University of Wisconsin Center for Cooperatives

ICA: Building Community Jobs by Replicating Model Worker Co-ops

GEO NEWSLETTER
GEO is published by EDINA, The Ecological Democracy Institute of North America, with support from the Cooperative Charitable Trust.
ICA: Building Community Jobs by Replicating Model Worker Co-ops

Carol DiMarcello
Community Jobs and Worker Co-ops


Across the country, the non-profit world is looking hard at community-based economic development (CED) - for obvious and urgent reasons. The enormous jobs loss over the past fifteen years has scarred the lives of people in both urban and rural communities. How can we repair the harm? Strategies cover a broad spectrum: micro-lending programs, business incubators, entrepreneurship training, Main street revitalization, flexible business networks, and worker- and community-owned business development.

The ICA Group (Industrial Cooperative Association) plays a significant role in this last category. Founded in 1978, our mission is to promote human and economic development through creation of model worker-owned and community-based enterprises that create and save jobs. Boston-based, we work throughout the U.S.A.

ICA's Community Jobs Program collaborates with other nonprofits in joint projects. We bring a knowledge of small business development, as well as capability in feasibility studies, business plan development, finance packaging, and staff recruitment and training. Our community partners contribute strong ties to their neighborhoods, the potential work force and clients, and often political linkages.

In developing CED businesses as worker coops, the worker ownership component is often established over time. Since there is no membership base at the outset, the sponsoring non-profit will hold ownership of the company "in trust" for the future workforce, through controlling seats on the Board. When specified milestones of financial performance and training have been reached, the transition to a worker owned company will be made. This two-stage approach avoids problems generated when workers-owners with little business experience take on the responsibilities of running a new and unproven company.

ICA will assume a co-developer role, as well as providing technical assistance, in certain projects: this involves raising equity capital, serving on the Board during start-up years, and providing ongoing support. We are performing this co-developer function in the context of our Replication Program (see next page). In all of our work with community-based partners, we utilize an in-depth planning process to build solid footings for job creation. This process moves through the following phases:

  • PRE-FEASIBILITY: During this pre-planning phase, a business concept is broadly explored and fleshed out, contacts are made with stakeholders, potential resources are identified, and a scope of work contract is negotiated.
  • FEASIBILITY STUDY: This study provides a careful analysis of what's needed for success in the marketplace. It's an essential first step before we can ask workers, managers, and investors to commit to a new venture. It identifies the opportunities, as well as obstacles and risks, the business will confront. It evaluates the potential for establishing a viable independent company, able to survive and grow over the long term, and recommends whether the project should be launched.
  • The feasibility study includes an in-depth makes analysis and a preliminary marketing plan. In addition, it furnishes, in preliminary form, financial projections, capital requirements, and management and staffing needs.

  • BUSINESS PLAN: a fully developed planning document is needed at this stage. This involves contacting potential clients and funding sources, constructing a thorough marketing plan, detailing financial projections for income and expenses over 3-5 years, establishing management requirements. In addition, initial stages of management recruitment and staff training may also take place. The business plan will also define the proposed legal ownership structure, spelling out the short- and long-term control of the firm, and the terms of transition to worker-ownership where that is an agreed goal.
  • DEVELOPMENT AND FINANCING: Here we take the emerging company to the point of opening its doors. The financial package for short- and long-term funding is finalized, equity and loans are secured. A Board of Directors is established, the business incorporated, and by-laws developed. Recruiting a manager, to take on increasing responsibility for the start-up, is a key step. Other pre-start up activities will include facility location and build-out, setting up accounting and other office systems, finalizing sales contracts, and hiring and training of staff.
  • ON-GOING SUPPORT: ICA provides ongoing support, in a gradually decreasing way, over the first three years. This takes the form of staff and Board training, regular review of financial systems and data, and consultation as needed. In some enterprises, ICA will also hold seats on the Board of Directors.

Replicating Success: Targeting Business Sectors tor Community-Based Co-ops

Seeking ways to ensure success for CED startups, ICA has launched a "Replication Program." We began this approach by identifying several specific industry sectors which fit the needs and abilities of people with limited formal education and job experience. We are now working In cooperation with community-based non-profits in different cities to develop, in each of these sectors, a successful model that can be widely adapted.

We believe this replication strategy will Increase our impact, since it builds on previous work, provides greater understanding of each sector, and enables us to better handle obstacles and opportunities.

Our first focus has been the home health care sector. Following successful experience in helping develop the worker-owned Cooperative Home Care Associates in the South Bronx, we worked with the Home Care Associates Training Institute to support home care co-ops in Philadelphia and Boston. We have also partnered with the Naugatuck Valley Project to develop Valley Care Cooperative in Waterbury, CT, and are engaged in replicating that co-op with the Merrimack Valley Project in Massachusetts.

We've now moved into a pilot project to test the viability of several other sectors: temporary services, franchising, security guard services, lead paint abatement, wood recycling, and childcare. Consistent with our mission, we have, in general, assumed eventual worker ownership as a long-term goal of these enterprises. This article will focus on our work within the temporary services and franchising sectors.

A Fresh Look at Temps: From Temporary Disadvantage to Permanent Gain

How do you create a temporary service composed of permanent worker-owners? We are working with two companies established to do exactly that. Work Source Staffing Partnership, in Boston, opened its doors this past November and will be structured as an ESOP (Employee Stock Ownership Plan). Enterprising Staffing Services of Alexandria, Virginia is scheduled to begin operation this July, and is designed as a worker co-op. (Editors' note: on ESOPs, see issue # 77, p. 10.)

The temporary services "industry" will continue its rapid growth, in step with strong nationwide trends towards a deskilled workforce, and corporate outsourcing of lower-skilled jobs. We can ignore these trends and the people caught up in them, or we can attempt to intervene and change the dynamics, potentially expanding opportunities for these workers.

The average person signing up with a temporary agency will get 1.6 assignments and be in temp work for about 13 weeks. A typical agency has about a 500% annual turnover. Most agencies recruit as large a pool of workers as possible, and send the nearest and easiest-to-contact person to an assignment. It is more in these agencies' interests to have a large pool, than to maximize opportunities for a small core.

But several factors suggest that this sector offers opportunities for job creation in disadvantaged communities, and can improve the quality of work for current temps. For one thing, it is growing at about 15% per year. In addition, market entry is relatively easy, as there is little customer loyalty. The opportunity is there: to provide reliable, trained workers who over time will be able to upgrade their skills and their pay.

Work Source Staffing Partnership, in its first six months, has worked with 21 staff people, most of whom have been AFDC recipients. Its marketing strategy has two unique features.

They seek contracts that place a team of workers with a client; this makes the work experience more supportive, and enhances Work Source's managerial function. And they market to longer-term staffing needs, where clients hire teams for up to 10 weeks at a time. Jobs have ranged from warehouse distribution, to hospital frontline staffing, to taking phoned-in catalog orders.

Work Source draws its workers from several training and job readiness programs. Most customers to date have contracted to hire staff for a specified period, after which they have the option to offer them permanent jobs (this called the "temporary to permanent" track). The alternative track is the more traditional placement of workers In a variety of jobs over time. Job creation goals are 50 full-time employees in 3 years, 150 in 5 years.

Enterprising Staffing Services (ESS) is a joint job creation project of United Community Ministries (UCM) and St. Louis Church Human Development Project in Alexandria. UCM has operated a computer training program, and will furnish incubation space, while St. Louis provides mentors from the congregation. The planned temp services enterprise would employ graduates of the training program. ICA is consulting on these plans, and helping to secure financing.

Finding a qualified manager who is able and willing to head up a democratically structured, worker-owned enterprise is never easy. In this case, it took several months, but the Project is now ready to begin operations. It will focus on providing clerical and telemarketing staff to businesses along the Route 1 corridor in Virginia. Drawing from a local welfare-to-work program, Its staffing goals are 25 full-time employees by year 3, increasing to 40 in year 5. Both break-even point and the transition to worker ownership are scheduled for the second year. Until that point, control will rest in a Board of Directors representing UCM, St. Louis, and other outside investors.

Franchising: A Natural for CED?

Franchising offers interesting opportunities for community-based enterprises. It inherently offers a replication model, as well as potential marketing advantages In its readily packaged products and well understood product lines. The growth of franchising over the past two decades has been extremely rapid and is expected to continue. Thus, between 1977 and 1988, the number of companies offering franchise opportunities had doubled to 2,000, and by 1992, an estimated 620,000 franchised businesses were in operation.

Franchising has advantages for community groups as a strategy for job creation and enterprise development. These include lower business risks, brand recognition, lower start-up and operating costs, and a proven business format.

Not including land or construction, the cost of starting a typical franchised business ranges from $5,000 to $ 1,000,000; the average investment is $140,000. Ongoing franchising royalties, excluding those for advertising, range from 2% to 12% of gross sales, averaging 6%.

ICA has been working with Fifth Avenue Committee, a Brooklyn-based non-profit, to establish an auto oil change company. Problems in securing an appropriate site are now nearing resolution, and a final choice among four potential franchisers is imminent. When these issues are fully resolved, a manager will be recruited and the financial package completed. We expect operations to begin in late 1996.

The franchise will have a community ownership structure, under Fifth Avenue Committee, its nonprofit parent. It is expected to create 1~15 jobs, and to build on linkages to a local community college and its auto mechanic certification program. Workers will be encouraged to enroll in this program, enabling them to move on to higher skilled jobs. The franchise will function as a training business, with workers on staff an average of 18-24 months. Once the initial company is on solid ground, Fifth Avenue plans to explore the development of other automotive enterprises.

Finally, ICA is beginning a feasibility study to identify three to five opportunities in the Roxbury neighborhood of Boston. Here we are partnering with Urban Edge, a CDC long involved with housing and real estate development in that area. This Project is part of a revitalization program along two commercial districts. ICA and Urban Edge have agreed that at least one of the enterprises selected will be worker-owned, the others to be developed by local entrepreneurs.

In Summary: If You Want Justice, Work for Economic Empowerment

ICA's goal for the Community Jobs Program is to help create decent jobs for economically disadvantaged people -- jobs rooted in the texture of their communities. Industry-focused business replication is a strategy that seems to us to hold much promise for achieving this and other goals of CED. By adapting proven business models to a variety of local markets, development can spread to several communities, each time building on previous efforts and lessons. With this strategy, the CED process should be hastened, and each business strengthened.

A development strategy grounded in worker and community ownership builds an economic base for the long run, a base controlled by local residents. The interests of the firms and those of the surrounding community become aligned. In short, these ownership models, coupled with the replication strategy, represent sustainable and empowering approaches to economic development. ICA's belief is that social and economic justice begins with opportunities to earn a living wage, in enterprises which provide people with a significant degree of control over their workplaces. Our work is committed to creating and developing those opportunities.


Carol DiMarcello is the Director of ICA 's Community Jobs Program. ICA distributes two useful reports linking CED and worker ownership as well as their newsletter, the ICA Bulletin, which profiles the progress of worker owned firms which they support. Should you be interested in these or in partnering with the ICA on a replication program, contact Carol at 677-338-0010, ext. 104, the ICA Group is located at suite 1127, 20 Park Plaza, Boston, MA 02116.

From GEO NEWSLETTER #22 ISSN# 1071-0590
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GEO is published by EDINA, The Ecological Democracy Institute of North America, with support from the Cooperative Charitable Trust. 


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