pension333: How employee ownership transformed Clansman Dynamics

Dick Philbrick on how Scottish engineering firm Clansman Dynamics became an employee owned enterprise

If you're born, as I was, in a twee Suffolk village with large farms the divide between farmer and very small number of farm workers does not seem unbridgeable. If you then go to work in a Merseyside shipyard the chasm between foreman and plater, let alone between manager and shareholder seems to make commitment and cooperation impossible.

The shipyard agreed that I could go and work on an Israeli kibbutz in a university vacation ? suspect they were pleased to get rid of me! When I returned and wrote a report, as agreed, but in which I compared the industrial relations in the kibbutz factory where I stuffed beans in tins, with those in the shipyard where few worked, I was sacked. Blessed relief and an early lesson that the type of ownership and form of organisation has a large impact on productivity and commitment. Further employment briefly as a civil servant and in engineering companies that struggled to survive convinced me that employee ownership would offer a richer working environment with more chance of success.

John Stuart Mill wrote in 1848 in Political Economy about what we would now call employee ownership. In 1972, when he was Rector of Glasgow University, the shipyard shop steward Jimmy Reid made a powerful speech in which he vividly described the alienation felt by fellow shipyard workers. All fine words that resulted in few actions. The problem was clear for me: how could a real manufacturing and exporting business be started where it was owned by the workers of that business?

I started Clansman Dynamics in 1994 with two other engineers and we had a plan to produce a world-beating range of handling equipment for the forge and foundry industries. The problems of raising capital, the seeming impossibility of getting any customer to buy anything from such a small and unknown company, the determination of competitors to stifle our efforts at birth...all these issues absorbed our energies in a daily struggle to survive. There might not be any business for the employees to own ? survival was our priority.

We slowly became increasingly successful. Three years of losses have been followed by fifteen years of profits. In 2003, while selling a machine to a foundry within the Mondragon Cooperative movement in the Basque country, I came face to face with the raw motivation of employees in an employee-owned business and vowed that I would try again to convert Clansman to employee ownership. We would all meet each month and I would try to explain profits, problems, orders, and answer any questions. I felt I was communicating in an open way, but in reality it was more me talking at them. Another prompt came in one of our monthly sessions when one of the engineers said "Dick you're an old bugger ? what happens to Clansman after you have moved on?" I tried again to discuss employee ownership with the other shareholders but could see no way through the arithmetic. Meanwhile, foreign buyers were approaching me to buy Clansman with schmaltzy noises of millions of pounds, and help with marketing and funding.

I was not interested in years of struggle with 40 others simply resulting in yet another engineering business disappearing across the channel. I resolved to begin the process of buying out what was now just one other shareholder. Clansman had grown organically; new products had been launched each year; 95% of sales were exported and we had been profitable for 15 years. I turned down the offer of a management buyout made by some of the managers ? management buyouts often seem to have a similar 'must- sell-the business-to-realise-the investment ' thrust as for venture capitalists. I hoped that employee ownership would weld the business to Scotland and set it up for the long term. Engineering needs long term development and is not suited to the Anglo-Saxon method of fattening to sell fast. The employee ownership model responds to this.

Finally, in November 2008 John Alexander and David Erdal (read his marvellous book Beyond the Corporation; Humanity Working) from the Baxi Partnership helped me shape the proposition I would make to the employees. Our commercial director Jim McManus was immediately enthusiastic about it. Surely if the 'bean counter' was on board others would be enthusiastic? In my darker moments I could not believe that we could persuade hardened North Lanarkshire engineers to part with hard earned cash for a piece of paper called a share certificate.

Jim was more than on board ? he saw the prospect as a fantastic opportunity to break the mould (albeit in our tiny way). It was a bargain and Scots appreciate them but it was still a huge step for most. Within a few months, he announced the 'cheques were in the drawer' and all he we need is for the bank to 'stop fannying around'.

By December 2009 the deed was done. The employee buyout has completely changed the complexion of our monthly pizza and coke meeting when 40 of us cram into our largest room. Nothing is off limits except knowledge of individual salaries for the moment. Sales are up 50%. The assembly area has been doubled. Employees are slowly buying more shares each month, which is a statement in itself.

Confidence, equality, fairness, security, empowerment??all these intangibles have been given a boost. We are trying to combine the passion of the Italians and the precision of the Germans with the friendliness, energy and commitment that an employee owned business can bring. So far, so very good.

Dick Philbrick is managing director of Clansman, which he started in 1994.

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Source: http://www.guardian.co.uk/social-enterprise-network/2012/feb/29/employee-ownership-transformed-clansman

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