Growth Shares
This year Co- has instituted a Growth Shares scheme for everyone working in the practice. We explore the whys and wherefores of our decision.
why do it?
Our main motivation was for us to build a team that is sharing the success of the business. We don’t dismiss the value of providing someone with employment and a decent salary but it has its limits.
We the business owner may be excited to see the business grow, but to our employees, they may only see more work, more complexity and more disruption.
The scheme is therefore a way to share in the overall success of the business and for us to be building something together.
It is obviously another way to reward people outside of salary and in some instances that is helpful either because cash flow is tight or because there is a limit to what the market will stand in terms of salaries.
And of course many people are not just in it for the money. They want to be part of something in a way that is more than just a job, they want that sense of collaboration.
growth shares
The most common way to achieve employee share ownership is the Enterprise Management Incentive, but sadly this is not available to some sectors including accountants. The alternative is Growth Shares. A Growth Share is a share that has no value when it is given but gives the owner a share of the growth in value of the share as the overall value of the business grows from the day it is issued to the day it is sold.
Getting it right
We are not referring to the legalities here, although of course this is important. (Here we relied on the specialists - in our case the Mill Consultancy.)
Instead we mean that there are pitfalls which we did our best to avoid.
A source of resentment
We have heard anecdotes of employees who believed the shares they were being given were worth something and ended up feeling conned out of a decent salary.
At the same time the mechanisms for valuing the shares is to a certain extent subjective. Again we recognised the potential for dispute.
Given that our intention was to strengthen relationships we have strived to be open about what our employees might expect from their shares and set rules for how they are valued.
Giving away too much
We want to value the role of committed employees but we also don’t want to devalue the role of investors who risk money and often time to get a business going.
We tried to get this balance right by:
Creating a threshold for employee ownership (a minimum of three years employment in the business)
Increasing ownership over time
Reserving dividends for investor owned shares
T&Cs around selling up
The result
Time will tell if we have thought our scheme through well. Only our staff members themselves can vouch for how they feel about it. As the business owner myself, I am exhilarated.
The business is no longer just me, it truly is a shared enterprise. I feel relieved that not only I will benefit from its success because let’s face it, it is a shared endeavour.
I am excited to see how far we can take it.
