Alison Lingane is building demand in our economy for employee-owned businesses and facilitating the transition of companies to this more equitable model.
The New Idea
Project Equity is facilitating a significant transition of small businesses into employee-owned companies in order to grow community wealth and address our nation’s racial income and wealth gaps. They do so by raising awareness about the tremendous benefits of broad-based employee ownership, by working directly with business owners and employees to facilitate the transition, and by leveraging the public sector (beginning with cities) to encourage and promote this under-represented and highly impactful business model.
In an era of the highest levels of income and wealth inequality since the Gilded Age, and with major forces – from globalization to AI – bringing uncertainty to the future of work, employee-owned businesses offer a powerful opportunity to address the wealth gap while bringing stability and quality jobs to millions of workers. What’s more, we are at the front end of a “Silver Tsunami” with nearly 2.5 million baby boomer business owners considering whether, how, and to whom to sell their business.
Data consistently shows that employee-owned companies increase job quality, invest locally and have demonstrable positive impact on job creation, and on business retention. Job stability is also higher, given lower employee turnover rates. Project Equity is focused on making transitions as easy as possible while simultaneously building demand so that employee ownership moves from a misunderstood outlier to a common and celebrated path toward an economy that works for all. Founded in 2014, Project Equity is now collaborating with major California cities on ways to accelerate employee ownership and was involved in the drafting of recent federal legislation (the 2018 Main Street Employee Ownership Act) to advance business transitions to employee ownership.
The income and wealth gap in America between the very top and everyone else has reached its widest point since the Gilded Age. The implications are manifold, including rising economic anxiety and uncertainty that cuts across the political divide. More and more American communities are full of hard-working people who fight for economic security in the face of low-quality jobs. Indeed, one quarter of all jobs in California pay less than the average cost of living (including food, shelter, healthcare, transportation, childcare). Meanwhile, nearly half of Americans cannot cover a $400 emergency expense.
The underlying causes of this inequality are multidimensional and often the product of deliberate economic policy and business practices. But it is worth pointing to several factors in particular:
• Decreased power of labor. The decrease of unions and the increase of so-called “absentee ownership” along with labor monopolies through corporate consolidation enable companies to make decisions that are disconnected from workers' and community needs.
• Shrinking middle. Because of globalization and the outsourcing of jobs in key sectors, many U.S. communities have knowledge workers at the top and low-paid service workers at the bottom. This “shrinking middle” of small businesses, manufacturing, and other employers that traditionally provide better wages and benefits alongside professional development opporutnities demonstrates the missing rungs in the ladder of economic opportunity.
• Racial wealth gaps. Current systems, such as discriminatory policies (e.g. modern-day redlining) and the traditional capital infrastructure, perpetuate roadblocks that prevent historically marginalized communities from accessing quality jobs and from building wealth through home and business ownership.
Business transitions to employee ownership represent a powerful market-based pathway to address the wealth gap but significant barriers remain. One-third of business owners over age 50 report having a hard time finding a buyer for their company yet few consider selling their companies to their employees. The vast majority (over 85%) of business owners do not have a succession plan in place, and only a very small percent have a successor in the family. As a result, most of these companies will quietly close down or be sold to a larger company or out of area buyer, laying off employees as they consolidate. These patterns will exacerbate our wealth gap by further concentrating business ownership.
Project Equity’s strategy is rooted in its vision of a society where people of color, immigrants, and low-wage workers have the stability, security, and means to fully participate in the American Dream. They achieve this by building awareness and demand for employee-owned business models and addressing the major barriers that keep employee ownership so underrepresented in our economy. Their “end game” is to have a well-established market for employee ownership in which both the private and public sector have adopted it as a preferred model to achieve strong businesses and economic equality, and in which major roadblocks (such as awareness and capital access) have been removed.
Alison, her co-founder Hilary Abell and their team have identified several key leverage points to build that well-established market:
1. Increase awareness and grow demand. Worker-owned cooperatives and Employee Stock Ownership Plans (ESOPs) are not new, and yet despite their many benefits they are both misunderstood and underappreciated. A critical component of Project Equity’s work involves educating business owners and small business support providers – including governments, Small Business Development Centers, exit planners, CPAs and more – to fully understand the value of transitioning to employee ownership. This includes sharing the compelling evidence that employee-owned businesses outperform their competitors particularly during economic downturns because employees feel more invested – literally – in the success of the enterprise.
Project Equity has a dedicated media strategy and its research is now regularly cited—including to frame the need for the recent Main Street Employee Ownership Act (passed by Congress in August 2018) that makes it easier for small businesses to transition to ESOPs and worker-owned cooperatives. Organizations and journalists alike are referencing this trend with more regularity, and cite Project Equity in referencing the growing concern people now have about business retention and the need for succession planning to preserve local businesses in their communities.
2. Build a body of best practice. Of course, understanding the benefits of employee ownership is just step one. The unfamiliar process of transitioning to employee ownership has been a deterrent even for business owners who might have the inclination to go in this direction. To that end, Project Equity has over the last several years developed and refined a range of offerings that guide businesses, from the financial feasibility to the transaction details and financing structures, to ownership culture and governance training and consulting. To date they have worked directly with over 30 businesses across the U.S., including in states as diverse as California, Minnesota, Nevada, Michigan, North Carolina, and beyond.
From Day 1, Project Equity’s work directly with companies was geared toward developing a roadmap for the field at large – what Alison refers to as “the easy button” – to demystify and streamline the transition process. Indeed, now they are developing partnerships and plans to expand to 10 regions across the United States to help scale the direct service of helping companies transition to employee ownership.
3. Find partners to achieve scale. The problem of the Silver Tsunami (the baby boomer retirement wave) is broadly recognized as a healthcare or workforce problem, but Project Equity is helping the country understand the implications for business retention as local businesses close or are bought out by distant owners. Not surprisingly, cities are particularly concerned as a signifcant portion of their tax revenue comes from business tax. Project Equity launched a city strategy to specifically work with local governments to adopt economic development plans that include employee ownership as a solution to both business retention and economic inequality. Beginning in some key California cities (Berkeley, Fremont, Long Beach and Los Angeles) such partnerships significantly legitimize employee ownership while also creating an important “market-making” channel that builds demand for business transition and the surrounding support network. Longer term, integrating business retention and employee ownership into city offerings mainstreams employee ownership and begins to anchor it in the public sector as a pathway to scale.
In early 2019, Project Equity co-convened the Government Equity Summit together with Nexus Community Partners to provide city economic development and elected officials with tangible tools and strategies to retain valuable assets while advancing equity goals. Attendees included government officials from 18 cities and counties.
Finally, Project Equity is now piloting how to arm small business support organizations, such as the nearly 1,000 Small Business Development Centers (SBDCs) across the United States to aid in the process of getting business owners ready for transitioning, including via education and business advising services that are already in place.
4. Unlock the flow of money. While the impact investing field has taken off in recent years and has influenced small business financing, employee ownership is not yet a viable option for a typical mission-aligned small business lender. The effect is two-pronged: lenders are missing out on an opportunity and businesses have few options for financing a democratic employee ownership transition. Project Equity addresses this potential barrier to scale by partnering with a 40-year-strong CDFI (Shared Capital Cooperative) to set up their own financing to support transitioning businesses through their collaborative initiate Accelerate Employee Ownership. Their first $4M of lending capital is from the Quality Jobs Fund, with plans to expand their lending capital in the coming years. A major part of this strategy is educating mission-aligned lenders and investors about the value and feasibility of financing employee ownership transitions, and how they can get involved, including offering co-investing opportunities to help lenders gain experience with these transactions. In the long term Project Equity wants to eliminate capital access as an obstacle to employee ownership.
As they look to the future they increasingly see their role as field builders who can both grow the demand for employee ownership and grow the ecosystem of support for these transitions – whether private or public. They are centered in a deep commitment to racial equity, taking steps at every turn to ensure that the opportunities and benefits afforded by employee ownership are truly accessible to all workers across the United States.
In Alison’s family, education and access to asset building was the path out of poverty. Within three generations, her family moved from immigrant farmers who could barely scrape by, into the middle class, through education, stable jobs and access to home ownership. As Alison grew into young adulthood, she learned that her family’s “bootstrap” opportunities—including access to bank loans to become home owners—weren’t available to everyone, especially people of color.
In her early 20s, she led youth job training programs but saw firsthand that training young people for dead-end jobs (as many programs did at that time) doesn’t address the cycle of poverty. So she launched a new program that the young people could be promoted into, to design and launch micro businesses. It was powerful to watch them pitch the offerings they had developed to local store owners, then be invited to display their products in those same stores, and see the impact of the different message this delivered—both to the young people and the broader community—about their strengths, capabilities and potential.
Inspired to learn to scale impactful programs, Alison got an MBA, then gained experience through leadership roles at mission-driven companies. At InsideTrack, a company that has coached over a million college students to keep them on track for graduation, she intimately saw how poverty thwarts educational goals. It’s hard to submit your class discussion responses through the online forum when your power got shut off, or to make it to class, when you suddenly have to care for your sister’s kids because the police picked her up.
When Alison first met her co-founder Hilary Abell and learned from her about employee ownership, it just *clicked* for her. Employee ownership creates jobs that provide financial stability, through better pay and asset building. And it invites—and expects—people to bring their full potential. She co-founded Project Equity with a personal mission to support working families to create more stable jobs and build wealth.