Housing.com has been in the news of late, for all the wrong reasons. Rahul Yadav, its CEO and founder, has called his erstwhile investors cheats, his Board un-intelligent, resigned, and subsequently withdrew his resignation in a span of 24 hours. Viewed in that context, his latest move to allot all his shares worth some ₹150-200 crores to his 2,200 employees has caused ripples -- ranging from caustic to noteworthy praise. Whatever his motivations, he has brought one key issue to the centre stage – that of making your employees partners in your business. Putting aside the dramatics, let me share my thoughts on the rationale and benefits of sharing ownership with one’s employees.
It is my strong belief that
(i) companies will grow faster in a climate of intrapreneurship
(ii) at our core, all of us are entrepreneurs.
Spectre of risk
It is only the spectre of risk that turns people away from translating that entrepreneurial instinct into reality. Some want to play safe while others don’t have the wherewithal to stay on course. But if one can adopt the true attributes of an entrepreneur viz. innovation, risk taking, enterprise and commitment from employees, however small the company, there is no better way to get the best out of employees.
It is with this rationale that my partners and I decided to make all our key employees our partners (the heads of our functions and Lines of Business) and we issued shares to our key employees and ESOPs to other key employees just before we went for our first round of venture funding. Till the time of our exit, we had only one of these shareholder-employees quitting. This also went down very well with our customers who are concerned about high employee turnover at their vendor companies.
High expectations
Today, most talented people entering/already in the workforce have high expectations. They also have great mobility. Organisations are affected most by high employee turnover, which impact them in two ways – disruption of business and cost involved in loss of talent. One of the most effective tools to retain talent is giving them a sense of ownership:
(i) actually giving them shares in the company and thus effective ownership, however small that may be and
(ii) supplementing that with a culture of learning, independence, risk-taking and tolerance for failure.
One without the other, in my opinion, cannot successfully help build an entrepreneurial culture which is necessary in a growing organisation, whatever the scale of business.
Even large companies like Google are incorporating some of these practices as part of their business culture. To cite an example, Google provides employees one day a week to experiment on projects outside their day-to-day tasks. That’s a lot of time on new projects from which some may fructify into apps which can be marketed, and which customers value. This is in addition to the liberal stock options that it provides to its valuable employees.
Attitude of intrapreneurship
In order to encourage an attitude of intrapreneurship and ensure that it really works, here are a few lessons:
(i) Allot equity shares –- Make employees a part of the business. That way you will have more co-owners and less employees, more people who will share your load of decision-making and less people to supervise. Of course, this needs to be done after careful evaluation and with objectivity else it can be a double-edged sword.
(ii) Quick decision making – Making people entrepreneurs means that you also give them the right to share the risks (not just the rewards). They must have a role in decision-making. Support and guidance need to be given but for the most part, employees must also be given the freedom to move forward as entrepreneurs. This is also the most difficult area for entrepreneurs because it means trusting your key employees and also letting go. Some of the best ideas that we were able to suggest to our customers came from our employee-shareholders who had been given the freedom to explore and take risks.
(iii) Have a supportive culture -- That both supports the intrapreneur as well as facilitates fun at the workplace. A work culture that is filled with stress and tension is not the most conducive place to be creative and innovative. This was an area that we focused our time and attention on. Especially in the kind of knowledge work that we were involved in, we wanted to built a culture where our employees worked well in teams rather than proving individual excellence.
(iv) Acknowledge contribution -- While employees must be encouraged to contribute their ideas and knowledge, it is equally important for the management to acknowledge their contribution, preferably publicly. For instance, we used to celebrate success however small; whether it was an idea or client feedback/comment or process improvement. A small gesture by way of a public acknowledgement in front of peers and colleagues followed by a token gift went a long way in boosting motivation levels.
(v) Financial Rewards --There must be a system that also rewards employees financially for their contribution to the company. We had put in place a system of recording contributions which was integrated with performance evaluation at the time of deciding increments and promotions.
To conclude, stock options and shares are important tools to inculcate a culture of involvement and entrepreneurship within the organisation. Equally important are several other enabling factors like risk-taking ability, acknowledgement of contributions made and financial rewards.