An Owner Vs. An Owner’s Mindset: How Companies Can Bypass The Doldrums

 

The smart people at Bain & Co. know how to crunch numbers and this one’s a doozy: of 8,000 companies the consulting firm looked at globally, each having crossed the $500 million-in-revenue line, fully two-thirds stalled out. Often, the doldrums settled on these companies suddenly and without much warning. And, the Bain partners Chris Zook and James Allen tell us, the problem isn’t typically a broken business model or a market with exhausted opportunities, but rather the calcifying forces of bureaucracy, complexity and internal dysfunction.

To re-energize a stalled out business, the Bain partners recommend a re-simplification of the business, elevation of front-line (customer-facing) employees and adoption of an owner’s mindset. Admirable examples of well-known companies that shook off the doldrums include Starbucks (SBUX) and Home Depot (HD).

Perhaps it all sounds obvious, but the Bain thinking takes us through these and other turnaround stories in a way that could help us see faults – and opportunities – in our own companies. From my perch working with employee-owned companies, I’d add just one thing: why settle for an owner’s mindset when you can power the business with actual owners?

At the risk of repeating myself, a wide survey of research concluded that employee owned companies tend to out-perform other firms. And a separate study found that the most common employee ownership format (S-Corporation Employee Stock Ownership Plans) outperforms other retirement savings vehicles. Not familiar with ESOPs? You can find a list of the largest ones here.

Non-employee-owned companies have to struggle with a concoction of compensation and management formulas to try to achieve an owner’s mindset, and still often fail. But ESOPs, by making employee actual owners, typically enjoy a boost in productivity; a reduction in management-worker friction; the benefits of a low-waste, self-policing workforce; and the bubbling up of many helpful ideas. Owners, in other words, acting like owners.

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