This piece was originally published in 2019 in Eye on Design magazine’s “Worth” issue. It has been updated to reflect changes in statistics and at the studios since its original publication date.
When I first spoke to Greg Mihalko, one of three partners at the NYC design studio Partner & Partners, in 2019, he was knee-deep in the legal language and regulations of a half-updated operating agreement. He had consulted the city’s small business resources and reached out to a trade association for worker cooperative businesses, which promptly directed him to two other nonprofits. He’d contacted the lawyer who drew up the studio’s first operating agreement and sought advice from another lawyer friend out of Chicago.
In January 2020, Partner & Partners became fully worker-owned, switching over from six years of operating as a traditional two-person partnership. Throughout the pandemic that arrived a few months later, they’ve remained fully staffed with no pay reductions, and were able to do their first distribution of profits at the end of last year. But when Mihalko and his colleagues started looking into the transition the year prior, they weren’t finding a ton of designer-specific advice. “There are a lot of theoretical notions on what a worker-owned model would look like, but nothing that says, ‘Here is how to apply these principles to your specific situation,’” Mihalko explained.
Put simply, a worker cooperative, or co-op, is a business entity that is owned and governed by the people who work there. It’s not a new concept, but it is one that was gaining renewed traction against a backdrop of growing economic inequality, even before the global pandemic. According to the U.S. Federation of Worker Cooperatives, there are more than 450 worker cooperatives in the United States, which together employ 8,000 people and generate more than $450 million in annual revenues. A scroll through the organization’s national co-op directory surfaces the kind of left-leaning, community-based initiatives you might expect—the Green Mountain Spinnery of Vermont, and Moosewood Restaurant in Ithaca, New York, among them. But increasingly, more conventional businesses across industries are looking into the co-op model as both a reinforcement of their social values and a savvy way to run a small startup. And that includes design studios.
For Partner & Partners, transitioning to a worker-owned co-op didn’t drastically change the nature of how it operated when it was an LLC, but it did codify the studio’s nonhierarchical workplace structure and set up a formal pathway to ownership for its employees. Like many designers who go into business for themselves, Mihalko first formed the studio in 2013 with two other partners who shared the responsibility, the risks, and also the profits. There was no hierarchy, because there were no employees—“worker-owned” is the default when your only workers are the founders. A company that maintains that model as it grows benefits from making it official, with a business valuation, a plan in place for collective decision-making, and all the paperwork and lawyer fees that go along with it. For many designers, that effort could be worth it as the co-op model offers collectively pooled financial backing, creative autonomy, and a sense of social responsibility in a changing world.
The co-op model offers collectively pooled financial backing, creative autonomy, and social responsibility in a changing world.
Sabiha Basrai, worker-owner at Design Action Collective in Oakland, California, says the organization’s co-op model empowers her as a worker, activist, and graphic designer. Decisions like setting rates and bringing in new work are made collectively. When it comes to designing for clients, members collaborate on projects while supporting each other’s creative process. As worker-owners, everyone has a shared commitment and responsibility to make those projects successful and generate income for the business.
“I came to Design Action from a national nonprofit organization that was extremely hierarchical; I had a boss and he had two other bosses, and they had bosses over them,” she says. “By the time anything got to me, a lot of decisions had already been made. Here, I can go beyond the question of, ‘Am I following the instructions correctly?’ and really consider how to be accountable to the movement we’re trying to serve.”
Design Action began as a spin-off of the Berkeley co-op Inkworks Press, founded in the 1970s, and is behind the branding for Black Lives Matter and other progressive social change organizations. Designers who work there are involved in social justice organizing inside and outside the office, and distribute work based on those interests, which for Basrai means often working with immigration rights NGOs.
Design Action Collective is incorporated as a worker-owned cooperative under California state law. There’s no buy-in process, and all 11 Design Action workers are either owners or on an ownership track. They’re currently paid the same hourly wage regardless of how long they have been part of the collective, but they also accrue patronage based on the number of hours they worked the previous year. This means that whatever profits remain after the fiscal year closes, and expenses and wages get paid, are distributed in proportion to hours worked that year. In order to maintain the business’ cash flow, patronage is paid out in installments after three years over the course of five years (you still get paid after three years even if you leave the company).
As the pandemic exposed systemic oppressions, Design Action members looked for ways to budget and plan, so that they could continue serving their clients while taking care of one another as whole people. In order to model social justice values in the way they work with one another, Design Action engages with conversations around race and class equity while maintaining a sustainable small business under the pressure of capitalism.
An important part of the worker-owner model is that it reinforces beliefs about equally distributing power and ensuring that employees feel valued.
Both Basrai and Mihalko say that an important part of the worker-owner model is that it reinforces their own beliefs about equally distributing power and ensuring that employees feel valued. That ethos is echoed by advocates of worker co-ops that also view them as a way to address economic inequality on a larger scale. The NYC government resources that Mihalko consulted are courtesy of the Worker Cooperative Business Development Initiative, a city council–backed venture that put $3.6 million toward supporting 83 co-ops and 76 additional business entities in 2020. In the wake of COVID-19, WCBDI provided cooperatives with technical assistance and educational sessions throughout the stay-at-home orders and city reopening. Similar city-sponsored programs are established or underway in Cleveland, Ohio; Austin, Texas; and Richmond, California.
That equitable ethos can also be something that benefits a company’s bottom line, with the right company structure and what Pentagram partner Abbott Miller calls “organizational intelligence.” Since its founding in 1972, Pentagram has grown into one of the most reputable design firms in the industry; today it has 24 partner-designers in 4 cities across the United States, UK, and Germany. At its core, Pentagram operates like a traditional company and not a co-op; the firm’s partners are all shareholders, while the employees under them are not. However, the finer points of the company structure have several intentional similarities to a co-op model, with little institutional hierarchy and, crucially, partners in each office pooling their profits and dividing them evenly among themselves. Miller says that the unique business model, created by founding partner Colin Forbes, gives partners a sense of financial stability. “The brilliance of the model that Colin devised is that it creates a sense of incentive for partners, but it also creates this incredible stabilizing influence in what can be a very mercurial profession,” he says.
This financial structure also influences one of the most interesting aspects of Pentagram’s functional structure: Each partner has a team of around eight to 10 employees, and each team essentially operates as its own individual studio. In many cases, partners were already running studios of about that size before they came on to Pentagram; joining the firm gives them IT support, an accounting department, legal advice, the cultural capital of being part of a renowned design firm, and the actual capital that results from the shared profits of 24 design powerhouses.
The benefits of a collective model, however, don’t always come easily, especially for businesses smaller than Pentagram. Operating a co-op can mean a lot of trial and error without a clear-cut path. But the US Federation of Worker Cooperatives says that co-ops are currently experiencing a surge in popularity—particularly in the food-service, health care, manufacturing, technology, and design sectors—and that’s thanks to the “growth of a support infrastructure at the local, regional and national levels,” with initiatives like the WCBDI. The more models and resources there are for co-ops, the easier starting one will become, and the greater the potential for a more equitable, sustainable design industry.