Employee ownership could boost British business
Rachel Muller-Heyndyk, June 28, 2018
Employee ownership could help to tackle the current challenges presented by the economy, a report has claimed
The panel of the Ownership Effect Inquiry, a year-long independent business-led review, heard evidence from more than 100 employee-owned businesses and advisers at national hearings across the UK.
The report found that more employee-owned businesses would improve UK productivity, enhance the resilience of regional economies, and motivate more engaged employees through transparent models of corporate governance.
The best-known examples of employee-owned businesses are the John Lewis Partnership, Arup and Mott MacDonald.
The sector contributes £30 billion in annual turnover and is growing by a rate of 10% a year. Despite this the sector’s profile is low and its potential contribution to the economy under-exploited as a result, the report claimed.
The report cited findings from consulting firm RM2 showing that 'upper tier' employee-owned businesses are seeing growth in both personnel and revenue terms. In 2017 the UK’s top 50 employee-owned businesses recorded year-on-year staff growth 2% higher than that at like-for-like non-employee-owned businesses, reaching 176,000 employees. The same year, these businesses also achieved year-on-year sales growth 3% higher than that of non-employee-owned businesses, totalling £22.7 billion.
In Scotland The Co-operative development group cited a tenfold return on investment (ROI) in gross value added (GVA) for every pound invested in on-the-ground support. Furthermore, 69% of employee-owned businesses reported increased employee input in decision-making, 56% said they had seen better employee performance, and 88% said they have implemented or plan to implement flexible working.
The panel made several recommendations off the back of the findings. These included investing in ownership capacity-building to echo Scotland’s scheme, creating a national strategy for business ownership, and creating pilot projects across the UK.
Deb Oxley, CEO of the Employee Ownership Association, urged the government to invest in such capacity-building for employee ownership.
“The ownership dividend benefits employees through delivery of better work and greater financial opportunities, and together employees’ extra discretional effort as owners positively affects corporate performance," she said. "The ownership dividend also helps businesses to maintain an independent and sustainable model of ownership, and subsequently roots jobs and investment locally and more resiliently.
“To increase [this] we call on the government to invest in capacity-building for employee ownership that echoes the successful approach in Scotland, supported by trailblazing regional pilot projects focused on resilience and succession as well as a national strategy for business ownership.”
Charlie Mayfield, chairman of the John Lewis Partnership, added that it was time to take a "fresh look" at the employee-ownership model.
“The most valuable asset to business in driving productivity is its people. Employee ownership is business powered for people by people. [There are] significant benefits from giving employees a meaningful stake and share in the value they create – not just financially but in terms of motivation, wellbeing, and fulfillment at work,” he said.
“With the significant shifts currently taking place in the workplace and in society, it is time to take a fresh look at the dividends that increasing employee ownership can offer to the UK economy and society.”
The Ownership Effect Inquiry was based on oral and written evidence from more than 100 employee-owned businesses and professional advisers.