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Late last year, Miles Burke, the founder of Perth-based Bam Creative, engineered a coup d’état within his own business. He invited all the company’s employees to become shareholders. Bam started the new year with everyone buzzing around the office, genuinely working for the collective good rather than selfish individual ends. Here’s Burke’s account of how (and why) it happened.

It became obvious that something had changed when on the first day of 2010, a number of employees brought in spare coffee cups from home to aid stocking our new kitchen. The office was buzzing with a new energy and motivation.

Our business, Bam Creative, had new owners: the collective employees. What have we got ourselves into?

The startup

But first, let me take you back eight years. It was in late 2002, when I founded Bam Creative, a Perth-based website design and development company, after leaving a full-time gig in media. I’d had enough of working for others, and believed I’d be happier working long hours for myself rather than someone else.

A friend of mine also saw my vision, and his business invested in my new direction at the start, taking a large cut of the shares in exchange. Things were great. Within a few months, we’d hired our first staff member and business was booming.

The business teenage years

In 2006, we decided it made sense to amalgamate both existing companies under one umbrella, and create a bigger company between us.

It was an exciting time. We moved offices into the same building.We saved on administration costs by combining reception, accounts and the like. Everything went smoothly. I personally ended up with a smaller piece of a larger pie. We had 17 employees in Bam Creative, more than 40 employees in total, and the market reacted positively to the move.

The downside of amalgamation

Over the last couple of years, we’ve tried unsuccessfully to merge the company cultures of two different organisations, and last year came to the conclusion that creative web designer types and corporate IT people just don’t get each other.

It was nothing major; just a sense that the two sides didn’t understand each other and that neither business had ever really gained much cross-traction with complementary service offerings to our wide client bases. That, on top of a softer financial performance in the last year, inspired the directors to start looking at our options of separating the two businesses.

Employee ownership: Is that a communist thing?

Ever since I started Bam Creative, I wanted to instil a sense of ownership in my employees. That old adage about business being as good as its employees can’t ring truer for a professional services business. Bam Creative really is only as good as the people who work in it.

I was keen to sell the business to the employees, and commenced looking into ESOP (Employee Share Ownership Plans) options, talking to my family and friends and the other Directors. I had mixed responses, from “Is that a communist thing?” to very positive. I even had a few non-employees keen to invest.

Why buy from within?

My reason was simple: I believe a business owned by its employees is more powerful than a business owned by only one or two shareholders. The benefits of an employee owned business include:

• Adds wealth and value for all shareholders.
• Creates a deeper level of employee commitment to the business.
• Encourages greater innovation at all levels.
• Creates a common purpose across the entire organisation.
• Aligns employees’ goals with those of the business.
• Encourages better customer service.

In early December last year, at one of our regular Friday afternoon staff drinks hours, I spoke to the team about what my vision for an employee-owned business where the majority of the employees had a real financial stake in the business.

I spoke individually to each employee over the following week, and out of ten staff, eight were keen to get involved. We all sought individual advice, many sought finance to cover their slice of the deal, and on Christmas Eve we sat in the boardroom sipping Champagne, celebrating the deal closure.

We closed for the festive break, to return on January 4, facing the start of 2010 with a new, revitalised business.

The (new) startup

Besides spending that first day back setting up our kitchen with all the equipment, we also voted in a new board of Directors, comprising myself and two fellow shareholders, and embarked upon setting a balance of communication and management, where traditional management still applies, yet all shareholders have a new, open visibility into every aspect of the business.

I’m focusing on delegating better, and reminding myself daily that those that surround me have displayed a deep commitment and a high level of trust in both myself and the team. I’m adopting complete transparency, educating employees (most of which have never owned a business) how to read Profit & Loss statements, how to forecast cashflow and what shareholder and Director responsibilities and liabilities they face.

Advice for business owners

• Employee ownership should be a consideration in any exit strategy.
• Face your fear of transparency — trust your team.
• Look long-term, not short-term. Sure, there’ll be a steep learning curve, but it won’t last forever!
• Empower everyone in decision-making — even when shareholdings are different from one another.
• Once you do it, tell the world about it. It’ll excite customers, suppliers and, most of all, your new shareholders.
• Focus on the business, not individual roles. Keep shareholding and organisation structure separate.

Most importantly, do your research and consider all the outcomes. Employee ownership could backfire without the right mix of people, or the right strategy to deal with morale and disputes.

Where to from here?

We’re seeing innovation and motivation across the whole team in the first two weeks. Suggestions of new products and services, a group focus on financial performance, and the new adopted mantra of ‘What’s in it for us?’ instead of ‘What’s in it for me?’

The future is bright. Sure, we expect to make some mistakes, and we’re prepared for the pain. However, the benefits far outweigh the dangers. We can’t wait to see where it heads!

Miles Burke is the Managing Director of Bam Creative, an award-winning (and now, employee owned) web design and development business in Perth, Western Australia. Miles is an awarded entrepreneur, published Author and has been working with the web since 1994.