Knitting together the workforce

Rowlinson Knitwear’s unconventional approach to ownership is resulting in happy employees, happy customers and a happy bank balance

“Being employee-owned isn’t soft,” stresses Donald Moore, managing director at Rowlinson Knitwear, while explaining how the company is run. “It’s not a nannying type of business, it’s very commercial. It’s great working with people that are happy at work.”

The Stockport company, founded in 1935, makes knitwear, sweatshirts and polos for the schoolwear and corporatewear markets. So far, so normal. Rowlinson Knitwear is also majority employee-owned. This, while slightly more unusual, may seem like an issue that will only be of interest to the company’s employees. But Donald reports that it’s having a positive impact on all aspects of the business, from profits and customer satisfaction to the well-being of suppliers.

Ask anyone for an example of a company that is owned by its employees and the answer is likely to be John Lewis. Push for another example and you’ll probably be met with a blank stare – there are not that many companies yet in the UK following this path, although the Employee Ownership Association (EOA) reports an annual growth rate in employee-owned companies of just under 10%. According to the EOA, employee-owned companies deliver 4% of the UK GDP annually, and achieve higher productivity, greater levels of innovation and are more resilient to economic turbulence than other companies.

Rowlinson’s path to employee-ownership begin in 2009, during the global financial crisis, as Donald explains: “Our bank virtually went bust, we had the cotton crisis, we were making mistakes and it was a really difficult time. Our attempts to be better in every way really took shape then. I thought, ‘I can’t bear this anymore, there’s more to running a company for the sole benefit of its shareholders.’ Employee satisfaction was 34%, customer satisfaction was 43%, labour turnover was pretty dreadful. Profits were good.”

A Performa cardigan from Rowlinson

A big step was starting to understand how to care for employees in the most effective way. The national Workplace Wellbeing Charter gave them the structure they were looking for, and Rowlinson became the first company in Stockport to achieve charter status. Established to promote the wellbeing of employees, the charter allows companies to highlight their commitment to the health, safety and wellbeing of their employees. There is evidence to suggest that doing so is not a vague, fluffy ‘feel good’ gesture, but actually has financial benefits for companies in terms of reduced sickness days and staff turnover along with improved productivity.

“We’d always tried to do the right thing by people, but it was quite ad hoc,” explains Nicola Ryan, head of people services at Rowlinson. “If we had a good idea we’d follow it through, but the charter gave us more of a structure as well as access to local services that we can use to help our people more. We were able to train some of our managers on mental health and well-being strategies, all free of charge. We use it all the time.”

There are many other initiatives from Rowlinson that are unexpected: the pension contributions, for example, are paid for entirely by the company. “A lot of people are on such tight budgets; they just haven’t got the money to give towards things like pensions. So we said, we’re the employer, we’ll pay it, because employees shouldn’t have to see a reduction in take-home pay.”

Enhanced sickness pay is another benefit, along with death in service payment, truly flexible hours, extra holidays as a reward and interest-free loans [see The benefits of working for Rowlinson; and Providing clean water for factory workers]. This may all sound a bit too good to be true, but Donald reiterates that having these caring values along with employee-ownership doesn’t mean the company is ‘soft’. “If anything, I think it’s a bit tougher, because people are accountable for what’s going on in the business,” says Nicola. “If they see something they’re not happy about they’ll tell us. If there is something that doesn’t fit with where we are heading in the business, people will share that with us.”

Ironically, on the day Images visited Rowlinson, Mike Ashley of Sports Direct was being questioned by MPs about the company’s work practices, which included paying some staff below minimum wage, as well as reports of a ‘culture of fear’. In August, The Guardian reported that the annual staff turnover at Sports Direct was 22%, almost three times the national average. In stark contrast, at Rowlinson just four people have resigned in four years, out of a staff of 45. One of the four left to emigrate to Australia, but it didn’t work out – they are back working at Rowlinson again. Another who left wanted to come back, but wasn’t able to. Having seen the list of employee benefits, it’s hard to imagine why anyone would ever want to leave.

Becoming employee owned

Early last year, the company’s executives had a strategy meeting, says Donald. “We discussed what should we do next, because we were doing quite well. We talked about whether we should buy another company, or should we move somewhere, or should we look at a new market… We always look at risk, and so we decided that our strategy should be to take the company into employee ownership so that it could never be sold.” The Rowlinson family, who had owned the business since 1935, agreed to sell 60% of the business in September, with the shares being held in a trust for the employees – called indirect ownership. “There are different types of ownership; ours is like the John Lewis model,” explains Donald. “It can’t be sold, the profits are distributed fairly and you recruit on the basis of the sort people you want to attract, which is the nice people, typically; they care about the customer and want to give really good customer service. Maybe they could earn more elsewhere, but they like the spirit.”

The coalition government introduced new rules in 2014 to make employee ownership more attractive, one of which is that employees can have income tax-free bonuses up to £3,600 each year. In December last year, every employee at Rowlinson received around £2,000 tax-free. “For some people, such as those in our warehouse team, that’s nearly two months’ money,” points out Donald. “And tax on that would typically be about 500 pounds, so it’s huge. It’s great that the coalition got it through, supported by all parties, because it’s a pretty egalitarian thing to do.”

The executives also identified the need for a successor to Donald. “Our executives said the next biggest risk is me. They said ‘There should really be someone that can take over.’ I had to find someone that was intelligent, business intelligent, had got our values, would be amazing, but would want to come here, and – even more difficult – work with me,” he laughs. Neil Ward, who was a fast-rising star at HSBC, started at Rowlinson on 1 July. “ I don’t think he would have been remotely interested if we weren’t employee-owned,” states Donald. “We attract different people when we’re recruiting. We don’t pay commissions and we don’t pay bonuses. That’s because it’s not fair: why should one group of people get paid commission based upon the ability of everyone else? It stops people selling for the short-term. We always go for the long-term approach.”

The company is clearly doing something right: the latest survey of its hundreds of customers (around two-thirds responded) revealed that customer satisfaction now stands at 98.1%, with 70% saying Rowlinson is excellent.

“That’s one of the best scores in business-to-business; not just in the sector or locally: that’s nationally,” says Donald. “And employee satisfaction is 100%. Everyone says they’re proud to work here and everyone would recommend us as a place to work. If you work for an employee-owned company, that figure is on average 80%.”

For those doubting that this caring approach makes commercial sense, the sales turnover has increased by 50% and there has been a six-fold increase in profits in the past five years. Proof, if any was needed, that it is possible to be extremely successful without exploiting either your customers, your suppliers or your employees. Sports Direct and its ilk would do well to take note.

www.rowlinson-knitwear.com

The quality control team at work at the factory in Bangladesh

Clean water for factory workers

One of the factories used by Rowlinson is in Bangladesh. “It sounds like a marketing blag, but they say they produce gifts for us, because the products that they make are made with such care and attention,” says Donald. The reason for this is due, he believes, to how the company treats the workers at the factory. “We love that factory, it’s outstanding. Their employee of the year was their cleaner; it’s spotless, just amazing. It’s a difficult country: infant mortality is 4.5%, people live to about 62, 20% don’t have tap water and for the 80% that do, the water is not exactly clean. Everyone there knows someone who has died from the dirty water. A couple of years ago, we decided that to promote loyalty and to say thank you, we would buy everyone that had worked there for two years, no matter what position, a big water filter machine to take home.

“A year later we gave out more machines to those hadn’t qualified the first time around, as well as replacing the filters, which last around a year, for the others. If you imagine how many people will benefit per machine – friends, family, neighbours – I think we’ve probably saved a life and we’ve probably increased the longevity of some people’s lives by a few years.”

The benefits of working for Rowlinson

• The company funds a healthcare scheme that allows staff to be reimbursed for costs on dentistry, eye appointments, physiotherapy and up to six face-to-face counselling sessions each year. Also included is a 24-hour advice line for legal and health issues, with a GP available on the phone 24 hours a day. It’s a very well used service, reports Nicola.
• Another incentive is extra holidays as a reward for customer satisfaction, with a maximum of five extra days per year. “In December we announced that customer satisfaction levels had gone up so everyone would be getting three extra days holiday this year,” comments Donald. “We want everyone to be thinking of customer satisfaction all the time. Even our cleaner is obsessed with making sure things are right for the customer. It’s amazing.”
• “Personally, I would hate it if I thought that anyone had gone to a pay-day lender. I heard today that a third of middle class people would struggle to pay an unexpected bill of £500, and half of working class people would struggle,” notes Donald. “One of the things that can drag you down is money stuff. Say your car breaks down or your boiler blows up in winter, and you don’t get paid until whenever and it’s £300, what do you do? To help take away the worry, we give interest-free loans.” So far, the company has helped out eight employees in this way, which has included working with people on a money management programme.
• Working hours are extremely flexible. “We’ve got someone on term-time only, and we’ve got people working part-time – and that can be certain hours each week, or certain days each week, it can be more one week than another… It’s never a problem,” explains Donald. “It you’ve got an emergency, you don’t have to take it as holiday, you can make it up another time.” It is, he notes, one of the most popular benefits with the employees.
• Nicola adds: “We’ve got some employees with health issues but people have managed to stay in work because we’ve altered their hours and made sure it fits round their health condition.”
• If an employee dies while employed by the company – however it occurs – their family or estate receives four times the employee’s annual salary thanks to the ‘death in service’ insurance Rowlinson holds. Marketing manager Carrie Hamer says: “Typically you get this insurance in big companies, but a company of this organisation’s size? I’d say it’s rarer than hen’s teeth.”