BC Business
How to reward performance
If you’re Odlum Brown. Even a good idea will fail if the people whose job it is to make it work don’t own it. Just try getting employees to put in extra hours on the final phase of a project they’ve never heard of, or getting the neighbours to clean up the nearby park if they haven’t been involved in the decision to do so in the first place. It’s one of those valuable universal lessons: ownership as motivator. Applied to the corporate world, it can make the difference between profit and loss, according to Ross Sherwood, CEO of Vancouver’s Odlum Brown and a 38-year veteran of the company. This B.C.-based investment firm is 100 per cent employee-owned, and more than 76 per cent of the staff are shareholders. “The fastest way to an employee’s heart is giving them equity in the company,” says Sherwood. “They have a larger responsibility to the organization than simply getting a paycheque. And they know they’re going to share in the profitability of the firm.” Indeed, in recent years, profits at the 200-employee firm have been substantial enough to warm any heart, the average staff member – even non-shareholders – receiving eight or nine weeks’ salary as a bonus. Here’s how Odlum’s profit-sharing package works: Of total profits, the company keeps as much as necessary for operating capital. Sixty-five per cent of the balance goes to shareholders. Of the remaining 35 per cent, 10 per cent goes to salaried employees other than management as Christmas bonuses. The 25 per cent left over is paid out as merit bonuses to management and any other employees who have gone above and beyond the call of duty. The profit-sharing package is in line with the company’s horizontal management style. It’s equally possible for the company file clerk to receive a Christmas bonus, share-dividend cheque and merit bonus in one year as it is for the director of client services. Becoming a shareholder is not automatic, however, nor is it without cost. Employees must earn the privilege through their performance and they must pay for the shares. Sherwood won’t say how much shares are worth, insisting that the purchase price doesn’t make any difference because they can’t be traded or sold. “The program,” he says, “is designed to be fair to everybody. It’s designed so that the cost accrues to the buyer.” He also says the company will finance the purchase for those who need it. The idea, he insists, is that everybody who is eligible can share in the profits, including those in the lower salary ranges. The company also tries to ensure shares are available to younger employees by buying them back from those who are close to retirement. So what’s in it for the company apart from all the smiling faces at bonus time? There’s much more to it than that says Sherwood. “The number of long-term employees here is incredibly high. There are not a lot of former Odlum employees working somewhere else, but we have a lot who came here from elsewhere,” he says. In fact, 14 per cent of Odlum’s staff have been with the company for more than 20 years; 47 per cent for more than 10. “We just don’t have much of a turn-over to speak of. And that’s worth a lot,” emphasizes Sherwood. To start, you don’t need a large human resources department to hunt for new employees and train them. And the longer an employee is with the firm, the more likely they are to have a broad knowledge of the company. It’s the knowledge, Sherwood says, that transforms employees into valuable contributors – the kind who don’t mind digging in to turn a profit.