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The Ownership Culture
Servant Leadership

The Ownership Culture

How to build-in participative management and help employees think and act like owners

Joao Gamas profile image
Apr 06, 2020 • 6 min read

A few years ago I got called into an engagement that I thought was the dream of every change manager or enterprise coach. This was not any organization, and in fact it was not even a corporation. It was actually an association, where employees were 100% owners. I mean, they were literally owners of the enterprise. What more empowerment could you possibly ask for?

I go there wondering what I could possibly contribute, and even more curious about what I could learn from such a giant. They had incorporated agile methodologies, created an entire change management structure, and hired (many internally) legions of change agents. They showed me rooms covered in post-its, pleasant work areas with natural light, and took me to lunch with the team. Everyone was friendly and welcoming, dressed casual and seemed to lack stress. We struck a conversation as to how the team came together through identifying people with the same personal mission.

After lunch they dove deeper by saying that in most companies employee engagement efforts turn to some type of employee profit sharing program - either through stock ownership (ESOP) or through an incentive program tied to overall results. But in this association they were way beyond that, since each employee simultaneously were insured by each other and, as a group, own all the assets of the enterprise. It wasn't a profit sharing program - the actual enterprise was wholly owned by the employees.

The performance of companies with ESOPs has been studied in some detail, and the research indicates that they typically outperform their peers. For example, data from the nonprofit National Center for Employee Ownership (NCEO) shows that ESOP companies register 25% greater job growth over a 10-year period than similar companies with conventional ownership; they also see an average yearly increase in return on assets of 2.7 percentage points. Productivity improves by 4% to 5% in just the first year after adoption of an ESOP.

Joseph Blasi, Douglas Kruse, and Dan Weltmann, of Rutgers University, examined more than 300 privately held companies that set up ESOPs from 1988 to 1994, comparing each one with a similar, conventionally owned company in the same industry. They found a higher sales growth and higher revenue per employee in ESOP companies than the rest. Kruse and Fidan Ana Kurtulus, of the University of Massachusetts at Amherst, found that companies with a high level of employee ownership were more likely to survive downturns and suffered much less layoffs.


So what can I contribute? I asked having no idea what the answer could be.


“We’ve come to realize that a decent living in the new economy entails more than a generous wage; it involves sharing the company’s success with employees. It’s also about more than money: People want to learn new skills and to understand how their work contributes to that success.” said the director, looking like she was just getting started. “We have highly motivated employees and an amazing training program, but are really falling short on the delegation of decision making. Our people seem to wait for orders instead of making things happen on their own - they have a strong military background, and have trouble shifting to a completely self-driven environment.”

"I have to say, that to me was a first. Usually companies want to get where this enterprise is, and here they are in uncharted waters facing the next challenge".

Thought the studies on companies with significant ownership reveal impressive results on paper, digging deeper we find what my client was now facing - financial ownership does not always translate into day-to-day operations. It is not about being an owner, it is about thinking and acting like owners. And the companies that truly realize an ownership culture do so by building in structures of participative management. “The positive effects,” write Blasi, Kruse, and Harvard’s Richard Freeman, “appear to depend on workplace policies and norms that support cooperation and higher effort, such as employee involvement in decisions, participation in company training, and job security.” Companies that rely on financial ownership alone see a negligible impact on worker engagement.

My client had a very different history. Where many traditional organizations seem to use corporate ownership as a way to gain engagement, the reality is that financial ownership is simply a visible outcome of a much deeper change in mentality. The organizations that share ownership to gain engagement end up disappointed. But my client never went through the process of sharing ownership - never had the conversations that shape thinking on how or why to get there. Ownership was shared from inception, and the culture had grown around a military governance paradigm. As Mr. Zhang of Haier Electronics (the most well known case of decentralized management) says, “corporate culture can be a double-edged sword: something that helped you become successful in the past may prevent you from future success”. 

There were too many KPIs, often conflicting with each other. The customer acquisition department KPI, for example, was maximizing the number of new monthly policies signups while the credit risk department was policy quality measured by repayment schedules. To increase the number of signups the rules for customer selection had to be relaxed which increased overall credit risk. My client needed a way to help departments break the barriers and find metrics that were easy for everyone to understand.

After much deliberation, we decided on an approach founded in the spirit of jobs-to-be-done - the idea that instead of focusing on target metrics to guide workers we should focus on the progress each individual is trying to make in a given circumstance, or what they hope to accomplish.

Imagine the customer acquisition worker, to take an example. On a Monday morning, half way towards the end of the month and with less than half of the quota achieved, what would that individual think about? In order to meet the quota, s/he must drum up business. It’s time to hit the phone, the email directories, or the lists of potential customers. The priority is acquiring new members.

But is that really what that individual is driven by? As we had multiple conversations with various customer acquisitions representatives, we discovered that it was much more emotional for them. They truly believed that potential clients would be better served with their institution than with any other agent. They really felt that there were not looking for new customers, but instead for individuals to save. 

This was a shocking revelation to me. Most companies only dream of having this kind of emotional connection with their front line workers. And yet there was a disconnect between the front line people and the management system. They were not measured on impact, but on cold numbers.

Armed with this new knowledge, we moved on to identify communities of interest that related to the desire to “save” clients. As it turned out, looking at it from this perspective helped the Credit Risk department to come up with a completely different metric: which were the clients that needed the most “temporary” help while still maintaining a low future risk forecast. The community of interest had centered around getting certain types of clients through a tough spot in their lives.

We next identified what these communities of interest would need in order to succeed. We found that potential customers that fit this new description often were undergoing a personal period that involved some trauma, or difficult emotional situation. They also needed financial security, since these periods consumed a lot of resources, but most of all they needed emotional support.

This led us to the identification of unmet opportunities, in offering “packages” that solved the actual problems of our customers. Part time psychologists were hired and a hot-line was setup that went along with the insurance policies. What we started measuring was not the customers as potential risks, but instead we started measuring how long the recover times would be. Internal success became getting external customers to new life situations, where they could resume normal life.

Our next task was to pass our “customers that resumed their normal life” to a new internal group dedicated to them. The external customer now had a new set of needs, and internally we would setup teams to identify and generate a solution to that moment in the customers’ lifecycle with us.

We had somehow re-imagined how to organize ourselves around external needs - and that was a powerful lesson. As we mapped the entire customer journey with us, we identified certain internal tribes (or segments, as we called them) that either needed more help (due to lack of internal expertise) or that were centered around crucial moments in the customer journey (and thus should receive a greater share of resources). 

Without meaning to, we created a 8-step process to internal re-organization based on jobs-to-be-done:

  1. Define target worker desires
  2. Group around communities of interest
  3. Identify needs to produce desired outcomes
  4. Discover new opportunities where help is most needed
  5. Map the customer journey
  6. Segment internally around outcomes
  7. Invest in crucial tribes
  8. Optimize the customer journey flow

Not only did we re-shape how work was done, but people started working for a higher purpose.

Intrinsic Motivation
Organizational Culture
Autonomy
Business Agility
Culture
Decentralization
Resource Allocation
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Created on Dec 12, 2019 22:33,
last edited on Apr 06, 2020 09:44