How specialist EO advisors Brabners support businesses along their employee ownership journey

An employee ownership (EO) journey for any business is a series of steps. The decision to become employee-owned is obviously the first (and most significant) leap of faith, but that’s very much the start of the journey. We work with owners and management teams from the outset who see the cultural and legacy benefits of becoming employee-owned. However, we’re also increasingly supporting employee-owned businesses (EOBs) at later stages of their EO journey.     

We’ve built up a reputation as leading advisors on employee ownership models and are recognised as such by the Employee Ownership Association. Here, specialist EO adviser Stephen Hadlow outlines how we support EOBs at three key milestones along that journey: the EO transition, incentivising senior leadership and financial freedom.

The transition to EO

The question posed by the majority of owners looking at EO is whether the EOT (employee ownership trust) model is the right fit for the business. Exploring the benefits of EO and the motivations of owners are key drivers, though a candid discussion about the potential challenges and long-term objectives is also important.

Our support goes beyond purely legal considerations. We assist the business in designing robust governance frameworks, emphasising how a trustee board will best be able to support the business while recognising the concerns of owners who often rely on the business to repay a significant deferred purchase price sum over a number of years. 

Leadership succession

Once a business has transitioned to EO, the problem of ownership succession is immediately solved. However, the challenge of who’s going to run the company isn’t always so straightforward. To tackle leadership succession concerns, we increasingly support EOBs in adopting hybrid EO models through implementing share incentive schemes. Share options granted to members of the senior leadership team (SLT) can provide a tax-efficient financial reward — the value of which is directly determined by the success of the business and dependent on them remaining with the business. 

Share schemes therefore encourage retention and motivation among SLT members. Former owners have the additional peace of mind that the SLT will remain committed to the business during the pay-back period for the purchase price. Looking beyond financial freedom, share schemes can also play a part in attracting top talent to EOBs — helping them to thrive and prosper. 

While this is a key benefit that has an important part to play in EOBs, share schemes should always be proportionate and fair in view of the interests of the wider staff under the EOT. This balance is fundamental. 

Financial freedom

The importance of clear communication with employees leading up to the business becoming employee-owned is key, particularly to gain initial employee ‘buy in’. In reality, however, staff can feel nervous of change and so — at the time of the transition to EO — a ‘business as usual’ message is common. 

In contrast, when ‘financial freedom day’ arrives, the business may want to break the connection with the former owner to ‘stand on its own two feet’ as a mature EOB. We support businesses at this point of their EO journey in re-designing and re-purposing pre-existing governance frameworks for the business, which are typically written by the former owners and may no longer be relevant or appropriate. 

We also help businesses to plan for greater profit sharing — designing more complex bonus schemes to share those profits more creatively.  

Talk to us

We’re proud to sponsor this year’s EO Day on 20 June, where businesses in the EO sector come together to reflect on the achievements of employee ownership and promote its benefits. 

This year’s theme — EO Smile — emphasises the positive impact of employee ownership on working lives, livelihoods and opportunities for individuals.

Talk to us by giving us a call on 0333 004 4488, emailing us at hello@brabners.com or getting in touch with me directly.