Why Michigan's Favorite Food Brand Is Turning Its $50 Million Business Into A Worker-Owned Co-Op

Zingerman's Deli is a staple of Ann Arbor, Michigan. Its fans include President Obama and celebrity chef Mario Batali.

The deli, founded in 1982, is just one of nine businesses in the Zingerman's Community of Businesses, which also includes a bakery, creamery, candy company, and restaurant.

These businesses are founded on a unique philosophy. They lack a traditional business hierarchy and emphasize collective decision-making. The unorthodox strategy has worked well for them, and the company is on track to make $50 million this fiscal year.

In the next few years, Zingerman's plans to adopt an even more radical business model, becoming a worker cooperative, where its 600-plus employees will own the company and influence its direction.

A worker co-op is an old business model that has seen renewed interest post-recession due to a lack of investors creating jobs in communities. But Zingerman's has been focused on getting its employees to think like owners long before hard economic times.

One of the tenets of modern cooperatives, open-book management, has been in effect at Zingerman's for 20 years. It is a management philosophy founded on the idea that even the lowest-level employee will work better if they know how the company is doing financially and should have a stake in its success.

All of Zingerman's meetings are open to every employee, including those about important budgetary concerns. Ari Weinzweig, cofounder and CEO of Zingerman's Community of Businesses, recalls one recent budget meeting for Zingerman's Cornman Farms that included a part-time employee who had only been working there for 10 days. "She's sitting in there as we're discussing where cash is going to come from, what we need to do to finish up the construction budget, start the labor budget for the operations, and all that," he says.

Weinzweig believes it's simply common sense to have employees in on the company's strategy. "There's a person at the deli counter who makes 1,000 decisions in an eight-hour shift," he says. "The more information they have, the better they can make decisions."

Further, Weinzweig and the 17 other partners, who act as managers, want to find a way to get employees involved in the consensus, rather than just sitting in to ask questions and offer insight. It would give them real influence over the direction of the company. Right now, he's playing with the idea of having a rotation of two to three non-partners gaining consensus power for each big meeting.

Essentially, that could give someone like that new part-time employee as much voting power as the CEO.

He hopes to have the model in action by next year. "I'll have to figure out every detail, half of which will be wrong and will be changed within the next year to three years, but we've got to start somewhere," Weinzweig says.

He thinks that traditionally managed organizations, in which executives operate in a different sphere from their employees, "are operating with about 5% of their intellectual and creative capital, which really doesn't make sense."

Weinzweig and cofounder Paul Saginaw have a vision for what Zingerman's will be in the year 2020: It will consist of 12 to 18 businesses in the Ann Arbor area, each managed by partners, and will be owned and partially controlled by employees.

Weinzweig knows that rebelling against the traditional way of doing things comes with challenges most business owners haven't dealt with before. But he wouldn't want it any other way.

"We strongly prefer the problems of going our own way to going with the flow and being mad at ourselves later," he says.