This week we continue our discussion of cooperatives in an interview with Adam Schwartz, founder and principal of The Cooperative Way, a consulting firm dedicated to assisting cooperative businesses succeed. (Listen to part 1 here.)
The Cooperative Way is a strategic partner with CDS Consulting Co-op, a shared services cooperative. Adam has served cooperatives from different sectors for 23 years and has extensive knowledge of the key ingredients that lead to high-performing, sustainable success for all types of cooperatives.
Adam says, “If you’ve seen one co-op, you’ve seen one co-op.” Cooperatives are so different, both in how they’re set up, how they serve their members, and in their culture. But they all follow a set of Cooperative Principles, which guide co-ops in creating their business with members and the community and environment in mind as well as profits — because if there is no money coming in, then the co-op can’t serve its greater mission.
Running a co-op isn’t easy — take it from us here at Organic Valley. There are easier ways to run a business. It’s simpler to focus only on profits and taking only one level of the business (stakeholders) into account, but we believe there’s a better, fairer way, both for people and the planet. Running a cooperative business takes balance, collaboration, strategy, reflection, foresight, and service-mindedness. And these values seem to be working well – we’ve been in business for coming up on 30 years, and serving our farmer-members, employees, and communities for just as long.
We hope you enjoy this conversation with Adam Schwartz on a topic that is near and dear to our hearts.
ANNE O’CONNOR: Hello, and welcome to Rootstock Radio. I’m Anne O’Connor, and this is part two of our exploration of co-ops. Today I’m speaking with Adam Schwartz, who is the founder of The Cooperative Way, a consulting firm dedicated to helping cooperative businesses succeed. Welcome, Adam.
ADAM SCHWARTZ: Hi, Anne, how are you?
AO: I’m doing great—happy to have you here with us. In last week’s episode, we spoke with Jan Rasikas, who is the general manager of the Viroqua Food Co-op in Wisconsin, about what cooperatives are and about the Principle Six or P6 movement. Today we’d like to round out the conversation with some big-picture thoughts, such as what does a cooperative look like in a business? What role do co-ops play in local economies? And, looking to the future, what are the possibilities for co-ops as people are more closely scrutinizing and criticizing traditional corporate culture, especially since the 2008–2009 recession?
But before we get into those big questions, Adam, would you tell us a little bit more about The Cooperative Way and its mission?
AS: Thanks, Anne. The Cooperative Way is a consulting firm that is dedicated to helping cooperatives in all sectors succeed. So whether it’s an agricultural co-op, food co-op, electric, credit union, any kind of co-op, or their support organizations, I’m happy to work with. And I’m also a member-owner of the CDS Consulting Co-op, and that’s a network of thirty independent consultants around the country and Canada that have formed a co-op of consultants because we all work with co-ops. So I’m kind of a co-op guy through and through.
AO: Yes, you are. So you’ve been at this for almost three decades. Why The Cooperative Way? What’s the advantage of being a cooperative? And what is a cooperative?
AS: So a cooperative is a business that is owned by the members, by the users of the good or service. So in the case of a farm co-op, it’s owned by the farmers. In the case of a credit union, it’s owned by the members of the credit union. There are worker co-ops where the workers own the business. And from my standpoint, there really is no better business model, because it marries the interests of the people who are using the service with the owners of the service. So there are no outside stockholders who are merely in it just for the profit and don’t really care much about the goods or the service. Since the owners are the user of the service, there’s an alignment within those organizations, and they’re created for both an economic purpose and a social mission to them. There are co-ops in every type of business sector that you can imagine, with the exception of the military.
AO: Okay, so I think everybody can understand this idea that if you’re in it and you’re invested, that some decisions actually are quite different in a cooperative. But can you give us some examples of what are the kinds of things that happen differently in a cooperatively run business versus, say, a corporation that’s privately held?
AS: So in a stock-held corporation, a certain amount of the decision making has to be made with the investors in mind, because those folks are not putting their money into the company out of any sort of charitable or philanthropic purpose. They are doing so to make money. Since most cooperatives operate at cost so that their profit margin can be somewhat reduced, those excess dollars above expenses are then returned to the members in the form of a patronage dividend or capital credit. So it operates with the best interest of the owners, not with outside investors.
So in the case of, let’s say, a health care co-op, HealthPartners out of the Twin Cities, there the doctors, the patients, and the administrators of insurance are all part of the cooperative. And the doctors are ultimately measured on how well the patient does, not on just ordering another test because they bought another machine and now have to pay for that test. So it really does change the focus of the business to operate in the best interest of the owners.
And that’s not to say that it does not serve the self-interest of the individuals. I’m a big believer that we have to answer the question of “What’s in it for me?” And cooperatives answer that question of what’s in for me with “What’s in it for we,” by taking the individual self-interests of a number of people and then collectively solving that self-interest, whatever it might be, by forming a cooperative to create that good or service.
AO: So if you have a group of members who are making decisions about their own destinies and their own everyday work lives, their perspective is going to be quite different than somebody who perhaps sits on a board and isn’t in the work, and just wants to see the profit line grow.
AS: Exactly. Yes. There’s just a greater alignment. When they’re operating properly—and let’s face it, cooperatives are made up of human beings with all their faults and fallibilities as well—but when they’re operating properly there is an alignment within the organization that I don’t think many investor-owned companies are capable of achieving.
AO: I know there’s some research that talks about employees, staff, owners, people who are working within a cooperative have better job satisfaction, they have longer stay rates—that there are some very tangible benefits for a business to this model. Not just that people may be happier, but that it affects the bottom line as well if people are happier. We’re learning that in business, but it’s not always been the priority.
AS: Right. And there’s evidence for the employees and then also evidence for the consumers as well. One of the great challenges that cooperatives face is that it’s not taught in school. I would be pleasantly surprised if many of your listeners to this program studied cooperatives in school, because it just doesn’t happen. We don’t teach about cooperatives, so people don’t know about them, so they have to learn it on the job. And then when they start a job and they see that they are working for a different kind of business, and it is a high-performing cooperative that is using our principles and values, they do have a greater sense of satisfaction.
And then when they’ve done studies and surveys with consumers after briefly explaining the difference between a cooperative and an investor-owned business, they have found overwhelmingly that consumers have a favorable impression of cooperatives and would like to do business with cooperatives. But once again, the challenge we face is that many cooperative businesses don’t tout the fact that they are a cooperative. They don’t prominently display the fact that they are owned by their members.
AO: So what you’re saying is consumers maybe need to look for the fact that people have cooperative structures.
AO: And that the cooperatives haven’t really quite gotten to the point of understanding that this is something to explain to consumers because they actually care. And there’s some research that says they are widely more likely, by a wide margin more likely to purchase from a cooperative or do business with a cooperative, if they know it’s a cooperative, versus a traditionally owned company.
AS: Absolutely. And a greater affinity, which will then translate to greater loyalty. And, you know, in the case of food products, knowing, having a closer connection to the farmer that is ultimately bringing that food to market.
AO: Can you talk, Adam, some about the local economies, regional economies, national economies—how do cooperatives affect the greater good in our communities?
AS: Because most cooperatives are locally owned or have members that are active in the local communities, it is a better way and, I think, a more sustainable way over the long haul to help grow local economies. You know, Yogi Berra never said it, but we all live locally. And if we’re going to be living locally, we all have a great interest in supporting our local economy. And because co-ops are locally owned and made up of people in the community, the money recycles within the community.
In a couple of books by Michael Schulman, The Local Economy Solution and Local Dollars, Local Sense, he makes a very effective case as to the importance of driving economic development at the local level and is highly supportive of cooperatives as one of the tools to help do that. Also, another book by Amy Cortez, Locavesting, makes a very good case as well for people to form cooperatives in their community to meet whatever economic and social needs are not being met currently by the more market-driven economy.
AO: So Adam, you know, right now the state of our planet, you know, sometimes it’s a little challenging out there. And we listen to some of the things that are happening in the news, and the elections—it’s not always very hopeful. And so one of the things that I hear you saying is that we can influence and impact our local world. We can make a difference in our own communities, in our own regions, by supporting cooperatives, and also by thinking about what the needs are in our own world, and making that happen by joining together with other people.
AS: Right. Every time we spend a dollar, whether on a service or a product, or invest a dollar, we are in essence voting with our pocketbook about the kind of economy that we’d like to see. By making people more conscious of how they are spending their hard-earned dollars, and not put those dollars at work in the economy that often may be working against them, but rather put those dollars to work in an economy that is working for them and for their local community. Co-ops tend to reduce the middle-man aspect, so greater efficiency in the market, with more dollars being able to either go to the producers of the good or the service or lower costs for consumers as well. But all certainly are focused on keeping more dollars in the local economy and recycling those to the greater benefit of the individuals.
AO: When I was listening to you speak just now, you were talking about the fact that every time you purchase something you vote for the kind of economy that you want to support, the kind of economy that you want to live in. And a cooperative economy can help support people in communities, and that scale and that structure. And when I was hearing that, there’s a real parallel, so this might be a good place to jump into food, because that is something that I have often said and heard in relation to food as well: when you purchase your food, and if you know where it comes from, and you understand how it was grown, you are voting for the kind of food system that you want to support, that you want to create—not to mention the health benefits for your own body and the people you are serving. But there’s a lot of ramifications about buying your food. So can you talk about where do cooperatives and food meet?
AS: So, you know, some of the most famous and brand iconic names are in [unclear] with producer co-ops around the country and the world. So the idea that farmers would come together to jointly market and sell their product is something that’s been around for quite a while because they saw the wisdom in doing that. So a hundred years ago, the orange growers in California saw value in creating the brand called Sunkist so that their oranges can come to market. And much more recently, about twenty-eight years ago, organic farmers came together to form Organic Valley because they wanted to bring organic goods to the marketplace. So the idea that farmers would come together to jointly market and sell their product has been around for quite a while.
And what it does is it helps keep the farm price at a stable place so that those farmers can make a living to continue to grow their product. There was a time in American history where dairy farmers were spilling milk because it was actually cheaper to do that than to bring it to market. So cooperatives help bring stability to the marketplace and allow the people who grow our food and fiber to earn a decent living so that they can bring it to market. So that’s on the production side, the producer type side.
And then on the purchasing side, on the consumer side, there are food co-ops, roughly three hundred of those, like Viroqua that you spoke with last week. So there are these food co-ops around the country. And we’re in actually one of the highest growth periods for food co-ops in our history because people want to be able to have a say in the types of products that their grocery store is offering, and they want it to be locally sourced as much as possible so that they have that connection. So we have it on the producer side, and then we have it on the consumer side.
And then there’s actually another way as well, on the purchasing side. There are independent grocery stores throughout the country, and really the only way you can be an independent grocery store is if you are connected to a purchasing co-op. So there are roughly fifteen of those around the country that do the group buying for their members, and then allow them to sell the product. One of the most famous brands of that is ShopRite, which is a brand in the northeast. So all of those individual store owners have come together so that they can jointly purchase and get a greater economy of scale. So it really works in just about every area.
And then finally I’ll mention Rainbow Grocery in San Francisco, which is one of the most successful worker-owned cooperatives. It’s a full-scale grocery store, but the difference is that all of the workers own the business. So we see, in the four different types of co-ops that exist—producer, purchasing, consumer, and worker—that there’s a place for food in all of those different types of co-ops.
AO: And it’s a big place, right? I mean, as you mentioned, there are companies that have been doing this for some time, a hundred years in the case of Sunkist, twenty-eight in Organic Valley. There’s also a lot of cooperatives out there, brands that maybe people don’t necessarily understand are cooperatives. And I think of Ocean Spray, or—
AS: Welch’s is; Blue Diamond almonds; Land O’Lakes; Cabot’s [[Cabot Creamery]]. There are a bunch of brands out there—Sun-Maid Raisins—that are cooperatives. Some are starting to get the message that it is a good idea to showcase the fact that they are a cooperative, but others are still lagging behind on that.
AO: I think, as people begin to become more familiar with their purchasing power and… You know, we’ve seen this, as the Internet’s grown and people have more access to information and more access to interesting videos about cooperatives and things, that people begin to understand better and the movement does shift and change.
AS: I think so. In fact, I used to think that the greatest invention on earth would be the transponder from Star Trek—you know, that could transport you from one location to the next very quickly. Now the invention I would most like to see would be a device, like maybe you’d just take your smartphone and scroll over, whether it would be a food item or clothing or electronics, and it would tell you the whole supply chain of what went into creating that product—what were the working conditions for the people who picked it or assembled it or who sewed it, from the transportation to how it got to you—so that you would truly know what the path that was taken to get that product to you. Because once you know that, and once you’ve seen that, it’s very hard to un-know it.
AO: If you’re just joining us, you’re listening to Rootstock Radio. I’m Anne O’Connor, and I’m here today with Adam Schwartz, founder of The Cooperative Way. And we’re talking about cooperatives and their importance as a business structure to our culture of businesses and to our communities.
So Adam, we’ve been talking a lot about the benefits and the ways that cooperatives are better both for the people in the cooperative, for the consumer, for the community—lots of things there that are lots of great benefits. But as you mentioned earlier, cooperatives are human endeavors, and anything that’s a human endeavor isn’t all butterflies and sunshine. So can you tell us, where do cooperatives run into challenges?
AS: So in my work with cooperatives around the country and in different sectors, most often when I’m engaging with clients it’s around the culture of the organization and how we can use the cooperative principles and values as a strategic advantage in the marketplace. And what has happened in many cases is, as the co-op matures and the founders of the co-op pass on, that the connection to that original mission starts to wither a little bit and ultimately can even be totally disconnected. Which is sad, because that was such a part of why they became successful organizations.
So I do a fair amount of work with electric co-ops, and what I ask the leaders of those co-ops, from a standpoint of their members of electric co-ops, would they see your organization as a utility first or as a cooperative? What would they say? And most often they say as a utility, whereas clearly, seventy-five years ago, when those co-ops were founded, they would have said co-op. And the same thing with credit unions. Credit unions in many cases have morphed from locally owned financial institutions that were helping underserved people to banks with funny names. But those credit unions that stick to their roots and keep their members foremost in their mind, and those electric co-ops that do the same, will see a greater success, greater engagement with their members, and I think, for the long term, greater sustainability.
But it really does begin with the employees, because, as I mentioned, since the employees are not taught about co-ops in school, it really is incumbent upon the cooperative organizations themselves, when they hire employees and when they train them and throughout their career, make sure that they understand what the cooperative difference is and why that is such a key cornerstone of the success of the organization.
AO: So right. I mean, in the beginning, there’s a lot of energy around the creation of the cooperative. People have come together to provide something that isn’t being provided, or maybe even sometimes in direct opposition to what’s being provided and the way that it is being provided, right?
AS: Absolutely, yes.
AO: A lot of times it’s a call to action. And over time, as the action becomes sustained, it’s hard to remember the real need. Electric cooperatives are a prime example of that. We allhave electricity now. It wasn’t always that way.
AS: Exactly. That’s right, yes. Whereas back in the late 1930s it was not uncommon for people actually to invite their neighbors over to see electricity, if they were one of the first ones to get connected. And of course today that would seem very silly.
So the idea that, how do we keep that alive, how do we keep that founding mission of the cooperative burning strong as the organization grows, as new people come on, is an ongoing challenge for organizations. But it can be done if there’s a concerted effort to do so, and if people feel that that’s important to their ongoing success. So what’s very gratifying with my work is I tend to work with cooperatives that sort of see that and want to work on it, or are already doing it and looking to stay at the top of their game. So that’s one of the joys.
And what I hope is that more people and more co-ops will embrace using the principles and values as that advantage, and so we will become more wide-known, and so that we will begin teaching it in schools. I’m very happy, I was recently approved with a colleague to teach a course at the University of Mary Washington in Fredericksburg, Virginia, starting in the fall, about cooperatives. There are other courses at other institutions of higher learning that are teaching about co-ops. And we need to see more of that, and we also need to see it at the high school and grade school level as well.
AO: If I am in a cooperative, if there’s a listener who’s in a cooperative—and as you said, you know, there are these resources—but if you’re in a cooperative and you don’t see the passion and the fire for the founding mission, what’s something you could do if you’re a member of a cooperative and you want it to be reinvigorated with this idea of changing the way that we do business?
AS: Thanks for that question, because I do a fair amount of training with people at the middle of the organizations as well, where they may have the fire but the senior leadership maybe has atrophied a little bit and doesn’t feel that.
One of the things that I suggest to folks is that one, they learn a little bit more about the cooperative business model if they don’t already feel like they’re well-grounded. And if they do feel that they have a good understanding of what it’s all about, then just ask some questions to the co-op members: Have we considered doing this, and that this could be promoting the co-op principles, either maybe as a poster, if it’s a retail space, or having a seminar for the employees or the members. Just asking a series of questions so it doesn’t become sort of adversarial right from the start, but just asking: Have we thought about doing this? Would it make sense? And then looking, doing some research that showcases the fact that people that embrace the co-op principles and values do have more success in the marketplace, so that they can just start having the conversation.
And then when you find one or two other people within the organization that think like you do, then start spreading that. Work with them to fire those folks up even more, and then find two or three more people, and then two or three more people from that. And connect with people who might be employees or members of other co-ops in your community, or anywhere else, really, in the U.S. or around the world, and find out what they’re doing. People will share information.
And always keeping in mind one of my favorite sayings: If you’ve seen one co-op, you’ve seen one co-op. Every one’s going to be a little bit different, and that’s okay. That’s part of our unique charm is that we are owned by our members and we have our own vibe, and that’s good. But also making sure that we keep connected to the larger cooperative movement and the greater mission of what we’re trying to accomplish, which is truly, as the International Cooperative Alliance and the NCBA CLUSA talk about, is really using cooperatives to build a better world.
AO: Adam, you’ve given us a lot of information here, a lot of perspective on why cooperatives matter and why they are such a different thing than a regular corporation. Thanks for the inspiring ideas, and I really appreciate you being here with us here today.