My Library and Courses
Last Update: Wednesday September 20, 2017

Key Idea: Teach Ownership Thinking

Meeko Mullin works for Hot Dog On A Stick and she is an owner.   Her leadership responsibility includes calculating the cost of labor on the shift she is running.   More...

Key Question:

A: 

Freddie and Rick are constantly teaching employees about the meaning of ownership. They run formal classes and informal on-the-spot sessions.

Q
: What does Meeko know because she is being taught as an employee-owner?

A: She knows everything. There is open-book management plus many rules that are to be followed by those in leadership. As the manager of her location, Meeko has to measure results and turn those numbers into the main office. Meeko has been taught the meaning behind the numbers which is why the requirement to do the work does not feel heavy-handed. It feels right. If you own a business, you need to know your cost of labor, your cost of raw materials and understand that when the total sales are added up at the end of each day, the thing that counts is not sales but profit.

We know that a learning company is a growing company and that great business owners are teachers. We heard a futurist say that today there is no difference between working and learning.

Too often the easy road is taken and an employee is simply taught a task. This is short-term thinking. Employees need to be taught how to do their job but they need so much more.

Ray explained that there are rights and there are responsibilities within the ESOP citizenship. It is real work to teach this.

Just to know and explain the financials is a challenge, and do strategic planning, too! If employee-owners have such rights, then the founder/owners have the inverse responsibilities.

That's a real educational challenge -- for both student and teacher! Most of us do not look at ourselves as teachers. However, in the best run businesses that we have studied here, the founders/CEO's were great teachers and mentors.

And what better role for a founder/owner in their twilight years (50 to 70 years old) to begin developing and teaching people about the succession plan and one's exit strategy.

Q: There is a risk in assuming the role of a teacher or mentor. We think we have to be the expert, know the subject in detail. But is that the role we are being asked to take?

A: No. Know-it-alls have never been attractive to anybody at any age, and that is mostly because the attitude is hiding behind an insecurity for knowing very little. The Socratic method of asking questions and exploring possible answers together is the role we are being asked to take. Remember when you were in your 20's you had all the answers, and now that you are older, you have all the questions.* Explore answers to the questions that are asked by our bankers, suppliers, customers, and prospective customers. All the questions and answers become part of your working document (business plan). That working document is a pre-cursor for a formal ESOP, some kind of employee stock ownership plan, or even a SCOR.

Think about it

What do your employees need to know about how the business works from the inside out?

Clip from: Employee Stock Ownership Plans (ESOP)

Meet Ray Smilor, Rady School of Management, Univ. Calif. San Diego

SAN DIEGO: In this special episode you will meet many people who understand Employee Stock Ownership Plans (ESOP).   ESOPs are keys to the future for any growing business.  Though each word is quite operative, the most important is ownership.

To understand ownership, we have to understand something about the value of what is owned. It is a lot more than a  business valuation.  It is about business sustainability. 

Ray Smilor and Dr. Robert Beyster (SAIC) are experts on the subject.  Once a person is actively participating in the bottom line or the profit line of the business, once they are vested, don't you think they'd act differently and care more? Ray Smilor says that typical productivity increases 4-5% per year.

What would that do to your profit line?

Go to all the key ideas and videos from this episode...

Hot Dog on a Stick, Inc.

In Memory of Freddie Thode, a very special person, CEO

5601 Palmer Way
Carlsbad, CA 92008
7609300456

Visit our web site: http://www.hotdogonastick.com/

Office: 7609300456

Business Classification:
Beverages, food services, retail

Year Founded: 1946

Teach Ownership Thinking

FREDDIE (former Chairman of HDOS): We actually do a whole training program just on how the ESOP works: "What are the benefits? When can I get my money?"

HATTIE (addressing an employee-owner): So you're building up your retirement pension.

Employee of HDOS: I am. I'm fully vested. I've been fully vested for about six years now so I've been pretty fortunate to have been here right when the whole program started.

RAY: Just owning stock, whether it's an ESOP or option or some other form like that isn't enough. You have to have ownership combined with engagement. You have to have people really believe this is my company. That's where inspiration, information and involvement play a role.

Employee ownership is built on inspiration, in my view, all right. We inspire people to be owners and I think we're in an ownership culture today. People want to own things. So inspiration can come by saying you're actually an owner in this enterprise.

Two, the leadership must inform. Inform says I have to tell you everything you need to know about this company to run it effectively:
»   You have to know all the financials.
»   You have to know where we're making a profit.
»   You have to know where we have the problems. It has to be an open book.
»   You have to understand how this company is run, which means you have to have educational programs.
»   You have to tell people, how do you read a profit and loss statement. What's an income statement? How do you know what our major numbers are?

And that's a lot of work, but leadership must do that.

And third, leadership has to involve. Now by this we mean you have to be open. I remember talking to one entrepreneur who said, `Well, the problem with the employee owners is they think they're owners.' Well, in fact, they are owners. And to involve them you have to say, `I need your input. I want you to provide a decision-making capability. I want you to have a say in what goes on here.'

MEEKO MULLIN: I am the manager here at Muscle Beach Lemonade...

HATTIE: (Voiceover) This is Meeko Mullin.

MEEKO: And I pretty much just run the crew, make sure sells are, you know, up; labor's down and all that.

HATTIE: Sales are up and labor's down. And you've been with Hot Dog on a Stick for how long?

MEEKO: Three years next month.

HATTIE: What is this and why do you have it posted on the back bulletin board?

MEEKO: Basically, this is something that we felt -- we use these equations each week when we fill out our payroll and weekly packet. And we use the labor percentage to find out how much money we're spending on each individual employee to have us working here. And what we do is we calculate our average pay times how many labor hours we had for that week and then we divide it by our sells for that week and then we get a labor percentage which then tells the office how much money we're spending on labor.

Unidentified Man #3: We're trying to find some intraLATA pricing rate schedules and the service guides of the...

RICK: Convincing people that you have an employee ownership culture is not about convincing them that they're going to get stock options and they've going to vest and solely that they're going to be worth something. It's about the way you treat people.

You have to treat someone like an owner for them to feel like an owner. Not just give them options. So treating people with respect, sort of the golden rule is what we operate under here. All right. I'm just here to hand your paycheck out to you.

Here you go, Marcy. I hand paychecks out myself on a biweekly basis, and if I can't do it I have one of the executive team do it.

Unidentified Man #4: Have a good day.

RICK: It's an opportunity for us to go out and meet the folks and get to know them by first name.

Unidentified Woman #3: Appreciate it.

RICK: All right. We'll see you.

Unidentified Woman #3: Have a good day.

RICK: We've got to be able to capture every bit of information that goes into the system in a way that we can measure and manage it. You really do get interest aligned when you not only give the employee ownership, but you treat employees as if they really are owners, as if they really do have a stake in the game and as if their opinion does really matter. It made a huge difference to us. And I can really track when we started to really take off as a company back to the date that we committed to employee ownership and we offered stock options.
 
 

Not a member yet? Learn!  Be empowered! Join us!