Today Ownership at Work (OAW) issued a report entitled “Redesigning the CEO: How employee ownership changes the art of leadership” highlighting how and why being a leader to colleagues who are also shareholders can be a game-changer. Justin Rix looks at the highlights of the report.
The OAW report is a timely and important exploration of leadership in employee-owned (EO) structures, and the benefits those structures can produce; particularly in key areas such as productivity, agility and resilience. But perhaps more important than all of that is why we’re talking about it at all.
Does employee ownership raise productivity?
Despite high-profile examples like John Lewis, awareness of employee ownership schemes as a viable alternative to more-traditional business structures remains low. Even amongst the businesses we advise, organisations that are actively looking to restructure, it is rarely top or even on the list of options being considered when we start talking to them.
And yet, at a time when UK productivity is low, it remains high among EO companies. As investors and regulators place renewed focus on purpose and culture, the EO structure naturally prioritises both, and as the turbulence of the last few years shows little sign of letting up, employee-owned companies are proving well-positioned to weather the storm.
All of which poses the question:
Is employee ownership right for you?
Employee ownership won’t be the best option for every business, but its applications are far broader than they are often perceived to be, and we’re beginning to see key areas where EO is particularly successful:
As part of succession planning
For more traditional owner-managed businesses, giving all employees a share in its future growth can be an attractive option.
Professional practices such as architecture, legal and accountancy firms often see a clear benefit to giving talent a stake in the business.
The next big step
As companies grow to a point where they’re looking to sell or secure PE investment, EO could be the way to go. The positive effects it can engender in terms of culture are becoming increasingly attractive to investors. Whatever your reason for considering EO, the benefits of employee ownership could be significant.
In it together
Employee ownership businesses aren’t facing different challenges to other companies and best practice doesn’t change once you become employee-owned, but the EO structure, when done right, can help you overcome those challenges while helping improve the way you work:
Why are EO companies more productive? Because their employees are more invested. EO gives employees a stake; they take out what they put in and are therefore more aligned to a common goal.
When employees at every level have agency, everyone is in a position to challenge outdated or ineffective ways of working. This fosters innovation and better equips you to spot potential issues while they’re still opportunities.
All businesses face challenges, but when changes have to be made to overcome them, the employee-ownership structure helps. Employees, as stakeholders, are involved in the decision-making process and understand why action must be taken. This isn’t about making decisions by committee, but rather a model where an emphasis on transparency and communication is hard-baked into the structure. It’s a big change and one that needs proper planning to get right.
The way forward
Where is your business now? Where do you want to be? How do get from the one to the other and at what point is it right to make the full switch to employee ownership? If you’re considering becoming employee-owned, these questions are where you start. Knowing not just that you want to change, but what that change will look and feel like is critical:
Old roles in the new world
If you’re moving from a traditional owner-managed business model to EO, it is essential that you know what happens to your owner founder after the transition. A lack of clarity on their role in the new structure can cause confusion, resentment and make it harder to embed new ways of working.
As the report highlights, an employee ownership structure requires a different approach to leadership. Do you have the right skills in place? If not, will you develop them in-house or recruit talent from outside of the business?
Genuine culture change
If your employees don’t feel the effects of the new structure, you may end up getting the opposite of what you’d hoped for: a despondent workforce that feels disconnected from a structure that fails to give them the agency they were promised.
An informed decision
The truth is, the person best-placed to know whether employee ownership options are right for your business is you. If it is something you’re considering, arming yourself with as much information as possible is the way to go. The OAW report is a great place to build on or expand your knowledge of what it means to go employee-owned.
Want to find out more about how EO changes the art of leadership and can benefit your business?
For further information, please get in touch with Justin Rix.