In April 2022, ustwo studios became an employee-owned business. It is a bold move to preserve our independence, culture, and values, and to unlock the entrepreneurial potential of our talent. We think that employee ownership is not just important for ustwo’s future, but for our society more broadly, to address widening inequality, worker’s rights and participation, and the “great resignation” of talent.
I’d like to talk about why ustwo became employee-owned, and why other businesses should consider employee ownership. Please also read my colleague Abbe Bigelow’s piece to learn how we accomplished the transition to employee ownership.
A different type of succession
When we think of the term “succession”, we think of black helicopters and glass-clad boardrooms, and the vicious struggle for dynastic power and money between siblings and managers. It makes for good (TV) drama but it doesn’t reflect the reality of most businesses. Most founders want to generate personal wealth with their business. But they also want to pass their values and culture onto the next generation of leaders. Ownership change alone is hard. Preserving the cultural intangibles that make an organization unique and special is all the more difficult.
I joined ustwo studios as CEO in February 2018, with the mandate to help ustwo’s founders begin transitioning away from running the business. John “Sinx” Sinclair and Matt “Mills” Miller started ustwo in their early twenties. Under their leadership, ustwo studios emerged as one of the leading digital product studios, creating breakthrough products for Barclays, Google and BMW. Sinx and Mills always believed that ustwo was not just about work but also about friendship, community, and values. They saw our talent as business partners and consistently shared ⅓ of all profit with them. To formalize our commitment to being a business that gives more than it takes from the world, ustwo became a B Corp in 2020.
After we gradually shifted management away from the founders, to a talented team of leaders in the studios, it was time to transition ownership as well. Sinx and Mills didn’t want to continue owning 100% of the equity and value in a business that they were less involved in running. However, it was critical to them that we stayed independent. By moving the ownership of the business into an Employee Ownership Trust (EOT), the founders can realize monetary value over time but preserve the studios' culture, values, and independence for the long run.
For our talent, this has both tangible and intangible benefits. The ownership change is paid for with the future profits of the business, and when this transition is complete, our talent can expect an even larger share of the ⅓ profit than they are receiving today. All employees are now a partner in the business, and the management team of the studios works for our shareholders, i.e. the employees at ustwo. We have reflected this shift by having three elected employee representatives participate in discussions and decisions on our board.
Our clients often comment on the fact that our people are not just talented but deeply committed to their work and the users that they design and build for. We hope that this deep care will be even more evident with employee ownership.
Why businesses should consider employee ownership
Employee ownership is an often overlooked tool for businesses to increase employee engagement and productivity. After two years of a grueling pandemic, fewer workers find meaning and purpose in their job. There is extensive research to demonstrate that companies where at least 30% of the shares are owned by a broad-based group of employees are more productive, grow faster, and are less likely to go out of business than their counterparts. Retailers have realized employee ownership more than other industries: The John Lewis Partnership, a multi-billion pound brand of high-end department stores and supermarkets operating throughout Great Britain, is an employee owned trust. Publix Supermarkets is the largest employee-owned company in the U.S. with more than 225,000 workers.
Distributing business ownership more broadly is also one of the most effective ways to address problems of inequality. Wealth inequality in modern societies is driven by many factors but the concentration of company ownership plays a large and increasing role. In the U.S. for example, the top 10% own more than 90% of all businesses. As Thomas Dudley and Ethan Rouen put it succinctly: “Without intervention, the rich will continue to get richer, and everyone else will be unable to keep up.” Expanding employees’ ownership stake in companies can give workers a path to wealth creation, and they will reward the business with increased engagement and productivity.
This is a crucial time for capitalism and societies built around markets and a liberal constitution. Businesses need to take seriously the responsibility that they have for the world and their employees. By becoming a B Corp, ustwo made a commitment to giving more than we are taking from the world. And by becoming employee owned, we are breaking down the distinction between owners and employees, capital and labor, to become a business that is – to channel Abraham Lincoln – run of the people, by the people, and for the people.