Wednesday, March 24, 2010

Why WSM Owes A Huge ($1 Million A Year) Debt To Its Workers

The Co-operative Grocer this month [] confirms that Weaver Street Market Co-operative has had to be bailed out by the national co-operative movement to prevent bankruptcy, following its ill-fated expansion program – an expansion program which has left The Weave with $10 million in long-term debt and an ongoing annual debt interest charge of $1 million.

Before making suggestions as to how to deal with that crippling $1 million a year debt interest charge, let me first address the article itself, and the unfortunate fact that those responsible for it seemed to be more engrossed with patting themselves on the back for a job well done, rather than paying thanks to the folks who are actually saving the co-op – namely, its workers.

As a consequence of that omission, I wrote a short letter to Dave Gutknecht, the Editor of Co-operative Grocer, and he has very kindly agreed to publish it in the next (May-June) issue:

“Dear Dave,

I commend the Co-operative Grocer for its coverage of the troubles flowing from the significant expansion being undertaken by Weaver Street Market, and the response of the wider co-operative movement to the consequential financial problems.

It takes a rare individual, like our General Manager, to allow such public airing of the difficulties associated with a project in which he has invested so much of his time and authority.

And, of course, I am one of many workers in our rather unique worker-consumer grocery co-operative who remains deeply grateful to all those in the national co-operative movement who have so selflessly agreed to fill the breach in our finances.

Yet, I was disappointed by what I felt was insufficient reference in your article to the fact that the imbalance in our accounts (created by expansion) has been overcome not only by the short-term generosity of other co-operatives, but also by the hard work and magnanimous self-sacrifice of every worker in WSM.

It is no secret that our workers have had serious misgivings about the expansion program, both during its conception and its implementation, not least the timing, the scope and now, the sustainability of the long-term debt ($10 million).

Yet, each and every worker has responded magnificently and selflessly, both to the drop in sales resulting from the disruption to consumers, and to the weight of the debt service charge ($1 million).

We have accepted reductions in the hours for which we are paid. We have foregone pay raises. We have gone without a worker-owner dividend for two years now. And we have been the ones on the front line with customers explaining all the changes to those exasperated consumers.

It is not just the Food House which caused the labor savings you quote in your article. It is the contribution of every ordinary worker on the sales floor, in the production departments and in the corporate office, all of whom have been working harder for less these past two years in order to keep our co-operative afloat.

The underlying theme of co-operation is democracy. I do not think I am out of place suggesting that the exercise of democracy in your co-operative journalism might have seen you interview an ordinary worker or two in our co-operative, rather than just the most senior management, in order to get the fullest picture of the effort underway to restore balance to WSM’s financial outlook.

Yours in co-operation,
Geoff Gilson”

Of course, WSM wouldn’t need to owe a debt of gratitude to its workers for all their sacrifices, nor be asking them to make even more improvements in sales and productivity (as, indeed, it continues to do – or, were it not for WSM’s huge debt of $10 million (resulting from WSM’s ambitious expansion program) and the continuing annual debt interest charge of $1 million.

Does WSM’s Debt Really Matter?


1) It puts a 5% Silent Tax on every sale that we make. If it was important enough that we remove the consumer discounts in 2009 because they added 5% to every sale, then it should be just as important to remove the 5% Silent Tax [ and].

5% Silent Tax? Yes. We have a turnover of about $25 million. The annual debt interest charge is $1 million. That works out at about 4-5% on each and every sale that we make.

2) By having to pay out $1 million in debt interest each and every year, that is $1 million WSM does not have to improve food quality; renovate the stores (which is why the corporate office and the Board are now planning to borrow yet more money to upgrade the Carrboro store); restore worker hours; nor give workers pay raises and their long overdue dividends.

3) We workers are having to work ever harder, without any sort of financial incentive, or even the opportunity to query the demands being made of us (as is required by our co-op’s Mission Statement and Decision-Making Process). And this is not because of the recession. Nor because of competition from the likes of Trader Joe’s. But simply because we continue to have to pay that $1 million in debt interest each and every year.

There is only so much that WSM can realistically continue to demand. Workers are performing at their top productivity right now. We are as stressed as we can be. What more can we possibly do? Sure as heck, we can’t go on finding another $1 million in extra sales and productivity – every single year. I mean, you can only smile so wide.

The only realistic way to go on improving sales and productivity is to increase investment in product provision and quality and customer service. But WSM has tragically limited itself in what it can do in that regard, precisely because it has to use $1 million a year to go on paying that interest on the debt. It is a vicious, unsustainable and ever-decreasing circle. It would be a Monty Python sketch – if it wasn’t so serious.

4) Finally, there is not one penny of that $1 million annual debt interest payment that stays in our local economy. By continuing to maintain our current level of debt – with out-of-town banks – we are literally bleeding $1 million a year out of our local economy.

What Can We Do About The $1 Million Annual Debt Interest Charge?

Look. I will continue to do all that I can to be as productive as I can. I love my co-op and do not want it to fail. But if I am to go on improving my productivity in the face of almost impossible odds, then isn’t it time that the corporate office and the Board of Directors (that is supposed to monitor that office) did their part to improve their own productivity? Which means doing all they can to get rid of that $1 million a year in bank interest?

At the WSM Annual Meeting two years ago, I predicted that our annual interest charge would rise to $1.5 million a year by 2013, at the latest [ and]. I suggested to that Meeting of WSM’s owners that we set up an Owners’ Task Force to conduct a thorough risk assessment of all of the long-term debt, and make recommendations as to how to reduce it, without losing the benefits of and the jobs at the Food House and the new Hillsborough store.

The Annual Meeting supported my suggestion. But the following Board meeting refused to set up the Task Force, saying that it was not necessary. Leaving us with the debt unchanged, and we workers (on our own) having to find ways to pay that $1 million a year of debt interest.

And also – let’s get this very clear – and also, leaving the Food House and the Hillsborough store at risk. If WSM defaults on its loans (as this article says we almost did in 2008), then the Food House and the Hillsborough store (and their jobs) will be the first to go.

Now, it may well be that the corporate office and the Board of Directors are undertaking steps, even as I write this note, massively to reduce WSM’s debt and its burden on we workers. But if there is such a plan, they aren’t telling us. And we have a right to know.

Since we are not being told about any such plan to reduce the $10 million in long-term debt, I think it safe to assume that, for whatever reasons, there isn’t such a plan. Which brings us back to square one – there needs to be one.

Anyone who understands business knows that you cannot get every decision right the whole time. But, what you do when you realize that circumstances have changed is to review and adapt.

I’m not saying that the original rationale for the Food House and the Hillsborough store was right or wrong. What I’m wondering is this: can we any longer sustain the financial consequences of that original rationale (i.e. the $ 10 million long-term debt), without making major changes to the underlying game-plan?

Maybe we can. Maybe we can’t. But, doesn’t it make sense that we at least undertake a thorough and open review of the game-plan, to see how best we can reduce the debt, while saving what we can of the benefits of and the jobs at the Food House and the Hillsborough store?

And then letting the WHOLE co-op (owners, consumers and workers together) make the decisions that are necessary to give effect to the changes to the game-plan?

Indeed, looking to the future, doesn’t it make sense that the owners and workers of WSM demand of the Board of Directors that they introduce the systems and structures necessary to allow owners and workers to control all strategic decision-making from now on (as promised by the ICA Co-operative Values to which we subscribe and which we enunciate on the front page of every one of our store newsletters), so that we never again find ourselves having to go cap in hand to the national co-operative movement to bail us out? [ and]

In the meantime, WSM cannot go on as it is. We cannot go on borrowing to pay our existing $10 million debt and $1 million annual debt interest charge. Nor getting bailed out by the national co-operative community. Nor making impossible demands of our workers. And sure as night follows day, we cannot borrow any more money.

Sooner, rather than later, we are going to have to change our game-plan and reduce that debt. Before the banks who own that debt do the changing for us.

Proud To Be A Weaver Street Worker

I remain the eternal optimist. I wouldn’t still be here, busting butt and advocating my ass off if I wasn’t.

I believe that we can achieve anything in our co-op with the right people, the right attitude and the right decisions being made.

But I also believe that ‘co-operative’ is a verb: to co-operate. And co-operation in a co-op should work both ways.

If we workers are to become ever more productive, then it is time that WSM’s corporate office and Board of Directors worked just as hard at improving their productivity. Reviewing the co-op’s game-plan – and including owners and workers in that review. And then reducing the debt.

If we were to free ourselves from our debt, and take the necessary steps to place owners and workers in control of the strategic decision-making within our co-op, then I believe we would overcome our difficulties (on our own!); we’d become a stronger business and a better co-op as a result – AND we’d be a happier place all round!

Remember, it is happy workers who make for happy customers…

Thursday, March 18, 2010

Who Moved My Opening Hours?

Blimey. I wonder if the Rochdale Society of Equitable Pioneers (the every first co-op, founded in England in 1844) had it as difficult as we do at Weaver Street Market Co-operative?

The latest wheeze is that our corporate office have announced that they (not us, the workers in our worker-consumer co-operative), they will be evaluating whether or not to extend our opening hours to 10.00pm.

Ours by the way, not theirs. I'm pretty sure we won't be seeing the oil lamps burning in the corporate office until 10.00pm every evening.

So. I'm driven to write another letter to our General Manager (who I'm gathering is the 'we' in most of these 'we' strategic decisions...):

"Dear Ruffin,

I have read with interest your latest Financial Update. The very first thing that strikes me is your continued use of the pronoun 'we.' 'We' are evaluating, 'we' will be looking, 'we' have started. Who is exactly is 'we,' and when in this worker-consumer co-operative does it become 'us'?

Last week, I dug out all of my paperwork relating to orientation, signing up to be a worker-owner, worker decision-making process and the like. Leaving aside all the heavy discussion about what is a co-operative, and how it is supposed to work, what is clear from this paperwork is that workers and worker-owners were and are promised meaningful involvement in strategic decisions affecting the direction of our co-op.

I can think of no more 'strategic' a decision than whether or not we open until 10.00p.m. Or what shape the new design of the Carrboro store should take.

Quite aside from what was promised, it is Business 101 that, if you want more from your workforce (as you are asking), then you have to offer an incentive.

Traditional capitalism does so in the form of financial incentive. In a co-operative, the incentive is supposed to be the opportunity to be involved in collegial strategic decision-making. Where is that collegiality when the 'we' is 'you'?

Simple question. Why don't you simply submit the notion of opening until 10.00pm to a vote of the whole workforce? If your answer is that we don't understand all the issues or figures, then provide us with that information.

In a worker-consumer co-operative, strategic decisions of this magnitude should be implemented only with the active and recorded consent of those who are affected.

At the end of the day, 'co-operative' is a verb: to co-operate. And that co-operation should work both ways. You want our co-operation. Isn't it right that you should ask for it? So that 'we' truly is 'us'?

All the best,

Wednesday, March 3, 2010

Who Stole My Co-operative Identity?

Oh dear. The corporate office of Weaver Street Market Co-operative, where I am a worker-owner activist, has once again decided that the source of all authority within our co-op is not our owners and workers, but...well...the corporate office. And so, I write another letter...
"Dear Board and General Manager [of WSM],

The latest (March 2010) edition of our [WSM] store newsletter purports to offer a definition of 'co-op' (next paragraph) that is not the standard ICA definition (

"A jointly-owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members [owners] for their mutual benefit..."

As far as I am aware, we still subscribe to the ICA definition (next paragraph), as well as the ICA definition of co-operative values (which we publish on the front page of all of our store newsletters) and its various statements on co-op identity:

"An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise."

If, as a democratic co-op, we wish to change that definition, then the proper place to do that is within the policy-making process of our co-op, as imperfect as that may be, and not behind closed doors in the corporate office/operations/marketing department.

I would be grateful if you would confirm that, in future, when we seek to define any aspect of our co-op's policy activity in official organs of our co-op, we will do so within the context of that which has been agreed by our policy-making process.

Am I making a mountain out of a molehill?

1) This is not the first time that the corporate office or its marketing department have strayed from their strict responsibility for operational matters into areas of policy and strategy.

Last year, for example, a corporate office person described themselves in a magazine article as Director of Public Relations, and then sought to define the relationship between owners [members] and the co-op as 'we listen to 'em; if we like it, we do it; if not, we don't.' I can't find this approach to membership relations anywhere in our Ends nor in Board Policy. It was the corporate office making co-op policy on the hoof. For which it has no authority.

Again, when I served on the WSM Elections Task Force, we were presented with what purported to be official co-op policy on electioneering for Board Elections. Only to discover upon further questioning (mine) that the document was written by the marketing department, and had no official sanction whatsoever.

2) The definition offered at the beginning of the article in this month's (March) store newsletter could just as easily describe the structure of Wal-Mart. We are not a co-op because we are operated by members. Indeed, half of those who operate the store aren't members at all. We are a co-op because our members are the source of all authority within our company. Our members democratically control the decision-making within our co-op. At least, they are supposed to.

Our co-operative identity resides not in operations (who are the hired help - and I include myself) but in our membership and its democratic control of our enterprise. I do not believe it accidental that the definition in this month's store newsletter uses the word 'operated,' while excluding any mention of democratic control by members.

3) If this is merely a casual and personal definition offered without official sanction, then, with respect, it has no place in an official organ of our co-op. Will I be offered the same opportunity next month to offer my 'casual and personal definition'?

Perhaps, once again, the most disturbing feature for me is that I have to write this formal e-mail rather than being able to raise the point quietly in a co-op discussion group or owner meeting.

Why? Because the corporate office have closed down each and every avenue available to workers and owners to engage in meaningful discussion within our co-op and to feed into the policy-making apparatus.

This is sad, and I will continue to advocate for a revival of the sort of worker and owner involvement in our co-op which is promised to workers when they join this co-op, and which is then promised to them again when they become workers-owners.

All the best,