Employee Ownership Culture and Organizational Change Q&A

A few months ago, I started accompanying a Founder and CEO who has decided with her team that she is going to sell her company to her employees. She has a team of people who have become the initial group that is taking responsibility for the company in this transition process. Unlike many transactions — this process is being driven in part by the exiting owner — but with lots of involvement from the current COO and other senior staff who are going to become the new employee owners.

Already there are some in the organization who have decided they don’t want to become employee owners (at least not right now) — so they’re calling them “stewards” instead. So today, I was talking with a small group of company leaders who are thinking through the employee ownership set up process. They have buy-in from all the major stakeholders (the current CEO / owners who are selling / exiting over the next few months) — as well as all the major senior leadership in the company. A few days ago they sent me a set of questions. I share my answers below.

Workplace democracy? Shared leadership? Building and Maintaining Employee buy-in?

Too often, the conversation about employee ownership stays high level. Rarely do we get into the nitty-gritty day-to-day how does this actually work.

So many of us believe in employee ownership. Yet, how does it really work? How do we move towards a democratic workplace — with where we are working right now? What are the specific things to think about to build buy-in to convert your business to employee ownership or workplace democracy? What are the tensions inherent in this kind of conversation?

I’m by no means an expert, but since I’ve spent the better part of the last 4-5 years asking these questions and hanging around with growth-focused co-op entrepreneurs, I thought I’d reflect on these concepts in hopes that you might help me build on and point to other resources in a similar line of thinking.

The contexts that shape my thinking

One of the most formative experiences for me was my training as a community organizer. Also significant was my first few years as a management consultant & scenario planning economics researcher at IHS Cambridge Energy Research Associates. Since them, my experience has been more at the intersection of the environmental movement, clean energy, cooperatives and the new, solidarity economy movement. Specifically:

• At Start.coop with Greg Brodsky, Howard Brodsky, Jessica Mason, Helene Listerine, Lindsay Gaskins, Nathan Schneider, Jen Horonjeff from Savvy.coop…. Joseph Cureton from Obran.
• Molly Hemstreet of The Industrial Commons (ecosystem of 5 worker and producer co-ops some with 100+ workers),
• Tim Huet from Arizmendi Bakeries (200+ worker owners across 9 bakery locations in San Francisco),
• Melissa Hoover and Todd Leverette from the Democracy At Work Institute, and
• Phil Reeves, co-founder & principal at Apis & Heritage with Todd Leverette — a new $50+ Million private equity fund using an employee leveraged buy-out strategy to help existing businesses convert to employee ownership.
• Many others that have been built on the recent investment from Kendeda Fund, the Catholic Campaign for Human Development, and several other catalytic, early stage funders and supporters of Project Equity, ICA Group, Evergreen Co-ops / Democracy Collaborative in Cleveland, Shared Capital / Nexus in Minneapolis, as well as many practitioners like Cooperative Home Care Associates, ROC USA, Equal Exchange, Namaste Solar, Amicus Solar, Margaret Lund and leaders in New York, Detroit, Quebec, Mexico, Spain, Italy,

My Upbringing and Experience founding and exiting CPA Co-op

For the past 8 years, I started and led the Community Purchasing Alliance Co-op. I’ve been enjoying this experience accompanying this exiting founder & CEO as she sells her company because it has allowed me to reflect on the last 2-3 years at the Community Purchasing Alliance Co-op where we gradually shifted from a traditional leadership / management structure to “hierarchy lite” and in the last 18 months or so to Sociocracy.

The process was driven in part by my own belief in the need for all organizations to have greater “organizational justice” — something I had been convicted about for many years after watching my parents talk about significant organizational injustices each of them faced in multiple employers over the years I was growing up. This became an even more common topic of conversation as my mother got her PhD in Industrial/Organizational Psychology and in particular with a focus on procedural justice, interpersonal justice — and the concept of “psychological contract” with meat-packing workers in her dissertation.

In 2016, a friend gave me the book Reinventing Organizations. It stirred me up significantly — and painted examples of multiple much larger organizations using “Self Management” at the scale of thousands of employees. I started drawing significantly on it’s wiki to implement the “advice process” for decision-making and other day-to-day organizational practices. That, combined with my experience and formation as Alinsky tradition community organizer shape a lot about how I think about these things today.

without further ado…

Here are the Questions…. and my Responses

This team of leaders is at a company that’s going through the process of transitioning ownership from the current founder and CEO to a group of senior leaders who are gradually taking the company over. I spent about 40 minutes with the team today talking through a set of questions similar to this. Here are the notes I used to prepare.

What are the mission-critical tasks during an Employee Ownership (EO) setup phase?

• Recognizing this work is iterative; preparing to check-in on how the initial things are going after a set period of time — maybe 6 or 12 months (at CPA Co-op we have a evaluation & planning week every 6 months — where we take at 3-5 days where we stop all normal work and take meaningful time for evaluation and planning). we’re always learning. You’re going to learn a lot each 6-12 months, build in times to incorporate those learnings and make adjustments
• building in good will — the benefit of the doubt (story I shared) — cultivate trust, belief in each other. Even for those that don’t choose it — help them see the competitive advantage of being different in this way 
  • Seth Godin (& many marketing gurus) often talk about leaning into your edge (i.e. Walmart — cheapest stuff; Amazon, fastest reliable delivery…) lean into your edge — this may be one of the edges that sets you apart from others
  • it won’t all be perfect right away. You’ll likely get some pieces wrong. Things you don’t expect will come your way. That’s okay. Build in good will from the key stakeholders you need to keep believing in this throughout the first couple years of this transition process. 

Best practices on keeping things moving and what have been the common roadblocks to EO transitions so we can watch out for them

• it will feel unchartered. You will often feel like you may not know what you’re doing. that’s okay. You do know. it’s deep inside of each of us.
  • Part of the work (for each and every one of us) is unlearning. There is so much unlearning to do. We’re so often in businesses and other institutions where there isn’t organizational justice . We’ve come to grow accustomed to this — and we so often normalize the lack of procedural, interpersonal or distributive justice. That when we have a chance to make something more fair or just — we can often find that our first instinct is to fight against the change. we revert back to what has been normalized for us in previous settings or other institutions where we have felt good. 
  • It takes work to see what aspects of anti-oppression — or organizational injustice we’re going to take on. And so much of it is an art about weaving together the key decision-makers and the people you have.  
  • At the end of the day, you’re responsive to the group of the key stake holders — the key people that’ it’s most important to bring along and sensing what’s the right set of steps to go — even if it’s only a few steps in the right direction and not as many as some (or you) would want to take.
  • Or places where there isn’t 
•  There are so many fewer management resources. 
• Common Roadblocks: 
  • Organization stagnates… not enough new. 
  • Focused too much on near-term (forgets to be strategic/ think / plan act also on long-term self-interest)
  • Culture — can forget to invest in the shared identity / purpose / why? of the organization
  • visionary / possiilities
• Biggest roadblock: not thinking enough of yourselves (As the Growth Champions) and what’s possible. Dreaming too small. 
  • Believing in yourself. Confidence that you can do this — I think these are vital to overcoming this. Building a culture of trust, belief, confidence in each other that we can do this… vital. 

Best practices on employee buy-in during the setup phase. What are some ways of  “selling” company ownership to employees, current and future? 

• The concept of Relational Power vs. Unilateral power is vital here. short version: “Power with” vs “power over”.  Long version: 

• I talked about these community organizing concepts tonight — but perhaps some further explanation might make them more useful… B. Loomer and R. Linthicum are the two I first learned them from. 
  • These slides here are a quick start/summary (start with slides three, and the ones towards the end are better. 
  • While I don’t like the military analogy in this piece, this excerpt from Linthicum is probably the best description of both Unilateral and Relational Power. 
  • This short piece also adds a couple helpful aspects to the description of Relational Power. 
• The point is we have to use relational power to build buy in with folks — past, present and future… It’s about self interest, creativity, being open to being changed, giving and receiving feedback, mutual investment. Gentle persuasion, not coercion. Power with — not power over. 

In an EO setting, especially newly formed ones, what are your tips for encouraging people who may not have been in recognized leadership positions before to take ownership? (NOTE: we have people of various titles and levels on the growth team)

• Recognize we’re each different. 
  • We’re different in what we’ve experienced about the world (especially in different work contexts; different types of relationships with former bosses / organizational cultures — this significantly shapes what we can expect). 
  • some of us have experienced and felt first hand (or very close to us — significant injustice / unfairness — and that has led us to lead — in part with great conviction about brining more fairness/justice into this world. For others they have different ways of reading their situation / the world. Or different styles / approaches / ways of wanting to engage with their work. 
  • We have to recognize and appreciate these differences. And still build a culture / processes for this can work. 
• we’re different in what we want. 

Broad strokes: how do we resolve potential situations where employee stewards/owners have differing views on what to prioritize and what parameters to set? (NOTE: stewards are those who are not yet owners or declined to join the EO transition team)

• Differing views is normal. conflict is normal. It can be generative. 
• Humility is important. Recognize we all have only a partial picture. Even those of us that are the most senior in the organization / the most access to the most information — we can only see part of the picture at any one time. We need each other to be able to see more of the whole. 
  • to resolve conflicts (or get to “overflow” described below) — it might be 2-4 people might need to ask each other how high conviction they are about certain things… there may need to be a “weaver” somebody that weaves together / helps people see the wisdom on tough questions. / other people’s perspective. 
• wisdom re: holding differing views together: Pope Francis talks about this in his book “Let Us Dream” — as “contrapositions”. This was a new concept for me recently, but it helps me reflect on many differing perspectives I had with my former CFO who now is the co-Executive Director at CPA. Often we would have different views — and often we would not resolve them right away — but allow the conflict to be generative over time — through what Pope Francis describes as overflow — through the dialogue — through the discussion and learning to hold the differing view points in tension. 
  • at CPA — we learned to hold more tensions. This was something that senior leaders CEOs, COOs, CFOs always have to hold — but in the expanded employee ownerhsip / steward context — more people will be exposed to more tensions / differing viewpoints than they may have been fully aware of before. 
  • Some colleagues will feel an injustice to them isn’t being remedied fast enough; another set of colleagues will feel an investment in a new business development / sales / marketing position isn’t justified. Some will see the investment in fundraising (and lack of early results) as not a smart investment. These tensions and different perspectives will all be held together with many many others; while each day we put our heads down and focus on building the enterprise we most believe in while focusing on our individual and organizational most important work. 
  • See more about this “contrapositions” concept from the book “Let Us Dream” below.  

What steps can we take to make sure the stewardship or EO form we choose to take is culturally relevant?

• Accompaniment. You know your people better than anybody. 

• You will find a way that makes sense for you. “Steal like an Artist” is a great book by Austin Kleon. You want to take great ideas from great thinkers and other great EO models / forms / management structures. But your version of employee ownership– and the stewardship model will be built by you — with your unique wisdom and sense of what your organization needs given where you’re at right now. 
• Take the concepts / frameworks that resonate with you. Adapt them. Inject them with your own culture and make them your own. 
• You have important wisdom too. Trust it. 

PS — here’s a bit m ore on contra-positions and how / why it’s important to hold different views together — and how to do that well.

Pope Francis on “differing views” and “contrapositions”–> Overflow

The following excerpt is taken from the book Let Us Dream: The Path to a Better Future, pages 79-80. The book was published by Pope Francis, in collaboration with his biographer, in December 2020.

One of the effects of conflict is to see as contradictions what are in fact contrapositions, as I like to call them. A contraposition involves two poles in tension, pulling away from each other: horizon/limit, local/global, whole/part, and so on. These are contrapositions because they are opposites that nonetheless interact in a fruitful, creative tension. As Guardini taught me, creation is full of these living polarities, or Gegensätze; they are what make us alive and dynamic. Contradictions (Widersprüche) on the other hand demand that we choose, between right and wrong. (Good and evil can never be a contraposition, because it is not the counterpart of good but its negation.)

To see contrapositions as contradictions is the result of mediocre thinking that takes us away from reality. The bad spirit—the spirit of conflict, which undermines dialogue and fraternity—turns contrapositions into contradictions, demanding we choose, and reducing reality to simple binaries. This is what ideologies and unscrupulous politicians do. So when we run up against a contradiction that does not allow us to advance to a real solution, we know we are faced with a reductive, partial mental scheme that we must try to move beyond.

But the bad spirit can also deny the tension between two poles in a contraposition, opting instead for a kind of static coexistence. This is the danger of relativism or false irenicism, an attitude of “peace at any price” in which the goal is to avoid conflict altogether. In this case, there can be no solution, because the tension has been denied, and abandoned. This is the refusal to accept reality. 

So we have two temptations: on the one hand, to wrap ourselves in the banner of one side or the other, exacerbating the conflict; on the other, to avoid engaging in conflict altogether, denying the tension involved and washing our hands of it. 

The task of the reconciler is instead to “endure” the conflict, facing it head-on, and by discerning see beyond the surface reasons for disagreement, opening those involved to the possibility of a new synthesis, one that does not destroy either pole, but preserves what is good and valid in both in a new perspective.

This breakthrough comes about as a gift in dialogue, when people trust each other and humbly seek the good together, and are willing to learn from each other in a mutual exchange of gifts. At such moments, the solution to an intractable problem comes in ways that are unexpected and unforeseen, the result of a new and greater creativity released, as it were, from the outside. This is what I mean by “overflow” because it breaks the banks that confined our thinking, and causes to pour forth, as if from an overflowing fountain, the answers that formerly the contraposition didn’t let us see. We recognize this process as a gift from God because it is the same action of the Spirit described in Scripture and evident in history.