Employee ownership is an alternative business model where employees become shareholders in the company. More construction companies are adopting this model as it can benefit both employees and employers. Lindum Group saw a reduction in missing tools after becoming employee owned as workers had a greater sense of responsibility and ownership over the company's assets. Employee ownership can take the form of direct shareholding by employees, indirect shareholding through a trust, or a combination of both. It is believed to improve productivity and provide a succession plan for retiring owners.
Employee ownership is an alternative business model where employees become shareholders in the company. More construction companies are adopting this model as it can benefit both employees and employers. Lindum Group saw a reduction in missing tools after becoming employee owned as workers had a greater sense of responsibility and ownership over the company's assets. Employee ownership can take the form of direct shareholding by employees, indirect shareholding through a trust, or a combination of both. It is believed to improve productivity and provide a succession plan for retiring owners.
Employee ownership is an alternative business model where employees become shareholders in the company. More construction companies are adopting this model as it can benefit both employees and employers. Lindum Group saw a reduction in missing tools after becoming employee owned as workers had a greater sense of responsibility and ownership over the company's assets. Employee ownership can take the form of direct shareholding by employees, indirect shareholding through a trust, or a combination of both. It is believed to improve productivity and provide a succession plan for retiring owners.
SHARING A PIECE Steel saws rarely used to last long
on construction firm Lindum Group’s
OF THE ACTION sites. They would disappear without
explanation, costing £1,000 a time to replace. MORE CONSTRUCTION COMPANIES ARE MOVING TO AN In just one year, a total of 29 of the EMPLOYEE OWNERSHIP MODEL. NEIL GERRARD ASKS WHAT saws went missing from Lindum sites, BENEFITS IT CAN BRING TO EMPLOYEES AND EMPLOYERS ALIKE leaving the firm with a hefty bill. Two years later, however, that figure was down to just one. What changed? It wasn’t as a result of new security measures or the dismissal of a light-fingered employee. Instead, the business decided to take the route to employee ownership and that led to a major shift in mindset among workers, many of whom had since become shareholders. While Lindum was an early convert to the model, making the switch back in 1994, it is comparatively rare among contractors. Architecture practices and big consultants like Arup, Mott MacDonald and Rider Levett Bucknall have embraced the concept, but only recently have more construction firms adopted this ownership model. Last month, utility contractor Falco switched to an employee ownership trust, demolition firm McGee made the same move in May 2020, while Glasgow-based Pacific Building – a CIOB chartered building company – set one up in January 2019. For Pacific founder Brian Gallacher, what prompted the decision to make a change was the need to put a succession plan in place. But it has delivered other benefits too.
“We hoped that by
encouraging people to buy into the company, employees would be more likely to feel involved further” David Chambers, Lindum Group
has 480 employee shareholders – around two-thirds of the workforce 480 short-lived. “When I announced it to the team here, a lot of them thought it The three main forms of was a really good opportunity and the employee ownership majority quickly got it,” he says. Employee ownership can take one of three forms: Changing attitudes l Direct employee ownership – using Once the trust was in place and one or more tax-advantaged share employees felt they had a stake plans, employees become registered individual shareholders of a majority in Pacific, Gallacher spotted an of the shares in their company; immediate shift in how employees l Indirect employee ownership – viewed their job. shares are held collectively on “There was a step change in some behalf of employees, normally people’s attitudes and that was what through an employee trust; l Combined direct and indirect I really wanted. People who came in ownership – a combination of every day and treated it as just a job individual and collective share suddenly realised it was a bit more ownership. than a job. They wanted this business SOURCE: EMPLOYEE OWNERSHIP ASSOCIATION to be successful and for clients to love us. There has been a real He explains: “The first thing I knew Above: Lindum improvement in productivity.” has been an important factor in our of employee ownership was when a Group staff holding The sudden reduction in missing success ever since.” their shares in 1994 subcontractor of ours who operates steel saws a quarter of a century ago The company, which started life as Below: Lindum in the retail sector said he was doing was due to a similar shift in attitude, a family-owned business 65 years ago, Group apprentice it. He explained how it worked and Katie Hughes says David Chambers, chairman of now has 480 employee shareholders I looked into it because as I pass my Lindum Group, which operates out of – around two-thirds of the workforce – 60th year I do have to consider a offices in Lincoln, Peterborough and and is managed by a board of succession plan. York. Lindum’s decision to set up an directors, who also own shares. “The concern the directors, staff and employee ownership scheme followed The process to establish employee I had was how do we make sure that completion of a complicated project. ownership took a few months and the business retains the philosophy, “With hindsight, we felt some of Chambers says the main challenge culture and values if there was a change the problems we encountered during was communicating the concept. in management, particularly if the the contract may have been avoided “Employees needed to understand company was acquired by a business had there been a deeper level of pride, why we were suggesting they should that didn’t share those values? ownership and commitment among become a partner in the business. We “Employee ownership seemed the employees,” he says. “We hoped that needed to be clear on the reasons, the most seamless and simplest route to by encouraging people to buy into the potential benefits and, of course, the maintaining some kind of legacy.” company, employees would be more potential pitfalls,” he explains. In Pacific’s case, setting up employee likely to feel involved further and this “In the beginning, we invited senior ownership took just over two years. staff to buy shares and then we gave “I had a good look at the possible away free shares to every employee. downsides and went to the Employee This helped to embed the system and Ownership Conference in Birmingham encouraged people to continue their and met people who were at various investment. As personnel changes, stages of the process. The harder I being clear on the reasons for doing it looked at it, the more appealing it remains a priority even today. became to me,” Gallacher recalls. The difference is that now we have He expected some employees to be real-life examples of how the shares suspicious of his motives and while scheme works and how it can be he did meet some cynicism, it was beneficial to them.”
a camaraderie and a togetherness that perhaps might not have existed in its fullest extent pre-employee ownership” Brian Gallacher, Pacific Building
DAVID BOYES WORDMEDIACO
Company strategy Under an employee ownership trust model, Gallacher and his management team still make all of the decisions about company strategy at Pacific. The shareholding is held by a trust so none of the employees has individual shares. Pacific Building celebrates its move to employee ownership in 2019 “The official status of the employees is that they are Employee- these work with their teams to because we are obviously burning a beneficiaries of the trust. The owned determine the direction of their bit of cash at the moment. trust can make awards based on construction business within the group plan. “Had there been a management profitability to each beneficiary or companies Divisions manage their own business buy-out or a trade sale it would employee should the business have a Pacific Building development, with the support of probably have sucked all the cash Main contractor good year,” says Gallacher. central resources, and all employees out and we would likely be operating Lindum Group The firm’s trustee board is made Main contractor are encouraged to see potential on an overdraft. I think there is also up of five people – two employee McGee Demolition business opportunities. a camaraderie and a togetherness representatives and two management contractor “We also have an annual AGM to that perhaps might not have existed representatives, as well as one Erith Demolition which all employees are invited. in its fullest extent pre-employee contractor independent. The management team This is an opportunity to discuss the ownership.” Falco Utility meets with the trust a couple of times contractor business and ask questions directly of Chambers agrees that employee a year to tell the trust how it plans to Raised Floor its board of executive directors.” ownership helps Lindum to handle run the business. The trustees can Solutions Flooring obstacles. “If we save more money, by interrogate the management team’s contractor Negotiating the pandemic delivering good client service or being decisions but can’t prohibit it from The unpredictable, volatile careful how we spend money and making decisions. environment that has been created looking after our kit, then our shares “But if all of the board of directors by the covid-19 pandemic has hit will perform better,” he says. were to suddenly say they were going nearly every sector of the economy “In terms of the pandemic, our to buy themselves Ferraris, I would hard, and construction has been sites were able to reopen quite fully expect the trustee board to say no exception. But Gallacher thinks quickly provided they abided by that they don’t think it is a good use the employee ownership model is a strict regulations. Our employees of company money,” adds Gallacher. useful one to have when it comes to understood that it was in everyone’s At Lindum, Chambers says the negotiating tough conditions. best interest to be back in action approach to decision-making is “Employee ownership swiftly but without compromising on “the best argument wins”. He says: wouldn’t make a bad business social distancing and hygiene.” “Lindum Group is one company good, but it helps a good business Gallacher certainly has no made up of several divisions. Each be better and stronger,” he says. regrets. He says: “It won’t work for division has its own directors and “We had some good cash reserves everyone but I know that I have done management structure. Each of which will continue to help us, the right thing.” ●