Between the stock market having its worst December since the Great Depression, the economy tapping its brakes, the Federal Reserve considering interest rate bumps, and current trade wars, it’s clear that stock values are in flux.

Anytime the public market goes on a roller coaster ride as it did in late 2018, it can cause quite a bit of uncertainty and anxiety for employees who are invested in stocks or equity funds as part of their 401(k) and other retirement accounts. So, naturally, your employees may be wondering how it all impacts their ESOP accounts.

For privately held companies with an ESOP, the way employees perceive annual stock value can impact engagement in your vision and enthusiasm for the benefit. Workplace Development’s Annual ESOP Communication Services — engaging annual presentations, learning activities, materials, and video tools — can help you share the right information, at the right time, in the right way. We suggest following these five practical tips to keep everyone in-the-know about ESOP stock value, particularly during such volatile times:

1. Convey that the ESOP is a different kind of addition to retirement
You can allay fears about market impact on the ESOP and clear up any confusion by reinforcing the things that set your ESOP apart from the changes in the public market. After all, employees can do something about this part of their retirement. They can’t do much about passive savings in other retirement savings.

2. Share basic knowledge, not all the detail
People hear or read about the public market fluctuations — but often don’t understand what drives value at their own companies. Take the time to communicate the factors affecting your company’s ESOP valuation — pull them out of the appraisal report, translate them into “human-speak” and share them with employees. Not sure what things you should consider? Workplace Development can work with you to evaluate the business drivers that impact valuation and communicate them in plain language.

You’ll want to illustrate how a privately held ESOP valuation is different, yet similar, to the value of stock traded on the NYSE or NASDAQ. While you want to explain the appraisal, it’s best to come at the topic from an employee point of view. Your appraiser (whose expertise is based in the external factors that impact stock value) has a rich understanding of your valuation but they will be tempted to explain their assumptions and methods. Even if your employees are financially sophisticated enough to follow, you’ll want to avoid complex formulas and nix the details on what affected the discount rate. We recommend sticking with the concrete, practical concepts that are meaningful to employees in their everyday work.

3. Build a line of sight to job-level performance
Most employees want answers to two questions:

• How is our business performing (the big picture)?
• How do I affect this big picture in my daily job?

Your goal: build a line of sight between employees’ jobs and the company’s overall performance.

4. Implement a process to regularly discuss the business
Building a line of sight isn’t a one-and-done thing; it needs continual effort. Otherwise, people will use their own gauges (trucks leaving the docks, overtime worked, phone calls received) to measure the company’s success. These can become fuel for the rumor mill.

You can squash this kind of misinformation by establishing a communication process that provides meaningful measures of business success that inspire employee engagement. For some companies this involves routine communication of critical components of their financial results. If this triggers a Pepto-Bismol moment for you, don’t worry — we can help you pick some operational measures and other approaches that cultivate business awareness for your company. The idea is to provide periodic reference points to help everyone understand how job-level actions impact ESOP rewards.

5. Remind participants that it’s a marathon, not a sprint
The current volatile market is an ideal time to explain how ESOP rewards are a long-term benefit. A change in any one year doesn’t matter as much as the trend over time.

• Use your ESOP 101 or basic introduction to connect ownership with your firm’s strategic plan.
• Demonstrate how the company is working to build future wealth for everyone.
• Remind people they don’t invest in the ESOP; it’s earned as they work — unlike a 401(k) where they typically ante up their own cash to receive a benefit.

But don’t sugar coat the fact that, with most ESOPs, employees’ retirement eggs are all in one basket. Employees need to continue participating in the 401(k) and investing outside the company to secure their retirement future. The ESOP is a slice of their retirement plan, not the entire pie.

Engaged employees in an ESOP environment can make a big difference. Technology can be purchased, plants can be built, buildings can be acquired and innovations can be reverse-engineered into commodities. The only things your competition cannot duplicate are your people and your firm’s culture. They’re your true competitive edge.

Employees have the customer relationships, product knowledge, market experience and unique skills that differentiate your company from the competition. When employees are educated and informed about your ESOP, your business and its stock valuation, they are equipped to help their company reach its long-range goals.

If you’d like to discuss how Workplace Development can help you communicate the changes in ESOP stock value, please contact Jim Bado at or 419-427-2435.