Employee Ownership Effect launch, London

EOA 22 march 2010 Westminster Hall, LondonWent to the launch of “The Employee Ownership Effect: a review of the evidence” and “Model Growth:Do employee owned businesses deliver sustainable...

EOA 22 march 2010 Westminster Hall, London

Went to the launch of “The Employee Ownership Effect: a review of the evidence” and “Model Growth:Do employee owned businesses deliver sustainable performance?” The latest in a line of reports from the Employee Ownership Association. PDFs can be found on the EOA website. I was very pleased to be invited as a worker cooperative representative.

The first is a meta-review of several hundred research papers and the second the results of a questionnaire survey of EOBs (employee owned businesses) and nonEOBs. Worker cooperatives were not surveyed because worker owned cooperatives cannot unfortunately be members of the Employee Ownership Association. EOBs are businesses which are substantially owned by their workers. Many have external investor part-owners – unlike cooperatives.

We (me and Sion Whellens from Calverts) being the worker Coop representatives present, lobbied the EOA board members to agree to joint working with CoopsUK and to allow worker coops to join both organisations. Worker coops have so much in common with EOBs.

I told them that in Spain COCETA (the worker coop association) and CONFESAL (the employee ownership association sit together when they have joint interests but respect each others differences and the same in France and Italy and many other countries (eg the USA). Only in the UK are worker coops and EOBs at odds with each other like this. There is history between the organisations (although the forerunner of the EOA actively promoted worker cooperatives) but we have too much to gain to allow old arguments to keep us apart.

Although worker cooperatives were not studied in this research, we can take these results as relevant. Luckily we do have an academic hopefully about to do a comparative study of worker cooperatives in the UK. Prof. Virginie Perotin from Leeds University Economics dept. has studied French, Italian and Spanish worker coops’ business performance. So we will be getting an international comparison. Nothing like this currently exists in the UK, shamefully. As Patrick Burns from the EOA says ‘If you have no research to back up your claims, you cannot ask for policy.”

The EOA meta research shows that EOBs perform equally or better on all of the business performance indicators measured. Productivity, growth, commitment, absenteeism, retention, employee engagement, innovation, health, wages, investment returns

The positive effect was more where there was more employee participation in decisiomaking. But employee enthusiasm diminished over time.

EOBs had far greater sustainability and life spans than nonEOBs. Capital was locked into local communities far better.

There is no research on customer satisfaction but a large amount of anecdotal evidence that it is higher.

The questionnaire research looked at growth. It found that small and medium size EOBs grew better than larger ones and better than equivalent nonEOBs. That employee engagement and comparative business performance was better in smaller but equally as good in larger EOBs which actively decentralised decisionmaking and had less centralised business planning.

It seems that when businesses EOB and nonEOB empower front line staff, customer and competitor information circulates more freely enabling higher growth rates. Centralised control is associated with lower growth rates.

Worker owned businesses which install ‘proper’ management in an attempt to be more efficient will likely be achieving the opposite effect, losing their employee ownership advantage.

EOBs faced more regulatory challenges but employment law problems were not investigated, only financial. Worker coops face major issues with unfair employment laws. Yet again an employee ownership study looked at the business structure but not the relationships between the members of the business. Does this show a ‘business bias’?

People issues are commonly ignored in business research even in people based businesses. So many times expensive ‘technical fixes’ are brought in (restructuring, new IT, new technology etc) with little effect because it was the relationships between workers that were the real problem.

All the respondents were Chief Executives and equivalent. So there could well have been some CEO bias in the answers given. In my experience the stories told by EOB ’employee owners’ can be quite different to the official line.We outsiders only get the good news from a CEO.

This is one of the differences between the EOA ‘line’ and the UK worker cooperative position. We want to go beyond the cult of the chief executive and develop direct networked democratic management. CEOs can and do get in the way of genuine employee ownership and control. Worker coops don’t see the need for an ‘officer class’. We would rather have organic growth than the explosive and alienating CEO driven growth, of EAGA for example, where it has been difficult to induct the hundreds of new workers acquired along with their businesses into a shared ownership culture.

The CEO management model in EOBs certainly cause terrible succession problems. plc CEOs are ten a penny (umm no, 1 per million pounds more like). Their job to enhance share value is simple compared to the many factors that an EOB CEO has to learn, many of which are unique to that business. Replacing one of these charismatic EOB CEOs is very difficult. The CEO management model is a fragile model. Far better to find a more robust nonCEO management model, like the Suma network governance model. Because CEOs who revert to type, destroy employee ownership (Baxi for example and all the 1980 employee owned bus companies).

A 2004 european study of privatisation of worker coops found that the No.1 cause was executive capture. The chief executive and top team taking over and privatising the business. This has happened in many employee owned UK businesses. I find it odd that Employee Ownership enthusiasts merely seek to lock up shares in trusts (asset locks) rather than resolve the cause, alienation of worker owners to the point where they are prepared to ‘sell their birthright for a mess of pottage’.

In cooperatives we try to maintain the commitment to the collective ideal rather than alienate member workers by centralised expert planning and asset locks.

Some quotes from the speakers (paraphrased where I didnt get the exact words)

Patrick Burns the director of the EOA

“The dominance of investor owned business has to be tamed. A bigger employee owned sector would help.”

Mark Field MP for westminster.
“We need mutuals, building societies mark 2, Northern Rock as a mutual.” A critic of the joint stock company (the plc). “Has it run its course after 150 years?”

(He is the conservative MP for the City of London!)

Ali Parsa, Circle Health

“The intelligence of the many is always greater than the intelligence of the few, no matter how smart they are. So let the many take the decisions in their jobs and work.”

and the most extraordinary, I had to pinch myself at what I was hearing,

Andrew Lansley, shadow minister of health

“The American Centre for Employee Ownership says ‘The case is closed. Findings this consistent are highly unusual – employee ownership plus participative management result in higher business benefits.’ Its no good having just ownership (that’s a dig at the EOA).

Managers and management get in the way. Only 1/3 of NHS employees say they are consulted or listened to by their managers.

The Tories will make it far simpler for NHS staff to take control of their services as worker cooperatives. But not by top down orders. 20% improvements in productivity are possible like Circle health make. (Circle are a CEO led EOB.)

They all need leadership but leadership by the many not by a few.”

That’s a pretty radical point of view from a likely future Secretary of State for Health. Yes I know there are big questions about ‘coops in the NHS’ but its the thought that counts.

There really does seem to be a shift in the zeitgeist from CEO and investor domination to participative employee ownership. When a prominent front bench Tory is more radically democratic than the Employee Ownership Association!

The meeting room in the Palace of Westminster was full of Chief Executives of EOBs. Maybe full democracy is a step too far for them which is why they won’t let worker coops be EOA members. The owners of capital may have fled the scene (see below) but the ‘little owners’ are still clinging on to their privileges.

It’s a major opportunity. Why do we have it? After 150 years of fiercely protecting the ideology of labour vs. capital? Is it because Big Capital has left the arena? The masters of the universe are away playing global financial speculation and have lost interest in the capital generating potential of productive business. The corporate investors have followed them into the stratospheric world of complex financial derivatives and their betting shop ilk. (Its just gambling really).

The cat is away and we mice are allowed to play with the scraps left behind. Will the cat return when she runs out of pickings or are we on our own now?

In 1866 at the International Working Mens Association in Vienna, Karl Marx said “Tell the working men to invest their efforts in producer (worker) cooperatives rather than consumer owned cooperatives (like t’Coop). The latter merely scratch at the surface of capitalism while the former undermine its foundations.”

He’d have a big smile on his face under that beard if he’d been listening to these MPs

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