Employee ownership wins on profits

A report released recently by the John Lewis Partnership and based on research by Cass Business School has revealed that employee-owned businesses (EOBs) employing 75 staff or less generate substantially better profits before tax than non employee-owned businesses of a similar size.

The research also found that employee-owned businesses have created jobs more quickly during the recession, with employment numbers rising by more than 12.9% compared with 2.7% in non-EOBs.

The findings reflect the widely-held belief by EOBs that staff recruitment and retention are crucial in economic recovery.  Nearly three-quarters of EOBs strongly believe that employee commitment is a central advantage of the employee-owned business model.

The profitability of EOBs correlates with employees having greater autonomy in decision-making and being empowered to drive the business forward.  This also helps ensure EOBs are more resilient: their performance is more stable over business cycles, displaying less sales variability and, crucially, during the recession their sales have significantly surpassed that of non-EOBs.

The research will be of particular interest to Scotland’s business community and policy makers, given the high ratio and number of SME’s in the economy – of Scotland’s 300,000 businesses, the vast majority employ less than 10 people.  The implication from the research is that employee-ownership builds more profitable, effective businesses – and that Scotland’s economy would benefit from more such businesses.

Currently there are 50 plus employee-owned companies in Scotland, with a combined turnover over £700 million and employing more than 4500 people.

Sarah Deas, Chief Executive of Co-operative Development Scotland is passionate about the potential of employee ownership, saying:

“Employee-ownership is a hidden gem at the heart of Scotland’s economy and we would encourage more business owners, senior management teams and advisers to consider employee-ownership, particularly when a business owner is thinking about exiting.”

Given the important role that employee-owned businesses can play in developing Scotland’s economy, The Herald and Sunday Herald, with support from Co-operative Development Scotland, is hosting an event on everything to do with employee-ownership.  A panel of specialists, including financiers, employee-ownership entrepreneurs and specialist advisers will share their thoughts, experiences and expert opinion on how employee-ownership can and should work.

There are a limited number of tickets still available for the event, which is on March 26^th at the Radisson Hotel in Glasgow.  To book, please email: clare.walshe@heraldandtimes.co.uk or call: 0141 302 7407.