On July 1st, our firm became an employee-owned small business. There has been an incredible show of support from our clients and friends of the firm. But I was a bit surprised by the most common question.
It typically went along the lines of, “This seems really incredible what you are doing over there … but, what exactly is employee ownership?”
The reality in the United States is that employee-owned companies represent a fraction of the total. The National Center for Employee Ownership estimates that about 25 million employees participate in some form of employee ownership. (Source: NCEO – What is Employee Ownership?). With about 160 million people comprising the workforce, that would mean about 15% of the workforce has some equity in the company at which they work.
The great majority own shares or stock options and are pooled in with the rest of the financial market. A small fraction have a controlling or governance interest in relation to their employer. So, it is not surprising that few people have a frame of reference for employee ownership beyond the idea of having a few shares in a company.
First, what is ownership?
My view has always been that ownership is a responsibility, not a job title. The owner of a company is ultimately responsible for the long-term viability of the company. The owner is also responsible for the ultimate disposition of the company – to sell it, to continue or to shutter operations. Ethical ownership also means responsibility for the people who work there – for their health and well-being, quality of life and livelihood. To me, it has also meant establishing a higher purpose – ours is to serve nonprofit and other social enterprises.
When I was the owner of the firm I went to work every day with other job titles. I was a Project Manager, Principal (read: a little bit of everything), and then Chief Executive Officer. My job duties were many: identify new client prospects, manage projects, organize resources, oversee marketing campaigns, add new staff people, manage the leadership team. I saw part of my job was to bring the team into the financial decisions of the firm, discussions around strategy and direction, and our wider vision. This last bit reflects more on servant leadership than duties as an owner.
The idea of bringing the team into the business operations and strategy was to instill a “sense of ownership.” I expected people would be more excited about the work and feel they had more agency in our success if provided insight into the company itself. It was also a way for me to live up to my responsibility – in being transparent and honest about our position and open to feedback on our direction. It really is a half step from “sense of-” to “actual-” ownership. Feeling invested and committed to the success of your workplace is the most important piece – the responsibility part.
Then, what is employee ownership?
Employee ownership turns over the ultimate responsibility for the firm to the employees. Our employee-owners directly elect members to our board of directors, thereby ensuring employees have a clear say in the direction of the firm. We still have managers, directors and myself as chief executive officer. Those jobs exist to ensure we have a well-run business day-to-day. Every time someone wants to buy a box of paperclips, we do not put it to a vote – we have budgets and operational control in the hands of the management team. But the ultimate responsibility lives with the board and its employee representatives.
This has real-world implications. For one, it means never being surprised to learn that your company was acquired without your knowledge. It also means you could participate in choosing who would best represent your employment interests. And it means being able to ultimately hold accountable the leadership of the firm – notably, our CEO – to best represent the interests of the ownership group.
Our employee-owners also share in the financial upside of the firm. We are a modestly profitable enterprise, given the sector we serve. But where there is profit, it is distributed equitably among the employee owners. Our combined efforts to offer outstanding services ultimately create rewards shared among us.
The founding documents of our employee-ownership model take defining the type of business we are a step further. We remain committed to working with nonprofit and social sector organizations. Before employee-ownership, this was the decision of one person – our founder and sole-owner; it has now been codified in our charter. It is certainly possible the employee owners could decide to take our work in a different direction. It would not likely get my vote, but that responsibility now resides with the employee ownership group – and is no longer for me alone to decide.
Where will we go from here?
Becoming employee-owned is really just the first step. It is a bit like a democracy in that it is what we make of it. As we prepare for board elections in August, we will each ask ourselves what we hope to see from our representatives. We will reflect on the direction and sustainability of our company. I expect we will ask more of ourselves as we have a real and meaningful stake in our workplace. We have information and agency.
I believe this is a further step to creating a more fair, just and equitable workplace – and to better serving organizations with the same aspirations for the world.
BJ Cortis is the Founder and CEO of Craftsman Technology Group. As of July 1st, he is also an employee-owner.