Employees Disengaged? Show Them How They Add Value

If you manage a team that loads trucks, do you want your employees to prioritize speed—or carefully maximize each truck’s capacity safely without causing damage in a reasonable amount of time?

Harvard Business School Professor Ethan Rouen studies how organizations can encourage the second approach: by giving employees equity in their companies and showing them that their efforts lead to growth—and more income. Rouen uses the truck example to illustrate how small shifts in the way companies structure and communicate incentives can significantly change employee behavior.

“Making Equity Incentives Actionable: Internal Communication and Broad-Based Employee Ownership,” which examines frontline workers at a lumber company, finds that employees are more likely to stick with companies that clearly explain how workers’ everyday actions can create value for both the business and themselves.

The research comes as broad-based employee ownership has seen a recent surge led by private equity. As more companies give frontline employees a stake, business leaders face a practical question: How do you get employees to act like owners? Rouen’s research suggests that being more explicit about how people’s work pays off is key.

“It's not enough to say, ‘We’re giving you some equity. Now go and make money for us and yourself,’” Rouen says. “For people who are living paycheck to paycheck and are stressed about the present, informing them of how value is created through doing their day-to-day jobs can be very motivational.”

Rouen, the Terrie F. and Bradley M. Bloom Associate Professor of Business Administration, teamed up on the May working paper with Ashley V. Whillans, the Volpert Family Associate Professor of Business Administration at HBS, and Sam Karasik, an HBS doctoral student. The research offers lessons for companies of all kinds that are seeking to boost workers’ motivation, productivity, and engagement.

“It's about creating that team environment and realizing that we all share in these benefits,” says Rouen. “An engaged workforce will lead to innovation and efficiencies because they're going to care about their jobs, and they're going to do them better.”

Today’s employees are disengaged

Why should companies consider passing ownership stakes to employees? Rouen points to Gallup survey data showing that only 31% of US employees were engaged at work in 2025, leaving a large majority tuned out.

The idea of giving workers equity compensation is that they might work more efficiently and care more about their work if they can benefit from the company’s success. Between 2022 and 2025, PE firms distributed $1.7 billion to non-executive employees, and about 270,000 workers hold about $13 billion in equity, Rouen says.

Meanwhile, some fund managers feel a social equality imperative to help blue-collar workers generate wealth. “Privately held companies tend to be sold from PE firm to PE firm, and the employees, if they keep their jobs, are left in the same position from sale to sale, while the executives get wealthy,” Rouen says.

Building an ownership culture

To explore employee ownership, the researchers studied a building-materials supply company in the southern US with 12 locations and 292 employees. In June 2024, the PE firm owner explained to staff how the equity compensation would work, estimating that employees’ stock appreciation rights would be worth roughly four months of salary when the investor exited.

The challenge was to show workers how their daily work would build value, so the researchers sent two types of shareholder letters:

1. A letter emphasizing company norms: 158 employees received letters saying specific workplace behaviors related to company norms, such as prioritizing safety, could create value for the company.

2. A letter discussing broader firm values: 134 employees received letters explaining how adhering to big-picture firm values, such as fostering an inclusive, people-focused culture, would help the program achieve its goals.

Then, Hurricane Helene struck the region in September 2024, affecting all of the company’s locations, allowing the researchers to examine whether the disruption had an effect.

Concrete guidance improves retention

During the six-month study period, the first letter that explicitly showed how employees could improve their payout worked better than the second letter that emphasized broader company goals. Employees who received concrete guidance on the behaviors that could create value were 13 percentage points less likely to leave the firm than those who received broader, values-based messaging.

The findings illustrate that employee ownership programs can improve retention if incentives are handled correctly, says Rouen: “We did a costless intervention, and it resulted in a meaningful decrease in turnover.”

During the hurricane and its aftermath, the difference in retention grew, suggesting that providing concrete guidance is more important when routines are disrupted.

“The decrease in turnover and the increase in cultural identification really strengthened around Hurricane Helene, which suggests that it wasn’t just the messaging, it wasn’t just the equity, it was the combination in this time of great uncertainty that really strengthened the culture for this subset of employees,” he says.

Three follow-up surveys found that employees who received the norms letter identified more strongly with the company’s culture than those who received the values letter. In addition, the researchers ran an online study with construction workers and found similar results: Employees responded better when they were given specific examples of how their everyday actions could increase the value of their equity.

Making the most of employee ownership

Rouen suggests four ways companies can make employee ownership more meaningful:

Explain the equity clearly

Employees need to understand what they own and how their everyday work can affect its value. Rouen suggests hanging signs in the office and holding shareholder meetings to ensure employees understand the stakes. “Most of the employees in the study were non-native English speakers, high school graduates at most, and it was important to teach them what equity is and how their efforts connect to the equity they hold,” he says.

Rethink performance metrics

Incentives focused solely on speed or the amount of time clocked can conflict with the longer-term goal of creating firm value, failing to build buy-in. “The organization wants to get employees to work as hard as possible, but the employees do the calculation: Is it worth it for me to exert all of this extra effort?” Rouen says.

Pair short- and long-term rewards

Smaller, more immediate payouts may help employees stay motivated while they wait for a larger equity payout. “Employees know it’s going to be a hard road to that first payout, and they are going to be skeptical because they’re not going to know how much they’re going to get paid,” says Rouen. “But the hope is that when they see that first payment, the effects of employee ownership will accelerate rapidly.”

Get creative with rewards

For example, contests can connect everyday behaviors to the broader goal of creating value. Rouen visited a factory that was spotless, and when he asked about it, the manager chuckled and said, “Right now we’re running a contest where every day we identify the team with the cleanest workstation, and at the end of the month, the team that had it clean the most times gets box seats to a minor league baseball game.”

Illustration created with photo from Unsplash/David Trinks.