Employees play a vital role in ensuring high production rate and quality of products in an organization, and hence managers always find various mechanisms of motivating them. According to O'Boyle et al., (2016), employees' ownership or buyouts "has a small, but positive and statistically significant relation to firm performance." Shared capitalism has made workers improve their job performance since their wealth and income rate are dependent on their work. Employees have become more innovative at workplaces to increase production using the available resources Aerts et al., (2015). Moreover, information sharing among employees have increased to facilitate the smooth running of the organization. According to an article by Co-operatives, U. K. (2013), "where a business is owned by its workforce, everyone has a stake in success”. Therefore, the workers' dedication towards productivity is undoubted. Companies whose employees have buyout have high longevity and success in the market compared to others which do not encourage or offer similar services to their workers (Co-operatives, U. K., 2013). The reason behind the success of institutions where works have stocks is that they have a motivating factor (high income as a reward for performing better).
Impact of Employee's Buyouts and Profit Sharing to productivity
According to Blasi et al., (2017), "most of the leaders and the members of Congress have undoubtedly come across business owners, managers, employees, owners of the business who shares the profit, productivity and the wealth acquired from their companies. It is mostly done through employee stock ownership and plans established by the Congress". Blasi et al., (2017) suggests that the profits sharing in a company equip the workers with some portion of the annual gains either in cash or in differed profit-sharing trust. Blasi et al., (2017), therefore, stresses that this practice encourages and promotes the employee to feel like a part of the business. Workers, in turn, feel motivated, and part of the company hence encouraged to buy and invest more in that particular business. Thus, this helps boost the company and promote the culture of profit-making and responsible ownership in a store. As a result, the company is able to thrive even with stiff completion from other organizations offering similar products.
Most family businesses safely hand over the ownership to the workers through the employees' stock ownership plan to ensure their (workers) job security (Blasi et al., 2017). Moreover, the society surrounding the company will continue developing since the management roles are mostly assumed by individuals from the same locale. EOSP also facilitate in solving business succession issues that arise from families and colleagues at work since the majority stockholder takes the leadership role. Such organizations use profit sharing technic to distribute incentives gained from high economic gains. Blasi et al., (2017), identified four significances of adopting profit sharing and stock ownership and they include:
Raising the worker's wealth and pay as well as increase the general income distribution leading to successful democracy (due to the reduction of employee's inequalities)
Provision of incentives for information sharing, excellent cooperation, innovations and more effort at work.
Enhancement of stable employment and company's survival with substantial economic gains resulting from unemployment.
Creation of a harmonious work environment with high employee's involvement and corporate transparency in job activities. Moreover, there is increased workers involvement in decision-making and access to information.
According to Aubert et al., (2014), "employee ownership is often used not only as a reward management tool but also as an entrenchment mechanism." Since people have different managerial skills and tactics, individuals with poor management techniques utilize employee ownership for entrenchment to bring a state of equilibrium in the workplace. On the other hand, leaders who are proficient in their roles use the employees' ownership as a motivating factor to encourage them to work hard. Such managers remind their workers of the reward (increased wealth) when they perform well. Therefore, stockholders should be keen while selecting a manager because they can make the business perform poorly even with enough resources and proper production techniques. Aubert et al., (2014), drew three primary conclusions from their empirical and theoretical considerations and they include:
Employees' ownership can be utilized as entrenchment mechanism by low performing managers in an organization.
The impact of employees' ownership can be balanced off by managers via using it as a reward or entrenchment.
Employees' ownership should not be lest under managers discretion because they can use it for an intended purpose.
According to Doucouliagos et al., (2018), "profit sharing is positively related to productivity on average, with a stronger relationship where there is higher unionization and in countries where honesty is less highly valued, and there are higher levels of individualism." Thus, since everyone has the aspiration of getting rich, individuals with shares and stocks on companies will work hard and share more information regarding production to improve efficiency which will lead to high profit. Organizations that provide incentives based on profit sharing schemes have become more popular currently, and their growth rate is too high because the workers are more productive compared to other companies that have not adopted the practice. Doucouliagos et al., (2018), also observed that profit sharing have a positive impact on production and hence workers are committed to producing quality products that suit customers' needs. As a result, these companies enjoy high-profit margins that allow them to compete successfully in the market. The management of these organizations is also easy because most employees are self-driven and they encourage others to perform well.
Profit sharing scheme is also beneficial in a circumstance where it is expensive for managers to evaluate and measure individual worker's performance because the employees will be able to assess one another. The degree of loyalty and teamwork in organizations that offer profit shared incentives is relatively high because both the employer and employees hope for high productivity to increase profitability. According to Doucouliagos et al., (2018), workers' low performance calls for training by use of incentives which will later raise the rate and quality of production. On the other hand, social and cultural values play a significant moderation role where some workers are demotivated by the "attitude towards free riding" according to Doucouliagos et al., (2018). The other factor that triggers moderation is workers who are aversive to risk-taking. Such individuals avoid group sharing incentive as much as possible and hence advocating for fixed salaries.
Aerts et al., (2015) defined profit sharing as a "credible commitment of the companies to let the employees participate in any efficiency gain." Therefore, the workers are more cooperative with the organization's policies and requirements to meet the goals and objective set. According to Aerts et al., (2015), knowledge is fundamental to the success of companies but it is expensive in terms of time and finances. Since people have different experience and know-how levels in an organization, collaboration can enhance information exchange that can facilitate productivity. Staff performance can be increased through the introduction of profit-sharing schemes in organizations (Aerts et al., 2015). The above reasoning is that sharing of profit becomes a win-win situation for both employees and owners of the companies and hence all will do their best to ensure the success of the organizations. Eventually, employees become more creative in their area of specialization to maximize production. (Aerts et al., 2015), concluded that companies that adopt profit sharing do well in the market than the others in terms of innovation. Adoption of modern technology makes the production process more efficient and cheap.
O'Boyle et al., (2016), referred to shared capital as a "variety of employee ownership plans where a part of employee compensation and wealth is tied to the workplace or firm performance." Thus, the higher the profit made by the organization, the more the wealth acquired by both workers and employers. O'Boyle et al., (2016) suggested various ways in which the employees could obtain ownership of the company and they include:
Whether the ownership is granted or bought
Availability of a discount after stock purchase
Right to vote for employees after purchasing stock
The difference in legal requirements
Permission to pay from gainsharing plans
Whether the workers' participation is voluntary.
The above acquisition mechanisms determine the level of workers motivation which in turn affects productivity. In cases where the workers are granted the right to vote after purchasing the stock, the quality of products improves because every person evaluates the decisions made in the organization. Moreover, instances, where purchasing of the stock come with discounts, motivate the employees to advance in their performance and buy more shares. On the other hand, an organization that offers different legal documentation for the employees might demotivate the workers since they might feel less valued and hence low productivity.
Lowitzsch " Hashi, (2014), discussed three forms of employees’ financial participation plans in various business organizations and they include ESOPs, profit sharing, and individual employee share ownership. Whatever method utilized, the level of participation in the company's affairs by the employees increases leading to high productivity and profitability. Lowitzsch " Hashi, (2014), highlighted various benefits of adopting employee financial participation some of which includes improving workers commitment, creation of job opportunities, provision of a solution for ownership succession, strengthening corporate governance of the company, facilitation in training and recruitments of workers, and reduction of employees inequality. Although companies face challenges while trying to introduce EFP, its benefits ensures company’s survival for a prolonged period and increased productivity.
Conclusion
Encouraging employees to purchase from the company is a strategy used by most managers to improve productivity and quality of the products. The workers' motivation increase after they gain ownership of the companies since their output will determine their pay or wealth. There are various ways in which employers can utilize to provide employees' with company' ownership. Small and family businesses have found a way of solving succession issues via the use of employee ownership stock plans. Companies that have adopted EOSP, profit sharing and individuals share ownership perform well in the market compared to the ones that have not. Some factors hinder proper implementation of EOSPs and PS in companies, but some policies can be applied to overcome the hinderance. Hence, employers should encourage the workers to acquire company's ownership for increased productivity and profitability.
References
O'Boyle, E. H., Patel, P. C., " Gonzalez‐Mulé, E. (2016). Employee ownership and firm performance: a meta‐analysis. Human Resource Management Journal, 26(4), 425-448.
Aubert, N., Garnotel, G., Lapied, A., " Rousseau, P. (2014). Employee ownership: A theoretical and empirical investigation of management entrenchment vs. reward management. Economic Modelling, 40, 423-434.
Doucouliagos, H., Laroche, P., Kruse, D., " Stanley, T. D. (2018). Where Does Profit Sharing Work Best? A Meta-Analysis on the Role of Unions, Culture, and Values.
Blasi, J., Kruse, D., " Freeman, R. (2017). Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and Profit Sharing. Third Way NEXT.
Aerts, K., Kraft, K., " Lang, J. (2015). Profit sharing and innovation. Industrial and Corporate Change, 24(6), 1377-1392.
Co-operatives, U. K. (2013). Simply buyout: A guide to employee buyouts and becoming and employee owned business.
Lowitzsch, J., " Hashi, I. (2014). The promotion of employee ownership and participation
