Many years ago, I worked in paper manufacturing. I vividly remember the day I was told that we, as 70 managers, had the opportunity to buy the business.
But then I discovered that it had all been done in a ‘them-and-us’ way. A colleague with whom I had worked closely for years had been told that he wasn’t senior enough to qualify. It was ‘managers only’. That did little to improve the company’s industrial relations or sense of teamwork.
‘Why not involve everyone?’ I asked the MD who had led the process. ‘Confidentiality’ he said. ‘What was stopping you setting aside a slice of shares for the purpose of employee ownership?’ I asked. There was no need to invite each employee individually at the time the deal was still confidential! Clearly, he wasn’t aware of or interested in the ownership effect.
According to this and other recent research 75% of UK businesses are wasting around two hours per person every week as a result of inefficient management practices. High ambition enterprises – those with ambition to set ambitious plans supported by long term goal – are 14% more like to achieve turnover growth than those that live in the short term.
And at a launch of this research David Hunter, chairman of employee-owned designers and architects Stride Treglown, described the difference employee ownership made. In a previous recession, the need to cut costs meant a divisive and destructive redundancy. After the change of ownership, when the banking crisis meant a need to cut back the board asked employees for suggestions as to how it might be done and having targeted 5% savings they received suggestions that offered more savings they had asked for. The first crisis was divisive. With employee ownership, the second was unifying.
Where employees become shareholders, it is more likely that they and all their middle management colleagues will think like owners.
So why don’t more companies do it. Later that day I was chatting to an experienced expert on corporate governance and he said, ‘Of course it’s ok for SME’s. It’s much hard for big listed companies’.
I asked him if he had heard of Handelsbanken. A very large and established listed company which, each year, puts a percentage of profits into its employee shareholding trust. That trust, the Octagon Trust, is now the largest shareholder in the business!
It was also fascinating to hear evidence at the launch that employee owned companies are more likely to be rooted in their geographical areas for the long term. The researchers found that where there is a cluster of employee-owned companies, they learn from each other and support each other. This is why the Scottish Government are taking steps to encourage firms to take the employee ownership route.
A UK government that was truly interested in increasing productivity and strengthening the health of our economy would make the development of employee ownership a priority across all departments.
After the Brexit referendum we were told that people voted for Brexit because they wanted to ‘take back control’.
Isn’t that exactly what stronger employee ownership offers?