Increasingly, employee ownership is a route down which many organisations are travelling, and not without good reason.

Research from the University of St Andrews into the resilience of employee-owned companies found that many have increased business turnover and improved staff retention amid a turbulent economic period.

The study, conducted on behalf of Co-operative Development Scotland at Scottish Enterprise, found that more than half (53%) of employee-owned businesses experienced turnover growth in the last year or were not “significantly impacted” by the pandemic.

This is in stark contrast to non-employee-owned businesses across the same period, with 80% of SMEs experiencing declining revenue and bearing the brunt of the pandemic disruption.

A focus on staff, health and wellbeing were all highlighted as key factors in ensuring the resilience and success of these firms, with 97% also citing job protection as an “extremely or very important” organisational objective.

Similarly, 75% of employee-owned businesses cited workplace equality as highly important within the organisation.

Scotland’s employee-owned businesses

In recent years, dozens of companies have pursued – and successfully secured – full or partial employee ownership. At present, there are more than 100 employee-owned companies in Scotland spread across a range of sectors.

Among these are some of the tech sector’s success stories, such as Commsworld, Network ROI, and Aberdeen-based firm, IFB.

Indeed, earlier this month, Commsworld revealed its intention to further increase employee ownership of the company through a new Enterprise Management Incentive (EMI) scheme, which offers employees the chance to acquire share options.

On Employee Ownership Day, one of the Scottish companies celebrating its success is Edinburgh-based IT firm, Quorum.

Launched in 1999, Quorum is one of the largest Microsoft Gold Partner IT Consultancy firms in Scotland, providing tech solutions, infrastructure consultancy and managed services to a range of clients.

The firm announced its move to employee ownership in March 2019, a decision which Managing Director Andrew Watson says was a long time in the making.

“We’d been planning employee ownership for about three years before we made the move, and it was actually one of our employees that suggested we look at it,” he explains.

“When we started exploring this option, we realised the company was making enough money to buy itself over a period of time,” Watson adds.

“This meant that as long as we kept enough working capital over the years, we could use the excess profit to fund the exit of the owners, but leave a fully intact and valuable company for the people who had worked over the years to build it up.

Recommended

• Quantum resilience and the challenges of cloud security
• Comment | “It’s time to take the tech out of technology”
• Invest in space capabilities to “stay ahead of the curve,” says Skyrora CEO

Becoming employee-owned means that Quorum is 100% owned by its staff, from apprentices through to directors. This culture of equity, Watson notes, has strengthened the company and ensured that it maintains a values-led approach to operating.

According to St Andrews research, 68% of employee-owned businesses say that employee voice is a key organisational objective, which ultimately fosters stronger teams and stronger businesses.

While the focus of employee ownership often focuses on the benefits for staff, Watson says it is important to prove to entrepreneurs that there are alternative options to traditional exit strategies.

“Everybody talks about employee ownership from the point of the employee, and everyone agrees it’s a great idea,” he says.

“But I don’t think people talk about it enough from the point of view of entrepreneurs, which is important because if we want to do more of this we need to start thinking about this.”

The traditional entrepreneur process of starting up, building and exiting a company does offer a greater degree of flexibility, Watson concedes. Quorum is currently working through a seven-year plan to complete the buyout.

Want to keep up with all the latest news, views and opinion from Scotland’s digital technology sector?

Sign up to the DIGIT newsletter, delivered every Tuesday and Thursday.#Tech | #News | #Events | #Scotland https://t.co/HZyr1CDfUe

— DIGIT (@digitfyi) June 24, 2021

However, he insists that employee ownership offers economic and social benefits, so it’s crucial that this option is impressed upon budding entrepreneurs.

“I do hope we see more employee ownership transitions in years to come. More from a social point of view than an economic one, though. There are so many upsides and the pandemic has proven this,” he says.

“You’re keeping the company in Scotland, you’re also keeping the skills, jobs and wealth in Scotland.”

Looking ahead, Watson hopes that the challenges of the pandemic will prompt more businesses to consider employee ownership.

“I’d like to see more of it, and I certainly hope that people are starting to shift toward more socially responsible company ownership coming out of the pandemic, rather than with the last recession where everyone was just focused on capital,” Watson adds.

Traditionally, a lack of awareness appears to have prevented more transitions to employee-owned practices, he says. But with high-profile examples across Scotland, there is potential.

“I think one of the reasons we haven’t seen more employee-ownership is that not enough people know about it. So, people like ourselves or the folks at Commsworld and other contemporaries are helping to spread the word.

“The more people know about it is a good thing, knowing that there are other options to just selling your company on.”