Despite some illustrations and frameworks which portray ESOPs as excellent performers, there is a way in which an ESOP can perform poorly. For instance, if an ESOP is not able to generate returns for the initial investments that went towards setting it up, this is one indicator of an ESOP's poor performance. Additionally, if the company is not generating profits, the tax benefits promised to each ESOP holder is deferred or lost altogether. This outcome would, in turn, cause employees to become demoralized. These employees, who were previously motivated to work harder due to their investment in the company, will now feel that their efforts are useless. As a result, they will not work as hard, making the business venture even less profitable. 
Thus, having a strong start is essential in setting up an ESOP. Without it, the time and money invested in the ESOP will not be returned in kind, and show in the work ethic of its employees.