Tag: business models (Page 4 of 4)

Keeping it in the family?

September 17, 2013 / CDS Admin

Co-operative Development Scotland (CDS) is working with the Scottish Family Business Association to help family businesses explore employee ownership as an exit route.

CDS specialist advisor Carole Leslie shares the experiences of two heads of family-owned businesses on why this model is such a success.

“Scotland is a brand”, Maitland Mackie told the capacity audience assembled at Strathclyde University for the launch of the International Centre for Family Enterprise at the end of last month.

Seventy-three per cent of Scottish firms are family-owned, employing half the private sector workforce. Family firms are an important feature of the Scottish economy as well as playing a major role in their local area. As Martin Stepek, chief executive of the Scottish Family Business Association says: “Take away family business and there will be no community in Scotland.”

The International Centre for Family Enterprise is an initiative which brings together the business, academic and professional world to provide a world-class collaborative resource to support this critically important sector. Martin Stepek, alluding to the difficulties caused to his family in running their successful family firm, put it so well: “I want to save family businesses the challenges that we experienced.”

Maitland Mackie’s presentation was the first in a series exploring the essence of family business.

Maitland Mackie subtitled his talk: “How not to be a cantankerous old father”. He described the challenges and rewards of heading up one of Scotland’s most recognised brands. He emphasised the importance of people; not just family members but also the local families employed in the business. Most of his employees have at least 10 years’ service, many have 20 years plus.

Maitland described his Damascene conversion from command and control management (or, in his words “Dae fit yer telt”), to a more inclusive and participatory culture. He advised the audience to “involve, involve, involve” employees and to be clear on business objectives. Mr Mackie also spoke of his “no change, no chance” philosophy. There are two rules; get the product right and market it well.

Mackie’s of Scotland went from dairy farming to ice cream production and, in conjunction with another Scottish family business Taypack, diversified successfully into crisps. The firm is about to launch a chocolate range. Maitland attributed the successful diversification to the strength of the Mackie’s brand name. Family ownership enables Mackie’s to plan for the long term. The firm “lives” on its capital. There are no outside shareholders to consider. The company can focus on doing what it does best; serving the customer.

Much of what Maitland Mackie described resonates well with the experience of employee-owned firms. There is that same fierce loyalty to the brand, the commitment to producing the best product, and delivering the highest quality service. With no external ownership, the business can look to the long term.

Keeping the business in the family was not an option for Ralph MacLeod, third generation of Lanarkshire-based agricultural feed manufacturers and merchants Galloway & MacLeod. It was important to him that the business remained independent, and the staff that had helped develop the business should have continuity, job security and the business should continue to support the local community. The Employee Ownership Model satisfied all these needs and enabled the employees to take over without incurring personal debt. In December 2010, The MacLeod family shares were transferred to two Employee Trusts.

Maitland Mackie (left) and Ralph MacLeod (right)

His experience is encouraging. “I believe we’re more of a family business now”, he says. “Many staff have long service records and career progression is encouraged through personal development training. Galloway & MacLeod directors no longer have to worry about family succession every generation and the dynamic structure created rewards endeavor and innovation. The staff think and act like owners which is to the benefit of everyone connected with the business.”

“Galloway & MacLeod is a progressive, quality-focused business delivering the best service to our customers. Our people understand that and will all share in the success.” The firm has performed well since the transition of ownership, and has ambitious plans for the future.

Passing on the business to the next generation is likely to be the preferred route for most family businesses. Maitland Mackie’s three children are now running the family firm. With nine grandchildren waiting in the wings, it looks like succession is solved for a few more years. When the next generation isn’t an option, models which preserve and protect the unique qualities that make the enterprise successful – the relationships, the loyalty, the personality – should be considered. Employee ownership is one such model.

As Galloway & MacLeod demonstrates, selling the business to employees can be the natural progression. The employees are the people who know the business well, and have a vested interest in its success and sustainability. Like family firms, they provide quality employment and training for local people, in what is a proven business model.

Family and employee-owned enterprises are critical to the long term prosperity of the Scottish economy. CDS welcomes the International Centre for Family Enterprise to Scotland, and looks forward to collaborating with such an exciting and worthwhile venture.

The second lecture in the series of the International Centre for Family Enterprise will feature Bill Gordon of William Grant & Sons and takes place on Wednesday 18 September 2013. To register for this presentation please email: corporate-events@strath.ac.uk or call 0141 548 2245.

Success is the common currency of employee ownership…

April 5, 2013 / CDS Admin

Employee 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.

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.

A 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.

I 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.

Herein 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.

This 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.

Seafood Producer Serves Up Food For Thought…

March 21, 2013 / CDS Admin

Scotland has a thriving food and drink sector. Employee owned companies like seafood producers Aquascot are reaping the rewards of co-operation.

Angela Wardrope, project manager, Co-operative Development Scotland, shadowed Aquascot’s Dennis Overton when he went before the Scottish Parliament Cross Party Group on Food.

I had the opportunity to hear Employee Ownership Ambassador Dennis Overton from Aquascot address the Scottish Parliament Cross Party Group on Food in January. The experience provided an insight into Aquascot’s journey towards employee ownership and a fascinating bird’s eye view of Scotland’s food and drink sector. It got me thinking about the bigger role co-operation could play in this industry.

Aquascot is based in Alness and takes its inspiration from the 1920 pioneering profit sharing model of employee ownership set up by John Spedan Lewis. The seafood producing firm began its journey towards employee ownership in 2008, which it will complete 2016.

In 2008 the main driver was to sustain and grow the business for the future. The potential was huge: a strong team, accelerating health drivers, expertise in aquaculture and strong market demands. A business owned by the employees was the only solution to create long term value in a fairly remote part of Scotland.

Now, four years later turnover has reached £29m and total staff numbers are up to a healthy 135. Aquascot is also benefiting from a reduction in absenteeism and leaving rates – half that of the sector average. Staff are twice as productive as the sector average and feel they can bring forward ideas that are listened to and implemented.

So what is the wider potential for this model in Scotland’s food and drink sector? The industry is made up of lots of micro-businesses, a few large family businesses such as Tunnock’s and Mackies and a few giants like Devro. The industry also has plenty of first generation entrepreneurs, who in my view would be a great fit for employee ownership. The challenge is how we ensure other companies take inspiration from the benefits enjoyed by Aquascot, and think about employee ownership themselves.

But back to our parliamentarians. A good debate took place amongst Cross Party Group members following Dennis’s address. They wanted to hear more about the risks when changing ownership structure and how businesses adapt to this change. Dennis responded by pointing out the difference between ownership and management. He conceded the transition process can add complexity to the mix, but a well run business is a well run business, irrespective of the ownership structure.

A question was also raised around ‘co-opetition’, when businesses co-operate with competitors. At Co-operative Development Scotland (CDS), we are seeing a strong appetite for this. Especially where there is an opportunity for businesses to collaborate to help a sector grow.

For example Food from Argyll is a consortium of nine food producers that came together to sell their produce at events under its singular banner. Overall, the members all saw the co-operative as an opportunity to get into a market that would be really hard to crack on their own. A consortium co-operative allows single businesses to pool their resources in this way without compromising their independence as singular entities. They look at the bigger picture and will reap the benefits as a consequence.

So did the Cross Party Group members feel that co-operative business models were a good fit for Scotland’s food and drink businesses? Overall, there was a feeling that any form of co-operation would be beneficial. And that much more needed to be done to promote collaboration for the benefit of the sector.

CDS supports all businesses in Scotland, irrespective of sector or size. If you like the sound of accessing bigger markets through co-operation we can help you. We have produced a short paper on Scotland’s food and drink sector, so if you want to read more see: Co-operate for growth; Growing Scotland’s food and drink sector.

Employees can have their ‘stake’ and eat it…

February 21, 2013 / CDS Admin

Austin Flynn is a corporate lawyer and head of Morton Fraser’s business team where he advises business owners from across the UK. Here, he reflects on the rising popularity of employee ownership and says workers’ rights need not be compromised by this business model.

For more than twenty years I’ve been advising businesses on a variety of corporate and commercial legal matters. For most of that time the majority of my clients have been owner-managed. As a result, the person who’s instructing me not only works for his/her business, but also owns it, has capital tied up in it and sees the business as ‘part of the family’ and inextricably linked with it.

There isn’t the kind of work/life distinction that allows owner-managers to leave work behind when they get home and it certainly creates a different dynamic when compared with taking instructions from someone who is simply an employee and has no share in the business. Interestingly, increasing numbers of my owner-managed clients are now looking at ways of giving their key employees a financial stake in the business.

These range from share option schemes where a small proportion of the company is made available, to more radical and far-reaching re-structurings that in some cases can effectively be a partial exit for the owner. As with anything in life, there’s no ‘one size fits all’ solution when it comes to employee ownership but it’s striking how popular the concept has become, thanks to organisations like CDS spreading the word about the benefits.

On my own weekly blog on the Morton Fraser website I commented last year on George Osborne’s new owner-employee contract under which employers will be able to award shares to staff in return for staff giving up unfair dismissal, redundancy and training rights and also relinquishing the right to ask for flexible working.

I commented at the time that as a fan of employee ownership I couldn’t see any reason why an employee can’t have his/her employment rights and a stake in the company. My guess was that many of the benefits of true employee ownership (increased productivity, innovation and profitability) would be undermined by a structure where the employee is shackled to a company and can be walked over roughshod. Also, the lack of liquidity in the private company share market could make the value of such shares very subjective anyway.

It was therefore interesting that recently in the House of Lords John Gummer declared the plans to be ‘mystifying’, adding “I cannot imagine in any circumstances whatsoever that this would be of any use to any business that I have ever come across in my entire life.”

Lord Pannick QC added: “What is so objectionable is that these employment rights were conferred by Parliament over the past 50 years and they have been protected by Governments both Conservative and Labour precisely because the inequality of bargaining power between employee and employer means that freedom of contract is quite insufficient to protect the employee. To allow these basic employment rights to be traded as some sort of commodity frustrates the very purpose of these entitlements as an essential protection in the employment context.”

I couldn’t have it put it better myself, so I won’t even attempt to do so.

Tag: business models (Page 4 of 4)

Keeping it in the family?

Success is the common currency of employee ownership…

Seafood Producer Serves Up Food For Thought…

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