IDT recently
undertook a pilot survey of 9 employee owned organisations to identify any
consistencies and best practice in how these companies are organised. The full
report was published by Ownership at Work, the research arm of the Employee
Ownership Association.
Using the
findings from the research, as well as our own experience acting as the
independent trustee with a broad range of IDT clients, we have written a series
of articles providing further insights into best practice in action in EO
companies.
In this article
we focus on the role of the founder post transition
.
The majority of
companies that transition to ownership by an employee ownership trust already
have an ethos and culture of employee participation and engagement. However,
prior to their transition, leadership and direction sat solely with the
founder(s). This leadership, along with the teams that have grown as the
organisation itself has grown, is at the core of the success of the company.
With the
transition to EO, maintaining the best parts of this ethos and culture into the
future organisational structure is key to enabling the best benefit to be
obtained from both the history of the company, plus the future opportunities.
To support the transition, founder(s) often remain in an organisation in some way or other.
Often this transition is formalised prior to the transfer date. More often, it
is gradually implemented over time as new leadership teams emerge,
organisational opportunities are developed and the company becomes more
confident under its new ownership structure.
The survey
identified that:
- founders
mostly retain some form of active role in the company on transition. Most also
tend to feel more comfortable staying closer to the high-level decisions while
there was still a significant proportion of the deferred consideration payable.
What we have seen most influences this decision post transition are the
considerations and contacts that the founder has outside of the business that
they have been so heavily intertwined with up to this date. The impact of the
change should not be under-estimated, even where a founder may maintain a role
within the business. As one founder noted 3 months after their transition:
I still lead the business, but I no longer feel the
pressure and anxiety of sole decision making.
This mental change and reduction in anxiety and stress for the founder is often the most unexpected, but welcomed, outcome of the transition.
The survey also identified that:
- Although most founders saw their medium to
longer term future only as a trustee, few take this step immediately on
transition. More prevalent is a middle
phase where the founder reduces
to
part-time hours as a director whilst a new CEO/MD steps up.
The appointment
of this new leader may be an internal or external appointment. In either case, it
is the appointment and leadership by this new director that can be the catalyst
for significant change for the founder.
Once they have
handed over the running of the company, and trust the new CEO/MD and their team
to lead the business, the founder often feels like an elder statesperson –
available for reference but no longer required for day to day operations and
decision making.
This role as
the elder statesperson can then be crafted to be part-time or ad hoc
depending
on need. It can also be an opportunity to re-invigorate the passion they had
that created the foundation for the company in the first place. Reverting back
to a part-time role in their original creativity, activity or focus, leaving
the administrative and leadership burden to others.
Planning for
Founder Change
Across our
discussions with EO companies, we have found that, whilst there is usually some
ongoing involvement by founders, it is rarely as these individuals planned.
Often those intending to stay in a role within the organisation find that,
having found the freedom to expand their horizons, they no longer felt the need
or drive to be intricately involved in the day-to-day activities of the
business that they had founded.
What cannot be planned is the potential change
in how the founder perceives their company once they are no longer the owner
and/or the head of what was once ‘their’ business. Across our clients we have
seen founders who were adamant that they would leave immediately to allow their
new leaders to run the company. Often this happens, occasionally either the
founder or the new leaders seek to keep closer engagement in the early months
and years than originally planned.
On occasion we have also seen founders and new
leadership teams that have planned for continued founder involvement but, very
quickly, have found that this is not necessary or wanted by either the founder
or the leadership team.
The difficulties lie where the founder and new
leadership teams’ wishes are opposed to each other. Where there is a positive
and open on-going communication on the topic, this can be a positive discussion
and journey that both go on. Where it is ignored or avoided, it merely pushes
the discussion further down the path with the add on effect that employees are
unsure of where the ‘new’ leadership and decision making authority lies.
For the benefit of the business, its continued
success and the understanding and engagement of all employees, it is better to
be transparent on plans, continue to communicate and not be afraid to adjust as
expectations, needs and desires change post transition. As with all aspects of
transition to employee ownership, it is enabling flexibility in plans and
timings that allows for a successful transition.
None of the respondents of the survey were
clients of IDT at the time of the survey. Additional information in this
article reflects the experiences of IDT with their clients and contacts.
The full report can be downloaded from the Ownership at Work website
at:
OAW-IDT-EOTs-In-search-of-best-practice-28-March-2022.pdf
(ownershipatwork.org)
. Alternatively,
you can obtain a copy of the report, or arrange a confidential discussion on the contents or your specific EO with IDT , by contacting us at:
info@directorsandtrustees.co.uk
