Making employees part of the business
When employees failed to connect with Weir's vision, the company resolved to make all 15,000 shareholders
When Jon Stanton was appointed chief executive of Weir Group in October 2016, he unveiled a one-page strategy document, entitled We are Weir, that articulated a vision and mission for the engineering company which placed people at its heart.
In May 2019, Stanton crystallised that strategy by making the majority of Weir’s 15,000 employees across 53 markets shareholders in the FTSE 250 business, with a gift of free shares worth €600 on that day. Distributed in two tranches, the move will cost Weir €10 million over the next two years. Every recipient received the same amount, whether they were a UK-based employee or the sole worker in Burkina Faso, where gross domestic product per head is around $650 – or €500. Employees in China gave Stanton a standing ovation on hearing the news while those in Chile are said to be ‘so very proud’.
‘If we want to reinforce a culture of ownership and customer focus right across Weir, I can think of no better way of doing it,’ Stanton stated, on the day the plan went live. But an employee shareholder scheme was not initially on the cards when he unveiled the We are Weir strategy to give every employees ‘a clear sense of purpose and direction’ to help Weir in its stated objective to become the most admired engineering business in its markets.
While employees understood We are Weir, it seemed many struggled to find the connection with their working lives. Chief people officer Rosemary McGinness explains: ‘We were getting mixed reviews. It wasn’t that people didn’t find it compelling, but they maybe did not understand it or their role in it. We thought about what we could do to help people understand that they are part of something bigger. We workshopped several ideas but we also looked for an iconic idea that would really up the ante in terms of We are Weir and what that might mean for employees.’
One suggestion put forward was to make everybody a shareholder in Weir. It was an idea that resonated with the board.
As Stanton asserted: ‘I firmly believe that if our employees do a good job for the business and deliver good results, they should absolutely share in that success. In turn, if every employee is a shareholder in the business, they have a powerful incentive to play their part in increasing the share price. It’s not rocket science.’
But when Weir started to research the available employee share schemes, they found that most were ‘matched’.
McGinness adds: ‘Matching plans privilege people who have a higher income. We know that the majority of our workforce does not fit that category, so there was a danger that it would not be inclusive enough. For it to be truly inclusive, our share scheme needed to be totally free.’
Computashare found just one other employee shareholder scheme globally that was as inclusive as Weir determined its plan would be. Around 450 Weir employees already participate in shareholder incentive schemes, and so were excluded from this companywide programme.
‘We had to go to extraordinary efforts to register share plans in every single country. We were so committed to doing this in an inclusive way that in some countries, the cost of registering the plans was more than the cost of the shares we were giving people,’ explains McGinness. ‘The only place we could not get coverage was Morocco, where we have 23 employees, because it is illegal. We could not get a share plan registered there; that’s not to say we have given up. We continue to talk to locals to see if we can influence that.’
The 23 employees will instead be ‘treated like shareholders; they will get the cash equivalents when the shares vest’. (The first €300 tranche of shares vests in three stages over the next three years, while the second €300 tranche will be awarded next year.)
The only place we could not get coverage was Morocco, where we have 23 employees, because it is illegal
But there is a difference between giving employees shares and making them feel like shareholders – or owners of the business – as McGinness was aware. ‘Many of our employees had not owned shares before, so there was a real education programme to be done,’ she explains. ‘To make it truly inclusive, all communications related to the share plans were translated into 21 languages – some of that was due to local legislation but we were concerned with employees understanding what we were doing – and ongoing communications will also be translated.’
Weir is also committed to meeting the requirements of the UK Corporate Governance Code around employee voice and representation at board level.
‘We adopted the principles of this on a global basis,’ she adds. This led to the creation of ‘meet the board’ sessions and a proposed virtual, annual general meeting for employee shareholders next April, one month before the first vesting, which is focused on their queries and interests. ‘We will also probably produce a subset of the annual report, a small package of pages, that is digestible and also translated, not into 21 languages but into eight core ones, which represent about 80 per cent of the workforce, so that everyone understands what is happening to the business,’ explains McGinness. Details are still being finalised, though.
To make it truly inclusive, all communications related to the share plans were translated into 21 languages
‘We have chosen not to put an employee on the board, but Mary Jo Jacobi [a non-executive director who formerly led communications and marketing at HSBC, Lehman Brothers and BP America, as well as advising two past American presidents] has been appointed to lead the employee engagement agenda. She chairs the ‘meet the board’ sessions, and we also produce an employee insights report, which collates data from all sources, including our employee engagement surveys, ethics hotline, ‘Ask Jon’ questions and town halls, and tries to extract key insights.’
She adds: ‘We just couldn’t find a way that one employee – or even half a dozen employees – could sit on the board and provide a representation of the workforce. It just didn’t seem feasible for our complex organisational model. We are trying the employees’ insights approach first, but we will, of course, keep it under review.’
While Weir has always held town hall meetings, in which employees can quiz management, the ‘meet the board’ sessions turn this on its head.
‘We recognise that it can be an intimidating format. We write to all employees and ask for volunteers to to be part of a small group of people, who meet the board with the idea that the board wants to hear from them,’ says McGinness. ‘Once we get the list of volunteers, the central group – who don’t know these people – look for diversity: gender mix, length of service, age, ethnicity, job roles. We select 20 people and then give them training. We do two sessions – one explains what a board is and employee participation, and begin to help them think about what they might like to share. We are not trying to manipulate them, but more to help them to understand what the board might be interested in – which is is not about whether the food in the staff restaurant is good enough, say.
‘The second session helps them formulate their thinking, and then on the day of the meeting we have a two-hour session to get them very comfortable in the environment. We do some fun things to relax them. We reassure them that, although we take notes, none of their comments will be attributable. We have a fabulous board, who are incredibly approachable, so it is very informal. There are no desks or top table. Everybody sits in a circle. Two of my team facilitate the process. We tell them that nobody needs to put up their hands; we will come around to them. We help them be prepared.’
Two ‘meet the board’ sessions have been held this year: one in America and one in Santiago, which was conducted in Spanish. The Santiago event took place during the week of riots in Chile [over a hike in subway fares], which meant it had to be relocated to a hotel rather than the plant. ‘We were very aware that changed the dynamic,’ she adds. ‘We brought them in a bit earlier. It was all very casual. We downplayed the room, and tried to make them as relaxed as possible. And they appreciated our determination to make the event happen, and that we did not cancel it.’
After both events, McGinness and her team conducted anonymous feedback to discover what aspects had worked and which had not. Relevant feedback from the meetings is also fed back to management. One theme that emerged, for example, related to appraisal performance, where individuals did not feel the current system worked well.
‘That is useful feedback for the site but also for our central HR department,’ she adds. ‘Some of the information seeps into different places. It is not just about local leadership.’
The success of such initiatives relies on trust, though. The employees have got to feel comfortable about speaking out while the leadership has to believe the events are valuable. ‘We ask people what they love most about working for Weir and then say If you had a magic wand to improve something, what would it be? It is not about What do you hate? It sets the tone in a positive way.’
The first vesting of the initial tranche of shares occurs next May. A measure of the initiative’s success will be the number of employees who retain their holdings. Weir is planning an internal campaign ahead of the first vesting. ‘We need to do a lot to explain why they should believe this will grow in value. But we are going to assume that they continue to be shareholders, but, of course, if they want to sell their shares there is a mechanism in place. But there will be a big education programme about things like dividends, appreciation of value and also, fundamentally, the connectivity to Weir. We did not position this a a money making exercise. It is not a lot of shares at the moment, so it is much more about being part of Weir – which is the message we will continue to enforce. It is about the long-term; we are all in this for the long-term. It is trying to reinforce that mentality.’
After the second trance has been allocated, new employees will receive their shares after completing a full year’s service with Weir. The company will then also launch a matched share ownership scheme. ‘We are looking into the design of that,’ explains McGinness. ‘We haven’t finalised that yet, but we are looking to make sure it is as inclusive as possible so that it favours people on low incomes and does not disadvantage them in any way. But we also have employees asking if they can buy more shares, so we are explaining that if they have the money then here are the mechanisms to do so. But we are encouraging them to wait for the matched giving plan.’
The scheme, which was approved by more than 99 per cent of shareholders at Weir’s 2017 AGM, has also ‘gone down well with investors’, but has also prompted questions from other companies. BT unveiled a similar scheme, offering all 100,000 employees shares worth €500, just days after Weir made its announcement. ‘There is definitely a lot of interest in such schemes,’ says McGinness. ‘But for us, it is about reinforcing the message We are Weir, and putting our money where our mouth is. But it is also a big diversity and inclusion message – we wanted to include every employee – a lot of share plans are very much about salaried staff or, even if they are open to everyone, the predominant holdings are at management level.’