Tag: employee-owned (Page 3 of 4)

Going against the grain has led to success for Galloway & MacLeod

March 31, 2014 /

Donald Harvey, MD at Galloway & MacLeod

Galloway & MacLeod has roots dating to 1872, and is now one of Scotland’s most successful employee owned companies.

Here, Galloway & MacLeod’s managing director Donald Harvey explains the benefits the business model has brought to the agricultural firm.

Selling the business to the employees is the best succession option Ralph MacLeod could have chosen – for the company and for the employees. It can be an uncertain time when a business owner begins to think about exit from a business. When Ralph started to speak with me and thereafter the management team, his first concern was that we were kept informed and involved in whatever choice he would eventually make. It was the opportunity of a lifetime – owning the company!

The company began in 1872 and Ralph MacLeod was the third generation of the family to own the business. When the time came to think about handing over, Ralph was not clear on the options open to him. He did have strong views on what he didn’t want to do. Galloway & Macleod is a unique company, which is an important feature in the local community. Ralph wanted to find a succession route that protected that.

Agriculture is a fiercely competitive business, dominated by large players. As an example of this domination, there are now only two main players in grass seed supply worldwide. None of us wanted to see Galloway & MacLeod swallowed up by a large conglomerate. We pride ourselves in the strength of relationships we have with our customers.

Ralph MacLeod took the firm down the employee ownership route

Ralph MacLeod took the firm down the employee ownership route

If Ralph had chosen to sell to a trade buyer, then the danger was that the business would have become product driven rather than customer driven. To me, the move to employee ownership allowed us to maintain our independence and preserve our customer-centered focused approach, without a noose round our neck and an overdraft which would have had a big impact on the business.

There have been other benefits in the move to employee ownership. We now have 34 owners who all have a stake in the prosperity of this business. This means that most of the people come into work thinking like owners. They want the business to do well, and they know that they will share in the rewards of that success. We don’t have issues with absence or staff turnover; people enjoy being here. We are able to attract the highest calibre of recruit, and will always promote from within.

Alongside these benefits are challenges, particularly for the management team. How do we make sure that these owners understand how the company works and where our revenues and costs are? How can we ensure everyone has the information to enable them to make the best contribution possible? We had to take a very close look at how we communicated with our people, and how we make complex information accessible. We had to ensure our management team had the skills and support to do their job well. We don’t always get it right but we are quick to acknowledge and address our mistakes.

The owners at Galloway & MacLeod

The owners at Galloway & MacLeod

As Managing Director, I’m accountable to the 34 owners of this business. As these owners are the employees, they see and understand the process from prospecting to order fulfillment and the relationship we have with our stakeholders.  As our management team is running a business in an accelerated growth plan with high expectations, we meet challenges which can be hard to overcome. However, I’m sure we have the skillset and understanding to make these decisions, ensuring our values, sustainability and environmental impact are exceeded. Every day’s a schoolday!

The flip side is that I’m leading a team of people who have a stake in the future of this business. It’s in their interests to do as good a job as they can to ensure the company prospers. I’ve first-hand experience of the evidence demonstrated in the research: employee ownership is the most effective route to true employee engagement.

And it all seems to be going in the right direction. Sales are up 39% since 2010. We keep our customers and have won several new ones. Our employee satisfaction levels are extremely high.

As for Ralph, I’m delighted to say he’s still there for when we need him. He knows this business and its people inside out. It’s good to see him have the time to spend on his other passions of sailing and hill walking. Ralph MacLeod did a great thing for the employees of Galloway & MacLeod. The current owners know we have a lot to live up to, and we are all working to ensure we continue the legacy and deliver a prosperous future for our business.

 

Time to learn from the experts…

February 14, 2014 /

CDS Employee Owner Managers Event 21Last week we hosted the first of our expert adviser breakfast briefings, with Baxendale’s  legal director Ewan Hall delving into the world of employee ownership.

Here, CDS specialist advisor Carole Leslie reflects on the key learnings from the session.

At CDS, we have been working with professional advisers on building knowledge of employee ownership (EO) over the past 18 months.  We uncovered a real appetite amongst lawyers, bankers and accountants to learn more so we organised a series of expert breakfast briefing sessions, each one led by a respected specialist in their sector, covering an aspect of employee ownership.

Our first event took place last Tuesday (4 February), with Baxendale’s Ewan Hall – one of the foremost legal advisers in the field of EO in the UK. He has managed more than 20 EO transitions directly and been involved in many more.

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Ewan Hall, Legal Director, Baxendale

 The company itself is a major player in the EO field across the UK, with an impressive 50% of their projects in Scotland. They offer specialist advice and investment to help support the creation of sustainable and growing businesses.

During the session – which was covered exclusively by BusinessScotland.com – Ewan spoke about the key decisions and elements involved in an EO transition and talked the audience through the process of an employee buyout (EBO).

 Breaking the subject matter down, Ewan touched on many important points during the 90 minute presentation – here’s a snapshot of the key learnings:

  • An EBO deserves every bit as much consideration as a trade sale or management buyout. The vendor can expect to get open market value for their business, which can be hugely attractive to them.
  • Having a stake in the business doesn’t just motivate people as the new owners of the business; the stability of the EO model safeguards the future of the firm, sustaining local jobs.
  • The vendor also retains considerable control and influence over both the process and the outcome, and can help to put the post transfer structure in place.

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  • Vendor financing is a major feature of today’s EBOs and is often the favoured source of funding – many businesses are conservative about taking on external debt.
  • The sector is incredibly supportive, with CDS providing adviser support in the initial stages. CDS will introduce potential EO companies with established EO firms, so they can share their experience  of the process.
  • Scotland is seeing more EO transactions than the rest of the UK – this is possibly due to the amount of support available.
  • EO doesn’t end with the completion of the legal transaction. It is a constant process, with engagement and communication key to driving the benefits of the model.
  • The EO model gives a long term solution to the issue of succession, but it doesn’t mean the owner has to leave the business – they can still be involved post transfer, often in a non-executive capacity.
  • The key to success for the EO model is flexibility, as it can be adapted to suit the vendor and industry.
  • EO is growing and there is a high level of interest. Upcoming changes to tax legislation are likely to make a major impact on encouraging new EO businesses and rewarding employees of existing ones. The changes will enable businesses to pay out bonuses free of income tax.

If you were interested in attending one of our breakfast briefings, we have four more throughout 2014 – for more information, click here.

And for those of you who couldn’t make it, you can watch Ewan’s full presentation on our website or watch a short teaser below:

Co-operative Development Scotland is the arm of Scottish Enterprise working in partnership with Highlands & Islands Enterprise  that supports company growth through collaborative and employee ownership business models.

Shining a spotlight on finance

January 31, 2014 /

Jaye Martin 03At the most recent CDS Advisory Board meeting, some of Scotland’s key industry figures gathered to discuss how ‘stakeholder banks’ can be the ideal solution for co-operatives looking to raise capital.  

Jaye Martin, a Specialist Advisor at CDS, shares her experience of the day.

As January comes rapidly to an end and the weather shows no signs of improvement, like me, you are probably longing to get away from the soggy grey skies.

But at the recent CDS Advisory Board session, we refused to be cowed by the January blues and instead presenting an eclectic mix of speakers to throw some light (and shade) on the topic of Financing and Capitalising Co-operatives. 

James Graham 2323 - 008

James Graham of SAOS

Insights gained from the session will help inform our thinking over the coming year as we consider in sharper detail the financing issues affecting the businesses we work with particularly relating to employee buyouts and consortia of scale.  This is of course in the wider context of Scottish Enterprise’s ongoing work in the Access to Finance arena and the Scottish Government’s Sustainable, Responsible Banking strategy, published last year.

 Attendees from CDS, our Advisory Board, Scottish Enterprise and the Scottish Government heard from James Graham of SAOS on the challenges of capitalising a typical agricultural co-op and the potential need for a farming and rural financial intermediary to serve that community, and Angus Waugh and Gerry Sweeney from First Milk on the challenges of raising capital in a 1,700 member strong dairy co-operative. 

New Economics Foundation’s Tony Greenham gave an in-depth analysis of the UK’s banking system and the benefits of ‘stakeholder banks’ with Rod Ashley of Airdrie Savings Bank, the UK’s last remaining independent savings bank, highlighting the benefits of local banking.

Trying to summarise the rich learning and discussion from this jam-packed session is probably an injustice. However, as a taster let’s consider on the top five financing facts:

  • The UK, and particularly Scotland, lacks diversity in its banking system as compared to other developed nations.  In the UK, local banks comprise just 3% of the sector as compared to 67% in Germany and 34% in the USA. 

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  • Co-operative (and employee-owned) business models by their very nature make capital-raising difficult due to the ownership structure.  In the USA, there are special provisions supported as a necessary counterbalance to other types of enterprise.
  • Collaboration is the name of the game in Germany. Local banks co-own central services (for example, back office, regulatory and marketing functions).  This collaboration (rather than the consolidation seen in the UK) allows them to remain locally focused, with sophisticated systems.

    Rod Ashley, chief executive of Airdrie Savings Bank.

    Rod Ashley, chief executive of Airdrie Savings Bank.

  • Airdrie Savings Bank was founded on 1 January 1835 and is the only institution now operating under the auspices of the Savings Bank (Scotland) Act 1819.  Customers have ready access to bank managers and staff with knowledge of the local area and local businesses.  The Bank faces an ever increasing scrutiny from the regulatory landscape. 
  • There are comparatively higher levels of lending to co-ops, social enterprises and charities as well as local SMEs by local banks.  For example, the German government-owned development bank KfW has specific funding available for family businesses to help the younger generation to buy out the older (retiring) generation. 

Although, like the January sun, this is just a brief account of the topics, the discussion will help us to put finance in the hot seat in 2014.

CDS is here to help businesses considering the adoption of co-operative business models.

2014 is a time for change

January 10, 2014 /

Kim Lowe Director John Lewis Partnership

Co-operative Development Scotland recently hosted ‘Embedding a Culture of Ownership’ in collaboration with the John Lewis Partnership – the UK’s largest employee-owned company.

 Kim Lowe, managing director of John Lewis Glasgow, shared insights with an audience of over 30 existing and prospective employee-owned businesses in Scotland. Here she explains why she thinks 2014 is the year for employee ownership.

A new year presents opportunity for change. It is my hope that 2014 will see more businesses adopt the Employee Ownership (EO) model, aided by legislation and by examples of best practice. New legislation will be included in this year’s Finance Act after a period of parliamentary scrutiny and will mean that bonus payments to staff of employee-owned companies will be free from income tax up to an annual limit of £3,600. We hope this will encourage the creation of more employee-owned firms and will also help existing EO businesses – such as The John Lewis Partnership – to thrive. 

Last year, the Government-commissioned Nuttall Review revealed the link between employee-owned businesses and long-term economic success. According to academic evidence, they outperform other companies in job creation, have a lower risk of failure and are more satisfying places to work.

Employee ownership, in my experience, is most often motivated by a desire for a fairer and more responsible form of capitalism. At the John Lewis Partnership, shared ownership means engaging our Partners to deliver more for our customers and the business.  It means adopting a positive culture based on sharing in the rewards of success and creating a business that remains resilient in the face of challenging economic conditions. Giving employees a personal stake in the long-term success of their business is a powerful way of aligning their interests.

While the Government is starting to take forward many of the Nuttall Review recommendations, the playing field is still weighted against employee-owned businesses. The EO model remains relatively rare in Britain, despite evidence to suggest numerous benefits to the economy.

For too many and for too long, ownership has implied the right to sell, when I would contend that good ownership means the responsibility to nurture, develop and sustain organisations for the long term. This requires a change in culture and the way we perceive ownership in the UK. This shift won’t be an easy one to make but if done correctly it could mean a new generation of high-growth businesses, new employment opportunities, greater productivity and an economy better able to cope with the turbulence we will face in the decades ahead.       

Kim Lowe, managing director of John Lewis Glasgow

Kim Lowe, managing director of John Lewis Glasgow

 The article above appeared in The Scotsman on Thursday 9 January 2014.

New Year Message

December 30, 2013 /

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.

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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

2013: Looking back at a year of employee ownership

December 19, 2013 /

Euan_Ferries low res 2Co-operative Development Scotland recently took a delegation of employee-owned businesses and advisors to the Employee Ownership Association’s Annual Conference 2013 in Birmingham.

Euan Ferries, Corporate Advisory Director at professional chartered accountants French Duncan LLP shares a brief account of the day.

 We had a great time at the Employee Ownership Association’s Annual Conference 2013. The large number of attendees and exhibitors clearly demonstrated the increasing popularity of employee ownership (EO).

EO is now very much viewed as a viable alternative to other exit mechanisms such as trade sales and management buyouts. This is demonstrated through the established EO transaction structures including the increasing availability of funding geared towards EO such as mini bonds and specialist capital providers. The sheer number of employee-owned and aspiring EO businesses attending this year’s conference was further testament. 

I particularly enjoyed listening to the real life examples of employee-owned businesses at the conference and seeing business journalists who have previously never spoken about EO, such as the BBC’s John Pienaar, now very much aware of it. 

We all took a few good tips away with us from the conference including:

  • Think:  “culture first, legals later”
  • Hybrid management structures are becoming increasing popular.
  • And the original Golden ethos of “Do Good Work, Have Fun and make a Profit”!

It is likely that the popularity of the EO model will grow further in popularity with the support and tax breaks currently being considered by the Government. 

The Autumn Statement introduced a new tax relief which will allow companies that are indirectly  owned and controlled by an employee trust, to pay employees a tax-free bonus up to £3,600 from October 2014.

Owners who sell their shares to an employee ownership trust will be able to do so from April 2014 free of Capital Gains Tax, as long as controlling interest in the company remains within the employee ownership trust following the sale. In most cases this will save Capital Gains Tax at 10per cent.

These tax proposals should be a great incentive and improve productivity, so a ‘Win Win’ for employees, the business and the economy.

Here’s to many more EOs in 2014!

Take Five

November 4, 2013 /

Jaye Martin 03Jaye Martin is a specialist adviser who joined Co-operative Development Scotland this summer. Here she shares her experience of what it’s like to work at Scotland’s co-operative and employee-owned enterprise development organisation.

It’s already six months into my new role as a CDS specialist adviser, focussing on collaborative business models, so now is as good a time as any to pause for a moment and take stock of my top five experiences so far in what has been an exciting and challenging few months.

 

 1. The CDS Collaboration Prize

PrintThis has been a revelation for me as I’d never been involved behind the scenes of a competition before – unless you count making up a quiz sheet for Comic Relief to sell around my village when I was 12! We were overwhelmed with the quality of the collaborative ideas contained in the applications this year and it’ll be a valuable learning experience for me to be involved in the strategy sessions for the winners when they take place in due course. Excitingly, we are poised to announce our winners shortly so watch this space…

 

2. New consortia

We support so many groups of businesses and communities across Scotland in exploring and formalising their ideas for collaboration and I love the variety this work provides. To mention only a few of the new collaborations we’ve advised so far this year: Destination Stirling, the new tourism group supported by Stirling Council, Scottish Enterprise and VisitScotland; Scottish Mountain Biking Consortium, a group of like-minded businesses committed to developing the best family mountain biking experiences, packages and solutions in Scotland; and Community of Raasay Retail Association (CORRA), the community group behind the purchase of the only shop on Raasay.

 

3. Community shares

On my second day at CDS, I attended our Advisory Board session on ‘Community Shares – Realising the Potential’. Of great interest was a presentation by Hugh Rolo of the Community Shares Unit in England. Their newly launched dedicated web platform for community share issues, Microgenius, is a potential game-changer for this growing sector. We are seeing increasing interest in community co-operatives in Scotland, particularly in relation to renewable energy generation (wind, hydro) and broadband projects.

 

4. Tweeting

Another revelation. Somewhere between dinosaur and sceptic when it came to social media,CDS Twitter I can now see the real value in tweeting, blogging and their ilk – there is the potential to strike up dialogue with like-minded individuals and organisations and to spread the word about co-operative business models. Follow me @CDSjaye and us @cdscotland to find out more!

 

5. Collective Futures workshop

I was pleased to be asked to present on the consortium co-operative model at one of the Collective Futures workshops. This is an exploratory project to define the nature and form of co-operative business models used by designer/makers to sustain and grow their creative businesses. The project is itself a collaboration between Gray’s School of Art, University of the West of Scotland, Glasgow School of Art and a selection of residents who are practising designers/makers from all over Scotland. I was (unsurprisingly) impressed at the creativity used to facilitate the discussion on collectives, particularly the ‘mood boards’ which caused much hilarity (one included a photo of Katy Perry being blasted into outer space) but also revealed inner thoughts about the pros and cons of collaboration.

And as for my top moment outwith CDS…? It has to be when a boy from Dunblane lifted the Wimbledon trophy on that oven-hot day in July. Let’s hope the next six months are just as exciting!

 

Employee ownership gives us a new lease of life

October 18, 2013 /

Turnberry Rug Works 13It’s been a busy few weeks for handmade rug manufacturers Turnberry Rug Works. Not only has the Scottish textiles company just become employee owned, but it also took centre stage at a high profile design event at London’s Kensington Palace, supported by Scottish Enterprise. Here, Turnberry Rug Works managing director John McKerchar, reports on how it all went.

Becoming an employee owned company is quite a journey to make. But for us long term planning has really helped to make the road less bumpy.

Since 2011 we have identified this dynamic business model as the best way to safeguard our long term stability and preserve the unique skills of our staff. We like to think that what we do is a bit different in the world of textiles.

Turnberry Rug Works is making the transition to employee ownership.

Turnberry Rug Works is making the transition to employee ownership.

Turnberry Rug Works specialises in producing handcrafted rugs and wall hangings from a converted granary overlooking the sea at Turnberry, on the west coast of Scotland. Our clients have recently included the British Embassy in San Salvador and Virgin Money.

We started out in 1991 and have grown to annual turnover of £450,000. Most of the team has been with Turnberry Rug Works for over 20 years so we’re part of the local community. Employee ownership gives us a new lease of life, and ensures we remain rooted here.

Turnberry's staff are the lifeblood of what they do

Turnberry’s staff are the lifeblood of what they do.

Quite simply the skills and experience of the staff are the lifeblood of what we do and mean that clients come to us instead of our competitors. So employee ownership will give our staff a real say in their future direction of travel and harness all their considerable expertise.

The help we have received along the way from Co-operative Development Scotland (CDS), the arm of Scottish Enterprise that supports employee ownership, has been very welcome. Their role has been to demystify the process and help us ensure that staff are fully on board for this.

The transaction involves the creation of an Employee Benefit Trust (EBT), which will initially acquire 49 per cent of the shares, and eventually the full balance will be purchased by the EBT out of the company profits over the next five years.

That means staff have every incentive to succeed and I have every confidence they will do so. Indeed we have just returned from exhibiting at Decorex in London which attracts a large number of interior designers and high-end retailers.

Turnberry Rug Works at Decorex in London

Turnberry Rug Works at Decorex in London.

It’s the type of event that is usually out of reach for a company of our size but thanks to Scottish Enterprise organising a delegation of six Scottish companies to exhibit at the event, we found ourselves in the gardens of Kensington Palace where the event was held this year

Before the event we held a series of meetings with Scottish Enterprise to design the stand and to discuss the best way to benefit from the exhibition.

In addition to the stand Scottish Enterprise organised a Scottish gin and apple juice reception in the late afternoon on the Monday at which we were able to invite as many of our contacts as we could.

It was mobbed and drew people from Harrods, John Lewis, Heal’s and the building unit from the Foreign and Commonwealth Office to the stand. The exhibition security had to chase us all out at the end!

On the first day, Sunday, the stand also hosted a breakfast reception organised by the British Institute of Interior Design (BIID).  Usually the first few hours are quiet when an exhibition first opens, but our stand was full of key personnel from the world of interior design.

We gathered about 100 contact names during the course of the exhibition. In the few days since the event we have been asked to sample and quote for business worth over £8,000.

The hard work has only just started, and we now have to work through all our new contacts and send samples and follow up details but the initial responses do look very favourable.

Staff at Turnberry Rug Works.

Staff at Turnberry Rug Works.

My impression from the other five participating companies was that they too had a positive experience and that the stand, organisation and quality of the visitors, matched their needs.

We are yet to go through our formal review with Scottish Enterprise but we as a company are hopeful that this can be a regular feature of the Scottish Enterprise programme to help small Scottish companies in this area of the interiors market.

Why Scotland should take Employee Ownership seriously

October 3, 2013 /

Sarah Deas 05Co-operative Development Scotland’s (CDS) Advisory Board recently met to explore ways of increasing take up of employee ownership.

CDS is the arm of Scottish Enterprise (SE) that is charged with promoting employee ownership.

Here, Sarah Deas, chief executive of Co-operative Development Scotland, explains how they invited policy influencers and membership bodies to join the debate.

In order to bring participants up to speed the features and attributes of employee ownership (EO) were first described. Participants heard how Scott & Fyfe, Tullis Russell, Accord Energy Solutions and Galloway & MacLeod came to choose the model and the resulting benefits. With the exception of Accord, these were all long established family businesses that chose EO as a succession solution. Whilst their experiences differed, there was one common and positive result – long term sustainability of the business and its jobs. This offered a clear demonstration of ‘why we should take the model seriously.’

The benefits described by the participants included securing local employment, driving performance and generating socio-economic well-being. We heard that since 1992, the ‘Employee Ownership Index’ has outperformed the FTSE each year by an average of 10%. Also, EO businesses have a significant presence in the ‘Sunday Times Best Businesses to Work For’ – there are three in the top 10. Clearly the model won’t be appropriate in all cases, however, research shows that on balance it out-performs other models.

Scottish paper and board manufacturer Tullis Russell made the transition to employee ownership in 1994

Scottish paper and board manufacturer Tullis Russell made the transition to employee ownership in 1994

It was acknowledged that there is growing political interest in the model, both within Scotland and across the UK. The Nuttall Review generated 28 recommendations that are currently being taken forward. HM Treasury has committed £50million per annum to incentivise uptake and recently consulted on the best way to use this funding. CDS is promoting the model directly to businesses and via the media and professional advisers. 83 professional practices (lawyers, accountants and bankers) have met with CDS over the last year – and two are now even considering the model themselves!

 We also learned that 73% of Scottish businesses are family owned and account for 50% of private sector employment. However, evidence shows that only 9% progress into third generation family ownership. So, what is happening when the family sells out? Answer: trade sale, management buy-out, employee ownership or insolvency. EO is one of the options – but suffers from being little known and understood. It was acknowledged that the number of businesses being sold has reduced due to the recession – which may lead to what some call the ‘succession time-bomb’. 

So, what more could we be doing to position EO as an effective option?

It was now time to reflect on the wider policy and business environment. Who better to kick off this discussion than respected economist, Jeremy Peat? He described two lenses through which we could look at the economy: GDP (output) and ‘economic well-being’. Jeremy felt that there are signs that economic well-being is becoming more important to the Scottish public: ‘There is a change in tone … and EO is part of this’. 

Jeremy Peat OBE

Economist Jeremy Peat

In reflecting on finance, he worried that there is limited understanding of the model by banks resulting in a lack of mutual empathy. In his view, we need banks to take a longer term perspective, new forms of finance (eg patient, crowd) to be created and for equity investors to appreciate that longer term factors matter. On a positive note, Jeremy felt that this is starting to happen. Overall, he felt that more plurality of business models would be helpful in rebalancing the economy. A ‘let many flowers bloom’ approach.

Guests included representatives of the Institute of Directors, Confederation of British Industry and Royal Society for the encouragement of the Arts, Manufactures and Commerce, alongside members of SE’s regional and industry advisory boards. Some shared perceptions of what they had heard. Others focused on the process by which the model could be most effectively introduced to companies. 

Scottish Enterprise and Highlands & Islands Enterprise account managers were seen as crucial in this process. A focused approach was strongly recommended, enhanced by diagnostic tools and support from ambassadors.  An important message was that EO should be presented as one of the options – cautioning against a ‘one trick pony’ approach.

The rich and wide ranging discussion also explored the employees’ view and the role of unions. The model was shown to work well from all perspectives. In summing up, it was felt that the ‘quick buck era has gone’ and ‘people are increasingly questioning values and priorities’. Employee ownership is a model for ‘sustainable enterprise’ and, as such, has an important role to play.

Keeping it in the family?

September 17, 2013 /

Carol LeslieCo-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)

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.

The PIGS that DO fly

July 1, 2013 /

 Glen Dott low resSheffield is a hive of employee owned organisations and the place to embark on a learning journey to see what makes these places really tick.

Here Glen Dott, specialist advisor with Co-operative Development Scotland (CDS), reports back on his findings and offers plenty of food for thought.

 

‘Pigs might fly’ is the sort of cliché that applies to an idea that however well intended is unlikely to ever have any practical application. But when it comes to Pigs in the business world we have a model whose time has truly come and offers Scotland Plc. a dynamic alternative to growing the economy.

My role as a specialist advisor with CDS is to promote business ownership models which are Productive, Innovative, Growth-oriented and Sustainable. Pigs that fly in the commercial world…in other words!

With this in mind I was fortunate enough to be part of a trip to Sheffield to understand variations in ownership and governance models and their impact on performance. Sheffield happens to be a hive of Employee Owned organisations which exhibit diversity in structural and governance options and in their own way exhibit one or more of the ‘PIGS’ characteristics.

Learning Journey attendees: Co-operative Development Scotland advisers and staff, Scottish Enterprise organisational development advisers and Co-ownership Solutions staff. Taken outside the Aston Hall Hotel in Sheffield.

Learning Journey attendees: Co-operative Development Scotland advisers and staff, Scottish Enterprise organisational development advisers and Co-ownership Solutions staff. Taken outside the Aston Hall Hotel in Sheffield.

 First port of call alongside tour leaders Andrew Harrison and Norman Watson from Co-ownership Solutions was Parfetts Cash and Carry. It’s a traditional cash and carry founded in 1980 by the Parfett family. Steve took over from his dad in 1989 and by 2006, when he started reviewing his own succession options, it had six depots and a £250m turnover.

Steve was heavily influenced by his time working as a management trainee at John Lewis which has galvanised him into pursuing an EO exit option. In 2008 55 per cent of the company shares were sold to an employee trust, with an option for the trust to take up the balance of the shares in future. 

Employee engagement activities begun once the deal was concluded. Although it’s a fantastic result for 550 employees our advice generally is to engage with the workforce at the earlier opportunity available. Employees certainly now have their say, the business is growing and local jobs have been preserved.

After a gourmet lunch, courtesy of Parfetts, our next stop was Gripple, a model example of employee engagement and home of their eponymous and ingenious wire tensioning device. Charismatic and straight-talking founder Hugh Facey is one of the UKs foremost proponents of employee ownership and gave a fascinating account of his beliefs and the company.

A company limited by guarantee (GLIDE) has been set up as a holding company and will ultimately be the governing authority for Gripple and other operating companies and hold majority shares in the subsidiaries.

Gripple UK office

Gripple UK office

Employees are required to purchase shares and as demonstrated in the well attended communications meeting the returns, displayed publicly, are highly attractive. In addition to having a strong international focus, innovation and new product development are crucial with some 25 per cent of revenue being generated from products less than four years old.

I couldn’t help admire the way that all staff were immaculately turned out by choice in company uniform – a fantastic endorsement of any business. Fun certainly appeared to be part of the ethos with a screening of a corporate video involving many in the Old West Gun Works and espousing all Gripple’s principles including honesty, integrity, commitment, humour and passion. Gripple is certainly productive, innovative, growth oriented and sustainable.

That evening we were treated to an overview of the Employee Ownership Association’s vision to increase EO contribution to GDP from three to 10 per cent by 2020. David Daws, legal partner at Co-ownership Solutions and part time helicopter pilot, gave an eloquent description of the governance system options within EOBs. The message from David was clear: keep transitions simple and don’t let the tax tail wag the corporate dog.

Next stop was School Trends. The business was founded by Peter Beeby who sold the business to an employee trust in 2004 to preserve the ethos and maintain a community culture.  Employees are also required to buy shares as a condition of employment. The 120 employees are consulted widely on many decisions and have influence within the business, not least on the governing council, board of directors and via trustees.

We then travelled a short distance to a very interesting business. SUMA is a true workers’ co-operative and the largest equal pay organisation in Europe. All workers receive a flat wage of £14/hour and rotate jobs on a regular basis.

Members (shareholders) in the reception of SUMA in Elland near Sheffield

Members (shareholders) in the reception of SUMA in Elland near Sheffield

But wait for it…no-one is a boss! Sounds crazy? Maybe so, but both myself and my colleagues were impressed since the business has 100 members and turns over £30m annually. Furthermore it is growing and has successfully penetrated the Chinese market.

That’s amazing I hear you ask…how does such a ‘flat’ structure like SUMA deliver growth at a time of widespread economic gloom?

In truth, they are a highly organised worker community with a clear vision of the value they provide. They maintain close contact with their clients whilst and do so in a highly competitive marketplace.

Over tea and home baked cake in the canteen personnel officer Bob Cannell talked us through facts and figures relating to the business. It was set up as a workers’ co-operative in 1975, as an Industrial and Provident Society. Policy and direction is decided by general meeting of members, and an elected management committee oversees the fulfilment of a democratically agreed business plan.

Conventional no, but effective yes, SUMA passes the PIGS test with flying colours. They are productive, innovative, growth oriented and definitely sustainable. Food for thought.

Success is the common currency of employee ownership…

April 5, 2013 /

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.

Seafood Producer Serves Up Food For Thought…

March 21, 2013 /

Angela Wardrope hi resScotland 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 Dennis Overton 94

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. 

AquaScot 02In 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.

AquaScot 05So 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. 

Best of Food Argyll 2So 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.

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.

Employees can have their ‘stake’ and eat it…

February 21, 2013 /

Austin Flynn - PortraitAustin 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.

sharesThese 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.

FiguresI 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.

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.

A co-operative consortium that’s bringing home the bacon…

February 7, 2013 /

D&G Farmers Cooperative 02Farmers Nigel and Angela Taylor look after 180 Highland cattle at Castle Douglas, Dumfries and Galloway. The company, Barlochan Highlanders, was one of three similar outfits to win the CDS Collaboration Prize. Here, Nigel reports on why forming a co-operative consortium with Annanwater Organics and Clash Saddlebacks will bring home the bacon.  

 

 

I once read that forming a co-operative could best be described as a leap into the unknown. Until now I never fully appreciated the scale of the challenge involved, but more importantly I’d never really considered the huge benefits that taking a collective approach to a business can bring.

All that changed a few months back when myself and two other farming outfits from Dumfries and Galloway found ourselves clinking champagne glasses together having just won £10,000 worth of funding as part of Co-operative Development Scotland’s (CDS) inaugural Collaboration Prize. 

My partners are Steve and Sarah Burchell from Annanwater Organics, based near Moffat, who sell organic blackface and blackface-cross lamb and Robert and Caron Stewart, based at Port Logan, whose firm Clash Saddlebacks sells rare breed traditional pork and bacon.D&G Farmers Cooperative 07

The first strength of our enterprise is the fact that we have known each other for years and our triumvirate of existing businesses all share an obsession with delivering produce of the highest quality. Here in Dumfries and Galloway we all have the same approach to high animal-welfare, outdoor reared, slow grown, ethically and locally sourced and artisan produced meat.

We would all tick the same boxes and this has proved a positive foundation to forming our co-operative.

So what’s the big deal? Well, I guess it’s all to do with working together…the very definition of a co-operative, you might say.

Of course agriculture is known for its solitary lifestyle. After all my outdoor office in the beautiful Scottish countryside, and comprises just me and 180 Highlanders (cattle that is!) and we spend most of our days together. It’s only when a rep turns up, or I have to go and get something fixed, that I meet anyone else.Highlander Barlochan 2 for blog

Farmers’ markets each weekend throughout the season can be a real test of my dormant social skills.  We are simply not used to working with other people, especially when we only have a share of the decision making process. But then again, that’s the whole point.

Setting up a consortium has been a big step forward for each of us. We have immediately been thrown into a season of re-adjustment that we could never have envisaged. Geographically separated by almost 100 miles of open space, we have had to plan ahead and consciously think about how to communicate. Whoever invented the conference call deserves a pat on the back.

We have had to adjust to each other’s timescales in terms of lifestyle and when we are each available. Steve & Sarah (Burchell) from Annanwater Organics, out at Moffat, are just about to embark on what is their most demanding time of the year … lambing! Sheep Annanwater 2 for blogWhilst Robert and Caron (Stewart) in the fantastic area of Port Logan with Clash Saddlebacks are always busy.

Saddleback Clash 1 for blogGood communication will be key to our success and is all part of our exciting new venture.

I think each of us are quite creative in their own way and that again is important for this enterprise. We each have strengths and specific areas of experience that we each bring to the kitchen table (or conference call).

Okay, we each have our weaknesses and areas we would rather avoid, but somehow the co-operative knits together six individuals, all from different backgrounds, knocks out all the rough edges off, sticks us all back together, and then gives us something exciting and rewarding to fight for.

The future looks bright. We are just about to sign the lease for premises that will enable us to develop an exciting range of pork, beef and lamb added value charcuterie products, as well as providing a distribution and admin location.

Our new branding (including new co-operative name … watch this space) is in development with one of the top marketing companies in Scotland, and we just can’t wait for the summer when we are planning our official launch.

So, to answer the initial question: Yes, we are taking a huge step, but so far we are all finding it a hugely exciting one to be making.

Highlander Barlochan 4 for blog

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.

October 25, 2012 /

 

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.

October 16, 2012 /

Welcome to our first “guest blog”. This one’s from senior Scottish businessman Professor Nick Kuenssberg, chairman of Fife-based technical textiles firm Scott & Fyfe which only last month embarked on its journey to employee ownership. Over the next year we’ll be hearing regularly from a range of co-operative voices.

We hope to make this blog a must-read not only for the Scottish co-operative sector but also the wider Scottish business community. Thanks Nick for kicking our guest blog spot off in style.

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

 

 

 Nick Kuenssberg

Having launched Scott & Fyfe Limited – the Tayport-based technical textiles business – on the journey towards becoming an employee owned company, I thought it helpful to explain not only the context but also the reasoning behind its introduction and the special attributes behind our particular employee ownership model.

Context: Scott & Fyfe, founded in 1864, is a traditional industrial textiles company, a survivor of the Tayside jute industry that reinvented itself successfully in the 1960s when jute was replaced by polypropylene. There had been significant restructuring of both the business and the management following the 2008 international crisis and the 2009 retiral of executive chairman, Hamish Tough.  The existing profit share scheme was increased from five per cent of pre tax profit to ten per cent, distributed on a per head basis. In addition, an annual incentive scheme for management and a three-year rolling incentive scheme for out-performance by senior management were introduced in 2011. The company was stabilised and a new innovation-led strategy was developed together with a flatter organisational structure and greater market-facing activity in January 2012.

Decision justification: Hamish Tough and his sons Richard and David, both current executive directors, represent the family owners. In mid 2011, while discussing the future needs of the company and likely succession plans, they hit upon employee ownership as a potential solution. Following discussion within the family and with others including employee ownership expert David Erdal, they concluded that the long term sustainability of the company, the health of the Tayport community and the interests of its customers and employees could perhaps be well served through an employee ownership model.  There followed long conversations, support from Co-operative Development Scotland and six months consultancy from Baxi, all carried out in complete secrecy in case the project did not come to fruition.

Shareholders and board committed to the concept in mid August and the project was launched to all 100 employees in a lengthy but successful meeting in mid September of this year, when all received a “Business Class” boarding pass for the journey.

Scott & Fyfe model: The particular structure adopted by Scott & Fyfe is mixed i.e. ordinary shares will be owned by an Employee Benefit Trust and directly by the staff. This will be achieved as follows: the family will sell all their shares to the Employee Benefit Trust which will always own an absolute majority of the ordinary shares. Richard and David Tough will reinvest the bulk of the proceeds (in reality the totality of their proceeds net of tax) in redeemable preference capital which will be paid out over up to 16 years.

Only current employees and the Employee Benefits Trust will be ordinary shareholders in the company. All employees will be shareholders and will have the opportunity of building a cumulative equity stake via a number of routes, these to be sold on departure, retiral or death:

  • An initial one-off award of free shares through a Share Incentive Plan (SIP) to create personal individual ownership and ensure the right to participate in the AGM;
  • The annual profit share will be split 50:50 between ordinary shares (warehoused by the SIP to mitigate NIC, PAYE and capital gains tax liabilities) and cash (subject to NIC and PAYE);
  • The potential annual purchase of partnership shares from the SIP through the payroll up to the legal maximum of £1,500;
  • The issue of free and matching shares in line with the purchase of partnership shares, the multiple being determined by the company’s performance the previous year; and
  • Management performance-related share option EMI schemes, whereby 50 per cent of the award vesting in line with the criteria (personal and company-related) will be issued as ordinary shares, the balance in cash subject to NIC and PAYE.

Corporate governance: In addition to the more obvious benefits of ownership for the workforce:

  • Employees will elect one employee director (maximum 3 terms of 2 years);
  • Employees will be represented on the ten strong employee forum;
  • The Employee Benefit Trust will be managed by a careful balance of seven trustees including two employee-elected and one independent trustee, and
  • The long-term beneficiaries of the EBT in the event of the sale or liquidation of the company are any outstanding pension fund deficit and the Tayport community.

In this way the company will be managed by the board of directors (all of whom will be subject to re-election every two years) in the interest of current and future employees and the community. The incorporation of a requirement for special resolutions in respect of major decisions means that corporate governance will be more challenging for the directors than under previous family ownership.

Legacy: This dramatic move by the Tough family is to be welcomed; it will help to underwrite an exciting future for the company and its stakeholders including its customers, its employees and through them the local community. This is a wonderful legacy for Tayport.

Website: The employees have welcomed the opportunity and the initial workshops have generated a positive current of interest. As part of the education and training the company has established a comprehensive website (www.tayportworks.com) that is being constantly updated and is available to all including third parties.

Progress: There are two rounds of training workshops underway and the legal documentation is virtually complete so that there should be no obstacle to completion before the end of the current calendar (and financial) year.

This is genuinely a new dawn for everyone at Scott & Fyfe and it’s up to all to seize the opportunity. The board believes that the combination of employee involvement and employee ownership will contribute to the future long term success of the company.

Richard Tough, David Tough, John Lupton from Scott & Fyfe.

 

Members of Scott & Fyfe’s ‘NOW’ team – Michelle Quadrelli, Business Manager, Kevin White, Machine Operator, Alison Bond, Business Manger and Peter Thomson, Project Technician (knitting) – assessing new product ideas.

 

 

 

 

Stuart McLaren, Assistant Technician threading a double needlebed machine at Scott & Fyfe.

 

 

 

 

Bob Caird, Machine Operator Stich Bonding and Loop Fabrics Department at Scott & Fyfe.

 

 

 

 

David Nicoll, Development Technician assessing new weave constructions on Scott & Fyfe’s flat weaving looms.

 

 

 

 

David Walker, Machine Operator Stich Bonding and Loop Fabrics Department at Scott & Fyfe.

 

 

 

 

 

 

 

 

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

Celebrating 110 years of building a successful co-operative…

September 27, 2012 /

It was an honour and a privilege to be invited to Italy by CMC di Ravenna.The company had invited me to speak at a conference to celebrate its 110th Anniversary.  The event also marked the Italian launch of the United Nation’s International Year of Co-operatives (IYC) 2012.  It was a wonderful experience to visit Emilia Romagna, which is world renowned for the prominence of co-operative enterprises, at such a important time.

CMC di Ravenna is an international business – a worker co-operative operating in the construction industry. The company was established in 1901 by bricklayers and cement masons to give them competitive strength. It delivers large projects – including the Singapore underground, Milan subway and the United Nations conference centre in Addis Ababa. It employs 9,000 people and has a €715 million turnover.

The company operates as a co-operative controlled group. There are three forms of members; staff, retired staff and financing members. Voting rights and board differs within these groups. By involving retired members the company benefits from their knowledge and goodwill and financing members enable access to external investment. Governance structures are designed to maximise member engagement and influence, while enabling effective decision making which involves an Assembly, Board and a Council of Delegates.

The anniversary celebrations took place in CMC’s conference centre – which had been recently upgraded to include a concert hall venue for the local community (an excellent example of the company’s commitment to the community).  Massimo Mattencci, chair of CMC, opened the event, reflecting on the company’s success and strengths citing the company’s philosophies of ‘act locally, think globally’ and ‘our strength is human resources – not capital’.

The event had been widely promoted – including posters visible on the streets – a format we in the UK would more typically align with concerts!  

Professor Zygmunt Bauman (Professor  of Sociology at Leeds University) was billed as the main act . And I was surprised to see my name listed as one of the supporting acts!  I think that is what they call an ‘Andy Warhol moment’. The advertising clearly worked with at least a 400-strong audience in attendance and the paparazzi at every turn!  

Professor Noreen Hertz (from Judge Business School, University of Cambridge) author of ‘The Rise of Co-op Capitalism’ was also on the bill and attracted much interest. Co-operatives UK recently published a paper summarises her work which is interesting reading click here to read. Perhaps terming the conventional system ‘Gucci Capitalism’ was not the best idea in front of this audience!  But her main message was clear – given all the challenges of the conventional system, it’s time for us to change to a system that values relationships and is based on collaboration – what she terms ‘Co-operative Capitalism’.

Other speakers included Vera Negri Zamagni, academic and author of a number of books on the history of co-operatives – including one on CMC di Ravenna which was launched at the conference. Dame Pauline Green, President of the International Co-operative Alliance spoke of the significance of IYC 2012 and the ‘once in a lifetime opportunity’ that it offers. Arantza Laskuran, Secretary General, Mondragon Co-operative, provided an overview of its business strategy and R. N. Pandey, Managing Director of the National Labour Co-operatives Federation in India spoke of developments in his country. And, I provided an overview of Scotland’s innovative approach to co-operative development. A very eclectic, insightful and thought-proviking line-up if I do say so myself!

So what were the final lessons we can take from this for Scotland?   CMC di Ravenna and Mondragon are both good examples of co-operatives that have achieved scale. New organisational structures and forms of finance have been utilised to enable this growth.  A key message for Scotland is the importance of business model innovation in enabling growth and international competiveness.

This is my final blog on my most enjoyable and informative visit to Emilia Romagna. I’d like to convey a very special thanks to Massimo Mattencci and Valda Miani, CMC di Ravenna, for inviting me to be part of their celebrations and to Stefania Marcone and Sara Vicari, Legacoop, who kindly organised my study tour. 

All that remains for me to say is a very sincere ‘grazie’ to all!

Until next time…

And remember…think ‘co-operatively’!

Sarah Deas is the chief executive of Co-operative Development Scotland, 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.

Spotlight on co-operative youth…

September 13, 2012 /

The UK faces constant challenges in terms of youth unemployment. I thought it would be interesting to share my experience of how our Italian friends have used the co-operative models to help address this issue. 

Over the years Italy has faced tight labour markets, with young people leaving the higher education system and finding it difficult to secure work.  Faced with unemployment, many of the forward thinking Italian youth have chosen to establish their own businesses – setting up a worker co-operative with other graduates.

I visited Atlantide – a tourism co-operative – established by environmental studies graduates who were struggling to find employment.  Their endeavours certainly paid off, establishing a business which has grown to 50 worker members, with temporary staff doubling that number during peak seasons.

Like many co-operatives, Atlantide collaborates with other businesses. I visited one venture that is operated by a consortium of four businesses; Atlantis plus two cultural co-operatives and an environmental services company. Together they have established a society co-operative providing educational services on ecological, environmental and cultural assets. 

The consortium has a contract to manage 14 country parks in Emilia Romagna and deliver environmental educational services to schools. My visit included a tour of one of these parks – which I will never forget as the park was home to the most amazing wild flamingos. And just to add a bit of trivia – did you know that the reason Flamingos are pink is because they eat red plankton? That is a fact!

I was also lucky enough to visit Ravenna’s Museum of Natural Science which the consortia manage on behalf of the municipality.

So it seems the young professionals of Italy can teach us Scots a few lessons. This example illustrates how young people can create their own successful business and by working together, they can pool knowledge and resources while sharing risks. 

Until next time…

And remember…think ‘co-operatively’!

Sarah Deas is the chief executive of Co-operative Development Scotland, 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

 

Sociable Italia…

August 30, 2012 /

Before departing for Italy, I was determined to find out more about social co-operatives – a model pioneered in the country in the late 1970s. It has had impressive growth, especially in recent years, with numbers doubling since 2005 to 15,000 businesses. 

So, why are social co-operatives so popular?

The answer lies in the co-operative model being central to Italy’s social services system. It is legally recognised and given preferential treatment in public procurement. It places civil society at the forefront of service reform. Most are worker co-operatives, however the multi-stakeholder model – where workers, beneficiaries & volunteers share control – is also popular. 

Principles of reciprocity, equality and accountability are important in the delivery of humane care and the organisational attributes of co-operatives offer such advantages. Other drivers include dissatisfaction with service quality and a perception that user involvement will ultimately enhance delivery. Also there is an expectation that social co-operatives will deliver at a lower cost and with a commitment by the government to ‘subsidiarity’, services delivered and controlled by organisations closely relate to citizens.

There are two types of social co-operative:

‘A’ Co-ops – account for seventy per cent of social co-operatives. They serve the elderly, children, and disabled people through the provision of health, education and social services. They operate as commercial businesses but have privileged relationships with the municipalities.

‘B’ Co-ops – account for thirty per cent of social co-operatives. They are similar to UK’s ‘social firms’. Their aim is to integrate disadvantaged people – referred by municipalities’ social services departments – into work.  Over thirty per cent of employees must be deemed ‘disadvantaged’. These groups typically undertake cleaning, landscape gardening, parks maintenance, laundry and packing/assembly work.  Disadvantaged employees can be compensated at lower pay rates (recognising a lower productivity) and there is no national insurance paid on wages. 

Social co-operatives, like other co-operatives, have beneficial tax arrangements and access to finance on good terms. This is balanced against restrictions on distribution of profits. The law ties social co-operatives to only serve a given municipality – although wider coverage is often achieved through collaborating in consortia.

During my stay in Emilia Romagna I visited Cadiai – a ‘category A’ social co-operative. It was established in 1974 to provide services to the elderly, handicapped and children, now employing 1,246 staff, primarily working in Bologna. Services include residential care, nursing care, day nurseries and home care. 

I visited one of its nurseries which is operating under a 28 year contract with the Bologna municipality. It is owned by a consortium of two social co-operatives, a construction co-operative (that built the facility) and a catering co-operative (that provides the meals). This enables an interesting financing model as investment can be spread over a long contractual period (enabled by both the contract period and a construction company being part of the consortium).

I was fascinated to see the thought that had gone into the design of the nursery. It was clearly based on a scientific understanding of a child’s development.

It was more client centric than any nursery that I’d visited back at home. The ethos that underlies co-operative ownership was explained as the reason. 

 

Some serious lessons for us here in Scotland. The potential role of mutual models in delivery of public services is currently being explored. Italian social co-operatives demonstrate that such models lead to reduction in costs, improved quality and higher job satisfaction. They also illustrate that legislation – put in place to promote a specific approach – can have far reaching effect.

Until next time…

And remember…think ‘co-operatively’!

Sarah Deas is the chief executive of Co-operative Development Scotland, 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

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