Abstract
More and more companies have implemented globally standardized share plans. From 2008 on, Siemens has offered an equity portfolio for all employees across the globe. Today, more than 148,000 employees are part of the Equity Culture, following an overall positive trend. However, on a local level, participation rates are sometimes declining. A likely explanation for this trend is a lack of effective local communication measures. A possibility to halt the downward trend can be an effective internal communication strategy on a regularly basis, using the limited available budget and facing local conditions. The Siemens case introduces a process designed to tackle these challenges using a localized communication strategy. In the first place, the “Equity Culture Enhancement Project” targets equity awareness using local and target group–oriented communication to establish a global and sustainable Equity Culture. Effective monitoring revealed that employee awareness and plan participation were successfully increased by the chosen communication strategy, which is the first step to increase participation and Equity Culture in share plans in the long run.
More and more companies have implemented globally standardized share plans over the past decades. Employee ownership and financial participation are now common attributes of an employment relationship. From an employer’s point of view, the drivers for this ongoing trend can be considered from several perspectives.
Share plans are an interesting vehicle to align employees to the company and its values in many ways. For example, as a result of shared ownership, the company’s workforce turnover is reduced, leading to more successful outcomes. Reduced turnover results from an enhanced employee commitment and increased employee opportunity costs when leaving the company. Commitment as an important part of the overall corporate culture can be increased by an active Equity Culture, too.
Share plans also foster the alignment of shareholder and employee interest and enhance the entrepreneurial spirit in employees. These plans motivate employees to act and take decisions on a long-term basis with a positive impact on shareholder value. Also, risk-averse employees are more likely to make decisions in favor of shareholder value, building a long-term relation with the company.
The implementation and acceptance of share plans among employees often face many difficulties. In today’s business climate, most companies that implement share plans act in a global environment. Even in a single country, the implementation of share plans is challenging. In multinational organizations it has to face even more challenges with respect to the implementation and acceptance of share plans than in locally acting organizations. Different cultural and local conditions are major determinants that influence the success of implementation and acceptance of share plans. The cultural and local environment is reflected in individual characteristics of employees and also influences the commitment employees have toward their organization. In addition, local HR offices often have limited access to information compared to headquarters, which can lead to unanswered questions and resistance to the implementation and promotion of share plans on a local level. Even if the communication between headquarters and local units is good, local units often feel subordinated.
These cultural challenges should be addressed when implementing share plans and evaluating its success. We hypothesize that localized communication can overcome information asymmetries and thus increase share plan awareness among employees. By interacting with employees, for example, by providing financial education or increased knowledge about share plans, awareness can be targeted directly. Thus, communication can help overcome cultural differences. However, only a country-oriented, localized communication is the key to success.
The global Share Matching Plan Siemens introduced in 2008 is an interesting example to illustrate the mentioned challenges and how to overcome these challenges successfully. It shows how localized communication can help increase share plan awareness among employees.
Before 2008, Siemens offered employees in Germany the so-called Belegschaftsaktienprogramm, an employee share scheme, whereas senior managers worldwide received Siemens Stock Awards. From 2008, the Siemens Share Programs changed from selective equity plans for executives and Germany-based employees to a broad, comprehensive target group–oriented equity portfolio, for all employees across the globe. Now Siemens offers the Share Matching Plan, the Share Ownership Guidelines and the Siemens Stock Awards. Whereas the Share Matching Plan is a global share plan that allows all employees worldwide to become Siemens shareholders, the Share Ownership Guidelines offers top-level managers an opportunity to prove their commitment. In addition, the Siemens Stock Awards is used as an instrument to strengthen entrepreneurial behavior within Siemens management.
Parallel to introducing various share programs, the communication at Siemens transitioned from being Germany focused and low intensity to being centralized, mainly legally driven and global.
Today, 148,000 employees out of 380,000 employees in 67 countries are part of the Siemens Equity Culture, which is to say they have an equity investment in the company. Since 2009, employee participation has increased by 54%, demonstrating a rising trend (Figure 1).
Participants in Share Plans in Total.
In 2013, 107,000 employees elected to participate in the Share Matching Plan 2013, an increase of 5% from 2012. Overall the share plans’ positive numbers underline the success of the programs Siemens introduced in 2008. However, on a local level, the participation rates are surprisingly declining, showing a negative trend. In fact, the positive general trend is mainly driven by Germany, Central Eastern Europe and a few other countries, which offsets the downward trend in other regions. The negative trend in many countries demands a detailed analysis of possible causes as well as suggestions for improvement in the short and long terms. See Figure 2.
Change in election statistics per region.
Two effects offer explanations for the negative trend. First, there is the classic “out of sight, out of mind” effect. Around their launch dates, the share plans are ranked high on an organization’s agenda, with many activities to announce and support its kickoff. This may include, for example, an interview with the CEO in the internal newsletter or regular mail correspondence. After this first wave of activities, the organization naturally shifts focus to other topics. Communication is than limited and sporadic, which can lead to a decreased awareness of share plans. Second, the more global and inflexible the communication, the more difficult it is to reach employees in different countries and cultures and to strengthen their commitment and program promotion. The consequences of reduced activities and less commitment from the organization: a lower share plan participation rate and a weakened commitment to Equity Culture.
To sum up, a likely underlying explanation for this negative trend is a lack of effective communication measures. In fact, the right communication approach can be an effective tool for supporting Equity Culture in the future. The issue HR now faces is finding ways to approach and halt the downward trend. This can be accomplished by developing an effective and efficient internal communication strategy to promote the share plan on a regularly basis, using the limited available budget.
The following section introduces a process designed to tackle these challenges using a specific communication strategy called the Equity Culture Enhancement (ECE) Project. The ECE Project, which Siemens established in 2012, illustrates how the Siemens Equity Culture—a culture of ownership, entrepreneurial spirit and participation—can be harnessed to support corporate culture.
It also shows how localized communication enhances Siemens Equity Culture in the long run. The ECE Project’s objective is to build participation in share plans in pilot countries by establishing and using localized communication to address country-specific needs. Singapore and the Czech Republic, for example, are two pilot countries in which localized communication was applied and monitored with different tools. The project targets of the ECE are summarized as follows.
Since the communication budgets for a project typically decrease over time, it is very important to prioritize the communication tools before launching the communication measures. This means first developing a long-term–oriented communication strategy (Figure 3) that focuses on increasing employee knowledge and understanding. In addition, it is essential to analyze in detail the impact of communication on employee awareness and participation. To accomplish this, an underlying three-step process within the ECE Project framework was established.
Communication strategy.
The first step to halt the declining participation rate is identifying the communication challenges in detail and understanding employee knowledge and perception. To accomplish this, it may be useful to categorize employees into specific groups. From an HR perspective, there is a difference between employees who are not aware and therefore do not participate and employees who are aware and still do not participate.
Knowing this, the natural process to encourage sustainable participation rates occurs in three steps (Figure 4):
Being aware of the plan
Deciding to participate
Actively promoting the plan to their team or colleagues
Transformation process.
Supporting Equity Culture requires knowing where employees get lost in the process and, more importantly, why. To answer this question, it is essential to systematically analyze the steps involved. A useful way to learn what employees know is by conducting an employee survey before the communication takes place. Siemens used an employee survey within the ECE Project to gain information about the process status of employees. The survey asked, for example, if employees are aware of the plan, if they signed up to participate and if they promote the Siemens Share Matching Plan. In addition, understanding of the plan process was evaluated and employees were asked about their general attitude toward investment in shares. The survey results showed that although 40% of the respondents were aware of the Share Matching Plan, only one third actually participated. Interestingly, most employees who did know about the plan heard about it from print and Intranet communication. These results demand a communication strategy that targets raising awareness among employees from the beginning.
In Germany, where participation rates have steadily increased, figures from recent years exemplify that continuous, localized communication appears to be a formula for success. Thus the ECE Project implemented local communication in the pilot countries, within the limited budget, to significantly increase employee awareness.
Localized communication materials must consider country-specific and individual characteristics, including language, Internet and computer access and the general work environment. Intranet banners and e-mail newsletters, for example, are less efficient in locations where employees work in factories and have only limited access to a computer, e-mail or the Intranet. Flyers and posters with local employees as the campaign’s heroes can dramatically increase awareness in smaller locations. In Singapore, for instance, posters aiming to increase identification with Siemens Equity Culture featured for local employees. The campaign was a huge success (Figure 5).
Poster from Singapore’s campaign.
Localized communication tools directly target employee awareness and increase knowledge about the next step to take. In addition, plan participation mainly depends on awareness and understanding the plan details. Siemens data has shown that only one third of informed employees actually participate in the share plans. Understanding and not only being aware of the plan concept is an important trigger that influences participation rates. Local information sessions or info booths in the entrance hall with Siemens Share Plan experts are one way to provide employees with all essential details as well as creating opportunity for questions and answers. Targeting employee understanding, the next step within the communication strategy, is thus addressed in this approach.
During the actual election period, a communication mix can increase participation rates as well. Here the main task is reminding employees about the ongoing election. In the Czech Republic, for example, Siemens used an e-mail newsletter, an Intranet flash banner and a CEO video to inform employees right before the election period ended.
Plan participation is followed by promotion about the underlying process. Only satisfied participants will actively promote the Siemens Share Plans to their team or colleagues. Their satisfaction depends mainly on making the share plan process transparent and comprehensive. Keeping the process open and establishing a contact person who can be reached to answer questions or deal with issues are vital aspects to consider. Additionally, using status updates and distributing regular information reminds employees about their ongoing investment. This increases awareness about the plan and can encourage promotion of the share plans over time. Moreover, it is important to have local leaders who actively live by the Equity Culture and thereby function as contact people. Recommending the plan to others is a communication tool in itself. However, the ECE Project 2012 focused mainly on increasing employee awareness, the first step of the communication strategy.
The final step in achieving and maintaining high participation levels is monitoring the communication’s success. This is necessary to identify which communication tools are efficient and which ones are not. The election results, feedback from local HR and an employee survey can be useful sources of information when it comes time to evaluate the communication’s success before, during and after the election period.
Within the Siemens ECE Project 2012, an employee survey was conducted both before and after the election. The results show that total awareness in the reviewed countries only increased from 40% to 55%. In contrast, in Singapore and the Czech Republic awareness increased to up to 82%. This demonstrates the impact of localized communication in these pilot countries. Increased awareness also influenced share plan participation. Whereas in most other countries plan participation declined or stagnated, the two pilot countries showed a positive trend, which underlines the success of the ECE Project strongly (Figure 6).
Increases following communication campaign.
The evaluation of the ECE Project 2012 supports the strategy of focusing on an optimum communication mix, which is, on the one hand, cost-effective and, on the other, adaptable to local and cultural needs. Moreover, the analysis showed that employee awareness must be raised first to actually increase participation. In the end, increased participation can lead to a strong and active Equity Culture.
The ECE Project has helped increase understanding about how communication can most efficiently support the Siemens Equity Culture. The cost-efficiency approach with focus on key countries has proven to be the right strategy to foster Equity Culture. Monitoring revealed that the first target, increasing employee awareness, was successfully reached, and furthermore, even a positive effect on plan participation was visible. It has shown that localized and continuous communication helps notably increase share plan awareness compared to countries that were provided with a centralized, mainly legally driven and global communication approach.
However, only one third of informed employees actually decided to participate in the Share Matching Plan. For the future, it is important to understand in detail why employees participate in share plans and, in particular, why they do not. Currently, a new employee survey is being designed to address these questions, with the aim of transitioning from simply interacting with employees to actually integrating them into the Equity Culture. In addition, communicating on a regular basis, not once a year before the election period, is cornerstone to achieving this goal. A strong family brand is necessary to interact with employees and to integrate them into the Equity Culture.This requires a shift from an administrative to a more cultural communication to help successfully establish an active Equity Culture.
The Siemens experience illustrates the importance of localized communication to increase share plan awareness in a global environment. However, the next challenge will be to analyze what drives employees’ decision to actually participate in detail. In the future, different hypothesizes will be tested to evaluate determinants of share plan participation. By now, we can observe that communication plays a major role when implementing share plans and attracting employees. HR units have to focus on communication strategies in order to implement share plans on a local level.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.