From employees to entrepreneurs: How employee ownership supercharges business
By Duncan Smith
Danny Sims set up DJS Research in 2001 and placed it into employee ownership twenty years later. We spoke to him about why independence matters, whether the process has run smoothly and tips for businesses considering adopting the model.
Why did you decide you wanted your company to move to employee-ownership?
I was thinking about succession and while I’d been approached by Private Equity for a trade sale a few times, it just didn’t feel right for us. A lot of market research companies take that route: there’s not many independent companies around anymore. But I couldn’t see myself standing in front of our team of people and announcing to them that we’re now part of this bigger group and that their jobs are at risk. That’s when I started to look into employee ownership and thought that it could be a good solution for us.
It gives us everything we wanted in terms of retaining independence, getting some money from the value of the company, and giving something back to employees. It went down really well with people when we told them. They had questions of course but we explained it, everyone went and did their own research and it’s been a really positive step that we’ve taken. I’m not saying it’s all perfect but it feels really good letting everyone have a say and sharing responsibility.
What advantages have you seen so far?
To say we are employee-owned is a solid stamp to show that we are a good place to work full of great, motivated people. It is the cherry on the cake. It really helps us stand out to clients and stay competitive, showing we’re progressive and independent.
We regularly carry out an employee satisfaction survey and in the two years since the switch, around half of employees say they think, feel and behave like an owner. Another 20% say they’re getting there. So there is still work to do but people are thinking differently and stepping up.
What tips do you have for other businesses considering handing over the reins?
I think the first question you need to ask yourself is: is this right for my company and its culture? DJS has always been a place where we’d ask for people’s views so it was more of a natural decision than it might be in some other places or industries. Everything we do is totally transparent, every decision is explained, even finances and profitability are discussed openly and clearly. That’s all a healthy, different way of doing things, but is your company ready for that?
I’d also advise: be prepared for change. There has to be change. You definitely need time to prepare to get the culture right. It’s not just a case of signing a piece of paper and getting tax free money. It’s a journey that we’ve had to learn and teach. We’ve even done formal leadership training as part of that transition. Our governance structure has changed too. We’re trying to make the business a lot flatter so everyone is engaged in business decisions. Now we’ve got a Trust Board which is the Operational Board’s critical friend. It looks after the majority shares on behalf of the employees and ensures the business is run in the best interests of all of the employees. It’s a much more open process to get onto the Operational Board now which everyone is involved with, not just the leaders.
Work out how it will work for your leadership. Will you have a clear plan where they leave the business in two or five years for instance? I kept some shares so it’s not as simple as that for us. You still need an ultimate decision maker because there are naturally often split views so we have a new Managing Director. I’ve had to step back. That’s probably the hardest thing for me. In the early days, I was poking my nose in and that’s not fair on the new Managing Director and the Operational Board. I’ve had to learn how to let others make decisions.
I’d also suggest looking into the Employee Ownership Association (EOA). When I’ve been to the annual conference, it’s been full of fantastic case studies about how employee-owned companies are running and what the model means to them.
We helped do research into employee-owned companies for the EOA and found that they are outperforming other companies in terms of performance turnovers, profitability, investment, wellbeing: all of the things you’d want. I honestly believe that the more employee-owned companies, the better: it helps businesses and people thrive.