Leading an Employee Owned Business

This article, authored by Barry Matheson an IDT independent trustee, explores leadership in an EO company through the lens of the culture of the business.

In the early phase after transitioning to employee ownership, there is much for management to consider. Ensuring that governance arrangements are working between the Trust Board and executive, establishing communication channels between employees and management, and creating a sound financial basis on which the business will thrive while remaining on track to repay the former owner on time are all crucial.

As is managing early expectation of entitlement versus clarity on responsibilities amongst the new employee owners – it is a tricky equilibrium to achieve so that enthusiasm for a greater say in the business doesn't compromise business strategy.

Putting in place visible mechanisms common within EO businesses, such as Employee Councils and having an employee on the Trust Board, might create the impression that the employee engagement box is ticked. However, those structures around communication and involvement will not, in and of themselves, deliver the benefit of greater employee engagement over time.



In my experience of over 30 years in the John Lewis Partnership, it never ceased to amaze me how different business units with the same formalised structures refined over decades could achieve fundamentally different degrees of employee engagement and consequent business success. In nearly every case, the common denominator was culture.

Consider these five questions in terms of yourself and your organisation, you might be surprised by what you discover!

Does Your Business Have a Clear Purpose to Believe In?

EO organisations should have a head start here if the vision and purpose of the business was captured as part of the transition to employee ownership. In some cases, this may be hard-wired into the legal documentation, but this is only beneficial if employees know what is in that documentation and their role in fulfilling it.

Agree on a common set of values that are intuitively understood and against which everyone’s behaviour is judged, not just words on a poster in the canteen.

Communicate that purpose constantly, either directly or in the language that is used and the behaviours that are displayed. This should be the purpose, the North Star the business is heading for that helps you ride out the ups and downs that will inevitably be encountered.

Be prepared to have your decisions challenged if your employees think management decisions conflict with that purpose and the benefits of ownership they rightly expect.

Are You a Role Model?

Employees look to leaders for clues on how they are expected to behave.

Engagement with ownership and its responsibilities therefore needs to start with those at the top, often through symbolic actions that demonstrate you are always “walking the walk”.

Do you behave in a way that motivates and inspires by providing meaning, optimism, and enthusiasm for the benefits of employee ownership?

Or do the pressures of leadership get in the way of good intentions? Invite your leaders to hold the mirror up to themselves, as individuals and as a collective, to explore the same question. Then ask your employees to hold that mirror for you and see if you get the same answers.

Whatever your role or seniority in an organisation, use that mirror to reflect yourself, your actions and behaviours, as well as how others may perceive you, before leaping to challenge others.

To What Extent Do People Have the Right Skills to Deliver the Purpose and Live the Values?

Do your leaders have the skills to lead employees who also own the business? Do they empower and coach for success, or do they achieve success through control?

Many leaders in small businesses acquire their position because of their technical skills, but success in an EO business also requires confidence in skills such as setting clear direction, coaching, empowering, and giving and receiving feedback.

Employees will thrive as owners if they understand the business’s inner workings. Consider training sessions and workshops that enhance financial literacy and operational knowledge.

Explain the bigger picture of how an organisation works, how the cogs within it interact and rely on each other. Reinforce how the actions of a single person or team can make the difference between success and failure.

Do Your Business Processes Reinforce the Culture You Want?

Organisational structures, symbols of hierarchy, and even meetings are just some of the things that will typically impact the sense of ‘how things really are done around here’.

Even with the best of intentions, leaders will have blind spots to things that can greatly impact employees’ commitment to the business.

Only through powerful questioning and keen observation will a skilled leader truly understand the positive and negative things that impact company culture and make ownership come alive.

DO you, as a leader, seek insights from employees in all roles and at all levels? Are you confident enough to incorporate these insights into your decision making? Do you thank those individuals for sharing their views, and provide feedback on how it has been useful in shaping your decision making?

Do You Make Ownership Personal?

Or is employee ownership only felt through structures such as employee councils and trust boards?

Ensuring that commitment to developing the right skills and adopting the right behaviours should be recognised and rewarded at an individual level, not just through collective structures.

Consider performance management, reward, and recognition systems in particular to ensure employees engaged in business success are recognised ahead of those who go through the motions.

Whilst employee ownership can herald a collective share of profit through an EO bonus, failure to address an individuals short-comings or failure to work within the values of the organisation can very quickly undermine the positivity ta EO can create.

So share profit equitably, whilst addressing issues individually. 

Barry Matheson had a successful 30-year career in the John Lewis Partnership before becoming a leadership consultant and non-executive director. An operational leader at heart, he has extensive experience of developing leadership teams and saw the difference it makes when leaders put culture and people ahead of process to deliver sustainable business success. He brings this expertise and experience to his role as an IDT independent trustee to employee owned organisations.