Worker Owned and Local Businesses
From Students to Ecopreneurs by Kathleen Candy
Worker-Owned Restaurant by Leslie Schaller
Patch Work by Angela Bonavoglia
Gentle Rain by Patty Talahongva
In 1975 I was hired as a lathe operator at Taylor Forge, in Cicero, Illinois, an industrial suburb on Chicago's Westside. The company made big pipe, fittings, and flanges for the Alaska pipeline and big utility companies.
G+W had recently purchased Taylor Forge, along with a number of other manufacturing companies, with the intent of “milking the cash cow,” as it was described in a Harvard Business School case study. G+W had no long-term strategy for these companies or for their products or the workers, except to pull out cash and value. It was like buying a car and never changing the oil.
Soon G+W began to close Taylor Forge, department by department. G+W shareholders made a ton of money, and the corporation continued to expand. Cicero — the town that had been home to Taylor Forge for several decades, was to lose 50 percent of its job base in the next six years, as other companies also closed.
In 1982 I founded the Center for Labor and Community Research (CLCR) to provide the kind of research and analysis I had needed at Taylor Forge for unions, communities, and others concerned about saving jobs and stabilizing our economy. We began by looking at hundreds of companies in Chicago that had closed or were in danger of closing. Chicago lost 3,000 of 7,000 companies in the 1980s and 150,000 basic manufacturing jobs, so we had a lot to examine.
The prevailing and powerful view then, as now, was that this painful, destructive chain of events was inevitable in the new global economy. We felt that this notion needed to be examined in the context of specific companies and communities. Of course, we found a few companies that needed to close — their products or technology were completely out of date. But the overwhelming majority were not obsolete. They were at risk because of problems that could be solved.
In 1986, Gladys Scott, a resident of Chicago's South Side, called CLCR with alarming information about a printing company, Bankers Print, that had handled her printing needs for more than 16 years. The owner, Carl Wilson, had cancer and no heir to take over the business.
After meeting with Mr. Wilson and talking with the employees, we arranged an employee purchase of the company — a successful conclusion that no one had seen as an alternative. That experience focused our attention on small companies. Since then, CLCR has looked at 800 of these small companies with an owner at least 55 years old and found that almost 40 percent were at risk of closing because the owner had no successor to take over the company. In this scenario, everyone loses unnecessarily
Yet small companies with aging owners and no successors are often good opportunities for employee buyouts, as was the case of Bankers Print. Or they are an excellent opportunity for aspiring local entrepreneurs heretofore excluded from this kind of opportunity, typically African Americans and Hispanics.
CLCR's focus for the last 16 years has been on investigating and experimenting with such issues as worker ownership, acquisitions, and various components of community development.
Consider the story of Sharpsville Quality Products. In 1990, members of Steelworker Local at Sharpsville in the Pittsburgh area narrowly supported their local president's controversial decision to agree to a company “participation in management” proposal. Union members used the program to learn more about the company and the industry. When faced with a three-day notice of management's plan to shut the plant down, the workers occupied the company for 42 days with a sit-down strike.
From their position of power and through gaining community support, they negotiated a purchase of the company with the assistance of Locker Associates, a consulting and investment firm, and the Steel Valley Authority, a regional industrial retention initiative. The buyout was supported by local churches and community organizations, who created the “A New Beginning Fund” and loaned the workers $250,000. The company remains open under employee ownership. The marketplace in Pittsburgh adjusted to the dramatic entry of these new union/worker entrepreneurs with strong community support.
Despite long and successful European and Canadian traditions, American experiments in worker ownership were on the fringes of the economy until the late 1970s. With a few notable exceptions, employee-owned businesses fell within the “sandals and candles” category — mostly small craft cooperatives. The labor movement had no compelling reason to understand the dynamics, dangers, or possibilities of worker ownership.
Since then, however, interest in employee ownership has grown dramatically, along with an increase in the number of employee-owned companies. The potential for growth in the field is enormous. More important is the potential for employee owners in concert and collaborating with other socially minded entrepreneurs to extend the growing demand for greater democracy into the economy.
This article is excerpted from Dan Swinney's paper, Building The Bridge To the High Road. See page 41 for more on the Center for Labor and Community Research. From Students to Ecopreneurs Kathleen Candy
Student-turned-inventor Ross Evans believes his new product, the FreeRadical, can help thousands of individuals around the globe pursue small businesses that require low-cost, sustainable transportation.
The FreeRadical is a simple retrofit attachment that extends a bicycle's frame, transforming a basic two-wheeler into an Xtracycle, an all-purpose cargo carrier — the world's first sport/utility bicycle. The Xtracycle can haul loads previously considered too long, heavy, bulky, or fragile to be transported by bicycle. According to company president Kipchoge Spencer, “It carries everything, yet still functions like a bike, looks cool, is fun to ride, and is useful.”
In his travels and work in the developing world, Evans noted that while bicycles were abundant, they weren't as useful as they could be. Although it is one of the cleanest, cheapest, and most convenient forms of transportation available, a bicycle can't carry much. Evans posed a question in his design journal, “What is the cheapest, lightest, simplest, most maneuverable, most adaptable way to carry cargo?”
He began to answer that question when he returned to Stanford University. With a grant from the National Collegiate Inventors and Innovators Alliance (NCIIA), an organization that provides encouragement and material support to student entrepreneurs, he assembled an E-Team (the “E” stands for excellence and entrepreneurship) of six students from a variety of fields: mechanical engineering, product design, psychology, science technology and society, and Latin American studies. Four students from the Stanford Graduate School of Business also joined the team to produce a business plan.
Evans then traveled to Cuba and Senegal to test his design ideas and get feedback from product users. As a result, he redesigned the Xtracycle numerous times, until he believed he had something useful and marketable. In 1998, Kipchoge Spencer and Erin Anderson joined Evans, and together they launched Xtracycle International.
“We're not just committed to doing good — it's why we're in business,” says Spencer. They hope to manufacture the Xtracycle in a closed-loop process that produces no waste and uses only renewable resources and energy. They also hope to prove to others that a values-driven business can be profitable.
They will sell the FreeRadical for a profit wherever they can in the world — its purchase price in the US is $390. But any profits will support company initiatives in developing countries. They plan to lower the price, to rent, or to give away a simpler version of the product, called the extrabike, wherever people can't afford it but need it to improve their lives. In South Africa, they are already conducting workshops to teach people how to use locally available materials to build appropriate versions of the extrabike and then teach others. They are also planning to offer loans to extrabike buyers through microlending programs.
In the US, the company is licensing the extrabike design to grant-dependent nonprofit organizations that are part of the Youth Bicycle Education Network, an association of groups around the country that teach disadvantaged kids how to recycle bikes and sell them. The money the kids earn allows them to buy new bikes. Evans' and Spencer's objective is to give these organizations an income stream that is not grant-based by allowing the groups to produce the extrabike and sell it for $225 to other organizations or individuals.
In addition, Xtracycle and several other groups launched the “extrabike Partnership” as an avenue for Xtracycle to participate directly in community development and youth education. Partners are all nonprofits involved with the manufacture or distribution of the extrabike that sell the product locally to increase their self-sufficiency.
In September 2000, Xtracycle launched a non-profit sister called Xtracycle Access Foundation. The foundation directs activities such as build-your-own programs and partnerships with the Youth bike groups. The foundation is now active in several countries in Africa.
Xtracycle is at 14618 Tyler Foote Rd., Nevada City, CA 95959; 888/537-1401; www.xtracycle.com. Information about the NCIIA is at: www.nciia.org. Adapted from the September/October 1999 issue of In Business Magazine
Back in spring of 1985, I was one of a group of eight recently unemployed restaurant workers who formed a worker-owned restaurant cooperative. We had never run a business before, but among us we had over 100 years of restaurant experience and the determination to create our own livelihoods. The Appalachian Center for Economic Networks had recently formed to promote community-based economic development in the region. Through its tutelage, we developed a business plan, secured financing, and created the foundation of our cooperative.
Our lack of financial assets was one of the largest barriers we faced. Many small, unsecured loans and food barter arrangements provided the start-up capital for the business. Worker ownership was a very new idea, rather inconceivable in our community, so it took a little convincing, but we secured a bank loan as well. That combined with a lot of co-op members' sweat equity and a “risk taking” landlord allowed us to launch Casa Nueva as a Mexican-American restaurant on October 8, 1985.
We've grown dramatically over the years, from a staff of 20 worker-owners to an average of 45 owners, who receive full health insurance benefits and equitable wages. Sales have quadrupled, generating over $1 million last year.
Every employee of the corporation also has the opportunity to become a shareholder. The corporation is governed and owned solely by the shareholders (worker/owners) as a cooperative business. All decisions are made by consensus, with each worker-owner casting one vote. This intense involvement with the governing of the business increases shareholder commitment and vision.
Our menu combines traditional Mexican selections with an organic, vegetarian, and vegan options. Our staff routinely visits farms to better understand the challenges that our produce and livestock farmers face. These visits have made us more flexible about choosing ingredients. Every menu has a page highlighting all of our vendors, so customers read about the bakery that produces our desserts or the farmers who provide eggs and poultry.
Casa Nueva is now viewed as one of the most innovative and successful small businesses in Athens, Ohio. In January, for the fifth year in a row, Casa Nueva has won The Athens News “Best of Athens Readers Choice Award” in the category of Best Local Business with a Conscience.
In 1992, Casa added a Cantina, where we serve alcoholic beverages and provide entertainment. In 1998, Casa Nueva began bottling salsa for retail sales from the restaurant and at local supermarkets. The manufacturing division has also begun to experiment with a number of new bottled products, including pickled asparagus, jams, applesauce, and peppers, to take advantage of our region's bountiful seasonal produce.
At Casa, we believe that our efforts are part of a larger movement in which owners can create a workplace where all individuals are treated with equality, respect, and compassion. Through our business, we can enhance the social, environmental, and economic well-being of our customers, suppliers, and business collaborators.
Leslie Schaller is a founding member and business manager of Casa Nueva. This article is excerpted from the March/April 2000 issue of In Business magazine.
More than a million people poured into Grant Park last summer for the 19th annual Taste of Chicago. Among the participants were cooks from Michael Jordan's Restaurant, owned by the basketball player; Emeril Lagasse, the Food Network personality; and for the first time, Pearlie Green, a caterer and aspiring restaurateur.
For microentrepreneur Green, who was used to catering weddings, meetings, and private parties, Taste of Chicago was a breakthrough. Selling her “Dirty Rice,” “Pineapple Chicken Wings,” and “Barbecued Rib Tips,” Green made $30,000 in 11 days — not bad for a former welfare mom.
Almost 20 years ago, after a divorce at age 32, Green was devastated to find herself and her two babies on welfare. She took a course in practical nursing and got a job, but when she was laid off, she decided to take advantage of her knack for baking and start her own business.
In 1986 she took a 14-week entrepreneurship training course sponsored by the Women's Self-Employment Project (WSEP), a microenterprise development group. The course taught her how to support herself or supplement her income by running her own microbusiness. Green credits WSEP with teaching her all the business skills she has, from developing a business plan to pricing products to keeping books. WSEP also lent her $1,500 to launch a baking business. With three more loans she expanded into catering.
Today, Sisters Exotic Catering Service operates from a fully stocked commercial kitchen in a small-business incubator on Chicago's South Side. Green now subleases her kitchen to other new entrepreneurs. She also employs and advises two women from WSEP's welfare-to-work program, and she's looking for space to open her own restaurant.
About 800 entrepreneurs like Green have gotten their start from WSEP, which has loaned over $2 million to women's microenterprises. WSEP's borrowers have included women on welfare as well as others with moderate incomes. Most have been women of color, and none have had resources available to them to start businesses.
But WSEP borrowers have staying power: a four-year study concluding in 1995 found that 79 percent of WSEP's clients were still in business. That's significantly more than the 50 to 65 percent of all microbusinesses that survive, according to figures quoted in an Aspen Institute study.
Most microenterprise programs like WSEP were originally based on the model developed by the Grameen Bank in Bangladesh, which set out to show that self-employment by itself was the route to self sufficiency. However, it targeted the rural poor, who needed very small amounts of money to get their businesses off the ground. They were invited to form small “peer lending circles,” whose members would make joint lending decisions and guarantee each other's loans. The program has been extremely successful: since 1976, the Grameen Bank has lent $2.6 billion to 2.4 million borrowers — 95 percent of them women — with an enviable 95 percent repayment rate.
But for many who have worked their way out of poverty in the US, like Pearlie Green, the route has not been so simple. In its recent study of low-income microentrepreneurs, the Aspen Institute found that among the 53 percent who moved out of poverty, many derived their income not from a microbusiness alone, but from a combination of self-employment and wages — at least initially. Even in a booming economy, the study reported, many were locked into low-wage jobs and required more than one source of income to meet family needs. Others look to self-employment to achieve flexible hours in order to tend to their families. The study termed this blending of different income sources “patching” andidentified it as a trend with broad implications.
In response, organizations like WSEP are transforming the old Grameen model, looking for ways to adapt it to conditions here. For example, WSEP and others are concluding that peer circles are not the most efficient mechanism for lending to low-income women. The trend in the United States is to phase out peer lending in favor of direct loans. It has also become evident that an advanced market economy — with its government regulations as well as tax, licensing, and welfare laws — calls for more elaborate and costly training and technical assistance than the Grameen model provides.
“When you listen to futurists talk,” says Connie Evans, head of WSEP, “they project that 50 percent of the work force will be contingent workers. That means more and more people will need the know-how to maneuver in and out of wage- and self-employment, including professionals and highly skilled workers.”
Excerpted with permission from “Women's Work” by Angela Bonavoglia, published in the Ford Foundation Report, Winter 2000, Volume 31, No 1
Just outside the village of Kykotsmovi on the Hopi reservation in Arizona, you can hear the sound of sewing machines buzzing and humming as a few Hopi women carefully sew brilliant-colored fleece vests, jackets, and coats that sport designs of the Hopis and other Native tribes. This fleece is not made of wool, though; the solid colored fleece is made from 100 percent recycled two-liter plastic bottles.
Welcome to Gentle Rain Designs, an arm of the Hopi Foundation, a nonprofit organization.
“I came in as a seamstress. I ended up being the administrative assistant,” explains Janet David, who has worked at Gentle Rain Designs for two years now.
As is the case on many American Indian reservations, employment opportunities are scarce on the Hopi reservation.
“People that want to live on the reservation need to have a job. The economy doesn't provide that out here,” says David. That's why she believes so strongly in Gentle Rain Designs and its growth.
Most jobs that are available are located in towns 70 to 120 miles away. For Hopis who take those jobs, the long commute is tiring. Employers are often oblivious to the cultural and religious responsibilities of each Hopi. At Gentle Rain Designs, the employees can work their schedule around ceremonial duties. And by being located right on the reservation they can easily get to and from work.
But Gentle Rain was founded to do more than just provide jobs for Hopis living on the reservation. Its mission is “to create local, self-sustainable employment opportunities while balancing modern financial needs with strong cultural values of family, environmental stewardship, and self-determination.”
David is excited about being able to use recycled material to create fashionable clothing.
“Native Americans pretty much have always honored our mother, which is the Earth. Recycling, though, isn't very much understood by Native people yet.”
According to the fleece company Fortrel Ecospun, recycling plastic bottles keeps 2.4 billion bottles out of landfills each year. The recycled bottles are broken down and respun into fiber, which in turn is woven into fabric. Gentle Rain Designs buys several colors of fleece in bulk. It's shipped to the reservation where cutters and seamstresses take their turn at creating the garments.
“Everybody knew what recycling was, but they always put it together with aluminum cans,” she says. “But with this line of fleece clothing people are beginning to see other ways recycling works.”
“There's a lot of good feelings here,” says David. At first, Gentle Rains didn't have a shop, and the women sewed at home. Today, they have their own building with a sewing room and a display area. “They're happy to be doing this, and you can tell it in the jackets. I'm happy to be here being the guiding hand to help out as much as I know.”
Patty Talahongva is a Hopi journalist and owner of White Spider Communications. Excerpted from Native Peoples Magazine, www.nativepeoples.com; 888/262-8483. You can reach Gentle Rain at PO Box 35, Kykotsmovi, AZ 86039; 520/734-9535 or fax: 520/734-9539
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