Ed Mayo: I work in the co-operative sector. Co-ops are different and much of this, as I see it, comes down to the fact that co-ops tend to be characterised by complex purpose.

We are set up primarily to meet needs, not to generate profits. Our owners have overlapping interests, as they are both investors and participants in the enterprise (such as customers or workers). We are expected to live up to seven different (internationally agreed) principles and how we do that – our culture – is shaped by a range of ethical values.

Telegraph pole outside a co-operative nursery, Seoul

A tide of simplicity

In contrast, the wider business environment within which we operate is increasingly characterised by assumptions of simple purpose: return on capital for external investors.

In most markets, the shift to simple has shaped institutions and policies, such as accounting standards or taxation, that are designed to encourage performance against that purpose. As a result, as co-ops, we are often swimming against a tide of simplicity.

How do co-ops around the world track their performance or design their reporting systems? This is the topic next week in London (neatly falling in the UK Co-operatives Fortnight with its theme of the Co-operative Difference) for an international symposium on co-operative accounting and reporting, organised by the great co-op business school, Sobey (from St Mary’s Halifax, Canada).

Accounting, set up to make clear what is true and fair, is a case study of simplicity versus complexity in business. The move to harmonise international corporate accounting standards over the last decade looks to reduce the costs of complexities at a global level of different accounting traditions – a worthwhile goal (even if somehow in the process, the complexity of delivering global standards further reinforces the dominance of the big four accountancy firms).

But the drive for accounting simplicity can cross over into an attempt to reduce diversity. From time to time, international accounting policy makers want to move member capital from an asset, co-invested in a joint endeavour, to a liability, assuming that it is a promise of money owed by the business to those who participate in it. Why? For simplicity only, as if all companies could be treated as if they were owned by investors, rather than other stakeholders. But for financial co-operatives, among others, a move like this could mean instant closure.

For and against

Simplicity in business, in terms of return on capital, has significant strengths of course, including these five:

1. Decision-making. It is easier within the business to judge trade-offs and investment opportunities.
2. Capability. There are plenty of tools to draw on, plenty of expertise to bring in.
3. Communication. Not surprisingly, simplicity is easier to communicate. Expectations are clearer, the chance for conflict reduced.
4. Comparison. With net profit, return on capital and share prices, it easier to see and to compare how a business is performing.
5. Accountability. Simpler purpose makes simpler accountability, because it is clearer what to account for – less room for people who use complexity as a source of obfuscation.

Staircase at the National Co-op Centre, Warsaw

But simplicity becomes an obstacle, when the context changes and these same strengths turn to weakness:

X Decision-making. Chasing financial results, like share price, makes companies act for the short-term rather than on long-term drivers of success.

X Capability. More subtle aspects of the business, such as culture, are less valued.

X Communication. The purpose of making someone else money is not motivating for the workforce or for customers.

X Comparison. Simple metrics can be misleading, encouraging conformity rather than diversity and learning.

X Accountability. Wider social responsibility or stakeholder concerns are sidelined, generating the potential for risk and backlash

The case for complexity is that businesses operate in complex and fast-moving environments. To succeed, they need sufficient complexity in their own feedback and learning systems to adapt and improve.

One example is innovation. The two most common sources for business innovation are workers and customers. Where you are owned by your workforce, or by your customers, as in the co-operative model, you stand a better chance of capturing those ideas and adapting in line what they offer.

A second example is loyalty. Where people identify personally and collectively with the purpose of a business, going beyond simply making money, they are likely to be more engaged and more loyal to the business, as workers, suppliers or as customers.

The third example is the challenge of sustainable development, increasingly the focus of policy concern and action. Business is challenged to act on a complex array of risks and opportunities that are hard to reduce to simple metrics.

Taking these, the case for complexity in business can perhaps be expressed in these five characteristics:

1. Realism. The context within which companies operate is complex, so matching this can lead to more realistic decisions.
2. Responsiveness. Embracing complexity encourages a culture of openness and enquiry, helpful for listening and learning.
3. Safety. Companies that look at their interactions with the world through a lens of complexity are less likely to be blindsided when risks arise.
4. Strategy. In complex models, no one aspect is weighed alone without addressing the totality, supporting companies in moving forward in an integrated way.
5. Sustainability. The challenges of sustainability are complex and companies that succeed will be those able to sense and adapt to hard-to-predict changes.

There are other, more philosophical grounds too to affirm complex purpose – as a counter to the ‘financialisation’ of life, as an expression of freedom and as a component of cultural diversity.

The search for middle ground

As I see it, the response of business policy in many jurisdictions is to mitigate the weaknesses of simplicity, by interventions that encourage and require compensating actions to restore some complexity.

In a European context, stakeholder engagement and to a degree, stakeholder accountability, is a longstanding tradition. Having workers on the boards of German companies (co-determination), a tradition with roots post-war in the co-operative model, has been good for the German economy.

The Nordic countries have led the way on gender diversity, again with the argument that company boards need mixed perspectives rather than narrow unity – just one more example of the ‘law of requisite variety’: that you have to be able to reflect the complexity of your context in order to succeed in that context over time.

In the UK, the draft new governance code from the Financial Reporting Council is an overt attempt to move listed companies towards a greater degree of complexity – encouraging a focus on long-term purpose, engagement with the workforce, values and culture.

To that extent, companies are being encouraged to be more co-operative, more complex. And these are areas in which co-ops have tended to lead – on values for example. As I point out in my book, Values: how to bring values to life in your business, values evolved as a collaborative decision-making tool in the context of complex options. Values are a short-cut way of making decisions – as one co-op procurement lead says to me, “values are our handrails.”

So, should co-ops also move the same way, adding to complexity, further complexity?

My view by and large is no. There are of course some of those opportunities, evident in the rise of more participatory tools for decision-making, and the hopeful interest in multi-stakeholder models of governance.

I would argue that if co-ops need to change, it is usually towards more simple complexity.

An example is the UK’s consumer retail co-ops. For larger and more longstanding co-ops, there can always be a degree of drift in the sheer accumulation of expectations. To succeed, a co-op needs to be clear on how it makes a difference to its members.

Lincolnshire Co-operative has been going through exactly this process, with some support from us at Co-operatives UK. Successful, with over 250,000 members, and 150 years under its belt, the Chief Executive, Ursula Lidbetter has supported a process where the Board and members develop a clear forward purpose for the society: a few words, simple to say but still rich and complex in content and intent for what makes it so different as a business.

With a clear focus on what matters, what value is for members, it is then easier to choose the metrics that can paint a picture, alongside other forms of feedback, of performance. Merthyr Valley Homes tracks a range of indicators, including spending in the local economy and weekly levels of litter. The results are open to the members: residents and staff. For one social club in Yorkshire, the lead indicator is barrels of beer sold weekly. Members tell them what else they should be doing – the benefit of a participatory co-op, but key indicators help to balance that complexity of expectation with a more simple story of performance over time.

That is something which we are helping with, through the development of guidelines for the co-operative sector in narrative reporting.

More simplicity or more complexity?

The balance between simple and complex is one many others have considered. The words of Oliver Wendell Holmes, a late nineteenth century US Supreme Court Justice, are worth the repetition: “for the simplicity that lies this side of complexity, I would not give a fig, but for the simplicity that lies on the other side of complexity, I would give my life.”

The great mathematicians and philosopher Alfred North Whitehead, said in a lecture a century ago: “we are apt to fall into the error of thinking that the facts are simple because simplicity is the goal of our quest. The guiding motto in the life of every natural philosopher should be, ‘Seek simplicity and distrust it.”

I appreciate the modern Law of Conservation of Complexity, also called Tesler’s Law, after Larry Tesler, the computer scientist who is credited with inventing cut/copy and paste. This states: Every application must have an inherent amount of irreducible complexity… The only question is who will have to deal with it.

The implication is that designers can help ensure that the simple is not over-simplistic and the complex is not over-complicated. Computers, since Tesler’s days at Xerox have become more complex in terms of technology but more simple in terms of ease of use. In turn, complex software, such as the open source Unix operating programme suite, might be designed on the basis of simple subsets, collaboratively assembled, that do a single task well.

In business, it seems that simplicity alone is of value, complexity a necessary constraint. In terms of business philosophy, simplicity sells.

Ceiling at a coop and trade union education centre, Helsingor

I argue the opposite. There is a value to complexity, and a growing value at that. And yet, the need for simplicity remains a necessary constraint.

Like a flock of birds, wheeling in the sky, complex systems can emerge from simple rules, while retaining a function, of collective intelligence, what Geoff Mulgan calls ‘the bigger mind’ – or to the observer, beauty – which can’t simply be reduced down to those rules.

For my colleagues in the co-operative sector, the moral is that we should embrace complexity – and promote our understanding on how best to organise around it.

——————-

Footnote

This is all an example perhaps of a wider challenge that goes to the heart of a generation of debates on economics. A substantive body of work looks to redefine wealth and progress beyond the simple aggregate of money flows in the economy (or Gross Domestic Product), to integrate the context of unpaid labour, well-being, economic externalities and sustainability thresholds.

What we have learned is that while a new map (such as the triple bottom line) can sometimes become part of the landscape itself, a static description is not enough. There needs to a dynamic perspective that integrates things – a theory of change.

You can, for example, have as many different forms of ‘capital’ as you like in your (satellite) national accounts, but if they don’t make it easier to build an account of what is happening across the complexity of those domains, they don’t necessarily help. Of course, the simple option, which is to use money as a common denominator simplifies may help even less if it assumes that we can buy our way out of one or another dimension of collapse in environmental functions that are critical to habitable life.

The United Nations Sustainable Development Goals gives one interpretative framework and offers an important reference point. It is good to see it used by so many co-ops and Fairtrade organisations worldwide in their planning. And yet, as a complex array, it does not resolve the challenge of displacing the dominant simplicity of economic growth.

The struggle for what Paul Ekins and Manfred Max-Neef many years ago called ‘Real-Life Economics’, reflecting the complexity of human nature and natural systems, continues…

Republished from Ed Mayo’s Blog

Photo by bdesham

The post Does everything have to be simple? The case for complexity in business appeared first on P2P Foundation.

With 7.1 million workers engaged in ‘precarious’ employment and 77 per cent of the self-employed living in poverty, the report ‘Working Together: Trade Union and Co-operative Innovations for Precarious Work’ calls for increased protection for those operating in the so-called gig economy.  

“Not only do they have almost no security, but while the average employed worker is losing out year by year in real terms, the self-employed are doing even worse, earning less each year in cash terms,” said co-author Alex Bird. “1.7 million of those in precarious employment are earning less than the national minimum wage, with no real enforcement of the law, and the self-employed are not even covered by the existing legislation.”

There are solutions according to Working Together. The report, commissioned by Co-operatives UK and The Co-operative College, and supported by the Network for Social Change, Wales Co-operative Centre and the Institute for Solidarity Economics, identifies ‘co-operative solutions’ as well as partnerships with trade unions as a way of ensuring a fair deal for workers in an expanding gig economy.

It calls for the UK to replicate the ‘umbrella co-operative model’ for supporting freelancers and other precarious workers and points to Belgium-based SMart. The non-profit organisation enables precarious workers operating in the arts sector to obtain a range of welfare benefits – including unemployment benefit.

SMart also provides its 70,000 plus members with tax support and advice. Sarah de Heusch Ribassin, Project Officer for the Development Strategy Unit at Smart, said:

“Many of those who were self-employed found the legislation around taxes to be so complex and were afraid to do things wrong. SMart offered an alternative that meant they no longer had to worry about making errors that would affect their income.”

Working Together also identifies Indycube as a blueprint for how partnerships between trade union and co-operatives can flourish. Indycube is a rapidly growing network for freelancers and the self-employed and offers access to workspace in more than 30 locations, predominantly across Wales.

The not-for-profit co-operative works with the trade union Community to offer a range of benefits including advice on tax, insurance, pensions and employment law.

Mark Hooper, Founder of Indycube, sums up how the relationship with Community has developed. He said:

“We see this as the way to grow with Community’s resources, capacity and knowledge, and the plan provides an opportunity for third party representation of our self-employed members.

“On a practical level, freelancers often find themselves presented with complex contracts full of legal jargon, which can result in problematic agreements and issues with payment.

“Community’s legal team are able to advise on these sorts of documents which many independent workers wouldn’t otherwise be able to access. Likewise, Invoice Factoring is a service which is generally only available to bigger companies and organisations, but banding independent workers’ voices together and working in partnership with Community has allowed Indycube to secure access to Invoice Factoring services, effectively putting an end to late payments for our members.

“Fifty-one per cent of invoices are paid late, a figure we think is far too high, and Community’s support has enabled us to make progress in this area. Thanks to Community’s status as an established union, Indycube has been able to cement itself in the minds of policy-makers and others as a voice for the fast-growing group of independent workers.

“The more members we have, the stronger our collective voice, and the more work we can all do to make our futures better.”

Les Bayliss, National Officer and Head of Special Projects for Community, said: “Our partnership with Indycube is one of a number of newly developed initiatives where, as a trade union, we are reaching out to new workers in today’s world of work.

“We will continue to listen to and understand what they need from a trade union, providing support, representation, mediation and settlement. Working together we hope to develop a ‘one voice’ approach to the needs of self-employed, freelance workers, speaking out and campaigning on the issues that affect them most.

“As a trade union we will continue to learn from our new initiatives and our new members, building new alliances with others in the private, co-operative and not for profit sectors. We will reach out to workers by being relevant to them and their needs.”

The rise in the gig economy means businesses, trade unions and government must do more to protect workers according to Ed Mayo, secretary general of Co-operatives UK, the trade body that works to promote develop and unite co-operative enterprises. He said:

“The number of zero hours workers has increased by over 800,000 within the past decade. Some 77% of self-employed workers are living in poverty…

“These are incredible numbers. With increased precariousness comes the need for increased protection and support and we know that co-operatives and trade unions can be part of the solution to this growing need.”

Cilla Ross, Co-operative College Vice Principal and co-author of the report said,

“The experience of growing numbers of workers in education, from teachers in the compulsory (pre-16) sector through to further, higher and adult education, is one of casualisation and precarity. This report pulls together examples of how unions and co-ops are successfully working together and offers real solutions on how precarious work can be challenged.”

The full Working Together report can be viewed and downloaded here.

Additional Notes 

The Working Together report profiles a number of examples where trade unions and co-operatives are working together including:

Musicians Union (MU) and Musicians co-ops: Local Authority music service closure in 1998 led to the launch of Swindon Music Co-operative. The MU was an active supporter of the co-operative which is now the main provider of instrumental and vocal tuition in over 70 local schools. The co-op and trade union partnership has set up seven other musicians’ co-ops across England and Wales.

Actor Co-ops: There are 30 actors’ co-ops in England and Wales. Their development and success has been through a close working partnership over many years with the actors union, Equity. The partnership has secured workers’ rights through negotiated industry agreements.

Community Lives Consortium: This social care organisation has operated as a co-op since 2001. It provides housing and social care services for severely disabled adults in Swansea, Neath and Port Talbot. Unison has supported the development of the co-operative since 2001 and has a place on the board of directors.

Key findings and recommendations in the report include:

• Co-operative sector share of GDP is 2% in the UK while in Italy and other EU countries it is over 10%. There are only 474 worker co-ops in the UK versus over 23,000 worker and social co-ops in Italy where public policy support (including tax reliefs) and legislative changes in 1985 and 1991 have been transformative.
• A wider partnership with local authorities can make a real difference. Cities in the US are supporting programmes to establish an eco-system of support for co-operative development including legal and technical advice as well as enabling finance. Local government partnerships in Italy have assisted the significant growth of social co-operatives in the fields of social care and jobs for disadvantaged groups in the labour market.
• Platform co-operatives co-developed by trade unions and worker co-ops are emerging in the USA as an alternative to Uber. Other trade unions in the USA are working on Union Co-op platform solutions for childminders and district nurses. Union Co-op solutions like this are needed in the UK.
• Mutual guarantee societies were developed in Italy and considerably reduce the cost of development finance for co-operatives. 19 EU countries have adopted this innovation and the UK should do the same.
• Universal Basic Income could be introduced in the UK in tax neutral ways that would significantly benefit those in precarious work. Trade union interest in this reform is growing as an alternative to the widespread problems with Universal Credit.

About The Co-operative College, Co-operatives UK and Wales Co-operative Centre

The Co-operative College is an educational charity and has been a leading provider of education, training and research for the co-operative sector since 1919. As a membership based organisation, we work across the UK and internationally to promote co-operative values, ideas,  principles and practices. www.co-op.ac.uk

Wales Co-operative Centre is a co-operative development agency, working across Wales to promote social, financial and digital inclusion through a range of projects. For further information visit http://wales.coop.

Co-operatives UK is the network for Britain’s thousands of co-operatives. Together we work to promote, develop and unite member-owned businesses across the economy. From high street retailers to community owned pubs, fan owned football clubs to farmer controlled businesses, co-operatives are everywhere and together they are worth £37 billion to the British economy. www.uk.coop

For further information, please contact:

Dominic Mills:

Tel: 0161 2141767

Email: [email protected]

<small>Photo by Startup Stock Photos from Pexels https://www.pexels.com/photo/people-coffee-meeting-team-7096/</small>

The post The UK is failing its ‘precarious’ workers says new report appeared first on P2P Foundation.

In his new book, Ed Mayo brings together this rich story for the first time in A short history of co-operation and mutuality.

Covering everything from the Commons to lending circles to labourer societies, this is a fresh take on the origins of co-operation form a leading voice in the global co-operative movement.

“A very thoughtful, deeply researched and original history of cooperation and mutual aid.” Frank Trentmann, Professor of History

Chapters

• Preface         1844 – The birth of co-operation
• Chapter 1      Co-operation and the human story
• Chapter 2      An ancient way of getting things done
• Chapter 3      Craft and co-operation in Europe
• Chapter 4      Traditions of co-operation
• Chapter 5      A friendly turn
• Chapter 6      From friendship to resistance
• Chapter 7      Freedom and repression
• Chapter 8      Out of Rochdale
• Chapter 9      After 1844: Plymouth and Finland
• Chapter 10    Self-help and state sponsorship in the twentieth century
• Chapter 11    The co-operative sector today
• Chapter 12    Co-operation and mutuality over time: a conclusion

Download the English version

Download the Spanish version

Take a look at the slide deck on the 12 early co-ops herePhoto by dkantoro

The post Book of the Day: A short history of co-operation and mutuality appeared first on P2P Foundation.

From Finland’s high-tech businesses through to an extensive network of regional co-ops that ensure that there are banks, stores and other services within two miles of residents throughout the year, there are co-owned services in every sector stretching right across a country 40% larger than the UK.

We have much to learn from countries like Finland and, across Europe, there has been a welcome strengthening of trade relations and contact between the 160,000 co-op enterprises which provide jobs for 5.4 million European citizens.

My recent trip to Finland coincided with the start of the Lapland tourist season: the plane that brought me there boasted a seven metre high picture of Santa Claus on the tail. But I was there for a more prosaic reason, visiting some of the country’s leading co-operative enterprises.

It was mid-afternoon and already dark in the capital city of Helsinki by the time I met Taavi Heikkilä, chief executive of the SOK Corporation (also known as the “S Group”), who filled me in on his organisation’s progress towards creating a co-operative economy.

As in the UK, there are employee-owned co-ops and customer-owned co-ops in Finland. The S Group’s retail co-ops are customer-owned, with 1,646 food and grocery stores and 42,000 staff. Over the last 30 years the S Group has grown from around 20% market share and the third largest retailer in the country to be the market leader, with just over 45% market share. Co-operatives in the group now cover an unusually wide range of consumer services, from cars and fuel through to department stores, hotels and restaurants.

My counterpart Sami Karhu, of the Pellervo Society, reports that the co-operative business sector more widely includes 161 co-operative banks, 20 co-operative insurance companies and a range of water, forestry and farmer co-operatives. The longest running of these date back close to the start of the first co-ops in Finland in 1899, launched as part of a movement to strengthen Finnish society in the face of threats from Russia. From these humble starts, co-op banks, diaries and shops opened in almost every community in the country. The movement’s founder Hannes Gebhard described it as “the peaceful endeavor of the underprivileged to improve their lot by their own efforts, joined together.”

Finland was later described by its Nobel Prize winning scientist A I Vertanen as an economy based on mutuality: “We have no Rockefellers or Carnegies, but we do have co-operatives,” he said. This tradition continues to spread some seven decades later.

The lessons for the UK are encouraging. At a time when the closure rate for rural shops and banks is increasing, the Finns have developed and sustained vibrant community-owned model for sustainable rural outlets that integrate different services, including food, petrol and banking. By combining services in a format that is shaped by local communities and responds to local needs, but with the scale and distribution of a national chain, Finnish co-ops are finding new ways to sustain more distant regional economies.

Finnish customer-owned retailers have won market share by making membership something that is meaningful, rather reproducing another consumer loyalty scheme. They are using data and new technologies to support the close relationship, and give a sense of ownership.

The S Group’s Heikkilä explains: “In the past a retailer knew all its customers and their needs personally. Today, customer proximity means new solutions.” Customers want easy and smooth shopping and a quick interactive service and the S Group has focused on digital services to offer just that. “We see digital mobile retail as the customer’s remote control to the co-operative”, he adds.

Today, the number of co-operative enterprises in Finland stands at 4,626. While Nokia, the leading Finnish company, has been knocked back and the economy has the strains shared by Eurozone nations, there is a fresh wave of co-ops: one new co-operative enterprise starts up every working day of the year. These organisations extended the co-operative model of member to include non-traditional areas such as woodlands, energy supply, consumer and business broadband and telecoms.

Here in the UK, the Lincolnshire Co-operative Society is looking to try something similar, with experiments that combine libraries, pharmacies and post offices – each of which might be a marginal business, but together could attract sufficient footfall to sustain a village outlet. In Waddington, the library is nested within a pharmacy and operates with 15 volunteers, including one local author.

Although many retail consumer co-operatives in the UK are owned by millions of their customers, most people wouldn’t know it. Over time, the relationship between co-ops and their members and consumers has become a far more thin connection than when dividends were high and the decision makers were all local.

The larger co-operatives, such as Co-operative Group, Central England and Scotmid, are now talking actively about member engagement and so-called meaningful membership. Let’s hope we take a leaf out of the Finnish book.

Ed Mayo is secretary general of Co-operatives UK and a vice-president of Co-operatives Europe

Originally published in The Guardian

The post Lessons from Finland: building a co-operative economy appeared first on P2P Foundation.