Worker Co-op Created to Provide Neighborhood Job & Skills Training
SOUTHWEST DETROIT CONSTRUCTION COOPERATIVE (SWDCC) CASE STUDY CATEGORIES:
Cooperatives (Co-op): Worker co-op created to provide neighborhood jobs & skills training with non-profit for back office support
Southwest Detroit Construction Cooperative (SWDCC), Painting and Plastering and Janitorial Cooperatives – to be sustainable most (but especially inner-city) worker co-ops need a supporting joint business resource or community support organization. That is why the Mondragon, Emilia Romagna, Evergreen Cooperatives in Cleveland, WAGES and the Arizmendi Co-ops in Berkley have all created mutual support organizations for back office and business development functions. SWDCC’s story explains why that is.
In 1985, Ed Bobinchak, then executive director of WARM Training, created Southwest Detroit Construction Co-op (SWDCC) to create a worker co-op as an employment mechanism for neighborhood residents who were trainees of WARM. People who took the training would join the co-op and begin paying their membership share through payroll deduction. The early organizing group agreed on a $1,000 membership. Members felt it was reasonable.
WARM as a non-profit had a lot of relationships with non-profit housing groups as a market for co-op. Ed became a licensed builder so they could bid on contracts. Ed did the outreach and bidding on most of the contracts. Co-Founder of WARM, Michael Laughlin, a college grad, teacher who had done home repair work also became a licensed builder and served primarily as the initial crew leader for the co-op. He subsidized the co-op with his own labor. WARM subsidized it with Ed’s work and the back office accounting and reporting on taxes, filings on the state, putting together the monthly financial statements for the members. WARM raised some grant dollars for training and workshops in management and business training for members.
During the first year of the weatherization contracts, Atty. Deb Olson structured a Mondragon style co-op structure. Ed and Mike sought the co-op structure because they were doing most of the work. The trainees would show up irregularly when it was part-time employment. WARM wanted the workers as co-op members to enable them to help the workers learn bidding and take on more responsibility.
The co-op worked up to about $50,000 in year one gross revenue and $300,000 gross in year two. Work in the 1st year was weatherization contracts funded by the utility companies for around $50,000 total. Second year WARM bought a building on Michigan Ave. The City of Detroit provided facade improvement federal block grant (Neighborhood Opportunity Fund) funds to renovate the building. In year 2 the revenue of $300,000 was for the WARM facade renovation and similar facade work for local non-profit Michigan Avenue Community Organization (MACO). The co-op bid and won contracts on other facade renovation for MACO members.
Although the original co-op idea was around weatherization, the members did not want to stay with weatherization, which is a dirty, messy job, crawling around in cellulose powder. The more skilled members wanted to get into more skilled and interesting work. WARM recruited several people who had more construction experience. There were now 3 different crew leaders. SWDCC began bidding on contracts through non-profits MACO, Church of Messiah Housing Corp. and other non-profit housing groups were getting city contracts to do home repairs. Co-op bid on and got many of those contracts. Ed and Mike were doing most of the bidding. There were a couple co-op members who, within their expertise, did the costing and bidding on those contracts.
At the end of 2nd year there were 5 or 6 full time employee owners, and 6 trainees who came into contracts as needed. They were not invited to become members until they proved their reliability and skills. A number were invited into membership. Some early members left and joined the carpenters union as apprentices. Another went back to school. The overall level of proficiency didn’t grow. SWDCC started bidding on kitchen and bathroom rehab that had higher profit margin and required more skill. There were fewer new trainees joining the co-op. The number of skilled and semi-skilled trainees decreased. SWDCC wanted the people with greater skills to have dependable full-time employment. WARM continued to bring in trainees.
By the end of the 3rd year the co-op was not making enough money to employ people full time. SWDCC needed the more skilled work to support co-op, but the members’ skill was not growing. The members went through a planning process to figure out what to do about it. They felt they needed to offer membership to more experienced and skilled workers and couldn’t continue to have 6 full-time members. WARM and SWDCC didn’t want to treat people as contract workers we would pull in when there were jobs. SWDCC did not have contracts enough to pay full-time wages and benefits for 6 members. The non-profit housing groups were SWDCC’s primary source of income and they were less dependable. There were a lot of roofing contracts. SWDCC bid in the spring and often didn’t get the work until November and were roofing in the snow. The work would bunch up in a few months of the year. With lulls in the winter.
WARM Training funding and the co-op profitability was not enough to keep employing all the members. A lot of the trainees who became members were basically looking for a job and accepted ownership as a necessary requirement. They were not joining as entrepreneurs. Without that entrepreneurial sense we could not get people to seek contracts or get work done quickly and effectively. There were a lot of callbacks and need for repairs that ate into the company’s profit. Ultimately, the bills put the company out of business. We had too many debts and not enough income. The company downsized from 6 members to 3 members who had more skill. They kept it going at a much reduced level. The members decided to do other things. Jim Sweeney started teaching at a vocational technology school. Michael went back to teaching. Several guys kept the insulation machine and continued doing insulation contracts. Jerry Jackson continued to do insulation jobs on his own. Former co-op members bid for jobs on their own, not as a co-op. No one got back their co-op share, but we distributed tools in lieu of co-op share. The insulation machine was in one person’s garage and when they got contracts the individuals could use it. The company did not go bankrupt legally, but the assets were distributed as fairly as possible.
WARM set up a painting and plastering co-op and a janitorial co-op both had similar fates. WARM provided the back office for these 2 co-ops. They never got the contracts consistency needed to have more than one or 2 members. When one lost interest they tended to fall apart. The janitorial co-op ran into hard times not having consistent contracts. There were accusations of theft from a well-placed customer, although we think there was not really theft. The janitorial co-op did not survive that.
Ed and another employee were doing the back-office for the co-ops throughout.
Dave Horning who worked w/ ch of mess did Painting and plastering and wanted to organize the painting and plastering. He did the costing and bidding. Pastor Ron Spann worked in the co-op and later wanted to become pastor. Horning late went to seminary and became a pastor too. The other 2 members never did any of the costing, bidding or creation of a business plan.
Recommendations from Ed Bobinchak: Look for people with entrepreneurial drive and experience who appreciate the need for efficiency and keeping within budget. It doesn’t come naturally and it is hard to create it.
There never was a business plan before we started and what we came up with turned out not to be the right market. Neither Ed nor Mike had previous experience running a company. Dave had never had full time employees before. We never thought it would make sense to hire the members as contractors. That seemed to go against the idea of creating decent full-time employment to support a family.
Ed realized he was not the right person to move the company forward. WARM hired Karen Brown, who had managed Cass corridor Food co-op to work with the co-op in the last year, as they needed someone with more experience. Working for the non-profit was a real benefit and a limitation. WARM and SWDCC chose contracts with non-profits because it was easy to get the contracts, but it was limiting due to timing of payments and timing of the contracts themselves. There should have been a lot more market research done before starting a company.
