Can a company succeed if no one is in charge?
“Now, comrades, what is the nature of this life of ours? Let us face it: Our lives are miserable, laborious, and short. We are born, we are given just so much food as will keep the breath in our bodies, and those of us who are capable of it are forced to work to the last atom of our strength.” —George Orwell, Animal Farm
AUSTIN, Tex.—The pastry chefs were unhappy. They had to follow the whims of the head baker, they weren’t allowed to take bathroom breaks, and the hairnets they had to wear were truly unflattering.
Inspired by an anti-capitalist documentary, they came up with a solution: no more bosses. The pastry chefs quit their jobs and joined together to form a vegan-donut co-op, where they could bake sweets free from the strict confines of the top-down corporate world.
But life without bosses was not all they had hoped. Instead of one boss to bother them, they each had four colleagues doing so. Baking sessions devolved into shouting matches as personalities clashed. Meetings had no order, and conversation would hop from farmer’s markets to glazes without any decisions or plans being made. No one would take charge. No one could. There were no bosses.
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Worker cooperatives are not new, but they’re seeing new life as progressive-minded employees seek out remedies for the nation’s growing economic inequality. Worker cooperatives are equally owned and governed by employees, who also earn money from the profits of their labor. There are no CEOs here making multi-million dollar salaries while workers receive minimum wage. Nor are there CEOs with decades of experience and education to successfully guide the company through the up and downs of the dog-eat-dog business world.
In worker cooperatives, decision-making is democratic, so each worker has one vote, and policies can’t be determined by an investor whose only priority is profit. (Most profit-minded investors probably wouldn’t touch a worker cooperative with a ten-foot pole anyway.)
In a typical workplace, “there’s a pretty clear hierarchy at work, where power and wealth are concentrated at the top and decisions tend to flow from the top down,” Carlos Perez de Alejo, the executive director of Cooperation Texas, an Austin-based resource for cooperatives, told me. “We end up with the results of those decisions without really knowing where they came from.”
In Austin alone, there are worker-owned green cleaning cooperatives and collectively-run thrift stores, worker-run brewpubs and worker-owned Internet hosting cooperatives. Taxi drivers, threatened by Uber and Lyft, are talking about starting a taxi cooperative.
Nationally, there are 300 “democratic” workplaces, collectively employing more than 3,500 people, according to the U.S. Federation of Worker Cooperatives.
There are many different types of cooperatives. There are consumer cooperatives, which are owned and governed by customers (such as New York City’s Park Slope Food Coop); producer cooperatives, which are owned and controlled by independent producers (such as Florida’s Natural Growers); multi-stakeholder cooperatives, which are democratically governed by workers, consumers, and producers, or some combination thereof; and there are worker cooperatives like Red Rabbit, Austin’s donut co-op, which are equally owned and democratically governed by workers.
Worker-owned cooperatives are rare in the United States, but in Spain, where they are much more established, they’re often followed closely by a whole community. One study looked at the retail chain Eroski, which has both worker-run and traditional stores, and found that the worker-run Eroski stores grew “sales significantly faster” than those not run by workers.
The reason? “Compared to workers in other firms, cooperative members have opportunities for substantial employee involvement and training and also strong incentives because they have a large financial stake in the firm,” the researchers concluded.
But giving every worker a say can also slow things down. One of the best-known worker cooperatives in Austin is Black Star Brewing Company, a multi-stakeholder cooperative that is run by workers and opened its doors in 2010. Black Star has been trying for some time to build a cover on its patio to increase seating in the hot summer months. At some businesses, a $30,000 patio cover might be able to be approved by a CEO and built within months. At Black Star, it has taken years. There were detailed purchase proposals and meetings, and the vote had to be unanimous among the 20-member worker assembly. Construction is going to start soon.
Many worker-owned cooperatives operate by consensus, meaning that the objections of one worker can scuttle plans. When Black Star first opened, some workers wanted to wear uniforms to distinguish themselves from patrons. One worker, Dana Curtis, strenuously objected.
“I said, ‘I absolutely do not want to do this,’” Curtis remembers. Black Star workers do not wear uniforms.
Worker meetings at Black Star happen monthly, and every worker gets a chance to lead a meeting. This is democratic, but also means that meetings can sometimes cover the same ground again and again, when new worker-owners bring up issues that have been talked about before in the company’s history. Every six months, someone will suggest switching the way ketchup is dispensed, Curtis says. This can be annoying to old-timers, Curtis says, but in the name of democracy, they can’t steamroll the newbies.
“I’m like, ‘We talk about this every 18 months—I don’t care about ketchup, I don’t want to talk about ketchup,” she said. “But then I have to remind myself not to let that expression show on my face.”
Still, Curtis, a one-time union organizer, says she’d choose the worker-run structure over a traditional hierarchy any day.
“People can do so much more when they’re empowered,” Curtis told me. “When people realize they have agency, so many amazing things happen.”
For example, when Black Star was facing a problem that slowed sales—lines out the door because there wasn’t enough seating—the company had its full line of workers to think about the problem and find solutions. The solutions were creative, and have worked, Curtis said. Black Star adopted new point-of-sale systems, started taking orders from places other than just the counter, and moved forward with the plan to cover the patio.
“When we have struggles, we have really creative ways of solving them,” she said. “We have so many minds that see the everyday work.”
Similarly, Red Rabbit has long weekly meetings that sometimes sap the patience of even the most democratically-minded baker. But that’s led to innovation, too.
Jose Rodriguez, one of four new donut worker-owners, says he and another worker-owner have come up with better glaze recipes together than they’d have been able to do alone. Workers aren’t afraid of making suggestions to co-ops, he said, while in traditional companies, they might be wary of getting labeled a troublemaker or know-it-all. Also, workers in traditional settings have no reason to suggest new ideas or to be truly invested in their employer’s success—they get paid whether the company makes a lot of money or a little money. But worker co-ops motivate every employee to do their best, because doing so will help the business thrive.
“It’s an attempt to call on the best of our humanity, try to make things better,” he said.
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It’s hard to imagine that Apple would have made such an impressive comeback in the late 1990s and early 2000s without the strong and sometimes divisive leadership of Steve Jobs steering the launch of new devices such as the iMac and the iPod. Assertive leaders usually rise to the top at companies big and small—everyone else follows their lead. Following directions well is much easier than making up the directions and agreeing on them with your colleagues.
“Most of us have a punch-in-punch-out approach to work. We’re not used to being asked for our opinion,” Perez de Alejo of Cooperation Texas told a room full of budding cooperative founders. “The vast majority of people living in the U.S., despite living in a ‘democratic society’ don’t have the experience of participating in face-to-face democracy.”
Alejo is determined to build workplaces where people feel “heard,” and he was teaching these founders about democratic decision-making. Successful meetings will have a “pulse-keeper” or a “vibes-watcher” to make sure everyone is participating and being heard, Alejo said, as well as a facilitator and a time-keeper to make sure the meeting is running on track. If someone is being quiet and not participating, they need to be drawn in, he said. If someone is trying to boss others around, they need to be quieted. The approach was reminiscent of Occupy Wall Street, where members were asked to twinkle their fingers to show agreement, or exhibit “down twinkles” if they disagreed. It could take half of a two-hour meeting for Occupiers to decide where to hold the next meeting, according to an article in Fast Company.
That may have been an extreme case but the fact is that face-to-face democracy is a laborious, slow process. Perez de Alejo had the group try out democratic decision-making by asking us to pretend we worked at a company together and had to decide whether or not to fire “Jim,” a co-worker at our business, for consistently turning up late to work.
Most of the group seemed interested in treating Jim nicely, giving him the benefit of the doubt, and rearranging his schedule so we didn’t have to fire him. But not me: I suggested firing Jim. When other people said they’d cover his missed hours, I refused. Eventually I got hungry and bowed to compromise, but had this been a real situation, it might not have been so easy. My conclusion: I am the wrong person for a worker cooperative; worker co-ops need people who are willing to compromise, give others the benefit of the doubt, and, most of all, who are invested in participating in a worker co-op.
Those that fail are lacking at least one of the above. Burley, an Oregon-based worker cooperative founded in the 1970s that made bicycle trailers, thrived until 2006. Challenged by global competition, members sold the co-op to a single investor, who promptly laid off employees and publicly said he didn’t think it was possible to be a competitive business as a cooperative.
Burley’s transition to a private business after being a cooperative for so many years raised the question of whether cooperatives could really compete in the private market. But sociologist Joel Schoening looked more deeply into the fall of Burley, and came to a different conclusion. In interviews with Burley members, he found that Burley had hired too many people who didn’t buy into the idea of a worker co-op, rendering the structure unworkable.
“The problem for Burley, however, was not that it was a cooperative or that it was democratic, but that it was not cooperative or democratic enough,” he writes in The Oregon Historical Quarterly.
As demand for Burley products grew, the company hired new worker-owners without properly vetting them, he found, after doing extensive interviews with former Burley workers. Most cooperatives have a six-month or year-long trial period so that members can test out whether they really like working at a cooperative, and the business can decide whether they’re a good fit. At Burley, that six-month period “became a rubber-stamp method to fill desk chairs and get laborers on the production floor,” Schoening found.
For two decades, Burley workers had “exceptional” benefits, good wages, and a share of the company’s profits, writes Patricia Marshall, a one-time worker-owner. The 100 or so people who worked there were dedicated to the democratic process, and made sure it remained democratic. Knowing that they would earn money whenever the company earned a profit, they paid close attention to the quality of their work. But over time things changed. “The membership became more concerned with protecting its dividends, and individuals prioritized the security of their own wealth rather than the general health or mission of the collective,” Schoening explains. Burley began to fail.
The former workers of Burley, then, might have an important message for all the workers trying to start cooperatives now: To create a cooperative that can successfully make democratic decisions, make sure you have the right people in your democracy.
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The newest worker cooperative in Austin is a microbrewery called 4th Tap, set to open later this summer in a renovated office park.
The idea for the business came about in 2011, when a few guys who like making beer started thinking about doing it professionally, but the process of getting funding and permits took a long time—longer than it would have taken had the company started as a traditional small business, rather than as a cooperative.
Financing is an especially difficult proposition for worker cooperatives. By definition, every worker-owner has an equal vote and gets an equal share of profits. This is not appealing to investors who would choose a company because they want to get a big return on their investment or because they want to take control.
Since microbreweries are capital intensive, 4th Tap set up a separate LLC for investors, which John Stecker, one of the co-founders, says will give investors a competitive return but also protects the integrity of the worker co-op. It also secured a Small Business Loan from the Small Business Administration, which Stecker believes is the first worker cooperative in the nation to receive an SBA loan. (The SBA says it does not track loans to cooperatives, and could not confirm.)
But this was a very time-intensive process. When every worker is an equal owner, a worker-owner with bad credit can scuttle a loan. Red Rabbit, the donut company, is trying to raise $15,000 to open a retail location, and is considering going to Kickstarter because of the challenges of getting traditional financing.
I asked Stecker and Chris Hamje, one of the other co-founders of 4th Tap, why they didn’t chose to go a route that was equally socially conscious but less of a hassle. B-corporations, for example, have a typical top-down structure that make for easier decision-making and financial accounting, and in their charters, B-Corporations pledge to equally weigh three factors: profit, the planet, and people. Making their brewery a B-corporation would require 4th Tap to be socially conscious, while still allowing the founders to make money from all their hard work. (This is America, after all.)
Hamje says that the B-corp model is not a strict enough commitment for his tastes.“If we went to being a B-corp, there’s a lot of wiggle room if our philosophy changes,” he said. “It would be easy to just cash in if our philosophy changes. With a co-op, that’s impossible.”
Being a worker cooperatives also means sharing in all the duties of a business, whether that be cleaning the toilets or brewing the beer. Surprisingly, Stecker and Hamje said that appealed to them, because it means they can make sure every part of their business is running well, and that everyone working there is invested in the cooperative’s success. “Beyond profit-sharing, the theory is that people care more, they’re not just turning a wheel,” Stecker told me. Hamje used to work for Black Star, and says he’s trying to help 4th Tap avoid some of the downsides of being a cooperative, including the slow decision-making that seems to come with the territory. But he and the other members would rather be working as a co-op than anything else, they said. They’ve all spent time in cutthroat businesses where making money was paramount, and it was miserable.
“We could definitely design something where we’re ready to sell, as owners. But we didn’t want to work in that place for 10 years,” Stecker said. “We’ve already worked in that place, and it is not a fun time. We wanted to create something that we enjoyed doing.”
Life at work is, after all, tiring and uninspiring for most employees. Life at a cooperative has the potential to be something different. Many may scoff at the Occupiers, the cooperative workers, the people using twinkle-fingers to test the pulse of the room.
They will scoff right back.
This post originally appeared on The Atlantic.