Another French social innovation: Cooperatives of Salaried Entrepreneurs

Arvind Ashta Banque Populaire Chair in Microfinance of the Burgundy School of Business Partially funded by Burgundy Regional Council

Apeejay conference New Delhi, India, July 26, 2013

Social entrepreneurship
Solving deep social problems
If the problem / root cause is defined correctly it provides half of the answer

Model
Empowering people Sustainable organizations Challenging conventional wisdom Innovative business models Local actions

Mutiple impact in people's lives

Making the world a better place

http://www.insead.edu/facultyresearch/centres/social_entrepreneurship/about_us/directors.cfm

The problem
Financial markets pressure on profits leads to disregard for people

Unemployment is eating into the French social fabric

1997: 3.2 million unemployed 2013: 3.2 million unemployed
Year 1999 2000 2002 2003 2004 Official unemploym 11.0 9.7 9.1 9.7 10.1 ent rate Source Lexusmundi who cites CIA Factbook, 2012 from press 2005 9.9 2006 8.7 2007 7.9 2008 7.4 2009 9.1 2010 9.5 2011 9.3 2012 9.8

Problems generated by conventional State policies

Do nothing Give a dole Subsidized State aided jobs Promote Entrepreneurship

starve, beg on the street, suicide

paid to do nothing,

Do unproductive things

Lose whatever savings you have, downside risk

Rob, go to jail, Society pays to lodge and feed

creating dependency

Feel good, Hide the problem

Cannot compete with big business who has economies of scale

Try Entrpreneurship

Conventional / Institutional Blocks

Entrepreneurs Salaried Cooperatives don't work (Soviet history), Cooperatives are for the salaried
Employees get salaries, right to dole Profit-sharing is not a right Dole is my right, Why work if I lose the dole

Ideology

Enterprise is for shareholders, dividend, buying and selling the firm

Entrepreneurs get profit, no right to dole Aversion to loss, to downside risk

Regulation

Attitudes

Building blocks

Stakeholder Theory

Succesful Cooperatives
Cheque djeuner : > 2000 employees

Business Cooperatives
Cooprative d'activit et emploi

Shared Enterprise Model

Stages of an entrepreneur's involvement in a CAE

Exit or Stay Develop your activity Test your idea
Partnership with cooperative You can bill in the name of the cooperative You are now a salaried employee, Some money spread over time Keep dole for 15 months, amount depends on your activity level

Become member of the cooperative and salaried Create your own enterprise

Unemployed
Get your idea Get your dole Contact a CAE

Findings: Of those who exit: (Orientation session on CAE at Envol, Dijon) 42% create their enterprise 35% find a job 23% remain on the dole

The Evolution of CAE

Nursery
Legal shelter Initial risk Testing market
Equality and mutual interest

End of isolation

Keep dole

Shared Enterprise
Entreprene urs become members

Retain Autonomy

Knowledge sharing

Sharing indirect costs

simplified social security

economies of scale

Representat ion & proft sharing

Catalyst
Cross-entrepreneurial initiatives. Form alliances to respond to market needs. Captive internal market

Macro Advantages of Shared enterprises

Encourage micro-entrepreneurship

Reduce doles
Locally anchored intiatives that will not fly

away
Develop citizenship and cooperation Profit to workers

The Growth of CAEs

Turnover of CAE Number of (in Turnover Turnover per Number salaried millions per CAE entrepreneur Entrepreneurs of CAE entrepreneurs of Euros) Euros (Euros per CAE
2000 2006 2012 20 61 68 106 1,527 4,000 3 22 37 132,500 354,393 544,118 25,000 14,157 9,250 5 25 59

Source: Bost (2011) and website of the federation of cooperatives.

Share of social and solidarity economy in total French economy

Table 3 :Comparison of the cooperative sector in total activity in France Cooperatives Total A. Number of establishtments 2005 21,509 2,159,619 2010 25,871 2,351,396 % growth 2010 on 2005 20.30% 8.90% B. Number of employees 2005 283,436 21,643,523 2010 306,424 22,669,852 % growth 2010 on 2005 8.10% 4.70% Share of employment 2005 1.30% 100.00% 2010 1.40% 100.00% Employees Per Establishment 2005 13.2 10 2010 11.8 9.6 Souce: INSEE

The 68 CAEs are therefore not even 1% of the cooperative sector and the 4000 jobs they have created are miniscule in comparison with the needs of the French economy.

Case Study: Coopaname

Coopaname started in 2004 and is situated in Paris. During 2011, it hosted 522 entrepreneurs. 381 were receiving salaries in December 2011. There were 83 associate members.
The total income for 2011 was 6.3 million Euros, of which 10.5% was government subsidies. These subsidies and the 10% of turnover of all the entrepreneurs, finances most of the cost of the Structure, which is about 1.3 million Euros. Coopaname had a surplus in 2011 of 113,000 Euros. The total income of the entrepeneurs themselves was about 5.8 million Euros. Their main expense was their own salaries, 3.3 million Euros. 62% of the entrepreneurs are women. The age profile varies from 23 to 75 years. 80% were unemployed before coming to Coopaname. 90% were immigrants.

The largest microenterprise of Coopaname had a turnover of 393,000 Euros.