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ESOP

Top 7 Pitfalls You Need to Avoid When Building an Ownership Culture

Foster growth and profitability through an ownership culture that transcends superficial perks, shaping behaviour, values, and accountability.

Ownership Culture Promotes Growth & Profitability

Many companies talk about cool perks like free snacks, but those things don’t really show what a company’s culture is like. Culture is like an invisible force that affects how everyone in a company thinks, acts, and treats each other. It’s seen in how bosses treat employees and how employees treat each other. It’s also about things like how people can grow in their jobs, how pay and promotions work, and how responsible workers are for their performance.

Research has shown that companies where employees have a say, like ones where they own part of the company (called ESOPs), tend to grow faster, make more money, keep employees longer, and even pay better.

But having a good culture isn’t just something bosses say – it’s made by everyone who works there. It’s like a living thing that keeps changing and growing with the business. If it’s not changing, you might run into some problems, and that’s a sign that it’s time to make some changes.

Reliance on One-Way Communication

Recognising when people feel unheard is crucial; ignoring them hampers engagement. True engagement blooms when employees feel their ideas and problems matter. This dynamic is invigorating and empowering.

Leaders can foster connection and listening through various means:

  • Personal Check-ins: Regular one-on-one conversations.
  • Surveys: Conducting quarterly surveys to gather insights.
  • Suggestion Boxes: Providing a platform for anonymous suggestions.
  • Open Office Hours: Allowing employees to approach leaders with ease.
  • Monthly Meetings: Regular group discussions for sharing ideas.
  • Online Channels: Creating dedicated spaces on platforms like Slack or Teams.

Failure to Create Ownership Opportunities

Establishing an ownership culture should be evident right from the outset when job candidates first engage with your organisation. They should sense it in how their questions are answered with confidence and authority. Following their recruitment, the onboarding process and training should equip them with the necessary knowledge to excel.

Through professional development programmes, company-wide initiatives, and involvement in culture and communication committees, employees can actively contribute to shaping the collaborative workplace. It’s important to note that ownership thinking can be cultivated over time, so offer meaningful opportunities for employees to adopt this mindset as they progress within the organisation.

Reluctance to Embrace Open-Book Management

While no one is proposing that you reveal confidential HR files or disclose every financial detail, there’s value in helping your entire team understand how their efforts impact the collective bottom line. Embracing open-book management and consistently sharing specific key performance indicators isn’t just about keeping employees informed – it’s about showcasing a sense of ownership in action.

In the end, an ownership culture thrives on mutual trust. As a leader, you can display your confidence in your employees’ ability to critically assess company performance, to inquire about unfamiliar concepts or matters, and to treat sensitive information with discretion. This approach fosters pride and a strong commitment to meeting expectations.

Neglecting to Include a Diversity of Viewpoints

A cohesive sense of collective ownership stands in contrast to corporate groupthink. An ownership culture injects a democratic essence into the workplace, allowing space for fresh ideas and inventive thoughts. A broader, inclusive perspective frequently emerges as an organic outcome of attentive, empathetic listening.

It’s worth acknowledging that numerous employees encounter marginalisation at work, stemming from variations in identity, abilities, language, and more. At its finest, an ownership culture ensures that every employee feels acknowledged, prompting them to actively contribute to the collaborative atmosphere.

Regarding Ownership as a Handout

When ownership is bestowed rather than earned, the impact can lean towards paternalism rather than empowerment. In reality, a study uncovered that family-owned businesses managed in a paternalistic manner encountered diminished growth across successive ownership generations.

However, if an ownership culture is woven into your recruitment procedure, candidates will perceive their employment as an achievement within your team. Equity compensation schemes such as employee stock purchase initiatives and employee ownership via an ESOP provide a tangible, down-to-earth sensation of ownership involvement in the role, as they link an employee’s understanding of the company’s share value to their job performance.

Lack of Clarity in Your Organisation’s Mission

Shared ownership doesn’t imply that every employee participates in every decision – that would result in chaos. Instead, HR should take responsibility for conveying the mission to every candidate during the hiring and onboarding stages. New recruits should step in already grasping the purpose from day one.

Once trust and transparent communication are established with employees, and they comprehend the mission and acknowledge its significance, their performance tends to improve. Understanding the reasons behind their daily duties adds a sense of purpose, enabling them to apply critical thinking and exercise authority in uncertain or demanding scenarios.

Reverting to Micromanagement When the Going Gets Rough

In an ownership culture, the opportunity for professional growth and continuous learning extends to everyone, including top-level leaders. This encompasses mastering the art of guiding the business without falling back on bad habits when obstacles arise. Consider the frequency of market fluctuations and how external factors can impact your business, beyond your control.

Now envision encountering such challenges after stripping away autonomy, authority, accountability, and trust – things that employees cultivate when encouraged to think like owners. Upholding this shared sense of responsibility fosters incentives and sparks innovative problem-solving across the team. In fact, a recent study revealed that companies with ESOP ownership showed notable resilience during the pandemic’s challenges – precisely the type of unpredictable scenario where you want your top talent to be engaged in finding solutions.

Make Ownership Culture Part of the Company Mission

Culture represents a collection of core values that transform into actions. It defines how things are done and the expected responses. A robust culture encourages employees to:

  • Understand how leadership wants them to react in any situation.
  • Believe in the validity of these expectations.
  • Expect recognition for showcasing the organisation’s values.

Creating a strong ownership culture starts by identifying core values and outlining corresponding behaviours. Surprisingly, nurturing an ownership culture requires more than just employee ownership for ESOP companies. However, a few impactful steps can swiftly infuse a stronger sense of ownership thinking.

In the realm of corporate governance, shareholders can legally ensure that retaining employee ownership is a company objective. Both the ESOP and its ownership culture should be embedded as long-term strategic goals. Selecting board members with ESOP expertise, who wholeheartedly support both the ESOP and employee ownership, with training as needed, is crucial. Shareholders should evaluate board members based on their effectiveness in backing the ESOP and ownership culture.

For optimal results, the board should integrate the ESOP into long-term corporate strategy and consider future repurchase obligation forecasts in strategic planning. Sustainable ESOP practices involve substantial ESOP contributions, continuous assessment of employee benefits, distribution policies, and funding. Implementing a policy to evaluate unsolicited offers ensures shareholder (employee) interests are safeguarded.

The influence of a robust ownership culture extends to the trustee’s fiduciary risk. By electing board members supportive of ESOP, the trustee demonstrates acting in shareholders’ best interests. In ESOPs where a control premium was paid for voting rights, the trustee bears the responsibility of preserving both voting control and control in practice for the ESOP.

FAQs

How do you build a culture of ownership?

Building a culture of ownership involves aligning core values with behaviours, fostering employee understanding, and recognising contributions that reflect organisational values.

What is the ownership culture?

Ownership culture embodies a workplace atmosphere where employees feel deeply connected to the organisation's goals, demonstrating accountability, innovation, and alignment with company values.

What are the four elements of ownership?

The four elements of ownership include understanding leadership expectations, believing in those expectations, anticipating recognition for upholding organisational values, and aligning behaviours with core principles.

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