Case Study: Zebra Collective

Last week I went to Exeter and Plymouth to visit Co-operativesSW and some other Co-operatives including Co-operative Enterprise Unit, Meta4Theatre and Zebra Collective. Below is a quick look at Zebra Collective a training and facilitation worker co-operative based in Plymouth.

Most of their income derives from delivering training - particularly in the areas of equality, participation and communication skills. Operating mainly with 3rd sector and public agencies in the community, health and social care sectors. Zebra is an organisation motivated by its strong commitment to its values of social justice and consistent in the quality of its work.

History
Zebra collective was founded in 2003 as a company limited by guarantee and run as a worker co-operative. Three founder members with experience in the health and social care sector wished to set up an independent business that offered good quality employment.

They received generous and excellent support from Co-active (formerly Plymouth Co-operative Development Agency) and chose the co-operative model as they agreed with the Values and Principles.

Coming from a public/grant-aided sector background some members found the culture change of working in a co-operative business difficult “if you don’t deliver work you can't get paid”. Some members did not make this transition and left, but others persevered. The co-operative survived and had steadily grown in strength.

Four phases of development:

1. Started with 3 founders with 4 more joining quite rapidly after start, structure was informal collective with only a few earning sufficiently for full time employment.
2. As a number of members were partly or fully employed elsewhere, the co-operative began to split and inadvertently the feel of a management committee merged. This was tackled as the co-operative created a definitive split between the core membership group and a wider group of associates to properly segment membership and improve Governance. Those members not doing paid work for Zebra gave up their membership and became Zebra Associates, an informal collective that exists to this day (see below)
3. Zebra in the last 15 months has gone through a growth phase and is now up to 7 members (all but one part-time). This can be attributed to a positive cycle of gaining more work, including winning larger contracts, that has enabled them to recruit good people and therefore deliver more work.

Some recent successes

1. 2008 & 2009: winning contracts with regional government to support local authorities in implementing the empowering agenda, including the "Duty to Involve" their citizens.
2. Significant growth in demand for its equality and diversity training, including winning and keeping contracts to deliver equality and diversity training for Devon County Council and winning a new contract for such work with Westward Housing. In September 2009, Bernadette Chelvanaygam was recruited as Zebra's new Equality and Diversity Lead.
3. After receiving some training in solutions focus communication in October 2009, in November Devon County Council began using solution focused techniques to review it strategic plan and asked Zebra for more training.
4. Facilitated Co-operatives SW AGM, 2008 & 2009.
5. Attained Social Enterprise Mark, July 2008.

Current Structure
Zebra has a flat management and pay structure. As members all get paid the same irrespective of role; they work pay out as a proportion of two main roles carried out: training/facilitation (4/5) and administration (1/5). At the outset in 2003, in their area the market rate for a facilitator was roughly £30,000 and £14,000 for an administrator, they therefore worked pay out to be £27,000 (it has since risen). Zebra also operate good flexible working conditions like 6 weeks annual leave.

Zebra operate on the more than profit principle and are looking to enshrine this in their governing documents. Any surplus earnt is used to offer free or subsidised work to good organisation with limited ability to pay and to pump-prime new initiatives.

Membership is split into core members (Employee/Directors) and associates. Some associates get the odd bit of work to fill in gaps in capacity, others act like a “friends of” and get involved in recruitment panels and in other more voluntary ways. Zebra organises events for Associates to keep them engaged in their work. The Zebra Associate group exists also for collective action beyond that of the Zebra worker co-operative, e.g. climate change action and other social justice campaigns. etc

The team at Zebra Collective believe in and employ their work, and frequently reflect on the benefits of worker ownership of their organisation. They have great hopes for the co-operative sector and are keen to contribute actively to its development. If you in the SW please get in touch with them.

Case Study: Whomadeyourpants?

I always enjoy supporting new co-operatives and hearing their story. Here is a case study of Whomadeyourpants? by Becky John one of the founder members.

I had the idea in May 2006 to start a co-operative underwear business and started making formal enquires to CAN (Co-operatives Assistance Network) in January 2008. I quit my job on June 30th 2008, and started full time work on this on July 1st 2008. We were incorporated and registered with the FSA on the 12th December 2008.

We are based in Fairways House, Mount Pleasant Industrial Estate, Southampton, SO14 0QB. Currently just three founder members, with40 volunteers around the country. We are training 25 women who will become members when they are employed by us and complete probationary periods.

Why did you choose to set-up as a co-operative?
I believe in the concepts of fairness, equality, democracy and also sharing responsibilities and rewards.

We set out to empower marginalised women. We basically mean women who have had little opportunity or who have had opportunity taken from them. We define this as women marginalised by their status as refuges or up to 20% may be marginalised by other factors such as being taken out of school as a child due to abuse (at the discretion of the committee).

This came from a number of things. I had become empowered through 2.5 years counselling at Rape Crisis and wanted to share that feeling. I knew there was a huge refugee population in Southampton. And I knew that women are, even within marginalised groups, some of the most marginalised.

Women who have had really hard times, and have very little opportunity offered to them in our society often become isolated and develop mental health issues. It can be hard for people to feel powerful and involved. We believe that supporting the women to feel strong and capable is critical to their real and full empowerment.

How did you start?
By talking to Nathan Brown of CAN, and then Chris Funnell of SACDA. We received support around everything from co-operative structures and how they work to bid writing and registration. We also use the SACDA office as our registered office which was handy as before we had premises I didn't want it to be my house!

What issues have you faced?
There has been constant headaches and waking up at 3 in the morning moments. In particular funding is a nightmare, so many people don't understand social enterprise or worker ownership and the effects of that, ie, that we can't take equity funding.

We never seemed to be at the right stage to get this or that fund and funders all want the same information in a different format. It takes AGES to get grants applied for and decisions made, which is understandable, but it would help to plan ahead a bit more than I did - I tended to be firefighting today's problems rather than planning ahead to prevent the ones coming in 6 months.

Grants being paid in arrears by some funders makes for a huge cash flow problem. As we are a start up, we deliver training up front before we are making pants to sell - so we are spending but not generating income. Cash flow has become a word I dread.

Negotiate with suppliers on utilities - ask to spread bills over a few months. If you don't ask you don't get and they can only say no.

Bureaucracy and paperwork - tedium that is vital

Being REALLY busy means mistakes and cock ups can happen - getting more people involved as volunteers if 1) they are good 2) they don't need micromanaging and 3) they know you can't pay them is brilliant.

Juggling all the balls in the air - project managing everything from finances to supplies to premises to which kettle to buy to which bows to designs to training to recruitment to the day to day stuff like answering emails- it takes huge amounts of time and mental energy. I'm almost constantly exhausted.

But the joy is, I love it. I know I'm doing this because I want to and so, yes, it's a headache and yes it's hard, and yes some days are truly awful - but I still know I want to come to work every day.

What do you do?
To the public - we make and sell gorgeous ethical pants.

To marginalised women -

We provide opportunities for work, learning at various levels, computers, social space, advice space - all in a safe women only environment.

We provide access to a range of advisers from partner agencies on languages, personal finance, safety, computer training, supporting family dynamics - whatever the women want.

Have you had any major achievements or recent successes?
Happily they seem to be coming every day:

• Just been offered an interest free loan by a venture philanthropist
• Got through to last stage of level 2 UnLtd award completion (interview 5/11/09)
  
• Been approached by a shop locally to sell our products.
  
• It's a massive success that we are here - we are supported by volunteers working on bookkeeping, web design and build, photography, professional PR, copy writing, marketing materials design, IT suite set up, PA.
• Invited and gave a lecture to a local Univeristy MSc Entrepreneurship course and got 10 willing volunteers out of it - their voluntary work for me is coursework for them.
• Received a bursay from NCVO to visit and learn from the lovely Infinity worker co-op.
  

I love that people just want to be involved.

What approach have you taken to starting up?
My approach tends to be 'I want to do that, what, who can tell me what I need to do' and then talk to them. Talking to people is vital - they know stuff you don't.

Find people involved in any areas you want to be involved in and talk to them, ask questions, make sure there is always someone you can call whatever you need to know about. DO NOT try to know everything yourself. We are linked with CLEAR, a local refugee organisation, Solent MIND, various community groups, various churches, local Universities, Southampton Women's Forum.

Don't presume anyone is 'not your type' - talk to ANYONE about what you're doing and see what they have to say. If you are passionate people WILL help.

Any pros and cons associated with choosing a co-operative model?
We probably could get more money if we were a charity, but I still think this is the only way we can achieve our social aim. Members controlling the direction of the business democratically is key and I think the women will benefit from seeing their work pay off rather than just getting stuff given to them.

What are your future plans? Loads! whomadeyourbra? in 5 years time. Potential for global expansion, in times of resource scarcity let's look at keeping skills in each country in case there's a day when we can't import everything from china.

Case Study: Software.coop an LLP

We are seeing more new-start co-operatives set-up as LLP's and even some conversions of existing co-operatives. software.coop has written up their personal experience of setting up a Limited Liability Partnership and some of the practical things you should know. If you want to know more or interested in setting one up please contact Co-operativesUK. We can put you in touch with existing LLP's like software.coop or help regsiter your LLP, with the co-operative values and principles in mind.

Software.coop is a tech worker co-op centred on web and GNU/Linux development and maintenance, with particular interests in library management systems, email services and Django, Drupal and Wordpress web applications.

As well as being strongly in favour of Free and Open Source Software (FOSS) because of its importance for cooperative values, we're also fairly unusual in being a Limited Liability Partnership (LLP) instead of a Ltd company.

In 2002, we incorporated Turo Technology LLP (Turo means tower and we started in King's Lynn, which is famous for its towers, including the nationally-famous Greyfriars Tower), which may make us the oldest LLP cooperative. Our early days were assisted by a New Entrepreneur Scholarship, but we were also still heavily dependent on "sweat equity".

The co-op currently has four members and no employees. Our headquarters are now in Somerset, but no two members are currently in the same region, while we work for clients around the world. That wasn't intentional, but it seems to work.

Software.coop became a CooperativesUK member in 2007 and has recently applied to join Cooperatives-NW. Member MJ Ray currently represents tech/worker co-op views on the board of Cooperatives-SW and is struggling to get involved with the North Somerset Partnership and West of England Partnership.

Why We Chose the LLP Model
"The essential feature of an LLP is that it combines the organisational flexibility and tax status of a partnership with limited liability for its members." - Explanatory Notes to the Limited Liability Partnerships Act 2000

We chose LLP as the corporate form because it appeared to have low start-up costs and low administration costs. Also, we took the enthusiasm of professional services businesses like accountants for the LLP as a good sign. Finally, because we didn't have to file particular rules with the registrar of companies, we could improve them if we found any flaw or mistake in them, without much bureaucratic process. We actually used this feature when we replaced our original rules with a modified set that made it more obviously cooperative in 2005.

Pros and Cons
The main benefits:

• Lower overheads, although I feel you need to be clear with all partners from the outset that the LLP will only address partnership tax affairs and not all members' personal tax returns;
• it is an "inherently cooperative model"[1] and you can see this in the "Default provision" section of the Limited Liability Partnerships Regulations 2001. It implements several (but not all) of the key cooperative values: voluntary membership, economic participation, member control and autonomy;
• there was no requirement to file our rules, so we could fix initial mistakes fairly cheaply.
  

But there were drawbacks:

• LLPs had poor support from banks. Initially, we failed to open a bank account because banks did not recognise LLPs. This has improved since Community Interest Companies (CICs) were introduced (because they also have letters in their company numbers), but even in 2007, some banks would not accept company numbers that contained letters. I thank Norwich and Peterborough Building Society's Cambridge branch for living up to their mutual status and patiently learning about LLPs in 2002 while helping us to open an account with them.
  
• LLPs get fewer services from Companies House than Limited companies. While there is a helpful specialist LLP Team there, LLPs are excluded from key online services, but you have to use those online services to get discounts on filing fees. In effect, this means LLPs now pay higher filing fees than Ltd companies, although I think we don't file as many forms.
  
• LLPs get poor support from HMRC. Because LLPs are taxed as ordinary partnerships, we have the same limited range of software for filing tax returns as ordinary partnerships and I don't think any of them are Free and Open Source Software. So, we have completed paper tax returns for all but one year to date. In effect, this means LLPs must complete their tax returns months earlier than Ltd companies.
  
• LLPs are not always understood or promoted as an option by some Co-op Development Advisers and many Social Enterprise Advisers. I have been surprised by how many will tell us we cannot be a cooperative or a social enterprise because we are an LLP. In our region, Social Enterprise materials include phrases like "most Limited Liability Partnerships (LLP) are not eligible" before it even considers any rules!
  
• Co-operativesUK questioned our worker co-op status three times: before we joined, when we joined and once since we've joined. [edit JA: Co-operativesUK checks all members are bona-fide co-ops. As the LLP model is/was a new model, we took special interest in this case.]
• LLP co-ops seem to be generally uncommunicative about their cooperative rules and most LLP co-ops that I know are not members of any larger body. I feel that this is a consequence of the initial hostility from advisers. An LLP could lose a lot by describing how it implements cooperative principles and gain little, particularly because most seem to trade more with non-cooperatives than with other cooperatives. This leaves LLP co-ops "semi-detached" from the wider movement and fails to demonstrate the cooperative difference to them.

2amase LLP are probably the best-documented example: a group of MA Social Enterprise students who are probably more sure about their ability to assert their co-op status against hostile experts. Yet the 2006 case study of 2amase LLP (available from [1]) also reports poor support from banks and advisers.

While being asked to explain LLP co-ops so many times means that cooperative status has probably been a slight net cost for TTLLP so far, we believe in the long-term benefits. The pros are very compelling and long-term, while the drawbacks seem to be mostly short-term: banks are becoming friendlier, Companies House and HMRC should catch up eventually, which just leaves raising awareness with advisers and the wider movement.

How can we persuade them to treat LLP co-ops fairly?

The Process for Setting One Up
In essence, you find at least two partners, complete form LLP2 and send it to the Registrar of Companies with the appropriate fee (£20 as of 14/10/2009). It's generally a good idea to write a partnership agreement at the same time, but it's not actually required. If you want to be really thorough, read the first LLP Act and Regulations (they're fairly short and clear as legislation goes). The Companies House guides about LLPs are also worth reading.

However, like any incorporation, it comes with responsibilities and risks of fines for maladministration, so I feel that this is not to be taken lightly.

Practical Things - Tax, NI and so on

• Tax and NI behave as if the workers are self-employed, so each member needs to:
  
  1. register with their tax office as self-employed,
  2. pay self-employed National Insurance quarterly and
  3. complete a tax return each year that includes partnership pages.
     
• In addition to the personal tax returns, a Partnership Tax Return will need to be completed. It is worth getting the LLP's tax reference number from HMRC as soon as you can because of the previously-mentioned poor support for LLPs by HMRC. In seven years, I haven't had a trouble-free partnership tax return yet.
  
• Other than that, you'll need to send a membership return (on the anniversary of the incorporation date or previous membership return) and financial accounts to Companies House each year (within 9 months of the accounting reference date). These are usually at different times.
  

Further Resources

• [1] http://www.opencapital.net/articles.htm has copies of both "The Partnership is Dead! Long Live the Limited Liability Partnership" (Chris Cook, British Journal of General Practice, Dec 2004) and the 2amase LLP case study.
  
• http://www.companies-house.gov.uk/about/guidance.shtml contains the LLP guides.
  
• Limited Liability Partnerships Act 2000 (see the explanatory notes and check http://www.statutelaw.gov.uk for updates).
  
• Limited Liability Partnerships Regulations 2001 are the main implementation.
  
• Partnership Act 1890 in general does not apply, but may be informative.
• Article on LLP as ideal structure for open co-operative enterprises.
  

Case Study: Calverts

Calverts, one of our long standing worker co-operative members and has kindly updated their case study. If your interested in what makes a successful worker co-op, continue reading. If you want to help us promote the co-operative model, I am always looking for more case studies.

Founded in 1977, and based in central London, Calverts North Star Press Ltd (now trading simply as Calverts) is a successful graphic design and print co-operative employing 16 worker members, with a turnover of £1.4m. The co-op specialises in communications design, branding, graphics and print. Clients range from investment banks and marketing agencies to government organisations, arts groups, charities and campaigns. Services include branding, corporate identity, design, copywriting and photography; website design and development, and print media of all kinds.

Calverts is a market leader in environmentally positive design and print. It holds Forest Stewardship Council (FSC), Greenmark and ISO14001 accreditations. In 2001 it was given the Inner City 100 award, in recognition of its achievements as one of the UK’s fastest growing inner city social enterprises.

Calverts was named in honour of Giles and Elizabeth Calvert, who published and printed many of the millenarian texts of the 17th century English revolution (and were frequently imprisoned for their efforts). Their workshop was in Clerkenwell, where the co operative had its first premises.

Calverts was set up after an industrial dispute at IRAT services, the design and publishing wing of the Arts Lab. The workers had understood that they were working for a ‘co-operative’, which turned out not to be the case when they found themselves in receipt of redundancy notices. Believing that there was a market for their work, wanting to preserve jobs, having no investment capital and wanting to work in a radically egalitarian way, seven of the employees decided to set up a common ownership, ICOM (Industrial and Common Ownership Movement) collective type worker co-operative. They incorporated as an Industrial and Provident Society in November 1977, and the first formal meeting was held at the North Star pub in Finchley Road (hence the other part of the co-op’s name).

Early barriers to success were many. The co-op had no capital other than a £500 loan from ICOF to buy equipment; initially, there was no money to pay wages. Calverts’ landlord required personal guarantees on the lease (two people volunteered, and the other members signed a legal deed in case things went wrong, to indemnify the two); suppliers had to be persuaded to continue delivering raw materials such as paper, ink and typesetting consumables on credit; membership of the NGA trade union had to be negotiated.

The biggest single weakness of the co-op was lack of capital. Calverts was a classic ‘sweat equity’ operation. It was decided to cease trading if all the members could not be on the trade union minimum within six months (they succeeded); apart from some small members’ loans at low interest rates, major equipment purchases were financed through debt (asset finance loans from Close Brothers merchant bank, United French Banks, and further ICOF loans.)

This has continued to the present day; Calverts last major investment was in a £750,000 Heidelberg printing press, financed by a loan from Close Asset Finance over 7 years. The view has always been that relatively expensive capital has been a price worth paying for autonomy and equality.

Essentially, all the early problems were overcome through a combination of militancy, hard work, solidarity and persuasion.

For the worker members, the main benefits of working at Calverts are good wages and conditions (slightly higher than average pay, and much better conditions than the industry standard), respect and equality in the workplace, education and skills development, and the opportunity to exercise democratic self-management. Average staff retention is more than twice the industry average, which means that as a business Calverts has built a body of considerable creative and technical expertise. This is reflected in high levels of quality, service and client care.

Trading through three recessions, no employee has ever lost their job by reason of forced redundancy, and continual improvements in productivity and service delivery meant that real wages have increased almost without interruption for 30 years. Apart from these obvious social dividends, Calverts has also developed an unusually strong management culture based on mutual respect, trust and consensus building. This is the true strength of the business, and it is maintained by paying close attention to good governance, which the members have interpreted as operating according to both the letter and the spirit of the co-operative principles.

Successful and innovative business initiatives in Calverts have come from all areas of the co-op, which has always invested for the long term, and attributes the success of its investment strategy to rigorous discussion and testing of its plans. As a result, the co-op has weathered the storm of the current recession, in a business market was already hugely competitive, much better than its competitors.

In Calverts early days, skills development was almost entirely ‘on the job’, and members rotated job functions. As the business grew, technical and creative skills became more specialised. All members have a personal training budget which allows them to develop knowledge relevant to their job role, but also to their personal aims. In recent years, the co-op has invested more in the area of new member induction and education in co-operative values, principles and the movement’s history, believing this to be an important aspect of skills development for any worker in a co-operative business.

Interestingly, Calverts is still a true equal pay co-op; the hourly rates of pay are the same for a founder member with 31 years’ service, who is now a trained financial accountant, as for a newly-qualified design or printing apprentice. The co-op has had to meet the needs of all its members by driving up productivity, and thereby improving pay and conditions across the board. As a result, it has no problem recruiting experienced and highly-skilled new employees.

Calverts demonstrates that radical ideas around worker co-operation can lead to innovative and successful businesses, bringing member benefits which other business models cannot equal. It believes the project to build co-operation as 'social brand' is now an urgent challenge for the wider movement. To demonstrate the kind of work it thinks is needed to raise public awareness and approval of co operative values and principles, Calverts developed the 'Co op Hands' stamp for worker co operative produced goods and services, and is working on ideas for a new ‘co-operative mark’.

The co-op champions socially and environmentally conscious design and print - but, like many other co-operatives, it didn't jump on the last green bus. It pioneered high quality printing using recycled papers and vegetable oil based inks before such things were popular or profitable. As one member explains: "our clients want the assurance and credibility which comes from eco-positive design and print - but in Calverts early days, it was as much about clean and safe working methods for our members."

Jess Baines, a former member now teaching at the London College of Communication, has set up a wiki about radical printshops, design studios and poster collectives of the 70’s and 80’s, and there are a couple of interesting reminiscences about Calverts here.

Sion Whellens one of Calverts members is a member of the Worker Co-operative Council and at present represents the WCC on the main board of Co-operativesUK

Other links:
www.twitter.com/calverts
Calverts Facebook group