- Christopher Mackin, Ownership Associates
- Published in The Journal of Employee Ownership Law and Finance,
- Oakland: National Center for Employee Ownership (NCEO)
- Vol. II, No. 4, Fall 1990, pp. 79 - 94.
One of the fondest hopes of ESOP proponents is that stock ownership will lead to the creation of an "ownership culture" within the company. In this longed-for entrepreneurial paradise, workers and managers alike would spontaneously and regularly "think of the company first" when faced with the multitude of potentially cost-saving decisions they face daily on the job. Like many such hopes about employee ownership, most now realize that the achievement of the widespread "ownership perspective," which is at the heart of the idea of an "ownership culture," is not guaranteed by the simple adoption of an ESOP. It takes a little work.
Research on employee ownership (Conte, 1990 and Rosen, 1987) points to the fundamental relationship between participation in decision-making by employees and positive ESOP performance. If employees in ESOP companies are allowed some measure of practical "voice" in the conduct of their jobs and the firm at large, the argument goes, they will be able to apply their ownership motivations in a practical and constructive manner. They will feel that they, in fact, are more than passive shareholders and do have a say over what goes on at "their" company.
These insights concerning the centrality of participation mechanisms to the development of a widespread ownership culture are now generally accepted. Following from them, a variety of participation technologies are being developed for the ESOP community so that companies can enter this new world of employee participation.
What the participation thesis at least partially neglects, however, is the more subtle and complex task of building a common ownership culture of norms and values that underlie ownership thinking and ownership behavior. The question is, what will it take to create a sufficient motivational basis for employees to care to participate effectively in the first place? What sorts of cultural and attitudinal changes, in other words, are necessary to support effective participation efforts?
Intuitively, it would appear that regular, factual communication efforts from company leadership the to workforce about the meaning of ownership and performance of the company would be sufficient to satisfy employee interest and cause the development of an ownership culture. But because most such communication activities are one-way, top-down messages from management, there is reason to doubt how effective and long lasting they can really be.
Some of this ownership culture building, it can also be argued, is achievable "on the run," through day-to-day communication and working within newly participative decision making structures. Much of it, however, will also require a more direct and explicit process. The kinds of day to day communication methods most companies use are not likely to create a dialog between workers and mangers about the meaning of shared ownership.
The Nature of Ownership Perspectives
Ownership perspectives are at their core private, individual interpretation or theories about the meaning of ownership. Ownership is one of American culture's primary, "hot" concepts, like the flag or religion, that can be a source of intense controversy. Everyone has some personal experience with the concept of ownership, from owning cars, houses or other property, and everyone has built up a set of expectations about what an ownership relationship entails.
Depending in part on how employees ownership is marketed to employees within any particular firm, employees who become part-owners will bring their private theories about the meaning of ownership to the employee ownership setting. A primary goal of ownership training presumably should be the development of a positive, shared perspective about the meaning of ownership. The achievement of that shared perspective, however, does not necessarily arrive automatically.
R&R Groups™ should be considered as one mechanism of helping to build ownership perspective and a shared ownership culture within workplace settings. "R&R" Groups stand for Rights and Responsibilities Groups, small group discussion exercises that are organized to provide realistic, useful, and provocative exposure to problems and dilemmas that exemplify the "real world" of business ownership.
In the real world, ownership is not just about the rights, about having the power to voice their opinion and watch people respond accordingly. It is also about responsibilities, about making sure that the organization survives and succeeds before, during, and after the philosophical debate about what it is to become. The fundamental educational objective of R&R Groups is to help attain an appreciation of the necessary ownership balance; that successful ownership entails both rights and responsibilities.
The Practice of R&R Groups
R&R Groups are small group discussion exercises which make use of scripted dilemmas that portray typical "real-life" tensions and problems facing actual business owners. Guided by a trained small group discussion leader in a safe and confidential environment, these discussions provide employees and managers an opportunity to "role-play" each other's perspective and to hear directly from their peers how effective they are at resolving the dilemma at hand. Employees' "personal" theories about what is right, fair, and responsible are brought out into a safe public setting where they can challenge and be challenged by the perspectives of others.
Two core ownership-based R&R themes are used to draw out realistic dilemma situations: Rights and Responsibilities themes and Risk and Reward themes. Rights and Responsibilities dilemmas focus primarily upon basic fairness and responsibility issues that characterize life in a work organization. These themes are familiar to all work organizations. The importance of these themes increases, however, under ownership conditions. What was once swept under the rug with traditional ownership and management practices is now perceived as "our" problem, requiring direct confrontation and discussion under employee ownership. Risk and Reward dilemmas focus more specifically upon the economic side of business life, portraying the difficult trade-offs that owner/managers face in their decision-making roles. These dilemmas are particularly useful for helping build an appreciation of the concept of investment, the regular demand in a competitive environment to defer immediate rewards in anticipation of potential later returns and enhanced market share.
A sample R&R dilemma (in this case a Rights and Responsibilities dilemma, see below) should help to illustrate the concept of R&R discussions. These dilemmas are typically introduced after a more general, preliminary "values clarification" exercise that deals with the topic of shared ownership. The groups themselves should be lead by trained small group discussion facilitators.
A Model Dilemma – Tonar Graphics
Tonar Graphics is a 20-year old, fast growing, computer software business catering to business and technical markets. From its headquarters, a stone's throw from the Charles River, it can view MIT and Harvard as well as another more well known software house in town, Quotus Development, founder of the famous 4-5-6 spreadsheet program.
Tonar operates out of four regional offices in New England, each focusing upon a particular industry and its needs for software development. Altogether, these offices and headquarters employ 300 employees. In 1989, Toner's founders Bill and Sarah Stern instituted an ESOP which now holds 40% of the company's stock. The Sterns, now in their early fifties, are not certain of their future stock distribution plans. They are leaning, however, toward the idea of selling majority stock ownership in their company to their employees because of a basic belief in the concept and the need to hold on to qualified employees. At least they were leaning in that direction until last Friday.
Helen Murphy is a new Product Development Manager at Toner's recently opened Worcester, Massachusetts office. She is a college graduate in her mid-twenties with an impressive background in computer sciences and business principles.
The Worcester office, open now for three and one-half years, is doing very well. It is responsible for developing some particularly successful software applications for the medical markets. Helen , it turns out, was instrumental in working out an original deal with the local university-affiliated hospital to try out several new blood-testing data software programs. The returns to the Worchester office have been fabulous, with new business coming in from around the country. Tonar Graphics' older offices in Cambridge, Hartford, and New Haven are holding their own, though the Cambridge office, the oldest of the group, and still operating headquarters, had its first significant dip in profits in the last fiscal year.
On a recent visit to the Cambridge headquarters for a meeting of all product development managers, Helen, who arrived early, came across a copy of Tonar's latest consolidated financial statements sitting on the receptionist's desk. The Sterns, despite the connotations of their name, had never been sticklers about protecting company information, particularly from interested employees. Quite frankly. Tonar employees had never really shown an interest in the information. So, when Helen asked the Stern's receptionist Joyce whether she could make herself a copy Joyce answered, "I can't see why not, after all, we're all owners now, aren't we."
Worcester office manager Phil Fine was not enthusiastic about bringing the topic out in the open when Helen and John broached it with him the next day. "File that one. Helen," he exclaimed, while he picked through his chicken salad sandwich in the company cafeteria. "We've got enough to worry about from the competition these days without starting a family feud with the Sterns. I hear that Quotus is developing some new software for the medical market. Let's keep our eyes on the rear view mirror for a change, instead of our pocketbooks.
Phil Fine's comments were enough to cool Helen's newfound ownership righteousness. Still, Bill and Sarah Stern sensed something was wrong at the monthly management meeting that Friday in Cambridge. Helen, who along with her other product development compatriots had been attending these meeting for the past year, was not being her usual verbal self. "Is there anything wrong, Helen?" Bill Stern asked late into the Friday management meeting, when Helen continued to gaze out the conference room window, even after Bill had cleared his throat for the third time to try and direct her attention to his comments about company finances.
"Well, Bill," Helen responded, "not really, I guess, well, maybe there is, but I just don't know how to bring it up or whether I should, but I got a look at our recent financial, and well, maybe it isn't my place, but I'm afraid I think that we Worcester people might be getting the short end of the stick on things. After all, our profits constitute almost 40% of last years earnings, but we're just one of four locations."
Bill Stern looked at Sarah Stern. Sarah looked back at Bill. Both knew what the other was thinking. They remembered the first eight years in the Cambridge location, when they were alone and making little money, sinking everything they had into technologies that yielded little return. Then the move into Hartford, after a series of contracts with the insurance industry offered some promise, but still not much money.
Now, 20 years down the road, their combined sacrifices that had made the Worcester medical research location investment possible were being questioned by a 25 year old who happened to be brilliant, basically a good person, probably a key to the future of the enterprise, and also an owner. Phil Fine glared at Helen. Her co-worker John stared at his shoes. Sarah Stern spoke up. "You're raising an important point here Helen, but I'm afraid we don't have time to get into it just now. We'll talk to Phil about this and get back to you all with some information at a later date."
The Group Discussion
After a group reading of an R&R dilemma such as this one, the discussion begins. There are a number of methods for organizing R&R discussions that can respond to the comfort level of the work group that has been listening in. Some groups will respond best if they are given a chance to "enact" the dilemma through role playing. Others are ready to jump right in after a group reading.
Trained group facilitators are ready to move the discussion along through certain key thematic points and take care to draw in the opinions of less vocal members. After 30 to 60 minutes of group discussion , the lead facilitator helps to sum up the discussion and begins the process (often carried out in a separate session) of drawing out practical implications of the discussion for life in organizations such as the one playing host to the R&R Group.
R&R dilemmas such as the Tonar Graphics case are deliberately staged to not have clear, simple minded answers to the problems they pose. Is Helen really so pushy, so selfish, that her perspective should not be listened to? If you were responsible for recruiting young talent for you r firm, could you afford to alienate people like Helen? On the other hand, Helen does seem to be missing certain key concepts having to do with fairness, the historical investment of others who have come before her and (at least partly) made her success possible. How should she be "taught" these lessons?
Each of the participants in these fictional dilemmas may be said to have a legitimate point of view that in some fashion probably mirrors the "real life" points of view of R&R group participants in their workplaces. The key here is, through the discussion process, to give these different perspectives some "air time," to be able to publicly exercise and contrast the various legitimate points of view represented by the characters in these dilemmas to their furthest useful extent.
Since the lessons of R&R Groups are not the kind that are necessarily learned in one or two sittings, R&R Groups work best when they are integrated into a more extensive, ongoing ownership education and training plan. Small group discussion experience with R&R Groups, however, should be at least an annual ritual for every employee-owner. Employees should be able to anticipate that there will be a setting like an R&R Group where their various interpretations about what constitutes "fair" treatment and a "fair" basis for policy questions can be heard.
The bridge from hypothetical R&R Group discussions to discussions of actual or proposed company policies, however, is one that should be constructed carefully. While R&R Groups can serve as an extremely useful prelude to substantive "real-life" discussions of company policies, they are not themselves designed primarily as a policy-intervention device.
R&R Groups are instead intended to be primarily an educational tool which can help to foster the development of the particular social and cognitive skill of perspective-taking. Such perspective-taking of various individual and group interests provides an effective basis for application to real-life dilemmas a particular employee-owned company may face. The actual application of these new perspective-taking skills may involve an entirely different natural work setting, a departmental or company-wide meeting, for instance, not necessarily the R&R Group itself.
The decision to introduce real-life examples to an R&R like educational setting should be preceded by a clear articulation of the practical objective of company management. Does management wish to use these settings to enhance its understanding of a particular company problem? Do they want to use R&R Groups as a kind of "straw poll" to gauge support for particular strategic options? Any of these objectives are potentially legitimate and useful, but should, nevertheless, be articulated in advance of the planned discussions.
What is the likely outcome of an R&R experience? No outcomes are guaranteed, but at a minimum R&R Groups should lead their participants to be able to better comprehend the points of view or perspectives of other group participants. Such increased comprehension can provide the foundation for better quality communication, tolerance, and respect for the points of view of others. At a maximum, however, R&R Groups, particularly if combined with "ownership skills" training in basic financial concepts, could, over time, lead to a qualitative advance in individual and group perspective-taking abilities and to a more sophisticated grasp of complex business principles.
The original of the idea of R&R Groups can be traced to two sources of inspiration: the American pragmatist school of philosophy, most closely associated with John Dewey (1938) and the more contemporary adaptation of many of Dewey's ideas by social psychologist Lawrence Kohlberg (1972, 1986) and others. John Dewey was an active and widely respected academic philosopher and essayist during the early Twentieth Century at the University of Chicago. He was concerned primarily with the development of democratic culture in American society. He complained that existing institutional structures in schools, workplaces and communities did little to stimulate the kind of active and critical moral dialogue and perspective-taking that he saw as the heart of a democratic society.
During the 1930s Dewey attempted to put his ideas into practice through the establishment of a largely successful democratic "Laboratory School" at the University of Chicago (Cremin, 1962). Followers of Dewey, including Harvard social psychologist Lawrence Kohlberg (1923 - 1987), and his graduate students, further developed the idea of encouraging practical moral dialogue within various institutional settings, including schools and workplaces.
Under Kohlberg's leadership, curricula and training materials were developed to help facilitate practical moral discussions among institutional participants that focused upon the perceived fairness of the rules and policies that governed those settings. Open, though structured, discussions of these issues, Kohlberg and others argued, could help invigorate new, advanced levels of perspective-taking and of respect for these institutions by their respective constituents, by their students, employees, or citizens. Research by Power, Higgins, and Kohlberg (1989) and others lent empirical support to claims of actual development in perspective-taking abilities and group perceptions of fairness.
Christopher Mackin (1984), following Whyte and Johanneson (1978) and others, extended Kohlberg's research with an investigation of the development of individual employee expectations about ownership within an employee-owned construction enterprise.
If the goal of communications, education, and organizational development efforts in employee-owned companies is to cultivate a shared understanding of successful business principles, educational methodologies must be developed that are equal to the task. In the real world of most businesses, however, the exercise of grappling with core business principles of rights and responsibilities and risks and rewards is a task reserved for a privileged few at the top of the organizational chart.
Ironically, these same leaders can often be heard to complain that their employees just aren't responsible enough and that they don't understand the complexities of business judgments. Few of these leaders, with some notable exceptions, seem to be doing much about that complaint. For employee ownership to reach its potential, this monopoly at the top regarding the core themes and practices of ownership must end. Workers and mangers must learn to share an understanding of these core principles.
The question is how to reach employees concerning these key ownership themes in a manner which engages them where they are today and leads, potentially, toward the development of increasingly more sophisticated points of view. Just introducing an ESOP will not do the trick. Ownership perspectives have to be learned. Employees need "practice" to learn to be owners. R&R Groups are a form of ownership practice. Combined with effective communications and employee participation programs, they can help deliver on ownership's bold promises.
- 1. Conte, Michael and Svejnar, Jan. "The Performance Effects of Employee Ownership Plans," inPaying for Productivity: A Look at the Evidence. Alan S. Blinder, Ed., Brookings Institution, 1990.
- 2. Cremin, L.A. The Transformation of the School: Progressivism in American Education 1876-1957. New York Alfred Knopf, 1962.
- 3. Dewey, John. Experiences and Education. New York: Collier, 1963 (originally written in 1938).
- 4. Johanneson, Jannette, and Whyte, William F. "Organizational Strategies for Preserving Jobs and Strengthening Local Economies," Department of Labor Small Grant # 91-36-76-39, 1978.
- 5. Kohlberg, Lawrence and Mayer, Rochelle. "Development as the Aim of Education," Harvard Educational Review, Vol. 42, No. 4, 1972, 449-496.
- 6. Mackin, Christopher. The Social Psychology of Ownership: A Case Study of a Democratically Owned Firm. Unpublished Doctoral Dissertation, Harvard Graduate School of Education, 1984.
- 7. Ownership Associates. R&R Groups™ Handbook. Unpublished educational materials, Ownership Associates, Inc., Cambridge, MA, 1989.
- 8. Power, Clark, Higgins, A., and Kohlberg, L. Lawrence Kohlberg's Approach to Moral Education. New York: Columbia University Press, 1989.
- 9. Rosen, Corey and Quarrey, Michael. "How Well is Employee Ownership Working?" HarvardBusinessReview, 65, Sep.-Oct. 1987, 126-9.
Source: Ownership Associates Inc.