August 7, 2014

Myths of Co-op Development: A Guarantee for Success

Prospera

Worker cooperatives are an emerging strategy to develop local economies and grassroots leadership. However, the field is fraught with many misconceptions. Our "myths" blog series gets beyond assumptions to address what it takes to succeed in co-op development.

Myth #2: Worker co-ops are guaranteed not to fail.

Co-ops are getting a lot of buzz, now more than ever, about their resiliency. We’ve heard (and said!) that they tend to weather recessions better than traditional businesses. We also know that co-ops tend to lay off fewer employees in economic downturns. Sounds like a silver bullet, right?

Well, when you look a little closer, the data shows that yes, co-ops are indeed resilient. But, they do fail. There are loads of examples of failed co-ops, just like any other type of business. In fact, Fagor, one of Mondragon’s flagship manufacturing co-ops, failed last year. In WAGES’ 19 years of experience, we’ve seen two co-ops close their doors. The list goes on.

Yes, co-ops have a unique structure that often makes the employees more invested and more motivated to see the business succeed. However, at the end of the day, co-ops are still businesses that have to compete in the market, which is an unforgiving place. As the oft-cited data point suggests, half of all small businesses fail within the first five years.

So we, as the people growing the co-op movement, need to shift our thinking from “we can’t fail” to “how do we fail better and faster” since we know that some degree of failure is inevitable. Some ideas to consider: spread knowledge so we don’t repeat past mistakes, have clear go/no-go points built into plans, create contingency plans, and educate ourselves so we can spot warning signs early.

At the end of the day, the sooner we embrace failure and use it to our advantage, the stronger the co-op movement will be.

This series explores myths of co-op development