The facts in this case study about Big Timberworks’ conversion were collected largely from a great case study published by the Northcountry Cooperative Foundation Center in 2004. We highly recommend reading it for more detail on how the coop operates. In the last section below, we pulled out what we saw as key learnings for other businesses considering converting to a worker coop.
Background
Founded as a sole proprietorship in 1983, Big Timberworks is a design / build construction firm based in Gallatin Gateway, Montana. Big Timberworks specializes in timber-frame construction, as well as in woodwork, metalwork, stonework, and concrete building. Big Timberworks converted to a worker-owned cooperative in 1999, and as of 2014, the coop had 11 worker-owners.
Why it became a coop
The idea to transition Big Timberworks to a worker cooperative first emerged in the late 1990s, when Big Timberworks founder and owner Merle Adams began finding the rapid pace at which the company was growing unsustainable for one person to manage. He worried that if he decided to sell the company to an external buyer, he might put his employees’ jobs at risk—and furthermore, he wasn’t ready to leave the company. Adams and his employees looked to worker ownership as a solution. By converting the sole proprietorship to a worker-owned cooperative, Adams could stay on as a worker-owner and share the responsibilities of managing the growing company—simultaneously relieving the unsustainable pressure he was experiencing as a sole proprietor and offering his highly skilled craftsman employees the opportunity to “be their own boss.”
According to a case study of Big Timberworks’ conversion to a worker cooperative published by the Northcountry Cooperative Foundation in 2004:
The business of construction is one that usually spawns many small sole-proprietorships because once employees have mastered the craft many want to start their own businesses and “be their own boss.” Big Timberworks specifically wanted to retain its crew of highly trained, specialized and talented craftspeople. Worker ownership allowed employees to have the benefits of ownership without leaving the business.
According to Big Timberworks’ website, worker ownership has benefitted the company by “giving each employee owner a vested interest in the quality of their products while ensuring that the spirit of creation lives on.”
Conversion logistics
Under the guidance of the ICA Group, and looking to South Mountain Company as a role model, Big Timberworks began its transition into worker ownership in 1999. The company hired an attorney and an accountant to help navigate the complexities of cooperative law and accounting. Additionally, Big Timberworks successfully lobbied to update Montana’s 80-year-old cooperative statutes so that the company could become a “justifiable business” under the cooperative statue. The primary motivation for Big Timberworks to seek this update in state law, according to the Minutes of the Montana Legislature, was to “feel more at ease” in approaching others to buy into the coop.
To finance the buy-out, Big Timberworks and its advisors hammered out an eight-year buy-out plan. Former owner Merle Adams initially retained ownership of the land but sold the cooperative the buildings and equipment in order to make the transition to worker ownership financially feasible for Big Timberworks’ employees.
Challenges during conversion
The case study compiled by the Northcountry Cooperative Foundation notes that Big Timberworks chose to lobby for a change in state law in order to ensure that its transition into worker ownership was legally sound. Although lobbying for an update to Montana’s cooperative statutes, which had not been updated since the 1920s, certainly introduced an additional challenge into Big Timberworks’ conversion process, the cooperative transformed this potential barrier into an opportunity to ensure that Montana’s cooperative statutes are applicable to and supportive of modern worker cooperatives. In doing so, Big Timberworks not only secured its own status as a cooperative, but also paved the way for the formation of future Montana worker cooperatives.
The Northcountry Cooperative Foundation’s case study of Big Timberworks goes on to describe how
…one of the biggest challenges the coop has had to overcome is the lack of business experience on the Board of Directors. They’ve hosted trainings on such topics as how to read financial statements, and often Merle’s advice is used to interpret subjective business data…As the board’s skill-set becomes more developed, Merle’s role is expected to diminish.
Finding a balance point between the roles of the selling owner and the new worker-owners is an issue frequently faced by newly converted worker-owned businesses. Workers transitioning from purely employee roles into ownership often have never before had the need or the opportunity to learn the business management skills required of business owners. The selling owner can play a critical role in transferring ownership knowledge over to former employees, but he or she must simultaneously work toward relinquishing sole symbolic and emotional control over the company. Big Timberworks’ conversion provides an example of how one company has successfully dealt with this challenge.
Key lessons / effective practices
Big Timberworks’ transition to worker ownership demonstrates the extent to which the continuous presence and active guidance of a selling owner can ease the growing pains of a new cooperative business. Merle Adams’ willingness to train his former employees in how to manage the business was likely a critical component of the continued success of Big Timberworks during and after the transition to worker ownership.
Big Timberworks’ utilization of prior worker ownership conversions as models for its own transition should also be highlighted as an effective practice. To avoid wasting time and energy “reinventing the wheel” in designing its cooperative structure and membership requirements, Big Timberworks looked to another design / build worker cooperative for guidance. The example set by South Mountain Company, a design / build company that transitioned to worker ownership in 1987—more than a decade before Big Timberworks began its conversion—shaped how Big Timberworks formulated its own membership requirements. Following the South Mountain Company model, Big Timberworks set the equity investment it requires of new members relatively high ($10,000), and the probationary period relatively long (2 years), in order to require a significant up-front commitment from new worker owners. The commitment to long-term ownership is both monetary and symbolic, and may contribute to Big Timberworks’ low turnover rate and overall long-term success.