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Roger Spear and the Project Team

This is a report on a project born from and carried out in the true co-operative spirit. Arising from an acute awareness of a need in the movement, an initiative was developed within the Society for Co-operative Studies (SCS). The result was a project proposal developed by a team comprising Co-operative College, Co-operative Research Unit, Open University, Leicester University Management Centre. The next step was raising finance, and the Society decided to set up a research and development fund and appeal to the movement. The response was excellent with many societies contributing as well as the UK Co-operative Council (UKCC) and Co-operative Union and KPMG (auditors for many societies), the project team also made substantial contributions in terms of unfunded time committed. The project and the fund represent two important innovations for the Society and could represent a model for the future, leading to a capacity for it to help address major issues facing the co-operative movement.

The Society for Co-operative Studies has commissioned this report to address issues in the consumer sector, but the findings have a bearing on other sectors. Indeed in future it is envisaged that there might be scope for extending the research in another project to other sectors, such as the financial services sector (banking, building societies and insurance). In order to assist the process of change the Society is submitting this report to the Co-operative Commission and disseminating it widely through its Journal of Co-operative Studies. It is hoped that its findings can be disseminated widely to managers and members in the belief that improving the co-operative advantage should clearly benefit them as well as ordinary consumers.

Thanks are due to many people: most of the SCS Board, including Rita Rhodes for the first initiative, John Butler for leading the fund-raising, Frank Dent for keeping an eagle eye on finance, and the rest for providing valuable support and insight before and during the course of the project. We are also indebted to our anonymous reviewer for an excellent commentary on the draft report. Although the Society has been instrumental in bringing this project into being, the outcome should not necessarily be seen as representing its views. It is a work it has commissioned to contribute to the debate on improving the co-operative movement. We thank them for their support and hope that their belief in this project will bear fruit, and perhaps lead to similar projects in future.

The Project Team: Roger Spear and Mike Aiken (CRU), Peter Davis and John Donaldson (LUMC), Alan Wilkins and Richard Bickle (CC).

Background

Carpetbagger campaigns to demutualise building societies and insurance mutuals, the conversions of farmer co-operatives and the Lanica bid have contributed to a public perception that the co-operative idea is one that belongs to a past generation. Published research and general statistics in annual reports in various sectors of the co-operative movement indicate that although there are signs of growth and development, much of the movement’s recent history has been one of loss of market share and retrenchment. And at the core of the movement in Boards and management there is often a lack of commitment or real understanding of co-operation, sometimes combined with demoralisation and a sense of isolation, which limits the capacity of the movement to respond vigorously and effectively. The international context of transition economies in eastern Europe, deregulation in much of the rest of the world and globalisation has only increased the competitive pressures on co-operatives in the UK and abroad.

However, at the same time, these problems represent an enormous opportunity to respond positively and vigorously. There are numerous examples of co-operative innovation and good practice, and there is a mood of reassessing features of co-operation that “make the difference” - in business terms and ethically. Indeed there is a strong sense that good business and high standards can be a winning combination. But a new capacity needs developing fast to help tackle the problem and capture the spirit of reasserting co-operative advantage.

Clearly the fight back has begun: the vigorous K.O.ing of Lanica is worthy of Lennox Lewis himself, Standard Life and Nationwide have both successfully defeated carpetbaggers, but the threats continue, the risks remain and while protection is so limited, the need to move from defensiveness to assertiveness (of co-operative advantage) has become even more urgent.

This project set out to conduct research in order to reassert the co-operative advantage.

This required the following:

1. To identify where the co-operative advantage lies in the context of the contemporary business environment.

2. To investigate management and organisational development practices as they are presently emerging in response to the reassertion of co-operative purpose, values and principles. The intention is to identify potential and actual convergence and divergence between co-operatives and a) contemporary management practices and b) their business environment.

3. To investigate contemporary and historical records of co-operative business activity to identify areas of best practice, successful innovation and barriers to change.

4. To identify the key business and organisational issues for the Co-operative Movement associated with: a) The Movement's adopted ICA Statement on Co-operative Identity b) The change in the social, economic, technological and competitive environment.

5. To identify the criteria by which co-operative success may be evaluated.

6. To develop models of co-operatives strategic management and organisational development that can best respond to the challenges identified by the project.

The overall approach was to divide the overall task into 3 parallel but linked phases - each carried out by one of the partners. Phase 1 was mainly concerned with case studies of good practice, Phase 2 a major survey of management strategy, performance and practices, and phase 3 with distilling lessons from an extensive workshop programme in order to evaluate levers for and barriers to change. Phases 1 and 2 were linked to ensure that good case studies were identified. Each phase was informed by progress and findings in the other phases, and methodologies were jointly considered and developed. The focus of the study was on the consumer co-op sector, but a similar model could be applied to other sectors in subsequent studies.

This was to research selected sites of good innovative practice by gathering evidence and views through interviewing managers, active members and board members (and consumers where relevant). In some cases examples of contrasting good practice in other sectors were studied to throw up different approaches to similar problems in order to stimulate creative responses.

This involved an extensive survey of co-operative societies (70% by business turnover); it examined key business issues and strategies, and co-operative and business practices. The survey was completed mainly by senior managers.

This phase complemented phases 1&2 by evaluating a unique change programme; it helped to identify the levers for change and the barriers to change; and so contributes to determining how to go about establishing co-operative advantage effectively. The programme evaluated was a CWS training and development project on the values and principles of co-operation and their application.

The project comprised 3 interlinked but independent parts. It was managed by a project team coordinated by Roger Spear, CRU, with Peter Davis, and John Donaldson LUMC, and Alan Wilkins as team members. Other researchers contributed substantially, most notably Mike Aiken, CRU, and Richard Bickle, CC.

Meetings of the project team were held approximately monthly and reports were produced regularly for an SCS managing committee set up to oversee the project, as well as for the SCS Board.

Detailed reports have been produced by each of the three partners. These were revised on the basis of a perceptive independent evaluation commissioned by the Society of Co-operative Studies. This is a Summary Report distilling the main points from the separate reports and combining them into an integrated document.

This Summary Report consists of:

This Overview, followed by reports on

Phase 1 (CRU),

Phase 2 (LUMC)

Phase 3 (CC).

The 3 case studies, the survey of 16 consumer societies (70% of turnover) and the survey of over 100 CWS managers represents a considerable data base, and for the first time for many years, provides a solid basis for an assessment of key issues, strategies and practices in the UK’s consumer co-operative sector. Nonetheless researching a field as large and diverse as the consumer co-operative sector is fraught with difficulties, and raises almost as many questions as it answers. Time and resources have limited the extent to which it has been possible to follow up interesting leads, explore difference within responses, and verify specific findings. Inevitably generalisations have been made, and only some of the rich diversity of practices has been illuminated. However given these caveats, the findings can and should greatly inform the debate on future strategies and practices within the consumer co-operative sector, and play a considerable part in helping managers, boards and members rethink ways of reasserting the co-operative advantage.

The general picture emerging is that while the sector has considerable strengths in a number of markets, it appears to be inward looking focussing on internal issues, and strategically reactive to threats and opportunities in its external environment, which is changing rapidly. Across the sector there does not appear to be a clear consensus on market trends and innovation, and there is a lack of information on the customer base, and hence, except in Food and Dairy, a lack of consensus on marketing strategies (though the recent CWS/CRS merger should strengthen this capability). While procurement strategies have made a huge leap forward through the Co-operative Retail Trading Group (CRTG), this does not seem to be fully recognised as a key opportunity. With strong regional and local relations in many areas, there remain big questions over marketing, branding and procurement capabilities at national levels. Nonetheless there are strong national businesses with real centres of excellence, though these may be hampered by regional structures, in their capacity to achieve greater efficiencies and growth. A similar theme of greater potential for integration (whilst respecting local initiative) can be seen within societies where for example horizontal (between businesses sectors) and vertical business linkages seem weak, and could be strengthened for example (vertically) by structuring in feedback from store managers.

There is a lack of information on members and customers profiles; and lack of consensus on how members and customers can be differentially categorised - so that they can be appropriately targeted, and member and customer identity with their societies enhanced; thus from the point of view of information and governance it is important to move towards a congruence of member and customer interests. This theme of strategic congruence could be extended to community relations. Congruence at the strategic level would help ensure that member and community areas of activity are to an extent market driven, and that management regard them more inclusively and less as separate “extras”. Thus if societies have better information on their members and customers, they can determine appropriate categories of each, the links between them, and how to match benefits to categories; this implies that member relations is inextricably linked to customer marketing, that co-operation is part of business, and vice-versa.

While member relations could be regarded as structurally separate, and generally in crisis, there are beacons of light from some strong regional societies; with at least one example where member relations is clearly integrated with corporate marketing. Similarly Boards have generally been reported as negative, conservative, and over-cautious in attitude, (and mergers of last resort appear to confirm this), but clearly there are exceptions in societies with more active membership.

Consumer co-operative society management is generally informed by strong ethical and professional values, but there is not a consensus on co-operative values; and though such values frequently figure in mission statements, this is often not carried through to measures of performance used by managers. Thus in a sense co-operative values are sometimes seen as something separate or extra, as additional costs and constraints on freedom, rather than an integral part of core business.

In general staff are clearly valued, and those with experience outside the co-op sector consider the Co-op a good employer. But Human Resource Management does not appear culture driven or well-developed, especially with regard to co-operative values.

While in general terms there appear to be distinct sub-cultures of management, staff, and active members, some societies (eg strong regional ones) have made substantial attempts to change and integrate these differences.

A shift towards more inclusive patterns of management (bringing together business and co-operative concerns) requires strategic as well as cultural change; and the initiative of the CWS values programme shows that such programmes can make a contribution to overcoming attitudinal barriers with personal, organisational and business payoffs; but barriers to change were shown to remain - existing work practices, time, and finance (though these may indicate low priority); and it is clear that such change initiatives can usefully be continued - so that rhetoric better matches reality, and so that they become more extensive within the organisation.

The findings from each of the three phases of the research follow this overview, but more detail can be found in the full reports produced by and available from each partner.

The following emerge from the findings of this study, and it is recommended that they be seriously discussed and implemented:

Improve information on consumers in the eight main co-operative markets either through national surveys or through developing better customer information systems from sales, etc.

Improve information on members on the eight main co-operative markets either through regional surveys or through developing better member information systems from sales, participative processes, etc (this implies that consideration be given to membership being a relevant status in all these markets).

Use such information to develop member and customer categories, the relation between them, and the benefits to be delivered to each.

Develop more inclusive co-operative/business strategies, for example for integrating mission, strategy and practice with regard to co-operative difference by developing a clear statement for each business sector of the nature of the co-operative difference which the business is trying to deliver, and the performance criteria by which this will be measured (suggested by independent evaluator).

Develop greater congruence of member, community and customer (business) strategies.

Improve vertical and horizontal integration within and across co-operative businesses.

Combine strategic change with cultural change for example via values training (recognising this will be more effective if regarded as part of a wider change programme, and an integral part of day-to-day operation).

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