Suite TV announces move to employee ownership
JGA supports Suite TV in their transition to EO
We are delighted to share the news that Suite TV have become employee-owned. The award-winning television post production company responsible for providing editing facilities to the nation’s favourite comedy programmes became the latest business to join the employee ownership community.
This week’s announcement reveals that 100% of shares have been transferred into an Employee Ownership Trust (EOT) on behalf of all their employees.
JGA’s MD and Founder Jeremy Gadd and our Associate Corrine Thomas have supported the founders’ ambitions to transition the organisation to an Employee Ownership Trust (EOT). From the initial contact made during a networking session earlier this year, the last five months have seen a great deal of planning and preparation to which Jeremy and Corrine have been able to add clarity and guidance throughout.
Suite TV provides editing facilities for a number of well-known national comedy programmes, including the popular ‘Have I Got News For You’ (with Ian Hislop and Paul Merton), critically-acclaimed ‘Afterlife’ (penned by the irrepressible Ricky Gervais) and ‘Not Going Out’ (the second longest running British sit-com). The team were also involved in editing the recent groundbreaking documentary drama ‘Partygate’.
At a staff meeting of the 40 employees this week, Julian Aston, Suite TV’s Chairman and Founder, announced this monumental news at the company’s headquarters.
Julian said: ‘The decision of the founder shareholders to sell their shares to the newly-formed Suite Employees TV Trust was the very best way to ensure the future of the business, and that by passing the ownership to the staff, the long-term future of the business was secured.’
Shelley Fox, Founder shareholder and Managing Director, said: ‘We looked for years to find the right succession strategy and employee ownership will, I hope, mean that we pass the baton on to our brilliant young and talented staff.’
The transition to employee ownership has taken more than three years, and Suite TV was assisted in this journey by William Franklin of Pett Franklin, Jane Jeavon of Legal Clarity as well as Jeremy Gadd of J Gadd Associates. JGA have been retained by Suite TV for a further nine months to support and guide the transition journey. Suite TV are full members of the Employee Ownership Association.
For any further information on Suite TV, please contact Julian@suitetv.com
Keeping your people engaged and excited about EO
It’s not rocket science. For most of us, the connection we feel to our business is as important as the work we produce. In fact, the quality of the two is often linked.
So if you’re an EO company looking to maximise your potential by strengthening your employee owner engagement, what practical steps can you take?
The first is to recognise that effective employee engagement doesn’t only reinforce your ethos and values – it unlocks commercial benefits too.
That’s because knowledge and awareness can drive positive behaviours such as collaboration, sharpening the focus on key business goals.
In today’s tough economic climate, sharing key challenges such as margin and profitability will always be time well spent.
Communicate openly with your employee owners
As Lisa Fryer, JGA’s Operations Manager and Associate, points out: ‘It's easy to talk about revenue and income targets, but how often do employees hear about margin and profitability? And do they understand the link with employee services and benefits?
‘Openly sharing figures will support your employees’ wider education about their business and can positively impact your ability to achieve commercial goals.’
Lisa speaks from experience. In previous commercial roles, she saw how enabling her team to understand their contribution changed behaviours and added value to the bottom line.
Keep employee owner engagement on the radar
Yet focusing on employee owner engagement can quickly slip off the radar post-transition, especially if other change is afoot. Even without the pandemic’s impact, energy can drift.
Reaching the point of transition can also leave companies feeling they need to step back and draw breath.
Lisa offers this advice: ‘If your business plans to pause, make one commitment, set a deadline for when you will give more attention to culture and stick to it. Explain to employees why there’s a break and when EO will be back on the priority list.’
Refresh your employee owner engagement as you grow
So is it ever ‘too late’ to start engaging your employees in your EO? ‘Definitely not!’ says Lisa.
‘In fact, keeping your employees informed and engaged in your EO is something you need to revisit and refresh over time to ensure your approach is still fit for purpose – so set a review point to check in.’
It’s easy to think that because you have an employee survey with encouraging results, it’s ‘job done’. ‘But if you’re facing into wider commercial or cultural challenges, it can make a huge difference when everyone feels involved and engaged with the changes and goals,’ Lisa explains.
‘We often advise organisations to see their transition as the start of a longer journey, so there’s no need to run headlong into lots of activity right at the start. Instead, pace yourselves and identify the areas of your culture that will have the biggest impact over the longer term first. As your business evolves, other things will naturally change too.’
Practical tips for effective employee owner engagement
So how can you keep your employees informed, engaged and excited about EO? Lisa shares these practical tips.
1. Be clear about your purpose, so employees understand your ultimate focus. This provides a point of alignment and something they can test business successes and decisions against.
2. Establish a strong set of values. These will clarify expectations, help with decision-making and support external stakeholder relationships too. Don’t have them? Involve and engage everyone in shaping them for the longer term.
3. Explain your governance structure, each element’s responsibilities and how they support/challenge each other. Raise the profile of the teams involved and equip them with the skills and information to engage your whole business.
4. If you’re establishing or reinvigorating an employee forum or council, be clear about roles and responsibilities. In smaller companies, it’s usually more effective to hold informal group meetings, such as a bacon butty breakfast for all!
5. Support your middle leadership. They’ll be feeling squeezed as the shift in ownership will change attitudes and expectations. Equip them to be more empowering EO leaders to accelerate embedding your EO.
6. Communicate well and through several channels, investing in new tools or people if needed. As employees share more and influence bigger decisions, the language and culture will shift anyway.
7. Define the key indicators of business success and share regular performance updates. Ensure these cover more than sales and profit, so every employee feels connected to your overall success.
8. If not already a member, join the Employee Ownership Association. Get involved in their activities, networking and learn from others’ best practice, while sharing your own.
Secure the right support at the right time
Employee ownership isn’t a label – it’s a different way of doing business that requires energy and focus to bring to life. That’s why our Associates draw on their own experience to enable EO companies to effectively engage their employee owners.
Our employee owner engagement support ranges from EO perception studies, employee representation reviews and mentoring to EO-focused leadership development (with Telos Partners as part of the EOA’s EO Learn) and our free-to-clients networking forum for Employee Trustees.
Want to know more about how we can support you with our range of transition, people and governance services? Get in touch with us now.
JGA @ EOA Better Business Together 2023 – our key takeaways
New format, new faces and an exciting look at EO’s opportunities through 2023 and beyond – it could only be Better Business Together 2023, incorporating the Employee Ownership Association’s AGM.
As a proud EOA supporter member, JGA was there last week to listen, learn and contribute alongside a diverse range of EOA members and specialist providers who, like us, are committed to supporting the sector’s growth.
‘Better Business Together 2023 highlighted the EOA’s achievements in a very challenging year, building on from a solid base,’ says our MD Jeremy Gadd. ‘It was especially good to hear updates from CEO James de le Vigne and the team about the EOA’s exciting ambitions, and I’m looking forward to seeing how their new product developments take shape.’
Missed it? If you’re an EOA member you can watch what happened via EO Hub on the EOA website. But first, here are JGA’s own takeaways from Better Business Together 2023:
1. The EOA is the ‘go to’ membership body for the EO sector
Confident, bold and changing fast: EO and the EOA’s membership are growing as more founder/owners choose employee ownership for their succession planning. We were encouraged by the EOA’s confidence that there will be opportunities to support similar membership groups in the devolved government areas, as demonstrated by the work already under way in Scotland and Wales.
2. The EOA’s member services are creating an impact…
… and (get ready!) there are more in the pipeline this year. We were delighted at the positive mentions for the offer that’s already been successfully established, including our own Independent Trustee Resourcing service (EOTAS) plus the ‘How to be an Empowering EO Leader’ course which JGA co-delivers with Telos Partners as part of EO Learn. Watch this space.
3. The EOA is championing awareness and advocacy of EO
We know that (done well) EO can be a better way of doing business, but what about everyone else? The EOA shared its more proactive approach to getting the message out there, with a focus on advocating for EO in areas of policy and legislation. We liked the EOA’s sharper focus on using research, data and feedback to tell EO’s story more effectively as well as shape their future offer – epitomised by the Knowledge Programme, which you can sign up for (until 4 April 2023) by contacting the EOA here.
4. The EOA member networks are a great source of knowledge, insight and support
No Better Business Together would be complete without the chance to network, but the networking doesn’t have to stop there... ‘You are the heart of the EOA,’ James reminded members, pointing out that the EOA’s regular virtual and in-person networking events and EO Hub are a great way to build and strengthen connections across the wider sector right through the year.
5. EO Day 2023 is coming – how will you support it?
Diaries at the ready: the countdown’s on to 23 June when EO Day 2023 will be live and happening at an EO business near you! This year the day is being sponsored by one of JGA’s trusted partners, Postlethwaite Solicitors. The EOA used the AGM to urge members to get creative and ‘make some noise’ about this year’s theme #TheEOeffect. Count us in, EOA!
Want to know how JGA can support you and your employee-owned business through our transition, people and governance services? Get in touch with us now.
Taking tough decisions as an EO business – practical steps
The UK might have narrowly avoided a recession so far, but that doesn’t change the pressure many companies continue to face. These are tough times, and tough times bring tough decisions – particularly when restructuring, redundancies and cuts to hours are involved.
Elon Musk’s approach understandably made global headlines (for all the wrong reasons) when he took over at Twitter last year.
In fact, the CIPD put the billionaire on the cover of its People Management magazine as an example of ‘how not to make people redundant’ and went on to explain the legal, commercial and personal considerations a good employer should instead apply, in its informative article within.
So if you’re the leader of an EO business taking tough decisions in the current climate, what should your priorities be? What is best practice?
Here, our Associates Lisa Fryer and Kathie Robb share their insight and five practical steps to support leaders to take tough decisions when they are EO.
Do your research – then clarify options
You have a tough decision to make. Start by investigating your options, clearly setting out each one’s pros and cons.
‘This will help when it comes to seeking the support – or even agreement – from stakeholders,’ says Kathie. ‘Remember that in an EO business you may need your Trust Board’s approval if redundancies or significant changes to your structure are being considered.’
Next, do your research and check current best practice with trusted sources, including the CIPD and your legal advisors or accountants. They will help you navigate the statutory requirements and meet minimum expectations.
You should be mindful of your business’s values, ethos and wider reputation too.
As Lisa (who is also JGA’s Operations Manager) explains: ‘There’s nothing wrong with working to minimum statutory requirements, but if your customer base values trust and respect highly, you should take this into account.
‘Younger customers and the power of social media mean that a poorly-considered action can have a significant impact on your reputation (as seen at Twitter) – risking your business’s sustainability in the longer term.’
Keep your employee-owners informed and engaged
One of EO’s benefits is that the best solutions can come from within.
In companies with a genuinely effective EO culture, the employees will already understand your business’s challenges and direction of travel.
‘While it might be scary to explain that tough decisions must be taken, if your employees are already informed and engaged it’s likely these won’t be a huge surprise,’ Kathie points out.
‘Values-led businesses tend to work with transparency and appreciate honesty, so bear this in mind.’
Avoid taking hasty action under pressure
So what mistakes might leaders make when taking decisions in today’s climate – and how can they avoid them? Lisa identifies the top two as taking ‘hasty action’ as a result of feeling pressurised because of rapidly evolving situations – and not seeking expert advice.
‘There’s a risk of just doing what might have been done before, even though legislation, attitudes and expectations might have changed,’ she says.
Another pitfall can be the informal leaking of concerns and challenges, causing unnecessary unrest, speculation and distress.
If your network is raising concerns, Lisa recommends working with ‘general observations rather than specifics’. Save those details for trusted specialist advisors instead.
Seek expert advice on best practice HR if you need it
Having the right HR policies in place (ideally from the start) will also support leaders when they face tough choices.
‘Investing time in an HR policy for restructuring and redundancy might not be your priority when all is well, but it will give your business a solid basis if needed later,’ Kathie explains. ‘Flexible working, career breaks and contractual flexibility as an employer might also afford a more open discussion / conversation when the tough times hit.’
Don’t forget to ensure any HR policy is updated to keep it legally compliant. You should also take account of changes in attitude and expectations, especially around restructuring and redundancy. Seeking expert external advice can be particularly useful here.
‘Any Trust Board worth its salt will be asking the operational leadership to identify the current top challenges facing the business and, more importantly, what plans are in place to mitigate their impact as early as possible’
Kathie Robb, JGA Associate
Draw on the insight and value of your Trust Board
As you’d expect, sound governance comes into its own when tough decisions need to be made.
In an EO business, the Trust Board can add real value, with its oversight of the business risk register and role as a conscience for the Operational Board providing a positive support for effective decision-making.
‘Taking a more measured approach and looking through the longer strategic lens, the Trust Board can ask difficult questions during the good times and increase scrutiny and challenge as situations change,’ Kathie reveals.
‘Any Trust Board worth its salt will be asking the operational leadership to identify the current top challenges facing the business and, more importantly, what plans are in place to mitigate their impact as early as possible.’
‘Smoothing the curve of change and helping to minimise any shocks – this is where sound governance can pay real dividends,’ Lisa adds.
Support your leaders to deliver change well
Of course, tough decisions don’t only affect those on the receiving end of difficult news. Leaders are people too so a good EO business should be providing them with the right professional (and personal) support to deliver change well.
‘It’s easy to assume that senior leaders will be capable and ready to communicate and support the delivery of tough decisions,’ says Lisa, ‘but the business should check that those who will be responsible for the execution of any plans are well-informed and up-to-speed on all communications, decisions and what is open for discussion.
‘The business should also provide the opportunity for this group to feedback and access specialist advice, even if it’s through an internal lead. Lastly, if you want to deliver and execute tough decisions well, you’ll need to demonstrate empathy at all levels – remember this isn’t the same as sympathy.’
Taking tough decisions as an EO leader – practical steps
It’s a lot to take in. So what five top practical tips would Kathie and Lisa offer to EO leaders taking tough decisions in challenging times?
1. Take time to take stock as soon as possible. Don’t get wrapped up in the day-to-day – you need to be heads-up to the horizon so you can limit any surprises. Check with your networks for any incoming trends or concerns to ensure nothing slips through. Chances are, other business leaders will be considering similar challenges so ask around and share what you can in exchange.
2. Speak to specialist advisors before you get to the crunch. Seeking their input early could save time, energy and keep the whole situation a lot calmer in the long term.
3. If you’re an EOT, fully utilise your Trust Board. Ask for their challenge and be prepared to listen and act on their questions. Trust Boards tend to have employees on them, frequently from positions that are not senior leadership, so their experience and perspective can be invaluable.
4. Engage with your governance and wider employee groups, where possible. If you’ve identified an incoming problem and they’re able to support with solutions (however creative) this may lead to a smoother outcome.
5. Don’t assume you’ll get everything right. Remaining alert to how any change is being managed and experienced by your employees can make a huge difference. If your business already supports open and effective two-way communication, fewer employees should be frustrated or begrudge any personal impact in the longer term. Graciously accept feedback from employees about their experiences, acknowledge where improvements could be made for the future and appreciate their honesty.
Want to know how JGA’s transition, people and governance services can support you and your EO business to take tough decisions in challenging times?
Doughnut economics – the challenge and opportunity for EO
Doughnuts, hosepipe and the future of the planet… not quite the mix you’d expect to find in your usual business lecture, but then Kate Raworth isn’t quite your usual business lecturer. She’s the influential economist focused on making 21st century economics fit for the ecological and social realities of today.
She was also the inspirational speaker at the Employee Ownership Association’s annual Robert Oakeshott Lecture at Bayes Business School in London last week.
Kate’s topic? ‘Redesigning business with Doughnut Economics’ and, specifically, the opportunity for employee-owned businesses to help society meet the challenge to change.
As she explained: ‘Currently, we are a world perilously out of balance, overshooting our planetary boundaries. We need new theories, business models, government policies and ways of living to turn this around…. We need to become regenerative and distributive to thrive.’
Her challenge to the audience of EOA members and advocates was clear: ‘Employee ownership is intentionally distributive by design – can it be regenerative too?’
Redesigning business to be a force for good
Our MD Jeremy Gadd attended the event and was intrigued by what he heard from Kate and her colleague Enrich Sahan, Business and Enterprise Lead at the Doughnut Economics Action Lab.
He was also interested in Kate’s response to the questions the audience asked, including his own about the most common ‘yes but…’ she hears when discussing doughnut economics with businesses.
The answer? ‘Yes but… the market or my shareholders won’t take it,’ she revealed. ‘The beauty is we’ve shown the design can change that.’
‘It was certainly a thought-provoking afternoon,’ Jeremy says.
‘What was so appealing about Kate’s presentation on doughnut economics wasn’t the academic interest it stimulated or the ‘yes but…’ question, but how easy it is to see why employee-owned organisations are by their nature well-placed to embrace the concept and vision that was shared. They’re the ideal recipients of doughnut thinking!’
Why? ‘Because when people understand the challenge they face, the choices they can make and are given the freedom to make these choices, empowering them through the culture of employee ownership releases so much positive energy,’ Jeremy replies.
‘This energy can be such a force for good and if, like me, you believe that business can be a force for good and that true change will only come through cultural entrepreneurship, then the scary challenges we face every day become exciting opportunities to embrace.
‘That feels a little easier when you have a genuine stake in the place where you work.’
Empowering employees to make a difference
Of course, for this to happen in practice, employee ownership needs to be more than a description on a piece of paper. The ability to maximise both its commercial and social potential requires a genuine culture of shared ownership across all levels of the organisation, which takes time and energy to evolve.
‘Currently, we are a world perilously out of balance, overshooting our planetary boundaries. We need new theories, business models, government policies and ways of living to turn this around…. We need to become regenerative and distributive to thrive’
Kate Raworth, ecological economist and EOA guest speaker
In our work at JGA, Jeremy says he’s often asked: ‘How do you know when a business has really embraced employee ownership?’. This question was on his mind as he listened to Kate’s view that ‘being an EO business is a very good starting point for redesigning business’.
His own view is that it starts with clarity about the responsibility, opportunities and rewards of EO.
‘People freely share information, ideas and challenge,’ he explains. ‘The employee owners have a clear sense of purpose, understand their role in the organisation and believe they truly matter and can make a difference.
‘You know when a business has really embraced EO because you can see, hear and feel it all around you. There’s a palpable belief that anything is possible.’
Looking forward to a ‘brilliant year’
The afternoon started – and closed – with the opportunity to network with other EOA members as well as meet several of the EOA’s team who had travelled down from Hull to host the event, which was sponsored by Brabners LLP.
This included EOA Chief Executive James de le Vigne who said he was delighted that the first in-person Robert Oakeshott Lecture for three years had attracted such a strong gathering of ‘employee ownership pioneers and advocates’.
Even without the prospect of more doughnut economics, he confirmed he was ‘very excited’ for the EO sector’s future as he predicted a ‘brilliant year ahead’.
Want to know how JGA’s transition, people and governance services can support you and your EO business?
Revitalising your governance at key stages of being an EO business
Is your EO business set up to withstand tough times? Checking in on your governance might not be top of your ‘to do’ list right now, but revitalising it will strengthen your commercial resilience for the months ahead.
Just ask Lisa Fryer, JGA’s Operations Manager and governance ‘pro’.
‘Governance might have a reputation for being a bit dull,’ she concedes, ‘but it’s simply good organisation. It’s about having sound structures in place to ensure your business can do what it needs to do.’
In uncertain times, ensuring your governance is strong provides reassurance and stability, while safeguarding your reputation. It also creates opportunities to connect more deeply with clients and employees.
So how do you revitalise your governance at key stages of being an EO business?
Lisa shares her practical tips here…
Stage 1 – Revitalising your governance during EO transition
During EO transition, you’ll be preparing the ground for your legal and financial transaction and ensuring that your business, leaders and employees are ready for your company’s sale to an EOT (Employee Ownership Trust).
Your Board
You may already have an Executive Board, but does your senior team have the capability, experience and skills to lead your organisation through its EO transition and support employees through an extended period of change? Undertaking a Board diagnosis could give you invaluable insight and options through external appointments, internal promotions and NEDs for permanent or interim roles.
Your Employee Forum / Council
If you already have an employee forum or council, do they have a role to play during your EO transaction? Very few will be a formal part of your governance structure, with decision-making powers, so this may be the time to review whether your current set-up is the right one for your employee-owned future. It’s also worth supporting your forum members’ understanding of what employee ownership is (and what it isn’t), as well as consulting and involving them in the transition if you can.
Your EOT
If you’re setting up an EOT (Employee Owned Trust), how is the trust being supported in its duties from the outset? Do its members have access to effective independent advice in addition to training on fiduciary responsibilities? Are they appropriately insured and have they considered how they would like to operate?
If you’re appointing an Independent Trustee, how will you do this? Using your network may not ensure you secure the diversity of thought and experience your trust needs to be truly effective in the longer term. Consider the value of appointing an Independent Trustee with experience of leading in an EO organisation in the early stages, as this is when your employees’ experiences of EO will start to be formed.
Stage 2 – Revitalising your governance in the early years of being EO
Post-transition, the focus shifts to embedding your employee ownership: putting down foundations, educating employees about their ‘new’ business, launching (or strengthening) employee representation and establishing sound structures and routines.
1. Take your time, don’t set unrealistic targets and continue to access specialist advisors. Use their wealth of knowledge to provide options, and consult with co-owners on what and how they expect to be involved. The clue is in the name: you’re employee-owned!
2. Do your research and don’t be swept up by what look like ‘perfect solutions’. EO is a diverse and growing sector, so there’s no one size fits all. Beware rushing to get things ‘nailed down’ or creating something so rigid that it can’t be easily adapted further down the line.
3. Whatever you establish, allocate time to review and adapt. After meetings or presentations, check in and make sure you celebrate what worked well and pick up any challenges or frustrations.
4. Invest in developing your Executive Board and other leaders to enhance their ability to support and empower your new co-owners.
5. Support your Trust Board to become truly effective. Although its key focus at this stage is to ensure the debt repayment is fulfilled, its job isn’t quite as simple as that. The Trust Board will be busy developing their relationships and skills while acting as a ‘critical friend’ – particularly on matters impacting employees’ experiences – to your Executive Board.
Stage 3 – Revitalising your governance as an established EO business
Now comes the ‘accelerate’ stage, when things have clicked into place, most employees and leaders understand (and value) the EO model and you have a clear vision or purpose in place. Things seem to work smoothly and there’s strong collaboration across the company.
This is the time when everyone feels ready to build up speed, but you’ll still need some support to keep your high performance vehicle running smoothly.
‘In uncertain times, ensuring your governance is strong provides reassurance and stability, while safeguarding your reputation’
Lisa Fryer, JGA Operations Manager and governance pro
1. Make sure you’ve always got the right team in place. Things move on, different skills are developed or needed, and some might decide it’s time for a change.
2. Manage your succession, particularly at Executive and Trust Board level. Have a plan and agreed processes and stick to them. Appointing senior leaders should be done with transparency so everyone has confidence in the decision and the candidate gets the best start to their role.
3. Apply the same approach to the Trust Board. Make sure your Trustees have the right mixture of skills and that relationships aren’t too ‘cosy’. If it starts to feel like this, or you’re a new Trustee joining an established Board, ask again about the processes and routines. If it sounds as though a lot goes through ‘on the nod’, you may not be as effective as you could be.
4. By now, your organisation should have developed effective tools or processes to gather employee input and feedback. Make sure your Trust Board is aware of these and ask what the Executive Board does with this information. There’s no point gathering opinion if you’re not prepared to listen to what is said.
Want to know how our Transition, People and Governance services can support your employee-owned business? Get in touch to arrange a no obligation meeting now.
What difference does it make?
At JGA, we’re always interested in evidence-based research on the impact of employee ownership and how this might inform what we do. For our latest guest blog, we invited Dr Jonathan Preminger and Dr. Dimitrinka Stoyanova Russell – both Senior Lecturers in Management, Employment and Organisation at Cardiff Business School – to share what emerged after they spent 12 months’ researching a key question for every EO business: what difference does being EO actually make?
Dr. Jonathan Preminger and Dr. Dimitrinka Stoyanova Russell
Does employee ownership (EO) make a difference? Champions of this increasingly popular organisational form assert that the change of ownership structure, accompanied by forums for employee voice and participation, leads to better decision-making, greater commitment, and improved employment terms and conditions, which enhance productivity and, ultimately, increase the organisation’s success. It seems one cannot go wrong, so what more is there to discuss?
Well, academic research is more circumspect. Scholars investigating EO over the years, looking at various ownership models and governance structures, have failed to agree on an unequivocal answer to the question: what difference does it make? The range of models and structures has contributed to the difficulty of researching EO meaningfully. The Finance Act 2014 and the resultant rapid growth of the Employee Ownership Trust (EOT) model have created an opportunity for a more systematic investigation and robust comparison across sectors, with greater conceptual clarity. By focusing on a single model, we can cancel out the variation due to different structures, and look at the impact this specific kind of EO is likely to have on businesses and the experiences of those working with and within them. And this is what we set out to do.
For the last year, we have been speaking to key people in EO firms throughout the UK in order to understand the transition process and the benefits it brings to employees. To unpack the latter, we chose to use the concepts of ‘decent work’ and ‘job quality’. Why? Firstly, ‘decent work’ has recently been in the spotlight and on the agenda of major international organisations like the UN and the ILO, as well as a key policy concern for the UK government. Secondly, and we hope you would agree, if EO is to be more than merely an elaborate profit-share scheme, it should improve the experience of work – and the concept of ‘job quality’ can capture this. Thirdly, HRM suggests that having happy, fulfilled and engaged employees is likely to increase the success of the organisation, so we wish to explore the potential of EO to do exactly that.
Discussing ‘job quality’ however is not straightforward. Though there is little agreement on its precise indicators, it is generally agreed that it is “constituted by a set of work features that have the capability of enhancing or diminishing worker well-being”. Focusing on such work features, we investigate the organisation of work, skills and development, wages and compensation, job security and flexibility, and engagement and representation. As you too would be aware, employees’ perspectives are subjective: their understanding of job quality is likely to be related to personal backgrounds and expectations, and it must be remembered that even when employees are satisfied with workplace conditions, these may be detrimental to workers’ physical (or mental) health. Likewise, pay and remuneration are important, but pay is a poor proxy for job quality on its own: conditions can deteriorate even as wages rise. With these words of caution in mind, let us now turn to what we found so far.
Over the five key components, and despite some variation, our findings suggest that EO is likely to lead to a modest rise in job quality. This is encouraging, but let us examine this further. Wages were often a prominent concern, but beyond profit-shares and dividends, we also discovered firms which aspired to pay above market rates for the lower-paid employees; a few cases even aimed to reduce pay differentials between senior management and shop-floor staff. Aspirations for greater remuneration equality were reflected in employees’ perceptions of a greater sense of mutual respect despite organisational hierarchies, and an equal voice in developing organisational culture and values. Similarly, many firms spoke of their efforts to avoid an ‘us and them’ culture between core employees and administrative/maintenance staff, as well as trying to reduce their use of subcontractors, labour agencies and self-employed staff.
Employees noted a greater sense of control over the firm’s vision. All the firms we spoke to had set up or formalised some kind of employee council; in some cases, employee representatives sit on both the board of directors and the board of trustees, too. Almost all firms noted that there was more transparency of the organisation’s key data, and many had formalised the processes by which this data was distributed to employee-owners. Educating employees about reading those and various other business issues was also not uncommon. Many people we spoke to talked about their organisation as simply a ‘nice place to work in’, of ‘being in it together’. This was sometimes supported by concrete steps, e.g. more opportunities for job rotation or at least having a taste of colleagues’ jobs. Linked to this idea, we found many employee-owners were more willing to share the burden during tough times to avoid laying off staff.
However, the increased job quality was sometimes rather marginal. Indeed, a key finding from our research is that for many of the organisations the transition to EO was a way of preserving what good the firm was already doing and ensuring it continued to operate in the same way, without fear of buy-outs that could change the organisation’s character. This finding is unlikely to surprise anyone recently involved in a transition to EO. Importantly, such preservation does require some adaptation: most prominently, formalising what had already been done before the transition. We discovered that in many cases various HRM processes such as training, career progression, voice and participation, were formalised often just to seal pre-existing practices rather than make improvements. Crucially, in many cases this formalisation extended to the understanding that the business should be retained within a specific location and community: an important aspect of recent conceptualisations of job quality that take a more holistic view of an organisation’s role within its locale. Is this a significant positive impact of the transition? The degree and evaluation of this may vary across firms and across perceptions, but in any case, this is an important question to consider.
From our preliminary findings, we can say that EO in itself is unlikely to guarantee an immediate improvement to job quality: its impact seems to be conditioned or at least mediated by pre-existing aspirations and informal practices, or by the organisational culture. The transition to EO, then, is both an opportunity and a stimulus for preserving and formalising elements of job quality already enjoyed by employees, and a way of anchoring a status quo in firms already considered to be “nice places to work in.’’ This is reassuring. But is it sufficient?
For vocal advocates of EO, this may appear to be a somewhat lacklustre claim. But let us not forget that the EOT model is still in its early stages. We also found some evidence to suggest that the length of time a firm has been EO matters. The participatory aspects of EO in particular seem to get stronger with time, and respond better to changing external context. In addition, the sector in which the firm operates is significant, not only in terms of overall job quality (employees in some sectors enjoy ‘better jobs’ than others regardless of EO), but also in terms of what aspects of job quality are appreciated by employees. In some sectors, EO is likely to be more impactful in helping to retain local jobs and ensuring relatively good wages, while in other sectors it might ‘merely’ formalise pre-existing structures of voice and profit-share. Finally, it is worth noting that EO may benefit different employees to different extents within the same organisation: for example, core professional staff such as dentists or architects may not feel greatly the changes resulting from a transition to EO; yet support staff, cleaners or contract labour may find their job quality and working lives significantly and positively impacted by the transition. This, we think, is already an achievement worth celebrating.
About the authors
Dr. Jonathan Preminger is Senior Lecturer in Management, Employment and Organisation at Cardiff Business School and author of Labor in Israel: Beyond Nationalism and Neoliberalism (ILR Press, 2018). His research interests include employment relations, the sociology of work, and alternative organizations. Jonathan is a member of the Editorial Board of Work, Employment and Society, co-convener for the Work, Employment and Economic Life study group in the British Sociological Association, and director of the Employment Research Unit at Cardiff Business School. Email: premingerj@cardiff.ac.uk
Dr. Dimitrinka Stoyanova Russell is Senior Lecturer in Management, Employment and Organisation at Cardiff Business School. She has published on skills and performance, social networks, diversity, careers and skills in the UK Film and TV, employment and emotional labour of stand-up comedians. Dimitrinka is a member of the British Sociological Association, a member of the Editorial Board of Work, Employment and Society, and a Research Associate of the Institute for Capitalising on Creativity at St Andrews University. Email: stoyanovarusselld@cardiff.ac.uk
Are you in an EO firm? We’d love to hear from you! Please get in touch
If you’d like to know more about how JGA can support you and your organisation through our Transition, People and Governance services, please get in touch here
From family-owned business to EO – one company’s story
‘Our employees are the heartbeat of our company, both past and present, and to be able to transition in the right way was really important to us all’ Sarah Pym-Eaton, Finance Director and family member, Pym & Wildsmith
Family businesses – valued as the bedrock of their community, many have been hit hard by this turbulent year. Yet today more than 5m of them are still providing vital employment for 14m people across the UK.
So what happens to succession planning when the next generation wants something different – and a trade sale or MBO just doesn’t feel right? Transitioning to EO is one option for a family business that can safeguard the founders’ legacy, while freeing the company to shape its own path.
Pym & Wildsmith is a family business that became EO last summer so, to mark the IFB’s Family Business Week 2022, we asked Financial Director Sarah Pym-Eaton and MD Craig Taylor to share their experience for others considering the same.
Showing resilience in difficult times
Pym & Wildsmith’s transition didn’t follow the ‘usual’ path. On the eve of the original planned handover, a serious fire damaged the specialist metal finishers’ factory. Although nobody was hurt, the fire caused major issues for the Uttoxeter company and delayed the EO transition by 10 months.
However, the fact that Sarah, brother Ian (Technical Director) and their parents Wendy (Finance and Administration Officer) and Steve (now retired) had already invested such care in their preparations stood them, and their business, in good stead.
‘It’s not until you experience adversity together that you see how resilient you are,’ Sarah recalls. ‘I couldn’t have been prouder of how the team, led by Craig, worked to get us through.’
Exploring EO as a succession plan
So where did Pym & Wildsmith’s EO journey begin? ‘As a family, we’d been thinking about succession planning for several years, but nothing fitted until I discovered EO,’ Sarah reveals.
Curious to learn more, she did her ‘homework’ – joining the Employee Ownership Association, attending virtual networking sessions and connecting with other EO businesses to hear their stories.
Six months later the decision was made.
‘We could see EO was the best option for us personally, our company legacy and for our extended ‘family’ of Pym & Wildsmith workers,’ says Sarah. ‘Our employees are the heartbeat of our company, both past and present, and to be able to transition in the right way was really important to us all.’
Shaping the transition you want
With this in mind, the family made a point of engaging trusted advisors to help shape the process – RVE for the legal/financial transaction and JGA to support the cultural transition and employee owner engagement.
‘We’d learned from existing EO businesses that one of the things they’d do differently was to focus on the cultural side earlier, so they could unlock EO’s benefits sooner,’ says Sarah. ‘So we engaged JGA to help us to shape our transition and bring different people into that journey at different times.
‘It started with the Founders’ Workshop and creating our Founders’ Wishes document, followed by involving Craig, the SLT, our employee groups and finally our employees.
‘We invested a lot of thought and care because we wanted to get it as right as we could without constraining the team moving forward. Lisa Fryer’s support has been invaluable, both then and now.’
A chance to be a catalyst for change
As then Operations Manager, Craig was the first leader to be brought in on the family’s plans. He became MD in July this year.
‘To be offered a stake as an employee owner in a company as longstanding as Pym & Wildsmith felt like a real investment in me as an individual,’ he recalls. ‘It was an exciting opportunity to be a catalyst and drive the change.’
It was also, he agrees, a challenge – especially ‘the journey of bringing the rest of the team up to speed’ on EO before the transaction took place. ‘Having Lisa’s support to break down barriers and bust myths was invaluable. The fact we went so far to engage our teams beforehand allowed us to tailor what’s right for the founders and right for me as MD and the business.’
His current focus as MD is, he explains, strategy, values and vision. ‘EO is about people having a say, so our priority now is to define and differentiate who we are as an EO business: we didn’t want to present a finished article before we transitioned.
‘With JGA’s help, we’re supporting and educating our teams to join us on the journey. This is a monumental change and a challenge, especially in the current economic climate, but we have a good strong team to deliver our ambitions and bring our EO to life.’
What should you do next?
And bringing EO to life is integral to unlocking EO’s benefits. So what should you do next?
Here, Sarah and Craig share 5 practical tips for family businesses exploring EO:
Do your research. Joining the EOA will give you the best start thanks to its wide range of information, support and resources. ‘The EOA were very kind in connecting me with others,’ says Sarah, while Craig loved his time at this autumn’s EOA Conference 2022.
Connect with other EO businesses. The EO community has a great network of new and established EO companies happy to share their own experience of EO’s challenges, opportunities and rewards.
Engage trusted EO advisors. Not just for the legal and financial transaction, but to strengthen the cultural, commercial and engagement process too. Pym & Wildsmith was supported by RVE and JGA.
Take time to shape the transition. Letting go as an owner can be daunting, but becoming EO gives you more control of the process and allows the transition to happen in a more structured way. Leading in an EO business involves a different level of responsibility, so make sure you strengthen your board to step up too.
Allow time to embed the change. Every transition is different, but some owners initially stay on – Sarah, Ian and mother Wendy remain part of Pym & Wildsmith. ‘As a family, we wanted to ensure we were still here during this next stage to support everyone to find their feet and give a gradual transfer of knowledge,’ says Sarah. ‘It was another big tick in the box for EO.’
‘With JGA’s help, we’re supporting and educating our teams to join us on the journey. [Transitioning to EO] is a monumental change and a challenge, especially in the current economic climate, but we have a good strong team to deliver our ambitions and bring our EO to life’
Craig Taylor, MD, Pym & Wildsmith
Want to know more about how we can support your family business to transition or unlock the benefits of becoming EO? Get in touch here.
JGA @ EOA Conference 2022: Our key takeaways
Liverpool, the city where exciting things happen: not just the next Eurovision Song Contest but last week’s eagerly-awaited in-person EOA Conference 2022. JGA was delighted to be back ‘in the room’ with others as a Platinum Exhibitor at the ‘go to’ event for EO.
The conference was busy and buzzing, with keynote speeches and debates from high-profile leaders and EO influencers, alongside workshops, discussions, case study sessions and a gala celebration of this year’s EO Stories awards.
For JGA, the mix of 670 founders, leaders, employee owners, trustees and expert providers from more than 200 companies made Liverpool the ideal place for us to connect, learn and share our insight on today’s hottest EO topics.
This ranged from how to develop the next generation of EO leaders in an interactive workshop delivered by our Lead Associate Pip Meaden, to practical steps to strengthen your board.
MD Jeremy Gadd and our Associates also took the chance to introduce some of the services JGA has launched to equip businesses to navigate the challenging economic climate. This includes our new Coaching through Change programme of support.
The right support for your business – at the right time
So what were our key takeaways from the EOA Conference 2022?
For Jeremy, the conference confirmed how important it is during fast-moving change to engage the right support at the right time from a provider that knows what it’s doing – with a clear focus on the tangible value this adds.
As he explains: ‘With such a breadth of businesses transitioning to EO, it’s easy to take advice which isn’t right for your company, so I was pleased to see the growing recognition that becoming employee-owned is an evolutionary process that requires a different focus at different times.
‘This aligns with what JGA knows from our experience of supporting more than 80 businesses at various stages of their EO journey, and is why we first developed our successful transition, embed and accelerate approach.’
Developing effective Trustees – and a stronger board
Adrian Wheale, our Associate Resourcing and executive board development expert, liked the opportunity for face-to-face contact with the EO community. ‘I also enjoyed the excellent sessions on finance and the economy, with brilliant insight into the business ramifications of the fast-moving political landscape,’ he says.
Kathie Robb was one of five Associates who hosted a dedicated networking session from JGA’s stand, focusing on the support we offer to Employee Trustees through our Trustee Connect network. Other topics on our hosted networking schedule included building Trust Board effectiveness with Associate Lisa Fryer and building a stronger board with Adrian.
‘My highlights were that the pace was so much more measured, which allowed time and space for more meaningful conversations at our stand with prospective and existing clients, and a more joined-up feeling for us as a team,’ says Kathie.
‘I was surprised by how many people we met who we already knew, and it was great to see so many familiar faces,’ she adds. ‘We also heard so many useful, relevant and inspiring stories from EO businesses, which is always good.’
‘With such a breadth of businesses transitioning to EO, it’s easy to take advice which isn’t right for your company, so I was pleased to see the growing recognition that becoming employee-owned is an evolutionary process that requires a different focus at different times’
Jeremy Gadd, MD
All aboard the EO Product Showcase
Associate Libby Unsworth enjoyed facilitating the Case Study session focusing on Shawston’s seven-year EO journey.
But the two days weren’t all ‘work’: as a keen camper, Libby also found time to explore inside the Jerba campervan at the conference’s new-for-2022 Product Showcase, where other EO companies including Go Ape and Lush were demonstrating their products too.
Needless to say, Libby was in her element on board Jerba’s campervan – and knew exactly where everything should go…
JGA’s in-person team were supported virtually by Coaching Lead and change expert Corrine Thomas, who was on hand to discuss our new Coaching through Change service, while Virtual PA Nessa Good was available behind-the-scenes to coordinate follow-up appointments and No Obligation Meetings.
Catching up with our trusted partners
Finally, it wouldn’t be an EOA Conference for JGA without the chance to catch up with so many of our trusted partners. Companies ranging from Fieldfisher to RM2 were well represented, while fellow Platinum Exhibitor Postlethwaite Solicitors was located right next to us on an adjoining stand.
Jeremy was particularly pleased at a comment made by Danny Sims, Chairman, DJS Research (an EO Stories 2022 winner) that was prompted by the chance to win 10 copies of The Employee Ownership Manual from the Postlethwaite stand.
This essential guide to EO transition was written by Robert Postlethwaite with input from Jeremy. Danny described it as ‘a perfect combination of all of the ‘black and white’ legal information that you need to know about EO combined with how to communicate and engage with employees prior to transition by Jeremy Gadd’.
Danny’s verdict? ‘Highly recommended!’. We know we’re biased, but we couldn’t agree more...
JGA’s transition, people and governance services equip businesses to achieve the change they want in challenging times. To find out more about how we can enable you and your organisation to navigate today’s fast-changing economic climate, please get in touch here.
EOA Conference 2022 – 6 reasons we’re going ‘Platinum’ to help boost #GoodEO
It’s back, it’s in Liverpool and it’s happening from 3 to 4 October: yes, the final countdown to the 2022 EOA Conference is now on. At JGA, we can’t wait to play our part as a Platinum Exhibitor at the ‘go to’ event for employee ownership – bringing fresh thinking to unlock the potential of being EO.
Will you be there? If so and you’re looking for trusted support with the transition, people or governance aspects of your employee ownership, come and find us in the ACC Liverpool’s 30-stand exhibition and networking space.
Our knowledgeable team will be ready to help on Stand 2 where – new for this year – JGA will be one of only a few exhibitors who can provide a more private, sit-down hosting space for those useful one-to-one / no-obligation conversations.
It’s the final countdown – here’s why we’re so excited about the EOA Conference 2022:
1. It’s back – and it’s in person
It’s been three long years but the fully in-person EOA Conference is back! At JGA, we’re all set to make the most of this chance to listen, learn and catch up with our dynamic EO networks – and connect with EO’s newest movers and shakers too.
2. JGA is going ‘Platinum’ to help #GrowEO
New for 2022 is our role as a Platinum Exhibitor, drawing on our previous experience as joint conference headline sponsors since 2019. From Stand 2, we’ll be making full use of our more private hosting space to offer no-obligation conversations. We’ll also be sharing our practical knowledge, insight and opportunities for topic-focused networking – on the hottest issues impacting EO right now.
3. The packed agenda – what will you choose?
Keynote interviews, case study seminars, workshops plus networking, insights and shared expertise – in economically uncertain times, the 2022 EOA Conference looks set to provide ever better value than before. The challenge? Which speeches, sessions and workshops to choose…
We’re excited that so many of JGA’s own network are playing their part in this year’s packed agenda. This includes Adam Campbell from Telos Partners – our delivery partners on EO Learn’s How to be an Empowering Leader or Manager course – who will be hosting a workshop on building a strategy for growth. Former JGA client The 1:1 Diet is also set to take part in a panel discussion on being Financially free to revitalise your business. Meanwhile our Associate Libby Unsworth is facilitating a Case Study session on the success of Shawston’s success at igniting leadership and putting people first. The challenge? Which speeches, sessions and workshops to choose…
4. Pip’s hosting her own EO leadership workshop
How do you develop the next generation of leaders? Our Lead Associate Pip Meaden will share the essential behaviours, skills plus a framework to develop your future EO leaders in this focused, interactive workshop. Not to be missed, Monday 3 October, 1pm.
5. Five former JGA clients are up for an EO Stories Award
We’re keeping everything crossed for The Rooflight Company, Seetec, and Hayes Davidson, Riverford Organics and Jerba Campervans – five of the 27 inspiring companies sharing their #GoodEO experience in the EO Stories Competition this year. We’re proud to have supported each of these inspiring businesses at different stages of their EO journeys. Winners announced Monday 3 October at the Celebration Dinner, from 7.30pm.
6. We’re in it together
In tough times it’s good to work together, so we’ll be making the most of the chance to catch up in person with the JGA trusted partners we know will be at the Conference – including key EO specialists Fieldfisher, Birketts, Postlethwaite Solicitors, RVE, RM2, TLT and Stephens Scown. We’re also excited to reconnect with the EOA’s new CEO James de le Vigne and his team, following our visit to their Hull HQ in May.
Going to the EOA Conference 2022 and need support with your EO transition, people or governance? JGA’s knowledgeable Associates will be on hand to offer practical knowledge, useful insight and (if required) a no-obligation conversation from our hosting space on Stand 2.
Not going? Not a problem. Follow our latest EOA Conference updates via @JGaddAssociates on Twitter or via the JGA Company Page on LinkedIn. Or get in touch with us here.
JGA’s Autumn Conference: fresh ideas to help clients maximise the benefits of being EO
Focused, creative, productive: our recent JGA Conference was an opportunity for our Associates to catch up again in person and finalise our plans for the 2022 Employee Ownership Association Conference – which we’re excited to support as a Platinum Exhibitor this year.
While October’s EOA Conference was the main focus of our get-together last week in Oxfordshire, that wasn’t all that was up for discussion.
Hot topics also included updates on our latest results, our evolving service offer and fresh ideas for how we can continue to enable our clients to leverage the benefits of their EO model in these uncertain times.
Associates shared many thoughtful (and thought-provoking) insights around the specific support we can offer businesses as they navigate the ongoing cost of living crisis – and the challenge / opportunity this brings.
Sharing our experience and new ideas
MD Jeremy Gadd was delighted at what our conversations achieved over the packed two days.
As he explains: ‘We’re a people business so I always look forward to the JGA Conference – it’s great to enjoy good company, focused discussions and, of course, good food!
‘While we often work closely with each other in delivering client value, it’s a privilege to spend dedicated time like this with the Associates. I enjoy the chance it gives us to share our experience and knowledge further and strengthen the relevance of our offer at a time of such uncertainty – and the opportunities the scale of this change presents.
‘I’m particularly excited at our plans for the EOA Conference and our role as a Platinum Exhibitor – we’ll be building on what we’ve learned as joint headline sponsors over the last three years.’
‘We’re a people business so I always look forward to the JGA Conference – it’s great to enjoy good company, focused discussions and, of course, good food!’
Jeremy Gadd, MD
Unlocking the potential of our clients
Associate Kathie Robb agrees. ‘I always enjoy the JGA Conference because it gives us all a chance to reconnect. This time it was especially useful to finalise our plans for October’s EOA Conference in Liverpool and get excited about our year ahead.’
Associate Garry Davis says he was inspired by ‘the ongoing passion to develop new products and services, expertise and delivery’ he felt and particularly excited about the recent success – and future potential – of our involvement with the EOA’s leadership development programme as part of EO Learn.
Associate and Coaching through Change Lead Corrine Thomas adds: ‘It was useful to be able to debate and discuss potential future services and how we can build on what we already have. There was a clear passion from everyone for evolving JGA and what we stand for.’
Fresh thinking for the EOA Conference
Looking ahead to this year’s EOA Conference, Corrine was ‘inspired’ by the detail and depth of our planning.
The whole JGA team will be involved in some way across the two days, either in person or virtually, with Lead Associate Pip Meaden delivering her own workshop on ‘Developing the next generation of leaders’.
Other Associates will be helping to facilitate or attending workshops and sessions, while supporting networking and other activities on our stand.
‘There’s a true sense of putting the client at the heart of everything we do, ensuring they get a good understanding of what we can offer and an opportunity to speak to us confidentially and with no obligation,’ says Corrine.
‘I always enjoy the JGA Conference because it gives us all a chance to reconnect. This time it was especially useful to finalise our plans for October’s EOA Conference in Liverpool and get excited about our year ahead’
Kathi’s Robb, Associate
All systems go for EO
Associate Libby Unsworth echoes that point.
‘I came away feeling we’re the best prepared we’ve ever been for the EOA Conference – there’s a been a lot of creativity and innovation at JGA over the last 12 months and we’re definitely embracing the benefits of our digital tools and tech.’
But the last word comes from Marketing and Comms Support Katy Perceval.
‘Good people, fresh ideas and the joy of being together again in one place with a shared purpose: the JGA Conference is a real highlight of my calendar,’ Katy reveals. ‘I love that we each bring an alternative perspective to the table – that we genuinely support, listen and learn from each other. It’s part of the fun of working with JGA.’
Going to the EOA Conference? If so, come and find us on Stand 2 next to our Trusted Partners Postlethwaite Solicitors Limited or follow our full coverage of what’s happening as it happens across our JGA Twitter and LinkedIn.
Hybrid Employee Ownership: More than just an Employee Ownership Trust
At JGA, we work alongside a small number of carefully-selected Trusted Partners – chosen for their shared commitment to the clients we serve. For our latest guest blog, we asked Robert Postlethwaite, MD of Postlethwaite Solicitors to explain what hybrid employee ownership involves, and what owners need to consider when exploring this option.
Robert writes:
If you’re thinking about what legal structure to use when moving your company into employee ownership, the simplest approach is to use an employee ownership trust (EOT). The EOT’s trustees own the company but for the benefit of its employees (the beneficiaries), so employee ownership is indirect ie through the trustees. Ownership by an EOT means there are few moving parts: all employees (and new joiners who’ve completed an initial period of employment) automatically enjoy the benefits of ownership, leavers automatically cease to do so.
For many employee-owned companies this works perfectly well, the EOT permanently holding all the shares in the company (or all of them apart from any that the company’s founders have retained). Some, however, choose a different arrangement, where alongside the EOT’s indirect ownership sits a separate direct form of ownership under which all, or some, employees each have their own personal ownership stake.
This is often called a hybrid: a mix of indirect and direct employee ownership. What are the advantages of choosing hybrid, how can it be done, and what are the challenges involved in making it work?
Why choose hybrid?
Most companies choose hybrid because they want their senior leadership team or other key people to have a targeted incentive and reward to grow the business, the business being more heavily reliant them than on other employees. Of course this could be achieved by a special bonus arrangement and often this is the chosen solution.
But some companies wish to go further and create a long term reward arrangement for key people involving personal share ownership. This has two potential financial benefits for participants: it enables them to receive a dividend on their shares if linked to company profit (on top of any general employee profit share) and gives an opportunity to enjoy capital growth, that is the ability to sell their shares at a profit in the future of the company’s performance means it grows in value.
The UK tax regime provides incentives for companies doing this (see further below).
So we sometimes see a hybrid arrangement under which (for example) an EOT will hold a minimum of 80% of a company, with up to 20% allocated to key people.
There is another form of hybrid under which all employees – not just the key ones – are able to hold shares personally alongside the EOT’s majority stake. This is occasionally seen but it not common. A company might do this because it feels some personal share ownership for each employee will make ownership feel more real and make it easier to engage employees as owners.
It is even possible to have hybrid ownership involving both of the above, or hybrid ownership plus some shares retained by founders
How to do it?
For key employees, a good starting point for most companies will be EMI share options. Participants can be selected and will be granted a right (option) to purchase shares at a fixed price (normally their value at that time) from a future date (eg after three years). If the shares’ value grows over that period, they may then take up the right to buy the shares (exercise their option). Participants enjoy a reduced rate of tax on any financial benefit through growth in the value of their shares. Not all companies are eligible to grant EMI share options.
A company looking to create personal share ownership for all its employees might consider doing this though a share incentive plan (SIP), under which employees can be awarded free shares without this being taxed as a benefit, or given full tax relief to buy shares (or both).
What are the pitfalls?
Any hybrid arrangement is going to involve more administration. There will be work to do to create individual share ownership, administration and record keeping, and when participants leave (or simply wish to sell their shares) further work to do to bring their share ownership to an end.
Every participant will (unless they leave relatively soon after acquiring shares and are therefore required simply to forfeit them) eventually wish to turn any growth in the value of their shares into cash. If the company has grown significantly, those shares could potentially be very valuable. It is vital to avoid the arrangement becoming a victim of its own success because the company cannot afford to pay for the shares to be bought back. This can partly be addressed by a mix of advance planning (financial modelling to predict future repurchase values and building a cash reserve) and terms of ownership (for example, employees who are selling are paid in instalments).
Further details are available via this link in this ‘Guide to becoming an employee owned company’
To find out more or if you would like to discuss an approach that would align best with your objectives, get in touch with Robert Postlethwaite, who would be happy to talk in more detail about the different options.
About Postlethwaite
Postlethwaite Solicitors are a team of specialist employee ownership and share scheme lawyers.
With top tier firm and lawyer rankings and over eighteen years of employee ownership and share scheme experience from a wide range of commercial transactions and situations, we are able to stand by your side and ensure you have a solution that is fit for purpose, commercially sound and wherever feasible, tax efficient.
Since 2003 we have assisted hundreds of businesses in setting up employees share schemes and over 70 companies in making the transition to becoming employee owned. We focus on helping our clients find the approach and structure that is right for them and then assist with putting it in place.
‘Welcome to your new company!’ – Pym & Wildsmith celebrates becoming EO
‘Welcome to your new company’: that was MD Craig Taylor’s message to his fellow employee owners as Pym & Wildsmith – one of the Midlands’ leading metal finishing companies – officially celebrated its transition to employee ownership last week.
JGA Associate and Operations Manager Lisa Fryer was delighted to join the team for the party at their Staffordshire factory, arriving with her steel-capped boots following a very different morning commute. She has been providing transition support, including communication and announcement planning, to the family-owned company since early 2021.
‘Pym & Wildsmith’s transition to employee ownership has been a long time in the planning and at times there were questions about whether it was meant to be, but their resilience has been amazing,’ says Lisa. ‘I’m so happy they made it in the end.’
A challenging journey to EO
Resilience is the right word because, while every client’s journey to EO is different, Pym & Wildsmith’s has been particularly challenging after a serious fire destroyed a major part of their Uttoxeter factory last September – on the eve of their original transition date.
Fortunately, nobody was injured but the fire left their main building ‘in tatters’ and the team shaken, precipitating a sudden shift of priorities. Understandably, Pym & Wildsmith’s EO transition was delayed by 10 months.
Revisiting the factory last week for the first time since the fire for the party, Lisa says the celebration was ‘bitter sweet’.
‘Seeing the damage was an ongoing reminder of what Pym & Wildsmith have overcome. I also saw how the team has realised new opportunities, with equipment changes and efficiencies as a result of the fire.’
The fire gutted the main coating and oven shed, standing as a reminder awaiting rebuild
Securing the founders’ wishes
So where did Pym & Wildsmith’s inspiring journey to employee ownership begin?
In a conversation with Lisa and our Managing Director Jeremy Gadd in early 2021, during which Sarah Pym-Eaton – Pym & Wildsmith’s Finance Director and one of four family owners – explained that she had been investigating succession planning for several years, ‘discovered EO’ recently and that it was rapidly becoming the preferred option.
‘That initial conversation gave us a sense of how important it was for Pym & Wildsmith’s owners to make the right choices to secure what was important,’ recalls Lisa. ‘When Jeremy asked Sarah what was keeping her awake at night about the change, her immediate response was ‘the people part’.
‘I knew then that it would be vital to get a clear narrative in place and to support the business to recognise its history, while planning a new course for the future.’
Sarah revealed how the business had navigated turbulent times, with redundancies and talent being drained while managing to maintain key clients’ confidence. ‘Like all businesses, the pandemic and Brexit had presented further challenges, but they had a secure base and a resilient team, and knew the future held more opportunities to bounce back,’ Lisa explains.
The right support at the right time
JGA’s initial support was virtual (due to lockdown) and included a Founders’ Workshop with Steve and Wendy Pym, one half of the original founders’ team, and their children Ian and Sarah, who had joined the leadership team.
The thoughts captured in this session became the basis for Pym & Wildsmith’s Founders’ Wishes and a comprehensive FAQ to support the announcement and wider communications.
These included their heartfelt desire that, having committed their lives to the company, it should continue to provide for their employees’ families for generations to come.
Gradually senior leaders and key Admin team members were brought on board, with preparations carefully managed to meet a target transition date of September 2021.
‘That initial conversation gave us a sense of how important it was for Pym & Wildsmith’s owners to make the right choices to secure what was important’
Lisa Fryer, Associate and Operations Manager, JGA
Making clear communication a priority
However, in August, rumours started which had the potential to cause problems so JGA swiftly supported on-site briefing sessions for employees to prevent misinformation and avoid confusion.
‘Everything got back on track,’ Lisa explains. ‘Key clients and suppliers were contacted just ahead of the signing, culminating in a public statement on the eve of the transaction and an early night for the recently-appointed MD, Craig Taylor, in readiness for the big day.’
Then the call from the night shift came. The morning light revealed the damage. The Fire Service had done an amazing job but the impact was extensive.
The planned signing of the EO agreement was off, as the focus switched to securing Pym & Wildsmith’s survival. Months of communication with insurers, contractors and clients followed, while rebuilding plans left no space or energy for employee ownership. Pym & Wildsmith finally (formally) transitioned to employee ownership on 1 July.
Pride in an EO transition well done
Returning for last week’s party, Lisa was struck by Craig’s ‘pride in his amazing team’, as he introduced them to their new company plans.
As he explained: ‘What I saw that day [after the fire] was nothing short of a miracle. When the chips are down, we get things done.’
‘They’re not kidding!’ Lisa agrees. ‘Congratulations to Pym & Wildsmith from all at JGA for making it past this post. We can’t wait to see your next milestone and are excited to be joining you again on your journey now you’re officially employee-owned.’
If you’d like to know more about how JGA can support your organisation through our Transition, People and Governance services, please get in touch here.
EO’s record growth: New stats revealed – and JGA’s verdict
It was the standout figure of the day – 1,000-plus and counting: that’s how many UK companies are now employee-owned. This encouraging news, and other evidence of EO’s continued growth, was unveiled by the Employee Ownership Association as it kickstarted celebrations last Friday for EO Day 2022.
Even better, that 1,000-milestone figure followed a record three years of growth, during which the number of employee-owned businesses (EOBs) has more than doubled – from fewer than 500 in 2020 to 1,030 today.
But what else in the EOA’s 2022 Report caught JGA’s eye?
The success of the Employee Ownership Trust
Lisa Fryer, JGA’s Operations Manager, was excited at the record rate of the EO sector’s recent growth.
She was also struck by report co-author Professor Andrew Robinson’s comment that EO is now in the ‘mainstream’ of British business, thanks to the ‘phenomenal success’ of the EOT (Employee Ownership Trust).
As the University of Leeds Professor explained: ‘EOTs are so attractive because they enable business owners to step back without fear their company will be taken over by someone who does not value the culture, values and employees that are part of the business.’
Lisa agrees, pointing to the impact of 2012’s independent Nuttall Review of Employee Ownership by Graeme Nuttall. The review’s recommendations to government led to the creation of the EOT as a vehicle for promoting employee ownership – underpinning the growth of the sector today.
Supporting founders to make the right choice
‘JGA was established in 2014, at the time the Nuttall Review’s recommendations came in,’ Lisa recalls.
‘From the start, our mission has been aligned to helping owners / founders truly understand and prepare for what they want their version of EO to be.
‘In the years since, we’ve evolved new products and services around transition, people and governance to match the sector’s growth. It’s been a dynamic time to support this different way of doing business, alongside the other values-driven clients we serve.’
Putting values at the heart of good EO
Lisa’s particularly pleased to see values becoming a ‘must have’ feature of the modern workplace – and not just for the younger generations. The EOA’s 2022 Report reveals that 71% of EOBs have a statement of purpose, which includes making a positive contribution to society and the environment.
‘We work with many different models and mixtures of ownership – from 51% through to 100% EOT, and many below that level exploring if introducing an EOT is their next step in succession planning,’ she explains.
‘In our conversations with founders today, around legacy and employee ownership, even more are expressing their desire to retain the culture and ethos on which their business was built.’
‘EOTs… enable business owners to step back without fear their company will be taken over by someone who does not value the culture, values and employees’
Professor Andrew Robinson, Co-author, EOA 2022 Report
A more productive way to do business
So what else in the EOA 2022 Report stood out? Here are some final headline stats…
The top end of the EO sector continues to out-perform the rest of UK business in terms of productivity – at between two and three times the national average.
96% of EOBs say looking after the workforce is a key measure of business success.
97% of EOBs have at least one form of employee governance – 74% have at least two.
90% of EOBs report that employees have some or a lot of say in decisions on working conditions – 85% have some or a lot of say on new working methods.
To find out more about how JGA can support your EO business with our Transition, People and Governance services, please get in touch here.
Succession Planning – the importance of expert valuation when selling to an EOT
In the second of our new guest blogs, we ask Tom Lethaby, Business Development Manager of RVE Corporate Finance, why selling your company to an EOT could be the right approach for your succession planning – and how an expert valuation will ensure you agree a fair price.
Selling your business is likely to be the most important financial transaction you’ll ever undertake. It can be a stressful, costly and exhausting process which might not deliver the outcomes you had hoped for.
Since 2014 over 700 business owners have sold their companies to an Employee Ownership Trust (“EOT”). High profile examples of this sort of sale include Go-Ape (2021), TTP Group (2021), Richer Sounds (2019), Riverford Organic Farmers (2018) and Aardman Animations, the creators of Wallace and Gromit (2018). An EOT sale process tends to be a less stressful and less risky exit route for business owners - but it isn’t right for all types of businesses.
Managing your succession planning risk
An EOT is a low-risk transaction when compared to other types of exit process. It is essentially a form of share buyback, through which the shareholders of the company sell their shares to a newly formed EOT at a fair value, and the EOT pays off the purchase consideration using the historic and future profits of the company, which typically takes 5-8 years. In a sense, this is an internal transaction. The process isn’t reliant on any third-party buyer or bank, and the purchaser (the EOT) does not need to undertake extensive due diligence – the execution risk is therefore much reduced.
So how does the newly formed EOT decide what price to pay for the company it is buying?
The EOT is a trust which has a fiduciary duty to act in the best interests of the employees of the company. It is acting on their behalf to purchase the company from the existing owners. The Trustees (who typically comprise a mix of employees, independent professionals and perhaps also the company founder) must therefore pay a “fair” price and this is established through an independent valuation carried out by a corporate finance or accounting firm (such as RVE Corporate Finance “RVE”).
Agreeing a fair price for your business
There are several valuation methodologies used when assessing a company’s worth – generally either linked to profitability or revenue and occasionally linked to asset value.
Most EOT sales have been for small businesses, typically worth less than £20m (although the largest EOT deal on record was completed by our team at RVE last summer for £275m) and an EOT can be appropriate for businesses worth just £1m-£2m. To help guide valuations for these SMEs there are several organisations which provide M&A transaction data to corporate finance and accounting professionals. Transaction data is often segmented by company size and industry sector. Mark2Market, CMBOR and UK200 all regularly report both revenue and profitability multiples paid for SMEs – and it is the latter which would most commonly be used in assessing the value of a business for sale to an EOT.
When a company is sold to an EOT the objective is to create a perpetual partnership-style structure, similar to that used by the John Lewis Partnership - indeed the benefits of the “John Lewis Model” were heavily referred to by the Coalition Government at the time of the creation of the EOT legislation in 2014. An EOT allows employees, as shareholders through the trust, to benefit from the future stream of profit that the company will produce – dividends can be paid in the form of profit share bonuses to employees once the initial purchase consideration has been paid off (typically 5-8 years).
‘Although the largest EOT deal on record was completed in 2021 by our RVE team for £275m, most EOT sales are for businesses worth less than £20m – and the process can suit those worth just £1m to £2m’
Tom Lethaby, Business Development Manager, RVE
When RVE values a company for the purposes of an EOT sale, we produce a 10-year P&L forecast, with the company’s management, to model how profits will be allocated to pay down the purchase consideration and thereafter to pay profit share bonuses to employees. If the purchase consideration, based on a market value for the company, can only be paid down from profits over 10 years or more, then this is an indication either that the “market value” is too high for this particular company, or that the company is not well suited to the EOT structure (because it cannot generate cashflow to pay a reasonable purchase consideration within an acceptable timeframe).
Companies are typically valued on a debt free/cash free basis but retaining enough working capital for the business to fund its ongoing trading activities. If the company holds significant surplus assets, beyond what is needed for working capital, (e.g. surplus cash) then the value of these assets will be added to the debt free / cash free value to arrive at the fair value of the company. Surplus cash in the company can be used by the EOT to fund an initial “Day 1” pay down of the purchase consideration.
Claiming shareholder tax relief as an EOT
With any EOT sale shareholders will need to be patient, as the Company’s future profits are typically the only source of funds available to the EOT to fund the purchase consideration. It will take several years for the purchase consideration to be fully paid down and during this time shareholders will be holding a credit risk. Offsetting this risk however are tax reliefs that the shareholders can claim - HMRC grants a special 0% rate of Capital Gains Tax for shareholders selling to an EOT (“EOT Relief”) - saving shareholders typically between 10% and 20% of the proceeds that would otherwise be payable in CGT. The UK Government introduced EOT Relief in 2014 and remains highly supportive of Employee Ownership. Through EOT Relief the government is encouraging the sector to grow, as businesses that are owned by their staff are proven to be more productive and more resilient.
What should you do next?
In summary, we at RVE believe that all businesses owners should consider an EOT as part of their exit plans because it will deliver:
Competitive market-rate pricing for the shareholders
A sale process that is not driven by external parties
A sale which preserves the business as an independent entity, with its reputation and team intact
A significant saving in CGT
RVE Corporate Finance specialises in advising and structuring employee buyouts, where business owners sell their business to a newly-formed EOT.
Discover how we could support you to choose this option as part of your succession planning by contacting us info@rvecf.com.
EO Day 2022 – 10 reasons we’re excited to help #GrowEO
It’s back! The first fully in-person EO Day since 2019 and at JGA we’ll be adding our support to #GrowEO by celebrating on Friday 24 June.
EO Day 2022 marks a decade of this calendar highlight, which the Employee Ownership Association (EOA) launched in 2013 to champion the benefits of operating business in this different way. Since then the world’s changed, but EO continues to show the potential of business as a force for good.
So here, for EO Day 2022, are 10 reasons we’re excited to help #GrowEO:
1. EO is a diverse and dynamic sector
From professional services, manufacturing and construction to retail, healthcare, farming and film – there are now more than 800 EO organisations operating successfully in virtually every sector, with the 50 largest employing 180,000+ people across the UK.
2. EO is making its (economic) presence felt
In 2021, the combined value of the UK’s top 50 largest EO businesses exceeded £21bn. The EOA’s new Knowledge Programme is gathering the data and insight to transform the UK’s understanding of EO and the sector’s knowledge about itself.
3. There’s no one (EO) size fits all
And that keeps us on our toes (in a good way). JGA’s knowledge of the different EO models means we can support our clients to choose – and tailor – the one that best suits their culture, sector and size.
4. The best EO companies are leading the way on ESG
ESG has become a social, economic and business priority for 2022 and beyond. Employee-owned Riverford Organic Farmers is a shining example of how good EO combined with good ESG can make a real difference on the ground.
5. The EO community is innovative and supportive
At JGA, we love the conversations we share with our EO networks, thanks to the insight, support and connection they provide. We also value our relationship with our Trusted Partners who share our commitment to #GrowEO.
6. Working together is a better way of doing business
And, done well (right support, right time, right people) you don’t get more ‘working together’ than when you successfully transition to EO. We’re inspired by how the most innovative EO companies share responsibility, opportunity and reward.
‘We’re inspired by how the most innovative EO companies share responsibility, opportunity and reward’
7. The EOA are good people to work with
In May, we enjoyed our Yorkshire road trip to meet new CEO James de le Vigne and the EOA team. We’re delighted at the EOA’s stronger focus on promoting EO’s economic and social potential as a force for good.
8. EO is where we came from…
At JGA, we don’t just work alongside EO clients: many of us have also worked and led in EO organisations ourselves. Together, we have a combined 100-plus years’ direct EO experience, so we understand what EO really involves.
9. … and it’s where we’re heading too
We’re used to enabling others to shape their EO transitions, but now we’re taking steps to become EO ourselves. We recently enjoyed our first ever JGA Employee Conference. It feels exciting and unnerving at the same time.
10. EO is a great excuse to eat cake
Not every day (obviously) but in 10 years no EO Day celebration has ever happened without a few treats being baked, iced and eaten. At JGA, our ‘cake plans’ are already in motion ahead of this year’s special EO Day.
To find out more about how you can get involved in EO Day 2022, see the EOA website.
To find out more about how JGA can support your EO business with our Transition, People and Governance services, please get in touch here.
Meet the experts - Webinar event
Jeremy Gadd and Philippa Meaden will be joining others in a session aimed at helping demystify some of the considerations and preparations any founder or business owner considering transition to employee ownership.
‘Events like this are invaluable to those in the early stages of exploring their succession options, because it brings together the combination of professional services supporting the legal, financial and cultural changes.’ say Jeremy. ‘We recognise that employee ownership is not as well known or understood as some of the traditional sale options, and so being involved in these events really helps in providing clear guidance from those experienced in working in the employee ownership sector.’
The event is being organised by Birketts, with Lisa Hayward and Alex Nelson, Partners, bringing their expertise to the session. From FRP Advisory, Jon Dodge, Partner and Matt Field, Director will be providing an insight to the financial aspects and considerations.
If you are interested in joining the session, please follow the link below to register in advance.
EOA Better Business Together - 5 reasons JGA will be there
It’s been a whole year coming, but this Thursday (31 March) it’s Better Business Together 2022, incorporating the EOA AGM.
At J Gadd Associates, we’ve booked our place and we’re going – here’s what we’re looking forward to the most:
Hearing outgoing CEO Deb Oxley’s review of the last 12 months and reflections of her time at the EOA helm. We’ve enjoyed working with Deb during an eventful six years for the sector and wish her well for whatever lies ahead.
Learning more about the EOA’s priorities for 2022 and beyond from Membership Board Chair Chris McDermott. We’re encouraged by the EO sector’s growth and interested to see how our transition, people and governance services can support it in the years ahead.
Welcoming incoming Chief Executive James de le Vigne to his pivotal new role. We’re excited to understand how James’ background in co-operatives – and the fresh perspective he offers – will help shape the EOA’s future success.
Strengthening our links with the EOA and wider EO community at the closing (optional) networking session with the EOA team, Board, Membership Council and other delegates.
Getting ideas for how J Gadd Associates can best support this year’s 10th annual Employee Ownership Day on 24 June as an enthusiastic Supporter Member. #GrowEO is the theme – want to know what we’re planning? Watch this space!
EOA Better Business Together 2022 runs from 1.30pm to 3pm this Thursday (31 March), with the last 30 minutes set aside for optional networking. Not yet booked your place? There’s still time, but you’ll need to be quick. Register now via the EOA website.
Challenging, supportive, insightful – the value of an Independent Trustee
Challenging, rewarding and (yes, at times) surprising: that’s how MD Jeremy Gadd describes the experience of being an Independent Trustee.
And he should know. Not just because Jeremy and Lead Associate Pip Meaden are themselves Independent Trustee Directors at four successful EO businesses – but because, at JGA, we specialise in building Trust Board effectiveness and providing Independent Trustee Resourcing support.
So what value can an Independent Trustee bring to your Board? The clue is in the name.
The value of independence
As Jeremy explains: ‘A good Independent Trustee brings independence of thought, a fresh pair of eyes and the ability to ask the really simple questions that invite people to think in a different way.
‘You’re there to ensure the company is being run in the best interests of the beneficiaries - who are the employees - and that’s different to other Non-Executive Director roles.’
Pip agrees: ‘I get to ask the questions that some might view as naïve, but which often bring about the best conversations. It’s critical that, when appropriate, the challenge is there – being able to offer assurance that the right decisions are being made for the right reasons is key.’
The power of working together
Part of the role is to fill a gap by providing additional insight and skills – chairing, financial, EO or sector-specific. Jeremy cites the ability to listen and ask good questions, curiosity, empathy, commercial know-how and sound judgement as integral to being an Independent Trustee.
Working together is also important.
‘When you join a Trust Board, you must first collectively establish trust and define your purpose and culture,’ he says. Then, as an Independent Trustee, you’ll be able to call out the important things that might feel uncomfortable, and stand your ground.
‘You’re independent but you must be a team player, recognising that everyone in the room is playing their part.’
This approach extends to the relationship an Independent Trustee builds with any Employee Trustees the company might have – ‘a really important dynamic’, Jeremy says. ‘The Employee Trustee offers valuable insight into the experience of working within the organisation.’
As an Independent Trustee, you can also support the Employee Trustee to develop in their role as their business grows. ‘Employee Trustees take on a high level of responsibility and that can feel lonely,’ he points out. ’That’s why JGA launched Trustee Connect, our open forum for this vital group.’
‘A good Independent Trustee brings independence of thought, a fresh pair of eyes and the ability to ask the really simple questions that invite people to think in a different way’
Jeremy Gadd, MD and Independent Trustee
‘It’s critical that, when appropriate, the challenge is there – being able to offer assurance that the right decisions are being made for the right reasons is key’
Pip Meaden, Lead Associate and Independent Trustee
The challenge of ‘keeping close’
So what about Jeremy’s own experience as an Independent Trustee? He currently holds the role at two innovative EO businesses: multi award-winning animation company Aardman and design-led manufacturer and supplier The Rooflight Company?
‘I’m lucky to be on two very good, very diverse Trust Boards that operate in different ways and have strong relationships with two impressive executive teams,’ he agrees.
‘I’ve taken time to understand the different dynamic and business lifecycle of each, to ensure my judgements are well-informed and sound. It’s a privilege to play a small but important part in the success of a company when it’s making significant organisational changes or capital investments.’
Being an Independent Trustee has enhanced Jeremy’s personal development too, giving him the chance to meet (and learn from) people at all levels and across functions, including Employee Reps – something that gives him ‘a real buzz’.
‘What might surprise some is the range of issues we discuss,’ he adds. ‘The challenge for anyone in this role is to keep close enough to the organisation to sense how it’s being run internally. You don’t need to know the detail, but is it living its values? It’s important to get that balance right.’
Getting the right people in the right roles
For Pip, being an Independent Trustee offers the opportunity to apply her experience of working within EO at a different level, supporting people and cultural change. ‘It enables me and my fellow Trustee Directors to monitor, sense check and balance the way the businesses are being led,’ she explains.
‘With the employee ownership trust (EOT) the major shareholder, I enjoy my role as an independent voice. I can bring a degree of common sense and perspective which can be difficult for others to offer if they have an emotional attachment to an issue or thing.
‘the EO sector’s growth and the number of founder / family-led businesses choosing to transition is driving the demand for good Independent Trustees,’ concludes Pip. ‘My advice to any organisation is to be very clear about your requirements, seek expert support with the Independent Trustee Resourcing process and recruit accordingly.’
What should you do next?
At JGA, we connect high-calibre Independent Trustees with forward-thinking EO organisations through our EO Trustee Appointment Service (EOTAS) – in partnership with Russam. We also enable businesses to build Trust Boards that actively make a difference – with our Trust Board Effectiveness support.
Want to know more?
The different approaches to making your company employee-owned
At JGA, we work alongside a small number of carefully-selected Trusted Partners – chosen for their shared commitment to the clients we serve.
In the first of our new series of guest blogs, we ask Robert Postlethwaite, MD of Postlethwaite Solicitors, to explain the four options founders/owners have when employee ownership is part of their succession planning – and why there is no one size fits all.
Are you thinking of making your company employee-owned?
If so, did you know that there are actually a small number of alternative ways you can do this?
As with most things there is no -one size fits all. The best approach for you will depend on you and your company’s situation. Let’s look at the different options available in more detail…
Employee Ownership Trust
This is by far and away the most common approach. Your shares in your company would be transferred to a trust which would then hold the shares on behalf of the employees. If the trust is a statutory employee ownership trust, all employees will share in the company’s ownership, so this is a good model to choose if you are committed to everyone having a stake. This approach also brings tax incentives, in particular an exemption from capital gains tax if you (and any co-shareholders) sell more than 50% of your company to the trust and also the ability for any subsequent employee bonuses to be free of income tax, so long as all employees receive them.
Employee Benefit Trust
If you prefer a form of employee ownership that allows greater flexibility (in particular if it is felt important to allocate benefit in the trust to selected key or senior employees) you could instead choose a more generic employee benefit trust. However, this option does not bring the same tax reliefs described for an Employee Ownership Trust.
Any form of employee trust will need to be run by trustees. These could include at least one employee, perhaps combined with an independent trustee. The trustees do not run the company, this responsibility remains with the directors and leadership team who will be accountable to the trustees.
Hybrid approach
Alternatively, you could choose the hybrid approach. This would be best for a company that favours an employee ownership trust holding a majority of its shares but also sees an advantage in combining this with personal share ownership. In this scenario individual employees (or some of them) would be permitted to hold shares but the trust would always continue to hold more than 50%.
Where employees hold any shares personally, they will each hold their own share certificate and can receive a profit share through dividends. They can then sell their shares back on leaving the company or perhaps earlier, potentially making a financial gain if the company has grown. They will also have a shareholder vote.
This scenario is often used to:
enable all individual employees to have their own personal ownership stake alongside a separate indirect stake through the trust, usually by the trust transferring some of its shares to employees
and/or
provide a special incentive for more senior employees, for example through the grant of share options.
Personal shares only
It can also be possible to create employee ownership in your company without involving any kind of trust, although this would be unusual and often complex. Most commonly, it would involve a new company acquiring your shares. The owners of that company would be its employees, each holding shares personally. Usually, this approach is inferior to one that involves trust ownership, but it could on occasion be the best solution.
This approach involves several moving parts, and for a company with large numbers of employees and/or significant staff turnover, it would involve substantial administration.
Can we as the current owners be paid for our shares?
Yes, it is common on a transition to employee ownership, whichever model you intend to adopt, for the current owners to be paid for their shares. Typically, this involves payment in instalments, funded from the company’s profits.
To find out more or if you would like to discuss an approach that would align best with your objectives, get in touch with Robert Postlethwaite, who would be happy to talk in more detail about the different options.
About Postlethwaite
Postlethwaite Solicitors are a team of specialist employee ownership and share scheme lawyers.
With top tier firm and lawyer rankings and over eighteen years of employee ownership and share scheme experience from a wide range of commercial transactions and situations, we are able to stand by your side and ensure you have a solution that is fit for purpose, commercially sound and wherever feasible, tax efficient.
Since 2003 we have assisted hundreds of businesses in setting up employees share schemes and over 70 companies in making the transition to becoming employee owned. We focus on helping our clients find the approach and structure that is right for them and then assist with putting it in place.
We’ll listen to what you want to achieve, carefully design a solution to achieve your objectives, and think ahead. We do not provide off-the-shelf or commodity solutions.