Can employees truly become Owners!

Most CEO's I meet, have one consistent grouse-My employees don't think like owners, they don't think as if the company is their own. They are often indifferent to the outcome and most often task/activity based. Though they may be aware of the financial difficulties and the business environment they still insist on increments at the end of the year and that too anything less than 15% is reciprocated  with raised eyebrows…

Per se there' nothing wrong with entrepreneurs thinking on these lines and most entrepreneurs are tempted to think some time or the other in this direction especially when frustration from business takes the better of them(I mean us, I too am included).

Calmly we should pause and ponder on whether there is legitimacy in thinking on such lines with sustainability or are we being merely opportunistic and desperate to tide over the present economic realities. While I shall not sit in judgement on this aspect, I may have some insights to offer....

If we were to examine the definition of ownership, out of several dimensions involved in ownership one aspect is the possibility of an infinite upside and even the reality of a significant potential downside!!! I think we would all agree out here on this aspect. That’s also one of the main elements that differentiates an employee from an owner.

For an employee, rarely is there any downside in the form of penalties for things not happening right or for not achieving even the base expectation for which he /she was hired. The upside for an employee is more in the form of increments, incentives (generally limited) which in most cases is generally semi-structured in SMB's.

In quite a few traditional, family run enterprises, the incentive is extended to employees during Diwali as a Bonus. Invariably the employee is unaware of how much he will receive...and it’s given towards a mixture of loyalty, obedience, good performance etc. Rarely are there structured KRA’s against which payouts are made.

Another observation is that immaterial of the debtors situation/outstanding and cash flows, most owners pride themselves to pay on time for the past 20 years without delay. Hence immaterial of the cash position, immaterial whether the owner has to borrow to fund the payroll-employees must be paid. The best part is that there is a high possibility that the situation was created by employees in the first place for wrong billing, not completing work as per the phased development to bill, weak collections etc

So while most owners take a Raja/Praja view we still expect the employee to be owners in the format?? Incidentally this term of Raja/Praja was shared during one of my interactions with an owner….

Now while the thinking is magnanimous and not for a moment, I am advocating that it is incorrect, does it weaken the argument of employee ownership!!!. One may argue that employees must be paid on time which is not something that should be debated and indeed there may be merit! but does this not also apply to owners, should they not be paid on time????

I know of several instances when the owners draw salaries less that the top executives employed. Owners generally take their compensation last, they have no fixed remuneration and generally take drawings as and when there is a requirement or scope to draw cash.

So the moot question is can employees become true owners within the perimeter of their operations. 

The answer is "YES" but it needs to be structured and crafted within certain riders and within a culture that fosters ownership. Ownership within an enterprise at the minimum would mean making employees being accountable for the outcomes of the job they manage. As the levels increase ownership must graduate to include P&L responsibility. 

During my recent discussion with the Managing Director of one of our esteemed clients, he mentioned that he wanted his senior management to be more of owners whose compensation is aligned with the output they produce. The higher business they achieve, the higher amounts they can earn. Moreover if they can't fit into this system of thinking either they should downgrade their role or refrain from requesting for annual salary increases. Strong views and approach but this is one thing which plagues entrepreneurs immensely...Employees are always in a queue to ask for increments immaterial of the realities of the market or business. In this matter they are extremely persistent (wish the same extended to business!!)

In fact when I quizzed him further he mentioned that senior management should look at it in a way where he was providing them space, infrastructure, clients and a certain minimum guarantee on compensation but beyond that they should earn it. Wow…It’s sounding quite like a variation of a franchisee system. Interesting perspective…. and the rigors of the market are forcing all of us to align in this direction. Bluesky is working on providing him with a viable solution which we hope to leverage across the portfolio of the clients we service…

These are real issues before HR and the concept of ownership will only advance from here. Top level executives must be tied to the top line and bottom line of business and must have something to lose if they don't meet the numbers. If businesses can have penalties in the form of SLA's why not these getting appropriately passed to employees. 

Bluesky has implemented the Incentive and Penalty structure for quite a few clients with encouraging response. Of course these things will take time as it goes against conventional mindset. But the business environment globally is forcing entrepreneurs to be unconventional and instilling ownership among employees is not only unconventional but also a strategic advantage to business. 

Do share your thoughts, views, perspectives including your disagreements.