The Impact of Jaynes’ 100% Employee Ownership on Jaynes’ Employees (And Customers)

JAYNES IS A PIONEER IN 100% EMPLOYEE OWNERSHIP

In our previous post on Jaynes’ Employee Stock Ownership Plan (ESOP) and 100% employee ownership, we focused on what that delivered to Jaynes’ customers. Academic research has shown that ESOP-enabled companies perform better than their traditional counterparts without employee ownership. A Rutgers study found that “ESOP companies grow 2.3% to 2.4% faster after setting up their ESOP than would have been expected without it.” A NCEO study found that employee owned companies grow 8% to 11% per year faster than they would have without employee ownership.

Additional benefits of working with an employee owned company are:

• Employee ownership is linked to better company performance
• Longer tenured employees are common in 100% employee owned companies, and in commercial construction, this retention of skilled employees translates into more experienced and efficient project teams, and
• Sense of pride and ownership is higher at companies with ESOPs, and employees of ESOP companies own their jobs, they don’t rent them like at other companies

Benefits to employees at ESOP-equipped companies are many. According to research, ESOP participants tend to have 2.2 times more in retirement plans and 20% more financial assets overall compared to the comparison group at non-ESOP companies.

Workers aged 28 to 34 early in their careers with employee ownership, compared to their peers without ESOP, found that being in an ESOP delivered:

• 92% higher median household net wealth
• 33% higher median income from wages, and
• 53% longer median job tenure

In addition to an ESOP, Jaynes offers a spectrum of employee benefits, both financial and professional, that are based on the concept of employee ownership.

A fundamental financial benefit of an ESOP for employees is enhanced retirement security through stock accumulation paid out at retirement.

THE BENEFITS OF 100% EMPLOYEE OWNERSHIP

There are intangible professional benefits — often labeled as company cultural benefits — for employee owners in an ESOP that include:

• Pride of Ownership
• Retirement Security
• Company Stability
• Financial Incentives
• Greater Job Satisfaction
• More Influence
• Employee-Focused Workplace Culture
• Long-Term Career Growth
• Employee Alignment With The Company’s Success
• Increased Job Retention Delivers More Expert Project Teams

These professional advantages and the financial benefits of an ESOP create a well-rounded and mostly rewarding experience for employees. They feel more valued and empowered, have greater job security, and foster a professional culture supporting personal and professional growth.

The National Center For Employee Ownership (NCEO) is a nonprofit organization that supports the employee ownership community. It regularly publishes research on ESOPs. The data from NCEO below points out some important data about how ESOPs improve employee financial well-being and retirement security:

• The average ESOP account balance is more than double the average 401(k) account balance at a closely matched non-ESOP company offering only a 401(k) plan. (Many ESOP companies, including Jaynes, also offer a 401(k) plan alongside the ESOP.)
• For employees making under $25,000 a year, ESOP employees hold an average of $16,670 in retirement savings, compared to $8,827 for similar workers nationally.

THE ECONOMIC POWER OF ESOPs

Above: Infographic from the National Center for Employee Ownership’s “The Economic Power of ESOPs”

EMPLOYEE OWNED COMPANIES FINANCIALLY REWARD LONG-TERM EMPLOYEES

Above: Infographic from NCEO at https://www.ownershipeconomy.org/research/2018-update/

The charts above from the National Center for Employee Ownership’s “A Visual Guide to Employee Ownership” and their “2018 Update on Employee Owners” pointedly shows the financial benefits employees enjoy (across all industries) in employee-owned organizations.

A DEEPER DIVE: EMPLOYEE BENEFITS IN ESOP COMPANIES

As mentioned, an ESOP offers a wide range of benefits for employees, particularly in terms of financial rewards, job security, superior company culture, and the opportunity to have a meaningful impact on the company’s performance and direction.

• Pride of Ownership

Employees receive shares of company stock, making them part-owners of the business. This ownership stake gives employees a direct financial interest in the company’s success and the success of the company’s customers and greater motivation to grow the company. As the company’s value increases, so does the employees’ stock.

• Retirement Security

Over time, employees accumulate shares in the company. As the company’s value grows, the value of these shares increases, allowing employees to build significant wealth. This is often a major financial benefit compared to traditional compensation structures. ESOPs act as an additional retirement benefit for employees. The stock in their ESOP account typically grows over time. Employees can cash out their shares when they retire or leave the company, often providing them with a substantial retirement fund. The bottom line is that ESOPs incentivize valued employees to stay and mentor younger employees.

• 100% Employee Owned Companies are More Stable

Companies with ESOPs tend to have lower employee turnover and are less likely to lay off workers during tough economic times. Employees, as part-owners, are more invested in helping the company succeed, which can lead to greater job security and a more stable work environment. ESOP-owned companies are often more financially stable, particularly during economic downturns.

• Financial Incentives and Alignment with Company Success

Through an ESOP, employees benefit from increased earnings in addition to their regular salary. As the company grows and becomes more profitable, the value of employee-owned shares grows, providing employees with additional financial rewards. Many ESOP companies also offer as part of their benefits package a 40(k) as well. Employees may receive direct bonuses or dividends based on the company’s profitability, which further incentivizes employees to work toward the company’s success.

• Greater Job Satisfaction

Being part-owner of the company gives employees a sense of pride and ownership for the company’s performance. This often results in greater job satisfaction, as employees feel more valued and empowered. ESOPs usually create a culture of greater employee engagement. Employees who own a stake in the company are more likely to be involved in decision-making, suggest improvements, and contribute to the business’s overall success.

• More Influence

Many ESOP companies incentivize employees to be vocal about corporate governance decisions. This gives employees a voice in shaping the company’s strategy and policies, which can lead to more employee-friendly workplace practices. ESOPs often encourage a culture of shared responsibility, where employees take greater ownership of their work and contribute to improving the company’s efficiency, innovation, and performance.

• Employee-Focused Workplace Culture

ESOP companies tend to be employee-centric, fostering a strong sense of community and collaboration. Employees are more likely to work together toward common goals, knowing their success is tied to the company’s overall performance. Research has also shown that ESOP employees report higher morale, job satisfaction, and commitment to the company than employees in non-ESOP firms. This is primarily due to the ownership mentality: employees in 100% employee owned companies act as owners and not renters as the saying goes, and they feel they have a real stake in the company’s success.

• Long-Term Career Growth

Employees in ESOP companies are often more engaged in company operations and decision-making, which can lead to more significant opportunities for career advancement. With increased visibility and responsibility, employees can grow within the organization and contribute to its long-term success. Additionally, employees are encouraged to develop new skills and take on leadership roles. This focus on employee development can lead to personal and professional growth, which benefits both the individual and the company. In construction, veteran employees in ESOP companies are often incented to ensure that the education and mentoring of younger employees is part of their job responsibilities.

• Increased Job Retention = More Project Team Expertise

ESOPs incentivize employees to stay with the company for the long term, as their ownership stake increases over time. The longer they stay, the more shares they accumulate, making leaving the company less attractive. Employees remain motivated to stay with the company to maximize their benefits from their growing ownership stake, especially as they approach retirement. This is especially valuable in industries like construction where experience often translates directly into more efficient project delivery. Less mistakes, fewer accidents, rinse and repeat.

HELPFUL ESOP AND EMPLOYEE OWNERSHIP RESOURCES

• A highly watchable documentary on the companies DPR Construction, Namaste Solar, and New Belgium Brewing, “We the Owners: Employees Expanding the American Dream,” features employees discussing how employee ownership affects their lives.
• Check out the NCEO’s “What the Research Says: The Impact of Employee Ownership.” It’s an index of recent ESOP research.
• For young job seekers wanting to understand the value of ESOPs to their financial well-being, check out The National Center for Employee Ownership release of an ongoing research project that compares the economic well-being of employee owners early in their careers with that of other young workers. Spoiler: workers aged 28 to 34 early in their careers with employee ownership compared to their peers without ESOP, found that being in an ESOP was associated with 92% higher median household net wealth, 33% higher median income from wages, and 53% longer median job tenure.
• Check out the surprisingly readable academic case study “Here, You Earn It” Employee Ownership at Parksite, Inc.” by Adria Scharf from Rutgers’ Institute for the Study of Employee Ownership and Profit Sharing: “YOU ARE AN OWNER OF THIS COMPANY. What you do reflects on the whole company and what the whole company does benefits you, good and bad.” This details the 100% employee ownership culture of Parksite, the construction materials distributor known for launching the well-known Corian® and Tyvek® building brands.
• A study conducted by the NCEO, with funding from the Employee Ownership Foundation, found that ESOP participants had 2.2 times as much in retirement plans and 20% more financial assets overall compared to the comparison group at non-ESOP companies. See the full study (19-page PDF) and the supplemental tables (12-page PDF).

Learn more about Jaynes, our 100% employee ownership, and the projects we deliver.

Interested in joining 100% employee owned Jaynes? Check out our careers page.

DISCLAIMER: Nothing in this material should be construed as advice to enter into or participate in any transaction or adopt any investment strategy, or as legal, tax, regulatory or accounting advice. This document is intended for general information and basic education purposes only. These statements are not guarantees of future performance, and past performance is not a guarantee of future results. The opinions expressed herein reflect the judgment of the author(s) as of the date prepared and are subject to change without notice and are not a complete analysis of any financial or investment topic. This material may not be reproduced, redistributed, retransmitted or disclosed, or referred to in any publication, in whole or in part, or in any form, without the express written consent of Jaynes’ Board of Directors. If a participant has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, they are encouraged to consult with a qualified lawyer, accountant, or financial professional.