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Employee ownership works

Recently an “E-Myth” blog on optimising employee performance caught my eye.  It talked about employee “ownership” in terms of getting employees to take ownership of their roles and to be fully committed to doing their best for the company and for themselves, not just about having some legal ownership.

This is a subject that is very close to our hearts at K&H (as regular readers of our newsletter will know).

At the recent Employee Ownership Association conference, Cory Rosen from the US, who is widely regarded as the world’s leading expert on employee ownership, spoke about these two meanings of ownership. He explained that his extensive experience had clearly shown the synergistic impact of ownership and culture and how the most successful companies pay at least as much attention to the latter. In fact, this is often more important than simply issuing share or setting up and employee share trust.

In an age of such abundant information, the cement that links these two aspects of ownership is having an open book policy – ie sharing with the team the key information about the company, including its accounts and profit figures! Without this the essential element of trust is missing.

Here at Kirkpatrick & Hopes we hold a monthly meeting which the whole team attends.  We look at the past month’s figures openly, discuss workload, air our views  and round off the meeting with lunch and a general knowledge quiz.

For those unfamiliar with the 8 rules for employee ownership these are:

1. Establish clear agreements about  what work is to be done, and how and when it is to be done.

2. Clear communication

3. Employee responsibility for their tasks and outcomes

4. Report changes to what has been agreed immediately

5. Give them space- don’t undermine them by looking over their shoulder the whole time.

6. Have regular check-ins

7. No exceptions to these rules!

8. Build the working relationship on trust

A reminder also that Kenneth Blanchard’s classic book on delegation, The One Minute Manager Meets the Monkey (see here)  sets out clear guidelines for how to do this in practise.

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Employee share planning can save huge amounts of tax as well as having all the well documented positive effects of a more motivated, engaged team.

Of course  mistakes can sometimes be made with employee share schemes, and these include: :

  • Having no exit strategy so that the shares/options have no perceived value. Of course, if dividends are paid on shares this can counteract any such concerns- especially if they save tax too!
  • Offering shares or options at an unrealistically high price.
  • Giving too many shares/options to new, unproven employees and not being able to withdraw them later, and therefore also…..
  • upsetting existing team members who you have been less generous with.

In my experience, the number one problem is procrastination on the part of business owners. They know that making employees shareholders is the right thing to do (for the company, the employees AND for their own succession planning) but fear of change stops them from seeing through their promises, especially to key team members. Over time those key people  can become more and more disenchanted with promises not fulfilled and leave with ill feeling. Often they take with them valuable knowledge, contacts and experience that allows them to set up in competition with their old employer- the very worst scenario!

At Kirkpatrick & Hopes, everyone is a shareholder, and I think this makes us pretty much unique in the accountancy profession.

Clients who are open to this and have tried at least sharing profits and important information with their team, have certainly been the businesses that have tended to prosper.  And perhaps more importantly, they are the businesses where the owners are able to delegate with confidence to a trusted team of employees without the paranoia and insecurity that many owner-dependent business owners seem to carry with them.

And let me know if you think you can add to the 8 rules of employee ownership. I’m interested to find out other organisations’ experience of implementing these cultural changes.

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