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Employee owners often come to understand the value of their ESOP over time as they experience the effects on workplace culture and their personal retirement wealth. 

They may get a sense from the beginning that ESOPs are different, but they might find it challenging at first to articulate the benefits of an ESOP on their financial security and employee experience. A deeper appreciation of employee ownership is often nurtured over time, fostering a sense of belonging and commitment, and driving productivity and loyalty that benefit both the individual and the organization.

But it’s typically up to the employer to bridge the ESOP knowledge gap to help job candidates and new hires recognize the unique opportunities employee ownership can bring, and to anticipate the cultural differences they can expect once they join the team. 

Yes, an ESOP is a qualified retirement plan, but before candidates jump to a side-by-side comparison between a 401(k) plan and your ESOP, you’ll want to help them understand the tangible and intangible advantages that can come with working at an employee-owned company.

Here, we’ll explore what we know about ESOPs and employee experience, and some ways you can frame and facilitate a straightforward conversation with candidates that highlights your uniqueness as an employee-owned company.

Tell Your ESOP Story with Numbers

Job candidates spend a lot of time honing their message about themselves. Strong candidates highlight not only hard skills, but also personal qualities like dependability, critical thinking, communication and teamwork, ethics, and ambition. It’s natural for employers to be focused on identifying and affirming these qualities in applicants — but it’s equally important to help job candidates get to know what an ESOP is, how it impacts your company culture, and what it means in terms of potential wealth they could grow over time as an employee-owner. Here are a few things we know:

Leaders of ESOP-owned S corporations reported voluntary quit rates of their employees that were roughly one-third the national average, and layoffs that were about a quarter the national average. 

The same study estimated that the median ESOP account balance across all participants was $80,500 — and that didn’t account for additional retirement savings vehicles many ESOP companies offer, such as 401(k) plans. In addition, the ESOP Association reports that 93.6 percent of ESOP companies that responded to a recent survey offered another retirement plan in addition to the ESOP.

Even in times of major disruption, ESOPs can offer specific advantages to employees. A 2020 Rutgers study found that, throughout the initial phase of the COVID-19 pandemic, ESOPs were:

  • 3 to 4 times more likely to retain staff
  • Less likely to reduce pay
  • More likely to take measures to protect against the spread of illness at work

Another Rutgers study, this one asking employees to compare their current ESOP to previous non-ESOP employers, found that employees who came from non-ESOP employers consistently assessed their ESOP employers more highly than prior employers. The study also found that these higher assessments were associated with a lower intention to quit, a higher satisfaction with the ESOP, an ownership mentality, a sense of fair treatment, and even an increased satisfaction with their pay.

It seems to make intuitive sense that, to have the best possible outcome in terms of employee satisfaction and protecting against turnover, it’s smart to encourage candidates to learn more about your ESOP during the hiring process.

Framing the ESOP for Job Candidates

Help applicants understand that ESOPs offer a unique wealth-building opportunity, as their number of shares can increase over time, and company performance can increase the value of those shares. As the company’s stock price rises, so does every employee’s individual retirement wealth — so personal financial success is directly linked to company performance. This creates a tangible outcome of employees’ day-to-day work and reinforces the idea that their efforts can directly contribute to profitability.

And there’s more to having a voice in the company than just financial rewards. When employees know their voice will be heard and valued, that can lead to higher job satisfaction. Learning throughout the interview process about ESOPs’ lower turnover rates and preservation of local jobs can instill a sense of confidence and stability in your employer brand. Collectively, these factors help underscore a position at an ESOP as more than a job; it’s a career investment that encourages a deeper commitment to the company’s long-term success.

Building a New Employee-Owner Experience that Distinguishes Your Brand

Differentiate your new hire experience to leverage the full potential of your ESOP from the start. Just as it’s important for new employees to understand your ESOP’s vesting schedule and other policies, it’s vital that they see themselves as intrinsic to your organization from day one. What does that mean to your company? 

We recommend an exploration that starts with your current employee owners, but here are some ways high-performing ESOPs are drawing in new hires and setting them up for longevity and success:

  • One-on-one mentoring between “original” and second-generation employee owners
  • Open-book management practices
  • Interdepartmental cross-training
  • Celebrating employee ownership in October and all year long
  • Reviewing training and education plans to develop employees and support a “hire from within” strategy
  • Encouraging community engagement through volunteering

Reviewing and aligning policies can help support a goal of nurturing long-term associates who are loyal and deeply integrated into the fabric of your ownership culture, and your company’s mission and values. A strategic approach to building an informed, cohesive, and engaged workforce can enhance your competitive edge — in your industry and in the labor market.

Stand Out by Shining a Light on Your ESOP

An ESOP’s benefits extend beyond the usual compensation package for both employers and employees, offering a comprehensive way to impact employee engagement, satisfaction, and financial well-being over time. When company representatives understand and effectively communicate the advantages, you can attract a workforce that’s not only skilled, but also deeply invested in shared success.

Take a deeper dive into the value of these benefits from an employee perspective. Read our report on the recruiting and retention value of various employee benefits — including ESOPs. Read the full report now.


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