The Silver Tsunami. One Google search takes you to its definition as “a metaphor used to describe population aging,” internet news articles worrying about “who will care for these aging Baby Boomers” and several calls-to-action for addressing the threat it poses. This looming phenomenon has the potential to cause a dramatic shift in the local business landscape as family-run businesses owned by Baby Boomers are forced to close due to a lack of successors. Today, only 15% of family owned businesses have successors and 60% of owners plan to sell their companies within the next decade. At a recent Santa Clara City Hall meeting, several community members presented a solution: converting small businesses to a worker-cooperative business model.
Worker cooperatives are democratic, employee owned businesses led by member-elected boards. Like most businesses, they strive to generate profits, yet unlike traditional businesses, the employees are entitled to the profits and actively participate in governance. With this framework, worker cooperatives generally see increased transparency amongst management and a strong focus on employee well-being.
For small business owners, worker cooperatives provide a viable exit strategy. By empowering current employees, owners can ensure the company’s mission and culture remain intact even after the owner is no longer involved. In turn, workers receive wealth-building opportunities and hands-on business knowledge.
One example of a worker cooperative in our local community who we heard from at the City Hall meeting is the Niles Pie Company. Early on, this company saw a lot of growth which was difficult to handle for a small business. It was also difficult to survive and pay employees in the Bay Area, resulting in frequent staff turnover. So, the Niles Pie Company decided to use the existing staff to scale the business and convert to a worker cooperative. According to employees and co-owners, the change has allowed them to be involved in every aspect of the business from finance to leadership, empowering them to grow the business. In the eyes of the former owner, the cooperative model made the Niles Pie Company about more than just pie– it became a practical lesson in business for each of its employees.
This aspect of the worker cooperative method makes it a viable alternative to higher education. As college costs skyrocket, home prices surge, and the job market becomes more competitive, workers in a cooperative model can gain valuable education while earning a living. With each worker taking ownership over the business’ success, profits rise and each employee gets a larger piece of the pie. As a testament to its merit, we heard about several co-owners who made enough to purchase homes in the Bay Area, a reality often out of reach for even people with multiple degrees. Even if employees/co-owners decide to leave the business, the skills they gained are easily applicable to any professional setting.
Additionally, with the World Health Organization making a push for age-friendliness, worker cooperatives are certainly doing their part in helping the Baby Boomer generation age actively with the ability to exit their family owned business. For future senior citizens, worker cooperatives can help each employee build a financial net with benefits assisting in retirement to carry them through old age.
At the City Council meeting, we heard about the Niles Pie Company and other worker-coop success stories including those of A Slice of New York, Sustainable Economies Law Center and the Arizmendi Association. Ultimately, the Santa Clara City Council members unanimously voted in favor of further opening discussion on ways that the city of Santa Clara could educate on worker cooperatives and encourage small businesses to convert. Several cities in the United States have already taken strides in this direction, including Boston, Miami, Los Angeles, Cleveland, Durham, Minneapolis, New York, Berkeley and Philadelphia- just to name a few. The Federal Government has also been at work for the worker cooperatives with the Main Street Employee Ownership Act (HR 5236).
So, is the future small business landscape cooperative? Perhaps, but first, awareness needs to be spread and the idea of coops must be destigmatized. In the coming months, this is what Santa Clara City Hall will convene to discuss.