Presentation to IDC Conference 24 – 25 June 2012 Using Employee Ownership to drive innovation and creativity and performance, can they be linked?

Presentation to IDC Conference24 – 25 June 2012

Using Employee Ownership to drive innovation and creativity and performance, can they be linked?

2

What the Research Says…

*Source A research report for Employees Direct from Birkbeck and The Work Foundation, By Jonathan Michie, *Source A research report for Employees Direct from Birkbeck and The Work Foundation, By Jonathan Michie, Christine Oughton and Yvonne Bennion November 2002Christine Oughton and Yvonne Bennion November 2002Over 100 companies 78% individually ownedOver 100 companies 78% individually owned

Information provided to Employees

65%

70%

75%

80%

85%

90%

New initiatives Companyperformance

Corporateobjectives

Performancetargets

The formulationof corporateobjectives

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Involvement of Employees

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Day-to-day decisionmaking

The design of newinitiatives

Long-term strategicgoals

Formulation ofperformance targets

4



Increased Ownership and Participation Results

0%

20%

40%

60%

80%

100%

120%

Increasedcommitment &

motivation

Reducedturnover

Increasedproductivity

Increaseprofitability

Strengtheninput in day-to-

day decisionmaking

Strengtheninput in

strategicdecision making

Help reinforceemployee

commitmentand motivation

5


The ESOP Performance Puzzle in Public The ESOP Performance Puzzle in Public Companies:Companies: 196 publicly traded U.S. ESOP companies Each ESOP company was matched to a comparable non-ESOP company Studied during the years 1998 through 2004

The results:The results: Returns on assets that were higher than the matched non-ESOP companies in all seven

years Net profit margins that were higher in all of the five years Operating cash flows in three of the five years

6


In "The ESOP Performance Puzzle in Public Companies," published in 2006 issue of the Journal of Employee In "The ESOP Performance Puzzle in Public Companies," published in 2006 issue of the Journal of Employee Ownership Law and Finance, Robert Stretcher, Steve Henry, and Joseph KavanaughOwnership Law and Finance, Robert Stretcher, Steve Henry, and Joseph Kavanaugh

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Return onassets

Net profitmargin

Operatingcash flowto assets

Return onequity

Market-to-book ratio

Debt ratio Operatingcash flowto sales

Operatingcash flow

peremployee

7


Joseph Blasi and Rutgers UniversityJoseph Blasi and Rutgers University

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

High supervision,no high

performancepolicies, low

wages

Low supervision Low supervisionand high

performancepolicies

Plus high wages

No ownership Average ownership levels High ownership levels

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Joseph Blasi and Rutgers UniversityJoseph Blasi and Rutgers University

0%

5%

10%

15%

20%

25%

Overall average High supervision,no high

performancepolicies

High supervision,high

performancepolicies

Low supervision Low supervisionand high

performancepoliciesNo ownership Average ownership levels High ownership levels

9

10

1929 John Lewis Partnership

“owned by the staff, for the staff”

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2011 JOHN LEWIS PARTNERSHIP

Sales of £8.7bn

81,000 employees (Partners)

Profits of £354m

Partnership Bonus of £165m 14% of pay

Over the last fifty years the average bonus has been 16% In industries in general in the UK in the last 3 years bonuses

have averaged 0-3% 100% employee owned

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Be honest Give respect

Recognise others

Show enterprise

Work together

Achieve more

13

Verdict business researchWhich? consumer magazine

“Britain’s favourite retailers

No 1 and No 2”

14

The ARUP Story

Consistent organic growth over several decades Strong financial independence The advantage of being able to take a long-term

view that allows: Innovation pursuit Creativity Technical excellence

That’s backed up by the latest staff survey: 89% of Arup personnel around the world “feel proud to work for Arup” 87% “would recommend Arup as a place to work”.

15

The Publix Story

Fortune 100 top best companies to work for 2012, for the 15th consecutive year

Largest employee-owned supermarket chain in the United States

2011 retail sales of $27.0 billion Current employee count of more than 152,500 Fastest-growing employee-owned supermarket

chain in the United States Excels in community involvement and

volunteering

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The Publix Story

Why I Love Publix

Essie,Deli Manager

Teamwork is so important to be successful, and we really have that here at Publix. I am proud of my co-workers and managers because we always pull together to get the job done. I love interacting with our customers. You just never know how a simple smile and a, "Hi, how are you today" can brighten someone's day. I feel that every customer I deal with leaves a little brighter than when they came in.

I love the fact that I work for a company that allows me to talk to anyone in management if I have a problem. Publix has boundless opportunities for anyone who puts forth the effort. You can go as far as you want with our Company. My name is Essie and I LOVE PUBLIX.

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The Publix Story

Why I Love Publix

Don,Pharmacy Supervisor

Before I ever worked for Publix I knew the company had a great reputation, even though I might not have known exactly why. The more I learned about the company, the more I wanted to be a part of it. When I graduated pharmacy school in 2001, I set my sights directly on Publix and accepted a position as a floating pharmacist.

You will notice very quickly that we are not "employees." Being a private company, we are associates and owners whether in the stores, manufacturing, or support staff. There is a definite sense of ownership present at all levels of the company. This results in an environment where associates are empowered and encouraged to make a difference.

Despite a very competitive marketplace, Publix continues to expand and succeed, never losing focus of our mission. Continued expansion and innovation provides limitless opportunities for professional growth and advancement. I always enjoy looking back on my career with Publix, but that is not nearly as exciting as looking forward at my future with Publix.

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Conclusions

Just as important as ownership is: Employee involvement Low supervision, but a high performance culture Employee participation in decision making Information flow to employees Involvement in shaping the culture

Innovation is harder to measure but of note most silicon valley companies operate employee ownership with low supervision and high involvement…..

Discussion

Documents

Presentation to IDC Conference 24 – 25 June 2012 Using Employee Ownership to drive innovation and creativity and performance, can they be linked?