THE COMMONS Business Model™ is a socially responsible, self-managed, profit-sharing business model using the Benefit Corporation for structure and Consortia as an operational system.
All five are proven separately.
Let’s look at the record of the five proven components of THE COMMONS Business Model™:
- Social responsibility
- Benefit corporation
1. 10 Brands Doing SR Right
Most Corporate Social Responsibility (CSR) programs in large corporations are designed to preserve or increase revenue, not serve the common good. Largely it’s a scam. But there are exceptions. These are real:
- Johnson & Johnson: The company has focused on reducing its impact on the planet for three decades and continues with the goal to procure 35 percent of its energy from renewable resources.
- Google’s CEO stands against racism and the Google data center is using 50 percent less energy than others in the world.
- Coca-Cola’s massive fleet of delivery trucks contributed 3.7 million metric tons of greenhouse gases to the world before switching to alternatively fueled trucks.
- Ford Motor Company plans to reduce gas emissions by 2022 by using its EcoBoost engine to increase fuel efficiency.
- Netflix offers 52 weeks of paid parental leave, which can be taken at any time whether during the first year of the child’s life or another time that’s needed.
- TOMS mission is to donate a pair of shoes for every pair it sells and has resulted in the donation of over 60 million pairs of shoes to children in need.
- GE launched Ecoimagination a decade ago to double down on green technology and the payoff is $20 billion in revenue from green products.
- New Belgium Brewing Company, owned entirely by its employees, produces 18 percent of its own electricity through solar panels and wastewater.
- The Walt Disney Company is committed to reducing its carbon footprint with goals for zero net greenhouse gas emissions, zero-waste and a commitment to conserve water.
- Lego will invest $150 million over the next 15 years reducing packaging waste and investing in alternative energy sources.
2. Morning Star: No Bosses, No Titles, No Structural Hierarchy
Morning Star has become the worldwide market leader in tomato processing with revenues around $1 billion annually. It has no bosses, no titles and no structural hierarchy.
Doug Kirkpatrick, a management and HR consultant, served as the first financial controller for Morning Star. He tells the story:
“It all starts with principles.
“Self-management will not succeed when you don’t believe in two crucial principles. First, people should not use force against others; all interactions should be voluntary.
“And second, people should honor the commitments they make to others.
“Self-management without these principles is doomed to fail. It sounds elementary but it’s by far the most essential condition for successful self-management in any environment. The lack of belief in these principles is an important reason why we see large amounts of self-management projects fail. It’s used as a tool to save costs or follow the hype, but if the belief isn’t there, it is doomed to fail.”
- All interactions should be voluntary.
- Honor your commitments.
- A collective mission statement: “Self-management does not mean doing whatever you want; it’s about being part of determining what to do,” Kirkpatrick says.
- The Colleague Letter of Understanding (CLOU): It is a short document that details an employee’s personal mission and all commitments he/she has made with other colleagues who are affected.
- Clear process to resolve conflicts: Whenever a conflict, disagreement or problem arises, workers have to resolve it themselves. They can’t pass it along to a manager.
- A trusting leader: Morningstar owner Chris Ruger is the one who initiated the self-managing way of working. He is also important to establish and maintain the levels of trust, loyalty and innovation.
- Every business has its challenges: On-boarding, unlearning, self-management are tough.
3. Profit-sharing Boosts Productivity and Satisfaction
The first step toward proving the efficacy of profit sharing is to debunk the myths.
Back in 2016, the National Bureau of Economic Research undertook a major study of companies which use profit-sharing in some fashion and came to the conclusion that these programs do work when combined with supportive management practices.
The research concluded that three of the most prevailing concerns about the efficacy of team incentives were more myth than reality.
First: the “free rider” problem.
Turns out not to be such a big deal because participants who work in teams tend to monitor their coworkers, enforcing reasonable levels of effort.
Second: the “line of sight” problem.
Managers fear that workers can’t see the link between the minutiae of what they do with the overall output of the company. But study after study shows that workers who belong to Employee Stock Ownership Plans (ESOPs) and group-based pay schemes identify more strongly with the firm than those on standard pay contracts.
Third: Fear of fluctuations in earnings.
Although this seems like a reasonable concern, studies do not find much of an association between risk aversion and workers’ desires to participate in shared capitalism. The spirit of entrepreneurialism runs even higher when risk as well as profit are shared.
There is a down side to ESOPs, though.
Employees don’t feel a “warm glow” in response to the “gift” of free stuff or purchase of discounted shares, which is the usual method. These individual performance-related pay plans do not have that positive impact. Shared capitalism programs do.
The conclusion is that profit-sharing, not gifting or discounts, can boost productivity and satisfaction. But it has to be done right.
4. The B Corp: SR with Both Profit and Proof of Social Value
Many businesses today claim they’re in the business of “doing good.”
And it is clear that today’s consumers care a lot about ethical, social and environmental issues. The change is beginning to influence purchasing decisions.
But there has been nothing in most corporate legal structure that vouches for their social commitments. The Benefit Corporation requires proof.
“The benefit corporation is a remarkable and disruptive new vehicle,” says Jason Erb, director of strategic alliances for small business at the business services company.
Wolters Kluwer CT Corporation. “Before its existence, directors and officers of public and private companies were obligated to consider shareholder returns above all else.
“Now, the benefit corporation entity structure enables companies to legally embrace other directives in addition to profit, such as the statutory mandate to provide a material, ‘positive benefit’ to society.”
Why become a benefit corporation?
B Corps have a different transparency and reporting requirements than other company structures.
Rick Alexander, head of legal policy at B Lab, says:
“Benefit corporation status has advantages for every stakeholder in a business, from consumers and talent to shareholders and directors. Directors enjoy reduced director liability when making decisions that consider or balance nonfinancial stakeholders, while shareholders can hold the company accountable to its mission, all while enjoying all the precedents and protections found under current corporate law. ”
Examples of B Corps
Better World Books, which is one of the founding B Corps, is an excellent example of what the B Corp movement is all about. This online book retailer was founded in 2002, and states on its website that social and environmental responsibility is at the core of its business; it is not simply an “add-on component.”
The company operates using what it calls a “triple bottom-line business model” — financial social and environmental. It makes its profit by selling new and used books, but it gives a percentage of its funds and unsold books to literacy foundations across the globe. If a book can’t be sold or donated, Better World Books ensures that it is properly recycled.
Many well-known companies have become benefit corporations.
In 2012, national outdoor clothing company Patagonia became California’s first registered benefit corporation, and more recently, Kickstarter converted to a PBC (public benefit corporation).
There are already over 3,000 registered benefit corporations, including nearly 300 in Delaware and 200 in California. There are now 1,550 Certified B Corporations in 42 countries in 131 industries including Ben & Jerry’s, Cabot Creamery, Laureate Education and Etsy.”
5. Consortium: Accomplishes More Than You Can By Yourself
A consortium is an agreement, combination, or group (as of companies) formed to undertake an enterprise beyond the resources of any one member. Arrangements are made in which members pool their human and financial resources.
“Coopetition” is a coined word that is used when companies — that are otherwise competitors — collaborate to pool resources on areas not strategic to their core businesses.
For example, the GENIVI Alliance is a not-for-profit consortium between different car makers in order to ease building an in-vehicle “infotrainment” system. Another is the World Wide Web Consortium (WeC ) which is a consortium that standardizes web technologies. Sharing marketing cost is also a motivator.
In Commercial Use: One example of a for-profit consortium is a group of banks that collaborate to make loans. Alyeska Pipeline Service Company, the company that built the Trans-Alaska Pipeline System, was initially a consortium of BP, ARCO, ConocoPhillips, Exxon, Mobile, Unocal and the Koch Alaska Pipeline Company.
In the Travel Industry: A great example. Independent travel agents and agencies work together to increase their purchasing power, commissions and amenities for their customers.
In Non-profits: They have been the consortium leaders from the beginning because they are generally not in competition with one another and there are no legal constraints. Libraries share resources, coordinate activities and combine expertise.
In Education: The Big Ten Academic Alliance in the Midwest and Mid-Atlantic, Claremont Colleges consortium in Southern California, Five College Consortium in Massachusetts, are among the oldest and most successful higher education consortia in the world.
In Aerospace: Airbus Industries was formed in 1970 as a consortium of aerospace manufacturers. The sharing of production and engineering assets made Airbus Industries a sales and marketing company. The companies collaborated on the development of Airbus, but guarded the financial details of their own production activities.
In Government and Industry: The Institute for Food Safety and Health is a consortium consisting of the Illinois Institute of Technology, the Food and Drug Administration’s Center for Food Safety and Applied Nutrition and the food industry.
THE COMMONS Business Model™: Brings these five processes and structures together in total alignment. All we have to prove now is that they will work together. To that end we start strong because the success of each of the components is already proven.
COWORK Entrepreneurs™ is committed to making that happen by attracting the interest and energy of others with the talent, passion and entrepreneurial spirit necessary. People who are willing to invest their intellectual capital for the sake of themselves as well as those who will benefit from a socially responsible, self-managed, profit-sharing environment in which to live and work.
Our work is transparent and everyone has an opportunity to learn and share.
Jerry Ash, the Disruptive Professor