When Mary Jenkins took over as CEO of Westbrook Manufacturing in 2017, the company was hemorrhaging talent and struggling with productivity issues. Her solution wasn’t a management overhaul or a new marketing strategy – it was giving employees a meaningful stake in the business. Five years later, Westbrook boasts 18% higher productivity and just 4% annual turnover in an industry averaging 15%.
This transformation reflects a broader trend that’s reshaping American business. Employee ownership structures – from Employee Stock Ownership Plans (ESOPs) to equity grants and profit-sharing mechanisms – are gaining traction beyond the tech startups that popularized them. Data from the National Center for Employee Ownership shows companies with employee ownership programs outperform their competitors by 2.5% annually and weather economic downturns more effectively.
“The psychological shift that happens when employees think like owners rather than hired hands is profound,” explains Dr. Joseph Blasi, Director of the Institute for the Study of Employee Ownership at Rutgers University. “It’s not just about financial rewards. It’s about creating a fundamentally different relationship with work.”
I’ve spent the past two decades covering business transformations, and the evidence for employee ownership as a competitive advantage continues to mount. A 2022 study by the Federal Reserve Bank of Chicago found that employee-owned companies maintained higher employment stability during the pandemic while requiring fewer government supports.
The business case becomes clearer when examining how ownership changes behavior. When Denver-based New Belgium Brewing transitioned to 100% employee ownership in 2013, they documented a 32% reduction in waste and a 41% improvement in workplace safety within three years. Employees watching the bottom line began identifying inefficiencies invisible to management.
“What surprised us wasn’t just the financial performance,” Kim Jordan, New Belgium’s co-founder, told me during an interview last year. “It was how ownership transformed decision-making throughout the organization. Suddenly everyone was thinking about long-term sustainability, not just quarterly targets.”
The movement toward broader ownership isn’t limited to small businesses. Public companies like Starbucks and Home Depot have implemented variations of ownership programs with demonstrable results. Home Depot’s success with its employee stock purchase program has been credited with helping the company outperform competitors during retail’s digital transformation.
However, implementing effective ownership isn’t as simple as distributing shares. The most successful programs combine financial stake with meaningful participation in decision-making. According to research from Harvard Business School, ownership programs deliver 4.5 times the impact when coupled with participatory management practices.
“We see three critical elements in successful employee ownership models,” explains Corey Rosen, founder of the National Center for Employee Ownership. “Financial stake, information sharing, and a voice in how work gets done. Miss any of these, and the program underdelivers.”
This insight explains why simply granting stock options without transparency or involvement often fails to produce lasting results. Employees must understand how their actions connect to business performance and have channels to influence outcomes.
Tax advantages also make ownership structures increasingly attractive. The Main Street Employee Ownership Act of 2018 expanded SBA loan access for ESOP transitions, while various tax incentives make ownership transitions financially beneficial for selling owners and participating employees alike.
For family businesses facing succession challenges, employee ownership offers a compelling alternative to selling to competitors or private equity. According to Project Equity, an organization supporting business transitions, approximately 2.3 million American businesses are owned by baby boomers nearing retirement, controlling roughly $5 trillion in business assets.
“Many owners want their legacy to continue serving the communities where they built their businesses,” says Alison Lingane, co-founder of Project Equity. “Employee ownership allows for continuity while creating wealth-building opportunities for workers who helped build the company.”
Manufacturing firm Hypertherm in New Hampshire demonstrates this potential. When founders Dick and Barbara Couch wanted to ensure the company wouldn’t be dismantled by outside buyers, they transitioned to 100% employee ownership. Twenty years later, the average employee-owner at Hypertherm has retirement savings more than eight times the U.S. average for their income level.
The impact extends beyond individual businesses. Communities with concentrations of employee-owned companies show greater economic resilience, higher median household wealth, and more stable employment, according to research from Fifty by Fifty, an initiative promoting employee ownership.
Implementation challenges remain significant. Transitioning to employee ownership requires careful planning, cultural readiness, and often specialized financing. Legal and administrative complexities can be daunting, particularly for smaller businesses without dedicated HR departments.
Yet resources for companies exploring ownership are expanding. Organizations like the Democracy at Work Institute provide technical assistance, while specialized lenders are developing financing products specifically for employee ownership transitions.
The movement comes at a critical moment in American business. With wealth inequality at historic highs and worker disengagement costing the economy an estimated $500 billion annually according to Gallup, ownership structures that align incentives and distribute rewards more broadly offer a market-based approach to addressing both challenges.
For businesses considering this path, the evidence suggests starting small and building gradually. Profit-sharing programs can create the cultural foundation for more comprehensive ownership structures. Transparency around company performance and decision-making processes establishes the trust necessary for ownership to transform behavior.
As we navigate economic uncertainty and shifting workforce expectations, employee ownership represents not just an alternative compensation strategy but a fundamentally different approach to organizing business. The companies embracing this model aren’t just sharing equity – they’re creating more resilient organizations built on aligned interests rather than traditional hierarchies.
The question for American business isn’t whether employee ownership works, but rather how to implement it effectively across diverse organizations and industries. The evidence suggests those who solve this challenge will enjoy significant competitive advantages in the decades ahead.
