Obran’s Ambition to be the Largest Co-operative in the World
Baltimore is an American post-industrial city facing chronic troubles. For many, it’s a tough place to live, and for those coming out of incarceration, it’s even tougher. In the US, employers are allowed to ask candidates if they have ever been incarcerated. To combat this significant obstacle, a staffing agency called Core Staffing was formed by three returning citizens in order to provide work for the formerly incarcerated. After that success, the team banded together a group of freelance tech workers led by people of colour and formed a digital creative agency of sorts, Tribeworks, which continues today as an artist-led worker-owned co-operative. Planted on both ends of the socio-economic spectrum, these two organisations decided to merge together as a co-operative holding company, the Staffing Co-operative, which eventually became the Obran Cooperative in 2018. Obran has now grown to six subsidiary companies under the co-operative umbrella, representing a range of industries, from home health care and HR software to third-party logistics and shipping.
Obran is a worker-owned co-operative conglomerate rooted in the values of social justice and equity. It prioritises the economic advancement of its worker-owners and has championed marginalised groups as core stakeholders since its founding in 2018. I interviewed the Chair of Obran’s board for a book I recently co-authored, Assets in Common: Stories of Business and Community Leaders Remaking the Economy from the Ground Up, and was struck by her genuine care for the cause, and her bona fide background in the co-operative movement. The team are card-carrying worker co-operative types, but they are ready to do more with the model.
In the US, the median revenue of a worker-owned co-operative is just $282,000 with a median team of ten employees, according to the 2021 Worker Cooperative State of the Sector Report. Worker co-operatives tend to be small; Obran wants to be big. They have publicly stated their ambition to be the largest worker-owned co-operative in the world. Rather than growing a single business, their business model is closer to that of a diversified private equity fund. By acquiring businesses into the co-operative, Obran sees the potential to create economies of scale, and to create economic resilience for worker-owners.
Obran’s unique model of a ‘co-operative holding company’ entails bringing multiple organisations, all dedicated to a social purpose, under a single roof. In Assets in Common, we also unpack a related approach: the use of shared services as a way for multiple organisations to create deep mutual support. Obran internalises this idea of shared services. It owns multiple companies, which then share certain functions across the group, like HR and payroll. This way, resources and expertise can go to broader use, rather than each portfolio company having to invest in their own services. For instance, the home health group has two companies with a similar business model and offering, who share an HR team that recruits new nurses for both companies.
The founding team have spent the past few years not just acquiring and starting companies, but also bolstering Obran to be ready for larger growth. Workers at Obran hold a stake in the umbrella co-operative, not just the business in which they work. This means that workers are buffered if one industry has a bad year, and in this way, they benefit from the kind of diversification that tends to be available only to wealthy investors.
Obran does take on outside investors, but they will always have minority governance control, and Obran only takes on companies in which it has a controlling stake of at least 51%, ensuring that the co-operative remains an active owner-operator of these companies, rather than a passive investor. Employees vote on board members, and always have board control. This means the employees of Obran collectively have full governance control of all the companies in the group. Since the top-level holding company is structured as a Colorado Limited Cooperative Association, subsidiary companies can be incorporated as simple Limited Liability Companies or other entities. These subsidiary portfolio companies are referred to as ‘operating companies’, or ‘OpCo’s’, and their employees’ membership and ownership rights roll up to the entire umbrella co-operative. Individual worker-members can elect board members or run for the board both at the OpCo and HoldCo levels, elected democratically by the one member, one vote process. In addition, financial investor board seats are limited, and in this way, employees retain full governance control of all the companies.
Obran is acquiring companies in three industry groups: Healthcare, Employment Services, and Logistics. As we wrote in Assets in Common: “It finances these acquisitions through a fairly standard capital stack of senior debt, seller financing, and equity. The co-operative has an internal Acquisition Fund which contributes $700K–$2M of equity per deal. Directors have meaningful financial incentives tied to the growth in enterprise value of their groups, seeing as much as 20% of the uplift in the value of the companies in their group. However, this performance-based compensation is also contingent on dollars going to worker-owners, which is determined by an increase in the disposable income of workers in the group.” Said another way, directors can earn a healthy cut, but only once employees see real financial gain first.
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Obran ownership model
Assuming Obran is able to grow significantly over the next ten years, it will be interesting to see how culture and governance play out and how much positive impact results for the employees. Perhaps the larger scale will generate multiplier effects that greatly benefit employees. For any organisation to scale, however, there will be growing pains, and many questions arise with respect to the impacts of scaling. Will employees be enthusiastic about ambitious growth, and be motivated to help drive growth year after year? If growth happens mostly via new company acquisition, will it really impact the day-to-day experience of teams at the other companies? If major amounts of outside capital are required to finance acquisitions, what will Obran’s balance sheet look like? Is unlimited growth only bad when it centralises wealth and power, and somehow good when it benefits more stakeholders?
Evolving the worker co-op culture
Obran is almost a hybrid of a private equity firm and a worker co-operative, which produces a creative tension where others might fall into discord. It ditches notions of martyrdom that are endemic to much of the solidarity economy. Instead, it powerfully repurposes the tools of capitalism to benefit workers. Success, for Obran, is based on employee outcomes rather than shareholder value. By using a private equity playbook for the people, Obran is pushing the worker co-operative movement out of its comfort zone.
Even if Obran does not achieve their goal of becoming the largest co-operative in the world, that’s not really the point. The real goal seems to be to leverage the same tools used by traditional capitalist groups and share the benefits more broadly. The question is: is it enough just to redistribute wealth? Or is there a human intimacy in smaller-scale organisations that leads to a quality of life and sense of agency and direct control that will be lost in a large co-operative holding company?
In our research beyond Obran, we explored what might come ‘after’ co-operatives, driven by the question of whether redistributing wealth and power is sufficient to enact the change needed in today’s world. One emerging solution is that of Steward Ownership, whereby a special form of trust owns the company. In this case, the mission, cause, or purpose of the organisation takes precedence over profit maximisation, and the management has a fiduciary responsibility to uphold this mission, which is formally encoded in the core legal agreements of the organisation. Steward Ownership is compatible with the values of the co-operative movement; in fact, many steward-owned small businesses use the structure as a means of de facto employee ownership. The purpose of the company could be to support the emotional, physical, and economic wellbeing of its staff, which could entail profit distributions to owners, but could also be in the form of health programmes, leadership training, and family support.
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