The journey from private, closely held company to employee ownership is transformative for all parties involved. Becoming employee-owned creates an opportunity to foster a unique sense of pride and partnership among everyone who’ll carry the business forward.
Once you’ve laid the groundwork and the initial paperwork is complete, you will have achieved a notable business milestone: launching an employee stock ownership plan. That’s already a major achievement — but your ESOP has so much more potential value to offer than “just” a valuable retirement benefit for eligible employees.
As a singular event in your company’s history, your ESOP announcement is your moment to begin maximizing its impact.
To optimize your ESOP’s effects on profitability, company culture, employee engagement and well-being, it’s absolutely vital to get off to a strong start. That means clearly communicating and educating employees about any changes they can anticipate as an ESOP-owned company (and some reassurance about the aspects of work life that won’t change).
Why Does the ESOP Launch Matter So Much?
Your ESOP announcement is a defining moment in your business’s lifecycle. How you choose to announce the ESOP can set the tone of your new employee ownership culture and get every participant off to a great start embracing and engaging with the ESOP. It represents an opportunity to reinforce trust in the leadership transitions that may be part of your succession plan, and to cultivate an inclusive, proactive mindset among employee owners.
Here are our top recommendations to help you make the most of your ESOP launch.
1. Charting the Course: A Transparent Rollout
Build transparency into your transition roadmap. That doesn’t mean employees are involved in every decision or detail; it does mean offering a general timeline of events and key milestones — especially for milestones that have an impact on workers.
Explaining the mechanics of how an ESOP works, in broad terms, is a first step in fostering trust and commitment to the ESOP phase in your company lifecycle. Sharing an approximate timeline and an outline of key process players may be all it takes to put initial concerns to rest.
2. Talk About the Benefits in Terms Everyone Can Understand
Help employees understand what’s in it for them, starting with the basics. For instance, if you already offer a 401(k) plan, then you have a starting point to talk about retirement savings plans. You can draw from parallels to clarify concepts like vesting and how employee accounts may grow over time.
It can also be helpful to call out differences. To participate in a 401(k) plan, employees have to contribute. You might explain that unlike traditional retirement plans, their ESOP “contributions” are their daily efforts that drive company success, which in turn, enhances their future financial security. That’s a great place to start describing what’s in it for them.
But don’t stop at the literal benefits. It can be inspiring to share study results that demonstrate ESOP value. Statistics show ESOPs offer competitive wages and benefits, are more resilient in times of challenge and volatility, and have proven less likely to lay off workers in downturns.
3. Identify & Cultivate In-House ESOP Champions
At least some of your leaders and management team will be involved in the process that takes you from initial ESOP readiness assessment to the completion of your ESOP sale. Empowering those leaders to become your internal ESOP subject matter experts can help you quickly develop and deploy support across the organization.
Be sure your leadership team has a strong understanding of ESOP mechanics and business advantages, and tap your trusted ESOP advisors to learn how employee ownership has positively impacted other companies. Create opportunities to share their knowledge with their reports.
4. Kick Off With a Bang: Announcement Event & Celebration
Your ESOP kick-off event should be uniquely yours but no matter what form it takes, make it a celebration! Consider marking the official implementation date as a historical company milestone you celebrate every year to come as your “annual ownership day” event.
You might make it your biggest annual event — with a company-wide lunch, employee awards and appreciation, reflections on the year’s achievements, goals for the year ahead, and learning events. Consider creating an ESOP welcome kit for plan participants with a guidebook, FAQs, and a basic glossary of terms they need to understand.
It’s also a great public relations opportunity that you can use to add extra “kick” to other efforts—promotions and recruiting, for example. Prospective customers and job candidates may respond well to your new message of employee ownership.
5. Connect Employee Contributions to Company Value
A few weeks post-announcement, you might consider conducting a town hall meeting featuring a panel of ESOP specialists, long-tenured employees, and new hires, to discuss different perspectives on the transition. This can create an opportunity to maximize momentum and enthusiasm around the ownership transition.
Help your team grasp the importance of new ESOP-related documentation and responsibilities, such as the annual valuation, and explore how their daily work has an impact on valuation outcomes. It’s all about connecting day-to-day work with the bigger picture of company success.
You might introduce a “value-creation” training module that helps every employee conceptualize their contribution to the company’s health and shareholder value. Use department-specific meetings to highlight how different teams contribute to the annual valuation—like how the sales team's new contract can increase company worth, which in turn, benefits everyone's shares.
6. New Governance: Shaping the Future Together
Establishing an ESOP often introduces governance changes. If you’re bringing a professional ESOP trustee on board and/or taking steps in succession planning, communicate those changes openly so that employees have a chance to understand and ask questions. Keeping an open-door policy helps reinforce trust and build employee confidence in the plan.
7. Establish an Inclusive Ownership Culture Committee & Annual Calendar
Announcing your newly established culture and communications committee at your ESOP celebration can help showcase its importance. Encourage a broad cross-section of employees to get involved, so participants at all levels of the company are represented and encouraged to actively shape the company culture.
Your culture and communication committee can regularly survey employees, collect their questions and feedback, and help ensure employees are well-educated on what the ESOP means to your organization.
Remember, the big kick-off day is important — but so is every day thereafter. Develop an interactive employee ownership culture calendar that includes regular educational, team-building, and culture-promoting events.
Tap the Experts for Help
The experts on your team of trusted ESOP advisors can be a tremendous asset to your communication and internal promotion efforts. Our ESOP Partners team members are go-to subject matter experts for lunch-and-learn meetings, Q-and-A forums, and much more.
Your team of experts can also help you identify new, fresh ways to connect more effectively with employee teams to address concerns — and to help you find ways for more employees to fully engage with your ESOP, for maximum benefit. Encourage employees to familiarize themselves with the faces behind the firm that will guide your transition, building a personal connection and growing trust in the process.
Your ESOP announcement communicates much more than a financial decision. It’s your chance to inform employees and support their transformation into invested partners and champions of shared success. Learn more about what to expect after the ESOP transition when you download our free guide. Click below for your copy.
