Productivity linked to Employee Ownership?

The term “Employee Ownership” refers to ownership of a company, by some or all of its employees. This can either be directly or indirectly and in part or in whole. Employee Stock Ownership Plan (ESOP) is an employee benefit program which enables the employees to become owners of the stocks of the company they work for. Companies offer shares to their employees because they believe being a ‘shareholder’ of the firm – would increase employee loyalty, performance and motivation substantially.

‘Employee Ownership’ is relatively new concept in India (primarily started by software development companies) as far as ESOP is concerned. But, a century back, job opportunities were not many and employees felt ‘morally’ responsible to do their best without much incentives other than salary. But today, Managers like to believe that simply introducing ESOP would lead to the creation of an “ownership culture” (causing ‘culture effect’ ) within the organization. In this culture, it is assumed, managers and workers would always think of the company first when faced with any sort of problems in the course of their day-to-day activities.

But in reality, there are various other factors which are at play in such a scenario. Some of these factors might be the difference in perception of ‘employee ownership’ among peers, differences in understanding the meaning of ownership, level of actual participation in decision-making and truly, the fairness of the plan. I feel that in companies where ESOP has been implemented, a vast disparity seems to exist between the sense of ownership felt by peers. Naturally, this is as a result of disparity in the ESOP plans!

Productivity can be linked to Employee ownership – only if there is parity and fairness in the proposed plans (ESOP) effecting ‘actual’ employee commitment, easy access to decision making to all involved, besides realizing a ‘culture effect’ conducive to better performance. Most of the companies (other than MNCs) in India are family owned and unfortunately in such a scenario, factors other than employee performance are considered pivotal. Close proximity to the owner ( or his family) for reasons not related to job creates an undue advantage for the one who is close and in effect results in loss of parity in remuneration scales. In such conditions, productivity does not play any role to earn employee ownership.

But, in MNCs, there is ‘well earned’ employee ownership and there exists an conducive atmosphere built on transparency and efficacy of the proposed plans to benefit employees. In organizations that are professionally inclined, there is not much room for organizational politics and employee appraisals are effective, timely and generate an environment boosting sufficient self-esteem amongst employees to do their job well. In such organizations, productivity can be linked to employee ownership since everything is documented on a ‘public’ interface visible to one and all.

Employee ownership plans have positive effects on the employees if they perceive that it helps in bringing greater income, better control over their jobs and builds job security. On the contrary, it may have negative effects if employees do not perceive any difference in their work lives despite the plans, have unfulfilled expectations or feel the plans bring forth an extra risk to their current income levels.

(The Author is Director/Proprietor, Rambuna Consultants, specializing in recruitment services, corporate training and new business start ups assistance)

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