by Josh Davis
One of the biggest stories in the worker co-op movement over the last several years has been the founding of the Evergreen Cooperatives in Cleveland, OH. These three cooperatives were started by the Cleveland Foundation and premised on the concept of using sales to anchor instituons - hospitals, universities, etc. - to provide a stable base of demand for a laundry facility, an industrial greenhouse, and a solar installation company. Additionaly, these enterprises have been advertised as worker co-ops, i.e. businesses owned and democratically managed by their workers.
The concept seems promising to many, and reports in the co-op press and in mainstream publications has been overwhelmingly positive. However, despite all the talk about Evergreen, there has been very little detail about the actual workings of the co-ops or their internal decision-making processes. How exactly are business decisions being made, and by whom? What are the wage differentials between workers and management, and who decides on pay-scales? You know, that type of thing.
So, I was excited when I saw the Democracy Collaborative had sent a report to their email list with a "case study" of Evergreen. Finally, we were going to get down to the nitty-gritty! Unfortunately, it was not to be.
What is called a case-study reads more like a PR piece than a detailed analysis of the businesses. At the end of it, I was left with the same questions I had at the beginning - questions which I've had for quite a long time now. Before I dive into the "case-study," I'll provide a little background on why I think it is so important that we get some real answers as to how, exactly, Evergreen is operating:
One of the stated goals of the cooperatives is to pay a living wage to workers, and while early reports trumpted the increased wages that the Evergreen co-ops were paying, more recent stories have painted a somewhat less rosy picture. Take this from a story that appeared in Politico last year:
When Allen Grasa showed up at the laundry, four years into its operation, he saw little in the way of planet or profits; all he could see were people—too many of them, too idle, laboring unsustainably, often incorrectly, resulting in too few sheets per hour, at too high a cost, and with results not nearly as pristine as customers expected. A heroin user broke a key piece of machinery, a boiler. Training didn’t exist, nor did a sense among employees of being in it together—a key to success in collectives. In 2013, the laundry lost $1 million. “I couldn’t believe what a mess it was. I’ve never seen such a screwed up plant in my life. Everybody was clueless,” says Grasa, a 24-year veteran Mr. Fix-it of the local commercial laundry industry brought in to clean house.
Yikes! It sounds like a disaster. But what comes next strikes me as almost as bad, at least from a cooperator's standpoint [emphasis added]:
Grasa made the startup profitable, barely, last year, without needing many new customers: A $92,000 profit required only $100,000 in additional revenue, inefficiencies had been so great. Social mission gave way to business imperatives. Grasa fired people, replacing them with those who had industry expertise, regardless of where they lived. He cut pay, in some cases from $20 to $9 an hour, and trimmed the work force to 45, only half of whom live in the target communities. “Now that we know how to do things, we need to get more work to do,” says Grasa. “Then, hopefully, once we have more customers, we can go back to hiring from the neighborhoods.”
Firings and pay cuts to less-than-livable wages with no mention of any democratic process involved - this does not sound much like the worker co-ops I'm familiar with. And one has to wonder, how much was Grasa getting paid, while he cut people's wages by over 50%? Was the financial pain being spread evenly, and how was that decided and by whom?
It was answers to questions like these that I was hoping to find in the report by REDF that the Democracy Collaborative circulated at the end of January.
Here's what the report has to say about governance at the cooperatives [emphasis added]:
Workers are eligible for membership in the cooperative after one year of employment and have to be voted in by the other members. Once they become members, workers receive a $0.50/hour wage increase, an equity stake in the business, and a patronage account that is funded by business profits...
Unlike a traditional worker cooperative, the three Evergreen businesses have multiple stakeholders. From the outset, these businesses were set up so that workers would own 80 percent of the business with the other 20 percent owned by a holding company (Evergreen Cooperative Corporation), which represents the investors, Anchor institutions, and the city government. Workers own Class A shares and ECC owns Class C shares, which gives ECC less decision-making power but important authority over mission-critical decisions.
That last sentence conceals more than it reveals. What can it possibly mean that the ECC has both "less decision-making power" and "authority over mission-critical decisions"? How does this system operate in practice? What does that "important authority" mean on a practical level? Are there decisions in which the workers are not involved? Decisions in which ECC is not involved? How and by whom were decisions being made when the laundry was doing so abysmally?
Sadly, we are left to wonder. It does seem clear, howerver, that the Evergreen enterprises are not worker co-ops as we normally understand them, but rather multi-stakeholder cooperatives with a unique structure. It may seem pedantic to some, but I think it's an important distinction to make. Different forms of co-op operate in very different ways and just like we distinguish between consumer co-ops and worker co-ops, we should also be clear on the difference between worker co-ops and multi-stakeholder co-ops.
To it's credit, the report does discuss the problems that the cooperatives have faced, and notes several times that the businesses are moving "closer to financial self-sustainability," - which is a nice way of saying they are not yet financially stable, six years after their start. However, despite their admitted inexperience and the fact that none of the three businesses has acheived financially sustainability, we are told that the Evergreen staff is already providing consulting services to other cities!
The experiment has not yet proved successful or sustainable and already it is being encouraged in other places. I can't imagine that this is a good idea. As Esteban Kelly said during our ADWC conference, "If we scale up our movements with out fixing our problems, we'll just end up scaling-up our problems." It is far from clear that Evergreen's problems are fixed.
It would appear from this "case-study" that there is still a dangerous level of hype surrounding the Evergreen co-ops. We should remember that in 2010, Evergreen's management was saying that they were shooting for 10 co-ops with 5,000 worker-owners by 2015. The real numbers turned out to be 3 co-ops with 110 workers. That kind of over-hyping is embarassing, and even though Evergreen has scaled back it's projections (to 10 co-ops with 1,000 workers and no particular timeline) they have yet to prove the efficacy of their experiment. It might turn out to be a great system, but it's still too early to tell.
These are only a few of the questions and concerns that were raised for me by the recent report. There is, for instance, the thorny issue of debt-financing which I'll have something to say about it in the future; but for now I'm embedding the whole thing below. Take a look for yourself, and if you can provide any answers to the questions raised here, please feel free to put them in the comments (I would especially like to hear from worker-owners at Evergreen).
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