The Economics of Spam

Not everyone was born an accountant. Not everyone necessarily understands the complexities of a $21 million turnover co-operative – which is what The Weave now is.

So maybe our Board should ask for help from people who do understand?

When, in the past, I have advised companies with a turnover similar in size to Weaver Street, it has been the normal practice of those companies to have a special committee of the Board called an Audit Committee.

This Committee is usually made up of Directors (those who are not directly employed by the company in question), and by an equal number of experts, with specific knowledge of the company’s specialty and/or corporate finance.

The primary job of the Audit Committee is to oversee the Annual Audit. As opposed to WSM, where the Audit is overseen by the General Manager.

Audit Committees can also meet all through the year, and advise the Board on complicated financial issues that are presented to the Board by management.

A case in point.

Earlier this year, management suggested to the Board that they do away with the Board Policy requiring that there be a 1% profit each year.

How was the Board to know that removing this Policy would ‘move’ our Dividend – which is paid out of profit? An Audit Committee of financial experts could have warned the Board of this.

******

I set out below a copy of the e-mail I sent to Jacob Myers, the Worker-Owner Director who has been Board Chair these past three years, asking questions of WSM’s new Auditing firm.

These are the sort of questions your Board should have been asking over the last few years, and which an Audit Committee of experts probably would know to ask.

If they had been asked as we went along, we might not now find ourselves over-extended and over-indebted going into what promises to be a severe recession.

Look. I know this is not as much fun as Monty Python quips, or as interesting as the Wine Shows, but this is exactly the sort of dry, complicated, tedious crap you expect your Directors to be able to take care of competently, when we are a $21 million turnover co-op.

So that you can focus on the fun stuff, while tentatively hoping that your Board knows what it’s doing, and is taking care of your business. Ok?:

“Dear Jacob,

The WSM Audit is underway. As I understand it, the Auditors will be presenting their report to the September Board meeting. As an owner, I would be grateful if the Auditors could address in writing the following. I think it follows that I would wish that copies of their report, and their response to my concerns, be available to owners attending the September Board meeting:

1) Is the Audit of just Weaver Street Market, Inc.? Or is it of the whole entity we know as ‘Weaver Street Market’ (‘WSM‘), including all of the associated companies, corporations, organizations, non-profits, et al (‘associations’)?

2) Could the Auditors please prepare and present a full organizational chart of all of the ‘associations,’ showing the full picture of assets and liabilities, and flow of monies between the ‘associations’ (if any), with specific and separate mention of all real estate holdings?

I understand there are certain LLC’s which bear names such as ‘Carrboro‘ and ‘Hillsborough.’ There is also Public Gallery of Carrboro, which I understand receives monies directly or indirectly from WSM.

3) Concerns may well be raised at the Annual Owners’ Meeting as to whether or not the monies spent by WSM and its associations on Expansion and the Food House could have been better spent. Clearly, that is a matter on which the auditors should be able to give owners comfort.

Would the Auditors please make available any and all written comparative studies that were produced before Expansion began, which helped WSM managers and the WSM Board decide that the Expansion course chosen (including the Food House) was the most beneficial to owners, with respect to the risk to their financial investment?

Will the Auditors state that, in their opinion, WSM managers and the WSM Board undertook a sufficiently comprehensive comparative analysis of the alternatives before deciding up on the course chosen? That is, was Expansion and the Food House the best way of spending our money?

Will the Auditors state categorically whether or not, in their opinion, WSM and its associations are on target with their financial forecasts for the cost of Expansion and the Food House. If we are over budget, by how much?

4) Will the Auditors please state definitively what they regard as being the total current debt of WSM and its associations, and what they regard as being the debt to equity ratio of WSM and its associations?

Are the Auditors legally required to offer assurances in any Audit statement that the appropriate processes were followed by WSM and its associations in creating such a level of debt, against collateral (equity) which is the property of the owners, in respect particularly of obtaining the owners’ permission beforehand to collateralize their property?

5) Will the Auditors please define what they understand by the expression ‘equity,’ and specifically explain how each category of ‘equity’ presented by WSM and its associations is ‘equity’ within the Auditors’ definition?

Can something be ‘equity’ if we have to return interest upon it, or if it is recallable? Specifically, are loans arising from the Community Investment Initiative, and the like, equity or loans?

6) Will the Auditors please explain clearly what is their recommendation for the debt of WSM and its associations in 2009? Should it be reduced, be allowed to stay the same, or can more be borrowed – and with what qualifications?

Jacob, I would be grateful if the Auditors responses to these concerns could also be made available in writing at the Annual Owners’ Meeting.”
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Published in: on September 18, 2008 at 7:45 am  Leave a Comment  

Something Completely Different

So. My line is that we need a different Board which will do things differently. And that if we did things differently, we could be a better co-op and a stronger business.

Fine so far. But what do I say to anyone who asks: can the Board actually make a difference; and how exactly would I suggest they do things differently?

Actually, even before we go there, I’ve been asked more than once, just what makes me think I understand the complexities of all of this (and it is complex), and why do I believe that I’m qualified to offer any solutions?

Good question. The blunt answer – and forgive me for blowing my own horn – is that I know how to make Boards work. I used to make my living at it.

Ten years ago, I left the corporate world to pursue my creative interests. But before that, I was a successful lawyer and marketing and management consultant. I served on the Board of several companies with turnovers ranging from $3 million to $30 million.

I made my living troubleshooting for companies that were having problems. This meant mediating disputes, opening channels of communication and creating value-based strategies that encouraged the Boards of those companies to understand that people are the core value of profit.

What I am offering you is the opportunity to have on your Board someone who really knows how to make your Board work for you – properly, as it should in a co-op.

Right. So, back to those first two questions – can the Board make any difference, and what can it do differently to make that difference?

Hopefully Jacob and The Weave will agree to some Candidate Forums, and I can explain in detail. Something I will also be doing on this blog, over the next two months.

In the meantime, here’s a brief, two-step summary:

1) Yes, The Board can make a difference. It’s a question of truly understanding the Policy Governance model we use. And I’m not sure that everyone on our Board does.

It goes like this: the Board is supposed regularly to ask owners and workers, on an ongoing basis, what they want for their co-op. The Board should then fashion what they are told into a Mission Statement (what) and Policies (how).

The Mission Statement and the Policies set the direction for ‘Operations’ (us, and our managers). The Board is supposed then to check to make sure ‘Ops’ is doing what workers and owners have said they want, by monitoring ‘Ops’ every month at its Board meetings.

It’s supposed to be that simple.

Now, I’ve been present at almost every Board meeting in the past year. The fact is that our Board, with Jacob as its Chair, has been getting it the other way round.

They ask ‘Ops’ (and I mean just the senior managers) what they want, and then tell owners and workers what’s good for them.

I want to turn it back around. Jacob, on the other hand, wants to keep it the way it is.

Now, I want to be clear. I say kudos to Jacob for sticking to his guns, and not backing down.
I may disagree with him on this point. But he is taking an honorable stand by defending what has happened during the period he has been Chair these past three years.
I think he’s wrong. But I admire his integrity.

2) What would I ask the Board to do differently – and specifically?

a) Regularize the finances. Cut the debt – in a manner that does not hurt workers or consumers. And that does not hurt our efforts in the community. To give us back our dividend, and un-mortgage our future.

I talk about not hurting our community. Here’s an example:
We will almost certainly have to sell the property on Greenboro Street – where orientations were held.
But let’s do it in a way that does not put the future of WCOM 103.5 (our community radio station) in jeopardy – since WCOM also uses that building.
Many of us actively support WCOM. WSM helped to create it. I serve on its Development Committee. With a little thought, we can be creative about the tough decisions that have now to be made. Not destructive.

In the meantime, I’m going to suggest there be a one-off incentive bonus for all workers at the end of 2009, based on improved production during the year.

All we workers are already being asked to do a lot more to pay for the decisions that others have made.

Is it too much to ask that, in return, we receive a temporary incentive for all that extra work, and one that will entirely pay for itself?

b) Monitor ‘Ops’ (i.e. management) better. Make ‘Ops’ more accountable to the Board. So that we can avoid some of the more-avoidable big, bad decisions.

Suggest ways for ‘Ops’ to be more inclusive of worker-input (our ‘in-house experts’). Do more real listening. Be more responsive. So that we can avoid some of the more avoidable small, bad decisions.
[I explain in more detail in a strategy document I presented to the WSM Board in 2007 – “Informal Intimacy”.]

c) Do a better job of asking workers and owners what we want. Not least about the last remaining piece of the Expansion jigsaw puzzle – the refurbishment of the Carrboro store.

Let us feel that, in future, we have real control over our future – a future which, at the moment, is being created by a small handful of people, often in secret.

Someone recently used the expression ‘dark-of-night decisions, made without any public input.’ I think that’s a description that’s appropriate –and it’s not only wrong; it’s unproductive.

Workers and owners are far more likely to support and implement smoothly big decisions which they already own.

So, create vehicles to allow the Board to know exactly what owners and workers really want. And then, make sure the Board pays attention.

‘Yeah, very nice, we’ll let you know’ is not co-operative democracy. Not according to the Policy Governance model to which our Board claims it subscribes.

It’s just ‘feedback.’ The Wal-Mart way. Also known as ‘filing under ‘D’ for Dustbin.’

Revive the Worker-Owner Discussion Program. Re-jig the Open Forums. Have The Weave adopt the Online Forum that Jamie Bort (a Consumer-Owner) will be completing shortly – with a little help from me.

And most important of all – let us vote on things from time to time. Like whether we want to pawn our co-op for $6 million…
[Again, I expand on these thoughts in a proposals document I submitted as a member of the WSM Elections Task Force, earlier in 2008.]

That’s a start. And now I wish I could think of a really cute Monty Python quote.

Nope. Sorry. Guess some things are more serious than that. Oh well. Next time, maybe.

In the meantime, this Board Election is about you – not me, and not Jacob. It’s about what you want your co-op to be. How you want it to reflect the values and aspirations you have for it.

I’m standing because I love The Weave, I’m troubled about where we are, I think I can help us get safely to the other side, and I want to help. But that’s not the point. It’s still all about you.

I’ve spent as much time as I can trying to contact as many of you as possible, so that you can tell me about the hopes you have for our co-op.

I haven’t got to all of you. I’ll keep trying. But, you see me around. Feel free to chat to me, anytime. Or write to me on Facebook, MySpace or at: geoffgilson@hotmail.com.

And when you talk with me, I promise I’ll truly listen. We should all strive to be a genuinely ‘Listening Co-op,’ and that should start with our Board, and your Worker-Owner Board Directors.

Now please remember, you have to be a Worker-Owner to vote. You really can shape the future of your co-op. But you can only do it by being an owner and voting. To find out how, ask Linda in Marketing, Deborah in HR or write to: board@weaverstreetmarket.coop.
You can become an owner anytime up to October 25, and still vote in this year’s Board Election. Whoever you vote for, please use the opportunity you have to create your own future. Good luck to us all!
Published in: on September 10, 2008 at 9:04 am  Leave a Comment  

More of the Spam?

Nominations for the Board of Directors of The Weave are now closed, and the Worker-Owner Director contest is a two-person race – between ‘more of the same’ and ‘something completely different.’

Jacob Myers is Kitchen Specialist in Carrboro, has been the Board Chair for the past three years, and is the newly-announced, second Worker-Owner Candidate.

I served with Jacob earlier this year on the WSM Elections Task Force. I’ll be honest. I like Jacob.

But I’ve got to admit, I kind of feel like we’re in a Monty Python skit – bless us all. I mean why on earth would we want ‘more of the same’?

This would be the same ‘same’ that just took away our dividend; mortgaged our future with a $6 million debt; and left us wondering if our money was spent the best way, and why we were never asked, in the first place, if we wanted it to be spent at all, or how. Right?

Then I’m thinking, why am I asking these questions of thin air – that really would be a Monty Python sketch, wouldn’t it? Why not ask Jacob himself?

So, I’m writing to Jacob to ask him to take part in Candidate Forums around the units, to give all of you the opportunity to ask him why he defends where we are. And to be fair, to ask me how I believe things could be different.

Or we could just compare silly walks…

Make sense?

*******

Now, we all know that Spam is a form of processed meat. Which is kind of appropriate to us, at the moment, if you think about it. And, of course, it’s also the subject of a fabled song from Monty Python.

In addition, the dictionary defines ‘spam’ as being something received which was unsolicited and for which permission was not given. Hmm. Sounds about right, doesn’t it?

So, yes, I’m probably going to be cute over the next few months, and do the Monty Python theme to death, and go on talking about ‘more of the spam,’ and ‘something completely different.’

I mean, if you can’t ‘always look on the bright side of life,’ then what’s it all for…?

So. Good luck to us all. And with that thought…now for something completely different…!!

Published in: on September 9, 2008 at 8:13 am  Leave a Comment