Share schemes need to be coupled with employee involvement

FINANCIAL PARTICIPATION

Share schemes have little "standalone value" in the drive to boost productivity, but they do serve to underpin other forms of employee reward and involvement, says the CIPD's assistant director-general, Duncan Brown, in an interview with Employee Benefits magazine.

For Brown, it is clear that employee share ownership, as part of a whole range of employee involvement programmes, tailored to suit the needs of the organisation and its employees, can improve productivity. Research consistently demonstrates that employee share ownership among non-management staff when used as part of a bundle of HR practices improves both employee retention and productivity.

The importance of involvement programmes

But Brown has a stark warning: share scheme by themselves do not build commitment and employee engagement. To reinforce high performance, they have to be coupled with other employee involvement programmes. These participative mechanisms should be used to stimulate discussions about the share price what operational measures affect it and what employees can contribute to improve performance.

High levels of staff involvement, knowledge sharing, skill engagement and team-based structures are what really counts, according to Brown.

He told Employee Benefits: "Employee share schemes are not magic bullets, but are part of a comprehensive strategy of employee involvement and rewards where there is strong evidence that they contribute to positive attitudes and high corporate performance."

Role of share schemes in HR strategy

Brown reckons that one of the secrets of success is to work out how your HR strategy is going to meet the business needs of its executives and shareholders, as well as meet the employee needs, and what the purpose and role of share schemes is going to be to achieve this. "You need to have a very clear HR and reward strategy, specifying how people contribute to business success, and highlighting the objectives and role of share schemes within that."

What you will find in this report

The 15-page report brings together three pieces of research:

For the first piece of work, Employee Benefits interviewed the CIPD's assistant director-general, Duncan Brown.

The second study is devoted to looking at the major implications of the International Accounting Standards Board's proposals on how companies should account for share options for employees, which are expected to come into effect in January 2004. It also covers the problem for option-based schemes in falling markets.

The final article examines the tools employers can use to launch share schemes during a stock market downturn with the emphasis on financial education and effective communication.

Want to know more?

Title: Share schemes supplement, Employee Benefits, December 2002

Availability: Contact Employee Benefits subscriptions department in London, tel: 020 7970 4000 or email: employee-benefits@centaur.co.uk.

To read the supplement online, visit the magazine's web site at www.employeebenefits.co.uk.

Posted 17 January 2003