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Almost no-one washes a rental car – which is why employees need an ownership stake in their company

Almost no-one washes a rental car. Yet, this is what many employees, are, in effect, asked to do. Owners and managers typically strive for good employee engagement without offering an ownership stake.  

Almost no-one washes a rental car. Yet, this is what many employees, are, in effect, asked to do. Owners and managers typically strive for good employee engagement without offering an ownership stake. Recent reports from the Chartered Management Institute (“CMI“) have started to provide answers to some key questions that impact on how a business is run, including how to get staff to, in effect, “wash the company car”.

 Without an ownership stake what drives good business performance from staff?

When employees perform well, why do they do this? Is this simply obedience? Some managers require staff to do only what they are told. Others believe in consensual management and indeed welcome constructive dissent. Roger Steare in his book ethicability refers to Milgram’s experiment in which 65% (26 of 40) volunteers were apparently prepared to inflict fatal voltages when ordered to do so. This may seem an extreme way to argue for participative management but there is clear potential for commercial harm to a business and customers, if not actual harm to patients, if staff cannot occasionally “stop the line” and suggest it is best (or right) to do things differently.

So perhaps each “employee of the month” has actually worked out for themselves what is needed, what is reasonable, from first principles. Or perhaps these employees care, perhaps they simply want what is best for their customer, or patient. Or is their behaviour driven by a mix of these values? We can start to answer these questions by looking more closely at how managers behave.

• To what extent do ethics inform the decisions of managers?

A March 2014 CMI report (Managers and their MoralDNA) tackled this question. Three ethical perspectives were tested: obedience, reason and care i.e. the perspectives described above. What did the report find? Among all recognised leadership styles the strongest ethic is that of reason, with care next and obedience the least strongest ethic. The relative strength of each varies between different styles. A balance exists in each case but always with more emphasis on reason and care.

However, managers are more likely than most employees to lack empathy and to become more robotic and less caring at work, than at home, especially when they are younger, male, junior, right-wing and without any religious faith. This is a deliberate over-simplification but each of these separate trends emerged from an online psychometric survey called MoralDNA™, of about 1,500 CMI members.

This report emphasised that what it does is describe the replies and no particular characteristic is presented as better than others. The answer to a problem could well be the same: it is how managers get there that differs. But if different approaches to problem solving, if not answers, are important then it helps to have diversity among managers. This CMI report concluded that diversity, in every sense, helps managers make better decisions.

Also, it follows, says the report, that regulators should clearly change their approach. More rules do not make people more ethical. The ethic of obedience was the least significant factor in managers’ decision-making.

• What links are there between ethics and the performance of an organisation?

An October 2014 CMI report (The MoralDNA of performance) is another descriptive report. It surveyed 2,500 managers, using the same approach as before, to identify links between their MoralDNA and the performance of their organisations. The key finding was that “across all 11 performance indicators … high levels of performance were associated with higher ethical scores”. There are some, perhaps obvious, correlations.  The particularly interesting findings are those that link to employee engagement.

• Which management styles have the best link to good employee engagement?

Managers working in coaching, visionary and democratic management styles rate their organisations as better performing than those who work in command and control environments.

• Do better ethical scores tie in to better business?

Managers “who rated their organisations highly in terms of staff satisfaction and their ability to attract new staff also had higher MoralDNA scores themselves on the ethics of reason and care”. Similarly, there was a positive correlation between reason and care and good customer satisfaction scores.

• What links are there between types of business and the ethical behaviour of an organisation?

What is very interesting in this second CMI report is the substantial difference between different types of business. The highest “ethical” scores were given by managers working in co-operatives, partnerships and private companies. The report comments that in these types of organisations managers are more likely to be owners and so the suggestion is that ownership or a sense of ownership has a positive effect on ethical behaviour, which, as we have seen, links to high levels of performance.

Now it could be that the benefits of being in a smaller organisation show strongly in co-operatives and partnerships etc. and perhaps these are more likely to be organisations that are growing rather than declining. There were also fewer managers surveyed in each of these sectors. Nevertheless the headline news is that co-ops and partnerships are twice as likely to have excellent ethical behaviour in contrast to, say, listed companies, or the public sector.

Conclusions

The main conclusion from these reports is that if you want to get staff to go the extra mile and cannot offer an ownership stake you must explain why this is the right course, logically and in terms of its impact, rather than simply set rules to be obeyed.

Where this research should go next is to test the impact of actual employee ownership, as against a sense of ownership. In, say, employee-trust owned companies all staff should have a strong sense of ownership. In these organisations will managers display the high ethical scores found in co-operatives and partnerships? And, what about other employees? Will all staff display the ethical behaviours of owners? Will there be a stronger display of reason and care rather than simple obedience in employee-trust owned companies?

The employee ownership sector certainly believes that the best outcomes for a business both in terms of its performance and the well-being of staff derive from a combination of ownership and employee engagement. In other words, businesses should provide actual ownership rather than a sense of it. The “company car” is converted into something in which every employee has a real interest.

The MacLeod Report on employee engagement acknowledged employee ownership is a profound enabler of good employee engagement. These two CMI reports, particularly the October 2014 report, suggest the employee ownership sector has indeed got it right. Real ownership and good employee engagement create better business.

Anyone interested in employee ownership as a business model and, in particular, as a tax efficient succession solution should read the other articles available on this Tax Deductions blog. For #employeeownership news follow @nuttallreview.

You can test your own MoralDNA at Personal Test. You can follow the CMI via@cmi_managers

This article was originally published as a LinkedIn post on 13 April 2015

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