Employee Owners – Will I Lose Control?
How to Get Out the Way and Build Value
You’ve built your business from the ground up. It’s hard to let go of the reigns. Lots of business owners experience this. The challenge is how to overcome them. Engage employees to be more like owners themselves. Equally if they all started to think like you, wouldn’t they be wanting to run the place? And you’d end up with everyone wanting to be the boss! That’s a recipe for chaos. Making Employee Owners is a big step – but you don’t leap straight in.
The First Step
The first step is understanding your own behaviour and why you think a certain way. This helps you figure out how you engage with your team so they understand ownership thinking. As a business owner you are frequently performing 3 main roles. One of Ownership, one of Direction and Leadership and one of being an employee (i.e. doing a job). Let’s break those down to look at thinking, behaviour and responsibilities. It answers the question: “How do you get everyone in your company thinking and behaving as if they were business owners?”
Shareholders – It’s About Ownership Control
One of the privileges of being a shareholder in a Limited Company is the limit of your personal liability. The business has received investment from you by way of capital. You expect a return on that investment. As a shareholder you have control of the OWNERSHIP of the company but not control of the day to day affairs. You delegate that responsibility to the board of directors.
When you first start your business you are shareholder, MD, sales directors, chief marketing officer and everything down to head of tea-making. As the company gets bigger, you employ people in your team. You don’t need to be a director or even an employee to still be a shareholder (except to benefit from entrepreneur’s tax relief). The roles are bundled together at the beginning. They stay bundled together throughout the life of the business, long after they should be separated.
Directors – They are in Control
Shareholders delegate control of the operations of the company to their board of directors. The shareholders set out a clear vision regarding the return they expect from their investment. The directors get on with delivering that vision and return on investment.
Shareholders have a limit on their personal liability towards the company. Directors have legal obligations and unlimited personal liabilities if they do not discharge those responsibilities with the necessary care and attention. There are many directors who do not understand the full extent of these liabilities. Shareholders hang onto being directors in their businesses without realising that they are joining their personal liability to the other directors and the business.
Directors lead the organisation.
They articulate the long term vision to the organisation. They think and act strategically. If they are constantly reacting to day to day demands within the organisation they are NOT LEADING. They cannot be thinking strategically. If you look at the behaviour of your directors – including yourself – how much time do they spend leading? Ownership Thinking starts with the leadership showing the way.
Employee – That’s all about Income
If you are doing a job in the business, you get paid a wage. It’s the same for you as a business owner. The only difference is that in the UK business owners can pay themselves dividends in lieu of wages. This gets a business owner thinking very differently about the “job” they do in the business. What if you were paid for the role you are actually doing, in the same way as any other employee? Once this small change happens (either in reality or just in thinking), there is often a change in owner behaviour.
If you were to treat yourself the same as you treat your employees would you think differently?
Separate the Roles
Once the three roles are “unbundled” it’s easier to see more clearly what role you are playing at any point in time. It’s common for the shareholder and director roles to be completely overlapping. This can lead to employees seeing a two tier organisation with one rule for some employees (as a result of their other roles) and another rule for them. Resentment soon follows, especially if the goals and vision of the shareholders and directors are not shared with the employees.
Sharing information often frightens business owners. And whilst there is a case for complete transparency, it can come in stages. Many business owners keep the numbers completely hidden from employees – all the numbers, even the ones that would help others do their jobs better. Sharing information that is relevant and at an appropriate level is a good start for engaging your team. It might sound scary to start off with, but one you see the engagement and results you get, it becomes easier and easier.
One business owner shared her numbers with the employees. Everything from turnover to profit and how much she was paid. The response was astounding. One employee said “Why do you do it if that’s all you are getting?” She was not being under paid for her role in the business but the return on investment was surprisingly low in the eyes of the employees.
How Employees Behave
When employees know enough to be able to understand their role and how they fit into the entire organisation, they change their behaviour towards achieving the goals laid out. They suggest improvements that are goals and outcome led. Of course there is the odd employee who doesn’t do this, but they self-select themselves out of the organisation as other employees want to achieve the targets and make the company bigger than it’s collective parts.
Employee ownership ultimately leads to ownership mindset in your employees, buy you don’t have to wait till you’ve decided whether it is the right thing for you and your company to get working on the shift from employee thinking. Understanding your own roles as business owner and unbundling them is a start of the journey. Leading your employees into an ownership mindset by sharing information is a good start too.
To find out more:
- watch our webinar where we look at the 3 roles of business owner
- For more details on individual employee ownership schemes, click here to down load our white paper “Building Value Through Employee Ownership”
- Read the another article in this series
- Give us a call to find out more about how to take the first steps