By Phil Copestake, OPM principal.

The Deputy Prime Minister’s speech yesterday highlighted a paradox at the heart of the employee ownership business model. You can’t have a mutual without actual shared ownership, and yet owning shares does not in and of itself guarantee the benefits of being a mutual. As Mr Clegg said: sharing ownership means sharing power. But to really maximise the potential of mutual models the staff who own the business need guaranteed influence too.

I’ve seen first hand the benefits that shared ownership can bring. OPM is 100 per cent employee-owned, and we’re working with public services across the country where managers and staff are looking to set up new employee-owned businesses i.e. ‘mutuals’ (there are lots of different types of ‘mutual’, but that’s for another post).

We know from our own research, as well as from this practical experience, that if staff do not own a significant chunk of the shares in a mutual - preferably half or more - then there’s a real risk of these benefits – productivity, innovation, better customer service – being significantly diluted.

At the same time, simply owning a share in your social enterprise does not mean you necessarily have a genuine stake in it, in the sense of perceived and real influence (both are vital).

If the only time an employee owner feels they get to influence their company is when, as a shareholder, they get to ratify the election of a director, vote for a staff trustee, or approve a major strategic decision at an AGM, then influence will not feel real, and the benefits of mutual ownership that Mr Clegg talks about are less likely to accrue.

One way to make staff influential is for managers to put time and effort into proper engagement. And indeed published evidence shows that it can be hard to differentiate the impact of ‘good engagement’ from the impact of employee ownership itself.

The problem with relying on good engagement practices is that management styles and priorities inevitably change over time – including but only when managers themselves change.

So that’s why staff influence and other key mutual principles must be built into the constitution and governance of an employee owned company. As is, of course, the case at John Lewis, where the partnership model of electing staff reps at all levels leads to a structure with real power.

Employee share ownership is an indispensable part of the mutual model, but whilst it’s necessary it’s by no means sufficient for success.

If you’re interested in hearing more about OPM’s work with new mutuals, then please email mutuals@opm.co.uk.