Busted – 5 common myths about employee ownership
We’ve all heard them, those stubborn ‘myths’ about EO – some positive, some negative, some as old as the hills...
But one thing’s clear: none of those myths is helpful when you’re trying to decide if employee ownership (EO) is the path for you.
So if you’re a business founder/owner exploring EO as a succession plan – or you’re already on your way but feeling ‘stuck’ – how do you know what’s true?
Here, our MD Jeremy Gadd busts 5 common myths about EO.
Myth 1: It’s not about the money
Jeremy disagrees. ‘In my experience, it’s not about the money until it’s about the money,’ he says.
‘Whatever your reasons for choosing EO – however committed you are to preserving your legacy, sustaining jobs, safeguarding your culture – transitioning your company to EO is still the sale of a business by one owner to another,’ he explains. ‘It’s not a gift: it’s a legal transaction and you need to be realistic about that.’
Founder Guy Singh-Watson has been open about how he's benefitted from Riverford's sale to an EOT, alongside his philanthropic aims
Jeremy highlights the importance of getting an accurate valuation.
‘If you don’t get an accurate valuation, if your business isn’t financially sound, it won’t be able to fulfil all you need it to do because a building block of success is being honest about what you’re doing and why – with yourself, your stakeholders and your employees.
‘Successful employee ownership is about adult-to-adult relationships and honest conversations,’ he explains. ‘You’re giving people rights and responsibilities in the business they now own.
‘As a founder/owner, you can be as philanthropic as you like with the proceeds of that sale, but it’s important to recognise that your decision to transition to EO has consequences and impact. That includes the ability of your business to pay you back.’
Myth 2: Nothing will change in the business
It’s true that although your ownership model will change, your business can remain the same in the way it operates, its services/products, its people and culture.
However, Jeremy is clear that becoming employee-owned is more than a signature on a piece of paper.
‘If you want to leverage EO’s benefits and the competitive advantage it can bring, you need to enable your employee owners to take more personal responsibility for the business’s success.
‘Becoming EO affords you the opportunity to have a different conversation and gain their psychological discretionary effort.
‘It’s now a business held in trust for its employee owners, and they’ll share in ownership’s rewards. Those might be a share of the profits, as well as a greater ability to influence and participate in a business where their input makes a difference.
‘But with opportunity comes the responsibility to build that success. As founder/owner, you must create a narrative for change and bring it to life. Depending on how strong your business is in terms of purpose, culture and engagement that can be hard work, but the benefits can also be huge.’
Myth 3: Becoming employee-owned will slow the decision-making process
JGA's founder and MD Jeremy Gadd in London this year
Yes, becoming EO will change the rhythm and pace of decision-making, but (done well) the bigger picture is the benefits this can bring.
‘When you’re running your own business you can make decisions quickly,’ Jeremy explains. ‘Once you’ve become EO, leadership will still lead but it will be more accountable, so you need to be clear about how and when people can influence and be involved in the business they own.’
What will this mean in practice?
‘It means that as you come to decision-making, the process may take longer but you should make better decisions because employee owners have been more involved.
This means that the change lands better so the overall process may be shorter. It can certainly be more effective because of the realistic conversations you’ve had.’
Myth 4: Employee ownership is a good thing so everyone will ‘get’ it
In an ideal world? Yes. In the real world? Not quite.
Successful employee ownership can indeed be a force for good.
Commercially, EO businesses have been shown to be more productive and invest more in supporting employee’s wellbeing and career development, according to the eoa’s research.
‘But it’s a myth that everybody will automatically ‘get’ it,’ Jeremy says. ‘There’s no legal definition of employee ownership – you have to create your own version of it.
‘Often, when clients reach out to JGA for support, they’ll say: ‘Our people don’t get it’. When I ask what it is that their people don’t get, the reply is ‘being EO’.
‘Enabling your employee owners to understand the rights, responsibilities and rewards of EO will go a significant way to helping them ‘get it’. But you need to invest time and energy in it because this won’t happen by itself.’
Myth 5: Employee ownership only works in ‘white-collar’ businesses
Not true. Although the latest data on where EO is ‘trending’ puts the Professional Services sector on top (39%), Manufacturing (13%) and Construction (12.5%) are next in line. The wider sector is both thriving and diverse.
‘Employee ownership can work in all types of business, not just those that are consultancy or office-based,’ Jeremy confirms. JGA’s own client list backs this up.
Since 2015, those we have supported range from Riverford Organic Farmers and Jerba Campervans to the Rooflight Company, Pym & Wildsmith (metal finishers) and Lodge Brothers – an eighth-generation funeral services family business which became EO in January 2024.
Next steps
So that’s 5 common myths about EO successfully busted. If it’s got you thinking that EO could be the path for you, what should you do next?
Find out how we can enable you to shape, transition, embed, energise and renew the elements of EO in your business.