By Nicky Goringe Larkin
What are EMI Schemes? For small to medium companies, it is often a battle to entice the most talented staff to your company. An ace in the pack for these companies are EMI schemes (Enterprise Management Incentives). These have grown to be an essential tool for small companies when recruiting staff in competition with much larger organizations.
The schemes themselves give employees an option on shares within the company, the terms of these options are set out within an initial option ‘agreement’. Because of the impressive monetary returns that employees can have from these schemes they are also known to strongly help incentivize employees.
How do EMI schemes impact an employee’s attitude and behaviour?
The first and most obvious change to an employee is the potential for an EMI scheme to improve their productivity. If an employee has a monetary value assigned to a company’s performance, then it can be a strong motivator in improving their productivity and the achievement of the businesses key goals.
A recent study carried out by Loughborough University in 2012 looked at the impact on Employee Stock Options (ESO’s) across a wide variety of UK-based companies. This found a direct correlation to ESO’s and an employee’s productivity stating that “Almost a third of employees felt that participating in ESO’s made them more motivated to work for their employer.”.
An EMI scheme can also help employee engagement across a company. The scheme directly correlates the company’s success with the employee’s ability to utilise the EMI scheme. The improvement in engagement this causes can be spread across the employee’s direct workload or even across other areas of the organization.
Again the Loughborough University study found obvious improvements across employee engagement.
“Participating in an ESO plan made some employees feel more likely to:
- Help others in the organization learn about the organization’s work (40.1%)
- Make suggestions concerning issues that affect the organization (40.6%)
- Keep well informed about issues where their opinion might be useful to the organization (43.1%).”
EMI schemes also help to bring into focus a company’s core goals. Does your company have profit or turnover goals? Do you aspire to grow to ‘x’ size over the coming financial year? The company’s goals can have greater importance for employees if there is an EMI option scheme in place.
This is especially prevalent in the circumstance of the scheme being directly related to the company’s goals. This can be tied into the original share option agreement requiring the employee or company to achieve certain performance goals and/or profits. For example, in the coming financial year the company’s total sales will grow by 10%.
When employees share the same business objectives and goals, it can help to build a closer workplace and community. All of the employees know they are collectively striving towards a shared goal. This transparency across the company and how those goals are being achieved will help to build a closer workplace community.
An employee’s commitment to a company can be significantly strengthened if they are engaged in an EMI scheme. As with improving the company focus, creating an EMI scheme which is directly tied into specific timespans will only help improve the commitment of employees to stay with your company over time.
The same Loughborough University study in 2012 found out that ESO’s encourage longer term commitment across workforces stating that “50% of employees thought they would stay longer because of their share plan participation compared to approximately 30% who did not”.
An often underappreciated effect of an EMI scheme is that you will find employees showing greater proactivity during their working life. Are there areas outside of their direct remit where they feel improvements can be made? If so, then an employee will be far more likely to proactively seek this out and look for a solution if it directly affects a company’s performance.
Overall, EMI schemes can be hugely rewarding for both employees and companies. It not only helps recruit better staff but also aligns an employee’s objectives with the company’s owners. This can have a hugely beneficial effect across the behavior of employees and a company’s top line productivity.
Nicky Goringe Larkin is the managing director of Goringe Accountants Ltd., an award winning accountancy and auditing company based in London and Reading. After setting set-up Goringe Accountants in 2007, the company has grown into one of the most respected accountancy firms in the region.