Crucial Career Advice Young People Won’t Get Elsewhere
As the mother of five – young adults and teenagers at this point – I confess that as I go about my job as an investment banker, meeting with companies in many industries, I’m constantly wondering which businesses would be the best places to work for young people. First and foremost, young people should stay away from chaotic workplaces. Offices that don’t use basics like document management software from FilecenterDMS.com would be an instant red light for me when visiting prospective employers. Young people should value having an employer that values efficiency and streamlines operations for the good of the company.
The elaborate corporate training programs of earlier times are now few and far between, so helping to size up a potential employer as a good fit for a young person in your family seems all the more crucial. I think about all the usual things: How would a job at a particular company match up with a youngster’s college major? Is it a fast-growing industry that will have lots of opportunities? Is this a high-performance company within its industry? Is the executive across the table from me charismatic and visionary – the kind of person who would make a good mentor to younger professionals?
But I also think about something that might seem more obscure: Does the company have significant employee ownership? And does a participatory work environment go along with that?
You see, for more than 25 years I’ve been helping founder/entrepreneur/CEOs structure Employee Stock Ownership Plans, or ESOPS. And I know from long experience that these companies – there are more than 10,000 of them in the U.S. – tend to be good places to work. In fact, companies with significant employee ownership are over-represented on the national and local best-places-to-work lists one reads every year in business publications.
Among the largest employee-owned companies, you’ll find supermarket chains; major construction, engineering and architecture firms (for example, you could look at one of these senior living design firms); retailers; manufacturers; professional services firms; healthcare companies; distributors or more.
Studies have found that the act of converting to employee ownership itself tends to improve a company’s performance; workers act more like owners. But it’s also true, I’ve observed, that the company owners who chose to sell their business to an ESOP, in part of in whole — rather than sell to a private equity fund or to a direct competitor – tend to be progressive managers who’ve all along cared about their corporate cultures and about their employees.
That makes for a more satisfying workplace and, often, a better-performing company. My impressions are backed up by decades of studies on ESOPs. Steven F. Freeman, a resident scholar and faculty member at the University of Pennsylvania’s Organizational Dynamics program, surveyed a wide array of ESOP research and published findings worth understanding for anyone making career choices:
–ESOP companies tend to pay as well or better than non-ESOP competitors. And then on top of that, workers receive an ownership stake.
–Regardless of the size of the ownership position collectively held by workers – an ESOP can buy as little as 20%-to-30% and still yield considerable tax savings to the selling entrepreneur and to the ongoing company – worker satisfaction rises. The key isn’t percentage ownership, but the extent of employee engagement.
–In concept, ESOPs could increase risk to employees because their paycheck and a significant amount of retirement savings come from the same place, and a company bankruptcy could be devastating. But in practice, Freeman found in the research, ESOP companies fail less frequently than others do. “Most research on employee ownership shows robust, positive, firm-level effects,” Freeman writes. “These studies show that employee-owned firms are more productive and profitable, survive longer, and result in better shareholder returns.”
–Why ESOP-owned companies perform better seems obvious: As owners, employees work harder, make decisions based on the company’s success rather than their own comfort or situation, and there is a self-policing mechanism among workers that prevents waste and other behaviors that undermine success. Oddly, though, the research is spotty on cause-and-effect, Freeman writes. My own observations at scores of ESOP companies, however, support the above assumptions.
–If ESOPs do so well, Freeman wonders, why don’t more of them exist? Good question. My experience suggests that for an ESOP to be a viable option a company must already have in place habits that encourage employee longevity, high levels of training, and practices that seek to instill better work habits from the bottom up.
The work experience at ESOP companies is different and, to my mind, better. Workplace confrontation is diminished. Cooperation flourishes. And employees young and old are able to work up to their capabilities and while doing so build retirement savings far superior to workers in similar non-ESOP companies.
Advising a family member or friend on career decisions? You might want to point this out.
In coming weeks in this space, I will be writing more about exit strategies for owner-entrepreneurs.