The Description of a Software Cooperative

Photo by Anna Bauer CC BY

What is a cooperative? One description of a cooperative is "a jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit..” The economist Richard Wolff notes that “cooperative ownership, cooperative purchasing, cooperative selling, and cooperative labor have all been labelled co-ops”. Cooperatives are not necessarily worker owned, worker managed, or worker directed.

What is a worker owned business? When workers partly or completely own the corporate enterprises in which they work, they are very similar to other shareholders. A worker in a worker owned business may not be able vote with the board of directors, which is similar to what we traditionally think of as a minority shareholder.

What is a worker managed business? Workers who self-manage still fulfill what the directors have decided during board meetings. Worker managed businesses aren’t necessarily worker-directed.

What is a worker directed business? In a worker directed business, everyone who is a member of the board is also a part of the production of the product or service. No passive group of shareholder gets a vote on the board. All of the workers who produce the profit generated inside the company collectively vote on what to do with it.

What is a software cooperative? A software cooperative is a worker directed business that engages in collaborative decision-making functions, such as participatory budgeting, in order to decide how its resources and profit are used. Cooperative members learn through researching and debating the best ways to allocate resources. Since cooperatives operate as a democracy and not a hierarchy, they rely more on discussions between specialists on cross functional teams instead of top down command and control.

Cooperative members are lifelong learners. Cooperative members are constantly learning and wrestling with things that are outside of their specialty. If you don’t like learning, or if you think you are done learning, you probably won’t like being in a cooperative meeting.

Cooperative members are well rounded. Each member must have a minimum knowledge of how to be a consultant/contractor, and therefore how to run a business. This requires knowledge of financial statements, tax considerations, and legal considerations. Given these knowledge requirements, cooperative members need to undergo lots of cross training to fill in whatever gaps they may have. Knowledge requirements notwithstanding, members will also be specialists in a field such as graphic design. This combination of skills is necessary for being a professional consultant and cooperative member.

Cooperative members know how to take advice. Since cooperative members can’t be experts in everything, the members must seek out the best advice from experts in the pursuit of being world class at what they do. Unlike traditional hierarchies where only executives seek out expert advice, each member must judge and accept expert advice from CPAs, attorneys, computer science PhDs, and many other professionals when making decisions. Paradoxically, healthy cooperative members don’t think all opinions are equal.

Cooperative members work as a team. Cooperative members prefer democracy over hierarchy. They vote on the budget and other directorial matters. They also have some way of measuring and dealing with the personal side of the group. For instance, the cooperative that I am a part of engages in measuring group performance using the definitions found in the Five Dysfunctions of a Team. Cooperative members value horizontal loyalty, which means loyalty to people you know. This would be your peers, immediate managers, professional communities, and your customers. This is in contrast to the bottom-up vertical loyalty and the deference found in a hierarchical rank structure.

Cooperative members are measured by the market. Cooperative members are rewarded by how well their projects do on the market. If a member does not work they don’t eat, albeit with certain safety nets in place. If their project is successful they are successful. This is in contrast to being measured by political skill in a large hierarchy.

The "Why?" Question

Cooperative members are motivated by fair compensation, autonomy, and expression. As elaborated on in Daniel Pink’s book ‘Drive’, after monetary compensation is handled, mastery of your craft, being able to decide where you spend your time, and making a dent in the universe are the best incentives.

Compensation within software cooperatives is driven by projects. You could call this form of compensation hyper-capitalism because it allows market forces to penetrate the boundaries of the corporation down into the project level, whereas in a traditional organization the internal members are protected from the market. A software cooperative should prepare its members to sell their wares on the market, which includes deciding on what price the product or service will be. This is in contrast to a traditional corporation, which promotes specialization and detests artisanship in any form. A software cooperative creates true consultants who are able to stand on their own in the market. For our cooperative, our members were usually independent consultants and contractors before joining. As a general rule for fairness, we have a 7 to 1 compensation ratio limitation on members. This means that our highest paid member makes no more than 7 times more than the lowest member. This is an incentive to train the junior members to be more valuable on the market.

All cooperative members are owners. Cooperative members have autonomy through voting, because each member gets one vote. Directorial duties are driven by membership. Members usually work on whatever project they desire to be a part of and are qualified for.

Cooperatives are a sustainable business. One of the ways cooperative members make their dent in the world is by using a corporate structure that is good for the community. The members of a community would probably not get together and vote to employ child labor in another country instead of fulfilling those jobs with local workers. They also probably wouldn’t vote to pollute in their own communities. Consultancies in general tend to be better at distributing wealth than regular corporate structures, since consultants tend to advance to partners/owners with seniority. A properly managed cooperative might even have the capability to innovate more than a traditional structure since people have part ownership in the business processes and software they create while feeling more independent. If more businesses adopted these practices there would probably be less exploitation of people on the earth in general.

Special thanks to the Vulk team

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