Turning Employees into Owners

Question: As my business grows, keeping good employees has become a big challenge. I'd like to explore ways of offering them some type of ownership stake in the business to increase motivation and offer incentives to stay long term. Where do I find solutions in this area for a small privately owned business?

Answer: Thousands of small companies are growing faster and keeping employees longer with employee stock ownership plans (ESOPs) and ownership "cultures." An ESOP is a type of employee benefit plan, similar to a profit-sharing plan. Instead of cash, however, workers receive shares in the company. Company contributions to the plan are tax deductible, within limits. Such plans work wonders for some businesses, but they are not right for all. These resources can help you establish an ownership culture at your business and find out if an ESOP is right for you.

• The National Center for Employee Ownership (NCEO) (www.nceo.org), a non-profit membership organization based in Oakland, CA, is probably the nation's leading source of information on employee stock ownership plans and related programs. And you do not have to join the organization to take advantage of its many resources (although regular membership is only $80 for small businesses). The Web site, for example, has an excellent overview of what ESOPs are, how they work and what types of small businesses have them. In the Reference Desk section of the Web site you'll find helpful information on comparing different types of plans, and a guide for owners of very small businesses who are considering employee stock ownership, including the benefits of taking this approach. You can download NCEO's catalog of publications and services at the Web site. Call (510) 208-1300; e-mail: nceo@nceo.org.
  
  
• The Foundation for Enterprise Development (www.fed.org), and its affiliate the Beyster Institute for Entrepreneurial Employee Ownership, is another excellent resource for biz owners considering an employee ownership program. FED offers basic information about ESOPs, consulting services and help locating professionals in your area. They will discuss your situation, answer questions and outline an approach to employee ownership for your business at no charge, or help design a specific program for a fee. Their online magazine has profiles, news and views on employee ownership from other business owners. Call the West Coast office in La Jolla, CA, at (858) 826-1690; or the East Coast office in Washington, DC, at (202) 530-8920.

• The ESOP Association - an organization of companies with employee stock ownership plans - is a national cheerleader for the ESOP cause. The group's main mission is to persuade the public that employee ownership is good for America. And to that end, they offer extensive (and free) information on how ESOPs work, tax and other advantages of having one and how to establish a plan. One advantage the ESOP Association offers is access to localized advice and information through 19 state and regional chapters. Click on "State Chapters" at the Web site for a map with links to regional chapter listings that include names and phone numbers. Headquarters is in Washington, DC. Visit the Web site at www.esopassociation.org. Call (866) 366-3832; e-mail: esop@esopassociation.org.
  
  
• The Edward Lowe Foundation, which supports entrepreneurship, has several helpful articles available online through its PeerSpectives publication, aimed at business owners trying to take their companies to the next level. One, called "Is an ESOP a Good Choice for You?" spells out the details - and drawbacks - in a more candid look than you are likely to get from the other ESOP organizations. To find the articles, go to www.peerspectives.org and enter "ESOP" in the keyword search.
  
  
• ESOP Services, Inc. (www.esopservices.com) is a consulting firm with 25 years experience in the field. The Web site has answers to frequently asked questions, a summary of ESOP uses and other helpful information Call (434) 286-3130; e-mail esop@esopservices.com.