Rhian Edwards argues that co-operatively run firms deliver better results
At the Wales Co-operative Centre we have a long-standing commitment to increasing employee engagement and empowering individuals within the workplace. We famously helped broker the ground-breaking buyout of Tower Colliery by its miners in the 1990s. Last year we published research, 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.
4 July: Employee Ownership day
Today the Employee Ownership Association is highlighting the achievements of employee-owned firms, working with a range of partners including Co-operatives UK, Wales Co-operative Centre, Co-operative Development Scotland, the Federation of Small Businesses, John Lewis Partnership and Santander.
There is no doubt that employee ownership is a valid and sustainable plan for long term business succession. As 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. Whilst this may not always be the most lucrative solution for the owner, it can be the best outcome for the sustainability of the business and it recognises employees’ role in helping build it”.
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. A more fulfilled workforce is a more productive workforce and absenteeism levels also decrease. If, as the Employee Ownership Association asserts, the growth rate of employee owned businesses was 50 per cent higher than the rest of the UK economy in 2012, then employee ownership may offer a viable and sustainable means of generating growth for Welsh industry.
Barry Wise, one of four founding directors of Aberystwyth based Aber Instruments said:
“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. In our company we strive for excellence in customer service and this is rewarded with sales orders. Such links are clear for all to see and this engagement brings great job satisfaction resulting in lower staff turnover.
“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”.
Last year, employee ownership legal expert, Graeme Nuttall of Field Fisher Waterhouse was tasked by the UK Government to investigate the barriers facing employee ownership. He found three major problems that blocked wider take up of employee ownership across British business:
- Lack of awareness
- Lack of technical and financial support
- Real and perceived regulatory barriers
Whilst there are real barriers to be overcome to encourage more professional advisors and business owners to take the benefits of employee ownership seriously, more often than not the biggest issue is awareness of the approach in the first place.
Traditionally accountants and solicitors are the first point of call for owners looking to recapitalise their business or discuss their exit strategy. The business support network in Wales offers many areas of advice for business growth but rarely, if ever, mentions employee ownership as a growth strategy. If business advisors advocated the approach, our experience tells us that owners are often very open to the benefits available to them and to their employees.
Gill Wilde from Skye Instruments in Llandrindod Wells identifies three main benefits his firm has gained from employee ownership:
- Job security: no external shareholders can influence our direction. The success, or failure, is down to the employees.
- Financial: employees benefit from the firm’s profit sharing scheme so our employees benefit financially from our success.
- Employees have a voice: their views and suggestions are considered seriously and treated professionally, with all employees eligible to act as Trustees on the Employee Benefit Trust or as Directors in the company.
Allan Meek of SCS Group says:
“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 agrees:
“We have seen other companies sell out and, as a result jobs and know-how have been lost in the locality. We are determined not to go that way. Employee ownership brings stability and control over our destiny”.
Employee ownership is recognised as a viable and sustainable succession solution in Wales. But we need to broadcast more widely that its benefits – increased engagement, increased profitability, reduced absenteeism – bring as real competitive advantages for businesses at whatever stage they are in their development.
Employee ownership is not new. John Lewis Partnership has been doing it very successfully for many years. It is time for more responsible and accountable models such as employee ownership to have a greater role in our economic recovery.