EO Day case study Flowstore transition

Employee Ownership Association (EOA) affiliate member Flowstore will celebrate the national EO Day 2017 on June 30th by actually transitioning to employee ownership.

The business, a specialist in applying Lean Manufacturing solutions for customers, provides custom built materials handling and storage equipment for manufacturing and distribution operations. It was established in 1984 with just 2 people, and has now grown to 50 employees covering the UK, Ireland & Benelux.

Owners Simon Dennis, MD for 30 years, and his wife Alison, had been wondering how to plan their exit from the business. Their journey to Employee Ownership began in early 2016 when one new possibility jumped out from a page from a copy of Warehouse News magazine.

They had considered succession planning via a third party sale or a management buy-out, but these did not feel like the right option for their business or their staff.

Simon said: “Talking to other businesses owners who had exited through third party sale revealed they had often not enjoyed the experience of working under new owners for the agreed handover period. New owners often change the dynamic, often introducing new staff without giving opportunity to existing staff. These aspects frequently appear to damage the very things that a successful and long established specialist company has built up, such as its ethos and core values.”

“A management buy-out was also not feasible, or advisable in my opinion, since it requires individuals or the company to take on personal or corporate debt where none before existed. Usually that includes having to do something like putting up someone’s house as security. Putting colleagues at risk in that way would not feel right, as we have never borrowed.”

“At this point, and not knowing about Employee Ownership, the third option was stay working forever. Equally unpalatable and impractical!”

So when Simon read about Union Industries Ltd in Warehouse News, he knew he had to explore further. Like Flowstore they had no natural successors in the family business, were specialist manufacturers, at the top end of their own market. Andrew Lane, MD at Union since it transitioned to Employee Ownership in 2014, had overseen great innovation and growth since that time, and from an initial phone call, kindly invited Simon and his team to his factory, where they also met former owner Mrs S (Isobel Schofield).

Simon and Alison also attended one of the EOA’s regional workshops in London in May 2016, and with his Operations Director Austen Jonas and Financial Director Adrian Baker attended another in September plus the November two day EOA Annual Conference on a fact finding mission.

Simon added: “At Union Industries, Andrew Lane invited us to talk to any member of his team and to walk around the whole company to gauge what any of their employee-owners thought of Employee Ownership – and they would give the good and the bad!”

“We were amazed at what they had to say about how they felt more valued, how they were able to make more of a difference. They said they gave that extra thought and effort to what they did, as they understood the impact, and also had a stake in the outcome. They told us that learning about EO at the beginning was a challenge, but had gained new skills and understanding about the finances, which was initially daunting for some, but just part of what they do now.”

Simon felt that he had tried to always put staff at the centre of what the company does. “Already operating a lean manufacturing philosophy within Flowstore (in which continual improvement is sought), we have a exisitng culture of encouraging employees to have a voice, suggest improvements and be rewarded for initiative. Employee Ownership seemed to be the natural partner and progression for our business , and for the staff, so as a management team we all agreed to bring the staff along on the EO journey!”

They brought Baxendale on board to help with the process of transition, and have been working with Ewan Hall, who had also worked with Union Industries.

Simon added: “At the first EO announcement meeting in Dec 2016, a lot of questions came from the staff – but we saw that as a good thing! They wanted to know more, and we agreed that a project team be created by a vote procedure, to take forward more of the investigations. There were some initial questions about our motives, and of course some disbelief that I would actually step aside  from the business! But we continued with regular meetings and updates.”

To prove that EO was going to happen, Simon officially stepped down as MD in January, succeeded by Austen Jonas, and supported by Finance Director Adrian Baker.

“We have now also completed staff voting for their own Trustee Directors by department, and on June 30th Alison and I will step away from ownership, with myself remaining involved with the business as Chairman and looking forward to supporting Austen MD on the EO journey ahead!”

Flowstore will be taking part in a webinar with the ICAEW in September alongside Ewan Hall from Baxendale on succession planning – read more or book