As BIBA enters day two maybe there is time to reflect on your company’s growth journey.
Sometimes funding can be from within, rather than just banks or VC funds. Ownership also transforms employees into shareholders and the old example of the John Lewis partnership, which used to generate a bonus of about 8-11K a year for Partners, before JL went woke, is a powerful illustration of how “common cause” can promote a thriving workplace culture. A genuine team.
So this article is timely and offers useful insights into the shared ownership model across the EU;
The effect of using ESOP (Employee Share Ownership Plans) is transformative for both companies and employees, considers Radu Georgescu, Chairman of the Board of SeedBlink – an all-in-one equity and financing solution dedicated to European tech startups. These programs give employees the opportunity to benefit from substantially higher in-comes, but more importantly, they induce a significant change in the mindset of both employees and the company in general – from a self-centered perspective focused on “how to do my job better” to one focused on shared success.
The Chairman of the Board of SeedBlink highlighted the transformative effect of Employee Share Ownership Plans on organizational culture and employee engagement.
Radu Georgescu has over 30 years of experience in founding and growing software, internet and e-commerce companies. Successful exits include Microsoft’s acquisition of RAV Antivirus technol-ogy in 2003, Naspers’ ePayment business in 2010, Francisco Partners’ Avangate in 2013 and Fit-bit’s Vectorwatch technology in 2016. Radu is also a board director and advisor to a number of technology start-ups and mature companies.
WHAT DRIVES PEOPLE?
People are driven by various motivations in both their personal and professional lives. In the work-place, motivations typically include salary, which covers daily expenses and meets basic expecta-tions; bonuses, which finance luxuries like vacations and cars, encouraging employees to exceed expectations; and equity participation through Employee Share Ownership Plans, which offer sub-stantial financial potential. Employee Share Ownership Plans contribute holistically to employee wellbeing and company prosperity. Employees participating in ESOPs may benefit from dividends or profit sharing when the company goes public or is sold.
This reward system shifts employees’ focus from personal skill enhancement to overall company success. ESOPs motivate employees to extend beyond their roles, such as a programmer who might recommend a suitable candidate or attract new clients.
Offering such rewards is always beneficial, with Employee Share Ownership Plans being particu-larly valuable for both employees and the company. ESOPs provide significant income opportunities beyond salaries or bonuses, increasing employees’ attachment and motivation. Employees start to view themselves as co-owners, deepening their understanding and emotional investment in the company’s success.
Employee Share Ownership Plans are prevalent in the technology sector, noted for rapid growth. Originating in the US in 1956 and popularized by Microsoft in the 1980s, this model helped many early employees become multimillionaires and has now spread across Europe.
For instance, our product launched last year to simplify capital and ESOP management is now used by over 2,500 European companies.
The ESOP concept is well understood in Europe; the challenge is to fully understand its implications
While the concept of ESOPs is well understood in Europe, implementing this type of program ef-fectively remains challenging. Many European companies express interest in ESOPs, but actual execution often lags. The success of implementation depends on comprehensive planning that in-cludes business, legal, and tax considerations.
The ESOP concept is clear and accessible in Europe, especially in Western European countries, but the challenge remains in understanding all the implications. There is often a gap between the idea of implementing an ESOP plan and actually executing it. I’ve met hundreds of entrepreneurs and companies who say, “Yes, we want to implement an ESOP. How do we start?”
They start by hiring or contracting a lawyer, who asks questions that entrepreneurs can’t answer. Lawyers can offer solutions related to logistics and legal issues, but the business implications often remain a question mark. Implementing an ESOP doesn’t take long if you have answers to questions, but it does require some quiet time to ponder the implications of the answers provided.
People fear that they will have to share the benefits even when they are not successful.
I noticed that people generally welcome sharing success but are apprehensive about sharing benefits during downturns. Properly structured ESOPs can mitigate these concerns, ensuring fairness regardless of company performance.
Spotify (Sweden), Klarna (Sweden), UiPath (Romania), BlaBlaCar (France), Revolut (United Kingdom), Delivery Hero (Germany) or Skyscanner (United Kingdom) are just some of the tech European giants which have been launched in the last 20 years and which have developed significantly through ESOPs.
Unquestionably, these unicorns have been a catalyst in this direction and this ESOP idea has been set in motion with remarkable speed. We see these trends in all European countries, uni-corns and legislative adaptation to encourage the extension of benefits to new generations.
The state of employee share ownership in Europe in 2023
Currently, large European companies are seeing a decline in employee share ownership, while SMEs are experiencing growth, particularly in the UK. According to a survey conducted in 2023 by the European Federation of Employee Share Ownership about 90% of large companies in Ireland, Czech Republic, and the UK have ESOPs, while adoption is lower in countries like Romania (30%), or almost inexistent in countries such as Serbia, Latvia and Bugaria.
I had the privilege of being well connected to the American business environment and observed the functioning of Employee Share Ownership Plans. Within the Gecad group, the group I created during the ’90 in Romania, we implemented this system 25 years ago. As a result, employees developed a sense of belonging and continued to work together because they understood what success meant, experienced it and tried to replicate the same principles in other contexts. They created inclusive cultures in their new work environments.
Entire teams that had worked together at Gecad chose to regroup at other corporations such as Intel or Lenovo, perpetuating inclusive cultures, both among themselves and in collaboration with these corporations. Not to mention the personal satisfaction of seeing dozens of people earn significantly more than they would have through salary.
It’s a spectacular and impressive achievement.
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