Just five benefits of employee ownership (to businesses)

As our countdown to Employee Ownership Day (28 June 2019) continues, here are five ways employee ownership benefits companies

By Tim Gibson

Let’s get this out of the way right at the start of our countdown to this Friday’s Employee Ownership Day: making the switch in ownership model isn’t an act of charity.

    Companies that choose to transfer ownership to employees are motivated by commercial interest as much as altruism.  

Companies that choose to transfer ownership to employees are motivated by commercial interest as much as altruism. If it didn’t make good business sense, nobody would bother.

But it does make sense, as we know. Which is why a growing number of high-profile businesses are making the move, joining the likes of Richer Sounds and the John Lewis Partnership in giving shares and control to their workforce.

There are clear advantages available to a business from handing ownership to staff. Here are just five of the most striking.

1. A more engaged workforce

The Employee Ownership Association is very clear: “…co-owned businesses tend to be more successful, competitive, profitable and sustainable.”

This is partly to do with the sorts of companies that make the change in ownership structure, of course. Businesses like Richer Sounds and Just Recruitment Group have long been committed to their people, and to delivering the highest levels of customer service. So employee ownership probably appeals to them more in the first place than some other businesses.

Even so, there is a clear link between the competitive edge gained by co-ownership and the empowerment of staff that results from it.

Put simply, by giving employees a stake in the business, you engage them in a fresh way. Work is no longer just a job. In effect, they’re running their own enterprise, which means every wasted resource or sales lead that isn’t pursued has a direct impact on their bottom line.

Moreover, as Just Recruitment’s founder Jenny Wrightson has discovered, by transferring ownership, you show staff how much they’re valued. That gives them greater self-belief and a renewed emotional investment in the company they work for.

2. Better staff retention

The second benefit follows the first: a more engaged workforce is also likely to be one that hangs around, as this study from the US makes plain.

Think about it: if you work for a company in which you own a stake, the thought of moving to another employer with a more conventional owner-worker relationship will seem unappealing. You’ll be back to a context where no matter how hard you work, the rewards remain the same. Where you don’t have a say in the future of the company. Where it doesn’t matter if you pull a sickie, because someone else will take up the slack.

    ...there’s a real feeling that everyone’s in it together, they feel a far greater commitment to their colleagues.  

Compare that to the average employee-owned business and you’ll immediately see why staff choose to hang about. The more they put in, the more they get out. And, because there’s a real feeling that everyone’s in it together, they feel a far greater commitment to their colleagues.

Employee ownership gives staff an emotional and financial stake in their business. It entwines their destiny with the company, and with their co-workers. Who would choose to turn their back on that?

3. Higher productivity, better margins

According to The American Management Association, staff in employee-owned companies are more likely to over-deliver, and to maximise efficiency.

They make a point of turning lights off when they’re not needed, for example. They stay late to brainstorm ways of preventing waste. They go the extra mile for customers, secure in the knowledge that the success of their business relates directly to their personal success.

In short, employee ownership drives better productivity and enhances profit margins. It makes businesses better, in every way, and gives employees a share of the success.

4. A longer-term outlook

As Just Recruitment Group has found, employee ownership encourages the next generation of business leaders to step up and develop their skills.

“We’ve found that our managers are taking a more direct hand in business planning,” says Peter Foy, the Just Recruitment Director who spearheaded its move to co-ownership in December 2017. “They see that the future is in their hands, that they are the ones who will lead the company in the years to come.

“That gives them a real incentive to up-skill, so that, when the time comes, they can drive the business to future success – and, crucially, share the spoils with all of their colleagues. As a result, everyone is more committed to success in the long term. Quick wins are eschewed for the sake of careful, sustainable business planning.”

5. An exit strategy for company owners

On a related note, Mr Foy says that employee ownership provides a way for company founders and owners to hand over the reins, without simply selling to a competitor or unknown investor.

“Since 2010, the UK government has recognised the benefits of employee ownership, and set up fiscal incentives for company owners to sell shares to their staff,” he reports. “That has helped drive interest in employee ownership, which partly explains why the number of businesses pursuing it is growing.

“But there’s more to it than finances. In the case of Just Recruitment, for example, Jenny was keen to keep the brand alive, and to honour the culture that has defined her company for the last 36 years. Rather than selling up to a stranger, she’s passed the company on to the people who are its essence. They can help it flourish for the next phase of its life, keeping her legacy alive but allowing her to enjoy the fruits of her lifelong labour to build a hugely successful company.

“That’s a benefit of employee ownership which is often overlooked,” Mr Foy concludes. “Yes, it’s altruistic and the mark of a caring employer. But it’s also a smart business move. The two things go hand in hand.”

Published: 24 June 2019

© 2019 Just Recruitment Group Ltd

If you enjoyed this article, you may also like: Employee Ownership Day 28.09.19: the countdown begins

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