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Reasons Why You Might Want to Start a Co-op
- Cooperatives exist to meet their members’ needs. Their focus is on service to members, not on bringing a return to investors.
- Cooperative members are not penalized for working together in a cooperative business under US Tax Code; therefore many cooperatives enjoy tax advantages.
- Cooperatives are owned and controlled by their members. They help keep resources in the members’ community and are guided by members’ values.
- Decisions made democratically by the membership provide a strong direction that is supported across the organization.
- Profits are returned to members so members benefit from the business they do with the cooperative.
- Cooperatives contribute to the economic stability of their communities.
Reasons Why You Might Want to Think Twice Before Starting a Coop
- Sometimes cooperatives have difficulty gaining access to the capital they need without being able to bring on investors who have a seat on the board.
- Cooperatives need to invest time and money in supporting their democratic process – educating members about key issues, holding meetings, and responding to member concerns. This can be expensive and time consuming.
- Sometimes there are legal limits to the scope of operations or membership for a cooperative.
- Cooperatives are only as good as their members ask them to be. When members stop investing time and energy, cooperatives can reduce the benefits they provide to their members.
Self-Managed Business
A worker co-op is known as a self-managed business because it is the workers who manage it themselves. In the 1970’s Jaroslav Vanek and Christopher Gunn were dissatisfied with a lot of the literature on this topic. They felt that most texts were written in complex language that wasn’t accessible for many readers. Because of this, Vanek and Gunn wrote the following in order to outline basic and key points about self-managed businesses:
- "The self-managed business is owned and run by the people who work in it – and by no one else. And any money the business makes (after costs and taxes are paid) belong to these workers. The self-managed business is democratic. That means that all of the workers, no matter what their skill or education, make the decisions on how the business is run. Each worker has a vote, and no one has more than one vote. So only those who work in a self-managed business own it, vote in it, and get money out of it.
- The self-managed business tries to teach. It teaches its workers all of the jobs, and shares what it learns with the community. And it does not discriminate because of race, sex, age, or any other reason.
- The self-managed business does not give up control of its work in exchange for money. Every business needs money to get started and keep running. (This money is called capital.) Self-managed businesses need capital, too. And they pay interest for using this capital to anyone who lends it to them – whether it is the government, or a helping agency, or even the workers themselves. But it does not give control of the business to anyone just because they loan the capital. It gives this power only to those who actually work in the business. In other words, the self-managed workers “hire” the capital. Most other business run the opposite way – the capital hires the workers and controls their work.
- Workers in a self-managed business can loan capital to it. But they do not have to. If they do, they are paid interest for it. But again, it does not give them any special rights or powers.
- Every business must keep getting capital in order to keep running. The self-managed business does, too – but it must do it very carefully, so the workers keep control. A self-managed business can put the money it makes back into the business, or start new self-managed business. But, if it does, it must pay interest to its workers, who earned that money.
- Because they are a new kind of business, self-managed businesses usually need help to survive. This can come from a “shelter organization.” Such an organization can help self-managed firms help each other. It can help find money to start new self-managed businesses. It can help self- managed firms to improve themselves and run better. Finally, it can help all of the self-managed firms to unite as part of a notional self-managed economy. Such organizations should be developed for each region of the country, and then tied together on the national level.
Worker Ownership
These are the basic ideas of self-management. They can help working people to take control of their own lives. They can help us learn to work together, in cooperation and democracy. By managing our work ourselves, we can give ourselves more job security and stop being used for the profit of others.
In these co-ops, the workers own the business. However, they own the business together equally. No person can own more of the co-op than another person (and therefore have more of a say in it).
When a person enters into a worker co-op, they invest a set amount of money into the business. This is referred to as a Buy-in. This money can be paid all at once or over an extended period of time.
By doing this, and becoming part of the co-op, a person gets a Share of the cooperative. Every worker-owner, or member, of the cooperative has one equal share of the cooperative. No worker-owner can have more than one share, no share can be worth more than any other, and no shares can be transferred to anyone else for money or anything else.
Workplace Democracy
Main article: Workplace democracy
While the workers are the owners of a co-op, they’re also the ones in charge of it together. These cooperatives operate under the One Worker, One Vote principle.
Major decisions are discussed and decided on by workers. This can range from the cooperative business plan, who to hire, what hours to be open, worker salaries, how to distribute surplus, and much more.
Some worker cooperatives use majority-based decision making. This means that only half plus one of the workers need to agree on something. However, others adhere to a consensus decision-making process. This practice means that everyone has to consent to a proposal for a vote to succeed (however,some co-ops that use consensus also have super-majority fall back options if consensus cannot be reached).
What workers debate and decide on can vary from co-op to co-op, and the differences are certainly exaggerated depending on the size of the cooperative. However, the general rule persists: the workers are in charge.
Workplace democracy manifests in many ways in co-ops. Major decisions that affect the business as a whole and the workers are almost always decided on by all-worker assemblies. However, especially in larger cooperatives, actions can be taken and decisions made by small groups of workers who are delegated responsibility by the other members. This can take place in shop-floor committees, work teams, and more. This all will be examined more carefully in later sections.
When they are smaller, worker cooperatives often function more like collectives than cooperatives. (See: Differences between worker cooperatives and collectives.) This means that they have less hierarchy and the worker-owners have more direct control over every part of the co-op. As a worker co-operative grows or becomes more complex/specialised (usually around 8-15 people), it becomes more and more difficult to keep everyone informed and the level of interaction needed for decision making becomes too high (there is also the issue of newer members not being 'experienced' enough). Therefore, larger worker co-ops generally adopt a model that allows them to remain cooperative but manage their size via either higher levels of hierarchy (where members elect people to represent them on the co-op's board or management teams), or semi-autonomous work teams (teams that work collectively together on specific aspects of the co-op's businesses), or both.
For a much more detailed look at different worker co-op structures and how worker co-ops address growth, please see this article: "worker co-op structures."
Comparison images of worker co-ops vs. collectives
Comparison images of worker co-ops vs. collectives
[edit] Examples of Worker Cooperatives
Here are some examples of contemporary worker coops:
These are spotlighted conversations from this page's Discussion Area.
- What are some advantages to worker ownership? How can these advantages be employed to strengthen a worker co-op as well as the co-op's community?
- What are some of the unique challenges that worker co-ops face? How have worker co-ops addressed these challenges (successfully and unsuccessfully)?
See Also
- Membership Rights and Responsibilities in Worker Cooperatives
- Reasons to consider worker cooperatives
- Worker self-management
- List of Worker Cooperatives in the United States
[edit] External Resources
- A "toolkit" for starting worker-owned home care businesses: http://www.directcarealliance.org/_data/n_0001/resources/live/DCA_coop_toolkit.pdf
[edit] References
The introduction to this article was originally adapted from the Wikipedia page on worker co-ops.
- ↑ Ridley-Duff, R. J. (2009) "Cooperative Social Enterprises: Company Rules, Access to Finance and Management Practice”, Social Enterprise Journal, 5(1), forthcoming
- ↑ ICA (2005) World Declaration on Worker Cooperatives, Approved by the ICA General Assembly in Cartagena, Columbia, 23rd September 2005.
- ↑ As quoted in: Zwerdling, Daniel. Workplace democracy; a guide to workplace ownership, participation & self-management experiments in the United States & Europe. New York City: Harper Colophon, 1980.
Structure Key
The Collective
When people first come together informally or create a small worker co-operative. They often start as collectives; Governance and Management can be very difficult to separate, usually all members are at the same level in terms of Governance, formally as Directors (or act as if directors) and operate using a flat management structure (everyone gets an equal say on issues). (Also see: differences between worker cooperatives and collectives.)
Some people may take the 'lead' in a certain areas or activities but this may swap and change depending on the circumstance. I've tended to see this structure from 2-10 people.
Growth
As a worker co-operative grows or becomes more complex/specialised (around 8-15 people, some last even longer) it becomes more and more difficult to keep everyone informed and the level of interaction needed for decision making becomes too high (there is also the issue of newer members not being 'experianced' enough).
At this point two things happen:
Firstly; Governance moves to a system of representation where some members are elected by the membership to represent their views and these representatives are delegated to make certain decisions on their behalf. Some co-operatives choose Directors on a completely open annual elections basis (at AGM), others staggered elections 3 one year 4 the next etc. Others have certain designated places for certain roles within the organisation (for example the Finance role).
Issues with this approach like any form of representations, can break down if: members don't feel their views are represented or there is a lack of clarity on level/type of decision that has been delegated. Co-operatives UK is currently writing a guide called "Simply Governance" so watch this space for more information.
Secondly; Management changes and this can change in variety of ways:
Self-managing work teams; Usually this means, as co-operatives grows they split into teams; based on areas of the business: Cafe/Shop, Sales/Designers/Printers, Warehouse/Drivers/Buyers etc.
These become self-managing collectives, who then nominate representatives from their own team to the Governing Body
Hierarchy system
Usually this means a general manager is chosen; sometimes elected or specifically recruited/selected by the governing body. They are accountable to the governing body, and have been given authority to manage the organisation. In larger co-ops there may be multiple levels of management. A term used for this relationship is; "Management is not a status but a function"
Even larger structures
Suma is the largest worker co-operative in the UK with around 130 employees. They operate on an equal pay basis and don't have a CEO or executive managers in the normal sense of the term. They also multi-role; which means members work in a least two different "Function Areas" of the Business.
Suma is governed by periodic General Meetings for all the membership, and an elected Board of Directors. On the Management side; the business is divided into "Function Area" Such as: Buyers, Warehouse, Drivers etc.
These like the above operate relatively autonomously with each area having a "Functional Area Co-ordinator" who are elected to co-ordinate an area and come together with other "FACs" to co-ordinate operations as a whole.
Suma is the largest using this structure, and there are a lot of interesting theories about democratic management and social relationships (how far can you go). One theory is Dunbar's number.
"A theoretical cognitive limit to the number of people with whom one can maintain stable Interpersonal relationships...link
This says that numbers larger than the Dunbar number generally require more restrictive rules, laws, and enforced norms to maintain a stable, cohesive group. No precise value has been proposed for Dunbar's number. It has been suggested it lies between 100 and 230, with a commonly used value of 150.
It might be no co-incidence that Suma has reached this size. Is there a natural size for a worker co-operative? What should a worker co-operative do it if wishes to retain a democratic management structure but grow beyond 150? One suggestion is for the co-op to divide or create off-shoots, forming "Consortia" Corporate Group Structures of smaller co-operatives that share common approaches, branding and inter-trade with each other.
Mondragon Example
Some might say the Pinnacle of worker co-operative achievement is Mondragon in Spain. Governance and Management in Mondragon is very different to UK worker co-operatives; for a start it employs 85,066 people! It also has a very standard management hierarchy (although there are maximum pay ratio's and most managers are trained from within).
Mondragon is not like a traditional PLC either and operates more like an Economy in itself. Mondragon is a type of Consortia mentioned above, where its member co-ops have their own bank, social security, education, research and development services. All the 250+ businesses are split into Group; Divisions; Units. Each individual company is semi-autonomous and may leave the Mondragon Group (and some have).
Modragon's Governance is also on a representative system with workers voting for Board Members of their individual company, who in turn vote for the next level up
This below diagram illustrates one companies relationship to the overall structure.
