8 ms·

Worker-owned businesses: 'We get paid the same regardless of role'

53 points by adrianhoward 9y ago

lev99 9y ago
I'd be interested in the economics of founders selling to their employees from a founder's point of view. It seems like a way to protect a founder's legacy after they exit. Where does the money come from? Do the employees get a loan and then the money from the loan go to the founder? Does the founder provide a loan to the employees and receive regular payments on the loan? Do the employees have to have cash? Do all employees own equal shares regardless of role of employment length? Do employees buy businesses at the market rate?
- jubal00 9y ago
  Employee Stock Options Programs (ESOPs) are the way most conduct this transaction. It's frequently a way for a founder to sell to employees due to relationships/promises, to get a higher valuation than the market offers, or, like with options, to incentivize productivity and retention. The employees can get a loan with the business as collateral but the founder/s is going to hold a note as well. Assignments of stock are similar to options - customizable but more valuable employees get the lion's share.
  - charlesdm 9y ago
    It's probably easier to raise capital an owner run business -- think of it like a crowdfunding.
  - steveax 9y ago
    That’s what Bob and Charlee did with Bob’s Red Mill when he decided to retire: https://www.bobsredmill.com/bobs-way-meet https://www.bobsredmill.com/bobs-way-meet
golergka 9y ago
> We all get paid the same hourly rate regardless of the roles we do. Good luck retaining any skilled professionals then. One of the most repulsing stories that I got from Soviet Union from my grandparents was about excellent engineers being on the same pay scale with manual labour workers. No matter how much do you put into your skills, the system had standard pay scale that you couldn't break out from. I'm happy that these days are gone now, and skills and professionalism can be valued by the free market by people competing for them; why, despite pure populism for the lowest common denominator, someone wants to return to something like this, is completely beyond me.
- dragonwriter 9y ago
  > Good luck retaining any skilled professionals then. It's a good wholesaler where employees “multiskill” so that roles re flexible; virtually all skilled professionals are probably outsourced (which isn't uncommon in firms where professional services aren't the core business, even if they aren't coops.) Equal pay isn't a universal (or even dominant) norm for worker coops, though they do tend to have flatter pay structures than traditional firms. > One of the most repulsing stories that I got from Soviet Union from my grandparents was about excellent engineers being on the same pay scale with manual labour workers. Which would be germane if we were talking about either the Soviet Union or a system with that feature, which we are not.
- morgante 9y ago
  Seriously. Can you imagine trying to hire a skilled professional who has put years of effort into acquiring a skill when you won't pay them any more than a retail cashier?
  - T2_t2 9y ago
    It depends on the mix of roles in a company I guess, but animal farm comes to mind here: all worker-owners are equal (but some are more equal than others). What happens when the company expands? Do the new employees get equal shares? But these are positive-negatives, i.e. the harm is done by being successful. When the company starts to fail, what then? What happens when a company needs to downsize? Which of the worker-owners will survive, and under what conditions? Will it be political, e.g. we all vote, so the 7 PAs who everyone loves get to stay, but the entire sales department gets voted out? What about if departments vote together? Seems very sketchy. Ironically, the ability to survive failure is why our system perpetuates. In the hard times, hard choices can be made that are individually distasteful, but required. Evolution is driven by the non-dying breeding, and corporate evolution is similar, with company structures that can navigate the bad times - much more than maximise the good times - the ones most likely to be replicated.
andrewclunn 9y ago
The twentieth century motor company lives on it seems.
notyourday 9y ago
This has been tried multiple times. All of those attempts failed, regardless of the scale. It won't be different this time.
- dang 9y ago
  https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - blorsh 9y ago
    I found the comment to be insightful. I'm trying to find his violation, and I can't really. There are a few things that are close, maybe, but not really. "political or ideological battle" and "shallow dismissals" seem most plausible, but neither really fits. It's not as if the entirety of his comment was "more dumb leftist shit". There was more substance to his comment. ???
    - dang 9y ago
      It's a shallow dismissal. It makes a grandiose claim without support. More importantly, it doesn't teach us anything. An example or two could have rectified that.
      - notyourday 9y ago
        Do I need to provide an example that water is wet? But ok, just for you: Largest scale: USSR North Korea Cuba Recent entry: Venezuela Recent entry: South Africa Smaller: https://www.economist.com/news/business/21589469-collapse-spains-fagor-tests-worlds-largest-group-co-operatives-trouble-workers https://www.economist.com/news/business/21589469-collapse-sp... Even smaller: https://munchies.vice.com/en_us/article/gvkqnm/marxist-vegan-restaurant-in-michigan-closes-for-predictably-marxist-reasons https://munchies.vice.com/en_us/article/gvkqnm/marxist-vegan...
        dang 9y ago
remir 9y ago
I find worker-owned businesses very interesting. Obviously getting paid the same regardless of role may be an obstacle to attracting highly skilled people, but if salaries are competitive and established in function of role and experience, in a transparent way, that could be great.
- wutbrodo 9y ago
  Yea, i wondered the same thing. I like the idea of a worker owned Co-op in general, but it's subject to them actually being functional. I don't see how that could be the case with industries with large productivity/talent gaps, like software. Most of the co-ops I've come into contact with are smallish restaurants or grocery stores, which makes sense: most tasks can be handled by anyone and those that aren't can be judged a lot more effectively.
  - icebraining 9y ago
    I don't see how that could be the case with industries with large productivity/talent gaps, like software. And yet: https://github.com/hng/tech-coops#coops https://github.com/hng/tech-coops#coops The gaps problem seems self-correcting; anyone who thinks they are underpaid will leave, and conversely the team will probably push out those badly underperforming. You'll still have gaps, but only among people who don't mind getting paid the same despite them.
    - gremlinsinc 9y ago
      Thanks for that link.. lots of good resources... I want to start an MSP (Computer Repair / Maintenance as a Service) + Hosting + Development Business as a worker co-op someday, when I get the free-time and money to do so.
  - dragonwriter 9y ago
    > I don't see how that could be the case with industries with large productivity/talent gaps, like software. There are a number of large coops in industries where the firms require everything from professionals to manual labor; equal pay isn't common in those kind of coops, though the pay ranges are probably flatter than conventional firms. A co-op, ultimately, can be very much like a conventional firm, where the voting stock is held equally by the employees, so that management is ultimately accountable to the employees.
jacobkg 9y ago
There is an excellent book called 'Maverick' about a Brazilian manufacturing company that, while not owned by the workers, gets much closer than almost any other business. I highly recommend that all founders read it https://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553 https://www.amazon.com/Maverick-Success-Behind-Unusual-Workp...
- Cyph0n 9y ago
  Very interesting. The first successful non-hierarchial company that comes to my mind is Valve. I recall reading that Valve has a higher revenue per employee than any company in the world... Edit: profit, not revenue
  - jessriedel 9y ago
    Seems to me the causality works the other way. Industries where companies are formed from a small number of employee who are individualy quasi-millionaries (elite SV talent) are more likely to function well without a heirarchy than industries built on coordinated entry-level manual labor (Walmart). Also, I don't really get this claim. Valve has ~360 employees with annual revenue under a billion dollars, https://en.wikipedia.org/wiki/Valve_Corporation https://en.wikipedia.org/wiki/Valve_Corporation whereas there are ten companies in the S&P 500 with over $3M in annual revenue per employee. https://priceonomics.com/which-companies-have-the-highest-revenue-per/ https://priceonomics.com/which-companies-have-the-highest-re... Perhaps the comparison is only supposed to be to other tech giants like Apple, which are roughly $1-2M per employee.
    - Cyph0n 9y ago
      > Also, I don't really get this claim. Valve has ~360 employees with annual revenue under a billion dollars, Looks like I was wrong: Newell claims that Valve has the highest profit per employee. I'm sure the numbers are not accurate, but that is still a very impressive figure for revenue/employee.
typeformer 9y ago
German companies are pretty great at finding the balance between corporate profitability and worker interests.
- philipkglass 9y ago
  In the post-WW II economic "golden age," roughly up through the early 1970s, American manufacturing workers and the corporations they worked for were also both doing well. That fell apart as America went from a net exporter to net importer. I'm unsure if the importer/exporter transition is a direct cause, because a lot of things changed in the 1970s, but that's about the time the party ended. I wonder if Germany will do better when/if Germany no longer has a substantial export surplus. I hope that it can. It's mathematically impossible for every country to run an export surplus, so "look to Germany" is a useful prescription only if there are other good ways to imitate Germany.
aaronchall 9y ago
I'll recount a short twitter conversation I had with some engineers who wanted to be in a collective, I suggested them all being equal partners, and was promptly blocked... > My company laid off 17 engineers including me when we tried to unionize. Now I’m having a hard time finding a job. Any leads for junior-to-mid software developers in the DC area or remote, send em my way. And please share. #LanetixUnion #jobsearch - Sara J. Martinez ‏ > Software developers are generally well treated and compensated. What drove you to attempt unionizing? - Me. > There should be interviews with Lanetix engineers coming out soon which will go in depth. For a quick overview, here is what we wrote to management: - Björn Westergard ‏ > If you're a collective of software engineers worth bargaining with, you should all form your own consultancy firm, and forget about that "client". This might be your best, realistic solution. Thank me when you're making 2x, in nicer conditions and fewer hours... - Me > This “solution” doesn’t scale due to the competitive race to the bottom dynamics of capitalism. Unions demonstrably do work at scale. Everyone is “worth bargaining with” for those who don’t to serve mammon alone. - Björn Westergard ‏ > You have limited options as I see it, and you probably need to ask yourselves what's more important, getting back to work (but apparently not at Lanetix), or grinding an ideological axe? If you're so egalitarian, make everyone an equal partner, and start looking for clients. - Me (https://twitter.com/aaronchall/status/970717102465323008 https://twitter.com/aaronchall/status/970717102465323008) Björn promptly blocked me at that point. > "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" In this case, his non-existent union salary, I suppose...

53 points by adrianhoward 9y ago

I'd be interested in the economics of founders selling to their employees from a founder's point of view. It seems like a way to protect a founder's legacy after they exit. Where does the money come from? Do the employees get a loan and then the money from the loan go to the founder? Does the founder provide a loan to the employees and receive regular payments on the loan? Do the employees have to have cash? Do all employees own equal shares regardless of role of employment length? Do employees buy businesses at the market rate?

jubal00 9y ago
Employee Stock Options Programs (ESOPs) are the way most conduct this transaction. It's frequently a way for a founder to sell to employees due to relationships/promises, to get a higher valuation than the market offers, or, like with options, to incentivize productivity and retention. The employees can get a loan with the business as collateral but the founder/s is going to hold a note as well. Assignments of stock are similar to options - customizable but more valuable employees get the lion's share.
- charlesdm 9y ago
  It's probably easier to raise capital an owner run business -- think of it like a crowdfunding.
- steveax 9y ago
  That’s what Bob and Charlee did with Bob’s Red Mill when he decided to retire: https://www.bobsredmill.com/bobs-way-meet https://www.bobsredmill.com/bobs-way-meet

golergka 9y ago

> We all get paid the same hourly rate regardless of the roles we do. Good luck retaining any skilled professionals then. One of the most repulsing stories that I got from Soviet Union from my grandparents was about excellent engineers being on the same pay scale with manual labour workers. No matter how much do you put into your skills, the system had standard pay scale that you couldn't break out from. I'm happy that these days are gone now, and skills and professionalism can be valued by the free market by people competing for them; why, despite pure populism for the lowest common denominator, someone wants to return to something like this, is completely beyond me.

dragonwriter 9y ago
> Good luck retaining any skilled professionals then. It's a good wholesaler where employees “multiskill” so that roles re flexible; virtually all skilled professionals are probably outsourced (which isn't uncommon in firms where professional services aren't the core business, even if they aren't coops.) Equal pay isn't a universal (or even dominant) norm for worker coops, though they do tend to have flatter pay structures than traditional firms. > One of the most repulsing stories that I got from Soviet Union from my grandparents was about excellent engineers being on the same pay scale with manual labour workers. Which would be germane if we were talking about either the Soviet Union or a system with that feature, which we are not.
morgante 9y ago
Seriously. Can you imagine trying to hire a skilled professional who has put years of effort into acquiring a skill when you won't pay them any more than a retail cashier?
- T2_t2 9y ago
  It depends on the mix of roles in a company I guess, but animal farm comes to mind here: all worker-owners are equal (but some are more equal than others). What happens when the company expands? Do the new employees get equal shares? But these are positive-negatives, i.e. the harm is done by being successful. When the company starts to fail, what then? What happens when a company needs to downsize? Which of the worker-owners will survive, and under what conditions? Will it be political, e.g. we all vote, so the 7 PAs who everyone loves get to stay, but the entire sales department gets voted out? What about if departments vote together? Seems very sketchy. Ironically, the ability to survive failure is why our system perpetuates. In the hard times, hard choices can be made that are individually distasteful, but required. Evolution is driven by the non-dying breeding, and corporate evolution is similar, with company structures that can navigate the bad times - much more than maximise the good times - the ones most likely to be replicated.

andrewclunn 9y ago

The twentieth century motor company lives on it seems.

notyourday 9y ago

This has been tried multiple times. All of those attempts failed, regardless of the scale. It won't be different this time.

dang 9y ago
https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- blorsh 9y ago
  I found the comment to be insightful. I'm trying to find his violation, and I can't really. There are a few things that are close, maybe, but not really. "political or ideological battle" and "shallow dismissals" seem most plausible, but neither really fits. It's not as if the entirety of his comment was "more dumb leftist shit". There was more substance to his comment. ???
  - dang 9y ago
    It's a shallow dismissal. It makes a grandiose claim without support. More importantly, it doesn't teach us anything. An example or two could have rectified that.
    - notyourday 9y ago
      Do I need to provide an example that water is wet? But ok, just for you: Largest scale: USSR North Korea Cuba Recent entry: Venezuela Recent entry: South Africa Smaller: https://www.economist.com/news/business/21589469-collapse-spains-fagor-tests-worlds-largest-group-co-operatives-trouble-workers https://www.economist.com/news/business/21589469-collapse-sp... Even smaller: https://munchies.vice.com/en_us/article/gvkqnm/marxist-vegan-restaurant-in-michigan-closes-for-predictably-marxist-reasons https://munchies.vice.com/en_us/article/gvkqnm/marxist-vegan...
      - dang 9y ago

remir 9y ago

I find worker-owned businesses very interesting. Obviously getting paid the same regardless of role may be an obstacle to attracting highly skilled people, but if salaries are competitive and established in function of role and experience, in a transparent way, that could be great.

wutbrodo 9y ago
Yea, i wondered the same thing. I like the idea of a worker owned Co-op in general, but it's subject to them actually being functional. I don't see how that could be the case with industries with large productivity/talent gaps, like software. Most of the co-ops I've come into contact with are smallish restaurants or grocery stores, which makes sense: most tasks can be handled by anyone and those that aren't can be judged a lot more effectively.
- icebraining 9y ago
  I don't see how that could be the case with industries with large productivity/talent gaps, like software. And yet: https://github.com/hng/tech-coops#coops https://github.com/hng/tech-coops#coops The gaps problem seems self-correcting; anyone who thinks they are underpaid will leave, and conversely the team will probably push out those badly underperforming. You'll still have gaps, but only among people who don't mind getting paid the same despite them.
  - gremlinsinc 9y ago
    Thanks for that link.. lots of good resources... I want to start an MSP (Computer Repair / Maintenance as a Service) + Hosting + Development Business as a worker co-op someday, when I get the free-time and money to do so.
- dragonwriter 9y ago
  > I don't see how that could be the case with industries with large productivity/talent gaps, like software. There are a number of large coops in industries where the firms require everything from professionals to manual labor; equal pay isn't common in those kind of coops, though the pay ranges are probably flatter than conventional firms. A co-op, ultimately, can be very much like a conventional firm, where the voting stock is held equally by the employees, so that management is ultimately accountable to the employees.

jacobkg 9y ago

There is an excellent book called 'Maverick' about a Brazilian manufacturing company that, while not owned by the workers, gets much closer than almost any other business. I highly recommend that all founders read it https://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553 https://www.amazon.com/Maverick-Success-Behind-Unusual-Workp...

Cyph0n 9y ago
Very interesting. The first successful non-hierarchial company that comes to my mind is Valve. I recall reading that Valve has a higher revenue per employee than any company in the world... Edit: profit, not revenue
- jessriedel 9y ago
  Seems to me the causality works the other way. Industries where companies are formed from a small number of employee who are individualy quasi-millionaries (elite SV talent) are more likely to function well without a heirarchy than industries built on coordinated entry-level manual labor (Walmart). Also, I don't really get this claim. Valve has ~360 employees with annual revenue under a billion dollars, https://en.wikipedia.org/wiki/Valve_Corporation https://en.wikipedia.org/wiki/Valve_Corporation whereas there are ten companies in the S&P 500 with over $3M in annual revenue per employee. https://priceonomics.com/which-companies-have-the-highest-revenue-per/ https://priceonomics.com/which-companies-have-the-highest-re... Perhaps the comparison is only supposed to be to other tech giants like Apple, which are roughly $1-2M per employee.
  - Cyph0n 9y ago
    > Also, I don't really get this claim. Valve has ~360 employees with annual revenue under a billion dollars, Looks like I was wrong: Newell claims that Valve has the highest profit per employee. I'm sure the numbers are not accurate, but that is still a very impressive figure for revenue/employee.

typeformer 9y ago

German companies are pretty great at finding the balance between corporate profitability and worker interests.

philipkglass 9y ago
In the post-WW II economic "golden age," roughly up through the early 1970s, American manufacturing workers and the corporations they worked for were also both doing well. That fell apart as America went from a net exporter to net importer. I'm unsure if the importer/exporter transition is a direct cause, because a lot of things changed in the 1970s, but that's about the time the party ended. I wonder if Germany will do better when/if Germany no longer has a substantial export surplus. I hope that it can. It's mathematically impossible for every country to run an export surplus, so "look to Germany" is a useful prescription only if there are other good ways to imitate Germany.

aaronchall 9y ago

I'll recount a short twitter conversation I had with some engineers who wanted to be in a collective, I suggested them all being equal partners, and was promptly blocked... > My company laid off 17 engineers including me when we tried to unionize. Now I’m having a hard time finding a job. Any leads for junior-to-mid software developers in the DC area or remote, send em my way. And please share. #LanetixUnion #jobsearch - Sara J. Martinez ‏ > Software developers are generally well treated and compensated. What drove you to attempt unionizing? - Me. > There should be interviews with Lanetix engineers coming out soon which will go in depth. For a quick overview, here is what we wrote to management: - Björn Westergard ‏ > If you're a collective of software engineers worth bargaining with, you should all form your own consultancy firm, and forget about that "client". This might be your best, realistic solution. Thank me when you're making 2x, in nicer conditions and fewer hours... - Me > This “solution” doesn’t scale due to the competitive race to the bottom dynamics of capitalism. Unions demonstrably do work at scale. Everyone is “worth bargaining with” for those who don’t to serve mammon alone. - Björn Westergard ‏ > You have limited options as I see it, and you probably need to ask yourselves what's more important, getting back to work (but apparently not at Lanetix), or grinding an ideological axe? If you're so egalitarian, make everyone an equal partner, and start looking for clients. - Me (https://twitter.com/aaronchall/status/970717102465323008 https://twitter.com/aaronchall/status/970717102465323008) Björn promptly blocked me at that point. > "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" In this case, his non-existent union salary, I suppose...