Common Communication Pitfalls for New ESOPs

By Danny Lamastra, in collaboration with the North Carolina Employee Ownership Center

Launching an ESOP is a major milestone. For founders and leadership teams, it represents years of planning, negotiation, and vision finally coming to life. It’s natural to feel a sense of pride and relief. We did it!

For employees, however, the experience may be quite different. Many have probably never heard of an ESOP, and this can lead to skepticism and consternation. Will this cost me something? Does this change my job? Is leadership leaving? In other words, what does this mean for me?

This disconnect can be discouraging for sellers who have invested countless hours and personal sacrifices into making the transaction a reality. But with the proper ESOP communication strategy, it’s a challenge that can be overcome. 

After decades of working with thousands of ESOPs, our team has identified common early communication pitfalls—and the strategies to overcome them. By crafting a thoughtful rollout plan, you can help your ESOP launch with momentum as employees begin to understand and take pride in their ownership.

Pitfall #1: Deal Fatigue

By the time an ESOP transaction closes, the people closest to the deal are often exhausted. Months, and sometimes years, of legal, financial, and operational work can leave leadership and advisors ready to move on. This fatigue shows up in two main ways.

First, leaders often become so immersed in the ESOP process that they forget how unfamiliar it is to everyone else. What feels repetitive or obvious to them is entirely new to employees. While leadership has lived and breathed the transaction, employees are starting from zero, navigating unfamiliar concepts and trying to understand what the change means for them personally. Without deliberate communication, employees often feel left in the dark.

Second, budgets may feel stretched after the cost of the transaction. After investing heavily in legal fees, pre-transaction analysis, professional advisors, and all the other components of the deal, investing even more in communication may seem over the top. 

One founder I worked with flipped this thinking on its head. In his view, he’d invested to get this deal done, so why wouldn’t he invest a little more to make sure the employees understood and appreciated it? That shift made all the difference. Instead of treating communication as an afterthought, the company leaned into a thoughtful rollout strategy. Watching this founder tear up as he shared the heartfelt story of turning ownership over to the employees at an all-company meeting was a powerful reminder for me of what makes employee ownership so special.

It’s true that a strong ESOP rollout often has a cost. It may be the implicit cost of lost work time to bring people together or direct costs like reserving a venue or bringing in an outside speaker. Either way, we’ve seen time and again that those investments are worth it. Clear, thoughtful communication reduces confusion, builds trust, and accelerates engagement, helping your ESOP get off on the right foot.

Pitfall #2: Communicating Only the Legal Minimum

Another common misstep is limiting communication to only what is legally required.

This may stem from good intentions. Leadership teams may worry about giving misinformation, overpromising, or not being able to answer employee questions. As a result, they default to a short email announcement, distributing the Summary Plan Description (SPD), and stopping there.

The problem is that the SPD is a legal document, not an engagement tool. While it’s certainly important and necessary, it’s not usually easy for employees to understand and falls short of capturing what’s so unique about employee ownership.

When companies stop at the minimum, employees are left to fill in the blanks themselves. The rumor mill starts, and people can quickly develop a distorted picture of employee ownership. One comment I’ve heard many times after delivering ESOP education sessions is, “This is the first time I really understand how this works.” In some cases, these employees had had the SPD for years, but it hadn’t succeeded at developing an educated workforce or a vibrant ownership culture.

Don’t stop at just the legal minimums when you communicate your ESOP. Compliance communication protects the plan, but strategic communication unlocks its full potential as a cultural catalyst.

Pitfall #3: Missing the Cultural Catalyst

Perhaps the biggest pitfall is failing to recognize the differentiator employee ownership can become when it’s communicated well. An ESOP isn’t just a retirement plan. It’s a transformational ownership structure that can enhance company culture, boost performance, encourage retention, and attract top talent. But that only happens when employees grasp how the plan works and can clearly connect the dots between their daily job-level actions and the value being created in the ESOP. 

Research consistently shows that employee-owned companies tend to outperform their peers across key metrics such as productivity, profit margins, and employee retention. But these advantages don’t happen automatically. We believe they emerge most fully when ownership is understood and felt.

A strong example of this right in our own state is Carris Reels, a former winner of ESOP Company of the Year that has invested heavily in keeping ownership culture vibrant and relevant. Rather than treating the ESOP as a static benefit, they’ve leaned into creative and high-energy education experiences that make ownership tangible. In the words of Drew Manning, General Counsel for the company, “People are proud to be employee owners at Carris.”

The results speak for themselves: Carris Reels has delivered strong stock performance, expanded domestically and internationally, and even acquired other companies. While there’s certainly more behind this than just employee engagement, we believe this is a clear example that high investment in ESOP communication directly supports measurable business growth and value creation.

ESOPs can provide a real competitive advantage, and the companies that tap into this the most are those that communicate ownership clearly and consistently. 

The Solution: Be Intentional From Day One

Avoiding these pitfalls doesn’t require perfection, but it does require intentionality.

If you’re launching a new ESOP, focus on making the most of your rollout:

• Treat communication as part of the investment, not an optional add-on.
• Go beyond legal minimums to build true understanding.
• Help employees connect ownership to their everyday work.
• Reinforce the message consistently over time.

The good news is that you don’t have to build this from scratch. Proven frameworks, storytelling approaches, and engagement strategies already exist to help companies turn their ESOP launch into a defining cultural moment rather than just a financial transaction. Many organizations have successfully navigated this transition and are willing to share what worked. Reach out to other employee-owned companies in your area, lean on your professional advisers, or connect with groups like the North Carolina Employee Ownership Center (NCEOC) for guidance and practical resources. With the right support, your ESOP launch can become the foundation for long-term engagement, ownership thinking, and measurable business impact.

The real success of an ESOP isn’t measured on the day the deal closes. It’s measured in the years that follow, in how deeply employees understand it, believe in it, and live it. That journey starts with communication.

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