A Stake in Success
Dan Clore
http://groups.yahoo.com/group/smygo
Comment
A stake in success
Like Wayne Rooney, employees want to be part of a winning team
by Jonathan Michie
Friday October 21, 2005
Guardian (UK)
Business people and corporate executives lose more sleep --
at least one night a week according to research by Capgemini
management consultants -- over their employees' performance
than over almost any other issue, including share price
nerves and their own pay. That's why successful companies
are spending more on training and consultation to boost
productivity. It's also a key reason for the rapid growth of
employee share ownership schemes as a lever to increase
commitment and performance.
In the US there is widespread use of employee share
ownership, linked to an ideology of "people's capitalism".
But it's also on the rise across Europe. Gordon Brown is
keen for more British companies to sign up to employee share
ownership, hoping that the motivational effect could help
close the UK productivity gap with the US. The chancellor's
tax incentive scheme for employee share ownership has
already had an impact. But if the motivation relies solely
on share price rises, the effect can be the opposite when
stock markets fall. Motivation can go down as well as up.
The evidence suggests that employee ownership of companies
-- such as the John Lewis Partnership -- may offer
significantly bigger productivity gains. For any kind of
employee ownership to produce improved performance demands
real involvement and participation. Without that, the
company management's commitment to sharing success won't be
believed.
Most existing employee share ownership schemes are neither
large enough nor structured enough to give employees a real
voice. However, the employee-owned sector -- where employees
hold majority or outright ownership -- is growing fast.
There are hundreds of workers' cooperatives, but the main
growth recently has been among "classic" companies where the
owner has sold up to the employees.
The expansion of this employee-owned business sector -- with
a turnover of more than £20bn a year in the UK -- is partly
explained by the failure of existing employee share schemes
to deliver the participation and collective voice that
boosts corporate performance. This week the chancellor
pointed to the success of the papermaker Tullis Russell, a
medium-sized employee-owned business in his own
constituency. As employee motivation becomes increasingly
important in a skills-based, globalised economy, Brown has
argued, employee ownership will become more relevant.
There is clear evidence of employee share ownership
delivering improved performance across the developed world.
But these benefits are only reaped when the schemes are
considered genuine and combined with genuine participation
systems giving employees a voice. If they're seen as a fad,
or a trick to avoid wage rises, they can be
counterproductive. Hence the cool reception from the
Communication Workers Union to Allan Leighton's announcement
on Tuesday that he wants 20% of Royal Mail to be owned by
the workforce. The CWU fears a slippery slope to
privatisation. The union might be right, but it doesn't have
to be. Shares could be held in a trust, to which any
employee leaving is obliged to sell their holding, so that
ownership remains locked into the state and the employee
shareholding trust. This could benefit Royal Mail and its
customers through improved employee motivation. And the
Treasury would receive funds in return for the shares, plus
higher tax revenues from a more profitable Royal Mail.
Employees need to feel that together they have a sizable
stake, along with a genuine say. For this, the evidence
suggests, the shares need to be held collectively in a
trust. Employees can still cash in by selling their shares
to the trust -- indeed, in many schemes they're obliged to
when leaving the company. So the collective holding remains
intact. And with it the belief that the ownership represents
a genuine stake.
The growth of the employee-owned business sector, along with
the companies that have substantial employee share ownership
schemes, is creating a biodiversity of business models that
adds value to the economy. There used to be a view that the
lesson for business from biology was "survival of the
fittest". The real lesson from biology is that the enormous
diversity that has characterised human societies is a
strength -- which applies equally to institutional arrangements.
But further growth of employee ownership and shareholding
needs changes to legislation. At present, unlike for
individual shares, there are no tax breaks for employee
trusts with long-term shareholdings -- precisely the sort of
policy that is needed.
The task for any organisation is to get all employees
contributing. Some may "free ride", leaving it to others to
make a success of the enterprise. This year's Nobel prize in
economics was awarded to a set of theories analysing this
issue. But you don't need a prize to know that the way to
improve someone's effort is to make them part of the team.
Even Wayne Rooney wants to be loved, rather than played out
of position.
The government must ensure the tax breaks are well targeted.
Companies taking advantage of them should include the
participation measures that actually deliver results and a
payback for the taxpayer. And the tax breaks need to include
employee trusts with long-term shareholdings. Will the
chancellor do it?
· Professor Jonathan Michie is the director of Birmingham
Business School and a co-author of Shared Company: How
Employee Ownership Works, published today by Job Ownership
Limited.
mailto:j.mi...@bham.ac.uk
--
Dan Clore
My collected fiction, _The Unspeakable and Others_:
http://www.amazon.com/exec/obidos/tg/detail/-/1587154838/thedanclorenecro/
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sinister
"Dan Clore" <cl...@columbia-center.org> wrote in message
news:3s0k3dF...@individual.net...
> News & Views for Anarchists & Activists:
> http://groups.yahoo.com/group/smygo
>
> Comment
> A stake in success
> Like Wayne Rooney, employees want to be part of a winning team
> by Jonathan Michie
> Friday October 21, 2005
> Guardian (UK)
>
> Business people and corporate executives lose more sleep --
> at least one night a week according to research by Capgemini management
> consultants -- over their employees' performance than over almost any
> other issue, including share price nerves and their own pay. That's why
> successful companies are spending more on training and consultation to
> boost productivity. It's also a key reason for the rapid growth of
> employee share ownership schemes as a lever to increase commitment and
> performance.
One problem with employer-sponsored training/education: what if the
employee leaves for another company?
> In the US there is widespread use of employee share ownership, linked to
> an ideology of "people's capitalism". But it's also on the rise across
> Europe. Gordon Brown is keen for more British companies to sign up to
> employee share ownership, hoping that the motivational effect could help
> close the UK productivity gap with the US. The chancellor's tax incentive
> scheme for employee share ownership has already had an impact. But if the
> motivation relies solely on share price rises, the effect can be the
> opposite when stock markets fall. Motivation can go down as well as up.
What's to keep employee-owners from freeriding?
[snip]