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Management Series: leadership-entrepreneurship

Are employee owned firms more resilient in the long-term

This study examines the resilience of Employee-Owned businesses. It looks at how they have fared under adverse economic conditions when compared to their own performance during a period of economic growth and the performance of non-EOBs during a downturn.

Author(s): Professor Ajay Bhalla - Cass Business School; Joseph Lampel - Cass Business School; Pushkar Jha - Newcastle Business School, Northumbria University; Mridula Chordia - Cass Business School

Cass Professors Joseph Lampel and Ajay Bhalla with Dr. Pushkar Jha from Northumbria released their recent study examining the resilience of employee-owned businesses during protracted economic downturn. The release of the study is part of the longitudinal studies undertaken by Lampel, Bhalla and Jha examining employee ownership businesses. The study was released on January 14 2014 at a Cass symposium looking at Employee ownership in 21st century. The symposium was organised in partnership with the EOA, and RT Hon Danny Alexander MP, UK Treasury Secretary, delivered the keynote speech.

In 2010, Lampel, Bhalla and Jha with the support of Employee Ownership Association and John Lewis Partnership published a study that examined whether employee owned businesses (EOB) maintain the advantages of their ownership structure as they grow in size and complexity.

The study examined the resilience of EOBs and how they fared under adverse economic conditions when compared to (a) their own performance during a period of economic growth and (b) the performance of non-EOBs. Based on the findings, it was concluded that EOBs are more likely to be resilient than non-EOBs.

This study extends the comparative analysis of EOBs and non-EOBs over the periods 2009-10 and 2010-11 to examine whether EOBs continue to demonstrate resilience during the prolonged disruption caused by the global economic crisis.

The downloadable report below details the methodology employed and the data analysed.

The study shows that over the 2009-10 and 2010-11 periods EOBs showed significantly higher growth in sales turnover relative to non-EOBs. Indeed they continued to maintain superior relative growth even as the recession deepened. EOBs also saw higher growth in employee numbers over the same period, relative to non-EOBs. The recession also had a lesser effect on productivity in EOBs (as measured by sales turnover/employee), with non-EOBs being hit by a sharp drop in sales. Profitability for both EOBs and non-EOBS suffered during the downturn. However, on the metric of profitability per employee the gap between EOBs and non-EOBs narrowed over the period of recession.

From the findings it is possible to conclude that although EOBs are not immune to recessionary pressures, they are more able to withstand the downturn. Non-EOBs are shown to falter during periods of crisis. With high levels of employee engagement EOBs are able to adapt their busines to sustain and increase growth. Indeed, the higher employment levels seen at EOBs during the downturn demonstrates that employees are viewed as their greatest asset and integral to the business' success. Without external shareholder pressure to sustain or increase margins, EOBs are able to develop long-term strategies in partnership with their employees rather than to the exclusion or detriment of them.

Attachment(s)
{Does Employee Ownership confer long-term resilience?}{https://www.cass.city.ac.uk/__data/assets/pdf_file/0011/358193/employee-ownership-report-2014.pdf}
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