Blog - Are good Employee Ownership practices just good business practice?

Why good business practice isn’t universal

In many non-EO companies, leaders aren’t being challenged and encouraged by engaged employees. Where employees do challenge their leaders, it is often for individual benefit rather than collective benefit: a promotion, a pay rise, greater influence or visibility. That’s understandable, but it doesn’t create the conditions for a business to be run well for the long term.

In an employee owned business, the dynamic is different. Employees have a real stake in the company’s success, so the challenge and encouragement leaders receive is more likely to be aimed at the health of the whole business, not just one person’s career. That is a powerful driver of better decision-making.

The power of a common purpose

Great leaders engage employees in a common purpose, whatever that purpose may be. Great employee ownership goes a step further: it delivers a common purpose of collective benefit and long-term business sustainability.

A common purpose gives people a reason to pull in the same direction, particularly when times are tough and short-term thinking is most tempting.

When businesses fail

Both EO and non-EO companies fail when:

• There isn’t a shared common purpose. Without one, people default to pursuing their own agendas.
• Leadership fails to communicate and stand by that purpose. A purpose that is stated once and then ignored is worse than none at all.
• Too few employees contribute to delivering it. A purpose only works when enough people are engaged in making it happen.

Ownership alone doesn’t guarantee any of these. Becoming employee owned doesn’t remove the need for strong leadership, clear communication and genuine engagement. It gives you a better framework in which to achieve them.

Internal storytelling with a purpose

Marketing teams have long understood the value of storytelling. A compelling brand story engages customers and can drive commercial success. Leaders of employee owned businesses can apply the same skill inwardly.

Sharing and explaining your purpose is internal storytelling with a point: collective benefit. When employees understand why the business exists, where it is heading and what their part is in getting there, they are far more likely to contribute, and to hold their leaders to account in a constructive way.

The role of the EO trust

This is where the EO trust and its trustees come in. In an employee ownership trust (EOT) structure, the trust holds shares on behalf of employees, and trustees are collectively responsible for ensuring long-term business sustainability and success. Part of this is challenging the board to seek employee insights and perspectives to enhance their decision making.

Independent trustees can bring objectivity, challenge and alternative experience, helping boards keep the common purpose alive and ask the right questions when it matters. It is one of the most important safeguards for making sure the benefits of employee ownership are real and lasting and evidences oversight of leaders and their decision making.

So, yes, good EO practices are good business practices. But employee ownership provides a wrapper that gives those practices a much better chance of success. It aligns the interests of leaders and employees, rewards a long-term view and makes a shared purpose something people have a genuine stake in.

If you are leading, advising or considering becoming an employee owned business, the question isn’t whether these practices are “just good business.” It’s whether your structure, your leadership and your trustees help you apply them consistently.

Independent Directors and Trustees (IDT) provides independent trustees for employee owned companies across the UK. To find out how we can support your EO trust, get in touch.