Baking up a new business model

While producing 50,000 loaves of bread a day, Alvarado Street Bakery has cooked up a new way of doing business that prioritizes people over profits.

Last month, the bakery not only earned a Leadership in Sustainability award from Sonoma County's Leadership Institute for Ecology and the Economy, it was named one of America's top 50 small- or medium-sized businesses to work for by Fortune Magazine.

The business raked in $28 million in revenue last year, and at this cooperative bakery, profits are shared equally among the 121 employees, whether they're a janitor or an executive. Each staff member has a guaranteed base salary, along with a generous benefits package. Once the bills have all been paid, any remaining money goes straight to the employees on a quarterly basis.

"Those profits can exceed $30,000 in a year per worker," said Michael Girkout, president of Alvarado Street Bakery. He said on average, workers take home $50,000 a year, but that can fluctuate. "There have also certainly been times in the past when we haven't had anything to share."

But the bakery's business philosophy is about more than just profit sharing. The entire company is democratically run by a board of nine elected employees who must represent all aspects of the bakery, meaning there must be at least two men and two women; managers and floor workers; and members from different departments. The board oversees everything from setting annual wage ranges, which are updated annually to reflect cost of living increases; to ensuring that the bakery is compliant with state and federal business regulations.

Larger financial decisions, such as the bakery's choice to install 1,700 solar panels making it the only solar-powered bakery in the country, are taken to the members for a vote. Because it required a big expenditure of company profits, all members were given a voice in the decision.

"We are a democratic workplace, so one person, one vote, regardless of what position you hold," Girkout said.

It's a model that has changed over time. Early on, as the business settled into the revolutionary model, issues between employees sprouted up at the whole grain bakery. "We had some rough times," said Frank Vallin, who has spent 22 years on the production line.

"That's when the committees were formed," added Julie Mager, a marketing assistant who's worked for the bakery for seven years. From grievances to employee wellness, the bakery has myriad committees to ensure the business is running smoothly for everyone.

"For the record, we have not had a grievance come up for 15 years," Girkout touted. "People are pretty happy here. We have nearly zero turnover in the bakery. My son started working here six years ago and he is still called the new guy."

On the rare occasions when Alvarado Street advertises for an available position, resumes pour in from all over the country. People with advanced degrees regularly apply for positions on the production line. "We have a lot of smart, college-educated workers bagging bagels because in a company with no turnover, there are limited opportunities to move up."

But the employees don't seem to mind. The above-average pay scale and the expansive benefits package that is funded 100 percent by the business, are enough of a reason to stay. Even more, the company offers English language and financial literacy classes, and contributes annually to every employee's retirement fund.

"I have corporate executives from big super markets who say, 'How can I get a job here?'" Girkout laughed.

The business has always been based on the unconventional. "We were producing whole grain breads long before it was cool," Girkout said of the 33-year-old bakery.

In the bread mecca of Northern California, where sourdough reigned as king, Alvarado Street began making whole grain sprouted breads. While most bread comes from milled grains, the Alvarado Street Bakery buys whole seeds, which it brings to sprout at its Petaluma facility.

"We don't use any flour in our bread," Girkout said, explaining that the mixture of wheat, rye, corn, alfalfa, lentil and other sprouts is ground into a wet mash that is the foundation of all of the bakery's bread. Because of the higher degree of moisture in a live product, the bread freezes easily, allowing it to be shipped all over the planet.

"We're the biggest whole grain bread seller in Japan," Girkout said, adding that the bakery recently signed contracts in Puerto Rico and Jamaica.

While the business has always operated under the same democratic, employee-owned philosophy, it wasn't until controversial documentary filmmaker Michael Moore walked into the bakery that the national spotlight focused on Alvarado Street. After featuring the unique business model in his 2009 film "Capitalism: A Love Story," Girkout saw a boom of interest in their workplace.

"We've been singled out a lot as of late," he said of the bakery on South McDowell Street.

He's consulted at business conferences and discussed how the cooperative operates all over the world, but remains dedicated to the simple idea that if it's good for the employees, it's good for the business.

"We are they - there's no one to give the money to but ourselves," he said. "We are able to give a living wage to all of our employees who are able to buy a house in Sonoma County, who are able to send their children to college."

(Contact Emily Charrier at emily.charrier@arguscourier.com.)