Skin in the game
Is employee ownership the perfect way to engage staff?Gary Boyle remembers the first time he understood the benefit of what he calls ‘tangible engagement’. He’d been working in a plant in Waterford, and one Thursday night his boss told all the workers that if they completed their targets early on the Friday, they could all knock off early.
‘I thought it was a crazy idea,’ Boyle admits. ‘But come 11.30 on Friday morning, I was the only one left at the plant. The workers had organised themselves and done their jobs perfectly, and were off enjoying their long weekend.’
That experience helped inspire Boyle’s spirited belief in engagement. As an HR Business Partner with Intel Corporation, and a council member of the Irish ProShare Association, he’s spent more time than most assessing what genuinely drives buy-in.
‘In terms of engagement, how you treat people is absolutely fundamental,’ he says. ‘In particular, as a leader you need to ask yourself, ‘Why should someone want to do this task? We need to talk as much about the why as we do the what.’
One of the best ‘whys’, says Boyle, is Employee Financial Involvement. EFI takes a number of forms, including gain sharing, profit share, equity stakes and, in its most extreme form, employee ownership, which is usually abbreviated to ‘EO’.
Stock solutions
Intel itself seems pretty committed to EFI. It offers employees up to five bonuses a year, stock options, restricted stock units and a stock purchase plan. Financial incentives – including ad hoc bonuses for delivering short term spikes in production demand – have helped the organisation through a couple of sticky periods.
Financial incentives, Boyle argues, put everyone on the same side. ‘When EFI’s in play it’s not a ‘them and us’ conversation,’ he says. ‘It’s an ‘us’ conversation.’
EO as a model is increasingly on the radar of UK businesses. The 2012 Nuttall Review of Employee Ownership, and the implementation of its recommendations, has seen the visibility of EO increase and barriers to its implementation removed.
The Deputy Prime Minister, Nick Clegg, has been a particularly vocal proponent, expressing an ambition that the contribution to the UK economy of employee owned organisations increases to 10% by 2020.
The coalition is said to be keen on the model as a form of ‘responsible capitalism’, but not everyone seems to see it as an exclusively capitalist tool. ‘My advocacy has led me being called a Marxist a couple of times,’ smiles Boyle.
Might EO find itself without a political sponsor after next year’s general election? Review author, Graeme Nuttall, tells us not. ‘There’s always been all-party support for employee ownership in the UK,’ he says. ‘But now the Coalition has taken such a high profile stance in supporting employee ownership, it’ll be interesting to see what the manifestos contain.
‘Hopefully all will continue to support employee ownership and agree to carry forward the Nuttall Review agenda, with some healthy competition between the parties as to what this means in practice.’
The power to engage
Fans claim that EO is a silver bullet when it comes to engagement. The recent Review of Staff Engagement and Empowerment in the NHS, chaired by Chris Ham, Chief Executive of The King’s Fund, found that public sector ‘mutuals’ (generally, organisations that have spun off from the public sector, but continue to offer public sector services) deliver unusually high levels of engagement and consequently lower mortality rates.
Nuttall himself is a firm believer that EFI can be a big driver of engagement. ‘The Nuttall Review’s definition of employee ownership clearly cements together employee share ownership and employee engagement,’ he says.
‘Although each can exist without the other, and each can benefit a business and its staff, research and practice suggests the best outcomes are obtained when employee financial participation and good employee engagement are combined.’
A unique HR challenge
From an HR point of view, working with an organisation owned by the employees offers its own challenges and opportunities. Writing for the CIPD last year, lawyer Kevin Jaquiss identified a number of issues that HR folk need to take into account. In particular, he cites decision-making structures, frameworks that allow the owners to approve strategy and annual accounts, and transitioning to an employee ownership structure as key considerations for HR.
Interestingly, Jaquiss evolves the Boyle ‘them and us’ thought in a way which suggests the model might ultimately offer clarity to HR people who feel torn between responsibility to management and to the people. ‘In an employee owned business, HR professionals and other managers are no longer dealing with staff on behalf of the parent company or the shareholders,’ he says. ‘They are working on behalf of all staff, trying to ensure the business delivers what it is supposed to.’
Increased popularity
In 2014, interest in employee ownership has increased due to the introduction of tax incentives: one for capital gains, one for income tax. Many forms of organisations are looking into adopting the model, but in particular popularity is rising with owners of small private firms looking for an exit strategy, and start-ups.
So how do organisations wanting to know more go forward? Firstly, there’s the Employee Ownership Association website, which contains a wide range of suggestions and resources. And since the tax changes, the business press has been alive with commentary on the topic.
Graeme Nuttall’s blog offers an excellent index of most of the recent activity: pop along to it if you think EO might be an effective way of reinventing your organisation to hitherto unseen engagement levels.
Gary Boyle was talking at the Human Resource Summit 2014, in Sitges.
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