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3 Lessons We've Learned From Publix for a Successful ESOP

June 19, 2017
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If advertising can be believed, Publix is where shopping is a pleasure. This chain of grocery stores, found predominantly across the Southeast U.S., operates on principles devoted to southern hospitality, providing unparalleled customer service with a smile. At Publix, it’s not uncommon to see a bag boy escort shoppers to their cars or to receive above-and-beyond service from staff members.

This dedication to customer satisfaction makes Publix a household name in Florida, Georgia, Alabama, South Carolina, Tennessee, and North Carolina, and has kept Publix growing since its inception in 1930. To date, the chain boasts 1,144 stores with numerous new locations opening later in the year. This expansion hasn’t slowed employee satisfaction, either; Forbes rated Publix a top 100 employer to work for in 2016.

But what makes Publix such a great place to work? The answer may lie in the company’s use of an employee stock ownership plan. Advertised as an employee benefit for team members at all levels, Publix’s innovative use of an ESOP prioritizes employee satisfaction while maintaining and perpetuating company objectives.

 

The Publix ESOP

Publix began to offer stock to employees in 1959, 29 years after the founding of the company. Today, stock is available through three different plans: the Publix People Reaching Our Future Investing Together (PROFIT) ESOP plan, the 401(k) Saving Makes A Richer Tomorrow (SMART) plan and an employee stock purchase plan.

The PROFIT plan provides employees who work over 1,000 hours a year with stock compensation of 7% to 10% of pay on March 1st of the following year. Vesting is on a three-year schedule.

 

Lessons Learned from Publix

As one of the largest U.S. companies to operate an all-inclusive ESOP, Publix has broken through many of the barriers in how ESOPs are perceived. Here’s what Publix has taught us about successful use of an ESOP plan.

 

1. ESOPs Are Effective in Large Companies

Traditionally, ESOPs are thought to function best in small companies with 25 to 100 employees, and in industries that see low turnover. Publix is not this at all; with nearly 193,000 employees, many of whom work in low-level jobs, the company is very large and turnover is relative to this.

However, in spite of two major qualities believed to work against ESOPs, Publix has made their plan work for decades, providing employees with benefits that don’t affect growing concern in the slightest.

 

2. ESOPs Improve Employee Morale

Publix is consistently rated as a great place to work, and employees tend to agree. Most associates stay with Publix far longer than industry averages, implying high levels of employee satisfaction. One key reason? The PROFIT plan.

Low-level employees are frequently treated as easily replaceable, but Publix takes a different stance. PROFIT effectively rewards employees who work at all levels of the company, including part-time associates. This perceived value boosts employee morale, helping team members to prioritize the success of Publix from the ground up.

 

3. ESOPs Don’t Negatively Affect Business Operations

Many business owners considering ESOPs are afraid of the power partial ownership gives employees. However, Publix demonstrates that this is not a worthwhile fear.

With over 190,000 plan participants, Publix has been able to stay the course, opening new stores every year with planned expansion into new states on the horizon. The company has grown steadily since its inception, indicating strongly that use of an ESOP doesn’t hurt business operations at all when used properly.

Publix is one of the most popular brands in the Southeast and is beloved by shoppers and workers alike. As a strong example of the benefits ESOPs have to offer, curious business owners can learn a lot from the PROFIT plan model and its demonstration of the effectiveness of ESOPs in the modern business landscape.

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Gary Canon

Written by Gary Canon


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