Dr Jo Bentham explains how she uses business news stories to stimulate deeper understanding of specification themes.
Being able to take current business news and use it to develop techniques which link areas of the specification has always been one of my key teaching and learning resources. This business story arrived just in time for revisiting some year one A Level topics and moving through into the more synoptic topics of year two.
In May 2019 Julian Richer, founder of Richer Sounds – a specialist hi-fi- to TV retailer, announced that he had transferred 60% of his shares in the company into an employee owned trust. This event has begun a process which will hand control and ownership to the employees of the home entertainment retail chain, and will also reward them with sizeable cash bonuses.
Julian Richer started the business as a nineteen year old in 1978, but at sixty years old felt that the time was right to create a continuity that would allow him to be part of the transition of ownership and control to his employees. Whilst Mr Richer will remain involved in the business, the day to day running of the business will be handed over to the existing management team.
This change of ownership has been compared with the John Lewis model of ownership, where John Lewis and Waitrose staff are known as partners and have ownership of the stores. This business news came as it was reported that engineering company Weir was giving all of its 15,000 staff £300 worth of shares both this year and also next year, and that telecoms group BT is planning an annual distribution of £50 million worth of shares starting in 2020.
The Employee Ownership Association (EOA) reports that the employee-owned sector creates more than £30 billion in annual turnover, more than the aerospace sector. More than 350 businesses have adopted employee ownership in recent years, including more well known names such as Aardman, the animation studio responsible for creating the characters Wallace and Gromit, and Riverford, the organic vegetable box company.
So, what are the benefits of employee ownership? What is the business sense behind this move?
Employee ownership means that all employees have a ‘significant and meaningful’ stake in a business. This means that employees must have both a financial stake in the business (e.g. by owning shares) and a say in how it is run, known as ‘employee engagement’.’ (https://www.gov.uk/employee-ownership).
Employee owned businesses come into being through a number of routes. Some businesses, such as John Lewis, the Arup Group, or Scott Bader, are owned by employees from the outset. Some occur as the business decides to expand and broadens ownership to employees, and in so doing, hopes to attract and retain talented staff. Some businesses threatened by insolvency and closure turn to employee buy-outs as a way to survive. However, the most typical route occurs as private owners, often entrepreneur led or family businesses, decide to sell the business or gift the business to their workforce in order to manage the business’s succession. The Employee Ownership Association reports that employee-owned businesses benefit from greater productivity, less staff turnover, more innovation, and greater security in making long term plans.
So, how can we use this as a case study in our schemes of work? How can we get our students to engage with this information?
There are five themes that I would focus on:
- Models of business ownership and business aims and objectives
Delivering subject content on business structures can often feel quite dry, but opening up the discussion of employee owned businesses can generate a number of questions based on how and why such businesses come about. It is important to differentiate between co-operatives and employee owned businesses. This can then lead to a consideration of how business objectives may differ when employees are in charge. Are the objectives focused on profit and revenue, or is there more of a focus on sustainable growth?
- Approaches to human resource management
More recent thinking in the field of human resources has focused on the value of the employee – as an asset or a cost. Employee owned businesses are firm believers in the worth of the employee. Using the financial information provided by Richer Sounds, the students can begin to calculate a worth for each employee which could be compared to their cost measured by their wage or salary. What kind of organisational culture is created in such firms?
Students can be asked to consider the benefits mentioned above – greater productivity, less staff turnover, more innovation, and greater security in making long term plans. Students could take each of the benefits and using the example of Richer Sounds could suggest ways in which employee ownership can help achieve these benefits. To what extent is employee ownership more of an incentive than employee engagement?
- Business success and competitive advantage
How can employee ownership create competitive advantage? In which industries is employee ownership more likely to lead to business success? Julian Richer’s business philosophy has been based on providing secure and well-paid jobs which has led to a happy workforce and business success. There are no zero hours contracts and the pay gap is favourable for women. Employees benefit from perks that include access to company homes around the world, and the business donates 15% of profits to charity. Does this suggest that employee owned businesses are likely to have more ethical objectives and that this is what leads to business success?
- Surviving the slumps of the business cycle
Following a recent fall in profits, John Lewis employees have seen their bonuses reduced to the lowest level in over 65 years and the employees of Aber Instruments, a supplier of advanced systems for brewing and biotech companies, have agreed to take a 10% pay cut whilst still maintaining output levels. Are employee owned forms more able to survive adverse trading conditions? How important are such firms to the UK economy?
Dr Jo Bentham teaches business and economics at Adams Grammar School