The importance of engagement in employee ownership – five examples from across the UK and across the world.
A number of our Business Succession and Employee Ownership team members visited the UK Employee Ownership Conference in Birmingham recently. Here, Rhian Edwards, Project Manager within our Business Succession Team, discusses the importance that employee engagement has in the employee ownership process – and in developing focussed business growth.
The employee ownership conference is an annual event held in Birmingham by the Employee Ownership Association. Although employee ownership is seen by many as a niche approach, there are lessons that can be learnt from companies utilising employee ownership successfully from around the world. Employee ownership can be a sensible long term exit strategy for business owners – but it can also be an amazingly powerful tool for developing employee engagement and innovation.
Some of the key similarities between the businesses that we observed at the conference included:
Focus on innovation – each of the companies presenting focussed on innovation and company growth
Focus on engagement – real, positive engagement with employees or employee-owners was seen as integral to the companies’ growth and success
Focus on business – whichever approach the companies used to engage with employees and promote the employee ownership approach, all the companies focussed on doing business and doing it well. There may not always have been as large a focus on profits or shareholder return but where that was the case, the emphasis was always on business growth and personal fulfilment across the company.
Here are five examples of companies that struck us as interesting and good examples of how employee ownership can work in practice.
Sector: Advanced Materials
WL Gore is a US based multinational with offices and production units all over the world. It is largely employee owned and has been named one of the best workplaces in the UK, Germany, France, Sweden, and Italy for several years in a row. Perhaps most famous for inventing the Gore-tex material used in outdoor clothing, Gore has created numerous products for electronic signal transmission, fabric laminates, medical implants and fibres technologies for diverse industries across the world.
Belief in the individual and small teams is core to the culture at Gore. They believe people need to know each other to trust each other – so no plant has more than 180 people as they believe that any more than that makes it impossible to know everyone personally. Their employee ownership culture is based on three aspects:
- Interest & Motivation
- Business Needs
- Knowledge & Skills
Gore believe that innovation and new product development comes from creating balanced teams with leaders that evolve from each team. That’s right, the team leader role defers to the person who is most knowledgeable about the topic under discussion. Salary levels relate to an individuals ranking in a team although salaries are kept confidential. This unusual approach is highly successful and has led to Gore earning a position on FORTUNE’s annual list of the U.S. “100 Best Companies to Work For” in 2011 with a worldwide sales of over £3billion.
Clansman Dynamics is a Scottish manufacturing tools company based in Lanarkshire. It is an award winning company that develops and supplies high technology solutions for material handling in harsh working environments such as forges and steelworks. It has been employee owned since 2009.
The company is in the process of developing its employee engagement and the feeling of ownership within its employee base, but working hard to achieve it. They hold regular ‘pizza meetings’ where a different employee from the workforce will be tasked with presenting key company figures to their peers – this encourages employees to take responsibility for understanding the financial data that effects them as owners and as employees. The company has encountered increased levels of productivity since moving into employee ownership.
The fact that the company is owned by its employees, who live close to the factory, means that the company is ‘glued’ to Scotland. Its ownership structure means that the company can’t be bought by an external company, stripped and moved elsewhere – a lesson that we in Wales should consider carefully.
AG Parfett & Sons
Sector: Retail (Wholesale)
AG Parfett & Sons is a family-run cash and carry business split over 6 sites in the North West of England. In 2008 the family sold 55% of the shares in the business to an Employee Ownership Trust which holds the shares on behalf of the employees. The Trust is committed to buying the remaining 45% of the shares in the future to achieve the aim of Parfetts becoming fully employee owned. The company vision enshrines employee ownership as an integral element of its strategy:
“To continue to grow a successful and profitable business, incorporating the values and ethics of an employee owned company, and to encourage a collective responsibility, that recognises the importance of the welfare and development of both employees and customers.”
The family didn’t consult with employees before placing an element of ownership of the company into the Employee Benefit Trust. The company has found that middle management have been the biggest doubters of the merits of employee ownership – it can be seen as a threat to their position within the business, and in Parfetts case they are not yet fully engaged in the process. This demonstrates that it is essential to put in place effective communication strategies during the change to employee ownership – but also to ensure that good communication is enshrined within the company culture as the benefits and responsibilities that come with employee ownership are taken on board by the employees.
Gripple is an employee owned manufacturing company that was built on the success of a wire tensioning device aimed at farming and agriculture. Innovation is the foundation of their culture. They have created new products in different sectors including construction. In 2003, they opened a sister company, Loadhog, focussed on developing transit solutions such as the Loadhog Lid, the Smartstak frame, and a pallet/dolly hybrid, the Pally.
Gripple insists that all employees take a stake in the business as a condition of employment. The investment is £1000 (or local equivalent) into GLIDE (Growth Led, Innovation Driven, Employee Company), a company limited by guarantee which represents all shareholders and works on democratic principles of one member, one vote. Glide is the receiver of gifted shares from the company’s founder. Eventually, over 60% of the shares will be owned by GLIDE and the employees.
GLIDE was created to act as a custodian for the shares and harness the company culture. Innovation is built into the strategic business planning and future targets in the Gripple group of companies. They aim for 10% growth per annum but with turnover to come from 25% new products every four years. The company sees itself as having a responsibility to invest in social and financial well being, sports and social facilities and most importantly, product and process improvements and patented technology to support its ambitious innovation driven growth targets.
The Childbase Partnership employs 1400 staff in 42 settings. It is 67% employee owned and is aiming for 100% within 10 years. Its nursery facilities are of a high standard with 47% of them graded as outstanding by Ofsted when the sector average is about 12%.
The Childbase Partnership endorses an inclusive ethos ‘we all contribute, we all benefit’. Ownership is via a trust with an internal share market. They operate a partnership board which consists of 50% staff as well as external executive directors and a representative from the family that owns the remaining shares. They operate an employee led Partnership Council which has implemented changes to pensions and payment dates, embarks on staff engagement programmes and attends the main company board meeting twice a year.
The company believes that with employee ownership, more people are committed and are more likely to go the extra mile. Employee ownership encourages people to contribute ideas, take responsibility, solve problems and cope with change. In a survey, 88.5% of staff agreed that employee ownership makes a positive difference.
Employee ownership in the Childbase Partnership encourages employees to communicate openly and honestly about the company, which breeds mutual trust.
Communications approaches the company utilises include:
- Bright ideas – individuals get paid for bright ideas that contribute to the running of the company
- Staff conferences and quarterly partnership meetings
- Magazines and intranet communications which feature HR stats and updates from the Managing Director
- Annual roadshows (42 a year)
- Encouraging wide ranging career development opportunities to allow staff to create a ‘career of choice’
- Awards and recognition on a regular basis.
Anecdotal evidence suggests that the increased worker engagement has been highly successful – the most highly engaged nurseries in the group are the venues with Ofsted ‘outstanding’ and 100% occupancy rates. Share prices between 2000 and 2011 have risen from £0.40 to £1.18.
Childbase is engaged in a growth strategy that incorporates new builds and taking over existing businesses. The induction process for staff is easier in the new build nurseries but the induction process is becoming easier for staff in purchased nurseries as they know who Childbase are and have a better idea of what to expect from the culture of the company.
These five examples demonstrate the employee ownership and well planned employee engagement can drive business growth. Employee ownership can be more than just an exit strategy – it can be a means of growing a business and increasing job security for every employee.