Are community co-operatives an untapped resource?

Head of Co-operative Development Scotland Clare Alexander explores further.

As the effects of Covid-19 take their toll and more and more businesses announce closures and redundancies, it’s clear that the pandemic has had a massive impact on our economy. But this adversity will create opportunity, rebuilding and rethinking the way we do business and how we support our communities.

While calls to focus on the social aspects of the economy have become more insistent in recent years, Covid-19 has undoubtedly fueled their urgency. Many of our norms have been questioned and there is a real desire for change. Business leaders have prioritised wellbeing, communities have responded by supporting each other through the crisis, and new and innovative ways of being economically viable have come to the fore.

New research released by Co-operatives UK said community ownership models are helping to create a new generation of UK businesses that are better equipped to withstand the Covid-19 crisis, or any economic crisis of this scale and nature. The organisation’s study focuses on community shares, a way of funding community co-operatives, and finds that of those businesses who have raised finance this way, a remarkable 92% are still trading.

Since 2012, £155 million has been raised by over 103,000 community share investors across the UK to save and create more than 440 vital community spaces and businesses.

Community co-operatives are run by and for their community, with profits generated invested back into those communities. They can have a significant positive impact whether they provide a service, deliver economic growth, or contribute towards the health and wellbeing of the local community – often all three.

The model is particularly suited to Scotland’s economy due to the prevalence of rural communities. Sectors including retail, hospitality and tourism can be the main employer in rural locations, particularly for young people, playing a key role in safeguarding jobs and retaining young residents. Businesses within these sectors can be run as community co-operatives allowing the communities, sometimes overlooked by traditional businesses, to create new jobs while protecting vital services (often for an isolated and aging population) or developing exciting new opportunities. Examples include saving a local food shop under threat of closure and the creation of an ambitious new distillery selling whisky and gin internationally.

The Community Carrot, a community-run shop in Dunbar, East Lothian, went from supplying 60 vegetable boxes per week before the pandemic to 350 during the early stages of lockdown, responding to the community in its time of need. Strong and well-established local supply chains with mills and farms, something local chain shops didn’t have, meant all orders were fulfilled and deliveries to vulnerable customers were guaranteed.  Whilst demand has eased as people return to normal shopping patterns, The Community Carrot has still significantly grown its customer base on the back of the reliable and reassuring service it was able to provide during difficult times.

Community businesses have undoubtedly experienced many of the same challenges around cash flow and uncertainty as others during this period but these impressive overall figures are a result of creating businesses that meet the needs of their community. During the initial response to the pandemic many of these businesses had a greater understanding of their communities’ needs, helping them to adapt and innovate during the crisis and putting them in a strong position to not only weather the economic storm but to thrive.

The economic and social potential of community co-operatives is significant and should be more widely adopted in Scotland.  Combined with the greater community spirit that has been cultivated during Covid-19, now is the right time to champion community co-operatives that can sustain jobs and communities and deliver wider economic, social and environmental benefits.

If you’re interested in more information on forming a community co-operative, please visit: https://www.scottish-enterprise.com/support-for-businesses/business-development-and-advice/community-co-operatives

Leveraging Ownership event follow up

Last month Scottish Enterprise held a webinar on Leveraging Ownership at which participants gained valuable insights into the evidence underpinning employee ownership and its impact on business performance and employee engagement.

Drawing on practical lessons and experiences from Sheffield-based Gripple and the Basque Country’s Mondragon Corporation, the webinar demonstrated how employee ownership in its different forms can support a pervasive culture of accountability, self-management and employee-driven innovation.

Following on from the event, we asked Dr Peter Totterdill, Director of Workplace Innovation Europe, to write a blog based on the findings from the event including a Q&A with Ed Stubbs, MD of Gripple and James Sallows, Chair of GLIDE, the Employee Ownership Trust that holds shares on behalf of workers at Gripple, about their model of employee ownership.

(L-R) Dr Peter Totterdill, Ed Stubbs and James Sallows

Employee ownership can and does work for businesses

“Employee owned businesses generate higher levels of productivity by empowering staff to take decisions and feel valued to do so.” (R. Andrew Davies: the Living Story of Gripple)

If the introduction of innovative workplace practices can enable all employees to use and develop their skills, knowledge, experience and creativity, leading to enhanced performance and quality of working life, how can we stimulate that introduction process?

One option is to leverage employee ownership – a more committed form of employee engagement that allows delegation of decision-making, provides more scope for individual initiative and encourages employee-led innovation.

With an ownership stake in the business and an influence on governance, employees are more focused on the achievement of strategic goals, more likely to engage in improvement and innovation, and more receptive to positive change in the workplace.

On such success story is Sheffield-based Gripple, a world leading manufacturer of wire joining and tensioning systems, which has been an employee-owned business for over 25 years.

About Gripple

Gripple was established in 1989 to manufacture and market an ingenious means of joining agricultural wire fencing together, the name deriving from the way the device grips and pulls wire. This year Gripple is aiming for a turnover of £90m, achieving a very consistent year on year growth of around 15%.  There around 850 employees across six factories in the UK, with eleven subsidiaries and 17 other operating locations around the world.

From its start in supporting the agricultural sector with fencing solutions, Gribble now services viticulture and landscaping, civil construction and building services suspensions and retains a competitive edge through investment in R&D and the continual development of patented products, of which around 85% export to around 80 countries.  They have an annual target of 25% of total sales coming from products that are less than 5 years old.

Explaining the benefits of employee ownership: Q&A with Ed Stubbs, MD of Gripple and James Sallows, Chair of GLIDE, the employee ownership trust that holds shares on behalf of workers at Gripple

Peter: “The company is growing and was successful in its first five years so why was the decision made to go down the Employee Ownership route?”

Ed: “Employee Ownership came from our founder, Hugh Facey, who was the majority share-holder in the business. And as the employee ownership evolved, he had his succession plan put in place and secured it with structures such as Glide (see below). When Hugh sold his original wire business, enabling him to establish Gripple, he decided to give 10% of the proceeds of the sale to the employees that were staying with business in recognition that they had actually been a major part of building that business’ success and value.”

From offering voting shares to employers, the model developed when in 2007 it was decided to make share purchase compulsory, with all employees required to buy £1000 worth of shares in their first year of employment.

A strong culture and inspiring workplaces

Ed: “Ours is a direct model of ownership where every employee is making a financial investment. They’ve all invested their own money and we think that’s quite an important aspect of our employee ownership model in terms of driving productivity and innovation, engagement and funds.”

“We have continued to innovate and we’ve continued to develop patented products, and one of the benefits of this is that it has given us the confidence to invest in worldwide marketing. The business’ growth has come from real geographic expansion over the course of 30 years supported by new products developed by our employee owners.”

“Setting and achieving targets is strongly ingrained in all of the employee owners. It provides a measure that all of the owners ask about and are very aware of, and it drives real action on a day to day basis, focusing on translating opportunities, customer problems, and employee suggestions into tangible, physical products.”

Peter: “Has compulsory investment been well received by employees?

James: “Yes, absolutely.  They all have a vested interest. They work very hard and they get the rewards. When I say ‘rewards’, it’s not just from a financial standpoint. The culture that we have created provides a happy workplace. We believe in making workplaces very inspiring and that comes with the buildings, the working environment, with the development of the business and with our people, which all relates back to our employee ownership model.”

Underpinning this model is Glide (an acronym for Growth Led Innovation Driven Employee Company Limited).  Collectively owned by employees, it was established in 2010 to preserve and develop employee culture; to look after the interests of its members and to generate engagement from everyone in their company. Peter enquired how this model of ownership operates:

James: “Glide was established as a private company limited by guarantee with a remit to future proof the culture of the business, to act as custodians of the shares gifted by our founding Chairman and Vice Chairman, and to act as a safety mechanism to prevent a hostile takeover and the threat of being stripped.”

Employee voice in action

Peter: “So how are employees represented on Glide, how do they shape what it does?”

James: “In addition the board, Glide has 35 representatives from around the world which give a real front-line view of the business and what’s working well and what’s not. As a board, we hold to account the MDs across all our businesses and subsidiaries. In the Gripple business there is a tiered structure of leadership boards and all these have elected representatives from Glide.”

Ed: “The Glide board has teeth and can bare them if it chooses. It appoints the managing directors and oversees their reappointment.  It is the recipient of substantial dividend income which it can reinvest in the business in a variety of ways, and can also invest in spin-out businesses and new businesses by supporting them or taking equity, and so becoming a part of the Glide member companies.”

“The three tiers of executive decision making and governance comprise a group board, a group executive board responsible for strategic decision making and business direction, and regional boards. For every decision-making tier of the business there is Glide and employee representation.”

Devolved decision-making and individual initiative means there’s no ‘buck passing’

Ed: “The board structure works well for us but we still gain a competitive advantage through our employee ownership model because we are less bureaucratic than other businesses. We practice faster and more entrepreneurial decision-making, and this is possible because all of our employees are owners and are encouraged every day to resolve problems and take opportunities by making decisions themselves. Our constant challenge is to push that decision-making and the acceptance of individual responsibility as far down and throughout the organisation as we possibly can.”

Peter: “Are you achieving that sense of greater trust, greater employee discretion over how the staff do their work than perhaps more traditional organisations?”

James: “Absolutely. Employees are shareholders so everybody has a vested interest to come to the right decisions and improve areas wherever they see it’s possible. It’s not a ‘pass the buck up’ scenario. Everybody is in at the ground floor working hard and having a say in the business.”

“I think one example which most employee ownership businesses probably would subscribe to in terms of a tangible effect is performance management by peers, which operates well within our business. Our employee owners have a strong sense of Gripple, our values, and how they inform the behaviours that we expect and how people approach their daily work routine, their tasks and their responsibilities. If people aren’t pulling their weight or aren’t performing well, performance management by peer will immediately kick in.”

“There is a real leadership challenge at every level to constantly reinforce that behaviour and that sense of ownership, because it doesn’t necessarily sustain itself just because someone stuck their hand in their pocket and bought some shares at some point in time.”

Ed: “Leading the overall business at managing director level requires real openness of facts and transparent information, but it also requires thought and opinion leadership and how you are feeling about the business. You have to make the time to engage with employees at all levels about sharing the intangible as well as the tangible and that’s where you can get real benefits because you are encouraging your other employee owners to participate in some of those quandaries.”

More than a model of fairness

Ed: “At the start of our journey, it was about fairness and about making sure that people at all levels of the business had the opportunity to see the returns on their labour and their input and their value. But this is not just a model of fairness, it’s a model that drives the performance of the business.”

“For any leader in a business like this, there is a completely different level of accountability in terms of how you can challenge your employees to contribute to the business and how they should be behaving and thinking. So, it’s a real two-way street in that regard and that two-way street obviously drives better performance from leaders but also drives better performance from employee owners that aren’t necessarily in leadership positions. But they are owners nonetheless.”

If you’d to know more about employee ownership and how it could help your business, please get in touch with us here using the ‘expert support’ option.

RESET AND REBUILD VIDEO

As part of our Reset and Rebuild campaign, we have created a video featuring a wide range of experts on inclusive business models, including Darah Zahran, Sarah Deas, Jaye Martin and Carole Leslie, as well as the businesses themselves such as The Community Carrot, Merlin ERD and the John Lewis Partnership, discussing why they think the models can help rebuild the economy post-Covid-19 and help create a stronger, fairer and more democratic economy.

You can watch the video below.

 

Read more about these inclusive models here and find out about the support available if you’re considering your options: https://bit.ly/3jJVMuf

Employee Ownership Explained – Making Employee Ownership Work

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The final webinar in the Employee Ownership Explained series took place on Wednesday 18 November. This month, the focus was on ‘Making Employee Ownership Work’. Having worked in the employee ownership sector for 16 years and supported over 60 companies move into an employee ownership structure, Carole Leslie of Ownership Associates, talked through the process of moving to an employee-owned structure, and how to achieve the best outcome for the sellers, the employees and the business.

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Employee Ownership Explained – The Role of the Legal Adviser in the EOT Transaction

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The latest webinar in the Employee Ownership Explained series took place on Wednesday 21 September. This month, the focus was on the role of the legal adviser in employee ownership transactions. Having worked on a number of these transactions himself, Bruce Farquhar of Anderson Strathern gave an insightful overview of the process from a legal adviser’s perspective.

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