The Workforce Scorecard

Managing Human Capital to Execute Strategy
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Corporate success today is fueled more and more by the performance of intangible assets. The most important of these intangibles is usually a firm’s workforce. Many times, the workforce is a businesses’s largest under performing asset and the area where the greatest gains in competitive performance can be generated.

To maximize the contribution of its workforce, a firm must meet three challenges:

1.The Perspective Challenge—To view the workforce in terms of potential contribution rather than as a cost to be minimized.
2.The Metrics Challenge—To replace conventional benchmarking metrics with measures that will differentiate improvement.
3.The Execution Challenge—To hold both line managers and HR staff jointly responsible for workforce quality and performance.

In practical terms, this means companies don’t just need one strategy but actually require three strategies and three corresponding scorecards to measure the success of each of those strategies:

Strategy for the business

Balanced Scorecard
1. Operational success
2. Financial success
3. Customer success

Strategy for the workforce

Workforce Scorecard
1. Workforce success
2. Competencies
3. Behavior
4. Mind-set and culture

Strategy for the HR function

HR Scorecard
1. HR practices
2. HR systems
3. HR staff competencies

Of all the factors affecting firm performance that CEOs and senior managers can directly influence, workforce success—or the extent to which a firm can generate a work force with the culture, mindset competencies, and strategic behaviors needed to execute its strategy—is both the most important and most underperforming asset in most businesses. In an economic environment marked by hyper competition, anything less than optimal workforce success is a direct threat to the very survival of the firm.

–Mark Huselid, Brian Becker and Richard Beatty

How to Move to an Employee Equity Business Model

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Moving to the equity model isn’t just a matter of giving employees some stock. To treat employee shareholders as true partners in an enterprise and to operate the business in a way that correctly reflects that dynamic is a challenge. It requires changing the culture and managerial style of the organization and making a concerted effort to educate everyone and then incorporate their combined best efforts into growing the business. Reaching that point is not the work of an idle moment but will require an implementation plan. Fortunately, the corresponding boost in company performance will make this all worthwhile.

They key steps in making the transition from a conventional company to an equity company are:

Conventional Company

Create significant ownership programs offered to all employees

Educate employees as to the significance of equity programs

Encourage employees to get involved in running the business

Create systems and structures to get employees involved in the day-to-day management of the business

Equity Company

Taking each of these steps in turn;

Creating ownership programs: is usually the easiest step of all. A number of nonprofit organizations can offer suggestions on how to set up and administer employee ownership programs. For example, the National Center for Employee Ownership (www.nceo.org) and the Beyster Institute (www.beysterinstitute.org) have ideas and templates available for doing this. They key point is whatever plan you ultimately decide on has to provide employees with an opportunity to earn some real money over time if the company succeeds. A viable ownership plan must be inclusive (applying to full- and part-time staff), ample, continuously added to and sufficiently robust that it will generate an opportunity for the value of the employee’s ownership stake to grow in the future.

Education and communication: is a key step because ownership is meaningless until employees understand what it means. This will require correcting any and all misperceptions and increasing the business literacy of rank-and-file employees. In formation about how the business operates must be communicated in simple terms and then repeated enough times and with sufficient variety until everyone understands what it means to be part owners of the business.

Encourage involvement: which is often accomplished by setting up a steering committee of managers and frontline employees. The committee can then search out the best ideas and best practices from other companies that have gone down this path in the determine the current state of things and then develop practical plans to enhance involvement. A good committee should feel free to ask very blunt questions:

What is the stupidest thing you’ve been asked to do?

What is the one thing you need to make your job better?

How would you rate the level of teamwork around here?

What do you see as the biggest challenge we face?

Create the systems and structures: which will help people learn how to run the business. This is usually the hardest step of all, not least because it runs counter to the preferences of most top and middle managers. In practice, this usually comes down to five or so definitive steps:

Identify your critical numbers: the one or two key numbers everyone agrees that if you improve, you will do better than all your competitors.

Set an achievable target in each of these critical numbers: something everyone agrees would be good for the company. This can’t be a shot in the dark but must be based on a hard-nosed assessment of what is possible and why that would be worthwhile.

Gather everyone’s ideas: on the most practical ways to achieve those targets. Focus on what needs to happen. Keep things simple so everyone can participate in attempting to achieve the targets. Gather data, experiment a little and find out what will work.

Monitor and track the key numbers: so everyone knows whether you’re winning or losing. Have a scoreboard updated daily if at all possible.

Record and celebrate any “wins”: so everyone feels a sense of achievement and progress towards the larger goal. Hand out gifts to mark your accomplishments and progress towards the overall goal. Build positive momentum for change.

Note that these transitional steps are easy to describe but difficult to implement. Change always requires effort. It’s difficult, as are most things in business today. Fortunately, the payoff can be spectacular and impressive. Many businesses that would have struggled to stay in operation are today thriving because of their past decisions to pursue the equity business model. When a company is owned and operated by its employees, there is a definite enhancement in the energy level of the organization as a whole. Instead of playing the usual game of “do whatever is required to keep the boss happy,” employee owned companies generate a spirit of engagement and purpose for everyone. There is an underlying ambition to make things better because people understand what’s going on and have the tools available to actually influence the company’s activities.

Employee ownership of a business can take many different forms. Some of the more common plans for broad-based employee ownership currently in use include:

Employee stock ownership plans (ESOP), which own all the stock of the company. All employees are eligible to participate in the ESOP as soon as they meet any specified age and service requirements. More than 8 million U.S. employees currently participate in 11,000+ESOPs at the present time.

Stock option plans that grant employees the right to buy company stock at a specified price during a specified period. Ideally, if the stock price has appreciated, employees are then able to buy shares at a substantial discount to the market price. If, however, the stock price doesn’t rise, employees may simply choose not to exercise their options and they will expire. It is estimated that between 7 and 10 million employees presently hold stock options.

Restricted stock plans that allow employees to buy shares, often at a discount to the market rate, subject to some restrictions. The most common restriction is that the employee must continue to work for the company for a specified length of time, usually three to five years. The shares cannot be sold until the restriction conditions have been met.

Qualified employee stock purchase plans allowing employees to buy discounted stock through payroll deductions or other regular contributions. Employees can decide whether to retain the stock or sell their shares once they are fully paid for. The “qualified” status refers to the fact these plans follow the rules set out in the Internal Revenue Code, thereby receiving favorable taxation provisions. If companies prefer, they can also fun unqualified employee stock purchase plans that work the same way but don’t enjoy and preferential tax treatment.

Stock appreciation rights plans that provide employees with a payout based on the increase in the company’s stock price during a specified period. These payouts may be in the form of cash or in shares of stock.

Many companies have found that offering stock is a cost effective way to attract and retain employees. There are even some industries like software and biotech where it is difficult to attract anyone at all unless stock is offered. More specifically, there are five situations where it makes excellent business sense to build an employee ownership corporate culture:

1.When you want to build a destination workplace: which will attract the very best employees. To do that, you’ll need to offer good jobs, generous rewards and a supportive environment, but stock ownership will be the clincher. Quite simply, the best people will always seek out situations where they can enjoy part of the fruits of their labors. Employee ownership is the ultimate extension of that line of thought and a definite way to differentiate your enterprise.

2.When you’re facing new and potentially devastating competitors: and potentially devastating competitors: and you need a very robust business philosophy capable of seeing off all competitive threats. People work harder and more creatively when employees own the business and are responsible for driving it forwards. They will find ways to be innovative and treat customers well. This just won’t happen to the same degree if ownership is not spread widely.

3.When you are a middle-of-the-road company: and you need some way to differentiate yourself from everyone else in your industry. By being an employee owned company, you’ll be able to offer people something they can’s get anywhere else—the chance to call their own shots and choose their won growth opportunities.

4.When you’re putting together a start-up: and you need a way to attract and then keep the high-quality people you can’t afford. Technology-related companies and young growth-oriented companies have long known equity ownership is an ace in the hole. Nothing attracts talented people like an opportunity to get some stock in a growth-oriented business on the ground floor.

5.When you believe it’s the right thing to do: that is, when your personal ethics tell you everyone who creates the wealth should get a fair share and not just those are employed as the senior business managers. The equity model is ethical and fair to everyone and is an intensely appealing idea to some people.

I tried to make Starbucks the kind of company I wish my dad had worked for. Without even a high-school diploma, he probably could never have been an executive. But if he landed a job in one of our stores or roasting plants, he wouldn’t have quit in frustration because the company didn’t value him. He would have had great health benefits, stock options, and an atmosphere in which his suggestions and complaints would receive a prompt, respectful response. The bigger Starbucks grows, the more chance that some employee, somewhere, isn’t getting the respect he r she deserves. If we can’t attend to that problem, we are facing a failure worse than any shortcomings Wall Street can detect.

–Howard Schultz founder, Starbucks

Understanding—There Must Be a Shared Understanding of Business Disciplines

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In and of themselves, equity ownership and an ownership-oriented culture are a good foundation for transforming a workplace, but they only go so far. A way has to be provided by which the enthusiasm for change is supported and built upon. In short, people have to know how to actually run the business differently in the future. That understanding is only feasible if first everyone understands the fundamental disciplines that drive the business and then secondly employee involvement is integrated into the day-to-day management of those elements. Employee ownership moves from the theoretical to the actual when employees take joint responsibility for their part of the business.

Standout companies succeed and ultimately excel over an extended period of time because they have learned and apply a specific set of disciplines to a degree competitors find difficult to match. In effect, they become world-class at doing what generates their profits and then keep moving the needle as they learn how to do things better. In almost all cases, this requires employees who can not only follow instructions competently but who can also think and act for themselves as fully vested partners in the business enterprise. Usually, what has to be done to make money is no great secret, but the key is to have people who will pitch in and do whatever is necessary to make the business a success, even if this is not strictly speaking a part of their job description. This is the effect of an owner’s mind-set as opposed to an employee’s mind-set.

To reach this point, some key elements are required:

1. The right metrics have to be highlighted and tracked: the one or two critical numbers that will mean the difference between success and failure for the business as a whole. Most equity companies have found that the best approach is to identify one or two key numbers and then help everyone understand what those numbers mean. For an airline, the key metric might be aircraft turnaround time. A manufacturing business might track labor variance closely as an indicator of success, or profit per machine per shift worked. A service company might look at the number of proposals submitted, the number of contracts awarded and the total billing time of professional personnel. The key here is to keep things simple and tightly focused. Find the numbers that have a direct line of sight with success and that employees can control or influence. Then teach everyone the linkages between what that number is and how much they earn as a part-owner of the business.

2. Once the right metrics are identified, communicate changes in those numbers: ideally in real time or with as little time lag as possible. Develop some sort of dashboard or even a very simple scorecard updated daily that lets everyone know how those numbers are running right at this point in time. Let people understand the economics of their day-to-day decisions in fine detail. These metrics will only prove to be useful if people relate the decisions they’re making to changes in that metric. To reach this stage, everyone in the organization must be familiar enough with the numbers as well as understanding all the linkages and flow-on effects of the decisions they make.

3. Manage the key operational numbers proactively: so people aren’t trying to make do with historical financial information and data. Cisco Systems closes its books on a daily basis and makes that financial snapshot available to everyone. Other companies publish their financial results every two- or four-weeks so employees can meet, review their performance and make the most appropriate changes well before the end of the quarter. These progressive financial results are also used to project forward so controllable expenses can be well managed.

The whole thrust of all this financial information and its discussion by employees is to allow everyone to participate in managing the company. Employees are still responsible for specific parts of the business individually and for doing their jobs properly but they share the overall perspective of a business owner. Like any owner, the employees are interested in the company’s business results as the basis for their returns.

When you have this kind of bottom-up financial awareness within a company, the budgeting process becomes even more effective. To develop an annual budget, every employee compiles their own forecasts for the part of the business they control. These numbers are then collated for the organization as a whole. Employees can then track their actual performance against budget in terms of elements they control each day. They can do whatever is required to hit or exceed their budget targets. When employees are part owners of the business, they think and act like partners in the enterprise rather than like mere cogs in the machine.

Notably, an open-book management system where everyone knows the financials in great detail solves some of the more controversial problems companies of all kinds commonly strike:

Incentive compensation packages: much of the mystery and murkiness that commonly surround these programs will be dispelled by open-book management. Typically, equity companies pay bonuses to everyone as an equal percentage of salary or wages. People can see how they’re progressing towards achieving these bonuses each month rather than waiting until the end of the financial period to find out. Note these bonuses will be in addition to any compensation that may accrue to the employee owners in the form of profit sharing, dividends or increased stock values. Bonuses reinforce the notion everyone is in this together and will benefit when the business succeeds.

Organizational initiatives: instead of being decreed from on high, organizational initiatives are much more likely to bubble up from the bottom. People will understand the linkages between acting differently and overall financial performance, and therefore will buy in rather than wonder why. In equity companies, people design their won initiatives and then analyze the flow-on results achieved. That surely has to be a more effective way of doing business.

Culture—The Organization Must Have a Culture that Helps Employees Think and Feel Like Owners

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Making employees shareholders in the business enterprise is a good starting point, but it isn’t enough in and of itself. To really make employee ownership work, you also have a to create a different kind of workplace. You have to create a culture centered around ownership of the business by sending the message to your people this isn’t an ordinary place to do business. You have to build a culture which brings the employee ownership concept to life and makes it real.

A corporate culture embodies all the beliefs, values and expectations that govern how your people think and act while at work. It will be established through what’s said and through your standard procedures and rituals, the messages communicated through official and unofficial channels, and so forth.

Owners → Workers

In a conventional company, the workers do whatever generates income and creates wealth, but those benefits are enjoyed by an entirely different group altogether, the owners. In this hired-help environment, the culture will explicitly or implicitly suggest:

Employees should show up for work when required.

Employees should do what they are instructed to do.

Decisions will be made by the chain of command.

Employees will be paid market rates for their skills.

Employees should leave their personal lives at home.

The business will specify when it needs the workers.

Owners: Workers

When a company is wholly- or partly-owned by it employees, the workplace will be organized and run differently. Instead of a business-as-usual mindset, an entirely kind of culture will emerge. In these circumstances, a corporate culture will emerge that is centered around four distinct messages:

1.Never forget that you are a part owner of the business as well as an employee: and therefore you have to look at the bigger picture and not just solely at how much you’re paid. To reinforce this message, different companies use different approaches. Some have elaborate induction ceremonies where new hires go from being just employees to fully vested part owners of the enterprise. Others work hard at using language that reinforces the concept. In all internal communications, employees are referred to as “employee owners.” Or people may have business cards printed with “owner” as their job titles. Or the company may run a monthly “employee-owner of the month” competition, complete with enticing and substantial prizes everyone wants to win. Irrespective of the specific mechanism used, all of these ideas are centered around the ideal of telling people often they are part owners of the business and this requires them to think and act differently.

2.If you make your career here, you will have great long-term opportunities: because employee owned companies almost always promote from within. Some make it a point to never hire outsiders and to grow their own leaders internally. That way, managers have credibility and established relationships with others before they get into action rather than as a result of being appointed. The implied assumption here is the company will invest in training and in rotating people through different departments so they have sufficient experience to become managers. This happens much more frequently in equity companies. It isn’t unusual for an employee owned company to have committees or councils who identify promising talent and provide career development guidance and support. In all, employee owners are more likely to build their careers with the companies they have an ownership interest in than with anyone else.

3.You will participate in the running of this company: by having input into the making of some meaningful decisions. Many high-performance companies have inclusionary and participatory management practices. Employees have the opportunity to put forward their ideas, express their opinions, make decisions and then evaluate the results of those decisions. When people have goals set for them and then figure out for themselves how to go about achieving those goals, this creates an entirely different environment. Most companies have found that the best way to do this is to create teams that, in effect, have responsibility for running one part of the business. The team can visit other companies to get ideas, develop new concepts and even put them into effect all without requiring anyone from management to sign off on the ideas.

4.We’re all in this together: so let’s make certain the very best ideas get used, regardless of who puts them forward. People in an employee owned company rarely if ever look at some problem and say, “That’s not my job.” Instead, everyone wants to get the problem solved because it will impact on how the company as a whole does. Many companies have social events that reinforce this message. Naturally, the real acid test of this “we’re-in-this-together” mind-set is what happens during a serious business downturn. Conventional companies lay people off. Typically, employee owned companies will have a strict no-layoff policy. Instead, it isn’t unusual in an employee owned company for everyone to take a 5-percent pay cut, or employees will be encouraged to take unpaid time off until the business environment improves. At the very least, everyone will know well in advance that layoffs which can’t be avoided are coming rather than simply turning up one day and being given the bad news out of the blue. To avoid this situation, it isn’t unusual for equity companies to be run lean with as few employees as possible.

Creating the kind of culture that enhances rather than detracts from the employee ownership ideal is not the work of a moment. It can be done, as evidenced by the vibrant cultures that exist at numerous employee owned firms. There are, however, some potential drawbacks to this kind of culture:

An employee owner workforce is inflexible: it will be very difficult to lay people off regardless of external events or marketplace developments. This may be offset by superior loyalty and the retention of the best people but it may also mean managers can’t let go the people who are not great performers as well.

It will take longer for decisions to be made: because there will need to be a number of meetings where every employee is given enough information so they can participate in the decision-making process. Maintaining a workable employee owner culture takes time and effort.

It’s hard to retain an employee owner culture the bigger a company becomes: as you get more people who have divergent views on how things should happen. Reaching a consensus will take longer and cost more the bigger the company becomes.

Sometimes, it can be difficult to quantify the benefits of an equity culture: and it will be difficult to decide sometimes whether the requisite culture is a business benefit or a business hindrance. Admittedly, these cultures encourage employees to use their initiative, go the extra mile and take care of customers better, all of which will have obvious business benefits, but putting an actual dollar figure to those benefits will be difficult.

So how do companies build a culture that supports employee ownership? First and most obviously, they share large amounts of information about how the business is doing, right down to the exact information managers use to make their decisions. Next, they teach financial literacy by explaining what the figures mean an how they relate back to the basics of the company’s business model. These companies also develop techniques by which employees are asked what they think before decisions are made, and modify plans or processes to take into account some of the issues that get raised. A growing number of companies are simply entrusting their employees to make to make more decisions on their own. By giving employees complete authority to run their own operations and make decisions on the spot without requiring a supervisor’s approval, they find the right culture is developing naturally.

Equity companies have also developed a host of other techniques, at once symbolic and substantive, for breaking down hierarchy. The companies are much more likely to implement the host of ‘participatory management’ techniques that have become conventional wisdom (if not conventional practice) about how companies should be run. These include work cells, self-managing teams, cross-functional teams, open-book management, job enlargement, devolution of authority to lower levels, and other approaches to structuring—not just encouraging—employee involvement in workplace decisions. Some of the cultural changes have a direct impact on people’s careers and livelihoods. Equity companies make a point of cross-training people, encouraging career development and promoting from within. They also take a different attitude towards layoffs, the threat of which has become the bane of nearly every employee’s existence in today’s turbulent economy. They may let people go; no company that expects to survive can swear it will always maintain employment. But layoffs are a last resort, not a first.

–Corey Rosen, John Case & Martin Staubus

Size—There Must Be Enough Equity that It Will Impact on the Employee’s Finances

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It really doesn’t matter what percentage of the company’s stock an individual employee owns. What is important is that employees feel like they own a significant asset. Until they feel like their stock ownership is of importance to their personal financial security, employees won’t really think like owners. As soon as that threshold is passed, however, employees will start taking their ownership of the company’s stock seriously. They will start doing what all business owners do—find creative ways to grow the value of the business enterprise and generate wealth.

The term “ownership” implies a whole packet of rights, benefits and responsibilities. At one extreme, a sole owner can determine the direction of the business, hire and fire people at will, spend the company’s money and make commitments for the firm. At the other extreme, a shareholder in a publicly traded company gets a vote on who goes on the board of directors (which is often meaningless) and a share in the company’s dividends ad stock appreciation or loss. In between these two extremes are lots of different variations and permutations.

To make the notion of ownership come to life for employees and to get them to commit to act that way, the rewards must be substantial enough when compared with what they earn year in and year out. There is no hard and fast rule as to what that threshold has to be, but a number of companies with successful stock ownership experiences have made it feasible for twenty-year veterans to have an ownership stake of approx. $750,000 to $1 million after twenty years of employment. Perhaps that would be a rough estimate to start considering.

Note that this ownership stake is not built up in one transaction but is the result of regular additions of stock to the employee’s portfolio. If people get granted all the stock they will ever own in the first five years of employment, you’re going to encourage them to cash up and leave the company at that point. A better idea is for the company to award stock to its employees every year. This generates a buzz among employees. SAIC, the company formerly known as Science Applications International Corporation, has created more than three thousand employee millionaires since it was founded in 1969 through sharing ownership. Microsoft is also well known for having created a multitude of Microsoft millionaires.

To further enhance the impact of regular stock ownership contributions, many companies provide employees with educational programs that help them learn what it means to think like an owner. Typically, these programs cover:

The rights and responsibilities of acting like a business owner

A basic understanding of how the business operates

Basic accounting principles and concepts—like the difference between debt and equity, between net income and sales revenues, the significance of inventory turns and so on

Some companies run financial literacy courses during business hours while others make their training available from Intranet or Internet Web sites and employees are expected to use these resources whenever it suits them. A few companies even recognize their people who complete these courses as official “certified business owners” and award them shirts, bags or $500 cash,

Other companies use more informal educational initiatives, in combination with whatever level of on-the-job training is feasible. For example, some companies have developed educational games around their employee share ownership programs. They use their own versions of Bingo, Scateggories or Hollywood Squares to familiarize people with the terminology used in running the business or participating in the ownership structure.

All of this ownership training is worthwhile, but to be of real value to employees they will also need to be updated regularly on what’s going on in the business so they can think and act like owners. To achieve this, many companies are now:

1.Holding regular webcasts and business-unit meetings where the senior managers talk about the specifics of what’s happening in the business. Typically, these meetings are held quarterly so the information provided is up-to-date.

2.Encouraging senior managers to meet with groups of employees informally to discuss the business. Often these meetings are held at lunch or dinner so employees can interact with the senior management team while talking about balance sheets and income statements.

3.Holding monthly meetings where different people come and talk about their areas of specialization.

4.Using internal Intranet Web sites to provide detailed financial information.

5.Posting or e-mailing a monthly update to each employee summarizing the company’s financial information.

All of these initiatives are designed to make employees feel like they can influence the financial results achieved by the company. This information also makes employees more aware of the added value they can create by becoming more efficient in their daily activities. The better an employee understands the linkages between what they do to create satisfied customers and the subsequent increase in the value of their company stock, the more motivated they will become. When this is reinforced by cash bonuses and other incentives, the learning becomes real and practical rather than being merely nice in an abstract sense. It isn’t uncommon for companies to be paying bonuses that amount to 10 percent of base wages in this way, and in a few cases employees have earned bonuses and profit sharing payments that are more than 25 percent of their wages. When that is achieved, not will potential employees be lining up at the door but your existing employees will be eager to stay.

Of course, encouraging employees to think and act like owners also has some drawbacks. To be more specific:

Employees may become overly optimistic about their rights as owners: and expect to be able to vote themselves a pay rise each and every year. Or they may expect to be consulted over every decision the company makes. There may be some hard feelings when these things don’t go exactly as planned.

Employees may be suspicious of the concept of part ownership of the business: and may believe it’s the company’s way to avoid paying them what they’re truly worth. This will sometimes be the case when there is a long and colorful history of labor-management animosity. Employees may end up thinking: “What are we giving up to get this stock?” or “Can I trust the company to really give me what it says it will give me when I retire and want to sell my shares?” Or even “Nobody gets something for nothing. There’s got to be a catch somewhere in all this rhetoric about being a part owner of the business. What is it?”

If the value of the business declines rather than appreciates: many employees will lose their enthusiasm for being part owners. This will be true even when the decline is the result of factors well beyond the direct control of the company.

SEC regulations may mean it is difficult or illegal the communicate financial information to employees before that information is released to the public: or else all employees would be designated as “insiders” and become subject to the restrictions on insider trading.

Running an employee share ownership plan may incur substantial legal and accounting costs: in order to comply with the applicable regulations.

When companies are required to repurchase the stock of retiring employees, this may be a substantial drain on the cash the company has available.

If the employee ownership program is too successful, employees may feel the urge to take the money and run: that is, to retire early and enjoy the fruits of their success rather than keep on working the 9-5 grind. Many companies have found they had to introduce various minimum years of participation requirements in order to avoid this phenomena.

Employee owners may exercise their vote to put unsuitable people on the board of directors: which may appear to be a risk in theory, but in practice most employees understand the need to fill the board with the best people available. Employee shareholders always end up voting for the same people that other shareholders would vote for.

Ownership is indispensable it is what tips the balance of the conventional employment equation. Traditionally, those who provide the capital to a company own the entire business. While owners can lose their money if the business goes south, they have a claim on all the earnings and all the growth in value if it succeeds. If your company is larger than a one-person operation, you face a time-honored challenge. You must pursue growth and profits through a workforce of employees who do not share your interest in growth and profits. Of course, employees have an interest in seeing that the company fares well enough that it does not close its doors and eliminate their jobs. And if it grows, maybe they can earn more money or get a better position. But the connection between business success and their own is at best tenuous and uncertain. In principle, employee ownership transforms this dynamic because it gives everyone in the company a direct and visible interest in the longer-term success of the business. From top management to the front lines, the participants in employee-owned companies are partners in enterprise, sharing a single agenda common goals. In practice, conflicting interests do not disappear overnight.

–Corey Rosen John Case & Martin Staubus

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