5 Tips for a Successful Transition to Employee Ownership

You’ve done the research and are convinced of the multiple benefits of transitioning to Employee Ownership (EO) and how it can have a positive impact on your business, your employees, their productivity and also your legacy.

You realise the employee ownership option provides the best exit strategy for you and your business, so what happens next?

To assist and ensure your business’s transition to employee ownership is as smooth and as successful for the long term as possible, there are some key considerations you should take the time to think about and address.

1. The foundations

There are several factors that any company becoming employee owned should have in place to help ensure the foundations of the business are supportive to this new type of business structure:

• Good leadership

A good leadership team is vital.  If you and your co-shareholders are not also planning to step down as directors, you can take the time to put a leadership succession plan in place after your business has become employee-owned.  If you do want to step back from a leadership role more quickly, it will be essential to have new directors to replace you, and that they “get” employee ownership.

• Trust

Trust is key between the employees, the management team, the leadership team and the owners (if they are not on the leadership/management teams already). Great if this already exists.  If it doesn’t, you will need to work at building it.

• Positive culture

A ‘can do’ and positive culture is really important for a business that’s looking to become employee owned. It helps ensure everyone is ‘pulling’ in the same direction.  Employees will need to be interested in the business, what makes it successful and what can make it less so.

• Clear purpose

Is the purpose of the business clear to everyone throughout the company? If not, why not?

• General communications

Is there a good communication structure in place? Do employees know and understand what is going on? Is the communication flow good both ways and do employees feel comfortable asking questions and advancing ideas and suggestions, in a collaborative way?

2. Prepare to give up control

Control of the company will go to the trustees of the Employee Ownership Trust (EOT) and as the retiring owner you will need to feel comfortable with that.  It will need some adjustment and change to your behaviour and mindset, especially after owning and running a company for a long period of time.

3. Learn from others

Talk to companies that have transitioned already. What can you learn from them? All companies obviously operate and run differently but if you can find a company in the same sector to talk to, you are likely to benefit from their insights on their journey to EO.

4. Communicate the plan

Engage and communicate what you are hoping to do and the plan to transition as early as possible with leadership team and employees.

5. Keep it simple, stupid!

There are several ways the Employee Ownership Trust can be set up.  It will be hard to avoid a level of detail, but we recommend you keep it as simple as you can, with flexibility for your EO structure to change in the future to adapt to changing circumstances.

This article first appeared on the Employee Ownership Association website as a guest blog from Robert Postlethwaite here.

If you have any questions around becoming Employee Owned, please contact Robert Postlethwaite or someone else on the team at Postlethwaite Solicitors on 020 38189420 or email info@postlethwaiteco.com.

Further information on employee ownership available here.