The date 14 November 2014 will live long in the Philip Colchester’s memory. It had been a long Friday with papers to read, check and be witnessed as he signed away ownership of the Colchester Print Group. But he says it was just as thrilling as 1 April 1976, the day that he started the business. On 14 November last year, the majority of shares in Colchester Print Group were transferred into an Employee Ownership Trust, one of less than a handful in the printing industry.
Over 40 years Breckland Print and Moreton Hall Press, the two arms of Colchester, have grown to be one of largest commercial printers in East Anglia. The last few years have been tough across the sector and the constantly curious Colchester was keen to know the future of the business. “About 18 months ago I asked one of our competitors if they would consider buying us,” he says. The answer was emphatically No, whether Colchester was serious or not.
However, he still needed to think about the long term future. The trade sale was off the table. An MBO would have saddled a management team with an impossible amount of debt, even if it could have been funded. He might have decided to run the business for cash, extracting as much from the business for his retirement before the inevitable happened, or as he explains, he might have simply closed the doors and liquidated the business, casting staff out of work.
“I could not do that,” he says. “We are in the top 10% of print companies in East Anglia by net worth, which means there must be lots worse than we are beneath us. Why should I make their life easier?”
The solution is instead likely to make their lives considerably harder. “The only people who have a vested interest in this business are the employees. They needed a future,” Colchester says.
Selling the business to these people via an Employee Ownership Trust became the logical decision. The government has encouraged it through tax breaks as part of what Deputy Prime Minister Nick Clegg sees as a future business model for many companies.
Almost exactly three years ago he declared: “We need more individuals to have a real stake in their firms, more of a John Lewis economy.” That declaration was mentioned in the autumn statement the following year and last year was implemented. “It hasn’t been very well publicised, but there are now tax breaks and incentives for people like me and for the staff to go into an EOT,” Colchester says.
That said it is not a straightforward process. He likens it to being dropped on the south coast and told to get to the north of Scotland – the destination is clear but there are many ways to get there and no real map. The obvious port of call is John Lewis Partnership, the poster child for employee ownership. It is not the only model and Colchester set out to call on as many different types of employee owned business as he could, “some good, some bad, some indifferent”. He steered clear of John Lewis until proper ideas of the way forwards for Colchester Print Group had formed in his head.
The seed had perhaps been planted on trips to Scotland to celebrate landmark anniversaries where he had visited the Loch Fyne Oyster Company and had eaten in its restaurant. On one occasion, a waitress had dropped a glass and muttered that ‘there goes my profit’ while inscribed in the restaurant wall was “this is a business run for the benefit of its employees”. That Loch Fyne has subsequently made some poor decisions and has lost this status points up that employee ownership is neither a panacea nor a guarantee of good management.
But it was a new way of organising a business for the long term and where sustainability of that business becomes vital. His visits also opened a network of advice and support, not in print, but with experience of the trials and tribulations of setting up this sort of structure. In print the example that Colchester Print is closely following is Anton Group, which achieved its employee owned trust just weeks before Colchester. “What Anton has done has helped tremendously from the credibility point of view,” he explains. There has been contact between Philip Colchester and Malcolm Lane-Ley at Anton. While Anton is on the A12, it is not quite East Anglia where examples of employee ownership are scarce, meaning that Colchester had to clock up the miles to meet these businesses. There was also background reading around the issues that can arise. The lessons will be adapted for use in Colchester “where they fit” he says. “If we have a problem we have to change it into a non-problem,” he says. “And then we can celebrate overcoming it. We are not looking for inspiration from print. What is the point of only looking at our industry?” he adds.
The work, the advice and the reorganisation has resulted in handing over 51% of the shares to the employee ownership trust which has five trustees, four from different sections of the business and one outside member with experience in similarly organised businesses. They will meet four times a year to oversee management decisions and monitor that they are in the long term interests of the business. “I have gifted my shares and will get value from the future profits, which means there is an incentive for us all to make it work, without any ‘them and us’ situation,” he adds.
It is not a co-operative, Colchester stresses. “This is still a business and managers have the right to manage. But they have to justify their decisions to the trustees.” Employees are also engaged in the process because they start to understand the impact that investment has on the business and the need to pay for it through improvements to productivity or additional services, cost savings elsewhere and so on.
Ultimately the commitment should work to the real advantage of the business by encouraging positive behaviour from each other. When recruitment is needed, an extra layer is added to the decision process. Will this person be committed to the team in the right way?
A further 5% of shares has gone into a government approved share inititative scheme which allows staff to buy shares at a discount and enjoy an extra benefit as the value of those shares increases in line with the performance of the company.
Not all staff will be ready to participate in this, thanks to static wages over the last couple of years, but Colchester sees a way of turning this to the advantage of the business. “If someone says I would like to buy the shares, but can’t afford to, I can sit with them and say ‘Let’s work out a way to get you the money so that you can afford them’,” he explains. “The more people that are engaged, the more chance there is of making it work.”
It is clear that Colchester is going to be an evangelist for this business model. “It is like beginning a new business,” he says. “Our suppliers and customers have been kept informed. Now we have to up the ante with internal communications and change the culture.
“My outlook I think is different to most in this industry. I didn’t want to retire completely, that’s not my philosophy in life. This is giving me a real interest, keeping my muscles tuned.”
It also makes Colchester Print Group a member of a very interesting club where most are just as committed to this form of company as its newest member. Each wants to see each other succeed, hence the willingness to provide support and advice and to welcome visitors to see how things are done.
Philip Colchester aims to be part of this, opening his doors to show others what has been achieved. But there is also the commercial aspect of companies buying from similarly minded companies, where the paucity of printers that are EOTs will help open doors for new business.
At the point of transfer the business had paid off all its borrowings and was effectively lean and free from debt to provide the best chance of success. The first task has been to set a budget for the financial year that had just begun and to really measure the performance of all aspects of the operation. A whiteboard displays several of these metrics and performance to date against these so that all employees know where their business stands. They can then work towards securing its future.
This is important to Colchester. The staff in prepress, in production, who have young families, realise that they have a say in the future and that the business is not going to be sold to a rival that might close them down.
When the process began Colchester had declined to visit John Lewis Partnership, not wanting to be overly influenced by the leading example of an Employee Ownership Trust. At the start of the company’s final week as a directly owned business, he accepted the invitation.
When he brought up the key conundrum, that a quarter of staff were enthusiastic, the sort that attend summer barbecues and other events; another quarter were against it; while the remainder were balanced. The JLP executives smiled. It was exactly the same in their business. The challenge for the new EOT is to win over the waverers. It should be possible.
On that Friday afternoon in November, after everything has been signed and after dropping the external trustee back at the railway station at the end of the long day, Colchester remembers going back to the factory, perhaps a little deflated because there had been no thunderclaps or choral singing.
“Then one of the employees came up and shook my hand, saying ‘thanks for giving me a future’. I corrected him. ‘You should have said thanks for giving me a potential future’.”
Colchester Print is closely following is Anton Group, which achieved its employee owned trust just weeks before Colchester.
“What Anton has done has helped tremendously from the credibility point of view,” says Philip Colchester.