Employee ownership ‘makes for better business’

Graeme Nuttall smlGraeme Nuttall OBE is a partner at law firm Fieldfisher and author of the Nuttall Review of Employee Ownership.

Here, Graeme delves into new research which highlights the numerous benefits employee ownership can help to deliver for companies.

Research has shown conclusively that employee-owned companies outperform conventionally structured firms on a range of metrics including productivity, sustainability, innovation, customer satisfaction and employee wellbeing.

My report for the UK Government “Sharing Success; the Nuttall review of employee ownership” examined the barriers to employee ownership, and how these could be overcome. The new tax reliefs that came into force in 2014 were a result of this. Awareness of employee ownership is higher than ever before, and the business benefits are recognised.

There is no doubt there is something about employee ownership that makes a difference and I was keen to look more closely at why it works. The Chartered Management Institute (CMI) has been undertaking research into the nature of leadership and employee engagement using the MoralDNA diagnostic tool that measures thinking preferences when making moral decisions.

I was delighted to collaborate with the CMI and the report’s authors, Professor Roger Steare, Pavlos Stampoulidis and Peter Neville Lewis, in examining how employee-owned companies compare to other business models.

This is the first piece of research to look exclusively at employee trust owned companies; the predominant model of employee ownership in the UK. Sponsored by Fieldfisher and the eaga Trust, the report, “The MoralDNA of employee owned companies”, gathered evidence from more than a thousand employees across 15 employee-owned (EO) firms.

The results were compared with those from employees from other sectors, and with the sample of managers used in other CMI research. We found that employee ownership has a positive impact on business ethics, and there is an established link between higher ethical scores and better business performance.

Some of the results are quite extraordinary.  90% of employee owners report that they experience high-performing visionary, democratic and coaching leadership styles. Only 58% of employees in the control sample said this, with 42% of this control sample saying they experience poor-performing, command and control leadership styles.  The working environment is more collaborative and collegiate in employee-owned companies compared with the coercive and demanding styles of other forms of ownership.

The values in employee-owned organisations are seen to be stronger than in other businesses.  People working in employee-owned companies demonstrated significantly higher scores in the values of fairness, trust, excellence, humility and courage. 95% of respondents said employee ownership enhanced commitment to the company, and 91% said it contributed to performance. 87% believed the company’s ownership model was an attraction for new staff. The report contains 15 case studies from employee-owned companies with inspiring stories of how their employee ownership impacts on their ways of working.

This is remarkable research that gives a fascinating insight into why companies owned by their employees are better businesses in every sense of the word. The report provides a broader message about the importance of inclusive leadership, and the importance of ethics in business. It reinforces the strong case for more employee ownership and sends out a call to business owners to consider giving their employees a stake in the company in which they work.

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