Employee Ownership

Hello, I’m Poss, a Chief Operating Officer (COO) working in technology, and I enjoy talking about some of the themes behind running a business. One of those is ownership itself and in particular, the commercial part. 

Friday was Employee Ownership Day (#EOday), and as good as any excuse to talk about the model that many businesses are adopting. I’ve spent the best part of 4 years working with them myself. 

Whilst there are less than 2,000 employee owned businesses across the UK, the number of companies that are EO has doubled since 2020. 

At dxw - employee owned since 2021 - We chose this model because we felt ownership would accelerate our growth through greater staff engagement, and commercially, as a differentiator from other digital agencies. We also thought it would be a fairly frictionless transition given we already had practices and a culture that aligned with employee ownership. 

Multi-year journey

First things first. There’s no overnight success with employee ownership. By its very nature it’s a multi-year play. You’re trading short and mid-term gains for the long term. But even if those early years are challenging, it’ll sharpen your proposition and productivity. 

For example, your clients aren’t going to hand you a huge contract because you have employee trustees. But having trustees (or an employee council) will help your staff develop leadership capabilities they wouldn’t normally have the opportunity to. Those leadership qualities, translated into better outcomes, are a longer term investment.

By the same token, clients aren’t buying from you simply because you are “employee owned”. I’d compare it to being a B-Corp in that it (EO) might help, but it won’t magically fill up your sales pipeline. But a debt-free employee owned business, which converts profits to staff bonuses, will very likely incentivise colleagues to fill up that pipeline and grow that collective shareholder value. 

Damn debt

I mention debt-free deliberately, as I think this is perhaps the most under-appreciated aspect of employee ownership. 

In most cases, employee owned trusts - the legal entity buying the company - will have to borrow from its future profits to pay the founder off. This can be anything from 12 months to 12 years. Some of the most tangible benefits to employee ownership (mainly financial independence for all) will likely be held back to balance the need to maintain business-as-usual (like nice facilities and salary increases) or accelerate the repayment (and celebrate like Torchbox here). Of course you can do both, but the point I’m making is that the harsh financial reality of debt repayments doesn’t always make it into the shiny EO brochure. 

But saying that, I’m still buying EO stock. The positives greatly outweigh the negatives, and the negatives can be turned into good things. I’ve not even touched on the social and societal benefits employee led businesses bring. If you’re a founder or executive thinking of adopting it my advice would be to do your homework, get your sums right and don’t expect any immediate miracles. Play the long game! 

Got lots more to say on this subject, so reply in the thread if you want to talk, or DM for anything specific. Thanks for reading.

First written 24 June 2024