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Employee-owned Entrepreneurship:
Lessons from and for Scottish SMEs

 

In Scotland, employee-owned businesses (EOBs) are growing in number, in line with the government’s target to pass the mark of 500 EOBs by 2030. Although it remains conventional for public bodies, lenders, management consultants, and academia to think about EOBs primarily as socially driven and egalitarian types of organisations, it cannot be ignored that they are first and foremost for-profit businesses that need to be entrepreneurially oriented to succeed within competitive industries. Accordingly, this report deals with the following question: What specific advice should be given to existing and future EOBs on how to enhance their entrepreneurial orientation, thus future-proofing their contribution to economic prosperity?

 

The report draws on original research and data collected mainly through in-depth interviews and observations within selected Scotland-based EOBs, in addition to inputs from senior practitioners. Engaging with two main fields of literature – employee ownership and entrepreneurship – the analysis of the report’s findings is structured around three focus areas that have emerged as most topical when assessing the entrepreneurial orientation of the EOBs under study. The first is the centrality of entrepreneurial leadership as the locus and driving force behind the firms’ entrepreneurial drive, i.e. their propensity and ability to undertake new entry initiatives on the basis of entrepreneurial proactiveness, innovativeness, and risk-taking.

The second area concerns the various strategic management processes through which the firms’ entrepreneurial intent is formed, decided, implemented, and monitored. Thirdly, employee participation also impacts on the firms’ entrepreneurial orientation, both positively and negatively, by influencing their governance, leadership, and strategy. Based on the analysis of its empirical findings, the report makes three matching recommendations to current and future EOBs. First, to recognise entrepreneurial leadership as a critical organisational capability, and as such invest in the development and continuity of adequate leadership competencies, including in terms of succession planning. Second, to explicitly define the processes supporting the firm’s corporate entrepreneurial strategy, and ensure to uphold their vitality. Third, to review the firm’s governance, participation, and reward arrangements at regular intervals, ensuring they are aligned with, and conducive to, the firm’s entrepreneurial strategy.

 

Finally, this report offers some suggestions to the main public bodies fostering employee ownership in Scotland. The first one is to review their own strategy and positioning about EO in the context of the government’s new national economic strategy. The second suggestion is to engage in awareness-raising activities on the importance for EOBs to develop and sustain a robust entrepreneurial orientation, for instance through communication materials and resources which could build on this report’s findings. Finally, tailored support to established EOBs could eventually be built up as a complement to the current priority by public bodies of promoting the transition of conventional businesses to EO.