East Anglia: Workers who are ‘all in it together’ celebrate Employee Ownership Day
- Credit: Su Anderson
Employee Ownership Day, which took place earlier this month, is an initiative designed to promote the benefits of employee-owned businesses. ROSS BENTLEY talks to some of the people championing the model in East Anglia.
While most of us took to the beach for our summer holidays last year, Philip Colchester spent his vacation visiting a range of businesses around the UK.
The managing director of Colchester Print Group, which has sites in Atleborourh in Norfolk and at Moreton Hall in Bury St Edmunds, had gone to see businesses that were employee-owned to find out more about how they operate.
Employee ownership is the general term for businesses who give their employees a meaningful stake in it. This is typically achieved through significant or total ownership combined with high levels of employee engagement and participation in the business. The number of employee-owned businesses is on the rise in the UK and thanks to successful companies like John Lewis, is increasingly being seen as an attractive and progressive business model.
Mr Colchester has spent the past three years looking at different options for the future of the firm as he takes a step back from its day-to-day running. A management buy-out, a sale to a competitor and even liquidation were all considered and then discounted before he decided that moving the business over to employee-ownership was the way forward.
“There must be lots of people at my stage of life,” he says. “I am not going to retire but want to reposition and not work full-time. I’ve owned the business all my life and I wanted to find a succession plan.”
After a tough few years for the printing industry, Mr Colchester believes employee-ownership offers a compelling future for the business but he wanted to see other firms that had adopted the model to be sure. Thus, his road trip.
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“I wanted to know what employee-ownership felt and smelt like,” he says. “I spent all last summer talking to employers in places like Sheffield and Pontefract and I’ve built up a great network of people willing to help me.”
He liked what he saw and on November 1 has pledged to sign 51% of his £3.7million company over to an employee ownership trust and make 5% more available to staff as part of a share incentive plan. He intends to keep the remaining shares in the first instance and to gradually dilute his holding over time as staff members become more business savvy. His decision has been helped by the Government announcing tax breaks for employee-owned businesses last Autumn.
According to the Employee Ownership Association (EOA), an organisation that represents employee-owned businesses across the UK, Mr Colchester is not alone. It’s figures show that employee-owned organisations currently contribute £30bn to the UK economy each year - around 4% of GDP. The EOA hopes to see around 10% of GDP generated by employee-owned businesses by 2020 and on July 4 held its annual Employee Ownership Day to profile the economic and social benefits of businesses being owned by their employees
“The UK is an unusual economy in that it has a disproportionate number of externally - owned businesses,” says Iain Hasdell, chief executive of the EOA.
“This means short-term business thinking dominates and the returns for shareholders become the priority. We would like to see a better balance in the economy because evidence shows that employee-owned businesses are remarkably high-performing and exhibit higher productivity and innovation.”
Mr Hasdell said productivity in employee-owned businesses has grown by 4 ½% in the UK whereas in the economy as a whole companies are under-performing. Profitability in employee-owned businesses is growing 25% year on year.
“People tend to get more respect and recognition in employee-owned businesses and organisations benefit from a deeper, long-lasting commitment from the workforce,” continues Hasdell.
“Staff in employee-owned businesses don’t keep looking over their shoulders worried that the owners might sell it or cash it in. It’s a British disease - a lot of firms are obsessed with building up the business to sell it for a profit. But this can be disruptive and economically dysfunctional. In employee-owned businesses, there tends to be a move towards efficiency as staff are motivated to improve processes because it is their business.
And while he admits it is very difficult for externally-owned businesses to make the shift to employee ownership, Mr Hasdell says the model is ideal for family businesses where there is an issue about succession or start-up businesses wanting to attract top talent by employing a better business model.
One organisation that is a 100% employee-owned is Leading Lives, a co-operative that provides social care support for people with learning disabilities across Suffolk.
When the organisation was divested from Suffolk County Council in July 2012, the decision was made to set it up as an industrial provenance society. All staff have the option of buying a £1 share in the business once they have attended a training course about the implications of being a member. All board members are staff voted for by their peers and the board includes front line employees.
Milly Gaskin is the chairman of the board who also manages the short break service for parents with caring responsibilities as her day job at Leading Lives.
“We looked at our greatest asset – it wasn’t the building or the furniture but our people. Who else would you trust to run your company?,” says Ms Gaskin. “Employee ownership is a fantastic model for a business like us working in the health and social care sector where values related to caring for people are important.
“No one else owns any other stake in the business other than employees and employees shape the direction of our business – we feel this works as it give real autonomy to our employees. It also makes us closer to our customers as many decisions affecting the whole company are made involving front line staff who know our customers best,”
Gaskin says she has been on the board now for three years because they had to form it a year before the organisation divested. She admits to having felt out of her depth at times during this period and also having to navigate the potentially tricky situation of disagreeing with her workplace boss during board room discussions.
Another drawback is that the organisation doesn’t always have the right business skills in-house – be it accountancy, human resource or legal expertise - to make certain decisions. This has been overcome by bringing in consultants on short-term contracts to advise the board.
But in general, Ms Gaskin can’t praise the new set-up enough.
“I’ve gained a greater understanding of how the organisation works as a whole. I’m not just working in my own silo and have been made more aware of the challenges that face everyone,” she says
“Everybody who works for us is a face of the organisation. Companies like John Lewis have shown how people take more pride in their work, have more empathy towards colleagues and realise the more they put in, the more they will get back. In our organisation sick leave has gone down and people are not worried about the business being sold – it belongs to everybody.
She adds: “ But we’ve had to say to people just because you have a stake in the business, please don’t be thinking we will be handing out bonuses straightaway. We were able to give out a gift voucher at Christmas, which makes a difference.”