Buffalo State Experts: Cooperative Businesses Are a Viable Alternative to Traditional Business Models

Cooperative businesses—co-ops—are a growing sector of the business world. They can enable people to have greater control over their work, and greater financial return for that work. Co-ops may also provide a way for baby boomers to pass the businesses they’ve built on to their employees.

That’s the way it looks to Andrew Delmonte, adviser with the Small Business Development Center. Delmonte specializes in aiding businesses that follow social enterprise and cooperative models. A social business enterprise addresses social problems as part of its mission. Cooperative businesses are those owned and democratically managed by its members.

“There are three main kinds of cooperatives,” said Delmonte. “In co-ops like the Lexington Food Coop, the members are the customers. In agricultural co-ops, farmers form a cooperative to share in production, marketing, or both.” Upstate Niagara Cooperative and Cabot Cheese are examples.

In the third type of co-op, workers are member-owners. “Worker-owned co-ops are run on a one-worker, one-vote basis,” said Delmonte. “Yes, sometimes that poses problems, but all businesses encounter problems. It’s what you do to solve those problems that matters.”

Long, Diverse History around the World
In the United States, co-op businesses evolved in the late 1800s along with the labor movement, Delmonte explained. They experienced a highly visible resurgence in the counter-culture of the 1960s and 1970s, when the Lexington Coop began along with half-a-dozen other local efforts.

“But that’s not the first time Western New York had a co-op movement,” said Delmonte. “The African American community in Buffalo established the Buffalo Cooperative Economic Society here in the 1930s. The idea of cooperative businesses is global with a long, long history.”

Success Requires Hard Work and Training
Delmonte links people interested in co-ops to the resources they need to succeed. “To prosper, a co-op requires structure,” he said. “As in any business, members have to put in the time and effort necessary for it to thrive.”

Despite the one-member, one-vote structure, voting on every decision gets impractical very quickly, according to Delmonte. “A co-op can have a hierarchy,” he said, “with a manager, assistant managers, and department heads. The difference is that the workers at the bottom of the org chart are also at the top, usually as a board of directors. So the manager’s directives are subject to review by all the members.”

For this to work, participants must gain the necessary skills, Delmonte noted. It’s especially important in the areas of communication and conflict resolution. Organizations such as the United States Federation of Worker Cooperatives are advocating for legislative support for co-op businesses, including greater support from the Small Business Administration.

“Worker co-ops are increasing up all over the country,” he said. The largest is Cooperative Home Care Associates, based in the Bronx, with more than 2,000 worker-owners.

Another impetus for the rise of worker co-ops is what Delmonte called the “scary numbers” of baby boomers who want to retire from businesses they built. In Buffalo, the Rose Garden Early Childhood Center recently was sold by its retiring owner to its employees. The Buffalo State SBDC helped the seller and buyers develop a plan for the transition. Now the SBDC staff is considering the development of a curriculum that can be used state-wide for anyone interested in selling a business to its employees.

All that said, can a co-op’s member-owners make any money? First, Delmonte said, co-op wages tend to be higher because the employees are setting the company policy. “Like any business, it depends on whether the business shows a loss or a profit at the end of the year,” he said. “If the business is profitable, that profit gets distributed equitably among the worker-owners.”