Is Employee ownership the secret sauce European companies are looking for?

Mar 1, 2019 12:02:16 PM |

The four ‘Paul’ companies (Pinterest, AirBnb, Uber and Lyft) have been making headlines recently, as investors and employees eagerly await their upcoming IPOs. The unicorns are going public.

The ‘Paul’ companies all started as uncertain startups. They were outliers, operating with limited cash. They couldn’t offer their employees traditional benefits like healthcare or pensions; they could barely afford a small salary. So how did these companies retain and motivate the best talent in the world? Employee ownership.

Share plans directly linked their employees’ financial success to the success of the entire company—the harder they worked, the higher the company share price rose, and the larger their personal finances grew.

When they started, the ‘Paul’ companies could barely give their employees a salary; now they’re preparing for their IPOs. They’re about to make those same employees millionaires. At least one already has—AirBnb’s founders and early employees have reportedly cashed in at least $350 million worth of equity to date.

One small area of Northern California created nearly all the technology that has dramatically transformed—if not created—our modern world.

How did Silicon Valley become so dynamic? And, more importantly, why isn’t there a European counterpart?

One major reason is that Europe is not embracing employee share plans. Share plans are not just for startups—they have the same benefits for established companies. European companies are crippling their potential by not giving their employees a share of it.

In a company with employee share plans, every employee’s motivation is aligned with management’s. They become owners—and with loyalty and hard work, they stand to earn far more than they could with traditional benefits.

Even while bringing their employees more money, share plans are far more cost-effective for businesses than traditional benefits. It’s one of the reasons Uber is trying to expand their employee share plans to include their drivers as well. Their drivers are contractors, and Uber has long been criticized for the low pay and lack of benefits the drivers receive. With share plans, they can increase compensation without losing cash. And Uber has already seen from their employee share plans how turning workers into owners can transform a company.

According to a recent study, European companies lag far behind American companies in terms of share plans, generally only giving them to their senior executives. With this company culture, it’s easy to see why America has a Silicon Valley and Europe does not.

These days, people are far more likely to switch jobs and careers at least a few times in their lifetime. This makes employee retention even more important to companies. Why not address this issue in a way that also generates cash for your company, and makes your employees happier overall?

The biggest lesson to be learned from Silicon Valley and the ‘Paul’ stocks--if we want to create a European version--is innovation. Not just in products and technology, but in employee ownership.






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