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The PixelSpoke Worker Cooperative Journey, Part 1: Why Change?
In late 2016, I met an unusual character at a business networking event. Blake Jones is the co-founder of Namaste Solar, a 10-year-old Certified B Corporation solar company based in Boulder, Colorado, with over 100 employees and a strong focus on positive social and environmental impact. It all sounded right up my alley.
Then Jones casually let slip that Namaste Solar is a worker-owned cooperative — owned and run democratically by its workers.
All that I really knew about cooperatives at that point was based on shopping trips as a kid with my parents to a local food co-op; a few conversations with clients that followed a cooperative model — one a power co-op and the other a credit union; and a vague awareness that REI is a co-op, which I occasionally shopped at but hadn’t bothered to join.
When I co-founded PixelSpoke in 2003 as a marketing agency that works with credit unions and other mission-driven companies, we structured the company as an LLC because that’s what we were advised to do. Not once did a lawyer or adviser even mention the option of structuring the company as a cooperative.
PixelSpoke became a B Corp in 2014, making a public commitment to our long-held belief that business can be a force for good. And yet, as I began to explore the cooperative model, I started to wonder if we could be doing more.
While there are only around 450 worker cooperatives in the United States — including Equal Exchange and the 1,000-plus worker Cooperative Home Care Associates — I learned that it is a much more common business model in other parts of the world. A single province in Italy has over 8,000 cooperatives, representing over 30% of the businesses in the local economy. A global cooperative founded in Spain, Mondragon, has more than 200,000 workers.
The more worker cooperatives that our team started to meet, the more we learned that for whatever reason — perhaps our shared myth of The Rugged Individual and the echoes of McCarthyism? — the cooperative model is not discussed in the United States much at all. Though cooperatives are mentioned as a standard option for ownership and operation of a company in many business schools in Europe, I have yet to speak to one U.S. MBA graduate whose education covered this model.
I also came to realize that my preconceptions of cooperatives were not very nuanced. While worker cooperatives are less common in the United States, there are three other cooperative models, all of which have very different types of members and defining characteristics. The best known are consumer cooperatives, like REI, power co-ops, credit unions, and food co-ops; but there are also purchaser cooperatives, like True Value hardware, and seller cooperatives, like most agricultural cooperatives.
When you take into account all these models, there are over 29,000 cooperatives in the United States and over 2.6 million around the world, according to the Global Census on Cooperatives, with over 1 billion members and clients. If the global cooperative economy were a single economic unit, its $20 trillion combined asset base would make it the fifth largest economy in the world. That’s all to say that cooperatives are far more common, and more economically significant, than you might think.
5 Reasons for a Cooperative Shift
Here at PixelSpoke, we are just now concluding the first chapter of our own cooperative journey: As of January 1, 2020, we completed an 18-month process of transitioning from a single-member LLC to a worker-owned cooperative. An initial group of four employees have joined me in our new five-person cooperative ownership structure.
When people have asked me why I would possibly give up control of my company — something I have spent over 16 years of my life building and from which I have only started receiving meaningful dividends beyond my salary in 2015 — I cite five primary reasons:
1. Living My Beliefs
The foundation of our democracy is civic participation. I subscribe to the notion that democracy is a fragile institution — it only works when citizens are educated on how to meaningfully participate and are personally engaged in the democratic process. That engagement must happen continually and in a variety of contexts, not just every four years at the ballot box.
Sadly, since the 1960s, civic engagement has been the decline, as detailed in Robert Putnam’s seminal book, Bowling Alone. Americans have been retreating into their houses, jobs, families, and devices, and the number of Americans practicing democracy — on the board of their church, or in their local parent-teacher association — has plummeted dramatically. Cooperatives are one tool for teaching democracy through doing.
2. Reducing Inequality
As civic participation declines, inequality increases. As humans, we are terrible at gauging the risk of things that change gradually, like the proverbial frog in the slow-boiling pot of water. But inequality is the water that is gradually boiling us alive, resulting in political polarization, withdrawal from society, and declining levels of empathy.
As a business owner, I felt that I couldn’t ignore this reality or my role in it. I was drawn to the cooperative model because, as The Nation points out, “The equity principle of worker-owned cooperatives could be especially crucial for communities of color, as a path toward expanding community investment and closing the abysmal racial wealth gap.” In fact, according to the 2019 Worker Cooperative Economic Census, 58.8% of worker owners in the United States are people of color, and 62.5% are female.
3. Increasing Employee Engagement
In a business ecosystem suffused with battle metaphors, cooperatives may seem like nothing more than a “cute,” idealistic pipe dream. Yes, a shared belief in collective success pervades most cooperatives, and while that in and of itself is hardly a bad thing, they are certainly not detached from modern business best practices.
Some modern cooperatives are run on self-managed models (like Holacracy, which Zappos runs on), but the majority have more “typical” management structures. That means we have an opportunity to increase employee engagement without having to reinvent the management structures we have already invested years in building. According to the Democracy at Work Institute (DAWI), employee-owned small businesses see an average of 4% to 5% higher productivity levels, as well as more stability and growth potential.
4. Ensuring Long-Term Sustainability
I have seen evidence of “founder syndrome” in so many organizations at this point that I can’t even count them all. It is real, and it destroys so much of the good work done by founders who don’t know how to gracefully evolve, transition, or share power. Though we often lionize the dominant genius — a Steve Jobs or Jeff Bezos — these characters are very rare, and to be honest, I wouldn’t want to work for either of them.
The transition to a cooperative model allows me to get a fair valuation for the company in exchange for creating a more robust leadership structure, greater employee buy-in, and greater long-term sustainability.
5. Stimulating Change
I have had the privilege of meeting hundreds of entrepreneurs over the years, and one thing I’ve noticed is that sometimes we get trapped. Our dream of owning a company gradually turns into just owning a job — and often one that we don’t really want. I understand the importance of continually evolving myself and the company. Wherever this journey leads us (and I am optimistic!), at the very least, we will not risk being stagnant.
I will share more about this journey, which I know is far from over, in Part 2 of our worker cooperative journey next week.
B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.