Employee ownership is an alluring concept for many engineering firms, welcomed by owners and employees alike.
In employee-ownership scenarios, employees own the company in whole or in part and are usually given a share of the corporation after a certain length of employment or they can buy shares at any time.
A corporation owned entirely by its employees would not, therefore, have its shares sold on public stock markets. Employee-owned corporations often adopt profit sharing where the profits of the corporation are shared with the employees. They also often have boards of directors elected directly by the employees.
Employee ownership appears to increase production and profitability and improve employees’ dedication and sense of responsibility.
However, there are other reasons that make this concept a persuasive one.
Robert Allan joined his family’s naval architecture and marine engineering consultancy, Robert Allan Ltd., in 1973, and in 1981 succeeded his father as president. The company was founded in 1921 by his grandfather.
As the head of a third-generation family business and being faced with the prospect that none of his three sons planned to follow in his footsteps, Allan began to evaluate his options.
He did not want to see 80 years of effort invested in the business be wasted upon his ultimate retirement, nor did he want to continue working well into his old age. Having been approached by a large international firm that was gobbling up smaller consultancies, Allan had a meeting with a group of senior employees. Virtually all of them said they would prefer to try and continue the business as an independent, employee-owned consultancy rather than work for foreign interests.
Allan saw this as a win-win situation, and in 2008, the company was restructured to a culture of employee ownership with 11 of Robert Allan’s core group of senior employees becoming shareholders in the firm.
Allan moved into his new role of executive chairman of the board and is still actively involved in the day-to-day operations, providing an advisory role to the new owners.
“I got my exit strategy, I got to see that the heritage of the business would continue for a considerably longer amount of time than I would be able to sustain it individually, and the people who helped me get to that successful point were being rewarded.”
Richmond-based Levelton Consultants Ltd. is also an employee-owned firm. Tom Cotton, president of the environmental, materials and geotechnical engineering company, and Ken Harford, president of Robert Allan, see the employee-ownership model as a natural progression of the engineering industry itself.
“Perhaps why it’s relatively common in the engineering field is that it’s a creative process and the people involved invest their skills and energy and have a tendency to take ownership of what they are doing,” Harford explained. “They ultimately want to have some ownership and say in the operation of the company.”
As Cotton sees it, employee ownership follows the organic life cycle of a typical engineering firm.
“It starts with a small practitioner working out of his basement, who then gets busy and hires more employees and the business begins to grow and flourish.”
Like many companies, engineering firms know their most valuable resource is their employees.
If firms don’t keep their employees motivated with competitive benefits, employees will want to leave, and the onus is on management to try and keep its team together.
“If you don’t bring them on as partners, they leave, and we would prefer they stay in the practice,” said Cotton.
In the highly competitive world of engineering, an employee-owned business model could ensure a company stays local and can increase its reputability with no affiliations to anybody other than itself and its clients.