22 July 2009

Part 2: The Surge of the 70's and its Aftermath

In the 1970’s ICOM, young and full of evangelising zeal, soon identified two key problems which were hindering the expansion of the employee-ownership sector; first, the need for an easily understood model legal framework, and second, the need for start-up capital. Several of the entrepreneurs behind these ten founder businesses of ICOM had spent huge amounts of time and expense on constitutions embodying their personal and varied convictions.

Scott Bader called itself a Commonwealth, Trylon was a Christian working community, Fakenham Enterprises Ltd. was an all-female business which scorned any male interference. Outwith ICOM, the John Lewis Partnership was growing into a large retail business with its own complex constitution for employee ownership.

The only model available was the CPF Rules, originated in 1882 and augmented on numerous occasions in the 90 years since. By 1970 these Rules had become a turgid 100 pages, incomprehensible to nearly all who persevered to read them. It was a time of considerable idealism but would-be co-operative entrepreneurs had no alternative but to go to solicitors who merely pulled a standard Companies Act Memorandum & Articles from the bottom drawer because they had no knowledge of IPS's. They would then modify the Memorandum a bit to accommodate the views of the founder, and take their fees.

Roger Sawtell, as chairman and dogsbody of ICOM, was given the task of formulating a simplified set of Model Rules for employee-ownership, ‘on one sheet of paper’. As the main principle, worker members should take decisions themselves, the Model Rules were to be minimal but had to comply with IPSA for registration. The first ICOM Model Rules were eventually adopted in 1976 and the first co-operative to register with them was Daily Bread Co-operative in Northampton. ICOM grew steadily in the 1970’s and by the end of the decade there were over three hundred employee-owned businesses, most of them registered with the ICOM Rules and covering a wide variety of industries. A door had been opened.

The second requirement to enable the sector to grow was to make loan capital available to emerging worker co-operatives. Working capital is just as necessary for a co-operative as for any other business but equity voting shares are not appropriate because the enshrined co-operative principle is that control rests with the working members on a one-person-one-vote basis, similar to parliamentary democracy, and not with ‘outside’ investors on a one-share-one-vote basis, looking for dividends and capital appreciation.

Banks were cautious and even suspicious of co-operatives so ICOM decided to initiate a revolving loan fund, taking in loans from well-established employee-owned businesses such as Scott Bader and lending to newly emerging worker co-operatives. At a meeting in the kitchen of the ICOM chairman’s home in October 1973, Industrial Common Ownership Finance (ICOF) was founded (later to operate as Co-operative and Community Finance). Several well-wishers pledged incoming loans to get the fund off the ground and ICOF grew slowly and with occasional setbacks. (By 2008 the fund was well-established and had £17 million out on loan, with few failures.)

The Triumph Co-operatives. Following the miner’s strike in 1974, a Labour government (Harold Wilson) was elected and determined to do something about industrial democracy. Tony Benn was briefly Secretary of State for Industry. ICOM recommended grassroots help for emerging co-operatives but civil servants argued that a more dramatic gesture would be to make substantial grants to three troubled businesses in danger of going bankrupt, Kirby Manufacturing, Scottish Daily News, and Triumph Meriden, to transform them into worker co-operatives.

Their shareholders must have rejoiced all the way to the bank for this rescue but there was no experience of democratic management among the workforce and failure was inevitable. The first two soon succumbed but Triumph motorbikes struggled on until 1983 before collapsing.

For the ensuing thirty years Conservatives used this debacle as ‘proof’ that worker co-operatives do not work. It became a millstone round the neck of advocates of all kinds of co-operative ventures. The bitter lesson was learned that money will not turn a failing capital-owned business into a successful co-operative. Very slowly, the positive lesson was also learned that sustainable development can be achieved by co-operative entrepreneurs from the grassroots or by the transformation of successful businesses, like Scott Bader.

The Industrial Common Ownership Act (1976)
In 1975, while the Triumph co-operatives were in the news, David Watkins, MP for Consett, which had suffered from the closure of its substantial steelworks, drew a favourable place in the annual ballot for private member’s bills and invited ICOM to draft a Bill.

The parliamentary lawyers changed every clause of the draft and the resulting Act, expertly steered through parliament by Watkins, and brilliantly supported by Peter Melchett at the Department of Industry, was disappointingly weakened. It provided a legal definition of a common ownership enterprise but few co-operatives perceived this to have much merit.

However, the Act gave a publicity boost to the co-operative concept and underpinned the surge in worker co-operative registrations in the 1970’s and 1980’s, despite the impending failure of Triumph. The Act also provided a very helpful grant of £250,000 to ICOF to lend to emerging worker co-operatives.

Co-operative Development Agency (CDA) 1978 – 1990.
After much political lobbying, a national development agency was initiated in 1978, chaired by Bert Oram (Lord Oram), a seasoned co-operative campaigner. This augmented the work of about 30 local co-operative development agencies which had sprung up all over the country. The CDA legislation was one of the last Acts before Labour succumbed to 17 years of Conservative government. It acted as publicist, advocate and adviser, and decided to concentrate its efforts on worker co-operatives to provide good quality jobs. The first Directory published by the CDA in 1980 listed 330 worker co-operatives and the third Directory in 1984 showed 911.

Although accepting the CDA as a means of generating jobs in a time of recession, the Thatcher government was lukewarm towards co-operatives and happier to encourage private ownership and equity share companies. So the CDA was deflected away from co-operative ownership towards employee shareholding schemes and the playing field was tilted towards minimally-regulated capital ownership. The CDA was gradually strangled by diminished government funding.

Despite the debacle of the Triumph co-operatives and the lack of real support from the Conservative government, the surge of the seventies had generated a momentum and many more small worker co-operatives were initiated in the 1980’s. Larger employee-owned businesses like John Lewis Partnership and Scott Bader continued to do well and worker co-operatives of all sizes showed that this structure could survive recession because there were no outside shareholders expecting dividends and because the working members were committed to survival in a way that conventional wage earners never could be.

A directory published by the Co-operative Research Unit (CRU. Open University) in 1989, listed 1400 worker co-operatives, probably the highest figure recorded. The foreword to this directory reflected an optimism which was soon dispelled by those who claimed that private enterprise would bring everlasting increases in material prosperity. Greed was not to be discouraged and the doldrums for worker co-operatives set in.

The government finally killed-off the CDA in 1990, local authorities were closing down some of the local co-operative development agencies to save money, the CPF continued to be moribund and the Co-operative Union(CU) the representative body of the co-operative movement, dominated by the consumer co-operatives, showed scant interest in worker co-operatives. ICOM and ICOF passed through various crises but struggled on. The number of worker co-operatives began to diminish.

Hope re-emerged around the turn of the century when Co-operativesUK, led by Pauline Green, replaced the CU and was determined to represent all manner of co-operatives and mutual enterprises and become truly representative of the whole co-operative movement. ICOM responded by merging with Co-operativesUK in 2001 and other co-operative bodies joined until there were 560 members by 2009. Co-operativesUK have brought together several different model rules for co-operatives and offer a straightforward registration service and advisory support for worker co-operatives.

The recorded number of worker co-operatives at March 2009 is 403 and, if those with other legal forms are added, the total number of employee-owned businesses is about 500. This is significantly less than twenty years earlier but, and it is an important but, plenty of these 500 are well-established and experienced in effective management under the seven Co-operative Principles established by the International Co-operative Alliance(ICA). Thus the worker co-operative sector has never been stronger and is ready to meet the challenge to make this the century of co-operation.

20 July 2009

A short history of worker co-ops part 1

For those new to worker co-operatives interested in history, Roger Sawtell has kindly written a brief article. This first part looking at pre-1970's worker co-operatives. The second part will look at the rise in the 1970's of worker co-operatives.

Roger Sawtell is a co-operative entrepreneur, co-founded two ongoing worker co-operatives, Trylon Ltd.,Wollaston, in 1968, and Daily Bread Co-operative, Northampton, in 1980.

This potted history is deliberately peppered with the names of organisations and individuals so that those who want further information can access it on websites. [JA - added links, if you have interesting links please post as comments]

The Early Years, Rise and Decline 1850 -1970

The modern co-operative movement in UK dates from 1844 when the Rochdale Pioneers opened their co-operative store. In 1852 the first Industrial & Provident Societies Act (IPSA), under which co-operative societies were registered to distinguish them from conventional companies, was guided through parliament by the Christian Socialists, an influential group of academics and lawyers, including Charles Kingsley, author of The Water Babies, F.D.Maurice who became professor of theology at King’s College, London, and J.M.Ludlow. They put their energy and their money into the formation of worker co-operatives of tailors, shoemakers and even ‘piano manufacturers’.

These dedicated reformers, determined to provide a ‘better way’ than rapacious Victorian capital ownership, were the founding fathers of the subsequent development of worker co-operatives, In 1882, E.V. Neale and Edward Greening initiated the Co-operative Productive Federation (CPF) to be the representative body for worker co-operatives but the number grew slowly and was overshadowed by the dominance of the consumer co-operatives. Beatrice Webb, a powerful voice in the co-operative movement, wrote against producer co-operatives and the trade unions showed little interest. In 1923 there were 44 societies in membership of the CPF but thereafter it gradually diminished in size and influence and by 1970 only a rump remained.

However, in the 1960’s, independent of the co-operative movement, there was a scattering of employee-owned businesses, mostly transferred to the workforce by reforming entrepreneur owners wanting to create a more democratic business structure. Prominent among these was Ernest Bader, a turbulent Quaker and gifted entrepreneur, who had founded and developed Scott Bader Ltd. into a substantial chemical manufacturing business. Bader had strong and unusual convictions which included not only employee ownership but also pacifism and vegetarianism – a heady mixture. By 1963 he had completed the transfer of the business to the 260 employees and formed The Society for the Democratic Integration of Industry (Demintry) with five employee-owned businesses as members. Scott Bader continued to grow and there was increasing interest in industrial democracy.

At a historic meeting in 1971 Demintry was transformed into Industrial Common Ownership Movement (ICOM) with ten founder members, five of which were located in the Northampton area. The ICOM businesses were in fact worker co-operatives but an early resolution to join up with the CPF was soundly defeated because these energetic businesses did not want to be dragged down by the seemingly moribund CPF.

The secong part will look at ICOM and the rise of the worker co-operatives in the 70's

For wider reading on co-operative history:

Co-operative College Archive
Society of Co-operative Studies
History of worker co-ops in the US

13 July 2009

Mediation in worker co-operatives

Bob Cannell has kindly provided a summary of the 37 page ACAS guide to mediation. A topic of interest to worker co-operative and other equal status organisations where management authority is is not available to "sort out" arguments between peers.

Mediation is increasingly recommended (ACAS, CIPD) as a method to resolve conflicts and disagreements between people at work. Unresolved disagreements and blocked communication can cause serious long term damage to cooperative team working and business performance.

Mediation is a method by which people can take responsibility for resolving their own disagreements with the help of a facilitator, the mediator. There is little paperwork because the process relies mostly on verbal communication.

What is Mediation?
Mediation is where a mediator helps two or more people to reach an agreement to change behaviour. Any agreement comes from those in dispute, not from the mediator. The mediator does not judge or tell them what to do (beyond making suggestions). The mediator is in charge of the process of seeking to resolve the problem but is not responsible for the outcome.

The stages of mediation

  1. A complaint is received by Personnel
  2. Personnel ask the parties to accept mediation to resolve the issue. (if they refuse, it might become a formal grievance or disciplinary)
  3. Personnel agree a mediator (themselves, other member(s) or an external mediator.)
The process

First contact with the parties
The mediator meets the parties separately. To set the guidelines for the mediation process. To allow them to tell their story and find out what they want out of the process.

Joint meeting
Hearing the issues
  • The mediator brings the participants together and invites them each to put their side of the story during a period of uninterrupted time.
  • The mediator begins to summarise areas of agreement and disagreement and draw up an agenda with the parties for the rest of the mediation.
Exploring the issues
The mediation is now about encouraging communication between the parties, promoting understanding and empathy and changing perceptions. To begin to shift the focus from the past to the future and begin to look for constructive solutions.

Building and writing an agreement
The mediator encourages and supports joint problem-solving by the parties, ensures any solution and agreements are workable, and records agreements and respectful ‘agreements to disagree’.

Closing the mediation
  • Once agreement has been reached, the mediator will bring the meeting(s) to a close, provide a copy of the agreed statement to those involved and explain their responsibilities for its implementation.
  • If agreement cannot be reached, other formal procedures may later have to be used to resolve the conflict.
  • Nothing that has been said during the mediation can be used in any future proceedings.

Conditions for Successful Mediation

Not a First Resort
People should first try to resolve disagreements by themselves and managers/co-ordinators should not use mediation to avoid their responsibilities for people and team leadership.

Trained Mediator
  • If possible, Mediation training ACAS or CEDR should be done in advance of it being needed.
  • With goodwill from the parties in dispute, lack of training need not be a reason to delay.
  • Starting meaningful communication between the people is more important.
Time and Place
  • Mediation works best if started promptly.
  • The first stages must not be rushed by time pressures.
  • Length of meetings depends on the people involved.
  • Many mediation processes take one day or less to complete
  • The place must be private with a private room to break out into if a calming down period is needed.
Voluntary and Co-operative
Both (all) parties must agree
  • to use mediation.
  • to want to achieve a cooperative resolution.
  • to be prepared to ‘give and take’.
Mediation does not work if one ‘side’ is seeking revenge or is determined to win at the cost of the other or does not intend to be open and honest.

Informal and Flexible
Both parties must be prepared to be flexible and allow the mediator to facilitate the process.

Personal and Unrepresented
People only use representatives or ‘go betweens’ in mediation where they cannot be in the same room together. email, video links, telephone can be used if necessary.

Non-speaking work friend companions are sometimes useful. NB some people need interpreters or care assistants.

Anything said during mediation is confidential to the parties. They may choose to reveal some or all of what has occurred during the mediation to colleagues but only if all parties agree. The only exceptions are where, for example, a potentially unlawful act has been committed or there is a serious risk to health and safety.

When Should Mediation not be Used or be Stopped?
Where clear evidence exists (including detailed written accusations) of serious Bullying, Harassment, Intimidation or Discrimination, the employer has a legal duty to protect employees by intervening, investigating and stopping any such behaviour. Mediation then can be used to repair relationships.

Reasons to Stop Mediation
  • One party wants to withdraw from the process
  • The behaviour of one or both parties becomes unacceptable
  • Emotions and /or distress make progress unreasonable.
  • The mediator realises that the issue is too serious for mediation and should be a formal Grievance.
Morally binding but not legally enforceable
Both parties should realise that mediation agreements are morally binding, you have given your word, but that subsequent ‘backing out’ of mediation agreements cannot be prevented.

Agreements and Failure to Reach Agreement
Mediation is not a mechanical process. People may agree but not change behaviour. People may not reach agreement but then change behaviour. Mediation should be easy, cheap and convenient enough to be repeatable whenever required, even with the same people with the same problem.

Feedback and Debriefing
It is useful for the mediator if the participants briefly give feedback about the process and the mediator’s role.

Mediators need space and time to recover from what can be an exhausting and emotionally demanding experience.

Further information on Mediation can be found on here.

10 July 2009

Map of worker co-operatives

Ed Russell (Co-operative web), one of our new worker co-operative council reps, has kindly given up a bit of his time to map worker co-op members.

This is purely a test and is not 100% accurate, as only the postcode and town of a co-op has been entered, but I thought it might be interesting to share. If people think this is a good idea, or have other ways of mapping the same information using open source solutions, please send me a comment.

01 July 2009

Worker Co-operative Forum

The Worker Co-operative Forum took place last Friday as part of Co-operatives 2009 Conference and was attended by 33 delegates. This is the first time I have organised a worker co-operative specific strand and I hope to build on this and our presence at Co-operatives 2010 next year.

We had workshops on: Marketing co-operatives, running effective meetings, HR issues, and implementing The Code of Governance. For the presentations and other materials, please visit our events page.

We also had 3 opens sessions on: Perceptions of Co-operatives UK , Business networking using the web, and social auditing and performance measuring.

If you attended and their is an online form to feedback on the day.

Other interesting bits at Co-operatives 2009.
We had worker co-operative representation throughout the weekend, of particular interest I attended workshops on: Employee participation, Where future co-operatives will come from, How much is your manage worth?

I should also not forget that The employee co-operative council has had its name change approved and will now be known as the worker co-operative council.

We will be uploading videos of some of the workshops when there ready in the next week or so. Please check here for articles already online.

Do you want worker co-operatives to be more visible at Co-operatives 2010, please post your comments or email me your thoughts about what we can do next year.