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