Background of U.S. Cooperative Businesses

Cooperatives are member-owned, democratically controlled business enterprises. One of the main goals of cooperatives is economic inclusion. They are formed to help small players gain parity with large investor- owned competitors to address market failures where neither the private sector nor the government provides a needed service or to give consumers a deliberate choice of enterprise to better meet their common needs and aspirations. The very structure of a cooperative requires that it be responsive to its member-owners and, in turn, to the local community. The  is inherently both locally based and participatory, embodying a direct connection between member needs and the services provided. Because of this, cooperatives are well positioned to contribute directly to community vitality and stability, modeling equitable and inclusive economic practices. This essential aspect of cooperatives can affect community health through the support of stable, community-based institutions and the nurturing and developing of authentic local leaders and informed and empowered members.

Cooperatives impact communities by developing authentic local leaders and informed and empowered members.

Unfortunately, with limited data on cooperatives and a need for performance measurement indicators to better measure cooperatives’ impact over time, it is hard to know whether cooperatives are in fact meeting their promise and, if so, to what degree.

Cooperatives have been described as businesses where “the interests of the business user, or patron, are primary to the capital investor, and returns on capital are limited. Cooperative control is in the hands of member patrons, who democratically elect the board of directors.

Member patrons are the primary source of equity capital, and net earnings are allocated on the basis of patronage instead of investment.⁵ But as Hueth details, the definition of cooperatives can be more technical and complex than this and can even vary somewhat across sectors.

Cooperatives are a meaningful part of the U.S. economy as they promote community involvement and economic inclusion. However, to be sure, they are more prevalent in certain sectors and geographies than others. In 2017, the University of Wisconsin-Madison identified more than 64,017 cooperative businesses in the US across four sectors (not including housing cooperatives): commercial sales, marketing and production; financial services; social and public services; and utilities.⁶

Types of Cooperatives

In this brief, we focus on three primary types of cooperatives as well as hybrid models. The three primary types are classified by the people or groups that use the business: consumers, independent small businesses and farms, and workers. Hybrid models include elements of two types and evolving work arrangements.

Consumer Cooperatives

Membership is made up of people who want to buy goods or services from the cooperative.

Consumer cooperatives are present in a wide set of sectors, including grocery stores, utility services, housing, insurance and credit unions (table 1).

These cooperatives vary tremendously in size, from Dill Pickle Food Co-op in Chicago with one market and deli location and 2,350 members⁷ to the Navy Federal Credit Union with nearly $92 billion in assets and 7 million members.⁸ Consumer cooperative members can be involved in the running of the business, but, more frequently, membership’s primary involvement is in the consumption of its goods or services.

Membership is most often made up of community residents within geographic proximity to the cooperative business. For some such businesses, the barrier to membership is low. For example, a grocery cooperative may ask residents to sign up for a low fee to become a member. In other cases, such as housing cooperatives, the number of units and potentially rules around members’ financial assets limit the number of consumer members involved in the cooperative. In some cases, consumer cooperatives extend their benefits beyond members. Grocery cooperatives often serve nonmembers, but nonmembers cannot vote or receive rebates at the store. In other cases, cooperatives open their office or business space to host community events, donating proceeds to local initiatives and joining in coalition advocacy around local and national policy issues, such as the preservation of affordable housing or environmental justice issues.

Farmer and Independent Small Business Cooperatives

These cooperative businesses serve members’ marketing, processing and purchasing needs. Independent businesses in service sectors such as retail, hospitality, and agricultural businesses (which includes farming, fishing and forestry) are the most typical sectors that form these sorts of cooperatives. These U.S. cooperatives bring business owners and farmers together to collectively buy goods and services that would otherwise be too costly for an individual business owner to purchase alone.

Purchasing cooperatives provide benefits to owner members via cost savings through bulk purchasing. For example, hotel owners may see savings by joining together to purchase linens and cleaning products in bulk. Joint purchasing gives small businesses scale to compete against much larger firms, which again, fulfills the ultimate goal of economic inclusion.

Processing cooperatives add value to commodities through the collective ownership of processing equipment. Marketing cooperatives provide members access to regional, national and international markets for their goods that would not be available to independent producers. Additionally, these cooperatives may give member-owners the benefit of national brand names that add value to products marketed through the cooperative. Cooperatively owned brands include Land O’Lakes, Sunkist, Ocean Spray, Ace Hardware, Carpet One and Blue Diamond Growers.

Measurement can be used to assess the extent to which the market power of purchasing cooperatives helps keep main street businesses open and provides stable employment in small communities and neighborhoods. Since economic inclusion is the goal, the success of these cooperatives can also be understood by whether they are more likely than other business structures to keep money in the community, instead of with upstream processors.

Worker Cooperatives and Their Economic Impact

Worker cooperatives are businesses that some or all the employees own. Members produce and/or sell different goods and services and share profits. Many worker cooperatives are small, and worker-members play direct roles in decision-making from setting hours of operation to designing membership eligibility criteria. Some, however, are larger enterprises, like New York’s Cooperative Home Care Associates with over 2,000 employees, the largest worker cooperative in the U.S.⁹

Worker co-op member-owners are more productive and have lower turnover than their non-cooperative counterparts.

Many worker cooperatives are anchored in a neighborhood with members coming from the surrounding community. In some cases, the goods or services sold are predominantly sold to local residents, but in others, worker cooperatives sell their products nationally and internationally.

Worker cooperatives are well positioned to provide benefits to their members. Studies show that member-owners have a higher productivity rate and lower turnover rate than non-cooperative jobs in the same industries, especially in comparison with traditionally low-wage jobs (Pérotin 2014). To the extent they offer stable jobs, defined by consistent hours, benefits and wages that keep up with the cost of living, worker cooperatives can be quality employers in their community.

Hybrid and Platform Cooperatives

These include two emerging models, consumer- worker cooperatives and cooperatives focused on workers in the freelance economy, which is often online or app based. In consumer-worker cooperatives, both the employee members and consumer members own and manage the cooperative. This model can also extend into grocery and retail-based cooperatives.

The increased reliance on short-term or contract- based jobs, including app-based jobs such as ride sharing and home repair, as well as freelance work in domestic work, media, and the arts, is inspiring the development of new cooperatives that meet the needs of these gig employees.

Platform cooperatives may blend elements from the different cooperative types previously discussed and use the growing reliance on internet and app-based commerce to develop cooperative businesses. For example, the app Up & Go (https://www.upandgo.coop/) offers house cleaning from local worker-owned cooperatives. Unlike other home cleaning apps that take up to 30 percent of workers’ income, Up & Go charges workers hired through the app 5 percent to maintain the platform. To lower costs for purchasing insurance or work materials, platform cooperatives can also adopt aspects of the purchasing cooperative model. In other cases, cooperatives may focus on the worker cooperative model and organize into a collective of worker-owners who accept contract-based work with established minimum wages and access to shared facilities for trainings or equipment storage.¹⁰

Developing an Assessment Framework for Cooperative Economic Impact

To better understand cooperatives and their links supporting a more inclusive economy, we worked with the Cooperative Development Foundation and the National Cooperative Business Association CLUSA International to develop a shared framework for assessing impact on cooperative enterprises, their members and the communities they serve (box 1). The framework focuses on factors that build equitable, healthy and sustainable communities as well as inclusive economy indicators, such as participation, growth and stability (Benner and Pastor 2016).¹¹

Guided by this, we identified both output and outcome metrics for cooperative members and their broader communities. An output is the direct quantity of work activity a cooperative produces. An outcome measures enduring changes in attitudes, behavior, health and economic or social conditions brought about by a cooperative.

Cooperatives and their partners can use this information to make an evidence-based case to funders and policymakers about their creation of social and economic opportunity in a way that leads to improved health and well-being.

Specific metrics will vary by type, of course, but we articulate seven areas where cooperatives should assess their efforts.

It is important for cooperatives to measure their effects at all relevant levels and, as such, we discuss outputs and outcomes for different beneficiaries.

Most immediately are outputs and outcomes for members, which are affected by the direct activities and results of activities. Also important are the direct benefits to the cooperative business— outputs and outcomes that include profit and firm survival. Lastly are the more indirect benefits— outputs and outcomes for communities that relate to “spillover” effects for a local economy, community and even region.

Through economic inclusion, the cooperative economy enables greater community ownership of businesses than other structures and, as a result, an increase in local spending of those profits within the community. Yet, the benefits of community wealth building that derives from the presence of cooperatives are challenging to measure. Business profitability and sustainability of the cooperative itself is an important measure of success, but there is a broader set of metrics of interest. The presence of cooperatives owned by and serving communities that historically lack access to small business capital, groceries, and health services, to name a few, must also be captured in a comprehensive review of cooperative impact.

The ABCs of Cooperative Impact

We know that the cooperative model enables greater community ownership of businesses and, as a result, an increase in local spending of those profits within local communities. Yet, it is challenging to find a compelling, discreet group of metrics that apply across cooperatives given their range of activities and local contexts. Despite the challenge, it is important to do so, and we present a streamlined framework with specific examples of metrics across the spectrum of cooperative industries. Our research surfaced seven key areas of impact where cooperatives can be thoroughly assessed in the extent to which they promote social and economic opportunity. We first introduce each area of impact briefly, then describe examples of sector-specific metrics and, finally, provide a proposed series of metrics across cooperative sectors.

• Access. A cooperative can increase access to affordable quality products, services, suppliers and markets, lowering costs and serving markets and communities historically seen as “higher risk” or underserved.
• Business sustainability. A cooperative business structure can increase firm survival and profitability through higher and less volatile revenues, lower costs and a focus on long-term outcomes, including scaling the cooperative to compete with multinational corporations.
• Community commitment. A community-focused cooperative is committed to being a good neighbor through education, financial support, facility use and business practices that reflect the values of the community.
• Democratic governance and empowerment. In a well-functioning cooperative, membership actively participates and shapes the mission and decisions of the organization, which translates into broader civic and political involvement.
• Equity, diversity and inclusion. To be an effective contributor to its community, cooperative membership reflects the community in racial composition, gender, age and abilities, and historically excluded communities and individuals have a voice and leadership opportunities.
• Financial security and advancement for workers. Cooperatives work best for their members, employees and communities when they provide living-wage jobs with benefits and increased opportunity for wealth building, career advancement, training, and leadership development with lower turnover and higher job satisfaction.
• Growth. Cooperatives can be local and regional anchors, promoting economic growth through stable jobs, high industry standards, consistent services and economic multiplier effects through increased community investment, local jobs and local procurement.

A Closer Look at Cooperative Community Involvement

Cooperatives can operationalize these ABCs and measure their effects in different ways depending on the needs of the communities they serve and specifications of their business model. Metrics allow for comparison between two groups or two points in time to illuminate the impact of cooperatives in comparison with a counterfactual or baseline measurement. Cooperatives can develop metrics based on the ABCs to best measure their work compared with non- cooperative business competitors or show their impact on a local community and economy. An agricultural purchasing cooperative’s approach to business sustainability and civic participation would, for example, look different from a limited-equity housing cooperative in a large city—but both can achieve success in the seven ABCs.

Metrics can measure the economic and community impact of cooperatives compared to noncooperative businesses.

Some sectors are further along than others in measuring outputs and outcomes. And measurement in some sectors is easier than in others, just as collecting information on some specific metrics is easier than others. We advance this framework aware that realities of expense, response rate, time horizon and access to data will shape the specific metrics that cooperatives choose to measure.

Table 2 provides a set of output and outcome domains for each of the cooperative types and each of the ABCs. In some cases, cooperative sectors share similar or overlapping outputs and outcomes and, in other cases, the distinct nature of a cooperative type will lead to differences. Below, we illustrate how each of the ABCs can be applied using examples across the various cooperative types and sectors. As the examples make clear, there are multiple ways to define, document and analyze data related to the ABCs. It is worth noting that in many cases, both qualitative and quantitative approaches can be taken to assess cooperative outputs and outcomes, with different strengths to each (Creswell and Clark 2010).

Access

Access is about the ability of a cooperative to provide members, consumers, workers, or the broader community with the ability to purchase or make use of products, services, suppliers and markets. This may occur through lower prices than would otherwise be possible and also serving high-risk or underserved markets and communities. Credit unions could, for example, be assessed against the extent to which they expand account and financial product availability, offer more flexible underwriting standards, charge lower rates and fees, provide higher-quality and more personalized customer service, result in decreased consumer use of high- cost alternative financial services, and improve consumer financial health when compared with other financial service providers or in markets or with populations that other firms are not serving.

Access is still relevant but looks different for farm supply cooperatives. They could be assessed against how much they increase the availability and affordability of supplies and services for cooperative members and to what extent this leads to lower cost and greater choice.

A utility can be judged against the access outputs and outcomes of consistent and competitively priced energy, water and broadband services. In Virginia, the Roanoke Electric Cooperative’s Upgrade to $ave Program conducts a free home or business energy efficiency assessment. Based on the assessment, the co-op recommends weatherization upgrades to achieve cost and energy savings. If the member chooses, the co-op helps facilitate low-cost financing so the member can invest in energy efficiency improvements and the member can save money in the long term.¹²

How might this translate into specific metrics? The cooperative could identify the number of current members who would qualify for the Upgrade to $ave Program and collect data on the number of members enrolled in the program. In the longer term, the cooperative will have the information to assess if there is increased participation over time and if they have expanded access to energy efficient services for member owners and the degree to which the improvements increased discretionary income.

Business Sustainability and Stability

Sustainability and stability are essential if cooperatives are going to survive long term. Cooperatives across all sectors can be assessed to see whether a cooperative business structure can increase firm survival and improve profitability, either through higher and less volatile revenues or through lower costs. For a cooperative grocer, this might mean the business is simply able to continue existing and maintaining profitability in a difficult-to-serve market. Or, compared with other business structures, a cooperative insurer might be willing to accept lower profits and thereby serve more vulnerable markets. A cooperative structure may allow business owners to scale and thereby compete with multinational corporations.

One well-documented example is the importance of the cooperative structure for rural electric service.

Many parts of rural America were electrified only because of the work of cooperatives, as other market-driven approaches were deemed too risky. And these cooperatives are profitable, as defined by several example outputs and outcomes, including that sales and customers are growing more quickly than for the industry overall.¹³

Community Commitment

Community commitment can happen in a variety of ways but is an important element in assessing cooperative impact over time, one to another, and against other types of businesses. Cooperatives can participate in their local community by providing education, financial help and the use of their facility, and by using business practices that are environmentally sound—and all sectors can be assessed against these things.

The largest agricultural cooperative in the U.S., CHS Inc., operates a foundation focused on investing in the next generation of farmers.¹⁴ The CHS Foundation is working toward a goal to invest $8.9 million in agricultural education by 2020, including scholarships, grants and training programs for young people and educators.

Another example is the Withlacoochee River Electric Cooperative, which held a visioning day to understand resident needs beyond utility services.¹⁵ From this engagement process, the cooperative spearheaded the development of a community center that includes a Boys and Girls Club and medical clinic. The cooperative also funds college scholarships for members, and cooperative staff participate in the community from chairing the region’s public housing authority to working at a domestic violence survivor organization. Each of these activities from fundraising for the community center to number of scholarships given and number of staff volunteering in the community can be quantified into specific measures. If the cooperative clarifies long-term health and education outcomes, informed by existing metrics like the University of Wisconsin Population Health Institute and Robert Wood Johnson Foundation’s County Health Rankings,¹⁶ the Withlacoochee River Electric Cooperative can capture its record of investment in broad community development to show investment and neighborhood-level engagement.

Democratic Governance and Membership Empowerment

Democratic control and membership empowerment are foundational, even definitional, elements to any cooperative and often stand in stark contrast to traditional private enterprise. All types of cooperatives can be evaluated to see the nature and level of membership participation, including to what extent members shape the mission and decisions of the organization and whether becoming a cooperative member helps individuals become more active and involved in their community.

Democratic control and member empowerment in cooperatives stand in stark contrast to traditional private enterprise.

Cooperatives can measure these democratic elements by collecting data on the number of members voting at meetings or participating in leadership or board member elections depending on organizational structure. In addition, for consumer cooperatives, leadership can create member- engagement strategies like community advisory boards and ensure that customer members make up a certain percentage of organizational leadership or seats on a governing board.¹⁷

Of course, democratic control, requirements for volunteer boards, and other elements can introduce challenges to managing larger cooperatives. Though direct member participation in organizational decision-making is common in some sectors, in larger cooperatives it creates challenges around ensuring authentic democratic participation and capturing appropriate data to explore cooperative impact on member empowerment.

Equity, Diversity and Inclusion

These concepts are increasingly used to provide insights into not just how financially viable cooperatives are, how much they lower purchasing costs or how democratic they are, but for whom they do so. These concepts can be operationalized as outputs and outcomes and used to assess the extent to which a cooperative’s membership reflects the communities it serves and gives a voice and leadership opportunities to historically excluded communities and individuals.

Cooperatives can begin by collecting data on membership demographics including race, gender, age, disability, income and other relevant attributes. After identifying who makes up cooperative membership, cooperatives can then compare membership characteristics to those of their nonmember staff (for consumer cooperatives), the geographic area they serve, or the neighborhood where the cooperative is located. Identifying mismatches in representation between the local community and membership, as well as staff demographics and membership, can allow cooperatives to develop strategies to address patterns of exclusion.

For example, in the utility sector, the U.S. Department of Energy identified a persistent employment gap for Hispanics, African Americans and American Indians in the country’s energy sector (24 percent of the overall workforce, 9 percent in energy sector).¹⁸ Cooperatives could assess how they are doing relative to industry norms and the workforce as a whole.¹⁹

Financial Security and Advancement

Others have laid a lot of groundwork that cooperatives can adapt to achieve financial security and advancement. For example, the Organisation for Economic Co-operation and Development measures job quality and earnings quality, labor market security and quality of the working environment.²⁰

Cooperatives can assess how employee wages and benefits compare with local and national living-wage indicators by using a living-wage calculator.²¹ Payroll data and surveys can be used to identify turnover rates and job satisfaction. Additional outputs and outcomes can measure financial security for employees, including a company’s ability to provide flexible work arrangements, dependent care, work- family stress management, benefits, and community involvement. Membership training and leadership development are also important components of this area, and cooperatives can offer trainings and leadership opportunities for members and document participation and progress.

Cooperative Home Care Associates offers free four- week trainings to workers, providing dual certification as a certified home health aide and personal care assistant. Workers who complete the certificate are guaranteed employment through Cooperative Home Care Associates. This training program developed after members identified a gap in available home health education at the area’s local community college.²² The cooperative filled this need, enabling greater access to the career ladder in healthcare jobs. And by guaranteeing hours to new homecare workers, the cooperative provides additional employment stability to members entering the field.

Growth

At the community and regional levels, growth is something that cooperatives can contribute to in meaningful ways. Credit unions can increase community investment by local businesses and consumers via expanded access to credit and savings products. Cooperative insurers can boost economic growth through risk mitigation that results in increased community investment. Housing cooperatives can provide increased residential stability, especially limited-equity cooperatives, which provide an alternative to renting (Temkin, Theodos and Price 2010). Agricultural cooperatives can be assessed on whether they expand local sourcing and hiring over other types of firms, thereby keeping more money in a region.

Local spillover benefits can be challenging to measure accurately. One option is to make use of input-output models to estimate local benefits based on industry and investment size assumptions. For example, based on the University of Wisconsin’s 2009 multipliers, utility cooperatives create a total economic impact of $57 billion in revenues, more than 133,000 jobs, and wages of $9.6 billion annually.²³ Any method to measure local spillover benefits should be used with some caution, however, defining a model’s assumptions and how it translates into accurate estimates for a specific geography, sector, business structure and time period. Other options available to measuring spillover benefits include comparing communities with and without cooperatives that are otherwise similar and examining changes over time with cooperatives entering or leaving a community.

Applying the Framework to Facilitate Cooperative Economic Impact

Current measurement and knowledge of cooperative impact is uneven. We have suggested a framework to help level the playing field by giving guidance on how to improve evidence on the contributions cooperatives make to their members, workers, consumers and communities. Moving from framework to actual measurement and then to action is important. We offer several next steps to implementing this framework, and other measurement resources may also prove helpful as well (such as those from Theodos and Seidman [2017]).

Metrics can be used to identify patterns of exclusion and disempowerment.

Individual cooperatives, associations, stakeholders, impact investors and philanthropic funders interested in understanding the impact of one or more cooperatives can begin by discussing each of the ABCs and grappling with different ways to operationalize the framework presented above. We recommend casting an initially wide net during this brainstorming stage.

A next step is to review existing materials published either for a cooperative-specific audience or a more general, but still applicable, audience. Where possible, incorporating already- accepted metrics can allow for comparisons within sectors or business type, across different business structures (e.g., cooperative versus not), and the aggregation of information across establishments to represent the cooperative sector overall.

Combining the brainstormed ideas and other resources, the third step is to pare back and prioritize the list of potential metrics. Cooperatives and partners should at this point be guided by a sense of which metrics are the most important and feasible to collect in terms of cost, burden, completeness and quality. We recommend that cooperatives start parsimoniously and build up as needed. A small subset of high-quality data outstrips, in value, a large swath of poor-quality information. Cooperatives will need to get specific about the metrics of interest, including over which time periods they should be measured (e.g., monthly or annual rates), for which populations (e.g., all members working for a cooperative this year or all members working for a cooperative as of the point of an annual spring survey), and with which denominators (e.g., scaling per member or per month or per region). Above all, cooperatives should remember that the process of determining metrics can be even more valuable than the destination— as it can be the opportunity to engage in strategic planning and target setting.

Metrics should be determined by importance and feasibility of collection.

To measure increases or improvements in outputs and outcomes that can be causally attributed to the cooperative business requires comparing similar data on a counterfactual, such as non-cooperative businesses, or over two or more points in time.

Not every metric requires a counterfactual, but cooperatives and partners should give thought to the audience of interest and what their information needs are.

After finalizing a list of metrics, cooperatives should build out a data collection and reporting strategy. This includes not just what data are collected, but how they are collected and how often. It is also valuable to clarify specifically who will complete the analysis and what audiences will receive it. To accomplish this work, cooperatives will need to develop databases and software to more easily collect and store data, as well as employ staff focused on measurement and evaluation. Similarly, associations will need to do so for commonly reported metrics.

Next, cooperatives and partners will need to pretest both the metrics and data collection processes.

They should ensure they are getting the information they want and need from the metrics and data collection strategy. Metrics and data collection approaches should be revised and the previous steps repeated until the cooperative is assured that the data collected will be of value.

Finally, of course, cooperatives and partners should make good use of the data—both data they have in house and secondary data from the U.S. Census Bureau and Bureau of Labor Statistics. This includes examining data to inform operational improvements and to communicate impacts to stakeholders.

To help along this journey, cooperatives and their partners may need technical assistance. Some may need help building their capacity for data collection, and others may need assistance with analysis. In addition, partnerships with universities and third-party evaluators can help cooperatives quantify and extrapolate on long-term economic impacts.

Though this list looks discrete, we appreciate that progress in measurement and learning is often iterative, not linear. But some sectors are well under way in the steps we have articulated. Associations can help, facilitating the work of standardizing metrics and data collection approaches, as well as identifying what collective data gaps exist. From this point, an industry can plan to collect and jointly report on data relevant to their sector.

Given the diversity of the cooperative sectors, we offer an assessment framework without prescribing universalized metrics, except for seven areas we feel are universal to all cooperatives: access; business sustainability and stability; community commitment; democratic governance and empowerment; equity, diversity and inclusion; financial security and advancement for workers; and growth. We provide this framework to support the work of inventorying and developing measurement for cooperative sectors and helping individual cooperatives and their associations understand and fill gaps. Data, once collected, can facilitate information sharing across sectors on best practices, improving implementation, and communicating strategic value.