HATTIE (addressing an employee-owner): So you're building up your retirement pension.

Unidentified Employee #5: I am. I'm fully vested. I've been fully vested for about six years now so I've been pretty fortunate to have been here right when the whole program started.

RAY: Just owning stock, whether it's an ESOP or option or some other form like that isn't enough. You have to have ownership combined with engagement. You have to have people really believe this is my company. That's where inspiration, information and involvement play a role.

Employee ownership is built on inspiration, in my view, all right. We inspire people to be owners and I think we're in an ownership culture today. People want to own things. So inspiration can come by saying you're actually an owner in this enterprise.

Two, the leadership must inform. Inform says I have to tell you everything you need to know about this company to run it effectively.

• You have to know all the financials. You have to know where we're making a profit.
• You have to know where we have the problems. It has to be an open book.
• You have to understand how this company is run, which means you have to have educational programs.
• You have to tell people, how do you read a profit and loss statement. What's an income statement? How do you know what our major numbers are?

And that's a lot of work, but leadership must do that. And third, leadership has to involve. Now by this we mean you have to be open. I remember talking to one entrepreneur who said, `Well, the problem with the employee owners is they think they're owners.' Well, in fact, they are owners. And to involve them you have to say, `I need your input. I want you to provide a decision-making capability. I want you to have a say in what goes on here.'

MEEKO MULLIN: I am the manager here at Muscle Beach Lemonade...

HATTIE: (Voiceover) This is Meeko Mullin.

MEEKO: And I pretty much just run the crew, make sure sells are, you know, up; labor's down and all that.

HATTIE: Sales are up and labor's down. And you've been with Hot Dog on a Stick for how long?

MEEKO: Three years next month.

HATTIE: What is this and why do you have it posted on the back bulletin board?

MEEKO: Basically, this is something that we felt -- we use these equations each week when we fill out our payroll and weekly packet. And we use the labor percentage to find out how much money we're spending on each individual employee to have us working here. And what we do is we calculate our average pay times how many labor hours we had for that week and then we divide it by our sells for that week and then we get a labor percentage which then tells the office how much money we're spending on labor.

Unidentified Man #3: We're trying to find some intraLATA pricing rate schedules and the service guides of the...

RICK: Convincing people that you have an employee ownership culture is not about convincing them that they're going to get stock options and they've going to vest and solely that they're going to be worth something. It's about the way you treat people.

You have to treat someone like an owner for them to feel like an owner. Not just give them options. So treating people with respect, sort of the golden rule is what we operate under here. All right. I'm just here to hand your paycheck out to you.

Here you go, Marcy. I hand paychecks out myself on a biweekly basis, and if I can't do it I have one of the executive team do it.

Unidentified Man #4: Have a good day.

RICK: It's an opportunity for us to go out and meet the folks and get to know them by first name.

Unidentified Woman #3: Appreciate it.

RICK: All right. We'll see you.

Unidentified Woman #3: Have a good day.

RICK: We've got to be able to capture every bit of information that goes into the system in a way that we can measure and manage it. You really do get interest aligned when you not only give the employee ownership, but you treat employees as if they really are owners, as if they really do have a stake in the game and as if their opinion does really matter. It made a huge difference to us. And I can really track when we started to really take off as a company back to the date that we committed to employee ownership and we offered stock options.