The Ownership Effect Could Power up Productivity

Scotland's latest unemployment rate fell to its lowest ever, now standing at 20% lower than the rest of the UK. That said we still have a significant number of people who have given up searching for work all together. Some don't like the jobs on offer and some who are in employment don't like the jobs they are in, they are engaged only by fear of benefit sanctions. Many work less hours than they would like and a lot are overqualified. This isn't unique to Scotland as the Good Work: Taylor Review of Modern Working Practices published this week and featured in next week's STB (Scotland the Blog) post.

The Scottish government and Scottish Enterprise have been crafting a promising response to Scotland's skilled future, based upon innovation and inclusion. In short we need to ramp up economic growth sustainable create fairer workplaces and we need to do it amidst a period of turbulence and uncertainty. On June 20, on behalf of the CIPD, I attended a London launch of Scotland's innovation strategy. We discussed many of the challenges and solutions to Scotland's skilled future. One thing was clear from presentations from Prof Patricia Findlay, fair work will be a cornerstone of competitiveness.

One big obstacle to fair work is the nature of corporate culture and the structure of corporate governance (watch out for some exciting CIPD campaigns on that soon). If organisations are obsessed with term horizons such as quarterly reporting and public sector service targets, then we will not develop the workplaces we need. The nature of ownership and governance is therefore crucial.

On Wednesday 28 June CIPD contributed to a day long panel investigating one possible solution Employee: Ownership. Scotland's heritage in employee ownership is both proud and sadly mixed. Tullis Russel's paper making business pioneered the technique under visionary business leader David Erdal, but the punishing product market meant that the business folded. First bus started off as employee owned but transitioned to a more traditional form of ownership. There are currently 86 employee owned businesses in Scotland. Many of these are small businesses and this is a very fruitful area for further development.

Scotland's smaller businesses account for 99% of private firms and 55% of jobs. Their sheer quantity suggests there will be a more promising proving ground for new forms of ownership. Increasingly, with help from Scottish Enterprise, family owned businesses at risk of folding are transitioning to employee ownership. This helps employees to literally "own" the difficult decisions required to stay competitive in, for example a manufacturer competing against low cost producers. But the owner of one such business admits that they can't just drive costs they need to drive what CIPD experts call job quality.

One business operating in the far north of Scotland have developed EO as a competitive talent retention tool in a business dominated by high turnover, their EU migrant labour force engage deeply with the concept. Another EO business trying to operate differently is in an energy sector consultancy in Aberdeen. The firm is anchoring skills and capability by developing a super flexible collaborative style of working to operate within the challenged oil and gas sector.

These are all examples of a structure which on a U.K. basis accounts for £22 bn in revenue from the top 50 alone. These include behemoths like John Lewis, Mott MacDonald and Unipart - who are employing thousands. Smaller companies like W.L. Gore who make our parkas rain proof and Wilkin and Sons preserves who put something tasty on our toast, are also employee owned. These top 50 compiled by the Employee Ownership Association, account for 175,000 employees. They have seen a 6% increase in sales and an 11% increase in operating profit. They have also lifted productivity by 1.5% and nearly four fifths have no net debt. Probably most importantly, they have also grown employment by over 5% a year.

The evidence in EO is that it's good for the economy and good for the workforce. As we grapple with Brexit, challenges to world trade and the disruptive potential of automation, it makes sense to do more of what appears to be getting results.

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