While enjoying an afternoon meal with his wife at a Loch Fyne restaurant in Edinburgh around four years ago, Colchester noticed a large sign that explained that the restaurant chain is owned by and run for the benefit of its employees.
“When I came to pay the bill a glass got broken and the waitress said ‘that’s our profits gone’. That was the trigger point for me so when we came to leave I bought a book that was there called Local Heroes, which tells the story of how Loch Fyne came to be employee-owned. It was a compelling read,” he explains.
The challenge
Armed with the knowledge of how successful a transition to an employee-owned business model can be, Colchester was keen to further understand the benefits of this way of working.
“Print is a tough industry and for years I’ve been trying to find a way forward for the business. I looked at the normal routes, but in the end I thought that I’ve got a very good bunch of people here and they deserve a better future,” he says.
Prior to thinking about employee ownership, Colchester had considered the idea of a management buy-out.
“I talked to my management team about six or seven years ago about the potential of them buying the business, which they thought was an absolutely brilliant idea. But once we got into the numbers they thought there was a lot of money and a lot of risk,” he says.
“I’m so pleased that nothing came of it because, given the state of the general economy, I’m not so sure we’d have been around today if we’d done that.”
Deciding that employee ownership was the way forward for the company, Colchester initially spoke to a funding organisation for some advice on the transition. But it was around a year later that he started to more seriously consider setting the wheels in motion after reading an article about the business model.
The method
During 2013 and early 2014 Colchester visited a number of employee-owned businesses using different business models and operating in a range of different industries to form a better impression of the pros and cons of the venture.
“I visited an engineering company, a company that manufactures climbing apparatus, a wholesaler and consulting engineers. I wanted to look at mature businesses in tough industries that had made employee ownership work.
“If they hadn’t managed to make it work then it wouldn’t have been quite as attractive to us as an option.”
Colchester also consulted with the John Lewis Partnership, which he reports was open and willing to share the workings of its model. The business ultimately opted for a hybrid model, meaning that 56% of the its shares have been transferred into an employee ownership trust (EOT).
“We had to have a minimum of 51% of the shares in an employee-owned trust to make sure it’s truly employee-owned and meets the criteria under the government guidelines. The other 5% will go into a government approved share incentive plan where employees will have the option of buying shares in their own name,” explains Colchester, who is retaining the other 44%, which he plans to dilute over time.
Employees will ultimately be able to buy shares out of their monthly salary, before tax and national insurance and with a 32% discount.
“It’s an incentive for them to work smarter and more efficiently to improve the share value,” says Colchester.
The business transfer process was completed in November 2014, giving Colchester enough time to fully explain the process and its benefits to his staff, and enabling the firm to take advantage of incentives that came about as a result of the 2013 Autumn Statement in which the government pledged it would set aside £75m a year in tax reliefs for the employee ownership sector.
The company brought in the help of business specialists and lawyers to assist with the transfer of ownership.
“We went to an organisation that had buddied up with some lawyers and it helped us in terms of education, communication and selling the concept internally,” says Colchester.
All of the employees are now members of the EOT and therefore have a vote and can make their voice heard.
“We’ve got a very democratic company here but we’re doing it in the same way as John Lewis in as much that it’s still the same management team and still the same people around here,” explains Colchester.
“That doesn’t mean that every-body is involved in every decision. The management team have to make sure that the business is managed in the best interest of the shareholders – the employees. They agree a strategy for the business and make the tough decisions, but staff will be involved with carrying out some of those decisions.”
Employee ownership is still a rare beast in the print industry, with only a small number of printers having opted into this type of business structure, notably paper and cartonboard producer Tullis Russell.
Colchester believes that the process is still too under the radar, despite the Employee Ownership Association’s desire for employee-owned companies to contribute 10% of GDP to the UK economy by 2020 (the figure currently stands at 4%).
“I think more people aren’t doing it because it’s not particularly well publicised and it’s too off-piste. It doesn’t suit everybody and it’s unusual but if the circumstances are right then it’s a no-brainer.”
The result
The move has brought a stronger sense of community to a business that already promoted togetherness through numerous summer and Christmas gatherings as well as other activity days.
“We’re now running a business that’s changing and evolving and I see that as an evolution within the business in the same way that the actual printing industry is evolving,” says Colchester.
He admits that while not every member of staff is yet fully engaged in the process, he has seen a slowly changing mindset and an increasing level of engagement that he expects to see further evolve.
And any new staff that are recruited going forwards will be taken on only with the understanding that they will be required to fully engage and immerse themselves in this way of working.
“When we recruit from now on we will say to people that if they are offered a job they will come into this environment and this is what we do. I think we’ll finish up with a different business within the next five years because we’ll change the dynamics of the workforce,” says Colchester.
“We are changing the culture already, but it is a big step and will take years – you can’t do it overnight. We’ve been through a tough trading period but I see employee ownership as a secret weapon for us, a catalyst of change and part of our evolution.”
Colchester says he is now more conscious of the impact of each business decision he has to take, as the management team are accountable to the shareholders and each major decision now personally impacts on each of the company’s employees.
“I’m reluctant now to make a decision without fully understanding the impact on the business. The last thing I want to do is burden the business with a bad decision that I’ve made. I think we’ll have a business that will be run in a better way and that’s the key to it all.”
The company now carries out comprehensive employee briefings every month where each member of staff is told the latest numbers and informed of how they can influence and change them in a positive way.
“The employees have taken it on board and, in some cases, we get some very good questions. We want staff to come into work and use their brains throughout the day,” says Colchester.
“It’s nice to see people changing and it’s just lifted everybody here. One of our folk came up to me and said congratulations, shook my hand and said thank you for potentially giving us a future. I found that incredibly powerful.”
Ultimately, although Colchester believes that it will likely take many years to fully realise all of the benefits of moving to employee ownership, he says that the venture has secured the future of the business for generations to come.
“It’s a long haul and it will take us years to get there but there’s something in it for everybody now.
“Most people have got a vested interest in doing a good job for you because they’ve got a stake in the business and that’s an absolutely terrific edge,” he concludes.
VITAL STATISTICS Colchester Print Group
Location Attleborough, Norfolk, and Bury St Edmunds, Suffolk
Inspection host Managing director Philip Colchester
Size Turnover: £3.5m; Staff: 38
Established 1976
Products Litho print, digital print, finishing, mailing, artwork and design
Kit 10-colour Komori 1028, five-colour 529C, two-colour 228p perfector, two-colour Heidelberg GTO 52, Presstek 34DI, Konica Minolta C7000 digital press and a raft of finishing equipment
Inspection focus Moving to an employee-owned business model
TOP TIPS
Do your research. There are a number of different employee ownership business models, so work out which best suits your business. The Employee Ownership Association can help to advise you while visiting existing employee-owned companies may also prove useful.
Help staff to understand the personal impact they can have on business to further increase their engagement. “We’re introducing a number of internal staff awards and as the year goes on we’ll be introducing competitions where the winners will get some sort of recognition in some way or another,” says managing director Philip Colchester.
But realise that it is unlikely that you will be able to convert every employee, and certainly not overnight. It will be more difficult to encourage active participation and enthusiasm from staff who see their job as purely a means to get by.
Inform parties close to the business of the change, to gauge their opinions. “I told customers, suppliers and potential customers and I spoke to bank managers, lawyers and accountants and I’ve still not had one person shoot me down and tell me that it’s a bad idea,” says Colchester.
Understand that employee-owned businesses are still relatively rare so you are likely to come across a number of staff and customers that won’t immediately grasp or understand the benefits and may need reassuring.
Get employees more involved in decision-making and ask for their input along the way. Many staff are likely to become more engaged and inquisitive about business decisions and results once they become shareholders.
