Introduction
Employees are critical to effective running of an organization and their attitude towards work they do have a great impact on their productivity. Organizations today are exploring ways to attain their productivity goals through their employees. The need for sufficient incentives for employees to enable them perform according to organization’s expectations cannot be overlooked (Kruse, 2013). Whether it is financial or non-financial, material or non-material, incentives have a general effect of boosting the morale of employees to work hard towards attainment of organizational goals. Economic motivators, for instance refer to those factors that are expressed in monetary values. They are those incentives whose value is determined with certainty provided to employees of an organization to enhance their productivity and further give them a sense of belonging and pride. Huawei, the second largest company in the word producing manufacturing telecommunication equipment based in china has utilized motivational tools to make the most out of its employees. To accomplish its goals of growth, efficiency and ultimately productivity, it has implemented a special motivational program that has worked out well for decades (Dunbar, 1989). It has in place employee stock ownership, a plan that has proven to be an excellent motivational tool since 1990 only three years after inception of the company.
The idea rose when the company wanted to solicit funds for expanding operations but because it was a private company, raising capital from external sources was extremely hard. To overcome this challenge, Huawei turned to its employees and offered for sale 15% of its shares at 10RMB per stock to employees. However, the right to vote and control the affairs of the company was not accorded to employees. In 1997, the company modified the ESOP into an incentive model by significantly lowering the price of shares to 1RMB from 10RMB. In addition, employees were entitled to loans to enable them to purchase shares while dividends during this period were dependent on an individual’s proportion of shareholding. It was a powerful economic incentive that encouraged employees to purchase company shares. The ultimate goal was to make employees feel recognized and motivated to work hard. In 2001, the company restructured its ESOP into a virtual stock option in compliance with regulations relating to stock ownership. The amount of dividends now depended upon changes in the net assets of the organization. Share price rose to around 2.6 RMB, but old employees could exchange their shares at the previous price of 1 RMB. These initiatives confirmed that Huawei was committed to pursuing the interests of employees who are the livelihood of the company (Freeman & Blasi, 2010). A significant stake of the company was then in the hands of employees. The intention according to the company management was to enable sensible and able workers to assume significant responsibilities in the company and ultimately boost productivity of the company.
Share ownership provides employees with a stake in the organization as a way to reward them for their long-term commitment. It is an excellent way of encouraging teamwork in the company because employees contribute to the success of the company. They equally benefit from the success by earning dividends on their shares as well as creating value for their stocks (Kruse, 2013). The bottom line is ESOP that has impacts on individual and collective behavior which ultimately leads to increased performance and productivity. The partial ownership of the company gives employees a sense of pride as they feel part and parcel of the organization. As employees work, they feel emotionally motivated which is a powerful incentive for productivity. Employees generate more money than they would have if such plans were not in existence. Long-term membership is provided for as long as the employee holds stocks of the company. Employee’ personal interests match those of the company because they know that the profits generated by the company directly affect the value of their stocks as well as the size of earnings on dividends. ESOP is an excellent way to enhance employees’ participation in activities geared towards improving the productivity of the enterprise. They are more willing to be part of activities such as quality improvement committees and other committees whose aim is to take the organization to greater heights. In addition, employees disengage in activities that are likely to have negative impacts such as bargaining for higher salaries or joining harsh trade unions.
ESOP encourages employees to stick to the company for a long period of time because of the numerous benefits derived thus employee loyalty increases. This implies the company enjoys the skills and expertise of the experienced employees for relatively long period. The low workers turnover has effects of reducing significantly the cost of recruitment, selection and training new employees that are incentives to high productivity. Given that employees play a critical role in the growth and development of the company, efforts to take care of their welfare is an incentive to high productivity. The company’s desire to meet the education needs of its employees led to the establishment of a higher institution of learning in 2005, Huawei University which has enabled most of the company’s staff to enroll for various programs. The company has incredibly skilled managers with wide experience in influencing employees to work hard to accomplish the goals of the company. Creativity and innovation are directly related to employee performance and productivity. According to a survey conducted by World’s Intellectual properties organization, Huawei has attracted the largest number of technical employees who have submitted the highest number of registered patents. High level of creativity and innovation is occasioned by employee satisfaction in their jobs as well as ESOP (Kramer, 2010). Job satisfaction is an important aspect of employee productivity. Unsatisfied employees frequently underperform because dissatisfaction affects their psychology. Organizations that have effectively managed employees’ satisfaction such as Huawei through ESOP have a competitive advantage over their rivals who are yet to put strategies to increase employees’ satisfaction. Proponents of theories of motivation argue that money is a strong motivational tool that is capable of attracting, retaining and motivating employees towards high productivity. They argue that when an employee with expertise in a certain field is provided with an identical job opportunity in another company with a higher salary, that employee will be highly motivated to take a new job.
In conclusion, ESOP has given Huawei competitive and comparative advantage over its rivals in the industry because it is a powerful motivational incentive. Any organization that wishes to increase its productivity should consider the effectiveness of ESOP strategy in motivating employees to work extra hard. The positive correlation between ESOP and productivity in Huawei has grabbed the attention of many companies across the world. Today, the list of companies that have adopted this strategy is endless.
References
Dunbar, A. E. (1989). An empirical investigation of the association of productivity with employee stock ownership plans of publicly held corporations. Ann Arbor, Mich: UMI.
Freeman, R. B., & Blasi, J. R. (2010). Shared capitalism at work: Employee ownership, profit and gain sharing, and broad-based stock options. Chicago: University of Chicago Press.
Kruse, D. (2013). Sharing ownership, profits, and decision-making in the 21st century. Bingley, U.K: Emerald.
Kramer, B. (January 01, 2010). Employee ownership and participation effects on outcomes in firms majority employee-owned through employee stock ownership plans in the US1. Economic and Industrial Democracy, 31, 4, 449-476.
