Business Record - Iowa Biz

ESOP or employee-owned

Victor Aspengren is a vice president at Prairie Capital Advisors Inc.

A company has been transitioned to an employee stock ownership plan (ESOP). The company now has an ESOP, which is technically a defined contribution plan governed by ERISA. The challenge to the leaders in the company is: Do they promote the company as an ESOP or the fact they are employee owned?

In most ESOP companies, the terms ESOP and employee ownership are used freely to mean the same thing. This creates confusion to the employees. The simple fact is that the terms ESOP and employee ownership are not interchangeable. They are two distinctively different terms and how they are interpreted by employee owners is critical.

An ESOP is technically owned by the ESOP Trust, not the employees. Being an employee owner is tied to the culture of a company. Day to day decision making does not have to change at all. The only items where there is truly a vote are the following as related to IRC 409(e):

• approval or disapproval of any corporate merger or consolidation

• recapitalization

• reclassification

• liquidation

• dissolution

• sale of substantially all assets of a trade or business, or

• such similar transaction as the Secretary may prescribe in regulations

Ultimately, even in these situations the ESOP trustee can override the vote based on their fiduciary role.

Companies that clearly differentiate the terms ESOP and employee owner have much stronger cultures. It requires a much higher level of training and education and requires a different type of leadership.  Employee ownership is about having input, being valued, and understanding the business through training and financial literacy.

The following is an example that illustrates this point: A new 25-year-old employee is hired. Is their interest focused on the ESOP or what it means to be an employee owner? The answer to this question will be directly linked to their tenure in the company. What's the right answer... what would the answer have been when you were 25?

-Victor Aspengren

Open book management

Victor Aspengren is a vice president at Prairie Capital Advisors Inc.

I just attended the 21st Annual Gathering of Games conference in St. Louis this week, and it was another incredible experience. The conference is conducted by the Great Game of Business, a division of SRC Holdings out of Springfield, MO, an ESOP company.

This entire conference is centered on open book management, and the attendees are practicing it or looking at starting the open book process. They come from all industries -- healthcare, manufacturing, engineering, health & fitness, food, agriculture, printing, etc...

When I discuss this topic with business owners and managers, many of them think the idea is crazy or that the employees will not understand the financial information shared. One can argue that it will not work, but after hearing the stories of success from this conference, the past 10 that I have attended, and the fact that I have lived the open book management implementation process, there is not an argument that holds water.

I encourage you to explore the open book management concept at www.greatgame.com  This is truly a game where everyone can win!

-Victor Aspengren

The performance review conundrum

Victor Aspengren is a vice president at Prairie Capital Advisors Inc.

When companies are asked "What is your greatest asset?", 95% of the time the answer is "our people". If people are the greatest asset and a company wants to maximize its assets, does it not make sense that a return on invest (ROI) is calculated?

Companies measure their performance with monthly financial reports and they slice and dice the numbers of the company in a hundred ways to analyze their ROI. 

The comedy of people being the greatest asset in a company is that the majority of companies only measure their people once a year through a performance review process. To add to the comedy, most companies and their employees would grade their performance review process with a "F".

The following is a short list of typical performance review issues:

• Rating scales
• Performance review is concurrent with wage increases
• Supervisors' (reviewers) lack of preparation
• No dialog
• It happens once a year
• Lack of goals
• The CEO does not get reviewed
• The Board of Directors does not get reviewed

The list goes on and on...

Companies should consider making a significant investment in their performance review process.  It could be one of the best first steps to maximize the greatest asset in a company - "the people".

 -Victor Aspengren

ESOPs are the rage

Victor Aspengren is a vice president at Prairie Capital Advisors Inc.

The Employee Stock Ownership Plan (ESOP) concept is gaining momentum as a business succession tool. The following is list of reasons for this increased interest in ESOPs:

• People are tired of seeing jobs and companies leave their local communities
• There are over 70 fellowships across the US doing research on the impact of employee ownership in the world of academia
• ESOP companies lay off less workers than non-ESOP companies
• ESOP companies provide higher retirement benefits than non-ESOP companies
• ESOP companies allow employee owners to share in the sweat equity of the company
• There is an increased bottom line performanace in ESOP companies vs. their non-ESOP peers

This is an incomplete list and there are many other valid reasons why the ESOP concept is growing in popularity.

Wise business owners consider the ESOP concept in their evaluation of how to transition their ownership. It may not work for all business owners, but it should be an idea that their business advisors discuss with them. 

-Victor Aspengren

 

Exit planning

The data shows that only approximately one third of business owners have a succession plan or exit strategy. Owners may be savvy in business, but they fail miserably when it comes to their own exit.

Sadly, most exit plans begin upon the death of business owner. In these situations, it leaves the owner's family and the employees of the business in a very vulnerable spot. The lack of planning increases the probability that decisions with will be based on emotions and not sound, thought-out plans. In far too many situations it leads to family chaos and a failed business with a bunch of unemployed workers. 

There are multiple sources for business owners to access - accountants, attorneys, business consultants and others. There are also wonderful conferences that focus on exit planning and business succession.

One such conference is the XPX Summit in Boston on May 3, a gathering where professionals and business owners can hear some of the most cutting edge ideas and knowledge in the exit planning space.

As a business owner, start the exit planning journey today.  Do not let your efforts on this earth go to waste.

-Victor Aspengren

Kodak Moments

"A picture is worth a thousand words" is a quote that is used on a regular basis. The
 lack of a picture during a significant event or situation has been labeled a "Kodak Moment". These Kodak Moments may not be recorded in a real picture, but the picture is stored in the mind of the observer.

Organizations create multiple Kodak Moments that are sadly locked inside people's heads. These pictures and the stories that are associated with them can be powerful tools in building a high performance culture. 

The key is to share the picture and story. It may be with an individual or the entire organization. The picture and story can cover acts of kindness, generosity, or celebrations, but they can also cover acts where people dropped the ball, lost control, or totally handled a situation incorrectly. 

Take the risk, overcome the fear and start the journey of sharing Kodak Moments   and building a high performance culture. 

Flickr photo by John McColgan

-Victor Aspengren

 

 

Ownership transitions are not slowing down

The 4th quarter of 2012, according to my professional network, saw the busiest ownership transition period they have had in their careers. Yes, it was driven by the potential increase in capital gains and the reduction in the estate tax exemption, but the bigger issue was the log jam that was created by the recession. Many business owners put their business transitions on hold due to the fallout in company values.

2013 is looking just as busy and smart business owners are beginning their due diligence right now. The hardest part of an ownership transition is what structure will be used that meets the business owner's needs after the sale. It is much more than the final number of the deal. It is items such as:

• Control of the business after the sale
• Legacy issues
• How will the transition impact the employees?
• Do I want to continue to work?
• Do I need the cash now or later?
• Do I want to get some cash off the table?
• Do I want the maximum value I can get and what are the consequences?

Business owners should be having robust discussions with their service providers on what is the best solution for their ownership transition. Is it a merger, sale, ESOP, management buyout, or some other vehicle that meets the needs of all stakeholders? Exploring all the options takes time and finding the right partners is critical. The sale of a business can be as significant as a marriage or having a child.

If 2013 is the year for your ownership transition, then now is the time to start the conversations!

-Victor Aspengren

Leading In ESOP Company

Leadership is critical in all organizations, but when you add the element of employee ownership it elevates the importance. When a company shifts the mindset of its workers from employee to employee owner, the scrutiny of leaders is more pronounced.

When everyone is asked to step up and act like an owner, then the top leaders better be prepared for valid questions and challenges to the status quo. This shift can happen in a very short period of time and many leaders are not prepared to handle this shift in organizational and individual behavior. There are many programs and books that focus on leadership development, but not in an employee owned company context.

The good news is that there is a program that has been around for several years that focuses on leadership in an ESOP company. The program is conducted by the University of Pennsylvania and is called "Leading in Ownership Setting - Program for CEO's". It is a stellar program and I can personally speak to the value of the program as I was member of the planning committee and a participant in the first class.

The program challenges individuals in how they view leadership in multiple ways. More importantly, participants create a peer group that they can stay connected to for ideas and help with future challenges.

If you are looking to implement employee ownership in your company, this program can help you prepare for the challenges and joys of leading a company of employee owners. Make the investment in yourself and you will receive payback for the rest of your career.

-Victor Aspengren

Breaking the numbers barrier

Before the recession, I would ask the audience in my presentations how many people shared financial information with their employees. Typically I would get a yes response from around 40% of the audience. Today when I ask the question I get around a 90% yes response.

Why the difference? The great recession forced owners, managers, and leaders of companies to share financial information with the employees to survive. When the company's back was put to the wall they looked to the employees for help. A sinking ship can sometimes be the best way to initiate new ideas and tactics. The real fear of going out of business replaced the many false fears that have been in place about sharing financial information with employees like the following:

• They do not have the knowledge to understand the financials
• They will share it with competitors
• It will create issues because of compensation related numbers

These false fears are easily discounted:

• They know how to spend their own paycheck to survive
• A good competitor knows your numbers
• People talk about wages all the time. There are multiple ways to share the information without sharing individual salaries

In the new economy, companies that do not share financial information will find it even more difficult to compete against companies that do. Sharing financial information with your employees allows them to understand why the company makes the choices it does. It is not about complete agreement; it is about sharing the action behind the numbers. Everyone likes to know why - the two year old still exists in all of us!

-Victor Aspengren

Managing the ESOP benefit

The average ESOP company contributes between 8 and 12 percent of an employee owner's wages into their ESOP account on an annual basis. This contribution is somewhere between three and four times the average 401k company match. This is a huge benefit to the employee owners and a wonderful marketing tool in recruiting new employees.

For many ESOP companies, the selling shareholder sets up the original financing and structure of the ESOP. A key question that gets missed in these original ESOP discussions is - "What level of benefit can the company support long term"?

This is not an easy question, as it is intertwined into the highest level of strategic thinking. Remember that the ESOP benefit is tied to the value of the company stock. The allocation of cash (be it generated or from debt) for equipment, acquisitions, executive compensation, the ESOP benefit level, or other items, requires a deep analysis of the impact on the stock value long term.

ESOP benefit levels are not locked in stone and can be modified, but be sure that the modifications are reviewed by qualified experts. This is just one step of many in the sustainability of an ESOP. Take the step!

-Victor Aspengren

Without vision, the people perish

Many companies wish they could predict the future, but they have no idea how to go about it. The future can become reality if there is vision.

Painting a picture of the future through a statement of vision is critical to organizational success. The vision is driven and championed by the top leader of the organization.  It is the leader's responsibility to make the vision statement a living language within the organization.

Human nature has shown throughout history the power of vision and what can be accomplished - Alexander the Great, Crazy Horse, Abraham Lincoln, JFK, Winston Churchill, etc...  These leaders fueled a vision that captured the minds and spirits of their people.  It is no different in organizations.   

Individuals are no different than organizations when it comes to vision.  Successful people have a vision for their future.  The challenge for organizations is to create a vision that allows personal visions to be accomplished at the same time.

The old proverb "Without vision, the people will perish" has been supported throughout history.  Create an organization where people thrive and do not perish - create a vision!

-Victor Aspengren

ESOP myths

The baby boomers transitioning out of the business world could create a new platform for business. Instead of the traditional private sale, management buyout, or taking the company to market, an ESOP (Employee Stock Ownership Plan) may be something to consider.

At the end of 2011, the number of companies that had ESOPs or equivalent plans was around 10,900 (NCEO data). Why are the numbers not higher? In many cases it is the fact that business owners and professional advisors are misinformed about how an ESOP works. Some of the myths that impede the implementation of an ESOP as a business transition strategy are as follows:

• The owner has to leave the business
• The owner has to give up control of the business
• The employee owners now have the right to "know" everything
• Employees now own stock in the company
• Everyone is treated equally and there is no room for management incentives
• The owner has to sell 100% of the company

All of these statements are false. ESOPs are not the answer to all business transitions, but they should be explored as an option. Make a point to get the correct information on how an ESOP works before the idea is disregarded.

-Victor Aspengren

Equity is king

Employees today are more attentive to the benefits that a company provides them. Pay, health benefits, insurance and others are the standard. The exception in the benefits realm is equity.

According to the NCEO, only 13 million workers in the United States have equity in the companies they work for. This amounts to roughly 8% of the workforce. These workers can make the linkage between working overtime, weekends, and extra time outside of the normal business day and equity. The value they create is not directly tied to cash in the hand, but to the long-term success of the company and themselves.

Sharing equity in a company gives employees a greater appreciation and tolerance for downturns, capital investments, tough decisions, and the future of the company. Employees will give that little "extra" which turns ordinary companies into extraordinary companies.

Equity is the motivator for employees to put their sweat, knowledge, and the vast majority of their life into a company. Equity is the driver that increases company and personal success.

-Victor Aspengren

We the owners

The Great Recession has caused many of us to evaluate the way we do business. It shook the foundation of our country and changed lives in a significant way.

But did we learn anything during this crisis?

The Foundation for Enterprise Development and Passage Productions has put together a film that talks about a different model for business - employee ownership. The film profiles several successful employee-owned companies, and has commentary from experts within the employee ownership field - ESOPs, cooperatives, and other types of equity sharing with employees.

The film will be released this coming summer. The trailer can be viewed at http://www.wetheowners.com/the-film.html.

The trailer gives a taste of something truly special in the business world. When people talk of hope, future, trust, and responsibility with passion - then something amazing can happen.

Watch the trailer and feel the change that comes over you. This may be the spark that creates a movement for employee ownership and a better business model in the USA.

-Victor Aspengren

 

 

Watch for employee burnout

The recovery is making great strides, but it will be critical for organizations to pay attention to employee burnout.

The recession forced many organizations to do more with less and adding capacity is stilled feared. The high cost of employee burnout and turnover can ruin a business.

I do believe that organizations are responsible for burnout and turnover. A blog by Ann Bares shares some insight into this line of thinking.

Leaders wake up and pay attention.

One of the most important bottom line issues you can impact is employee burnout and turnover. It is your responsibility to create an organization that keeps burnout and turnover at a minimum.

Walk the talk, keep your ego low and your awareness high, and encourage growth that leads to planned turnover.

This type of turnover feeds organizations instead of tearing them down.

- Victor Aspengren

The power of expectations

When left alone, the human mind will fill in the story of any situation unless it has good information.

Example: A significant other, child, or spouse is supposed to be home by 10:00 p.m. - it is now 1:00 a.m. When they walk through the door, there is already a story in the mind of the person meeting them. Right or wrong, the mind will fill in the story without good information. A simple text or call would have changed the story in a significant way.

The same thing occurs within employee owned companies. As soon as someone is called an "owner", the mind begins to fill in the story for expectations of what an owner can do. Employees who are now employee owners will begin to cross the boundaries of how decisions are made. They think, "I am an owner, therefore I should be able to hire, fire, give raises, and have input on everything in the company".

Managing expectations is critical to creating a culture of respect, understanding, and trust. Being an employee owner may or may not change how decisions are made in the company. The key is defining what does it mean to be an employee owner based on the expectations of the company's leadership. A best practice would include the employee owners in this process.

A simple tool that clears up expectations is a Rights and Responsibilities chart. It lays out the different decision making bodies and clearly identifies where decisions are made and where input may be asked for. Everyone will not be happy, but it helps in clarifying the expectations of what it means to be an employee owner.

- Victor Aspengren

The curse of emotions

Image via Wikipedia

Emotion is the key element to what makes us human and it drives our behavior. Emotions in business...they can be a precarious thing.

Many businesses have failed because emotions replaced logic during key periods of transition in a company. Be it fear, pride, avoidance, etc... emotions became the barrier to the conversation that could have saved the company. During good times emotions can feed the success of a business, but when the conversation gets intense they tend to be a barrier.

It is the cool, calm, leader that helps organizations during difficult times. They shed their ego, fears, anger, and other negative emtions and replace it with logic and patience. The tone that the leaders takes will be reflected in the decision making group.

There are times when it pays to be like Mr. Spock!

Candor is critical

The new economy has forced companies to become more efficient in how they conduct their business. Companies that fought the implementation of lean, six-sigma, open book management, and other business improvement processes in the past, dropped their fears and moved forward with these processes to survive.

One aspect of lean that is often overlooked is candor. The practice of candor allows concerns, issues, and new ideas to be addressed much quicker. If candor is a priority in a company, it reduces the vast of amount of wasted energy that goes into the rehashing of issues that everyone knows about, but no one wants to deal with. Candor can bring to light many of the drags on profitability that are present in a company.

Candor in its highest form is supported by high levels of trust and the application of tact. Communication is rarely a black and white issue and many people fall into the trap of practicing candor with a black and white mindset. Trust and tact are essential in navigating the gray area of communication.

Candor is critical to improving your bottom line, relationships, and culture.

- Victor Aspengren

Upcoming employee ownership events

2012 will be a big year when it comes to the number of businesses that will experience a transition in ownership. The driving factors are the rebound in business values and the potential threat of increased capital gains in 2013.

This spring offers a multitude of conferences that explore how to drive value and strategies for transitioning a business. The following is list of conferences that any business owner that is thinking of selling their business should consider attending:

National Center for Employee Ownership Annual Conference, April 25-27, 2012 Minneapolis, MN

The Annual Confernce on Open-Book Management, May 9-11, 2012 St. Louis, MO

ESOP Association Annual Conference, May 10-11, 2012 Washington D.C.

National Worker Cooperative Conference, June 22-24, 2012 Boston, MA

To get more details just click on the link for each conference. All of these conferences are well run and have occurred for multiple years.

- Victor Aspengren

The cost of delays

As I sit in an airport and patiently wait for a delayed plane, it brings to mind the cost that is paid for delays in dealing with important issues. Specifically, those delays that impact the culture of your organization.

The key delay that impacts a company's culture is the tough conversation that needs to be held with key leaders. The problem is there, everyone is aware of it, but as the CEO or owner, you procrastinate due to loyalty, fear, and the potential repercussions that could arise - hoping that the problem will correct itself and you can avoid an uncomfortable situation.

The cost of not having this conversation is not easy to measure, but it is significant. Think of it this way - the good of the one vs. the good of the whole. One person working at 80% efficiency is tolerable, but if a key leader creates 80% efficiency in those they lead...it really is an easy answer.

Being patient and allowing time to pass can be a wonderful tool in correcting problems, but there is a fine line between success and failure. If you have the ear of your employees, they will let you know when the time is right. Take a deep breath, accept what is in front of you, and move forward.

My delay just ended, what about yours?

- Victor Aspengren

The holiday bonus

It is the time of year when many employees receive a year end or Christmas bonus. The bonus comes at a time when employees can use the extra cash for the holiday season. The sad thing about these bonuses is that in many cases they are given even if the business lost money for the year or has to borrow on their credit line to pay for it.

Giving a bonus to employees under these circumstances...it would be better served to go to a homeless shelter or someone truly in need. This type of bonus creates an entitlement culture and does little to engage the employee in the success of the business. It can also feed the frustration of owners and leaders that their employees do not care. The fact that the bonus is "free" creates a plethora of on going challenges.

Bonuses should be self funded. They should be based on goals that improve the performance of the company and therefore increase the bonus opportunity for the employees, which also leads to higher returns for the owners. This can create psychic ownership in employees and improve their level of engagement.

Think of it this way. How many people wash their rental car before they return it? A free bonus increase the chances of the Scrooge emerging in everyone. Increase the holiday joy by giving employees bonuses that are earned.

- Victor Aspengren

Flickr photo by bjosefowicz

Your name - a powerful tool

Do you remember the names of new people you meet? Many people struggle with remembering names. It is not easy and it takes effort to consciously make a place in your mind for a new name. In a social setting the consequences of not remembering a name are minimal. In a company or business setting the consequences can be dire.

Do you know the names of the employees in your company? Obviously if you have thousands of employees it would be a rare leader that would know all the names. Just as obvious, you would expect leaders in companies of say less than 150 employees to know the names of their employees. The sad reality is that many leaders do not know the names of their employees and there may only be 25 or 50 employees.

If you are one of these types of leaders, corrective steps should be taken. The symbolism and impact of knowing an employee's name is critical to creating an engaged employee and building a high performance culture. If names are not important, then the culture that the leader believes they have will be disconnected from the real culture that exists for the employees.

Leaders have a higher expectation put on them, but knowing names is equally important to all employees in an organization. Knowing a person's name is a sign of respect and genuine interest. A key ingredient in a high performing culture.

Stop the "Hey you" statements, blank stares, and lack of interest - remember the name.

- Victor Aspengren

The sacrifice of leadership

Leading a company of engaged employees requires sacrifice. For many leaders it is all about them, and what they will gain or what their immediate team may gain.

Article after article is written about the lack of engagement in the workforce today and the grotesque behaviors of leaders. These leaders have no concept of sacrifice and how their employees view this lack of sacrifice.

Sacrifice can and in some cases will be painful, be it physical or psychological. Enlightened leaders are prepared and step up to the sacrifices that may be required to support the organization. Here is a short list of leadership sacrifices examples:

• First one to work, last one to leave
• Spending the time to console an employee in need
• Taking the pay cut in hard times
• Filling in for a critical position when needed
• Attending weddings and funerals
• Admitting their mistakes
• Laughing at themselves

Sacrifice requires leaders to be confident in themselves and the people they lead. The saying "The more you give the more you get" holds true for leaders that understand the power of sacrifice.

- Victor Aspengren

Square peg, round hole

There are many owners, leaders, and employees that are viewed as a square peg in their organizations. The square pegs have no definitive profile other than the fact of being the square peg. The plain and simple fact is that they are just not a great fit for the organization (round hole).

There are instances where individuals know fully well that they will not fit or do not fit. These situations are typically driven by the need of the job vs. the want of the job. They can be good or bad employees, but they will never be the engaged, productive employee that organizations dream of.

The vast majority of people that are considered square pegs have been put into a position that does not fit their profile, they may not have the skills, and in many cases it is a failure of those in power to make a tough decision. The people in these situations are the victims of poor decision making by organizations, leaders, and managers.

The saddest situation is where newly hired employees are a square peg from day one, but they have no idea themselves. The lack of a rigorous hiring process, the "selling" of the organization to the employee, and the focus on skills vs. fit, create organizations full of square pegs.

Organizations need to recognize if they are guilty of practicing the square peg syndrome then they need to take immediate action to correct it.  This also applies to those individuals that know they are square peg, correct it.  Round peg, round hole - it truly does make a wonderful fit.

- Victor Aspengren

Flickr photo by danstorey14

The power of perspective

Image via Wikipedia

One of the issues faced by long time employees is the loss of perspective.  

As the blinders of time narrow an employee's  perspective, they can easily get caught in the trap of  "the grass is always greener on the other side"  syndrome.  If this syndrome is left unchecked, they can become an organizational cynic.

Organizations that understand this maintain a robust training and education program to combat the loss of perspective. Exposing employees to new ideas and thoughts gives them an opportunity to view their work, themselves, and the organization in a different light.

Another tactic is to have a formal cross training program or job shadowing program.  Exposing employees to what others have to cope with in their daily routine can provide a new perspective.

A compelling and unique tool that some companies have implemented is a sabbatical program for long time employees.  This allows a longer and more intense period for employees to gain new perspective. 

These are just a few of the methods to keep the grass greener at work for employees.

- Victor Aspengren

Culture still counts

The topic of how culture can improve financial performance is becoming more prevalent as companies look for ways to compete in the new economic environment.

There is a company that has made culture a priority for over 40 years - Southwest Airlines.  Not only has it been a priority, it has lead to 38 straight years of profitability in the airline industry, which is amazing.

How do they do it?  I was on a Southwest Airline flight yesterday and picked up their magazine Spirit.  The first article in the magazine was by their leader Gary Kelly and it was titled "The Importance of Culture".  It struck me that companies that understand the impact of culture have leaders that walk the talk - Herb Keller, Colleen Barrett, and now Gary Kelly.

Shortly after reading the article an announcement was made looking for a passenger on the plane.  A four year old girl raised her hand and the attendant announced that this was her first airline flight and would everyone give her a round of applause - which everyone did.  He then proceeded to hand her a certificate for her achievement.  It does not take a genius to figure out why Southwest Airlines has had 38 straight years of profitability.

What kind of culture do you have at your company? If asked, would one of your employees raise their hand and would the rest of the team applaud?  If an attendant on an airplane can get a bunch of strangers to applaud someone they do not even know, then leaders should not be afraid to engage their employees and improve their company's culture and profitability.

- Victor Aspengren

Flickr photo by GirlieErin

The CYA culture

Would you want anyone to copy the culture at your company?  In our high stress, high speed world there is a strong prevalence for many companies to adopt a CYA culture -  Cover Your A..s

There are files on computers, desks, home, and in safes where employees are keeping what they hope is a get out of jail free document.

The email or document that will allow them to save face, get back at the boss, or potentially save their job.  Hours upon hours of wasted time is spent on creating and maintaining these files.  What a waste of energy!

The CYA culture is rife with a lack of leadership, clear direction, trust, and respect.  Business is tough today. So why are there so many CYA cultures out there? 

Because it takes a tremendous amount of energy and far to many company leaders will not make the sacrifice to eliminate causes of a CYA culture. If you are one of the millions of employees that live in this type of company culture, a change may be in order.

There is a limited amount of energy each of has to give to life - do not waste it giving it to a CYA company.

- Victor Aspengren

United we stand

Leadership in many cases is a team effort - it can be the board of directors, management group, company division, or a special projects group. One of the reasons that great leadership comes from a team atmosphere is that better decisions will be made.

Groups make better decisions and they can make them just as fast as individuals - follow this link for more. That being said, many times a group makes a decision and then the decision is sabotaged by a member of the decision making group.

A key ingredient in group leadership is that the group fully supports the decision once it has been made.  When individuals of the group "talk behind the back" or say "I never really agreed", this is a sign of poor group decision making. This also confuses those who will be impacted by the groups decision.

Groups make better decisions, but make sure that the processes and expectations for how the group makes decisions and supports them are very clear. Otherwise, your culture will drown in apathy.

- Victor Aspengren

 

10,000 Hours

It is a common discussion by leaders in employee-owned companies that employee owners do not appreciate what ownership gives them, they do not act like owners, and they will never understand employee ownership. 

In the book Outliers, Malcom Gladwell suggests that to gain perfection in an activity, an individual must spend 10,000 hours practicing it. He gives examples of Bill Gates, Tiger Woods and others, where the data supports this thinking. Mr. Gladwell clearly articulates this is not the only factor that leads to perfection of an activity, but it is an important one.

Taking this thought, and applying it to the scenario stated earlier about employee ownership, it makes sense why leaders get frustrated. How many employees or leaders have spent 10,000 hours practicing being an owner in a company? Here in lies a fundamental issue that many leaders and employee owners overlook. 

Every company has its own set of expected behaviors and attitudes that surround employee ownership. The issue is that when, where and how can 10,000 hours of practice occur in an organization? 

The key is to start today. Practice through training, company meetings, sharing financial information and defining the behaviors that are expected from all employee owners. Do not let excuses get in the way. Start small - 10 hours, then 100, a 1,000.

If 10,000 hours of practice occurs, incredible success will follow!

- Victor Aspengren

Flickr photo by einmaleins.olympia

Leadership Unplugged

New technologies develop at a dizzying pace. What is often forgotten is the parallel: the pace of technology-related stress. With all these gadgets, there is a growing obsession with constantly being "wired-in" and connected to the world.

There are 40% of people who admit to checking their work email or work phone while on vacation or at home. When the work day ends, we don’t log off, clock out and go home. Instead, the seductive glow of the smartphone tempts us; we remain completely connected to work, wherever we are.

Technology can be an ever-present symbol of work-related problems. Anxiety from competition in the workplace suddenly has no off-switch. Connection can, in this way, cause disconnection from what is important.

Constant communication can have a detrimental effect to the original goals of communication. It becomes sort of the technological equivalent to "paralysis through analysis."

Permanent plug-in has some measurable drawbacks. One in seven married couples that use mobile devices admits that the devices are causing them to see less of their spouse. Also, 1 in 10 people claim they spend less time with their children under the age of 18 due to technology.

Technology has created a double edged sword in our society. It has increased productivity but at the cost of increased stress on the worker. Innovation in technology has led to America being more productive in terms of speed and output, but that does not mean being permanently plugged in is a cause of this.

Learning where to break from the constant flow of information, and when to direct it, is an important skill. Good leadership recognizes the importance of focus, and can recognize when technology is assisting productivity, and when it is inspiring employees to merely go through the motions.

If you are constantly "wired-in" to the new age of technology you will not be able to hear yourself think. Good leaders establish the expectations for communication with the latest technologies but great leaders are the example of these expectations and have learned to balance demands of work communications with being present in person.

No matter what is going on at your job, always allow time to unplug and recharge.

The Blind Organization

The failure of companies to provide a vision for the organization leads to employees that feel blind. They go through the motions with half-hearted efforts that lead to apathy and poor results. If the company does not know where it is headed, then how can any organization expect the employees to know where they are going.

In many cases, this vision comes from the top leader or leadership group. The vision statement is announced and everyone is expected to buy into the vision that has been handed to them. It may sound good, but it typically means very little to the employees.

A better method for creating vision is getting input from all employees and providing a process that is not controlled or manipulated by the leaders of the company. Leaders need to be involved, but giving up control of the process is key. If the employees of the company are the true creators of the vision, then the chances of the vision actually meaning something increase dramatically. 

As humans, we want to be a part of something bigger - something that has meaning and adds value to our lives and those around us. Understanding how we fit into the bigger picture of life and organizations gives meaning to what we do.

Creating a vision that has meaning is a great way to open the eyes of all employees to the true potential of the organization and how they can help make it happen.

Flickr photo by lupinehorror

 

Capitalism Through ESOPs

There is a growing debate on capitalism and what it will look like in the future. Most people would welcome the chance to build a significant amount of wealth for themselves and their families. The challenge is that the entry into capitalism requires an ever increasing amount of investment. The vast majority of Americans don't have it or can't get access to it.

The world is not fair and that will not change. ESOPs are a vehicle that can allow the average american worker a shot at building wealth and pride, and create a bit of leveling in our wealth distribution. Chris Mackin gives a wonderful narrative about this in The Nation.

ESOPs are not perfect, but they are a viable alternative to the future structure of capitalism.

Flickr photo by boetter

The Power of Goals

It has been proved over and over again that putting goals in writing increases the chances of success. It is a HUGE first step, but it is not the magic bullet to success. There are several key drivers that many organizations fail to implement that increase the chances of reaching the goals that have been written.  Organizations that utilize and practice these drivers increase their goal realization significantly. 

They are as follows:

1.  Involvement in setting the goals

2.  Commitment to peers to achieve the goals

3.  Regular progress reports

4.  Emotional attachment to the goals

When people are involved in the creation of the goals, they have a deeper understanding of the why and how of the goals. It reduces the noise that is typical of top-down goal-setting and moves the organization to action much quicker. 

Commitment to goals done in front of peers can be uncomfortable, but it raises the stakes of meeting the goals. No one likes to let down their team.

Out of sight, out of mind. Without regular reporting and updates, organizations will never achieve a rhythmic cadence for people to follow. Repetition leads to a change in habits.

If goal setting is done in a sterile, here-we-go-again manner, do not be surprised that the organization looks like a zombie movie. The human nature is driven by emotion and far too many organizations forget this fundamental fact.   

Finally, if the organization's leaders do not buy into these drivers, then do not expect improved organizational performance.  Simply put - walk the talk.

Flickr photo by Cheryl Gebhart

Work Sacrifice

Are the sacrifices that your employees make forced upon them or given freely? If these sacrifices are driven by fear of job loss, intimidation, avoidance of home life, looking like a martyr, or an absolute requirement, then the value of these sacrifices are drastically diminished.

The best-in-class businesses know that leaders, employees and families all sacrifice something to be the best. The reasoning behind the sacrifice is what truly defines the intent and value of the sacrifice. Here are some examples:

• Working long hours = avoiding a destructive relationship elsewhere
• Working long hours = facade of being a good employee
• Tolerating verbal abuse = fear of job loss
• Knowing it is wrong and saying nothing = apathy or fear of job loss
• Volunteering for every project = avoidance of real job responsibilities
• Volunteering for every project = justification for poor performance

Sacrifices that are given freely with no strings attached is where true value is created within organizations. Sacrifices that are cherished are tied to deep beliefs, strong values and a better life. 

What is the true reason your employees make the sacrifices they do?  To understand this question you need to know the answer for yourself - do you know? 

- Victor Aspengren

Flickr photo by romanlily

ESOP Ownership Balance

One of the elements that employee owners in an ESOP must come to grips with is the short term vs. long term views of business. Educating employee owners on how the company balances these two views should be a priority and a regular activity.  

The company may have great products, strong market penetration and high profits today, but maintaining this status typically requires investments in new products or services. These investments can be funded by internal cash flow or outside debt. Either way, these new ventures will diminish stock value in the short term with the hope that greater value will be created long term.

The timing of these new ventures in conjunction with when employee owners decide to leave the company can create an uncomfortable situation. Specifically, in a new growth cycle, the employee owner will receive a lower stock value for their ownership balance and may feel they are getting the short end of the stick.

To avoid these situations companies need to invest the time and effort in educating the employees on how a new venture will impact stock value and that the company has to look out for the welfare of employee owners today, as well as those five, 10, 20 or more years down the road. Educating employee owners gives them the information to make a better decision on when to the leave the company if they want the highest value they can get.

The is a balancing act that every ESOP company and every employee owner should become skilled at. 

Flickr photo by Hotdog Photography

Trust

If there is one thing a company or leader should focus on, it is trust.  It is the bedrock of successful companies, cultures and families.  Unfortunately, trust is a vanishing quality in our world today.

The violation of trust has become a mainstream event in our society and companies.  It is not discussed, people are not held accountable and, to some degree, it is accepted as normal behavior.

High levels of trust lead to high levels of safety, tolerance, innovation, communication, creativity... the list is endless.  Trust is the key to unshackling the potential in people and organizations.  If change is needed, then focus on this one important human trait, and only this.  Forget everything else and be fanatical in the pursuit of trust.  It will not be easy, and it will require a tremendous amount of energy in the beginning.

But give it time and the energy will come back ten-fold.   

To put it all in perspective, answer this question: How many times can we violate trust in our most cherished relationships? We know the answer, yet we go about our business lives violating trust like eating candy.

Build trust and unleash the potential in your organization.

Flickr photo by UnforgetFire

End Of The Road

There is nothing more stressful than the termination of an employee.  It is a life changing event for the employee and it should not be a surprise.

Unfortunately, the vast majority of companies do a poor job of letting their employees know where they stand in regards to their job situation - layoff or firing.

Companies that truly believe in their people create a process that is based on respect.  Here are some key elements for a respectful process:

• Regular and meaningful performance feedback.
• Strong support process for employee to correct behavior.
• Strong company training program.
• Human resources should not be the termination lead. They should play a support role for the manager and the employee.
• Company does not fight unemployment filing.
• Explains what type of reference will be given to employment inquiries.
• Has a clear and simple process for the transition of benefits.

How you handle termination makes a huge difference for the employee, the company and the employees that remain with the company.

Do not be the company that terminates an employee and then two months later tells them they will get a severance. Too often, this is a sad but true story. It does make a difference how you terminate an employee.

Flickr photo by blue_william

Socialism or Capitalism?

The debate rages on.

Is socialism or capitalism the right approach to support the people in this country? Both have advantages and disadvantages. Is there something beyond both of them that could work better?

ESOPs (Employee Stock Ownership Plans) could be the solution. The idea is shared ownership not equal ownership. Ownership is typically distributed based on wages, but there are variations where ownership is distributed on hours worked. In either case, those that have a perceived higher value to the business (hours or wages), and stay with the company longer, receive a greater ownership stake.

Ownership implies that you accept the risks and rewards that come with it. The actions of the owners make a difference in the value of their company, whether it is the individual owner or the owners as an organization. 

The research shows that involvement by the owners creates better financial results. If an $8 an hour employee can build a retirement account of $30,000 in five years, is that success? If a company of eighty employees has a six-figure retirement account, is that success? There is no right answer, but these results are actual examples from ESOP companies. If an individual does not like the results, they have the choice to leave. There is no gun pointed at their head requiring them to stay.

It is time for owners, employees and companies to quit acting like there is a gun pointed at their head and realize that they have a choice to do something different and become something better - to go beyond socialism and capitalism.

Flickr photo by fenderjrp

Is your work a choice?

For most employees, work is not a choice. It is a forced action. This is one of the biggest obstacles to creating a productive and engaging work culture.

The requirements of money, family and benefits push people to a forced action versus a conscious choice of fulfillment at work. What were the real reasons you chose your current occupation? Chances are high that life fulfillment was not a priority at the start.

Once the routine of pay, benefits and work schedules have set in, the question of "why do I do this" sets in. This internal conflict keeps employees from being engaged and productive.  It is not easy for a company culture to overcome this internal conflict and that is why many companies give up on culture.

Those companies that create a culture that allow employees the slightest chance of finding a sense of fulfillment perform well. Those that allow fulfillment to flourish blow the doors off performance. What culture will your company choose?

Flickr photo by H.R. Hatfield

The Cooperative Alternative

The economic downtown and the loss of jobs has created a souring opinion of work, leaders and corporate America. The sudden loss of a job emphasizes how little control individuals have over their employment status.

If it is important for people to have more control over their work, then the cooperative model should be considered. The model has been around for centuries.

The cooperative principals are as follows:

• Voluntary and Open Membership
• Democratic Member Control
• Member Economic Participation
• Autonomy and Independence
• Education, Training and Information
• Co-operation among Co-operatives
• Concern for Community

Cooperatives provide direct control by the workers of the business. In some cases, each person has a vote. The U.S. Federation of Worker Cooperatives gives more detail of the principals at their website. 

Cooperatives have not been a mainstream business model in the United States, but maybe it is time for them to become a major player in the recovery of our economy.

Flickr photo by BNNS.de