Democratic Management: Lessons from Worker Cooperatives

I have worked in nonprofits for my entire career. Most have been progressive organizations aiming to make a positive difference in the world. Many were fraught with problems, often due to a lack of alignment between external social change work and internal power dynamics. In some cases, workers’ voices and needs were ignored or treated as less essential than the community’s voice and need. This sometimes went as far as expecting that staff martyr themselves in service to the mission. But the staff who do program and administrative work are also stakeholders along with the board, the executive director, and the community.

A push for changing nonprofit practice is gaining momentum. Some of this push is coming from younger staff expressing their desire for greater voice and power. Some is from new leaders of color stepping into executive roles and wanting organizations to be more inclusive and empowering for all staff. Some is from leaders who recognize that an engaged and empowered workforce increases the impact of the work. I have seen all these forces active in the organization where I work. I also hear of them from my colleagues in the field. What stands out to me is the gap between the desire for new ways of working and the skills and practical tools to do it.

Absent sector-wide practices, some nonprofits are turning to systems that aim to flatten workplace hierarchy entirely, or ratings systems that help assess organizational health. One model often overlooked—the worker-owned cooperative—offers the benefit of having grappled with questions of participation, management, and control for decades. And I believe nonprofits can learn from this experience.

Worker cooperatives are businesses owned and controlled by the people who work in them. Workers serve on the board of directors and wear their “owner hat” while doing so. Workers also serve in management, wearing their “management hat” when doing that. In larger worker cooperatives, the organizational chart may look a lot like a conventional corporation. However, managers are beholden to the board, itself composed of worker-owners.

In smaller cooperatives, often operating as collectives, worker-owners organize management committees to carry out operational tasks, which report to the entire group. In short, workers, board members, and managers are aligned because they are one and the same.

Can worker cooperative tools be used to create and reinforce similar alignment among the disparate stakeholders in a nonprofit setting?

Since I have worked with both worker-owned cooperatives and nonprofits, I believe I am well positioned to address this question. And I do believe some worker co-op practices might apply in nonprofits, improving both the workplace and their work.

I currently serve as director of education and training at the Democracy at Work Institute (DAWI), a national nonprofit focused on expanding the worker cooperative model to meet the needs of workers locked out of good jobs and ownership opportunities—particularly BIPOC, immigrant, and low-wage workers. DAWI, which is seven years old and has 16 staff, is itself structured using some worker cooperative principles and practices, while maintaining many conventional nonprofit management elements.

At DAWI, we are organized legally as a membership nonprofit. Staff can apply to become members of the organization after one year. With membership comes several rights: the right to elect two members to our nine-person board, the right to receive and review annual financial statements, and the right to shape the budget and policies that directly impact staff.

Members also have responsibilities, including participating in annual meetings and in self-organized committees responsible for setting business strategy, developing personnel policies, and assessing the larger ecosystem. The executive director is a member of the organization and of the personnel committee. In addition to formal member rights and responsibilities, DAWI broadly elevates its staff as stakeholders. For instance, all staff, not just members, participate in the executive director evaluation.

Even without a formal membership structure, there are systems nonprofits can put into place to support people, demonstrate respect for staff experience and skills, and share power. The tools worker cooperatives have created to foster participation, delineate roles, and balance accountability are broadly useful beyond their specific structure. When we advise organizations on implementing more democratic practices, we work along a spectrum of possibilities with engagement and input at one end and full democratic control at the other end; we do not assume there is a universal “right answer.”

If you wish to implement participatory practices in your nonprofit, it’s important that you clarify your purpose for doing so—and set some realistic expectations or boundaries on what changes are desirable or doable, and in what timeframe. Some questions I often hear from executive directors curious about workplace democracy are, “How much power should I share with staff? Where are the boundaries?”

In a worker cooperative, the boundaries of power are delegated by role (owner-board-management), as is the level of accountability of each role to the others. The answer to the boundary question is not going to be the same for every nonprofit, but the path begins with examining your purpose. Do you want to share power because you think it is the right thing to do? It will help attract and retain the best people? You want to build staff leadership? Will it improve program outcomes? Something else? Let your reasons for increasing democratic practices help you set your boundaries.

Four Corner Posts

To help worker cooperatives and nonprofits think about applying democratic practices in a systematic way, I use a simple metaphor. Think of building a democratic workplace like you were building (or shoring up) a house. Any house needs four corner posts to stand, and for workplace democracy, these corner posts have to do with power, information, people, and money.

In DAWI’s recent publication, Democratic Management Guide for Managers and Others, I show how worker-owned cooperatives share power and information, invest in people, and compensate workers fairly. This guide includes case stories, practices, dozens of tools, and instructions for how to use them.

Here are a few examples of how each post is used in worker cooperatives and how they might translate.

Corner Post 1: Power

While research has shown that increasing worker participation contributes to productivity and retention, if staff participation is at the sole discretion of management, it can feel insincere to staff, who rightly perceive it as unconnected to their power. At worker cooperatives, members hold real power to decide on matters that affect them, so the organization needs to be clear about who decides what, when, and how.

For example, at Mandela Grocery Cooperative, a Black-owned worker cooperative in Oakland, California, all nine worker-owners also serve on the board of directors. As noted above, worker-owners often wear different “hats” when they are speaking from the perspective of a board member, or as management committee member, or a worker-owner. Mandela worker-owners have found it important to clarify what decisions different management committees can make, and what needs to go to the general manager or to the board. For the hiring committee, uncertainty about authority was slowing down the hiring process. They used a tool that helped them identify which types of decisions fit in which “zones” of authority—management, board, or worker. Once they completed their decision chart, the committee was able to move forward faster with decisions—and bring on new workers.

What does this mean for a nonprofit wishing to distribute power? Perhaps the most valuable lesson to borrow is about decision zones: laying out the types of decisions and who makes them can help not just clarify but intentionally shift where power and accountability lie. At the governance level, although it is uncommon, staff can serve on boards of directors of nonprofits. Even if staff are not on the board, however, boards can still create avenues for staff input into governance-level decisions or service on board committees. At the management level, staff may serve on different committees, including hiring or policy development. At the program/operations level, it can be valuable to document and affirm the many daily decisions staff make on their own as a “decision zone.”  

Corner Post 2: Information

While financial data enables an organization to assess how it is doing with revenue and expenses, where the risks are, and how to respond to those risks, this information is typically held close by management. In worker cooperatives, management is expected to share financial information with all worker-owners, so they may jointly analyze and decide what, if any, changes need to be made to secure their livelihoods.

At A Yard and a Half Landscaping, a mostly Latinx worker-owned landscaping cooperative in Waltham, Massachusetts, the 16 worker-owners review the company’s financial statements on a monthly basis. First, it’s with the accountant; then, with the support and guidance of management, each team reviews and analyzes their project estimates, materials, and labor costs and discusses when, where, and why they were over or under budget. When they miss targets, they discuss as a team what they have learned. They admit that some workers distrusted management’s motives at first, as well as the accuracy of the information, but over time even the most outspoken critic has admitted he hadn’t known how much he needed to learn in order to really understand the numbers.

What does this example offer to a nonprofit wanting to become more transparent with financial information? The why and the how of financial information sharing are what set worker cooperatives apart. They share financial information because all worker-owners have a stake in the outcome.

The same may be true of nonprofits, since everyone has a stake in mission work, even though there are no profits to distribute. Reporting and feedback loops might occur by team/program, or in quarterly all-staff meetings that examine budget variances or set goals for critical numbers. Structuring this information-sharing to connect to questions of power, money, and people can create actionable feedback loops. The key is to bring financial reports into dialogue with daily work.

Sharing data is not enough, however. Financial reports need to be shared in ways that staff can relate to. Some ways to do so are described in the Democratic Management Guide. These include sharing financial information as a story with a past, present, and future; or showing financial information in a graph that uses colors to highlight trends; or posing a question that engages staff in analyzing the reasons for a given situation.  

Corner Post 3: Money

While one of the most important concerns of workers is stable work and fair compensation, our economy is set up for work to be precarious, wages to be unfair, and compensation systems to be opaque. In worker cooperatives, company profits (called surplus) are distributed to the worker-owners. Worker cooperatives also pay close attention to wages, creating a fair differential between the highest and lowest paid people in their companies.

Founded in 1986, Equal Exchange is a “fair trade” coffee, tea, and chocolate distribution worker cooperative based in West Bridgewater, Massachusetts, with 125 worker-owners. As they have grown, they have maintained a commitment to fair wages. While maintaining a relatively conventional management structure for efficiency, their wage differential is 4:1, meaning the highest paid person makes no more than four times the lowest paid person. In addition, worker-owners are entitled to a portion of the surplus generated, which can have a balancing effect.

What can be learned from this experience? While nonprofits cannot distribute profits, they can commit to fair compensation. They can develop policies and practices that narrow the gap between the highest and lowest paid workers. While a common concern is that leaders may earn less as a result, generally what results is that junior staff will earn more. Certainly, a comprehensive compensation policy needs to consider the consequences for equity, longevity, and advancement. Still, done well, a compensation package—wage, benefits, and paid time-off—that meets workers’ needs can lead to better recruitment and longer tenure, ultimately creating efficiencies and cost savings.

Corner Post 4: People

While people are at the heart of nonprofit work, labor is often seen as just another expense to be minimized. By contrast, worker cooperatives center the people who work in the company, which means they invest in training and retaining their workers, aim to design a workplace that is a good place to work, and provide adequate benefits and opportunities for growth. They do this because member benefit is a core principle, but these measures have also been shown to reduce costs and increase productivity.

Cooperative Home Care Associates (CHCA), a mostly Black and Latinx homecare cooperative with 1,005 worker-owners, operating in the Bronx, is committed to what they call “coaching supervision,” which is a system based on inquiry and support. CHCA trains all supervisors and all workers in communication skills, including active listening, emotional response, and giving effective feedback. With everyone trained in the same system, practice, and language, they can support one another in times of stress. Making real their motto of “Quality Care Through Quality Jobs,” CHCA can point to much higher worker retention and client satisfaction than its competitors. The workers and the community they serve are entwined.

What can nonprofits take from this experience? They can make a direct and public connection between their workers and their mission. They can adopt a supervision system based on coaching. They can invest in strengthening the communication skills of everyone, not just supervisors, to support a culture of inquiry and curiosity. Any organization that aims to increase participation will need to invest in training. Most people do not communicate, understand financial statements, or contribute to boards or committees as well as they might. These skills are not taught in school, so the workplace must provide it.

Management Skills and Traits

While conventional companies often fall short on “people skills” or “soft skills,” the most successful managers of worker cooperatives have the traits and skills to both teach those they supervise and to share power with them.

At Technicians for Sustainability, a solar installation worker cooperative in Tucson, Arizona, with 22 worker-owners, the CEO has expanded his management team to include not just senior management but installers. He does this not only to get relevant information needed to manage the company, but also to develop worker-owner leadership skills, so they can become future board members.

What might a nonprofit executive gain from expanding the leadership team? Nonprofit executives are often spread thin, and as a result are susceptible to burnout. One way to address this is to expand the size and composition of your leadership team. Returning to the concept of “decision zones” above and seeing what decisions and implementation can shift away from the executive could be a first step.

Where to Start

You can start with an assessment. The guide DAWI has developed includes a simple Democratic Management Skills Assessment which can help orient this work. Leading democratic organizations requires skill in communication, listening, conflict mediation, facilitation, and education. Knowing where you are and where you need to be can help. The guide also includes a checklist, organized using the four corner posts, to identity where your organization is at currently and help with goal setting.

Of course, this is just the start. Building more democratic, participatory, and empowering workplaces is hard work. It is also highly rewarding. Let’s get busy!