Last weekend, the German daily newspaper Süddeutsche Zeitung published an article called “The Three from the Cooperative” (a Kollektiv in German) that immediately caught my attention. Needless to say, I had to read it on the spot since it dealt with my “affairs of the heart”: shared leadership, self-organization, and flat hierarchies!
The article mainly describes the succession arrangements for a plumbing business in Nuremberg. The designated successor of the former boss begins to feel a certain unease when it comes to suddenly being the boss, assuming all of the responsibility alone and now giving instructions to its two former colleagues. After some emotional “ups and downs,” he decides, together with his colleagues, to establish a cooperative, i.e. the company is owned by all three of them in equal parts, each of them receives the same salary, although only one of them is a Meister, a master craftsman, and nobody is the boss. So there is nobody who allocates work and holds sole responsibility for the company. The three workers have no choice other than to have a meeting once a week in order to organize their work and to discuss problems and their individual emotional state. Can you imagine: three plumbers get together for a morning circle or a discussion group. Well, actually, I can imagine something like this very well. And the article of Süddeutsche Zeitung describes this in a very striking manner.
But what is a cooperative in the first place?
Here is the definition of the International Cooperative Alliance: Cooperatives are people-centered enterprises owned, controlled and run by and for their members to realize their common economic, social, and cultural needs and aspirations.
In brief: there are equal decision-making structures for all employees and the business is owned by the employees, ideally in equal parts. People who establish cooperatives as alternative businesses or participate in such cooperatives often have the following motives:
- They place sociopolitical commitment above maximizing profits;
- They want to establish shared responsibility as well as equal pay;
- And they organize their work on the principle of trust.
Accordingly, the three plumbers from Nuremberg included a provision into their cooperative agreement that each of them has to work for a not-for-profit project – during working hours. This goes to show that maximization of profits is not the uppermost goal of the business.
Academic research time and again shows that companies that are not only managed based on KPIs and maximization of profits exhibit a higher adaptability and higher chances of survival in times of crises. This may be due to the fact that their actions are more focused on long-term goals that depend less on external economic developments. For example, the 2013 report of the International Cooperative Alliance provides evidence that 87% of the cooperatives were still in existence in the 6th year after their foundation, but only 50% of the hierarchically organized businesses.
In Germany, however, operating as a cooperative is not made easy for companies and entrepreneurs as there is no corresponding legal form. The legal form of a private limited company under German law (GmbH) is often chosen in the case of only a few employees (up to three people). The situation is more difficult for larger businesses that shall be managed on a cooperative basis. If a GmbH is also founded in these cases, some employees are liable while others are not, resulting in an imbalance: equally distributed decision-making authorities are not reflected in equally distributed ownership and liability. A combination of GmbH, cooperative association (Genossenschaft) and foundation is often the way to go. However, this comes with excessive red tape, which many companies want to avoid – and rightly so.
Things are a bit different in other countries: in Italy, for example, the Marcora Act, which has been in effect for 36 years, provides a bullet-proof legal framework for cooperatives. Around 300 businesses in Italy are owned by their employees. In Germany, in contrast, there are only approximately 100 cooperative businesses (many of which are located in Hamburg and Berlin), predominantly cultural institutions, cafés, bars, educational institutions, and childcare facilities, and there is an increasing number of craft businesses. However, there are more than 3 million cooperative businesses worldwide and around 12% of the world population is organized in such cooperatives.
It’s up to you to decide whether this is a negligible phenomenon or not...
In a nutshell: No, I don’t have the gift of foresight. Nevertheless, the trends happening around us reflect, in my view, a new spirit which is characterized by a broad-based willingness to implement change. I believe that the adoption of the Supply Chain Act; court judgments that require politicians to intensify climate protection measures; the European Union, which is now putting the pressure on Germany to press ahead with climate protection, not the other way round; and CEOs such as Janina Kugel who bow out and call for a new way of working are signs that there is an unmistakable call for a different way of doing business that is more sustainable and more people-centric. Preserving our resources, social commitment, and true equal collaboration among employees will be the future goals of businesses. These goals are largely equivalent to the motives of cooperative businesses.
This text first appeared in my newsletter 'Innovation on Wednesday'. It is published every other Wednesday. For subscription click here