Building a case for employee ownership
Engineering and design firm Arup is a global behemoth, with 14,000 staff in 35 countries. It may have its headquarters in London, but it 3D-prints bridges in the Netherlands, designed the iconic Sydney Opera House, has it’s fingerprint on the world’s largest airport terminal in Dubai and the longest sea bridge in Hong Kong. What is less well known is that it’s an employee-owned business.
“This is a huge piece of glue in our organisation. We are all part of a global profit share. We do not divvy up the money geographically or by business streams. It all goes into one pot, binding everyone together,” explains Miriam Staley, chief financial officer (CFO) for Arup’s business in the UK, India, Middle East and Africa.
“Employee ownership on a global level removes lots of barriers to business and promotes collaboration. In many international organisations executives jockey and compete with each other and people don’t necessarily help colleagues because they want to make their own numbers. In Arup there is only one set of numbers and it’s the very bottom line, for the group, globally.”
Such employee democracy came to Arup before it was trendy; rewind the clock to the 1960s and their progressive structure predates when John Lewis, Richer Sounds or Riverford Organic Farmers hit the headlines. Today employee-owned businesses contribute more than £30 billion to the UK economy and engage 200,000 people across more than 370 companies, according to the Employee Ownership Association.
“It’s surprising that more businesses aren’t employee owned. I am a great fan of it. As it says on the tin, there is a lot of ownership at Arup and you get the motivation that goes with that. You also try to take decisions for the long run rather than short term, aiming for reasonable prosperity and to be a humane organisation in the process. In that way there’s a sense of stewardship,” says Ms Staley, who has been Arup for more than 20 years.
“Employee ownership is particularly attractive to younger people coming in. I hear the word ‘purpose’ bandied around quite a lot nowadays. There seems to be a thirst for it, and to hear and to see the purpose and values of a company lived out on a day-to-day basis can only be a good thing. It certainly makes for some interesting exchanges.”
A seismic shift for CFOs
What companies are for is a burning issue addressed recently by 180 of the biggest names in global business, from Amazon to Siemens, Pfizer to Apple, that collectively agreed to change the definition of the purpose of their corporations, with a seismic shift away from shareholder primacy and making them money, to serving all stakeholders, including employees, communities and the environment.
The long term has to be the goal; this is where the employee ownership story becomes more like that of a family
Employee ownership structures such as Arup’s echo this shift; it also impacts how finance functions. Decision-making becomes more democratic and accountability to peers rather than bosses is more prevalent. Discussion and persuasion come to the fore. Everyone also has an interest in the state of the firm’s finances. In the process, finance teams get a better view of the underlying health of the business and strategic direction. And there’s a lot more engagement at all levels.
“This shrinks the business somewhat. In fact, everyone has a voice and that can be a bit loud at times. You could be talking to a graduate or a senior director; we have some bright and motivated people at Arup and they all ask interesting questions. So it always keeps me on my toes in how to explain things in a way that becomes less about accounting and finance and more about relevance to someone who is, say, client facing,” says Australia-born Ms Staley.
“There is also a lot of constructive debate since leadership teams need to coalesce around an agreed way forward. What this means is the decision-making process is not necessarily linear. But once decisions are made, then implementation and moving people forward is much quicker.”
Skills for the CFO of the future
Arup’s financial chief has been taken into the area of behavioural science, a leadership skill you don’t necessarily equate with role of CFO. Communicating complex accounting ideas and their relevance to those whose heads aren’t buried in spreadsheets is a sought-after skill.
“I quite enjoy it, but it might not necessarily be every chief financial officer’s bag, because it’s about lining everybody up to get the outcome you are looking for. It’s a challenge if you don’t like talking to people,” says Ms Staley.
An employee democracy is potentially more difficult when economic times are tough, since heads have to roll, bonuses and shares of profits evaporate, and the focus is on preserving the business for the future rather than anything in the short term. John Lewis is feeling the pinch right now with the high street apocalypse; Arup felt it during the global financial crisis.
“We are no different than anyone else; we are not going to outrun the market. Ten years ago, everyone was having a tough time. You have to make some really hard decisions from a business sustainability standpoint. The long term has to be the goal; this is where the employee ownership story becomes more like that of a family,” Ms Staley concludes.
“It’s a matter of playing those long-range scenarios out and understanding what it’s going to cost, and the impact on money and families and jobs. It’s also about retaining hugely scarce skills. You don’t want to reduce your staff count or let people go if you know you’re going to need those very skills to sustain the business in the future.”