Team

People First, People Owned

Author

Divyangini Lockwood

Project & Finance Manager

In 2020 FSC’s founders contemplated opening up the ownership of the company to its most valuable assets, its people. “We reached a point where the company became bigger than us, where our smarts became less crucial to its success,” recollects Lachlan. “So, we started the long journey of restructuring the ownership model to one where our people could own a stake in the business and get a share of the value they helped generate.”

In March of 2015 Lachlan, John and Luke came together to start FSC. Their shared vision was to create an organisation where people enjoyed working, one that recognised the efforts of its employees and valued creative thinking. Over the course of the first five years, FSC evolved into a diverse company with co-founders Stuart Twelftree and Nathan Burmeister establishing environmental services and engineering design services functions respectively.

Having recently become a shareholder in the company, Erdem reflects on his decision to invest in FSC, “I jumped at the opportunity to invest in FSC. It is very exciting to be part of a young company in an ownership position. I knew how FSC operated and saw the potential of such an offer.” Erdem was surprised that as someone who wasn’t part of the senior leadership team, he was extended this opportunity, “The fact that FSC included me in the mix and welcomed me as a shareholder highlighted the inclusivity of this program. Generally, companies don’t offer this to employees who aren’t senior staff. FSC demonstrated that they value all employees equally regardless of level.” On whether he noticed a change since he bought shares, Erdem says, “It’s opened my eyes up to the bigger picture when engaging in my day-to-day engineering activities.”

Image: FSC staff at the Melbourne office in Richmond.

Employee-owned businesses empower their workforce by allowing them to purchase shares in the organisation and participate in decision-making. At FSC, the founders recognised the importance of adopting a model that created value for both the organisation and its employees. Lachlan reflects, “It took us 2 years of research, consultations and discussions to implement this new ownership model.  There were many things to consider including tax implications, legal considerations and accounting aspects.” Structuring the ownership model also involved ensuring alignment with FSC’s values. Lachlan emphasises, “There were many ways we could have gone  about structuring the shareholding and we wanted to adopt a model that resonated with our values.”

The psychology of transferring ownership was another consideration. “When we were building the company, there was a period where the company’s success was linked closely to my personal identity. These two being intertwined wasn’t quite healthy and creating that separation was an important step in allowing the company to be broadly owned” Lachlan acknowledges. “Building FSC, in a way, is akin to being a gardener. You invest effort, plant new things, tend to the plants, water them and then the garden evolves naturally over time. Nurturing the garden is important, but it also grows organically on its own.”

Image: Kevin Yu, an Engineer at FSC, is now an employee shareholder.

FSC’s employee-owned business model allows permanent employees who have been in the business for more than 2 years to acquire shares in the company. The company gets an independent valuation every year which informs the board’s decision on the number of shares to be released. Every employee reaching the two-year milestone, regardless of their position, receives an invitation to purchase shares. To ensure broad ownership, there is a limit on the maximum number of shares an individual employee can own. Lachlan adds, “Shareholders vote on broad decisions at shareholder meetings, but we wanted to extend involvement in varied aspects of FSC. As a result, we introduced a feature allowing non-founder shareholders to be voted onto board seats, actively participating in strategic decisions. Currently, we have reserved two board seats for non-founder shareholders.” Lachlan adds, “We wanted people to be rewarded through good returns while they own the shares, rather than a large windfall when they eventually sell them.”

In the first year that FSC opened up ownership to its employees, it welcomed 18 new shareholders. By the end of the second year, the total number of employee shareholders jumped to 28. Lachlan, reflecting on the impact of this change in the ownership model on FSC says, “This shift has enabled our employees to see the big picture and they are more excited about the company’s successes now that they have a stake in its ownership. I have also seen a more cohesive environment develop with traditional silos being broken down.” Lachlan further notes, “This also creates a sense of duty amongst the management team as they feel an additional responsibility towards employee investments.”

As for the future of FSC, Lachlan hopes that the company continues to attract skilled individuals who eventually become shareholders in the business. In the short term, the founders will be actively involved in the operations and growth of FSC. In the medium to long term, they hope to create a pool of talented employees who will have a stake in FSC and come together to shape its future trajectory.

As Lachlan puts it, “The future will hold what the shareholders collectively want.”

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