One of the most effective ways to guide a company to success is to ensure that employees are fully invested in their role, sharing the values and aims of the broader organisation. Good salaries and benefits, flexible working conditions, and a focus on career development are surefire ways to keep employees motivated. A step beyond is to give staff a stake in the business.
In late March, CPC Project Services (CPC) did just this, announcing it had transferred ownership to its employees through an Employee Ownership Trust (EOT). Managing Partner Steve Mole sat down with RailStaff to explain the move, and what it means for the business and its employees.
The company
CPC provides project and cost management services to clients in both the public and private sectors with a focus on rail infrastructure, and has worked on some of the biggest projects across the UK.
“We deliver consultancy services to a range of clients including to the Department for Transport (DfT), Network Rail, transport authorities such as Transport for London (TfL), train operating companies (TOCs), and MTR Crossrail,” said Steve
“One of our divisions, CPC Systems, specialises in major signalling upgrades and we’re currently working on the Four Lines Modernisation project for TfL, as well as working with Irish Rail on its new train protection system and Network Rail on the East Coast Digital Programme.”
CPC was previously owned by five partners, with Steve as principal shareholder. He has been with the company since 1993, starting as a database analyst. Having worked his way up to supporting and then leading projects, he was invited to join the board in 2000, before becoming managing partner in 2004. Since then, he has seen the company through a period of intense growth, leading CPC to triple in size over the last six years.
Steve continues to drive the company to further success and changing the way the business is structured is part of his strategy for the decade ahead. The transfer of CPC’s business structure to an EOT means that the company will now be owned by its employees, enabling them to share in the future success of the business and have a greater say in how it is run.
Why choose this model?
“In the last 12 months I’ve been reflecting on what the future holds for CPC and myself,” he said.
“Last Autumn I set up a 10-year growth strategy, with the aim of remaining independent and doubling our market share for both project and cost management services. I’ve set targets of achieving £50 million in revenue within five years and £100 million revenue within 10, both of which I firmly believe are achievable.”
“I wanted to ensure that CPC’s brand and culture could be secured for its long-term future. I was never going to sell the business from underneath the people who have helped me build it, and I was exploring all kinds of opportunities. An EOT ticked every box for what I wanted to achieve. It means that we can offer long term career opportunities for our people, continuity of service for our clients, and longevity of the CPC brand in the market. It also means that the people who helped to nurture the business now get to share in its success.”
How does it work?
An EOT is a mechanism for business ownership that enables the transfer of a majority stake of company shares to employees through a trust structure.
Employees do not hold shares directly – instead, the trust holds shares on their behalf. This ensures collective employee benefit rather than individual shareholding. While the trust holds the shares, employees typically have a say in how the business is run through representation.
The model is designed to encourage broader employee ownership and participation, providing various benefits to both the business and its employees, including tax benefits. Selling a controlling interest in a company to an EOT can be exempt from Capital Gains Tax (CGT), providing a significant tax incentive for business owners. Companies controlled by an EOT can pay annual bonuses to employees free of income tax, up to a specified limit.
“A number of businesses have followed this model recently, and I think you’re going to find it becomes increasingly popular going forward,” says Steve.
“The current model was introduced by the UK Finance Act in 2014, but the concept of employee ownership dates back to likes of Arup who transferred their business to employees in 1970 and even earlier John Lewis back in 1929. For CPC to progress with this model we had to get sign off from HMRC as well as the Cabinet Office, due to the nature of a number of the projects that we’re delivering.”
“The main benefit today is community. In real terms, the business has been valued and sold to the trust, where the shareholders have a deferred consideration for the business. This consideration is realised on a gradual basis – over the next seven or eight years – and only if there are sufficient funds to do so, which means that everyone has a vested interest in the long-term success of CPC.”
“As we grow the business, we’ll see value being created, and shareholders will fully hand over their interest in the business, to CPC’s employees.”
The future
The EOT marks the beginning of a new chapter for CPC, paving the way for a new stage of growth. Steve and the board have been working for many months to ensure the new business structure is in the best interests of its employees and clients, as well as the company.
Steve’s strategy shows that he’s got his eye on the future and remains passionate about the continuing success of the company. And he’s keen to let everyone know that he intends to see his plans through and to remain with CPC for quite some time to come.
He’ll continue to lead CPC alongside the current board of partners which will remain responsible for managing the businesses day-to-day operations and interests. The board of trustees, meanwhile, will be responsible for ensuring the success of the trust for the benefit of the company’s employees.
“I’ve made a commitment that I will continue to lead the business for the next 10 years, which will see me through to my fortieth year with CPC. In around five to six years, I’ll start to look at what my succession plan is and make sure that the right leaders take the business beyond my tenure to maintain our employees’ best interests.
“I’m more energised than ever to drive our plans forward and rather excited to see what the future holds.”
Lead image: iStockphoto.com
