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When the two former Directors of SDC announced to the Board that they wanted to retire in 2007, being astute businessmen, David Ledsom and Brian Fox saw SDC as more than just a profit centre ripe for disposal to the highest bidder.
The dedicated staff of 300 were a close network of friends and family, many of whom had grown up in the business and developed with it, professionally and personally. Furthermore, the local client base was diverse, supportive and growing, with nearly 80% of work carried out using Design and Build principles. Values of quality and fairness were firmly embedded in the organisation and the future looked bright. What Dave and Brian had, they realised, was a legacy - sustainable, profitable and enriching to the lives of staff and customers. The question was, how were they to leave it, without selling up and seeing their life’s work dispersed or compromised?
The solution was bold and radical. In September 2007, SDC became the first ‘Employee Benefit Trust’ (EBT) in the British construction industry. It meant that ownership of the company transferred from shareholders – ever prone to ageing, loss of interest or the temptation of a fast buck – to a Trust, whose purpose is the continuing benefit of staff, who share in the profits, and the wider community.
Today the legacy of Dave and Brian looks secure. SDC has continued to grow throughout the recession and staff display the same motivation as the former owners. This is because the effect of the EBT has been to integrate the entire SDC staff as one unit working for the express benefit of the business. The sounds of ‘it’s our business’ and ‘we’re spending our money’ are heard throughout the company represent a very real sign that the EBT is achieving its primary objectives, a business for our clients and a business owned by – and for – all of its employees.
The formation of the EBT has even been recognised by the Chartered Institute of Building, who praised the move at their Research and Innovation Awards in 2008.
The Managing Director’s View
The establishment of the Employee Benefit Trust means that there are no shareholders or owners. The Company owns itself. The Trust can go acquire goods and property, or it can be a means to an end. In our case, it’s more a case of the latter. It acts as a framework for SDC to function.
I don’t think of myself as in charge. I see myself as a facilitator helping others to do their job well. My position is a supportive one. I consider myself fortunate to have ended up as MD, but a lot of staff could have done the same. That’s why the EBT solution was developed. We kept talking about how to be fair to members of staff. We wanted everyone to be inspired by the changes.
This has worked, with the EBT creating a sense of collective responsibility throughout the business. It has affected attitudes from recycling to energy-efficiency. A team recently prepared a presentation about saving money on paper. This feeling of collective ownership is our greatest achievement. Throughout the recession the staff have worked longer hours, which probably has a lot to do with SDC being an EBT.
More importantly, the SDC culture was absolutely right for the foundation of the EBT. It wouldn’t have worked in a lot of companies. SDC has always been run like a family and the departing owners had a desire to leave it that way. They left feeling they had made a big gesture and had given the business to everyone. They got great satisfaction out of leaving that legacy.
How does the EBT work?
No member of staff is excluded from a share in company profits. Entitlement starts the moment a new employee arrives at SDC. Everyone gets the same percentage, which tends to fluctuate between four and six per cent.
The board decides on the actual percentage of profit to be shared out by consulting with its auditors and the rating agency Dun and Bradstreet, which takes a view of the company’s tangible net worth and overall financial health. The board also seeks the opinion of its banks on the current market, annual turnover and the strength of competition. The five directors then decide how much to distribute and how much to add to SDC’s net worth. SDC withdraws the money for distribution before it is shown as profit. The sum is paid out, effectively, as a bonus, which means staff receive more money, but pay more tax than if it were paid as a dividend. The final sum is around the same with either method. Additional benefits for the employees include:
1. All trades operatives given the same holiday entitlement to staff and furthermore comparative pension rights, thereby giving them greater benefits than other trade operatives employed by other contractors.
2. Improved pension benefits.
3. Improved holiday entitlement based on loyalty.
4. Annual profit share entitlement.
In addition the EBT wishes to bestow upon staff benefits which would more usually be enjoyed by Company owners. These would include a more enjoyable work experience along with a feeling of greater security.
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