Carole Leslie

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  1. 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.

     

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 6 Pitfalls Employee Councils Fall Into

    March 10, 2013

    Properly constituted Employee Councils are good for employee owned businesses. The collective voice of employees can be more representative, and louder, than having one or two elected positions within the company’s governance structure. However, in my 13 years in the sector, I’ve seen some common pitfalls that Employee Councils should strive to avoid..

    1. Expected to solve issues over which they have no control The council is sometimes seen as the place to go to when an employee has some kind of work issue, for example, a problem with their workload. However, a voluntary elected council rarely has the ability to resolve that kind of issue. In an employee owned company, any employee should feel able to address any concern they have directly with the individual who can give the answer to that concern. It may not be the desired answer, but it is much better to have a direct answer.

    2. Given the tasks no-one else wants to do There are few things more disheartening than working with a council which then receives an approach from the management team that it’s been decided that it’s the council’s role to organise the Christmas party, or some other task that usually falls to one or two beleaguered individuals. Resist! Does that fit with the constitution? Does the council have the will and the resources for event management?

    3. Absolve management of the responsibility of communication Employee owned businesses thrive on communication. As long as it’s all correct then the more the merrier. I’ve seen some companies where managers have thought it the job of the council to communicate changes in policy (especially unpopular changes!). Good and bad news is always more effectively communicated if employees work together to determine the best way to get information out to all the employee owners.

    4. Not given the proper authority to be taken seriously in the business Employee Councils work best where senior management recognise the value and purpose of the council, and are seen as actively supporting it. In companies where the council is not respected as the voice of employees, for example where managers make it difficult for employees to attend council meetings, then the council, and therefore employee ownership, is not likely to be successful.

    5. Become a talking shop Council meetings are like any other business meeting; there has to be an agenda and someone has to take on the responsibility of ensuring that the agenda is followed, no one member dominates the meeting, and that the meeting achieves its objectives. Some councils find it more effective to have a permanent Chair, some find that rotating the chair keeps people involved and the meetings fresh.

    6. Apathy! This is the most dangerous pitfall of all. If employees aren’t enthused enough to stand for election or to vote, and council members “forget” to turn up, then it’s likely time to rethink the purpose and start again.

    What can be done to a avoid these pitfalls? Being clear from the beginning on the purpose of the council – What’s it for? – is a start. So many companies form a council because “it’s the thing to do”, or it’s “how John Lewis do it”. Communicate this purpose so that everyone in the business understands it, and refer to that purpose often during discussions. Vocal support from the Chief Executive helps focus people’s attention on the value of the council. And of course, if it “does what it says on the tin” then that value will become obvious to all.

    A well functioning council can be the best way to ensure employee owners are truly involved in the business. Invest time in getting it right, and ensuring the Employee Council stays on track.

  8. The missed opportunity- the Autumn Statement fails to deliver the new economy

    December 5, 2012

    How deflating!  The year started off with a bang with Nick Clegg’s commitment to “drive employee ownership into the bloodstream of the UK economy”. The Nuttall report was launched by no less than three government Ministers and a source close to No 10 promised me that “the landscape for employee ownership will change”.  Has it?  There will be an institute established, and a “task force” to raise the awareness amongst lawyers and accountants.  Hardly “landscape changing” stuff…  When will we see the real policies that will make a difference?

    We got October’s red herring with George Osborne’s proposal for a new form of contract which would allow companies to recruit workers on a weakened employment contract in exchange for shares. Many of us in the employee owned and co-operative sector judged this to be a bizarre move and I wrote about this here  .  It seems I wasn’t alone. BIS published the result of their consultation on the proposal which found that only 3% viewed this positively.  Yet, the government has stated an intention to press ahead.

    So, hopes were pinned on the Autumn Statement.  I suggested this might be the opportunity for the Chancellor to reclaim the government’s position as champions of employee ownership in an article for the New Statesman. The new employee shareholder scheme merited one sentence.  This was followed up by a further statement from the Treasury to say that the April Budget will consider measures to support employee ownership based on the Nuttall review.

    There were some positive measures in the budget for SME businesses – but nothing that will specifically support the growth of the employee owned sector.

    Let’s not get too despondent. There are good things happening.  The Employee Ownership Association has seen membership grow by 10% this year.  Co-operative Development Scotland offers an excellent advisory service for business owners interested in exploring employee owned models. Since the beginning of the year, their programme to engage law firms, accountancy firms and banks has been spreading the message of employee buy outs as a succession option.  Wales Co-ops has seen an increasing interest in employee ownership particularly in rural areas.

    This is a growing sector.  Had the promises of support been delivered today, we could have seen an acceleration in that growth which would have brought benefits to the economy, local communities and employees.  As it is, employee ownership will continue to gather momentum despite the lack of political follow through.

  9. You can’t swap rights for shares

    October 10, 2012

    For many of us in the employee owned and coop sector the announcement of the “trade rights for shares” scheme was a blow.  Is this the Government’s big plan to foster more employee ownership?

    We expected better. Following Nick Clegg’s commitment back in January to “drive employee ownership into the bloodstream of the UK economy” and the endorsement by no less than three Government Ministers (Lamb, Clegg & Maude) of the Nuttall report, those of us in the sector thought – at last – they’ve got it! The very idea that employees should have to forgo employment rights to enjoy the rewards they help create is simply ludicrous.  Where did that come from?

    If only George Osborne had attended an excellent, and busy, event in Glasgow this week, he would have heard Sarah Deas of Cooperative Development Scotland say why employee ownership is so important to a healthy economy:

    • Unlike a trade sale where relocation is often inevitable, the model roots the business in the community.
    • The ownership stake engages the hearts and minds of employees and aligns everyone with the business
    • The wealth created is distributed over a broad base of people.

    Employee owned businesses enjoy a dynamic not often found in conventionally structured businesses.  As in every business, the board is accountable to the shareholders.  In the co-owned sector, these shareholders are largely employees.  This breaks down the “them and us”.  The goals of management and workforce are aligned, reinforced by the transparency and accountability that ownership brings.   The Government’s idea that there would be a two tier organization, with managers who hire and fire, and a subservient contractor workforce rails against the very principles employee ownership stands for.  This is a huge step back to the adversarial industrial relations environments of the seventies and eighties.

    At the core of Osborne’s proposition is that share value in these companies will grow and thus compensate employees for the lack of employment security and weakened working conditions. Just about every employee owned business will tell the Chancellor that this is a faulty premise. Financial gain is not unimportant, but is not usually a priority.  The fairness, the transparency, the accountability are the reasons why most employee owners produce the remarkable results that interest the researchers.

    There is no doubt that the model proposed might fit with a very small number of firms who may be looking for that “flexibility”.  Will this really drive the benefits of employee ownership and create a fairer, more solid and beneficial economy?  I think the response so far has been overwhelmingly that it will not.

     

  10. Surprise – you own your company!

    September 23, 2012

    The news that long established family firm, Scott & Fyfe, is moving to an employee owned structure has been welcomed.  Employee ownership is proving to be a fitting succession option for many business owners, as it allows them the freedom and flexibility to exit on their own terms, whilst achieving an acceptable price for the business. It’s also a good option for the UK economy; employee owned businesses tend to be more productive and profitable, and more likely to remain in their community.  Furthermore, research published just last week shows how beneficial employee ownership can be for employees.  A four year study by Loughborough University, sponsored by ifsProshare, found that employee shareholders were more committed, motivated and more likely to produce quality work.

     However, many observers have expressed astonishment that the employees of Scott & Fyfe were told of the company’s planned restructure after the decision had been made. Surely the new owners, the employees, should have participated in this decision?

    Having worked on many employee buy-outs, I can confirm this is not an unusual sequence of events. When there is little or no need or desire to raise cash from the employees to finance the deal, (with the company taking on any debt to pay off the outgoing shareholders), then the transaction can be completed without any involvement of non-Board employees. There are often commercially sensitive reasons for confidentiality.  It could be due to a competitive market, interest from other buyers, uncertainty over funding.  Sometimes, the company would like to get “the legals” out of the way before they focus on what is often a large culture change programme. I can say it is usually a rather uncomfortable situation.

    Initial reactions to the news fall into two categories: relief and suspicion.  Employees will often know that something is afoot. Men in suits walking around, key executives away at unexplained meetings?  When called into an all company meeting, many employees will fear the worst. “The company’s closing” “I’m going to lose my job”.  When that’s not the case, the rest of the message is often lost.

    Employee ownership can seem too good to be true.  When told that their bosses have sold the business to them, many will look for the hidden agenda. Where’s the catch? In control of our own destiny, no relocation to foreign lands, no major upheaval in ways of working – what is not to like? But there is a catch.  The responsibility for making this business prosper lies with the owners, who are now the employees. That’s a weighty responsibility to give anyone, especially as a surprise!

    The most successful transactions I’ve been involved in have included employees at an early stage, before the business transfer process begins. Often we would form an EBO (employee buy-out) team who would be involved in meetings with lawyers, input into governance structures, finalising documentation, and communicating to colleagues. This goes a long way to creating the transparent and honest culture which is the foundation for employee owned businesses to thrive.  When that is not possible, for whatever reason, the company must work extra hard to ensure that employees understand the rights and responsibilities of owning their business and have real voice in their organisation.  Employee ownership does not start and finish as a technical restructure. “The legals” are the sideshow to the main event.  When employees think, feel and act like owners – that’s when the business transformation begins.

Copyright © 2011 Carole Leslie. All rights reserved.