Category Archives: ESOP

The Need to Own It

I have written here often about some of the cooperatives with whom we work and, especially, the remarkable people encountered in these organizations.  Along the way, I have shared descriptions of some of the tools that we have shared with Nica partners (like Open Book Management and Lean principles), because many rural producers have become convinced of the need for organizational strengthening.  It should be no surprise that Winds of Peace Foundation regards these tools, and others that encourage inclusiveness and participation, as key to sustainable organizational strength.  So do many Nica partners.  But thinking that something is true does not automatically prove that it’s true.  So I decided to share some data about ownership that has recently been published.

The National Center for Employee Ownership (NCEO) has published a new study of employee-ownership in the U.S.   Now, the U.S. is not Nicaragua, and employee stock ownership is not cooperativism.  But the results cited in the report focus on enterprise ownership, owning the business and social equity of an enterprise, and that definition encompasses an entire spectrum of stakeholder models.  And this is a portion of what the study has found:

*Enterprise-owners in this dataset have 33% higher median income from wages overall. This holds true at all wage levels, ranging from a difference of $3,160 in annual wages for the lowest-paid employee-owners to an extra $5,000 for higher-wage workers.

*Median household net wealth among respondents is 92% higher for owners than for non-owners. This disparity holds true for the great majority of subgroups analyzed, including single women, parents raising young children, non-college graduates, and workers of color.

*Enterprise-owners of color in this data have 30% higher income from wages, 79% greater net household wealth, and median tenure in their current job 36% over non-employee-owners of color.

*For families with children ages 0 to 8 in their household, the ownership advantage translates into median household net worth nearly twice that of those without employee ownership, nearly one full year of increased job stability, and $10,000 more in annual wages.

The report is full of additional data which supports the organizational value of ownership; take a look at it for lots of details. But the picture being painted here is one of many colors: organizations that involve their workers as owners are more successful;  greater opportunity comes from ownership; greater participation through ownership yields greater strength and organizational growth; there is a central tendency in us as human beings to nurture and protect that which we own.

Concurrent with the publication of this groundbreaking study was the publication of Fortune Magazine’s 2017 100 Best Companies to Work For.  Of the 73 corporations recognized for their outstanding workplaces, more than half of them (35) incorporated ownership plans for their members.  It’s hardly a coincidence that many of the best companies to work for are companies owned, in whole or part, by the employees or members themselves.  (The Fortune list is traditionally weighted heavily toward technology and healthcare providers; the preponderance of ownership would presumably be even higher in a more representative sample of U.S. businesses.)

There is no mistaking the fact that Nicaraguan cooperatives are owned by their members, in at least the structural, legal sense.  But like their U.S. employee counterparts, Nicaraguan owners need the understanding of what ownership is, of what their ownership obligations and rights are, and how their success truly rises or falls based upon the members taking responsibility, collectively.  Successful ownership is not reliant upon heroes or the efforts of the few or the presence of a beneficent patron.  Success follows a basic understanding of how their cooperative works, how A+B=C, and importance of each member to the whole.

So when the third Certificate Program is convened in August, there will be modules about family strategic planning and access to markets and means of improving production and quality.  But at its core, the Program will be about ownership, seizing the opportunity for self-improvement by embracing both self and collective responsibility.  We’ll be there to help conversations about Open Books and Lean, but the days will really be about our partners’ futures, and their appetite to own it….

 

Cooperativism, a means for an arduous peace in a space of ‘conflict’

Cooperativism, a means for an arduous peace in a space of ‘conflict

René Mendoza Vidaurre[1]

War is the continuation of politics by other means.  Clausewitz (1780-1831)

My husband and son were killed in the war. I was left with a little bit of land. The cooperative was like my husband. I supported myself in it to raise my children. E. Terceros, producer, cooperative member, Nicaragua.

The stronger the sons and daughters are, the stronger the parents will be. Proverb in Rural Central America

War and peace are the continuation of politics by other means, we would say, hoping that Clausewitz would agree with the addition “and peace”. Countries with wars that sign peace agreements experience a period that De Sousa (2015) called “post peace accords.” It is a period of the continuation of conflict where different development paths clash with one another, and where associative organizations are an expression of that, and have the potential to make a difference. Under what conditions do associative organizations contribute to peace? What alliances are needed to make a difference? This text responds to both questions from the reality of war and peace that Central America experienced over the last 50 years.

[pull down full article here]

[1] The author has a PhD in development studies, is an associate researcher of IOB-University of Amtwerp (Belgium) and a collaborator of the Winds of Peace Foundation (http://peacewinds.org/research/) and member of the COSERPROSS Cooperative R.L. rmvidaurre@gmail.com. This article, for now a draft, will be the basis for our presentation in the Peace Prize Forum to be held in Minnesota (September 2017).

 

 

“First Person”

I had the wonderful opportunity last month to briefly address the National Center for Employee Ownership (NCEO) Annual Conference in Minneapolis, Minnesota.  I have not spoken before a national employee stock ownership plan (ESOP) audience in several years, so it was a terrific chance to renew past friendships and catch up first-hand with what is happening in the ESOP community at-large.

Along with that invitation, NCEO also wondered whether I might be willing to write a companion piece in a column entitled “First Person,” to be included in their monthly publication, “Employee Ownership Report.”  The periodical provides updates on all sorts of ownership-related matters., both in the U.S. and also in other locations.  I agreed to submit a reflection on the similarities of ownership as I’ve experienced them in both the U.S. and Nicaragua.  The article was published in the May-June edition of the Employee Ownership Report and I think it has application not only for a U.S. ownership audience, but also anyone engaged in development work in places like Nicaragua.  The following is the article in its entirety:

“Universal Truths”

It’s still amazing to me! After working for 31 years in my company, the last 20 of which were under ESOP ownership, in 2005 I found myself working for a private foundation serving rural Nicaraguans. But as different as the circumstances and surroundings may be between those environments, I’m still talking and teaching the same language and the same lessons as all those years ago. To my great surprise, my greatest strength in working with impoverished Nicaraguan farmers is my ESOP orientation, and recognition of just what it is that grabs the human spirit and shakes loose creative drive.

Things such as ownership, as in the coffee cooperatives. And transparency, as in understanding the fundamentals of how an enterprise succeeds, how A+B=C, the rules of the game being played. (Yes, The Great Game of Business translates into Spanish!) Or participation, by members all across the organization, both as constituents and leaders. Like organizational holism, where the entire organization focuses on the six dimensions of well-being: Intellectual, Social, Emotional, Spiritual, Occupational and Physical. It turns out that the elements of organizational strength are the same whether in Nicaragua or within the U.S. and there’s a lesson in that.

The lesson is that the methodologies we encourage for effective employee ownership are not simply progressive management tools that can generate improved organizational performance. Rather, the elements are responses to basic human needs, universal truths that address some of the most basic yearnings that we experience in our lives.

We need to provide for ourselves, of course. But we long to be part of something bigger, something that goes beyond vocation, something that promises a lasting imprint. We want to know how things work around us, and how we make it better. We need to feel that we have contributed something of ourselves to an undertaking that is good and successful. Providing a living for ourselves is a livelihood. But elevating those around us at the same time is a legacy, something that transcends everyday existence in ways profound and subtle.

I’ve experienced the power of that truth both in the U.S. and in Nicaragua. In 1993, The ESOP Association began its annual practice of recognizing employee-owners and companies for their achievements under an ESOP ownership structure. The very first national employee-owner of the year was Shirley Bauer, a Tool Crib Attendant at Foldcraft Co. Shirley and her husband were farmers in southeastern Minnesota; maybe that contributed to her ability to see the potential in employee-ownership. A humble but outgoing woman, Shirley had daily access to people from around the entire company and became an outspoken promoter of the ESOP. When her name was announced at that first annual awards dinner, both her energy and humility-as well as her ESOP passion- were evident to everyone in attendance. The moment emblazoned itself in the memories of many who were present, and I still hear recollections from some of those people today.

Two weeks ago, I sat in a very different venue. I attended an organizational workshop for coffee cooperatives. Before an audience of 75 people, a tiny Nicaraguan woman by the name of Corina nervously but firmly explained the details of a 5-year family farm plan which she had created. I had met Corina several years before, after her small coop had been defrauded by unscrupulous middle-men and faced almost certain collapse. The Foundation provided enough help for coop survival, but I recall Corina as a defeated woman, one who had invested much and now faced near-ruin. Back then, she was barely audible in the presence of her North American visitors. But now she was sharing the wisdom gained through perseverance, the success of her immensely hard work and that of the coop, the “family strategic plan” blueprint provided by her coop mentors. Her radiance mirrored that of Shirley Bauer so many years ago.

We’re not as different as we sometimes think. There are universal elements that feed our psyches and souls, among them the power of shared, collaborative work. Tenets of employee-ownership are not simply good structure. They meet some of our most basic human needs.

It’s often the case that we spend much of our time and energies identifying how we’re  so different from one another, and deciding who should be allowed to participate in the freedoms and joys of this life, rather than recognizing how entirely alike we members of the human species really are….

 

 

 

                                                                                

 

 

 

“Open Books” innovation in business

“Open Books” innovation in business

René Mendoza, Steve Sheppard y Mark Lester*

Information should not be a tool of power, it should be a means of education

Jack Stack

Jack Stack,[i] and hundreds of employees turned into the owners of the Springfield Remanufacturing Corporation, innovated in 1980 the “the Game of Business”, known as “open books management.” This novelty was disseminated to thousands of economic organizations of different types and sizes, in and outside of the United States, particularly to many corporations in that country whose workers became the owners of their corporations. What does this innovation entail? Can it be adapted to enterprises in Latin America?

Every game has rules for scoring and winning, and the team that knows and practices how to score better than others wins. So it is in soccer or in cricket, the team that plays better, scores goals or runs. So it is also in businesses, whose staff are the players, the more they know the rules and play as a team, the more scoring they do, the more money they make, and the more cash they generate. The motivation for this comes from the desire to harness all of the resources possible for success, as well as understanding what a business means for their family and community, from looking beyond the specific job and its pay, and from feeling proud of being part of an enterprise whose numbers – both overall, as well as for each area of the business – they understand: sales, profit and losses, daily production, balance statement…If the company is a coffee exporter, their areas include coffee buying-harvest collection, dry milling, credit, commercialization, administration…Knowing the moves, they know who is on offense, on defense, or in midfield in the business, and they know that they should make an effort based on their “critical numbers” (standards or goals) like sales, cost of raw materials, productivity or cash flow.

This novelty clashes with the myths of traditional businesses (“only the accountants understand the numbers”, “the manager has all the answers”, “the staff should only be concerned about their job”), and proposes a different perspective: no one individual is more intelligent that all the people together; instead of one person who centralizes the information, let the personnel function as a team, generate information and be educated in this game. This allows for collective trust to be built, as well as credibility in the information. From here, if the staff of an area understand that their work is generating profits and losses, then that impacts the balance statement, and that that is connected to the financial rewards that everyone has set when certain goals are met as a company. Then he or she will understand that they are not “a tooth in the grinding wheel”, but an important contributor for the company, their family and society. The more the staff of your organization know, the better they perform, and consequently the company produces with lower costs and has the capacity to offer more unique products or services.

This innovation has been adapted by companies of all sizes and types, and especially by companies where the employees are also shareholders, and they have been successful. In the financial crisis in 2008 many of these companies continued growing, while more traditional firms were shrinking. It does not work in companies with a pyramid-shaped organizational structure, where the leader is on top and the staff down below, and that moves under the spirit of Taylor, separating brains and hands. It requires companies to move toward circular organizational structures (see Mendoza, 2014)[ii] among owners, board members and management, revolving around itself where everyone from the cleaning staff to the manager understand the rules of the game, objectives, goals, and rewards (incentives for all the staff, and not individual incentives, e.g. incentives of x percentage after achieving a 5% increase in earnings as a company), and regular meetings organizing the information of each area and evaluating it in light of their objectives and goals. In this context, when a certain area does not meet their goals, they identify the problems and the remedies, pressure and collaboration is expressed to solve them, because the success of their company and their rewards are in play. This is a model that comes in part from indigenous peoples in the US, the elders and leaders that would meet in circles, where each one expressed their data and perspectives to stay or move to another place, with the role of the chief being to seek consensus, and when there was none, based on what he had heard and his judgement, to make the decision.

This is a game that overcomes Hardin´s[iii] dilemma of collective action, of opportunism (free riding), and that of generating wealth by walking on top of others. It changes the mentality of “employees” to that of “owners.” It recovers the original idea in the US that corporations emerged for the good of the entire society. And it is a game with which businesses are achieving their puprose of making money and generating cash, of producing wealth and having an impact on its distribution.

Can companies and cooperatives of Latin America play this “game” of business? Obviously they can! Nevertheless for companies to achieve it they will have to also overcome other strongly institutionalized myths: “whoever provides information will be crucified,” “the rich are self sufficient,” “God made the poor and the rich, and he made me poor”, “the boss is always right”, “those who mix with business men are disrespectful”. There are businesspeople who would wait until hell freezes over before their staff would buy shares in their companies (“the two don´t mix”), and there are companies whose staff have shares, but continue functioning under a pyramid-shaped organizational structure, with centralized information, and therefore with a mentality of employees and bosses. The teaching that “open books management” left for companies of all sizes and types, is that if you play “the game of business” as a team, with all the players, they will learn more and will generate more wealth; and in the long term the staff that cultivates a mentality of “owners” will organize (incubate) other similar or more democratic companies than the mother-companies, and society will benefit more. Because our lives are brief, and needs and opportunities are infinite, will sign up to play this game?

* René (rmvidaurre@gmail.com) has a PhD in development studies, is a collaborator of the Winds of Peace Foundation (WPF) (http://peacewinds.org/research/), associate researcher of IOB-University of Antwerp (Belgium) and the Nitlapan-UCA Research and Development Institute. Steve, the current director of WPF, was manager of the Foldcraft corporation bought by its 350 employees. Mark is director of WPF in Nicaragua and of the Central for Global Education and Experience at Augsburg College.

 

[i] Stack, J., 1992, The Great Game of Business. USA: Doubleday

[ii] Mendoza, R., 2014, “Liderazgos colectivos y compartidos. Antídoto para una sociedad dependiente de patrones y jefes” en: ENCUENTRO, 99 http://encuentro.uca.edu.ni/pdf/e99/e99-art1.pdf

See English version at http://peacewinds.org/collective-and-shared-leadership-antidote-for-a-society-dependent-on-bosses-and-patrons/

[iii] Hardin, R., 1982, Collective Action. Johns Hopkins University Press. Baltimore.

An Ownership Advantage

I attended a party last week.

The gathering was in recognition of  The Minnesota Chapter of the ESOP Association.  The chapter is one of 22 chapters nationally, in the association which represents the 15,000 employee-owned companies across the country.    Minnesota has been a particularly strong chapter in the network and over its 25 years has been a strong contributor to the employee ownership movement.

Parties are normally fun and friendly occasions, I suppose, but this event contained a special air of zealotry.  The 75-80 folks who attended are among the most enthusiastic supporters of the shared capitalism idea, and they are never bashful about displaying such passion.  These were the people who have either led the chapter or been especially active in its work; they are champions of the cause and the effects of employee-ownership.  I had not seen many of these people for nearly ten years, since I retired from the employee-owned Foldcraft Co. in 2005, so the gathering had the feel of a grand reunion.

All of that context provided more than enough reason for a stellar evening, and indeed, the laughter and the hugs were genuine all through our time together.  But there was something else in the air.  There was a tangible feeling that this group of ownership advocates exuded an intensity of knowledge, some sort of awareness that other organizations don’t necessarily experience among their members.   That perception, merely felt by some but outwardly acknowledged by others, recognized the immense power of their shared sense of ownership .

Let me be clear on one major point: not every member of every employee-owned entity demonstrates a deeply-felt sense of commitment, empowerment and liberation.  But those who are able to envision their own development within an ownership mindset have often defied the odds in creating opportunities and experiences for themselves and their enterprises.

In fact, organizationally it’s true whether there is an actual ESOP component in place or not.  Entities that are managed under the terms of transparency, broad participation, engagement and a sense of shared outcomes perform better, feel better, last longer and ultimately have a more positive impact upon the societies in which they serve.   That requires the right people, the ones who share in a vision and who possess the energy to want to go there.  In the words of author Jim Collins in his book, Good to Great:

But I know this much: if we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.”

On Thursday evening, the ballroom was filled with the right people.  They have been and continue to be consistent champions of encouragement and commitment for everyday workers to access equity ownership.  They know that such an opportunity is actually a component of our holistic health.

It’s a universal need.  We want to claim a deep and rich ownership of our lives, and the places where we work constitute a major portion of our time.  We long to be integral parts of our labors rather than simply renting out our time and skills.  We need to know what is happening in our vocational lives, what is impacting us, what we can do about it, how we can do better.  Where we have come together in our work organizations, we sense that it could be possible to truly belong to an endeavor bigger than ourselves, in some cases maybe even more important than ourselves.

Some of the best-managed companies around the world have recognized this truth.  The most stable and productive governments have operated under principles of democratization, which are still the envy of people in non-democratic societies.   Employee-owned enterprises often “get it,” as reflected in annual workplace survey data.  And in addition to data, I suspect that we recognize intuitively that fully collaborative efforts will almost always outperform individual ones; “none of us is as smart as all of us.”

It’s a truth that Winds of Peace is working very hard to teach this reality to rural cooperatives in Nicaragua, as well.  It may run counter to the model the government uses.  It may fly in the face of the big company executives there who have copied the traditional corporate models from the U.S.  It even challenges the cultural and historical patterns that shape societal behaviors.  But it’s a lesson worth teaching, and one definitely worth learning.

It’s an advantage that we celebrated last week.  It doesn’t represent the easiest manner in which to organize and operate.  But it’s certainly the best….