In the March 1984 issue of Canadian Business, Diane Forrest reports on a growing trend in which employees take over faltering businesses. American figures show that the number of companies purchased by some or all of their employees have more than doubled since 1978 to 30% of all corporate divestitures.
Despite the increasing number of success stories, the employee purchase of a company can be hazardous. It requires expertise, commitment and the backing of capital providers. Above all, it reguires that there not only be a desire to save jobs, but that there be good business prospects and a viable business to be rescued.
One success story is that of National Hardware Specialties Ltd. of Dresden, Ont., a zinc die-casting company founded in 1945. The company had fared poorly under the ownership of Cominco Ltd. and lost more than $2-million on sales of $14-million in 1980 and 1981. Cominco decided to sell. Bill Gispen, company manager since 1980, believed that National Hardware and the jobs of 92 employees could be saved if he could get the backing of at least 80% of the employees. Most of the employees invested $1,000 and with the cooperation of Cominco, the Imperial Bank of Commerce, and the Ontario Business Incentive Program, the takeover has proved successful. Sales shot up 30% in 1983. It was, says Gispen, a very risky venture nonetheless, and success was not guaranteed at the beginning. A crucial factor in the turnaround has been the improved productivity (a 15% increase in the first year) and the increased involvement and flexibility that comes with employee ownership. Said Gispen: “You can look them straight in the eye and say, ‘This is your company, too.”1
A distrust of management, developed over the years, has to be unlearned and employees have to start accepting more responsibility. Said one employee on a beautiful day last summer: “It’s amazing what ownership does. Two years ago, I would have phoned in sick and gone fishing on a day like today. But here I am.”