Photo courtesy of Co-operatives UK: Debbie Harley, a worker and director of Delta-T Devices, a thriving environmental science instruments worker co-operative, checks in on an installation.
Worker co-operatives tend to be smaller than conventional businesses and struggle to find investment, right? Well, not necessarily, according to new research into worker co-ops.
Over the last few years a growing body of evidence about worker-owned businesses has emerged, showing that they give staff more of a stake in the organisations they work for, boost productivity, and can work in almost all parts of the economy.
But, beyond these headlines what do we really know about worker cooperatives? Do they tend to be small? Do they struggle to get financial investment? Are they successfully competing with conventional businesses?
Professor Virginie Pérotin at the Leeds University Business School has looked at international data on worker-owned and run businesses in Europe, the U.S., and Latin America and compared them with conventional businesses.
In her new report, What Do We Really Know About Worker Cooperatives?, published by Cooperatives UK, the network for Britain’s thousands of cooperatives, she has analysed international studies on business issues like productivity, survival, investment, and responsiveness and identified a number of findings that add to our understanding of worker cooperatives.
1. Worker co-ops are successful businesses. First of all, she finds that worker cooperatives represent a serious business alternative and bring significant benefits to their employees and to the economy. “There are thousands of worker-run businesses in Europe, employing several hundred thousand people in a broad range of industries, from traditional manufacturing to the creative and high-tech industries,” says Professor Pérotin.
2. Worker cooperatives give staff control. Because worker cooperatives are owned and run by them, their employees have far more say in the business, from day-to-day concerns through to major strategic issues. “A job in a worker cooperative probably is particularly valuable, since it is a job in which the employee has a say in decisions that affect employment risks,” reads the report.
3. Worker cooperatives boost productivity. As the employees are the owners with a stake in the future of the business, worker co-ops are more productive than conventional businesses, with staff working harder and the organisation harnessing their skills more effectively. The largest study finds that “in several industries, conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organising production” the report highlights. “Worker cooperatives are more productive than conventional businesses, with staff working “better and smarter” and production organised more efficiently,” adds Professor Pérotin.
4. Worker cooperatives provide greater job security. When market conditions change, worker cooperatives review wages first and keep employment more stable than in conventional businesses. In a downturn, they drop wages rather than reduce their workforce and, when business picks up, they are ready to respond and can make up for lost pay because employees enjoy a share of profit.
5. Worker cooperatives are larger than conventional businesses. Contrary to a popular myth, far from being small, cooperatives tend to be larger than other businesses. Professor Pérotin identifies a number of reasons for this -- most businesses are in fact small, cooperatives are resilient and therefore are often older businesses than the average, and many in countries like France emerge as buyouts of existing businesses rather than start-ups and therefore are born large.
6. Worker cooperatives are resilient. Last year our own data found that, whereas only 40 percent of new businesses in the UK survive the difficult first five years, 80 percent of co-ops do. Professor Pérotin’s analysis supports this, and she points out “worker cooperatives survive longer than other firms overall when industry and starting wage, size, and year of creation are taken into account, and this is due to their much lower closure risk (hazard), all else being equal, than conventional firms.”
7. Worker cooperatives have relatively high levels of investment. It is sometimes thought that worker cooperatives may struggle because they rely on investment from the employee members rather than external sources. “However, in practice,” says Professor Pérotin, “worker cooperatives plough back significantly more profit than required, perhaps as a form of insurance against job losses in downturns. This suggests that the hypothesised under-investment process itself does not apply in practice.”
So, when you put it all together, worker co-ops are successful, productive, resilient, and relatively large businesses that give their staff job security and control over its strategic direction. That is something that everyone needs to know about worker cooperatives.
Author Ed Mayo is Secretary General of Co-operatives UK, the network for Britain’s thousands of co-operative businesses.