7 recommendations to grow your Employee-Owned business

Research from the business school at Auburn, USA, outlines some key strategies for improving the performance of employee-owned businesses. The academic research on ESOPs is widely positive and several studies have found that the earnings of employee-owned firms are superior or equal to those of conventional companies and that employee ownership contributes significantly to productivity and performance when it is accompanied by employee participation in decision making.

The research I have undertaken strongly supports that the more successful employee share ownership plans are designed with a win-win-win focus; that is the business, the founders/owners and the employees all need to be better off to win! Research also highlights the six major advantages enjoyed by employee-owned business: co-operation, productivity, patience, loyalty, flexibility and risk-taking.

This study outlines seven key recommendations for improving the sustainability of employee-owned companies:

1. Explicitly adopt a set of common foundational values.
2. Create an organisational structure that shares power amongst several bodies, and thus limits its concentration.
3. Craft an organisational culture of character and take active steps to maintain that culture throughout the life cycle.
4. Manage the affairs of the employee-owned company in a way that manifests servant leadership.
5. Transform the whole of the HR/Industrial relations function to focus on win-win rather than adversarial strategies.
6. To foster democracy at the microlevel, create and sustain (through education and development) self-managed work teams.
7. Recognise that every member, employee or owner of the business must serve as a vigilant guardian of the foundational values of the organisation.

The combination of these strategies should reduce the impact and threat of degeneration (a falling away from the foundational values of employee ownership to compete economically) and the darker side of human nature (greed, abuse of power and a willingness to shirk at the expense of others).

The seven strategies are largely values-based and all are inter-related. Implementing these should strengthen the effect and sustainability of the employee ownership model.

If you’d like to speak with an accredited adviser about the implementation of an employee ownership model into your business, get in touch. 

Dr Craig West

Founder & Chairman | Succession Plus

Dr Craig West is a strategic accountant who has over 20 years of experience advising business owners.

With a background as an accountant in practice and two master’s degrees, Craig formed a strong view that the majority of business owners (and often their advisers) were unprepared and unaware of the steps required to prepare for exit. He then designed and documented a unique 21-Step Business Succession and Exit Planning process to assist owners and their advisers in navigating this process.

Craig now acts as a strategic business and financial mentor for mid-market business owners. Craig has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection, and exit strategies. Additionally, he has completed doctoral research on Employee Share Ownership Plans (ESOPs) for succession.

Craig is a Member of the Forbes Business Council where he leverages his extensive experience to contribute valuable insights on helping business leaders navigate the complexities of growing and exiting their businesses.

In April 2024, the Exit Planning Institute admitted Craig to the International Exit Planning Circle of Excellence.