Wales Co-operative Centre Chief Executive calls for business owners to consider employee ownership options
With the new series of Baker Boy’s hitting our screens, Wales Co-operative Centre Chief Executive, Derek Walker, calls for business owners to consider employee ownership as a realistic option for business succession.
The eagerly awaited new series of Baker Boy’s has returned to BBC Wales. The drama that focuses on a fictional worker co-operative in the Valleys offers a warts ‘n’ all insight into the benefits and hardships that a worker buy out or worker co-operative offers. All is not looking good for Valley’s Bara, the bakery taken over by its employees in the first series. The business is struggling, their key investor has disappeared, there is dissention in the ranks, cash flow issues, customer relationships, and the ongoing search for new business. But it was never going to be an easy ride.
This is often the reality of a new business. Whether the business is created by a single investor, a partnership or is owned by its employees like Valleys Bara there will always be business challenges to live up to. The hard work, sweat and sometimes, tears are the building blocks of security and future success and this is the reason that both business owners and employee groups should consider employee ownership options and opportunities for the future of their companies.
In Valley Bara’s case, the owners closed the factory and the employees bought it out as an emergency measure. This is achievable in some circumstances but considering employee ownership as a planned exit strategy may be a more considered approach for many business owners and a more attractive choice than redundancy for their employees.
Federation of Small Business research shows that the average business owner in Wales stays with his or her business significantly longer than in the UK as a whole. Over 1 in 5 business owners have been involved with their businesses for 21 years or more. Business owners expecting a trade sale to materialise out of nowhere to fulfil their retirement plans may be in for a nasty surprise in the current climate.
Employee ownership is not an altruistic option though. It can ensure a fair price for the company and can offer several options for phased withdrawal. Employee Ownership has been proven to increase employee commitment to the organisation, ensure more security for both the businesses and the employees. It guarantees the business is in the safe hands of people who know the business and care about it.
At the Wales Co-operative Centre we are often asked how worker co-operatives and employee owned businesses can work. After all, they are democratic, they are focussed on the interests of a major stakeholder group, the employees, who have a vested interest in the day to day running of the company and they are inclusive. How are decisions ever made? The fact is that employee owned businesses still need an effective management structure to run the business on a day to day basis. The owner employees make strategic decisions at specific times such as AGM’s and quarterly meetings depending on the set up of the company. But operational, marketing and financial decisions still need to be made by the relevant officers with responsibility for that area. Worker co-operatives or employee owned businesses are businesses just like any other. The only difference is that the benefits of a successful business are shared by a wider circle of people within the business.
The employees of Primepac Solutions in Ebbw Vale created their business in October 2005 after their parent company pulled out of South Wales. The 19 members of the worker co-operative had to be involved in every aspect of the business – they even scrubbed the floors of their new premises to get it ready for production. They now employ 22 permanent staff and up to 20 temporary staff at their site in Ebbw Vale in a business with a turnover of £1.8 million. In Aberystwyth, the owners of biotechnology instrumentation company Aber Instruments decided to look at employee ownership as a phased exit strategy. Now, 10 years into the process the original owners are minor stakeholders and the employees own a large share of the business with the remaining shares in trust for future ownership and to allow future employees the chance to have a stake in the business.
Of course, employee ownership isn’t just limited to micro businesses and SME’s. The Co-operative Retail Group and John Lewis have outlets all across the UK, turning over nearly £20billion of business between them.
Think about it. If everyone had a share in the business, wouldn’t everyone want it to achieve more? More turnover, more sales – more profit?
Of course, back at Valleys Bara, Owen and the rest of the employees have to deal with the day-to-day issues and the effects they have on their relationships and their families. Hopefully, over the three episodes we will see the employees at Valleys Bara make their enterprise work.
The Wales Co-operative Centre has set up a project with Welsh Government and European Union backing to support business owners and employee groups develop employee ownership approaches. Our advisors work with both parties to ensure that the process is fair for both the owner and the employees. We offer support to employees on their journey from the initial formation of a buyer group to management support throughout the first months of the new business. Click here for more information on how the Wales Co-operative Centre can help with employee buyouts, exit planning and worker co-operatives.
To give the story impact the scriptwriters pit the Valleys Bara employees against some big business challenges. Fiction needs drama to make it interesting. However, in real life, the Wales Co-operative Centre can be there to support employee buyout teams and worker co-operatives to minimise the drama that they face on a day to day basis. We can help to take the crises out of the drama.
Derek Walker is Chief Executive of the Wales Co-operative Centre.
The Wales Co-operative Centre is a development agency which champions co-operatives and co-operative working, believing co-operation can be a powerful driver in business success, innovation and social change.
This article first appeared in the Western Mail on Thursday 24th November.