Worker Cooperatives Are More Productive Than Normal Companies

[Odin]

Link

Quote:magine an economy without bosses. It’s not a utopian vision but a growing daily reality for many enterprises. A close analysis of the performance of worker-owned cooperative firms—companies in which workers share in management and ownership—shows that, compared to standard top-down firms, co-ops can be a viable, even superior way of doing business.

The term “co-op” evokes images of collective farming or crunchy craft breweries. But Virginie Perotin of Leeds University Business School synthesized research on “labor-managed firms” in Western Europe, the United States and Latin America, and found that, aside from the holistic social benefits of worker autonomy, giving workers a direct stake in managing production enables a business to operate more effectively. On balance, Perotin concludes, “worker cooperatives are more productive than conventional businesses, with staff working ‘better and smarter’ and production organized more efficiently.”

Under worker-run management structures, co-ops might avoid the usual friction between bosses giving orders from above, and staff misunderstanding or disputing decisions or resisting unfair work burdens from below. Fusing the workforce and management streamlines operations and saves energy otherwise sunk into training and monitoring the workforce.

Perotin highlights research on French cooperatives showing that “in several industries conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organizing.”

Contrary to stereotype, the European co-op sector is generally as diverse as any other type of ownership structure, including full-scale factories. Though co-op conversion is often seen as a way to rescue “failing” firms, Perotin’s research reveals that in France from 1997 to 2001 more than eight in 10 worker co-ops starting up during this period were established “from scratch,” not derived from ownership transfers in failing companies (compared to new business formations overall, co-ops had a larger portion of brand-new startups).

By prioritizing worker autonomy, co-ops provide more sustainable long-term employment, but not only because worker-owners seek to protect their own livelihoods. If a company runs into economic distress, Perotin says, co-ops are generally more adept at preserving jobs while planning longer-term adjustments to the firm’s operations, such as slowing down expansion to maintain current assets—whereas traditional corporations may pay less attention to strategic planning and simply shed jobs to tighten budgets.

While co-ops vary in form, the underlying philosophy, particularly in Europe, is the co-op as both democratic enterprise and public trust. Often worker-owned firms are mandated—either by law or corporate bylaws—to reserve a portion of assets for longer-term preservation of the integrity of the co-op model. Even if the owners close or leave the business, these indivisible assets are recycled back into future co-op generations or co-op support organizations. The practice seems less common among American co-ops, but in European co-op culture, Perotin observes, “we set up a collective good, we set up an institution for future generations.”

There are far fewer co-ops in the United States than in the established French and Spanish co-op sectors, with only an estimated 300 to 400 US worker cooperatives “employing around 7,000 people and generating over $400 million in annual revenues,” according to the United States Federation of Worker Cooperatives (USFWC). But in an increasingly precarious economy, advocates push worker ownership as a pathway to restore equity and control to labor. Co-ops can boost career mobility and seed homegrown job opportunities, while communities benefit from an ownership structure that keeps capital reinvested locally, not exploited or outsourced to faceless corporate chains.

“We don’t see any reason why this shouldn’t be the way that businesses are preserved as the owner retires, or the way that startups happen,” says Melissa Hoover, executive director of USFWC’s Democracy at Work Institute. Through advocacy and training programs, USFWC helps incubate new co-ops and promotes policies fostering grassroots worker-ownership. In some areas, budding co-ops are evolving into a pillar of community development programs: New York City, for example, recently launched a $1.2 million initiative (update: now raised to $2.1 million) to develop and network local co-ops. Last year California enacted legislation to streamline the legal framework for founding a co-op.

Though the co-op model is not widespread, a few have built extensive operations, such as Bronx-based Cooperative Home Care Associates, home healthcare agency that employs more than 2,000 workers in union jobs upholding living wage and fair scheduling standards. Others include DIY print shops, neighborhood cafes or renewable-energy producers, often founded on a socially conscious ethos.

But could these co-op shops “scale up” to rival major corporate employers? Hoover projects that an oncoming wave of retiring Baby Boomer small business owners could offer fresh opportunities for co-op conversion. Many of these firms are viable, but won’t attract big buyers, so instead of folding, a retiring owner can hand the keys over to veteran staff. “If it’s a buyer’s market,” Hoover says, “why not help the buyers be people who have never had a chance to own a business before—the people who work in them?”

Amid stagnant wages and rising inequality, Hoover adds, “I actually see a competitive advantage in cooperatives, particularly as our world crumbles around us. There’s environmental crises, there’s capital crises, people are starving and homeless in the richest country in the world. And as that begins to filter through the consciousness of everyday people…how do we envision a different system?… This actually is a system that foregrounds member benefit and community benefit in the [organization’s] form.”

For worker-owners, the business proposition is even more straightforward: Max Perez, an employee-owner at Arizmendi Bakery in the Bay Area, discusses in a USFWC report how the co-op helped him overcome the employment barriers that he faced after leaving prison.

“I was really nervous to tell them about my past, but the co-op gave me a chance because they cared more about me than my record,” he writes. A family-sustaining co-op job has enabled him and other workers to cope with the high cost of living and remain rooted in the community. “It’s hard work at the bakery, we don’t always agree, but that’s why I care about this place so much, you know? I want other people to have the chance I did.”

Co-ops may not bring about a revolution, but they do bring a priceless return on investment—giving workers the power to repay one good turn with another.

We have a strong Socialist tradition of worker co-ops here in the upper-midwest, and so I thought this was an interesting article.

[Kinser79]

Not surprising. If the workers themselves own and manage the company they are naturally more productive. Each has a direct stake in the profits of the company. Furthermore, they have no interest in offshoring their own job/profit-generation-machine.

[TnT]

Seems to me there's a disconnect here ...

If co-ops are inherently more productive, then why have the MBAs not turned all companies into co-ops? Clearly, everyone would make more money if it were true.

[Kinser79]

(05-13-2016, 06:58 PM)TnT Wrote: Seems to me there's a disconnect here ...

If co-ops are inherently more productive, then why have the MBAs not turned all companies into co-ops? Clearly, everyone would make more money if it were true.

The answer is rather simple. In a Co-Op situation the profits generated are shared out amongst the workers, in a traditional corporate setting the profits are split up amongst management. Therefore it is not in the interests of Mr. MBA to have a co-op as he'd get a smaller slice of the pie because he has to split it with the plebs.

[Galen]

(05-13-2016, 07:21 PM)Kinser79 Wrote: The answer is rather simple.  In a Co-Op situation the profits generated are shared out amongst the workers, in a traditional corporate setting the profits are split up amongst management.  Therefore it is not in the interests of Mr. MBA to have a co-op as he'd get a smaller slice of the pie because he has to split it with the plebs.

I have heard of this but I am not certain how well this would scale since virtually every company I know has management.  Only a few companies have every done this so it is hard to tell what the limits really are.  It does suggest that the modern regulatory state is necessary since the assumption that everyone is evil clearly is not true.

[Kinser79]

I would argue that the problem with the argument "A regulatory state is necessary because people are evil" runs into a problem with the statement that people are evil. I would say that persons who truly are evil are incredibly rare. Most people, the vast majority (we're talking >95% here), are neither evil nor good, they operate however on the principle of their own self-interest and in the interests of their in-group.

Interestingly, in a co-op situation, the company itself creates an in-group. I do know that in Japan it is seen that the corporation is seen as having an in-group responsibility to its employees to provide them with decent pay and the ability to retire comfortably. Establishing an in-group relationship, and in turn employees are expected to work as hard as possible to make the corporation as profitable as possible.

Where regulation comes into play is between these in-groups and the public at large.

I would argue in large part where the US lost its way was in the ideology that businesses should operate solely in the interests of its owners (share holders) and that is the end all be all of the social responsibility. This makes companies in general, and corporations in particular, sociopathic and destructive to the largest in-group possible the nation.

[TnT]

YOUR answer is rather simple, but in fact, if an enterprise is inherently more profitable and more efficient as a co-op, it would out-compete the traditional corporate organization. It could underprice and out-service the traditional organization.

Profits are not the only feature that makes an enterprise competitive.  In fact, I would argue that a profits-only perspective tends to generate bad customer service and cheap crap product.

You would think that in a co-op, the collective desire to provide good service, make good product, out-compete competitors, and thereby guarantee one's livelihood, would ultimately lead to a business society of co-ops.

Of course, I'm not a believer that co-ops ARE more efficent or more productive, but that's another story.

[Odin]

(05-14-2016, 03:14 PM)Kinser79 Wrote: I would argue that the problem with the argument "A regulatory state is necessary because people are evil" runs into a problem with the statement that people are evil.  I would say that persons who truly are evil are incredibly rare.  Most people, the vast majority (we're talking >95% here), are neither evil nor good, they operate however on the principle of their own self-interest and in the interests of their in-group.

Interestingly, in a co-op situation, the company itself creates an in-group.  I do know that in Japan it is seen that the corporation is seen as having an in-group responsibility to its employees to provide them with decent pay and the ability to retire comfortably.  Establishing an in-group relationship,  and in turn employees are expected to work as hard as possible to make the corporation as profitable as possible.

Where regulation comes into play is between these in-groups and the public at large.

I would argue in large part where the US lost its way was in the ideology that businesses should operate solely in the interests of its owners (share holders) and that is the end all be all of the social responsibility.  This makes companies in general, and corporations in particular, sociopathic and destructive to the largest in-group possible the nation.

FWIW my workplace does a good job keeping us happy with donuts every Monday morning, pizza on the last Friday of the month, and a Thanksgiving dinner on the day before Thanksgiving.

[Kinser79]

(05-14-2016, 03:57 PM)Odin Wrote: FWIW my workplace does a good job keeping us happy with donuts every Monday morning, pizza on the last Friday of the month, and a Thanksgiving dinner on the day before Thanksgiving.

Your workplace is a rarity. Most places I've worked for this was not the case, and where it did happen it was largely the result of management digging into their own pocket.

I happen to know having just paid, out of my own pocket no less, for a "pizza party" for scoring 100% on an inspection from corporate (my boss actually hates that I do this, but then again my store has the most profit, most product turn over and the highest morale so she usually leaves me alone). And doesn't even get into how I came in very late to insure that my overnight people didn't get the nasty pizzas nobody wanted.

[Bronco80]

(05-14-2016, 03:14 PM)Kinser79 Wrote: I would argue in large part where the US lost its way was in the ideology that businesses should operate solely in the interests of its owners (share holders) and that is the end all be all of the social responsibility.  This makes companies in general, and corporations in particular, sociopathic and destructive to the largest in-group possible the nation.

Recently, I've taken it upon myself to explain to certain friends just how perverse the concept of shareholding is.  It essentially consists of a group of people who have absolutely nothing to do with the operations of the firm, yet they are allowed to reap a portion of the revenue generated by the firm on the sole basis of being recognized by firm bylaws and government enforcement as an "owner" of the firm.

Here in Boise we have a grocery store founded here called WinCo, and I try to buy as much as I can there due to the fact that they're employee owned.  I've been futilely trying to convince some of my otherwise left-leaning friends to go there instead of the Whole Foods a couple blocks away--its founder is well known for being a libertarian nut.

[pbrower2a]

The modern world has five classes of potential exploiters:

1. Traditional big landlords
2. Tycoons and financiers, the owners who can enforce poverty upon workers who have no viable alternatives.
3. Bureaucratic elitists
4. Intellectual shysters (from shamans to political hacks)
5. Organized crime

The absence of these elites allow people to live better lives even with a lower level of productivity. If most of the income is going to those elites, then much of the productivity of a society is for naught aside from the elites. A well-functioning capitalist system can function on capitalists getting small margins on huge volumes of productivity.

Marxist-Leninist regimes generally killed or exiled the big landowners and tycoons. But Marxist-Leninist regimes often allowed bureaucratic elitists to take much of the role of capitalists, and because they did not own the property, they could not exploit as capitalists did. Sometimes they simply exploited in different ways, like granting themselves huge salaries while sweating and starving their workers. There's plenty of money to be had as a government official in charge of some ministry charged with production through embezzlement if people get away with it. It is far easier to steal and get away with it if one is a director than if one is a checker-cashier.

Co-ops are private sector, so they are not socialism. If they can operate without bureaucratic elites, then that is one way to avoid some exploitation.

Are they effective? They might not be as responsive as companies with despotic management and ownership. If they have some internal democracy, then they can be very political. But unlike bad business organizations, the worker at the least has a stake in the system other than avoiding getting fired.