Cass professors’ report incorporated into official government policy
Deputy Prime Minister Nick Clegg encourages growth of employee owned businesses with new legislation
A report by Cass Business School's Professors Joseph Lampel, Ajay Bhalla and Dr.Pushkar Jha from Newcastle University has been incorporated into official government policy. The findings of the 2010 report: 'Model growth: Do employee owned businesses deliver sustainable performance?' were extensively quoted by the Deputy Prime Minister Nick Clegg as he outlined forthcoming government legislation at a speech at Mansion House on 16 January.
In the report, commissioned by the John Lewis Partnership (JLP) and Employee-Owners Associations (EOA) in 2009, and launched in February 2010 at the Institute of Government, Professors Lampel, Bhalla and Dr. Jha found that employee owned businesses are more resilient than conventionally structured companies: outperforming the market during the downturn and demonstrating a lower risk of business failure, higher rates of sales growth and job creation.
The research found that the employee ownership model offers particular advantages to small and medium-sized businesses and in knowledge and skill-intensive sectors, where employee-owned companies significantly outperform competitors. Employee-owned firms also create new jobs more quickly and add more value to output and human capital than conventionally structured businesses, whilst demonstrating the same levels of profitability.
Mr. Clegg said: "I want to focus on employee ownership, a touchstone of liberal economic thinking for a century and a half. What many people don't realise about employee ownership is that it is a hugely underestimated tool in unlocking growth.
"Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact, they often perform better: lower absenteeism, less staff turnover, lower production costs. In general [they demonstrate] higher productivity and [pay] higher wages. They weathered the economic downturn better than other companies."
Professor Bhalla said "Both Professor Lampel and I are delighted to see our work recognised at governmental level. We both believe in employee owned businesses as a genuine growth model and support the role of small to medium enterprises (SME's) in economic recovery.
"The research we conducted points to the employee ownership model as a robust and effective business model. Its structure answers the criticisms businesses have faced in the economic downturn by empowering employees and closing gaps in wage inequalities. Whilst, as Mr. Clegg says, it is not a panacea for all business, evidence and success stories cannot be ignored."
Joseph Lampel is a Professor of Strategy and Innovation at Cass Business School
Ajay Bhalla is a Professor of Global Innovation Management at Cass Business School
Pushkar Jha is a Lecturer in Strategy at Newcastle University Business School