Imagine an economy without bosses. It’s not a utopian vision but a growing daily reality for many enterprises. A close analysis of the performance of worker-owned cooperative firms—companies in which workers share in management and ownership—shows that, compared to standard top-down firms, co-ops can be a viable, even superior way of doing business.
The term “co-op” evokes images of collective farming or crunchy craft breweries. But Virginie Perotin of Leeds University Business School synthesized research on “labor-managed firms” in Western Europe, the United States and Latin America, and found that, aside from the holistic social benefits of worker autonomy, giving workers a direct stake in managing production enables a business to operate more effectively. On balance, Perotin concludes, “worker cooperatives are more productive than conventional businesses, with staff working ‘better and smarter’ and production organized more efficiently.”
Under worker-run management structures, co-ops might avoid the usual friction between bosses giving orders from above, and staff misunderstanding or disputing decisions or resisting unfair work burdens from below. Fusing the workforce and management streamlines operations and saves energy otherwise sunk into training and monitoring the workforce.
Perotin highlights research on French cooperatives showing that “in several industries conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organizing.”
Contrary to stereotype, the European co-op sector is generally as diverse as any other type of ownership structure, including full-scale factories. Though co-op conversion is often seen as a way to rescue “failing” firms, Perotin’s research reveals that in France from 1997 to 2001 more than eight in 10 worker co-ops starting up during this period were established “from scratch,” not derived from ownership transfers in failing companies (compared to new business formations overall, co-ops had a larger portion of brand-new startups).
By prioritizing worker autonomy, co-ops provide more sustainable long-term employment, but not only because worker-owners seek to protect their own livelihoods. If a company runs into economic distress, Perotin says, co-ops are generally more adept at preserving jobs while planning longer-term adjustments to the firm’s operations, such as slowing down expansion to maintain current assets—whereas traditional corporations may pay less attention to strategic planning and simply shed jobs to tighten budgets.