What is an engaged stakeholder worth to a business?
This is a question we’ve been asking ourselves regularly over the last year as we’ve developed Orchestra. While at its core the product ensures that your share registry and annual returns are accurate and compliant, we believe there is real value from the visibility stakeholders get from viewing and managing their investments, and from the increased engagement you can generate with them through the communications tool and other activities.
Based on previous research and insights from our partners and customers, there are clear benefits for companies who can increase engagement with their stakeholders- both with external investors in the business, and with staff who are shareholders through an ESOP programme.
What is the value of increased engagement with your investors?
If you are a company looking to grow quickly, then raising capital is probably a regular occurrence. With everything else that founders and executives have going on in the business, it can be difficult to keep your current investors up to date with progress so they continue to be committed to you and the company.
How to increase investor engagement
One of our customers mentioned that he has to go “cap-in-hand” to investors asking for more funding at least every 12 months, so having a tool like Orchestra which can be used for regular investor communications is vital. This frequent communication with visibility to the latest company updates can build investor relationships and make future capital raises a much smoother process.
Calculating investor engagement
So to put a value on an engaged investor? Of course it depends on the company size and stage, but a rough calculation is that a fully informed and engaged investor is worth $5,000 a year to a growth business. This is based on improved access to additional capital when required, and from the efficiency savings from having a system to provide investors with the latest information- you and your team don’t have to spend extra time managing shareholder details and manual email updates.
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What is the value of increased engagement with your staff?
When it comes to staff, there are a number of benefits from using employee share ownership plans (ESOPs) to increase engagement and positively impact company performance. Research from Rutgers University’s Institute for the Study of Employee Ownership and Profit Sharing has shown that companies with ESOPs outperform on a number of measures including sales growth compared to those without.
How to increase staff engagement
I believe that when set-up correctly, nothing will create employee engagement and an ownership mentality like real skin in the game through an employee share scheme. However to be an effective motivation, an ESOP can’t be just a document that is parked and forgotten about each year. Staff engagement can be created through regular communications on the company performance, and with activities such as secondary share trading where staff have the opportunity to buy and sell their shares.
Calculating staff engagement
Altogether, we believe that an engaged staff shareholder is worth $20,000 a year to a business based on increased productivity and higher retention. This sounds like a large number, but when HRINZ research suggests that replacing a long term staff member will cost your business triple their salary, the value of staff engagement can’t be underestimated.
Helping businesses to increase engagement with their stakeholders is a central strategy for Orchestra, and we will keep on collecting information on the value of this for companies. We’re interested to receive your view and any feedback you have on this, so please contact us with your ideas.
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DISCLAIMER: This article is for informational purposes only, and contains general information only. Orchestra is not, by means of this information, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This information is not intended as a recommendation, offer or solicitation for the purchase or sale of any options or shares.