These are interesting times for
mutualism. There has been a crisis of confidence in traditional models of
ownership; the private sector seems unable to sustain growth and the public
sector is creaking under growing pressure. At the same time, employee ownership
is increasingly being seen as offering the potential to rebuild the UK economy
and revolutionise our public services.
Public services need to change.
Demographic shifts will lead to ever growing demand just as public finances are
undergoing an unprecedented and prolonged squeeze. What’s more, people are
increasingly demanding as consumers of public services. They want bespoke
services that meet their individual needs, not one-size fits all. This poses a
significant challenge to the old monolithic model of public service delivery.
But at the same time increased involvement of private
providers in public services tends to provoke opposition – particularly in
sensitive areas such as education, policing and the NHS.
It is undeniable that faith in the
private sector as a whole has been shaken. The financial collapse and the
prolonged recession have undermined confidence in our economy. The fact that
those at the top receive ever-increasing salaries whilst the majority are
feeling squeezed has led many to conclude that the old model can no longer be
relied upon to produce sustainable and equitable growth.
There is a gap in the market here in
which mutuals could play an increasingly important role going forward. It is clear
that employee ownership offers both the potential to deliver more sustainable
economic growth and a ‘third way’ in the debate on public services.
This is something not lost on
politicians on all sides who sing the praises of employee ownership. However,
much of the discussion on employee ownership has been woolly at best. There’s
been talk of a ‘John Lewis economy’ and of the ‘spinning out’ of mutuals from
the public sector. But for all the warm words, there has been little clarity on
exactly what the benefits of employee ownership are for consumers and
employees, or how we are to go about encouraging the growth of the sector.
In an attempt to put some meat on the
bones of this agenda, the Cabinet Office established the Mutuals Taskforce,
chaired by Prof Julian le Grand, of which I was a member. Our report published in July makes it clear
that mutualisation has benefits for employees themselves, for service users,
and for performance. First, employees who have a stake in the ownership of
their organisation tend to be more engaged. They are more likely to display
high job satisfaction and have a good sense of wellbeing. Perhaps as a result
of these higher levels of engagement, employee owned organisations tend to be
more innovative, more productive and more successful than competitors with
different ownership models. These higher levels of performance can feed through
into more satisfied service users and customers. It truly is a win-win
So there is much evidence that
employee owned organisations are more successful and innovative than others.
But it is not clear precisely why this is. Are employee owned organisations
more successful as a direct result of staff having a stake in the organisation?
Or is it something distinct from the ownership itself; something about the way
the company is run and the way employees are treated?
The evidence here is much less clear.
Take John Lewis for example, the most well-known employee owned organisation in
the country. Few within the organisation – from Chief Executive down to the
Partners who work in store – would say that it is the dividend alone that
drives performance and productivity. For mutuals, it is not necessarily the
ownership itself, but their modus operandi that makes them effective. It’s how
they treat their staff, how they engage with them, how they listen to and
empower them, how they harness their expertise and enthusiasm. This suggests
there is a gap in our understanding about the ‘added value’ employee ownership
offers; the benefits that arise from the model of ownership itself, distinct
from any other factors. We are planning further research into this area to try
and fill in this gap.
This has important consequences for
the debate on employee ownership, productivity and growth. It seems that
instead of focusing and indeed fixating on the model of ownership, we need to look at exactly what it is that
makes employee owned organisations out-perform their competitors.
In the Engage
for Success report
for the Department of Business Innovation and Skills, David MacLeod and I
demonstrated the importance of employee engagement, and its tangible impact on
performance in all types of organisation. More than just the model of
organisation itself, it is the way that they engage with their employees that
determines their success and drives performance. We need to learn what it is
about employee ownership that is such a powerful driver of engagement –and
perhaps then we can use these lessons to help drive performance across every
type of organisation and in the economy as a whole.
This article has been published in the ResPublica Fringe magazine, a collection of articles and essays from our party conference partners.
Nita Clarke will be speaking at
‘Employee Ownership: Driving co-operation, achieving long-term sustainability’,
a ResPublica fringe event at Liberal Democrat Party Conference: Tuesday 25th
September, 6.15pm – 7.45pm, Holiday Inn Brighton.