Annual Cooperative worker/owner discussion 2022

Basics of Worker Coops

• Not all cooperatives are collectives, where everyone has one vote
• Some coops, especially bigger ones, might have different model, e.g. elected board of directors
• Thought coops had to be democratic and participatory, but not true. True in most US coops, but elsewhere places that look more like corporations, including bosses.
• Worker cooperatives is more about giving workers ownership over revenue and profit and formal voice in governing of cooperative, which is different than a collective structure.
• A collaborative is also a different thing, more a loose organization, e.g. all 1099 contractors, no employees, no formal relationship, VERY informal
• Important to think through what you're trying to build together, then find the structure that approximates that.
• Are there places where ownership isn't balanced equally across the org?
  • Started w ownership based on sweat equity, number of hours done for coop. Didn't pay for internal work, only client work. Created some imbalance and inequity among members. A byproduct of how things were set up initially rather than an intentional configuration.
• Patronage = sharing profits of the coop among its members
• Profit sharing is incredibly difficult!
• One example: 9-month worker candidacy period, consensus decision-making, patronage based on percentage of hours worked in a given year, buy-in not required up front before becoming a full worker-owner, can be taken out of patronage
• Another example: Longer candidacy period, lower buy-in which can come out paychecks instead of patronage. All decisions you need to make at beginning when writing bylaws.

• Question about setting buy-in: Did you all go through valuation? How did you set buy-in? A very mysterious part! Don't want to make it cost-prohibitive, want it to be accessible, but valuation seems tricky.
  • You can set a buy-in without valuation. Was a thoughtful discussion, wasn't scientific or hard financial. Reverse engineered: if you took $50 out of every paycheck for two years, how much would that be total? Set buy-in like that. Didn't want to wait for two years for someone to be fully bought-in.
  • Boss at one company did a valuation, the profit & loss was established. Consultants helped figure how the biz could afford to go coop. Valuation seemed expensive and wouldn't help people learn much.
  • If valuation is too unwieldy, could figure something else out.
  • One coop set buy-in totally arbitrarily; don't be so low that it's a trivial decision. Think of it as cost of buying a used car. [Jokes about current costs of used cars]
  • Another coop: used buy-in to raise capital, to have enough money to pay everyone and the bills. Worker-ownership not based on completing buy-in; you're a full worker-owner with full decision-making power before you finish paying buy-in
  • Another coop: when you've paid 10% of buy-in you are full worker-owner

• Can you retire from a coop and retain a share, sell a share, get some ownership still?
  • Each worker-owner in one coop has an account, buy-in plus interest; when you leave you get it all back from your capital account. Gotta keep funds available to pay out when ppl leave. Can decide whether patronage goes into the capital account, or into checks, or different ways of distributing patronage.
  • No way to sell shares to someone.
  • Some states have cooperative organizations and by law you cannot sell shares.

• Sustainable Economies Law Center in CA - they work hard to get corporate laws to make more sense for worker cooperatives. e.g. terms for collateral on loans and credit cards. Securities law means if your buy-in is too high, your buy-in is securities trading, not allowed. They also have lots of resources for worker self-directed nonprofits, which aren't the same as a worker coop.
• One company grew to 9 employees, probably will still grow but want to stop at 10. Having hard time finding small biz advice for their size; all of it is about how to get MUCH bigger. Don't want to grow in number, but they don't yet have health care, want to get raises, pay into retirement more, so in that sense do want to grow. Are there resources towards that?
  • Sounds hokey, but SBA locally might be a resource. Some are better than others due to local laws and regulations, e.g. requirements to display worker coop stuff alongside other small biz stuff.
  • Most advice is how to SCALE and get MORE PROFITS, but some are not interested in that.
  • May find resources about having benefits from the US Federation of Worker Cooperatives where as members you can get disability insurance, dental, vision, etc. Retirement accounts, just a simple IRA, low overhead, low maintenance.
  • USFWC has networks of consultants, can help you find consultants on this stuff that know about coops.

• Governance: how flat? different experiences?
  • Sometimes governance is REALLY hard. Difficult with accountability because of flat governance.
  • Hierarchy can be related to the founders.
  • Difficult to fire someone in small hierarchy; scaling makes it harder.
  • Sometimes governance isn't the hard part about being flat; more about accountability, standards, how to enforce them
  • Huge amounts of trust needed, but culture was such that whoever was bringing in less money felt awkward, weird, needed to hustle. People bringing in more money were totally cool with status quo. Higher earners have to be cool with being the higher earners.
  • Structure was not flat before becoming a coop. Early in the company, wasn't any strong management. Started having a management team at some point in the non-coop company. But that didn't mean that accountability was any easier there; differences in management styles and expectations. Pushes to be either tougher or super-friendly, but neither worked well. ** Managers can commit and build more participatory and empowering ways of management. Tried to engage people more, find out how they want things to run. Then when worker ownership was on the table, people were more ready to think like worker-owners
  • Accountability: pushed hard for reviews, want professional direction, want to know how they're doing. Now with more people thinking about how biz runs, developed a 360 performance review process. List of questions: does this person make your job harder or easier? Plain English questions.
  • If 360 review is not positive, then what?
  • Had someone who had major problem in one area of work, did great in the others. People had to be begged to write authentic reviews on that person. Managers get the complaints. Really challenge people to put complaints in the reviews (which are anonymous.) Then had honest conversation with person and understood that they have invisible disabilities, so made room for a 4 day work week. Just started, don't know how it's gonna work, but is great to understand limitations and make accommodations.
  • Another coop: Regret that invisible disabilities weren't acknowledged or understood enough until they developed for founders. Wish pay was equal salaries, not based on number of hours worked.
  • Accountability is difficult when there's no incentives or disincentives to meet agreed-upon standards
  • That was a huge benefit when we switched and started doing performance reviews of owners; before was only for part-time employees when there were problems. Did reviews with each other and that shifted the results.
  • Hard to see your income decreasing!
  • Always imbalances in who can speak up about problems, no matter the structure. Always present in those performance evaluations, incl cultural backgrounds.
  • A critical part: we do have paid managers who can't be on board of directors. That's how power and leadership is balanced in the org. Managers have mandate to help biz run well, not about the policy issues. Bug ppl to hold each other accountable, take private feedback and put in manager review.

• How do you recognize different forms of contribution? Any sort of compensation structures that recognize phases of importance or phases of contributions.
  • They couldn't do the rest of the work without you even if your work happened at very beginning.

• For structures that don't have managers or supervision, how do you receive and offer support and accountability?
  • Have buddy system, but everyone does it different, doesn't work out well
  • People whose personalities lend themselves more to management wind up taking a lot of the responsibility and have a lot more say.
  • Managers should work for the people they're managing. A lot of paid but emotional labor to help them navigate systems, understand expectations. Managers are hired by the board, need to be in service to other workers.
• How does that translate from individual style to organizational practice?
  • Even if there are no managers, there's ways to put that work in your job description.
  • People conflate difference between accountability and structure. In hierarchy accountability can be non-existent. In non-hierarchy you can create structures to foster accountability. If that was part of people's workplans, hierarchy wouldn't lead more to accountability.
  • Sometimes policies and governance were easy, but management issues were NOT there