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At the end of 2017, Auchrannie resort on the island of Arran in Scotland became the first Scottish resort to transition to a model of employee ownership. A trust now owns 100% of the company’s shares on behalf of its 160 employees.

The co-founder, and Managing Director since 2010, Linda Johnston said of the employees in relation to the transfer:

“They realise that what each of them does will affect the future success of the business and that this is directly linked to their own success, so they have already become more engaged in making the business better and understand the power and influence each and every one of them now has on their own future.”

 

New targets for the business

New efficiency targets for the business, agreed by the ‘new owners’, created the conditions to become a Real Living Wage Accredited Employer in April of 2018.

While the efficiency targets helped boost profitability, paving the way for the introduction of the Real Living Wage, there was also a recognition that the introduction of the wage would in and of itself support further financial benefits. These included lower staff recruitment costs (due to higher retention), greater productivity and increased occupancy from an improved reputation.

Linda Johnston, MD of Auchrannie resort

“Employee ownership will give the whole Auchrannie team a stake in the continued growth of the business. All of us will work together to build a more efficient, sustainable and profitable business.”
explains Linda Johnston

 

Since the acquisition of a 16-room guest house in 1988 by Linda and her late husband Iain, the resort has become home to two 4-star hotels, 30 5-star self-catering lodges, 14 luxury ‘Retreats’, two leisure clubs, 3 restaurants, children’s playbarn, a destination spa and outdoor adventure company.

 

Ownership transfer as an exit strategy

The ownership transfer was born of a desire for an exit strategy by the Johnston family (sole owners of the resort) that would allow the business to continue to flourish as well as upholding the ethos of the company, maintaining and motivating the team plus continuing the community’s access to the facilities of the resort.

“We are confident that the collective efforts of our fantastic team will continue to strengthen Auchrannie’s customer care and community focus as well as improving the sustainability of the business going forward.”
adds Linda Johnston, MD and former owner of the resort

Crucially, the transfer arrangements were designed for it to be affordable to the business to be able to reinvest in the future as well as financially reward the employees after the transfer. The previous shareholders will be paid out of the profits of the business over the next 25 years.

  • This is an extract from the forthcoming ‘The Business of Wellbeing – Alternatives to Business as Usual’ Guide, launching in January 2020. For more extracts, please click here
  • To stay informed of the release of each extract, please sign up to our newsletter here.

 

Riversimple is a car manufacturer that has taken value creation to a completely different level. The business was founded to address the enormous environmental damage created by personal transport, with the purpose ‘To pursue, systematically, the elimination of the environmental impact of personal transport’. The founders recognised that they serve not only investors but a total of 6 different stakeholders: The Environment, Customers, Communities, Staff, Investors and Commercial Partners. 

“We believe that it’s possible to design a business model that aligns the interests of the business with those of people and the planet but the mindset of the business has to be aligned in order to conceive of and implement such a model, so this is a further reason for redesigning the governance.”
Comments Hugo Spowers, Chief Engineer and Founder of Riversimple

 

As Buckminster Fuller said, “you never change things by fighting the existing reality; you change things by making a better model that makes the existing model obsolete” and so the intention is to make more money from doing the right thing than business as usual makes from doing the wrong thing.

Hugo Spowers, Chief Engineer and Founder of Riversimple

“If a business is designed to maximise financial return, delivering environmental and social return as well is inevitably a cost on the bottom line and competes with the financial return. However, if a business is designed to deliver environmental and social return as well as financial, it enhances rather than competes with financial return.”

 

The company did decide not only to include these actors in the governance model, but also to make them the key decision makers in the ownership structure. The aspiration was a business model with the capacity to ‘see’ in all directions and then ‘deliver’, even in the face of complex challenges.

“The original intention was to serve the ‘basket of interests’ so often referred to by economists. However, the interests of investors are not always well correlated with the interests of society and the planet, so we decided to embed the Purpose structurally in the governance of the company, rather than relying on altruism.”
comments Hugo Spowers, Chief Engineer and Founder of Riversimple

 

With that in mind, 6 ‘custodians’ with separate legal entities were put in place, each being a separate and independent entity, representing a set of members that represent each stakeholder.

image: Riversimple value creation model, riversimple.com

 

“Shareholder value has primacy in UK law, so we felt that the simplest way to deliver that without a conflict of interests was to make the Environment and other key stakeholder groups shareholders.”
adds Hugo Spowers

 

A Stewards Board ultimately ensures that the board is abiding by its fiduciary responsibility, “To balance and protect the benefit streams” of each of these stakeholders. 

Hugo Spowers, image source: riversimple.com

“The Board’s duty is to pursue the Purpose while balancing and protecting the benefit streams of all six stakeholder groups, rather than maximising the value of one.  It is essentially a partnership model and you cannot have a partnership in which one partner has control, because then it’s not a partnership.”
explains Hugo Spowers

 

While governance is distributed, money flows in a similar way to any normal business: 

“Dividends still go to the equity holders but that does not mean that control all goes to the equity holders. Equity and control are decoupled and addressed separately – ownership of all the equity does not mean control of all the business.”

 

This ownership model has especially proven its value in difficult moments, where the solution to balance all interests was not obvious.

“Having stakeholders actively interested and involved in the business means that we have the benefit of their wisdom and perspective and they hold us to our Purpose, which is fundamentally dedicated to the wellbeing of society and the planet.” comments Hugo Spowers

Riversimple has developed a unique business model that aims to completely rethink the automobile sector, from open-source design to a circular economy approach to car use, with the goal to minimize environmental impact deeply rooted in the organizational backbone. 

  • This is an extract from the forthcoming ‘The Business of Wellbeing – Alternatives to Business as Usual’ Guide, launching in January 2020. For more extracts, please click here
  • To stay informed of the release of each extract, please sign up to our newsletter here.