John Lewis: it’s one of the nation’s most famous brands, known for its quality and assurance as embodied by its slogan, Never Knowingly Undersold. It’s also an Employee Owned Trust – meaning that each of its employees owns a slice of the business.
John Lewis has taken this approach for decades, becoming just as famous for its employee ownership as for its place in British retail. And now, the Employee Owned Trust (EOT) model is filtering down into businesses of all sectors.
There are over 1,000 EOTs in the UK – of which, John Lewis remains the largest. But businesses from a wide selection of sectors including private healthcare, professional services, FMCG and construction are among those operating under this model.
Recently, one GP practice in Somerset made the move towards the John Lewis approach of business management, the first time a GP practice has made this move. As a commercial lawyer, I was involved in advising this particular practice on the transition deal that made the practice a limited company while simultaneously making it an employee-owned trust. For this practice, making this move helped to safeguard the provision of NHS services in its area by supporting the recruitment of GPs and allowing greater control over the way its healthcare provision is set out.
For HR Directors in many sectors, the option of working towards an Employee Owned Trust is an interesting proposition. There are numerous benefits to shifting to a non-traditional business model such as this – here are some reasons why it might the right thing for your organisation.
More autonomy
As the name implies, an employee owned trust is a business which is owned by its employees. The leadership team remains in place and, rather than running it for their own benefit or the benefit of other shareholders, the employees hold the ownership stake in the practice. This can be a handful of employees, or it can be everyone in the organisation – whatever works for your business. Whatever the set-up, the trust is operated by those who understand the business, work within it and know what makes it tick.
Working like this provides greater autonomy from shareholders and other external influencers, affording the business the luxury of making longer-term decisions with fuller buy-in from the wider team.
Greater sense of belonging
Part-ownership of the organisation is a key way to involve employees and ensure they are invested in the success of the business. In today’s market – with the battle for talent raging and businesses competing to deliver the best possible service – this could be a very clever way of securing longevity in your talent pool and encouraging your team to do a stellar job. Other businesses which have moved to the model have reported an increased sense of belonging and teamwork amongst their staff, which can reduce absence and presenteeism and help increase productivity.
Increased productivity
The Employee Ownership Association, in its 2022 report The Ownership Dividend, stated that increased productivity was one of the key benefits to wider EOT models in the UK. Cracking the productivity nut is a key driver in generating a more profitable and driven business. Businesses moving to the EOT model report being able to unlock greater performance and productivity thanks to increased personal efforts from staff – who act with a greater common purpose upon becoming employee owners.
Business with purpose
Over 71% of EOTs surveyed in June 2022 had a statement of purpose and operated in a socially responsible way. Nine in 10 reported that their employees had a considerable level of input into decisions on working conditions, while 85% said employees had input into new working methods.
Employee involvement and common purpose has never been more important than it is now, as challenges around recruitment continue and would-be employees report that they are seeking work that makes a positive difference and aligns with their personal values.
Operating a business with purpose can form a key element of an employer value proposition and be highly useful in attracting new talent.
More tax efficient
There are a number of tax-related financial benefits to operating under an EOT model. For example, people selling their shares can do so free of capital gains tax – and EOTs can pay annual bonuses to employees which are free of income tax. Together, these make for a very tax efficient way to increase personal wealth, thus supporting each and every member of your team – a prospect which is especially attractive given the current squeeze on the cost of living.
Solve the succession problem
This is particularly pertinent to family-owned businesses, which often use EOTs as a way to safeguard the future of the business without putting it up for sale when the founding owners want to retire. Because the business is transferred to employees, exiting owners can be reassured that all they have worked for is safe in the hands of those individuals who they have worked alongside for many years.
Choosing to change your organisational structure is clearly a big decision and one which requires full Board backing. Moving to a model such as employee ownership has worked exceptionally well for businesses of many and varying sectors; so the blueprint for success is definitely there.
If your organisation is at a cross roads and looking for a way forwards that protects the business’ history, safeguards its future, engages its team and helps make it more productive – then an employee owned trust might be for you.
Employee Ownership Association
