Tag Archives: business models

Learn more at our FREE event

We’re running a series of FREE events this Autumn on employee ownership for interested businesses.  Please find below details for our forthcoming event.

To book your place at any of our events, register online at www.scottish-enterprise.com/cds-events or call 0300 013 3385.

Sharing ownership: the employee stake

Date:                5 October 2016

Time:                9:30am to 1pm

Duration:          3 hours

Admission fee: Free

Venue:             Apex Waterloo Place Hotel, 23-27 Waterloo Place, Edinburgh EH1 3BH

Eligibility:         Open to all Scottish businesses and professional advisers with an                                   interest in employee ownership.

This event explores how to assess and improve employee engagement, and how shares can be used to reinforce and reward employee commitment and contribution.

Engaged employees make for a happier, more productive workforce.  Evidence demonstrates that company performance improves when employees have a stake in the firm.  Our workshop has been designed to help you improve employee engagement in your company.

Dean Hunter of Hunter Adams and Rodger Cairns of Shepherd & Wedderburn will lead a session on how to create the right scheme for your company and the pitfalls and success factors to consider.

What’s covered?

  • Ways to assess and improve employee engagement
  • How shares can be used to reinforce and reward your employees efforts

Speakers

Lirrie Craig, a member of Scottish Enterprise’s workplace innovation team, will explain the factors that enhance employee engagement within companies.

Dean Hunter, founder and managing director of Hunter Adams, will talk through why he divested 30% of his shareholding into the hands of employees.

Dean Hunter, founder and managing director of Hunter Adams

Dean Hunter, founder and managing director of Hunter Adams

 

Rodger Cairns, Scotland’s leading expert on share schemes, will explain the variety of options available and how to decide which scheme fits for you. Rodger will also talk about the importance of effective communication to the workforce when launching any kind of share plan.

Agenda

9.30am Registration and coffee
10am Welcome
10.15am Achieving employee engagement – Lirrie Craig, Scottish Enterprise
10.35am Giving employees a stake in the business – Dean Hunter, Hunter Adams
10.55am Shares as an engagement tool – Rodger Cairns, Shepherd & Wedderburn
11.30am Q&A
12pm Networking lunch
1pm Close

Register for this event

 

Engaging employees through innovative approaches to governance

11/12/15 - 15112301 - SCOTTISH ENTERPRISEGLASGOWSarah Deas

Scottish Enterprise director Sarah Deas discusses how boosting employee engagement can help drive business success.

When a business changes ownership, major changes can sometimes be expected.  The new owners may want to do things differently and fresh insight combined with new ambitions and goals can lead to significant restructure within a company. This can present a great opportunity to assess how well the company functions and drive changes that can lead to a more effective and efficient operation.

A good example of this is market-leading search and selection firm, Saxton Bampfylde, which undertook a radical shift when it switched to an employee ownership model. We spoke to Peta Hay, the managing director for Scotland, about the company’s experiences since.

“The traditional ways of making decisions and exercising authority didn’t fit with who we are as a business.  Now we’re owned by our employees, everyone has a right and an interest in how the business is governed and led. That had to be reflected in our governance framework.”

Peta Hay

Peta Hay, managing director for Saxton Bampfylde in Scotland

The company’s shares are held in an Employee Ownership Trust; a shareholding vehicle designed specifically for employee-owned firms.  The employees are effectively the beneficiaries of that trust and the trust becomes the major shareholder in the business.  This Trust is controlled by Trustees, and three of these Trustees are elected by the employees.  The company’s Board appoints the rest of the Trustees.

Another business that has embraced employee ownership is award-winning architecture practice Page\Park, which transitioned from a traditional partnership model to an employee ownership one in 2014. Since then, the company has recruited twelve new staff. We spoke to Karen Pickering, chair of Page\Park’s Board of Directors, for some insight into how the model has rejuvenated the business.

FREE FIRST USE Lenny Warren / Warren Media 07860 830050  01355 229700 lenny@warrenmedia.co.uk www.warrenmedia.co.uk All images © Warren Media 2016. Free first use only for editorial in connection with the commissioning client's press-released story. All other rights are reserved. Use in any other context is expressly prohibited without prior permission.

Scottish Enterprise director Sarah Deas (centre) with Andrew Bateman, managing director, and Karen Pickering, chair of the board of directors, at Page\Park

“Sustainability is a key feature of our architecture and that sustainability is what we wanted to replicate in our business model.  I believe we have. Our model has allowed our people to exercise their creativity and we are seeing greater innovation that is being driven by the team as a whole rather than coming from the top down.  Our employees are real owners and that brings with it greater engagement, productivity and energy.”

It is clear that there is no universal solution when it comes to good governance, and the key lies in implementing what works best for the specific needs of an individual business. However, something that all businesses should get on board with is the practice of periodically reviewing the company’s structure to ensure that the existing model is the most beneficial to the business and its employees.

Getting this right is integral to enhancing engagement among employees and harnessing their collective talents, a strong foundation from which a business can build lasting success.

If you would like more information on how you can improve employee engagement within your organisation, Scottish Enterprise will be running the below free events. To book your place, register here or call 0300 013 3385. Alternatively, give us a call and we can arrange a chat with one of our expert advisors.

SE Events table 2

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Why working for an employee-owned company makes a real difference

sAt Aquascot’s ‘Successful Succession’ event on Employee Ownership Day, training assistant Sylwia Goluda described her experiences at the Alness-based company.

Her presentation provided real insight into an employee’s journey towards employee ownership and here she provides us with a summary of the talk that so many enjoyed on the day.

I arrived in Scotland from Poland in July 2006. It was a scary prospect coming to a strange country, having left behind my family, friends and job. Thankfully, everyone was so nice and friendly which made everything so much easier.

I came to work at Aquascot and immediately noticed a difference from how companies work in Poland. What struck me most was the attitude of the managers – they were open and helpful and told us how much they appreciated our hard work. They care for employees and this makes Aquascot a great place to work.

In 2008, the three directors announced at our annual conference that the company was moving to employee ownership. It was an exciting time and we all felt we were part of something bigger and better. A Partnership Council was formed and I was delighted to be elected to this with nine of my colleagues.

We meet on a monthly basis to discuss employee views and to propose ideas and suggestions for our business to grow and be successful. We have been involved in lots of projects including organising social events, charity initiatives, conferences and celebrations, such as the company’s 25th birthday party.

We are almost at the end of our journey to become 100 per cent employee-owned. You can tell that everybody is waiting for that milestone with great excitement. Personally, I can’t wait to see what’s going to happen and how it can lead to even more success.

I feel very proud to work here and I’m glad I have the opportunity to grow and be recognised and appreciated for going that extra mile. I believe that Aquascot’s future is very bright – not simply because we are employee-owned but because we have a great team of people who will make success happen.

Employee ownership – the key to a stronger Highland economy?

AquaScot Dennis Overton 94Earlier this month, Alness-based sustainable seafood company Aquascot opened its doors to the local business community for a ‘Successful Succession’ event jointly hosted with Co-operative Development Scotland.

Here, Aquascot chairman Dennis Overton reflects on the day and the company’s experience of employee ownership.

With 185 employees operating from two sites in the town, Aquascot is currently 85 per cent employee-owned and is set to complete the transition to 100 per cent employee ownership by 2017. As an enterprise, we have a 12 per cent share of the UK’s ‘ready to cook’ salmon market.

On 3 July – Employee Ownership Day – we welcomed employee owners, local business people and local MSP, Rob Gibson to our premises. We focused on how employee ownership has been a successful model for Aquascot, and how it can make a significant contribution to economic growth.

I believe the UK economy would be in a much healthier position if there were more employee-owned companies. At present, I feel we are overly focused on short-term gain to the detriment of long-term value creation.

Employee-owned firms are different. In ‘conventional’ businesses there is often disconnect between shareholders and the company they part own. This can be because shareholders have different, and often more immediate, objectives than the people inside the company who have its long-term success at heart.

In an employee-owned company, the employees control the shares. They are more likely to be concerned about the longevity of the business and know that innovation, productivity and profitability are key to achieving that. Indeed, as Aquascot partner Donald Beaton put it so articulately: “This isn’t just about creating good jobs for us, it’s about jobs being there for our children and their children.”

In the Highlands, succession is a concern. In a survey we conducted in 2005, we looked at what happens to non-family, first generation businesses when it comes to considering succession. The findings were not encouraging:

  • There were few independent businesses of any scale in the Highlands
  • The most common form of exit was a trade sale to a buyer out with the region
  • In the majority of cases , the acquired company no longer had a presence in the Highlands after five years

When our founders came to consider Aquascot’s future, they knew that the final decision had to consider the contribution made by its employees. We have exceptional staff and they have made the company the success it is today.

By selling to employees, our founders have enabled this success to continue, and Aquascot will remain in Alness providing jobs and opportunities for years to come.

Friday’s event encouraged several businesses to explore employee ownership more closely, and with Aquascot as an example, this can only be good news for the local economy and the people of the Highlands.

Five points from Italy’s co-operative capital

Jaye Martin 03CDS specialist advisor Jaye Martin recently took part in a study trip to Emilia Romagna, the area of northern Italy with probably the richest co-operative history in the world.

Here, she reflects on the visit and looks at how Scotland can learn from the region.

The tour I was lucky enough to be part of was a collaboration between the University of Bologna and Saint Mary’s University (SMU) in Halifax, Canada. I joined a group of students undertaking a part-time Master’s Degree in Co-operative Management at SMU, all of whom are managers at co-operatives across Canada and the United States. Their organisations include food co-ops, insurance co-ops, credit unions and co-op development and their experiences provided me with valuable insight.

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One of the Towers of Bologna

Our chief executive, Sarah Deas, wrote a series of comprehensive blogs on her own experiences in Emilia Romagna a couple of years ago. With that in mind, I thought I’d simply touch on my highlights reel – although I can assure you that it was an intense eight days packed with visits to co-operatives and lectures on co-operative theory and economics!

So here’s my five most interesting points of learning:

1. Co-operatives are one of the most important tools in the reduction of inequality  Bologna – the capital of the Emilia Romagna region – has a lower unemployment  rate than other Italian cities. Emilia Romagna itself ranks first in Italy in terms of equality, evidenced by high average income and low income inequality.  Female participation in the workplace is significantly higher in Emilia Romagna (c65%) than in the rest of Italy (c45%). All of this can be linked back to the presence of co-operatives in the area.

IMG_01532. Social co-operatives… the future?

Legislation was introduced in Italy to create the legal and tax structure for the ‘social co-operative’ (what we might call a ‘social firm’).  At least 30% of employees must be categorised as disadvantaged (e.g. those affected by drug or alcohol addiction, physical or mental disabilities).  We visited some wonderful examples, such as Cooperativo Il Cammino e L’altro Giardino (‘The Alternative Garden’), a residence and gardens where herbs, fruit and vegetables are grown and used to make products such as jams and syrups.  Social co-operatives were oft-mentioned as the potential future growth area of the sector, but funding and support is increasingly hard to come by – so much will depend on the economic sustainability of projects and how they diversify and adapt to achieve this.

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Caseificio 4 Madonne

3. Caseificio 4 Madonne and the mix of the traditional and the innovative

My favourite visit – and not just because we got to taste all the lovely Parmigiano Reggiano cheese! Caseificio 4 Madonne is one of 350 Parmigiano Reggiano co-operatives in the region and together they form a huge consortium.  Caseificio 4 has 65-70 member farmers and produces 104 wheels of cheese each day.  We were shown the various stages of production and I was struck by the clever merging of traditional methods (e.g. use of muslin cloths and copper cauldrons) and innovative methods without the loss of the integrity and provenance of the product.  Perhaps something for Scottish food and drink companies to consider?

4. Co-operative funds – replicable here?

Co-operatives in Italy must pay 3% of their annual profits into one of three funds (each controlled by one of the three co-operative associations).  We visited Coopfond, the largest of the funds at 422m EUR and controlled by Legacoop.  The fund is used for the promotion of start-up co-operatives, growth capital for expansion and support for co-operatives in financial distress.  They will also help fund worker buyouts such as Greslab.  Given the issues around access to finance for employee-owned businesses and co-operatives in the UK, could a similar initiative be a potential game-changer?

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Our group outside University of Bologna

5. The importance of international connections

This study trip was important not just for the opportunity to see and hear about the strength of co-operative models in the region, but also to meet and discuss with fellow co-operators from Italy, Canada, USA and England.  Everyone in the group had a different interest or angle to their observations and questions and, for me, that was just as fascinating as the visits and lectures themselves. What is clear is that we should seek to build on these experiences, relationships and learning as far as possible as we continue to support company growth in Scotland using co-operative business models.

United States of Employee Ownership

Glen DottCDS specialist adviser Glen Dott has recently returned to Scotland after a fact-finding trip to the United States to learn about how employee ownership works there.

Here, he explores the differences in the systems across the Atlantic Ocean and why the American model of employee ownership has become so popular.

I have recently returned from the National Centre for Employee Ownership (NCEO) Conference held in Denver, Colorado. The NCEO is a membership body similar to the Employee Ownership Association in the UK. Both the United States and the conference were eye openers to me, having not seen either before.

Employee Ownership (EO) is big business in the USA. More than 11,300 firms exist there that use the Employee Stock Ownership Plan (ESOP). An ESOP is effectively an employee ownership trust which allows staff participation in corporate ownership and a share in the wealth these firms produce.

As in the UK, the company funds the purchase of shares from exiting owners, with the shares moving into the ESOP. Typically employees do not buy shares but are allocated a portion; in the UK a combination of both is common.

Purpose – retirement planning versus employee engagement

ESOPs were originally designed to provide for employee retirement. Companies would set aside stock to be given to employees when they decided it was time to collect their pension. This is still the case today. Countless US studies conclude share ownership combined with worker empowerment initiatives produce better financial results, but favourable tax treatment is a significant driver for ESOPs in the US.

Legislation driven

Even conferences in the USA are a little different.

Even conferences in the USA are a little different.

In the US, companies that adhere to a certain tax code and are 100 per cent owned by an ESOP pay no tax. Earnings are passed on to the shareholders (employees) within the corporation and these earnings are only taxed when liquidating the shares – at retirement or upon leaving the company.

Since ESOPs are the only retirement plans allowed by law to borrow money, they are attractive to owners, managers and advisers, as they can be used to raise finance. There is also considerable legislation in place to ensure ESOPs have independent trustees. ESOP valuations are independently verifiable and trustees are truly acting in the employees’ best interests. As you might imagine America’s famed legal system comes fully into play, with the Department of Labor challenging some valuations on behalf of employees.

Governance

From a UK EO perspective, employees in US EO firms do not seem to have great formal influence. This system appears to lack the ‘checks and balances’ we have, where the operating board is overseen by trustees.  There are no employee-elected directors and no employee-elected trustees. Furthermore, the trustees are appointed by the board.

There is however a certain logic to this. Trustees are legally obliged to work in the best interests of employees and are able to remove the company’s board, although in practice this rarely happens. The two interdependent governance structures are required to ‘work things out’ in the best interest of all.

While the systems across the pond differ, there is no doubt the American ESOP structure allows employees to fully share in the fruits of their labour – and provides interesting food for thought when considering how UK businesses approach employee ownership.

What do Co-operatives mean to you?

What words spring to mind when you think of co-operatives? Do you think of a specific business model or company? Perhaps you think of the business benefits? Maybe you reflect on your own experience?

We asked our team for their suggestions and compiled the answers into this word cloud – which we think is a terrific summary.CDS word cloud

What would you add to the list?

 

Employee ownership on agenda for professional advisers

Graeme Nuttall smlA recent CDS seminar saw professional advisers gather in Glasgow to hear from Graeme Nuttall OBE, author of the Nuttall Review of Employee Ownership.

Here, Graeme – partner of Fieldfisher – discusses the growing enthusiasm for the model, the important role played by CDS, new tax reliefs and Scotland’s success stories.

I was delighted to be invited to speak to an audience of professional advisers in Glasgow and was hugely impressed at the level of interest and enthusiasm that exists for employee-owned business structures.

There can be no doubt – the case for employee ownership has been made. A few years ago, a company owner looking to explore employee ownership would likely have been dissuaded from this path by their adviser. Now, advisers are much more likely to present employee ownership as a feasible succession option for their clients.

Co-operative Development Scotland (CDS), under the leadership of Sarah Deas, must take some credit for this achievement. CDS has been instrumental in building the employee ownership community in Scotland, and engaging with professional advisers to help them recognise the role these individuals and firms play in the development of employee ownership.

Advisers will know about the tax advantaged share plans designed to increase individual share ownership amongst a firm’s employees. These have been around for almost 40 years. In the Nuttall Review, I wanted to give greater priority to the trust model of employee ownership.

This is a simple model and gives employees a collective ownership of the company. I was delighted that as a result of the findings of the Nuttall Review a new tax regime for “employee-ownership trusts” (EOTs) was introduced last year. Briefly, there are two main new tax exemptions:

  • From 6 April 2014 there is an exemption from Capital Gains Tax (CGT) on gains on certain disposals of shares in a trading company (or in a holding company of a trading group) that provides an EOT with a controlling interest in that company; and
  • From 1 October 2014 there is an exemption from Income Tax (but not National Insurance contributions) of £3,600 per employee per tax year for certain bonus payments made to all employees of a company or group where an EOT has a controlling interest.

The CGT exemption has attracted attention to employee buy outs as a succession solution. Instead of a sale of shares being taxed typically, for owner managers, at an effective rate of 10% after entrepreneurs’ relief, there is an unlimited exemption from CGT.

The Income Tax exemption means there can also be a tax benefit for staff in this business model. In most cases dividends otherwise payable to the EOT as a majority shareholder are waived by its trustee and are paid out instead as bonuses to all staff – tax free up to £3,600 per employee per tax year.

This is a key concept – instead of external shareholders receiving dividends and staff bonuses being paid simply at the discretion of a board of directors, the EOT model provides staff with an economic stake.

However, tax should not be the driver of employee ownership. It is important that attention is paid to the business case. Scotland has more than its fair share of success stories.

Page\Park Architects, recently appointed to restore the world-renowned Glasgow School of Art Mackintosh Building, is a superb example of a trust owned model of ownership. Stewart Buchanan Gauges, a business where 85% of the workforce live within a five mile radius, represents the hybrid model of trust and direct employee share ownership. There are many more, and increasing all the time.

It’s always rewarding working through a transaction to completion. With an employee ownership transition, there is an additional bonus in that the relationship extends beyond the deal. The average life of a Standard & Poor’s listed company was apparently 60 years in 1958, around 30 years in the 1970s and was down to 15 years by 2014. Obviously businesses have to evolve and markets change but I like the idea that companies I help convert to employee ownership many years ago are still in existence in contrast to their competitors.

It was a real pleasure visiting Glasgow, especially speaking to so many advisers already convinced of the benefits of employee ownership. We do need more champions, and with advisers onside I trust we’ll see even more employee buyouts in Scotland over the next few years.

To read the speech Graeme gave during his presentation at Ernst & Young Glasgow, click here.

Avarix – a model approach?

Gavin Tosh1Inspired by a “Hackathon”, a novel consortium made up of IT students and business consultants is helping build fledgling careers and establish reputations across the world.

Linked to the University of Strathclyde, Avarix has already worked with some of the world’s largest companies. Here, Gavin Tosh of Clerwood Legal Services looks at how they’ve achieved that success.

Avarix is a consortium comprising computer science students at the University of Strathclyde and business consultants with their own companies who work part time for the university’s Enterprise Hub.

The initial idea for Avarix came from a cross-university “Hackathon”, where several universities collaborated to tackle a real-life technical challenge for an external organisation using video conferencing.

The success of this collaboration prompted an approach to Co-operative Development Scotland to form a formal consortium. With the help expert advisers – myself and Gill Joy of Intend Business Development – the consortium successfully formed and was incorporated on 31st January 2015.

This model helps Avarix capitalise on the significant technical talent amongst the computer science students by allying them with external business expertise in one commercial entity.

avarix logoWhile work for external customers was being undertaken by individuals already, including for big name companies such as JP Morgan, Barclays, VISA, Amazon, SkyScanner and the Mozilla Foundation, the experts did not have the capacity to handle multiple requests or more complex jobs. Being part of the consortium removes this constraint and offers greater capacity for work.

The consortium has already delivered several benefits for members. In the first three months of trading alone, Avarix secured orders worth over £150k.

Bringing together the varying skills of members means Avarix can pursue wider business opportunities and bid for different kinds of work. To help cope with peaks in demand and grow the customer base, the core group wanted to be able to formally involve other students in the business.

The consortium co-operative provided a flexible membership structure, allowing students to both carry out work and potentially join the consortium as associate or full members.

Inevitably some student members will need to leave for various reasons, such as gaining full-time employment out-with Scotland. The consortium cooperative makes this process easy, unlike say a company limited by shares.

Having access to funding and reduced operating costs provides a stable financial base and student members benefit from good business experience. Combining resources means members have a greater overall marketing budget, which has helped attract new business.

The external consultants will share in the commercial success of the team but can still manage and grow their own businesses independently.

With early signs of success, more clients in the pipeline and students keen to be a part of Avarix,

could this be a model which can be replicated in other Scottish universities and colleges in sectors other than IT/computer science?

Employee ownership could be the best thing for your business

SCTRecently, Alan Spence, a founder of hydrocarbon accounting firm Accord Energy Solutions, told us why he was eager to share his thoughts on employee ownership (EO) when he spoke at the National Economic Forum in Dundee last month.

Here, in the second of his two-part feature, Alan discusses how employee ownership and investing in staff has helped his company succeed.

As a company, Accord’s goals are very simple; we want to be a successful business with a long-term future. To achieve this we need to provide our clients with a quality service at a competitive price and we rely on all of our people to ensure this happens.

We pay competitive salaries and provide a good benefits package but we recognise that these things alone won’t necessarily allow us to attract, retain and develop the best people. There has to be something more.

For us, it all starts with knowledge and understanding. Every month we get together for a staff meeting. We meet in the office or join in by conferencing and desk-top sharing. We examine and discuss every aspect of the business.

From admin and IT, through to the monthly management accounts and new business opportunities, we take time to cover it all. I think it’s fair to say that every employee knows enough about the business to understand how we’re performing and why the management team makes the decisions it does.

We also believe our staff should have significant control over their own personal development. Each individual has their own annual training budget (currently £1,800) they can spend on whatever training they feel they need.

For some, the training can be job specific – developing a deeper understanding of a familiar concept or learning about a new technique or process. Others may want to know more about business processes; accounting and finance or benefits and taxation. Not only does this help the employee grow and develop it also benefits the business by increasing our overall capability in so many different ways.

As a company with aspirations for a long-term future and a strong presence in the local community, we believe it’s important to contribute to the community. We do this in two different ways; by sponsoring local sports organisations – such as Garioch Sports Trust, Curl Aberdeen, Aberdeenshire Cricket Club and Ride the North – and by supporting local and national charities that are nominated by employees.

Beyond this, we think it’s important that employees play a major part in the key decisions. Recently our employees determined how bonuses should be paid and they are now in the process of deciding how we develop the company so it meets their current and future aspirations.

We will all be meeting in Aberdeen next month to work through this process together. Our plan is to shape our company in a way that benefits all of us and stands the business in good stead both now and in the future.

Any or all of these things and many more can be done by any company – you don’t have to be employee owned – and will result in improvements across the board. I say this based on my experience in both small local and large multi-national companies, and after hearing first-hand the experience of people like John Reid at Michelin Dundee.

However, when you’re ready to take things beyond this to the next level you may want to consider employee ownership, it could be the best thing you do for your business.