Now is the Time for Employee Ownership discusses how "business as usual" won't cut it during an economic downturn and how employees with an ownership stake have more at stake and are more likely to rise to the challenge:

If employee ownership is already part of your company, you're in a fortunate position, able to tap this remarkable well of team strength. If not, it's not too late. Think in terms of making a deal with your people. A deal that says, "I'm going to give you a stake in the future of this company. I'm bringing every one of you on as a co-owner of this business. If we can pull together and get our company through these tough times, you will have accomplished something to be proud of and changed your economic status in a very positive way. This is not a guarantee of anything. But it is an opportunity. The companies that survive this period will be in a tremendous position to prosper when economic growth returns. Let's be one of those companies."

It also provides a two-step "rescue package" of implementing an ESOP or another form of employee ownership and developing and maintaining an ownership culture:

Step One. What sort of program or system should you adopt for delivering equity interests to employees? There are a variety of technical vehicles that are available for that function: stock options, ESOPs, stock purchase systems, restricted stock awards, synthetic equity and more. Creating a good program involves drawing from these many choices, and selecting one (or often, more) of these vehicles to form the framework of a system that is a good fit for your particular business. You will then need to address a range of practical and philosophical questions to develop a rationale for determining how many shares to award, when to award them and on what grounds. Ultimately, you end up with a living, ongoing system that, over time, puts an appropriate amount of ownership into the hands of each participating employee.

Step Two. How do we transform employee attitudes and behaviors so that our people start to think and act like owners of the business? You need to begin with the recognition that simply issuing some stock to employees will not by itself produce an instant transformation in their dedication and productivity. Yet there are proven practices that will reliably achieve those results. First and foremost, it takes a commitment to provide an educational process for the participants. A certain level of understanding – about the new system of employee ownership and, even more importantly, about the company itself – is an essential requirement for success. Only when participants understand how the company functions from both an operational and financial perspective will they be in a position to develop innovative ideas on how to operate more efficiently and successfully.

If you are looking for more information, we recently discussed Using an ESOP to Combat the Economic Downturn and Open-Book Management.