A couple posts ago, I suggested that if you want your employees to act like owners (that is, to be fully engaged in their work), then you should treat them like owners by giving them real ownership (equity) in your company. Kathy wasn't so sure, suggesting that there are other ways to "share the wealth" without giving actual ownership to employees.

I beg to differ.

A few years ago, the Gallup Organization surveyed thousands of American companies, and found some very disturbing news. Only 29 percent of American workers -- less than one-third -- are engaged in their jobs, that is, they work with passion and feel a profound connection to their company. However, fully 54 percent of American workers are not engaged in their jobs. But that’s not the end of it. The remaining 17 percent of American workers -- almost one in five -- are actively disengaged in their jobs, that is, they go out of their way to avoid doing their duties and accomplishing the goals their managers set with them.

While giving employees opportunities to become owners may not turn everyone into a fully engaged employee (some people don't care no matter what you do), it will have a significant impact on your organization. Tons of research shows that when you give employees a piece of the company (actually, you don't give it -- your employees earn it), employees perform better, they are more engaged in their jobs, and more loyal. The idea of sharing ownership is not a new one. In the 1880s, William Cooper Procter decided to share profits -- and, subsequently, stock ownership -- with the employees of Procter & Gamble. A number of other key leaders in the early history of American business thought seriously about these ideas, among them Alfred Dupont and J.C. Penney. And today, many of the companies on Fortune magazine’s 100 Best Companies to Work for In America list have some form of employee ownership, profit sharing, broad-based stock options—or all three. Many of them combine these ideas with a problem-solving, innovation-driven culture. 

• In a series of studies conducted for the National Bureau for Economic Research (NBER) Shared Capitalism Project, researchers Joseph Blasi and Douglas Kruse of Rutgers University, and Richard Freeman of Harvard University, found that employee empowerment, good employment relations, and various other work practices help determine whether employee ownership will succeed or not. Employees with the right corporate culture and different types of equity and profit sharing will more responsibly monitor fellow employees.
• A U.S. General Accounting Office study of 110 American firms found that participatively managed, employee-owned companies increased their productivity growth rate by an average of 52 percent per year.
• A study of 45 employee stock ownership plans (ESOP) and 225 non-ESOP companies conducted by the National Center for Employee Ownership (NCEO) revealed that companies that combine employee ownership with a culture of participative management grow 8 percent to 11 percent faster than those without such plans in place.

Is employee ownership the universal cure for everything that ills your organization? No. But when you combine employee ownerhsip with opportunities for employees to participate in decisions affecting their jobs, you've got some very powerful medicine indeed. 

So, the next time you wonder why your employees don't act like owners, consider making them owners. For more information on the best ways to do that (and data to support your case), visit the websites of the National Center for Employee Ownership and the Foundation for Enterprise Development.