Employee ownership, through the legal construct
of an employee ownership trust (“EOT”), creates an organisation that should
deliver greater benefit for all stakeholders, particularly employees as beneficiaries
of the trust.
However, how is this benefit defined and what
are the core ‘Principles of Good EO’?
The principles must incorporate the breadth of
the organisation, without which there are no shares to own and no roles for
employees to fulfill. Taking this as the foundation, the core principles of a
good organisation must then be expanded to include the opportunities created by
having employee beneficiaries engaged and participating in the business in a
way that is often not evident in non-EO companies.
When incorporated into the day-to-day
operational activities of an organisation, these principles can deliver greater
opportunities for a successful business. One element of this success, financial
profit, enables an organisation to have choices about how this profit can be
distributed – to employees, as reinvestment, to support wider causes, issues,
activities and initiatives aligned to company purpose and the expectations of
its shareholders, the employees as beneficiaries.
Those wishing to map their organisation against
principles of good EO should consider the following 3 principles, the subsets
of these principles in action and their interactions:
1.
Inspirational Leadership
2.
Collective Mindset
3.
Forward Vision
Interconnected by Structured Collaboration
Inspirational Leadership
The company should have a leadership team that
is inspirational, communicative and transparent.
The company should be headed by an effective
board which is collectively responsible for the future direction and long-term
success of, and continuous innovation within, the company.
The board should consist of the correct balance
of skills and experience to allow effective operation. A clear division of
responsibilities should be in place to ensure that one individual, or a former
founder, does not have excessive power over decision making.
The board should actively seek employee
insights to inform their decision making and leadership.
There should be transparent
communication of business critical data and information.
Collective Mindset
Every company should have a clear set of values,
understood and evidenced by all employees, that underpin the organisation and
align to all aspects of the company and its behaviours.
All employees should display an owner’s
mindset, delivering within their role as an owner, whilst working collegiately
and supportively for collective benefit.
Engaged participation and opportunities for
individuals to contribute to business success should be evidenced, encouraged,
maintained, and utilised.
Every employee should understand
their personal contribution to the success of the business, and where this
aligns to that of the wider organisation and their colleagues.
Forward Vision
A clear future direction for the business
should be in evidence and communicated to all.
All employees should understand the forward
vision, where and how they contribute, and the progress being made against
forward looking objectives.
All employees should have a formal opportunity
to contribute to, and participate in, the forward vision of the company and its
related activities.
Succession plans should be in place
for significant roles, and opportunities for personal development should be available
across the company.
Structured Collaboration
There should be a clear and documented governance
structure that adds value and company benefit. It should differentiate the
roles, responsibilities, deliverables, and authorities of the various forums in
evidence across the company.
There should be clarity of where, when, and how:
- The board as leaders;
- The trustees as shareholders (representing
the beneficiaries); and
- The employees in their contracted
role;
can contribute to the success of the business.
Clear and effective communication, interaction
and collaboration between, and delivery by, these 3 groups should be in
evidence within the company.
The governance structure should be reviewed for
its continued effectiveness and positive business contribution on a regular
basis.
These Principles have been collated through the extensive work IDT undertakes with their EO clients , as well as the feedback collated through the Governance Survey IDT undertook with the Employee Ownership Association and Ownership@Work.
If you would like to know more about how you can apply the Principles to your organisation contact IDT for a confidential chat at info@directorsandtrustees.co.uk
