Appendix 8 - Do internal employees who share ownership within their company hold the key to the companies success?

Many companies have employed a certain structure within their company which sees employees having a share in ownership. As well as working a day-to-day job for the company employees also have ownership of the company.

The advantages of employees having a share of ownership are employees who have ownership think more about business needs rather than personal needs. The employees are also more motivated to drive company success with most of the employees often working for the company for their whole careers meaning lower staff turnover and less cost towards the company. Employees who have ownership often make changes to satisfy customers meaning greater customer satisfaction and often look at ways to beat the competition

John Lewis & Waitrose group Success story

John Lewis is a company that offers share in ownership to their employees. They have seen from offering ownership to employees that they have sought advantages over their completion especially during the Christmas and New Year’s period. They have gained advantages over the competition as the employees are shareholders in the company therefore they will work longer hours during this period to gain more sales and this therefore affects their annual bonus over the year while offering a positive attitude to customers’ demands by offering flexibility during these busy times over the Christmas and New Year period. In 2010 employees with ownership received an annual bonus of 15% of their salary. Ms Armstrong who is the manager of Waitrose supermarket in Witney has said that business is still growing and due to VAT increase and higher inflation the rivals are getting jealous eyeing up the John Lewis and Waitrose growth. Ms Armstrong said “It’s about what sets us apart. It’s the quality of staff that we have, and the services that they give. The reason they give that service is because they do own the business”.

Delta Airlines Failure

Delta Airlines was another company which did also offer ownership to their employees but the company filed for bankruptcy in 2005. The reason behind the failure was due to the following reasons: Higher fuel costs impacted the company as well as all the companies in the airline industry. Low-fare competitors were stealing competition consumers from Delta and Delta was unable to offer the same low-fare to customers. New expensive security measures were introduced especially in America after the terrorist attack on the twin towers. 

Delta Airlines failure can be summed up that it was unable to keep up with the competition and unable to work with the day-to-day costs of running the airline hence why the company failed. Employees who also had shares in ownership of Delta may have lost their jobs along with their shares been worth nothing due to the company filing for bankruptcy. The company did however manage to exit bankruptcy in 2007 due to a management overhaul, aggressive cost cutting and merging with North West airlines which helped with the companies sustainability. The employees who remained with the company took wage cuts to help support the company during this difficult time. Delta did learn that it needed the right management team in place to help the company aim for success the management team before bankruptcy was not good at reacting to the ever changing business environment. Overall the company is currently going strong and the employees who share ownership are helping to guide the company to not suffer a further failure and instead remain competitive in the airline market.

Summary

Overall giving employee’s share of ownership making the employee a shareholder can be advantageous to the company, employees and customers as with the case with John Lewis and Waitrose group but in other cases such as Delta external influences can heavily impact the company you work for and have share of ownership for and the external influences in this case was rising costs and been unable to compete with competition in the airline industry.

Do internal employees who share ownership within their company hold the key to the companies success? Yes in some cases it does but also in other cases it does not. A company needs to also take into consideration external stakeholders such as competition as this can heavily affect the overall success of the company. A company must have a effective strategy on how the company is going to reach the company's needs as well as their targets. The company also needs finance to survive and to be able to grow in the market. The company also must have the capabilities to survive in the market and must be able to change to meet market needs and to attract consumers to gain sales.