How to Choose the Right Leader in an ESOP - Cowen Partners

      How to Choose the Right Leader in an ESOP

      ESOP companies are unique among their publicly or privately owned business counterparts. Instead of the company being led by outside shareholders or other investors, its employees retain most of the organization’s ownership, and they typically participate in significant decisions that can impact the company’s future.

      When an ESOP company seeks outside leadership to guide its corporate strategy rather than hiring from within, it can cause friction between the incoming executive and existing employees. New leaders often have specific organizational plans that may contrast with the employee-owners’ ideas.

      CEO Executive Search

      ESOP companies looking for a leader with skills their existing employees can’t provide are wise to consider not just their candidate’s technical abilities but also their fit within the company culture. 

      Here are a few traits and skills to look for when hiring a new leader in an ESOP organization.

      Communication Skills

      Often, executives earn their positions because of their unique team leadership capabilities. In some organizations, leaders expect their team to follow them regardless of their personal feelings about the strategy. Such top-down leadership can be disconcerting to an ESOP company whose employees are used to being part of the decision-making process.

      When looking for a leader, choose someone who can communicate well with all employees, not just other leadership team members. To evaluate their communication skills, ask them how they typically handle group and one-on-one conversations. 

      Someone who is an effective communicator will have no problem talking with people from all areas of the business. Every conversation will feel natural, not forced. They’ll look at communication as a means to ensure everyone feels involved in major company decisions and is comfortable sharing any critical insights.

      Employee Development Skills

      Most employees who work for ESOP organizations plan to stay for the long term. They have ownership in the company and know that if it continues to be successful, they’ll reap the benefits in their own pocketbook. 

      However, employees who don’t get the chance to develop their skills can become bored and may tire of their responsibilities.

      Your new leader should provide opportunities for employees to enhance their roles in the organization. They should be open to employee development rather than limiting everyone to the singular duties they were hired for. A good leader will feel comfortable sharing responsibilities with employees who are interested in career development.

      To learn about their people development skills, ask your top candidates how they’ve helped prior employees grow in their past roles. They should be able to provide a few key examples they’re especially proud of. You can also ask them to discuss a time when their employee development strategies didn’t quite work out. 

      Self-Awareness

      No one is perfect; everyone has a few attributes they aren’t incredibly proud of. Good leaders know this, and they recognize their faults as liabilities. They’re willing to acknowledge their mistakes instead of blaming them on others. 

      In areas where leaders aren’t as strong, they’ll look to others to help fill in the gaps while still doing the work to correct their limitations.

      Avoid hiring ego-driven leaders at all costs, especially in an ESOP organization. Leaders with strong egos aren’t willing to share the glory of significant accomplishments, and they’ll all too quickly criticize those they feel are responsible for mistakes.

      To determine whether a leadership candidate is self-aware, ask about prior mistakes they’ve made in other roles. If they give a generic response, they’re likely afraid to admit their errors. Providing a whole-hearted answer is a good sign that indicates authenticity and honesty — two traits that are beneficial to an ESOP company.

      Willingness to Make Effective Decisions

      The role of a leader is extraordinarily difficult. They must make critical decisions that can negatively affect the organization if they go wrong. There is tremendous pressure to succeed, and if their choices result in failure, the leader is the one held responsible.

      While making a hard decision is tough, there may not be time to hem and haw about the outcome in certain situations. Executives may need to react quickly, especially in instances that could impact revenue or continuing operations. 

      ESOP Executive Search

      An ESOP organization should look for a leader who isn’t afraid to make hard decisions and undertakes a strategic process when deciding. If several different departments are involved in the problem, they’ll need to be willing to listen to advice from people who may have views that differ from their own.

      You should ask candidates about prior major decisions they’ve made in other leadership roles. Inquire about their decision-making process and whether they asked for input from other trusted team members.

      Open-Mindedness

      Another positive trait to look for in an ESOP executive is open-mindedness. You want someone who is willing to consider others’ ideas and feedback — not an individual who assumes they’re always correct. 

      An open-minded leader is typically an acute listener. In fact, they may listen more than they speak. They have a natural talent for getting others to talk, and they’ll actively incorporate other people’s ideas into final decisions. 

      Often, they’ll hold meetings with their team members to discuss ideas and strategies rather than speaking with just a few high-level executives or directors.

      To evaluate a candidate’s open-mindedness and listening skills, ask them about a time when they implemented a successful strategy. Inquire how they arrived at the plan and how it impacted the rest of the team. 

      An open-minded candidate will talk about how they discussed the process with their employees, how their team supported them, and how they allowed others to provide insights.

      You can also ask how they solicit feedback from team members about current business operations. A leader with good listening skills will likely describe regular meetings with other executives and team members. They value their employees’ input, and this will be very evident in their answers.

      ESOP Leaders Have Unique Traits

      When an ESOP company needs outside leadership, it should look for someone with characteristics that will enhance the workplace culture. 

      ESOP companies are owned by their employees, and the leader will essentially report to them — not to outside shareholders or boards of directors. The right leader will include employees in their decision-making and actively work toward objectives that the whole team believes in. 

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      Our hands-on ESOP executive recruiters have experience working with of the largest and most complex employee owned companies. Clients are typically $50 million plus in revenue. Successful placements span the entire C-Suite – CEO, Chief Operating Officer, Chief Financial Officer, and include vice president, general counsel, account executives, and other director-level leadership roles.

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