Daily Times

The moment when staff at John Lewis and Waitrose are told the size of their bonus is always much-anticipated. This week’s announcement will be no different, except in one respect – staff will probably be handed a fraction of the usual 10% to 18% of salary. Last year it was 3%, this year it could be as low as 2%.

Under a more conventional business structure, the bonus might have disappeared altogether, but John Lewis Partnership is an employee-owned organisation and must listen to the concerns of its 81,500 staff working in 50 department stores and 338 Waitrose shops.

A report by thinktank Ownership at Work has found that employee ownership, whether achieved through direct shareholdings or an employee-owned trust, proves popular wherever the company operates and whatever the industry.

“When you are an owner you recognise the need to boost your skills levels,” says the report. “You know that the company’s productivity feeds directly into your pay packet and the company’s success. There is no need to fake enthusiasm or force yourself to go the extra mile when the business in hand is very much your business.”

Admittedly, all the companies in the report have grown since becoming employee-owned and have yet to suffer the kind of sales decline and cost increases that have put John Lewis on the rack. But many have disaster planning in place – or at least plans to cope with a contraction in sales – that staff have been involved in compiling, which has in turn made workers feel more secure.

Employee ownership usually starts with a gift. John Lewis handed the Peter Jones department store to workers in the 1920s. Employee ownership at the engineering firm Arup and the chemicals firm Scott Bader, named after Ernest Bader and his wife, Dora Scott, date back more than 50 years, while more recent examples include Richer Sounds, donated by founder Julian Richer, and Riverford Organic Farmers, the vegetable-box provider started by farmer Guy Singh-Watson.

Liberal Democrat influence in David Cameron’s coalition government translated into improved tax breaks for owners and staff, but the wider adoption of employee ownership has been slow. The Employee Ownership Association set up an inquiry into the ways different ownership structures affect a curse of the modern workplace: low productivity. Since the 2008 financial crash, Britain’s productivity rate – the output of each worker per hour – has failed to rise more than a fraction.

Could the traditional joint stock company with absentee owners be holding back productivity in an era when people want more from time at work than just a pay packet? Part of the inquiry examined how smaller employee-owned firms functioned to see if they, too, suffered from the low investment and sluggish output that characterised what Bank of England chief economist Andy Haldane calls “zombie firms” dragging down the UK productivity rate.

The report’s author, Stefan Stern, chose four businesses for his study: Community Dental Services, a worker buyout from the NHS based in Sharnbrook, near Bedford; Childbase Partnership, a nurseries business based in Newport Pagnell, near Milton Keynes; Union Industries, a maker of industrial doors, based in Hunslet on the edge of Leeds; and Gripple, a manufacturer of wires and cables, based in Sheffield.

Stern, a business writer and former head of the High Pay Centre, which monitors executive remuneration, says he put together focus groups made up of 10-12 colleagues working at all levels in their businesses. The report is due out in a couple of weeks. “What do the workers tell us? That employee ownership binds colleagues together, supports innovation, enterprise and risk-taking, wins engagement and commitment, and rewards people well for their efforts.”

Stern says he “kicked the tyres” of each organisation and couldn’t find anyone who wasn’t positive. . Workers can buy shares under some structures (and be loaned the money to do so) or be gifted them. Either way, they end up owning the business.

“Employee ownership is not necessarily an easy option, especially when a business changes from a more conventional ownership structure. But it was quite hard to elicit serious criticisms or concerns from these witnesses, none of whom seemed to want to go back to working for any of their previous employers,” he says.

The nearest comparison in the mainstream corporate world in terms of holding staff close is probably Toyota, the world’s largest car maker. Its management, developed by its founder, puts workers into teams and gives them responsibilities for monitoring standards, incorporating new ideas and developing new products.

Even looser structures seem to occur in worker-owned businesses, as staff question traditional command-and-control management methods.

“Employee ownership is clearly liberating for many workers,” says Stern. “But with that freedom to operate comes responsibility, accountability and a genuine sense of ownership – the benefits which accrue from that, but also the seriousness that goes with it. Taking ownership means thinking harder about how you work and how you make money.”

A survey of managers at the same businesses, released this week, showed they need to make an even bigger leap, shedding any bombast and egotistical tendencies on their way to the boardroom.

As Mike Thompson, founder and chairman of Childbase Partnership, says: “You have to understand, as a leader of an employee-owned business, that you have to be able to make it not about yourself. It has to be about the people.”

Under the heading “letting go”, Stern says it is counter-productive to be bossy.