It has been a while since the slogan “war-for-talent” emerged. Especially, established firms in Europe still struggle in finding and retaining talent. On the other hand, many start-up firms succeeded by establishing employee ownership programs and thus became more attractive in the eyes of the employees. Now, also more and more established firms introduce these programs, not only for their managers but also for rank-and-file employees. However, little is known about whether these programs actually help retain the talents in the firm.

In their open-access article in the „Accounting, Organizations and Society“¹ the two RUG researchers Jan Hennig and Jana Oehmichen,  together with their co-authors Carolin Ahrens and Michael Wolff  (University of Göttingen) address this issue. Their study is based on more than 190k employees of a multinational industrial firm headquartered in Germany.

Psychological ownership

The authors show that employees who participate in employee ownership programs are less likely to leave the firm. Furthermore, this effect depends on the country context of the employees. With better labor market conditions and lower uncertainty avoidance making it easier to change jobs, the effect becomes more pronounced. Hennig explains:  “Our study nicely demonstrates that this effect is not purely driven by monetary reasons but that especially for rank-and-file employees the cognitive mechanisms of psychological ownership are responsible for the retention effect. Accordingly, holding stock of the firm is related to an emotional attachment to the firm which makes leaving the firm less attractive.

This means that employee ownership programs can be a valuable tool to keep talent in the firm. Furthermore, this tool is especially effective, when employees‘ outside options are more attractive and the willingness to change jobs is higher.”

Recommendations

According to Oehmichen, for established firms these results hold the following implications: “First of all, employee ownership programs can help retain talent in the firm. However, firms are not done with introducing these programs. The frequently reported low participation rates highlight that firms need to motivate their employees to participate so that the programs can unfold their effect. In earlier studies, we showed that participation in employee ownership programs can be increased through positive role models among colleagues and managers or profit-sharing distributions.²

And finally, the effect of HR tools such as employee ownership programs depends on the country context of the employees. We advise avoiding one-sizes-fits-all programs across all countries but rather recommend adapting the design to the country context of employees.”

For more information, please contact Jan Hennig (j.c.hennig@rug.nl).

¹ Hennig, J. C., Ahrens, C., Oehmichen, J., & Wolff, M. 2022. Employee stock ownership and firm exit decisions: A cross-country analysis of rank-and-file employees. Accounting, Organizations and Society, in press, https://doi.org/10.1016/j.aos.2022.101390.

² Ahrens, C., Oehmichen, J., & Wolff, M. 2018. Expatriates as influencers in global work arrangements: Their impact on foreign-subsidiary employees’ ESOP participation. Journal of World Business, 53: 452–462.

Hennig, J. C., Hullmann, R., Rau, H., & Wolff, M. 2021. The hidden cost of profit sharing on participation in employee stock purchase plans. cege Discussion Papers No. 414, https://www.econstor.eu/handle/10419/232063.

Oehmichen, J., Wolff, M., & Zschoche, U. 2018. Employee participation in employee stock ownership plans: Cross-level interaction effects of institutions and workgroup behavior. Human Resource Management, 57(5): 1023–1037.