7 recommendations to grow your Employee-Owned business

Which Employee Share Ownership Plan is right for your business? Watch our Free Webinar 

7 recommendations to grow your Employee-Owned business

Blog

7 recommendations to grow your Employee-Owned business

By , May 4, 2020
employee owned - benefits and recommendations

Research from the business school at Auburn, USA, outlines some key strategies for improving the performance of employee-owned businesses. The academic research on ESOPs is widely positive and several studies have found that the earnings of employee-owned firms are superior or equal to those of conventional companies and that employee ownership contributes significantly to productivity and performance when it is accompanied by employee participation in decision making.

The research I have undertaken strongly supports that the more successful employee share ownership plans are designed with a win-win-win focus; that is the business, the founders/owners and the employees all need to be better off to win! Research also highlights the six major advantages enjoyed by employee-owned business: co-operation, productivity, patience, loyalty, flexibility and risk-taking.

This study outlines seven key recommendations for improving the sustainability of employee-owned companies:

  1. Explicitly adopt a set of common foundational values.
  2. Create an organisational structure that shares power amongst several bodies, and thus limits its concentration.
  3. Craft an organisational culture of character and take active steps to maintain that culture throughout the life cycle.
  4. Manage the affairs of the employee-owned company in a way that manifests servant leadership.
  5. Transform the whole of the HR/Industrial relations function to focus on win-win rather than adversarial strategies.
  6. To foster democracy at the microlevel, create and sustain (through education and development) self-managed work teams.
  7. Recognise that every member, employee or owner of the business must serve as a vigilant guardian of the foundational values of the organisation.

The combination of these strategies should reduce the impact and threat of degeneration (a falling away from the foundational values of employee ownership to compete economically) and the darker side of human nature (greed, abuse of power and a willingness to shirk at the expense of others).

The seven strategies are largely values-based and all are inter-related. Implementing these should strengthen the effect and sustainability of the employee ownership model.

If you’d like to speak with an accredited adviser about the implementation of an employee ownership model into your business, get in touch. 

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.

Interested in retaining your key employees?

Get your free ESOP whitepaper.