Informal Leadership and Burnout

Catherine W. Ng and Evelyn Ng (2009) “Balancing the Democracy Dilemmas: Experiences of Three Women Workers’ Cooperatives in Hong Kong.” Economic and Industrial Democracy 30(2), 182–206.

This paper is a study of three new, radically horizontal worker-coop start-ups in Hong Kong. Worker-ownership is not common in Hong Kong and at the time of the initial research (2004) there were only three worker-owned cooperatives registered in the territory, all of them women’s cooperatives. These three form the basis of this study.

The three new worker cooperatives were founded with the assistance of non-governmental organizations (NGOs), and the authors report that the NGO staff were hands-on in the development of these organizations to the extent that the cooperatives almost certainly would not have been founded without their assistance. Many of the women workers involved were displaced from the workforce and struggled with social exclusion and illiteracy. These coops were founded by the NGOs as opportunities for these women to re-enter the workforce, to develop confidence and new skills, and to provide extra income for their families.

The purpose of this study was to examine two possible ‘contradictions’ in the organization of worker cooperatives: the contradiction between democracy and efficiency, and the related contradiction between democracy and leadership. All three cooperatives were small service/retail businesses (a university tuck-shop, a cleaning coop, and a university canteen) of about ten members each, and all three were radically horizontal, governed by direct democracy with no vertical management structure. Nonetheless, informal leadership did develop and the authors document some of the tensions this created.

Specifically, some of the women came to the coops with more confidence in formal meetings and more experience in running a business, and these women were naturally deferred to when it came to decision-making. The cooperatives used job rotation and other techniques to democratize information and expertise, but these informal leadership structures were still a problem. Informal leaders suffered burn-out, but at the same time, felt trapped in their jobs both because of their commitment to the cooperative ideal and because of their friendship and loyalty to the other women. One woman commented:

“If I leave, I’m afraid the co-op will disintegrate. I worry that many of my colleagues will not be able to find employment then.”

These informal leaders probably would have been able to find work elsewhere, perhaps in management positions, so in effect, they had taken a pay-cut to work at the cooperative. This is obviously not a sustainable or fair situation, but what do you do when some workers are more skilled and confident, but also possibly, more invested in the cooperative, and take on more responsibility and work as a result?

The authors don’t offer any answers, but they do conclude that this tension must be addressed as cooperatives grow or they risk degeneration. Some cooperatives find a balance by carefully adopting some management structures, mixing elements of direct and representative democracy together as they grow. Other cooperatives may decide to radically commit to direct democracy and management by consensus, and may therefore decide to limit the growth of their cooperatives or perhaps to divide their businesses from time to time to avoid having to adopt formal management structures.

However, as Jo Freeman argued in her influential essay, ‘The Tyranny of Structurelessness’, these tensions always lurk in horizontal organizations, and the authors of this study argue that finding a workable and just balance between democracy on the one hand and efficiency and leadership on the other is an on-going and critical problem for all worker-owned businesses.

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Degeneration and Regeneration 2

Beginning with some of the earliest socialist theorists, many have argued that worker cooperatives cannot remain democratic in the long term. This is called the ‘degeneration thesis’ and according to this view, worker cooperatives are inherently unstable and will inevitably degenerate into capitalist businesses over time. For decades now, researchers have been studying worker cooperatives to see if degeneration really is inevitable, and if not, to describe the strategies that worker-owned businesses use to strengthen democracy in their organizations or to restore democracy if degeneration has started to take hold. This research has real practical value for entrepreneurs thinking of launching new worker-owned businesses, and previously I have reviewed some of the more recent research on this question.

Perhaps one of the best studies on degeneration and regeneration was authored by Chris Cornforth from the Open University in the UK. This study is getting a little old now: the paper first appeared in Economic and Industrial Democracy in 1995, and the research was conducted way back in the mid-80s; nonetheless, in broad strokes, Cornforth’s research and analysis remains just as relevant today as it was when it was first published. Cornforth conducted in-depth case studies of four small to medium-sized worker cooperatives, examining how they balanced democracy and efficiency, and how they coped with growth. These four case studies are of particular interest to us here because they were relatively ‘young’ businesses in the mid-80s. They were all launched in the 70s as small, radically horizontal cooperatives governed by direct democracy. Two were founded directly as cooperatives and the two others were converted to cooperatives a few years after being set up. By the mid-80s they had all grown and their worker-owners were experimenting with different democratic structures to better manage their larger, more-complex organizations.

All four case studies are interesting on their own, and its worth reading the whole paper for Cornforth’s detailed analysis, but examining the data from the four case studies together, Cornforth draws a number of useful generalizations. First of all, Cornforth contends that, at least in the short term, degeneration does not appear to be inevitable. At the time of his research, three of the four cooperatives he studied were successfully negotiating their growth without compromising their democratic principles. Cornforth does however suggest that there may be an upper limit to the size of worker-cooperatives that can be efficiently managed by direct democracy (full consensus):

The experience of [one of the larger cooperatives studied] suggests that once a co-operative reaches 15–20 members, a high degree of democratic involvement and influence can only be maintained by developing a more complex democratic structure, combining representative and direct forms of democracy, so that they reinforce each other.

This is a controversial suggestion, and many would contend that full consensus can be made to work even in much larger organizations, but if a cooperative — at whatever size and for whatever reason — decides to introduce representative democracy in some form, can the members successfully delegate some of their decision-making authority without compromising the basic principles of worker ownership and control, or is representative democracy the first slippery step in an inevitable slide to full degeneration? Based on his research, Cornforth believes that cooperatives can indeed successfully adapt to growth through more vertical management structures and still stay fundamentally democratic, and he contends that a shared ideology or vision among all members is critical in this respect. Ultimately it is a strong, shared cooperative ideology that serves as the best bulwark against degeneration in a worker-owned business, but as cooperatives grow, maintaining this shared ideology requires constant vigilance:

It is important then for co-operatives to develop working practices which aim to develop a shared meaning and commitment to the co-operative’s aims and principles, through, for example, common recruitment and induction procedures, training, and the periodic rotation of at least some staff between departments and jobs.

Cornforth is a particular proponent of job rotation and notes that all the successful cooperatives in his study used job rotation to democratize expertise and improve communication, even as they grew and diversified. In his view, management structures are not the greatest threat to democracy, but rather, that informal elites will the develop in a cooperative who start to act as de facto managers but who are unacknowledged as such and are therefore unaccountable to democratic control.

While Cornforth argues in this paper that degeneration is not inevitable, he does see it as a real and constant danger, and his final recommendation is that, as they grow, worker cooperatives should continually reflect on their performance as democratic organizations to guard against degeneration taking hold:

Finally and perhaps most importantly, the case studies suggest that co-operatives need to regularly review their performance both as co-operatives and businesses if they are to avoid degeneration.

Chris Cornforth (1995) “Patterns of Co-operative Management: Beyond the Degeneration Thesis.” Economic and Industrial Democracy 16, 487–523.

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The Grey Lady goes red

The president may call it “fake news”, and editorially, it is widely regarded as liberal, at least on social issues, but more than anything, the New York Times represents the voice of the establishment. Particularly on economic issues, the discourse in the New York Times conforms to the limits (and to a significant extent helps define the limits) of what the establishment considers acceptable debate in the USA. The New York Times discusses ideas that members of the establishment would consider serious and rational and stays far way from ideas — either from the left or the right — that the establishment would consider dangerous or implausible.

That is why it is particularly noteworthy that yesterday the New York Times published an opinion piece praising democratic socialism. For the whole of the 20th century, there has been no idea more vehemently excluded from establishment debate in the US than socialism. That the New York Times would print an unapologetically positive column proposing that socialism has a future in the US hints at a fundamental shift in what the establishment considers serious and rational.

The opinion piece is by Bhaskar Sunkara, a founding editor of Jacobin magazine and vice chair of the Democratic Socialists of America, and in it, he argues that “stripped down to its essence, and returned to its roots, socialism is an ideology of radical democracy”, but he acknowledges that authoritarian socialism in the 20th century betrayed those roots. He argues that we need a new, pluralistic vision for socialism in the 21st century. Simply nationalizing the economy isn’t a solution anymore. From the perspective of this blog, it is particularly encouraging to read that he sees worker-ownership as central to this new model for socialism:

A huge state bureaucracy, of course, can be just as alienating and undemocratic as corporate boardrooms, so we need to think hard about the new forms that social ownership could take. Some broad outlines should already be clear: Worker-owned cooperatives, still competing in a regulated market; government services coordinated with the aid of citizen planning; and the provision of the basics necessary to live a good life (education, housing and health care) guaranteed as social rights.

Of course, one New York Times op-ed piece will not restructure the economy; that will require a political movement of global scale (and plenty of socialist entrepreneurs!) but the publication of this piece in the New York Times, particularly with its emphasis on worker-ownership, feels like a small but nonetheless significant milestone on the path to a better, fairer world. I really do think things are changing.

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Deep-level Cooperation

Spencer Thompson from the University of Cambridge in the UK recently published a paper outlining a new theory of the firm, taking the worker-owned business as its starting point. It is a fascinating paper at a theoretical level, but in it he also discusses a number of practical issues about the design of worker-owned firms.

One concept that is particularly intriguing is his notion of “deep-level cooperation.” Thompson explains that firms function through a combination two processes: coordination and cooperation. We can understand coordination as the vertical organization of a firm, its management. Workers have certain skills and know when and where to apply their skills because their work is coordinated together through some sort of management structure. Everyone in the firm has a role and all those roles are coordinated together to produce a product or a service.

But firms also require cooperation to function. We can understand cooperation as the horizontal organization in a firm. Workers aren’t just coordinated into a production process, but they also must cooperate together to produce the product or service. While distinct in theory, cooperation and coordination are closely intertwined in practice, and both are required for a firm to succeed.

Thompson’s insight is to further divide cooperation into two different levels: surface-level cooperation and deep-level cooperation. Surface-level cooperation is the kind of cooperation that can be specified in an employment contract. When you are employed, you agree to cooperate in a productive process in certain specific ways in exchange for a pay check. It is a market transaction, but as Thompson points out, surface-level cooperation is not enough to keep a firm going. Indeed, working to rule — where workers stick exactly to their employment contracts, doing no more than explicitly required — is a kind of industrial action, just short of an outright strike, and it can slow work down to a crawl. Without a culture of deep-level cooperation, firms can’t function well.

[…] whereas surface-level cooperation is achieved through organisational structures (such as property rights, pay schemes, and monitoring systems), which constrain individualistic behaviour, deep level cooperation is achieved through an organisational culture, which enables solidaristic behaviour. (p. 5)

The dark secret of capitalism is that all firms take advantage of our natural cooperative nature as human beings and depend on us ‘donating’ our deep-level cooperation to our employers as we do our jobs. Deep-level cooperation is all the cooperation we provide with our fellow workers that cannot be efficiently described in an employment contract, and Thompson suggests that worker-owned businesses may have a competitive advantage over capitalist businesses in this respect, in that worker-owners may be more likely to engage in deep-level cooperation than employees in capitalist firms because worker-owners are more socially invested in their businesses.

Thompson argues that there is a trade-off between coordination and cooperation. As firms grow and as management becomes more bureaucratic and vertical, coordination from above may undermine workers’ desire to cooperate at a deep level. No one likes to be bossed around, and the more bureaucratic our jobs become, the more likely it is that we will take a purely individualistic approach to our work, that we will see our jobs simply as a way to get a pay check, and the less likely it is that we will cooperate socially with our co-workers.

The practical implication is that in order to realize the full efficiency advantages of worker-ownership, cooperative firms should always aim to organize themselves as horizontally as possible. The more a worker-owned firm turns to top-down structures to coordinate production, the more it risks undermining its members’ intrinsic desire to cooperate at a deep level in the business as a shared project.

This is a particular problem as a firm grows. Many small worker-owned businesses manage to successfully structure themselves as completely horizontal organizations, often making all major decisions by full consensus, but as worker-owned businesses grow, they typically move to a more vertical structure, and particularly when they reach the size of a cooperative corporation like Mondragon, for instance, significant top-down coordination seems almost unavoidable.

The trick then would be to find ways to build as much horizontal decision-making as possible into the structure of worker-owned firms at all stages of their development and growth, and also to make certain that management is always meaningfully and transparently answerable to the democratic will of the worker-owners as a whole. As Thompson points out, democracy in a worker-owned firm has to be meaningful before it can inspire a culture of deep-level cooperation among its members:

[…] if the day-to-day experience of worker-members (and managers) is no different from that of employees (and managers) in conventional firms, abstract notions of equality and participation substantiated by occasional exercise of voting rights are unlikely to influence workplace behaviour. (p. 9)

I’d be interested to know what readers think about these ideas. In your experience, how large can a firm grow and still maintain fully horizontal decision making? Is there an upper limit? And what are some of the ways to maintain horizontal decision-making and meaningful democracy in larger, more complex firms?

Spencer Thompson. 2015. “Towards a social theory of the firm: Worker cooperatives reconsidered.” Journal of Co-operative Organization and Management, 3: 3–13.

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Interview: Greg Demmons, Real English Victoria

greg

As someone who teaches language every day, I have a particular interest in language schools that are organized as worker cooperatives, and so I was very excited that just a few days before spring break I got a the chance to speak to Greg Demmons, president and founder of Real English Victoria, a new worker-owned language school in Victoria, British Columbia. In addition to being a worker-cooperative, REV is unique for pioneering an innovative new language-learning pedagogy, and Greg and I spoke about how his particular approach to language learning lead him to the cooperative model for his new school:

Tim: It would be great to start, just to learn a little bit about yourself and about the beginning of the cooperative and why you decided to form this business as a cooperative in the first place. What led you down that path?

Greg: Oh boy, there you go! It might take your 20 minutes. I’ll just give you kind of the short version. Prior to becoming a teacher I was an investment adviser at the Royal Bank of Canada here. But I left in around the year 2000, and I traveled overseas to Korea, and decided to teach English there. I was just going to stay for a year but I ended up staying for five in Korea, and then I spent five more in Japan. During that time, I discovered a particular style of learning, through doing projects called project-based learning and enquiry-based learning in Japan.

I helped to set up a programme in a Japanese school that basically transformed the school and turned it into what’s now a relatively famous school in Japan for English speaking. When I came back to Canada in 2012, I got a job in the ESL (English as a Second Language) business, and then I kind of decided that I wanted to try to do what I had seen work very well overseas, but unfortunately the schools here were trapped in a corporate business model that didn’t allow them to make large scale changes, despite it being very obvious that this was the way to go, and helpful for their clients.

So I started investigating models that would allow me, with very little start-up money, to be able to open a school that was project-based and enquiry-based, and be able to do it in a way that allowed the model to be flexible enough to change on a dime, with enough support and feedback mechanisms that would prevent us from making large-scale mistakes.

About a year-and-a-half ago I began investigating co-op models, and then I discovered the worker co-op model. And then the school that I was working at at the time, although people at the school didn’t know it, because of my previous tenure as an investment advisor, I could see they had… well, it was very apparent in the figures that they were going to go under, so I began to recruit other teachers who were of a like mind and who were interested. In December of 2015 we started the process towards incorporating as a worker co-op, and we were basically, according to the CWCF, the Canadian Worker Co-op Federation, at their AGM last fall, we were touted as pretty much the fastest ever worker co-op start-up; from concept to start-up was from January to June 20th. Our incorporation happened on April 9th, so this is almost our first incorporated birthday.

Tim: Excellent. Could you talk a little bit more about that journey? You also mentioned initial start-up capital; how did you raise that? And what’s the legal framework in Canada you’re drawing on to structure your business?

Greg: What we did is, we kind of played around with roughly how much it would cost, with what kind of finances we would need… And actually what’s happening right now, this will inform you a little bit about our situation: We are relatively small. We’re trying to keep our school small because the model that we use, the pedagogy and methodology that we use doesn’t really allow for a large school; it has to be done in a small, kind of personal setting. And that sort of speaks to the financial part of it as well. We determined what we would actually need to start up and survive for the first six to eight months, and we worked our way backwards, and we had an initial member buy-in of $5,000 per-person.

We were kind of toying with the idea of whether or not we needed to — or whether we should — incorporate. It was a bit of an odd situation, or a process to go through, because we started to discover that even though incorporation probably was more expensive and really didn’t help our business model in the way that it would function on a daily basis, incorporation gave the financial institutions and the organisations that helped finance us at the beginning the confidence to support the model.

And so that’s kind of the initial start-up, and we started out, originally we had about 14 or 15 people that were interested, and in order to get people to be more serious about it, that’s when we announced the $5,000 buy-in, which quickly narrowed it down to 10 people, and then eventually once we got working on the model and so on we were reduced to 9. A couple of months later, we had some international folk that were involved, and the style of doing business in their country wasn’t really compatible with the way that we did things or the co-op model in general, so they ended up leaving of their own accord because they knew that they wouldn’t be able to fit into what was happening.

As far as the legal framework, for us we just really wanted to have a flat system. We have a flat pay system. I’m the president and founder, and a couple of other titles as well, but I get paid the exact same amount of money as teachers, and the administrators, and the advisors and so on. We wanted that democratic functioning on a daily basis, in particularly at the beginning. And now we’re at the point where we’re starting to divide up the responsibilities a little bit more. I’m spending less time now in the classroom, and I’m spending more time in the promotions area.

So yes, it’s been an interesting ride. I guess ultimately we’re not really businesspeople in the traditional sense; we’re really only interested in teaching. We wanted our outcomes for students to be the primary driving factor in our decision-making, and that can’t be done in a corporate business model where your primary focus is on returning shareholder value. This is our big thing with the co-op model, is that we don’t see how society can continue on utilising an inhumane model of success based on GDP and things like that.

We’re a very philosophical group in that way. And it didn’t necessarily started out that way. I guess we kind of bought that in to what we were doing more after we’d started it, if that makes sense. But that’s kind of my character. I don’t worry about failure; as long as the rationale seems solid to me, I’ll jump in. So far it’s been working really well. It’s been very stressful, but there’s all kinds of different stress, and our stress is based on running a business rather than wondering what other people are going to do with the business that we happened to be employed in.

Tim: You mentioned a little bit there that in addition to member buy-in, that you also had other sources of capital at the beginning?

Greg: Yes, well not at the beginning. We started basically with – this doesn’t sound like a lot – with $43,000. Then we just went to the Canadian Workers Co-op Federation, the CWCF, and then Vancity which is a credit union here in British Colombia. We opened on 20th June, we had $43,000, and we went through until late October when we finally received funding from those two sources.

Tim: That’s great that you got that support. Were either of those two organisations also helpful in terms of business advice?

Greg: Oh, yes. The CWCF really does a lot to support us. They helped us with some funding to get co-op development advisors who helped us initially in the development of our business plan, as well as the governance modelling and so on. And then once our business plan was initially prepared, I actually did the business plan totally on my own with a little bit of help with those guys, but it was mostly formatting and those things. We were also really grateful to Vancity, a large BC Credit Union that has been focusing on social entrepreneurship for a while now. They put together a team of local business people and community experts to help shape our business plan, and then, in the end they recommended that we accept even more money than we had asked for, but with valid explanations as to why. They saw our model of education as being very unique and interesting, and that it actually looks to a non-expert in the field that this would be a very logical way for people to learn language. The head of the applied linguistics department at a major university here in Canada come up to me after a speech I gave at the university, and shook my hand, and told me that we had the school of the future. People can actually see what we’re doing and see how it works, and so it’s quite easy to sell ourselves actually.

Tim: What do you see as the next organisational challenges for your group in the future, and how do you think you’ll meet those challenges?

Greg: The next organisational challenge that we have is bringing in outside people to the board to kind of oversee or to help oversee the business with an objective perspective. And I also think that the second of those challenges will be resisting the urge to expand based on profitability, and trying to resist also the urge to use cutbacks as a way of improving profitability rather than sticking to our guns on the idea that if you build it they will come. So far we’ve stuck to our guns in such a way that we’ve actually probably lost some business, just because we haven’t really considered any other option other than if we provide really good service, and people get really good results, that that will result in a really good business.

Tim: If you did see the opportunity to grow, would you divide into two schools so that you could maintain the size that’s ideal for the pedagogy you’re using? What would you do?

Greg: That’s the challenge, I think. We would be more than open to helping other groups of teachers to do the same thing, and I mean, I’ll be quite frank, and people get nervous when they hear me say this – my goal is to destroy this industry as it exists right now, because it really focuses on extracting large amounts of money from international folks, and the model that they use for teaching is a model that keeps people in classrooms for as long as possible.

In contrast, all of our teachers here have lived abroad and have successfully learned other languages, and this is how we model our outcomes for students. I speak four languages. It took me almost a year to learn Korean, but I was able to understand conversational Japanese and get along in my job and life after six months of practice and listening at my high school job in Kyoto.

We’re actually now facing pushback from some local non-governmental organisations who operate on a volunteer basis, because we’re actually volunteering our services to teach refugees here, particularly Syrian refugees. And so our Syrian refugees are actually learning English probably two or three times faster than those people who are going to the non-governmental organisations. So the government is looking at them and going, “Uh…”

So ultimately I hope that other teachers will see what we’re doing and they’ll realise that we don’t get paid a lot of money, so we might as well be doing something good. Right now we’re in the process of helping another couple of teachers who are exploring the idea of doing this.

I see the co-op world as being a very literal thing, and I think in my own personal view it is the only way that the world can move forward. I know that sounds rather dramatic, but I don’t think, as a former investment advisor and someone who has a fairly good knowledge of the financial practices that we see in our systems right now, we’re not going to survive unless we switch to a cooperative model or we move back towards a more community-based system of doing business; businesses existing for community rather than communities becoming dependent on business.

Right now here in Canada, the co-op movement is really picking up a lot of steam, and so we’re actually hoping to find ourselves on a bit of the cutting edge of all the new system that we hope is emerging in the provinces here in Canada, where the government is now starting to look more seriously at supporting the co-op models. We work with a programme called Co-ops in Schools where university students from around the province work with our students on projects. We just want all the community to come together in these things. Ultimately it all comes back to that.

Tim: That is excellent. That’s actually a great place to stop. That’s really good. Thank you very much!

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Review: Making Mondragon

makingmondragonIf I had to recommend just one book on worker-ownership, Making Mondragon by William and Kathleen Whyte would be at the top of my list. The Mondragón cooperatives in the Basque Country in Northern Spain are the most successful group of worker-owned businesses in the world. In 2015, the Mondragón corporation employed a total of 74,335 workers world-wide and had a gross annual turnover of 11.37 billion euros.¹ Making Mondragon was first published in 1988, and then revised in 1991, and covers the early history of the group. The first Mondragón  cooperatives were founded in the 1950s under the leadership of “that red priest” (p. 29), the radical cleric, Father José María Arizmendiarrieta, and Making Mondragon documents in detail the development of the group over these early years: from its foundation in the 1950s, through a period of unprecedented growth in the 1960s and 1970s, and finally through the challenges of the Spanish recession in the 1980s.

While still very successful, the Mondragón group of cooperatives have faced a number of significant new challenges in the 25 years since Making Mondragon was last updated, and one could argue that this book is now very out of date, but in reality, I don’t think that that matters too much. As a social history of the early years of the cooperative group, this book covers the period of Mondragón history that would be of most interest to readers of this blog. The Mondragón cooperatives are responsible for modernizing the cooperative model, taking the basic Rochdale principles and elaborating on them to create a mature form of workplace democracy that can successfully compete with capitalist multinational corporations in the 21st century. Making Mondragon covers all of that early modernizing process.

As an introduction to worker-ownership, Making Mondragon is both informative and profoundly inspiring. There is plenty of practical detail about the design of the early cooperatives that will be useful to new socialist entrepreneurs, but it is William and Kathleen Whyte’s readable account of the origins and growth of the Mondragón group that puts Making Mondragon at the top of my list of favourite books about worker ownership. At the same time, this is a rigorous history. While the authors celebrate the successes of the Mondragón cooperatives, they also openly examine the controversies, contradictions, and setbacks the worker owners faced as their cooperative movement grew.

The idea of founding a worker-owned business is certainly daunting, but the story that the Whytes tell in Making Mondragon demonstrates that with smart collective effort, we can create organizations that not only survive, but that grow and diversify. Successful Mondragón cooperatives can now be found in almost every sector of the Spanish economy: in banking, manufacturing, high-tech, service, retail, and agriculture. In this book, the Whytes describe a group of collectives that serve as a real-world example of how a thoroughly democratic economy might be built. Both practical and inspirational, Making Mondragon is far-and-away the best book on worker-ownership I have read so far.

White, William Foote and Kathleen King Whyte (1991) Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex. Ithaca, NY: ILR Press.

¹  Mondragon Corporation (2016) Press Release for the 2015 Annual Report. [Accessed 27/2/2017].

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Interview: Elisabeth Barton, Echo Adventure Cooperative

echo-team

Echo Adventure Cooperative is a new worker-owned outdoor guide company established by four experienced guides who are based in the Yosemite wilderness in California. The new cooperative had the opportunity to take advantage of some recent legislation in California aimed at normalizing the worker-cooperative model in the state, and I had a chance to interview founding member, Elisabeth Barton, about how they got together and how they set up their company.

Tim: I guess the first thing I’d like to do is ask you if you could briefly tell me a little bit about the history of your cooperative, and maybe about some of the motivation behind starting a cooperative, about why you thought of doing it in the way that you did?

Elisabeth: Yes, great question. We incorporated in early August, and then operations began on the first of December, so it’s still really new.

It was an exciting adventure getting to this point; there are four of us that started this coop, and we had all come out of awkward job experiences. Guiding in and of itself is a relatively exploitive industry. A lot of people don’t realise, but oftentimes guides are making less than minimum wage and living in tents behind the homes of the owners that they work for.

So we had all experienced these exploitive practices and we were looking to transition, so then it just sort of happened over coffee, beer and a few conversations. Maybe within a month we were legitimately looking at incorporating, so it was very quick.

We always knew that we wanted a cooperative, or what we thought a cooperative was, so that guides could have a better chance at having a family and a career at the same time. We didn’t quite understand what it took to get there, so that’s why there was such a long time between when we incorporated and when we began operations.

Tim: Excellent, could you explain a little bit about what you learned and why it took so long, and what you had to adjust to?

Elisabeth: None of us are MBAs. I’ve worked in management for years, specifically recreation management, so I had that side of it on lock-down, but I’ve never started a business. Our CFO, William Holtsman, has been in finance for years, but he’s never seen terms like non-member profit and member surplus. Everything about the cooperative model is the opposite of traditional business, from profiting to terminology.

So we had to relearn an entire subject, or not really relearn, we had to learn an entire new subject. It was tedious for sure, but when we spoke with our lawyer for the first time, this amazing guy that helped draft the California Worker Cooperative Act, he laughed and said, “You guys know way too much about this. You’ve done most of my job for me.” So we may have over studied. (laughter) I’m realising now that not everybody needs to go as in depth as we did.

Tim: What were some of the resources you used to learn about starting a cooperative? What did you take advantage of?

Elisabeth: There were three things in particular. It began with a lot of web searching, and in that process we found a really amazing website called California Center for Cooperative Development. We didn’t know at the time, but the California Worker Cooperative Act had passed in 2015 making Worker Coops a legitimate entity. The CCCD had done a really wonderful job at translating the Act and putting it on their website. So all of the sudden we had a relatively new document that we could read, and learn what the expectations were for our structure, and then decide if that’s how we wanted to go forward.

Then we had the Tuttle Law Group. Sushil Jacobs is our lawyer, and he helped craft the California Worker Cooperative Act, and this is all by coincidence. I don’t know if it was his first opportunity to apply the new law to a new business, but he definitely couldn’t have been more excited for us and couldn’t have been more helpful.

Tim: Excellent, so then can you explain a little bit about your organizational structure? I noticed on your website that each member is also a member of the board. Could you talk a little bit about that and how, through this new California law, your coop structure is designed?

Elisabeth: We’re legally considered a Collective Board Worker Cooperative Corporation, organised under the California Cooperative Corporation Law, an obscene sentence! (laughter) What that means is that anybody who comes on, after they go through a six-month vetting process, they become a board member with full access to all of our information and documents as well as full voting rights. Eventually we hope to have our bylaws, our articles of incorporation and everything on our website for anyone to see, but right now our members have full access.

In this industry in general, guides give up a lot to live their dream, so the four of us felt like this was another step in becoming a productive member of the community. Being a Board member gives guides full access to their company and the opportunity to make decisions about how the company operates in the community in which they live. What other questions do you have in terms of our structure?

Tim: I think that explains it pretty well. I also noticed that you have a very transparent process on your website for joining your cooperative, and that struck me as particularly remarkable. Could you talk to me a bit about how you envision that process working?

Elisabeth: Yes, I should say that our guiding agency is really the next step in guiding, so somebody who is in finance or is a professor or maybe an amateur birder, we’re really not the place for those people to step in and to begin a career in naturalist activities… I guess in Europe naturalist means nudist doesn’t it?

Tim: I understood what you meant! (laughter)

Elisabeth: In a career in the natural world, maybe I should say. We’re really here for those guys who’ve been around for a while; they’ve done their time in their tents. What we wanted to do was provide two things. First, our requirements help eliminate those that are not experienced or serious. For example, we tried to make the amount of money to join the cooperative as low as possible, but still be just enough money to be serious. People wouldn’t just throw down $2,000 for nothing.

Then we also wanted to give a map or a blueprint for those people who were stepping out of their old careers and heading into this industry. It’s important for us that somebody can come to our website, without feeling awkward or having to call and ask questions, and read the information and know exactly what they need to do, what decisions they needed to make in their career to eventually either create their own cooperative, which would be awesome, or join ours.

Tim: Yes, I noticed that you mention different certifications that you wanted to see and so forth. That’s really interesting, that you’re kind of pitching your new cooperative at people who have some experience anyway, so they kind of know about the industry and what you do, is that correct? You’re not so much envisioning that you’re going to be training new guides?

Elisabeth: Exactly, however, that being said, one of our goals in the near future is to have mentoring programs for people who are either just out of high school or college, or maybe making a career change. Having these details on our website is just the first step. Eventually we want to offer mentoring and volunteer opportunities, beginner job referrals to local B-corps like Evergreen Lodge and Rush Creek, and a comprehensive a guide school.

Tim: Excellent. Stepping back a little bit, could you talk to me a little bit about the philosophy of your group? What appealed to you about the cooperative model and why was starting a worker coop something that your group decided you wanted to do?

Elisabeth: That’s such a great question. I think ultimately all we knew is that we didn’t want to be exploited, and we knew that we didn’t want to exploit. People in this industry always start out with really wonderful intentions, saying, “I’m going to profit-share and I’m going to give these huge bonuses at the end of the season.” Then, for one reason or another, they don’t and guides are left with, “But I thought…”

So from the beginning we wanted to build in egalitarian approach to business, as well as goals and guidelines for things that we wanted to accomplish in the future. It was really important to us that no matter how we structured our business, that our stake holders and the things that we’re the most passionate about were always considered. That’s our community, our environment, our member guides, and our guests, the people who pay for our service.

It was difficult to cement those ideas into our business model when we started to look at traditional corporate structures. So when we found out that worker cooperatives had just been established in California as a new legal entity, it was so perfect, because it gave us this blueprint for including those four stakeholders and gave us opportunities and ways to work towards protecting or enriching those four things.

So I guess the short answer is we wanted to build in protection for when we’re really wealthy and famous, and our company is known around the world (laughter), that we would be forced by the way we are structured it to continue to look after our four stakeholders on a daily basis.

Tim: Looking back over the last few months, and as you’ve been putting your business together and organising yourselves, are there lessons you’ve learned that you would like to share? If you were talking to other people who were thinking about starting a cooperative, what advice would you give them?

Elisabeth: Totally! The first one is just do it. We desperately need more cooperatives. This is something that I say all the time, but we really believe that coops are to the service industry what unions were for manufacturing. The only way that we’re going to have the kind of impact that unions had on manufacturing is if there are more of us.

And it really is easier than it appears at first. I guess that would be the second thing I would tell people. When you go out looking for your cooperative model, don’t expect to find a step-by-step guide for how to create your cooperative. The thing that makes cooperatives so beautiful is that they are a reflection of the values of their shareholders or their members, so each one is uniquely different

I think that gets a little overwhelming when people first go out there and start looking, because they really want to find their LegalZoom.com template, where they can plug in their information and simply print out a business plan and their articles of incorporation. It just doesn’t work like that, but again, that’s one of the most beautiful things about it is that your cooperative is solely a representation of what you’re passionate about.

So I would keep those two things in mind, and don’t get discouraged! Really just keep moving forward, and make it happen. It’s so much easier once it’s done. You’ll look back and say, “Oh, it’s done. OK. Cool. Let’s go!”

Tim: That’s really inspiring. That’s excellent. That’s perfect because we’re just at about 20 minutes and this a good place to stop. Thanks so much Elisabeth for sharing this.

Some links:

Text of the California Worker Cooperative Act AB 816

A helpful summary of the Act

Pictured: (the Echo team, left to right) Jamie Plouffe, Bryant Burnette, William Holtsmans and Elisabeth Barton

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