Alan Spence has only one regret about being the founder of the first company in Scotland to be employee-owned from start-up – he wishes he had done it years ago.
Accord Energy Solutions, which was established in 2010, has become a major success.
Alan and co-founders Phil Stockton and James Arthur have created a firm with a client list which reads like a Who’s Who of the oil and gas industry, is ahead of its financial targets, is enjoying tremendous staff retention and is on course to fulfil their vision.
Accord ensures its customers realise the true value of the hydrocarbons they produce through “hydrocarbon accounting” – working out by a combination of science and maths exactly what their share of cash should be when it is transported or processed through shared infrastructure like pipelines, platforms or terminals.
With the huge quantities of hydrocarbons involved a small error can make a massive difference.
Accord uncovered one 15 per cent underestimate which over the life of the field would have cost the owners around one million barrels worth $100million.
“That is a fairly extreme case but a very small error can make a huge difference to the final revenue for a company,” said Alan who began his working life as a chemist at the Dounreay nuclear plant.
“I then realised there was never going to be much money working for the government and thought the oil and gas industry sounded a great thing so I left to work on the Sullom Voe project out of a lab in Kirkhill at Dyce.”
His career took him to Flotta with Occidental and north again to Sullom Voe before he returned to Aberdeenshire in 1992 to work at the St Fergus terminal, eventually taking responsibility for the measurement laboratory services and hydrocarbon accounting for Exxon Mobil in the UK.
Alan said: “However, I had a hankering to get back to practical work and a more hands-on approach and consulting seemed to be a good way to go.”
He joined Smith Rea Energy and built up its hydrocarbon accounting business from a £180,000 a year to turnover to £4.5 million but when it was acquired by Intertek he didn’t believe the large company business model which was in place was consistent with getting the best out of his team and decided to set up a new business with Phil Stockton and James Arthur.
“We had one overriding goal,” he said. “To establish a company that was owned by its staff.
“Of course, it also had to be successful, have a long-term future and be rooted in the community. We felt that by achieving these aims we would strike a blow for responsible capitalism in the wake of the recent financial crisis and chronic skills shortage.
“At the beginning all we had was a blank piece of paper, a map with no bearings. We threw ourselves into research and discovered a treasure trove of businesses which not only embraced the employee ownership model but we’re thriving with it.
“We learned of Philip Baxendale and the Baxi Partnership, David Erdal and Loch Fyne Oysters (his book became our company bible), Tullis Russell, Co-operative Development Scotland and the Employee Ownership Association.
“With their help we began to plot a course to our destination and now three years later, we are well on our way.”
Alan is originally from Fife and his father worked all his life at Tullis Russell, the paper mill, from leaving school until he retired.
In 1986, the Russell family started a ground-breaking process, whereby the ownership of the company would transfer to its employees and it was only when he started doing his research for Accord that Alan remembered his father telling him about this new idea that David Erdal, the chairman, had.
“He thought it was great but just wished he had been a bit younger at the time. We were the first company in Scotland to set-up as an employee ownership business from start-up and also the first to found a company on its principles. In an industry where the traditional strategy is to grow a company until it achieves multi-millions in turnover before selling out what we were creating didn’t just go against the grain, it circumvented the grain all together.”
The HMRC-approved share incentive plan which they have adopted allows employees who invest £1500 in the company to effectively receive £7500 worth of shares in the company.
“It has helped to attract and retain. The employees don’t have to invest in the company but virtually every one of them has taken up all the entitlements.
“We do hear of some companies which are transitioning from a traditional model to an employee owned model where some people are reluctant to even take the free shares, particularly where there is polarisation between the management and the workforce, because they fear it is some sort of trick. We want the staff who join us to have a stake in the company to reflect the fact that they are contributing a lot to the development and operation of the company.
“We felt that would attract the best people and retain them better and it has worked fantastically well.
“In our business plan we set ourselves a target of 50 staff and a £5 million turnover by 2015.
“I think we are going to achieve that quite comfortably a year early. Right now we have 28 staff and 11 associates and we have achieved a turnover of £4.3 million.
“We have attracted very good people and are retaining them. I read the other day that some companies are turning over 30 per cent of their staff in a year. We have lost two people in three years.”
Alan, Phil and James plan to always retain a 10 per cent share in the company but to secure its long-term future they are reducing their stake by selling their shares to the company for passing on to the staff.
Having introduced the share incentive plan they have now established an employee benefit trust which has a golden share – a nominal share able to outvote all other shares in certain specified circumstances.
It means the trustees have the power to prevent any sale of the company or any change in the company articles.
Alan represents the founders on the Trust and the other trustees are two employees, an accountant and an advisor who helped set up the company.
“We have our best people doing the best work and our clients, who are all the majors, are coming back to us for repeat business so we believe we are doing a good job for them.
“We have been trying to promote this business model because the more people who are aware of it and what we do, the more likely we are to attract people into the company.
“We also believe that it is a very ethical business model so want to share it and are actively involved with Co-operative Development Scotland and I am an ambassador for employee ownership with them.
“My only regret is I would have done it years and years ago. I think it’s a fantastic model and it just feels right.”