Employee ownership: Strengthening your board to lead in a recession | J Gadd Associates Guest Blog

Uncertainty, instability, change. It’s a turbulent time to transition to employee ownership (EO) and the pressure is here to stay.

So, if you’ve chosen this path for your succession planning, how can you prepare your business to survive a recession once it becomes employee owned?

Most company founder/owners start by sourcing the expert legal and financial advice they need. They use this to confirm their underlying business is fit for purpose pre-transition, and secure an up-to-date valuation to satisfy accountants, the executive board and HMRC.

These are essential first steps, but there’s more to becoming EO than a signature on a piece of paper.

Unlocking the commercial advantages of employee ownership

Transitioning to a new ownership model is a major change project that will shape your business’s future. To unlock employee ownership’s commercial advantages faster, your transition should be properly planned, led and resourced.

And EO’s benefits are worth the groundwork because they include improved productivity, employee engagement and more resilient regional economies. This explains (in part) why the sector’s growth has recently accelerated, with 1,000-plus companies now employee owned.

The priority for founder/owners should therefore be to prepare their business to transition in a way that aligns all stakeholders behind a common purpose – and maximises the potential of EO.

That’s why the next step to a successful transition is to establish sound governance. Setting this foundation will ensure that, even when trading is tough, your commercial resilience will be strong.

Getting the right leaders in the right roles

Core to this is getting the right leaders in the right roles, with the right balance of experience, perspectives and skills to manage through a recession – then prioritising their development as a board.

Your company’s purpose should also be clear. Today’s consumers (and employees) are more attuned to businesses who are honest, values-driven and can demonstrate their point of difference. A commitment to employee representation is vital from the start.

“Successful employee ownership starts with a clean hand-over and transparent transaction,” explains Adrian Wheale, J Gadd Associates’ board development and executive resourcing expert.

“But a well-briefed board which is developed, on-side and committed – whose members understand their role, responsibilities and can collectively lead – is also key.

“At times of external threat, businesses whose people are united by a common purpose, and whose boards can create an impactful leadership/followership culture, are better placed to weather the storm.”

Practical steps to develop and strengthen your board

So how can your business achieve this, either before or after transition? 

  1. Organise a thorough audit of the business leadership, skills and senior-level experience of your current and/or proposed board: Create an Executive and Trustee Board questionnaire to support this. Assessing the balance and breadth of your board’s skills and expertise will establish whether they have the capability to fulfil their statutory duties, lead long-term strategies and negotiate the internal and external turbulence created by the recession we face.
  2. Engage experienced professional support to guide your next step: Choose a trusted partner to pinpoint priority needs, fill specific gaps and address the key challenges highlighted by your board questionnaire. A qualified EO adviser will offer insight and a valuable external perspective, while their ability to ask difficult questions will ensure you root out and resolve any ‘hidden’ issues. This will help you to avoid damaging mis-steps down the line.
  3. Secure the right people, structure and development support for both your boards: Striking the right balance between your executive directors and NEDs, and Executive and Trustee Boards, is the bedrock for successful EO. An experienced professional adviser should be able to mentor, coach and develop your current team to fulfil its potential, while assisting with any external executive or Independent Trustee resourcing needs. They should also be able to advise on building effective employee representation, which will come into its own when there are significant decisions to take.

J Gadd Associates is a specialist adviser of the Employee Ownership Association (EOA). Find out more here >>

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