Inaugural workshop of the White Rose Employee Ownership Centre (WREOC)

Posted in: WREOC
Event date: May 13 2013
University of York

Introduction to the Centre

Andrew Pendleton (University of York) introduced the Centre and the aims for the day.  The Centre is a collaboration between academics at the Universities of Leeds, Sheffield, and York, with the aim of developing and implementing research agendas on employee ownership.  A defining feature of the Centre is a concern to engage with employee ownership practitioners and policy-makers at all stages of the research process.

The aim for the day therefore was to address the question ‘What would we like to know about employee ownership (EO) and what sort of research would be useful to practitioners?’

Session 1.  Majority and Co-ownership: what do we need to know?

The Chair Peter Marsh (University of Sheffield)- described the day as ‘a co-operative day centred around a co-operative topic’.

Iain Hasdell (Employee Ownership Association)

There are substantial research gaps around important economic facts relating to  EO:

  1. How many EO businesses are there across the UK?
  2. How many employees work in EO businesses?
  3. What is the turnover of EO firms? What is the cumulative economic size of EO firms?
  4. What type do EO businesses take? How many have EBT in them?
  5. What is the productivity of EO businesses? (need evidence based on large number of cases rather than anecdotal evidence)
  6. What is the size of the EO sector vs the number of externally owned businesses in the UK?
  7. How far is the UK behind the US in terms of the number of EO businesses?

He argued that it is impossible to devise effective policy for EO businesses if we do not have a good knowledge of unless we know what we are dealing with.

Graeme Nuttall (FieldFisherWaterhouse)

Graeme outlined three obstacles to EO becoming part of the business  ‘mainstream’:.

  1. Lack of awareness about EO and what it means
  2. Lack of resources to promote EO
  3. Actual/perceived complexity in regulation/legal requirements

He agreed there is a need for clear evidence-based research in order to back up decisions being made by EO firms.

He argued that it would be especially useful to know:

  1. At what point in the process do the benefits of EO kick in?
  2. What are the significant elements of organisational structures of EO firms in terms of achieving the full benefits of employee ownership?
  3. Is EO the best way of ensuring employee engagement?
  4. Is an employee benefits trust important for achieving the most effective employee engagement?

Graeme indicated that there will probably be a follow-on report to the Nuttall Report so it would be good to be able to show progress on these issues.  Evidence of academic interest will be helpful to demonstrate that employee ownership is a worthwhile cause.

Andrew Harrison (Co-ownership Solutions)- raised a point about EO outcomes. EO means different things to different people, and different groups value different outcomes. He asked how about how sufficient data can be collected to cover all of these outcomes?

Graeme Nuttall­- agreed that there is a need for clear terminology and a clear statement of the benefits of EO so that it is possible to see which EO characteristics are associated with which outcomes.

Andrew Pendleton (University of York)

He suggested that much of the research in the UK and USA has been based on a model whereby ownership by employees has an effect on employee attitudes which leads to changes in employee behaviour (they are less likely to leave and more likely to work harder) which, in turn, has effects on the performance of the EO company.

Ideally, research would look at all of these stages together but this is technically difficult. Most research has tended to focus on just two of the various stages proposed. It is often difficult to determine what actually creates the observed effects.

He suggested that in some respects the EO research agenda has not moved on very much since the early research of the 1980ss.

He recommended some important questions for further research:

  1. To look at the different governance structures in EO companies in the UK. Which are more effective?
  2. Who is involved in governance?
  3. How are these linked to EO structures?
  4. How can governance structures be designed so that employees are involved but do not obstruct effective management?
  5. Ownership structures: is direct ownership or trust-based ownership, or some combination of the two, most effective in affecting employee attitudes and behaviour, and ultimately company performance?
  6. What factors are associated with sustainable employee ownership?  As part of this it would be useful to examine the demise of EO firms and the factors which led up to this.

Herman Kok (Lindum)

Herman argued that it  is important for organisations  to get their objectives right when looking at converting to employee ownership. Why are they doing it? They need to do it for the right reasons.

Lindum were looking for efficiency. The construction industry is not renowned for its willingness to change and openness to doing things in new ways. EO was a way of getting employee buy-in and encouraging a collective response to a difficult economic situation.

The company took a 2-pronged approach:

  1. Profit share scheme 10%- distributed equally to all employees
  2. Equity share scheme 10%- again distributed equally to all employees

By making the distribution equal, the message was sent that all employees are valued equally.

However, explaining to employees what it means to be a shareholder was challenging.  It is important to get it across to employees that their contribution matters.

Herman argued that getting the culture right was more important than adopting a particular form of ownership structure.

Session 2: Public Sector Mutuals (PSM)

Peter Marsh - posed the questions ‘What is the ‘public service’ part of PSM? What is it which makes the difference in this type of organisation?  Following a brief review, participants were divided into discussion groups to address these questions.

The group discussions raised the following points and issues:

  1. There appears to be a lot of similarity between PSM and the private sector.
  2. PSM face particular constraints around assets, who owns what, who can do what with what, and the market place they are moving into.
  3. The journey into PSM is a particular and difficult one. PSM is a description of a process of getting from a to b.
  4. The business of PSMs, especially in health, is distorted by the debate about whether they should be a charity or a CIC?
  5. PSMs are more influenced by public policy than other EO firms, and this is constantly shifting due to changes in government priorities etc.

Session 3:  Employee Ownership Culture: how to create and re-energise it

Alden Whittaker-Brown (Arup)

Alden outlined the history of Arup.  The company became employee-owned in 1968 and has 11,500 employees across 33 countries with 4,000 employees  in the UK. The company is 100% employee owned in trust and profit shares are paid to all staff. Profit is shared on an sliding scale with more junior employees receiving a smaller percentage and the more senior a greater percentage.

Arup is intending to re-energise its EO culture.  The aims are to:

  1. Raise awareness of employee ownership within the business. Vital to communicate to employees that the company is EO
  2. Establish closer dialogue between members of the firm and the leadership, which is important for EO to be effective.
  3. Embed citizenship behaviours (e.g. ‘going the extra mile’).  The aim is that employees see themselves as employee owners.

A further important issue concerns the measures of success: turnover, profit, recruitment (attractiveness of organisation to prospective employees), absenteeism, retention, productivity, or happiness (which is not usually measured by engagement surveys).

Peter Marsh- made a point about language and terminology. How should people in employee-owned businesses be referred to?  ‘Co-owner’ sounds American. ‘Member’ vs ‘Partner?. EO vs ‘held in trust’? Language is a researchable issue.

Ute Stephan (University of Sheffield)- drew attention to  emerging research that EO spills out beyond the organisation to the wider community e.g. to outreach/community projects.

Session 4:        Employee Issues and Representation in employee ownership

Janet Williamson (Trades Union Congress)

Employee ownership can represent a challenge for unions. The main issue is that of voice. In the view of the TUC, for EO to be meaningful it needs to be more than just profit-sharing: the voice element makes it meaningful. In addition, in terms of the business case for employee ownership, financial participation alone does not boost company performance; it is when it is combined with employee engagement that it is associated with better company performance.

If EO is introduced, it should be fully discussed with employees (and with TU reps if applicable), not imposed in a top-down way.

EO should involve effective involvement of workers in decision making in the organisation (can use representatives). This should be done with an awareness of context, rather than in a prescriptive way, but there must be a meaningful structure for employee voice. In addition, workers and their representatives should be involved in running the scheme itself.

EO is not a substitute for union recognition; there still exists a power imbalance between managers and employees so there is still a role for unions to represent members’ interests. The issues might be different in EO firms.

The TUC feels that for EO to be meaningful employees should be given a substantial amount of shares. Even more important than the size of the stake is the issue of access- shares must be available to all workers regardless of level. TUC against schemes based on workers’ ability to pay which reinforce existing inequalities.

The TUC favours collective ownership structures, for example trusts, which enshrine the principle of ownership for the workforce as a whole, rather than it being seen as an individual benefit.

EO is not a substitute for good pay and conditions.

The TUC is wary of schemes that encourage workers to invest large amounts of their own money into the company, especially lower paid employees. Many employees would be better off paying any spare cash into a pension, rather than putting all their eggs in one basket by investing their money in the company that employs them. 

Session 5: Health and Well-being

Richard Wilkinson (University of York)

He is interested in EO as a path for reducing income differences. He sees good research as good political ammunition in making the case for reduced inequality. He argued that the benefits of EO need to be shown in research again and again to promote the idea in the media that EO is a better way of doing business.

In terms of pay differences, the main problem is in the private sector. He argued that issues with pay differences will become less problematic as the percentage of EO firms in the market place increases. At the moment, there is pressure to pay the ‘going rate’ in line with what other CEOs are paid.

He discussed the relevance of EO to environmental issues. Pay differences feed into consumerism which is about status and competition and is intensified by inequality. Co-operatives and EO businesses do better ethically as well as being nicer places to work so we should support them for that reason as well.

Finally, he argued that there is a need to make existing research more available and accessible as well as doing more research.

Plenary session: Future agendas: how to take things forward

Summary of suggestions for future research/activities

  1. Co-ordinate activities with other organisations/bodies looking at EO to avoid duplication of effort
  2. Avoid over-politicising this research. It cannot be ‘all things to all people’.
  3. Would be interesting to look at the engagement experiences of women in EO organisations
  4. Need to identify skills/behaviours which employees in EO need to demonstrate to show engagement/empowerment
  5. Research which examines how EO businesses can get access to growth as compared to organisations with private financing
  6. Explore EO start-ups, perhaps as a comparison with spin-outs
  7. Unpick how voice mechanisms work in EO organisations
  8. Look into  the possibility of combining data sets
  9. Need to present a balanced picture of EO businesses- not just success stories but tell the bad stories too
  10. Need for research which makes it clear what particular type of EO the organisation is to help organisations decide whether the findings are relevant to them.

The organisers undertook to reflect on these very useful suggestions, and to report back on further deliberations on research priorities and projects.