Leadership Lessons From Employee-Owned Companies

Have you ever heard that employee-owned companies can earn higher profit margins than their non-employee-owned competitors in the same industry?

If you have a company full of talent, even if you don’t have any employee ownership program, you still might like to know:

What Can High-Talent Companies Learn From Employee-Owned Companies?

P5 Radio
 asked Dr. Stephie Althouse, Geek Guru, founder, and CEO of Top-Notch CEO, for another interview about exactly that topic.

Here is the podcast of the interview:

If you prefer to read the interview here it is. Enjoy and Please follow us on LinkedIn and Facebook.  We love your comments and thoughts as well. THANKS!

Robert: Hi, this is Robert again with P5 Radio and this is part of our ongoing series of conversations with people that are making a difference, and people we think you might want to listen to. Our guest today again is Dr. Stephie Althouse. She’s coming back to talk to us about leadership training lessons from ESOP companies. Welcome, Dr. Stephie.

Dr. Stephie: Thank you.

We’re Going to Talk about the General Topic of Leadership Training, But in Particular, Leadership Lessons Learned from Employee-Owned Companies

Robert: All right. It’s good to have you back. As I alluded to, we’re going to talk about the general topic of leadership training, but in particular, lessons learned from employee-owned companies. So, I guess you could also say it’s what high talent companies or geek companies can learn from ESOPs.

Dr. Stephie: Absolutely.

You Define Geeks as Top Experts in Their Chosen Fields?!

Robert: In our last conversation, we were talking about your work with geeks, which you define as top experts in their chosen fields, from technology and science to engineering and high-end construction, insurance etc. These are all kind of geeky fields. You call those companies high-talent companies. Is that correct?

Dr. Stephie: Absolutely. These are all companies that you couldn’t just do [the job for successfully] walking off the street and start doing it, but you need some training. It’s pretty expertise-intensive, so we call those high-talent companies.

Robert: Super. I know from your website and from talking to you over the past few months, that you also work with employee-owned companies, hence the title of this talk. But what exactly does employee-owned mean?

What Exactly Does Employee-Owned Mean?

Dr. Stephie: Well, it means exactly actually what it sounds like it means. It means that the company is either completely or in part owned by the employees.
Robert: That makes all kinds of sense. So what do you like most about working with ESOPs or employee-owned companies?

Dr. Stephie: Well, to me it is really a wonderful vehicle because what happens when employee-owned companies are run correctly – and trust me, there are lots of them that are not, that are not optimally taking advantage of the fact that they’re employee owned. But employee-owned companies really have the potential to empower their employees, because they can train them and give them the opportunity to think and act as an owner. And they also have the opportunity to increase the profit margin over companies in the same industry that are not employee-owned. So there’s really a wonderful situation whereas the traditional thing is you have owners and you have employees.

You usually don’t have anything in between. This is a situation where you can be an owner, but you’re not the only owner. You’re an owner together with a bunch of other people, and there’s a structure around it. Ultimately ESOPs are a retirement plan, but if this is run correctly, you can really feel like you’re contributing to the direction of a well-run employee-owned company, and you’re giving input and you’re making it happen. You have an influence on what happens with the company. For better or for worse; hopefully for better. That’s what I love about employee-owned companies. It’s another way to be an entrepreneur, in essence.

Robert: Okay. If I were to guess, I would guess that the majority of the ESOP companies that you work with are also kind of geeky? Or tell me a little bit about that.

 The Majority of the ESOP Companies That You Work With are Also Kind of “Geeky”?

Dr. Stephie: Yeah, among the employee-owned companies, which they’re certainly not the majority of companies, let’s say in the United States…. I forget what the number is lately, but around maybe 11,000 or so companies in the U.S. are employee-owned. But among those, you have all kinds of companies. We tend to work with the ones that are also more in the geeky arena. For example, engineering, high-end construction, architecture, CPA firms – you know, companies again, you can’t just walk off the street and start working there, because you need a lot of expertise. You need to be a geek. In our definition of the word, meaning you need to know your stuff really well, and hopefully, you also have a good amount of passion to go with it.

Robert: Well, okay, so I think you’ve set a pretty good base case that there are a lot of lessons to be learned and transferred, if you will, from ESOP companies to other traditional companies, I guess is a better word to say it. But what would you say is the number one thing that regular high-talent companies can learn from employee-owned companies?

What is the #1 Leadership Lesson?

Dr. Stephie: Well, I would say the number one thing has all to do with how do you build a top-notch team, and how do you have a [top-notch] mindset? So, I guess that’s two things. I cheated. Okay, let’s put the mindset first. The owner mindset versus the traditional employee thinking. There’s a big difference. What do you think about as an owner of a company? Well, you think about the bottom line of the company, making sure the company stays in business and grows instead of losing money and going out of business, and everybody loses their job, etc. You think about the positioning of the company in the marketplace. A traditional employee thinks more about things like, okay, when am I going to get paid? What are my benefits? How much vacation do I get? Do I get health insurance? Oh, by the way, what do I get to work on? Do I have some opportunities for professional and personal growth? Is this possibly an opportunity for some work-life balance? You know, exceeding the normal realm? Things like that.

[Typically] there are very different mindsets between an owner and a traditional employee. Well-run ESOP companies, they actually invest in their employees, and in their employee-owners, and they train them to actually adopt the owner mindset. Because you can’t expect to simply slap a label on a company and say, “We’re now employee-owned,” and expect that everyone’s magically going have a different mindset. If we now transfer that to other types of high-talent companies that are not necessarily officially employee-owned, you can still work on the mindset of the people, and you can give them training. We can talk a little bit more about that in depth because there are certain aspects. I want to give you some examples for that, what this really looks like.

Robert: Okay.

First of All, There Has to Be Some Sort of Channel for Giving Input

Dr. Stephie: Well, let’s say, for example, first of all, there has to be some sort of channel for giving input. You can’t just have a mailbox and say, you know, “If you have some input, put it in the mailbox.” Well, that’s a good start, but by far not enough. So there have to be some sort of systems in place where employees know that they’re definitely invited to give input and maybe even expected to give input. Then you have to actually truly listen. In fact, if you want to read about any of this, I’ve written a couple of books called “101 Quick Tips for ESOP Leaders,” and also “101 Quick Tips for High-Talent Companies”. So the top-notch team chapter is what we’re talking about here a little bit.

You have to create the channel for giving input, and you have to actually listen. Otherwise, the idea that you really have any significant input into the company and that you’re supposedly a part owner, that just seems like a farce then.

The ‘Truly Listening Part’ is Probably as Hard for Management as it is For Employees to Give Honest Input?

Robert: Well, I think the truly listening part is probably as hard for management as it is for employees to give honest input, wouldn’t you agree?

Dr. Stephie: Well, that’s why it requires a period of training. By the way that can’t be just the one-time workshop, in my experience. But it takes, let’s say, six months or so of really working with your people and fine tuning that, and then maybe periodical workshop again. We have various programs for this. But you can’t just do it one time. You have to give it some consistency because what you’re changing is the mindset, and that’s not an event, but it’s a process. It can be done reasonably quickly, so it’s not like an overbearing thing, but you’ve got to invest in it.

It’s an Investment That Will Get Paid Back in Spades in Terms of Not Just the Company Culture and the Kind of People You Attract, But it Will Pay Back in Terms of the Bottom Line.

Dr. Stephie: It’s an investment that will get paid back in spades in terms of not just the company culture and the kind of people you can attract [both staff and clients/customers], but it will pay back in terms of the bottom line. Speaking about the bottom line, you got to teach the employees – or the employee owners, in the case of ESOPs – how they can actually impact the bottom line. Because, a lot of times, in the normal company model, the leaders know what’s happening to the bottom line. How much revenue is taken in, how much profit is made, etc? And the employees really don’t have a clue. They see their paychecks and that’s pretty much all they see. Or maybe they see a big contract coming in, but they don’t know what the overhead costs, what the cost of goods sold is, etc. They don’t have any clue. They’re not given insight into that, typically. So, if you teach the employees how they can actually impact the bottom line, how their daily decisions, daily behaviors, impact that, then they really start to feel like, “Oh, okay.” They have actually the tools and the knowledge that it takes to have an owner mindset.

Robert: I would imagine that that kind of opens up the lines of communication between employees and the businesses itself?

Effective Communication is of Course, Very important. It Starts with Actually Setting the Scene Correctly. Typically When We Go into a Company, We Roll Out a Set of Rules With Them. We Discuss Them, We See How They Like These Rules. They’re Designed to Work in High-Talent, Highly Innovative Environments.

Dr. Stephie: Yes. Absolutely. Effective communication is of course, very important. It starts with actually setting the scene correctly. Typically when we go into a company, we roll out a set of rules with them. We discuss them, we see how they like these rules. They’re designed to work in high-talent, highly innovative environments, so they’re not viewed as restrictive, but they’re more like a general code of conduct. For example, rule number four says that only make a commitment that you’re willing and able to actually live up to.

Then if for some reason, something comes up, then you have to communicate that something has come up, at the earliest possible time. That’s often not done. I mean, I’m sure you have experienced this yourself, that if somebody says, “I’m going to deliver this thing by tomorrow, one o’clock,” and at one o’clock this thing isn’t there, and then maybe you have to hunt the person down to find out where the heck is it. Instead of maybe the person calling you at nine in the morning and saying, “Such and such a thing has just come up, and there’s no way that I can deliver this by one. I’m very sorry.”

The next part of the rule comes in, which is you have to suggest a remedy to the issue, as soon as possible. The person might say, “I’ll do it this afternoon. You’ll have it at 4:30[pm].”

Robert: That kind of good communication is not just work related, but it’s going to help everybody in life. Life works better when people communicate like that.

Dr. Stephie: Right. These communication rules actually also include what do you do if there’s an upset. We talk about how do we feel about gossip. To communicate only with good intentions, etc. So these are very basic rules, but they’re proven to work in high-talent companies. Essentially, they establish a foundation for communication that’s harmonious and respectful and focused on having good success.

Robert: Well, let me ask you something, because I did read your book, and I know that in chapter seven and in the same chapter, you talked about talent positioning. I know we could probably spend a whole hour on that, but I was going to ask you if you could give me a brief overview of what that is, and how it works.

You Talked About Talent Positioning. Could Give Me a Brief Overview of What That is, and How it Works?

Dr. Stephie: Absolutely. Here we’re talking about high-talent environments. Presumably, the people who you have on your team are all very talented in the area that you need them to be talented in. However, even when you have exactly the right mix of talent, there’s still an optimization process that can be done that brings about a huge increase in productivity, and a huge increase in just overall satisfaction for everyone. Imagine if everyone got to work in the flow of the top talent, basically almost all the time, or at least as much as humanly possible, what would that look like?
What we do for that is – again this is sort of a quick overview – we’ll ask the persons to take a 20-minute online test. This [process] is, by the way, not about creating a label, but more an opportunity for a conversation. The person looks at the test results, and it’s not highly granular. It has only eight dimensions of talent. For example, are you a highly innovative person? Are you more a systems person? Are you a very detailed person? Are you a person who’s awesome with leading people? Are you great at promoting things? Are you very in tune with the timing of things? Things like that.

These kinds of talents – we all have some of each, but we have dominant areas. By knowing the dominant areas, we can have this kind of conversation:
The first conversation we have is, to what extent does it reflect how you see yourself? Because again, it’s not a label that we slap on your forehead. Then we can have a team conversation about who is most suitable to do what within a given team.

It’s also really an excellent tool for recruiting in the first place. So, you can really optimize it. I brought this into teams. Let’s say there was a small team of just three people, and they had the ideal combination of talents in their team. However, they had assigned the responsibilities in a sub-optimal way, and when we shifted that, there was a vast increase in both productivity and happiness of everyone on the team that resulted from that.

Robert: I can certainly see how all that would help you recruit, attract and shape everybody’s responsibilities like you said. Is there anything else that we can learn?

With Well-Run ESOP Companies, There’s Often an Immense Pride in the Company, it’s Mission. And They’re Very Protective and Proud of Their Culture.

Dr. Stephie: Yeah, absolutely. I find that with well-run ESOP companies, there’s often an immense pride in the company, it’s mission. And they’re very protective and proud of their culture. They also often take the time to actually define their core values, and they use all of the above to attract the right people to their team and repel the wrong ones. That really helps with respect to making the company successful and making working there the satisfying experience that you want it to be.

Robert: Super. Wow. It sounds like we’ve, well we are getting close to our allotted time, so I think the thing to do is to thank you for your input. I’m sure that our listeners got a lot of value out of what they heard, and thanks again for coming, Dr. Stephie.

Dr. Stephie: Thank you for having me on again. Ciao!

Robert: Ciao!

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