A company that offers its employees the opportunity to become co-owner is more resilient in times of crisis. This is not the conclusion of a recent study, but the result of research that has been conducted for decades around times of crisis. We’re talking about the 80s, 90s, and around ’08. We saw the latest blow being dealt by the coronavirus pandemic.
Positive impact of employee participation
Most research into the impact of employee participation on the performance and resilience of companies in difficult times comes from America. There (due to good legislation) a significantly larger group of employees is co-owner of the company they work for. In an interesting article on the website of the National Center of Employee Ownership (NCEO) some research results from ’86 , ’87, ’96, ’00, ’08, ’10, ’12 and ’14 are bound together to provide a clear overview of the (positive) influence of employee participation plans on the performance of a company. This shows that companies with participation plans:
- quickly show 2% better sales and employment;
- show approximately 4-5% increase in productivity per year; and
- quickly score 52% better on their social performance (measured in Europe).
Ultimately, the Upjohn Institute study “How Did Employee Ownership Firms Weather the Last Two Recessions?“ shows the positive influence of employee participation on the survival of a crisis. Companies with an employee participation plan had the fewest layoffs in both 1999 and 2009 and they were up to 20% less likely to go out of business. It also showed that companies whose employees are co-owners showed much greater social cohesion. A kind of corporate nationalism, which ensures that its community (however small) stands up for each other, so that harder economic blows can be absorbed.
Collaboration is everything
What about that direct blow to the economy from the coronavirus pandemic? Ultimately, it is easy to explain why our financial engine stalls during the outbreak of an unstoppable, violent flu wave. When people can no longer work together, can no longer form a group and have to continue alone, a company loses all the strength it has as an ‘organism’. A society where everyone works together has the tremendous effect that the whole is worth more than the sum of its parts. Literally: Two individuals will not get further than themselves. When two people work together, this quickly has the effect of three. In larger groups, 100 people working well together can produce more than 100 people working on something individual at the same time. This also means that more value can circulate in a group where everyone works together and is in contact with each other than in an equally large group where this is not the case. Now that everyone is at home due to the pandemic, that powerful economic device is stalling. People no longer work together, no longer produce together and are left to their own devices.
Research EFEO and EP
Furthermore, the European Federation of Employee Ownership and the European Parliament have conducted several studies on the influence of employee participation plans and published the very positive results. The interest of the European Parliament is not only based on interest in business operations. This is also fueled by self-interest. Unsurprisingly, an entire community’s economy is more resilient to financial slump when there are more employee participation plans and employee owners in the community. It makes companies more resilient, and thus the economy as a whole more stable.
Fewer ‘owners’ – so less resilient?
“Is the opposite also true?”, I wonder. Are economies with a central group of ‘owners’, ‘rich’, less unruly? Indeed, it turns out that the more centrally capital is governed – and the more centralized ownership is – the harder an economic blow can hit. Unfortunately, not every country in Europe has already put this on the agenda so well that the legislation has been adjusted accordingly. As explained in previous Share Council articles, there are still many bureaucratic hurdles to overcome before an employee can be made a co-owner. But with small steps – and especially through digitization – we always come a bit closer to the ideal situation where everyone co-owns the company they work for.
Through the heavy weather
These are exciting times, around Corona. We are preparing for a significant economic storm. In addition, we like to work hard for Dutch SME’s. Have you also thought about making all your employees co-owners and going through the heavy weather with them? Are you suffering from hard liquidity blows?
Suppose there are liquid challenges and you are looking for alternatives… we provide a Quick Scan free of charge to gain immediate insight into whether these alternatives (participations, making shares available, etc) can be used for your company to solve financial problems.
Would you like to learn more about cooperation and the possibilities it provides? You can! Go to our website and discover the Share Academy. Here you will not only find more blogs, but also the knowledge base where you will find even more information. Any questions after this article that can’t be found on the website, or just want to talk to us? Do not hesitate to contact us, we are happy to help.
Quintus Willemse – Team Hero 🦸♂️ and participation specialist
founder Share Council