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Whitehall handed case for employee-owned businesses

Employee-owned business research will be presented to Whitehall by academics, after the Deputy Prime Minister called for investigations into EOB business models.

Research carried out by professors at Newcastle University and City University London Business Schools could shape national policy to encourage a ‘John Lewis-style economy’ in the UK.

The Government called for evidence, which will be submitted on 7th September, to make EOBs a prominent part of the structure of British businesses and introduce a ‘new era of capitalism’.

Advantages of this type of business model, which large retailer John Lewis is famous for, include higher productivity, sales stability during recession and lower production costs.

The benefits for employees, as they retain greater control over the company they work for, also has a positive impact for businesses, with figures to support lower rates of absenteeism and reduced staff turnover.

A team of researchers from Newcastle University Business School and Cass Business School of City University London have come up with evidence that shows the economic benefits, improved business performance and resilience of EOBs.

Dr Pushkar Jha, from Newcastle University explained the significance of employee-ownership.

He said: “Employee ownership is not only about employee stock ownership but also about employee role in governance, management accountability and good practices that allow employees to have a real and coherent say in businesses.

“While we have highlighted employee ownership’s superiority over the conventional corporate model, it is just the ‘what’. The next step is to look at a complex set of variables that influence the ‘how’.

“Our task as researchers remains. We need to look at how employee ownership can be induced and at the scenarios it is likely to shape for the future.”

Deputy Prime Minister Nick Clegg put his influence behind the EOB business model as a way out of the recession, after Dr Jha presented evidence in the Nuttall Review of Employee Ownership in July alongside Professors Joseph Lampel and Ajay Bhalla from Cass Business School.

The report highlighted that lack of awareness is the main obstacle to a wide implementation of EOBs in the UK.

Further findings show that employee-owned businesses have greater foresight and forward growth planning than other models, as well as improved employment levels and stable profitability and sales in times of economic downturn.

Professors Joseph Lampel and Ajay Bhalla commented: “Our study shows that employee-owned businesses are more likely to adapt a long-term orientation than non-employee owned businesses.

“That orientation promotes a mind-set which recognises that planning ahead of market demand is conducive to the sustainability of a business enterprise over the long-term.

“The study also shows that EOBs pay greater attention to building a culture where employees’ skills are continuously upgraded and customers given greater attention- both in good times and when times are tough.”

The Government have voiced their support for the Nuttall Review’s findings, and pledged to set up support institutes for EOBs to expand and acquire strong business capabilities.

This was posted in Bdaily's Members' News section by Miranda Dobson .