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Happy birthday to you John Lewis

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This year the John Lewis Partnership celebrates a milestone anniversary that very few businesses can claim.

2014 marks 150 years since John Lewis opened his drapery shop in Oxford Street in London. It marks 150 years since he began a multi-billion pound business empire that, unbeknownst to him, would become a flag bearer for employee engagement and employee ownership across the world.

The early history of the business is well recorded. John Lewis himself was a sharp business man whose focus on offering quality products at tight profit margins established a successful model he was quickly able to build on. The proceeds allowed him to expand the business and rent and buy further properties. He famously purchased the controlling interest in the Peter Jones department store with a massive £20,000 in cash.

However, it was his son, John Spedan Lewis who saw the benefit of increasing employee engagement by giving the employees a share in the profits of the company. In 1914 John Lewis appointed Spedan Lewis as Chairman of Peter Jones. Spedan Lewis soon realised that his staff’s interests were not in line with his businesses interests and he chose to make some innovative changes. He developed a commission system and started regular meetings with staff. When he gained full control of the Peter Jones business he improved staff conditions, increased holidays, increased internal communication and instituted the first staff council. Profits increased and by 1920 Spedan had started distributing shares to his staff who were now known as Partners and thus, modern employee ownership was born.

In stark contrast, in 1920, John Lewis’ original store experienced staff unrest, a five week strike and eventually he sacked the whole staff of the shop. Not a great model for employee engagement!

Spedan Lewis gained control of the whole business when his father died in 1928 aged 92. The following year he set up a trust which enabled profit sharing to the businesses employees and by 1950 he had passed ownership of the John Lewis Partnership to trustees to hold the business for the benefit of those who worked within it.

John Lewis employees continue to benefit from Spedan Lewis’ progressive approach to employee engagement and employee benefits. The Partnership operates a comprehensive network of business forums and a Partnership Council to ensure that every employee has an outlet to feed into the development of the business. The Partnership publishes a weekly in house magazine, the Gazette, and each branch has its own magazine, The Chronicle – each of which offers feedback opportunities to management. The Partnership offers an extensive range of social activities for its partners including holiday venue Brownsea Castle, country estates and hotels and a sailing club. Its pension, insurance and holiday benefits are generous and after 25 years of service, partners are entitled to a six month, fully paid, break.

Of course, the most famous benefit of being a partner in John Lewis is the annual bonus. This year each partner received a bonus equivalent to nearly eight weeks of their salary based on a 15% profit. John Lewis has consistently shown a profit of over 10% since 2002-3 and as much as 17 – 20% on several occasions. The partners at John Lewis are richly rewarded for their achievements.

Today, the John Lewis Partnership is a £10.2billion turnover retail empire which encompasses John Lewis and other Department Stores, Waitrose grocery outlets and has a very successful online presence. There is no doubt that the John Lewis Model works.

So, why is this multi-million pound business relevant to a Welsh Co-operative Development agency?

The answer is simple. Employee owned business approaches can offer stability and growth to businesses where the owner or owners are looking to withdraw over a period of time, reducing the need to search for, potentially aggressive, buyers. This sort of business transition lends itself to giving employees the opportunity to learn the business, become empowered within it and eventually become the future business owners. John Lewis provides the template that people know and can relate to.

Employee ownership is a flexible approach. Many employee owned business are co-operatives where employees directly own a share in the business, some are multi-stakeholder models and some are owned by a trust on behalf of the employees. All of these approaches are marked by high employee involvement, exemplary engagement, innovation, above average attendance, productivity and in most cases, profit.

This employee engagement and empowerment fits in perfectly with the Wales Co-operative Centre’s aims and ethics. It also provides an alternative approach to addressing one of the biggest problems facing an ageing population of business owners in Wales – how to ensure a business continues when the owner decides it time to leave.

So, as John Lewis’ newest, eagerly anticipated, advertising campaign celebrating their 150 year anniversary hits our TV screens this bank holiday weekend, let’s raise a glass to John Lewis, an employee owned, employee engaged company that is 150 years young this year.

Happy Birthday John Lewis.

If you would like to know more about the John Lewis Partnership, visit the partnership website here.


If you would like to know more about employee ownership and business succession services available from the Wales Co-operative Centre, please visit our website or call our business consultants on 0300 111 5050.

David Madge is Marketing and PR
Officer for the Wales Co-operative Centre. He has an interest in employee
ownership and worker co-operatives.

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Capital Gains Tax? What a Relief!

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Capital Gains Tax? What a Relief!

On April 6th 2014, the UK Government will formally launch a range of tax incentives to help grow the employee ownership sector. There will be an exemption from income tax of £3,600 for certain payments made to employees of qualifying employee-owned companies, and the introduction of a relief from capital gains tax (CGT) for owners selling a controlling interest to a trust which operates for the benefit of all employees. Finally, a tax hook on which to promote employee ownership to those business owners considering their business succession options!!

Although the Centre is disappointed that direct forms of employee ownership, such as the worker co-operative model, have not been recognised, this is still a significant milestone for employee ownership. The tax incentives headline what has been a very busy 18 months of UK policy development in this area, stimulated in the main by the recommendations in the 2012 Nuttall Review of Employee Ownership, ‘Sharing Success ‘

To us at the Wales Co-operative Centre, employee ownership is an economic ‘no brainer’. Giving employees an ownership stake in a business changes their relationship with the business and encourages them to take a positive and proactive role in helping their company grow. Recent research by the Cass Business School supports this by showing that employee owned businesses are more stable and more resilient as a direct result of the employees gaining a real stake in the success of that business.

Here in Wales, we see employee ownership as a crucial succession option which can help keep jobs, business and skills in Wales. Unfortunately it is often the forgotten succession option, not being viewed as a mainstream idea by conventional business advisers. At the Wales Co-operative Centre, we have received support from Welsh Government and European Union Regional Development funding to implement employee ownership in Wales and are actively working with both businesses and advisers to put employee ownership firmly in the mainstream.

To mark the introduction of the new tax regime for employee ownership, the Wales Co-operative Centre is hosting a number of breakfast seminars looking at the benefits of employee ownership and how the new tax incentives can benefit business owners who would like to move on from the business.

The events in Cardiff, Carmarthen and Bodnant in North Wales will also consider the employee trust, how it fits with your business model, and the benefits of the model for the business owner and the employees. The seminars will be of interest to business owners interested in looking at their exit strategies and to business advisors who want to know more about the approach to advise their clients. To find out more click here.

In our view, tax should not be the sole driving factor to considering employee ownership. Many of our clients are driven by legacy, and see employee ownership as an approach that engages employees and puts them in charge of their own futures. It helps retain jobs and provides a platform for continued local business ownership and growth. However, having an additional incentive to help promote the employee ownership exit route is never a bad thing and we’ll be working hard to promote the new relief available to business owners here in Wales.

Let’s just hope those clever tax specialists don’t find some loophole which allows companies to abuse the incentive for purposes other than employee ownership, otherwise we could see it withdrawn from the market as quick as at arrived.

Further information can be found on the Wales Co-operative Centres Website http://www.walescooperative.org

Places can be booked directly by calling the Centre on 0300 111 5050.

Rhian Edwards is manager of the ERDF and Welsh Government Business Succession project at the Wales Co-operative Centre. Her team works with micro-businesses and SME’s across Wales to develop employee ownership approaches and employee ownership based succession planning.

#walescoopreport Employee ownership could offer long term resilience in the Welsh SME sector

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#walescoopreport Employee ownership could offer long term resilience in the Welsh SME sector

In the second of our blogs on the potential implications of the recommendations of the Welsh Co-operatives and Mutuals Commission, we look at the potential for developing employee ownership approaches in Wales.


Rhian Edwards is Manager of the Succession and Consortia project in the Wales Co-operative Centre and has been heavily involved with work in Wales and the UK raising awareness of Employee Ownership as a viable succession option and as a means of encouraging engagement and growth in our indigenous businesses
.

The Welsh Co-operatives and Mutuals Commission report has recommended increased support for those employee groups who could consider employee ownership as a means of continuing viable businesses which are at risk of closure as well as specialist funding mechanisms to support employee buy-outs.

Employee ownership is a proven growth driver so it makes sense to raise awareness of, and support, a business model which is good for the business, good for the employees and good for the community the business is rooted in.

CASS Business School, a highly respected school within City University has been at the forefront of research into employee owned businesses for many years. Its 2010 study “Model Growth: Do Employee Owned Businesses Provide Sustainable Advantage” concluded that employee owned businesses are more likely to be resilient in both the ‘good times’ (2005-08) and recession (2008-09) than their non-employee owned counterparts.
CASS Business School has recently published a follow up study which concludes that employee owned businesses showed significantly higher growth in sales turnover relative to non-employee owned businesses throughout the recession (until 2011). This was reflected in higher growth in employee numbers and in employee contribution to profitability. This research demonstrates that although employee ownership is not a panacea that guarantees growth – after all, employee owned businesses are just as effected by external forces as any other business –increased employee ownership and engagement almost always results in increased stability and resilience than those businesses that don’t engage effectively with their employees.

At the Wales Co-operative Centre we have a long standing commitment to increasing employee engagement and empowering individuals within the workplace. A few years ago, we published ‘Defusing the Business Succession Time-bomb’ which asserted that Wales was in danger of losing an unreasonably high percentage of indigenous small enterprises over the next five to ten years due to poorly planned succession and unrealistic expectations of the potential for trade sales.

The Commissions report has recognised this issue and tried to address some of the big barriers to the approach: awareness, available support and finance.
There is no doubt that employee ownership is a valid and sustainable plan for long term business succession. Allan Meek, Managing Director of Caerphilly based SCS Group explains,

“For me one of the main advantages of employee ownership as an exit model for owner managers is the freedom to be open about plans for the future and for the exit to be conducted for the mutual benefit of the owner and the business”

There is evidence that businesses with high levels of employee ownership have substantial advantages over those without. Employee-owners have higher levels of job satisfaction, feel a greater sense of achievement, fulfilment and job security and are more likely to recommend their workplace than employees in non-employee owned businesses.

Barry Wise was one of four founding directors in Aberystwyth based Aber Instruments. He states,

“Employee Ownership ensures that everyone embraces a culture of openness and team-working. In turn this leads to all employees sharing some responsibility for the well being of the organisation and this drives profitability… The long term stability of the company is enhanced by Employee Ownership because employees, who know the business inside out, have a say in their future. This minimises external influence and our share structure ensures that ownership stays “within the four walls”.

Gill Wilde from Skye Instruments in Llandrindod Wells believes that the benefits of employee ownership are multiple,

“The first benefit is job security. No external shareholders can influence our direction. The success, or failure, is down to the employees. The second is financial; we have a profit sharing scheme so our employees benefit financially from our success. Thirdly, our employees have a voice. They have the opportunity to contribute to any activity of the business. Their views and suggestions are considered seriously and treated professionally. All employees are eligible to act as Trustees on the Employee Benefit Trust or as Directors in the company.”

Allan Meek of SCS Group agrees,

“We use employee ownership as part of a toolkit for engagement of our employees which is part of our core business strategy and we believe a source of competitive advantage. It is hard to say how much this alone encourages people to go the extra mile but it goes a long way to show employees that their opinions count”.

Employee ownership can also help ensure indigenous companies stay indigenous. As Gill Wilde explains,

“There are limited job opportunities in rural areas that aren’t connected to tourism and agriculture. Transferring the ownership of Skye Instruments to its employees enables a high tech business to remain and grow in the area and to be able to continue to offer specialist careers to future generations”.

Barry Wise concurs,

“We have seen other companies sell out and, as a result jobs and know-how have been lost in the locality. We were determined not to go that way. Employee Ownership brings stability and control over our destiny”.

In the new financial year, Capital Gains Tax exemptions have been introduced to encourage business owners to consider employee ownership as a viable means of succession.

If the recommendations in the Welsh Co-operatives and Mutuals Commission report are taken up there is every possibility that employee ownership could become a common and accepted business model in Wales, and one that makes a substantial contribution to the Welsh economy.

There are now seventy five million reasons to choose employee ownership

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There are now seventy five million reasons to choose employee ownership

One of the main challenges business owners face with succession planning is deciding what form of exit suits them best. Should they go for a trade sale which will be likely to guarantee a lump sum and may be eligible for an element of Entrepreneur’s Relief – but may come at a cost of relocation, restructure or redundancies to the businesses employees?

Or, could a business owner consider an approach that is more likely to safeguard their employees’ jobs and that could also drastically reduce their exposure to capital gains tax when they sell a controlling stake in the business?

The Chancellors announcement today of a Capital Gains Tax Exemption to business owners on the sale of shares that result in a controlling interest in their company being held by an employee ownership trust is welcome news for those of us campaigning for greater awareness of the benefits of employee ownership.

The new proposals will also benefit employee owners via
changes to the income tax regime on bonuses paid to employees of companies that
are indirectly employee owned, and changes to thresholds on key
incentivised share plans.

This removes one of the last big barriers facing advocates of employee ownership as a succession option.

Previously, the Capital Gains regime in Britain had not made any distinction between a business sold for employee ownership and a business sold to another business purely for profit. A high level of employee ownership and engagement has been proven through various studies to increase the innovation and productivity within a business. The new exemption recognises this and now dangles a very enticing carrot in front of business owners who were previously unconvinced of the benefits.

At the Wales Co-operative Centre, we are grateful for the support we have received from both Welsh Government and through European Funding to promote and implement employee ownership in Wales. These new measures compliment the work we are already doing and should lead to a marked increase in indigenous employee owned business in Wales over the next few years.

For further information on how the Wales Co-operative Centre can help business owners to assess their companies’ suitability for conversion to employee ownership, visit the website www.walescooperative.org or contact 03001115050.


Rhian Edwards is manager of the Welsh Government and European Regional Development Fund succession project at the Wales Co-operative Centre.

Written by David Madge

December 5, 2013 at 2:47 pm

Co-operative Congress 2013 – How can employee ownership help business?

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This year the UK Government is launching the very first Employee Ownership Day on July 4th. The purpose of the day is to raise awareness of employee ownership as an economically strong and balanced business model. Employee ownership is an effective way of running a business, that can work across sectors as diverse as manufacturing, retail, transport and professional services. Employee ownership means that employees have both a voice in how the business is run, through ongoing employee engagement, and a stake in the success of the business.

PrimePac Solutions Ltd. was formed in the summer of 2005, as an employee owned company, following the closure of the Budelpack Rhymney factory.

PrimePac Solutions Ltd. was formed in the summer of 2005, as an employee owned company, following the closure of the Budelpack Rhymney factory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Wales Co-operative Centre has a strong and long standing commitment to supporting employee ownership and increasing employee engagement within the workplace. We have supported employee ownership transitions throughout Wales and were instrumental in developing the deal which led to more than 200 miners buying and running Tower Colliery in Hirwaun, Aberdare. The Wales Co-operative Centre employs a specialist employee buy-out team, which provides advice to businesses across Wales on succession planning and employee ownership.  On Friday 28th June our Employee Ownership team will be presenting an update on recent developments in employee ownership, to an audience of business experts, as one of the opening events at this year’s Co-operative Congress in Cardiff.

We asked Sarah Owens from the Centre’s Employee Ownership team why the approach is so relevant at the moment.

Sarah: In an employee owned company, employees will have an ownership stake within the business meaning those employees have a direct relationship with the success or failure of the company. They have a level of engagement that means they actively contribute to the company’s development and financially benefit from its success,

The Employee Ownership Association estimates that the employee ownership sector employed over 150,000 people in the UK in 2011. A comprehensive review of the sector, undertaken by respected employee ownership legal expert Graham Nuttall, showed that employee owned businesses benefit from improved productivity, as employees are committed to making sure the business does well, innovation and reduced absenteeism. Employee owned businesses have proven to be particularly resilient during the downturn as they have a built-in reason to make the company succeed and be highly competitive. For the employees, the benefits are a higher level of involvement in the future of the business, a feeling of ownership and empowerment and of course, a share in any profits.

The employee owned Aber Instruments will be represented at the Co-operative Congress seminar

The employee owned Aber Instruments will be represented at the Co-operative Congress seminar

However, there are barriers to employee ownership and the Nuttall Review highlighted three in particular: real and perceived regulatory barriers;  lack of technical and financial support; and lack of awareness. We are hosting a seminar aimed at business advisors next week, to try to clarify some of these issues and raise awareness of the benefits of employee ownership.

How can employee ownership work as an exit strategy?

Sarah: Owners who are looking for an alternative to a trade sale can utilise employee ownership as a planned succession approach. The shareholding of the company can be sold to the employees on a gradual basis using various tax beneficial schemes or the company can set up a trust to hold shares on behalf of the employees (similar to the John Lewis approach). Many strategies use a mix of these approaches.

What are the negative aspects to this sort of approach? 

Sarah:  Good management and good governance are essential. Most employee owned businesses work to a traditional, professional management structure on a day-to-day basis, with the only difference being that managers are more accountable to their colleagues. Employee ownership generally produces superior performance and productivity only when it is accompanied by real employee engagement and well thought out ways to let staff participate in the business. When moving towards employee ownership, it is essential that employees have involvement with the approach and direction of the business and this is reflected in its governance.

How long does it take for a transition to employee ownership to be implemented?

Sarah: The timescales vary, depending on the complexity of the transaction and the intentions of the owners and the employees. We have seen transitions delivered within a few months, but we also work with business owners to consider this approach as a means of gradually withdrawing from the company over a period of several years. For this approach to work effectively as a long term succession plan, we would always advise a longer transition period if possible as this allows more time for the new management to learn how to run the business.

What advice would you give to owners considering a move to employee ownership?

Sarah: An employee owned business must be sustainable as a business, irrespective of its structure. It needs a good business plan, market research and committed leaders. Then, to ensure that employees are engaged within the process as early as possible and that all employees understand and have the same aspirations for the future of the new business and that the business model chosen reflects this.

There are still a few free places remaining at the seminar “Employee Ownership: Solutions for the Private Sector”. They can be booked online at http://www.walescooperative.org/co-operative-congress-2013-employee-ownership

 

Written by Mark Smith

June 19, 2013 at 9:38 am

The importance of engagement in employee ownership – five examples from across the UK and across the world.

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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.

WL Gore

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

Sector:  Manufacturing

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

Sector:  Manufacturing

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.

 

Childbase Partnership

Sector: Childcare

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.

Employee ownership can drive growth without leaving behind workers rights.

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At the Wales Co-operative Centre we have been proposing that engaging employees in ownership schemes could help secure the long term success of businesses in Wales. Employee ownership approaches engage workers and encourage them to take a positive and proactive role in helping their companies grow. Evidence shows that employee ownership is proven to support strategies for business growth as well as importantly laying the foundations for successful business succession for owners across the UK. Employee ownership is a growing economic force across the UK and it is very encouraging to see it on the agenda and stimulating so much debate.

The Wales Co-operative Centre has a dedicated project aimed at promoting the benefits of various forms of employee ownership at governmental level and throughout different business and industrial sectors.

Last week the Chancellor, George Osborne, announced that he intends to set up a new owner-employee contract which will be introduced in April 2013. The contract,  which allows owners to award tax free shares worth of between £2000 and £50,000 to their staff, in exchange for staff giving up workplace rights around unfair dismissal, training and redundancy amongst others has added a new twist to the discussion. Many commentators have questioned the link between employee ownership and the requirement to sacrifice worker rights.  

Employee ownership can be an opportunity for businesses to re-engage with their employees, reinvigorating the nature of the relationship between the employee and the company. However, this process must be managed to ensure the optimum benefits for everyone involved and should involve wide engagement with employees so they understand what ownership means, how it relates to their position as an employee and how they can enact their rights as owners. Where employee ownership approaches have failed they have generally been where the process is considered purely as a financial transaction with no consideration given to the needs of the various stakeholders involved.

The Chancellor’s approach raises a number of practical questions.

How are shares valued and managed? How will employees be able to make a judgement on the value of their shares against the value of their employee rights? Share values fluctuate according to the performance of the company so there is no way of guaranteeing a value to the shares. It is worth remembering that redundancy options are often presented when a company is not performing well and share values are likely to be lower. Also, how would dividend distribution be agreed and managed?

What voting rights are attached to the shares? What power within the company will a shareholding give the employees? Assuming voting rights will be proportional to shareholding the employees will be minority shareholders so could have little power attached to their shareholding.

So if an employee takes up this approach, or, is forced into a situation where they have to accept it as part of a contract when starting a new job, what, if any, safeguards are there for them?

The Wales Co-operative Centre always makes it very clear when working with employee groups that they are employees first and shareholders second. Ultimately their shareholding isn’t worth anything if they don’t fulfil their roles and responsibilities as employees. With this approach the employee ownership is both the carrot and the stick – a company that performs well is able to offer bonuses or dividends, a company that underperforms will not. It is intrinsically in the employee’s interests to work towards making the company a success. The Chancellor’s new policy announcement could put employees in a position where they have to choose between being an employee with employment rights and being a shareholder with rights to a share of any profits created. The roles of employee and shareholder in an employee owned organisation should compliment each other for the long term benefit of the business.

As an organisation we look forward to examining the finer details of the Chancellor’s proposal when they emerge.

In the meantime, owners will still be able to choose to implement employee ownership and offer its benefits without insisting on the withdrawal of the rights of its workers. This has the potential to create a whole sector of partially employee owned businesses whose employees are engaged, innovative and committed to developing their businesses and helping them grow

Rhian Edwards is manager of the Business Succession project at the Wales Co-operative Centre. Her team works with micro-businesses and SME’s across Wales to develop  employee ownership approaches and employee ownership based succession planning.

This article first appeared in the Western Mail on Wednesday 17th October 2012.

 

Written by David Madge

October 19, 2012 at 1:17 pm

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