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

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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>

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As part of an effort to make the ‘digital economy our own’, these organisations have today joined forces to launch a new pilot accelerator UnFound to support ‘platform co-operatives’, digital platforms that are democratically owned by their members or users.

UnFound will give these early-stage platforms the opportunity to access the UK’s first structured programme of support. Teams can apply for the accelerator programme at www.unfound.coop between now and 31st March.

Successful applicants will benefit from a team of six mentors and a series of masterclasses to support and develop the business planning and co-operative governance of their platform. Support is being made available through The Hive, a business support programme for co-operatives from Co-operatives UK and The Co-operative Bank. The accelerator culminates with live crowdfunding session, where the teams will pitch for financial support from 400 delegates at Co-operatives UK’s Co-op Congress event in London on 23rd June.

Ed Mayo, Secretary General of Co-operatives UK, says:

“We are seeing more and more sectors of the economy disrupted by online platforms, from Deliveroo to Uber. They are revolutionising so many aspects of our workplaces and lives. But what is not changing are the patterns of ownership, where a relatively small number benefit from the success of the platform.”

“Imagine, though, if the platforms we used every day were owned by the workers and the users themselves. UnFound is a great opportunity to kickstart platform co-operatives with some extremely valuable support.”

Nathan Schneider, co-organiser of the Platform Cooperativism conference, also sees the significance of this new pilot accelerator.

“Accelerators like UnFound make it easier for entrepreneurs trying to make their idea real in the world to do it with democracy. For too long, the startup ecosystem has been a game of trying to sell our best ideas to investors looking for exponential profits. Now, startups are starting to have better options. They can truly build their startups for their communities.”

What are Platform co-ops?

A platform co-operative is a democratically-run member- or user-owned online platform or mobile app. They are start-ups from communities of people – such as workers or users – to meet their needs or solve a problem by networking people and assets.

There are successful examples of Platform Co-operatives in North America and Europe, but they are still in early-stage development in the UK. Even though the likes of London-based TaxiApp represent an exciting new wave of co-operatively run platforms emerging here.

UnFound is open for applications from today (1st March) and closes midnight on 31st March 2018.

The accelerator is one strand of the National Co-operative Development Strategy – an ambitious strategy to create a more participative economy. Launched in 2017 by Co-operatives UK, it calls for more support for “platform co-operatives using new technology for shared ownership services.”

Jonny Gordon-Farleigh, Stir to Action, says:

“We’ve got experienced teams of facilitators and mentors who will be supporting the co-operatives through the accelerator. We’ll also be joined by the inspiring co-founders of Stocksy and Fairmondo who will be introducing new ideas for business development, digital governance, and crowd finance.”

For more information about UnFound visit www.unfound.coop

— ENDS —

 About Co-operatives UK

The network for Britain’s thousands of co-operative businesses, Co-operatives UK works to promote, develop and unite member-owned business worth £36 billion to the British economy.

www.uk.coop

Stir to Action

Stir to Action publishes STIR, a quarterly magazine on the new economy, runs workshop programmes, and supports Community Economic Development.

www.stirtoaction.com

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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

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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

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About the event

The 2017 Albert Medal is awarded posthumously to Robin Murray for pioneering work in social innovation.

As an industrial and environmental economist, Murray was active and influential across several fields, from cooperatives to energy system innovation. He was deeply committed to a democratic, creative and collaborative response to economic and technological change and developed pioneering economic programmes in local, regional and national governments.

In this Albert Medal event, we will hear from close collaborators Geoff Mulgan, Hilary Cottam and Ed Mayo who will offer insights into Murray’s work, and explore how it has inspired and informed a wide range of policy debate and development around the social innovation movement.

The Albert Medal is awarded for innovation in the fields of creativity, commerce and social improvement. This year’s event is organised with Nesta.

Photo by tidefan

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In his recently republished Cooperative Manifesto, Tim Huet explains why he came to the conclusion that ‘There Is No More Important Social Change Work You Can Do Than Cooperative Development’. Huet was one of the first organisers of the Arizmendi Assocation of Cooperatives, which Ed Mayo describes as a great example of coop replication.

For Huet, coops become relevant when they are part of a wider movement against capitalism. They provide answers to ‘the military question’: while closures, crises, strikes, protests and occupations can create the possibility and space for change, how do people self-organise to consolidate that space and expand it, by developing bases of economic and social power?

The difficult question of times

When cooperatives take a great leap forward, it’s usually in times of social crisis. This is when the relevance, necessity and potential of cooperation become clearest to people. In the ‘hungry 1840s’, the Rochdale cooperators’ fifth object was to ‘arrange the powers of production, distribution, education and government’. Providing decent food,  building houses, providing decent work and acquiring land were immediate tasks and also steps towards a hegemonic cooperative commonwealth, to be established ‘as soon as practicable’. Expressed in different language in different times, this is the invariant programme of cooperatives as a movement. So when is ‘practicable’, and what is practical now? These are strategic questions, throwing up yet more questions. What are the possibilities in these times? What resources, self-help and solidarity can we mobilise in this situation?

The political shell

Cooperatives seek to be self-reliant, therefore independent of lobbies and parties that seek to influence through private corporations or state action. The instinct of governments and sectional interests is to enrol, recuperate or suppress autonomous movements, including cooperatives. Coop organisations, therefore, have a strategic defence and propaganda role. In the present time of political turmoil, when parties make policy blandishments towards mutuals and coops, the principle of autonomy guides strategy and tactics. Cooperative movements exercise political ‘neutrality’ in order to maintain strategic freedom to resolve the real questions of social and economic power in favour of people.

Necessity, the mother of cooperation

We cooperate because there is no better or no other way. Meeting peoples’ self-defined needs and aspirations is the relevance test. We know that the movement is re-invented and grows fast in times of widespread social and economic conflict, if people have the means and opportunity to adapt the technology of cooperation. Lancashire in the 1840s, Ireland in the 1890s, post war Italy, Spain in the 1950s, Argentina in the present century.

Change was in the air in the 1970s. A wave of coop formations in the UK and US was inspired by a mix of libertarian socialism, anarchism, anti racism, the rising ecology movement, second wave feminism, community organising and other currents. Cooperatives gave people new infrastructure and tools in a period of social contestation. That wave fell back in the times of reaction which followed, particularly in the 1990s. In that phase, any strategy to rapidly expand coops had its work cut out. So, is now our time?

Of course, we don’t know yet. We know there is social conflict and political disintegration; we know people are in need; that people want change. But are they moving towards self-organised ways and means to get it? Do they have the time, social capital and savings to invest? Are they confident enough? Hindsight is easy, yet experience suggests that productive strategy won’t be a matter of helicoptering legacy coop models onto disparate people and situations, so much as directing solidarity to those expressing a desire to change their situation by acting together, and who feel that change is realistic, possible and necessary, even if they haven’t heard about coops. Where the human and material resources – cooperative capital – come from is another strategic challenge, especially in a country whose coops squandered their assets and failed to invest in the movement for decades.

Strategy has to aim at developing a framework in which cooperators can respond quickly and intelligently to what’s going on around them. Coop advocacy needs to work close to the heat, designing and disseminating relevant information about ‘why’ as well as proposals for ‘how’. Whatever language we use towards governments, policy makers and ‘influencers’, we need authentic language to speak to people. The effort to develop a real, uncompromised cooperative politics is especially urgent in times of cultural dissonance and rampant ideological cretinism.

Not all cooperation is good for you

Not all modes of cooperation are in themselves positive. We can understand the complex cooperation of workers that enables private firms to extract profit, the cooperation of prisoners with their captors, or the enthusiastic collaboration of consumers with extractive platforms, without justifying them as behaviours that meet peoples’ mutually defined needs and aspirations. Cooperative messages have to inspire, but they can’t just be feel good platitudes. They need to express what we cooperate against, as well as for. Our language should be sensitised to the fact that few would-be cooperators want to self-identify as ‘business’ people, for instance. Jargon words like ‘innovation’ and ‘entrepreneurialism’ mask mechanisms for increasing inequality and intensifying exploitation. The more we scramble our messages by trying to reclaim alienated vocabulary – perhaps to appear progressive, mainstream or unfrightening – the more we obscure the potential of cooperation as part of a movement for social change and the less relevant coops will seem to people. Good communication is strategic.

Show us the money

If the purpose of the coop movement is to create new cooperators, we can’t be defensive or patronising when they articulate a radical coop vision literally, even bluntly; or when they challenge the coop establishment. They’re correct, if not always polite. Years of work, negotiation and experience may yield useful knowledge and resources, but they don’t confer superior wisdom, ownership of the movement, or special insight into the goals and methods of coop strategy.

In a sense, any new wave of coops and cooperators begins to fail at the point it stops growing and starts consolidating. In movement terms, a coop that disappears is not necessarily a failure, and coops that go on forever are not all successes. Whether they go back 20 or 150 years, established coops tend to make their peace. They mutate from radical groups, to incorporated bodies, to businesses; move from meeting needs and aspirations, to hitting commercial targets; from self-help to charity. This is predictable. You can create coops, but you can’t make a commonwealth one coop at a time. Raising the game of intercooperation is strategic.

Strategy should to seek to update and adapt the coop development repertoire in response to times and situations. We should be open to the new, the unfamiliar, and the alarming. Strengthening established coops should be an object of strategy, where those coops are able to renew themselves and contribute to the renewal of the movement. In this wider renewal, younger generations often do the heavy lifting. They articulate new needs and aspirations, or old needs and aspirations in a new context. They put in the sweat equity. Many new coops are proposed or advised by old hands, and helping new cooperators make the right alliances and avoid old traps is vital. Yet we should not be in the business of judging whether there is a ‘market’ for their ideas and approaches. Coop renewal often means attempting things that are impossible, according to received wisdom. This is part of coop realism.

We will need to engage with many projects that don’t develop, to find the ones that could change everything. New cooperators are often our most passionate and connected advocates. In the recent uptick of formations in London and in the tech community, for instance, coop methods are being used by social activists contesting the use and ownership of new technologies; looking for new ways to combat exploitation; defending the commons; combatting fuel poverty; resisting landlords; radicalising food culture and politicising cultural work. Their views about the utility of what worked for people five, thirty or a hundred years ago are respectful and open, but critical. They look beyond the formal movement, and beyond the UK, for ideas and inspiration. The dimensions of the social crisis are global and local, rather than national. Deepening cooperative internationalism, and looking beyond the existing legal and national frameworks, are strategic for local development.

The places to look for the next wave of cooperators are all around us, if we’re willing to engage. The next game-changing coops may be on the verge of coming into existence.

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In the story of co-operative enterprises worldwide, there can be a powerful alignment between the ‘hard side’ of business structure and ownership, and the ‘soft side’ of business values and culture. There are 1.6 million co-operative enterprises worldwide, linked in theory under a common statement of identity and set of values. In the book Values, I look at the practice of this and the extent to which co-ops live up to their stated values.

A guest contribution from Ed Mayo, Secretary General of Co-operatives UK,

Values are what matter to us, what motivate us. As such, values have the power to encourage voluntary action and effort that goes beyond the narrow limits of individual self-interest. Values help us to work together.

How do values fit with models of organisation?

In commercial business, where participation is subject to contract and compensation, there are times when that same voluntarism, or ‘discretionary effort’ in the jargon, is critical to the enterprise. This insight underpins a new wave of attention to ‘employee engagement’ in many countries.

A different way to approach the case for investing in intrinsic values is the extent to which they can drive positive norms and behaviours, such as loyalty or ideas for innovation, in customers, suppliers or employees. The extraordinary success of open source or free software, the importance of volunteering in civil society, the power and reach of faith communities, are examples of institutional activity that are dependent on the free and willing collaboration of people on the basis of sufficient overlap of values and purpose.

There is plenty of evidence that businesses with strong sets of values perform better than those without. Research on around 700 firms, using five years of data compiled by the Great Place to Work initiative, suggests that, while there is no performance link with firms that have simply published a set of values, there is a strong positive link with those firms whose values are seen within the company to be prominent.

At their best, shared values create a northbound train – the effect of everybody focused on the same direction. At their worst, a clash of values can distract and destroy any business.

At the same time, it is mistaken to think that business behaviour you might not approve of is not shaped by values. They may just be the wrong values – for example, of power, status or personal greed. To effect change, though, values are still where you have to start. If you are concerned with fairness and democracy, for example, the question is what forms of ownership and control best fit with those values?

What the research can’t prove, though, is whether this is correlation or causation. Is it the case that the best-performing firms are so well organised that, as an illustration of their high performance, they have strong, embedded values? Or is it the case that those values help to reinforce and even drive that high performance?

The same research concludes that going public reduces the extent to which companies can focus on ‘integrity as short-term decisions can carry undue weight. Privately-owned companies (including venture capital-backed organisations) tend to have higher levels of integrity than publicly-quoted companies.’

The ultimate owners set the formal rules and structure of the business. While values are not transmitted in a top down way – contrary to the myths of business leadership – the structures of power in an enterprise shape the values that drive the business.

In listed companies, the owners are the investors. In a co-operative, they are the members. In a co-operative, values and/or their associated principles are typically included in the articles of association, giving a mandate for action. There is a parallel here with B Corporation, the growing field of companies that write public benefit into the articles of the firm. There are hopeful moments like this in the life of many a business, such as when a business founder retires and explores employee ownership as a way to take it forward, when ownership opens up and offers a way to lock in the values of the firm for good.

In the story of co-operative enterprises worldwide, there can be a powerful alignment between the ‘hard side’ of business structure and ownership, and the ‘soft side’ of business values and culture. There are 1.6 million co-operative enterprises worldwide, linked in theory under a common statement of identity and set of values. In the book Values, I look at the practice of this and the extent to which co-ops live up to their stated values.

As Professor David Wheeler, President and Vice Chancellor of Cape Breton University, Canada, says: ‘don’t look to a static list of stated principles, when what really matters is the development, articulation and evolutionary processes that surround them.’ But there is some evidence to suggest that, at the very least, businesses with distinctive values may act in distinctive ways. The global values offer a prompt, or default, for co-operatives that can then be a reference point for its members. In France, co-ops are now required to conduct an independent audit for members at least once every five years to assess their co-operative difference.

In many countries, ethical values are core to the brand values of co-ops. The UK consumer research magazine Ethical Consumer, drawing on an extensive database of ethical screening, states that co-operative businesses are in the top third of ethical performers in 80% of the markets that they surveyed, and are the top performers in 23% of markets.

Values are the hidden side of any business. There is a toolkit to run enterprises in a way that facilitates dialogue and behaviour around values – from participatory processes for articulating values and recruiting for values through to integrating values in the supply chain. This toolkit on values is one perhaps that can help to make business part of the solution and not simply part of the problem when it comes to the big challenges facing the world.

Ed Mayo is Secretary General at Co-operatives UK and author of a new book, Values: how to bring values to life in your business.

Values is published by Greenleaf and available on http://www.greenleaf-publishing.com/online-collections/values

Photo by swisscan

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Over the last few years a growing body of evidence about worker-owned businesses has emerged, showing that they give staff more of a stake in the organisations they work for, boost productivity, and can work in almost all parts of the economy.

But, beyond these headlines what do we really know about worker cooperatives? Do they tend to be small? Do they struggle to get financial investment? Are they successfully competing with conventional businesses?

Professor Virginie Pérotin at the Leeds University Business School has looked at international data on worker-owned and run businesses in Europe, the U.S., and Latin America and compared them with conventional businesses.

In her new report, What Do We Really Know About Worker Cooperatives?, published by Cooperatives UK, the network for Britain’s thousands of cooperatives, she has analysed international studies on business issues like productivity, survival, investment, and responsiveness and identified a number of findings that add to our understanding of worker cooperatives.

1. Worker co-ops are successful businesses. First of all, she finds that worker cooperatives represent a serious business alternative and bring significant benefits to their employees and to the economy. “There are thousands of worker-run businesses in Europe, employing several hundred thousand people in a broad range of industries, from traditional manufacturing to the creative and high-tech industries,” says Professor Pérotin.

2. Worker cooperatives give staff control. Because worker cooperatives are owned and run by them, their employees have far more say in the business, from day-to-day concerns through to major strategic issues. “A job in a worker cooperative probably is particularly valuable, since it is a job in which the employee has a say in decisions that affect employment risks,” reads the report.

3. Worker cooperatives boost productivity. As the employees are the owners with a stake in the future of the business, worker co-ops are more productive than conventional businesses, with staff working harder and the organisation harnessing their skills more effectively. The largest study finds that “in several industries, conventional firms would produce more with their current levels of employment and capital if they adopted the employee-owned firms’ way of organising production” the report highlights. “Worker cooperatives are more productive than conventional businesses, with staff working “better and smarter” and production organised more efficiently,” adds Professor Pérotin.

4. Worker cooperatives provide greater job security. When market conditions change, worker cooperatives review wages first and keep employment more stable than in conventional businesses. In a downturn, they drop wages rather than reduce their workforce and, when business picks up, they are ready to respond and can make up for lost pay because employees enjoy a share of profit.

5. Worker cooperatives are larger than conventional businesses. Contrary to a popular myth, far from being small, cooperatives tend to be larger than other businesses. Professor Pérotin identifies a number of reasons for this — most businesses are in fact small, cooperatives are resilient and therefore are often older businesses than the average, and many in countries like France emerge as buyouts of existing businesses rather than start-ups and therefore are born large.

6. Worker cooperatives are resilient. Last year our own data found that, whereas only 40 percent of new businesses in the UK survive the difficult first five years, 80 percent of co-ops do. Professor Pérotin’s analysis supports this, and she points out “worker cooperatives survive longer than other firms overall when industry and starting wage, size, and year of creation are taken into account, and this is due to their much lower closure risk (hazard), all else being equal, than conventional firms.”

7. Worker cooperatives have relatively high levels of investment. It is sometimes thought that worker cooperatives may struggle because they rely on investment from the employee members rather than external sources. “However, in practice,” says Professor Pérotin, “worker cooperatives plough back significantly more profit than required, perhaps as a form of insurance against job losses in downturns. This suggests that the hypothesised under-investment process itself does not apply in practice.”

So, when you put it all together, worker co-ops are successful, productive, resilient, and relatively large businesses that give their staff job security and control over its strategic direction. That is something that everyone needs to know about worker cooperatives.

Author Ed Mayo is Secretary General of Co-operatives UK, the network for Britain’s thousands of co-operative businesses.

Cross-posted from Shareable.

Top photo courtesy of Co-operatives UK: Debbie Harley, a worker and director of Delta-T Devices, a thriving environmental science instruments worker co-operative, checks in on an installation.

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Co-operatives UK has welcomed the announcement (Wednesday 20 April) by the Shadow Chancellor, John McDonnell, that the Labour Party will aim to double to the size of the UK co-operative sector if in power, as a way to boost the economy.

Drawing on figures from our co-operative economy report, he compared the size of the UK co-operative sector to counterparts in Europe, saying “We should be more ambitious about what can be achieved here. We want to see resilient, high-productivity businesses in an economy that is fairer for everyone. The next Labour government will look to at least double the size of the co-operative economy. That’s a £40 billion boost to the economy.”

His suggested mechanisms for supporting the growth of the co-operative sector chime with a number of our policy proposals, including legislation for ‘mutual guarantee societies’ which will enable small businesses to pool resources in order to access much-needed finance and support for self-employed workers to form co-operatives, both of which are recommendations from our latest report on freelancer co-ops that picked up significant media coverage.

The Shadow Chancellor also cited the limited resources allocated to co-operatives in central government, which points to our case for consolidating responsibility for co-ops in the department for business.

Ed Mayo, Secretary General of Co-operatives UK, welcomed John McDonnell’s support. He said: “Today’s announcement from John McDonnell is a welcome endorsement of the difference co-operative businesses make, both to individuals and to the economy as whole.

“The aspiration to double the size of the co-operative sector resonates deeply with Co-operatives UK’s strategy. The action the Shadow Chancellor suggests, including new legislation and allocating more resources in government to support co-operatives, are among proposals that can help deliver this step-change.

“Our report released earlier this month, Not alone, set out the case for co-operative solutions to some of the insecurity faced by freelancers, and we are delighted to see the Shadow Chancellor highlighting this potential and endorsing our recommendation for legislation that will help small businesses club together as co-ops.

“Co-operatives are owned and supported by people of all political parties and of none, whether as customers, employees or local residents. We have and continue to work across the political spectrum to support the development of a more co-operative economy. Labour’s political leadership on this issue and announcement today that co-operatives are an essential part of Labour’s vision for a ‘better, fairer economy’ is welcome indeed.

“We look forward to working with the Labour Party, as we do with other parties in Westminster and the devolved nations, to put this into effect.”

Photo by chriskay

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