Bigger Thinking Series Part 4: Growth and scale-up – Growing a Business that Goes the Distance

Growing a Business that Goes the Distance

“Growth is never by mere chance; it is the result of forces working together.”

James Penney, Founder of JC Penney

In any market in any economy, one of the biggest challenges is the notion of ‘business growth’. With regular stories of the UK’s flat productivity and slow growth, nobody seems to have THE answer on how to kick start the UK’s economy especially during the great pause many businesses are experiencing as they try to unpick what Brexit might mean for them.

A company’s approach to scaling up and expanding its efforts underpins not just the ambition of any given brand, but also its lifespan as an industry and market competitor.

Business commentators and independent studies show that growth is a stumbling block for many UK companies for varying and complicated reasons. Short-termism in trying to please external stakeholders often puts paid to planning for the longer term and the resilience and opportunities that can offer, resulting in unrealistic targets and depressed business culture, and a lack of focus and purpose. Add to this fierce competition within an increasingly digital environment, from start-up disruptors to quick-fix solution providers, surviving in an evolving market demands constant forward motion; which invariably means growth.

The EOA has been proud to showcase many of its EO business members tackling this challenge of scaling up and growing their businesses successfully. With a holistic mentality to growth, we’ve seen businesses not just grow in a traditional, financial sense, but also in retaining their unique culture and values at the same time. Tangible growth is certainly possible for businesses of all sizes – if the strategy is strong, the employee engagement effective and the customer experience intentionally overseen and managed.

The term ‘quick-win’ is one that should be cautiously used when considering long term, sustainable growth. There is no shortcut to sustainable business growth, and a quick-win approach will not be able to deliver anywhere near the sort of resilience needed to survive and thrive in today’s markets.

Union Industries: Case-in-Point

An example of innovation-led growth can be found with newly employee owned, Leeds-based manufacturer, Union Industries. As a well-established producer of industrial doors, Union Industries has recently announced its second record sales year in a row, with an increased turnover and a most profitable trading year to date in 2016/17 recording:

  • £7.4m turnover – a 27% increase from the previous year
  • £1.1m profit plus a dividend of £3,600 to each of the 75 employees
  • Growth in number of employees

Innovation, growth and the reward of intelligent risk…

To tackle the challenge of growth, Union invested £350,000 into new machinery to strengthen its leading position as a high-quality British manufacturer. This investment is paying off as the business increased the number of blue-chip customers, recently becoming the main supplier of doors for Lidl’s retail distribution centres across the country. These rewards are without doubt, risk-related. However, with clear business values dictating decisions, and a holistic strategy, the risk was an intelligent one.

This success follows on from earlier achievement in November 2016, when they secured the Innovation of the Year Award at the annual UK Employee Ownership Awards, when a suggestion from the shop floor resulted in a development of its already best-selling fast acting Eiger freezer door into an ‘intelligent’ door, by using a device to reduce energy used by up to 52% and decrease running costs, which is highly important for Union’s customers.

An EO approach to growth

It goes without saying that a company doesn’t have to adopt an employee owned structure to see holistic and meaningful growth, but from our experience, companies that have a clear purpose and strategy and engage their employee owners in the running of the business with a clear stake in the outcome see great leaps in the key areas that stimulate growth and enhanced performance. The employee owned business structure lends itself to ambitious business endeavour. Throughout an EO organisation exists shared values, and transparent operations that enable a forward-thinking mentality across the employee and customer experiences:

 

  • Long term planning – growth over time which helps with resilience as opposed to regularly reacting to the short term demands of influential external investors.
  • Performance powered by people – measurable performance leaps after adopting the EO structure due to staff being more engaged with a joint understanding of the business needs.
  • Customer-centric approach to growth leading to profits, which are powered and shared by the people.

Visible Growth

During the hearings for the Ownership Effect Inquiry, employee owned businesses were challenged by representatives from business intermediaries on their ‘growth ambition’. The answers given by EO business leaders revealed some interesting insights. Swann Morton, a world-leading surgical manufacturer, explained that they didn’t silo-off a separate growth strategy in the way that other businesses do in their market. Without the pressure from outside stakeholders, typically calling for speedy returns on investments, Swann Morton said their growth was based on protecting their USP and came from a duty to its employees and the money coming into the region.

 

This means that to protect their position, they decided to make a few targeted acquisitions that subsequently doubled the businesses employees in the space of four years. Coupled with this, they recognised that as some of their components were being made overseas, there was space for ‘vertical integration’ in producing what they would have previously imported. In terms of how the company saw growth on a geographical level, the answer was clear and effective. “Sheffield first, then Yorkshire, then the North, then the rest of the UK”. Swann Morton are another EO example that shows that growth has to be approached strategically, with a clear purpose that directs how it grows. Further reading: www.swann-morton.com/company.php

The innovation-led, vertical integration route to growth was echoed by other manufacturers such as Manchester based piping solutions manufacturer and distributor Shawston’s and Sheffield based Gripple which has a growth strategy that 25% of its profit has to be from products that did not exist four years ago.

For fast growing businesses such as global engineering, management and development consultancy businesses Mott MacDonald, where the skills and expertise of their staff differentiate their offer, they have a growth strategy that is customer centric, creating experiences that means over 80% of their business is with repeat clients.

And only last year at the EOA Conference we heard a cautionary tale from one of the largest employee owned businesses Golder Associates, which had always grown quickly, but saw growth rocket in 2000. When some of the markets they served saw a downturn in 2014 it was clear the growth had masked some problems – the gap between employees and managers was growing, the overheads were way beyond what they needed and they had continued to grow even when this was not profitable to do so. This nearly broke the business in 2014. Only when it went back to its employee owned roots and was clear about its principles did it come up with the right strategy to recover: by 2016 it was back on track but had to lose 1,400 of its 7,000 employees. It had lost sight of “what was its most potent strength – its people and the power of working with the same goal in mind”.

 

Conclusion

EO businesses grow or pursue growth through three foundational parts of the EO process and culture – innovation, vertical integration and acquisition. Being connected to its employee owned culture and strategy means that it is not growth for growth’s sake, it’s about putting people at its heart – employees, customers and the wider community – that helps it grow in a sustainable way for the longer term. Its profit powered by people with a culture that allows them to take some accountability and drive performance.

Time and time again we see businesses see immediate growth across a company when a decision to become employee owned is taken. These areas of growth include productivity, company size and profits. The culture of an EO company is by definition one that takes growth very seriously, and places innovation and value at its heart. If you’re exploring ways on how to grow your business, or want to find out more about what an employee-owned business looks like, don’t hesitate to get in touch: www.employeeownership.co.uk