By David Brodwin
Worker-owned businesses are on the rise. The number of worker-owned business in the U.S. is growing robustly, around 6 percent per year, and these businesses now account for about 12 percent of the private sector workforce. Yet, worker-owned business are frequently disparaged as “not quite capitalism.” Skeptics repeat the cliché that worker-owners bog down seeking consensus on the most minor points.
The skeptics should keep in mind that some the world’s most respected business organizations are in fact, owned entirely by their staff. It’s true for top tier law firms and accounting firms. It’s true for leading management consultants like McKinsey. And top investment banks like Goldman Sachs were partnerships until relatively recently in their history.
Members of worker-owned co-ops may not think of their businesses as having anything in common with top-tier professional services firms, but there are several important similarities between the two structures:
In both cases, the partners (or employee-owners) have a vote in electing the managing partner or president.
In both cases, the managing partner or president must exchange information extensively with other partners or owners, in order to maintain support and buy-in to the firm’s plans.
In both cases, compensation is shared among the partners or owners. This keeps incentives aligned.
In both cases, compensation is variable, based on a combination of individual and overall performance. This makes the firm more robust, since in tough times it has less of a payroll to meet.
In both cases, there are clear-cut rules for how a person newly entering the firm can become a partner or owners. This promotes a meritocratic culture that rewards performance and discourages cronyism.
Because of these characteristics, worker-owned businesses were, on average, better at maintaining their fiscal health during the last recession.
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