The PixelSpoke Worker Cooperative Journey, Part 2: The How
I wish I could say that it’s easy for a company to become a worker-owned cooperative. But having recently completed the 18-month process for PixelSpoke, the marketing agency I founded 16 years ago, I have to be honest: The process was long, sometimes tedious, and, though filled with tremendous excitement, also tinged with anxiety and fear.
If you’re wondering why I decided to embark on this unconventional journey, see Part 1. This article is about the how. As it is my firm belief that every Certified B Corporation should at least consider becoming a worker-owned cooperative, I hope I can help serve as a guide, illuminating what the process looks like and how you can best set yourself up for success.
1. Create a Shared Vision
We were almost a year into an 18-month-long process at PixelSpoke before I realized that we lacked anything concrete that we could all look at as our North Star. So we drafted a set of five “guiding principles” for our cooperative conversion based on our company strategy, culture, and learnings from other cooperatives and entrepreneurs:
Exceptional Client Value allows us to Deliver Greater Member Value.
Clients must be at the heart of any successful business. If we end up spending board meetings debating the break room snacks and PTO policies, the venture will prove unsuccessful.
Fairly Priced, Voluntary Member Shares.
The buy-in amount for eligible workers will be significant enough to make it a serious commitment, but not so high that it unfairly burdens them. The targeted return on investment will be 30%–50% a year.
Social Impact Orientation.
We will always retain our B Corp Certification (or a similar respected third-party standard of impact) to ensure we are continually improving our social impact, including giving at least 10% of profits to good causes every year.
Founding Owner Consideration.
We will respect the fact that I am taking on a very significant amount of risk, and appropriate safeguards will be in place for the first several years if the co-op does not function more effectively than it did as a single-member LLC.
Separation of Management and Ownership.
Our management structure is not expected to change significantly in the first year of the cooperative, and this is not a move toward holacracy or other self-managed systems.
2. Get the Order Right
A cooperative conversion is first a sale, then a way of life. I found that we were spending a lot of time thinking about all of the many issues that can arise when we operate as a cooperative, but that wasn’t what we primarily needed to be focusing on during the conversion.
First, we had to transition the business to a new model, which was essentially a sale from the owner (myself) to a group of five (the four founding members in addition to myself). It had to be a transaction that felt good to all of us. We quickly realized that talking about money can be even more difficult than we had expected, but our work over the last several years to build a culture of openness, honesty, and vulnerability paid off in helping us to identify and work on the root issues in getting this transaction right.
Second, once the conversion was legally complete on January 1, 2020, we had to transition into learning how to operate as a cooperative, building inclusive, everybody-wins practices for the entire company and a path for additional employees to become owners.
3. Seek Help
While there are only a few hundred worker-owned cooperatives in the United States, the conversion waters are not all uncharted. We benefited tremendously from the generosity of numerous cooperatives, all of which gave us a great deal of their time and expertise at no cost. We met via video or in person with five cooperatives, including groups as diverse as Namaste Solar, Equal Exchange, and Isthmus Engineering & Manufacturing. Every time we talked to someone, we learned something new.
You’ll also need a competent and trustworthy legal team. The good folks at JR Weiner, PC helped us along the path of the legal conversion — they are wonderful advisors who really walk the walk, taking this difficult process and making it (relatively) simple.
4. Set Aside Your Ego (It’s Not About YOU Anymore)
Though this should ideally be step one, it is actually something that an owner will have to grapple with continuously throughout the conversion, and particularly during the homestretch. During the month leading to the conversion, I found myself in a state of agitation when talking to the attorneys about the final documents, especially when issues of taxes and protections came up. I once melodramatically thought to myself, “I’m signing my own death warrant!”
I found myself wrestling with the reality that I will likely never make more money for the rest of my life than I have in the last few years, at the exact moment that my wife and I are about to have our first child. While I have worked hard to save money, at the age of 40 I find myself at that point where the basic human goal of continual progress every year will no longer apply, at least financially. For any business owner considering this type of transition, I don’t think some of these more difficult personal issues of identity and progress should be discounted.
An important postscript, however: I have felt a kind of joy, lightness, and release over the months since the conversion that I have never felt in my previous years as a business owner.
5. Talk Openly About Ownership
I find it a strange phenomenon that as a culture, we idealize entrepreneurship and executive leadership. We talk a lot about the people who found companies and the people who run companies, but very little about what it means to own a company. To be honest, I have always felt a strange dissonance around owning my company. Much of my identity has derived from the status that comes with being the CEO and sole owner, but that status often hasn’t brought me much pleasure. Shouldn’t ownership, the pinnacle of privilege, be a big joy ride?
When we don’t talk about who owns things, we miss a critical part of the conversation. The B Corp community, of which we are proud members, has talked a great deal about “mission lock.” How do you keep high-functioning companies with meaningful social impact orientations growing while preserving that mission once they start taking on outside capital?
There are many smart people working on this issue, but I now firmly believe that one of the simplest and most effective ways to achieve mission lock is to remove the separation of workers and ownership. This separation has become so pervasive in our economy that we barely notice it much of the time, let alone question it. One of the most fundamental and overlooked questions should be, who owns this?
In my opinion, the cooperative model paired with a trusted third-party certification like B Corp offers one of the strongest legal and financial framework for a durable commitment to consistently great work, socially responsible practices, and shared core values.
Change as the Constant
Now that we have completed our conversion, I don’t know for sure what the future holds. A loved and respected core team member with almost a decade at PixelSpoke left for a new opportunity four months before we were to all commit, and that turned out to be a wonderful lesson: Change will always be part of life, and the beauty and power of this model is the synthesis of collective and free market principles.
We will only succeed to the extent that we stay grounded, open-minded, and focused on our clients. At the same time, we will define success through a broader, more diverse lens and feel an even greater sense of accountability to do the right thing for our workers, community, and the planet.
If you’re interested in implementing any of these ideas, please reach out; we’d love to talk. 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.
How to Give Up Ownership of Your Company in 5 Steps was originally published in B The Change on Medium, where people are continuing the conversation by highlighting and responding to this story.