Employee ownership schemes have been around for a long time, but in recent years they’ve become more popular than ever. So, how are tech companies getting involved?
Lots of tech companies in particular have switched from a traditional share scheme to employee ownership. These employee benefits schemes have a lot going for them, and work really well for certain types of businesses.
In this post, we’re going to cover which tech companies are adopting these schemes and why they’ve chosen to do it. Take a look…
Which Tech Companies Have Become Employee Owned and Why?
Tech companies are increasingly choosing to split the shares of their company amongst their employees. But which companies are doing it and what are their reasons?
Torch Technologies are a science modelling, system engineering and IT company in the US. Their main clients are the United States Missile Defence Agency and Army Aviation, and Missile Command.
The company was co-founded in 2002 and began to move towards employee ownership only three years later. The company became fully employee owned in 2010, five years after taking their first step towards it.
One of the co-founders, Bill Roark, always had his mind set on making the company employee owned. His reasoning was that by having the company owned by the employees, job satisfaction would increase, and valuable employees would be less likely to leave.
It seems Bill’s decision was the correct one as Torch Technologies completed a $12 million renovation of its properties and has employee owners across the country, from Hawaii to Virginia, even opening an office in Egypt.
Across the pond in the UK, Consult Red, a West Yorkshire technology company, recently moved to employee ownership.
The company works with well-known brands to develop in-home entertainment technology and other smart products. Consult Red has worked with large companies, such as Virgin Media, Sky, AT&T and DirecTV.
Between May 2020 and 2021, Consult Red grew its team from 160 employees to 220 across its three offices in the UK, US and Poland. The company has chosen to bank on this success by transferring shares of its £18 million business to an employee-ownership trust.
Andrew Stewart, the chief executive of Consult Red, said he chose to adopt the employee ownership model “to attract and retain the best talent in agile teams who are ready to go.”
Stewart also said he recognised that the success of his company was due to the value of its people. Transferring ownership to them means they can continue to be guided by their principles and recognise the hard work and talent of their team.
This sentiment was mirrored by Deb Oxley, chief executive of the Employee Ownership Association in the UK, who said: “We congratulate Consult Red and its new employee-owners – their move to employee ownership will sustain the values and independence of the business for the longer term.
“Businesses that give employees a stake and a say build trust and shared responsibility, therefore uniting leaders and employees behind a common purpose. This leaves the business in the best position to flex and adapt to recover from challenges and to deliver on new opportunities.”
Agilisys is another UK tech company that focuses on local government citizen-centric technologies. The London-based company has been employee owned since 2015 and has approximately 1,500 staff members in total.
Agilisys is also owned by an employee ownership trust, the same as Consult Red. These types of employee ownership schemes have a trust that holds the employees shares for them, but the trust has to own the majority share of the company for it to work.
The reasons this tech company has given for choosing to set up a trust is that it wanted to continue to be a successful, independent and professionally managed business that allows its employees to engage more with how the business operates.
Back in the United States, Huntsville’s Dynetics has grown through the decades since its inception in 1974. The company primarily works in defence, aerospace and commercial technologies.
As early as 1989, one of the companies lead employees, Dr Bendickson, took over as President and led Dynetics in an Employee Stock Ownership Plan (ESOP). This plan involved a buyout of 67 percent of the company stock.
They did this at a time where they only had a three-month backlog of work, and their stocks went from $00.97 a share to $00.38. Thankfully, the employee ownership transfer came through and, by the end of 1989, Dynetics won several accounts, including:
- The Advanced Sensors Directorate Contract, which established the company as a leader in sensors.
- Subcontractor to Nichols Research Corporation for SS&DD support, which established them as experts in aerodynamics and wind tunnel models.
- Ground-Based Radar Concept Definition contract, which was their entry into the X-band radar business.
In fact, the ESOP purchase was so successful that over the two years after it occurred, Dynetics’ sales volume doubled. It took the company over 20 years to become fully employee owned in 2010 and, in 2020, the company was sold to Leidos for $1.6 billion.
This sale created a lot of millionaires amongst the company’s 2,300 employees. Dynetics never gave a reason for why they became employee owned in the first place, but whatever it was seems to have worked.
Are Tech Companies the Only Ones Choosing to Become Employee Owned?
In this post, we’ve discussed four employee owned tech companies in detail, and shared their reasons for making the switch.
There are certain industries where employee ownership seems to work really well, like the tech sector, but there are employee owned companies across many different sectors.
As long as a company can see value in employee loyalty, involvement in the running of the business, and improved motivation to make the company profitable, employee ownership is a good investment.