Research: Employee Ownership has Lower Voluntary Turnover, Say in Pay Structure Improves Productivity

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Mon, Sep 26, 2011
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The August 1, 2011 Employee Ownership Update is online and discusses the following:
  • Ohio Reduces Funding for OEOC
  • Time Remains to Take NCEO's Survey on Private Company Equity Compensation Practices
  • Senators Introduce Bill That Increases Tax on Stock Options
  • Twitter to Use Private Financing to Buy Employee Shares
  • IRS Announces Adjustments to ESOP Review Process
  • New NCEO Video
The Update discusses the Employee Stock Ownership Plan Review Worksheet and how the Ohio Employee Ownership Center (OEOC) at Kent State University will adapt to the loss of state funding:

The State of Ohio has provided funding for the Ohio Employee Ownership Center (OEOC) at Kent State University since 1987. For the fiscal year starting July 1, 2011, however, due to the state's budget crisis, grant funding from the Ohio Department of Development will not be available, resulting in a substantial loss of funding for the OEOC. However, most of its funding comes from sources other than the state grant, and the OEOC says it wants to "assure the employee ownership world of our commitment and ability to maintain the Center's operations, in both the short and the long term." The OEOC will continue to operate and to encourage and facilitate the growth of employee ownership.

It also discusses a proposal that would require companies to report stock option valuations using same methodology for book and tax purposes. Stock Option Accounting Is on the Line explores this issue further.
The August 15, 2011 Employee Ownership Update is online and discusses the following:
  • Winning Workplaces: Employee Ownership Decreases Turnover
  • Republic Airlines Flight Attendants to Receive Equity Stake
  • Experimental Economics and Employee Ownership
  • Polish Coal Company IPO with Employee Stake
  • NCEO Sponsors Ownership Thinking Conference
The Update discusses the research that found that Employee Ownership Increases Job Satisfaction, Innovation, and Productivity:

Mark Harbeke's blog post Employee Skin in the Game Is Good for Business draws on data from the 342 organizations that applied for this year's Winning Workplaces award. His finding? The organizations without employee ownership had an average of 16% employee turnover in 2010, while organizations where 40% or more of employees own shares had turnover under 11%. Harbeke notes that voluntary turnover is actually at a three-year high, making retention especially important, and concludes that employee ownership is "a vehicle for both increased job satisfaction and commitment (helping to keep in check and even reduce voluntary turnover)."

It also discusses how Workplace Democracy in the Lab, a research experiment and discussion paper that explores how ownership incentives impact job performance. Do Workers With a Say on Pay Work More? reviews the experiment and findings in more detail:

"The authors contend that a vote on compensation structure acts like an incentive without altering the amount of compensation. For getting a choice between two earnings schemes with the same bottom line for the company, workers will express thanks by working harder…How much harder? Having a say hiked output by 7% and, better yet, effective output - meaning improvement in quality, not just volume — rose by 9%."

Topics: Studies and Statistics, ESOP, employee stock ownership plan

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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