Tag: employee ownership (Page 1 of 3)

Employee ownership is the perfect fit for Bentleys

Bespoke joinery manufacturer and interior fit-out specialist, Bentleys Shopfitting Ltd, is the latest business in Scotland to adopt an employee ownership model.

Established in 1987, the Dundee-based company specialises in the management and completion of interior fit-out projects, creating high quality bespoke furnishings at its in-house manufacturing facility.

Bentleys Shopfitting Ltd, Dundee

Bentleys Shopfitting Ltd, Dundee

It has evolved from specialising in the retail sector to expanding its expertise across the education, leisure, hospitality, corporate, residential and oil and gas sectors, with notable projects including The Old Course Hotel and Spa in St Andrews, Gleneagles Hotel in Auchterarder and the Balmoral and Sheraton Grand Hotels in Edinburgh.

With turnover in the current financial year expected to exceed £8m, Bentleys’ three directors were keen to continue the trend in growth since the recession.

CDS guided and supported Bentley’s transition to employee ownership, providing expert advice on the implementation of the new ownership structure. Director Sarah Deas said: “2016 has been a tremendous year for transitions to employee ownership as more companies recognise its effectiveness in harnessing the effort of employees, preserving company ethos and rooting businesses in the local area. It’s an exciting time for Bentleys and I wish the company well as it joins the thriving and dynamic EO community.”

Managing director Alan Walker discussed why the company decided make its transition to EO:  “We wanted a succession plan which would allow us to continue in the business over a period of years whilst supporting a management team that will continue to drive the business forward.

“The involvement of all employees in the ownership of the business will be a major boost going forward.  In addition to our 50 staff we have a network of local suppliers and subcontractors who rely on our business. Other options were considered but the priority of the board was to ensure the business remained local.

Bentleys Shopfitting Ltd, Dundee photographer Fraser Band     07984 163 256 www.fraserband.co.uk

An Employee Ownership Trust will now buy the shares from the shareholders and hold these on behalf of the employees.  Tax incentives will be available to allow the employees to invest in the company.

If you would like to learn more about how employee ownership could benefit your business, please get in touch and have a chat with our expert advisers.

Climbing to success with employee ownership

Peter Will, managing director of Tayplay

Scotland’s latest business to become employee-owned is Perth-based Tayplay, a manufacturer of rope, playground and climbing equipment for the playground and leisure industry. Since it was founded in 1994, it has developed into the UK’s leading supplier of rope playground equipment, shipping hundreds of products worldwide and turning over £2million annually.

Last month’s move to an employee-ownership model has seen Tayplay’s 14 members of staff given the opportunity to become owners in the business. Managing director Peter Will discusses why the company decided to go down the EO route and shares his experiences of the transition process. 

Following the recession we experienced a difficult trading period and we were considering a trade sale.  However, we could not agree terms and after a strategic review we decided to look more closely at the employee ownership business model.  Co-operative Development Scotland then conducted a feasibility study and we quickly discovered employee ownership ticked all of our boxes.  No other options were even seriously considered at that stage.

Our EO journey started in 2014 and so far we have been able to meet all of our targets in terms of the sale price, timescales and the fact we’ve been able to retain the business in Perth.  EO is the ideal solution for retiring owners who want to preserve the ethos of the business and retain employment locally.  It is also a reward for the staff as we wanted to recognise the contribution and commitment they’ve made to the company’s success.

An Employee Ownership Trust has acquired a controlling interest in the company and will hold these shares on behalf of the employees, with the view that our employees will eventually own 100% of the company.

We spent quite a bit of time working with specialist advisors at CDS, undertaking meetings with the staff to help them understand the concept of employee ownership.  Our employees now really believe in the new model and we expect the degree of buy-in to increase now that the deal has gone through.  As the employees begin to see and feel the reality of EO we expect their commitment to the company will grow and it will make recruitment easier.

The Tayplay team

CDS guided and supported Tayplay’s transition to employee ownership, providing expert advice on the implementation of the new ownership structure. If you would like to learn more about how employee-ownership could benefit your business, please get in touch and our expert advisers will be happy to chat with you.

Happy partners make for better business at John Lewis Partnership

David Jones started working for John Lewis Partnership as a Graduate Trainee in 1982. Since then he has held a number of roles, including running several Waitrose stores and some time as Waitrose’s Supply Chain Director.  His current role is Partnership Registrar, in which he is tasked with ensuring the business upholds the principles of the partnership. David gives some background to the Partnership’s employee ownership model, and how putting the happiness of the partners first makes for better business.

david-jones-by-jeff-hopkins-resized

David Jones, John Lewis Partnership

“John Lewis Partnership has not always been employee-owned.  The son of the founder, John Spedan Lewis, decided it was unacceptable that his family made more from the business than all other employees combined. His objection wasn’t just moral; he felt it was bad for business.

Spedan’s view was that if he created a more successful business that reinvested in itself, took a long term view, gave everybody a voice in how it was run, and actively contributed more to community and society, then more people would want to spend money in his shops.   In 1929, he sold his shares to a trust, that would hold the shares on the employees’ behalf, and he was repaid for these shares over the next 30 years.

John Lewis Partnership now has almost 400 shops, 90,000 employees and gross annual sales of over £11 billion.  The Partnership employs 3200 people in Scotland. There are seven Waitrose stores as well as John Lewis shops in Aberdeen, Edinburgh and Glasgow.  We also have a customer contact centre in Hamilton.  We support many Scottish companies in our supply chain.  Quality of produce is paramount for Waitrose, and we are pleased to support many Scottish producers. Indeed, Stoat’s Porridge and Mo’s Cookie Dough are two Scottish companies who started out selling products in Waitrose, and have gone on to be national businesses.  We build long term strategic partnerships with our suppliers, and are proud to have been working closely with Aquascot so closely for many years.  I’m thrilled the firm has also adopted the employee ownership model.

As Partners in the business, our employees share the rights and responsibilities that employee ownership entails. This doesn’t mean that everyone is involved in every decision the business makes – we couldn’t function like that.  What it means is that they hold our leadership to account for the decisions they take.  We have 5 employees elected to our Partnership Board. These employees do not have management or executive responsibilities; they are there to provide the link with our partners and to test and probe the management. We have a democratically elected Partnership Council that ensures the business is run for and on behalf of the partners. The Council shares the views of the Partners on key issues and makes recommendations on policy.   The Partnership Council has the authority to remove the Chairman – although I’m pleased to say this has never happened!

Our Partners are rewarded for their commitment. The Partnership’s profit , after investment is distributed to Partners. This can be through pay, discounts subsidised leisure or learning. Each year we announce our annual bonus, which in 2016 amounted to 5 weeks’ salary for each Partner. Fairness is a key value and each member of staff receives the same percentage of salary in their company bonus. The same bonus is paid to employees whether they work in John Lewis, Waitrose or one of the other companies.  If John Lewis has a bad year, and Waitrose do exceptionally well, one balances the other.  This is the dual strength of our model.

John Lewis Partnership can never be sold, which gives us a powerful competitive advantage.  Because we have no option to sell our shares and invest elsewhere, each of our 90,000 partners has a strong incentive to throw all their energy and passion into making this year better than the last.

And it works. In a ferociously competitive sector, where we’ve seen the demise of high street brands such as Woolworths, BHS, Comet and others, we have not only survived, we’ve thrived.  Employee ownership is fundamental to our commercial success.  If we are to build a more diverse, sustainable and inclusive economy, we need to see more companies choose employee ownership.“

David Jones is speaking at a breakfast seminar on 20th October 2016 hosted by Highlands and Islands Enterprise at their Inverness offices. More information can be found here.

Learn more at our FREE event

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

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

Sharing ownership: the employee stake

Date:                5 October 2016

Time:                9:30am to 1pm

Duration:          3 hours

Admission fee: Free

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

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

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

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

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

What’s covered?

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

Speakers

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

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

Dean Hunter, founder and managing director of Hunter Adams

Dean Hunter, founder and managing director of Hunter Adams

 

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

Agenda

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

Register for this event

 

Engaging employees through innovative approaches to governance

11/12/15 - 15112301 - SCOTTISH ENTERPRISEGLASGOWSarah Deas

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

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

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

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

Peta Hay

Peta Hay, managing director for Saxton Bampfylde in Scotland

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

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

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

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

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

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

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

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

SE Events table 2

Click to expand

 

 

 

Sarah Deas discusses EO Day 2016

Today (1 July) is EO Day (Employee Ownership Day) and with 16,000 employers in Scotland looking to transfer ownership in the next five years, we’re urging business owners to explore employee ownership as a viable succession route.

Throughout Scotland’s business community, the benefits of employee ownership (EO) as a driver for growth are becoming increasingly recognised.  EO can be implemented not just as a succession solution for long-term stability, but as a catalyst for sustainable business growth.

The advantages of employee ownership have been proven in Employee Ownership Association-led research, and include improving employee health and wellbeing, increasing productivity and fostering creativity and innovation across an array of industry sectors.

By having a stake in the business, employees have a vested interest in increasing productivity and driving innovation.  This sense of ownership leads to employees being more willing to contribute ideas, from developing new products to identifying new markets.

Many employee owned businesses in Scotland chose to sell to an employee ownership trust with the vendors being paid the value of their business from current and future earnings.  That way business owners receive a fair price for the company and employees don’t have to dig deep into their own pockets.

Co-operative Development Scotland (CDS) can help you decide on the best model of employee ownership for your business.

One of the organisations that sought the support of CDS during its transition to employee ownership is Black Light Ltd. The company, which specialises in lighting, staging, sound and audio visual solutions, became fully employee owned just last month (June 2016) and in this blog for Scottish Enterprise, its founder Gavin Stewart explains the process and his experiences.

Gavin also kindly gave up his time today to join us in a live, interactive webinar to discuss Black Light’s journey to EO. If you missed the out on this the full recording will soon be available on the Scottish Enterprise website.

Today, another employee owned Scottish business is also celebrating success. Computer Application Services (CAS) has achieved the silver ‘Investors in People’ award in recognition of its excellent team engagement and management practice.  Ken Naismith, CAS chief executive, believes this success is down to its talented and motivated workforce who are highly engaged in the business thanks to its EO model. You can read more about this fantastic accolade on the CAS website.

The number of employee-owned firms based in Scotland has doubled in the past six years and this growth is forecast to accelerate.  Currently there are 78 employee-owned businesses operating in Scotland, with approximately 6,500 employees and a combined turnover of around £900million.

Our aspiration is to achieve a tenfold increase in employee ownership in Scotland over a ten year period.

If you would like more information about employee ownership and how it could potentially benefit your business, please do get in touch and our expert advisers will be happy to chat with you.

Transitioning to Employee Ownership – the Legal Perspective

andersonstrathern
In January 2014, software developers Computer Application Services Ltd (CAS) moved from owner management to employee ownership.  Bruce Farquhar and Bruce Harvie, from the corporate team at lawyers Anderson Strathern, advised on the process.  Here partner, Bruce Farquhar gives his views on the transaction:

“The Corporate team at Anderson Strathern work mainly with the larger end of the SME market, and although we have advised a number of cooperatives, this is our first true “employee ownership” transition.  It was an excellent deal to be part of and I would say I’m now an enthusiastic advocate for the model.

“The transaction was quite straightforward, certainly no more complicated than any other business transfer transaction.   There were two main parties to the deal, the former owners as the vendors and the employees of CASLtd as the buyers.  It was in no way an adversarial process – indeed it was very collaborative with all parties wanting what was in the best long-term interest of the company.  We also involved an accountancy firm, Johnston Carmichael, which was able to give specialist advice on the tax implications for the parties.

“Like most employee owned firms, the majority of the shareholding is held in an Employee Benefit Trust.  This Trust retains the shares for the long term and provides stability to the company.  There is also a portion of shares available to employees as options.  In this way, employees are able to see their value in the business grow as the company prospers.

“The chair and chief executive both invested in the business and this meant there was no need to source any external finance for the deal. The intention is that both chair and chief executive will sell their shares back to the employee trust in the future.

“The sale to employees was not the first intention of the vendors. They had been pursuing a trade sale which had fallen through. However, the employee ownership option provided a satisfactory exit for them as owners, and was well received by the employees of CAS.

“As an adviser, it is a model I see fitting well with the aspirations of a number of business owners. Many entrepreneurs are reluctant to see their firm in the hands of a competitor.  The grueling process of preparing a business for a trade sale can be uncomfortable for a seller.

“A sale to employees can be a much easier process. An additional attraction for the owner is that they are able to control the pace of the transaction, and can influence their role in the business going forward.  The former owners of CAS had decided they wanted to exit at the point of sale.  Many owners would prefer to remain involved in some way, perhaps in a non-executive role.  The collegiate nature of an employee ownership transaction enables the vendor to do that.

“The benefits for employees are clear.  There is continuity of employment, they have a stake in their business, and more say in how that business is run.

“We’re delighted that we are now working with another successful Scottish business making the move to employee ownership. As awareness grows, I’m confident there will be many more following suit.”

You can learn more about  CAS Ltd’s transition to employee ownership at an event hosted by CDS and CAS Ltd in Edinburgh on Thursday 3 September.

For more information or to register go to: http://bit.ly/1Vh9aUy

Scotland’s first software business back on track with employee ownership

CASStarted in 1969, Computer Application Services (CAS) Ltd is believed to be Scotland’s first software company.  A spin out from Heriot Watt University, two of the first products were a programme to schedule midwifery training and an application to control cremators – a real cradle to grave enterprise! Now the company has developed an enviable reputation in the niche space of case management and complaint handling.  In 2014, supported by Co-operative Development Scotland, the company became employee-owned.  Like many other employee owned companies, it didn’t start out on that path. Chief Executive, Ken Naismith tells the story.

“ CAS was an okay company with a lot of potential. That potential was not being realized.   It’s fair to say that in recent years, there had been little investment in the business infrastructure and its people.   The previous owners had planned to exit by selling the business to a PLC.  That sale fell through at the eleventh hour.

“I was invited by the chairman to get involved in identifying an alternative succession option.  Employee ownership as a concept always made sense to me – of course people will work harder and enjoy their job better if they own the business.  With the support of Co-operative Development Scotland, we arrived at a structure that gives the company a strong and stable platform for growth.   59% of the business is in broad employee ownership by trust and shareholding; the Chairman and I invested in the remainder of the business.  I plan to reduce my shareholding over time as the company gets on an even keel and this will release more ownership for employees.  We are in a tough, competitive market and our people are now energized and ready to face that head on.

“The employee owners call themselves CAStodians, reflecting their responsibilities to look after and grow the business.    We operate much more openly now.  Information is shared, board minutes are distributed and everyone contributes to our weekly staff meetings.

“We have just produced and distributed our first “Employee Owners Annual Report” which is a comprehensive reflection on our activities last year and our plans and objectives for the next few years.  We did forecast a loss in our first year post buy out, but it was good to report that this loss was much less than we expected.  The forecast for 2015/16 is good.  We have no debt and cash in the bank. There is a number of proposals out for some very lucrative and high profile pieces of business.  We are working on shortening our lead times and up scaling our marketing efforts.

“Our people have to wear two hats; as employees and as shareholders/owners.  We encourage open dialogue; if it’s small get it off your chest, if it’s big, put it on the agenda.

“There’s a palpable sense that the future is in our control now, and everyone has a part to play in making that future as good as it can possibly be.”

You can learn more about how employee ownership has been a catalyst for innovation and growth at CAS Ltd at an event hosted by CDS and CAS Ltd in Edinburgh on Thursday 3 September.

For more information or to register go to: http://bit.ly/1Vh9aUy

 

 

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

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

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

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

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

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

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

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

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

Employee ownership – the key to a stronger Highland economy?

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

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

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

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

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

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

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

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

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

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

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

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

Innovation and how employee ownership can unlock it

eodayWith today marking Employee Ownership (EO) Day, we asked our EO ambassadors how important innovation is to growing your business and how EO can offer an advantage.

Here, a number of ambassadors from a range of sectors – including manufacturing, oil and gas, textiles and agriculture – offer us their thoughts on the subject.

Nick Kuenssberg, Scott & Fyfe: “Recent findings from an employee survey have confirmed the intuitive belief that a sense of ownership and a genuine understanding of and commitment to the revised innovation-led strategy would enhance performance and thus the longer term future of the company. In parallel a visit from an internationally respected textiles consultant in April said that he had been impressed by such an innovative and vigorous company. Simultaneous innovation and ownership change was perhaps a risk but it is already proving to be well worth taking.”

Alan Spence, Accord Energy: “At Accord, we believe that investing in people and giving them space to think outside the box not only benefits them but also the company. Over the past five years, our employees have developed and presented a number of new and exciting approaches to oil and gas allocation. Our innovative work has helped clients by improving their systems of allocation, while we have benefited through wider industry exposure, higher levels of activity and improved recognition and satisfaction for our engineers.”

John Housego, WL Gore: “Bringing a continued stream of innovative products is the only way to keep your business alive and fresh in the marketplace. The benefit of an employee owned business is large in this arena because of the increased engagement EO businesses often demonstrate with their teams. Innovation comes from passionate associates who can use their knowledge of the capabilities available and the culture to have their ideas more readily heard, and so leveraging a larger proportion of the team in innovation. That feeling of ownership and joint reward really helps this process.

Ralph MacLeod, Galloway & MacLeod: “When structured correctly, employee ownership can unlock innovators within the business and reward them correctly. This is having a huge impact – differentiating us from competitors, identifying new markets and improving margins for stakeholders and customers in a responsible and sustainable manner.”

Dick Philbrick, Clansman Dynamics: “Cynics predicted that in an employee-owned business there would be a cautious attitude to technical development. The cynics were wrong – 2014 was our busiest year for technical developments. Nothing is guaranteed in engineering but if there are problems the Employee Owners will bust the proverbial gut to fix them.”

United States of Employee Ownership

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

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

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

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

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

Purpose – retirement planning versus employee engagement

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

Legislation driven

Even conferences in the USA are a little different.

Even conferences in the USA are a little different.

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

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

Governance

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

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

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

What do Co-operatives mean to you?

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

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

What would you add to the list?

 

Employee ownership on agenda for professional advisers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Employee ownership could be the best thing for your business

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

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

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

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

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

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

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

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

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

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

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

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

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

Navigating towards employee ownership – now is the time to get on board

Glen DottThis week, law firm MacRoberts will host seminars in Dundee and Glasgow on how employee ownership (EO) can improve a business. CDS specialist advisers will be on hand to share their experiences of being a business’ ‘first mate’ on the EO voyage. 

Here Glen Dott shares his thoughts on sailing safely in to the unknown…

My job is to work with businesses in Scotland, helping them plot their journey to employee ownership and eventually sail off into the sunset.

Over the years I have worked with many different types of businesses on their transition to EO and one thing is most definitely true – EO is the perfect vessel to develop an entrepreneurial and innovative culture within a business.

When employees have a vested interest in the business as a whole they become enthused and engaged in finding ways to make it more successful.

Many EO businesses reap significant rewards from this increased participation, giving them an advantage over competitors which, in turn, leads to greater profit.

It is this camaraderie and entrepreneurial spirit that helps most EO businesses establish an inspiring ‘we’re in this together’ culture – charting the unknown in search of new successes.

Not unlike sailors navigating the open sea, each EO business needs a brave captain and a willing crew. Together they plot their course making sure the journey is safe and one which is filled with discovery.

At CDS, we welcome the captains and their crews with open arms. And I am honoured to be ‘first mate’ to help them navigate their way towards effective employee ownership of their business.

The MacRoberts’ seminars, Employee Ownership – Making Your Business Better, will be held in Dundee on Tuesday, 17 February and Glasgow on Wednesday, 18 February.

You can find more details on their events page.

A Valentine’s message

As we are celebrating Valentine’s Day today, we asked members of the CDS team to tell us what they love most about co-operative working.

Gillian Kirton: I love the “we are all in it together” attitude we often hear from employee owned companies – it makes the staff go that extra mile!

Carol Boden: Employee ownership helps make the business world a fairer place through empowerment and engagement of all staff members.

Jaye Martin: I love co-operatives because the consortium model can be a great way for small businesses to collaborate and compete with larger companies.

Cathy McCready: I love the fact that cooperatives work together to grow together.

What do you love most about co-operative working? Why not tweet us, @cdscotland.

Director up front on employee ownership

Director magEmployee ownership features on the front cover of the influential Director magazine this month, thanks to an interview with John Lewis Partnership (JLP) chairman, Sir Charlie Mayfield.

JLP is the UK’s largest employee-owned business, employing 90,000 staff, known as partners, across its 42 stores.

In the article, he says the model is key to JLP’s success. Not only does profit-sharing motivate the partners, but it ensures better staff retention than can otherwise be seen in the retail sector.

Employee ownership also allows the business to take a more sustainable, long-term approach, he says, going on to discuss why he’s advocating the model as a satisfying and successful succession strategy for business owners.

Sir Charlie was speaking before the inaugural InspireEO conference, which saw 350 delegates from businesses and public bodies travel to the West Midlands to hear first-hand how employee ownership helps large businesses like JLP as well as SMEs operating across different sectors.

You can read the full interview in the February edition of Director.

Inspiring day to drive growth in employee ownership

Glen DottNearly 350 delegates from businesses of all sizes visited the West Midlands last week for the inaugural InspireEO conference, hosted by the John Lewis Partnership (JLP).

Several high-profile speakers addressed a large audience which included prominent government and business figures. Not only did it motivate businesses – it has set the tone for a Scottish event of its own, as CDS specialist advisor Glen Dott explains.

Sitting among the hundreds of entrepreneurs who had gathered to participate in the first-ever InspireEO conference, you couldn’t help but feel motivated and excited for the future.

Gathering in the West Midlands were representatives from businesses across the United Kingdom, keen to hear the benefits of employee ownership (EO) from one of its most well-known proponents.

In hosting InspireEO, JLP provided a platform to promote employee-owned business models of all types. They used their own approach as an example to demonstrate the benefits EO offers both the company and its staff. EOA0037

Supported by several high-profile sponsors, the event underlined the widespread and growing endorsement of EO to exiting owners, advisors and the public sector.

Productivity in EO businesses grew 4.5 per cent last year while others flat-lined, demonstrating the value of the model for sustainable growth. People who work in such businesses are happier and healthier, taking less time off sick.

Business advisers were also in attendance and helped sponsor the event. Not only does this highlight the increasing interest in EO from businesses, but it demonstrates there is growing recognition among the advisor community of the model.

Sir Charlie Mayfield, the chairman of 80,000 partner-strong JLP, was joined by Francis Maude, Minister for the Cabinet Office. Both addressed the audience and in doing so demonstrated just how important EO is to business and the economy.

Sir Charlie Mayfield

Sir Charlie Mayfield

So inspirational was last week’s gathering that we are preparing to have a similar conference in Scotland later in the year.

Awareness and support for employee ownership is growing in Scotland and we are hoping to attract a large audience.  An engaging programme of activity is being prepared, along with some truly inspirational speakers to demonstrate why EO offers a bright future not just to Scottish businesses, but to Scotland as a whole.

We’ll be announcing full details later in the year. Hopefully I’ll see you there.

Memorable year for co-operative working

Sarah Deas resized2014 has been a busy year for Co-operative Development Scotland (CDS), with interest in co-operative working higher than ever.

Here, CDS chief executive Sarah Deas reflects on the year and looks ahead to what 2015 may bring.

As we hurtle towards the end of 2014, it is a natural time to look back on the past 12 months. Last December, I remember fondly writing how the eyes of the world would be on Scotland throughout the year – and that certainly proved to be the case!

One shining moment was the XX Commonwealth Games, held in the always-friendly city of Glasgow. I was proud to serve as a Host City Volunteer at this spectacular event which will live long in the memory as an example of what can be achieved when we work together. CDS was delighted to contribute to Glasgow City Council’s (GCC) business event held during the Games. In fact, one of the highlights of the year was seeing GCC and its counterpart in the capital progress their commitment to be Co-operative Councils.Sarah Deas

This is a significant endorsement of co-operative working, which CDS is supporting through the provision of specialist advice. Co-operative working is now recognised as a means of achieving competitive advantage by businesses in a wide range of sectors and there is also growing interest in employee ownership – specifically as a succession solution – helped by the new tax incentives.

To tap further into that growing interest, we held five ‘successful succession’ events during the year. Kindly hosted by employee-owned companies – Aquascot, Galloway & MacLeod, Page\Park, Stewart Buchanan Gauges and Scott & Fyfe – these sessions gave those interested in the ownership model the opportunity to see how it works in practice.

We also engaged with Scotland’s professional advisers through our expert briefing sessions, tackling subjects including funding the employee buyout and employee share ownership.

David Narro Assoc 09

David Narro Associates celebrated becoming employee owned in August.

CDS helped a wide range of businesses across the year, including Fitwise and David Narro Associates, both of which made the transition to employee ownership. Scotland has a host of new employee owners, and hopefully they will find the newly-formed EOA Network Scotland useful – one to watch in 2015.

I was also grateful for the opportunity to visit Quebec for the International Summit of Cooperatives, a truly insightful conference. We heard from the Mondragon Corporation, often seen as an example of best practice when it comes to co-operative working. It is worth noting that the Basque region, where Mondragon is headquartered, is now looking to learn from the UK. Just last month, I welcomed a delegation from the Gipuzkoa province who visited some of our well-established employee-owned companies.

Finally, we once again offered companies in Scotland the chance to win £5,000 in cash and £5,000 in support to make their collaborative ideas a reality. The standard of entries to the Collaboration Prize this year was high, and all of us at CDS are excited to see who will follow in the footsteps of past winners the Scottish Mountain Bike Consortium and The Wee Agency.

In 2015 we anticipate interest in co-operative working to continue to grow as the benefits for staff, business and the economy are further demonstrated. While awareness is most definitely increasing, our job is to keep that momentum going. The growing desire for fairer, more inclusive approaches to working is an opportunity to further underline the virtues of the models – and we will continue to shout about it.

The year began with Kim Lowe, a managing director at John Lewis, calling for more businesses to consider a co-operative approach. I think it is clear that many have done just that, but more can and will be done in 2015.

2014 has been a memorable year in many ways, and I wish you all a happy, healthy and successfully prosperous 2015.

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