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Smart business leaders are always looking for ways to improve productivity, raise employee morale, and distinguish themselves as employers of choice. 

So it makes sense that participative management styles are getting attention.

Participatory management can help companies cultivate leaders from within, promote employee engagement, and improve retention. These positive effects can deliver strategic advantages in an increasingly competitive labor market.

But a participative leadership style is more than just a team structure. Participative leadership is based on mutual trust, respect, and an inherent value for the perspectives and insights of all employees throughout an organization’s hierarchy.

Let’s take a closer look at what it takes to transition to a democratic style of leadership. We’ll also cover some of the challenges to keep in mind if you do decide to incorporate aspects of participative management into your organization. Finally, we’ll see how employee ownership culture is a natural fit for this management approach.

What is Participative Management?

Participative leaders seek out diverse, innovative ideas and solutions from employees of all levels. They make it clear that the business values collaboration.

In turn, employees have a voice in company decisions and problem-solving. They feel seen and heard by leaders. This creates an environment in which employees feel encouraged to put their best skills, expertise, and creative ideas forward.

The example set by leadership also means that employees learn to value the input of team members all across the business, rather than looking solely upward at supervisors for ideas and solutions.

Communication, accountability, and trust are fundamental for participative organizations to succeed. They require cooperation and openness, to reduce competition between employees and departments, and make it easier to roll out new initiatives. When individual “ownership” of ideas is less important, the shared focus is on the productivity, efficiency, and quality goals the team achieves together.

How Can Participative Leadership Help Your Business Grow?

A participative management style’s advantages can position a company for strength and growth. They include:

  • Improved employee engagement, job satisfaction, and retention
  • More proactive mentorship by veteran employees
  • Greater individual accountability and motivation
  • Shared quality focus
  • Reduced conflict and increased cooperation
  • Increased interaction and communication across departments

Leaders who want to implement a participative culture should make a gradual transition. Even positive management changes can be disruptive and cause concern among employees.

Here are a few ways to initiate a transition toward greater employee participation:

  • Conduct company-wide surveys
  • Establish a mentoring or best practices initiative
  • Facilitate interdepartmental conversations
  • Solicit employee input with a direct approach
  • Hold management open office hours

Challenges of Participative Management

Any management system that depends on widespread participation of diverse people is likely to experience challenges. The larger, more complex, and more diverse an organization is, the more likely it is to face speed bumps along the way.

Consensus building can be time-consuming. That has the potential to slow down decision-making, which could impact a company’s efficiency and even increase costs. But this doesn’t have to be the case.

Leaders who are strong communicators can do a lot of the work to bridge gaps, share information, and build consensus. They can also publicly acknowledge and reward collaboration and cooperation to motivate employees.

In any organization, leadership sets the tone and example for how employees are expected to work together. That’s no less true among leaders with a participative management style. But a  company’s business structure can also contribute to a culture of participation.

Employee Ownership and Participative Management

Business structures based on employee ownership, such as employee stock ownership plans (ESOPs), show the benefits of participative management in action. The most successful employee-owned businesses prove that widespread employee participation doesn’t have to come at the expense of productivity and efficiency.

The employee-ownership culture that an ESOP can cultivate has proven benefits. Take employee retention, for example: In 2018, the median job tenure of an ESOP employee was 5.1 years, compared with 3.5 years for non-ESOP employees. In fact, a recent study reports that during the COVID pandemic, ESOP companies were three to four times more likely to retain employees than non-ESOP businesses. 

In fact, in a recent survey, many respondents cited ownership culture, not just the ESOP structure, as a key factor in employee-owned businesses’ pandemic resilience.

Certainly as important are wages, and while both employee-owners and non-employee-owners start with similar pay, employee-owner wages tend to rise faster and higher — as does their overall wealth.

An ESOP is a unique type of qualified retirement plan and company structure created with employee wealth creation as a primary objective. In an ESOP, employees earn shares of company stock over time. When they leave the company — at retirement, termination, disability, or death — the ESOP buys back their stock at fair market value. 

Employees make no financial contribution to this retirement plan. But their collective contribution to quality, productivity, and efficiency support healthy business growth and a healthy price for their shares when they leave the company.

Also read: Do Employee Owned Companies Grow Faster Than Competitors?

Employees earn shares over time worked, so an ESOP offers a built-in incentive for retention. That supports stability and sets up a culture in which veteran employees feel accountable for mentoring new colleagues. Improved retention rates also support the cultivation of company leaders from within.

And, because ESOP employees are shareholders, ESOP companies can leverage shareholder communications to promote the value of participative leadership.

Learn more about the ways an ESOP supports employee engagement, as well as best practices to ensure you’re promoting ownership culture to its fullest potential, with our free eBook, ESOP Culture and Communications. Get fresh ideas for building a strong culture of employee ownership. Click the link below to claim your copy now.

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