Fenix International’s Lyndsay Handler relates how the ENGIE-owned solar energy company overcame barriers to introduce an employee share ownership scheme
Fenix International, a pay-as-you-go solar home system company that serves markets in East Africa, became the first company to make a pay-out under a unique inclusive employee ownership programme in the region earlier this year.
Under the scheme, which we introduced at Fenix in 2016, all employees received "Fenix Flames", or shares, according to their seniority and length of service. These Flames were designed to represent a level of ownership and guarantee a pay-out in the event of acquisition or public listing. When we finalized our acquisition by global utility giant ENGIE in spring 2018, we were able to distribute the financial benefit to over 350 employees based in Africa. Some of the longest-serving members of the team have received two to five times their gross annual salary.
Getting to this point, where all our employees were given a stake in the company, was by no means an easy road
Getting to this point, where all of our employees – from cleaners, cooks and guards to sales managers, call centre staff and data scientists – were given a stake in the company’s growth, was by no means an easy road. Our belief that it would have a transformative effect on all areas of our business is central to the story of how we extended inclusive ownership to all our employees in a market where the idea is all but unheard of.
When Fenix first came to Uganda in 2009, privately owned companies did not commonly implement broad-based employee ownership programmes. In addition to the belief that they were not valued or understood, the discussion in most boardrooms was that there were many tax, legal and accounting challenges that came with giving equity to all employees. While many members of our leadership team believed in inclusive ownership from the early days, we decided this was not a battle we could immediately fight.
But we were shaken out of this view at a team meeting in 2015, when one of our original employees in Uganda stood up and asked a simple question: could Fenix employees buy shares in the company to help the business grow? He said the team believed in the company, wanted to help with fundraising efforts, and to become shareholders in the company they had helped to build. That moment was powerful – and somewhat unexpected – to see in a young start-up company in Uganda. Yet his sentiment was loudly echoed by the team, and by the end of the meeting there was widespread enthusiasm to grow the company by turning employees into owners.
Over the year, we spent countless hours designing a model for inclusive ownership that we could present to the board of directors. We faced challenges on all fronts. Executives, partners, advisors and investors told us that employee ownership would not be understood; lawyers told us there would be numerous insurmountable legal challenges; accountants said that there would be prohibitive tax issues and that the costs of administering the programme would outweigh the benefits of giving equity to hundreds of employees across multiple countries around the world. Even some mentors questioned our belief that giving ownership today would lead to value creation tomorrow.
We firmly believe that employee ownership programs like this increase the total returns to shareholders
But in 2016 after reviewing countless proposals, excel spreadsheets, legal opinions and tax analyses, we presented the proposal to our board of directors. Given the passion of the leadership team, the feedback from the broader team and our conviction that this would drive value for our investors, the board approved it.
Following the years of hard work to carefully craft the Fenix Flames programme, we have witnessed first hand the many impacts it has had. Most notably and against common wisdom, we firmly believe that employee ownership programs like this increase the total returns to shareholders. This sense of ownership often leads to employees being more willing to contribute ideas and feedback, from developing new products to identifying new markets, anticipating challenges and seizing new opportunities.
Several customer service representatives have made suggestions on how to improve the efficiency of our call centre; sales team members have made proposals to increase the quality of our new customers and reduce the cost of sale. We have seen significantly increased employee loyalty, attraction of further talent, and exceptional employee performance. Six months before launching the programme, our retention rate was 90.04 percent; six months after announcing Fenix Flames, it had risen to 95.49 percent.
Although more common in the West, with about 20% of private sector employees in the US owning company stock, and 32% of British employees involved in some form of employee ownership scheme, these programmes are largely unheard of in Africa. We were implementing this scheme in a country where benefits such as employee health insurance are unusual; communicating something as unprecedented as ownership was a challenge.
So, creating a version of employee ownership that works in Africa was not easy, but we hope it stands testament to the possibility that companies in every market can create a version of the idea that suits their business – and can then benefit from its impact. We are investing time in the year ahead to learn more about other employee-ownership models, and to work with interested companies who are looking to create their own. The results we have seen since implementing our Flames scheme have made all of the effort worth it. But more than that, it has validated the power of employee ownership wherever it occurs in the world.
Lyndsay Handler is CEO of Fenix International.