Tag Archives: co-operatives uk

Floyd’s Leader Focus – interview with Ed Mayo

My exciting series of interviews with social enterprise leaders for Social Enterprise Live is now called Floyd’s Leader Focus. Here’s the second one, with Co-Operatives UK‘s Secretary General, Ed Mayo.

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Lack of co-operation

I spent Monday and Tuesday at the third annual International Social Innovation Research Conference(ISIRC), hosted by London South Bank University. Amongst the wide range of exciting discussions taking place (which I’ll reflect on over the next few weeks) was the latest in a series of skirmishes over controversial accreditation scheme, the Social Enterprise Mark (the Mark). As I’ve mentioned before, I’m not really a big fan of the Mark but I’m beginning to think that the Social Enterprise Mark Company (SEMCO) often finds itself on the receiving end of a disproportionate level of ire as a proxy for wider problems that it’s in no way responsible for.

Roughly a year on from the post linked to above, there are now 440 Mark holders – a net increase of 165. This means Mark holders now represent 0.7% of the Social Enterprise UK'(SEUK)s estimated 62,000 social enterprises* in the UK. On that basis, the answer to Richard Patey’s question posed on Guardian Social Enterprise Network ‘Is the Social Enterprise Mark limiting social enterprise?’ is ‘no, no it isn’t’ because at least 61560 organisations are happily getting on with being social enterprises without holding it.

Patey, of consultancy Profit Is Good, has set up his own rival version of the Mark which is available free to all if they sign up to being part of: “a community of for-profit business which: 1) have an explicit social and/or environmental purpose and 2) are set up or reconfigured to create shared value for all.” Criticism of the Mark from the (to use an admittedly crude shorthand) ‘liberal wing’ of social enterprise is nothing new. There’s lots of people in the social enterprise movement who think that organisational structures are broadly irrelevant as long as organisations (or sole traders) are delivering the social goods. Patey bemoans the fact that: “The Mark’s strict interpretation of what constitutes a social enterprise means that it fails to encompass businesses which most reasonable people would say were social enterprises. One example is a fast-growing digital marketing consultancy called Yodelay.com whose business model generates income for charities but whose legal structure would not qualify it as a social enterprise.

Reasonable people are notoriously difficult to pin down but it’s definitely true that Mark’s key problem – in terms of the internal politics of the social enterprise world – is that it fails to encompass many businesses that the people running those businesses (some of whom are reasonable) self-define as social enterprises. This is probably true of most attempts to retrospectively define a diverse movement that already existed before the body doing the defining came into being. Either way, for many social enterprise ‘liberals’, the Mark is an attempt (as yet, not a very successful one) to rob them of their identity – whilst also discouraging others with similar approaches from joining the movement. Patey’s brand, on the other hand: “can be used by owner/manager ethical businesses right up to multinationals such as Nestlé, which has embedded the concept of creating shared value into its business model.

Unfortunately for SEMCO, while some in the co-operative movement might not advocate a social enterprise definition that extends as far as Nestlé, Tuesday’s debate at the ISIRC saw co-operative entrepreneur and academic, Rory Ridley-Duff offering a critique of the Mark that at least crosses over with Patey’s argument (with a response from SEMCO managing director, Lucy Findlay).

Referring to the discussion on the Mark’s Linked In group that prompted him to develop his alternative brand, Patey explains that: “At the last count, the blog had more than 170 comments, mainly from charities which are Mark holders arguing that they are businesses and that my business is not a social enterprise because it does not have profit distribution and dissolution of asset clauses, even though it has an integral social purpose.

Ridley-Duff explains his position on the Guardian site and at greater length in The Social Enterprise Mark: a critical review of its conceptual dimensions a paper presented at the ISIRC (which I have read in full but which is not currently available online due to a complaint from SEMCO). Ridley-Duff’s underlying position – based on discussions with his students – is that the Mark discriminates against co-operatives and in favour of charities, which amounts to a rejection of the social enterprise movement’s co-operative roots: “Co-operatives and their support bodies were also vital to the formation of the national support network for social enterprise. Worker co-operatives, co-operative development agencies and the Co-operative Party acted together to create Social Enterprise London. National and regional social enterprise organisations, including those that formed the company to promote the SEM, were registered by the Co-operative Union. The umbilical cord that provides intellectual nutrients for social enterprise development is provided by the co-operative movement.

Imagine our shock that participants on co-operative and social enterprise courses identified trading charities and voluntary organisations as the most likely to meet SEM evaluation criteria. Whether course participants came from the co-operative movement, public or charity sector, the results were the same. All thought that trading charities were advantaged, and co-operative enterprises disadvantaged by SEM evaluation criteria.

Ridley-Duff’s broader point is that as the UK social enterprise movement has evolved (and responded to the needs of UK governments) co-operative ideals of ‘socialisation’ – democratic organisational structures and worker ownership – have been sidelined in favour of ‘social purpose’. Having a social purpose, in this sense, means organisations whose outputs are beneficial to society rather than companies structured in a specifically social way.

The upshot of this is Charities and Community Interest Companies can fulfill an external social purpose without giving their staff any say over how their organisation is run or even treating them with greater consideration than employees of any other organisation – and still receive the Mark.

On the other hand, co-ops that – through their democratic structures – allow members to distribute profits and dispose of assets in any way they see fit, as opposed to accepting the Mark’s specified 50% distribution limit and commitment that: “If your company ceased trading, remaining assets would be distributed for social/environmental purposes” would not get the Mark.

To an extent, SEMCO is responsible for its own predicament based on its one dimensional approach to PR. The opportunity provided by The Guardian for a reply to Patey’s article was used to issue what amounts to a bland press release which shows little evidence of actually being written after the article it purports to respond to. Even as someone who doesn’t support a generic social enterprise kitemark, I can think of plenty of question about the value of a social enterprise kitemark (Patey’s) available for use by anyone who self-defines as having a social purpose and commitment to shared value. The line: ‘Richard Patey thinks Nestlé is a social enterprise, is he quite sure about that?’ is ominously missing from Lucy Findlay’s response.

The possible suspicion that SEMCO are simply not interested in engaging in discussions with the wider social enterprise community is disproved by the fact Findlay chose to turn up and engage in a debate with Ridley-Duff and other assembled social enterprise academics. Having turned up, though, she might have done better to spend more time talking about the fact that the Mark team are currently working with trade unions and others to develop further criteria based on employee engagement – mentioned briefly at the end of her presentation – and less time rehashing the basic points about why the Mark needs to exist.

While anyone who’s ever tried to sell anything – particularly something they really care about – will understand SEMCO’s initial desire to promote the Mark primarily to people who share their assumptions about the axiomatic need for their product, the next version of their PR and marketing strategy really needs to deal with the possibility that there may be under 500 of those people running social enterprises in the UK, and that they also need to sell to people who need a bit more convincing.

Having read the paper and listened to the debate, I’m not clear what SEMCO have to gain from pursuing a complaint and therefore preventing further dissemination of The Social Enterprise Mark: a critical review of its conceptual dimensions. The paper is an important one but not so much for its specific criticisms the Mark as for the questions it raises for the movement as a whole. The Mark may be one of a number of institutions – including, for example, the Big Society Bank – that embody a government-sponsored shift from socialised enterprises to social purpose enterprises within the wider social enterprise movement but it’s hard to see how the existence of the Mark actually makes it harder for ineligible co-operatives to make their case.

Co-operatives, like the more loosely defined social enterprises promoted by Richard Patey, are free to call themselves social enterprises and apply for or adopt any badges or kitemarks that they want to explain their values to customers and other stakeholders. The Mark is a means for defining social enterprise that is currently of value to over 400 hundred organisations. Engaging more effectively with co-ops might be a good way for SEMCO to get some more customers for their produce without significantly altering what they’re trying to do. But there’s lots of really bad stuff happening in the world and the Mark isn’t responsible for any of it.

*I know, the figure is possibly not as robust as it might be.

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Mutual assistance

“You can’t just talk, like people have in the past, about wanting more mutuals and co-ops and hope somebody, somewhere gradually gropes towards making it happen. You really need to push it.”

That was the message from Cabinet Office minister, Francis Maude, last August as he launched the government’s Pathfinder scheme of (12) public sector mutuals. As Social Enterprise Coalition (SEC) chief executive, Peter Holbrook, hinted on this blog last week, there’s no area of activity where the social enterprise movement is more likely to find itself hoist by its own innovative petard than this.

While sceptics may have other suggestions about their motivations, taken at face value the current government’s enthusiasm for mutuals is based on an eminently sensible desire to enable the provision of more flexible, more responsive public services in a situation where there’s not much money to pay for them. So, while Jesse Norman MP, author of The Big Society, is an honourable exception, the current support for mutuals should not be regarded as a sign that most Conservative politicians have specifically decided that co-operative structures are a good thing in themselves.

That makes it interesting to read the views of those who do support mutual approaches as a matter of principle. One leading voice is Jonathan Bland, Holbrook’s predecessor as SEC Chief Executive and now an independent consultant. Last week, Co-Operatives UK published Time to get serious, a paper in which Bland considers existing examples of co-operative public service delivery from around Europe: schools in Spain, social care in Italy and nurseries in Sweden.

Bland explains that Italian social co-operatives, which employ 244,223 people primarily in delivering local social care, benefit from a clearly defined legal structure (established in law in 1991), tax breaks and the active support of local authorities – both as purchasers of their services and investors: “The social co-operatives have strong and positive partnership relations with local authorities. They are often involved in joint planning of services with local authorities. When the law (establishing the social co-operative legal structure) was passed, it gave the co-operatives a status as preferred providers in the procurement of local authority contracts.”

In Spain, teachers themselves often provide the start-up finance for the 550 (mostly government funded) co-operative schools. Bland notes that: “The teachers that now own and run most of the co-operative schools are well educated and are in salaried positions that allow them to borrow against their future salaries to pay their co-operative membership fees. These membership fees then provide a capital base for the enterprise to develop and grow. This is important in relation to other sectors where pay levels are much lower.”

In Sweden, the government has put significant funding into support for specialist co-operative development agencies: “The Coompanion network of support agencies is funded centrally by the Swedish Government Agency for Economic and Regional Growth, with an annual budget of just under £4m, which is distributed to the regions on a per capita basis, and is then matched with regional funding and with other sources of finance. The specialist advisers have played an important role in the development of new co-operatives and the continuing success of existing ones.” 

Bland’s paper is engaging and well argued but the key underlying points are very much in the ‘not rocket science’ category. The main factors that existing successful examples of co-operative public service delivery have in common is:
  • political support
  • the ability to raise cash
  • and specialist business advice
While it may be seen by some as a diminution of our social entrepreneurial bravado to admit it, the second two factors are primarily by-products of the first. Francis Maude is absolutely right that someone in government (possibly him) really needs to push the public service mutual model if it’s going to take off. It’s currently unclear whether he and his colleagues believe the positive (but very smallscale) Pathfinder programme, the Big Society Bank and the ongoing blizzard of positive rhetoric are that push.

The stark reality is that the UK equivalent of the specialist regional business support that has been so successful in supporting co-operative development in Sweden has in fact been drastically reduced – from a much lower base – since the current government came to power.  That, the absence of the (practical) political support shown in Italy, and little or no suggestion about where the money will come from if spin-outs are going to have the muscle to compete effectively with outsourcing conglomerates, suggests that Bland’s conclusion: “The UK policy context does not emerge particularly well from the comparison with these pioneer countries and this must form something of a reality check” may be something of an understatement.

The additional challenge that  Bland can’t provide any answers for through comparison is on the specific question of organisations ‘spinning out’ of the public sector. All the examples cited by Bland are primarily based on groups of people, whether workers, parents or wider groupings within communities, getting together and deciding to form a co-operative to answer a need not (adequately) catered for by existing public services.

The situation in the UK is different. In his interview with me, Peter Holbrook rightly described the government’s mutualism agenda as ‘a brave experiment’. While levels of staff involvement in the decision in the decision to ‘spin-out’ will vary, all mutuals spinning out in the current climate are doing so as much as response to a funding crisis as out of a positive desire to create a new kind of organisation. Public service mutualism hasn’t been pushed for this reason on a significant scale anywhere else in the world before. In answer to the question of whether spin-outs would be able to compete with outsourcing conglomerates, Holbrook added: “I think we should be able to compete, it’s just a case of whether – particularly in terms of the public sector spin outs –  they will be able to transform their culture within the time period they’re given.”

Part of the response to this challenge may come from The Transition Institute, an organisation set up by Social Enterprise London and NESTA ‘to inspire and facilitate new model of public service delivery’ but ultimately its ministers have to take the big decisions. Do they really want to create an environment where mutual models of public service delivery have a serious chance of success, or do they not?

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