How do you grow a 200-year-old family business without putting the family jewels in danger?
Neil Donaldson, chairman and chief executive of James Donaldson & Sons, one of the UK’s oldest family-run timber businesses, has an answer: set up an employee share scheme.
“We still own a comfortable 85 per cent of the business, but I think it’s only right that a family business looking to grow gives key employees an opportunity to share in that,” says Neil, who is the fifth-generation chairman in the business.
If an employee has worked for Donaldson’s for more than ten years and holds a managerial position, they are given the opportunity to buy shares within the business. Today the company has about 40 employee shareholders who own up to 15 per cent of the business.
“We also have an employee share ownership trust. This encourages people to convert bonuses into shares, and if they’re still with us in three years’ time, we match the share and give them a free share for each one they’ve bought,” says Neil.
The share scheme is clearly helping to keep Donaldson’s 560 employees content: the company’s labour turnover is 1.3 per cent, compared to the industry average of 19 per cent.
“Although we are a family business, we behave very much like a public company in many ways – we have shareholder meetings, as well as annual general meetings,” says Neil.
“We get knocks on the door every few weeks from people trying to engage us in discussions about the future of the business, but we never entertain them – the mandate I have from the family is that they want it to remain in family hands.
"Besides, we don’t need to look to outside investment: our employee share scheme still allows us to continue to grow at a sensible rate.”
Indeed, despite highly competitive market conditions last year, Donaldson’s boosted its turnover by 12.8 per cent – from £66.9m to £75.5m – and profits increased by 193 per cent after achieving increased market share across all its operating sectors.