Employee Owned Ownership: Make Employees Their Own Boss For Growth
Updated: Dec 8, 2021
Choosing the appropriate ownership structure is an integral part of owning a business. There are different factors to consider: Is employee-owned suitable for your company? Does it align with your company’s values? If you value camaraderie, sharing information, and empowering employees and clients alike, a cooperative model may fit your company.
In today's episode, Amanda Bybee details the employee owned and the cooperative model. Amanda shares her firsthand experiences of the benefits of employee owned ownership. She also explores the challenges and strategies in a cooperative model, and how it empowers people.
Want to find out if an employee ownership and cooperative model is appropriate for your business? Then tune in to the full episode!
Here are three reasons why you should continue reading:
Explore the ins and outs of employee ownership and the cooperative model.
Find out when it’s the right time to switch to a cooperative and choose the model that suits your company’s needs.
Discover how cooperatives combat capitalism and empower their members.
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Connect with Amanda: LinkedIn
[05:00] Amanda’s Journey
Her journey in solar energy started in 2003 with a nonprofit organization in Austin, Texas.
Amanda jointly started the Solar Austin Campaign to encourage the municipally-owned utility in Austin to use renewable energy sources.
She met one of the co-founders of Namaste Solar, Blake Jones, in 2005. This meeting marked the beginning of a 15-year business relationship and friendship.
Namaste Solar was founded with the idea of being an employee-owned cooperative company.
Working with an attorney, they drafted a custom shareholder agreement that governed their relationship as employee-owners for the first five years.
[07:18] What Made Amanda Join Namaste Solar?
When she first joined Namaste Solar, Amanda didn't have a reference for what an employee-owned company entailed.
However, she was impressed that the company wanted to walk the talk. They paid attention to how they did what they did while still being successful.
Namaste Solar was mindful about how they shared the business ownership experience. Employees learned the elements of business ownership to improve the team’s financial literacy and business decision-making processes.
For many companies, information is a form of currency and power. However, Namaste Solar's information transparency empowered the employee-owners.
[08:56] ‘... In so many companies, information is a form of currency.’
Amanda liked the business model created by these earnest people who sincerely wanted to do good for the world.
[09:58] The Power of Open Information Sharing
“The Great Game of Business” by Jack Stack and Bo Burlingham introduced them to the concept of open-book management (OBM).
People become more effective when they have information about the impact their work has on the bottom line.
In the same book, they outlined a financially-motivating profit-sharing mechanism. However, open information sharing is behind many of their policies.
[10:27] ‘... When you give people the information and you help them see how their work affects the bottom line, they are that much more motivated to do a good job and to be efficient...’
Namaste Solar didn't even have policies. Enabling access to information and trusting people to make good decisions promoted a great working culture.
They did encounter some abuse of that idea. However, they believed that well-educated and responsible adults would make good decisions.
[12:31] Shifting to an Employee-Owned Cooperative
At first, everyone who joined the company became an employee-owner.
Later, they encountered people who weren’t interested in ownership but still wanted to join because they believed in the company’s mission and culture.
The company adapted and allowed both employee-owners and employees who didn’t want ownership.
After they converted to an employee-owned cooperative, people join the company as an employee. They later decide whether they want to become a candidate for ownership.
Candidates will then spend a year learning and being mentored on being an owner.
[14:21] Employee Owned vs. Worker Cooperative
Employee-owned and worker-owned models are both forms of employee ownership.
The "one share, one vote" governance structure benefited early joiners with more shares. Conversely, the cooperative model ensured that each person had one share and one vote only.
They also created a preferred class of stock that enabled external investment. It contributed to their growth without sacrificing internal control.
Preferred shareholders can purchase more than one share. However, their shares do not grant voting rights for any of the company’s decisions.
Listen to the full episode to hear more about their transition to a cooperative and how Equal Exchange was instrumental to that conversion!
[17:55] Finding the Right Investors
Finding investors willing to have non-voting rights is indeed a rarity.
Impact investing is better understood now than it was in 2011. They were also able to benefit from the tutelage of the capital coordinator from Equal Exchange.
As one of Namaste Solar's first board members, he introduced them to many investors in Equal Exchange and impact investing.
Namaste Solar always carefully orients, screens, and chooses its investors. Their ideal investor also believes in their services and mission, and screening has been lucrative thus far.
[19:30] ‘And it’s been incredibly gratifying to learn that there is a community of investors out there who believe in that, who are willing to put their money where their beliefs are and be patient with capital.’
[19:56] The Struggle in the Transition to Employee Owned
It took them a year to research, discuss, and implement the transition.
They held a vote to decide on a strike price and get a certain number of shares to agree to the conversion.
Some people cashed out due to their expectations of the investment paradigm.
Under the cooperative paradigm, there was an investment with no assurance of meeting the target dividends and valuing stock prices. Fortunately, they acquired sufficient shares to reinvest into the paradigm.
To hear how they made the switch to a cooperative paradigm and how it changed their dynamics, tune in to the full episode!
[24:03] How Amanda Felt About the Transition
Being an employee and an owner simultaneously, they got better at identifying which hat they were wearing.
As an employee, Amanda liked the transition. It fixed an issue within the company that needed addressing.
As one of the early investors, she enjoyed the benefits from the buyout and the set strike price.
Despite that, it was bittersweet. She knew that the growth potential would plateau because of the conversion to a dividend-yielding investment.
[26:18] Amanda’s Advice on Transitioning to a Cooperative
The cooperative paradigm is an egalitarian structure. One challenge in it is that it doesn't recognize the risks early investors incur.
Most early-stage investors incur a lot of risks and expect a commensurate return.
Their initial shareholder paradigm recognized that shifting to cooperative made more sense when the company was more stable.
A cooperative doesn't put all the responsibility of growing capital on the employee-owners.
Investments are better earned than given, so don't just gift stock.
[29:01] ‘... We didn’t want to just gift stock because people don’t feel the same sense of investment if something is given to them as they do if they earn it.’
[29:42] The Right Time to Switch to Employee-Owned Cooperative
A cooperative model is suitable for early-stage companies where everyone's contributions are equal.
However, an existing imbalance in investment deserves a structure that acknowledges that greater risk.
Choosing a business model depends on the circumstances and needs of the company.
[31:22] Starting Amicus O&M
In 2011, they co-founded Amicus Solar Cooperative as a response to the competition in the marketplace.
Currently, it has 65 owners all over the United States, Puerto Rico, and Canada.
Amanda’s colleague, Stephen Ervin, the CFO of Namasté Solar, was running Amicus Solar Cooperative.
In 2014, they created the Clean Energy Credit Union. It provided competent and attractive options to their consumers and improved information transparency.
Amanda managed the credit union application in 2014. Three years later, the company received the charter to open the business and begin operations.
[35:03] What Amicus O&M Does
Amicus O&M delivers tools and templates to help companies diversify and provide efficient services.
Knowledge sharing is essential to compare several solutions that work best for specific issues. It also helps them learn on-trend devices and technology on the market.
Operating and maintaining equipment for the solar industry is a relatively small niche. Amicus O&M trains its technicians in the best practices, safety precautions and codes they need to know.
They help companies connect with other organizations outside their geographic service area.
[37:14] How Does Amicus O&M Make Money?
Their fundamental premise is that member companies pay annual dues.
The company plans to sell access to non-member companies by organizing a training program for solar works.
Profit-sharing exists in every cooperative.
In Subchapter T of the IRS Tax Code, cooperatives must distribute profit among their shareholders. Each cooperative has its formula.
[39:31] Internal Business Processes for Employee-Owned Cooperative
A cooperative is married to its structure at the governance level. However, daily operations are not required to conform to that.
An employee-owned cooperative company could have a hierarchical structure for decision-making. It could also take a democratic approach like Namasté Solar.
There are seven principles of cooperatives that most businesses try to adhere to. These include a culture of engagement, inclusion, and freedom of choice.
In terms of organizational structure, there’s a lot of flexibility. The cooperative culture tends to merge your interests with that of the company.
Tune in to the full episode to find out how cooperatives counteract capitalist inequalities!
[42:59] Shared Services Cooperative vs. Worker Cooperative
Ownership in Amicus Solar and Amicus O&M contributes to the profitability of those companies.
That's also why they prefer employee-owned companies: it's an indirect contribution to their wealth growth.
Companies that are not employee-owned are still capitalist structures. Profits benefit shareholders rather than employees.
Amicus O&M isn't an employee-owned cooperative. It doesn't benefit its employees when the company is profitable. However, employees are protected from losses when the company suffers.
Find out about the graduate student from the University of Colorado who wrote a paper on “the Namaste network” by tuning in to the full episode!
[47:09] The True Value of a Cooperative
One critical aspect of Amanda's job is ensuring that new member companies will add value to their culture.
Their business philosophy around sharing information is integral to their process. Many business people keep their cards close and refuse to share their business secrets.
[48:18] ‘Because if they’re not going to be willing to share openly, and within that, be vulnerable and admit mistakes and share lessons learned the hard way [...] we come here to share honestly together and to help each other learn and grow.’
The true value of cooperatives lies in the camaraderie that develops. Its members can openly share ideas, learn from each other, and come up with creative solutions.
It would take a significant violation of trust for a member company to be invited to leave.
Although there are no intrinsic limits in accepting members, they might impose one in the future. Scaling will always require some modifications.
[51:52] Employee Ownership as a Form of Empowerment
Amanda encourages company founders to implement employee ownership as part of their succession plan when your retirement period approaches.
She firmly believes in its potential to address the inherent evils of capitalism, engage employees, and empower them to take charge of their work lives.
People nowadays are tired of being excluded from the information currency and not having autonomy over their professional lives.
There are many other creative ways to be employee-owned other than cooperative.
[55:20] You Don’t Have to Be Alone In Employee Owned
One of the loneliest parts of being a business owner is shouldering everything alone.
On the other hand, working with others distributes that load
Creating friendships is both personally and professionally rewarding.
The brilliance of cooperatives is that the people co-create the culture, giving them a deep sense of investment.
Leaving Namaste Solar was difficult for Amanda. Listen to the full episode to find out the incredibly touching parting gift she received from one of their co-owners!
Amanda Bybee is the CEO of Amicus O&M Cooperative. She became the coordinator of the Solar Austin Campaign, starting her journey in the solar industry in 2003. Joining Namaste Solar in January 2006, she held numerous roles and worked to obtain a federal charter for the Clean Energy Credit Union. She still serves as a volunteer on the Supervisory Committee.
You may contact Amanda through LinkedIn.
Powerful Quotes On Employee Owned Ownership
[49:31] ‘And so when I can compare notes with those others, and develop the camaraderie and come up with creative solutions, and partner together on new ideas, it’s incredibly valuable to find yourself in a community of companies who share your values and who are willing to be open in that.’
[51:19] ‘Because I think just like a company that scales from a very small and intimate startup into a large company, you do have to modify the culture as you go and you have to adapt it as you go.’
[52:48] ‘... People are tired of being excluded from that information currency. They’re tired of not having autonomy and agency over the decisions that affect their professional lives.’
[55:21] ‘... One of the loneliest parts of being a business owner is if you feel like you’re the only one bearing the burden, you feel like your shoulders are the only ones holding everything up. And when you do it together, you distribute that load across many shoulders and many hands.’
[58:35] ‘But that’s the beauty is that everyone has the opportunity to impress their thumbprint upon it and create it together and make it that unique combination of ideas and personalities and quirks and eccentricities and flavours...’
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