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#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
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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.

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Welsh duo bid for global gains at Co-operatives United

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PrimePac talking to Brazilian delegates at Co-ops United

PrimePac Solutions busy networking with Brazilian delegates at Co-operatives United, earlier today (Wednesday)

Tomorrow, at the ICA Expo ‘Co-operatives United’, two Welsh co-operatives will go in front of an international audience in a bid to sell their products and services. The hosted buyers workshop at the event, being held at the Manchester Central, could be attended by up to thirty companies looking to do deals with Dulas Ltd and PrimePac Solutions.

Both are also exhibiting alongside the Wales Co-operative Centre and the Co-operative Group who have sponsored the Co-operatives in Wales stand.

PrimePac’s Managing Director, Steve Meredith has told us how he has prepared for the event and how he is feeling ahead of the meet the buyer session:

I have exhibited PrimePac’s services and capabilities at numerous exhibitions with, to be honest, limited success. Networking is the most you can hope for. I live in hope but don’t expect anyone to visit any exhibition stand with a need for a million sachets. But who knows?

Usually I am just one of the many companies vying for the attention of the buyers attending. The difficult part is to know who the buyer is. I have often mused that if only they would make the buyer, who is actually keen to develop a business proposal, wear a big orange hat! Never going to happen, so the challenge is similar to a shop or pub worker who has a secret customer who will appear at any time, you have to keep positive and read name tags fast. The hardest thing for me is to smile when I know the visitor, although maybe interested, is never going to raise an enquiry or place an order. Worse still is the salesman who wants to sell me something when I am trying to sell, and as you’re talking to this visitor you see the buyer you really want to talk to walk past, straight into the outstretched business card of a competitor.

Enough negatives and whinges, in sales every ‘no’ means you’re closer to the next ‘yes’.

Contract packing is a strange sell. I basically sell machine time, as the products are not mine they are my customer’s. In the past I have stood there with all the sachets, bottles and packs previously made at PrimePac scattered and arranged around me, thinking everyone knew what a contract packer does, and the sad fact is that they don’t.

So at the ICA Expo I am going minimalist. No samples of other people’s products, it’s stripped to bare bones…a few PrimePac sachets and bottles and two pop-up banners. My first aim this time is to make sure people know what we do and what a contract packer can offer. Fingers crossed on that one! Apologies for my scepticism but last time I stood there with samples of all sorts and a large poster behind, professing that PrimePac is a great contract packer, packing sachets, bottles, strip and blister packs only to be asked what I did and if I had anything to clean the wheels on their van! But as always keep smiling, well try to anyway.

Sales are key to any business. It’s what feeds the hungry mouths otherwise known as employees and members. It’s what drives me to think that the next yes is just after the last no.

Cup half full at the moment, but what will I be like two days into the event? Smiling and pleasant or will the veil slip and a glimpse of a salesman trying to keep a multimillion-pound business fed, peep through?

The last few days I have designed the banners and set about putting PowerPoints and videos onto my iPad! So now I have an iCloud account, a Dropbox and some mpg to mp4 converter software. Whoever says Apple, iTunes and iPads are easy is very much respected by me. I struggle to find my way around the forums but it looks like I have made it.

Having spent the last few days on sales visits and getting everything ready for Manchester, the adventure can begin………….

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