So how does the profit sharing work, numbers-wise? Proportional to salary?
In my business we split it "evenly" with weight given to how many hours each person worked on each project. You could think of it like a variable hourly wage based on the profit of the business as a whole. But that's just one model that works for us as a small firm, there are other ways to structure it. Again, I recommend reading about Mondragon's policies for another example, though I can't say I agree with everything they do, but that's up to them not me.
And who decides each year/quarter what portion of the profits go to employers ...
I'm assuming "employers" was meant to be "workers", as there is no longer a separation between employee and employer. Everyone is equal.
Ideally this would be decided by all the employees through consensus-based meetings, with some discussion about what is necessary and what is not. That's not to say there can't be financial experts involved giving more knowledgeable opinions, but the decision must be everyone's.
People are more incentivized to let some profits stay in the company if the company is theirs. It's not much different from how the capitalist feels about "the company's money". The co-op company growing stronger is directly beneficial to each and every individual worker. If I personally work extra hard, I directly gain more money in my paycheck. That does not happen with a capitalist company, where working harder benefits one or a few shareholders who have nothing to do with the work being done.
Did your co-op start with this model? (I presume it did.)
I like the model a lot, and wish I'd done domething like that with my own business. Alas I fear it would be exceptionally difficult to -change- to that model now, because the record interests at every level that would make it hard to do.
A company with that model attracts folk who want that model, who understand (or can be taught) how concensus works, how the outcomes are not always "fair" and so on.
No, it didn't start this way. It started with one of us as the owner and the rest as employees or sub-contractors. It wasn't until I said something and everyone thought it was a good idea that we started doing it this way.
But it won't be easy at every company. Ours was easy because our business model is "go to place, do physical skilled work, collect money, pay for costs, distribute money, go home", on a timescale of 1-day to 1-week. Profit calculations, for example, could get more complicated with a business that runs on quarters or years and has money moving all over the place. But it does already happen and it does work, it's just not what people are used to.
If done in the same simple model we use, it's simple to implement. For profits, just take whatever the owner would have gotten before and divide it evenly, accounting for number of hours worked. For decisions, get the opinion of everyone involved in that particular thing, bonus points if you include people who aren't involved in the work but will be affected by it.
In my opinion this type of arrangement is attractive to everyone except "career-oriented" or power-hungry types, for obvious reasons. Everyone else seems to enjoy being treated as an equal and making more money.
It's good to hear you've considered doing it that way. I'd suggest at least rolling the idea around in your business, including with your employees. It might not be as difficult as it seems. Shareholding investors will certainly need to be taken into account, and that's a complex topic of it's own. I'm sure they won't be too excited at the idea of losing their shares if that's even possible; I don't know, I'm not a finance expert, I just swing a hammer for a living :)
I'd like to leave this Legal Guide to Cooperative Conversions[1] and this Consensus Handbook[2] as possible starting points if you remain interested in converting your business.
Comments
In my business we split it "evenly" with weight given to how many hours each person worked on each project. You could think of it like a variable hourly wage based on the profit of the business as a whole. But that's just one model that works for us as a small firm, there are other ways to structure it. Again, I recommend reading about Mondragon's policies for another example, though I can't say I agree with everything they do, but that's up to them not me.
I'm assuming "employers" was meant to be "workers", as there is no longer a separation between employee and employer. Everyone is equal.
Ideally this would be decided by all the employees through consensus-based meetings, with some discussion about what is necessary and what is not. That's not to say there can't be financial experts involved giving more knowledgeable opinions, but the decision must be everyone's.
People are more incentivized to let some profits stay in the company if the company is theirs. It's not much different from how the capitalist feels about "the company's money". The co-op company growing stronger is directly beneficial to each and every individual worker. If I personally work extra hard, I directly gain more money in my paycheck. That does not happen with a capitalist company, where working harder benefits one or a few shareholders who have nothing to do with the work being done.
Did your co-op start with this model? (I presume it did.)
I like the model a lot, and wish I'd done domething like that with my own business. Alas I fear it would be exceptionally difficult to -change- to that model now, because the record interests at every level that would make it hard to do.
A company with that model attracts folk who want that model, who understand (or can be taught) how concensus works, how the outcomes are not always "fair" and so on.
No, it didn't start this way. It started with one of us as the owner and the rest as employees or sub-contractors. It wasn't until I said something and everyone thought it was a good idea that we started doing it this way.
But it won't be easy at every company. Ours was easy because our business model is "go to place, do physical skilled work, collect money, pay for costs, distribute money, go home", on a timescale of 1-day to 1-week. Profit calculations, for example, could get more complicated with a business that runs on quarters or years and has money moving all over the place. But it does already happen and it does work, it's just not what people are used to.
If done in the same simple model we use, it's simple to implement. For profits, just take whatever the owner would have gotten before and divide it evenly, accounting for number of hours worked. For decisions, get the opinion of everyone involved in that particular thing, bonus points if you include people who aren't involved in the work but will be affected by it.
In my opinion this type of arrangement is attractive to everyone except "career-oriented" or power-hungry types, for obvious reasons. Everyone else seems to enjoy being treated as an equal and making more money.
It's good to hear you've considered doing it that way. I'd suggest at least rolling the idea around in your business, including with your employees. It might not be as difficult as it seems. Shareholding investors will certainly need to be taken into account, and that's a complex topic of it's own. I'm sure they won't be too excited at the idea of losing their shares if that's even possible; I don't know, I'm not a finance expert, I just swing a hammer for a living :)
I'd like to leave this Legal Guide to Cooperative Conversions[1] and this Consensus Handbook[2] as possible starting points if you remain interested in converting your business.
- [1]: https://institute.coop/sites/default/files/resources/SELC%20...
- [2]: https://www.seedsforchange.org.uk/handbookweb.pdf