loan repayment in addition to ensuring that it always remains able to buy back the shares of retiring employees. If a company has a large percentage of employees nearing retirement age, there is a very real potential of a cash drain which can divert capital from investment and growth.
There are potential issues for employees too. Their ownership of shares in the company where they work concentrates their economic dependence on that company's fortunes. It’s a common misconception too, that employees can through share ownership have more direct power over decision-making in their companies. Even the famous supermarket giants who trumpet their “employee-owned” status as differentiating their customer service credentials, in reality provide little additional power to their staff. The requirement to have share ownership schemes run independently of the company by Trustees do in any event stifle any leverage which staff might have.
For these and other reasons, the most successful employee share ownership schemes are those provided by conscientious, ethically aware owners of well – managed businesses, who in planning for eventual exit are keen to preserve not just the value of the business but the wider legacies of the company and to reward management and employees with ownership. But they are no substitute for a much more fundamental approach to the motivation of a company’s people - good leadership.
There is overwhelming evidence that for people with moderately satisfactory salaries, just a few basic nonfinancial motivators are more effective than extra money in building long-term employee engagement. Financial rewards mainly generate short-term boosts of effort, which can have damaging unintended consequences. Many corporate scandals in the banking and other financial sectors illustrate the risk of incentivising short- term imperatives such as dramatic cost reduction and quarterly profits, at the expense of long-term, sustainable performance.
Motivating good people is not rocket science. Praise from immediate managers, leadership attention (for example, one-on- one conversations) and the chance to lead projects or task forces can be even more effective motivators than the most common financial incentives of cash bonuses, increased base pay, and stock or share options. Non-financial ‘leadership’ motivators are immensely powerful in making employees feel that their companies value them. And as the global recession continues to erode company profits, they have a key role in mitigating the impact of financial incentives being pared back and sagging employee morale in the face of difficult trading conditions .
Companies face the challenge of retaining talented people amid morale-sapping layoffs that often see top performers among the first to jump ship. Recruiting and retaining new ones, especially in the finance services sector is a serious challenge and yet so often little attention is given to the fact that most people value non-financial motivators more than employers will ever know. Managers under pressure to improve results often abandon the basic behaviours of good leadership, in favour of the more immediate priorities of chasing orders and cutting costs. They praise their subordinates less often, they shrink from delegating opportunities to lead projects or business improvement teams
and they succumb to crude assumptions that people are motivated above all else by money.
It can be true that nonfinancial ways to motivate people can require more time from senior managers and that can lead to managers “hiding in their offices” when overwhelmed by uncertainty about the current situation. This lack of interaction between managers and their people creates a highly damaging void that saps employee engagement.
Some far-thinking companies are working hard to understand what motivates employees. One global pharmaceutical company showed recently that in some countries employees emphasised the importance of supervisors’ leadership capabilities; in other surveys social responsibility and “making a difference to peoples’ lives” ranked higher than increased financial reward.
One-on-one meetings between staff and leaders are hugely motivational – but only if they are truly two-way and genuinely identify how people feel about their work. Such discussions should be frank in confronting the performance not just of the employee, but also of the manager and the company itself. Such discussions need to make clear what is achievable against what is expected and ironically employees will often insist they can do more than managers expect from them if for example, they are given more autonomy, better business processes, better co-worker interaction and above all the emotional motivation to perform.
It’s easier than many think, to make people feel valued and far from throwing money at it, companies which are proven to achieve sustainable performance through motivation, are those that understand what most employees want most – the respect of their peers, admiration of subordinates, approval of their personal network, the feeling that their work has a true purpose and the opportunities for career advancement presented by training and delegated authority.
Those who doubt the superiority of emotional sources of motivation over money need look no further than the elite military units. Their motivation depends not on money but on the leadership capability of their commanders. And not just their commanders in operations, but of their instructors, in the 80% of their time spent in training. There, the emotional values of honour, courage and commitment are instilled by drill instructors whose ability to motivate through exhausting and terrifying training exercises is legendary. Whilst it’s true that initially they may motivate through hate and fear (which perhaps is not as rare in civilian organisations as we should expect!) their exceptional ability to motivate comes from the respect they earn for their own commitment, their beliefs and their leadership by example. The answer to the question “why are these soldiers so highly motivated?” is simple. Pride in themselves and in the unit that makes them shine.
Whether it’s in military or corporate life, the ultimate motivators are emotional – relationships, feelings and values. Money can’t buy them but they’re priceless for businesses that can harness them.
20/20 - Employee Ownership Page 93
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