Howard Brodsky, CEO of CCA Global Partners: Capitalism with a Heart
Van Ton-Quinlivan: Welcome to WorkforceRx with Futuro Health, where future-focused leaders in education, health care and workforce development explore new education-to-work approaches and innovations. I’m your host Van Ton-Quinlivan, CEO of Futuro Health. My guest today is as well-known abroad as he is in the U.S. for being a pioneer in the cooperative business model. Howard Brodsky is co-founder and CEO of CCA Global Partners, one of the largest retail companies in America, serving over one million family businesses. The $12 billion organization, which also has a presence in Canada, Australia and New Zealand, is the parent company for 14 other businesses in flooring, carpeting, lighting and other sectors, including child care.
Industry and nonprofit leaders describe Howard as a visionary social entrepreneur and a true champion of people and community. Over the course of his career, he has founded 22 cooperative companies and nonprofits and served on 23 boards of directors. He’s been recognized in the Entrepreneur Hall of Fame, received the World Affairs Council Global Leadership Award, and was named the first American to win the Rochdale Award, considered the Nobel Prize of global cooperatives. Howard, thank you so much for joining us today.
Howard Brodsky: Van, it’s my pleasure to be here with you.
Van Ton-Quinlivan: Well, we were introduced by Marina Gorbis, who was head of the Institute for the Future in the context of future of work discussions. It was interesting that during my tenure as an entrepreneur in residence there, it was often brought up that the worker co-op is a model for the new economy. When you started CCA Global in 1984, what led to your interest in this shared ownership model? And why did you found CCA Global?
Howard Brodsky: You know Van, I grew up in a small family business and my father was actually a Russian immigrant. I took over a small family business after I graduated college, a two-person business. But after it grew, I realized that scale was going to become everything, and family businesses could only grow to a certain size and compete against large conglomerates. Looking for a new model, I had a friend that actually was involved in cooperatives and I didn’t even understand what cooperatives were. He introduced me to someone and I came to understand that the power of cooperatives was not only bringing scale and “stronger together,” but I call it “capitalism with a conscience.” It’s not just capitalism. It’s putting people, not profit, first. And cooperatives are going to be owned by everyone, not me. So, it empowers people.
Once I understood that model and started the company, one sort of business led to the other business where we really understood that family businesses were so much at risk. I call them the fabric of our communities, but they need scale. How can you have scale without losing control? What cooperatives do is they give you scale without losing control, and give you the tools you need to compete against any large company in the world.
Van Ton-Quinlivan: It’s interesting that the phenomena of worker co-ops are coming up at this moment in time, especially as we talk about the gig economy. What was thought provoking was to see journalists, who are becoming independent workers, coming together to form worker co-ops in order to have the buying power or the scale to be able to buy benefits, for example. In a prior podcast, the head of Lumina Foundation noted that for this new economy, we needed new social structures such as portable benefits, and certainly worker co-ops are one of those structures that seem to be a particularly good match for that economy.
So, as chairman of Cooperatives for a Better World, you’ve been working to increase the number of co-ops around the world by 25 percent. Why isn’t this model more widely used in the U.S.? And do you think it’s misunderstood?
Howard Brodsky: I think, first of all, it is misunderstood. I think when you mention the word cooperatives, people think food co-ops. It’s the first thing that comes to mind. It’s really a shared ownership business model. I think it can apply to so many sectors in so many ways. In America, as we know, we have a fading middle class and we have the highest inequality of any developed nation in the world. When the top one percent receive 90 percent of all the wealth in the world in the last decade, we know that our economic structure is wrong. I think a lot of people have said capitalism is dead. I don’t think it’s dead. I think it has to be modified so that it cares about people, and co-ops do that.
But I think what co-ops have lacked, Van, is recognition for their flexibility and the different segments they can go in. I think, also, co-ops have lacked capital because in co-ops, you’re probably not going to get the 50 times return. It’s not going public, but we are very profitable. Most co-ops are very profitable. The only difference is we return our money to the members. We return multibillion dollars to our members and that really increases quality, it increases ownership, it increases opportunity. Butit’s not going to be where you go public and somebody makes 100 times.
Van Ton-Quinlivan: You know, Howard, based on my conversation with you back almost a year ago, we’ve had it in our mind to create a worker co-op that can help students with placement and staffing. Because in workforce development, landing into a job is so critical to the model. So, in January of this year, we actually stood up a legal entity called AlliedUp to serve as a staffing and placement firm for allied health jobs.
Now, what are the key advantages to the shared ownership model? You alluded to it, but how does it relate to the employee experience? What does the participation look like from an employee perspective? And could I ask you one more, which is, does it improve retention, because many of these small health centers, for example, are experiencing churn of 20 to 30 percent in some of their occupations. If we were able to put in place a worker’s co-op to help with staffing, would it have benefit in addressing retention?
Howard Brodsky: Well, first of all, it’s a great question, Van, and I think to go back to the first part of it, there are two types of poverty that we have in the world and in the United States. I think there’s poverty of economics and there’s poverty of hope. What co-ops do is they address both of those issues. To your point, what co-ops do is…people are empowered. They own something.
I know at the Institute of the Future and in Marina’s book, there are minimum basic assets that she felt is so critical in the world. A lot of people don’t have assets. When they become an owner of a co-op, they own part of it. They have a say in it. It is shown actually that retention goes up, I think, almost 65 percent if they are owners rather than just employees. They have a much stronger dedication, a much stronger sense of obligation, but also a much stronger sense of hope, and isn’t that what we all need? We need hope. When we see the devastation of so many people left behind…I just saw recently that 50 million people are going hungry in the United States and 40 million people got evicted. I always say that people might need subsidies, but they don’t want subsidies. They want opportunity.
What you’re doing in your world, Van, is you’re giving people opportunity. I think people need opportunity. I’m all for the subsidies that are going out now because they need them. But that doesn’t put people in a different economic position because they’ll need them again next year and the year after. What you want to do is really create a new economic environment where they have ownership, shared prosperity and shared wealth.
Van Ton-Quinlivan: Could you give us examples of what that means in terms of shared ownership? How does that feel to the worker themselves?
Howard Brodsky: It’s interesting. Probably one of the great cases of cooperatives in the world is a company in Spain called Mondragon that is incredibly successful. They are industrial, and they’re owned by 85 thousand employees. I think they have like 75 different factories. They make televisions and bicycles. During the recession, the employees voted not to lay anybody off. They took some minor reductions in pay so that no one would be laid off. They have the lowest unemployment rate in Spain and also the highest retention rate of any company. So, there’s a combination of economic opportunity, hope, retention and I think a sense of ownership that you could never get just being an employee.
Van Ton-Quinlivan: That’s an incredible story of stewardship by the workers themselves. Thank you for sharing that.
Howard Brodsky: Oh, it’s incredible.
Van Ton-Quinlivan: I’m going to take advantage of your problem-solving skills here and throw you a problem that’s in the healthcare field, which is with home health aides. As you know, this classification is notorious for being poorly paid, and yet they’re the ones in the homes working with the complexity of care in the home. You’ve shared with me once before a set of ideas on how to restructure this occupation so that there can actually be more viable, livable wages. Give us the details of how you think we could approach this.
Howard Brodsky: Sure. I have this in my own personal experience. My oldest son is very, very seriously ill and requires homecare workers, multiple homecare workers, for now going on three years. I saw that what happens is, if you go to an agency, you’re paying the agency $25 to $35 an hour and the agency is paying the worker $12 to $14 an hour. Well, $12 an hour is not a livable wage today. I know they want to raise the minimum to $15, but frankly, I would say almost every single person was working two jobs. There was not one worker coming from an agency that was not working two jobs. I call that part of the “extraction economy,” Van. An extraction economy is when the person taking in the money is getting a disproportionate amount of the money compared to the person doing the work. As you know, the homecare worker is doing all the work. So, I hired people directly so I could pay them a living wage. I could pay them $25 an hour.
But I think there’s a way to do a cooperative model. In fact, there is, and there’s some cases of it in the homecare health worker. Currently, there are over four and a half million homecare workers and they need almost a million and a half more. But you’re not going to get people at $12 an hour taking those jobs or at least making a living wage without working 90 hours a week. But if you actually formed a cooperative, they could own it. Just think about it. The only thing that really has to be done is placement, and placement is not that difficult. The demand is enormous. So, if they could go from making $11.50 an hour to making $22 an hour — because the overhead is probably $4 to $5 an hour — they could double their wage.
And the other thing is you could provide them with benefits, as you said, with access to healthcare and other elements at a cheaper cost. You could provide them with discounts on gas cards and discounts on the insurance so that they actually take home more money. Also, in our changing healthcare world today where telemedicine is going to become so important, that home aide is the crucial element in the connection to the patient. They are doing everything. They know what’s going on with the patient more than anybody and they could be an instrumental part of telemedicine.
Also, they know what supplies that person needs on a regular basis and what goods are coming into their house. Well, part of the co-op could be actually providing those supplies and they could get a percentage of that. It wouldn’t cost the customer any more. I think you could raise their wages from an average of $11.50 to $12 an hour, to $24 or $25 an hour, and you’re talking about four and a half million people.
Van Ton-Quinlivan: Is it a function of the co-op being willing to accept less profit than a regular private sector company?
Howard Brodsky: No question. The whole model of a co-op actually is, whatever profit actually comes out goes back to its members. So, say theoretically, the co-op charged $30 an hour and they paid the worker instead of $12, say they paid them $17 or $18 — they went up 25 or 30 percent — and there was an extra $4 an hour left over in profit after their expenses and overhead. All that profit, one hundred percent, gets returned to the workers. Not five percent. Right now, I can tell you, it is a very profitable business to own an agency in the home healthcare world. It is extremely profitable. People are making a lot of money in it. And the reason is, it’s extraction. They’re taking a disproportionate amount. So, yes, co-ops, if they make a profit, it all goes back to its members because it’s owned by the members. There’s total alignment of goals between the worker and the organization.
Van Ton-Quinlivan: So, in the case of a family that needs to hire one of these home healthcare aides, the cost to them is still the same. It’s just that the worker is getting proportionately more pay back.
Howard Brodsky: That’s exactly right, and that’s what you want. I can tell you, they usually know what’s being paid and a lot of times they feel so undervalued because they know that they’re only getting half or less than half, in most cases. So, they feel very undervalued, underpaid. You’re not asking them to do more work. You’re asking them to participate as an owner and you would have management find the jobs and place them. The current home care agencies do not do a lot of training and you could actually have better training and better sophisticated home healthcare workers in the future.
Van Ton-Quinlivan: You mentioned a part two of this model, which is that they’re the ones who understand what supplies to order and that they can get a percentage of that order. Could you talk more about this model? You’ve lived through a similar model in the past, right?
Howard Brodsky: Yes. For my own son, there are medical supplies that get shipped in. There’s normal goods that get shipped in that he needs on a regular basis and they’re just ordering them through whoever they want. Well, if the co-op was participating in this, it can be ordered through the co-op and the home aide worker would actually get a piece of that. They would participate in the economic process. That’s how you’re going to lift people out of poverty. That’s how you’re going to lift up and make middle America a wealthier America than there is and not have people left behind. And it would be easier for the person being taken care of to have everything go through one place. It would be more coordinated.
Van Ton-Quinlivan: What you’re suggesting is the co-op prearranges some master contracts with these distributors or the manufacturers?
Howard Brodsky: Yes, that’s exactly right. Let the co-op negotiate with them. And that’s the whole thing with scale. What the co-op can bring is scale. What individual homecare workers could never do was bring scale. But if the cooperative dealt with the issues of negotiating contracts so that they could just show an app and say to the patient, “Here’s the things you need and you’re not going to pay any more. I can coordinate when they’re coming in and when you need them.” And then the homecare worker could participate in having part of that. Besides their hourly wage being higher, they can actually be more a part of the holistic job of making the people they are caring for healthier.
Van Ton-Quinlivan: I see, Howard. So, if I were the individual homecare worker I probably couldn’t even get an appointment because I have no purchasing power. But the co-op can represent a thousand of us or even a few hundred of us and that’s enough to at least get the conversation going.
Howard Brodsky: You could represent thousands. We do a lot of negotiating of contracts and there would be a lot of money on the table for the home care worker.
Van Ton-Quinlivan: That’s good to know. Now, your organization has gotten into the child care business. Child care is another occupation that has notoriously low wages and also has a high concentration of females as well as minorities. How did you get into the child care business initially?
Howard Brodsky: Well, actually, Kirsten Moy, who was leading the Aspen Institute on scaling of nonprofits, came to us about 12 or 14 years ago and said, “I’d like to introduce nonprofits to you because I think your model would work. Nonprofits are like little cottage businesses. You really can combine them well because it’s the individual that runs them that makes them successful.” I think that is true. So, over a six-month period, she brought in every type of nonprofit, from home health agencies to child care agencies to art organizations. She said they loved the model and it would work.
We thought that child care was such a need in America. As is typical, the wealthy get the best agencies in the world, but the people that work in child care are making $12 an hour and the turnover was enormous. So, we started in the childcare world, now almost going on 12 years, and we now support over 22,000 child care centers in over 33 states across the United States. What we’ve done is we’ve brought down their costs, we’ve upped their quality, their training, their marketing, their insurance. We’ve saved individual child care centers $30,000 or $40,000 a year on buying food or insurance. You know what that translates into? Having one or two more people take care of kids. It translates into having a business that can survive. We think it’s really critical in our world that not just the wealthy have good care for their children. So, that’s a very growing area and as a cooperative, we can do it because we’re concerned about the end result, not just about the profit.
Van Ton-Quinlivan: We’re so excited to have you on this podcast. It’s opportunity and it’s hope. These are the themes that this model offers. Tell us a little bit about CCA Global, one of the most successful co-ops in the world? What kind of assistance or services do you provide to your members, Howard?
Howard Brodsky: Our makeup is really family-owned businesses, mostly in North America, but also Australia and New Zealand. As I said, I think family-owned businesses are the core of our country and the core of our communities. We do everything from buying to marketing to technology to training, and we do it across businesses — everything from bicycle stores and fitness stores, to floor covering stores to lighting stores and servicing 14 different industry sectors. Just to give you an idea, during the recession, back almost 12 years ago now, almost 25 percent of businesses in those sectors went out of business. But if a business was a part of our cooperative family business, we only lost two percent. And what happens when the local family business goes out? They lose their house. They become lower class, instantaneously, working for minimum wage. We think we’ve developed a formula with a very good infrastructure of how to really have family businesses not only just compete, but really succeed and grow. During the pandemic, they’re thinking over 25 to 30 percent of family businesses will have closed by the end of 2020, and yet members of our groups of all the different cooperatives, again, I think we’re going to be under one or two percent. Almost all of them have succeeded because we provided capital, we provided marketing, technology, learning, education. I think the question is, how do you get scale without giving up control, and cooperatives give you scale and you maintain ownership of even the cooperative.
Van Ton-Quinlivan: Those are dramatically different numbers. 25 to 30 percent death rate versus a one to two percent. Is it too late, Howard, for family-owned businesses to join CCA?
Howard Brodsky: As long as we do it within the sectors we’re in, we’re still looking to grow and certainly looking to help family businesses. Even in the child care business, we were so busy getting the personal protection equipment, PPE, for child care centers and other things they needed. Their world changed overnight and we were able to give them, I think, both the education and the resources and sourcing they needed. Again, when somebody is a “one” they need to count on somebody to succeed, and I think we’ve learned that the power of “stronger together” really works in a cooperative.
Van Ton-Quinlivan: On the education side, we’ve been calling it an “ecosystem.” That having an ecosystem or a network actually is more resilient during times of disruptive change. I can see the power of the collective here. You’re an active speaker and often talk about the theme of capitalism with a conscience. Is capitalism still the best economic model for our country, Howard?
Howard Brodsky: Well, I think the way it is right now, no. Last year, billionaires increased their wealth by $2.5 to $3 billion a day and yet the poorest 90 percent lost wealth. That’s why we have a fading middle class. Frankly, it’s wealth without fairness. The very wealthy give money to fix the problems they created. I don’t think that’s a good economic system. The economic system has to work for all, not just for the elite. I think people need more shared ownership, Van. I think that’s what a cooperative does. I think people need a stake in what they’re involved in, not just going from $14 to $15 an hour. I think it’s a very good thing, and important, to raise the minimum wage to make it somewhat livable. But I think we also need a stake. Going back to basic minimum assets…they should own a piece of something. Let them own. I don’t think it’s fair that one person has $120 billion and the people working for them own not one piece of that company. So, I still strongly believe in capitalism, but I think it does have to be capitalism with a conscience.
Van Ton-Quinlivan: Thank you for being so clear on this issue and also the path forward. Can I also ask you, is participation in a stock plan sufficient and how does it differ from the co-op model?
Howard Brodsky: Well, in the co-op model you have actual ownership and a say. You actually have a vote. You have real ownership. Somebody is not giving you a share. I would say most companies aren’t giving people shares. There are some that are, but most are not giving shares. But in a cooperative, it really is shared ownership, shared democracy and shared wealth. I would say a cooperative is a wonderful blend. It’s not a nonprofit, it’s not socialism, it’s a wonderful blend of capitalism with a heart. It definitely is capitalism. We’re an extremely profitable company. We’ve been profitable every year. The only difference is we return the profit to the people that are part of our company and use it. We distribute that profit. I think there has to be more distribution at the base level, not distribution after somebody makes a fortune and they decide where they want to give money to. As I said, they’re giving subsidies, not opportunity.
Howard Brodsky: Every time I speak to you, it gets me thinking about what more can we do to improve the situation for our nation. I love this idea of capitalism really with embedded stewardship in the values. Now, you have many, many members in CCA, all of these family-owned businesses, so you have a broad view of what’s happening in the economy. What are you seeing and hearing about their workforce challenges, Howard?
Howard Brodsky: I think it depends on which sector you’re in. As you know, certain sectors have been devastated by the pandemic. Certainly, the hospitality sector has been just really devastated. I have a lot of friends in the restaurant business and their world is turned upside down. But in the workforce, I think it’s realigning. What I’ve seen is it’s realigning people to where the opportunity is. I think there are excellent jobs and opportunities out there and people don’t have the skill sets. Probably a classic example is cybersecurity. There’s an enormous demand and the training is not three or four years. I think everybody’s not made to go to a four-year college. It’s about aligning the educational opportunities with the growth opportunities in the different sectors.
Van Ton-Quinlivan: If you were, for example, to roll out these training and upskilling opportunities, do you think the employees would take advantage of them naturally, or do you think there are more incentives that are needed in order for employees to upskill?
Howard Brodsky: It’s a great question, Van. I think one of the things is, you have to give people a transition period while they’re learning because a lot of people can’t stop working. I think that’s one of the issues. Some people are working, but they’re working at jobs that they can’t make a living on, right? If you’re working and making $9 an hour, you can’t give up the $9, even though that seems crazy, but you can’t give up the $9. Where we need the subsidy is to give people a working wage while they’re learning new skills. I don’t think that has to be for long periods, but if you really want to change people’s path and you want to change their opportunities, you have to build their skill set level to a new level that maybe didn’t exist before and you need to give them a transition period of income because then you’re not just giving subsidies, but you’re giving opportunity.
Van Ton-Quinlivan: That’s good advice. Let’s go global for a moment. I know in the past year or so you attended the International Cooperative Conference in Rwanda. Why was it special that it was held in Rwanda?
Howard Brodsky: Rwanda, as we all know, came out of the genocide not that long ago. It was only like 26 years ago. The country was torn apart, literally, and millions of people were killed by their neighbors. It was neighbor against neighbor. We heard from the head of Rwanda and the head of commerce that the country now economically is doing very well and they said there’s only one reason: cooperatives.
Almost 40 percent of the population in Rwanda belongs to a cooperative and they said without cooperative structure, you would not have the people working together, the democracy and the opportunity.
It was such a classic case of understanding the power of cooperatives. There was a country literally torn apart, Van, torn apart by neighbors, by the killings, by the economic crisis… everything. And cooperatives brought them back together. They are healthy economically now. They are healthy democratically now. They said there was only one reason, because of cooperatives. They had to work together, they had to share ownership and they had to share wealth and opportunity. It was amazing to be there and to talk to the people and to see how much cooperatives played such a large part of their life coming out of such a horrific time. I don’t think we can ever imagine what happened to them and their current state of neighbors to neighbors now literally working together, owning the same company.
Van Ton-Quinlivan: That’s amazing! Well, I’m part of the Brodsky choir to get the word out on co-ops, as you know. Let’s close by asking you this personal question: I hear you are also a Justice of the Peace. Tell our audience more about the weddings you perform and why.
Howard Brodsky: Well, many years ago I got a Justice of the Peace license and an employee came up and said, “Could you perform our wedding?” I said, “Well, I guess I could.” So, over the years, actually, I have performed weddings for my relatives and employees. I’ve performed now over 30 weddings with no divorces! I’m 30-0. So, if somebody wants to get married, I’m a very, very good percentage! I enjoy the emotional experience. It’s like, what better time to be with a person then during the happiest time of their life?
Van Ton-Quinlivan: Sounds like you’re a marriage “lucky charm” as well!
Howard Brodsky: (laughs)
Van Ton-Quinlivan: Well, thank you very much, Howard, for joining us today. It was such a pleasure to reconnect with you and have you share all your wisdom with our audience.
Howard Brodsky: Oh, thank you, Van. It was a pleasure being with you. It is always nice connecting with you.
Van Ton-Quinlivan: I’m Van Ton-Quinlivan with Futuro Health. Thanks for checking out this episode of WorkforceRx. I hope you will join us again as we continue to explore creating a future-focused workforce in America.