Worker Cooperatives

The Two Interrelated Contexts

External - hard to integrate a social model - employee well-being, the environment and sustainability whilst operating within a market context which prioritises profit Product market - the degree of competition Broader political economy context - e.g. in liberal-market economies reduced labour costs are a source of competitive advantage Internal - practices and processes within the organisation to promote and sustain democratic values to ensure that the participation of workers is being reinvented. Cheney et al 2014 - 'structures of democracy must be accompanied by commitments to democratic process, which ultimately means openness to new definitions and practices of democratic organizing itself'

Jenkins 2016

Pac Co - the paradox of economic and democratic participation in worker coops. - Contract packing company which emerged out of a management/worker buy out with redundancy money (a defensive cooperative). economically deprived area - best way to salvage jobs - Core values not based on the pursuit of cooperative values (democracy and participation), but on market and business logic - the primary objective economic survival - led to a growth strategy to create stable employment and increase profit. - Prospered and expanded during economic turbulence, generated work for over 10 years and provided significant financial rewards for the founding 16 co-operators. - Due to the highly price sensitive and competitive market, it developed a dual employment strategy of core & periphery employees - many weren't full members and didn't share the benefits of the original co-operators. - Oligarchy - the original management structure remained after the buy-out with limited evidence of worker democracy and participation - Tensions on the shop floor - complex mix of employees, due to concerns about failing productivity levels it was voted to move to an employee trust status where members share the profits equally - Evolving and dynamic: maintaining employment and growing profits in a volatile product market position, this move holds the potential of regeneration - Evidence of the following principles: - Cooperation of coops - received advice from Tower Colliery - Concern for community - donated money to the local football team - Democratic control - but only original members - no meaningful participation - Not voluntary open membership - When the business went through financial troubles, directors decided not to inform employees - Paradox - tight profit margins and competitive advantage derived from flexible to short term cycles but want to be a coop that creates and sustains context for long-term survival. So, kept wages low - Wasn't a contradiction because providing stable employment and financial security was the most important thing in the socio-economic context. - Employee-owners received lots of profit and didn't want to share - Workers felt a strong sense of involvement, despite little evidence of involvement in key decision making. - Some workers grateful not to be involved in decision making - so why change? - Shop floor work was boring and repetitive, but employees were given control and autonomy to redesign labour processes. Lack of supervision and relaxed environment. - Different categories of employees, original members getting the most financial benefit. Some share transfer, some permanent non-owners and others agency and zero hours contracts. Created tension e.g. some temp staff fired and rehired. - So, they transitioned to employee trust - all staff get equal pay of profit. - Successful - moved away from the degeneration thesis. - Economic and social domains are important - positive political context: "the Welsh government has made cooperatives a key part of their strategic .

Cheney et al Challenges Cooperatives Face

Cheney et al 2014 Organizational resources, structures, and dynamics allow for social as well as economic resilience for worker cooperatives The complex types and roles of leadership in worker cooperatives and related organisational forms The capacity of and the obstacles to the reinvention of democracy within cooperatives The relationships between cooperatives and organized labour, the state, the community and the larger financial system Pursuit of cooperative values and policies within international market and environmental contexts.

Cheney et al Advantages of Cooperative

Cheney et al 2014 Their potential to deliver sustainable corporate governance Their prioritizing of employee wellbeing leading to the potential for higher levels of productivity Connect to the community and the environment 'Having control over the firm, its employee-members are able to choose to preserve jobs in which they have a say in determining working conditions and employment risk, and in which they are likely to be better motivated, more creative and happier'.

Reid 1995

Cooperatives are a 'blueprint for a perfect world'

The Business Case

Cooperatives have an important role to play in reimagining and reconfiguring the economy as a whole, as well as bringing to the table alternative forms of governance (Cheney et al 2014) Since the GFC they have Out performed traditional organisations and lower risk of business failure (Lampel and Bhalla 2010) Cooperatives preserve more sustainable jobs in deteriorating market conditions (Lampel et al 2012) More sustainable jobs - they prioritise job security over income stability

Limitations of Meister's Four Phases of Degeneration

Cornforth 1995 - assumes that direct democracy is the standard and anything else is a sign of oligarchy Assumes that leaders, because of their position, will move into a different 'social world' than the led. Lose touch and interests will diverge Ignores context - may be influenced by wider economic, tech, social or political features.

How Might Degeneration be Avoided?

Delegating greater decision-making powers to members Reducing formal controls to a minimum Diffusion of knowledge to eliminate knowledge differentials - such as the use of 'appropriate technology'; links to wider social movements Active membership - member meetings; careful selection and socialisation of new members Conflicts are not suppressed Efforts to demystify specialised knowledge - education, job rotation, skill sharing; division of managerial responsibilities 'Cycle of vigilance' - regularly review structures and procedures; performance as a coop and business Suma Foods - Cheney et al 2014 - the challenges facing cooperatives emanate from the social and economic contexts in which they operate and the way these domains are interrelated. Requires an appreciation of the constant tensions facing coops.

Define Worker Cooperatives

Enterprises in which ownership and control reside ultimately or overwhelmingly with employees (Paton 1978). The internal workings of cooperatives are affected by the social context in which they occur.

Cooperative Values and Principles

International Cooperative Alliance Cooperatives are based on the values of self-help, self-responsibility, democracy, equality and solidarity Voluntary and open membership Democratic member control Member economic participation Autonomy and independence Education, training and information Co-operation amongst co-operatives Concern for the community

Three Key Strands

Jenkins 2016 Purists - Measure coops against the 7 core principles, adopting an idealised notion of how worker democracy and participation should function. Takes a normative stand, dismissing coops that do not embrace participation and democracy. Idealistic. Pessimistic - (Cornforth 1995) focus on the sustainability of cooperatives within capitalist economic contexts - 'degradation thesis' - Webbs' - democratic socialists who examined the ways 19th century coops evolved. Webb identified how many worker cooperatives failed and those that survived were undergoing a process of degeneration. Too extreme. Outdated? Pragmatic assessments - examine cooperatives as sites of competing and conflicting logics by highlighting the inherent paradoxes of reconciling business and social models. - Hernandez 2006. combines both.

Cathcart 2013

John Lewis Partnership - UKs largest employee owned business - Degeneration and a dilution of participation. As a result, management seek greater control and emphasise economic factors as a justification - Democratic degeneration - outsourcing to china - Goal degeneration - goals changed to make profit. - Organisational degeneration - Pay ratio reduced - more of an oligarchy - power condensed in the hands of the elite few. - Established upon the principle of sharing knowledge, gain and power o Experimentation in democracy o Organisational democracy - workers right to participate in decision making o Knowledge - inhouse-magazines with anonymous letter responses, detailed business information shared in weekly communication held-hours on the shop floor o Gain - minimum wage 25:1 but went to 75:1, all partners receive an annual profit-share percentage of salary. o Power - bodies e.g. Partnership Council. Elected representatives from each store - in order to hold management accountable, make key governance decisions, elect members to the board. - New management group wanted change - focussed on productivity and efficiency and claimed that partners didn't want to make decisions, so sought to dilute democracy - Degeneration - pay ratio change, growing reliance on non-partners to deliver services such as cleaning, removal of voting rights of majority of Branch Forums, lack of engagement, co-owned but not co-managed. o Changing 2005/6 survey question - 'my pay is fair' to 'my pay reflects the market rate and my performance'. o Escalator of control - moving down from codetermination to consultation o Branch Council non-representative of workforce as it mainly consisted of management. Ladder, they voted as expected to demonstrate allegiance with senior management and progress careers. o Employees could discuss operational issues, not strategic ones. o Limited participation through lack of confidence, understanding, fear or restricted bureaucracy in meeting structure. o Didn't feel they could have much of an impact, so didn't comment. - Regeneration - workers voted on trading hours by shop - many didn't accept 24 hour opening o Northern branch wanted to keep votes despite management being critical of their traditional view. o Proposal to remove decision making rejected (JP Focus 2009).

McQuaid et al Advantages of Cooperatives

McQuaid et al (2012) Higher levels of job satisfaction More control over their work Better communication and decision-making practices Higher levels of health and wellbeing More stable and secure jobs Increased innovation.

Four Phases of Degeneration

Meister 1984 1. High idealism and commitment but need for greater efficiency leads to the establishment of full-time administrators of co-ordinators who come to be seen as directors 2. Transition - further economic consolidation - conventional principles of organisation are increasingly adopted. Conflicts between idealists and managers 3. Loss of radical ideals and acceptance of market values. Democracy becomes restricted to a representative board; gap between managers and workers increases as the business develops and production is rationalised 4. Members and their representatives lose all effective powers as control is assumed by managers because of their superior expertise and ability to control information - Direct democracy is inefficient and elected leaders in democratic organisations seek to become a ruling elite - External pressures arise from tensions facing a democratic organisational form operating within a capitalist market - making it difficult for cooperatives to break away from capitalist principles of organisation such as hierarchy, wage differentials and the minimisation of wage costs

Iron Law of Oligarchy

Mitchels 1949 Assumes the inevitability of degeneration into an oligarchy.

Heras-Saizarbitoria 2014

Mondragon - 10th largest Spanish company. Employed over 74,000 people. - Presence in many sectors and the ability to adapt to changing markets. - Wage differential from 3:1 to 9:1 - Paradoxes between business success and social values within Mondragon - Local knowledge vs imported managerial regimes - Active civil society - "radical left" in the Basque country. - Want it to be seen as the best way of doing business - based on principles that closely relate to key coop - General assembly with one member one vote and democratic election - not day-to-day decisions. - Letting everyone vote would be chaotic - hard to be democratic in a competitive environment. - Some employees say they do the bare minimum and go home. They are bound to the organisation by job security in an age of precarious work and temporary employment. - Scepticism over managerial elite - ownership and decision making in the hands of members but in reality, the managers make decisions - Education principle - one day training about it, far removed from reality - Wage differentials have grown and number of temp workers has increased - Experiences become "romanticised and finctitionalised to a great extend" because people want to believe it. - Difference between formal corporate code of governance and daily activities - seems to be symbolically adopted. - Principles of democracy and cooperation associated more with rhetoric than reality - Has experienced tensions - attempts to sustain democratic control and technocratic tendencies - Democratic decision making structure, development of instruments of inter-coop solidarity (coop funds for redistribution), reallocation of workers as needed, education and research and 1:9 wage differential. - Can adapt and change in the market and be competitive - 2013 - one of the companies declared bankruptcy.

Hernandez 2006

Pascual Cooperative - Mexican Paradoxical approach to assessments of coops - Alternative - broke away from the traditional capitalist motive of profit maximization and instead their main motive is the well-being of the workers. - To achieve this, coops become embedded in an internal contradiction between the need to be productive to improve the economic wellbeing of the workers, and the need be humane and democratic. - The cooperative 'a site of unresolvable contestation between oligarchic and democratic forces' - Beyond interpersonal relations, shows how structural and cultural factors play a role in shaping the coops dynamic character - Understanding diversity requires exploration of internal contradictions in different kinds of cooperatives - Tendencies towards both oligarchy and democracy can co-exist - degeneration is a contested terrain rather than an inevitable outcome. - Democracy: o Indirect (representative bodies) and direct (one vote per person) but major decision making by the whole membership, not representatives. o Profit distribution - Degeneration/oligarchy o Individual attempts to gain control and power o Corruption - workers stealing - purchased from a fictitious business. o Organisational needs encouraged development of a managerial elite - well trained and consistent. o Long meetings on Sundays - uneducated decisions. Free food - not a utopian ideal. - Regeneration o Employees confronted their sense of indebtedness to advisors to maintain control. o Law- term in office limited to 2 years power can't be accumulated. Elected on alternate years. o Where employees felt that representatives weren't responding, they can recall elected officials. - Kept lots of profits for investing to be sustainable over time. - Structural, cultural, economic and political factors shape cooperative's dynamic character. Socialist govt support - laws: how a coop should look (e.g. 2 years) & political support for doing business differently. - Contradictions can coexist.

Three Types of Worker Cooperatives

Paton 1978 Endowed Defensive Alternative

Paton Limitations of Cooperatives

Paton 1978 External impacts overlooked - trading relationships, pace of technological change, labour traditions, attitude of the state and social climate Enormous scope for disagreement Mass meetings can be costly Artificial distinction between decision - both impact on everything. Having representatives doesn't ensure a smooth process of employee participation Managers will always win the argument.

Pragmatic View

Phases of degeneration and regeneration. - Cooperatives as sites of competing and conflicting logics - focus on the inherent paradoxes of reconciling business and social models; the external and internal contextual features in which co-ops operate (Cornforth 1995) - Realistic reading of coops - not as ideal forms of worker democracy and participation, but as 'sites of competing and conflicting logics'

Policy Makers

Policy makers promote cooperatives and mutual as an alternative business model. Cooperatives are attributed with 'generating employment, reducing poverty, and fostering social integration' (Cheney et al 2014) 'workers' cooperatives are perceived to be a more ethical and sustainable approach to business (Cheney et al 2014) Example - Welsh Assembly Government Strategic mission to promote coops because of the focus on business growth, employment generation and sustainability. The Welsh Cooperative and Mutuals Commission - 'to create a culture and environment in which co-operative ways of doing business are the norm, not the exception' The Social Services and Well-being Act - local authorities have a duty to promote social enterprises, cooperatives, user-led services and the third sector to deliver services which are based on a cooperative, co-productive model.

Regeneration

Pragmatic assessment considers the regeneration potential for coops which are conceived of as dynamic and evolving organizational forms (Cornforth 1995). - Due to the inter-related nature of the internal and external contexts, periods of interspersed degeneration and regeneration are likely o Cornforth 1995 - Maintained a division of labour without degenerating into oligarchy - go through 'degeneration and 'regeneration' phases. External and internal conditions can constrain what is possible in a coop, but they don't completely determine behaviour.

Criticisms of the Degeneration Thesis

Rothschild-Whitt and Lindenfield 1982 - Assumes organisations are unable to actively pursue strategies that avoid the concentration of power. Monopolistic use of expertise can be avoided, e.g. training and rotation Cornforth 1995 - best defence against degeneration is to be vigilant for its signs and remember to regularly review performance both as a coop and as a business.

Cheney et al 2014

SUMA foods - the UKs largest worker coop - Based on the principles of self-management - formal cooperative with steady organic growth - All employees are members (130+), earning the same wage and rotating roles - Entirely flat management system with no CEO - As it grew some jobs require expertise - e.g. marketing - rotate less frequently than others. - Slow decision making but improved quality of decisions and ease of implementation - Developed a structure where not everyone is equally involved - but not enough to lead to inequality - Didn't realise that elites form internally, not through democratic control. Informal hierarchy emerged. - Needed 70% majority so often didn't come to a consensus - Many felt it was run by a group of long serving members - dominance from expertise and knowledge. - New members felt left out of decision making as they didn't have information. - Created two subcommittees - finance and personnel - elected members. - Important issues still at general meetings - improved efficiency. Regeneration is possible. - Coop maintained commitment to principles and ideals and found ways of dealing with threats of degen

Advantages of Pragmatic View

This provides a more contextualised and embedded assessment (Jenkins 2016) of cooperatives. Acknowledges the diversity of coop forms and the paradoxical forces that shape its organizational structures and working relations. Hernandez (2006) - nuanced assessment of cooperative. She acknowledged the diversity of cooperative just as there are amongst private businesses and requires a focus on paradoxical forces shaping its organizational structures and working relations.

Crisis of Capitalism

Wolff 2012 Distrust of contemporary corporate governance. Workers who produce the surplus share it.