Need to know:
- All-employee share schemes can help to boost productivity and employee engagement by demonstrating how individual and team performance can impact on an organisation’s share price and, therefore, the benefit that employees could receive.
- Employee share plans can be used as part of a global engagement strategy, although the type of scheme that can be offered will vary depending on the location. This could be particularly useful after a merger or acquisition.
- Financial benefits, such as an employee share scheme, should be operated alongside initiatives such as a financial education programme. This can ensure that staff fully understand and appreciate the advantages of a scheme.
According to the Global equity insights 2017 report, published by the Global Equity Organisation in April 2017, 40% of global employers define employee engagement as a high objective of an employee share plan and 30% state that employee engagement is a very high objective. In addition, 40% of employers say that retention is a high objective for their scheme, and 41% believe identification with the organisation is a very high objective.
This correlates with findings from Proshare's January 2018 report, Attitudes to employee share ownership, which found that 38% of employees participate in a sharesave scheme in order to own shares in their organisation, compared to 52% who participate in a share incentive plan (Sip) for this reason.
With this in mind, employee share schemes can be a successful component of an employee engagement strategy. But how can employers ensure that they reap the benefits these plans can offer to influence organisational culture, productivity and overall engagement with the business?
The impact on organisational culture
Employee share schemes can provide a more personal, financial link between the employer and the employee. This, in turn, can impact employee engagement because an individual is investing in their place of work. Gabbi Stopp, head of employee ownership at Proshare, says: “Do [employers] want a culture where employees feel a part of something? […] The key thing for me is employee share plans give people a tangible stake in the [organisations] that they work for. It's not just about having a job and a regular wage; it’s about having a bit more than that and another reason to come to work in the morning.”
For some organisations, employee share schemes can be used as a unifying measure after organisational changes, such as a restructure or an acquisition, says Jay Foley, managing director at Computershare Plan Managers. This could assist employers in creating a single organisational culture that keeps employees engaged with the revised business and its goals, especially if the organisation spans numerous countries. “It is one of the few benefits that can be used equally across business lines and across countries, so it helps [employers] to promote initiatives and other strategies within the [organisation] by becoming more aligned with a global organisational culture," says Foley. "The [employee share scheme] could be one of the unifying components that enables [an organisation’s] strategy to come about."
The type of employee share scheme that an employer implements can also nod towards the organisation’s culture. For example, launching a sharesave scheme could demonstrate an inclusive employer attitude, says Charles Cotton, senior performance and reward adviser at the Chartered Institute for Personnel and Development (CIPD). A Sip, meanwhile, could be well suited to supporting a performance-driven culture, with the award of free shares to staff once agreed performance targets have been met.
Engaging employees with the business
Employee share schemes can play a role in engaging staff with organisational strategies and acting as a motivator to drive productivity, says Cotton. For example, employee share schemes can help employees potentially make a connection between their performance, their organisation’s overall performance and, therefore, any fluctuations in the share price. Stopp explains: “All types of employee share scheme will help focus employees on the [organisation’s] share price, and it starts a conversation, [such as] 'How [is] that share price arrived at? What are the factors that influence it? What can I do? What can we do as a team, as a department, as a business unit, to play our part in influencing that price so that everyone benefits?'”
Effective engagement
However, are some types of employee share scheme more effective at engaging employees than others? The use of partnership shares within a Sip are a good engagement method, says Stopp. “Sip partnership shares are probably the most helpful in terms of engagement and in terms of getting people saving and investing on a regular basis," she says. "The hurdles for participation for Sip, and indeed for sharesave, are very low.”
All-employee schemes, which utilise available discounts on an organisation’s share price, can also boost engagement. “I would say more [organisations] find better [results] [...] if they have all-employee plans, so not just executive share ownership, but all-employee plans," says Foley.
Employee share schemes can also be aligned with other initiatives or benefits, for example financial education and financial wellbeing programmes. “There should be an element of independent financial education or financial wellbeing, and share plans should form part of that," says Stopp. "The two are, for me, inextricably linked.”
Engaging communications
Employers must ensure they communicate details of share schemes to employees in the way that they can understand and relate to, otherwise they will not appreciate and value what is available to them. "It won’t impact on employee wellbeing and it’s not going to feed through to things like increased attraction, retention or engagement,” says Cotton.
Proshare's aforementioned research demonstrates the dangers of poor communications, revealing that 17% of employees do not participate in Sips because they are not aware of schemes and 25% do not participate because they do not understand how the scheme works.
Communications around employee share schemes could include face-to-face messages using local employee champions, paper brochures that employees can take home in order to make a financial decision with their families, or digital methods such as text messages, emails, or dedicated micro-sites that contain information solely around the employee share scheme. Features such as a multi-lingual website or an online trading function that uses a real-time trading environment could also aid engagement with the benefit, adds Foley.
Employers offering all-employee share schemes, therefore, should focus on maximising their workforces' engagement with the scheme, as well as monitoring the impact such schemes can have on broader employee engagement.
