When we talk about the why of becoming employee-owned, at the Employee Ownership Association (EOA) we often use the analogy ‘who washes a hire car’?
There is a mental change that happens when you own something. It drives behaviours that relate to what needs to be done rather than what you want to do. It is this shift that helps to drive success in an employee-owned business. It is important to note that it is not a panacea or a fix all. Employee ownership will not protect an organisation from market pressures, or put a business in trouble on the road to recovery.
However, evidence shows in addition to providing owners with the exit they want, realising the value of the business while securing its ethos, values and employees for the future, employee-owned businesses are proven to engage their employees in a more meaningful way, via their ownership stake.
This stake, delivered via direct shares, a trust, or a hybrid, along with the accompanying influence exercised through a structure of representation, drives more individual discretional effort. This then directly results in higher levels of financial performance, with new employee-owned businesses reporting an immediate increase in profits in the year after transition.
This is why employee ownership is one of the fastest growing succession solutions in the UK where there are now more than 800 employee-owned businesses, with more than 300 of those having transitioned since 2020. The fast pace of growth among SMEs and family-owned businesses have taken off with the use of the employee ownership trust, introduced by the government in 2014 to encourage long-term employee ownership.
The Ownership dividend report, launched in 2018, further evidenced the impact of the sector and since then, a number of household names such as Riverford Organic Farmers, Seetec and Go Ape have also helped to draw attention to the model.
We are told by many of our employee-owned member businesses that when they focus on their people, profit follows.
James de le Vingne is chief executive of the Employee Ownership Association