Posted On 15th April 2011

The later months of 2010 introduced the whole country to “employee mutuals”.  If you haven’t been following the press, the Government is envisaging that the Post Office will become an employee mutual and is considering the structure as a way of providing other public services.

Employee mutuals are, of course, nothing new.  As of today, the sector has a combined annual turnover of more than £25 billion, amounting to more than 2% of GDP (and growing) according to its trade body, the Employee Ownership Association.

The John Lewis Partnership has a long and proud history as an employee mutual. There are a number of other household names which fall in this category and among those you might know are Admiral Group (insurance), Divine Chocolate and Unipart Group.

The John Lewis story, while not unique, is quite particular.  Inspired by its founder’s vision, the successful retail business’s 70,000 permanent staff are, in fact, partners who share in the business’s profits and benefits.  The company is, of course, known for its high levels of staff satisfaction and retention.

The Government’s interest in the employee mutual model derives from ideas on how to deliver better public services through greater involvement and engagement of staff.  The aim is to support the innovation and entrepreneurialism of front line staff and use their expertise directly in improving the management of those services they provide.

Needless to say, relatively few employee mutuals have to date started with the vision of the John Lewis Partnership or as a result of a public policy decision.  Many of them become so owing to a change for the business.  These changes may include:

•     A private owner (an entrepreneur or a family) wishing to sell their business.

•     A professional partnership deciding to extend ownership rights as a way of attracting, retaining and motivating staff.

•     Employees buying a business threatened by insolvency or closure.

•     Companies giving their employees a majority stake in a business as a way of preserving independence.

Naturally, change can be worrying but if you find yourself as an employee with the prospect of your company mutualising, there are many reasons to view this in a positive light.

1.    It gives the employee shares in the business.  Employees in an employee mutual have to own the majority of the share capital, either directly, or through a trust, meaning that they will benefit from the profitability of the company.

2.    Naturally enough, it can give employees a sense of ownership and a sense of control of their own destiny.  The company ends up in the hands of the people who know it best and who are strongly committed to its success.

3.    Studies have shown employee buy-outs to be more sustainable than management buy-outs and are consequently more likely to survive.

4.    Employee buy-outs are also more likely to stay where they were created and remain integral to the local economies which have come to rely on them for jobs and trade.

Organisations such as the Employee Ownership Association and the Kellogg Centre for Mutual and Employee-owned Business can give much more information on this issue.  Needless to say, as Britain seeks to rebalance its economy, I suspect that we will hear much more about employee mutuals and employment in such organisations will be a real option for job seekers.

Heidi Nicholson [contact-form-7 id="4" title="Contact Page Form"]