CREATEEmployee Ownership: Building a More Equitable and Resilient Future with LA’s Manufacturers and Workers
Project Equity will leverage employee ownership (EO) to preserve local ownership of manufacturing firms and increase economic security for low- and middle-income (LMI) workers. Through outreach to firms and their networks, we will raise awareness of and counsel manufacturers on EO transitions—the sale of a firm to its employees—to provide retiring owners and those considering closure due to COVID-19 with an exit option that averts job losses, transfers assets to LMI workers, and embeds greater economic resilience and equity into LA’s future.
In which areas of Los Angeles will you be directly working?
East LA
San Fernando Valley
South LA
In what stage of innovation is this project?
Expand existing program
What is the need you’re responding to?
At the start of 2020, thousands of LA manufacturing jobs were at risk from baby boomer owners retiring without succession plans and closing their firms. Today, COVID-19 has made preserving LA’s manufacturing firms even more urgent by highlighting the nation's vulnerability to global supply chain shocks and the importance of domestic manufacturing. The crisis has also brought into sharp focus the injustices in our economy and the critical need to build more economically resilient and equitable communities.
EO presents a unique opportunity to not only keep LA’s manufacturers open for business, but also create a stronger future for LA: 1) EO transitions preserve businesses/jobs by providing owners who lack exit/succession options with a viable buyer—their employees, 2) EO firms are more recession-resistant with fewer layoffs and faster post-recession growth, and 3) EO produces more economically secure workers, who report 33% higher wages, better benefits, and 92% higher net worth.
Why is this project important to the work of your organization?
Project Equity (PE) is a national leader in the movement to harness employee ownership to maintain thriving local business communities, honor selling owners’ legacies, and address income and wealth inequality. Headquartered in the San Francisco Bay Area and with a team in Los Angeles, Project Equity works with partners throughout California—including LA County and the cities of Los Angeles, Long Beach, Berkeley, San Francisco, Santa Clara, and Fremont—and the country to raise awareness about employee ownership as an exit strategy for business owners, and as an important approach for increasing employee engagement and wellbeing. We also provide hands-on consulting to support companies that want to transition to EO and to new employee-owners to ensure that they, and their businesses, thrive after the transition. We have counseled hundreds of California businesses on EO transitions; those that transitioned generate demonstrable financial benefits for their workers.
Approximately how many people will be impacted by this proposal?
Direct Impact: 370
Indirect Impact: 4,600
Please describe the broader impact of your proposal.
PE's advancement of EO can:
Create a blueprint for LA economic development policy and investment that retains jobs and valuable businesses at risk due to owner retirement and COVID-19.
Embed—within manufacturers and key small business support organizations and networks—an economic development strategy that builds in greater economic resiliency, equity, and recession-resistance.
Preserve local tax revenues and anchor more money locally (every manufacturing dollar spent adds $2.74 to the economy).
Increase financial security for frontline workers through higher wages, job stability, worker empowerment, and asset building.
Help protect LA’s natural resources by including residents (workers) in company decisions with environmental impact.
Please explain how you will define and measure success for your project.
To date, PE has leveraged employee ownership as a succession strategy for baby boomer business owners retiring in the next 2-5 years. Today, COVID-19 has created an urgent need to prevent manufacturing closures due to owners seeking immediate exits, including aging owners who have weathered past recessions and are less inclined to endure another. PE’s long-term vision is to strengthen LA’s manufacturing sector and enhance community resilience by unleashing the power of EO to retain long-term local ownership of manufacturing businesses and increase future economic security for LMI and of color manufacturing workers as employee-owners.
PE will measure progress towards this vision by these outcomes:
1. Elevating LA manufacturing sector’s awareness of EO, indicated by the number of firm owners and industry stakeholders (e.g., industry groups, business advisors) reached through our awareness raising/outreach. Target: 4,000 owners; 250 stakeholders.
2. Increasing LA manufacturing sector’s demand for/uptake of EO, indicated by:
a. Number of consultations calls with manufacturing firms. Target: 80
b. Number of feasibility studies for manufacturing firms. Each feasibility study takes 90-120 days. Target: 2-4
c. Number of manufacturing firm EO transitions commenced. Each transition takes 9-12 months. Target: 1-3 firms; 40-300 workers
3. By building a pipeline of firms considering EO, creating future business ownership opportunities for 600 additional LMI and of color workers in additional firm(s) that may transition after the grant ends.
Which of the CREATE metrics will your submission impact?
Manufacturing activity
Income inequality
Jobs per capita
Which of LA2050’s resources will be of the most value to you?
Host public events or gatherings
Communications support
Office space for meetings, events, or for staff