I AM often asked why more businesses are not owned by their employees. One issue is a lack of awareness and understanding about how the model works. Another is that the model does not necessarily suit everyone.
But the greatest reason is because of the way that most owners perceive the value of their ownership. For most, the traditional means of value realisation is through the sale of the company either to another business or to the public market. This brings immediate, certain and often substantial financial reward. And as a result owners are often tempted to sell their businesses long before they have reached their full potential.
In Britain, we embrace the public limited company model more than in almost any other developed country. Yet there is evidence that employee ownership can deliver increased profitability and greater levels of innovation than other forms of business ownership. Employee-owned businesses are more resilient during economic downturns. They have more engaged employees who benefit from higher levels of wellbeing and experience less stress.
Companies like the John Lewis Partnership cannot be sold, which means that we remain focused on the lasting success of the business. Because we have no option to sell our shares and invest elsewhere, each of our 90,000 partners at John Lewis and Waitrose has an incentive to throw all their energy and passion into making this year better than the last. Partners have owned the business for 150 years and look set to own the business for another 150 years. This means we are all naturally focused on the long-term success of the partnership. In a highly competitive retail environment, this gives us a powerful advantage.
Employee ownership is gaining government support – recent changes to the tax system support the model and benefits of employee ownership were discussed at a Scottish parliamentary committee convened to discuss job quality in the Scottish labour market.
An increasing number of business owners are asking whether employee ownership could work for them. Employee ownership in the UK is growing at 10 per cent annually and in Scotland, there are 71 employee-owned businesses and worker co-operatives which represent approximately 6,500 employees and £900 million turnover.
This trend should be encouraged. At a time when businesses and policymakers seek new ways to address the UK’s productivity challenge, now is the perfect time for alternative ownership models to flourish. The economy needs more employee-owned businesses because they have demonstrated an ability to deliver increased productivity, while also thinking and acting for the long term.
But real change can only happen if we encourage a shift in perception of what it means to be a business owner: from the right to sell, to joint responsibility to nurture, develop and sustain businesses and their employee-owners for the long term. Almost by definition, owners of successful businesses are entrepreneurial and far-sighted when they set up their businesses. If we can help them to bring those same qualities to bear when they approach the exit, we could create a new generation of businesses that will deliver economic growth for the decades to come. «
• Charlie Mayfield is chairman of the John Lewis Partnership. He will be speaking at Inspire EO Scotland Conference (www.inspireeo.co.uk) tomorrow – an event that aims to provide businesses of all sizes the opportunity to learn more about employee ownership.