Bigger Thinking Series 1 – Mastering Corporate Governance and Engagement

This year I had the pleasure of chairing the UK Employee Ownership Awards, which recognise employee owned companies that have set their markets alight and delighted their customers by effectively engaging their employees via an ownership stake and culture. It’s been a privilege to hear first hand these success stories, from various industries, including start-ups and seasoned SMEs, and including household brands – each delivering meaningful and memorable customer experiences.

However, in contrast to this very positive experience, the media has had cause throughout the year to report a very different story for some other leading companies. In fact, at times this year, it has felt like an alternative awards ceremony could have been carried out, one which recognises companies who have drastically failed to deliver because of a lack of purposeful and value-led corporate governance. Sadly for some boards, it seems that the notions of purpose, value and principle mean nothing more than rhetoric to spruce up the boardroom. From companies scurrying around for elaborate tax avoidance schemes, to leadership teams totally abandoning their brand values and ignoring the voices of their customers and employees – there’s been a tapestry of governance and engagement failures that every business leader should look to learn lessons from.

The Airline Industry

Airlines of all sizes have struggled in 2017, drawing public questioning regarding their corporate governance and brand culture. Monarch’s well-documented administration, and Ryanair’s internal mistakes, which saw up to 400,000 passengers facing cancellations, filled our news feeds this year.

British Airways, the airline giant, will also likely reflect on the last 12 months with dismay. With cabin crew strike disruptions and 75,000 customers stranded due to an IT systems failure, the year has seen what Anthony Hilton described in the Evening Standard, as: “The airline’s worst self-inflicted crisis since it was privatised 30 years ago”.

With a disengaged and unhappy workforce and subsequent customer experience failures, the BA motto ‘To Fly To Serve’ has arguably rung hollow in recent times, with the 2017 Which Magazine Brand Customer Satisfaction Rankings see BA finish joint 80th, compared with 27th in 2015.

Retail

In the competitive retail sector, Sports Direct, a company that has seen brand value and employee engagement problems make national news headlines in recent years, is still struggling to learn lessons, it seems. 2017 saw another investigation that found some staff were being paid less than the minimum wage as well as facing extensive delays to back pay for employees who were owed for their shifts.

2017 has re-emphasised the often-ignored reality that the way in which businesses are governed, has a direct influence on employee-engagement and inevitably, on customer satisfaction, business performance and brand reputation.

A sector of the economy however which clearly understands this link between effective governance and corporate success is the employee owned sector.

An employee owned approach to corporate governance is one which has a long term orientation, and is representative, accountable, meaningful and transparent. In employee owned businesses, corporate governance and associated leadership is not simply about managing the ‘people assets’ of the business, but recognising that the employees are the business.

The Power of an Engaged Business

A brilliant example of the sort of corporate governance that delivers excellent brand experience can be seen in this year’s UK Employee Ownership Awards, where community care services provider ‘Here’ picked up the Employee Owned Innovation of the Year Award with a compelling example of purpose-led governance.

The ten-year-old organisation that employees 150 people, undertook radical changes to services delivered for those with dementia and memory problems. The company identified that 70% of its clients’ first priority was the need for support, and not, as the service was originally designed, for a diagnosis. After identifying this engagement problem, through their ownership structure, they established an approach that engaged the whole organisation to come together and develop a solution.

Using its co-owned membership, which is open to all employees as well as GPs, practice managers and nursing partner organisations, Here quickly set about redesigning the service. A decision was subsequently taken to invest £73k into funding memory support workers to have meaningful conversations with people at the point of referral. The decision was a long-term approach, value-led and holistic, all of the attributes that make up great corporate governance.

Here demonstrated how their ownership model and governance approach enabled them to fully engage with the people who delivered the service and those who experience it. The innovation in the redesign came from an employee idea which was then used to collaborate with carers, family members and other interested parties. It wasn’t about the ‘few’ dictating and ignoring the many, but an inclusive exercise of governance across an entire workforce.

An Employee Owned approach to corporate governance and engagement…

In my experience of working with businesses across different sectors, I would argue that governance and engagement are two of the most important cornerstones for any organisation. And having worked in this sector for over 5 years I can confidently say that the employee owned model of business places this front and central.

And there is clear evidence why this is important. A lack of representation of employee voice – or insignificance of this voice, often means boards don’t take account of or listen to external views, with some choosing to ignore their shareholders – even when they have voted against board decisions.

Employee owned businesses are geared to have a longer-term orientation. These are businesses seeking to make a sustainable and meaningful contribution to the localities and markets they are part of, considering the longer-term return on investment, not driven to fulfil some short term shareholder appetite.

An employee owned structure requires a business to adopt formal corporate governance approaches, acknowledging that strategic, board level decisions don’t just belong to directors, but also to the wider employee shareholder audience.

In board structures where there is little or no external or employee representation, decision makers often demonstrate a mentality of solely benefiting the ‘few’, often for short term reasons, which increasingly, is not going unseen by the consumer.

The symptoms of such poor corporate governance are clear:

> Voices outside of the boardroom seen as insignificant.

> A lack of varied voices within the boardroom.

> A moderated view of reality amongst the decision makers being told only what they want to hear.

> Corporate boardroom bubble that doesn’t seem to fit with the workforce and/or customer culture.

> Boards ignoring their corporate shareholder votes and carrying on regardless.

Employee ownership counters these risks by establishing formal approaches to engagement and governance. In the case of an Employee Ownership Trust (EOT) structure, this requires an external independent Chairperson. In addition, most will have employee Directors. In fact, 45 per cent of employee-owned companies have 1 or more employee directors drawn from the workforce on the main company board and 93% provide information to employees on the financial position of the company several times a year.

So what?

It is time for businesses to reimagine how they do business. This year saw YouGov research reveal that 58% of respondents think employee-owned businesses are more trustworthy than non-employee-owned businesses. This perspective comes at a time when levels of trust in UK businesses and institutions have fallen to an all-time low – 33% for businesses and 29% for institutions – Edelman Trust Survey 2017

I would therefore argue that in an ever increasingly competitive world, business governance and culture must support and enable the organisation to compete. However, for this to be sustainable, inclusive, and supportive of delivering the best customer and brand experience, this must be done with values and purpose and effective representation by the employee voice.

We know there are businesses in the UK that would benefit from exploring the employee owned structure to future-proof their own corporate governance, and essentially; their brand. We’d love to hear from you if you’re looking at ways of achieving this.

Merry Christmas and a Happy New Year from the EOA team.

Deb Oxley
CEO – Employee Ownership Association