How to Educate your Employee-Owners on your ESOP

Nate Moody, CPFA – RETIREMENT ADVISOR, PARTNER
OCTOBER 2024

Employee Stock Ownership Plans (ESOPs) offer a unique opportunity for companies to create a culture of ownership and drive employee engagement. Maine has seen a flurry of companies go ESOP over the past decade. However, for an ESOP to be fully effective, employee-owners must understand how the plan works and why it matters. Education is crucial to unlocking that understanding, which can lead to higher engagement, improved company performance, and increased employee-owner satisfaction.

Studies have shown that companies with highly engaged coworkers outperform others by up to 21% in profitability1. For ESOP-owned companies, the stakes are even higher. Employee-owners with a clear understanding of their stake in the company are more likely to take actions that contribute to the organization’s success. According to a 2015 article by the National Center for Employee Ownership (NCEO), companies with ESOPs grow 2.5% faster than non-ESOP companies, largely due to the sense of ownership employee-owners feel2.

For employee-owners to appreciate the value of an ESOP, they need to understand its structure and benefits. Ongoing education initiatives can help make the ESOP concept clear and engaging. Here are specific strategies to educate employee-owners:

1. New Employee Orientations

Introducing the ESOP during new hire orientations ensures that employees understand from day one that they are part-owners. This is crucial for setting expectations and establishing a culture of ownership early on. A strong introduction to ESOP principles ensures employee-owners know how their efforts impact the company’s success and their financial future.

2. Annual ESOP Statements with Explanations

Providing annual ESOP account statements is an excellent opportunity for education. These statements should not only show the value of the shares but also explain what factors caused an increase or decrease in value. This transparency builds trust and helps employee-owners understand the direct connection between their work and their financial stake.

3. Interactive Workshops

Workshops can help break down the complexities of ESOPs, financial literacy, and company performance. Using real-life examples or case studies, companies can show how day-to-day decisions—such as reducing costs or improving customer satisfaction—impact the value of ESOP shares. Interactive learning tools like group activities and Q&A sessions can make ESOP concepts more engaging and easier to understand.  Couple it with education on your 401(k) Plan so they understand the similarities and differences between the two Qualified Retirement Plans.

4. Forming ESOP Committees

Employee-led ESOP committees are an effective way to promote awareness and foster peer-to-peer learning. These committees can organize events, distribute educational materials, and provide a space for employee-owners to ask questions. Involving employees in leadership roles through ESOP committees enhances their knowledge and commitment to the ESOP.

5. K.I.S.S

Keep it simple!  ESOPs can be complex, filled with jargon and financial terminology. Simplifying the language used in educational materials is crucial to ensure all employees understand their ownership role. Visual aids, infographics, and short explanatory videos can help break down difficult concepts, making them more accessible and engaging for everyone.

6. Celebrating ESOP Month and Hosting Events

National ESOP Month in October provides an opportunity to celebrate employee ownership and reinforce education. Companies can host special events, offer financial literacy seminars, and engage employees with games or quizzes designed to increase knowledge of the ESOP. Events like these keep the ESOP top-of-mind and reinforce a culture of ownership.

The connection between ESOP education and employee engagement is clear. Engaging employees in the ESOP’s success is not just a financial win for the company—it’s an investment in creating a committed, high-performing workforce that truly owns its future.

How Lebel & Harriman Can Help

At Lebel & Harriman, we specialize in helping companies educate their coworkers on retirement plans & financial wellness. about both 401(k) plans and ESOPs. We offer workshops, customized materials, one-on-one support, and a digital 401(k) education platform to help your team navigate the complexities of their retirement plans.

Our goal is to help your employees feel confident in their financial future, leading to greater engagement, loyalty, and performance. If you’re ready to boost your employee-owners’ engagement through better ESOP and retirement plan education, Lebel & Harriman is here to help. Contact us today to learn how we can create a tailored retirement plan education program that empowers your team and maximizes the value of your 401(k) & ESOP.

Securities Disclosure: Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Investment Advisory Services offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor. | 130 Springside Drive, Suite 300, Akron, OH 44333-2431 | Telephone: (800) 765-5201 | Lebel & Harriman, LLP and Lebel & Harriman Retirement Advisors are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc.

  1. https://www.gallup.com/workplace/236366/right-culture-not-employee-satisfaction.aspx ↩︎
  2. https://www.nceo.org/observations-employee-ownership/c/ESOP-numbers ↩︎

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