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Employees are doing it … David Erdal 1st Oct 2010.

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Presentation on theme: "Employees are doing it … David Erdal 1st Oct 2010."— Presentation transcript:

1 Employees are doing it … David Erdal 1st Oct 2010

2 Doing What? Building businesses Supporting leaders Investing Inventing, introducing innovations Implementing difficult decisions In other words…

3 Contradicting the Economists

4 Jensen and Meckling 1979 Will bleed their companies dry Will not maintain the machines Will not invest for the long term And if you give them influence in a democratic governance system, such as the German co-determination structure …

5 Jensen and Meckling cntd … significant reduction in the country's capital stock, increased unemployment, reduced labor income, and an overall reduction in output and welfare... The final result will be fairly complete, if not total, state ownership of the productive assets in the economy [But the deregulation of the banks…]

6 Will bleed their companies dry Arup - Kate Hall –We dont have to respond to shareholder pressure. Were allowed a lot more freedom to do what we want. Weve got groups who just do stuff called foresight and innovation. They come up with great ideas, they lead conferences and have all kinds of contacts with researchers outside Arup. And that group doesnt have to be accountable. How can you have part of a firm doing stuff like that, that isnt instantly revenue- earning? Their value will be downstream: other people may get work as a result of what they do. It will not be directly attributable back to them.

7 Will not invest for long term UBH –Invested £5,000 each –Licensed technology: earned £millions –INVESTED it in cryogenic skills Also, SAIC - $8bn in 2006 Davey Tree - Ohio to every state, Canada

8 Will not innovate Floturn –Dominates US laser printer cartridge market –Employee engagement –> innovation EBO –Each person targeted to produce new ideas –Every quarter –Multiple new product lines, 3 new businesses

9 Difficult Decisions Impossible Tullis Russell –Bought Korean company, closed Stoke plant –2000s: Real sales flat, sales per head rising Inveresk flat: closed 4/5 mills Top elected body had veto –Voted 100% in favour

10 Democracy will Fail John Lewis –Chairman sackable by Group Council –All anonymous letters published –Registry is a critical faculty on managers Waitrose and John Lewis nos 1 and 2 Committed to growth Nearly caught M&S –Benefit of Capital Market Discipline (P. Green): Paid £2,300,000,000 to shareholders, and fell to 11th

11 Con-Dem Coops Reason for confidence –Sunderland Home Care –Highland Home Care –Central Surrey Health But not panacea –Needs leadership –Needs change from passive to active –Needs different ideology

12 Why are they doing it? Get services off the books History of E European privatisations –EO as sugar coating –In reality, sold cheap to managers, politicians, foreign companies, financial institutions

13 Employees CAN do it With decent structures –Trust holding for longevity –Poss individual holding for participation Supportive buyout finance Truly participative management –Inform, consult, involve And highly motivated leadership –Focused on building strong businesses

14 Yes we can!

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