Using business and finance tools to build community wealth
by Karen Kahn
“Our core mission is member empowerment and education,” says Joseph Cureton, chief coordinating officer at Obran Cooperative. “We want our members—i.e., individual worker owners—to feel empowered to use the coop for their benefit. It is, therefore, incumbent on us to educate them on how to do that.”
Obran is a cooperative conglomerate. Incorporated in Colorado as a Limited Cooperative Association (LCA), the cooperative is a holding company that is using a mergers-and-acquisitions approach—typically the tools of the traditional business world—to acquire firms; improve their operations through cooperative principles, participatory management, and centralized back-office functions; and create profits for its individual members to build better lives. Currently, Obran has a portfolio of five companies that include tech staffing, construction, and outdoor furniture rentals. It’s still too early to assess its impact—but Obran offers a powerful model of cooperation that holds enormous promise.
From Co-op to Conglomerate
Obran, says Cureton, originated with Core Staffing, a business started by returning citizens unable to find work in Baltimore City. They decided to start their own firm, providing day labor for construction jobs. They didn’t know a lot about cooperatives as a structure, but nevertheless they structured their business similarly: each worker put 50 cents an hour back into the business for administrative functions and they shared profits equally. Cureton joined the business around 2016, a few months after its launch, to help build a website, develop a marketing strategy, and formalize operations. A software engineer, Cureton says, “I was able to leverage my social privilege to benefit the business, and that principle continues. We aren’t shy about leveraging social privilege and the access it gives for the benefit of our co-op members.”
Obran offers a powerful model of cooperation that holds enormous promise.
Cureton also helped Core bring on an advisory board whose members had professional legal and financial skills that could be used to advance the business. Taking advantage of Baltimore’s cooperative ecosystem, the business participated in a Baltimore Roundtable for Economic Democracy (BRED) Jumpstart program and eventually secured a $50,000 line of credit from BRED, a loan fund that is part of the Seed Commons network built on the foundation of The Working World. The Jumpstart, says Cureton, reinforced everything we were thinking about in terms of formalizing our cooperative structure. “I researched every type of cooperative structure out there: Mondragon, Arizmendi, Equal Exchange, the Evergreen Cooperatives. Though we knew we wanted to be a cooperative, none of these were exactly the right fit.”
Around this time, Cureton was instrumental in forming a second cooperative, Tribe Works, a platform for freelance tech and creative workers of color to find clients and share administrative functions. Soon Tribe Works and Core Staffing were meeting together to see if they could find ways to support each other and invest in each other’s futures. The two groups applied for a grant from the Worker’s Lab to figure out how to formalize a cooperative structure that would allow the two different businesses to maintain their separate operations. At the end of 2018, the two cooperatives formed the Staffing Cooperative, a cooperative holding company, which would eventually become Obran Cooperative.
Using the model of the corporate holding company might seem odd to those who associate co-ops with the “soup and sandals crowd,” suggests Cureton, but “we wanted to turn existing tools to our own ends. We aren’t trying to fundamentally change the way business works. We are using existing corporate structures and business practices to benefit our members.”
The Obran model centers people: the members of the cooperative are the employees of the subsidiaries but owners of the parent entity.
Obran rejected the federation model, in which each business would be a member of the collective whole. The Obran model centers people: the members of the cooperative are the employees of the subsidiaries but owners of the parent entity. The structure allows each firm to maintain its separate brand and management while also empowering workers with voting rights and a share of Obran’s profits, which are distributed equally. Regardless of the profits of your individual employer, patronage (a formula that cooperatives use to calculate owner dividends) is allocated according to the number of hours each individual works. Workers buy into ownership at Obran with an initial payment of $250 (which can be done in installments) and an ongoing investment of 1 percent of their wages.
Leveraged Buyouts
“We want to be a little like private equity,” jokes Cureton. “We pivoted in 2019 to acquiring companies, when the workers from Core expressed a desire to have more ownership and control over their work lives than is possible in a staffing agency.” The first acquisition, Appalachian Field Services, was a home renovation firm, which could provide more stable employment for some of Core’s workers. Members of Obran are encouraged to move laterally across subsidiaries as they build their careers.
To build a pipeline of potential acquisitions, Obran has three strategies:
Blue Sky: The cooperative targets businesses that can help it grow and where members would like to work, as was the case with Appalachian Field Services. Obran would like eventually to acquire other firms providing construction-related services—for example, an HVAC firm—so that they could provide full-service renovation without having to share the work with outside contractors.
Partnerships: Community organizations, unions, and/or local nonprofits with rich local relationships identify targets that can be acquired through a joint venture strategy.
Cooperative Searchers—i.e., Independent Sponsors: These entrepreneurial partners explore verticals they care about—for example, home health care, staffing, or consumer packaged goods—to identify and acquire businesses that will significantly grow Obran’s membership. If a business is acquired, the cooperative searcher will join the firm’s leadership to manage the firm through a period of growth and integration. The cooperative searchers are incentivized by acquiring a small share of equity in the new firm, which will be sold to Obran after a five-year transition.
To purchase businesses and build equity for its members, Obran leverages both outside equity capital at the subsidiary level as well as its retained earnings. External financing partners include mission-aligned investors such as CDFIs—Seed Commons has been a major investment partner for the cooperative—but the goal is to balance borrowing with business growth in order not to risk over-leveraging the acquired firms.
We don’t want workers to be myopically focused on their own enterprise. We want them to see the cooperative as the value creator.
—Joseph Cureton, Chief Coordinating Officer of Obran
Worker control is also important. Obran must own at least 51 percent of the acquired subsidiaries, and it installs managers accountable to the worker-controlled Obran board. But each subsidiary also has a “Board of Managers,” made up of worker representatives from that firm, so the management remains accountable to its own employees as well.
It’s a bit complex, but “the structure is designed to address the risk aversion of many cooperatives,” says Cureton. “We want to continue the growth cycle of acquisition and integration, and the only way we felt we could do that was to give agency at the subsidiary level to the worker, but have profit share and profit maximization looked at at the co-op level.” Cureton continues, “We don’t want workers to be myopically focused on their own enterprise. We want them to see the cooperative as the value creator.” Each worker, of course, adds value to the enterprise where he or she is employed, but the Obran cooperative provides added value—resources, deeper relationships between the subsidiaries, and continued growth opportunities.
Vision for the Future
The Obran vision goes beyond providing stable, high-quality employment. The whole idea, Cureton says, is “to use the cooperative for what it is—an association of people who pool their money together to find the resources to make their lives better.” For example, when Obran acquired Appalachian Field Services, it also acquired some real estate. That real estate can provide housing for members in need; it can also be leveraged for future deals.
Obran is looking at how it can provide a range of services to members; for example, allowing members to borrow against their patronage accounts rather than having to use pay-day lenders; acquiring more property and renovating it so that more members can rent from the cooperative, essentially keeping the money circulating and building wealth for the Obran community; setting up its own food and health care systems. Talking to Cureton, it’s clear, there is no limit to Obran’s possibilities. It is designed to be a wealth-generating machine, entirely in the service of its membership.
Karen Kahn is a communications consultant and the editor of Employee Ownership News.
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