Phenomenal Year Ahead
My start to the year has been a very international one involving discussions with representatives of many countries including the United States, the Baltic states, Japan, Ireland and New Zealand.
The theme of all of these conversations has been one common question from overseas colleagues: how has the Employee Ownership Association driven the growth of employee ownership in the UK and how might a similar approach work in other countries?
I am proud that the EOA has been at the heart of every significant development on employee ownership in the UK over the last three years including our winning campaign for new tax incentives for employee owners that came into force last year. And it is very clear, as I set out in full in the Jack Fitzpatrick Memorial Lecture last month, why there has been so much progress. So it has been flattering to receive so many requests to share our thinking and our successes with contacts abroad looking for new ways forward in their own nations.
But the most powerful benefit of responding to these overseas enquiries has been on the complacency front. Many of the countries concerned have experienced very short term progress on employee ownership in the past, only for complacency to set in with the inevitable consequence that employee ownership subsequently disappeared from the economic agenda. One of the most striking examples is Lithuania. Employee ownership grew rapidly in Lithuania in the early 1990s as economic reform gathered pace. By 1993 about half of the working population had a significant financial stake in the business in which they worked. Various Governments incentivised this rapid increase in employee ownership through domestic legal and taxation frameworks. But the incentives were eventually either discontinued or inadequately replaced and the overall push for more employee ownership ceased. A recent estimate now puts worker participation in broad based employee ownership schemes in Lithuania at less than ten per cent.
The examples of Lithuania and other countries are a stark reminder that here in the UK we must not, after such a remarkable 2014, be complacent. I have no doubt at all that 2015 will be another year of phenomenal success for employee ownership in the UK. But it will only happen if we maintain our focus on two things.
Firstly, we must all grab every single possible chance to raise awareness of the brilliant economic performance of employee owned businesses and the way employee owners think and act for the very long term. This is by far and away the most effective method of encouraging more and more businesses to be employee owned from inception or to transition into employee ownership. Secondly, we have to work together to emphasise that more employee ownership is not just about individual businesses and their workforces. It is also about the structural reform of the wider economy, including the public service economy. More employee ownership is a solution to some of the UK’s deep seated economic challenges including our endemically low productivity. It also supplies a superb antidote to the short termism that still dominates the behaviours of too many businesses.
Finally for now, January has thrown up a couple of depressing stories about employee ownership in the National Health Service. CSH Surrey has reluctantly withdrawn from pursuing a major contract to provide Musculoskeletal services in Coastal West Sussex. In addition, Circle has declared that it is in discussions to arrange an orderly withdrawal from its franchise to run Hinchingbrooke Health Care NHS Trust.
Some have suggested these two announcements prove that employee ownership is incompatible with the NHS. Such assertions are clearly wide of the mark given that over £1bn of NHS services are currently delivered very successfully by organisations that are owned by their workforces. But employee ownership has not yet made the leap from primary health care services to a permanent role in acute health provision and its associated care pathways. The CSH Surrey and Circle stories this month are, more than anything else, worrying examples of how difficult it is for the deeply entrenched NHS economy, the status quo, to cope with the arrival of employee owned organisations into acute health care services.
But this does not mean employee owners should give up. Unleashing even more of the power of employee ownership, with the high productivity and greater innovation it delivers, should remain a priority if we want to have a world class National Health Service into the future.
Iain Hasdell is Chief Executive of the EOA