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Sharing Profits, Keeping Employees
A Penn study found that shared ownership leads to higher employee retention rates
In Brief: A study conducted by Marshall Vance at the University of Pennsylvania found that employee ownership options result in increased employee retention rates, and consequently, greater output and production.
What the Study Says: In the first of two essays, Vance analyzes data from a large retail firm that employs shared compensation at all levels. This means that many employees - but not all - are eligible. Eligibility is determined by factors such as company tenure and hours worked each year. Vance found that eligibility for the firm’s equity compensation plan led to a 15-35% decrease in turnover rates. Similarly, when a firm increases the amount of equity awarded to employees by one standard deviation, the firm saw a monthly increase of 2.3% in profits. Options for equity compensation increase both profits and retention.
Why It Matters: The study provides empirical data highlighting a benefit of employee ownership. While mere anecdotes are helpful in encouraging some businesses to transition, hard numbers are often more compelling and energizing both to interested firms as well as the broader employee ownership movement.
Go Deeper: Check out the study here.