Democratic management driving ethics and engagement in employee owned companies

Employee-owned firms are leading the way when it comes to ethics and management culture, with more democratic management cultures, high levels of employee motivation and a longer-term approach to business decisions.

That's according to the findings of an interim research paper published today by the Chartered Management Institute (CMI) and MoralDNA™ to mark Employee Ownership Day. Supported by Fieldfisher and the eaga Trust, the paper features data from 829 employees across 14 employee-owned firms.

The survey found that 94% agree that being employee owned positively affects people’s commitment to the organisation, while 86% agreed it improves their ability to attract new staff. 90% said it improves overall performance, while almost four in five (79%) said that it encourages longer-term decision-making.

Part of the reason may lie in differences in the organisations’ management and leadership culture. 90% of those surveyed said the prevailing management style is a high-performing democratic, visionary, coaching or affiliative style – compared to just 59% in non-employee owned organisations surveyed previously. Those in employee owned firms were twice as likely to say that management was democratic (31 to 15%).

Ann Francke, CMI Chief Executive, said:

“John Spedan Lewis described his famous retail company as an ‘experiment’ in employee ownership and called for others to set up their own. This research shows the success of such experiments. Employee ownership goes hand in hand with more democratic management styles and the benefits are clear, with high levels of employee commitment, more caring ethical mindsets and a more long-term approach to business decisions. The economy would benefit from having more employee owned companies and we can all learn from their example.”

The research is the first of its kind to focus on companies owned by employee trusts.

Graeme Nuttall OBE, Partner at law firm Fieldfisher and author of the Nuttall Review of Employee Ownership for the Government in 2012, said:

"Becoming employee owned doesn’t have to be complicated and it has become more attractive thanks to tax changes introduced in 2014. Existing research shows how employee ownership helps deliver better business performance and improved employee well-being. This ground-breaking CMI-MoralDNA research helps us understand why, through highlighting the positive impact of the democratic management styles typically found in employee owned companies."

The interim findings also indicate that employees score markedly differently to those in non-employee owned organisations when it comes to their ethical preferences. They scored higher on the ethic of care than a comparison sample of almost 52,000 employees from other sectors, and lower on the rule-driven ethic of obedience.

Lead author Roger Steare, Visiting Professor at Cass Business School, comments:

“There are no significant differences in the ethical preferences of shop floor employees and senior managers. This strongly suggests that the cultures of employee owned companies are much less hierarchical and more collegiate than others.”

Richard Marr, Chief Operating Officer of the eaga Trust, commented:

“At the eaga Trust, we strongly believe that the working environment would be a better, happier and more successful place if there was significantly more employee engagement and ownership.  It is great to see this vision being backed up by research such as this which will hopefully further promote the benefits of employee ownership.”

The interim paper can be downloaded from www.managers.org.uk/moraldna. Join the conversation on Twitter using @CMI_managers and #CMIethics plus #EODay2015 for Employee Ownership Day.


Additional Information

About the research

The empirical research for this report was conducted by moral philosopher Professor Roger Steare, psychologist Pavlos Stamboulides and leadership consultant Peter Neville Lewis in partnership with CMI. Originally designed by Steare and Stamboulides, MoralDNA™ was adapted for this research in partnership with CMI in 2014 with the addition of questions relating to respondents’ experience as professional managers – and adapted again for this research with questions specifically relating to employee owned companies

MoralDNA™ is an online psychometric profile that measures two aspects of human morality: how we prefer to make moral decisions and what moral values we prefer to consider when doing so.

829 respondents from 14 companies which are owned through employee trusts completed the adapted version of the online MoralDNA™ profile during May and June 2015.


CMI

  • CMI – the Chartered Management Institute – is the only chartered professional body for management and leadership, dedicated to improving managers’ skills and growing the number of qualified managers.
  •  Our professional management qualifications span GCSE to PhD equivalent levels, including the unique Chartered Manager award which increases earnings potential and improves workplace performance.
  • We provide employers and individual managers with access to the latest management thinking and with practical online support which helps them embrace change, create high performing teams and keep ahead of the curve.
  • With a member community of 100,000 managers and leaders, we promote high standards of ethical practice through our Professional Code of Conduct, and help managers build their expertise through online networks, regional events and mentoring opportunities

The eaga Trust

  • The eaga Trust was set up 1999 for the purpose of promoting employee well-being, engagement and ownership in the workplace in the belief that when employees feel like partners in their business, they deliver better day to day results which in turn produce a profitable, sustainable and fulfilling business to the benefit of all.
  • In eaga Trust’s experience, businesses operating under these principles have motivated employees whose sense of co-ownership means they take direct responsibility for helping drive long-term growth and financial success.
  • Nowadays, the eaga Trust still holds true the intent set out in a Trust Deed and provides a wide range of benefits including business loans, skills and training grants and business support initiatives to its beneficiaries
  • The eaga Trust supports the growth of employee ownership and engagement/fairness in the workplace through, amongst other things, direct, long-term investment.
  • It invests in businesses and management teams that believe in and are committed to these principles. It has established the eaga Trust Portfolio Company (eTPC) as its principal vehicle to make such investments. eTPC has considerable flexibility in the size of investment it can make but our typical investment in any one business will be up to £2m.
  • For more information, please contact Richard Marr, Chief Operating Officer of the eaga Trust – richard.marr@eagatrust.com

About Fieldfisher

Fieldfisher is a European law firm based in the City of London.  It has been at the forefront of developments in employee ownership and mutual structures in the UK. The Fieldfisher employee ownership and mutuals team includes Graeme Nuttall OBE, who as the Government's independent legal adviser on employee ownership authored the influential report "Sharing Success – The Nuttall Review of Employee Ownership" (BIS, 2012). Fieldfisher is the trading name of Field Fisher Waterhouse LLP.

Press contact: Ibrahim Kamara, Senior Manager – Marketing and Corporate Communications, Fieldfisher. T: 020 7861 4120 E: ibrahim.kamara@fieldfisher.com