What is Obran Cooperative? A Member’s Guide.
Obran Cooperative is a worker-cooperative conglomerate corporation. Over the next few months we will be publishing a series of articles aimed at providing a closer look at our structure, how we work together, and how we see our role in the ecosystem with the broader community. While we represent a relatively new form of cooperative enterprise we recognize that we are built from the collective wisdom and practice. We hope to help further the field and contribute back to that community of practice as we evolve.
Let’s start with the most basics of basics. Obran is a worker-cooperative. We are formed as a Limited Cooperative Association, or LCA, registered in Colorado.
What makes us unique is that we’re a conglomerated holding company. The holding company owns businesses, and the workers in those businesses own and govern the holding company.
This is distinct from similar structures, like Mondragon’s federation of worker-owned businesses, in that each individual worker-owner owns a piece of the holding company rather than solely the business they work in. This allows us to pool resources and share dividends in common, so that all workers, regardless of vocation, enjoy the benefits of the holding company’s shared prosperity.
Obran was initially founded as the Staffing Cooperative by workers at Core Staffing, a cooperative of previously incarcerated workers, and members of the Bmore Black Techies meetup who came together to found the tech staffing company Tribeworks.
We made our first acquisition in June when we purchased Appalachian Field Services. This Next City article gives a great overview of our history and how we operate.
Membership in the co-op
Workers can become members after 90 days of working in an Obran subsidiary. To become a member, a worker buys a member share for $250, either as a lump sum or as 1% of every paycheck until the share is paid off. This gives them, and all other worker-owners, an equal share of ownership in the holding company. This membership due also is a form of solidarity amongst workers that are able to earn different wages in the cooperative. Every member’s 1% is meant to be thought of as an investment in the growth of the cooperative over the long term.
Members can attend meetings, vote on certain issues pertaining to the cooperative, and both run for and elect a permanent majority of the board. Investor members can elect a minority of board seats.
Ownership in the cooperative is expressed through patronage, i.e. the amount of use you get from the cooperative. Worker-owners receive a patronage dividend equal to their hours if Obran turns a profit.
Worker-owners also sit on and appoint the board of managers for their workplace. This is generally a three person body that has a majority of representation from the workplace’s employees.
Structure of the co-op
Workplaces are the actual subsidiary business in which the worker-owner works. They are generally incorporated as LLCs. Where normally a CEO would run the show, we call the executive of these businesses a Coordinator. This person is installed by the board of the Cooperative. Their job is to ensure that the business is growing and turning a profit so that all members of the cooperative can benefit.
However, they are accountable to the board of managers and can be removed by (but not replaced by) the workers in the business.
The coordinator is usually the person who did the legwork to acquire the company, the founder in the case of an internal start-up, a leader from within the business, or one hired externally if those skills can’t be found internally.
This is meant to balance the needs of the workers in an individual business with the needs of the cooperative membership as a whole, like the competing pressures of a cantilever bridge.
Workplaces can either be acquired or created. To create a workplace within Obran, members have to come up with a viable business plan, get approval from the cooperative board, secure financing, etc. The cooperative’s leadership can help and consult on that whole process, but it also does the legal leg work to register the business as an LLC.
The cooperative is the holding company (or parent company). It’s governed by a board where the majority is elected by the membership of worker-owners and the minority is elected by Obran’s investors. This ensures that Obran’s workers retain permanent control of the cooperative, while allowing investors a say in the stewardship of their investment.
We believe in building the business and helping members grow by fostering internal entrepreneurship. We encourage self-forming teams called service units to come together in order to solve problems and provide services inside and outside the workplaces of the cooperative. This codifies something we formed organically to provide sales and marketing services to our first acquisition.
Workplaces are clustered into groups, categorized by a particular industry, market, or thesis. The leader of the group and the coordinators of the workplaces within that group work together to grow the group and ensure every business within it has the resources they need to succeed.
Funding
How do we pay for anything? It depends on the project, but we have worked with incredible mission-aligned lenders like Seed Commons and Baltimore Roundtable for Economic Democracy, and we have the ability to attract equity investors within our subsidiary businesses if it is in the best interest of the cooperative and the workplace to do so.
Acquisitions are done through a leveraged buyout process where the cooperative sponsors the purchase through one of our subsidiaries. We leverage both debt and equity financing in order to allow the cooperative to gain majority ownership of the target company. The workplace then works to pay off the cost of that purchase over time.
The cooperative also acquires, renovates, and rents residential property through our real estate holding subsidiary. These properties both house some of our membership and act as a capital diversification strategy in support of our future growth. Over time this strategy will help us build internal capital funds so that we can lower our overall cost of capital in the future.
But, it would be a mistake to say we’re flush with cash or that we have arrived! A lot of sweat equity is still going into building Obran into the engine for growing worker-ownership that we want it to be. We have resources, but we still need to be smart about what we do with what we have. Every member of the cooperative is a critical part of making that engine run.
Expansion & Search Process
Obran is set up to expand in two ways; acquisitions and startups. Each group within the cooperative is set up to execute against a thesis of how Obran can succeed economically while creating positive change within an industry. Acquisitions and new ventures are targeted to test these theses. While we may have several groups at various stages of formation and operations the search and startup processes follow a straightforward process:
A core method of growth for the cooperative conglomerate is through strategic acquisitions of profitable small- to medium-sized businesses. We have a standard approach to both the targeting of strategic acquisitions and the acquisition process itself.
Strategy Development: The Investment Thesis
Our unique value as a cooperative conglomerate is based upon the symbiotic relationship between our cooperative holdings and the efficacy of our shared services. It is critical that our growth is strategic so that new businesses that become part of the cooperative are supportive to the rest of the cooperative’s holdings. It is for this reason that we spend time developing Investment Theses to guide our acquisition searches and our investment funds.
Our Investment Theses are strategy documents that clearly identify target companies. These targets are companies that score highly on three criteria.
Mission Impact
Our reason for being is to improve the lives of our worker-owners and strengthen the communities they live in. Thus, all new acquisitions must help us advance this mission. Not only do we target acquisitions to support the cooperative’s mission, but the missions of our partners. We work with our strategic partners to develop a shared investment thesis that incorporates everyone’s mission. Common ways we see new acquisitions support our mission is through the expansion of worker-owner benefits from target services (e.g. financial services from a financial services company), career growth opportunities, and simply converting more marginalized workers into worker-owners.
Market Attractiveness
We study industry trends and competitive forces with an eye towards finding growth areas within industries. As part of this analysis we also look at industry and macroeconomic risks and invest in companies that are poised to thrive based upon macroeconomic and industry trends.
Conglomerate Fit
All additions to the cooperative conglomerate should be additive to our entire enterprise. Additions can be additive in a number of ways: symbiotic services, symbiotic sales channels, and/or shared infrastructure.
The output of this Investment thesis is a strategy document that narrowly defines companies that are targets for acquisition. Note that this Thesis will point us towards businesses that we believe will be successful, will benefit from our unique conglomerate structure, and achieve the cooperative’s and our partners’ mission objectives. This may or may not focus on a single industry or geography. Those are criteria that are not predefined at the outset, but are organically derived through the results of thesis development.
Thesis Driven Search & Acquisition Process
Along with a structured approach to thesis development, Obran has a structured process for the search & acquisition.
Recruit
We employ coordinators that serve as the lead for thesis development, search and acquisition. This coordinator is an experienced strategist and operational leader who may or may not have an industry focus. In our experience great coordinators are great entrepreneurs.
Develop
Coordinators are responsible to develop the investment thesis in collaboration with strategic partners. They conduct market research, engage partners and facilitate strategic planning. Coordinators will present their investment thesis to the cooperative’s board of directors and to relevant partner leadership for approval to begin the formal search and acquisition. Our board and partner leadership confirms the investment thesis is likely to fulfill our mission and strategic goals.
Execute
Upon Board approval the Coordinator leads a search with support from the cooperative’s strategic shared services and partner resources. Coordinators engage potential targets and move them through the acquisition flow detailed in the diagram below. All communications are tracked in the cooperative's CRM system this documentation is regularly reviewed by our leadership to track progress and refine our acquisition tactics.
During the Execution phase, Coordinators are working with the target company’s leadership, to gain interest and develop deal parameters, the employees of the acquisition target, and financiers of the fund.
The process of taking a target through the above flow can be lengthy and can range from 6-18 months. Once they have agreed to the terms of the deal and the employee base is supportive, we bring in financing to make the acquisition. Specific terms of this acquisition may vary, but in all instances we will acquire at least 51% of the company and the workers join the coop. The Coordinator will often join the acquisition target in a leadership position that will be flexible to the needs of the company. Having the Coordinator integrated into the company is highly valuable to translate down the co-operative ethos, but the rest of the coordinator’s scope of responsibilities will flex to meet the needs of the company.
Integrate and Expand
After acquisition, the focus is on worker and leadership development. There is significant work to develop employees into worker-owners and there is significant opportunity for the newly acquired workplace to benefit from the conglomerate’s shared services. The first year of operations is focused on setting a strategy and the full integration of the company into the conglomerate’s operating model.
Startup Model
This is a bit more straightforward. If a member or group of members has a brilliant idea for a new business that can fit well within the conglomerate, they can start it up with the support of their fellow worker-owners.
The member or team start by developing a lean business canvas and test the offering with potential customers. Most often this can be facilitated by an existing workplace or group. They then present the business plan or investment thesis to the cooperative’s board as well as any relevant partners or other outside parties who can provide insight into the industry involved. This allows them to get solid feedback and buy-in from leadership needed to move the project forward. If the product or service is viable and fits within the mission of the cooperative the member or team is given a chance to work on the project. Generally the cooperative will incubate the project under an existing business. Allowing the member or team to leverage the infrastructure of the business to get started.
If the project succeeds and needs to separate from the workplace where it was incubated, the cooperative will create the needed legal structure depending on the capitalization requirements for the business (generally registering it as an LLC that’s wholly owned by Obran’s worker-owners). This is now a new workplace within the structure of the cooperative. The leader of the start-up team is the coordinator of this new workplace. When the legal structure is in place, the team can start selling their services or looking for the investment and other resources they need to build their product or service offerings.
The Cooperative Conglomerate Model
We believe that the complex challenges we are facing deserve complex solutions. Our cooperative conglomerate model is the result of hard work and hard won lessons. We understand that this structure might not be what every business needs or where every worker wants to work. We do however believe that it represents a break from the status quo and a clear reflection of our values. If you are interested in learning more about Obran or joining as a member please contact coordinators@obran.org
