Less leadership, more democracy: lessons from a craft brewer’s management crisis

Original Content: The Conversation, in partnership with the AXA Research Fund

Craft beer brewing was born back in the 1980s, and while the start was slow, it’s since become a big business. One of the success stories is Scotland’s BrewDog, which was founded in 2007 by James Watt and Martin Dickie. Fifteen years after they pulled their first pint, BrewDog has become one of the sector’s leaders. In 2020, the firm’s overall revenues grew by 10%, online sales by 900% and the gross profit margin to 48%. All this despite the pandemic and the fact that the majority of its 100 bars were closed for long periods over the year. The company is currently valued at close to £2 billion and employs more than 1,600 people globally.

BrewDog grew thanks to crowdfunding support from thousands of small investors and a reputation for doing business with social and environmental values. Aiming to distinguish itself from traditional corporations, the company sought to become the best employer in the world and refers to its employees as our people, the beating heart of our business, and the reason we exist.

Unfortunately, despite such rhetoric, 2021 was a turbulent year for the company, triggered by allegations from former employees that there was a bullying culture. The allegations were made in a June 2021 open letter signed by more than 300 former and current workers. They accused the company of creating a rotten culture in which growth is pursued at all costs, and employees are left feeling burnt-out, miserable and afraid to speak out.

Certification, yet troubling questions

Ironically, the letter was published just four months after the firm was certified as a B Corp, with the workers’ dimension receiving the highest score. The certification is aimed at businesses that meet high standards of social and environmental performance, transparency and accountability toward generating a positive impact on its stakeholders – workers, communities, customers, suppliers, and the environment.

The accusations and the company’s move to offer attractive financial terms to private equity groups left many of BrewDog’s 18,000 crowdfunding investors deeply worried. The organisation that runs the B Corp certification, B Lab, also raised concerns.

In response, the company apologised and announced plans to conduct an independent review of the allegations. It concluded that mistakes were made, and the company would enact measures to address them. But it was too little, too late. A month after the announcement, a BBC documentary, The Truth about BrewDog, brought the accusations back to the headlines. Many were directed at the company’s leader and co-founder, James Watt, who had allegedly attempted to pressure former staff from appearing in the documentary.

‘The Truth about Brewdog’, BBC.

In May 2022, Watt announced that he would donate a fifth of his personal shares to an employee trust providing share options to around 750 of its 2,200 staff. Despite being a limited form of employee ownership, he described it as a radical move and very much about ownership, about building a new type of company and about giving back.

Limitations of leadership

The BrewDog case raises important questions about the limitations of certification systems and the potential of employee ownership. My PhD research involved an in-depth comparative case study of four leading Brazilian B Corps during 2015, combining 57 interviews of leaders and employees with observation-led research and document analysis, including the companies’ B Impact Assessment reports. The enquiry revealed three key points:

• The role of leaders is decisive in shaping the culture of these companies;
• However, certification is not always followed by plans to address remaining critical gaps, particularly with regards to the companies’ governance processes and relationship with workers;
• Corporate governance is key to achieving a balance of purpose and profit.

This raises the question as to whether improving leadership is enough or whether bringing workers to the centre of decision-making is what will make a difference. Research carried out with a group of small and medium-sized B Corps shows that those who had some form of ownership and/or governance model shared with employees presented higher levels of engagement with external stakeholders. Having a stake in the company made employees feel more invested and interested in developing positive relationships with customers, suppliers, communities, and the environment.

The importance of employee ownership to reinforce social mission is perhaps something that the B Corp movement could be more explicit about. For BrewDog, it’s still a timid step but appears to be a move in the right direction to prioritise collective democracy over individual leadership in the workplace.