Coops: The Way of the Future?

A cooperative organization, or "coop," is founded on the basic principles of "one person, one voice" and the fact that each member is both an employee and a shareholder. These organizations are known to operate with fewer internal conflicts and higher employee involvement. While such collaborative efforts have made their mark, it remains to be seen if this model represents the future of companies. The challenges of running a coop are many and include conflicts such as the opposition between the ideal of equality and a company's growth or its hierarchical structure. Vassili Joannides, a professor at Grenoble Ecole de Management, helps elucidate the key factors to consider when choosing the coop model.

"We found it interesting to investigate the workings of these organizations: How they integrate economic concepts? What are the structural, procedural and governance issues when operating under such circumstances? What are the impacts on factors such as work relations or capital?" comments Vassili Joannides, also the co-author of a book on coops (L'entreprise coopérative. L'organisation de demain ?). Brought together by a shared economic, social or cultural goal, the members of a coop have to agree on a philosophy built around complete transparency, continuous dialogue and little room for arbitrary decisions. "The key is that members must actively choose to be interconnected."

Employees or shareholders: who decides?

As coops are based on a shared philosophy, its employees are more involved and dialogue is a continuous process. Overall this can lead to fewer workplace conflicts as work relations are built around equality. Nevertheless, a coop has to elect an executive director and a board of directors who will enact decisions for the group. When not everyone agrees with a decision taken higher up, this can lead to important difficulties. "If one or more leaders take a controversial decision, they can find themselves disavowed and sent back to their previous position as an employee/shareholder. This situation can be difficult to digest and lead to members leaving the group." explains Vassili Joannides.

Clarifying who is speaking, the employee or the shareholder, can also help avoid important conflicts during tense internal debates. Otherwise the organization as a whole can be faced with an identity crisis. In such cases, Vassili Joannides explains:"the ideal of the coop can crumble due to individual reactions and this situation can lead to the organization's disintegration."

The challenge of subsidiaries: who owns who?

A coop's expansion and growth can be another delicate subject. For example, deciding who owns the capital when a coop creates a subsidiary, can be a source of conflict. In a traditionally organized company, benefits are simply directed back towards the parent company. However, the issue of equality affects how a coop manages shared property. Two solutions are possible: A coop can either, create a subsidiary owned by local members who are themselves members of the parent company, or the parent company can own its subsidiary. In the former, the subsidiary members and parent company members are consider to be equal shareholders and employees. "The parent company simply acts to register and coordinate its subsidiaries." adds Vassili Joannides. In either case, members will have to consider how to organize the ownership of the coop and its capital structure.

Overall the creation of a coop is a possibility in most sectors of the economy and can sometimes be the answer when a leader leaves the helm or a company has to cut costs. However, the key lies in having a viable economic motivation coupled with a shared vision. Without these supporting foundations, the ideals espoused by coop members can quickly turn to disillusion.


Dr. Vassili Joannides
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