Something I’ve spent a great deal of time reflecting on over the past year is how for-profit organizations can achieve two key goals: (a) generate attractive returns on invested capital and (b) deliver meaningful returns on the time invested by the people who build and run them.
If you talk to the average American worker or come across headlines like this one, you’ll quickly sense the inequity. This might manifest in rank-and-file team members feeling unheard by leadership or in the stark contrast between their paychecks and the lavish compensation packages of executives.
Often, this inequity is framed as a human interest issue: it’s unfair for a factory worker to toil in tough conditions for minimal pay while a CEO earns 3,000 times as much. I don’t disagree; it doesn’t feel fair. But at its core, a business is a financial instrument. If an investor could achieve a 3x return on their investment with zero employees, they’d take that deal every time. So would I, and probably so would you.
But what if we flipped the script and analyzed compensation and control from a purely financial angle?
An Alternative Approach
What if the most effective way to maximize returns for investors was through a more equitable and holistic organizational structure? An organizational structure where the people doing the work are highly aligned through both the use and direction of their time (control) and the rewards they reap when the business does well (compensation) has the potential to drive exceptional results. This approach, as we’ll explore, creates a stronger connection between effort and outcome, fostering both individual satisfaction and organizational success.
Compensation
It’s intuitive: a workforce that shares in a company’s financial success—through profit-sharing or ESOPs—is likely to perform better. Research consistently shows that employees with a financial stake in their company exhibit higher levels of engagement and productivity. For example, a study by the National Center for Employee Ownership (NCEO) found that companies with broad-based employee ownership saw a 4-5% higher annual growth in productivity compared to their non-employee-owned peers. This increased performance translates into stronger financial returns for all stakeholders.
Control
Self-determination theory highlights autonomy as a critical component of happiness. Workers who feel a sense of control over their work are more likely to perform better, enjoy their roles, and stay longer. They also drive positive outcomes for MOIC through increased operational efficiency and innovation fostered by organic, collaborative efforts rather than rigid hierarchies.
Consider the case of W.L. Gore & Associates, makers of GORE-TEX. The company operates on a lattice structure, granting employees significant autonomy to form teams and work on projects they’re passionate about. This model has driven both innovation and high employee satisfaction, contributing to their long-term profitability and resilience.
The Win-Win Organization
Why don’t more organizations adopt this approach? The answer often lies in ignorance or entrenched scarcity mindsets:
If you win, I lose.
There’s only so much pie to go around, and I need my share.
Instead, an abundance mindset—one that focuses on creating win-win structures and aligned incentives—can yield impressive financial returns while fostering a healthier, more engaged workforce.
Consider the case of Patagonia, which has built a highly profitable business while emphasizing environmental stewardship, employee well-being, and profit-sharing. By aligning its incentives with its values, Patagonia has not only gained a loyal customer base but also a motivated workforce that drives innovation and efficiency.
Similarly, Southwest Airlines thrives on a culture of shared success, where employees are often recognized as the company's greatest asset. With robust profit-sharing and a collaborative culture, Southwest has consistently outperformed its competitors, demonstrating that aligned incentives don’t just benefit employees—they boost financial performance as well.
The key takeaway is that by shifting from a scarcity mindset to a win-win mindset, leaders can unlock the true potential of their organizations to deliver sustainable, attractive financial returns for all stakeholders. A model where success is shared fosters loyalty, innovation, and, ultimately, better financial returns. In the long run, win-win structures don’t dilute profits; they amplify them by creating a thriving ecosystem where everyone—from employees to investors—benefits.
Embracing a balanced approach to compensation and control fosters a virtuous cycle: workers who are motivated and engaged drive exceptional results, benefiting both investors and the workforce. This isn’t merely a matter of fairness; it’s a strategic business model for achieving sustainable, attractive financial returns. Companies that adopt win-win structures position themselves for long-term success by aligning incentives, sparking innovation, and cultivating loyalty at every level of the organization.