Carole Leslie

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  1. 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.

  2. 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.

  3. Seller’s remorse: it’s about more than the money

    March 23, 2012

    For most business owners, selling their firm is more than just a financial transaction.  Many describe it as akin to saying goodbye to their child, and indeed, many entrepreneurs will have spent more time with their company than with their family.  There are the customer and supplier relationships, the loyal employees and often a unique culture and way of doing business.

    Yet, when the business owner seeks out the adviser for guidance on business exit, the most likely option presented will be a trade sale. Sell to the highest bidder, and sit back and enjoy the spoils.  If this is the right answer, why do so many business owners regret taking this route.

    At a workshop run by Telos Partners a few months back, we heard from an entrepreneur who had set up a successful recruitment business.  He sold to one of the multinational players, and he remained as an employee.  More accurately, he planned to. He left within the first month.  He told the group that the culture changed almost immediately.  The personalised service was ‘deskilled”, and quantitative rather than qualitative measures were used.  The bespoke consultancy was becoming a CV factory.  He told the group that he had his nice car, the cash in the bank, but wished there had been another way.

    The irony is that there is another way. Employee ownership must be one of the best kept secrets of British business.  By selling a business to employees, the business owner can manage their own exit from the business, to an extent shape the future of the company, and importantly, ensure that as long as the business remains viable, it can remain in the local area providing jobs,  developing skills and retaining much of what made that business special.

    Oxford academic, Will Davies, carried out a comparison of a business sold to private equity investors, and one sold to its employees.  The report can be read here.  The findings were conclusive.  The private equity sale led to decline in quality, in customer relationships, and employee relations. The employee owned business, Gripple, continues to be innovative, profitable and productive. Employee ownership can lead to a sustainable, successful business.  Selling to employees must become a serious consideration for owners looking to exit their business.

     

  4. Peter Huntley – a life well-lived

    March 4, 2012

    The best thing about my work is being welcomed into so many great companies. They aren’t all household names and not all of them are experiencing the easiest of times right now.

    I had the privilege of visiting one such company this week.  The TAS Partnership is a transport consultancy based in Preston. It’s a small business, under 20 employees, all of them passionate about what they do.  TAS Partnership became employee owned because its founder, Peter Huntley, wanted the business to remain committed to excellence in public transport. He didn’t want to see the company sold to a larger organisation where that excellence might be diluted. Peter recognised the contribution the employees made to that success and he wanted them to take control of the business, and share in the rewards. I had the privilege of working with Peter, the Board and the employees as they moved into employee ownership in 2009.  He was a challenging client, but only because he wanted TAS Partnership to stay true to his vision of enabling accessible, affordable public transport.

    As well as being a well-known character in the field of  transport, he was dedicated to raising funds for charity. Indeed, I first met Peter at a TAS Partnership board meeting where amidst the suits, he was wearing a “John o’ Groats to Lands End” teeshirt which he had worn on one of his fundraising cycle trips.

    Tragically, Peter died while training for a trip to the North Pole. Everyone who knew this vital. passionate man was shocked at his death. It really was not believable. Peter Huntley, with so much left to give, to be no longer with us. How fitting then, that attendees to Peter’s funeral arrived in a fleet of buses.  I use the word attendees rather than mourners, because the funeral was a true celebration of the life of a man who touched and inspired so many.

    Peter was raising funds for Transaid, the charity that works to reduce poverty and improve livelihoods across Africa and the developing world through creating better transport networks. Peter’s website is still open for donations. You can donate here

    Peter Huntley 1956 – 2012

  5. Circle Partnership and Hinchingbrooke Hospital – a test for employee ownership?

    February 12, 2012

    Hinchingbrooke Hospital, described variously as “failing”, a “basket case” “indebted” was under threat of closing.  Yet, the fact that the contract to run the hospital, a contact decided by open tender, was won by employee-owned Circle Partnership, has caused great controversy.  There have been many snide remarks about who actually owns Circle – is it financiers in smoke filled rooms just waiting for the day they can cash in their shares? is it evil autocrats with plans to subvert our beloved National Health Service?  Or is it just a group of people who want to find a way to deliver better health care?

    Because that is what Circle Partnership do – deliver better care.  Circle Partnership believe that clinical decisions should be made by clinicians – not bureaucrats, accountants or politicians.  Circle Partnership believe that those closest to the patient, make the decisions with that patient. Circle Partnership believe that their patients deserve the best; whether that is the best in healthcare, catering, service or surroundings. As Ali Parsa says, “Why settle for good enough, when you can strive to be great”.  The founders of Circle put a lot of thought into how Circle could be structured to achieve greatness, and decided that having more than 50% of the shareholding in the hands of those inside the business – rather than in corporate and external shareholders portfolios- the company could retain their vision of truly patient centred care.

    Yes, Circle also have external investors.  However, with a strong vision of transforming healthcare, there may have been no other way to finance their ambitious strategy.

    I had the pleasure of visiting Circle Bath with some members of the Employee Ownership Association . To hear a theatre nurse say that for the first time in her career, she was treated as an equal in the operating theatre was humbling. To hear how a consultant lost his post because he refused to park in the “Staff” car park, preferring the visitor and patient parking closer to the door was inspiring.  To have a porter explain that the corridor lights were placed on the walls as ceiling lights made patients on trolleys nauseous was educating. Indeed, the doors in  Circle Bath corridors are undamaged, because the porter does not want to bump them with the trolley.  There’s not “them and us” – everything is “ours”.

    I have every confidence that the great team at Circle Health will turn around the performance at Hinchingbrooke. They will do it by involving people, informing people and listening to them. Of course, time will tell. In many ways this is a great test of employee ownership.  Circle Partnership have a difficult task ahead.  Those who know the business are sure they will succeed.

  6. Corporate social responsibility – or a real sustainable social business?

    December 10, 2011

    Someone pointed out a painful truth to me today: the fashion for corporate social responsibility is often a marketing front, masking the true objectives and operations of the business. And yes, when I reflect, usually the responsibility for CSR within a company sits in the marketing department. What a depressing thought.

    That someone was Mark Adams, leader of Vitsœ, an exciting and innovative company which takes the whole matter of sustainable business very seriously indeed. As Mark spoke so passionately about the company’s products – they produce shelving systems – I wondered if he was a designer or an engineer. The attention to detail is incredible. The smallest components are painstakingly designed and custom-manufactured. Customers are provided with everything they need for a smooth installation in an attractive recycled cotton bag. The integrated IT system supports the company’s global operations. The units grace the pages of the glossiest magazines. It’s clever, and it looks good.

    Mark is neither an engineer nor a designer. He told me he was a zoologist. And it all fell into place. Mark views business as you would an ecosystem. No waste, just find another use. Don’t recycle, reuse. Get it right, and it will last. Evolve. Every stage of the business process has been considered to ensure that it is sustainable, customer focused and efficient.

    And Vitsœ mean it. It’s not empty words. Rather than using polystyrene, starch pellets protect the products in transit. A notice is pasted on the package to let customers know they can compost the pellets. The cardboard box packaging has been designed to minimise waste as far as possible. Even in the staff canteen, bottled water is banned and filtered water from the tap is kept cool in glass bottles in the fridge. A jar sits on the worktop with milk bottle tops ready for recycling. The array of bikes lined up in the workshop demonstrate the company’s favoured mode of transport. Even the workforce are sustainable. Two of the employees are returning to their homelands, Scandinavia and New Zealand, and Mark has given them the option of continuing to be part of the Vitsœ team. The company has locations in New York, Tokyo, Munich, Los Angeles, Melbourne and Sydney.

    Mark is now looking at how this sustainability can be anchored into the business for the long term. How can his vision, and the company’s very special ethos, be protected for the future? An admirer of John Lewis Partnership, Mark wanted to explore whether employee ownership might offer a potential solution to this. John Lewis Partnership is not owned by individual or corporate shareholders. It is owned by an Employee Benefits Trust, and the 80000 employees of the company are the beneficiaries of that trust. This ensures the company is protected from future sale – as far as possible – and free from external influences. A similar model would allow Vitsœ to continue to do business their way, and not be forced to compromise their ethics for short term gains.

    Sustainable business is about more than getting the product out the door and putting a marketing gloss on it. It has to be real. It would be an injustice to say Vitsœ produce shelving. No, Vitsœ produce the best shelving in the best way. Like the natural world used as the model, it’s the honest and ethical way to do business.