The problem of personal risk taking and investment
in the formation of worker owned cooperatives.

Daniel Kriegman, Ph.D.
Human Services Cooperative, Inc.

The Problem: Human Nature, Competition, and Cooperation

Underlying every conception of human social behavior--including economic, political, and psychological models of human functioning--there are basic philosophical ideas regarding human nature. What is a human being? What motivates an individual? What are the intrinsically human goals that lead one to a fulfilling and satisfying life? And, what is the essential nature of the relational world, i.e., are human relations inherently fraught with conflict or are they potentially, fundamentally mutualistic? It is easy to see that there are now widely accepted assumptions-- assumptions underlying the belief in the importance of individual endeavor and the belief that only competition leads to the healthiest most vibrant economies--that consist of a view of human nature as essentially selfish, i.e., as essentially oriented toward personal achievement and personal acquisition even if it is at the expense of others. As Freud stated in Civilization and its Discontents:

As we already know, the problem before us is how to get rid of the greatest hindrance to civilization--namely, the constitutional inclination of human beings to be aggressive towards one another ... I too think it quite certain that a real change in the relations of human beings to possessions would be of more help in this direction than any ethical commands; but the recognition of this fact among socialists has been obscured and made useless for practical purposes by a fresh idealistic misconception of human nature. (p. 144)

With the recent demise of communism and the general disillusionment with socialism, we see that, like Freud, there is widespread skepticism about the likelihood that economic changes can lead to changes in interpersonal relations. This disbelief has now taken hold as the firmly dominant, cultural Zeitgeist. Accordingly, other notions are simply idealistic misconceptions.

Yet, it is also not hard to see that those who believe in the ability of worker owners to cooperate in "generalized self employment" (Ellerman, 1992) must hold to a different set of implicit assumptions that include the idea that human relations need not be primarily conflictual. Those who believe that worker ownership can be a powerful tool for change do, in fact, feel that economic changes can lead to dramatic changes in interpersonal relations. They do not believe that personal aggrandizement provides an inherently far more powerful motivational pull than group success and community enhancement. Yet, are those who hold such views idealistically self deceptive? Is the example of Mondragon unique to a specific, socio-cultural context and thus not replicable on a larger scale in the rest of the world? Can the failure to utilize ESOP's to build genuine worker owned and controlled enterprises really be laid at the door of a lack of adequate funding, insufficient time, or a lack of managerial skill? Is it not possible that human relations are, in fact, naturally competitive, hierarchical, and motivated by self interest? Is it possible that Mondragon, by being an exception in unusual circumstances, simply helps highlight the rule?

As noted elsewhere (Kriegman and Knight, 1988), I believe there is a fairly conclusive case against the underlying assumptions regarding the inevitability and primacy of human competition. In short, modern evolutionary theory--our only scientific theory of creation and the prime theoretical ground for all notions of human nature--now fairly universally sees humans as evolved social creatures who, along with their selfish and self preservative motives, have incredibly powerful social, mutualistic, and cooperative motives built into our most basic biology (Trivers, 1971, 1985). These social motives have an evolutionary history of over 50,000,000 years (Kriegman and Slavin, 1989), are found in species that are much less psychologically sophisticated, and simply cannot be chalked off to the effects of social acculturation operating against inherent, self-centered biological motives.

So, if conceptions of human nature don't support the dog-eat-dog view of human nature, let's get back to work on developing cooperative models and working out the problems of funding and managerial skill. Why waste time on polemics about human nature? This is an important question and the answer is twofold. First, we simply cannot proceed without either stated or implicit assumptions guiding our endeavors. I would suggest that getting these assumptions out onto the table, so to speak, where others can see them and they can be openly discussed can help prevent our ending up blindly following absurd models of human nature and motivation in an attempt to force round pegs into square holes. And I believe that, for most of us, it can finally be agreed that communism was just such an absurd and ultimately violent endeavor. Second, regardless of where one ends up on the debate about human nature, there are now certain undeniable facts about human nature that are known.(1) These facts can help guide us and may explain the difficulty we have been facing in establishing viable models for cooperative endeavors.

Briefly put, there are no known creatures that, as a rule, endeavor to maximize the success of others at the expense of their own genetic success. Every living organism evolved, precisely, because each existing creature's ancestors were more successful at replicating and promoting copies of their own genes than were their less successful cohorts.(2) However, in the context of self promoting organisms, there evolved interactive, social creatures. In some of these species-- and we believe humans are not only in this group, but may be the prime example (see Kriegman and Knight, 1988; and Kriegman 1988, 1990)--altruism toward kin and the trading of altruistic acts became essential activities without which survival itself was impossible.

Consider that one of the most powerful human motivators--one which may be the primary cause of what is often the ultimate adaptive failure, suicide--is shame. Shame, the feeling accompanying the notion that others want to shun and avoid us. Shame, the feeling that represents the fear of being excluded from the human community. While this is only one example, it is presented as a simple and clear counter to the notion that all of the primary, inborn, human motivations are selfish. While clearly what we are ashamed of can be attributed in large part to learning and culture, the fact that there is a universal, cross-cultural reaction pattern with specific facial movements, posturing, and internal feeling states that we term "shame"and which we appear to be able to see in more rudimentary forms in other social animals such as dogs indicates that this social motivation is biologically rooted in our psyches.

Thus, any view of human motivation must include powerful, innate, social motives operating within a context of self promotion and self protection. Yet, again, while there may be a sound basis for developing models of cooperation, we must acknowledge the enormous competition and human destructiveness that surrounds us. Because all living organisms are the descendants of their relatively more successful ancestors, we must acknowledge that living organisms must be "designed" to promote their own interests first. Thus attempts to write off the ubiquitous selfishness in human behavior as simply resulting from learning or the cultural relationship between people and possessions (local economics) must ultimately be seen as naive. Using this, admittedly, schematically simplified context,(3) we shall find that a re-evaluation of the dramatic, "exotic flower" of Mondragon (Ellerman, 1992) and the disappointing struggle to create a Mondragon style cooperative movement in the US, can help us to explain why we have seen only modest successes (e.g., Rick Surpin's Cooperative Home Care Associates) here.

In addition, we shall see that the problem is not funding or managerial skill. The problem lies in basic human motivations. The problem is not the design of worker owned cooperatives: they should work just fine if they exist. Humans can cooperate quite effectively along the lines of the worker owned corporate model. Rather, the problem is the creation of worker owned cooperatives: we have no model for the creation of a cooperative. If this is so, then the solution must include the designing of methods of channeling those forces that motivate significant human endeavors into the development of worker owned cooperatives. Designs for solutions that fail to utilize our knowledge of human motivation in the attempt to develop economic cooperatives are designs for failure.

In the following section, I shall use my experiences in creating the Human Services Cooperative, Inc. to provide a framework for a brief, comparative analysis of four enterprises (including three traditional corporations composed of two non-profits and one for-profit). Using the framework presented above, our analysis will lead to a need to develop a worker ownership model that includes our attending to our self promoting needs while simultaneously tapping into powerful social motivations.

The Struggling Lone Entrepreneur: The Fire in the Belly of Capitalism

Betty had a successful manufacturing business making futons. After struggling for several years barely able to make ends meet, she was able to finally make a good living and even to pay her employees fairly well. However, her dream was to be in mail order and she sold her futon firm in order to create a mail order, natural fiber (cotton), children's clothing business. This enterprise struggled and required all of the profits from her sale of her old business. As she eventually had to rent space for her stock, she also opened a store. The mail end of the business continued to lose money while the store appeared to have the potential to succeed. In addition to her investments, she borrowed everything she could from her family, and along with sizable investments from a new partner the business barely stayed alive.

Betty worked 80 to 100 hours a week without pay. She was evicted from her apartment for non-payment of rent. Creditors called constantly. Desperately she kept the business alive by living in poverty. She lost her car, was evicted again, and her business was also evicted. In another location she continued on. The buyer of the futon business mismanaged it and it went belly up which ended the monthly payments on which she was dependent. At home, her phone was turned off. Only because she had two young children was her electricity and water not turned off. She was forced to move again. The pressure was unbearable. Frequently she would spend her days crying in despair. But, it still appeared as if the store should eventually turn a profit. In order to survive, she began to pay herself a small salary, but with creditors holding back on goods she couldn't pay her rent, and again she had to move her business.

This time, with the economic downturn in Massachusetts, she was able to obtain a small storefront in an excellent location and the business continued to exist. In the middle of this recession, in this new location, she began to turn a real profit. She is now in the process of slowly paying off her creditors. Goods are flowing again and she is shopping for a new car. She will eventually be quite successful. Though she will treat her employees well, when she was struggling, she struggled alone. Unable to accept failure and driven by her dreams and her faith in her ability to eventually succeed despite the pressures that would have driven most people to quit long ago, she will be a successful entrepreneur in a successful thriving business.

Betty surely isn't the point.(4) The point is that she is one of many millions that shape the world and its economies. Driven by their dreams of success, risking everything, working past the point of reason, some will succeed while many others who have tried will fail. Yet, for each failure, a thousand will rise to try in their stead. This is the fire in the belly of a vibrant, vigorous, capitalist economy.

The Struggling Cooperator: Who's Going to Put the Bell on the Cat?

Meanwhile back at the cooperative ... The history of the Human Services Cooperative, Inc. (HSC) can be used to compare the lone entrepreneur and the cooperative entrepreneur. As noted in the following are two more very brief stories about traditional entrepreneurs.

HSC's history begins in the 1970's, when a move toward community control of mental health programs was underway. The Solomon Carter Fuller Mental Health Center, Inc. (SCFMHC) was a non-profit corporation with a community based board that was to eventually run all of the programs at the Fuller Center. The idea was to decentralize such programming making it more responsive to the needs of the community. In the late 70's, the Regional Adolescent Programs (RAP's) were formed and SCFMHC was awarded the contract to run the one that was to be housed at the Fuller Center in the South End. This program served much of the city of Boston, including most of its minority communities. The RAP's were to be high quality, intensive, highly funded ($50-70,000 per bed per year), secure (locked), treatment programs for the most difficult and troubled adolescents in the mental health system. Previously these patients ended up being treated on adult inpatient units or prisons because the units for children could not manage them. In addition, these new RAP programs were to provide more intensive treatment in an attempt to enable them to enter the community and lead more normalized lives and to keep them from spending their adult lives in jails and mental hospitals.

The RAP program that was developed at the Fuller was the Adolescent Rehabilitation Program (ARP). Staff was hired. Several hundred thousand dollars was spent on training the staff and establishing the program prior to the arrival of the adolescents. The adolescents were admitted. The staff quit.

Several attempts to stabilize the program ensued. Racial issues in staff hiring were quite problematic. With its goal of enabling the local minority community to control a program for its youth, hiring was frequently not based on skill and experience. Chaos reigned. Some of the staff were bringing in drugs to the patients. Some were having sex with them. Some were stealing the equipment and food (typewriters, copy machines, microwave oven, turkeys, etc.). The good staff along with the bad ended up in a dangerous war with the patients. Riots would occur. Staff would be overwhelmed by a gang of several kids, locked in one of the rooms, and the patients would take their keys and escape. On more than one occasion, the escaped youths committed violent crimes. Locked door seclusions, four-point mechanical restraints (tying each arm and leg down to the four corners of a steel framed bed), and forced chemical restraints (injections of psychotropic drugs for control, not for treatment) were occurring every 2 or 3 days in order to manage 8 patients. Though there were few white staff (3 or 4 out of 40), racial tension was high. Two of the male staff tried to rape one of the few women staff.

In this atmosphere of chaos, the executive director of the Fuller corporation hired a new program director who had experience treating difficult patients at the Treatment Center for the Sexually Dangerous Offender. This new program director hired the author of this paper as the new clinical director because I had worked with the new program director at the sex offender unit.

When I arrived at ARP, the place was in the type of chaos described above. I was given the mandate of bringing it under control and creating a genuine treatment program. Needless to say, this was a daunting task. I remember dreading entering through the locked doors into the chaos and violence that characterized the unit. In the very first community meeting, I was assaulted by a 210 pound, six-foot- two, paranoid schizophrenic while the staff sat by wondering what this new "doctor" was going to do.(5) Clearly tension was high and I wasn't going to get much help from the staff who believed that, "You should never let the kids know you're afraid of them. If you do, they'll get the upper hand."

To keep a long story short, there were many struggles. All that remained of the old program by the time we were done was a handful of good staff and a strong affirmative action hiring policy. After two years, ARP had undergone a complete transformation. Understanding this turnaround is a key to understanding the eventual formation of HSC. But first, a very brief documentation of the extent of this transformation: rather than having a violent incident requiring some form of physical restraint occur every second or third day, there was one such incident every third or fourth month! In addition, over the same period our census went from eight to eleven and the patients we were receiving were continuing to be more and more disturbed and violent!

How was this transformation effected? Basically, by the creation of a miniature, therapeutic community. I called in consultants to help me (my personal experience, at that point, was woefully inadequate) and the first thing they suggested was the creation of forums in which every member of the community could have their concerns heard and addressed. Two meetings/week were set up for staff to discuss their gripes, personal issues, and feelings as they related to the job and working together with the other staff. At first these meetings were tense and unproductive. Little by little, feelings and tensions began to emerge. The commitment to making sure that all people could be heard, fair treatment, and the insistence upon both individual and mutual responsibility made it safer to begin to bring up the myriad issues that had always lain beneath the chaos at ARP. The meetings became extremely volatile and productive. Rather than acting out the staff tensions using the kids, the staff tensions were directly expressed and efforts were made to address them as best as possible. Sometimes this was successful. However, even when problems remained, staff were able to share their concern about them, the feelings they engendered were heard, the person responsible (for the problem or its resolution) was identified; in short, feelings were shared and expressed rather than bottled up and acted out.

This extended to the larger "community meetings" that became the central organizing experience of this miniature community. In these meetings, all staff and patients were free to address any and all problems they had with one another. On many occasions, a staff person ended a violent incident by simply saying to a patient, "The situation is too tense and dangerous. You know that if you go to your room now, you'll be able to bring it up in the community meeting." Almost magically, when assured--through actual experiences over many months--that there was, indeed, a forum in which their concerns would be heard, respected, and addressed, "psychotically violent" adolescents became reasonable and responsible. We were able to ask them to take responsibility for their actions. Consequences for irresponsible action were accepted by the adolescents without violent struggles. Responsibility was carefully rewarded.

After two years of struggling with patients and staff to create a true "therapeutic community," it became clear that one existed. When I arrived, I had found it frightening to leave my office and the work I had to do there to go into the unit with all its violence. Two years later I found it difficult to leave the unit and the warmth of that community to go back to my office to do boring paperwork. Treatment was occurring. The kids were functioning like normal adolescents. At that point (four years and several million dollars after the program's inception), the program was closed down. The pain at the ending was extreme. Staff and patients had formed bonds that continue to this day, more than a decade later. Patients (as is currently occurring at many inpatient units) were dispersed to myriad programs. The comradery that had been developed "in the trenches" was broken up as staff sought other jobs and left, one by one, as placements were made for the kids and the program dwindled away.

Beyond ARP: More experience in the world of human services

I then went to work for a program that provided a range of services to families that had an identified adolescent in crisis who would need hospitalization--or long-term, ARP-like, institutional treatment--without these services. In attempting to avoid exorbitantly expensive hospitalization, the family was "bombarded" with services that, despite their extent, were still far less expensive than institutionalization of the "identified patient." A school liaison/education specialist worked with the child, the parents, and the school. Individual therapists were provided for all family members who were in need. Day care was available as well as physical help with some of the family's practical concerns (shopping, going to job interviews, cooking, etc.). I was the first family therapist for this new program and would provide the family therapy in the clients' homes (most of the families were too problem ridden or suspicious to travel to our office). Despite the opportunity to develop the type of therapeutic community that existed at ARP, I found myself working for a non-profit corporation that was unresponsive to the staff. Turnover was high. Success was low. The concept was great. Execution was poor. Yet, the program grew by leaps and bounds and after only one year of operation was a multi-million dollar program!

The founder of this non-profit corporation created a well-paying job for himself that eventually would provide access to myriad methods of obtaining substantial financial gain in addition to his salary. By making an enormous investment and taking substantial risk, the non-profit entrepreneur could envision totally controlling a powerful economic enterprise with all of the attendant benefits.


I was asked to return to the state run Treatment Center for Sexually Dangerous Offenders to be the Director of Training and Supervision, a part-time position. In comparison to what I saw at the non-profits, only a state run facility could surpass them in ineptitude in delivering human services. However, in this case, with a strong union, the work situation was actually a compromise between the needs of the workers and the politicians who manage state monies and programs. Job performance (client care) was extremely poor. This model appeared no better--and in client care, was actually worse--than the others.

While working there, Charles Knight gave me a booklet about the Mondragon cooperatives in Spain. The Mondragon cooperative model appeared to provide an incredibly successful organizational structure that could embody the spirit of the community at ARP and would be more conducive to the creation of a therapeutic community than either a non-profit or a for-profit. Why couldn't their model be used to run human service programs in the United States? These programs were currently being run by corporations that had organizational structures that did not support real therapeutic communities and frequently were designed in ways that lead to disenfranchisement of the majority of workers whose interests are secondary to the owners (in a for-profit) or top level managers or controlling founders (in a non-profit). Why not combine the Mondragon model with the therapeutic community, clinical model?

HSC: The First Attempt

So, in the mid 1980's, I called together a dozen of the best staff from the then defunct ARP. I described the model and suggested we set up something along the lines of Mondragon. Enthusiasm was extremely high. Meetings were held. Nothing happened.

The problem was clear. All of those at the meetings had at least one full time job (human service workers often have to hold down two or more jobs to make ends meet). I was suggesting that several people each take responsibility for getting things started (doing research, developing a plan, writing proposals, etc.). People didn't have the time or energy and no one was prepared to guide us and make sure tasks were done. We needed a leader. No one had the time or energy for this very demanding task and no leader emerged. It was like the cartoon in which a clever mouse suggested to his assembled community that, if a bell was placed on the cat, they would never have to live in fear of being captured by surprise and eaten. The mice rejoiced until some spoil sport asked, "Who's going to put the bell on the cat?"

Beyond ARP, Part II: Yet More Experience in the World of Human Services

So, I went to work for a for-profit, human service firm as the Clinical Director of its three licensed, mental health clinics. The company's primary business was in providing therapeutic placements for adolescents who needed structured, supervised living situations that could serve as an alternative to hospitalization. The company would be paid $90-120/day for each placement (again, a great savings to the state over hospital placement) while those who actually cared for the adolescents would receive $35-45 per day. While there were other costs, the profit margins were potentially huge while virtually all of the labor--and in such an operation, labor represents virtually the entire cost of operation--was provided by workers who received far less than half of the revenues.

I, along with other top level managers, struggled with the owner--an entrepreneur who, like Betty and my previous "non-profit" employer, had placed his life on the line, risked everything, and worked extremely long hours to build this business--and his administrative team to try to make the company more responsive to its workers. However, he was more interested in developing a model that could be sold to some large, national health care company. The resultant ironies were severe. Workers making $13,000/year would stand before the owner on his $10,000 carpet to plead for more money to enable some of the kids (cared for by the company) to go to the beach. Or at a company picnic, they would be allowed to go into the owner's new Mercedes to use the car phone to make a call to check on one of the kids who they were worried about.

Meanwhile, in six years, this company had grown to a six million dollar a year enterprise and its worth kept increasing. There was an overabundance of referrals for placement of kids and the main obstacle to growth was recruitment of staff who could manage them. Recruitment was the central concern of the company and it spent over $2,000 for each successful recruitment and training. Growth occurred despite the fact that the care providers felt used and abused; turnover was high.(6)

HSC: The Second Attempt

Again, feeling that the Mondragon model could be the key to a much higher level of productivity and much higher quality client care, I made plans to leave this company. In 1986, I contacted the old staff of ARP and the enthusiasm was still there. Having now closely watched the founders of several companies, I understood what the problem was. The owners made the companies happen. They took enormous risks and worked long hours when the company was just an idea in their minds. When their companies were successful, they had no intention of sharing them with others who were not as integral in their conception and development, who had invested far less, and who had risked little or nothing. While I understood that such leadership was required--someone had to put the bell on the cat--I still was unwilling to take such a risk: I had to support a family and in general I do not have "the stomach" for high stakes gambling.

Instead, I approached a philanthropist who had a history of interest in cooperatives. I asked for a loan to support me during the creation of HSC so I could act as if I were an entrepreneurial owner. The loan had excellent terms. Interest and principal could be paid off over an unspecified number of years and if the company went bust I would not have to pay it back. Under such conditions I could afford to take a "risk." I placed the $10,000 in the bank and proceeded to bring together the incorporators of HSC to form the corporation. Even with the loan--ten thousand dollars doesn't go very far in paying for start up labor--I could not begin to make the kind of investment the aforementioned founders had made in their companies. So, I restricted my investment to writing contract bids in response to the Commonwealth's Request for Proposals for human service programming. The $10,000 remained in the bank(7) as I was able to support myself from my private practice and write the proposals in my spare time.

The Treatment Center for Sex Offenders was looking for a vendor for a $260,000/year contract for all of the psychiatrist and psychologist services for the center. I bid on it and, when HSC received the contract, HSC was in business. Dennis McNamara, who had worked at the Treatment Center for over 20 years and was intimately familiar with this contract was hired to be the executive director. That contract increased to over $347,000 and along with a contract for over $820,000 (for the emergency mental health services for the Lowell area), HSC had annual contracts for over one million dollars/year.

Repeated attempts at expansion have yielded some results and there have been some setbacks (current annualized gross revenues are 1.2 million, and though profit is minimal, the company has always been profitable). The board of HSC has come to the conclusion that state contracts are too unstable (witness the current statewide situation as well as my experience at ARP). Though HSC has 18 full time employees, it only has the original incorporators (and the Executive Director) as worker owners: there is nothing for new workers to "buy into." If the current contract were lost the company would disappear. In addition, because all of the jobs are wholly dependent on one contract which could easily be transferred to another vendor, how HSC does business is tightly controlled by the Department of Mental Health. Thus, worker ownership would give the workers little additional control over their work situation. HSC has generated many ideas for other services that are sorely needed, for which a market exists (initial feelers have received strong responses), and which have the potential of providing much better jobs for the staff while simultaneously providing higher quality services for clients. Yet, unlike submitting bids to the state (something HSC's founder was able to do in his spare time), these programs require true entrepreneurial development.

Attempts to follow through on the development of these new programs quickly led to a repetition of the earlier attempt to start HSC. HSC's Executive Director is too busy running existing programming to take the ball and lead the labor intensive entrepreneurial operation. Given the fact that the entrepreneur has to give his/her life's blood to start the operation and would not then be its owner, given the fact that none of those available has the enormous energy to spare, and given the fact that such entrepreneurial investment always entails a high level of risk, there were few demanding to be allowed to do the job.

The Successful Worker Owner: "I Didn't Do It. We Did."

In Rick Surpin's Cooperative Home Care Associates, we have a very similar description to the events at ARP. A largely minority staff led by a community oriented white manager has developed an intensely committed and caring corporate "family." The description of the internal community feeling as a safe haven from the rest of the world (Surpin, 1992) is almost identical to the atmosphere at ARP where workers would come in on their day off to hang out and check in on the kids and the other staff.(8) The major difference, of course, is that CHCA is a worker owned cooperative.

Yet, despite Rick Surpin's protests that CHCA is not Rick Surpin--it is the result of the efforts of all the worker owners--we must wonder if it could exist if it weren't for his vision, leadership, and unusual willingness to take a risk and make a major investment. Also note that, as with HSC, Rick Surpin's risk was subsidized. In the case of CHCA, a non-profit agency granted some initial start-up funding (Surpin, personal communication, 1992). As Mondragon may be an "exotic flower," is it not possible that the type of leadership Rick Surpin supplied required an unusually unselfish investment in an ideal? And even then, CHCA required some external support to get started. If this is so, then worker ownership will never have a significant impact on the larger economy unless some method can be devised for generating and supporting this type of commitment.

Movements, Cults, and The Question of Mondragon

But what about Mondragon? How did Mondragon attain such remarkable success? Doesn't Mondragon prove the power of cooperation? The answer is quite possibly, "no." Mondragon has all the characteristics of what--for want of a better word--can be called a "movement."

One major advantage the Mondragon cooperatives had is simply unavailable in the United States, especially if one is trying to create an enterprise with diversity. Mondragon is in the Basque region of Spain with a monolithic racial, ethnic, and religious identity. As the separatist movement there indicates, the people of this region have long felt themselves to belong to another independent nation that should not be part of Spain. They speak a separate language and the sense of community they have among themselves far exceeds anything that exists in multi-ethnic organizations in the United States. When they formed the banking cooperative (the source of half of the funding for the cooperatives), their drive for deposits took on a character that appears to be similar to American community cooperation during metal and bond drives during World War II. Thus, the funding and risk taking at Mondragon has a nationalistic character that--outside of what may have inherently entailed similar conditions (i.e., being at war with an external enemy)--we have been unable to duplicate in America.

Until recently, the unique context in which Mondragon has operated was considered to be the background context in which the power of cooperation has been demonstrated. But as Ellerman's (1992) comment about the "exotic flower" nature of Mondragon indicates, there is now some question as to whether other forces besides the economic model are the prime movers there. Indeed, we may have to consider if what fuels Mondragon are the same principals that fuel other movements and if Mondragon's economic pattern may simply be what gives this particular movement some of its specific identity.

So what is a movement? How is it different from any other group or organization? For that matter, how is it different from a religious cult? While any attempt to explain such social phenomena lies well beyond the scope of this paper,(9) this brief exploration of this issue seems to indicate the direction in which we must look in order to find the key to the solution of our problems. We probably can agree that nationalism, religions, movements, and other such phenomena have spawned some--if not all--of the most significant social changes that have been brought about by intentional human action.(10) Certainly, there are few, if any, examples of significant shifts in wealth or power that have occurred without some form of a movement. In addition, it is in the history of movements and social change that we find some of the most altruistic activity. On a massive, organized scale, the type and degree of personal risk taking and investment that can regularly be found in unorganized, self interested, capitalistic, entrepreneurial development has only been seen operating in relatively selfless directions in movements, religions, and cults. A movement can provide its participants with some of the deepest rewards of human activity. An analysis of religious cults shows that they tap into some of the deepest and most profound human motivations (Kriegman and Solomon, 1985).

This may be the reason we shy away from intentionally using this enormous motivational wellspring. That is, we are shy of fanaticism and religion. We are horrified by some of the bizarre actions that mass movements have spawned. We are thinkers. Men and women of reason. And, if we are honest with ourselves, we tend toward thought and away from action. By my count, at the ICA conference on Worker Ownership in Boston (1992), there was only one non-theoretician/consultant who had actually formed a viable worker owned cooperative that was pursuing and apparently embodying the ideals about which we all spoke.

Solutions: Modifications and Movements


In consultation with Charles Knight, I looked at the problem of entrepreneurial initiative, risk, investment that is followed by inevitably limited return in an attempt to explain the failure of HSC to take off as a developing democratically run enterprise. Charles suggested that debt to an entrepreneur who takes the initial risk--something that was desperately avoided at HSC in order to not deviate from the spirit of worker ownership--must be reconsidered in the light of the fact that as a society we recreate our wealth every 50 years or so. While I feared the loss of our cooperative model and ideals, a debt to an entrepreneur that was paid off over a long period of time would be minuscule in comparison to perpetual ownership by capital investors whose goal is to maximize profits removed from the product of the labor of the workers.

At HSC, we came up with a modified model in which the entrepreneur receives a larger percentage of profits from a business he/she created than the other worker owners. Our first modification has already yielded some encouraging activity. This modification gives the founder(s) of an operation 25% of the profit starting in the first profitable year and continuing (while diminishing) for the next ten years. Each year the founder's profit percentage decreases by 1% so that in the tenth year following profitability the founder's percentage would be 15%. Over the course of the ten years after the organization achieves profitability, the founder(s) would receive an average of 20% of the profits in addition to the share they would otherwise be entitled to as worker owners. So far, this has generated two full business plans and contract proposals by potential worker owners who have heretofore not become invested in such activities. Three more are in the works. This modification may need to be taken further: possibly starting at as high as 50% of the profits and going down to 20% for as long as 15 years (decreasing by 2% per year).

In a nod to the enormous risk and investment in a start up firm, we are trying to be realistic about the human animal we are trying to motivate. It is simply unreasonable to socialistically say, "Please, go be the one to put the bell on the cat. If you succeed, we shall all share in the wondrous benefit you have wrought." It is no surprise that no one steps forward for the potentially suicidal mission. But if we say, "If you succeed in putting the bell on the cat and staying alive, we will pay you princely sums for the rest of your life during which you need do no more work," there will be plenty of cat bellers. While most will fail, some will succeed. In our modified version of cooperative start ups, a middle road is sought. While the sums won't be princely, if you're successful they may be quite hefty. After a significant but clearly limited period of time, the firm's profits would be wholly owned by its worker owners. Democratic control could still exist from the beginning.

A second modification to the Mondragon model that may be necessary is acknowledging a continuing need for some initial, start-up grants. While efforts have been made to find financing for buy outs and investment capital, and while individuals (e.g., Rick Surpin) have been able to obtain start-up help, the Mondragon model suggests that workers will come forward on their own, choose a leader, and together with that leader take the risk. Lacking the zeal of movement involvement, we aren't seeing much, if any, of this type of spontaneous activity. What may be needed are funding sources that enable appropriate entrepreneurs with just a sound idea to make the major investment in building a thorough business plan that then can be used to obtain capital and attempting to actualize the plan. This is a shift in how to utilize moneys made available for starting worker owned cooperatives. The shift is away from post-business plan loan money (still needed) or consultant support (also still needed) toward subsidizing the enormous, initial, high risk investment required by the entrepreneur.

As an adjunct to this modification, organizational structures could be put in place that would enable an entrepreneur to start a worker owned cooperative as a subsidiary of a larger, already existing cooperative. In this model (currently being explored at HSC), entrepreneurs are encouraged to develop programs that are part of, yet independent of HSC. That is, subsidiary programs would be owned and controlled by the founder(s) and worker owners in that program while it is still a part of the larger corporation. The advantage is that the fledgling company would not have to duplicate the complicated and time consuming tasks necessary to start a new company: incorporation, payroll, taxes, accounting, bookkeeping systems, computer/office equipment, secretarial/answering service, etc. The details of the actual arrangement between each program and the parent corporation require some working out. However, combining a small subsidy (grant) with a link-up with an existing cooperative can enable the would be cooperative entrepreneur to greatly decrease the risk and investment required.


I believe that, in addition to modifications in our model, a more important potential for solving the problems in motivating the development of worker ownership may lie in modifying our focus. We need to be focusing more on leaders/ideals/values/beliefs--the essence of movements and less on managers, ESOP legislation, or technical changes to the Mondragon model. Yes, it is past time to acknowledge that religious, spiritual zeal lies at the heart of any significant attempt to change society.(11)

Interestingly, one of the themes of the first ICA conference(12) was whether we are a movement. This was debated, the meaning of the term was discussed, and it came up repeatedly in several forums. Yet, in the agenda setting call for follow up papers, it was missing. We are "movement shy." We are too intellectualized and too cut off from what really motivates people. We are awkward about enthusiasm and fanaticism. So we stick to ideas about worker ownership: worker ownership as a competitive advantage, the role of organized labor in worker ownership, ideal governance structures for worker participation; and the main areas of concern then become: structures for raising capital, the quality of management, technical issues in the design of cooperatives and cooperative legislation, etc. We may put together impressive worker buyouts, get significant legislation enacted, and still fail to produce any significant amount of worker owned enterprises that incorporate the spirit and values we do, in fact, seem to share. Rick Surpin's Cooperative Home Care Associates isn't an ESOP. Has there been a single ESOP that can claim to have achieved the human community that he has created?

We live in a world where--other than archaic religious notions that large segments of our society continue to cling to or pathetic attempts at new religious cults--nothing is sacred. The closest thing to a cultural value system that we have is "Whoever has the most (and best) toys when he/she dies wins." The human spirit cries out for the sacred, for the ideal, for meaning and guiding goals and values for human life. Our society responds with Club Med, country clubs, Mercedes, Lexus, Brooks Brothers suits, cigarette boats, and designer jeans. Meanwhile, the population of our overcrowded planet increases geometrically, doubling every 40 years. Our fragile environment is rapidly being destroyed. Drugs, despair, and crime mix with scenes of affluence as LA Law and Life Styles of the Rich and Famous shine from TV sets in our inner cities to create an unbearable tension between reality and fantasy. In this setting, how can anyone work for $4.25 an hour? Crime becomes sanity. The middle class runs to the suburbs only to find that they can't get away. The rich are able to move further out to palatial homes. For now, they can pretend they are safe as long as they don't send they're kids to a university in a city or go outside where the thinning ozone threatens all of us with cancerous tumors. In order to protect their illusory safety, they sell voodoo economics--that include bizarre tax cuts for the rich--by manipulating racial tensions and religious superstitions. All the while, human souls achingly long for something to believe in.

And what do we respond with? In our movement shyness, our embarrassment of anything religious or fanatic, we respond with modifications for ESOPS and new initiatives with which to raise funds to form theoretical worker owned cooperatives. When the funds are obtained--without the inspiration of a movement with its organizing idealized values, beliefs, and zeal--the highly motivated workers and managers can't be found and the ensuing businesses operate more like traditional corporations (though possibly more like traditional non-profits than for-profits).

Traditional businesses have long recognized that there are powerful non-monetary motivators. Apparently the Japanese--in their monolithic racial/ethnic group with a nationalistic (and sometimes racist) spirit with all the trappings of a movement--have been more successful in tapping into such motivators. We have the potential for one of the most powerful motivating movements in the palm of our hands. The evidence for this? Virtually all the participants in these two conferences were there as volunteers to some degree. That is, personal rewards are not the prime motivators for those of us here. All of us could achieve greater personal aggrandizement through other activities. If we have the potential for a great movement, why don't we use it?

In respect for our ancestors who struggled,
often in agonizing conditions
and often barely succeeded against incredible odds;
For ourselves;
For our children;
For our children's children;
For all the unnamed lives that live;
Let us work together, shoulder to shoulder
to save and preserve our fragile world
and to forge a new world of human respect, care, and decency.
It's our only hope.


(1) At this point in human self knowledge, we are still just beginning to be able to separate what we know about ourselves from what we have biased reasons to believe. Thus, we must be cautious about any specific conclusions about who and what we are. Yet, I believe that there are some very basic facts that can be stated with a fair degree of certainty.

(2) Remember that, in evolutionary terms, for the most part, "success" means reproductive success, and successful reproduction includes more than simply mating; it includes ensuring that ones offspring have a good shot at success. And "more" successful means in relation to our ancestor's cohorts at the time.

(3) Space does not permit any but this most brief and schematic description of what is now known and accepted about the basic nature of the human psyche. See Slavin and Kriegman (1990, 1992) for a more complex description of the dynamic structuring of social (mutualistic) and asocial (selfish) motives in the human psyche.

(4) Though capital investors frequently take a significant share of the risks along with the primary entrepreneur(s), they usually demand enormous personal investment from the entrepreneur in order to justify the risk to their capital. As in the vignettes that follow, in most successful enterprises, there is almost always a key individual who makes an enormous personal investment.

(5) I didn't do anything. This may be why the incident didn't escalate and I only suffered a torn shirt. Eventually, the dominant, male mental health worker ordered the patient back to his seat and the meeting continued.

(6) By 1992, six years later, revenues exceeded 40 million dollars a year, the company had gone national operating in a number of states, and the company was, in fact, sold making the founder wealthy.

(7) Where it remained providing some of the needed capital for cash flow. Interest was paid on the loan at 9% per annum without missing a payment.

(8) Also striking was the almost identical problems CHCA is having with its professional staff who are not worker owners. At ARP, the community feeling did not extend to the professional staff who tended to place barriers of unequal respect between themselves and the line staff.

(9) See Kriegman and Solomon (1985) for a more complete description of the dynamics of a cult. I would suggest that a movement entails the same dynamics but is generalized to a broader segment of the population. The willingness of a larger, more mainstream segment of society to become involved in a mass movement is usually related to two critical phenomena: 1) the existence of an intolerable condition (or external threat or enemy), and 2) a sense that a movement might succeed. No movement rose up to overthrow the immensely unpopular Stalin; success appeared impossible. But when totalitarian regimes lose their capacity for ruthless suppression, revolt is almost certain. In considering the importance of these two phenomena, try applying them to some sample movements, e.g., women's suffrage, emancipation and civil rights, unionism, anti-Viet Nam War, and the developing environmental movement.

(10) This is not to say that the effects of movements have all been intended by the leaders and members. Rather, this wording is meant to differentiate volitional activities by people from other powerfully influential events in human history many of which are technologically derived: changes in transportation, information processing, pollution, overpopulation, etc.

(11) By "religious" and "spiritual" I am not referring to content, e.g., the belief in a deity. Rather, I use these words to describe a quality of one's internal experience when one is motivated by idealized leaders, values, and beliefs. It is this type of motivation that leads to tremendous commitment and energizing group involvements (see Kriegman and Solomon, 1985).

(12) Industrial Cooperative Association conference, "Worker ownership: Time to take stock." March 1992, Boston.


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