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Neil Smith, managing director of Kinetic, had spent years searching for the right succession plan. He was against the idea of selling the business to a third party and wanted to find an option that would support the future growth of the business, safeguard its values and ultimately protect its people.
It wasn’t until a chance meeting with a Manchester-based lawyer in November 2017 that Smith discovered the employee ownership model. Until then, the knowledge levels of employee ownership amongst other accountants and lawyers he’d spoken to were very limited. “It’s not so much a criticism of the banks and lawyers, but you soon realise that their bread and butter is MBAs and sale,” Smith explains.
However, after learning more about employee ownership, Smith says he immediately realised it was the ideal fit for Kinetic, telling staff at the time that it was an important step in ensuring employees are truly respected as the company’s greatest asset and can share in the overall success of the Kinetic.
All the value in the business had been driven by people, so it was really important that our succession plan protected that, as well as the independence, culture and camaraderie of the company
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Neil Smith, managing director of Kinetic
How Kinetic transitioned to employee ownership
Kinetic became employee-owned in April 2018, with 100% of the business placed into an employee ownership trust (EOT). With the exception of profit sharing for the new employee-owners, who would receive an equal share equivalent to one-third of the company’s profits, there were no changes to salaries, contracts, reward structures or senior leadership roles.
After careful planning, an employee forum was established some months after the transition, ensuring employee owners’ ideas and any concerns are heard and acknowledged within the business.
Smith saw the transition as an opportunity to bring the three separate divisions of Kinetic closer together, enhancing communications channels and working relationships between the employee-owners at its nine offices. As equally important was ensuring everyone recognised what the transition to employee ownership meant for them and the business.
Smith set up a week of employee ownership roadshows at Kinetic’s main sites to do just that. These workshops have been ‘invaluable,’ he says, as they provided an opportunity for the Kinetic team to share their thoughts and suggestions on what the business is doing well and areas where improvements could be made. Smith was also present to directly answer any questions that employee-owners had about the transition and how it would impact the business.
What changes did Kinetic introduce once it became employee-owned?
Building on the success of the initial roadshows, Kinetic introduced an EOT intranet area that lists quarterly reports on progress and strategy, along with dates for future employee ownership roadshows that take place every six months. The group has always been transparent about reporting financials since it introduced a policy before the transition, but these additions gave staff a greater sense of ownership within the business.
A ‘knowledge share’ initiative was also introduced, which focused on sharing best practice and productivity across all Kinetic’s divisions.
“It’s brought all of our three divisions closer together,” Smith explains. “Going forward, whenever we talk about productivity or customer value and everything in between, everyone understands the other areas of the business and recognises the value that every individual brings to the business regardless of their role.”
All of these areas of improvement to internal communications meant Kinetic was more resilient and quickly adapted to the operational changes that were needed when the UK went into lockdown as a result of the coronavirus pandemic.
“We had to completely change our recruitment process. The speed at which this was done and how quickly our employee-owners adapted was magnificent, and was due in part to the communication channels we’d worked so hard on building since our transition.”
Outcomes and reflections
Kinetic PLC’s employee ownership model has brought its employee-owners closer together, helping them to grow relationships with clients, strengthen communication channels and ultimately make a positive impact on the bottom line – something that now benefits all of the Kinetic team.
One of the biggest outcomes from the transition was Kinetic’s decision to furlough its temporary contract workers during the pandemic, something that wasn’t done by many other recruitment companies due to the complexities surrounding the finances. This decision has not only strengthened the sense of camaraderie within the team, but it’s also strengthened client relationships too who respect the decisions that were made during this time.
Three years after the transition, Smith believes all the major changes in the business, whether that’s innovation, diversification, or adding new services, are driven by its employee-owners. With employee ownership regularly popping up in conversation with other business owners, Smith shares his knowledge for others that are considering the move to EO.
“I don’t know anyone that has ever really turned round to me and said, ‘that’s not for us’. It’s more a case of ‘wow, that’s not being considered, I need to understand this a lot more and get the management team on board.”
“I think there’s still a perception about [EO] that it’s for a certain type of company, which isn’t the case at all. Don’t go straight to your bank or lawyers to learn more because you’ll get caught up in the ins and outs. Speak to the EOA or other employee-owned business owners – most people say it’s great to hear from someone who has been through it, and I’m more than happy to share my personal experience and advice with anyone considering the move.”