Toying with employee ownership: Bayes experts react to The Entertainer handing over control to its workforce

The Entertainer, the UK’s largest toy store, has announced it is to hand over ownership to its 1,900 employees – ending the 44-year stewardship of co-founder Gary Grant and his family.

Dr Aliasghar Bahoo Torodi, Lecturer in Entrepreneurship and Dr Simon Parker, Senior Lecturer in Business and Society at Bayes Business School discuss the benefits of employee ownership models, and what this may mean for The Entertainer moving forward.

Strategic and financial gains

“Employee ownership, either directly or through a trust, has become an increasingly popular exit strategy across the UK – with John Lewis being another good example,” said Dr Bahoo Torodi.

“Rather than selling to outside buyers, founders often choose this path to ensure the business stays in the hands of people who care about its future.

“For founders themselves, there are plenty of reasons to choose this exit route. Beyond preserving the business and legacy they have built, they can ensure it passes to people who already care deeply about its success. There are also considerable financial advantages, including relief from capital gains taxes.

“For employees, the change can be equally transformative. Profit-related, income-tax-free bonuses are an obvious perk, but the deeper reward lies in knowing that their hard work directly benefits them. When staff feel genuine ownership, they often bring greater creativity and commitment to their roles.

“In fact, evidence suggests that worker productivity is higher in employee-owned businesses and that they tend to outperform their competitors.”

Dr Parker said The Entertainer’s employee ownership was likely to have been motivated by legacy rather than profit.

“Similar to Patagonia's ownership being transferred to a trust, this decision would appear to be motivated by legacy rather than profitability. In a way, it is a critique of shareholder capitalism more broadly,” he said.

“The Entertainer has always been driven by values, such as not opening on Sundays and not stocking toys that resemble firearms or relate to witchcraft. This move is a continuation of the growth of similar arrangements within businesses to encourage employee voice through structural and ownership means.

“Slowly, business leaders are realising that their employees, and not just shareholders, are the lifeblood of their organisation.”

“The benefits enjoyed by employee share ownership include heightened job satisfaction, motivation, productivity, and emotional connection with the organisation. Organisations themselves gain greater scope for long-term strategic thinking – leading to more stability and better sustainable and ethical practices.

“Passing ownership onto employees ensures continuity and a smoother succession process whereby the culture of the organisation knits in with its governance.”

Managing the transition

Although employee ownership has many long-run benefits there are also short-term challenges, according to Dr Bahoo Torodi and Dr Parker, which The Entertainer will need to overcome.

“Unlike a sale to a third party, where shareholders typically receive payment for their shares shortly after the deal closes, selling to an Employee Ownership Trust (EOT) usually means payouts happen over a longer period,” Dr Bahoo Torodi continued.

“This delayed return can be prohibitive for founders seeking immediate liquidity.

“Additionally, the process of transferring ownership to an EOT can be complex, requiring significant legal and financial advice to navigate properly.”

Dr Parker added that The Entertainer would need to put in place new governance measures which take time.

“There is still a lot to work on, including employee voice and heightened levels of democracy, which can slow down decision-making,” he said.

“There are also going to be new governance policies and communication channels that need to be carefully designed.

“However, such changes will pay off in the long-run, and having a focus on employees, their conditions and their pay is a positive to focus on during a cost-of-living crisis.”

All comments can be attributed to Dr Aliasghar Bahoo Torodi, Lecturer in Entrepreneurship and Dr Simon Parker, Senior Lecturer in Business and Society at Bayes Business School.