The Three Rs of successful employee ownership
How do you create and lead a successful employee-owned (EO) business when the climate is as tough as it is now?
For our MD Jeremy Gadd, the answer is clear. Clarify and articulate the ‘Three Rs’ (rights, responsibilities and rewards) of employee ownership – then bring each meaningfully to life.
JGA’s founder and MD Jeremy Gadd
Through his work with JGA, and elsewhere as an Independent Trustee, Jeremy has seen how each can play a practical role in enabling clients to drive their business’s performance.
As he explains: ‘The most successful employee-owned businesses know how to use their employee ownership as a business lever. The Three Rs underpin everything they do.’
Unlocking the best of EO
‘The Three Rs are the component parts that allow your business to have a different relationship, and different conversations, with your employees as ‘owners’.
‘When people can articulate how the rights, responsibilities and rewards of EO are effectively applied across all levels of their business – that’s where you can unlock really great EO.’
Jeremy cites Arup, The 1:1 Diet by Cambridge Weight Plan, Gripple, Richer Sounds and Riverford Organic Farmers as businesses whose understanding of the Three Rs has made them positive examples of EO in action today.
With #ProudlyEO the theme of the eoa’s EO Day 2024 on 21 June, each demonstrates the deeper value that the best employee ownership can deliver – for people, businesses, communities and the economy.
Recognising the role of leadership
‘At one level, EO is simply another ownership model. If you really want to pull the lever it affords you, going though this process and bringing the Three Rs to life – that’s what enables you to… secure the outcomes you want’
Jeremy Gadd, Founder and MD, J Gadd Associates
Over the last 10 years, Jeremy’s appreciation of the Three Rs’s has been boosted by seeing how useful JGA’s clients have found the process of clarifying what they mean for their own businesses.
‘Often, when clients reach out to JGA for our support, they’ll say: ‘Our people don’t get it’,’ he explains.
‘When I ask what it is that their people don’t get, the reply is ‘being EO’. Understanding the Three Rs will go a significant way to helping them ‘get it’.’
He points out: ‘At one level, EO is simply another ownership model. If you really want to pull the lever it affords you, going through this process and bringing the Three Rs to life – that’s what enables you to unlock the discretionary effort of your employee owners and secure the outcomes you want.
‘This is why a key part of our work at JGA is helping our employee-owned clients to explore what they’re trying to achieve, how they’re engaging their people and whether they have the right leadership in place.
‘That last point is important because every business needs great leadership to be successful, irrespective of its ownership model.’
Putting the Three Rs into practice
Riverford Organics’ journey shows how the Three Rs can work in practice
So what do the Three Rs look like in practice?
Every business is different, but Jeremy starts by explaining that there are three questions every employee owner should understand:
• What am I allowed? (my rights)
• What do I have to give? (my responsibilities)
• What will I get? (my rewards)
‘The rights of employee ownership might include the right to understand, influence and challenge how your business is working, to engage and be consulted with on major (and some smaller) issues,’ he says.
‘The responsibilities might be to participate positively, work collaboratively and support your fellow co-owners, to drive the performance of your business beyond your day job. To look for solutions, not problems.’
Understanding different types of ‘reward’
And the rewards?
‘The obvious one is the reward of receiving a share of the financial profits,’ says Jeremy. ‘Indeed, some people believe EO only works when you’re sharing profit.
‘However, I disagree with that – there are not-for-profits, mutuals and spin-outs where the rewards aren’t a profit-share but can be the ability to influence, to participate and to have the opportunity to create a culture with a deeper sense of belonging.
‘The ability to influence how surplus is invested for customer, client or patient care (depending on sector) is very appealing.
‘In an EO business the reward may be that you feel more in control of your destiny – that the future is more stable because there’s a lower risk of buy-out by a venture capitalist or competitor.
‘There’s also the reward of working in an independent business where your input makes a difference and your voice is truly heard.’
Creating a fresh relationship with your employee owners
Jeremy and JGA’s Kathie Robbie enjoy supporting clients to make more of their EO
But clarifying your employee owners’ rights, responsibilities and rewards is only half the picture. The next step is to bring them to life.
It’s not rocket science.
‘You may already be doing some of this in your business,’ Jeremy says. ‘But when you become EO, you should recognise that it’s powerful to create a different relationship with your people – and explore how you want to make that real at different levels of your business.
‘For example, if you believe the right to influence is important, you need to create the mechanisms to support that. If you’re going to pay a bonus, you need to be clear about how that can be achieved – it may be linked to the responsibility to reduce wastage and improve efficiency.
‘If you do this, the individual can see how they can make a difference and truly play their part. It’s important to look at your people as your fellow owners, not as employees.
Making the most of your employee-owned model
‘This is where having the right leaders in place – who can connect with the ideal yet who also know how to make EO ‘real’ at all levels of your business – is essential.
‘Get this right and that’s how you can become and remain successful, both through transition and beyond.
‘Fundamentally, the Three Rs are about making the most of your ownership model to drive greater performance,’ Jeremy concludes.
‘And this is why the evidence suggests that the most successful employee-owned businesses are more productive, more resilient, have higher morale and lower attrition – and benefit from their ability to take a long-term view.
‘This was the clear finding of the eoa’s landmark EO Knowledge Programme last year. It’s exciting to see how this important research is now informing the drive to build a thriving EO sector in the UK – including its role in the new EO Framework, which our Telos Partners colleagues helped develop for the eoa.’
Want to explore how JGA could enable your business to make the most of being EO? Book a no obligation meeting with us now.