Correcting the Record on the Evergreen Cooperatives

Written By Ted Howard

This month (December 2016), two million readers of Smithsonian magazine opened their copy of the publication to find an article, written by Pulitzer Prize-winning reporter Dale Maharidge, on innovative approaches to deal with poverty in the United States.  Among the three models written about in depth was the example of the Evergreen Cooperatives in Cleveland, Ohio—a project on which we at The Democracy Collaborative have spent a great deal of time and energy, and one that we feel justified in deeming one of America’s most interesting and ambitious experiments in shifting economic development resources to democratic ownership.  Evergreen also features in the current exhibition at the Smithsonian’s Cooper-Hewitt Museum: “By the People: Designing a Better America.” Our perspectives on the significance of Evergreen are not based only on pride in our own work and that of our partners; rather, we also take inspiration from what we have seen develop on the ground in Cleveland, and also, significantly, the manner in which Evergreen has become a powerful inspiration for cities elsewhere in the United States—and in other countries.

The Smithsonian is far from the only organization to have praised Evergreen.  Last year, an in-depth case study investigation of Evergreen was published by the Roberts Enterprise Development Fund (REDF). REDF spent a couple months on their piece, made site visits to Evergreen in Cleveland, and reviewed detailed financial material at the companies.  Their study concluded that the ambitions for Evergreen remain high, with further cooperative businesses planned in the future and a quite substantial number of additional jobs predicted.  Meanwhile, an ocean away in the United Kingdom, the Cooperative Party (sister party to the main opposition Labour Party) has taken up the Evergreen approach, publishing a report, “By Us, For Us” that shows how utilizing the enormous purchasing power of anchor institutions to benefit local economies, including through new worker-led cooperatives, could be applied across the UK. This is a strategy that has already been taken up in Preston, Lancashire, thanks to enterprising local councillor Matthew Brown, and is currently being embraced in Birmingham—the UK’s second-largest city—and elsewhere.  It is a strategy aimed at transforming cities and regions battered by austerity and disinvestment.

We draw attention to these reports on Evergreen, and on how far the ‘Cleveland Model’ is spreading, not to toot our own horn but rather to set the record straight.  Regrettably, for a few vocal cooperative advocates, Evergreen has apparently become a strawman that conveniently stands in for everything they don’t like about nonprofits or the constraints that shape the success or failure of worker-owned business in the real world.  Not that Evergreen is or should be above criticism.  On the contrary, good faith criticism, accompanied by a clear understanding of the strengths and weaknesses of both Evergreen itself and the attempts to generalize the model, is important and welcome.  But misinformation motivated by personal animus helps no one, least of all the workers at Evergreen itself.

It is for this reason that we are taking the unusual step of responding to the publication of Atlee McFellin’s unfortunate piece published online by Grassroots Economic Organizing (GEO).  McFellin was briefly an employee of The Democracy Collaborative and was terminated with cause in 2012 for abruptly and without warning or explanation abandoning his projects and responsibilities—a fact not mentioned by GEO in publishing his article.  We will let others be the judge as to whether some simmering resentment motivates McFellin’s one-sided attack piece on Evergreen.  More importantly, the so-called “intimate” involvement upon which the marketing of the account rests ended around the time McFellin was fired—which is unfortunate, because the analysis is woefully out of date, treating as current an exaggerated version of the early and somewhat chaotic days of the Evergreen Cooperatives.  The unsuspecting reader might be left assuming that everything has persisted as he describes it without change or alteration to the present day.  We find this doubly regrettable because it impugns the standing of Evergreen’s three worker-owned companies and their employee-owners.  By not bothering to speak to anyone at either the Evergreen Cooperatives or The Democracy Collaborative, and by not consulting any of the numerous and easily accessible publications that highlight the current status of the project or detail the past five years of learning and innovation at Evergreen, McFellin has produced—and GEO has published—an ill-informed and outdated article that does nothing to help people who care about building effective, sustainable, and democratic cooperative businesses.

This is not to say that Evergreen is perfect, or that given a chance to do everything over with the benefit of hindsight, we—together with many other people involved—wouldn’t have made some very different choices.  As anyone who has actually worked in a cooperative or started a real business can tell you, nothing is perfect, and nothing ever works as initially planned.  But seven years later, the Evergreen Cooperatives are providing living wage jobs with benefits to some 120 people in Cleveland, about 30% of whom have become worker-owners.  Many of these workers faced severe barriers to employment—criminal records, refugee status, or the lack of education and experience that comes with living in thoroughly disinvested urban communities of color.  At this summer’s national worker coop conference, Evergreen worker-owner Claudia Oates explained how the cooperatives are a lifeline for many: 

These are people that are always turned away, because they’re felons. They can’t find jobs. What we do provide is that we’re going to give you a work history, you’re going to be on time, look a certain way, dress a certain way. We mentor. It’s more than just a job, it’s like a family. Everyone says working there’s like a family, we take care of our own.

 Many of the workers now not only own a share of a democratically-governed business, but have been able to buy homes with assistance from the innovative structure of Evergreen.  Is Evergreen perfect?  Surely not—after all, it exists in the real, imperfect world.  But when you spend thousands of words attacking Evergreen without acknowledging the jobs it provides and the meaning it has for Claudia Oates—or Ernest Graham, Tameka Darby, Chris Brown, and all of their fellow workers—this looks a lot like grinding an ideological ax with the lives of real people.  

The Evergreen Cooperatives are rightly recognized as a groundbreaking effort to try something very different from business as usual which has left behind so many millions of unemployed and low-income Americans. Before Evergreen, no one had demonstrated the possibility of connecting the procurement dollars of large nonprofit institutions to a job creation strategy grounded in democratic employee ownership.  There were precisely zero worker cooperatives in Cleveland, let alone worker cooperatives designed to hire inclusively from disadvantaged communities.  The idea that millions of dollars in economic development resources from public and nonprofit stakeholders could be mobilized to create cooperative businesses designed to overcome structural barriers to employment—an idea that’s increasingly finding its way into the cutting edge of common sense in 2016—was nonexistent back then.  Nevertheless, the Cleveland Foundation, the city’s most important philanthropy, was willing to take the risk of trying something radically different, and enlisted the help of The Democracy Collaborative and the Ohio Employee Ownership Center to help.

Naturally, mistakes were made—ranging from overly optimistic assumptions about initial profitability (certainly not an uncommon mistake in the world of start-up business!) to naive expectations that workplace democracy is either easy or automatic.  These mistakes have been discussed at length, publicly, on numerous occasions—to assert that there is some kind of “untold” story here is disingenuous.  For instance, the author of the recent REDF Impact to Last case study of Evergreen was invited by Evergreen to spend an entire week at the cooperatives, given the opportunity to interview numerous worker-owners, and have full access to the financials of the project.  This was done precisely because Evergreen CEO John McMicken understood that being clear and open about the challenges of this model is absolutely necessary, particularly for those who seek to replicate it in their own communities.

Being clear about challenges is not the same as selectively using evidence to confirm your preexisting biases. Take the muddled assertion in the GEO piece that the very idea of using anchor procurement for community ends is some kind of “fallacy.”  What this fallacy is supposed to consist of is left unclear.  It was indeed the case in Cleveland that informal support to switch laundry away from existing contracts at anchor institutions proved to be more difficult than was initially imagined, and that valuable lessons were learned about the difference between vocal (but informal) support and signed contracts—and that securing the contract took longer than originally anticipated.  But it doesn’t follow that the underlying idea was invalid, or that the anchor institutions involved were constitutionally unable or unwilling to make this move.  On the contrary, the whole process has generated essential knowledge about the time and creativity it takes to move the wheels of a giant bureaucracy like a hospital purchasing department in the direction of a more inclusive local economy, and anchors like the Cleveland Clinic and University Hospitals have been partners in this work. 

By 2013, for example, University Hospitals, a major health system headquartered in Cleveland, intent on supporting the Evergreen initiative, required its laundry contractor to engage Evergreen Cooperative Laundry with a $1 million subcontract for five years—just one of many large contracts with anchor institutions or first-tier contractors in their supply chain that are currently providing the baseline of stable demand, allowing the Evergreen Cooperatives to grow and develop.  McFellin’s article fails to take seriously the growing movement among anchor institutions to evaluate the impact of their business practices on their surrounding communities.  This trend is particularly strong in the non-profit healthcare sector in the U.S., where an accelerating consensus about the key impact of social and economic determinants on health outcomes is amplifying institutional voices pushing for living wages, localized purchasing, and inclusive hiring as key tools to create community health.  This very week, The Democracy Collaborative convened more than 40 healthcare systems from around the United States, representing hundreds of billions of dollars in economic activity, to discuss these very opportunities.  Meanwhile, Cleveland Clinic has committed to a $12/hr wage as a baseline across its entire health system, nearly 150% of the current Cleveland minimum wage of $8.10. Case Western Reserve University grew procurement from businesses in the City of Cleveland from $75.7 million in 2013 to $110.4 million in 2015 alone. The Step Up to UH program at University Hospitals is building an impressive pipeline to connect residents of marginalized communities with the training and jobs they need at the health system. 

Nationwide, such institutional realignment of anchor institution resources has the potential to drive trillions of dollars to local economies in ways that center social and racial inclusion and that institutionalize community wealth building as a key criterion for economic decision-making, a vital source of reinvestment dollars at a time of austerity and shrinking public budgets.  Such a powerful shift will not happen automatically—it will require advocacy and engagement.  At a time when federal government supports for inclusive community development are severely threatened, we simply can’t afford to ignore and dismiss these possibilities just because working with large non-profit institutions can sometimes be challenging or frustrating.

McFellin’s piece is similarly harmful regarding the role of professional management and development incubation, where it ignores the facts both at Evergreen and in the cooperative sector more generally.  The idea that attempts to provide effective, competent, and professional management for the businesses under the Evergreen umbrella was somehow a grand moral failing perpetrated by shadowy forces working against the best interests of Evergreen’s workers and worker-owners only makes sense if one is deeply unfamiliar with cooperative business development as it exists in the real world.  There is indeed a healthy conversation to be had around the appropriate structures of management and governance for cooperatives.  What we see in the still exceptionally small worker cooperative sector—still around just 300 companies in the US—is this debate playing out in practice, with cooperatives at different scales and in different sectors and situations opting for different ways to manage their own businesses, ranging from consensus-driven horizontal models of complete self-management to more traditional management structures in which cooperative power is exercised to govern the firm, while the day to day operations are entrusted to appointed professional managers. Longstanding, respected, worker cooperatives like Equal Exchange have opted for the latter structure.  Why shouldn’t Evergreen be given this option?

But leaving the story where McFellin does tells the reader nothing about why the Evergreen Cooperatives are currently thriving, what they learned from their bumpy start, or why their worker-owners are demonstrably proud of their companies today.  In particular, the idea that there is some self-evident opposition between the interests of workers and the desire for professionalized management is simply incorrect.  In many cases Evergreen workers saw the early challenges faced by the companies they were part of as calling for more effective and professionalized management, not less.

Today, in the oldest Evergreen Cooperative—Evergreen Cooperative Laundry (ECL)—the early growing pains are largely a thing of the past.  The company is profitable—putting its worker owners in the position of having to increase the frequency of their member meetings to properly consider how to reinvest the very large revenues that the business is now generating, after completing repayment of an initial startup loan.  The capital accounts of worker-owners are growing—to the point where a topic at a recent worker-owners meeting was selecting a financial advisor to help manage these savings.  In 2016, the worker-owners democratically reconfirmed the manager that runs the business for a second term.  The respective roles of laundry coop and the nonprofit Evergreen “holding company” have been clarified.  The tour schedule that accompanied the—unexpected, but telling—explosion of interest in Evergreen as a model has been tamed and turned into a way to generate revenue for the cooperatives.  Worker-owners occupy the majority of positions of leadership on the shop floor.

The newest cooperative, Green City Growers (GCG), which is still in only its third year of full operations, is learning from this journey and building in a similar direction.  Challenges remain—but they aren’t the challenges you’d expect from reading McFellin’s piece.  For instance, in her presentation at the US Federation of Worker Cooperatives conference this summer, ECL worker-owner Claudia Oates highlighted that worker investment in a democratic workplace is far from automatic, and that her cooperative has therefore had to focus on the education and training that helps employees decide they want to take the step of getting on the path to worker ownership.

Actually listening to the worker-owners at Evergreen talk about their experiences over the past few years reveals a picture that bears no resemblance to the slanted account offered by McFellin.  GCG’s Ernest Graham, also attending the aforementioned UFWC conference, offered a clear account of his journey from entry-level employee to worker-owner and supervisor, in a company trusting in and supported by the community-focused nonprofit developers at ECC.   Chris Brown, speaking to a journalist from Smithsonian Magazine about the trajectory that led him from convicted drug dealer to Evergreen worker-owner, explained that:

This is my chance to right some of those wrongs.  It’s like a shot at the title when you don’t deserve it. This makes my mother proud. My neighbors want to know about Evergreen.

It’s in no one’s best interest to pretend that Evergreen is now or ever was a model of perfection. Fallible human beings made and continue to make Evergreen possible—and they have learned from the challenges they’ve faced.  Those lessons are important—as is the real difference Evergreen is making in the lives of its workers and worker owners.  Choosing to ignore these lessons and not even giving a hearing to the workers who have learned them is a hardly a sign of good faith.  Publishing such a piece does not indicate serious commitment to the full and fair examination of strategies that could move us towards a more inclusive, equitable, and democratic economy.  Having communicated with GEO about this article, the response we received did not inspire confidence in their journalistic integrity, and so we have chosen not to engage with them directly. 

For readers who would like to explore in an open-minded fashion with both the limits and great potential promise of the Evergreen Cooperatives, we’d suggest the following excellent resources by third party observers who have studied the evolution of “the Cleveland Model”: 

Ted Howard https://bulldog-walrus-c85a.squarespace.com/ted-howard
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