Choosing the right talent: A guide to employee ownership and profit sharing plans

As a business owner, you’re constantly juggling the challenge of attracting top talent, growing your business, and ensuring it’s future. One popular strategy is offering employee ownership or profit sharing. When done right, it can inspire loyalty, drive business performance, and align your team’s goals with your own –– but if not approached carefully, it can quickly turn into a costly misstep.

Why employee ownership can work wonders, and why it might not

In today’s competitive job market, the ability to attract and keep key players is more important than ever. Offering equity or profit sharing is a smart way to bring dedicated employees on board and keep them motivated. It’s more than just a job perk, it’s a way to make employees feel personally invested in the success of your business.

But there’s a catch. Without a solid plan in place, you might end up paying for mistakes down the road. One business owner put it perfectly, after three of their general managers either resigned or were released within and 18-month span.

So how do you avoid these pitfalls? It comes down to ensuring you’re offering ownership to the right people, who are not only dedicated but who also have the skill and mindset to truly be partners in the business.

Finding future leaders: Qualifying employees for ownership

Before you even think about handing over equity or offering profit-sharing, ask yourself, what qualities should a business partner have?

It's not just about rewarding hard work. Ownership comes with responsibilities, and not every great employee is cut out to be a business partner. That's why establishing clear qualifiers or criteria is crucial. These can help you identify the right people and avoid costly mistakes.

Qualifier one: Employees eligible for profit sharing

• Minimum time of service: Your employee has been with the business for at least six months, a year or longer, etc., depending on the role.
• Consistent performance: Your employee should already be meeting or exceeding expectations in their current position. 
• Leadership or Senior roles: They should hold leadership roles, such as a manager, executive, or supervisor.
• Long-term commitment: They demonstrate dedication and a mindset geared towards the success of your business.

Qualifier two: Employees eligible for equity programs

In addition to qualifier one, they have:

• Focus on strategic impact: They contribute strategically to your business and are committed to adding value beyond just fulfilling their job. 
• Established leadership with results: Within their leadership role, they should have a proven the ability to lead and deliver measurable results.

Qualifier three: Employees eligible for ownership

Along with qualifiers one and two, and being in a senior role with key decision-making responsibilities – they should also be ready to:

• Invest personally in the business (showing commitment).

As well as have:

• A sound financial background that reflects the values of your business.

Align your plan with your business goals

Before rolling out any ownership or profit-sharing plan, think about your business goals. What are you trying to achieve? Is it about attracting new talent, fostering long-term loyalty, or laying the groundwork for succession?

Your goals guide the structure of your plan. For example, a strategy designed to boost short-term revenue growth will look very different from one aimed at preparing for a future leadership transition. By aligning the plan to your long-term vision, you can ensure that it serves your business effectively for years to come.

Build for the future – thoughtfully

There’s no one-size-fits all approach to employee ownership or profit sharing. The most suitable plans require careful thought and a clear understanding of your unique business needs. It’s not just about offering financial incentives but designing a structure that supports your long-term goals and aligns with the right people.

By taking the time to assess your objectives, employee readiness, and work-culture, you can create a plan that fosters growth, loyalty, and sustained success. Our Smartshare process is centred on thoughtful discussions to uncover the best solutions for your business. Together, we can explore options and develop a structure that not only fits your current needs but is flexible enough to support your businesses growth in the long run.