Diversity in business forms can deliver sustainable growth, says report

Expanding the diversity of UK business forms will improve the way businesses operate and result in sustainable growth, according to a study by the business thinktank Tomorrow’s Company.

Its report, Tomorrow’s Business Forms, argues that a business’ purpose is more effective and successful when it is underpinned and reinforced by the form of the business. The report warns that when business form is incompatible there is a risk that trust and value might be compromised.

The study shows how some listed and private companies have changed business forms and the growing array of options. Growth in diversity of business forms includes social enterprise, employee ownership, public sector mutuals, listed company hybrids and community interest companies.

Tomorrow’s Company worked with a group of businesses leaders, including the heads of Deloitte, John Lewis and Camelot. It argues that a healthy economy gives a choice to customers, investors, employers, employees and the wider community.

Speaking at the launch of the report, Mark Preston, group CEO of Grosvenor, said, “The best recent example of a failure to match form to purpose must be Southern Cross care homes collapse. The vulnerability of its residents and the rather obvious purpose of caring for them ought to demand […] a business form and ownership suitable to conservative financing.”

Preston contrasted this example with the success of Circle, a health care partnership now running Hinchingbrooke Hospital within the NHS. He said the success of the first privately managed hospital is likely to be connected to the fact that Circle is half owned by clinicians and employees.

The report also highlighted the need for government to be more aware and increase diversity. It noted that the Nuttall Review, which examined employee ownership, is a step in the right direction.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, commented, “Tomorrow’s Business Forms points to the importance of exploring how business can deliver both commercial success and public benefit.

“Whilst no single form of ownership is right for every business, encouraging grater plurality of ownership is a positive step in promoting staff engagement and longer-term decision making.”

Further reading:

New FTSE Index to encourage investment in employee ownership firms

Social enterprises generate £2.7 billion to plough back into society

Ethex reached £1m positive investment milestone

Social bank Unity Trust to reward staff with ownership shares

Unilever, John Lewis and M&S in top 10 most sought-after employers