Could Employee Ownership Be Right For Your Family Business?

Succession planning – could employee ownership be right for your family business?

Five million. That’s how many family businesses there are in the UK today, employing more than 12 million people and contributing more than 25% of GDP. These are big numbers, by any measure. Yet equally big is the positive role many have played in their communities for generations, and continue to play today.   

So what happens when it comes to succession planning?

What if the next generation wants something different – and a trade sale or MBO just doesn’t feel right?  

Transitioning to employee ownership (EO) is one option family businesses might consider today.

Exploring Employee Ownership As A Succession Option    

The UK’s employee-owned sector is currently growing, with more than 1,650 employee-owned businesses around the country, according to EO membership organisation the eoa.

Companies who have chosen EO as the way to secure sustainable success in the last 10 years range from household names Riverford Organics and Go Ape to eighth-generation family business Lodge Brothers, which transitioned in January 2024.

So What Is Employee Ownership?

The clue’s in the name. Put simply, EO is when employees have a say and a stake in the company they work for.

Ownership can take a variety of forms – from employees directly owning shares in the company, to having shares held on their behalf in an Employee Ownership Trust (EOT).

The EOT model is the most common in the UK.

Creating Sustainable Success

So why is EO worth considering for your family business? Alex Bloom is a Consultant at Telos Partners, an employee-owned strategic change and advisory consultancy. Together with J Gadd Associates, Telos supports businesses with the leadership, governance and employee engagement aspects of transitioning to EO. 

Alex and his team also work with existing EO businesses to embed and accelerate the commercial and cultural benefits of being employee-owned.

"Transitioning to employee ownership can safeguard the founder’s legacy while freeing the company to shape its own path," he explains.

"It puts the business into the hands of the people who know it best and who, hopefully, also care passionately about securing its sustainable success. Becoming employee-owned is one way a family business can retain and strengthen its culture even when family members are no longer around."

Empowering The Next Generation To Lead

Having previously worked in and then led his own fourth-generation family business, Alex finds supporting others to explore EO – and achieve a smooth handover of the reins – particularly fulfilling.

"I genuinely love it," he confirms. "I’ve seen the impact of succession through my own family business as it passed from my grandfather and his brother to the next generation." 

"I’ve seen how a family business can be evolved and strengthened as new generations come on board – and I’ve seen the impact when some family members aren’t motivated to be involved. I’ve also seen the benefit that non-family members can bring."

"With employee ownership, it can be very empowering for the next generation (whether family or not) to understand there’s a future for them, with the opportunity to contribute to the direction of the business they now own."

Commercially, EO businesses have been shown to be more productive. They also invest more in supporting employee health and wellbeing, on-the-job training and critical benefits like flexible working, according to the findings of the eoa’s Knowledge Programme which was published in 2022.

What Should You Do Next?  

That’s good to know, but EO won’t be the right path for every family business. So if you’re a founder/owner who’d like to explore it as a succession option, what should you do next?

1. Do your research – the eoa website is a good place to start, as is connecting with other employee-owned businesses to learn from any insight they can share.
   

2. Seek expert legal and financial advice on the transition process from a trusted professional with EO-specific experience – there are several out there with a sound track record of steering family business clients through this phase to success.
   

3. Contact Alex at abloom@telospartners.com to find out more about the insight and support Telos and JGA can provide to prepare you, your leadership successors and your people to make the most of your transition – working with you to shape, embed and accelerate the benefits of being employee-owned.