An Introduction to Worker Cooperative Business Transition Planning

The Transition Process

Along the Way

Transitioning Governance

Complete the Deal

Worker Cooperative

Sole Proprietorship

• Owner and employees set expectations
• Owner and employees create a steering committee to guide the process
• The steering committee can require a high tolerance for ambiguity
• Original ownership, governance and management structure stays in place until the end of the process.

• The steering committee answers key questions about how the cooperative is governed in conversation with the potential members.
• Cooperative and business education and capacity building for members
• Business Education about the industry, about business finances, about the specific business
• Cooperative Education about what it means to be part of a worker owned business

• All documents are reviewed by an attorney, the owner and the purchasing employees
• Documents are signed and executed
• New cooperative is formed and purchases the old business
• First general meeting is held and new board is elected
• First board meeting and board training
• Arrange for ongoing evaluation and training

Case Study:

Cooperative Care

Ownership

Management

Governance

Ownership

Benefits &

Challenges

Management

Govern

Management

Ownership

Govern

Ownership

Govern

Management

2013

Ownership

Govern

Ownership

Govern

Ownership Transition

Transitioning Management

Ownership

Management

Ownership

• Examine the current business's finances and value
• What does the owner want?
• What can the employees provide?
• Find financing to cover the gap
• Plan for the future- Growth? Development? Expansion?
• Answer key questions about patronage and surplus distribution

• Document current management practices
• Define how the employees want to see the business managed
• Clarify policies and practices in handbooks
• Offer training for managers in a democratic workplace

Management

Benefits

Challenges

Marketing Committee

Personnel Committee

R.N.

Training

• May need to stay on longer to complete the transition (expect 2-3 years)
• May not make as much as an open market sale

Financial Committee

Co-op Transition Costs

• Creates a lasting impact and community institution
• Gets compensated for the business they built
• Helps instill the mission of the business into the new bylaws
• The community retains the services of the business

FINANCE COORDINATOR

Bookkeeping

Payroll

Owner

Co-op Attorney $10-30,000

Valuation $5-8,000

Education $2-$4,000

Planning $2-$4,000

TOTAL $19-$46,000

Costs are often rolled into buy-out financing and vary widely based on complexity

Board of Directors

• 7 board members, all worker/owners
• Elected by members

ADMIN COORDINATOR

Office/Reception

Recruitment

EXECUTIVE DIRECTOR

Management

Contracts

Client Relations

TEAM LEADERS & CAREGIVER TEAMS

Client care

Scheduling

• Education requirements and increased responsibility for the business
• Increased meeting time at work
• Business risk: chance that your job will go away through poor management
• Democracy can be challenging and frustrating

Employees

• Continuation of the business and jobs
• Shared profits and wealth building
• Continue to build a successful business
• More connection to the workplace
• Participatory management
• Worker cooperatives invest in their workers: education and skill building
• Having a challenging and supportive work place

Cooperative Care of Wisconsin

• Home health care cooperative in rural Wisconsin
• 55 Workers, almost all members
• Hierarchical management structure
• Most business is derived from government contracts

What Makes it a Worker Cooperative?

• Democratically member-owned

Own shares + distribute surplus

• Democratically member-run

What Is A Cooperative?

A Cooperative Is-

Key Questions To Answer

Elect a board Participate in management Daily operations

Cooperative Values

An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

Cooperatives- are based on the values of:

self-help

self-responsibility

democracy

equality

equity

solidarity

In the tradition of their founders, cooperative members believe in the ethical values of:

honesty

openness

social responsibility

caring for others.

Q: What’s the difference between a value and a principle?

Worker Cooperative

Ownership

The Seven Cooperative Principles of the International Cooperative Alliance

Ownership

Management

Cooperative Fundamentals

Ownership

Management

Govern

Management

Ownership

Govern

Ownership

Govern

Management

• Is this a good fit for us?
• Can we commit the time to undertake the process thoroughly?
• Do we have strong leadership and support for the process?
• Is there financing available for the deal?
• DO WE (enough of us) WANT TO DO THIS?

Ownership

Govern

Ownership

Govern

A: The co-operative principles are guidelines by which co-operatives put their values into practice.

Voluntary and Open Membership

Democratic Member Control

Member Economic Participation

Autonomy and Independence

Education, Training and Information

Co-operation among Co-operatives

Concern for Community

Ownership

Management

Ownership

Management

• How much compensation does the owner need to make?
• Does the owner want to stay for a while or leave right away?

Sole Proprietorship

A closer look at “member-run”

• Do the employees want to own a business?
• Are they prepared to own the business?
• Can they get prepared?
• Is there already a strong culture of trust and participation?

Ownership

Governance

Management

Governance

Vision, Policy Board

Management

Strategy Manager

Operations

Tasks Members/workers

Agenda

An Introduction to

Worker Cooperative

Business Transition

Planning

Your

Questions

• Introduction to cooperatives webinar- August 22nd
• Introductions-5min
• An Introduction to Worker Cooperatives-15min
• What It Looks Like- The Cooperative Transition Process-15min
• Benefits, Challenges and Key Questions of a Worker Cooperatives Transition-15min
• Questions- 15min
• Introduction to buying the business- September 18th
• Discussion with employees and employers at each business- September 18th
• Outlining next steps- September 19th through 30th

US Federation of Worker Cooperatives and Democracy At Work Network

Kathy MacCrate

DAWN

Joe Rinehart

USFWC

Melissa Hoover

USFWC

Select Machine

Location- Kent, Ohio

Industry- Fabrication/Machine Shop

Number of workers- 8

Year Founded as a Cooperative- 2006

New School Of Montpelier

What Do They All Share?

• Worker ownership
• Cooperative Principles
• What they don't have in common-
• They all look totally different in

how they manage themselves

• But they all do all have a board

Location- Montpelier, Vermont

Industry- Special Education Day School

Number of workers- 40

Year Founded as a Cooperative- September, 2013

The Cooperative Principles

• Voluntary & Open membership
• Democratic Member control
• Member Economic Participation
• Autonomy & Independence
• Education & Information
• Co-operation Among Co-ops
• Concern for Community

Cooperative Examples

What Does This All Mean?

All worker cooperatives are owned by the people who work there, but its up to them to determine how their work and management is arranged*

Equal Exchange Basics

Coop Culture Committee

Audit Committee

Composed of Board members who oversee the creation of a strong cooperative culture

Board oversight of finances

Board of Directors

• HQ in West Bridgewater, MA
• 110 Worker Owners
• Coffee and Fair Trade Products Importer
• 3 Offices and 3 Cafes
• Founded in 1986

• Elected by members
• 6 worker owners
• 3 outsiders from industry and key partners
• Empowered to make governance and policy decisions
• Hires/fires/review Executive Officers

Leadership and Training

Worker Owner Cabinet

Composed of Board members who facilitate educational activities for the cooperative

Elected body to speak to worker owner issues

Office of the Executive Director

Governance Details

Hiring Committee

Ad-hoc committee composed of position's supervisor, department member and one non-department member

Sales/

Customer

Service

Chief

Financial

Officer

Production/

Purchasing

*There are lots of models to choose from already

Equal

Exchange

Arizmendi Bakery

all members

COMMITTEES

• Empowered to make operations decisions
• Make recommendations to the Board (all group) about policy and management

BOARD OF DIRECTORS

Meets monthly

Makes decisions about hiring, firing, governance, and management

Arizmendi Bakery Lakeshore

Arizmendi Management Committee

• Located in San Francisco, California
• One of six Arizmendi Bakeries
• 27 Full time worker owners
• Founded in 1997

SITE & MAINTENANCE

COMMITTEE

Repairs, equipment

FINANCE COMMITTEE

Bookkeeping, reporting, financial oversight

BOARD OF DIRECTORS

all members

Arizmendi Bakeries

PRODUCTION COMMITTEE

Work flow, recipes, standards

HIRING & EVALUATION COMMITTEE

Hiring, evaluation, discipline

COLLECTIVE EVALUATION COMMITTEE

Vision, conflicts, issues