Yes Weave Can @ Annual Meeting

The 2008 Annual Meeting of the Owners of Weaver Street Market supported my call last Sunday (October 19) for the Board to establish an Owner’s Committee to review the finances of WSM, in the light of our Worker-Owner Dividend not being paid this year, and in view of the level of WSM’s debt and its debt repayments.

This is what one voice, speaking out for you, can achieve as an outsider. Imagine what that same voice, speaking up for you, could achieve if it was on the Board itself…

*******

[Update - November 5, 2008]

It is the day after the Board Election Count. Senior management have just announced a co-op wide reduction in worker hours, along with a freeze on hiring.

This will mean that we workers will be working harder for less take-home pay.

I can't help but wonder what effect this announcement might have had on the Election if it had been released the day before voting ended?

We are told that the reason for these savings is that there is a lack of sales growth.

Er...last time I looked, the Southern Village store had never recorded less than a constant 5% sales growth.

I'm not sure we're being told the whole truth.

Sure, there's competition. Sure, we're now in a severe recession. But another major contributor is the fact that we consciously eviscerated our foundation store in Carrboro in order to accommodate the new Food House and the new store in Hillsborough - and our customers are now voting with their feet.

Don't believe me? Check the sales figures for all of the stores. While Southern Village is registering a 5% increase, it is Carrboro that is suffering a double digit drop in sales.

This isn't because the competition is tougher in Carrboro, or the recession any more severe. Nor is it due to any lack of diligence on the part of our work colleagues in Carrboro. It's because we took away the tools workers needed to maintain the level of customer service they were used to giving to consumers.

Plus - and let's be honest here - the food from the Food House is still not pleasing our consumers. And their vote on that is being registered with their checkbooks!

This is especially true with Carrboro, where our customers were used to prepared food of the highest quality, because it was prepared on site, by artisans, who got to meet their clients, face-to-face, every day.

More to the point, the real reason that our books are out of balance is the huge ongoing cost of the Food House-to-Nowhere and its attendant $10 million debt.

Instead of nickel-and-diming we workers, we should be doing all that we can to reduce these enormous costs, while striving to rescue what we can from what is now being seen as nothing more than a vainglorious adventure in empire-building.

If we are to survive the difficult circumstances in which we find ourselves, we will need to do all that we can to maintain the loyalty of our workers and our consumers. Instead, senior management seems to be hell bent on doing all it can to upset us.

I'm a total sucker for 'hey, we're all in this together.' But, we're not.

There is an established process for including all employees in major decisions that impact our workplace environment. Where was the employment of this process before these recent decisions were made by senior management?

I'm guessing much the same place as all of the other vehicles by which we workers are supposed to have a voice in the affairs of our self-styled worker-consumer co-operative (can we truly go on calling it that?).

In these past couple of years, every single avenue by which we workers are entitled to input into co-op decision-making has been closed down, curtailed or rendered impotent.

I'm talking about the employee decision-making process, the open forums, the Worker-Owner Program, the Annual Co-op Employees' Meeting, and last but not least, the Elections for Worker-Owner Directors.

How on earth can we claim to have a free and fair elective system, that is supposed to put a genuine worker representative onto the Board, when that system allows managers to operate a veto over the result?

Who on earth ever heard of an elective system that includes both workers and managers anyway? Isn't it time for workers and managers to have separate representation?

The fact is that, while we are all supposed to be equal in our co-op, there are some who consider themselves to be 'more-than-equal.' Don't blame me for saying this. I'm not the one who created this 'them-and-us' situation.

And if you think I'm dancing with the facts, let me ask this: are senior managers going voluntarily to reduce their salaries, in line with the reduction we workers are having to suffer?

And when I say 'senior,' I wish to differentiate from junior managers, who are getting hit as hard as we workers.

They have all been put on fixed salaries this past year. And now, they are the ones having to make up the lost hours.

The fact is that we workers have been and will continue to be kept as far away as possible from the important financial decisions being made in our co-op. Decisions that impact our daily lives. Those decisions will continue to be made by senior management - on their own.

Which is why now, more than ever, it is of paramount importance that the Board heed the call of the Annual Meeting to set up an Owners' Committee to get a handle on the overall financial picture.

That Committee needs to be given access to all of the documentation that provided the rationale for the Food House and the Expansion - if any exists. And all of the documentation giving an accurate picture of the current financial situation.

We need to be able to determine if, in the changed economic circumstances, we still need all that we have built. And to decide what can be saved, and how we can make the financial equation work.

And we need to find a way forward that does not continue to penalize workers and consumers.

We need to be able to determine what caused the near $500,000 (or more?) over-run on the Food House and Expansion, which was the real reason the Worker-Owner Dividend was wiped out.

Let me just back up there. You will remember we were all told that the near $400,000 loss in 2008 was due to 'once-off' costs associated with Expansion and the Food House (the Monitoring Report presented to the Board talked about 'personnel') - as if this was planned.

Um...hmm. For reasons that are still not clear (and the Committee needs to find out), Expansion and the Food House ran over its budget. A lot.

The money that had been borrowed for Expansion and the Food House ran out. And without telling us what was happening, senior management then just dipped into the Operating Budget, and took out our Dividend Money to pay the difference.

And remember this, the loss of that Worker-Owner Dividend is now being used as the excuse to get rid of the Consumer-Owner Discount.

If Expansion and the building of the Food House had been undertaken by independent contractors, we would have been able to enforce some sort of penalty. As it is, the only people being penalized are we workers. And, if plans go forward, our consumers as well.

Back to the Financial Overview Committee. Once the Committee is in possession of all of the facts, it will then need to consider options as to how best to return us to financial sustainability.

I've said before, when we're talking about a $400,000 loss and a debt of $10 million, with debt repayments that balloon to $1.5 million in 2013, it's not nickel-and-diming nonsense that is going to do the trick. We will need tough decisions about major re-structuring of the co-op.

I think, among other possibilities, we may have to prepare ourselves for the Committee considering one or two of the following:

1) Selling the property on the West side of Greensboro Street. This could raise about $800,000.

2) Asking the good people of Hillsborough to take over the store there, along with the attendant debt - remember, we borrowed a large sum of money to buy the freehold.

They can still call it whatever they like. But if they want it, they need to pay for it - not we workers, with our lost hours and lost Dividend; and not our consumers, with their lost Discount.

Otherwise, we should sell the store. Or at the very least, sell the building, and get a Lease back.

That way, Hillsborough gets to keep its downtown grocery store; jobs are not put at risk; and Hillsborough gets to choose the manner in which their grocery store is saved - it's entirely up to them if they wish to keep it as a co-op.

3) Set the Food House free to be a separate Producer/Worker/Consumer co-operative. That way, it can go out into the market place and sell its wares wherever it can get the best price.

We can all continue to get our food from them. Jobs will not be lost. And it is more likely that the Food House can more quickly become financially viable - and look after its own debt and operating costs.

Nothing would be lost. It would merely be re-structured. With the debt and costs broken up into more manageable chunks. Rather than it all falling onto the shoulders of a few.

All of the various component parts could still choose to be co-operatives. That would be their choice. And we could all continue to co-operate with each other. By way of strict commercial relationship. Rather than the vague, unwieldy and rather unhappy inter-relationships we have at the moment.

With careful thought and sensitive consultation (and nothing should happen without the agreement of workers and owners), we can come up with ways to re-structure what has been created, so as to make the separate parts more sustainable, while allowing them to work together, and allowing us to save as much as we can of the original benefits - not least, peoples' jobs and their pay.

As drastic as this may seem, I would prefer that we be the ones to formulate whatever plans we need to make to save what we can. Rather than burying our heads in the sand, and waiting for someone else to come in and do it to us - in ways that we may all dislike...

*******

[Update - November 21, 2008]

A couple of further wrinkles.

First, the property on Greensboro Street is up for sale. But it's not going to realize any cash any time soon. And this is one of the major factors behind what some of us might regard as the short-sighted moves to save money by cutting operational costs.

Now, you might well ask: why on earth would something which is designed merely to reduce our outstanding debt cause so much fluster over our daily operational costs?

The answer appears to be that our plight is now so dire that the proceeds from the sale are likely to be used for shoring up operational costs, rather than paying down the debt.

You see, in a normal situation, if there's a temporary gap between income and expenditure, rather than turning the whole operation upside down (as we seem to be doing at the moment), it is much more prudent either to use some reserves or use a credit line.

The problem is (here we go again...) we don't have any reserves. We were supposed to have started them some years ago, but I'm guessing Expansion and the Food House used them up.

We don't have any more credit worth talking about, either. Why? You guessed it. We used it all up on Expansion and the Food House. And the Auditor has told us to stop borrowing money.

So. We are left paying our bills out of ready cash. And it ain't so ready at the moment. In fact, we're having problems keeping up with some of our bills.

Hence, the shift in how we're intending to use the proceeds of the Greensboro sale.

Once again, I'm saying "we," when I should be saying "senior management" - who, once again, are doing all of this without consulting the owners of the assets we're selling (namely, us).

The problem with this shift is that it will likely leave us, at the end of the year, with more liabilities than assets. This is not good. It will make our Auditor very unhappy.

Besides, I'm worried about just how close we're getting to the technical definition of insolvent, which I recall as being a situation where a company's liabilities are greater than its assets, and it is unable to meet in full all bills that are due and payable.

Once more, I am driven to say that there is a way forward, but it requires creativity and the need for some to put ego to one side.

I say the latter because we will not make any sensible progress until those in charge are prepared to ask for help. And that first of all requires that they admit they need help.

What would I suggest to improve out immediate liquidity?

1) Continue with the sale. On whatever terms. Get the cash. Ask the Auditor to sign off on some arrangement whereby we can use some part for immediate operational costs. Internal loan, whatever. Call a Pre-Board Meeting. Advertise it in the local papers. Get the support of owners and workers for this and the other moves mentioned below. Speedy action is possible, but not if we keep all of this a big secret. We have to tell people the state we're in. If we're too proud to do that, then we will go under.

2) Create a special, one-off call-for-capital. That's the proper way to get cash if you need it in a hurry. Offer every existing owner the opportunity to take out a second share, on the same terms as their first share, provided we have their money by this Christmas (or, in the case of Worker-Owners, have begun to pay their installments by Christmas). We want to be encouraging more owners to give us more money. Not finding ways to make them keep it, or take it elsewhere - by, for instance, taking away their Discount.

3) In the same vein, we want to be doing all we can to inspire our workers to work that little bit harder. We won't do it by taking away their Dividend, making them work harder for less, and offering them no opportunity to share in the decisions being taken. I would suggest that we announce that there will be no Dividend for two years. That instead, there will be a gainshare offered to every worker, with slightly more being given to Worker-Owners. The gainshare to be based on an increase in sales - from where we are now. If it is not possible to pay it from operational funds, then we should borrow it from asset sales or from the Worker-Owner Central Account. And again, we should get the consent of workers before going ahead with this idea.

Anything and everything is possible. But not if we put pride before common sense. We need to be open with the world about the trouble we are in. And we need then bluntly and loudly to ask for help.

If those in charge are too proud to admit that mistakes were made, and instead, seek to cover their tracks by making consumers, owners, and workers pay the price, while keeping them in the dark as to why, then those in charge will end up being the death of this co-op.

*******

[Update - November 23, 2008]

In the middle of the recent Board Election, a member of senior management vociferously took issue with me over my claim at the Annual Meeting that, during the Board's conversation with the Auditor, I had heard the Auditor suggest to the Board that they draw up a comprehensive plan to deal with our $10 million in debt.

The substance of that discussion with the senior manager has continued to bother me. I know that Auditors are sometimes not direct. They speak in circumspect terms. It could well be that I misunderstood what the Auditor had said.

But even if I did, are we seriously suggesting that we don't need a comprehensive plan to pay down the debt - soon? Are we seriously suggesting - as has been stated to me - that this is no business of owners, and certainly not a committee of owners?

Well, in any event, I wrote an e-mail to Jacob - as Board Chairman (with a copy to the senior manager concerned) - making what I thought was a very reasonable suggestion to attempt sensibly to clear up the whole matter.

Now, I'm beginning to wonder if I wasn't right in the first place. You see, I've still to get a response from Jacob...anyway, here's my e-mail:

"Hey Jacob,

Well, that was probably one of the most lively Worker-Owner mornings we've all seen in a while [The discussion involving the senior manager had occurred as Jacob and I were on our way to one of the Candidate Forums].

There is only one thing that troubles me, though. I am genuinely concerned at the level of debt. And more specifically, the level of debt repayments. I don't want all the gains to be endangered by a debt we can not sustain.

For that reason, in any event, I would want someone, some body immediately and comprehensively to examine the level of debt, and confirm that it is ok.

For myself, I can see no reason why it should not be the same sort of task force that we had for the Elections. But that's my input.

I also, very genuinely, believe I heard the Auditor say (and Auditors speak round-a-bout) that the debt level should be addressed, that this did not need to await the next Audit, and that there should be a comprehensive plan (of some sort).

Again, even if the Auditor had not said anything remotely like those things, I would be concerned, and as someone with experience of management consulting, I would ask the Board to get specific input from the Auditor about those very points.

Indeed, Jacob, you know that I did write in almost exactly those terms as the Audit was underway. And, to be fair to me, those questions were not answered. And, to be fair to me, [name of senior manager deleted], this is why I wrote to both Jacob and Ruffin before the Annual Meeting requesting that they address these issues at the Meeting. They did not. So, I raised them - as an Owner.

All of this is fine and dandy. We can disagree to and fro about my concerns, my expression of them, my candidacy, the vehicles I create to talk about my candidacy.

The one thing with which I have a problem is when my honesty is called into question.

So. I would like to suggest to you, Jacob, that you and the Board please find out precisely what the Auditor recommends WSM do about its debt in this next year.

I will accept what he says. And if there is no mention of 'comprehensive plan,' then I apologize. I mis-heard. But the mis-hearing was genuine.

Best,
Geoff"

*******

[Update - December 11, 2008]

All workers at The Weave today received a 4-page Blue Document from Ruffin Slater, General Manager, asking us all to work more for less, to help balance the books. What follows is based on the response I sent to my department manager, with a copy to Ruffin, other senior managers, and the Board:

I regard the Blue Document in my mailslot as an invitation. A request. Asking me to work yet harder, for even less.

In light of the fact that:

* No incentive is being offered to me in return.

* I have not been consulted on this alleged Turnaround Plan, either as a worker-owner, nor under the existing process for inviting feedback from employees on decisions that affect the workplace.

* Indeed, every single avenue that used to exist to allow workers and worker-owners meaningful input has been either disbanded or put in abeyance.

* It is now clear that the recent Board Election was an undemocratic process, beset with manipulation and intimidation - including of me personally.

* The Blue Document itself is riddled with inaccuracies and distortions. For example, the drop in sales in Carrboro makes no mention on the effect of customers of having their store eviscerated, the continuing poor quality of food from the Food House, nor the movement of sales to outside stores like Southern Season to the Food House figures.

* The alleged Turnaround Plan provides us with no hard and fast figures, about which we can make meaningful judgments.

* We continue to finance a capital project out of operating cash, when we ought to be considering the possibility that we are in over our heads.

* We are continuing to borrow, when the Annual Report said there was no more room to borrow.

* The Blue Document singularly fails to take responsibility for mistakes of the past - such as the enormous overrun on the Food House.

* The Blue Document doesn't mention the fact that the big hole in our finances is occasioned by the cost of the Food House and its attendant debt. Forget talk about recession and competition. We became over-extended the minute we (secretly) borrowed $10 million, on the back of a profit margin of 1% - $300,000. And we are in a hole because we are over-extended.

* The Blue Document offers no action with respect to lowering that cost and debt (where the repayments rise each year, to $1.5 million in 2013).

* There are no suggestions for making other sensible savings, such as suspending the Mystery Shopper Program, or suspending charitable donations. Indeed, it is hard not to draw the conclusion that this Document is less about saving our co-op or our payroll, and more about saving someone's face. And we are not all in this together. I see no mention in the Blue Document of senior managers or administration taking a 10% cut in their wages over 2008 - as I and my work colleagues have done in this past month.

In light of all of this, I respectfully decline the invitation.

When this co-op is prepared to hold a full employees' co-op meeting, where full and accurate figures are presented, senior managers may be quizzed, some sort of incentive is offered for us working harder for less, and some sort of process is allowed where the body of workers approve or disapprove of this alleged Turnaround Plan, then I will reconsider.

In the meantime, I will continue to work today and tomorrow just exactly as I did yesterday, no more, no less - provided I get paid the same.

This is a legitimate protest, which should be respectfully observed in this co-op. It pains me to do this. But I am not the one being destructive. I am merely protecting myself from the destructive behavior of others. I am forced to take this action because, frankly, we are no longer behaving as any kind of workers' co-operative.

In the event that any action is taken against me for this legitimate protest, I will consider that retaliation. After all, I can hardly be disciplined for saying I won't do more for less, without something in return.

Respectfully,
Geoff

-------------------------------------------------------------------------

"All financial innovation involves … the creation of debt secured in greater or lesser adequacy by real assets,” wrote the economist John Kenneth Galbraith in 1993. And “all crises have involved debt that, in one fashion or another, has become dangerously out of scale in relation to the underlying means of payment.”