Maintaining productivity & performance in an employee-owned business
Can an employee-owned business stay competitive?
One of the biggest concerns for founders considering employee ownership is whether it will affect business performance. Will employees maintain the same level of drive and accountability? Or will the shift to shared ownership lead to decision-making paralysis and reduced productivity?
What are the facts?
Recent studies by the University of Stirling and other bodies indicate that employee-owned businesses (EOBs) show notable advantages in productivity and employee welfare compared to conventionally owned firms.
Research conducted by WPI Economics revealed that EOBs are up to 12% more productive, as measured by Gross Value Added per employee, than their non-EOB counterparts.
Further findings from the University of Stirling underscore additional benefits of the employee ownership model:
- Enhanced Employee Benefits: EOBs distribute twice as much in bonuses and dividends to employees as conventional businesses.
- Job Security: Over a three-year period, EOBs were five times less likely to implement redundancies.
- Fair Compensation: These businesses tend to offer a minimum annual wage approximately £2,900 higher than non-EOBs and are more than twice as likely to have fair pay accreditation.
- Investment in Training: On-the-job training and skills development investments are, on average, £38,000 (12%) higher annually in EOBs.
The truth is employee-owned (EO) businesses can be just as high-performing as traditionally owned firms – if not more so. But success depends on how well performance and accountability are built into the transition.
The risk of ‘ownership complacency’
In some EO businesses, employees assume ownership means job security rather than responsibility. If there’s no clear link between performance and business success, motivation can slip, so it’s vital to keep all co-owners in the loop.
Common pitfalls include:
- Lack of accountability – Without strong leadership and expectations, productivity can suffer.
- Decision-making paralysis – If every decision requires group input, progress slows.
- Misaligned incentives – If employees don’t see a financial reward for strong performance, their engagement may decline.
Avoiding these pitfalls means ensuring that ownership comes with both rights and responsibilities.
Balancing inclusivity with accountability
One of the defining challenges of an EO business is ensuring employees have a voice – without slowing decision-making or reducing efficiency.
Best practices include:
- Well-defined roles – Not every decision needs input from everyone. Clarify whose input is essential and where those in leadership roles must take the lead.
- Performance-linked incentives – Bonuses or profit-sharing can reinforce an ownership mindset, if the connection is made between day-to-day work and achieving business performance.
- Clear KPIs and expectations – Ensure each employee fully understands their role in driving business success.
Performance management in an EO structure
Traditional performance management – where accountability sits with a boss – may need to evolve in an EO business, but performance management is still crucial.
Effective approaches include:
- Regular performance reviews – Linking individual and team success to business performance.
- Peer accountability – Encouraging employees to hold each other to high standards.
- Training in decision-making and leadership – Ensuring employees understand their role in maintaining standards and can participate with genuine skill.
Final thought
Employee ownership doesn’t mean compromising on performance. With clear structures, incentives, and accountability, EO businesses can and do thrive, combining commercial success with a strong ownership culture.