What's the difference between co-operatives and employee owned businesses?
There are a wide variety of business and ownership models in the co-owned business sector. However most co-operatives are not employee owned; they are mainly owned by their customers or suppliers. Whereas employee owned businesses are totally or significantly owned by their employees.
What's the typical employee owned company's attitude to profit?
Most employee owned companies are strongly profit-driven. The two big differences from other kinds of business is that dividends are shared amongst employees – and the same employees as co-owners – tend to get more of a say in how profits are allocated and invested.
If I sell the company to employees, can I still get the right price for it?
Yes – all the evidence is that a well-structured employee buy-out can deliver a fair market price for the business; plus the added benefit that ownership stays with the people who've helped build the company and who have the strongest commitment to making it successful.
Is an employee buy-out more complicated than another type of sale?
It needn't be, and can often be simpler than a management buy-out or trade sale, as well as less antagonistic and quicker to make happen. A big factor is whether the advisers helping with an employee buy-out are experienced in the process, and understand the special factors involved.
Are employee owned businesses as competitive as non-employee owned businesses?
The staff of employee owned businesses are usually more involved in the business through enhanced engagement. The result tends to be highly competitive staff whom have a vested interest to help make their company succeed.
Does being employee owned make staff more committed and productive?
Employee ownership generally produces superior performance and productivity when it's accompanied by real employee involvement and well thought out ways to let staff participate in the business.
Without Stock Exchange ratings, how are shares in employee owned companies valued?
Companies where individual employees own all or part of the share capital have what's known as internal share markets. These use a variety of measures, often based on or validated by HM Revenue & Customs assessment, to allow share values to reflect the state of the business and market. A frequently used measure is a multiple of profit.
What kind of situations result in employee ownership?
Easily the most common trigger for employee ownership is business succession typically entrepreneurs or family owners who want to sell the company, and choose to sell to their own workforce and management. Some companies simply choose to be employee owned from the start. Many public service spin-out businesses also adopt an employee ownership structure.
Do employee owned businesses survive?
Employee owned companies have an excellent record of sustainability – at least partly because their employee co-owners are so committed to making sure the business does well. This is particulalry the case in periods of economic downturn and recession.
What's the role of unions in employee owned firms?
Many employee owned businesses recognise unions and some have significant union membership; others employ few or no union members. There's nothing about employee owned companies that rules out a union role, although most are very effective at engaging staff and hence the need for unions is diminished.
How can employees afford to buy a company?
Employee buy-outs occasionally involve employees putting up some of their own cash to buy some of the shares but usually the sums involved are small. Typically most of the shares are bought - on employees' behalf - by a trust, financed by contributions from the company itself, or a loan that's then paid back by the company.
How do managers manage if employees own the company?
Employee owned companies have highly professional management structures. The key difference is that managers are more accountable to their colleagues and co-owners than they would be in a company owned by external shareholders.