The Intrinsic Satisfaction Model
The theory here is that owning company shares creates a sense of identity within the company and a feeling of being part of the company. The greater your slice, the higher your commitment to the company and therefore the less likely you are to leave. This, in turn, could translate into higher employee engagement. However, this model is now thought to be overly simplistic and hasn’t stood the test of time.
The Extrinsic Satisfaction Model
If you are given monetary rewards via a share plan and you are satisfied with the reward, the more fulfilled you feel and the less likely you are to leave. This is a better held argument. People have a fundamental need for money, whether or not they like where they work. And pay satisfaction is a strong argument to retain an employee. But people don’t go to work just to earn money or to feel a part of something. Whilst these are both important, these models both miss an increasingly important point which is where we introduce our third model.
The Instrumental Satisfaction Model
The key to this concept is empowerment. Some share plans give employees the opportunity to participate in the life of the business through shareholder rights. An empowering organisational culture can give employees a stronger sense of participation in decisions that influence their work life, further driving satisfaction. While all three satisfaction models have a role to play, it is the instrumental satisfaction model which provides the rationale for organisations to look more holistically at their employee engagement programmes.
Giving people stock or any form of employee ownership gives an opportunity to participate in the life of the firm.
Prof. James Hayton, Warwick Business School
Share ownership has an amplifying effect on employee retention
Employee empowerment, such as information sharing or participation in decision making, is often thought to
increase engagement and
enhance retention on its own. However, one large scale study by Blasi, Freeman and Kruse has shown that voluntary employee turnover is much more significantly reduced when
employee empowerment programmes are coupled with
employee share ownership.
The findings are illustrated in the graph:
- Where no share ownership programmes are in place, the
gentle negative slope of the
blue line shows a small reduction in voluntary turnover as the benefits of empowerment kick in.
- The
stronger negative slope of the
black line indicates that
empowerment and
ownership together have a much stronger impact on reducing voluntary turnover.
This is the
instrumental satisfaction model in action.
What does this all mean?
Share plans will appeal to people through all three satisfaction models with varying levels depending on the individual. Understanding the instrumental satisfaction model shows why organisational culture and employee empowerment is increasingly important and why organisations that combine strong cultures with employee share ownership reap significant rewards through increased staff retention.
With potentially many of your employees now working
from home, many could be feeling disconnected from their teams and the wider organisation. From what we've learned about instrumental satisfaction, the organisations that will thrive during this COVID-19 era will be the ones that find ways to empower employees, to consult and involve them in decision making, to find ways to remain collaborative, and that protect and strengthen their sense of organisational culture. Your share plan, critically the way you communicate about it, is a powerful and impactful tool in your strategy too.
Need help delivering your share plan goals?
If you don't operate a share plan today or you are looking to switch providers, we're here to help.
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