Employee owned businesses: at least as good if not better. The evidence.

Yesterday, John Lewis Partnership, the UK's largest employee owned firm, published a report based on research by CASS Business School.  The report looks at whether employee owned businesses deliver sustainable performance.  The research presents considerable evidence to support the claim that employee owned businesses are better for individual employees, do better business, and make a more valuable contribution to society.  You can read the report in full here .

Charlie Mayfield, JLP's Chairman, opened the event with an inspiring appeal that employee ownership is an alternative model that deserves to be mainstream.  He outlined the commercial and individual benefits of employee ownership.  People don't go to work just for the money.  Work helps people realise their potential in life, gain fulfilment, adds to feelings of self-worth, and provides a way to contribute to society.  Employee ownership can confront economic challenges form a stronger base because the value within the firm is built from the bottom up.  He highlighted two points from the CASS research:

• Co - owned companies are at least as good as conventionally owned busiensses, and are often better
• Employee owned businesses create jobs faster and are more resilient

Professor Joseph Lampel produced a compelling argument in favour of the businesses owned by their employees.  His findings suggest that employee owned firms:

• add more value to output and human capital
• are better employers, hiring more employees and paying higher wages
• offer particular advantages in the knowledge and skill intensive sectors
• Increasing focus on management innovation
• place a greater emphasis on seeking new ideas and involvement from employees in decision-making.
• experience difficulties in obtaining finance from institutions used to dealing with listed companies
• have to confront more regulatory and policy challenges

The difference between employee owned and traditionally structured businesses has become more apparent during these times of recession.  The CASS research has found that employee owned businesses:

• outperformed the comparison group
• demonstrated a more resilient, stable performance
• less variability in sales performance between times of boom and bust
• stronger value added performance
• increased recruitment

Professor Lampel made the very important point that resilience is an overlooked strategic asset.  The innovation in governance and in management within EOBs increases this strategic footprint.  The report is strong evidence that employee ownership is an excellent alternative business model which enhances success on so many fronts.

Arup is a well-known engineering consultancy.  They employ 10000 employees worldwide and if you don't recognise the name you would certainly recognise their work:  The Gherkin, the stadia for the Beijing Olympics, the Angel of the North, the M6 toll road.  Arup is a company owned by its employees.  Terry Hill is Chairman of the Trustees of the Arup Group. He backs up the academic research with real life experience.  There is no doubt that Arup is a very successful, profitable company, yet has never pursued profit per se.  Arup's objective is "reasonable prosperity".  According to Terry, successful businesses don't have growth as a target, growth is an outcome.  You don't maximise profits by pursuing profit maximisation strategies.

Terry explained the dynamics of the employee owned business in a simple and powerful way.  For the employee owned business, there is a straight line between the clients and the employees.  There is no distraction from the demands of external shareholders.  People can get on with the job.

The launch of yesterday's report was an excellent mix of academic research, political commentary and the real world of the practice of ownership.  The message was strong from all quarters, employee ownership is an excellent business model which deserves wider adoption.