ESOP presentation september 2011

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Employee Share Plans presentation showing how your business can attract, retain and motivate key employees - as well as improve financial performance.

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  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • Employee Share Plans Presentation Succession Plus Pty Ltd
  • ESOP presentation september 2011

    1. 1. Maximise Business Value: Employee Share Plans as a Succession Tool Craig West
    2. 2. Did you know?
    3. 3. Baby Boomers – the 18 year wave
    4. 4. 51% of business owners plan to use their business as their primary source of funding retirement
    5. 5. 43% aim for a lump sum and a third expect an ongoing income stream
    6. 6. The average age of a family business owner is 56 years.
    7. 7. 55% of all firms plan to recruit in the next 12 months (competition for talent will increase)
    8. 8. 61% would seriously consider selling if approached.
    9. 9. 31% of retired business owners do not have an adequately funded retirement.
    10. 10. Why Succession Planning? 55% of all business exits are due to death, disability, bankruptcy, receivership, liquidation or simply closing the doors.
    11. 11. $213b in US ESOP’s Of the estimated $8 trillion of corporate equity in the United States, employees own about $213 billion through ESOPs and similar stock plans
    12. 12. 11,500 companies & 9m employees In the United States, more than 11,500 companies have an ESOP covering almost 9 million employees.
    13. 13. 8-11% Faster Growth ESOP companies that combine employee ownership with a participative management style grow 8-11% per year faster than they otherwise would have.
    14. 14. Clegg in employee ownership push Wednesday 4th July 2012 Nick Clegg has announced plans for an Institute for Employee Ownership The Government has announced moves to promote employee ownership and make it easier for people to run their own business. Deputy Prime Minister Nick Clegg said he wanted employee ownership to be normal, rather than a “eureka” moment. He told a summit in London that he supported a culture shift to help people become their own boss.
    15. 15. Competitive Edge “People are definitely a company’s greatest asset. It doesn’t make any difference whether the product is cars or cosmetics. A company is only as good as the people it keeps” - Mary Kay Ash
    16. 16. Performance Examples! Year 1 Year 2 Year 3 Year 4 Year 5 Net Profit (average improvement) 55% 51% 35% 40% 43% Staff Turnover (as a percentage of total employees) 13% 10% 6% 6% 4% Absenteeism (average days per employee) 5 3 3 2 2
    17. 17. What are you telling your staff by the way you pay them? Rewarding key people who are already collaborating to drive the business!
    18. 18. Base Remuneration • Salary & Wages • Other benefits Short Term (annual bonus) • Cash bonus • Commission • Cars • Fringe benefits • Entertainment • Income Continuance Policy • Other benefits Long Term (loyalty) bonus • Retained Bonus • Equity Savings Plan • Equity • Shadow Share Plan • Replicator Plan
    19. 19. Key people as business owners?
    20. 20. “Employee ownership is world changing. It is the way ahead…in the global economy. It reflects that human capital is becoming more important than physical assets…The global economy will succeed when employees feel a stake in the business” Gordon Brown MP – Chancellor of the Exchequer
    21. 21. Sharing the Profit “The truth is that all profit sharing doesn’t create employee involvement – it requires it.” - Ricardo Semler
    22. 22. Ladder to Equity
    23. 23. 1. Employee – earning income (salary/wage/hourly rates etc. ) – this is where most employees sit ( and stay ). 2. Income model – the first step on the ladder then is to boost that income and this is quite common – we often see companies paying bonuses, commissions on sales, incentives etc. to increase an employee’s income
    24. 24. 3. Profit share – most equity plans begin with this simple step and in fact many end at this step – simply providing a share of profits to employees is a great additional incentive as they are directly rewarded as a result of the financial performance of the company in the same way that a business owner typically would be.
    25. 25. 4. Equity – whilst there are many equity plans available our Peak Performance Trust provides a formal structured mechanism to incorporate stages three, four and five into any business succession plan - this allows employees to transition into an equity ownership position within the business they work for.
    26. 26. 5. Control – often this step is never utilised though on occasion has substantial benefits in terms of succession not only of business management but also ownership. Ultimately control means that employees can be transitioned through the earlier four stages and end up in a position of control – this may be that they take over general management or CEO of the company, it may be that they end up with a seat on the board at some future date however this step is not to be rushed
    27. 27. Extra Profit Share 20% Target Profit Current Profit Your company Peak Performance Trust
    28. 28. Shareholders Company Participating Employees Peak Performance Trust Shares in Company extra profits
    29. 29. Peak Performance Trust – Stage One Shareholders Key Employees Existing Company Co-Trustee Peak Performance Trust
    30. 30. Peak Performance Trust – Stage Two Shareholders Key Employees Existing Company Co-Trustee Peak Performance Trust buys equity profit share % $ unit holders
    31. 31. Identify key employees and KPI’s Financial Modelling Employee Education Introduce the PPT Integrate the PPT Ongoing- Communication and Management
    32. 32. Creating an Organisation of Winners ENTITLEMENT FEAREARNING I HAVE IT COMING I DID THE BEST I COULD I LIKE THINGS JUST THE WAY THEY ARE HAVE YOU THOUGHT IT THROUGH? LET’S GO FOR EXCELLENCE! SHOOT FOR THE BIG ONE! YOU CAN NEVER LET UP WATCH OUT! MAKE ME SAFE Low High High From Danger in the Comfort Zone, by Judith Bardwick
    33. 33. Motivation is highest when the probability of success is 50%
    34. 34. The Three Characteristics of the Best Companies • Have fun • Really care: About each others, customers, suppliers • High expectations of performance: From within the team, not just top-down
    35. 35. The Ownership Thinking Process
    36. 36. The Right People VALUES PUPPIES STARS TERRORISTSDOGS PERFORMANCE
    37. 37. The Right People Ownership Thinking cultures retain employees at a 200% better rate than non-engaged cultures. (www.nceo.org)
    38. 38. The Right People Unlike many companies, we practice: “adequate performance gets a generous severance package.”
    39. 39. The Ownership Thinking Process
    40. 40. What your employees don’t know can hurt you
    41. 41. How to Effectively Teach Finance to Employees Paycheque Bills Savings Revenue Expenses Profit (Loss)
    42. 42. Everyone Can Create Profit SALES - EXPENSES = PROFIT
    43. 43. The Ownership Thinking Process
    44. 44. The Right Measures: Keeping Score The problems with financial statements: • Too Complicated • Too Late • Too Disconnected
    45. 45. Scoreboards & Forecasting ProTech Inc. Scoreboard Plan Forecast Actual Susan Existing Client Sales 700,000$ Calculation Existing % 93.33% #DIV/0! #DIV/0! Tom New Client Sales 50,000$ Calculation New % 6.67% #DIV/0! #DIV/0! Calculation Total Sales 750,000$ -$ -$ Alex Direct Labor 400,000$ Calculation Gross Margin 350,000$ -$ -$ Maury Overhead 250,000$ Calculation Profit Before Tax 100,000$ -$ -$ Maureen % Non-Owner Sales 80% Linda # of Qualified Leads 60 Cydny Close Rate 35% Frank # of Active Clients 16 Felix Billable Hour % 80% Tony Average Markup 57% Greg Average Collection Days 40 Tonya Number of Open Positions 2 Chad Customer Service Score 95%
    46. 46. Cascading • Mission • Vision • Strategies Strategy Plan Forecast Actual Bob Sales 1,650,000$ 1,720,000$ 1,728,000$ Bill DirectLabor 650,000$ 670,000$ 668,000$ Ann Materials 450,000$ 445,000$ 440,000$ Calc. GrossMargin 550,000$ 605,000$ 620,000$ Todd Overhead 400,000$ 400,000$ 396,000$ Calc. ProfitBefore Tax 150,000$ 205,000$ 224,000$ Bill Average Cost/Package $1.50 $1.58 $1.54 Doug Discounts/Returns 1,500$ 2,200$ 2,260$ Sally On-Time Delivery % 95% 96% 97% Adam SalesPer StaffHour 10,500$ 9,550$ 9,362$ Todd Average Collection Days 40 38 37 Ann Inventory Turns 7 7 6 NAME KPI BUDGET FORECAST ACTUAL Tom Overtime $600 $450 $438 Allan PackagingWaste 250lbs 290lbs 310lbs Phyllis ProductWaste 500lbs 820lbs 730lbs Tom Avg.SetUpTime 50mins. 40mins. 40mins. Allan Packages/Hour 1700 1550 1620 NO MORE TEARS Objectives Actions & People Financial Benefits Prize xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxxxxxxx xxxx Leadership Scoreboard Department Scoreboard Rapid Improvement Plans
    47. 47. Medical Supply Distributor Impact of RIPs QTR Name Objective Savings Q1 The VendorLove Boat Reduce junk fees, take all discounts, 30,000.00$ Q1 Sizzlin Samples Reduce Samples expense and Sample Freight 12,000.00$ Q1 Mercedes Drives 100 Add 100new accounts permonth 11,954.00$ Q1 Returns of the Jedi Reducing customerreturns 15,000.00$ Q1 It Aint Easy Being Green Reducing carbon footprint 5,000.00$ Q2 CPR Flatliners Reduce customerattrition 15,325.00$ Q2 The Terminator Paperless Picking and Packing in warehouse 5,400.00$ Q2 Deal orNo Deal Reduce Variouse Operating Expense 17,500.00$ Q2 UP (a catalog adventure) Obtain vendorsponsorships forads in catalog 41,000.00$ Q2 Credit Casino Royale Reduce CustomerCredits due to ordererror 12,500.00$ Q3 The Matrix Increase Web Sales 54,000.00$ Q3 No Going Postal Invoices via Fax orEmail - Reduce Postage 441.76$ Q3 The Three Amigas Upselling customers during ordertaking 3,583.00$ 223,703.76$
    48. 48. The Ownership Thinking Process
    49. 49. The Right Incentives: Designing Incentive Plans Most incentive plans don’t work In fact, many of them do damage
    50. 50. The Right Incentives: Designing Incentive Plans Elements of a Poorly Designed Plan • Separate Fiefdoms • Discretionary • Unattainable • No Perceived Value • Uncommunicated Goals • No Link to Work • Changes During Community Time Frame Elements of a Well Designed Plan • Self Funding – Drives Value of Business • Perceived Value • Shared Targets • Understandable Goals • A Stretch, But Attainable • Clearly Aligns Employees Behaviour to Business Objectives
    51. 51. Case Studies
    52. 52. LJ Hooker Commercial Central Coast Winner of the 2011 ESOP of the year award using a Peak Performance Trust. Award based on substantial reduction in sick days and improved staff retention, as well as a noted increase in performance and participation.
    53. 53. Ty Blanche – LJ Hooker: “We have created a more understanding team of people, and added value to the individual’s performance congruently.”
    54. 54. “both financial services and property management referrals from employees participating in this scheme increased at a higher level than before. I put this down to their seeing value in contributing to the company’s bottom line because they will share in the profit.”
    55. 55. Best SME/Succession – 2012 ESOP Award C-Mac Industries C-Mac was given this award because it is in a period of succession and transition. They have a very different set of circumstances and challenges from large companies. How do you move from single ownership to employee ownership whilst keeping the character, skills, employees and capabilities of the company intact? C-Mac’s plan managed to achieve this.
    56. 56. What Next? Further information on our website: www.successionplus.com.au Complete feedback form to be added to our newsletter Arrange a free 90 minute review
    57. 57. Craig West 1300 665 473 cwest@successionplus.com.au Visit www.successionplus.com.au Follow us on:

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