Tag Archives: Clansman Dynamics

New Year Message

Sarah Deas resizedFrom Sarah Deas, Chief Executive, Co-operative Development Scotland

The eyes of the world will be on Scotland in 2014 as we host the Commonwealth Games, Ryder Cup and Homecoming. It’s a fantastic opportunity to showcase our country on the global stage.

Whilst we wish our sportsmen and women every success, 2014 is much more than medals – it’s a catalyst for regeneration, innovation and sustainable economic growth. An opportunity to build international business relationships, demonstrate our capability to host major events and present Scotland as a leading tourism destination. 

Commonwealth-Games-2014For Co-operative Development Scotland it’s an opportunity to shine a light on the positive contribution that co-operative and employee ownership models are playing in the Scottish economy. Working with the Supplier Development Programme, we’ve been helping businesses to tender together to compete for Games related procurement contracts – capacity building that will have long term legacy benefits. 

One co-operative that will play a key role in helping visitors discover the best places to stay, eat and drink is the Merchant City Tourism & Marketing Co-operative. The Merchant City will be a hive of activity during Games time, including hosting the venue for high profile business events. 

Another co-operative that should benefit from the growth in tourism is the Scottish Mountain Bike Consortium. Set up to increase the range and quality of mountain bike experiences, it aspires to make mountain biking the ultimate family-friendly adventure activity.

roadshow

Scotland is leading the way in the adoption of innovative business models. The coming year offers an excellent opportunity to leverage this success. Businesses that are already successfully exporting, such as employee owned Tullis Russell, Clansman Dynamics and Scott & Fyfe, are well placed to use the flexibility and power of their business model to seize new opportunities for growth. 

As Scotland ‘Welcomes the World’, hopefully you too are considering what 2014 could mean for your business. Are you capturing this once in a lifetime opportunity to profile your business and build international relationships? 

Wishing you a successful 2014

Best wishes

Sarah

Selling to employees – a solution for owner exit?

Harper Macleod's Chris Kerr

Chris Kerr

Chris Kerr is a partner in Harper Macleod’s Corporate team and specialises in advising family-owned, owner-managed and employee-owned businesses in Scotland. He has been involved in some of the country’s highest profile employee buy outs and restructurings.

Here he looks at the growth of employee buy outs, some recent success stories, and considers when the legal sector should present employee ownership options to their clients.

The volume of business sales has slowed significantly in recent times due to the recession. Access to finance has been difficult, even for healthy businesses, and many business owners have postponed plans to move on.

However, the drivers for exit remain strong and at some point these owners will be looking at their succession options. Selling to employees is becoming an increasingly acknowledged route for succession. The exit can be managed, minimising distraction to the company’s operation, and some form of vendor financing can facilitate the funding of the sale. One attraction of this option is that, to an extent, the “legacy” of the company can be preserved.

There have been several high-profile employee buy-outs in Scotland in recent years, all concluded with apparently positive results. Business performance has improved, employee engagement levels have been raised and vendors report they made the right decision.

So is this an option that should be presented to all clients? The Westminster Government commissioned Graeme Nuttall, of London law firm Field Fisher Waterhouse, to report on how employee ownership could become more of a mainstream business model.

The Nuttall Report was published in July 2012, making 28 recommendations, all of which have been accepted by the Government. The Scottish Government has also expressed support for the model. Is the legal profession ready for this increased interest?

Harper Macleod is seen as one of the leaders in this field. In recent years the firm advised successful engineering company Clansman Dynamics Ltd on their employee buy-out. Clansman designs and manufactures manipulators, with 95% of their production going to export.

Clansman Dyncamics' Dick Philbrick

Clansman Dynamics’ Dick Philbrick

The owner, Dick Philbrick, had received several approaches for the business, mainly from overseas buyers. Dick was adamant that the business and skills should remain in Scotland and sought an exit solution that would secure the business in the local area.

The business has a turnover of £11m and a workforce of 38 employees so an overseas sale would hit the local economy. The management-led employee buy-out seemed a good answer. This meant that Dick could manage his own exit from the firm, and also shape the future of the business. Importantly, for employees, customers and suppliers, there was continuity.

Rather than the business being negatively impacted by the transfer of ownership, as so often happens, the firm has gone from strength to strength. In fact the company has experienced a 65% increase in turnover in the past three years.

Another client of Harper Macleod is award-winning Highland Home Carers. The founder, Nick Boyle, could not stomach the thought of selling the company to one of the national agencies as he was not convinced they would deliver the same high standards of care for which the firm is renowned.

Highland Home Carers member of staff with customer

Highland Home Carers is another successful Scottish employee buyout story

Since the employee buy-out, the company has more than doubled in size, made significant acquisitions and expanded its geographic reach. Having a stake in the business has significantly improved employee retention, vital in an industry where consistency of service is key. The business recently restructured its financing and now anticipates a successful future.

Harper Macleod also advises Woollard & Henry Ltd. The Dyce based manufacturer is one of the most successful employee buy-outs of recent years. A brave diversification strategy has resulted in six consecutive years of 30%+ growth in profit.

Scottish Enterprise is dedicating resource to promoting a model which leads to a rise in productivity and profitability. Employee owned businesses tend to stay rooted in their local area and are unlikely to relocate overseas, which also supports the overall economic growth strategy.

Co-operative Development Scotland (CDS) provides a free signposting service to businesses and advisers who may be looking to find out more. CDS is working with the Law Society of Scotland to raise awareness of employee buy-outs amongst the profession. CDS is offering speakers to faculty groups and networking meetings and depending on location, it is possible meetings could be hosted by employee owned businesses, giving direct insight into the model.

Co-operative Development Scotland is a Scottish Enterprise subsidiary, established to help companies grow by setting up consortium, employee-owned and community businesses. It works in partnership with Highlands and Islands Enterprise.

Success is the common currency of employee ownership…

Carol LeslieEmployee ownership is a business model that reaps rewards for companies home and abroad. Carole Leslie, specialist adviser, Co-perative Development Scotland, reports on her visit to America and why success is the common currency between UK and US employee owned firms.

we the owners

 Here at CDS we’re always keen to cast the net as far and wide as possible when it comes to broadening our understanding of employee ownership. Last month we ran a highly successful series of screenings across Scotland of the powerful film We the Owners: Employees Expanding the American Dream,which interviewed American workers. It cut to the heart of what it means to be an owner in your own business. 

  

I was also fortunate enough to travel to the US recently to take in a conference of employee owned businesses (EOBs) in New England. I was struck by the similarities rather than the differences that exist between British and American models of ownership.

On both sides of the Atlantic, companies owned by their employees are competitive, professionally run, excel in their sector, and operate a form of responsible management with inclusive and transparent governance systems. The result is a more robust and fairer model of business. 

carris reels logoA good example is Carris Reels. Carris Reels designs and manufactures reels and spools for the wire and cable industry, employs 450 staff and has locations across the US and in Mexico.

 

 

BillI met with Bill Carris, who engineered the transition to employee ownership in 2008. Bill’s father started the business in 1951, and Bill grew up in the company, taking over as CEO in 1980. Father and son shared the recognition of the importance of the individual, and of community.

 

 

Bill looked to find ways to involve employees more in the business. He knew that many companies pursued “emotional ownership” but he wanted his employees to have real ownership of the business. He embarked on what became known as the “LTP” or Long Term Plan, which would not only transfer 100 per cent of the ownership to employees but also 100 per cent of the governance.

Carris Reels 2Herein lies the real challenge. Firms who have gone through the transition, whether in UK or US or anywhere else, would agree that getting the technical elements in place is the easier bit of the business transfer process. Attaining true ownership – hearts and minds ownership – is much more difficult. Speaking with some of the employees and seeing the business results left me in no doubt that Carris Reels has been successful in achieving that transformational culture of employee ownership. 

Carris Reels used a three stage process to implement their ownership culture. The first step was to set out the objectives and vision. Bill Carris was quite clear in what he was looking for – total employee governance to fit with total legal ownership.

Carris Reels

The second step was to make this vision real by building the capacity of employee owners to understand what ownership means for them. This included a wide ranging examination of the business goals and how the company is managed.

A thorough education programme was implemented which explained the risks and rewards, company strategy and operation, and the technical details of ESOP operation.

 

The third stage examined the context for employee ownership, ensuring that managers and staff have the appropriate skills to manage and work in a transparent and productive environment. As part of this stage, structures for employee involvement and participation were devised and introduced, as was a systematic process clarifying decision-making responsibilities. Each one of these three stages is constantly assessed, reviewed, revisited and new recruits are fully inducted.  

Carris Reels StaffThis kind of programme might appear daunting and time consuming, but the long term benefits are evident. Indeed, Scottish firms such as Clansman Dynamics and the Keil Centre will testify that doing the spadework in the early stages reaps rewards later on and brings success much more quickly. Getting the legal structures and the tax repercussions resolved are both important; but these are only the start of what is a continual process.

The US experience tells us that legislation to support employee ownership in tangible ways is key if we want to see a step change in growth. However, to achieve that transformational change takes sustained and considered application. In many ways, the technical architecture is just the vehicle.

Achieving true employee ownership takes courage and conviction. But US companies like Carris Reels and native examples like Woollard & Henry and Accord Energy, clearly show the results are positive and far reaching.

Co-operative Development Scotland is a Scottish Enterprise subsidiary, established to help companies grow by setting up consortium, employee-owned and community businesses. It works in partnership with Highlands and Islands Enterprise.

New Chair reflects on 40 years of championing co-operative business models.

 

Dick Philbrick, Chairman of Clansman Dynamics, is the newly appointed Chair of Co-operative Development Scotland.   

 

 

 

Here he explains how his passion for co-operative models has underpinned a successful business career of 40 years.

You could say I’ve been on a forty year journey of promoting and developing co-operative or employee owned structures. My interest in the sector was first sparked on a visit to work in a kibbutz in Israel in the early 1970’s.

There I was struck by the animated debates surrounding the election of the new canning factory manager and the easy and informal relations that existed between all those who worked in the factory.

Canning beans and cucumbers was not a great job but the attitudes to work and towards each other were so refreshing compared to those in the Birkenhead shipyard where I was training.  I discovered that there really was a better way to organise work.

Almost 40 years later, in 2009, we took Clansman Dynamics into employee ownership (Clansman is an engineering company that designs and builds large robots for foundries and forges – see www.clansmandynamics.com).  Clansman does not have the structure of a pure co-operative, but everybody now has a stake in the business, everybody has the same vote and the business has thrived since we made the change.  

It’s why we have introduced coke and pizza meetings where members of staff present on company results so that everyone feels engaged. At Clansman we want our team to act and think like owners and the results are empowering for our workforce.

I feel compelled to spread the word that working within a different structure can be fairer and more rewarding, but it boosts profit margins too – all academic studies that compare comparable businesses support this.  So my message to those within Scotland who look enviously at Germany’s manufacturing sector, which is three times the size of ours, is that we can inspire our workforce by changing our structures.  Let’s inspire our workforce by giving them more responsibility.

I’m not just talking about the manufacturing sector here.  The open day at the Edinburgh Bicycle Co-operative earlier this year highlighted a successful retail business competing in a vigorous market. It showed that co-operatives, community enterprises and employee owned businesses are far from the idle talking shops their detractors would have us believe but instead deliver prosperity.

Clansman has dealt with foundry businesses within the Mondragon movement in the Basque country, in Spain for 15 years. We have learnt, to our cost, there is nothing whatsoever that is undynamic about their buyers and engineers!

And I feel the experience that Clansman has gained from collaborating and co-operating with small companies around the world has shown me clearly how a little Scottish company can compete successfully in Brazil and Beijing.  We are bringing 30 of our collaborating partners to East Kilbride in three weeks’ time for a two day meeting.  The co-operative consortium model can be the way for small companies to get into new markets.    

I’m looking forward to working alongside Co-operative Development Scotland who share my zeal for promoting a better way of doing business. I pledge to give any support I can along with other members of the Board. It’s a fantastic opportunity to help spread the word about the benefits that collaborating, co-operating and sharing ownership provide.  

It is so easy for those of us who are familiar with the model to assume that everyone out there is familiar with the benefits, but that’s not the case, as confirmed by the recent Nuttall report. For me the principles are the same in all of the models Co-operative Development Scotland promotes. 

High salaries and new cars are nice to have but if your company is serious about boosting its productivity there can be no substitute for a workforce coming together for a common purpose. A company that runs as a team in both thought and deed is one that will maximise its resources and output.

 

Co-operative Development Scotland is a Scottish Enterprise subsidiary, established to help companies grow by setting up consortium, employee-owned and community businesses. It works in partnership with Highlands and Islands Enterprise.