A majority stake in a company being sold inevitably means a change of legal control.
There’s lots of flexibility though in terms of day to day leadership/management.
- Sometimes founder stays on as MD.
- Sometimes senior staff take the reins.
- Occasionally a third party is brought in to lead.
This final option (perhaps rarest of the three) is what Inspired Cycle Engineering Ltd (“ICE Trikes”) did.
We caught up with Adrian Davies, the individual brought in to head up ICE Trikes after it was sold to an EOT.
As a bizarre aside, despite Adrian and Go EO’s Chris now being ~300 miles apart, they realised they were a few years apart at the same school ~30 years ago! Small world!
Background of ICE
Formed by Chris Parker and Neil Sellwood, ICE started making trikes last century.
Inspired Cycle Engineering started as a 50:50 venture between the two founder/directors, and remained that way for several decades.
On 14 November 2023 this all changed. The founders agreed to sell a controlling stake to an Employee Ownership Trust.
They had slightly different views on what to do next though. Neil wanted to step away from the day to day of the business, whilst Chris was keen to remain fully involved in the business.
Adrian had had no historic involvement with the company.
Void at the top
Whilst founder Chris would continue to work in the business, he was keen to hand over the reins.
There was a strong, loyal team of employees in the business. This included some very experienced senior members, heading up certain departments. However, none of them were keen to take on the leading role of managing director.
The team therefore collectively decided they’d bring someone in to take on this role.
Bringing in an MD from outside can be tricky at the best of times. Someone who doesn’t know the business swooping in, making big decisions.
With the change in ownership, and potentially unsettling impact of that, it needs to be done with great care!
Lengthy interview process
Adrian recalls a thorough recruitment process. Multiple interviews, and presentations, to a variety of different people.
There were so many groups who had to be happy with the choice.
- Founders, as their sale proceeds are at stake
- Senior team, who will be reporting to the new MD
- Remaining staff, as profit share payments may depend on new MD’s decisions
“I remember after the last interview stage thinking if I don’t get this, I’m not right for it. It had been a very personal experience, and they’d got to see the real me.”
He also recalls some of the quirkier questions asked, especially by the less senior employees. “What’s your attitude to dogs in the workplace?”. Not a question Adrian had anticipated, unlike typical “what’s your greatest strength/weakness” questions he’d got used to in the corporate world!
The first day & the founders
Whilst being interviewed in the factory, Adrian noticed the founders had their own first floor office.
After being offered the role and coming in on his first day, as he climbed the stairs, a thought crossed his mind, “I wonder if they’ve moved out of there”.
Possibly it seems a silly thing, but Adrian felt this would be a clear indication on their attitude. Whether they were genuinely stepping down, putting him at the top. Or whether perhaps, if they’d remained there, they’d be putting him in charge in name only. Maybe they’d still try to run the show, challenging his every decision.
He was pleased to see they had vacated!
Founders roles post sale
From prior to sale, the founders had set their positions out. Neil wanted minimal daily involvement, but remains connected with the business through the monthly EOT meetings. Chris wanted to stay, adding value where he could, and maybe stepping down in the future.
Chris has seen his role in the business gradually evolve since Adrian came in. Whilst Adrian’s of course very competent, he’s new to the world of trikes. Having Chris’s huge experience is invaluable.
Changing power/status can cause ruffled feathers. Egos need to be left at the door. Adrian’s pleased to say on the whole he feels this has been smooth. Everyone’s engaged, and on the whole embraced the early changes that have been made.
How have the team taken to the new MD?
Whilst they’ve had their moments, Adrian’s experience has generally been very positive.
It’s likely the case that as none of the staff had wanted the MD role, it must’ve made it easier. If instead one or more wanted it, interviewed for it, but were turned down, they may have found it harder to accept Adrian as their new boss. In that situation, there likely would have been resentment, in an “I deserve that role” way. Thankfully this wasn’t the case.
Adrian’s certainly been challenged from time to time. This in itself isn’t unhealthy. It has lead them to have more detailed discussions about how disagreements should be dealt with.
One of the new values is “collaborate” – regular sessions with colleagues and stakeholders ensures that they can shape the direction of the business.
How are disagreements dealt with?
In an EOT, the employees legally control the company. But the directors are appointed to make decisions for the business. Inevitably on occasion staff will disagree with Adrian’s decisions. Under what circumstances might they be able to veto it?
Legally the board of trustees have power over the directors of the trading company. So can the staff push the trustees to stop any decisions Adrian wants to make?
They discussed this as a group. Eventually they agreed if >70% of employees felt a decision was wrong, they could take it – together with the MD – to the EOT for further discussion.
The team have also had some healthy conversations about the division of powers between the board of directors, and the trustees. In the smallest EOT companies there’s often a lot of overlap in these. However ICE Trikes is big enough to have a reasonable degree of separation.
For example the trustees should not get involved in operational business decisions. Those are for the directors.
EOT controlled companies normally share lots of information with staff. It is of course the employees who own the company (albeit collectively/indirectly), so it’s right they know how it’s doing.
Like a lot of EOT companies, salary details are one thing not shared. There may be commonly known bands, but not each individual’s precise salary levels.
Having said that, Adrian suggested something we’ve certainly heard several times before…that even where salaries aren’t made public, most staff seem to find out what each other are on anyway!
Adrian was also aware of the fact that his role had been publicly advertised. Hence they all know what he’s earning too!
Why be MD of an EOT company?
Of course EOT companies can pay profit shares, but having come from the world of private equity, Adrian had had far more lucrative positions before. Ones with generous share option plans etc. So whilst the salary here was very respectable, finances weren’t his main motivation.
“I love the sense of purpose that often comes with EOT companies. For example with us, some of our trikes are used by people with physical impairments. We can help make their lives better, so in our own little way make the world a better place.”
EOTs certainly don’t need to be altruistic. They’re still generally profit motivated. The key thing is those profits are shared broadly, across all staff. Rather than retained in the hands of a tiny wealthy minority.
Additional advisers/support
Adrian would like to particularly thank the below for their support:
Christian Wilson of Spencer West
Christian’s a solicitor who’s been heavily involved in the EOT sector for some time. Indeed he assisted with the sale of the previous accounting firm of Go EO’s founder. Christian was pivotal in providing pragmatic advice and guidance, ensuring a legally robust and transparent Employee Ownership structure.
Allyson Glover/Andrew Holland
These two have really helped on the leadership/staff and management side. Even without shipping in an external MD, selling to an EOT is a big change. It can cause concern and misunderstandings.
They have supported throughout the journey to become a fully functioning EOT. From providing the initial introduction to the EOT concept, to recrtuiting an MD, and Andrew remaining on the EOT as the independent trustee who Adrian finds provides valuable input and guidance as a mentor.
The end result
At time of writing, Adrian’s been with ICE Trikes 9 months, so it’s still early days. But he seems to have been well accepted by the team, who are all optimistic about the future.
Summary
Some people are of the view that to lead a business, you need a certain X factor. Something that’s tricky to develop if you’re not born with it. Who knows if this is true, but certainly you need someone who wants to lead.
If the founders don’t want to lead post sale, and none of the senior employees want to take up the slack, leadership needs to be brought in from outside.
This won’t be easy.
- Getting the job advert right.
- Ensuring suitable candidates see it.
- Setting the right challenges/asking the right questions.
ICE Trikes prove this is possible.
If you are interested in finding out more about transitioning to an EOT, get in touch with us at Go EO to see how we can help.