Michael Morosi’s Post

As the human capital management space gears up for growth, private equity firms are eager for a slice of the action. Franklin Foster of Essex Bay Capital discusses his firm’s recent investment with ExitUp editor-in-chief Caleb Edmundson. "Beyond benefits management, STRIVE has expanded to offer tools in performance management alongside a whole continuum of other functions," said Mr. Foster. "What STRIVE does well is bring all of a company’s #HR tools together into one spot. Everything from community building in a remote work environment, peer-to-peer recognition, benefits management, wellness, etc. STRIVE has expanded way beyond a benefits management platform and it has really been their ability to expand the platform and incorporate more and more solutions that caught our eye." Read more >> https://lnkd.in/gmjRKeY8 #HumanCapital #PrivateEquity Hunt Scanlon Ventures

Some reflections about private equity and Employee Ownership 💡 What questions do you have about this?

There has been a lot of talk recently about private equity funds embracing Employee Ownership (EO). The Ownership Works initiative has been covered in 60 Minutes and on Freakonomics radio. Blackstone announced they are also going to embrace EO in their US private equity portfolio. The stated motivation for private equity is: sharing a company’s financial success aligns incentives between employees and managers, which in turn leads to business success. It has us asking the following questions: ❓Is the PE model of EO true Employee Ownership? The private equity firms typically grant only a small portion of the company’s shares to its employees. In contrast, the widely accepted employee ownership models of ESOPs, ESOPeratives, EOTs, and Worker Cooperatives grant at least 30%, and up to 100%, of a company’s equity to a broad-base of employees. ❓Are there decision making rights shared with workers along with economic rights? Governance is an important ingredient for the overall wellbeing of workers, but it’s often missing in these private equity models. As our colleague Julie Menter emphasized in a recent New York Times article about Ownership Works, “As long as everybody agrees, it can work fine but if there’s a true disagreement, then the employees don’t have formal governance power, which makes a difference.” ❓Is economic ownership enough by itself to boost profits? Ownership may not lead to the investor alpha by itself. As Ellen Frank-Miller, PhD stated recently in ImpactAlpha, creating "organizational identification" among workers and creating "social exchange obligation" between workers and managers is the real driver of financial results. ❓Who is getting the better deal, workers or investors? The private equity approach, while it can provide a substantial bump in income for workers (if the company does well), the payout is far smaller than what the investors themselves receive. As such, it likely does not reduce the persistent wealth gap. ❓What might strengthen the model? The private equity interest in EO is a great open door to engage the conventional finance sector in improving conditions for workers. In terms of opportunities for improvement, Delilah Rothenberg of the Predistribution Initiative highlighted some important considerations in a recent ImpactAlpha article: “Commitments like Blackstone’s are strong steps in the right direction, but narrowing the wealth gap at a system-level will also require private equity firms to consider the proportion of equity shared with workers, whether they are also paid a living wage in addition to contingent equity upside, the capital structure of these companies and ability to tolerate market cycles, diversification of workers’ investments, and whether worker voice is also upheld through freedom of association and collective bargaining.” 

At Empowered Ventures we think a lot about how employee ownership creates the potential for a different kind of worker-workplace relationship, one that creates life-changing outcomes personally and financially. The word "empowered" is a guiding light for us as we think about how that impact should look in practice. Here is a framework for how we think about what it means to empower people: 🥉 Good: empowering people by providing the opportunity for well above average financial security and work experience through effective financial management and people-focused leadership. (Providing is very parental, but better than not providing.) 🥈 Better: empowering people by helping them understand and embrace their ability to impact their financial security and work experience, rather than feeling like they have no power and are dependent on leadership. (Less parental.) 🥇 Best: empowering people by trusting them because they have fully embraced their agency to think and act like an owner (believing in their own ability to impact their financial security and work experience and acting accordingly) and being accountable to them as stewards of the overall enterprise, maintaining the culture, values, and leadership approach that matches their level of agency and self-determinism. My work is fun because I frequently feel like we are already living in the Good and Better areas most of the time. "Best" is the ideal outcome and is likely never perfectly achieved, but it is something I aspire to for our people and companies to experience.

💎 Equity for All: Revolutionizing Business with Employee Ownership 💎 I know an owner in Oklahoma City that is giving his employees equity. The company is always increasing sales around 30% a qtr. Employee ownership can be a powerful tool for revolutionizing business and creating a more equitable and sustainable future. Here are some ways that employee ownership can make a positive impact: 1. Increased Employee Engagement: When employees have a stake in the company, they are more invested in its success and are more likely to be engaged and motivated in their work. 2. Improved Productivity: Employee-owned companies have been shown to be more productive and efficient, as employees are more likely to take ownership of their work and strive for excellence. 3. Better Decision Making: Employee ownership can lead to more inclusive and participatory decision-making processes, which can result in better decisions that take into account the perspectives and needs of all stakeholders. 4. Greater Job Security: Employee-owned companies are more likely to prioritize job security and stability, as employees have a vested interest in the company's success. 5. More Equitable Distribution of Wealth: Employee ownership can help to reduce income inequality by giving employees a share of the company's profits and assets. 6. Increased Community Investment: Employee-owned companies are more likely to invest in their local communities and prioritize social and environmental responsibility. 7. Improved Employee Well-being: Employee ownership can lead to improved employee well-being, as employees feel more valued and respected. 8. Succession Planning: Employee ownership can provide a solution for succession planning, as employees can take over ownership and leadership roles. 9. Tax Benefits: Employee ownership can provide tax benefits for employees and the company. 10. Competitive Advantage: Employee ownership can be a competitive advantage, as it can attract and retain top talent and improve brand reputation. Some examples of successful employee-owned companies include: These companies demonstrate that employee ownership can be a powerful tool for revolutionizing business and creating a more equitable and sustainable future. #EmployeeRecognition · #EmployeeAppreciation · #EmployeeEngagement · #EmployeeExperience · #EmployeeSuccess

Learning more about employee owned company models and current policy. Listening through a critical lens, keeping an eye out for potential "ESG washing". Finding & tapping into mechanisms to enable true shared cross-sector responsibility of the health of our society and environment is work that I do on a daily basis through buildJUSTLY. Because of decades of neo-liberal economic theory, for-profit companies continue to siphon profit and power while shirking their responsibilities through "externalities". Meanwhile, individuals, governments, and nonprofits are buckling under the ever-growing weight. The unfortunate result is that the for-profit sector is also suffering from overly short-term and short-sighted business models created through neo-liberal economic theory. Employee-owned companies might be one of many ways we can begin to create change.

Employee ownership trusts are often overlooked but provide a compelling option for founders and business owners considering exit strategies. In this article, Brad shares how we implemented our Text-Em-All Trust, and why businesses should consider taking the leap to an EOT model. https://lnkd.in/g9GmgFdG

"Employee ownership is great. Employee ownership plus quality jobs is even better." Great piece by Ellen Frank-Miller, PhD in ImpactAlpha today, featuring her research that shows that in order to achieve the strongest results for both company performance and employee engagement and satisfaction, the financial incentive of worker ownership needs to be tied to management practices which cultivate a culture of ownership, and incentivize the right behaviors and relationships between employees and managers. Practical actions include: 1. Give employees more control over making decisions that affect their work 2. Empower employees with the autonomy to do their jobs in the best way they know how  3. Teach frontline supervisors how to be collaborative managers Bottom line: companies succeed when workers have agency, voice, and power in the workplace. Grateful for Ellen's work at the Workforce & Organizational Research Center, and to our partners at Ownership Works who are advancing this quality jobs + ownership agenda in practice. https://lnkd.in/eRFR2ejn

Shared ownership is not often given a spotlight, but this New York Times piece on Ownership Works captures a lot of the conversation that’s happening these days: https://lnkd.in/enxRAQey Our colleague Julie Menter weighs in on the importance of formal governance power and how it’s often too lacking in models that focus on wealth building: “As long as everybody agrees, it can work fine. But if there’s a true disagreement, then the employees don’t have formal governance power, which makes a difference.” A few more things worth highlighting:  🏔 The article mentions the importance of durable employee ownership that does not end via a sale. It’s worth mentioning that even ESOPs are not always durable, as fiduciary duty requires ESOP trustees to entertain offers to buy the company. This is a core dimension we compare models across in our recent report. 🦓 Melissa Hoover rightfully points out that for Private Equity, this is actually a step forward, even if it’s not supporting forms with higher percentages of ownership and/or elements of worker power: “‘Employee ownership is a zebra, and private equity is a horse, and they look similar, and you want it to be the best horse it can be, but it’s never going to be a zebra.’” (we appreciate the nod to Zebras Unite!) 🔴 Missing from the article: with Private Equity now interested in Employee Ownership models, how does this affect ongoing efforts to drive policy change and gain recognition for cooperatives and ESOPs? From our many conversations with Employee Ownership (and more broadly, Alternative Ownership Enterprise) folks, the biggest fear here is that this Private Equity version of EO becomes the model that decision makers push for, rather than acknowledging its place on a wide menu of models that can support workers and other stakeholders. What are your thoughts? 

Are you a business owner looking for a unique endgame strategy? Consider the Employee Ownership Trust model! It offers a compelling alternative to traditional methods of selling or transferring your company. With employee ownership, you can ensure the legacy and values of your business continue while also providing for your employees' financial future. Learn more in this article. #exitstrategy #employeeownership #businesssuccession