Employee ownership and the professional services sector
Deb Oxley, April 07, 2017
The professional services sector is finding an employee-owned model great for attraction and retention
As the UK faces economic uncertainty, AI and automation transforms the world of work, and businesses consider how to attract future generations, there is a group of businesses quietly confident that they might weather the storm a little better than most.
This group of businesses are not reliant on institutional investors favouring them or having to seek their permission to make the necessary investments to support growth. They remain flexible and responsive to their clients and customers, investing and innovating as necessary, and are able to offer an unrivalled employment proposition that is highly attractive to Generation Y. They are independently minded, privately owned businesses that have recognised that their most important assets by far are their people.
Recognising this, they are putting the interests of their people front and centre through shared ownership, meaningful engagement, shared responsibility and shared reward.
In short, they have become employee owned. The best-known UK employee owned business is the John Lewis Partnership. But the largest growth of this business model actually is in the professional services sector; over 40% of our 320-strong membership is made up of this group.
Architectural firms in particular are embracing the model as a route to managing succession planning, while retaining their best talent and providing an attractive opportunity for future recruits.
Firms such as BB Partnerships celebrated their 25th year in business in February by transitioning to employee ownership. They join a growing number of other design and architectural practices that have become employee owned either at their formation, such as Make, or as part of succession planning (MJP, Space Syntax and Stride Treglown).
In most professional services companies, the main assets of the business go home at the end of each day, so it makes real sense that those assets, the people, have a real stake in the business and a vested interest in seeing it perform well.
In most recent transitions to employee ownership as part of future succession planning, the most popular mechanism is the new Employee Ownership Trust (EOT) model, where a majority of the equity is owned on behalf of the employees in the EOT. The employees are very often represented as trustee directors, and the model can sit comfortably alongside other minority shareholders.
The EOT model enables all staff to become owners, and not just those who choose to or who are able to buy their way in. And this shared ownership makes everyone equally responsible for the success of the business, aligning the goals of the trustees, shareholders and employees.
While architectural practices are some of the early adopters, the wider professional services sector is also starting to recognise the benefits. IT business Agilisys is one of the larger firms to adopt employee ownership. The 1,900-strong workforce are now vested with shared ownership through their majority ownership of the business via an EOT. And the employees have elected representatives to ensure the employee voice is both heard and has real meaning in the future direction of the business. Scottish branding specialists Novagraf is another services business that, in its 32nd year, chose employee ownership as its route to sustainability following the retirement of its founders.
As the professional services sector becomes an ever more dominant part of the UK GDP, the need to secure its future, through a business model that is demonstrably productive, profitable and resilient, is essential.
Employee ownership, with is overt focus on people, can provide the answer, delivering a model where mutual benefit is derived from mutual and shared ownership.
Deb Oxley is chief executive of the Employee Ownership Association