Co-ops & Governance

Media comment about recent events at the Co-op Bank has generated much heat but very little light over the issue of governance in co-operatives. Like others in the UK co-operative movement, we are concerned that apparent failures in governance – as highlighted by the ex-Chief Executive of the Co-operative Group in his recent appearance before a government select committee – are being extrapolated to apply to all co-operatives.

This is far from the case. It’s important to remember that although the Co-operative Group provides generous levels of resources to support the UK Co-operative movement, it is not synonymous with it. Also the Group has a hierarchical and somewhat complex structure – unique in the UK – due to its size and its 150-year history. The current structure has grown over the years, through mergers and transfers of engagements, most recently with the historic merger of CWS and CRS, with a resulting mix at national Board level of representatives of other consumer retail co-ops as well as Group representatives from different regional Boards.

Co-op News reports that the Group has launched an independent review to look at “strategic decision-making, management structures, culture, governance and accounting practices”, and with a new Group Chair, Ursula Lidbetter MBE, Chief Executive of Lincolnshire Co-op, providing leadership and guidance, the future looks positive.

Co-operatives with a flat, democratically managed organisational structure aim to involve more people in decision-making, so good governance is critical, because without it we would be engaged in endless decision-making meetings or be subject to the whim of unaccountable charismatic leaders. We need structures which protect people from themselves and each other, so that we are not totally reliant on individual integrity, (not that integrity is not a good thing in itself!)

How can co-ops avoid problems arising from poor governance? A co-operative organisational structure should facilitate clear lines of delegation and accountability for decision-making. Directors must have clearly defined roles differentiating their responsibilities from those of operational management. There should be agreed policy on election of Board members to ensure a healthy turnover whilst at the same time retaining continuity. Member engagement is critical, with members involved in a range of different ways, including standing for the Board, so that there are contested elections at the AGM. And of course all members need excellent co-operative skills – good communication, efficient meetings and decision-making and effective techniques for coping with conflict. Inclusiveness is key – cliques and cronyism have no place in a successful co-operative.

Co-operantics has recently been part of a team delivering the ILM-accredited training programme: Core Competencies for Co-operative Business Advisors, which addresses these issues in detail, including organisational structures, legal forms, governance and co-operative management. The programme is funded through the Co-operative Enterprise Hub, itself funded by the Co-operative Group.

We are extremely pleased that our good friends Co-operative Business Consultants are organising a major conference on Friday 17th January 2014: Co-op Bank Crisis Ways Forward for the Co-operative Movement where activists, co-operators and co-operative business advisors will debate how we move on from the current crisis, building on the successes of the last few years.

And don’t forget: Co-operative businesses have a higher survival rate than conventional businesses, and the co-operative sector is growing faster than the UK economy, increasing by 20% in the last five years.

For more detailed discussion of the issues we recommend:

Ed Mayo

Ian Snaith

Andrew Bibby

December 2013

Get help with your co-op from Co-operantics for free!

If your co-operative is located in the South East of England or London, we may be able to provide with some support for free.  As part of the regional co-operative consortium South East Co-operative Support we are able to work with co-operatives who apply for support from The Co-operative Enterprise Hub.  To make sure you identify the right sort of support, and that the work is allocated to Co-operantics, we advise having a chat first.  Nathan is our contact for these areas so contact him using the form or email address on our Contact Us page.

People interested in starting a new co-op can also receive assistance through The Co-operative Enterprise Hub.

Decision making

Co-operative myths: decision-making is done by all, or how many co-operators does it take to change a lightbulb?

The last instalment of our series looks at the myth that in co-operatives, decisions are taken by everyone.

In this series Co-operantics aims to debunk some of the commoner myths about co-operatives – the stereotypical beliefs that people hold about what a cooperative is, which can lead to misunderstanding and can prevent people from recognising the very real value of the co-operative business model.

In co-ops everyone takes the decisions – right? Wrong! If they did, it would be difficult to get any work done!

Depending on the type of co-operative, everyone can be involved to some extent in decision-making, but the kind of decisions people can influence will vary according to co-operative structure. In a more hierarchical co-operative, with representative democracy, operational decisions will be taken by managers employed to run the co-operative, whilst member representatives may be able to influence strategic or policy decision making at Board level. The Co-operative Group is the largest consumer-owned cooperative in Europe, with a turnover in 2012 of over £13 billion. It is run like a conventional company, by employed staff and managers, but members sit on local and regional committees and also at national Board level, and are provided with induction and training to provide them with the skills and knowledge necessary to participate in running such an enormous business.

Employee-owned co-operatives tend to have less hierarchical structures, but nevertheless have a range of approaches to decision-making. Some, like Unicorn Grocery are committed to a highly participative approach to strategic management. They hold an annual away day where all members can contribute ideas and debate potential projects and initiatives, which can then be taken up and implemented by a strategic team or by relevant departmental teams. In other co-operatives, strategic decisions will be taken by a Board of Directors or a Management Committee, whose members are elected annually, often with a proportion standing down each year to ensure continuity whilst bringing in new blood.

In all co-operatives, people taking decisions must have delegated authority to do so, they must have the autonomy to get on with it without anyone peering over their shoulder telling them what to do, and perhaps most importantly, they must be accountable to the members in general meetings or at the Annual General Meeting (AGM).

There are a variety of levels at which decisions can be taken. In all co-operatives, employees should have job descriptions, which will include the kind of decisions to be taken on a day to day basis, as part of the job. Employees should also have easy access to the co-operative’s written policies and procedures, which will provide guidance for individuals on decision-making. Departments and teams should have an agreed remit, including the kinds of decisions they can take, perhaps with a budget limit. The co-operative’s Constitution will state what decisions can be taken at General Meetings and the Annual General Meeting, the latter usually concerned with election of Directors or Management Committee Members, approval of the Annual Accounts and acceptance of the Board or Management Committee Report, describing how Directors have implemented the co-operative’s business plan during the year.

Of course in smaller co-operatives, operational and strategic decisions will be taken by the same people, but wearing different hats, so it’s useful to find a way of differentiating operational decisions from tactical or strategic ones, by holding different types of meeting – or remembering which ‘hat’ you’ve got on!

Finally there are a range of approaches to decision-making, from Command (authority lies in the job description) through Delegated (authority lies in our remit) to Voting (authority lies in agreement by over 50% of the members) to Consensus (authority lies in arriving at an agreement that everyone can commit to).

It’s clear that each of these approaches has its advantages and disadvantages which are discussed in more depth here, however it is important that co-operatives understand the difference between voting and consensus decision making. It’s a mistake to resort to voting if your attempt to arrive at a consensus decision fails. It’s better to decide beforehand whether or not a decision requires consensus, and we believe there are clear circumstances under which consensus decision making is to be recommended. If the decision is going to affect large numbers of members, if it implies significant expenditure, or if it will impact on the co-operative in the long term, then it is worth using the techniques of consensus decision-making to arrive at a decision that everyone will commit to and no-one will ignore or subvert. However consensus decision making requires a good understanding of the techniques involved and can be time consuming. Seeds for Change have recently published their excellent Consensus Handbook with clear guidance and some thoughtful reflection on power and conflict.

And lastly, beware the dangers of Groupthink! Just because all your mates think it’s a good idea is not a good reason for agreeing something – co-operatives need assertive members who think for themselves and share their opinions including fears and reservations.

Equal Pay

In this series we aim to debunk some of the commoner myths about co-operatives – the stereotypical beliefs that people hold about what a co-operative is, which can lead to misunderstanding and can prevent people from recognising the very real value of the co-operative business model.

EQUAL PAY

The second topic is equal pay – in a co-op everyone gets paid the same, don’t they? No, not always, some co-operatives do have an ‘equal pay for all’ policy, for example worker co-operatives in the wholefood sector, but this is by no means common. Of course equity is one of our co-operative values, so all co-operatives would subscribe to equal pay for equal work. However many co-operatives do have pay scales and pay differentials, some following the example of the famous spanish co-operative Mondragon, and limiting differentials between managerial staff and shop floor workers pay.

A recent article in Co-operative News described how salaries in worker cooperatives tend to foster gender equality, even though in Europe, inequality in pay between men and women is high. According to the survey: European Project – Active Women in Small and Medium Enterprises (SMEs), in 93.8 per cent of cases in worker co-operatives in Spain, France and Italy, gender based salary discrimination does not exist. The survey interviewed 133 women who said that they receive an equal salary to men for an equal workload.

So when people do get the same pay, how does it work?
At Essential Trading Co-operative, the pay system is based on principles of equality and equity, with a pay scale based on length of service, and is possibly unique among worker co-ops within the wholefood sector in the way in which work responsibilities are allocated. Individuals who wish to join the co-op are recruited into specific roles (e.g. Personnel Worker, Retail Worker, Food Processing Worker). However Essential do not conduct job role evaluations in order to place roles into distinct pay brackets. This is because they do not believe that more value should be placed on some forms of work as opposed to others. Nor are there additional monetary benefits for individuals elected by the co-op membership to sit on committees (such as the Management Committee or Strategy Committee) or elected by their team members to act as Team Coordinators.

However, unlike Suma and Unicorn Grocery, Essential does not simply have one rate of pay. The co-operative operates a pay scale that is based on length of service. All probationary members begin on the same rate of pay. They progress through different pay grades, linked only to duration of employment. It is expected that members will come to take on a greater level of responsibility for the management of the co-op and their own area of the business with time, and it is this that Essential seeks to reward through their graded pay structure.

Similarly, the co-operative calculates members’ entitlement to dividends based on the number of hours that they are contracted to work per week, their length of service and their democratic contribution to the co-op’s decision making processes (e.g. how many General Meetings they have attended and how many ballots they have cast a vote in during the last quarter). Also, all members can access the co-operative’s generous health care scheme.

At Calverts Design & Print co-op, Sion Whellens says “the notion of a ‘market rate’ for different skills and job functions is a myth based on social and workplace hierarchy”. Calverts’ equal hourly pay system has been in place without challenge since 1977.

All workers (whether members or non members) are hourly paid, and the hourly rate is the same for all job functions. The rationale for this is that all job roles are equally necessary to the good performance of the business, and should therefore be equally remunerated – Calverts have never found that their pay system makes it difficult to recruit or retain workers. Staff turnover is less than half the industry average, so they have retained a high and increasing level of skills over the years. All workers are simultaneously members, directors and employees of the co-op. The co-op has never made compulsory redundancies on account of recessions or trading downturns. They have occasionally shared the pain of deferred wages and wage cuts, in order to maintain employment levels in the co-op.

Calverts’ current hourly rate is £16.50 per hour (down from around £17.75 before the current crisis), higher than London industry average. Full time hours are 35 per week, lower than the industry average of 39. All overtime (again irrespective of job function) is paid at x 1.5, serving not only as an incentive to work extra hours when needed, but also for the co-op to maximise working hours and minimise routine overtime.

Thanks to Essential and Calverts members for sharing this useful information.

De-bunking co-op myths

In this series we aim to debunk some of the commoner myths about co-operatives – the stereotypical beliefs that people hold about what a co-operative is, which can lead to misunderstanding and can prevent people from recognising the very real value of the co-operative business model.

JOB ROTATION – OR MULTI-SKILLING

The first topic is job rotation – all co-ops rotate jobs, don’t they?

Well no, some do and some don’t – it’s not a necessary condition for a co-operative. Co-ops organise in many different ways, ranging from full multi-skilling (mostly found in worker co-ops, owned and controlled by employees) to those which have specific roles and job titles.

However co-operatives that do organise around multi-skilling enjoy a variety of benefits – as long as it is implemented thoughtfully and as long as the costs are recognised, anticipated and accounted for.

Job rotation as practised in worker co-ops can be more usefully described as multi-skilling, meaning that all co-operative members must be ready to perform a range of tasks, so when extra hands are required (at certain times of the week for example, or seasonally, or if someone is off sick or on holiday) they are readily available.

Advantages
Apart from the obvious advantage of having those extra hands available, co-operatives that have successfully implemented multi-skilling report improved communications between departments, leading to fewer demands on the personnel department, more variety in the working environment, enabling the co-operative to cope more effectively with high workloads, so members are fresher and enthusiastic for longer; it allows recuperation from stress and enables the co-operative to use labour and skills more efficiently to cope with the troughs and peaks of business.

Pitfalls
If you are learning a new job, you will not be up to speed for some time, and nor will the person teaching you. This is a cost which needs to be built into budgets and projections. If it is not, the lower productivity implied by people ‘learning on the job’ can quickly become a drain on the co-operative’s resources. Another disadvantage is the resentment that can be caused when a trained and qualified worker is recruited for a specific task only to find that he or she is expected to perform tasks they are not experienced in while people who do not have their skills and experience step into their shoes in the job they were recruited for. I am remembering a new-start co-op veggie restaurant that rotated all their members around all jobs including the kitchen, with the unfortunate result that they lost the two qualified chefs they’d recruited! A major pitfall is to assume that all jobs can be rotated and to undervalue the specialist skills that qualified and trained staff bring to the co-operative.

Suma Wholefoods, based at Elland, near Halifax, have been practising multi-skilling for over 30 years and their 150 employees perform more than one role in the co-operative. They say that this broadens their skills base and gives every member an invaluable insight into the bigger picture. It also helps to play to each member’s different strengths, enabling them to ‘think outside the box’ when it comes to creativity and problem solving. Suma workers multi-skill, usually between desk and manual work and contribute to collective management. Drivers often drive for part of the week and work in the warehouse or offices for the remainder. Desk workers are encouraged to do manual work for at least one day per week.

At Unicorn Grocery, in south Manchester, members learn a range of core tasks – working the till, packing, cleaning – and then two or sometimes three people are trained up in specialist roles, so there is back-up when needed.

Suma says: “to avoid the chimps tea party approach of everyone trying to grab the best job, it must be agreed democratically and organised co-operatively. You can use regular HR practice such as job analysis to identify what needs to be done, then share the jobs according to skills and desires. That way you won’t be held to ransom by people with rare skills.”

Summary
What are the key benefits of multi-skilling?

  • improved communications
  • improved awareness of the business ‘big picture’
  • more efficient use of labour and skills
  • more variety, less boredom, less stress
  • more opportunities for individual continuing professional development

And the main pitfalls?

  • assumption that all jobs can be rotated
  • failure to identify those jobs that most need back-up
  • failure to include learning on the job into production costs
  • lack of planning

Co-operantics provides lots of free downloadable resources that will help you with democratic decision-making, the essential foundation for implementation of an effective multi-skilling approach.

Co-operative skills and motivation

It doesn’t take a genius to work out that a workforce, team or any other group of people will perform better when it is motivated. But how do you go about motivating people? In the world of motivation there is a theory that unpicks how to get the most from your workers, volunteers or members called the “Hygiene-Motivation Theory” developed by Fredrick Herzberg and published in “The Motivation to Work” in 1959.

The crux of this theory is that there are the factors which satisfy people in the work place and others that dissatisfy them. Motivation occurs where there is satisfaction and demotivation occurs where dissatisfaction prevails. However, contrary to what you might expect, what motivates people at work is not just the opposite of what causes dissatisfaction.

Hygiene factors must be met in order for people to stop being dissatisfied, but halting dissatisfaction does not itself provide satisfaction. This involves extra activity. If you like, the hygiene factors are the foundations upon which motivation can be built. Meeting basic hygiene needs provides only momentary satisfaction – in much the same way that finding a deserted building as shelter on a rainswept moor would provide momentary relief: you would not want to live there! Satisfaction, and sustained motivation, comes from meeting separate motivation factors. But, failure to address hygiene factors makes any work on motivation factors a waste of time and energy.

Herzberg identified typical examples of these factors which we can take as a starting point, but it may be possible to identify specific factors in your organisation which have either a motivational or demotivational effect on members:

Hygiene and motivation factors
Hygiene & motivation factors diagram

There is a useful introduction to Herzberg’s theory on the BusinessBalls website: http://www.businessballs.com/herzberg.htm

How can we apply this theory in our co-operatives?

A first step would be to get members talking so the co-operative can establish how they feel about these issues. One person’s idea of status may not be the same as another’s, and what is for one person an adequate salary (or total pay if you include profit share) may not be enough for another. Desirable terms and conditions can vary between people with different circumstances e.g. the parent might rather be able to work flexibly around school start & finish times whereas the hardened festival goer may want to take the bulk of their holiday in the summer. What does achievement mean to your members? At what point for individuals does responsibility provide motivation and at what point does it constitute unnecessary pressure? Do they want individual responsibility or shared responsibility?

What does this have to do with co-operative skills?

To benefit from this motivational theory, your co-operative might look at management decisions and organisational changes. However improving co-operative skills will address some of these motivational factors at a fundamental level:

  • Developing good communication skills and learning how to deal with conflict helps people to maintain relationships for longer (a hygiene factor).
  • Improved efficiency and effectiveness of the organisation through better meetings can generate better conditions, remuneration and job security – each of them an acknowledged hygiene factor.
  • Recognition of status as an equal in the business is an important hygiene factor in co-operatives. Poor co-operative skills such as bad communication can undermine the status of a member. If some members feel their views are not heard or taken on board they may feel they do not have equal status – despite what the governing document says about one member one vote. Behaviours that have developed over years and some policies, procedures or systems can also contribute to this .
  • Direct influence on company policies (a hygiene factor) and the way work itself is organised (a motivation factor) are more likely if your organisation adopts good decision making processes that take into account all members – not just the majority or the most vocal.
  • Well organised meetings encourage individuals to share responsibility (motivation) giving all members opportunities to gain recognition as important joint players in the organisation (motivation)
  • Training in co-operative skills is motivational as it provides advancement and personal growth.
  • A co-operative that functions well is a less stressful, more supportive place to work.

It is worth looking at the free resources on the Co-operantics website to develop the co-operative skills in your organisation, or you can bring us in to help.

We can also assist you to identify factors that can assist motivation or advise on improvements to your governance structure, policies and procedures.

Email us at nathan@cooperantics.co.uk

Dealing with Difficult People?

When I’m web surfing – looking for interesting insights and new approaches to dealing with conflict, I often come across articles or workshops claiming to tell you ‘How to deal with Difficult People’ – and I’ve always had a bit of a worry in my mind about how useful such approaches are – I’m not convinced that to pin the blame for conflict in the workplace on one ‘Difficult Person’ will solve the problem.

A few years ago, I worked with a now large and successful co-op, who asked me to come in and facilitate what they expected to be a ‘difficult meeting’. Two founder members who had conflicting views about the way the co-op was being run were expected to come head to head. The issue was being identified as a personality conflict – i.e. one member was being ‘difficult’. In fact it didn’t come to that – the members were too thoughtful to permit a head to head situation developing. What it threw up was that the difference between the two members was a typical challenge for any co-op growing up from three or four members to ten or twelve – one member wanted things to continue in a laid back ‘everyone decides everything’ style, whilst the other member saw the need for structure and a division of labour.

After much discussion the co-op agreed to adopt a more structured approach, recognising that especially regards HR (in co-op speak Human Relations) the personnel team needed the authority to implement policies agreed by all the members, and that the General Meeting was not the place to deal with issues such as members consistently arriving late. The co-op subsequently asked me to facilitate a strategy meeting called to look at the whole structure of the business, developing an organisational structure based on teams and team representatives, which as far as I know has served them well since.

We have also worked with co-ops in situations where a co-operative board member – again characterised as ‘difficult’ – had exploded with frustration in public, much to the board’s embarrassment and dismay. On investigation however, this ‘difficult’ behaviour seemed to be the result of a whole cat’s cradle of behavioural and governance issues.

In similar situations, we would recommend improving practice in areas such as:

 1. Communicationsears have walls

2. Meetings skills

  • An important role of the chair is to summarise debate as it goes along and especially to summarise any decisions taken in clear language so the minute taker can write it down
  • Minutes should be a record of decisions taken, not a blow by blow account of the meeting
  • There should be an agreed approach for taking decisions, consensus is best for important long term strategic decisions which will impact on lots of people or involve large sums of money, for less critical decisions it’s ok to vote (unless your co-op has 6 or fewer members, when voting is not recommended)

3. Dealing with conflict

You need a tried and tested recipe for dealing with the inevitable tensions as they arise. There’s also a comprehensive and helpful leaflet published by ACAS

If your co-op is facing such difficultiesyou need to make sure you have a clear vision of what the co-op is for – what does it deliver to its members, agreed by members – without that good communication can be just an efficient way to disagree. The lack of such an agreed ‘vision’ could be the root cause of the problems.  Two people might be pulling in different directions, but they might be in a minority, with the majority wanting a third option and disengaging, which could lead to the co-op crumbling away. 

All of which leads me to think that there’s no such thing as a ‘Difficult Person’ – although of course we can all exhibit Difficult Behaviour! Instead, developing a co-op ‘vision’, thinking about how we communicate, how we take decisions in meetings, and how we deal with the inevitable tensions when they arise – in other words, brushing up our co-operative skills – will make it less likely that such behaviour will occur and will help minimise its impact when it does. It will make us better co-operators and make our co-operatives better places to work.