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Worker cooperatives are a great way to bring democracy into the workplace. For retiring business owners and entrepreneurs, converting to a worker-owned co-op can also strengthen business and generate a return on investment. 

Co-ops are a great way to bring democracy into the workplace.

Worker co-ops can be built from scratch or created by converting existing businesses. Melissa Hoover, executive director of the (DAWI), says that co-op conversions are a promising source for new cooperatives. They already have customers, assets, and employees, which makes converting less risky than a startup. She also notes that converted co-ops are among the most passionate members of the .

鈥淭hey鈥檙e the most engaged and the most attentive to the cooperative forum, principles, and movement building,鈥� she says. 鈥淭o change something into a cooperative structure they had to educate themselves about what that meant, and connect themselves to movement organizations, models, and peers.鈥�

When converting an existing business into a co-op there are lots of questions that need to be answered. How will the business be structured? How long will the transition be? Does the selling owner want to stay on? It takes time to work out the details, and answering questions is an essential part of the transition.

Every business has unique strengths and challenges, and there is no single way to create a cooperative. But there’s no need to reinvent the wheel either. Hundreds of businesses have followed these five steps to become a worker-owned co-op.

How it鈥檚 done

Shareable spoke with Joe Rinehart, the cooperative business developer at the Democracy at Work Institute (DAWI), to learn how to go from thinking about a conversion to actually doing it. Rinehart used DAWI’s conversion timeline to layout an overview of what a typical conversion might look like.

It鈥檚 not a hard-and-fast template. Some of the steps overlap, some may be unnecessary, and the timeline will vary depending on how large the company is, how long the selling owner plans to stay involved, how much training is required, and more. 

Stage 1: Deciding to move forward

What it entails: research and reading, worker ownership succession options workshop (for owner and their leadership team), initial owner conversation with employees, Worker Co-op 101 workshop for the employees, owner and workers decide to move forward, select steering committee, contact outside transition support team.

鈥淎s you create a structure of participation you鈥檙e letting employees know they have a voice.鈥�

This stage is to get the ball rolling, and for the business owner to decide if they鈥檙e interested in converting. It鈥檚 also about educating everyone involved about the cooperative model and determining if there鈥檚 interest in becoming a co-op. According to Rinehart, this is best done as a facilitated conversation with a skilled co-op transition professional. If there is commitment on both sides, the next step is organizing the key players and moving the process forward.

Rinehart recommends building a participatory workplace as soon as possible. This can be done through practices like open book finances and letting employees have input in redesigning workflow.

鈥淎s you create a structure of participation you鈥檙e letting employees know they have a voice,鈥� says Rinehart. 鈥淚t鈥檚 a really powerful tool in creating a workplace that can transition.鈥�

Stage 2: Employee training and business valuation

What it entails: financial training for employees, business and industry training, cooperative trainings for employees, business valuation process, determine financing options, review and revise current business plan.

This stage is where investment in the transition occurs. Employees receive training so they can understand the finances of the business, the business is evaluated, and financial options are presented. Rinehart recommends having a professional determine the value, then give employees the opportunity to contest the valuation if need be.

This is critical for the owner and employees. This step creates a structure for moving forward, and gives employees an opportunity to debate the valuation so they don鈥檛 feel like they鈥檝e been taken advantage of down the line.

Stage 3: Defining structures

What it entails: document current management plan, draft cooperative by-laws, define post-transition management.

This is where the management plan for the transition and post-transition is laid out, and those in management positions are trained.

Elect a board and have a first board training.

Rinehart says that in most conversions the existing management structure is left in place and documented. At this point, everyone should be very clear what the rules are, and if they don鈥檛 like the rules they have a voice in changing them.

鈥淭he [worker-owners] know how to make the business better,鈥� Rinehart says. 鈥淭hey have knowledge about the industry and the business. They know the impact of their decisions.鈥�

Stage 4: Finalize the transition

What it entails: transfer business ownership, negotiate final price, seek financing, complete the transaction, elect new board, and transfer management as necessary.

This stage is all about dotting your I鈥檚 and crossing your T鈥檚. It鈥檚 where you find the financing and pull the deal together. You will elect a board and have a first board training.

鈥淚t鈥檚 about making sure everything is done legally, clearly, and carefully so you鈥檙e able to move on,鈥� says Rinehart. 鈥淵ou close the door on the transition and effectively move forward as a business.鈥�

Stage 5: Follow through and monitoring

What it entails: ongoing training with current employees.

Once the worker co-op has been launched, it鈥檚 important to have regular check-ins.

Once the worker co-op has been launched, it鈥檚 important to have regular check-ins about the business to maintain clear and open communication. The structures put in place are not only for current employees but for future employees too. Make sure there are processes in place for training employees in what it means to be a cooperative and that you also lay out plans for growth. All of this requires ongoing training and monitoring.

鈥淣o structure is perfect,鈥� says Rinehart. 鈥淵ou鈥檙e designing a human technology for participation and democratic ownership. No technology is perfect the first time out the door.鈥� He adds that you鈥檒l want to take time to evaluate it, refine it, and get help from people who are experienced with worker cooperatives. Among those are the DOWI and its associated organization the , other cooperatives, cooperative developers, and members of .

The Big Picture

Worker-owned cooperatives, whether created from scratch or converted from existing businesses, are a central part of the sharing movement. As Hoover says, they鈥檙e the 鈥渙riginal sharing platform.鈥�

For those considering converting to a co-op, Hoover recommends talking with other business owners who have converted. She also encourages business owners to think about what they really want to build, and what they want their business to be after they鈥檙e gone.