At the heart of the process of preparing a business for sale to the Employee Ownership Trust (EOT) is the transference of control. This means owners allowing others to step up.
In this light hearted piece we look at why this is important, and give one hilarious example of what not to do – the Tiger Oil Memos.
The Least Important Person
The ideal succession plan is often one where the owner leaves, receives payment for their shares, but the business carries on doing its great work. The challenge for business owners and leadership teams, therefore, is to prepare the business so that the owner can slip away unnoticed.
Make Yourself Redundant
The Employee Ownership Trust (EOT) is an ownership model which enables owners to sell for the market value, and leave the business as a legacy.
The payment to the owner for the shares comes from the future profits of the business (like almost all business sales, in one way or another). It therefore takes time – years – to get the business into the sort of shape that the owner will feel able to leave, confident that the business will continue to thrive and last forever – or at least long enough to generate the profits for their payout!
This process involves truly empowering and engaging the employees.
The Employee Voice
One of the features of a company which is owned by an EOT is that all employees need to feel that they have a genuine say in the running of the business; that their voice is heard.
This doesn’t mean that an EOT business is a democracy. The employees don’t get a vote. But they do, as beneficial owners of the business, need to be engaged for the full advantages of EOT ownership to be gained.
This is a long way from the domineering owner or boss, driving a business through the power of their own personality and vision. Such a business can be successful for a period, but only as long as that individual is with the company. If they one day wish to leave, the business must face up to the challenge of how to replace their drive and vision.
And when the owner leaves and wants to be paid, then it is in their own interests to make sure the employees are engaged; to ensure that the company runs effectively without them.
The Tiger Oil Memos
Let’s have a look at how not to do it. This focus away from a dominant leader and towards engaging employees was not commonplace in the 1970s.
Edward “Tiger Mike” Davis was the CEO and owner of Tiger Oil, a company based in Houston, Texas. His management style was, shall we say, somewhat dictatorial! His missives to staff, now collectively known as the Tiger Oil Memos, have become a thing of legend.
In these memos Tiger Mike informs employees that they will be docked wages for being off sick; threatens to sack anyone who expresses unhappiness about their job; forces everyone to work on a Saturday; and offers the extraordinary instruction, in capitals, that employees should “DO YOUR JOB AND KEEP YOUR MOUTH SHUT”!
My personal favourite is the memo which finishes with the following instruction: “Do not speak to me when you see me. If I want to speak to you, I will do so. I want to save my throat. I don’t want to ruin it by saying hello to all you sons of bitches.”
It is highly debatable whether such a management style is appropriate in any business, but it certainly won’t create an environment where employees want to contribute and feel engaged. And it won’t create a business that the owner will feel they can leave knowing it will continue to run successfully and generate the profit to pay the earn out!
And does such an approach result in a successful business? Well Tiger Oil ended up filing for bankruptcy, so I guess that answer speaks for itself!
You can read a longer selection of the Tiger Oil Memos on the web site of the marvellous Letters Of Note here.