Tag: business (Page 2 of 3)

Benefits of employee ownership are clear

ICAS members and their clients gathered in Inverness last month to hear about employee ownership as an exit solution. 

Here, ICAS member Peter Mitchell reflects on the day and looks at how the ownership model can benefit businesses in the Highlands.

As advisers we are careful not to direct our client towards any particular ownership model. It’s our job to provide them with sufficient, comprehensive information to enable them to make an informed choice.

One of my clients is employee-owned and I’m convinced of the benefits. It’s a model with particular relevance to the Highlands – independent, owner-managed and family businesses are a significant part of our economy.

Exit to a trade buyer from elsewhere places a threat on the future of the business in the local area. We need to sustain opportunities for our young people and retain quality jobs in the community.

ICAS logoCarole Leslie, a Co-operative Development Scotland (CDS) specialist adviser, reinforced the economic benefits of employee ownership in her presentation. Most of those present did not know how widespread employee ownership is; I didn’t know that the architects of the Eden Court Theatre were 100 per cent employee owned, or that the project managers of the Skye Bridge, Arup, have been employee-owned since 1974.

Chris Kerr, from Harper Macleod, is a leading authority on employee ownership and he talked the audience through the technical aspects of the model and the transition process. He stressed the importance of involving employees in the transaction as this helps shape a better outcome and wins greater engagement going forward.

The highlight of the session was the story of Aquascot, delivered so eloquently by ICAS member Robert Murray, a company founder and its finance director. Aquascot employs 150 people in Alness and has a turnover of £40m. The founders could have sold the business – and had some lucrative offers – but their commitment to Easter Ross and to an ethical way of doing business convinced them to look at other options.

Their main customer is Waitrose, and their employee ownership model fit what the founders were looking for. With some guidance from Waitrose, John Lewis Partnership and John Housego of employee owned WL Gore, the sustainable seafood company is looking to become fully employee-owned by 2016.

Chris Kerr summed it up well: “Employee ownership won’t fit with every business, but where it does, the results can be remarkable.”  It was encouraging to see so much interest in the model. CDS is doing a great job in raising awareness and I expect that a few more advisers and their clients will start to come forward.

A golden visit – part three

???????????????????????????????From October 6 to 9, Quebec in Canada hosted the second edition of the International Summit of Cooperatives, with the main theme being the power of innovation.

Here, CDS chief executive Sarah Deas discusses a US organisation driving employee ownership and takes a trip to a co-operative shopping quarter.

The first part of the blog can be read here and the second part can be read here.

An ESOP (Employee Share Ownership Plan) is another form of employee ownership that is becoming more widely adopted. So, I was delighted to meet Perry Phillips and Camille Jensen (pictured above), from the specialist consultancy, ESOP Builders.

They highlighted that there are now approximately 1000 Canadian ESOPs, the majority (80%) having come about as a succession solution. Most famous is WestJet Airline, where 80% of staff are employee owners (modelled on Southwest Airlines).

Sarah with Roy Messing

Sarah with Roy Messing

I was also delighted to meet Roy Messing, Chris Cooper and Bill McIntyre of the Ohio Employee Ownership Center. Established in 1987, the centre has helped 694 companies consider ownership succession, resulting in 92 employee buyouts and creating 15,000 employee owners. In America there is legislation to support the creation of ESOPs – see my previous blog.

The Center was the driving force behind Evergreen Cooperative – the innovative model of socio-economic development in Cleveland. Whilst there are similarities in our approach, there is clearly much that Scotland can learn from OEOC’s 27 years’ experience. Interestingly, they are currently establishing a Cooperative Development Center – an area where we can share our experience.

???????????????????????????????A visit to Quebec is not complete without a visit to the Quartier Petit Champlain. This delightful shopping quarter in the old city is a co-operative owned by its tenants. 50 artists and traders formed a co-operative to buy the properties. Desjardins, the leading financial co-operative, supported members with loan finance.

A co-operative model was chosen for practical reasons – an ideal model that allows shared management of the buildings and promotion of the quarter to tourists. An elected board has oversight, including approval of new tenants/owners and all members are invited to attend an annual assembly.

So, how do I summarise this visit? A golden experience – not just the leaves on trees, the abundance of pumpkins and the warm hospitality but also in the richness of learning. Thanks to everyone that was so open in sharing your story. Let’s stay in touch!

A golden visit – part two

image7From October 6 to 9, Quebec in Canada hosted the second edition of the International Summit of Cooperatives, with the main theme being the power of innovation.

Here, CDS chief executive Sarah Deas looks at the approaches taken by co-operatives in Argentina, Spain and France.

The first part of the blog can be read here.

We heard from the Argentinian Federation of Worker Co-operatives in Technology, Innovation and Knowledge that there has been a boom in worker co-operatives. In 1990 there were just 30, now there are 10,000. Social co-operatives account for the largest proportion, followed by young professionals (mostly in technology, communications and consulting services).

The growth is due to public policy; government contracts have advantaged social and construction sector co-operatives. A percentage of co-operatives’ tax also goes into a fund to support co-operative development.

mondragonWe also heard the Mondragon Corporation story – a federation of worker co-operatives based in the Basque region of Spain. It is the tenth largest Spanish company, employing 74,000 people in 257 companies and organisations spanning finance, industry, retail and knowledge. Mikel Lezamiz described the ‘four-legged support stool’ that supports growth: education, finance, social assistance and innovation. A virtuous circle.

France’s worker co-operative membership association, Les Scop, described how they are promoting the model as a solution to ownership succession. From a negligible number 10 years ago, a growing proportion (currently 15%) of their 2,200 members have chosen the worker co-operative model for succession reasons.

lesscopThis percentage is expected to double in coming years. I was interested to see Les Scop’s TV advert, which forms part of a campaign targeting 55+ year old owners – perhaps an approach that we might pursue in Scotland? Les Scop has also introduced training, on the back of the new law in France that requires all companies to provide training to employees.

image2For anyone interested in worker co-operatives a visit to La Barberie microbrewery is a must! On arriving, I was delighted to see Scotch Ale at the top of the menu – although on this visit Pumpkin Beer was the order of the day.

Established in 1997, this worker co-operative has 25 employees, of which 15 are members. It is one of four microbreweries co-operatives in Quebec province that worked together to produce the ‘Rochdale Beer’ which was launched at the Summit. Thanks to Jessica Provencher for hosting our visit.

Read part three of Sarah Deas’ account of her visit to Quebec.

A golden visit – part one

Sarah Deas resizedFrom October 6 to 9, Quebec in Canada hosted the second edition of the International Summit of Cooperatives, with the main theme being the power of innovation.

Here, in the first of three blogs, CDS chief executive Sarah Deas looks back at her trip to North America and reveals some of her key learnings.

October is a wonderful time to visit Quebec … maple trees adorned with golden leaves and pumpkins piled high awaiting Thanksgiving celebrations.

So, I was delighted when I was invited to facilitate a forum at the global International Summit of Cooperatives. This was a huge event attracting over 3,000 delegates from 93 nations. Keynote speakers included Nobel Prize economist Professor Robert Shiller and author of The Spirit Level, Richard Wilkinson.

Autumn in Quebec

Autumn in Quebec

Throughout the summit, speakers acknowledged the contemporary nature of co-operative models; identifying their relevance and potential for the future. Balanced against this, there was a strong call for promotion of the social values that make the models unique.

As one speaker said “Co-operatives have the DNA – the humanist values – you need to promote these since conventional businesses are now doing so and capturing your ground”.

Canada has a strong co-operative sector. The Canadian Parliament’s ‘Special Committee on Cooperatives’ reported that there are 8,500 co-operatives employing 15,000 people with assets of $330bn.

Quebec accounts for almost 40% of Canadian co-operatives and 50% of associated jobs. The provincial government aims to expand their economic contribution by enhancing the legal framework, availability of finance, advisory services and promotion.

quebec

I attended a really interesting workshop organised by Reseau and the Canadian Worker Co-operative Federation, in collaboration with CICOPA. Prominent themes included the difficultly young professionals face in finding work and the increasing number that are deciding to set up their own shared venture (co-operative). Also, recognition that owners are getting older and succession is becoming an issue.

I was pleasantly surprised to find that so many countries are taking a similar approach to Scotland in promoting employee/worker ownership as a solution. A big thank you to Hazel Corcoran for making me so welcome (and helping with translation!)

POSTSCRIPT: So sad that within a fortnight of my visit the openness and hospitality of the Canadians had been assaulted by violence in Montreal and Ottawa. My thoughts are with all those affected. 

Read part two and three of Sarah Deas’ account of her visit to Quebec

 

Collaboration Prize continues to make a difference to winner

Joanna Dewar Gibb, right, with SFS member Amanda Millen

Joanna Dewar Gibb, right, with SFS member Amanda Millen

Screen Facilities Scotland (SFS) is one of the earliest winners of the Collaboration Prize, having formed in 2012 to enter during the inaugural year of the competition.

In the two years since winning the award the consortium, made up of Scottish-based film, television and commercials facilities, has flourished.

Here, Joanna Dewar Gibb, one of the directors of SFS, describes why winning the prize was so important to its development.

We were delighted to be one of three winners of the Collaboration Prize in 2012 and we continue to reap the rewards from that. Since we’ve formed as a consortium, we’ve gone from strength to strength and benefit in many different ways.

The seeds of our co-operative were well and truly planted before we spotted the opportunity to be considered for the prize, but when we did we were pleased to see the entry process was both manageable and straight forward. Our entry was completed and submitted with the minimum of fuss.

And that’s been the case the whole way through.  From being short-listed, to eventually winning and then formally establishing SFS, the whole process has been possible thanks to clear guidance, simple structures and succinct documentation provided by Co-operative Development Scotland.

???????????????????????

We have used the prize money in different ways. It gave us a cash boost while waiting for membership fees to come in during our first year, with the money spent across various activities including collaborative marketing materials our launch networking event and administration costs.

Each of our members has since benefitted from shared marketing and promotional activities, new networking opportunities, better engagement and participation across the creative industry sector and closer working with colleagues and clients, both new and old, all of which helps us work towards a stronger, busier future.

It is no exaggeration to say SFS would not be where it is today if the collaborative consortium business model did not exist and if the Collaboration Prize, comprising of valuable business advice and welcome cash, had not helped us to flourish.

Until we had formed, many lucrative contracts including those originating in Scotland, were won by businesses based elsewhere, particularly in the south-east of the UK, so hopefully SFS has made a difference not just to our own businesses, but to the whole Scottish film, television and commercials production sector.

Highland Home Carers benefits from employee ownership

Stephen Pennington   Highland Home Carers held a conference last week to mark their 20th anniversary and their 10th year of employee ownership.

It was a fantastic event, attracting a TV personality, a Cabinet Minister, an MSP, the NHS Director for Adult Social Care as well as a wealth of key figures from the sector.  Here, HR administrator Laura Dobinson describes the day.

This is the most high-profile event we have run and we were all a bit nervous as to how it would work out. I’m delighted to say that everything just slotted into place.

Nick Boyle, the founder of Highland Home Carers (HHC), launched the event with an inspiring speech explaining why he sold the business to the employees.

HHC was set up to deliver the highest possible standards of care, enabling people in the Highlands to remain in their homes, in their local communities, for as long as possible. By moving the business to employee ownership, HHC’s unique ethos is secure and we can focus on quality of care.

Managing Director Stephen Pennington (pictured above) outlined how HHC is trailblazing the way adult social care is delivered in the UK. There is talk from Westminster of an integrated service with councils and the NHS collaborating rather than working in silos – this is already the case in the Highlands. Stephen explained how the employee-owned model provides a platform for HHC to build a stable and strong company.

Attendees could choose from a number of workshops to attend which covered a wide range of topics – money management, wellbeing, wills and trusts, personalisation of care, social exclusion.

Danny Alexander

Chief Secretary to the Treasury, and local MP, Rt Hon Danny Alexander, joined us for lunch and chatted to carers, service users and guests. In his keynote speech, Danny recalled opening HHC’s Stadium Road office in 2006, and was delighted to follow the progress of the company.

He said it was employee-owned companies like HHC which motivated him to introduce the recent legislation offering tax breaks to encourage more employee ownership of businesses. He told the audience that HHC is one of the best examples of employee ownership in the UK – a superb accolade!

The event concluded with a lively panel session. Aggie Mackenzie, from TV’s How Clean is Your House and Storage Hoarders talked about how she couldn’t get anywhere when organising care for her mother until she contacted HHC. She was full of praise for the service and said she knew their business model was different; this conference helped her understand why.

Aggie MacKenzie

Feedback so far has been great, with some attendees asking us to make it an annual event. It was so good to get together with friends and supporters to talk about the issues surrounding care, and employee ownership. It was particularly encouraging to hear how highly regarded HHC is by our key stakeholders.

Care is a challenging sector to work in. As employee owners we are immensely proud of what we do. At HHC we know we are part of something special. Looking forward to the next 20 years – and beyond!

Myths busted at Co-operative Business Development Seminar

Jim_Maxwell,_Business_Development_Manager,_Co-operative_Development_Scotland_resizedCo-operative Development Scotland’s business development manager, Jim Maxwell, was a guest of Glasgow City Council on Wednesday, speaking at its second Co-operative Business Development Seminar.

Held at the Orkney Street Enterprise Centre, Jim was asked to talk about the use of consortia and the growth of employee ownership. Here, he gives his thoughts on the event.

Glasgow City Council’s commitment to co-operative working in the city was crystal clear on Wednesday when I was invited to speak to around 25 of the city’s business advisers about consortium working and employee ownership.

It was so encouraging to see the interest shown in both these models.  Glasgow’s front-line advisers clearly do feel these are concepts worth introducing to suitable client businesses.

This was a perceptive (and quite challenging!) audience with searching questions about the consortium model and how it provides a collaboration structure with the minimum of risk and bureaucracy.

Interest quickly focused on procurement and how the model is used by groupings of businesses to bid for larger contracts they couldn’t win individually. In fact joint-tendering is the most common use for the consortium model and much of the free support CDS provides is in setting up tendering consortia.

Consortium-based tendering also fits well with Glasgow City Council’s procurement policy and public procurement generally, which aims to achieve local community benefit wherever possible.

The annual CDS Collaboration Prize always produces a rush of interest from businesses interested in forming consortia. This year it launches on October 1 so watch our website for details.

With prizes of £10k up for grabs, my guess is we’ll be receiving a fair few enquiries via the Glasgow business advisers!

The discussion on Employee Ownership turned out to be rather a ‘myth-busting’ session with advisers raising the kind of questions they expect from their client companies, such as:

Q. What if the employees can’t afford to buy the business?

A. The business itself purchases the owner’s shares, not the employees

Q. What if the owner feels the business cannot be run successfully by committee?

A. Employee owned businesses are not run by committee, they have normal management structures.

Q. What if the owner isn’t ready to exit yet?

A. The exiting owner controls the whole process of transition, including the timeframe.  Most successful employee buy outs are planned well in advance.

the futureInterest also focused on the (considerable!) new tax benefits for owners when they pass a controlling interest to an employee trust and how company performance invariably benefits when employees have a meaningful stake via employee ownership.

The steps being taken by Glasgow City Council to ensure local businesses derive benefit from the “Co-operative Council” agenda are exemplary.

The strength of commitment is clear in the overwhelming response to the second stage of their co-operative support grant scheme and the recent announcement of a £1million budget to support business ownership transfer.

Practical steps like these are a real boost to co-operative working in Glasgow, and very much to be commended.

End of the holidays – and the beginning of a busy end to 2014

After a summer of sun and fun – and of course the Commonwealth Games – things are about to return to normal with the end of the school holidays.

Merchant City FestivalIt tends to be this time of the year that businesses across the country refocus their efforts on a strong end to the calendar year, perhaps even taking a fresh look at opportunities to expand revenue further.

We’ve seen many terrific examples this year of how organisations across the country have done this by working co-operatively.

During the Commonwealth Games, the Merchant City Marketing Co-operative helped promote the events linked to the Commonwealth Games – as well as the wider calendar of events and attractions throughout the year.

The Food from Argyll consortium was busy too, helping feed hungry festival-goers and showcasing their produce stalls at BBC at the Quay and the popular Belladrum Festival.

For each of the individual businesses involved in both organisations, such exposure and opportunity may not have been possible on their own.

By coming together, however, they have opened up new markets, boosted sales and increased awareness of their brands, both collectively and as individuals.

And as the nights start to draw in, now is the perfect time to start thinking about how working in such a way can boost your business.

Council’s ringing endorsement of co-operatives

GillianKirton-002The eyes of the world have been on Glasgow over the last week and a half as the city plays host to the Commonwealth Games.

Here, Gillian Kirton, Project Manager at Co-operative Development Scotland, looks at how the host city’s council is providing real support to co-operative businesses.

With almost 20 per cent of Scotland’s co-operatives residing in Glasgow, the ‘sector’ is thriving – these co-operatives employ almost 1400 individuals and account for £192m turnover per annum. Impressive numbers indeed.

To further enhance this, Glasgow City Council is one of just 21 Councils in the UK to commit to becoming a Co-operative Council and is certainly taking its commitment very seriously.

There’s real practical support available to companies and the council are putting their money where their mouth is – to date they have awarded 13 co-operatives a total of £210k to implement ‘transformational business development activities’.

people make glasgow

A further tranche of funding is now available with sums of between £2,500 and £25,000 available for eligible activity. And at a Glasgow Business Embassy event last week, it was announced that a pot of £3m will be available to support companies looking at business ownership transfer.

I’m confident we will see more companies following in the footsteps of Glasgow-based Page\Park and opting to transfer ownership to employees.

Co-operative Glasgow sees partnership working as key to successfully delivering their action plan and it was a pleasure to meet so many of those partners.

In collaboration with the Council, we delivered a seminar to many Business Gateway and other front line advisors. It gave them the opportunity to hear more about co-operatives, the impact they can make to the local economy, the many benefits of the model, and the support available to their clients.

Glasgow City Council logo

It’s fair to say that there was a lot of enthusiasm and excitement about the models – they see them as a perfect solution to meet the needs and growth aspirations of many of their clients.

CDS is delighted to continue to work in partnership with the Council, Business Gateway and other advisors to provide free advice and guidance to those businesses considering employee ownership and co-operative business models.

Our annual Collaboration Prize has seen some amazing success stories in Glasgow – Music Co-OPERAtive Scotland and Screen Facilities Scotland are going from strength to strength.

This year we will launch our Collaboration Prize on 1st October – up to three collaborative ideas will each gain a substantial £10k prize to get their idea off the ground. Will we see further success stories in Glasgow?  Watch this space!

Enjoy the Commonwealth Games – another exciting reason to celebrate all that Glasgow has to offer!

Trust me – employee ownership works for Highland Home Carers

Jocelyn-Mitchell-1Highland Home Carers was established in 1994 to provide the first independent domiciliary care and support service in Inverness and the wider area. The business enables many people to remain in their own homes when otherwise they might have been moved into institutional care. The company increasingly works in partnership with NHS Highland to improve the quality of health and social care services in local communities.

Ten years ago, Highland Home Carers became employee-owned. Here, Jocelyn Mitchell – care worker and Chair of the Trustees – explains how the trustees ensure the company is run properly.

The trustee role is an important one within Highland Home Carers.  We represent the majority shareholding and it is vital that we hold the board to account – just like shareholders in conventional companies.

It is not our job to run the company, but we do have to sanction major decisions that could affect the long term stability of the business.  A few years ago the board restructured the company’s loan, opting to move the debt to a more favourable lender. This meant higher repayments in the short term, but would result in us being debt-free in a few years.  As trustees, we had to be satisfied that the impact of higher payments had been fully considered and that it would be for the company’s long term benefit.

We have grown significantly in the past two years. With 350 employees covering 8069 square miles, quality of delivery of care is central to all we do.  One of the issues we wanted to explore with the board was how we could ensure our high standards would be maintained when we were undergoing a period of growth. Our MD fully explained the measures put in place – as employees, we are able to see the consequences of board and management decisions.

Our board is superb, with a mix of management, elected employees and two experienced non-executives.  We haven’t had to exercise our veto over any decisions but there is no complacency. We continue to challenge and ask for explanations.

We are quite unusual in that none of our directors are trustees – how could we hold the board to account if some of us were involved in board decisions? There are six trustees – three elected by our colleagues and three appointed by the board. Two of the appointed trustees are also employees. The sixth is an independent trustee who is not an employee and supports us in our role.

There is a myth that if employees own the company then they will make decisions in their own interests and lose sight of the sustainability of the business.  That can’t happen here. We have a responsibility to current and future employees. This year we are celebrating our 20th year, 10 of which have been as an employee-owned company.  As trustees, it is our job to ensure we are still here for the next 20 years and far beyond, while still providing the best care and being a great place to work.

Taste of success for food consortium

When you’re a small-scale producer keen increase your sales and exposure across the UK, how do you do it?

Nine food producers in Argyll considered this very issue in 2008, recognising that there was greater opportunity for them all if they worked together.

With the help of Co-operative Development Scotland, they came together to form Food from Argyll – a consortium aimed at taking their goods into a wider market.

Here, the producers describe the benefits they’ve enjoyed since forming the consortium.

Building to a better future


Page\Park celebrate EO DayGlasgow-based architecture firm Page\Park hosted the third event in our programme of Successful Succession Seminars  on Friday, July 4 – Employee Ownership Day. 

Here, Page\Park employee owners David Page, Brian Park, Karen Pickering and Eilidh Henderson give their views on how employee ownership has impacted on the company.

Brian Park, founding partner: “There are three principles central to everything we do: creativity, integrity and making a difference.  That’s what Page\Park is about. A sale to a larger firm might have compromised that. An important benefit of the move to employee ownership is that the Page\Park brand is protected for the long term.”

David Page was part of the transition team who met regularly throughout the business transfer process. “We invested a lot of time in the transition to employee ownership, and it was time well spent. “We believe we were investing in our future. The founders had to wean themselves away from ownership and control, and the employees had to learn more about the business aspects of the company.

“We devised a structure where all employees get involved in at least three business areas as well as their architectural projects.  This means that we have a greater understanding of the business as a whole and are not solely focused on our own projects.”

Karen Pickering has been an employee of Page\Park for 22 years. Karen described how the business operates differently now all employees are owners. “Under the old partnership structure, there was a tremendous pressure on the founders to make the business work; to ensure the books balance, the order book full, we have enough resource to manage our projects.

“Now that we all own the business, the responsibility is shared. We are all much more mindful of costs than we were before and we all know how important it is to win new business.”

Page Park Architects 11“We operate with a flat structure and match each job to people’s talents and interests,” says Eilidh, an employee of 11 years. “It’s quite usual for junior staff to attend high level meetings; there is no top or bottom, we are all in it together.

“This works for us.  We have no need to advertise for recruits.  And once people join, they stay.  This is a great place to work.”

The profession agrees – Page\Park was awarded best employer in the AJ 100 Awards, the architectural sector’s Oscars. The move to employee ownership is about much more than a change in legal structure for the employees of Page\Park.

Eilidh is convinced the model fits with the firm. “There is a strong sense we are creating something quite powerful and dynamic.”  Karen agrees.  “Now we are employee-owned, we are architects of our own destiny.”

A route for successful business and business success

EO_logo_2014-01Today, July 4, is Employee Ownership Day – an opportunity  for companies that have chosen this model to celebrate their success and spread the word about its benefits.

Co-operative Development Scotland’s chief executive, Sarah Deas, tells us why it is worth celebrating – and why business owners looking for a succession strategy or even a different way of working should take notice.

It may only be in its second year, but already Employee Ownership Day has become a key date in the calendars of employee-owned businesses across the whole of the UK.

There is good reason for this. Employee-owned businesses have something to celebrate; many  have seen real, tangible benefits from the model. Staff work closer together, there is a genuine feeling of a common goal and productivity increases.

Today, Page\Park, one of Scotland’s newest employee owned companies, will host our EO Day celebrations,  A well-known architectural practice, Page\Park is another great example of how the model not only offers a sound succession option but also is an ideal model for professional practices.

Founders David Page and Brian Park have no immediate plans to leave, but they wanted to ensure that the company’s long-term future was safeguarded – and employee ownership was the best option for them. This was no knee-jerk decision either.

The firm was recently named the UK Employer of the Year in theArchitectural Journal Awards. So its transition is yet another example of how Employee Ownership isn’t just a successful route for business, but it’s a route for successful business.

There are other EO Day events taking place across Scotland today – all highlighting the value the model plays not only to individual businesses, but also to Scotland’s economy.

We’ll be tweeting live from the Page\Park event on @cdscotland. Do join us and  share your own employee ownership success stories.

Co-op Congress a real Saturday success

Jaye Martin 03Bees, thumbs up and visual minutes made for a different conference experience at this year’s Co-operative Congress.

Here, CDS specialist adviser Jaye Martin talks through some of the key points from the session.

The Town Hall in Birmingham, with its impressive architecture and historic organ dating from 1834, is not a bad place to spend a few hours. Even if it is on a Saturday (the middle Saturday of Wimbledon, a World Cup Round of 16 day)… and it’s sunny in Glasgow.

Being a consummate professional, I was able to set all this aside and concentrate on the subject at hand. Which was, of course, co-operation – or, more specifically, Co-operation: How?

This year’s Congress had been trailed as a pared down, back to basics approach to provide a space for open and honest discussion about the future of the co-operative movement. Two themes from the International Co-operative Alliance’s Blueprint for a Co-operative Decade were used as the focus of the debate:

  • How do we promote the co-operative message and secure our identity?
  • How do we take participation in co-operatives to the next level?

The pitches, debates and pledges stemming from these themes were used to help shape an action plan for the movement. Delegates were given voting cards with ‘thumbs up’ and ‘thumbs down’, to be used throughout the debate whenever the mood took us.

Visual minutes at the Co-op Congress

Visual minutes at the Co-op Congress

The take-aways were, for me, around the innovative tools employed to make this a different and truly more interactive conference, so I’m giving a thumbs up for:

  1. A good theme – the humble bee, long a symbol and unofficial ambassador for co-operation, was utilised to good effect in Ed Mayo’s opening speech, in the branding of the conference and even in the honeycomb-shaped pledges that attendees were encouraged to write on and stick up on a great honeycombed wall of hope.
  1. Steph McGovern – the BBC Breakfast business presenter was an inspired choice of Congress facilitator, with her down-to-earth humour endearing her to the assembled audience from the off. She has recently covered developments regarding The Co-operative Group and The Co-operative Bank for the BBC and her genuine interest in the sector was clear.
  1. Visual minutes – professional artists from Creative Connections recorded the debate and feel of the room through illustration, creating this wonderful piece of art which is a lasting legacy of Congress 2014.

The route to a successful succession – part one

The second of our “What’s Next” events in our Successful Succession programme, was hosted by Aquascot in Alness. 

One local business owner currently considering a succession strategy for his business attended to see how employee ownership may work. Here, he sums up his thoughts from the day. 

I’m interested in ways to make our business more sustainable for the long term and provide an eventual exit solution for the current shareholders.  As a business, we are constantly looking at ways to improve and reviewing our ownership structure is part of that.

I’d like to find a model that rewards and engages our staff for the contribution they make to the success of the business. I’m intrigued at how businesses owned by their employees appear to achieve much higher levels of staff engagement and productivity improvements.

???????????????????????

Our Scottish Enterprise account manager drew my attention to a programme run by Co-operative Development Scotland, which is showcasing employee owned firms around Scotland. I attended two events and found they greatly helped my thinking.

The first visit was to Galloway & MacLeod, who manufacture and sell agricultural feed. This is an impressive business.  It is innovative, high tech, and focused on growth.  A family firm, and significant employer in the area, a trade sale would have meant a likely relocation.

Selling to the employees means the business stays where it is, providing opportunities for local people.  The honesty was refreshing; they admitted that initially share uptake was low, but had now reached over 90%.

aquascot

The Aquascot visit was thought provoking.  This is an innovative company, very grounded in their values.  They strive to be a great place to work – and aim to have fun while “doing the right thing well”.  The MD, Dennis Overton, admitted a trade sale would have been quicker, simpler and easier, but did not fit with the strong partnership ethos.

It was good to hear the bankers who attended stress they are quite comfortable with employee owned business models; succession management is critically important, if the management team disappear, the business is exposed.  Employee ownership is a solution that promotes continuity.

Funding the employee buyout – Part One

At a recent Expert Breakfast Briefing session, John Alexander of consultancy firm Baxendale tackled the issues around funding an employee buyout.

Here, CDS specialist adviser Carole Leslie looks at some of the key points raised in the session.

Employee ownership is a model fast gaining pace – the number of employee-owned firms in Scotland has doubled in four years, and if more of the right kind of finance could be made available, this number would increase significantly.

Alexander said: “It’s chicken and egg. Raising awareness is important, but for an exponential increase in employee ownership there has to be access to the right kind of money. The money comes first.”

  • The equity gap must be addressed

Alexander proposed the solution as being the establishment of high-profile funding sources staffed with visionary fund managers. The Baxendale experience proves that employee ownership presents a reliable, if different, investment. Patient capital is required to nurture the model and that will take a change in behaviour from funders.

  • Vendor financing plays an important role

Properly structured vendor financing can benefit the seller and the business. The outgoing owner will usually be a benevolent and well-informed lender who will take a flexible approach to repayment, ensuring the employees are not overly burdened with debt. An earn-out deal can mean that the vendor benefits from productivity gains driven by the new employee-owned structure.

  • The importance of the employee stake must not be underestimated.

Alexander counselled that employees do not become the main funders of the transaction. This could create funding issues for a future internal share market. However, employee investment is the result of a decision by the employee that their company is worth investing in. Financial buy-in results in an emotional buy-in that reflects in performance.

Next week, we’ll be looking at some of the other issues around financing an employee buyout.

A new generation lighting the way…

Sarah Deas resizedLeaders from across Europe came together recently in Brussels to discuss all aspects of co-operative development, including how to engage with young people looking to collaborate in business.

Fresh from the insightful conference in the Belgian capital, CDS chief executive Sarah Deas reveals some of the different approaches being taken by various countries.

Across Europe the next generation is eager to create new endeavour – young people wanting to start their own businesses.  Many are talking about doing so together – championing a co-operative approach to match their values.

Recently I attended an event at which this message was loud and clear. I joined leaders from Flanders, Finland, Italy, Sweden and the UK in Brussels to share our approaches to co-operative development.

We heard from Gordon Hahn, chair of Sweden’s Coompanion, on how his organisation is tapping into this growing desire to collaborate. They recently launched ‘Generation Kooperation’, a campaign targeting 20 – 35 year olds.kooperation

I explained how here in Scotland we are also supporting the growing interest in the younger generation by developing teaching resources and a toolkit for use in universities and colleges. Following a successful pilot, we are now working with the Scottish Funding Council to support the roll-out of these resources across the futher and higher education sectors.

Other insights from our day in Belgium included recognition of the role that strong national bodies play in promoting the adoption of co-operative models. We were all impressed to hear how Coompanion, which operates 25 co-operative development centres across Sweden, has supported 5,000 new co-operative entrepreneurs over the last fiveyears.

Niina Immonen and Mirja Taipale, from Tampere Region Cooperative Center, also described the important Finnish initiative upskilling 820 business advisers – ensuring co-operative models are considered as mainstream options. Their contemporary campaign – ‘Enterprising Together’ – was designed to stimulate public interest in working with others. It involved radio broadcasts, mass distribution of brochures and events across Finland.  Together these initiatives resulted in a 10% per annum increase in co-operative start-ups.

enterprising

All the nations identified emerging opportunities for co-operatives in:

  • creative industries
  • tourism
  • social care
  • renewable energy
  • broadband

Consortium co-operatives are becoming increasingly prominent in the tourism and creative industries as a vehicle for business collaboration. Italy’s distinct legislation has resulted in 15,000 social co-operatives. The UK’s community shares initiative has enabled over 200 communities to invest in local enterprises. And, in Sweden, co-operatives provide 20% of the broadband infrastructure.

Our host, the Flemish Government, in its commitment to co-operative entrepreneurship is calling for ‘proposals’ for new co-operative business models – a refreshing and pioneering approach.

The increasing relevance of co-operative models in modern-day Europe was evident throughout the day – driven by changing societal values and the need for innovative solutions to local issues. A big ‘thank you’ goes to Kristof Welslau for arranging such a valuable day.

It is over 50 years since President Kennedy spoke of the torch being passed to a new generation. “United, there is little we cannot do in a host of co-operative ventures”. It may be our young people who will now take forward that torch and drive the adoption of co-operative models, not just in Scotland but world-wide.

Starter for six – top tips for those considering EO

????????????The first of five CDS employee ownership events took place last week at animal feed manufacturer Galloway & MacLeod’s HQ in South Lanarkshire.

Here, CDS specialist adviser Glen Dott takes a look at why employee ownership can be the ideal solution for businesses thinking about succession.

Plan for the future

It’s essential for business owners to be planning for their eventual exit. By providing certainty for the future, company value can be maintained. When Ralph MacLeod decided to sell to his employees he shaped the future of his organisation and more importantly dictated the speed and terms of his exit. Furthermore, it meant that the MacLeod family’s desire for the business to remain in Stonehouse was honoured.

Value extraction

An employee buyout offers an incredibly flexible way for owners to extract value from the business. Not only did Ralph strike a deal at a reasonable price but the sale process was simplified without compromising on due diligence.

Tax efficiency bonus

The Galloway and MacLeod deal was designed to ensure the maximum tax efficiency for the family, the business and also the employees. New tax regulations – which came into force in April this year – can ensure that a sale to an employee owned trust is essentially tax free. Businesses controlled by an employee owned trust are able to pay a tax free bonus to employees of up to £3600 annually.

The owners at Galloway & MacLeod

The owners at Galloway & MacLeod

Trust, individual or hybrid share ownership?

Galloway and MacLeod has designed a structure in which the employee trust will ultimately be the majority shareholder. Employees can also buy or earn shares, which allows them to benefit from share value increases and dividends when the company does well.

Marathon not a sprint

The transition to employee ownership can take place over a number of years – 15 in the case of Galloway and MacLeod. The MacLeod family have taken the long view and the employee trust will buy 1/15 of the shares annually using an option arrangement which provides leeway for both the family and the employee trust.

Turbocharging effect

It’s essential for employees to understand and be involved in the buyout process. If everyone is an owner their objectives will be aligned and it is likely there will be a performance uplift. All available evidence confirms this – employee owned businesses where employees have a significant equity stake and an influence on governance are more productive than other business ownership forms. In many cases this can positively affect the ‘earn out’ for exiting owners.

To view the CDS guide to a successful succession, click here.

My personal journey to employee ownership

Nick Kuenssberg ICAS photoIn 2012, industrial textile manufacturer Scott & Fyfe – a fourth-generation family business – made the transition to employee ownership (EO).

Non executive chairman Professor Nick Kuenssberg explains how lessons learnt in Germany, Peru, Chile and the UK led to the introduction of EO to the family behind the Tayport-based firm.

 

Germany, 1967

  • Representation and trust are paramount
  • Social welfare is necessary in the wake of mass redundancies

germany

I helped with the restructuring plans of a Hamburg manufacturer. Its acquisition proved to have been a major strategic mistake (the first bank con that I came across) and the textbook solution was to transfer the rump of the business elsewhere and close down the balance.

What struck me forcibly was that it proved possible to close it in an orderly way without headlines or hysteria – not only was there a social welfare plan for those made redundant but there was union representation on the supervisory board which meant that the employees believed the management story.

Peru, 1971

  • The profit motive is critical if investment is to prosper
  • Expectations for EO must be managed realistically and sympathetically

peru

The left-wing military government introduced the concept of an industrial community, a form of co-operative within each industrial company, which gained ownership up to 50 per cent of equity through the allocation of 15 per cent of annual pre-tax profit. The greater the profit, the faster the original shareholders were diluted, undermining the normally acknowledged capitalistic profit motive. Incidentally, there was also a profit share to be distributed on a per head basis.

This novel regime undermined the industrial sector within a few years because the profit motive was eliminated – investment dried up and any actual investment made saw surcharges on imports deposited outside the country – and the trade unions which dominated the industrial community board also had representation on company boards.

There were ways round this to be exploited involving transfer of profits but these routes di little to promote industrial development generically.

Chile, 1974

  • The rigid communist state planning controlled price model does not work

chile

In the post-Allende era, I worked to recover a company that had been sold to the Chilean Government (but never paid for). The company was comprehensively bust and 23 per cent inflation per month made normal life difficult.

Real demand collapsed and government price control meant not only that costs could not be recovered, but that the product was resold at a black market premium. Staffing was excessive and there was no cash to cover the payroll – other than via a government bank that charged interest at inflation plus.

Radical restructuring was necessary to recover the situation and price freedom was vital to make this possible.

Since then both economies have recovered and flourished under the Chicago School of Economics model with open frontiers, low duties, realistic exchange rate and promotion of investment and exports.

UK, 1975

  • The relevant parties did not listen to each other
  • Determined people will beat most governance systems unless board, management and employees are working to the same agenda

gb

The Bullock Report on employee representation appeared, recommending that employees be represented on the boards of UK companies with directors to be selected by the trade unions.

The bosses rejected this (in the light of the state of play in the late 1970s) and the unions did too, as they interpreted it as undermining their pay bargaining rights.

UK, 1999

As a non executive director of a large engineering company owned by the workforce through a trust, I resigned. The combination of an ambitious chief executive and a self-aggrandising chairman persuaded the company to embark on a reckless path to European leadership.

This transaction needed short-term finance of an aggressive acquisition which could not be refinanced, ending with a fire sale to private equity at a fraction of its market value.

Scotland, 2014

scotland

Many of the above lessons were applied to the transfer of ownership at Scott & Fyfe, ownership that is both indirect via an employee benefit trust and direct in that it provides opportunities for employees to acquire shares in the business.

The benefits have been real, wide-ranging and surprising; greater flexibility of labour, improved productivity, enhanced understanding of the business, an end to company politics and genuine trust in management. The move from employee to owner is well under way.

Employee ownership provided an exit route for shareholders and has contributed to a much better business – one committed to its local community, less exposed to takeover, sustainable in every sense and geared to a long-term strategy.

« Older posts Newer posts »

This website uses cookies to ensure you get the best experience during your visit.