FINANCIAL PARTICIPATION
Companies do "very little" to encourage share retention
The popularity of employee share schemes is continuing to grow, yet organisations do very little to encourage staff to retain shares and few formally evaluate the effectiveness of their arrangements, according to a new survey by PricewaterhouseCoopers.
The survey is based on information supplied by 450 organisations, using a postal questionnaire sent out at the start of 1999. Participants are drawn from a wide range of business sectors, with a particularly large response from manufacturing (27% of respondents).
Among the 450-company sample, exactly a quarter had introduced at least one type of share scheme. The most widespread types of schemes were company-share option plans, savings-related share options and unapproved share option schemes.
The most common reason for introducing equity ownership was to allow employees to share in the success of the business, mentioned by 18.1% of respondents, followed by "making employees feel more involved in the company" (14.9%).
While the vast majority of organisations with share schemes - nearly eight in ten (78%) - were confident that their objectives had been achieved, only 7% had undertaken some form of measurement to assess the impact of the scheme.
As Andrea Arnold, the report’s author, points out: "It appears that many who replied that their objectives had been achieved are basing their assertions on their own perception, which may be subjective. Designing a measurement system, particularly around qualitative issues. is difficult but can be achieved especially if planned when the scheme is introduced."
Among the other key findings of the PwC research are:
Communication: as many as 88% of organisations carried out a communication exercise on introducing their schemes. The most popular media were booklets, presentations and letters to individual employees.
Consultation: only a fifth of organisations (22%) carried out any form of consultation prior to introduction.
Retention: "Little emphasis is given by companies on using communication to encourage employees to retain the share obtained under schemes," says PwC. Indeed, less than one in ten (8%) undertook a follow-up communication programme to encourage staff to retain shares.
Nonetheless, the research suggests that the main aims of companies can be met without employees necessarily holding onto their shares in the longer term. "This issue will have to be addressed by the government if the new all-employee share scheme is to be as successful as the government would like," says Arnold.
PwC concludes with its two golden rules for ensuring the success of your share scheme: first, undertake a full communication exercise; secondly, establish measurement techniques in order to check whether the company is meeting its aims.
Title: "Share schemes — are they worth it? Employee share ownership survey — key findings", by Andrea Arnold, Human Resource Business Briefing, September 1999.
Availability: Clemency Marlowe, PricewaterhouseCoopers, tel: 020 7212 2182.
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