The Executive Brief

Is your ESOP Equipped for Growth?

Mike Frommelt Leadership, ESOP

I’ve yet to meet any business leader who says, “We’re not planning to grow, it’s just not important to our company.” To stay in business there has to be a focus on continually moving the company forward. Of course, CEO’s and the quality of the leadership teams they build, play an absolutely critical role in creating sustainable growth.

In many ways ESOP’s have a unique advantage over their non-ESOP competitors in this regard. Employee owners at all ranks are truly invested in the company’s growth and success. Thus, at least in theory, they should be easier for leaders to both inspire and motivate toward growth. Read more about Evaluating and Hiring Leaders for your ESOP.

Employee Owners

However, motivating employee owners is a bit tricky - the old “carrot and stick” method of leadership just doesn’t work. As owners, these employees have different expectations than your average employee. Owners need to be kept in the loop, understanding where the company is going and generally why and how company funds are being deployed. They also have to trust their leaders are operating in their own (and other employees) best interest, after all their lives and the lives of their families are tied directly to how the company performs.

Based upon that last statement, you may think leading in an ESOP carries more responsibility, or even more pressure, than leading in other types companies. To that, I’d say “you’re absolutely right.” Employee owners are tied more tightly to their companies and their jobs and that just drives a different level of passion and concern. The good news is if leaders understand this mindset, spend the time to build trust and emphasize a few key behaviors and traits, channeling that passion in the right direction will come relatively easily.

Active/Authentic Listening

Employee owners need the ability share opinions and ideas with the confidence their leaders will truly listen and consider. This doesn’t mean everything has to be implemented, just heard and considered. But, as we all know, some of the best ideas for innovation and growth come from the lowest levels of the organization, where the work really gets done. The ESOP leader who doesn’t take advantage of an employee owner’s desire to help the company innovate & grow is missing a real opportunity.


In his book Good to Great: Why Some Companies Make the Leap…and Others Don’t, Jim Collins writes about Level 5 leaders. He writes: “Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves.” While this is great for leaders in any company, within an ESOP it’s even more important – remember, owners have different expectations and their tolerance of big egos (jerks) will be less. They will be much quicker to check out or even sabotage a leader they don’t believe is in it for the right reasons.

People Development

One of the great things about most ESOPs is their low turnover and eagerness to promote from within. This makes it especially important for ESOP leaders to be committed to developing their employees. In fact, if an ESOP doesn’t keep employee owners growing personally and professionally, the traditionally positive effects of low turnover can turn the other direction, creating a company that is out of touch with their competitors and the rest of the market.

There are many other leadership traits that need to be evaluated when considering who to hire and/or promote within your ESOP. But, when it comes to one of the lifeblood aspects of creating a sustainable company for the future, we believe these three carry extra weight.  To download our full ESOP Leadership Search Pack, please visit our ESOP Practice page by clicking here.


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