Recommended actions provide the specific steps that a workforce or economic development agency can take to implement job quality in their local area. These steps are intended to provide both guidance and inspiration by highlighting a variety of options including how to support job seekers, businesses and their own operations.

First Steps

When embarking on an employee ownership initiative, consider starting with the following steps to gain a strong foundation prior to execution:

Become familiar with the basic forms and legal structures of worker-owned companies and how they can advance inclusive economic growth and racial and gender equity. Start with this article from Project Equity and this study from the Rutgers Institute for the Study of Employee Ownership to learn the basics.

Three common employee ownership models are:

  • Employee Stock Ownership Plans (ESOPs): Qualified retirement plans are used to transfer all or part of the company’s shares to a trust administered on behalf of the employees. This infographic details how an ESOP works.

  • Worker-owned cooperatives: These are 100% employee-owned and are managed via democratic values (one worker, one vote). Employee-owners share profits based on hours worked.

  • Employee Ownership Trusts (EOTs): An Employee Ownership Trust (EOT) is a trust that holds some or all of the shares of a company on behalf of the employees. An EOT ensures employees have a share in profits, a voice in governance and that the mission of the business—and its jobs—can be preserved for generations to come.

Want to learn more? Check out these two studies:

Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and Profit Sharing: The authors show that employee ownership has a long and robust tradition in American history. They argue that “policies that encourage firms and workers to broaden capital ownership and access to capital income, consistent within the long American tradition of encouraging broad-based private property ownership, should be part of any effort to address today’s economic inequality.”

US Worker Cooperatives: A State of the Sector: Democracy at Work Institute conducted a national survey of worker cooperative firms to answer basic questions and lay the groundwork for future studies. This appears to be the first nationwide survey to solely target worker cooperatives.

Pain points are workforce needs that can serve as a starting point for internal job quality initiatives. Examples include high vacancy rates, long time to hire, high turnover, burnout, lack of diversity (overall or in specific positions), or low productivity. Employers may struggle with one or more of these issues. 

The US Chamber Foundation's Talent Pipeline Management process is a great resource to assist an employer in thinking through their full business cycle and identifying key challenges.  The Workforce & Organizational Research Center's Job Maps can also be helpful in considering gaps in employer key performance indicators.

Interview business-facing team members (e.g., business services, small business coach) to identify low-hanging fruit from within your current portfolio of business customers. Low-hanging fruit might include businesses that have already expressed interest in employee ownership, owners who are actively looking to retire and/or owners who are looking for a way to support their employees during their upcoming transition. 

For additional insights, staff from Title I Workforce Innovation and Opportunity Act programs, small business development centers, the Economic Development Department, chambers of commerce and other partners are likely to have a perspective on which businesses may be interested. Here’s an example of a town hall that one economic development agency used to engage its community and gather perspectives.

Create a theory of change detailing the specific problem to be addressed, as well as the employee ownership (EO) initiative’s activities, desired outputs and outcomes (short-, medium- and long-term). Incorporate this theory into your agency’s job quality strategy.

Program logic models can be helpful for documenting a theory of change. This guide takes you step by step through the process.

Develop an EO Plan

Once you have completed learning and engagement in your community, the next step is to develop and Employee Ownership  (EO) plan.

An EO plan outlines the specific actions to be taken to advance EO in your community. You can begin with one or multiple focus areas below. Strategies may focus on a single item or may include multiple items that will be implemented simultaneously or sequentially. It is recommended a work plan have at least a two-year timeframe, as many actions will take time to implement.

Your business services staff can serve as a valuable asset by connecting businesses to key resources and identifying potential employee ownership (EO) projects. Here are two specific actions that can be taken

  • Establish a hotline and technical assistance “hub” for business owners interested in learning about EO. Owners can visit either virtually or physically and business services staff can refer candidate businesses to obtain additional details, resources and/or technical assistance.  Colorado’s Employee Ownership Office, New York City’s Department of Small Business Services “Owners2Owners” hotline and website and the Minneapolis (MN)'’ Co-operative Technical Assistance Program (C-TAP) model are good examples. Hub functions can be incorporated into existing funding streams as additional resources available to businesses.

  • Train business-facing teams to be “deal spotters.” Incorporate one or more questions related to succession planning and interest in employee ownership in existing business needs assessments/intake forms. Develop a referral workflow with partner agencies to quickly funnel leads to technical assistance providers. Business services representatives working on the Workforce Innovation and Opportunity Act Title I programs, small business development centers, economic development departments and local chamber of commerce staff are all good candidates to be “deal spotters” because they interact directly with businesses on a regular basis. This desk aid can be adapted for use by staff.

Here are some sample metrics that can help support changes to your business services:

  • Number of businesses receiving EO education and/or technical assistance

  • Number of EO businesses transitioned/created as a result of agency activities

  • Number of workers with EO stake in a business as a result of agency activities, including percentage of workers who identify as Black, Indigenous or people of color (BIPOC) 

Your existing internal funding streams and practices can be leveraged to jumpstart employee ownership (EO) in your community. You can start with subsidies and training.

Subsidize EO feasibility studies for companies interested in making the transition. This activity can be subsidized via existing Economic Development Administration (EDA) funds, Community Development Block Grant Funds, local fee/tax revenues and/or Workforce Innovation and Opportunity Act Title I Rapid Response and Layoff Aversion funds.

You can build technical competencies in-house or procure a set of technical assistance (TA) providers to help businesses with feasibility studies. For example,  the State of Colorado uses this simple form for interested TA providers; here is a sample contract scope of work that can be used to form an RFP/contract with TA providers. You may also find this sample report (2021 Democracy at Work Employee Ownership Report) useful for thinking about how you report out your investments to stakeholders.

Some of the benefits you can highlight to businesses interested in employee ownership are tax advantages, new options for retirement benefits and even shifts in employee attitudes. Check out the following reports to learn more:

ESOPs as Retirement Benefits | An Analysis of Data from the US Department of Labor: This study found that companies with an employee stock ownership plan (ESOP) contribute substantially more to their retirement plans than non-employee-owned companies. This promotes employee wealth building.

Does Employee Ownership Change Employee Attitudes and Behavior? An Econometric Case Study: This study shows changes in attitudes and values of workers over time as their firm transitioned from a family-owned to a 100% employee-owned firm. As the transition was completed, new employees became more profit-oriented and appreciated profit-sharing, saw management in a more positive light and became more committed to the firm.

Support participatory management structures through post-EO conversion training programs like Project Equity’s Thrive Program, using incumbent worker training funds under the Workforce Innovation and Opportunity Act or other state and federal sources. Ensuring that employee-owners understand that they benefit when the business performs well is central to reaping the full benefits of this job quality intervention. Focus areas include things like crafting participatory decision making, organizing ways to share key business information, developing an understanding of important data, growing business literacy and analyzing business performance.

Here are some sample metrics to help shift how you use your funding:

  • Number of businesses receiving education/TA from EO programs

  • Number of EO businesses transitioned/created as a result of agency activities

  • Number of workers with EO stake in a business as a result of agency activities, including percentage of workers who identify as Black, Indigenous or people of color (BIPOC)

Develop a loan guarantee program to incentivize traditional lenders to finance transitions of smaller businesses to employee ownership. This work may be done in close coordination with your office of economic or small business development. Loan guarantees can provide equitable access to capital for workers seeking to purchase a business from a selling owner..

Local and regional government agencies can use Community Development Block Grant (CDBG) funds, Workforce Innovation and Opportunity Act Layoff Aversion funds or general funds and/or they can partner with local philanthropic foundations to help establish the loan guarantee pool to incentivize the local lending market. Such a guarantee program can be a powerful way to make sure individuals who identify as Black, Indigenous, or people of color (BIPOC) and other minorities who may not have access to traditional credit can participate in employee ownership. For inspiration, check out these profiles and case studies of businesses in a variety of industries that have taken advantage of loan guarantees.

Amend the scope of existing loan programs to include the facilitation of employee ownership transactions as a target activity. Consider tapping into existing American Rescue Plan Act and Small Business funds (e.g., State Small Business Credit Initiative) and even Community Development Financial Institution’s programs for underrepresented individuals. Learn from what other jurisdictions have done. For example, Miami, Florida, amended its Economic Development Loan Fund  to include business transitions to employee ownership and capitalized the fund using  CDBG. Berkeley, California, amended its revolving loan program to remove obstacles that precluded worker cooperatives from accessing loans.

Workforce and economic development agencies can lift up employee-owned organizations in their communities through their own policies and processes. Procurement is a great place to start.

Give preference points to employee-owned companies in procurements for vendors, contractors, and subrecipients, incentivizing employee-owned business growth through your agency’s purchasing and contracting, and ensure that companies that currently have other preferences (women-owned, minority-owned, veteran-owned) can maintain preferred status post-transition. This can be done agency-wide through ordinances and policy changes led by executive officials. But there may also be opportunities to include language specific to employee ownership within evaluation scoring criteria for specific RFPs and proposals, similar to how priority points are given for women-owned businesses or those in a Promise Zone.

The number of preference points, how they can be awarded to employee-owned businesses and any supporting materials required should be clearly stated in updated procurement policies. Details on how preferred status and preference points can work with regard to employee ownership are available here. Need inspiration? The U.S. Department of Defense (DoD) has a history of awarding contracts to employee-owned companies. A study by the federal government found that DoD “generally rated contracts with companies having employee stock ownership plans as satisfactory or better for quality, cost and schedule.”

Here are potential metrics to track as you shift your procurement process:

  • Number of employee-owned businesses currently on the agency vendor list

  • Dollars spent of percentage of dollars spent with employee-owned businesses

Workforce and economic development agencies can guide job-seeking program participants to employee-owned companies, where they are more likely to find high-quality jobs.

Try developing a list of local employee-owned companies to target for public wage subsidy and training programs, such as Workforce Innovation and Opportunity Act on-the-job training and customized training products. Prioritizing employee-owned companies for job placement and wage subsidies can help program participants find jobs with greater representation and wealth building opportunities.

If you need some more evidence to support why employee ownership (EO) can be impactful for your participants, check out these two studies that show how EO can improve the lives of your participants:

Building the Assets of Low- and Moderate-Income Workers and Their Families: The Role of Employee Ownership: This first-ever national study of low- and moderate-income workers at employee-owned companies shows that employee stock ownership plans (ESOPs) enable families to significantly increase their assets. A Rutgers University study found that ESOPs also shrink gender and racial wealth gaps.

The Case for Employee Ownership: This study by Project Equity summarizes the evidence that employee ownership—via both ESOPs and worker cooperatives—offers great value to businesses, workers and communities.

Support entrepreneurs launching employee-owned business models like the CoRise Cooperative with training or subsidies to disrupt industries that often have lower job quality. CoRise Illinois will administer a contract for subsidized childcare for low-income families (the Child Care Assistance Program) through the city of Chicago, Illinois, and provide business technical assistance to its member-providers.

Here are some sample metrics to get you started as you build supports for jobseekers:

  • Percentage of jobseeker placements in jobs with broad-based employee ownership

  • Number of workers with an EO stake in a business as a result of agency activities, including percentage of workers who identify as BIPOC (Black, Indigenous and people of color) 

Advocacy is an important tool for raising local awareness.

Serve in a convening role (or support an existing local effort) to bring together allies to report on your employee ownership (EO) initiative’s progress and build the EO network in your region. Stakeholders may include local employee-owned companies, service providers, policymakers, philanthropic organizations, and economic and workforce professionals This group could also advance state EO incentives. (For example, Colorado’s new tax credit is defraying up to $100,000 in costs of EO transition.)

Such collaboration can help to raise awareness of EO and its positive impacts on job quality. The City of Durham (NC) EO Roadmap and Workplan and the Municipal Playbook for Employee Ownership are great examples of how stakeholders can come together to make significant shifts in their community.

Serve in a convening role (or support an existing local effort) to bring together local community institutions to promote equitable economic development through purchasing cooperatives. Stakeholders could include faith groups, schools, philanthropies, affordable housing and other nonprofit organizations, as well as a local small business agency, service provider partners and existing minority- and women-owned business enterprise (MWBE) programs.

The National League of Cities has leveraged purchasing cooperatives because the model allows small businesses to compete by pooling their resources. Individual retailers—not outside investors—own the purchasing co-op so they make decisions based on the co-op’s interests. Member organizations share purchasing contracts to acquire the goods and services needed to run their independent businesses. For example, ACE Hardware, a cooperative of independent hardware stores, formed a co-op to be able to compete with larger big box stores.

If a purchasing cooperative does not currently exist in your area, consider collaborating with city leadership on the benefits of developing a cooperative to address equity goals by facilitating local supplier matchmaking and expanding the pipeline of considered vendors.

Here are some sample metrics to get your advocacy efforts started:

  • Number of community members receiving education/technical assistance from EO programs

  • Pre/post surveys that capture changes in buying behavior related to EO companies

  • Percentage of tax savings as a result of new policy implementation

Concerned about challenges you may face? Go here.

Need assistance implementing this recommended action? Go here