How To Turn Your Non-Profit Into A Worker Co-op
Above photo: Members of the Wisconsin Natural Heritage Cooperative.
An Interview with Kim Grveles, Co-founder, Wisconsin Natural Heritage Cooperative.
Josh Davis: So first off, could you just introduce yourself and tell us a little bit about your co-op?
Kim Grveles: OK. My name is Kim Grveles and I’m a conservation biologist and the co-op that I helped found is called Wisconsin Natural Heritage Cooperative. And basically that firm is an environmental consulting firm that contracts with the Wisconsin Department of Natural Resources. And so the company is made up of conservation biologists. There’s a database manager, a program manager, and the workstations for most of the people in the company are right at the DNR office building downtown and in Madison. And so we’re embedded, as they say, in the bureau.
And we do an endangered, rare, and endangered species work, which means that we do inventory work in the state. Most of the people working on the program go out in the field — well, many of the people do — and some people are mappers. They enter the data that’s collected in the field as well as other data that is turned in to the program. And the program that they work on is called Wisconsin Natural Heritage Program. It’s been around since 1986 and was started by the Nature Conservancy. It’s an international program now. Every state has some kind of a heritage program and the employees for that program used to be employees of the Nature Conservancy. And about maybe eight years ago — no, about 10 years ago — the Nature Conservancy left the program and it was up to each state to figure out who would take over the program, whether the folks, those employees would become state employees, as they did in some cases, or whether another nonprofit would step in and become the employer.
And in the case of Wisconsin, we had Golden Sands Resource Conservation and Development, which was a nonprofit out of Stevens Point, Wisconsin, that agreed to take over the contract and hire all the workers on the program that was with the Nature Conservancy and agreed to take them on as their employees and they took over the contract. And that worked out pretty well for the first few years. But then there was a change in management, a huge change in management, with the nonprofit Golden Sands, and the employees in the program were having difficulty communicating with the new managers. And then new methods of management were not very employee-friendly and were very hierarchical and top-down. “We’ll tell you. You don’t tell us,” and that kind of attitude. It was an attitude of employees should just shut up and put up with whatever. And if we take away your benefits or we decide you’re not going to get paid for a holiday, then we can do that because we’re the employer.
And the difficulties were such that people were really, really wanting to know what can they do about this. Is there any kind of recourse that could be taken to advocate for themselves? And I was new to the program, right after the change in management had occurred. I was a DNR employee before that. I had a temporary position which ended. There was a hiring freeze on so they couldn’t hire me in a new position and they couldn’t keep that position going, so they put me on the contract to do more of the same of what I had been doing, which was managing rare and endangered species projects. And I saw that emails going back and forth between employees of Golden Sands on the new contract, my fellow employees, and the difficulties that they were having with management. And I had just learned about worker-owned cooperatives a few months before and so I threw out this suggestion. Maybe we should start a worker-owned cooperative and put in a bid for our contract the next time it comes up for bid, which was the following spring. And this was in the fall of 2011 that these conversations took place between us employees.
You know, most of the people in the program are scientists, and they’re very thorough about decision making, they like to do a lot of research and check out all the options. So we spent probably four months meeting with folks from MadWORC, meeting with Anne Reynolds from UW Extension Cooperative Development at the university, and talking with different people. We also looked into could we form a union? Would that be a way to deal with the situation? Would there be another nonprofit that would be willing to take and the contract and hire us as their employees? Could we possibly make that happen?
That turned out to be very awkward. You know, how do you approach a nonprofit and ask them to basically compete against your boss? And it was just not something we felt comfortable doing. And the union, there were only eleven of us employees. So we didn’t feel that a union was going to make much difference at all.
So, I think there were still a lot of people in the wintertime — this was probably in February when we finally stopped doing the research and stopped meeting — we had all the information we could possibly have, but there were still several members who were hesitant about forming the cooperative. So we kind of set it aside and didn’t talk about it too much anymore. And in late April, the DNR put out the call for the proposals to come in for the bid. And when that was issued, their deadline for the proposal to be in was in three weeks. So we had three weeks to get our act together.
And I sent an email out and I said, I need to hear — I think it was on a Tuesday — I sent this e-mail out and I said, “I need to hear a yes from everyone, all eleven of us, by Friday and I’ll move forward and get us incorporated and, you know, get bylaws done and get a business plan together so we can we can put in a proposal.”.
And we had already talked to the former program manager who managed the program prior to, and just after, the new management took over at the nonprofit. And she quit after the new management took over because they were asking her to do things that she didn’t feel was ethical in working with employees. She was a personnel expert and she quit. When we were exploring our options. We got in touch with her and asked her if she would be willing to be the program manager if we did indeed form our own company and she said yes, and that she would help us get the bid package put together because she had done that before. We didn’t have experience doing that, and there’s a lot that goes into that proposal that she had the expertise to do, but we didn’t.
And so she got to work right away on the proposal so that it could be submitted on time. And I, with the help of a few other colleagues, got with a lawyer and got the bylaws written and worked with some others to write our business plan and approached a local credit union, Summit Credit Union, to see about getting a loan for a startup. And the credit union was so cooperative and so helpful, and they were willing to take our contract as collateral for a loan. And the loan was the only way we could start because you don’t get paid from the DNR until you’ve logged hours and you have expenses that you can turn in as an invoice to them. And it was going to be a month before we were going to get our first check from the DNR, so we had to have money to cover us for that first month of operation for payroll and for paying all the insurance and all the other startup costs that you have as a new business.
We knew that we could undercut the nonprofit that we were bidding against. We knew that we could undercut them because they were charging an overhead charge that was very high and really not necessary. They were trying to make money for other things they wanted to do with their nonprofit off of our contract. And the thing of it is, is what pays for the contract in a lot of cases is we, the employees who are managing projects for the DNR, have to write grants to get money to pay our salaries and to cover the costs of the projects. And that overhead charge was making it very difficult for us to get grants and be competitive in the grant world. And so we knew that we had much lower overhead. We didn’t have a brick and mortar place to support.
We knew we were going to run the company out of our home computers and our cell phones, our personal cell phones. And that we didn’t need — we weren’t going to have expenses like rent or utilities or anything that’s costly like that. We didn’t need to pay for copy machines. We just used our own equipment at home. And, you know, those who printed a lot may be turned in an expense report and got reimbursed, but it wasn’t much expense at all to run the company. We knew that that was going to be the case. So our bid was a bid that was attractive because of the much lower overhead. We kept the same fringe rate because the benefits were still going to cost the same, and we had the former program managers help in determining what these costs should be, and where we should set our overhead rate, and what we should put in for our total yearly budget. And we won the bid.
Basically, we did a solid three weeks and two weeks after we submitted our proposal we got word that we won the bid and that our doors were going to open on July 1st, which is the first day of the fiscal year for the state. So we made the fiscal year the same for our company and we opened our doors on July 1st, 2012. And it was a very exciting time in our lives.
Josh Davis: Wow, that’s great. So are there still the original 12 members, that you started with?
Kim Grveles: Well, I think there have been one or two new employees, and we had one employee leave because she accepted another capacity at the DNR. And so she became a DNR employee and left our company. And I’m retired now, so I’ve left. I don’t think they’ve hired a replacement. That’s not been the case with anyone who’s retired at the DNR. They just don’t hire new people very often. But I think there are 10 people now since I retired. And the program manager still works part-time as the program manager. She’s still there.
She chose not to be a member of the cooperative, so she’s just a part-time employee. The other members are member-owners. There is one member who is a part-time worker. She works part-time for us and part-time for the DNR. And she chose not to be a board member — not to be on the board. The rest are all board members because there is only nine of them now that are board members. It’s a small enough group that everyone who is a member-owner can also be a board member. And then they hold elections every year for officers. We scatter them or alternate them every September. Either they’re electing a president and a financial officer or they’re electing a vice president and a secretary. It alters every other year.
Josh Davis: I was interested to hear that you were able to get a startup loan from your credit union. That’s great and seems like kind of a rare thing. Was that loan structured so that some individual member had to underwrite that, or was the co-op, as it were, the signer on that loan?
Kim Grveles: Well, the co-op was the signer and those of us who were board members. I was the first president, and I think the president and the financial officer were the signers on the loan, but on behalf of the company. And it was a line of credit, so we could draw. And it was up to a certain amount. We only needed a certain amount. And I don’t remember what that amount was. It took us maybe two years, I want to say, to pay back the loan.
We set our overhead rate very low. We weren’t out to make a profit. Even though we didn’t have nonprofit status, we didn’t consider ourselves a profit-making company. We just wanted to earn enough to pay ourselves and to have similar benefits to what state employees have, and to be able to pay our bills, and not have a whole lot leftover at the end of the year. So we paid it off as we were able, and we only had to borrow to get us through that first month. So it wasn’t a whole lot that we had to pay back. And I don’t remember amounts, I can’t tell you amounts. That’s too far back and I don’t remember. But it was a considerable loan, to begin with, but our contract was worth, I think, over a million dollars.
Josh Davis: Correct me if I’m wrong on the timeline, did you get that line of credit from the credit union before you had officially been awarded the contract, or just immediately after?
Kim Grveles: Well, we met with them to discuss what would be possible. And they said, “well if you get awarded the contract, we will take that as collateral.” And so they just had to hear from us that we won the bid and we were awarded the bid. And then the money was made available to us at our startup date.
Josh Davis: Okay, great. So you had that preexisting agreement with them. So as soon as you got word —
Kim Grveles: Right. We met with them before we knew. They knew we were doing it, and they said, “well if you win, the contract is so valuable that we will take that as collateral.”
Josh Davis: And I assume that you guys are still a remote company, or have you ever had any kind of brick and mortar presence?
Kim Grveles: Never, not even to this day.
Josh Davis: This really seems like being ahead of the curve at this particular moment in time.
Kim Grveles: Yes.
Josh Davis: But you did say that most everybody there actually does work in the DNR office,
Kim Grveles: Right. So this program is in what’s called the Bureau of Natural Heritage Conservation. It used to be the Endangered Resources Bureau. And that name got changed a few years ago. It’s now the Natural Heritage Conservation Bureau, and they’re embedded in that bureau. So where that bureau resides in the main home office for the Department of Natural Resources, which is in a big government building a block from the Capitol in Madison. They are on the same floor in the same section. All of us workers had cubes in there. So the people who still work for our co-op, they each have a cube in that bureau. It’s cube land, they call it because it’s all the DNR employees. This is a huge building with big floors and lots and lots of cubes, and that’s where they reside and do their work, usually.
And of course, field season can begin for some people in March, as early as March, or even earlier than that. It depends on what species or what it is that they’re monitoring out on state properties. But then by this time of the year, by May, everybody’s out in the field that is going to go out, either doing plant surveys or bird surveys or other kinds of animal surveys. And for some of them, they go until September out in the field, especially the natural community and botany people. Bird season, field season, pretty much is over in mid-summer, mid-to-late summer they finish up. They’re mostly interested in recording breeding birds, nesting. And by late July, most of the nesting for birds has completed itself with the exception of a few species.
Josh Davis: So, for other people who might be listening to this and who find themselves maybe in a similar situation to what you were in — working for a nonprofit and thinking maybe we could do this same thing as a co-op — what words of advice would you have for somebody contemplating trying to do this sort of thing?
Kim Grveles: Well, I would encourage them to not be afraid. It’s a very scary big leap, and it takes a bit of guts to take that leap, especially when you don’t have a lot of experience or knowledge of worker-owned cooperatives. We had to get our learning curve up to speed very quickly, and I think we’re still learning about worker cooperatives and what it means to be a worker cooperative, and what are the best ways to function as a worker cooperative.
It took us a while to sort out roles and responsibilities of board members. So, I highly recommend that anyone thinking to start a new that they reach out to whatever resources are in their community, whether it’s a university cooperative development group, or a group like Madison Workers Cooperatives that provides that kind of support, and is willing to work closely with you to get through all the hoops you need to go through to get started. I think those resources were vital to us. We couldn’t have done it without that kind of support. And we continued to have MadWORC members come and hold sessions with us to help us sort out a policy, and roles and responsibilities. And we continued to meet with Anne Reynolds at UW Cooperative Center and get advice in how to overcome certain challenges. And I think that the more you immerse yourself in the cooperative community, the better your chances are for success.
So if people who want to start a worker-owned cooperative are currently working for a government agency — like we were working for a nonprofit that was contracting with a government agency — but even if you are working directly with a government agency and they’re going to outsource your jobs to another company, you have the best expertise that anyone could have for doing your job. And if you form a worker cooperative and put in your own bid, there’s nothing to stop you from doing that. And your bid will probably be the most attractive because you know the best of how much things cost, and what to expect in the way of expenses. And you can also address how the work will be done better than anyone else could. And so your chances for keeping your jobs that way are, I think, really good, as as we were able to do. And so I think what we did could be a model for any government employees where they’re going to get laid off, and the job is going to be outsourced. All government agencies have to put bids out for proposals. They can’t just give the job to somebody out. They can’t just hire a company willy nilly. There are laws that prevent and prevent them from doing that. And so putting in your own bid is a good alternative for saving your job.
Josh Davis: Great! That’s a really good thought because I was thinking “oh, you know, it’s dependent on a government grant,” and we all know that government funding for lots of things is getting cut all the time. But also a lot of the time the way that gets done is, like you said, through outsourcing. So there’s a way to maybe salvage a silver lining from outsourcing government employees. If they convert to co-ops that would be an actual positive outcome.
Kim Grveles: You know, I would think that it would be possible, if there was some government program, that they were going to decide, “OK, we’re not going to fund this program anymore for employees. We’re going to outsource it to a private company.” Well, you can become a private company by forming the worker cooperative and putting in your own bid. I mean, we did it in three weeks. It’s not that difficult to do. Just get a lawyer and make sure that your ducks are in a row for all the legalities of it and you’ll be fine.
GEO Collective (2020). How to Turn Your Non-Profit into a Worker Co-op: An Interview with Kim Grveles. Grassroots Economic Organizing (GEO). https://geo.coop/articles/how-turn-your-non-profit-worker-co-op.