August 11, 2021

Evergreen Cooperatives helps companies shift to co-ops, share profits with workers

The idea of a career and work day has changed a lot since the pandemic started in March 2020 and that’s already making many employees rethink what they want and need from an employer.

Long before that disruption, Evergreen Cooperatives was helping improve that relationship for employees by making everyone an owner.]

How it started

Evergreen started in 2008, at first creating its own cooperatives that would do business with major institutions in the City of Cleveland like the Cleveland Clinic and University Hospitals. Those first businesses were industrial laundries, an energy company, and a facility that grows fresh produce.

The idea was that these were services those pillar institutions would have to spend money on one way or another, so they might as well do business with a local cooperative where employees could share in the profits of the business.

“The notion was to create these companies as employee-owned firms so that the employees would not only have that quality job but would also have the opportunity to purchase a share in their company and to ultimately share in the profits of the company,” said McMicken.

“That offers individuals the longer-term opportunity to build wealth,” said Evergreen Cooperatives CEO John McMicken.

The workers get traditional wages, but they also get some of the profits that the business earns. Some of it goes into their paychecks, but a much larger amount goes into a Patronage Account. Workers have limited options to access or borrow against that fund with the goal of letting it build up over time to give the employee-owner a considerable amount of money to take with them when they leave the company, regardless of the reason.

The Silver Tsunami

Evergreen’s cooperatives had been running for years when Evergreen noticed a different problem: small business owners retiring.

Pew Research Center and wealth managers have been noticing that Baby Boomers are starting to retire in large numbers, potentially making it harder for all of them to find buyers, putting their employees’ jobs at risk.

Martin Berry at Berry Insulation says he wasn’t looking to retire but was interested in creating stability for his business.

Berry Insulation Founder Martin Berry wasn’t looking to retire but he was looking to make sure his business had some added stability.

“It’s difficult to sell a small business, because there aren’t a lot of people and if the owner leaves, sometimes there’s a void at the top and the business is too small for many buyers,” said Berry.

The Fund for Employee Ownership

That’s where Evergreen Cooperatives’ Chief Investment Officer Jeanette Webster comes in.

“We talk to the seller and we say, ‘You built up wealth and a legacy here in the community and with your employees, we can facilitate making the investment to you so your employees can continue this,” said Webster.

The move isn’t right for every business, and often requires a selling business owner who is willing to sell the business for a slight discount because he or she believes in the mission of helping their employees continue working for the business.

“When employees can truly internalize ownership, you have a whole different culture that exists,” said Webster.

When that lines up, Evergreen uses its Fund for Employee Ownership to help purchase the business and transfer it to a cooperative created with the employees. Evergreen and the employee-owners own the company together with the goal of Evergreen recouping its investment and exiting the business in five to seven years.

McMicken says the employees always have at least an 80% ownership stake in the business with guarantees in the cooperative’s by-laws that the ownership stake can’t drop below that level.

By converting existing businesses, McMicken says Evergreen doesn’t have to shoulder the burden of starting a new business from scratch, allowing them to impact more communities much faster.

“We feel like we can accomplish similar goals in a faster, lower-risk way,” said McMicken.

Where it’s already happened

“In the beginning, I think it was too good to be true,” said Berry Insulation Office Manager Mary O’Konowitz. “Once we got past that and started learning more about it, I think it’s fabulous for the guys.”

Mary O’Konowitz and Kavya Puvvada are both employee-owners at Berry Insulation.

She says the Berry Insulation employees who work on buildings and homes around Northeast Ohio benefit in a big way from the additional profit-sharing on top of their wages working in their trade. Berry says because his company had the stability and financial backing from Evergreen, it already acquired another insulation company from a retiring owner and folded those employees in with their own.

An added benefit is that employee-owners aren’t just paid better, they tend to work better too.

“Generally, the worker cooperatives are more productive, the absenteeism is a lot lower because people want to come to work as an employee-owner and contribute to the profits,” said Webster.

13 of Phoenix Coffee’s 36 employees are part of the cooperative. Employees are eligible to apply after working full-time hours for a year.

“We think it’s a way to attract better employees and retain the folks that we have and whatever success we had in our business over the years, a lot of it was due to the folks we had on our team,” said Berry.

In Ohio City, the regulars at Phoenix Coffee recently started getting their coffee from an unusual business model.

Phoenix Coffee had been considering shifting to a cooperative model for years and finally did it right before the pandemic hit.

Employee-owner Barista Keith helps customers with their coffee orders in Phoenix Coffee’s Ohio City location.

“Our Baristas were here everyday during the pandemic really putting themselves on the line in a pretty uncertain time, keeping the doors open and the business operating,” said Phoenix Director of Coffee Christopher Feran. “We felt even more strongly that we needed to share with [employees] any bounty that existed by forming a cooperative.”

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