In partnership with Scottish Enterprise (Co-Op Dev Scot)
MAINTAINING high levels of employee engagement and productivity are key drivers of success for any business. The challenge for employers is finding how to align employees with the company’s goals, and encouraging their workforce to create enhanced performance.
Lirrie Craig is workplace innovation specialist at Scottish Enterprise. She advises companies looking to improve levels of engagement.
She says: “A more engaged workforce will be more innovative and productive, meaning a high-performing organisation that will for example provide better levels of customer service, sell more and ultimately increase profitability.”
Share schemes are just one tool in the toolbox for promoting employee engagement.
Many companies choose to offer employees the opportunity to participate in a share plan, with the view that if employees are able to share in the rewards of business success, they will strive harder to create that success.
A four-year research study carried out by Loughborough University, found that employees who participate in a share plan are more motivated and committed to their employer; are more likely to produce better quality work; more likely to consider the cost implications of their actions at work; and better able to manage their finances as a direct result of being an employee shareholder.
Implementing an employee share scheme can help align employees with the company’s goals.
Share ownership can also be a cost-effective way for companies to reward staff. Employees benefit when the company does well.
Rodger Cairns, head of employee incentives with legal firm Shepherd & Wedderburn, is one of Scotland’s leading experts on share plans.
“Demand for share schemes continues to be strong, and I am convinced that there are even more companies out there who could benefit from implementing some form of plan that enhances employee engagement and improves performance. Giving employees a stake in their business can be a powerful motivational tool.”
Share schemes can be appropriate at different stages of the business life cycle.
Cairns explains: “A start-up may be unable to compete with more established organisations when it comes to paying upper quartile salaries, and the opportunity to participate in a share scheme with the expectation of significant growth can be a very attractive alternative for entrepreneurial-minded potential employees.
“Share options provide an excellent means to reward key staff for delivering on business critical objectives as a company grows.
“A share scheme can also be used to provide an exit for the business owner, when they can sell their shares to the management team or to the wider employee group.”
The Employee Ownership Trust, a vehicle designed to encourage employee ownership of businesses launched in 2014, is gaining traction as an exit route for business owners.
Employees do not own shares directly; but can benefit from an annual bonus of which £3,600 will be tax-free.
The popularity of all-employee schemes, such as Share Incentive Plans (SIP) and Save as You Earn Schemes (SAYE) is growing.
Gabbi Stopp, head of employee share ownership at IFS Proshare, the membership body for share plan administrators, says: “With continued year-on-year increases in take-up and investment levels in both SAYE and SIP, the message is very clear: employees value these schemes.
“Despite increasing choices over where to save and invest their pay, they are opting to put more into employee share plans.
“Employee share ownership remains a vital and valuable force for democratising share ownership in the UK, and of sharing wealth with everyone who helps to create it.’’
There are several share schemes available, many of which offer the business and the employees significant tax advantages.
Cairns believes in keeping it simple: “Find the plan that is right for your business, and invest time in explaining the scheme and its benefits to the employees. If that explanation takes longer than 20 seconds, it’s too complicated.”
Craig agrees communication is important: “Share plans can be useful particularly when deployed with good engagement practices. For many people financial benefits are secondary; employees have to feel valued and respected.”
An engaged workforce can give the company a competitive advantage. Craig continues: “In many sectors (even in the current climate) there is a shortage of skills and an ageing workforce, so it is important that organisations can find ways to engage and motivate employees across the generations.”
LEARN MORE – FREE EVENT
Scottish Enterprise is running a free event – Sharing ownership: the employee stake – on 5 October at Apex Waterloo hotel, Edinburgh. Dean Hunter of Hunter Adams, and Rodger Cairns of Shepherd & Wedderburn will lead a session on how to create the right scheme for your company and the pitfalls and success factors to consider.
To book a place, call 0300 013 3385 or register online at www.scottish-enterprise.com/cds-events
Dean Hunter, Hunter Adams
Having been a director in oil services giant PSN and incentivised to help grow the business, HR director Dean Hunter understood the value of holding equity from an early point in his career.
He explains: “You feel it’s your company. Everything you do is about growing the business, nurturing it and ensuring that the team deliver.”
It worked. The firm achieved more than a three-fold increase in value and the buyers cited the leadership, culture and values of the business as the reasons they were attracted to the acquisition.
When Hunter established Hunter Adams, an HR and business consultancy, in 2011, his aim was to offer a no-nonsense commercial HR advisory service.
He understood that HR typically had a fairly bad name in the market with a poor reputation for an over-emphasis on policy and unnecessary bureaucracy.
“Policies and processes are key to ensuring you have a stable foundation to grow the business – but we should never focus our time on navel gazing internally.”
Hunter sees that many leaders have no plan and very little strategy in place for growth.
“Managers often assume that the leadership team or board can deliver the growth on their own; that the staff will just get on with it and do what is required.”
This is rarely the case. The average level of engagement in UK companies is 36 per cent according to figures for 2015 from CIPD.
In effect, only one-third of staff are striving to deliver the goals of the business when the manager leaves the room.
So when you see the small or medium-sized firm constantly recruiting and hiring to fill “gaps” and the managers spending their time wholly on operational challenges, the key fundamentals of fast growth are not in place.
Mindful of his early career experience, Hunter’s vision for Hunter Adams was a business that attracted and retained talented people who understood the mechanics of business and the reality of employee engagement. “It’s a hackneyed phrase, but at Hunter Adams we have to ‘walk the talk’.”
In December 2015, Hunter took a big step when he gave away 30 per cent of his company to his staff: “Ultimately, it just felt the right thing to do, the staff were already engaged.
“I used to say ‘It’s your company’. I can actually say that with some kind of evidence now. I put my money where my mouth is.”
Hunter partnered with share scheme experts from Shepherd & Wedderburn and his accountants to advise on what plan would be the best fit with the people and the business.
“The right advice is important. The Shepherd & Wedderburn team helped me understand the scheme fully, which meant I was better placed to explain it to my team. That was important to me.
“By divesting such a significant proportion of the equity to employee ownership, Hunter Adams is involving staff in the future of the business, and helping us retain what makes us unique and successful.”
What does the future hold for Hunter Adams? “What happens next is up to our people. We may look at increasing the employee ownership stake as we grow, or we may decide a sale to a global firm might fit better with our aspirations.
“Right now, I’m not ruling anything out. We have a strong platform for growth that includes everyone in the company. We all have a stake in Hunter Adams’s success,” says Hunter.