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. 

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.