Worker-Owned Co-ops Redefine Office Politics
“We won’t have achieved true democracy until we have workplace democracy.”
—Tim Huet, author and attorney
Imagine you had no boss, no one ordering you around or thinking that his opinions were better than yours. You’d probably be a much happier and productive worker. You might also be a more engaged citizen. At least, that’s what those in the worker-owned co-operative movement believe. They say that by introducing democratic principles into the workplace, we can deepen respect for democratic ideals in the broader society. Instead of wallowing in complaints, the co-operative visionaries are building the world they want to see—one business at a time.
Work sucks. Surely you’ve heard that before. Chances are you’ve muttered it yourself, a grumbled complaint at the end of a long, frustrating day. Let’s face it: The nine-to-five grind can be grueling. More often than not, the dissatisfaction stems not from the work tasks themselves—whether writing reports or painting walls—but from the very atmosphere of the workplace. For many employees, there exists a disconnect between effort and reward; too many hours result in too little pay. That frustration is compounded by the insult of capricious office rules and arbitrary management decisions. Most employees are given little say over how to do their jobs, and for many people—who instinctively feel a powerful sense of their own agency—the daily orders from the higher-ups can feel like never-ending abuse.
The problem may not be that your boss is a jerk, but that you have a boss in the first place. Unless, that is, you are among the select number of Americans who are members of worker-owned and worker-managed co-operatives. In the breakneck, competitive environment that is the hallmark of U.S.-style capitalism, worker-owned co-ops are rare breeds. While they have managed to carve niches for themselves in many European economies, in the United States worker-owned co-operatives are hard to find. According to the U.S. Federation of Worker Co-operatives, there are some 300 enterprises in the country that meet the definition of a “democratic workplace.” Employing an estimated 3,500 people, these companies generate about $400 million in sales a year. Not bad—until you recall that the United States is a $12 trillion economy.
Those involved in worker-managed enterprises say that co-ops—due to their unique success—have the potential to exercise an outsized influence over the larger economy. By providing a working model for how business can be at once economically profitable and socially responsible, these enterprises prove that democratic decision-making can be preferable to the traditional model of top-down hierarchies. In business, just like in politics, democracy is often the key to success.
Proponents also say co-ops can help drive the transition to a local, green economy. For co-ops are by definition locally rooted: If the workers control and manage all the capital, there is no such thing as absentee ownership. They are also—by temperament, if not intent—green. Because co-ops have no incentive for constant growth, they more efficiently use resources. If a worker can’t have more than one vote per share, there’s little reason to spin off a new franchise, and the business stays within the sustainable limits of the local environment. The demands of democratic decision-making keep co-operatives at a human scale, one that doesn’t heedlessly gobble up resources from around the world.
This living example of democratic and ecological business practices is an essential part of the road map to a more sustainable and just future, say co-op promoters.
“I think a lot of the progressive movement is about protesting and criticizing,” said Tim Huet, a writer and attorney who has been involved with several successful co-ops, among them the Bay Area-based Arizmendi Bakery and Rainbow Grocery. “If that’s what you’re doing all the time, that’s what you become good at. But that’s not what we need to create a better society. It’s about asking, ‘How do we bake bread for our community and how do we build homes for our communities?’ And doing it daily.… If we can’t offer anything that’s better, then criticizing is not going to get us anywhere. We need to develop the habits of mind that are going to be part of that better society.”
For Huet and other co-operative pioneers, there is no better way to encourage those progressive habits of mind than by guaranteeing democratic control over the workplace. One of the most common complaints from employees is that their job fails to give them respect. Co-operative members say that by offering every employee a say in how to run the company, individuals at co-ops are given not only responsibility, but the respect that comes with it. Instead of being told what to do, workers themselves decide how they will do it. An informed and self-directed worker is a happy worker; and a business full of happy workers is a successful one.
“The bad thing about employee mentality is that you have no power,” Huet told us. “The good thing is that you have no responsibility. If you are a worker-owner, you can’t just sit back and criticize. You have to come up with solutions. I think people learn a lot from that.”
The idea behind co-operatives is elegantly simple: workers should own the means of production. That phrase, with its unmistakably Marxist tone, might suggest that co-operatives are grounded in some kind of anti-business ethic. Successful co-ops are anything but. Their very reason for being is to provide goods and services to their clients and communities. There are co-operative restaurants, design and printing companies, bike shops, farms, coffee importers, magazines, and light manufacturing and high-tech enterprises. The basic purpose is to exchange products for money. Co-operatives put a twist on that traditional market ideal by asserting that worker satisfaction, rather than merely profits, should be the baseline of success.
Isthmus Engineering of Madison, Wisconsin, is one co-op that reveals how such success works. Started in 1980 by four young engineers, Isthmus today is a $12 million company that specializes in custom-built manufacturing equipment for big corporations such as John Deere, Proctor & Gamble, and Duracell Batteries. Though the enterprise has grown, it remains committed to its founding principle of being employee-run. Of the 49 employees, 25 are worker-owners; most of the others are on their way to becoming owners, a process that takes several years. The day-to-day management of the company is purely non-hierarchical. There are no supervisors or bosses telling other people what to do. Rather, the company organizes itself into project-based teams. This fluid structure, say Isthmus employees, gives each person a feeling that their contribution is important and their opinions respected.
“People just like the fact that they have control over their workplace,” John Kessler, one of the Isthmus co-owners, told us. “I think a lot of frustration and stress in normal jobs is because people are just told or given an assignment, and are not given the power to affect how they do that. When we have a situation when somebody comes up with an idea, we listen to those ideas, we jump right on them.… People work harder because they aren’t being told to work hard.”
Probably the most well known example of a worker-owned enterprise is the neighborhood food co-op, where shoppers are part-owners and often part-time employees as well. But as the Isthmus experience shows, co-operatives come in all shapes and sizes. There is no template—and that is the point. At its essence, a co-op is a creative arrangement that gives individuals power over their own actions. In practice, this means that each co-operative has to figure out on its own what kind of ownership and decision-making arrangement works best for its members.
Chroma Technology is an example of the different forms co-ops can take. The company does not perfectly fit the non-hierarchical ideal. There is a measure of seniority. Veteran employees hold a greater number of shares in the company, and so get more voting rights; it’s not a “one person-one share-one vote” system. But neither does Chroma fit the description of an ESOP—or Employee Stock Ownership Plan. ESOPs are the most common form of employee ownership, a system in which the workers use their pension funds to buy and then control all of the shares in the marketplace. United Airlines is one of the best-known examples of the more than 11,000 ESOPs in the United States. But while employees with stock ownership plans may boast a measure of ownership, they lack the degree of worker control characteristic of co-operatives; there remains a management class that oversees the work.
Not so at Chroma where, like at Isthmus, employees are in charge of day-to-day decisions. That worker direction probably explains why Chroma—a $17 million manufacturer of optical lenses for medical equipment—has been ranked one of the best companies to work for in the state of Vermont.
“Ownership is clearly not enough from my perspective,” said Paul Millman, one of the Chroma founders. Seventy members of the firm’s 82-person staff are employee-owners. “I can own shares in AT&T, but I don’t participate in the decisions at AT&T. Ownership is a good thing at any level. Ownership is a good thing for employees. But it’s only a small step in terms of the real ownership society. The real ownership society has people participating in the decisions that owners get to make.
“[At Chroma,] people basically make decisions regularly, every day, and so they are part of the decision-making process constantly. Our profitability is really dependent on our efficiency. And I think that worker-owned co-ops are more efficient.”
Millman says that the co-operative culture relies on frequent meetings; nearly every decision requires a multi-stakeholder conversation. He says that while the discussions can be long, the company makes up for the time by having all employees buying into the final decision. Since everyone is present when the decision is made, there is no post-decision quibbling; people get right to work.
Isthmus engineer Kessler sees the same dynamic at his co-op. “It takes a long time to make decisions, longer than it would take in a hierarchical structure. But I think we end up with a much better result.… We hire electricians, programmers, engineers, professional people who are all coming from conventional corporate business. It’s a different atmosphere. But once people get used to it, they wonder why we are the only ones doing it.”
A good question. If co-operatives work so fabulously, then why aren’t there more of them in the United States? After all, the co-operative model of worker ownership and management is much better established in Europe. There are an estimated 1,000 co-ops in the United Kingdom, and more than 1,500 in France. Italy has a well-developed co-op system, as does Spain, where the Mondragón Co-operative in the Basque region is actually a federation of 150 smaller enterprises making everything from rice cookers to refrigerators. The Mondragón Co-operative is the seventh largest corporation in Spain.
U.S. co-operative members offer a range of explanations for why the system hasn’t developed more here. Both Millman and Kessler offer cultural reasons for the small number of co-ops. Simply put, we live in a more aggressively competitive culture, one that puts a premium on individual success. Few American entrepreneurs are willing to subsume their ego to the imperatives of collective decision-making. “A consciousness that focuses on the common good is not something that is encouraged in the U.S.,” Millman said.
There are also technical and legal obstacles to forming co-operatives, according to Huet. For example, the laws around co-operative ownership are illdefined, creating a barrier for startups. And because the laws are murky, banks often hesitate to make loans to co-ops, choking off capital.
All three co-op veterans agree that simple ignorance is perhaps the biggest obstacle. The concept is foreign to most people, and so, when starting a business, co-op arrangements are not something entrepreneurs consider.
“It is not the first thing that comes to mind,” Millman said. “It’s not even the second or the third thing that comes to mind when people set up companies.”
That may be changing. Huet says that there has been a sharp increase in the number of co-operative startups in the last decade. He attributes that increase to greater public awareness. As more and more co-ops distinguish themselves as successful enterprises, the number of new businesses considering organizing as co-operatives increases.
“I think when people hear the idea, it very much appeals to them,” Huet said. “We hire people all the time who have never heard of worker co-ops, and once they get in they say, ‘This is great.’ … Our success rate, compared to capitalist enterprises, is pretty good. But we don’t have that same exponential growth as capitalist industries.”
Co-ops’ day-to-day success occurs through the simple task of providing quality goods and services, and doing so in a way that creates especially happy employees. But co-ops’ potential benefits stretch much further. They don’t just contribute to the well being of their member-owners and customers, but also to society at large. Co-op proponents say that if their numbers were greater, the economy and the environment would be in a much healthier state.
Strengthening the country’s manufacturing base would be one result of a growth in co-ops. If there were more co-ops, there would be less offshoring. As Millman points out, no co-op member is going to vote to send her job overseas. Also, more co-ops would mean higher wages, for the obvious reason that the workers themselves determine their salaries.
There are also environmental benefits to co-operative arrangements. While many co-ops may not have explicit ecological worldviews, they are by nature more sustainable, says Huet. Whereas capitalist enterprises keep growing for the sake of growth—the “ideology of the cancer cell”—co-ops have no incentive to grow beyond their immediate size. This means that co-ops are better equipped to help manage scarcity when twenty-first century society faces shortages of critical resources.
“Take a bakery,” Huet said. “If there is one person owning the business, and they pay $11 an hour even though each worker brings in $33 an hour in value, they are taking $22 from each worker. There’s a huge incentive to create another bakery. But if a co-op creates another bakery, then each worker does not earn more.… Co-ops actually get to a certain homeostasis, and then they stop growing. Which is exactly what we need to have a sustainable economy.”
Beyond these benefits to the economy and the environment lies a less tangible, but more profound good: A deepening of democratic principles throughout society. Co-op proponents say that democratizing the office and the shop floor can have a ripple effect, strengthening respect for the ideals of collective decision-making and consensus.
The workplace is famously undemocratic. There is the boss, and there are the bossed-around. But it does not have to be this way. If we truly believe in freedom of association, freedom of speech and the right to “petition for a redress of grievances” in the public square, then why should we abandon those fundamental democratic ideals at the workplace door?
What would happen if you translated democratic principles to the office? Huet, for one, believes the effect would be nothing short of revolutionary.
“I don’t think there is much hope for achieving even limited political democracy … if you don’t have the everyday democracy of workplace democracy,” Huet has written. “For me, worker co-operatives are not simply businesses; they are democracy demonstration projects, schools for democracy, laboratories for democracy … If you want peace and democracy overseas, you should care fiercely about establishing economic as well as political democracy domestically.”
Most of us spend about half our waking hours at work. By encouraging democratic habits of mind in the workplace, co-ops can help spread democratic practices to other parts of our lives. In doing so, they will help create the kinds of political, economic, and social structures needed to preserve the planet and reduce social inequities. As this and other stories in the book show, democracy is the best antidote to despair, injustice, and environmental destruction.
“It’s like democracy, you know,” Millman said, reflecting on Chroma’s structure. “There are easier ways of doing things. But in the final analysis, it’s the most rewarding.”