Would you draft your own ESOP documents? Perform your own appraisal? Conduct your own 
ESOP audit? We’re sure the answer to the above questions is a resounding NO WAY! In some cases, ERISA mandates that you engage an outside professional to perform the required task. In other situations, it may be plain foolhardy to proceed on your own and draft legal documents or administer your ESOP in-house given the complexity and severe consequences of noncompliance.
ERISA rules and litigation concerns have caused an increase in the use of 3rd party professionals to communicate and assist employees with their 401(k) plan investments and investment allocation strategies. While ERISA does not yet similarly encourage or require the engagement of ESOP communication and culture professionals — it is certainly a best practice to do so as we explain below.
When economic times are tight, companies look to cut or eliminate costs wherever possible. Of course, fees for necessary legal work, appraisals, audits, and recordkeeping are inherent costs of operating the ongoing ESOP and cannot be easily eliminated. In contrast, services that foster effective ESOP communication and bolster employee engagement are often viewed as less important and ancillary. Employers are more likely to forego or cut services perceived as “soft” and not directly affecting a specific profit line entry.
Unlike legal drafting, appraising, et al., some plan sponsors may believe they can do effective ESOP communication and culture change on their own without outside professional assistance. Unfortunately, a “do-it-yourself” approach can be “penny wise and pound foolish.” (Why it’s not “dollar” rather than “pound” foolish is a discussion for another day.)
If you think it’s expensive to engage a professional, beware of what happens if you don’t.
Given the above cost concerns, the communications professional must make the business case that ongoing employee engagement and culture efforts are important both to the organization and to the bottom line. Since business decisions look at the potential Return on Investment (ROI) before making a discretionary spending decision, what’s the potential ROI on money spent creating informed, engaged employees and an active ownership culture? Extremely high, according to all academic research! After all, in the technology-driven information age, your human capital is your financial capital.
The best way to create informed, engaged employees and an active ownership culture is through ongoing, targeted communication efforts that build shared trust and teamwork. These communication efforts and activities can take many forms. Let’s look at some areas where professional assistance can be extremely valuable and cost-effective to your company.
1. ESOP Rollout or Expansion
“You never get a second chance to make a first impression” is a truism that clearly applies here. Visualize this typical scene: apprehensive employees are called to an important ‘all hands” meeting to be told about the new ESOP or perhaps the ESOP’s increased ownership to 100% of the company. The initial relief of not being laid off or the company being sold to an outsider can soon be replaced by skepticism about the ESOP deal if the meeting is not handled properly.
For example: What are the key points you need to convey to your particular audience? What expectations about employee “ownership” do you want to establish? Who will lead the presentation, explain how the ESOP works, and prepare the PowerPoint slides and/or interesting handouts? What specific tactics can be used to maximize engagement and attention at the meeting? How should the meeting be structured (which includes things like length, location, seating arrangements, refreshments, note taking, trinkets, and Q&A session)? Can you effectively answer the employee’s catch-all question “what’s in the ESOP for me?”
Professional assistance can make your ESOP rollout an effective and transformative event for your employees. Importantly, a professional will take you through the steps and analysis to properly develop and convey your company’s unique and enduring vision for its employee ownership culture.
2. Advisory Committees
Advisory committees serve as your peer-to-peer ESOP education and communication vehicle. In fact, no ESOP company should be without one! However, for the committee to be fully functioning you need a comprehensive committee charter that covers issues like committee composition, appointment terms, scope, training, and budget. A professional can help you design your charter and implementation, thereby getting your committee off to a great start.
3. AACE (Annual Awards for Communication Excellence)
An important activity of an ESOP Advisory Committee or company employees is to organize a submission for the AACE award that recognizes various forms of ESOP communication excellence (e.g., printed, internet, events). This is a great opportunity to benchmark your communication efforts against your peers. The right advice will allow you to put your best communication foot forward and help you win a coveted AACE for your company trophy case.
4. Company Cultural Assessment
Just like visiting your doctor for periodic health checkups, the health of your ESOP organization’s culture should be reviewed from time to time. This can be done through a professional cultural assessment. While surveys and interviews are common assessment methods, we have much less expensive ways to get a quick reading on the “pulse” of your company’s cultural fitness.
5. Open Book Management
Training employees to understand the linkage between job performance and the bottom line is the key to enhanced productivity and increased share value. This training needs to be focused and accessible to be successful and motivational. We will work with your managers and employees to convey your key metrics in an interesting manner using charts, games and easy to follow examples.
6. Succession and Talent Planning
The sustainability of your ESOP requires a committed leadership team and a plan to deal with transition, vacancies, and new job positions. Critical issues may involve handling the original owner who does not want to let go, squabbling minority shareholders who don’t want to sell, or deciding to go outside rather than promote from within for future executive leadership. Since keeping the peace, setting reasonable expectations, and moving the company forward can be extremely challenging in these environments, the situation requires objective third party analysis and assistance from a qualified professional.
7. Newsletters / Web Site / Branding / Handbooks
Ongoing and interesting communication is needed to create a real employee-ownership culture. It’s often hard to find someone in-house who is skilled in (or desirous of) taking on these communication responsibilities. Using ready to apply templates and other eye-catching professional pieces can help you deliver effective messaging and branding at attractive pricing. We have a wide variety of communication templates to choose from — including those of the advice columns of the esteemed Dr. ESOP (at right under Communications).
8. Plan Design
Your ESOP design can have a significant impact on your ownership culture — yet these critical design choices and issues often are not addressed by companies or your ESOP attorney. For example, how should you structure your plan rules to align with your desired culture in areas such as plan eligibility and entry, vesting and forfeitures, allocation, distribution, and voting? We can assist you in making these critical choices (or changes) based on our considerable experience in dealing with these important ESOP design issues.
Self help ESOP efforts at your company definitely will be enhanced by helping yourself to assistance from a benefits communication professional. Contact Us
