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The Loomio Cooperative Handbook: How we run a worker-owned tech startup (loomio.coop)
122 points by alannallama on Aug 24, 2016 | hide | past | favorite | 32 comments

So I have a project I'm working on now that could potentially be useful and commercial.

I'm not looking to be a billionaire but I would like to have a steady, comfortable source of income.

How easy is it to form the legal structure? I don't imagine legalzoom has the forms I need.

How do you get early managers in on this? I've had terrible managers I felt really weren't interested in development.

When it comes to company structures, I think form should follow function. It all depends on what you really want to do with your company. Sure, it's easier to use a known structure, but actually you can set up your company almost any way you can imagine, and a good lawyer can help you figure out the paperwork. But you need to dig deep and connect with your real purpose and vision to figure out what you want. It is harder than using a well-known template structure - more lawyers, less easy to explain - but your company's structure is its destiny, so you have to get it right.

We became a co-op not for the sake of it, but because it was the structure that best matched the impact we wanted to have on the world and how we worked together best. In fact, it was only recently that I review the Cooperative Principles[0] and was surprised how closely we've tracked to all of them. Many of these things emerged very organically for us because they were just the most effective ways of working in a highly collaborative way. I find it validating that the way we want to work meshes with a much bigger movement. Yes, co-ops are more rare, but actually there's a huge amount of legal and social precedence we could draw on.

We don't have, and have never had managers at Loomio. We all decide together on an equitable basis how to run the company. I would strongly advise you to find co-founders who really match your vision and sense of deeper purpose. We are a very diverse bunch in terms of personalities, thinking styles, and backgrounds, but we all share a commitment to the same core values and vision. If we didn't, it wouldn't work at all. So if you're working with people not interested in your vision, I'd really rethink that.

[0] http://loomio.coop/cooperative_principles.html

It's going to depend on the state. Try to find an organization similar to this in your state that you can talk with.

I'm a huge fan of innovation in organizational structure for software companies. Thanks for sharing so much about Loomio.

What's the hardest thing about being a co-op? What would you do differently if you were starting today, knowing what you know now?

Thank you! We are still figuring so many things out, but we want to be as transparent as possible if it might help others learn about co-op startups and different ways of doing things.

The hardest moments have probably been at structural transition points. We used to have a much more open "swarm" approach, with lots of volunteers and part time contributors. It was great for bootstrapping the project off the ground, but we reached a point where we had to hire a core team for long-term commitment, and get a lot more focused. The result was some people leaving. It was challenging, but we navigated it through very honest and open communication, and all making decisions with the good of the co-op and social mission above our own individual preferences. This handbook page talks a bit about our organisational structure history over time: http://loomio.coop/working_together.html

What would I do differently... in some ways I think we were slow to learn certain things and we could have moved faster. We are a very diverse team, with backgrounds in social change, facilitation, community sector, and civil society, as well as business, technology, and startups. It was a long process to integrate all these perspectives into one coherent product and business model. But I also think that diversity, and going through that process, makes us much stronger today. Now we're pretty good at thinking strategically together and getting the whole team very focused. Working in highly collaborative and inclusive ways often means investing more time getting everyone on the same page, but the benefit is once you get there you can move together very effectively.

How do firing decisions get made? If workers own a part, I assume they can still be forced out. Does it require a majority vote though, or do one or more people have that authority granted to them?

Hiring and firing happen through our Employment[0] and Membership[1] processes. The most important concept to get is that ownership and employment are the same thing in a co-op. If someone is no longer employed, they will cease to be a co-owner and give up their single worker-member share.

We have had to let people go before. We got together and talked honestly and openly about what was best for the co-op and the mission, what headcount we could afford to budget, and what skills were most needed going forward. And the people who weren't required anymore decided to step down of their own volition.

We did have one case where someone who clearly needed to leave didn't accept that at first, but through a series of conversations and mediation we worked it out and the agreed to step down. We now have a better conflict resolution process[2], developed out of learnings from that situation and others. If there's a conflict that cannot be resolved through this process, the result might be the person no longer being employed. This has yet to happen.

People could theoretically be forced out. Section 11 of our constitution[3] talks about the power of the Board to surrender shares at the option of the co-op, under certain circumstances (basically if someone is no longer employed or acts in bad faith). This has never been used so far.

We have a separate system to acknowledge the work people did for free or under market rates in the early days, and the risk they took giving their time to an early stage startup with no guarantees. This is called Loomio Points, and it's kind of like sweat equity (which we don't have because we don't have equity in that way). People keep their Loomio Points even if they leave the co-op, and we really hope to be successful enough to pay well on them in the future (currently everything is still being reinvested in the business).

[0] http://loomio.coop/employment.html [1] http://loomio.coop/membership.html [2] http://loomio.coop/conflict_resolution.html [3] http://loomio.coop/constitution.html

Loomio co-founder here, happy to answer any questions.

Thank you for sharing! I want to start my own robotics coop and this looks helpful.

Have you read Richard Wolff's book "Democracy at Work", or are you familiar with Richard Wolff? He's a Marxist economist that advocates for transitioning society to a worker directed business model like yours. :)

Yes I've watched some of his talks. Good stuff.

Why do you think worker cooperatives are so rare?

They are indeed rare, although I very much hope they will become more common. Co-ops aren't a radical new idea, in fact they are one of the oldest company structures we have.

I think they have become rare because the industrial economy of the last century was really optimised for command & control hierarchical organisations, due to needing to scale in an environment of limited communications technology. Now we've moved into an era of much easier peer-to-peer coordination at scale, and I think we'll see different business structures emerging. We already see this trend in how social and political movements are being reshaped.

The other big reason is the capital instruments we use to fund most startups. The VC model calls for a certain approach to ownership and control, based on financial contributions taking precedence over labor contributions. We've really only been able to be a co-op by finding alternative approaches to investment. First we did a big crowdfunding campaign, then we raised a round of impact investment that allowed control to stay with cooperative worker-members[0]. Not going the usual route with capital has presented challenges, namely taking longer to find the right model, but it's been worth it to keep our co-op structure and social mission at the core.

[0] http://www.yesmagazine.org/new-economy/how-a-worker-owned-te...

Hey HN Readers! I live in the bay area and really want to start a worker owned robotics coop. Does anyone else like that idea?

Have you found that 1 year is a good amount of time to evaluate if an employee is right for the co-op? I've seen some co-ops with much longer membership pathways. Also it wasn't clear if the new members pay into an equity/investment fund as part of their commitment?

So far for us, a year has been enough time to evaluate new members. But we take each one on a case by case basis and if we weren't totally confident I could imagine giving it a bit more time.

We also do a 3 month provisional membership, so that the new person can participate in member decisions and get a feel, and we can work with them in that way before officially issuing a share. It's important that the evaluation is mutual - becoming a business owner is a big deal so the person needs time to consider it deeply as well.

Members do not pay into a fund when they join, except a nominal $1 for their share. However, some members have become investors as well, which is a separate process completely from membership.

Thanks for writing this all up. I have been involved with the cooperative movement for almost 20 years and have worked in tech for over 5. I was at the Platform Cooperative (http://platform.coop) conference last year here in NYC and it was long on ideology and short on actual HOWTOs. I think it's crucial to have some templates to work from them rather than every org reinventing the wheel. When the orgs are closely aligned in structure it will show more people that there is "another way".

Yes! I agree that what we need is real world examples and experimentation. Loomio will have a presence at the next Platform Coops conference, so hope to see you there :)

Nothing to add, I'd just like to point out that I think this is awesome and I dream of starting/joining a company like that someday, nice that it's open source. ;)

Thanks! A big part of our mission is to demonstrate it's possible to do a co-op tech startup and run a company more in line with democratic values. If being transparent about how we've done it can help, that's awesome. Best of luck with your endeavors!

I am interested in the idea of loomio points. Have you codified the conditions that will activate this being paid out in part or full?

Another way of asking this is what does success look like :)

Not very codified. We've done an OK job tracking them over the years and have good records, but haven't yet made decisions about under what conditions they would be paid out. We can't attribute specific dollar value to them at this point, or legally they would count as debt (which we don't want on the books). We aren't making enough money to be close to paying them out any time soon, so we're leaving that discussion to a later date.

Success would look like the co-op financially thriving to the point we can continue to grow the business, pay back our investors, and pay out Loomio points to everyone who has given their time and effort to get us this far (including a risk multiplier on the earlier work), and then moving to having surplus to distribute to co-op members and, especially, to fund other social impact projects aligned with our mission of a more democratic, fair world.


What constitutes "ownership" and what happens to ownership when someone leaves the co-op?

Ownership means all the rights and responsibilities of an equal co-owner of the business. Each member has one share. When someone leaves the co-op, they surrender their share and are no longer a co-owner. For a worker-owned co-op it's important that the owners are the people actively working in the business, and this is required by law and by our constitution (what's called being a "transacting shareholder").

The link on the Introduction page to "on GitHub" is broken.

Thanks! I'll check that.

Meanwhile, you can find our repo here: http://www.github.com/loomio/loomio

Just reading through your handbook:

"We determine what proportion of the surplus is reinvested into the co-op, what proportion is directed to socially beneficial projects outside of Loomio, and what proportion is distributed to co-op members. Being a member makes you eligible to receive the distribution, but does not mean any distribution will necessarily be made."

So you have all of the responsibilities of an owner, but you may or may not even get any distribution of the overall profits, if the company sells.

These decisions are also above the heads of the members. This means it's technically not 'worker-owned'.

"Members are the ultimate decision-makers for Loomio. While we often delegate decision-making, such as to diretors, coordinators, and leaders of work areas, all mandate traces back to the members."

Another important aspect to owning anything, is being able to make a decision. It seems most decisions are delegated to a directory/coordinator, which isn't much different than having a manager/boss above you.

This isn't much different than a standard corporate setup in a startup, with the hopes that your small percentage of the company will pay out.

I look at actions rather than words and although you call it 'worker owned', the details in your handbook don't really portray this.

The members appoint the Board[0], and the Board makes decisions about surplus. If the Board distributed surplus in a way not in accordance with member wishes, we would just fire the Board.

Members also appoint the coordinators[1]. Coordinators are not bosses - they serve to operationally implement the strategy set directly by members. If a coordinator started acting like an overlord, we'd just remove them.

There is no decision in the co-op ultimately "above the heads of members". Our co-op is literally owned by the members. We appoint directors, set the strategy, and also carry out the day to day operational work with a lot of individual autonomy in our area of focus.

There are a few mandated delegations made by members (such as directors, coordinators, etc), but the ultimate responsibility and power is held by members. It's not effective to have everyone involved in every decision, and delegation by consent is very important for effective governance and operations.

[0] http://loomio.coop/governance.html [1] http://loomio.coop/coordination.html

Think that's a sensible approach (to looking at things) but there's a difference between how you work together with someone that you and your coworkers have decided are good at coordinating work, and a traditional boss. The coordinator is working for you, not the other way around, if that makes sense? Like the difference between having an elected president and a dictator.

This is correct. Coordinators do serve some of the same functions as a manager, but the difference is they are appointed by the people they are managing. We call this "dynamic hierarchies by consent". Coordination also rotates, and many members have been in the role and then moved on from it.

I was going to ask what is the minimum requirement to be considered "worker owned". It seems you of a similar mind

The requirement is that the workers are the owners of the business, legally and in terms of responsibilities and powers. All Loomio worker-members own the company together, equally, and no one who isn't a worker has any powers as an owner.

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