How to switch to an employee-owned business model

Businesses looking for more return from its workforce can give staff a stake in the firm, according to a guide encouraging employee ownership.

To mark the UK’s first Employee Ownership Day (4th July), Co-operatives UK has launched Simply Buyout — a toolkit with practical knowledge and resources to inspire business owners and workers who want to own the business they work for. It is particularly relevant to business owners looking to sell up or retire.

Launched in association with the Wales Co-operative Centre, Co-operative Development Scotland and Preston City Council, the guide was one of the key recommendations made in the 2012 Nuttall Review, established by Deputy Prime Minister Nick Clegg as part of his efforts to encourage a ‘John Lewis’ style economy in the UK.

Research from Co-operatives UK shows employee-owned businesses have higher levels of employee engagement, are more productive and more resilient in an economic downturn. Productivity in employee-owned businesses is nearly twice as great as a conventional business, at an average of 34 per cent in the four years following conversion, compared with just 17 per cent for other businesses.

And whereas only 65 per cent of conventional businesses survive the first three years, over 90% of co-operatives are in still in business beyond three years.

John Lewis, with a turnover of £9 billion, and the Mondragon Co-operative in Spain, which employs 83,000 people, are just two big examples of successful employee-owned organisations.

Smaller examples include the Edinburgh Bicycle Co-operative, with 100 worker owners, which is forecast to double in size by 2017. Overall there are at least 497 worker co-operatives in the UK.

Simply Buyout, which was drafted by Co-ownership Solutions LLP, is aimed at owners who wish to sell their business, professional advisers, and employees looking for a co-operative way to gain an ownership stake in the business they work for. It helps signpost people to specialist employee ownership experts who can help to create successful and sustainable employee-owned businesses.

Ed Mayo, Secretary General of Co-operatives UK, said: “Co-operative employee ownership is where the majority of the business is owned by the staff. Simply Buyout is an essential guide to employee buyouts and becoming a co-operative employee-owned business.

"Employee ownership is a great option for any business that wants to be successful, highly productive and innovative. It is one of the best ways to motivate and get the most from the people who work there. As the employees share ownership and control, they are much more productive."

Graeme Nuttall, Partner at Field Fisher Waterhouse LLP and author of 'Sharing Success: The Nuttall Review of Employee ownership' writes in the forward to Simply Buyout: “A good number see employee ownership as complex. It need not be. The company can be much like any other company. What is different is how it is owned.

"Co-operative models are a welcome part of the employee ownership landscape here and abroad. There are many leading employee-owned businesses that can be classified as co-operatives under accepted international definitions. I have helped to advise and form many myself. Co-operative forms of employee ownership help to underpin an active role for employees in terms of governance and accountability.

"The review I conducted for the Government on employee ownership, which reported in 2012, concluded that clear advice and information is now a key requirement, particularly at the point of business succession and transfer. I warmly welcome this guide as key to this and wish you the best for using it."

Sarah Deas, Chief Executive of Co-operative Development Scotland (CDS), said: “Employee Ownership Day is about celebrating the success of employee-owned businesses and their growing contribution to the economy.

“We hope that Simply Buyout will encourage more businesses to consider adopting this innovative business model which helps sustain businesses in communities, engage employees and deliver productivity, innovation and growth.”

Derek Walker, Chief Executive of the Wales Co-operative Centre welcomed the publication of the report: “Employee ownership offers business owners a sustainable means of growing their businesses while involving their workforces and sharing the benefits of the business’s growth. It also offers an attractive option for business succession planning. Simply Buyout will help raise awareness of the potential for employee ownership in Wales.”

• To download Simply Buyout, and to find out more, visit: www.uk.coop/simplybuyout.