Commodity or Community Asset?
The benefits of running a business as a worker cooperative
By Jessica Prentice
What defines a business as a community asset versus a commodity?
This question came to me recently from Janelle Orsi, cofounder of Oakland’s Sustainable Economies Law Center and lawyer for Three Stone Hearth, the cooperative business I cofounded here in Berkeley. Janelle was preparing a presentation for some food system movers and shakers and wanted to discuss Three Stone Hearth as an example of a business that functions as a community asset.
Coming from one of the most inspiring and astute people I know, this request highlighted an ongoing challenge: How do I talk in succinct and accessible ways about what we are doing at Three Stone Hearth? What makes us so different from other food businesses? Our products—nutrient-dense prepared foods—are one distinction, but it’s our operating process that puts us into a rather small (but notable) group of Bay Area food businesses. I realized this would be a valuable opportunity to get Janelle’s insight toward crafting a more effective description of our work and what we value in our approach.
Squeezed Out of Business
Like many people around the country, both Janelle and I feel disturbed by the growing wealth disparity and corporate consolidation going on in the food industry and many other parts of the economy. We hear daily about once-independent organic food brands being bought up by mega-corporations like Tyson, Conagra, Kellogg, Coca-Cola, Nestlé, and Campbell’s.
Small food businesses in the Bay Area are especially vulnerable to economic pressures. If you are committed to paying living wages and using sustainable ingredients, you are likely to find yourself squeezed—sometimes right out of business—by the rising cost of living here, along with the higher costs of your ecologically and humanely produced ingredients. On the other hand, wages in the food business are among the lowest in any sector, which has increasingly meant that people simply can’t afford to continue working in the food industry if they want to stay in the Bay Area. Recent closures of local favorites FuseBOX, Café Rouge, and Actual Cafe/Victory Burger are testaments to the challenges of finding and retaining staff in the current
Small business owners are often led to believe that they have only three options: scale up and sell out, make incremental daily compromises on their values to keep the doors open, or throw in the towel. The first option is actually what many entrepreneurs plan on from the start, perhaps without considering the devastating effects that consolidation wreaks on our economy and ecosystems. So much for a local food economy:
See ya, I got mine.
Janelle believes in the value of fostering and growing businesses that structure themselves to function and serve as community assets rather than commodities. She outlines three factors that define a business as a community asset:
1. Sharing the Profits
Community assets are structured to distribute wealth rather than consolidate it. Three Stone Hearth does this through a system of profit sharing called patronage. Here’s how it works:
Our company bylaws state that all owners must work in the business full-time (at least 30 hours per week) and that all owners will share in the surplus of the business based on their hours worked. We currently have 19 worker/owners, almost half our staff.
At the end of the year, all hours worked by worker/owners are added up and compared in a simple percentage to the hours worked by non-owner employees. For instance, in 2016 about 55% of hours were worked by worker/owners and 45% were worked by employees.
After calculating the year’s profit, we split it in this same proportion, with the employee-generated 45% of profit reinvested back into the business to serve as operating capital. The worker/owner portion is distributed such that each owner receives their portion based on hours worked. Although our pay rates might vary by virtue of our skills, experience, seniority, and level of responsibility in the business, the patronage split values each of us equally.
2. Dynamic Governance
The second characteristic of a community asset is that it must be structured in a way that distributes power so that workers are able to change things that aren’t effective in day-to-day operations. Workers need to have the opportunity to try something different.
Here’s an example: For years at Three Stone Hearth we struggled each week to have the correct amount of bone broth needed to produce our soups and stews. This bone broth is the original slow food. It can’t be produced in a jiffy, so running out and having to make more on short notice was a major frustration. Other times we found ourselves with so much extra broth stacked in our walk-in freezer that it was unsafe to go in there, or we had to throw away portions that had been around too long.
One of our cooks brought the situation to the fore at one of the regularly scheduled kitchen production governance meetings with a proposal that we create a new role, designating one person as “broth monitor.” The worker in this role would assure accurate broth production by reviewing how much broth was needed, rotating the stored portions, and alerting teammates to possible shortages. It took some effort to get the role functioning, but now we rarely have too little or too much broth for the week, and our broth monitor has been empowered to come up with other innovations we hadn’t even realized we needed.
This is how dynamic governance works. Anyone in the organization who senses a problem or a negative pattern within their operations can propose a new role, a change to an existing role, or a policy that would solve or prevent the problem. As long as no one has a paramount objection (which can be a very high standard to meet) that change will go through. A framework like this, which is based on consent (the absence of significant objections), is simpler than one based on consensus, which requires everyone to reach agreement. You may not agree with an idea, but if others consider it safe enough to try, you don’t have the power to stop it. This shift empowers workers to take initiative and become involved in decision making, thus making the organization simultaneously more adaptive and participatory. It creates what Janelle calls polycentricity, or many centers of power. Distributing power in this organic and responsive way throughout the organization generates resilience, stewardship, and ownership on many levels.
True stewardship can only happen when people have affection for what they are stewarding along with the power to influence what happens to it. These days, businesses like Three Stone Hearth often use the phrase “aligning with purpose.” It means that your work should ask more of you while offering more to you.
All this sounds wonderful, but finding the right balance between distributing power and getting things done is a challenge for any human organization, from a hunter-gatherer clan to a small startup. No matter how much a group may agree and align around values and goals, determining how power is held and maintained, how decisions are made, and where planning and strategizing fit in can’t help but complicate situations that under a more dictatorial model might be easily resolved.
Working within a governance system that uses a nesting-circle structure (rather than a top-down pyramid) gives everyone an opportunity to impact the flow and structure of the work. This feels to me like an evolutionary leap. Many community-oriented organizations like Three Stone Hearth are now utilizing the insights of these circle-structure systems (such as holacracy, sociocracy, dynamic governance, and variations) to distribute authority in a way that is transparent and evolving.
3. Selling Out is Not an Option
The final criteria that defines a business as a community asset is having built-in structural barriers to selling. In our worker cooperative, the cofounders started the business with the intention of generating “right livelihood” (the fifth fold of the Buddhist eightfold path) with no intention of cashing out. All cofounders have a vote in any decision to sell or change the entity of the business for as long as they live. While departing worker-owners do receive whatever is remaining in their capital account (which consists of their buy-in amount plus any outstanding patronage), they own no market share and so are not “bought out” in the way that owners are when leaving a conventional business. If the company were ever to be sold, any revenue from that sale would be distributed to all the worker/owners (past and present) based on the number of hours total they worked over the life of the business, with each hour holding equal value. This is such a wide distribution that no one individual is likely to profit enough to be motivated to sell. As long as candidacy and the path to ownership are active, and the business is continually adding new owners who would all have a vote in any sale, that sale is very unlikely to happen.
Advancing the Vision
Janelle’s vision for an expansive ecosystem of interdependent and mutually supportive community assets is being nurtured and cross-pollinated by innovative thinkers around the world. It is the antithesis and antidote to that soulless corporate world, which offers neither love of place nor loyalty to its workers. Any consumer can support this new paradigm by seeking out organizations that meet the community asset criteria and showering them with love and commerce.
Even as we work to re-envision and rebuild culture, we still live in the existing economy. Janelle’s advice is to become a co-opivore, going out of our way to walk the talk by patronizing cooperatives and like-minded businesses. In this way, each dollar spent is an investment in a local, living economy that has the promise of being sustainable and vitalizing into the future. It is also a dollar spent in protest of the consolidation of our food system and the concentration of wealth into the hands of the few.
Along with my coworkers, I operate in the trenches of this movement every day. I am grateful to have more allies and new language for describing the paradigm-shifting work we are engaged in. My deepest belief—and deepest hope—is that we are all in this together. ♦
Three Stone Fruit Honey Butter
This recipe is a great example of a product that brings together many values we have around food at Three Stone Hearth. We source all ingredients seasonally from small, ethical farms and producers. Raw honey, the only added sweetener, is a food considered medicine in India’s Ayurvedic tradition. The generous amount of butter in the recipe adds deliciousness as it buffers sweetness and slows down the metabolism of the natural sugars. Dollop the honey butter on oatmeal, slather it onto pancakes, stir into yogurt, spread onto toast, or eat it straight with a spoon. It’s a perfect pick-me-up at work when you need a little energy boost.
2½ pounds mixed stone fruit, preferably three different kinds, such as peaches, plums, and apricots, from your favorite local farms
2–3 sticks pastured, organic butter
½–¾ cup raw local honey
Lemon juice to taste
Pinch of sea salt
Pit and slice the fruit and place in a heavy-bottomed pan over medium-low heat, cooking until it becomes a concentrated paste. (Add splashes of water as you go if the fruit isn’t super-juicy.) Remove from heat and purée with an immersion blender. Add the butter and stir until melted and incorporated into the fruit. Then transfer the mixture to a bowl and allow to cool to body temperature (about 100°).
Stir in the honey until fully incorporated. Adjust the sweet and sour flavors with lemon juice or honey. Salt will balance and bring out the sweetness. Pack the butter into small Mason jars and refrigerate. This is a lovely treat to share with friends. If you want to keep it for a long time, it is best to freeze it. ♦
Author of Full Moon Feast: Food and the Hunger for Connection, Jessica Prentice is also co-founder of Berkeley’s Three Stone Hearth community-supported kitchen (threestonehearth.com), co-creator of the Local Foods Wheel (localfoodswheel.com), and coiner of the word locavore.