Own Your Own Job

"We view about 50 percent of what we do as laboratory work," says Thad Day Moore. "What we've been able to do is identify what will work — and what won't work — in creating democratically controlled economic development." 

The laboratory Moore and his cohorts have created is the Center for Community Self-Help, and it performs regular experiments on how to nurture worker-owned enterprises across North Carolina. Begun in Durham in 1980, the center now offers technical and financial assistance to 15 to 20 worker-controlled businesses and seeks new opportunities to expand this network. The center doesn't aim to produce new jobs per se; instead, it develops and tests innovative models and financing structures for worker-owned firms that can be duplicated elsewhere. 

Whether it's a garment factory in a predominantly black county or a health-food restaurant in North Carolina's mountains, each worker-owned business is built around several key elements. First, its governance structure reflects the principle of one-worker, one-vote. Second, the profits of the business, after reserves, are divided among the workers based on the effort they contribute to the business, measured by hours worked, skill, seniority, and the like. And third, employee owners must have the opportunity both to learn and teach management skills. 

Co-founder Martin Eakes traces the center's interest in promoting economic democracy to a desire to "move the civil-rights movement's struggle for dignity and democratic participation into the workplace." But its activities also have roots in previous worker-ownership efforts in the United States. The first major worker-ownership movement began during the formation of craft unions in the 1860s and 1870s; these early organizers sought more direct control over the conditions of their work. The second major effort occurred during the Great Depression, but most of these businesses were crushed by the falling economy. 

Combatting Plant Closures 

The center started by confronting conditions very similar to those faced by its predecessors in the 1930s. In the national recession of 1981-83, North Carolina experienced more plant closings than any other state. The center's staff offered legal and managerial skills to a number of rural communities desperately seeking to hold onto jobs in failing businesses. Though they had some early successes, the center's staff ran head-long into a harsh economic reality: Most of the plants were closing because they were no longer viable businesses. 

"Dealing with plant closings was a dead loser," reflects co-founder Bonnie Wright. "The level of resources it takes to reopen a shutdown plant was beyond what we could bring to the projects. Fifty percent of plants close because there's no market for their product, and worker-ownership won't solve that problem. Thirty to 40 percent can't be revived because their customers have been diverted to other suppliers, the workers have dispersed, and the managers have left. 

"That leaves only a 10 to 20 percent chance of success, and you just can't sustain the level of resources needed to keep up the work." 

With an expanding staff, the center refocused its efforts on businesses that were still prosperous but ripe for conversion to worker ownership. The first set included small firms begun immediately after World War II that are owned by a single individual who has no clearly established successor. Thomasville's Ragan-Thornton mills is a good example. Founded in 1918, this 150-worker hosiery mill had been run successfully since 1978 by Betty Ragan, who assumed control after her husband died. When she realized that neither of her children was interested in taking over the business, Ragan began looking for a buyer, and the center convinced her to let the workers purchase the mill. The buyout was completed in September 1986, and so far the new firm has been quite successful. 

The second target group of firms includes those industrial plants likely to close soon but whose business has not eroded so dramatically that they are beyond salvation. Uncovering information about such plants is not easy; like most Southern states, North Carolina has no requirement that firms announce a pending shutdown. Therefore, the center must rely on word-of-mouth indications that plants are conversion targets. 

Such an opportunity presented itself in 1984, when White Furniture — a 100-year-old furniture company based in Hillsborough, North Carolina — went on the block. The center quickly developed a worker-ownership plan that gained support from workers and some stockholders. Unfortunately, the company decided to sell to an investor (who proceeded to dismantle the operation), primarily because the center had a hard time securing capital to support the conversion. 

A Statewide Development Bank 

Even before the frustration with White Furniture, the center realized that it would always be hard to attain capital for projects in black and/or rural communities which traditional lenders viewed as high-risk ventures. So in 1983 it launched its own capital investment resource, the Self-Help Credit Union. Begun with $17 raised from the sale of cakes baked by the New Bern Bakery (one of the worker-owned businesses the center had supported), the credit union has grown in three years to deposits of $5 million — an impressive level of capital for a venture devoted solely to supporting worker-owned businesses and housing for low- and moderate-income people. 

The credit union functions like thousands of others across the country. Individuals and organizations — including many church groups — deposit their money and receive competitive interest rates on their accounts. Some investors agree to accept substantially lower interest rates so that the credit union can loan out money at below-market rates. 

"Lots of people thought we were crazy when we proposed the credit union," says Wright, who manages the credit union. "But it has become a major success. It's really the first statewide development bank. 

"It has the potential to be a self-sustaining mechanism for linking capital from socially responsible sources to impoverished communities. It can be started with very little upfront capital, unlike a bank. It has also drawn people from all different classes into common goals and common dialogue, and there aren't many projects that can do that in a real, concrete way." 

In addition to the credit union, the center began the Ventures Fund in 1983 to provide seed or equity capital vital to growing and emerging businesses. With $750,000 in capital, the Ventures Fund can make equity investments that might prove too risky for either the credit union or regular commercial banks. The newest offshoot, the Englewood Investment Corporation (EIC), is a wholly owned, for-profit subsidiary of the Ventures Fund. EIC enlists the support of investment bankers, business brokers. The $5 million credit union helps people with modest incomes buy homes. insurance company officials, and the like in efforts to develop a few larger and more visible worker-owned companies; the conversion of White Furniture would have provided a model of the kind of development EIC hopes to create. 

With a capital pool of $1 million, EIC can provide both venture funding and investment-banking services for larger-scale firms converting to worker ownership. Any profits gained from EIC's activities will provide operating money for other parts of the center. 

As the credit union grew larger, the center decided to enter another avenue of community development — housing. "Housing and jobs are two of the most fundamental human needs," says Moore, "In some very oppressed communities, it's the only place you can start to create economic development. Housing also provides a starting place to do the kind of self-help development of management skills needed for communities to develop from within." 

In addition to addressing the basic need for low- and moderate-income housing, this field of loans offers the credit union a healthy rate of interest and a source of more secure income compared to the more risky loans it makes to worker-owned businesses. Finally, the home lending program makes the credit union more attractive to a wider variety of depositors, which ultimately translates into an increased ability to make loans to businesses. 

"If I were starting over in another place, I would start with the credit union, not with the center," says Eakes. "The credit union can appeal to a very large audience of churches, individuals and others who are not being asked to donate all their money. They can do well while doing good." 

How Far Can Worker Ownership Go? 

Despite its rapid growth, the center and the credit union have still only assisted a small number of businesses and housing projects in North Carolina. "What we are doing now is trying to develop some models, to learn what will work and will not work," says Eakes. "We're creating democratic free enterprise. We're trying to translate what this country has adopted for its political reality for 200 years, and transfer some of the same principles and motivations into the economic arena. 

"For significant impact to take place, the established, pervasive institutions of Southern societies will have to pick up the themes: the churches, the unions, the banks, local governments. If established institutions do not pick up the themes and help expand those models, then our work will have just been an experiment. The churches in particular have the greatest potential, because they are the group that specifically calls on people's idealism, across class lines, to create social justice. 

"I used to say it would take 50 years. Maybe I would say now, after five years, that it's going to take 75. It's not a 10-year process. It's basically long-term structural change, the same kind of change the Northeast saw when the textile mills moved to North Carolina, a structural impact on the economy that took 50 years to work itself out." 

From the center's experience, it's unrealistic to expect a worker-owned business, from day one, to develop internally the management skills it needs to succeed. The management training and marketing process for most worker-owned business takes five or six years. 

"Too many people oversimplify the problem as being one of capital," says Bill Bynum, who provides training and technical assistance to several center-affiliated businesses. "What we found is that it's only one of two barriers, and probably the lesser of the two. Management skill is really the major barrier. That means we have to draw resources across class lines and find people with management skills who can provide teaching and role models for the worker-owned business while workers develop their own management capabilities in-house," says Bynum. 

One critical element in converting Ragan-Thornton Mills to worker-ownership, he says, was securing the services of George Gilbertson, a former senior executive at Burlington Industries, as plant manager. Gilbertson has brought the necessary skills to keep the business moving forward while the workforce learns more about worker management. 

North Carolina is now among the leading states in worker-owned businesses. The center has good reason to believe that its work can be duplicated elsewhere. There are three or four efforts afoot in the country to start variations on the Self-Help Credit Union; five or six existing credit unions are thinking of expanding into worker-ownership and housing lending; and representatives of several foreign countries have visited the center to exchange experiences and pick up lessons for their efforts abroad. 

"This is a much more supportive time to start technical assistance and credit union efforts for worker-owned businesses than it was five or six years ago," concludes Wright. "When we first began, people said this was just communism, and they didn't want to try it. Now there are lots of people talking about democratic enterprises."