Carole Leslie

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  1. Ownership is power

    November 15, 2015

    The Meaning Conference Panel

    I was beyond chuffed to be invited to speak at the 2015 Meaning Conference. The topic was Where Does Power Belong Within the Organisation of the Future. I was to give a summary of my position and then take my place on a panel discussion.

    I’m clear on this.  Power is inextricably linked with ownership and control.  Much of the inequality in our society can be traced to the imbalance of ownership.  Power is increasingly concentrated in the hands of the few, to the detriment of the many. This is particularly pertinent in business.  Employee rights are increasingly eroded,  we de-skill and outsource until we are left with little of value and the multinationals play the tax system of the countries.  Power sits with ownership – whoever owns the business has all the power.

    It was a lively debate.  The first speaker, Jack Hubbard, is CEO of award-winning marketing agency Propellernet. He kicked off his slot with a description of a fab company where ideas and energy abound and the culture is one of love and freedom and fun. Kevin McCoy, co-founder of Next Jump, employee incentive and engagement experts, talked of power as embedded in the company’s ecosystem. Their proposition was similar; ownership doesn’t matter, it’s culture that’s important. The fourth panellist, Dave Boyle of Community Shares , was closer to my view; we need more ownership in the hands of the people.  I feel we got into a bit of Entrepreneuralism vs Employee Ownership spat, when in fact our economy needs both.

    Jack Hubbard of PropellerNet

    A company doesn’t have to be owned by its employees to be a good company – of course not.  There are superb companies out there who provide great employment, cherish their people, love their customers.  Employees are “empowered” to deliver great customer service, invent innovative products and manage their day.  But empowerment is not power. In these high performing companies, employees are “allowed” to act within certain parameters.  A great boss hires good people and lets them get on with the job.  But let’s not pretend we are giving people real power.

    The focus on culture is a red herring. Of course, a key component of a successful business is a high performing, inclusive, innovative culture. But that’s not an indicator of power. The power remains with the owner.  And that’s not always wrong – we need plurality of business models (although fewer offshored PLCs might be better for the economy!). Family businesses, entrepreneurial-led companies, values driven corporations, cooperatives, university spin outs, social enterprises; they all have a rightful place in our commercial landscape.

    I’d go further and say we need more entrepreneurs – we need brilliant people who take an idea, turn it into a business, and create something magical that adds value to people’s lives.  Not everyone is willing to take the risks that entrepreneurs take. We need these entrepreneurs who value people’s contributions, offer fulfilling work, provide a place for people to display their talents. But – what happens when the owner wants to exit?  Where’s the “power” of the “empowered” employees then?  These cherished and empowered individuals are commodities to be sold with the business.

    And that’s where the employee buyout comes in. Mainly employee ownership is a succession option for entrepreneurs and family businesses who recognise that the people who helped them create the company are the ones to take it into the future.  By selling to the employees, the vendor has a buyer who will use their ownership power to preserve the legacy, protect the culture and work hard to ensure this is a successful and sustainable business.

    Entrepreneurs create and nurture the magic; employee owners have the real power to make the magic last.


    Posted in: General
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  2. Reaching for the skies

    April 20, 2015

    Last Saturday, I had the pleasure of participating in a sponsored walk to the top of Criffel, the highest peak in the Dumfries and Galloway region. Dumfries and Galloway is a beautiful, often overlooked part of Scotland. From Criffel point, you could see the Cumbrian coast of England, the undulating countryside of the Scottish borders, and to the West, the outline of the Irish coast.

    The sponsored walk was to raise money for Friends of Stewartry Care

    Stewartry Care team reach the top

    Stewarty Care is the leading care provider in Dumfries and Galloway and is owned 100% by the employees who work in the company. This means that there are no external shareholders to satisfy, all money goes into improving the business and the employees. The “Friends” were set up to provide funds to enable service users to enjoy trips out and activities. Social exclusion can be a huge problem for the elderly and vulnerable. Meeting basic care needs is only part of a solution; we need to ensure that these individuals are also given the opportunity to participate in the community. Stewartry Care organise regular coffee afternoons and day trips for people (not just their own service users) to come together and chat over a cuppa and some home baking. The Friends fund any additional support required for people to attend these events.


    Posted in: Employee owned business
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  3. 6 Steps to a successful employee buyout

    August 4, 2014

    1. Be clear about your own needs and intentions
    As an exit route, the sale to employees is the option that gives the vendor the greatest control over the process. You can set the timescales, choose the structure, decide on how much you want and even influence how the company will look once you have said goodbye.
    It can be very worthwhile to talk through your ideas with someone who understands the process. Talk to former owners and companies who have already taken this route. The more research in the beginning, the smoother the transition later.

    2. Choose the right adviser
    Although research proves that employee ownership is a very successful business model, it is not yet a mainstream ownership structure. It’s therefore important that you select an adviser who understands what you want to achieve, and knows how to help you get there. You don’t want to be paying for someone learning how to do it, or someone who doesn’t know how to get the best possible outcome

    3. Select the structure that’s right for you
    There is no “one size fits all” employee ownership structure, and the best one for your company is one that fits with your organisation, your people and your culture. For example, in the UK’s largest employee owned company, John Lewis Partnership, employees do not have an individual shareholding. The shares are held in trust on behalf of the employees. This is a popular model. In other companies, employees can buy and sell shares and build up value in the company in which they work. There are tax effective ways to facilitate employee share ownership.
    It may be that a family business may want to retain a small shareholding for future generations or the company may want to make a small number of shares available for external investors. It’s important to invest time in considering all options, and the potential consequences of these options. Consider this early in the process in order that you reach the best ownership model for you.

    4. Design the appropriate funding package
    The owner who has created and built a successful business should be able to benefit from a fair price when it comes time to sell that business. The funding of the employee buy-out must be structured in order to achieve the fair price, yet not place an undue burden of debt on the company and its employees. It might be that a “package of funding” is the best solution; using company cash reserves, employee investment and external and vendor financing. If possible, it makes sense to do this in the most tax effective way.

    5. Manage the change
    Despite what some lawyers might like you to believe, a business transfer is not just a legal process. Yes, it is of critical importance to take appropriate advice and to have the correct documentation in place but as an organisational change this requires a broader approach. The employees of the company will become the owners, and to fulfil this role they must have a proper understanding of the rights and responsibilities involved in ownership. Pulling together the different strands; funding, structuring, share transfer, communication, stakeholder management as well as keeping the day job going is a tall order.

    6. Communicate, communicate, communicate!
    Communication is the lynchpin of the process. The key to success in employee owned companies is when the employees think, feel and act like owners. By involving your employees in shaping the company for the future, gaining a real understanding of the rights and responsibilities of ownership, you can ensure that the employees will be as committed to business success as true owners.
    Customers are positive about dealing with employee owned businesses and companies owned by their employees fnd it easier to recruit and retain high calibre staff. Leverage your employee ownership to raise awareness outside of the company
    The move to employee ownership presents a tremendous PR opportunity. Make sure your PR people understand what it means,

    Of course, communication never stops within the employee-owned business. Many companies describe employee ownership as a journey. You will find the employee ownership community to be one where people share knowledge and experience generously. There is a genuine commitment to ethical working and best practice; driving successful, sustainable business which benefits the individual, the company, the community and the economy.

    Posted in: Employee owned business, General
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  4. Employee ownership – what’ s in it for the vendor?

    July 12, 2014

    Speaking recently with a business owner currently exploring exit options reminded me of how important, and how difficult, that decision can be. It’s a small business, but a significant employer in its local town. Many of the staff had been with the family business for many years. There had been several approaches to buy but all would mean the business would relocate and local employment would end. “I live in that town. How can I look people in the eyes if I’ve put them out of work?” he said. It’s a common dilemma – succession doesn’t just affect the owner, the decision can be far-reaching.

    For some business owners, it is about getting the best price and that’s fine. Many entrepreneurs put their all into a business, creating jobs and opportunities and sell. They then start something else and the cycle starts again. For many owners, the value of the business isn’t just financial. You want more from a sale than cash in the bank.

    As a business owner, you want to know that the business you created will be cherished, that the relationships you have built over the years maintained, and that the company will grow increasingly stronger to meet the challenges ahead. Who better to do that than the people who know the business best; the employees?

    Selling to employees is becoming an increasingly popular succession option for business owners looking for an exit route. Research proves that employee owned businesses produce more sustainable performance, demonstrate more innovation and have happier employees and customers than traditionally structured businesses.

    Entrepreneurs and leaders in family businesses often find the thought of a trade sale to the competitor unpalatable for a number of reasons: perhaps the business practices don’t meet their high standards, or there is concern that the incoming owner might not treat the customers and employees well. It may be that the the owner wants to keep the business rooted in the local community. Often a trade sale leads to asset stripping and/or relocation. It might just be a desire to retain the “name over the door” recognising the individual/family’s contribution to creating that successful firm.
    A management buy-out can put undue pressure on a management team, financially as well as in terms of stress, and of course, each manager will be looking for an exit themselves at some point. Indeed, the MBO can be seen as delaying the succession issue rather than solving it.

    The beauty of an employee buy-out is that the seller can dictate the pace of change, and manage their own exit at a pace and level that suits them. Many remain involved in an executive or non executive role, guiding the company into a new future.

    Employee ownership helps ensure that the end product meets not only the needs of the vendor in terms of the realisation of value, but also the needs of the business to enjoy a successful, sustainable future and the needs of the employees in sustaining the skills and wealth in the local community.

    Posted in: General
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  5. It’s not all about the numbers!

    June 10, 2014

    “Exit is rarely a purely economic decision for a business.” – Michael Kelly, Senior Associate, Macroberts

    I was invited to attend “The Deal”; a workshop looking at business transfer, facilitated by leading law firm Macroberts. Having worked on many transactions, all of them employee buy-outs, I was intrigued to find out how more conventional exits differ. Attendees were a mix of owners of owner managed firms, and business advisers. We were split into two groups and given a transaction to work on. One group was to look at this from the perspective of vendor, and my group was to take the role of purchaser. David Wylie, Corporate Partner, led the workshop by setting the scene. We were given some outline facts, but not much in the way of financial information. This made the accountants in my team a tad nervous: “We need to see the numbers”! Michael Kelly, Senior Associate, who facilitated our group, was clear. “You have to use the information you have. Exit is rarely a purely economic decision for a business”.

    It was a family business. Sound, profitable, good prospects. One of my group identified a winning tactic. “Let’s buy out their major supplier – that gives us some leverage.” This move almost broke the deal. The vendor team perceived this to be an underhand manoeuvre that would lead to breakdown in trust. Indeed, one of their number wanted to walk away then.

    Some of those present felt this was taking “role play” too far, but in my experience, this can be exactly what happens. The vendor has to feel comfortable with the sale. This is particularly salient in a privately held business, where often a chunk of life and legacy is being sold, not just what appears on the balance sheet.

    What did I learn? Lots! I didn’t know that patents were geographic (thanks, Euan Duncan) and was very interested to hear from employment specialist John McMillan how employment issues differ with an asset sale rather than a share sale. Ainsley McLaren, tax specialist, was on hand to guide us through the minefield of taxation issues.

    The most salient learning point from the workshop reinforced what I’d found in deals I’d worked on; the key factor in a business transfer is the people. Yes, price is important. The vendor has to be happy they are getting their earned reward for starting or building up the business. However, there are other factors at play. What are the aspirations of the current management team? What do the shareholders really want to achieve from the deal? Who makes the business successful? What’s the outlook in that sector? What are the real- tangible and intangible – assets in the business? It’s about more than the numbers.

    Macroberts have a winning formula in this workshop. You learn so much from working through the theoretical case study. You get the opportunity to explore issues that might not be immediately obvious, and experts guide you on the potential consequences of any actions and decisions. Selling a business can be a complex transaction whatever the circumstances. The workshops run throughout the year and if any business owner is considering a sale over the next few years, I’d certainly recommend attending. And great to see selling to employees is an option considered!

    For information on Macroberts Deal workshops click here

    Posted in: General
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  6. A new landscape for employee ownership?

    April 6, 2014

    On the 17th January 2012, Nick Clegg pledged to “drive employee ownership into the bloodstream of the UK economy”. Such a step change hasn’t quite happened yet, but he did make several strong moves which helped raise the profile of a business model that’s gaining interest across the globe.

    The most noteworthy policy change was the move to bestow Capital Gains Tax relief when an owner sells their business to the employees. As Policy Director of EOA at the time, I was involved in the discussions with various HMRC,BIS and Treasury officials. Danny Alexander, Chief Secretary to the Treasury, has taken an active interest in employee ownership, having visited the very successful Woollard & Henry engineering company in Aberdeen, innovative manufacturing company Gripple in Sheffield, and opened the new offices of Highland Home Carers in Inverness. He was always very supportive in discussions, but did challenge why there was a need to incentivise a sector that appeared to do very well without any help. A good question. There are some spectacular success stories demonstrating how employee owned firms can be more productive and profitable, with happier staff and customers than similar conventionally structured companies.

    Tax breaks were not a factor for these owners, and I believe tax breaks will not be an incentive for future business owners. Yet, I’d judge these tax incentives to be a huge success- and they’re not even in force yet! What the tax breaks have done – already – is create tremendous interest within the adviser community. Lawyers and accountants were largely oblivious to employee ownership prior to these changes. This meant that the option was not even going on the table when the client had the business succession conversation. Trade sales, MBOs, Listing – no mention of selling to employees. Employee ownership is now on the agenda.

    The Institute for Chartered Accountants in England & Wales hosted the launch of the Nuttall report in July 2012. Co-operative Development Scotland, responsible for promoting collaborative business models in Scotland, has been running a series of very well attended seminars for professional advisers interested in raising their knowledge levels on employee ownership.

    This is all good. The biggest hurdle obstructing the progress of employee ownership isn’t fiscal, it’s awareness. Not enough business owners and entrepreneurs know the model exists, and if they do, there are insufficient expert advisers with the knowledge to advise and support companies through the process. By giving tax relief to business sales to employees, the government has ensured that the professions now have a duty to know about, and explore the model with their clients.

    Perhaps not a new landscape yet, but it might just be a new dawn.

    Posted in: Employee owned business
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  7. If you only have one egg…

    March 9, 2014

    When it comes to investment, the advice is always “Don’t put all your eggs in one basket”. Where does that leave employees in employee owned businesses, when it comes time to decide whether or not they want to participate in the company’s share plan? Surely it’s not wise to invest your spare cash in the same vehicle that provides your income?

    I saw this in reality in one company, where, as an Independent Trustee, I participated in the annual discussion about how many shares to make available for employee purchase. Employees are not highly paid, and are not likely to have accrued significant pension pots. Under the HMRC approved Share Incentive Plan, there is scope to make share purchase quite attractive to employees. Shares are offered at the lower of the two share valuations for the year, and are paid for from pre tax salary. The company can offer up to two free shares for every one partnership share purchased. New limits came into force this year which allows the company to offer employees up to £1800 shares (or 10% of salary) for purchase annually. This is quite a lot of money to commit for people on basic hourly rates.

    This is a business where all information is shared. The employees know the company’s performance, the strategic plan, the outlook. They can elect employees to the board, and can challenge the management team via a number of routes. As shareholders, they are a particularly well -informed group.

    The deciding factor was a contribution to our discussion from an older employee. He didn’t see the value in investing in a pension at this stage in his life, where performance was unlikely to be stellar and any payments would be eaten by charges. He would welcome the opportunity to invest in the company he worked in. He had confidence that the share value would grow and he felt able to impact on that share value. To him, paying into an institutional pension fund seemed like giving his hard-earned money away.

    The moral of the story seems to be, if you have several eggs, spread them around several baskets. If you only have one egg, why not invest it in a basket you know well, can influence and have some control over the future?

    Posted in: General

  8. Carers should not be the ones paying the price of social care- the evil of zero hours

    June 6, 2013

    The Government is reviewing the use of zero hours contracts, which have become increasingly widespread as an employment contract in many industries.

    Workers on zero hours contracts can’t rely on a steady income, and therefore will find it difficult to plan a budget, never mind secure a loan for a car or mortgage for a house. Unfortunately, the zero hour contract is the usual employment contract for non public sector care workers. For carers, often not paid for travelling time between appointments, it seems a doubly evil form of employment . However, when a business is paid only per hour of care delivered, what is the alternative?

    A recent article in The Guardian suggests employee ownership as a model for social care providers. The benefit of being owned by employees is that there are no external shareholders looking to pocket any profit; in employee-owned firms any trading surplus can be reinvested in the business or used to enhance employee conditions.

    Responsibility for the care of our elderly and vulnerable lies largely with our public services. In these times of budget cuts councils and health authorities find the cost of in house care delivery prohibitive. One Scottish local authority costed their in house service at £27.34 per hour. An employee-owned provider received £13.99 per hour of care delivered in that year. It is no surprise we see the smaller, independent firms being squeezed out of the market.

    This is a great pity. I work with two employee-owned care companies. The employees are committed, professional and do a superb job. The businesses invest heavily in training, and standards are high. Staff turnover is negligible and morale is high. Both companies pay as well as they can, but in comparison to other jobs, the Ts & Cs of employment are minimal.

    Focusing on the “Public good, private bad” is not helpful. Employee ownership is a possible solution but we must not expect to get quality care at a bargain basement price. Social care is not an easy job, and with a a rising demographic of elderly people who want to remain in their own homes, the need for properly provided home care will increase. This should not lead to the exploitation of competent and ethical individuals who choose a career in care. Zero hours contracts are not good, but until we wake up and recognize the value of good care, and pay for it appropriately, these contracts will remain a necessary evil.

    Posted in: Employee owned business, General
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  9. Enterprising Scotland : for the long term

    May 22, 2013

    I was privileged last night to be invited to the Glasgow area meeting of the Institute of Chartered Accountants for Scotland to hear John Anderson of the Entrepreneurial Exchange. What an inspirational speaker! John, an accountant to trade, described how he developed a passion for nurturing entrepreneurship, and the measures his organisation put in place to build an entrepreneurial culture in Scotland.

    John doesn’t think our young people are the “lost generation”. It’s their parents who lost their way. Overly reliant on public sector or large corporate employers, ambition was stifled. Entrepreneurs were viewed as Arthur Daley type characters – not a role model to aspire to. For the good of Scotland’s indigenous economy, this had to change.

    Working with US business guru Rosabeth Moss Kanter, John saw the need to o get a real understanding of what makes an entrepreneur. The result of this was “Local Heroes” – a study of Scotland’s successful business leaders. Interestingly, few were graduates. Many had held sales roles within corporates, and started a business in the belief they could do it better. Having profiled these individuals, the challenge was to make entrepreneurs heroic.

    John’s vision was of an “Entrepreneur Eco-System” – a self sustaining infrastructure that would breed, nurture and support successful business. Education is central to this, and John described a primary school where the P7s not only initiated and ran their own social enterprise, but also had succession planning in place to hand over to the P6s! The Young Enterprise Scotland programme gives many young people a taste of running a business, and many universities have programmes in place to foster entrepreneurship. Some local authorities see entrepreneurialism as the key to unlocking potential in our non academic young people and John mentioned Renfrewshire as being particularly proactive. John observes that there is good support out there for pre start and startup business, and would like to see more for growing businesses. The Scottish entrepreneurs who comprise the Exchange’s Hall of Fame are testament to the quality of business in Scotland: Charan Gill, Maitland Mackie, Michelle Mone…it’s a long and varied list.

    This is all great. Scotland has a vibrant enterprising economy with many examples of successful growing businesses. The elephant in the room remains. What happens next? When these entrepreneurs and families sell on, many of these firms will leave Scotland, taking the jobs and skills and wealth with them. The Entrepreneurial Exchange is doing fantastic work in creating a prosperous Scotland. We have to find a way to root these businesses in our economy ensuring a better future for generations to come.

    Selling to employees as an exit option is one way to deliver this sustainability. Many of Scotland’s employee-owned businesses are demonstrating stellar growth driven by entrepreneurial employees. Should we be making employee ownership “heroic” and putting more effort into embedding collaborative working into the curricula of schools and colleges? As John told a captivated audience last night, Scotland is in a better place now than 30 years ago. I see the challenge as making this success sustainable.

    Posted in: Employee owned business
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  10. The danger behind “Shares for Rights” proposal

    May 1, 2013

    Many of us in the employee ownership sector are rather bemused at the government’s intent to push through the much decried “Shares for Rights” legislation. This is a proposal in the Infrastructure Bill which creates a class of employee where certain employment rights are compromised (e.g. on redundancy and dismissal) in return for a negligible shareholding in the business. The government’s own consultation was dismissive of the idea, and the House of Lords rejected the idea on the first two readings, with an eventual passing last week. I was with one of Scotland’s leading lawyers last week who dismissed the notion as “irrelevant” -take up will be less than negligible. There might be a limited application for small high tech startups, but the reality is that models already exist which fit with these organisations which are probably more tax effective.

    I agree with almost all of that. There is little danger that hundreds of employees will lose employment status in return for shares which might be worthless because the policy won’t get off the ground in the first place. A non event? Yes. Irrelevant? No.

    The idea came from nowhere at a time progress on employee ownership was gathering pace. Following a comprehensive consultation, and led by expert Graeme Nuttall, the Nuttall report had been published in July making many recommendations to promote the employee owned business model. “Employee shareholder status” was not one of them. In April this year, the Chancellor announced a £50m annual budget for the development of employee ownership. Some of this money is to be allocated to tax incentives for owners who sell to their employees – a policy we have been pushing for a long time.

    The whole nonsense idea has at best been a distraction to much of the good work going on to promote a business model that is better for our economy, our communities and our workers. At worst, it has tainted employee ownership with the tawdry brush of exploitation. Employee owned businesses tend to be better employers, with enhanced terms and conditions in comparison to conventionally structured firms.

    “Shares for Rights” is not employee ownership. It is far removed from what our growing sector is trying to achieve. Let’s put the idea to sleep and focus on positive moves that will create and sustain good jobs and shared wealth.

    Posted in: Employee owned business
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