The legal and business case in favour of the Chancellor’s rights for shares deal.
As we await the government’s response to the Nuttall Review of Employee Ownership, Christina Savage speaks to Iain Hasdell, chief executive of the Employee Ownership Association, and Deborah Warren, associate in the Employment team at Clarion, about why it pays to hand over the reins.
Deputy Prime Minister Nick Clegg said recently that he wants employee ownership to enter “the bloodstream of the British economy”. Do you think it will?
Hasdell: “I fully understand the government’s enthusiasm. A business where the entire workforce is intrinsically committed to its success breeds new ideas and innovation – leaving the business far better equipped to handle economic turbulence. The debate has progressed from being about whether employee ownership works to how embracing this particular company structure can be made easier.
"As a result of raised awareness, we are seeing a growing number of employee owned public service spin-offs ranging from those providing youth services to those delivering domiciliary care for the elderly.”
What are the benefits of employee ownership?
Hasdell: “If your desire is to optimise the engagement of employees because you want to deliver more creativity and more innovation by fulfilled workers who are less stressed than their counterparts in conventional businesses, then employee ownership is indisputably the way forward.
“The conditions of running a business owned by its employees successfully are, however, exactly the same as anywhere else. It requires sound financial management and demand for its products or services.”
Warren: “Employees who have an interest in the ownership of a business are likely to feel more valued, and having a stake in the business is likely to create a greater sense of corporate responsibility amongst employee owners. Employee ownership is also likely to be beneficial in sectors that struggle with persistent absenteeism and under performance. Of course a sound management structure remains essential for the effective running of a business.
"But if employees are happier at work, problems which require management time and attention are less likely. I’d imagine that workplace grievances are likely to be reduced if employees have a greater understanding of the challenges of running a business. The result could ultimately be fewer employment tribunal claims.”
From an employment law perspective, does employee ownership pose any particular challenges?
Warren: “If employees whose contracts are terminated retain their shares in the business, this could pose a challenge. It’s hard to see how a ‘clean break’ is possible in that scenario and this should be given some consideration beforehand.”
What can HR managers in conventional businesses learn from employee ownership?
Hasdell: “Almost everything there is to know about the dynamics of employee engagement. People who have the ability and skills to engage staff more efficiently are an extremely valuable asset to any organisation. As such, there is real merit for human resources professionals to grow their network of contacts in employee owned businesses to gain a deeper insight into how to improve employee engagement.”
“At the core of an employee owned business is a focus on the overall objective. It is ‘big picture’ thinking as opposed to each individual’s personal interest according to their job description.
"Employee ownership is a new way of thinking. From an HR perspective, I would encourage managers and directors to explore alternative ways of engaging with staff regardless of the structure of their organisation.”
Source: People Management, 15 October 2012
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