Blueprint for Increasing Worker Ownership in Low-Income Communities

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Blueprint for Increasing Worker Ownership in Low-Income Communities

How to replicate a regional approach to economic development

through the lens of cooperative ownership

March 31, 2014

Sushil Jacob, Alison Lingane, Ricardo Nuñez

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AGENDA

1. Introductions

2. Why a BLUEPRINT for worker ownership?

3. Elements of the BLUEPRINT

4. What we learned

5. Resources available

6. Next steps from here

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1. Introductions

Alison LinganeProject Equity

Ricardo NuñezSELC

Sushil photo

Sushil JacobEBCLC

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2. Why a BLUEPRINT for worker ownership?

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45% of working adults in the East Bay earn below

Basic Family Wage

55%

% working adults

45%

http://workingeastbay.org/wp-content/uploads/2014/05/State-of-Work-in-the-East-Bay-and-Oakland-2012.pdfBasic Family Wage is the minimum needed to cover basic living expenses of food, shelter, healthcare, transportation and childcare. In California it is $18.15 / hour for a family with 2 working parents. www.lafla.org/pdf/MakingEndsMeet.pdf

THE PROBLEM WE WANT TO SOLVE“Working poor” has become the norm

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What are Worker-Owned Cooperatives?

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Cooperatives

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CooperativesEmployee

Ownership

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Ownership

Worker-OwnedCoops

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Ownership

Worker-OwnedCoops

Businesses that are owned and controlled

by their workers

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WHY?Worker ownership brings significant benefits

All citations are in Worker Cooperatives: Pathways to Scale

TO WORKERS Better pay and benefits Assets (business ownership) A voice in key decisions

TO BUSINESSES Higher productivity and growth Lower employee turnover Improved business longevity

TO SOCIETY Local spending multiplier Higher voting levels Correlation with other social benefits

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3. Elements of the BLUEPRINT

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We have a vision that many share...

Worker-owned coops building

community wealthat scale

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Some imagine a yellow brick road...

Worker coopsat scale

“Let’s just start more worker cooperatives, and grow them to be big players in our local economies!”

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But in fact, there are MULTIPLE ways to get there


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Each one plays an important role in the economy

Start and grow SMALL businesses

Start and grow BIG businesses

Convert EXISTING businesses


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Each one plays an important role in the economy

Start and grow SMALL businesses

Start and grow BIG businesses

Convert EXISTING businesses


Our guiding question:How can we accelerate growth along any or all of these pathways?

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Bay Area Blueprintfor Increasing Worker Ownership in Low-Income Communities

WORKER COOP ACADEMY:small-scale coop entrepreneurship

SCALE STRATEGY 1: scalable coop incubation plan

SCALE STRATEGY 2: business conversion assessment


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Bay Area Blueprint Multi-Sector Partners

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4. What we learned

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Worker Coop Academy:small-scale coop entrepreneurship

Scale strategy 1: scalable coop incubation plan

Scale strategy 2: business conversion assessment


Bay Area Blueprint learnings

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First cohort

7 teams graduated on 12/10/14

4 teams get follow-on business coaching and 6 get legal counsel

Pictured here:

Mandela Foods Coop, Mandela Marketplace & WCA organizers

WORKER COOP ACADEMY, Oakland

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WORKER COOP ACADEMY: Multiple participant types

Mix of coop types – by design to meet ‘market’ need• 1 start-up

• 1 existing looking to expand / grow

• 2 nonprofit developers (with coop members)

• 3 conversions

Business models that build a better world• 3 farming / fresh food access (Planting Justice, Mandela, New Hope)

• 2 sustainable landscaping / construction (Mariposa, DIG)

• 2 holistic health (Sarana, On The Spot))

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WORKER COOP ACADEMY: What participants told us

“Having the opportunity to be in the Academy with my co-workers and to learn about coop-specific things like cooperative governance was invaluable. We need more of this kind of thing if we’re going to build the kind of economy we want, especially for people of color and low-income folks.”

“The Academy was very impactful for me in giving great resources and viable opportunities for cooperatively- minded people/organizations to support each other in growing their visions while strengthening the bones of the businesses.”

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SCALE STRATEGY 1: Business fit scorecard ranks business ideas for social impact and business feasibility

JOB CREATION Ability to create 50-100+ good jobs at maturity

Speed to 50 jobs

% of total jobs that are available 'entry level' to LMI workers

JOB QUALITY Compensation, relative to the cost to sustain a family locally

Career laddering and professional growth potential

Potential for higher than industry average pay and robust asset sharing

Other job quality factors

BUSINESS CHARACTERISTICS Competitive advantage

Potential for mission-aligned or anchor institution business contracts

Start-up capital requirements

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Business Fit Scorecard

Score, then compare individual business ideas based on relative importance of social impact components and strength of business ideas

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SCALE STRATEGY 1: Analysis of Bay Area industries identified business ideas in many sectors

• Biotechnology (along supply chain)

• Green building services

– Sub-sector: LED lighting

• Green infrastructure

– Sub-sector: Stormwater management

• Healthcare

• Logistics & Transportation

• Manufacturing

– Sub-sector: Specialty food and other light manufacturing

• Tech Services

– Sub-sector: Networking, security and helpdesk services

• Reviewed local reports on the Bay Area Economy completed by regional and city-focused organizations, and nonprofits

• Interviewed nearly 50 individuals across nine sectors

• Significant web research

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SCALE STRATEGY 1: Leading to additional considerations for selecting a business

• Presence of quality job training programs

• Mission focus of business

• Potential for support from existing local coops

• Unique “connection to market” opportunities

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SCALE STRATEGY 1: Example businesses demonstrate different approaches to “connection to market”

• Based on market demand and differentiated offering (competitive advantage)A “design-build-maintain” company with strong design aesthetics in the stormwater / water efficiency space

• For anchor clientsLED lighting retrofits for public and mission-aligned institutions that have long-term commitments and incentives to increase energy efficiency

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SCALE STRATEGY 2: Why focus on business conversion?

• Lack of succession planning is the #1 preventable cause of job loss

• Baby boomer retirement wave (“silver tsunami”)

• Bay Area beach head of socially responsible companies

• Business “conversion” risk < start up risk

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SCALE STRATEGY 2: Lack of succession planning is the #1 preventable cause of job loss

According to the Ohio Employee Ownership Center

• Only 15% of family businesses succeed to the 2nd generation

• Only 5% succeed to the 3rd generation

• Those that don’t close are sold to out-of-state buyers or private equity firms that often relocate jobs or the entire business

What if, instead, these businesses were sold to their workers?

http://www.oeockent.org/exit-planning/

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“Trillions of dollars of business value are going to change hands in the next 10 to 20 years.”

Image: Brett Ryder, The EconomistQuote: Bob Balaban, Headwaters MB, a Denver-based investment bank

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SCALE STRATEGY 2: Employee ownership addresses business owners’ fears about selling their businesses

Owners fear that a sale of their business to another (usually larger) company would result in its mission being overshadowed or cut out altogether, local offices or stores closed down, employees laid off and valued customers, vendors and partners de-prioritized

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SCALE STRATEGY 2: Quantitative analysis of Oakland businesses shows concentration in a few industries

Analysis criteria

• Growing industries

• 20-200 employees

• Low wage workers

Resulting target industries

• Manufacturing

• Commercial printing

• Logistics & shipping

• Health services

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SCALE STRATEGY 2: Quantitative analysis of Oakland businesses showed concentration in a few industries

Analysis criteria

• Growing industries

• 20-200 employees

• Low wage workers

Resulting target industries

• Manufacturing

• Commercial printing

• Logistics & shipping

• Health services

The Bay Area’s concentration of mission-driven

companies becomes a “beach head”

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SCALE STRATEGY 2: We need to use our megaphone with business owners, business associations, employees, CPAs, and engage impact investors

“If I heard success stories about this a couple times a year, it would be on my radar when I am ready to sell my business.”

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5. Resources available

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Resources availableWorker Coop Academy

• Round 2 next fall (we are actively fundraising for this)

• Think Outside the Boss workshops and manual

• WCA curriculum will be available early Fall 2015

• Upcoming Laney course as soon as Fall 2015

• Co-opLaw.org: online resource about worker coop law

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Resources availableSCALE STRATEGY 1: scalable coop incubation plan

• Business fit scorecard

• Written industry and sector assessments

– Biotechnology (along supply chain)

– Green building services, sub-sector LED lighting

– Green infrastructure, sub-sector stormwater management

– Healthcare

– Logistics & Transportation

• Worker Cooperatives: Pathways to Scale white paper

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Resources availableSCALE STRATEGY 2: business conversion assessment

• Methodology for assessing business “conversion” potential in your city

• Outreach plan to engage business owners, employees, investors and professional service providers (CPAs, accountants, lawyers)

• Case studies of businesses that have converted – released in early April by Project Equity

• Guide to worker coop conversions will be available later this year

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6. Next steps from here

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Implementing the Blueprint

WCA – Round 2, Fall 2015

SCALE STRATEGY 1: scalable coop incubation plan– Project Equity is looking for partners and creative “connection to market” opportunities

– Project Equity will focus more on this strategy in the coming years

SCALE STRATEGY 2: business conversion assessment– Coop Conversion Incubator with aggressive “pipeline development” (Project Equity)

“Collective impact” effort in its nascent organizing stages– Project Equity and SELC are spearheading

Worker Cooperative Bill in CA Assembly– SELC and EBCLC sponsoring AB 816 to create a worker cooperative statute

City Ordinance for the Promotion of Worker Coops– SELC is currently working with Oakland City council members to pass a city ordinance

that promotes the development of worker cooperatives.

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For more information…• On the Bay Area Blueprint, visit Project Equity’s website:

www.project-equity.org/bay-area-blueprint

• On the Bay Area Worker Coop Academy, visit SELC’s website: www.theselc.org/worker-coop-academy

Sushil Jacob [email protected]

Alison Lingane [email protected]

Ricardo Nuñez [email protected]

Hilary Abell (not presenting) [email protected]

Blueprint for Increasing Worker Ownership by Blueprint Collaborative is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

http://www.project-equity.org/bay-area-blueprint

mailto:[email protected]




http://www.theselc.org/worker-cooperative-academy

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Questions, comments, or thoughts to share?

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APPENDIX

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THE PROBLEM WE WANT TO SOLVEIncome inequality is perilous for the economy

Income inequality peaked right before the Great Depression and the Great Recession. Source: Robert Reich.

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The “Silver Tsunami” – a coop conversion opportunity

Baby boomers…

• own nearly 4 million businesses

• own 66% of all businesses with employees

• had fewer children than their parents, leading to succession challenges

http://www.axial.net/forum/baby-boomers-deal-flow/http://www.huffingtonpost.com/2013/05/20/baby-boomers-small-business-sales_n_3307156.html

Baby boomer retirement was the #1 reason driving business sales in key markets in 2012.

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11% 31% 44%White Black Latino

While whites lost 11% of their wealth during the great recession, Blacks and Latinos were much harder hit

“Wealth Gap Among Races Has Widened Since Recession,” New York Times 4/28/13

The racial wealth gap is getting worse