The Paula Principle

Here is a good succinct summary by Tom Schuller of the research on the fact that while men tend to rise to a level beyond their competence – the Peter Principle – women tend to rise only to a level below their competence. Tom has christened this the Paula Principle.

I worked for some years with the FI Group when they were employee owned. The company was founded in the 1960s by Steve Shirley, a woman who called herself Steve rather than Stephanie to counter the prejudice against women that was so powerful then. She stopped work to have kids, and realised that there were many young women with great programming skills who had done the same. So she designed the business for them: working part time, and from home. That was pioneering stuff in the 1960s. At the time I worked with them, the board was still all-female, and the joke was that although they employed men, none of them had shown to talent to make it to the top. Dining with the CEO, Hilary Cropper, and her family one evening, I heard another jest, by her daughter, one that illustrated some of the costs for women who get to the top. ‘Actually,’ Hilary’s daughter said (perfectly warmly and affectionately), ‘I don’t have a mum: I have two dads’.

In FI Group gradually the board positions were taken over by men. Then the employee ownership began to be given up, the company lost its crusading drive, and eventually it was taken over. So when the men dominated the board, the company declined. Coincidence – or cause?

Papermaking is a male-dominated, substantially blue-collar industry. In employee-owned papermaker Tullis Russell, which has outperformed the industry for years, the top elected council, which represents all the employees (including the managers) as the owners of the company, recently chose a new chair: a young woman called Kirsty Grant. They also elected her to be a trustee of the employee ownership trust that controls the company.

Employee ownership, in which the work and the fruits are shared, suits women. It also suits men. In a study in Italy employee-ownership was shown to have very positive effects on the cardiovascular health of both men and women. But the effect on men was greater. Perhaps it is something to do with the fact that when men are given the chance NOT to compete so hard with each other, they feel a lot less stressed. Cooperation where the fruits are shared is fun for human beings of any gender.

Rewarding Stars in Employee-owned companies

15_sf_ballet_pairHow do we reward people who do great things? We have to reward them well. Their special contributions need to be acknowledged. Often that means giving them lots of money, much more than the average.

At the same time, they need to acknowledge – and they may not want to recognise it at the time – that their work is hugely supported by the work of the others, the work of their partner employee-owners. They could not achieve all they do without that support.

Different groups of employee-owners come up with different systems for rewarding their stars. Some companies are very happy to see big differences in cash bonuses, while keeping the share distribution equal, building up through equal allocations every year. Others devise systems to share the ownership more with the people whose work contributes more in the way of growth or profit. Some reward the individuals, others have team bonuses, with the team itself or the team leader deciding how the bonus is divided among the team members.

In companies where a few stars make a really big difference – such as in a literary agency or a ballet company – there will usually need to be a system for addressing this question.

It is important for the people involved to have a say in designing the original system, and in reviewing it and perhaps tuning it from time to time. Employee ownership is never about imposing a ‘one size fits all’ solution.

But there are common elements. The clearest lesson is that there needs to be a significant part of the ownership held in common, and managed democratically. Otherwise the system will be open to opportunist abuse by people who are influential, people who don’t care about future generations. We need to be vigilant about selfish opportunists – the most dangerous being the ones who have not got beyond the current model, the people who think that those at the top do everything that is important, and deserve all the rewards.

Most employee owners want to pass on their company strong, so that future generations can enjoy the same excitement and freedom as they have. And they recognise that the big contributors should be well rewarded.

Kindle Version of ‘Local Heroes: The Liberation of Loch Fyne Oysters’

LocalHeroes eCoverThere is a new, cheaper version of the book originally published by Penguin as ‘Local Heroes: How Loch Fyne Oysters Embraced Employee Ownership and business success’. The new version looks like this, and is renamed ‘Local Heroes: The Liberation of Loch Fyne Oysters’.

The book tells the exciting entrepreneurial story of how this sustainable seafood company was founded and built, against the odds, in the wilds of Scotland. On the death of one of the two founders, the employees won control of the company in the teeth of other potential buyers. The employee-owners then worked to make a success of their business, and achieved huge uplifts in productivity.

Caring for Old People – or Bleeding them Dry

CaringForOldWhen financiers take over businesses, customers need to watch out. Look at Southern Cross. Rather than improving the care of the elderly residents of their care homes, Blackstone manipulated the financial structures and arrangements to extract over £1,000,000,000 – a billion pounds – in cash. The result? Suffering for the old people.

By contrast, when employees take over the company where they work, they strengthen the services, and invest. Sunderland Home Care, Highland Home Carers, Stewartry Care and several others are among the top rated carers for old people. In each case, the care is delivered by people who share in the ownership of the business. And in child care, the same story: by far the best provider of children’s nurseries in England is Childbase Partnership – owned by its employees.