29 September 2010

Building a creative economy

The talk at the moment is all about jobs: creating them, sustaining them and they must be good ones.  Not unskilled ones created by multi-nationals that would be whisked off to India given half a chance, not unethical or polluting industries and certainly not public sector ones.

So where will they come from and who will develop them?

The much publicised big society and outsourcing of public services (already done a blog on that) wont be a source, as that is straight displacement or likely reduction. They will have to come from the private sector and probably the "creative" or knowledge based sector in particular.
Businesses that are agile, innovative, where staff have high levels of motivation and productivity (which can be more critical than capital investment in this sector).

So how do you set-up this type of business and what model is appropriate?

From the 160 creative and knowledge based businesses we know about in our directory mostly: design, print and communications, business consultants, architects, IT services. The worker co-operative, and consortia model is good one. (Consortia are made up of, self-employed people and small business who come together for mutual support/shared services)

To help promote our model to the creative sector and potential entrant. Co-operatives UK with help from our members has developed a website and resource to help people create the perfect business for this sector.

To get the message out we are launching this resource around the country and last week I attended the launch event in Manchester, at Openspace a co-working environment which is itself a consortia co-operative of mainly self-employed freelancers and the worker co-operative web designers Ecobee.

Want to know more about Openspace? then have a look at this video.

If you know of people in the creative industries or looking to enter this sector please tell them about our resources and help us promote the co-operative model. www.creatives.uk.coop

20 September 2010

Implementing the formula for co-operation

I'm always like posting guest blogs, here is a short article from Britta Werner, member of Unicorn Grocery and representative on the worker co-operative council.

In June 2010, I went to Plymouth to the Co-operative Congress. This was in the middle of the first Co-operative Fortnight. Prior to that, I have already heard something about the 'formula of cooperation'. I was a bit suspicious initially, a formula? For co-operation? It sounded a bit like an oxymoron to me. Co-operation should be a spontaneous thing, a bit of give an take but not like for like.

I kept walking past the big formula in the main hall at congress

After Congress, I looked up what the abbreviations stood for:

Sc * (Ci + Mt) = Co

Sc was shared commitment, yes, I can understand that. If at the time of the event, one of the parties is busy doing other things, then that would not really be co-operation. Ci stands for common interest, of course you would need that, if you are interested in different things, you would probably not get together in the first place.  Mt is mutual trust, I definitely have a lot of examples where co-operation doesn't work because there is no trust.  

So, I started to understand why those three elements had to be part of a successful co-operation (Co).

The paper is only 16 pages long, including appendices, notes and bibliography. It is written by Ian McDermott, with Jason Miller and Ed Mayo. It is a nice easy read and very accessible. Read it here.

Around the same time, the training team at Unicorn have asked me if I could do a training session on co-operatives. I agreed but was not sure what I was going to say. I really didn't feel like talking about the Rochdale Pioneers or just randomly explain what we talk about when I attend the the worker co-operative council meetings. So I decided to tell my colleagues about the formula of co-operation. 

I started of with quickly telling them about Ed Mayo's paper Dog Helps Dog World which shows how important in all aspects of live it is to act co-operatively. Ed Mayo tells in that paper that we could reduce inequality if businesses were more co-operative and that climate change can be dealt with if we did not only care about ourselves.After giving my colleagues some food for thought, I then started to talk about the formula.

I reminded my colleagues about our principles and values and why we are all working in a workers co-operative. But how is this possible and how can we get better at what we are doing?

Sc * (Ci + Mt) = Co

You and the other party/parties involved need to know that you want to help each other but you need to trust each other initially to establish that, but to make anything happen you need commitment and it needs to be mutual. All three elements create a multiplier effect, each multiplies the effect of the other two. Co-operation will be the result. However only if all three elements are present. The result will be rewarding and satisfying.
If any of these are zero, you will get a different result but not the satisfying achievement of co-operation.

The example of tennis players are given at some point in the paper but I preferred to be a bit mean to my colleagues and torture them with a recap of the recent world cup.

The German team, most players playing in co-operatively owned clubs, were at their best. All elements were present. The way they passed the ball, the way they showed trust to their fellow players. They were a team and they co-operated; they had the same interest: they wanted to win.

The England team on the other hand, were a group of individuals, worried about their careers in their clubs, they might have wanted to win it, but there was no real trust between them. Each player played for themselves. So, no co-operation and no success in the world cup.

I used the England v Germany match to wind my colleagues up but the more I looked for examples, the more I could see it. Spain won, again, most players are playing for cooperatively owned clubs, they were not only playing for themselves, not even only playing for their team but for their whole club, which is owned by the fans.

Every good training session should have a little test to apply your just learned knowledge. I didn't have to work hard for one because the 'co-operation health check' is already included in the paper. For all three elements are two statements each which describe what co-operation means. Each statement should then be marked on a scale of 1-5 of how true they are for the business. 

Shared Commitment
  • What gets agreed gets done.
  • Result are frequently tested against the original intent.
Common Interest
  • New possibilities emerge frequently because innovation is naturally fostered.
  • New parties want to join because they are attracted by what we do and how we do it.
Mutual Trust
  • Working relationship are emerging both for those involved and those around them.
  • People readily express themselves even if it goes against the grain becuase they are empowered and able to challenge.
Our staff are split into two groups for our training, one is attending training the other one is on the shop floor and vice versa. So I had to do the training session twice. When I did the health check, the first group, quickly marked all statements and discussed the points afterwards in a large group. The other group, however, immediately split into smaller groups to discuss it. This showed that co-operation can look very differently. Both groups had very similar answers and views about our business.

The paper also includes an 'acid test'
  1. Do you care enough about this to take action with others?
  2. Are you willing to trust the people you will collaborate with?
  3. Are you prepared to do what it takes?   
Good questions people in all kind of businesses should ask each other and their teams.
I concluded with pointing out how this formula can be used to help us making our business an even better place to work in. Most businesses will have some faults and once identified, the faults could be split into the elements of the formula and see what is lacking most. It might not work for every single aspect but at least it is a start.

When I came to the staff room in the evening, one of my colleagues has made this:
I can highly recommend this paper and if you have read it, then share it with your colleagues.

Formula for co-operation

10 September 2010

What's a social co-operative, can it help create a Big Society?

Back in May 2010 Bob Cannell and I were attending a European Conference for worker co-operatives, when we heard the news that David Cameron had not just be talking about the Big Society and worker co-operatives as vacuous election rhetoric, but he actually meant it.... (well as much as a politician can)

My tweet:
"Reading a cabinet office paper on how the new government in going to build a #bigsociety, with worker #coops http://s.coop/ix amazed..


This law recognised social co-operatives as organisations that primarily benefit the community, or groups of disadvantaged people. There are two types identified in the law:
Type A - Deliver health, social or educational services.
(Closest UK example is Greenwich Leisure)
Type B - Integrate disadvantaged people into the labour market. (30% of employees much be disadvantaged.)
(Closest UK examples is social firms like Daily Bread)

The interesting bit for co-op people is the primary purpose. In the UK (and before this change in 1991, in Italy) the primary purpose of a co-operative is to benefit a co-operatives members, not the general public. That concept is similar to the purpose in Societies for the benefit of the community (Bencom) or Community Interest Company (CIC).

Members may be:
  • People who work or manage in the co-operative
  • People who directly benefit from its services, such as a disadvantaged or marginalized community
  • People who are unpaid volunteers in the co-operative - (must be less than 50% of total workforce)
  • Funders of the co-operative - in practice mostly local government/ public agencies.
The majority of members tend to be the  workers and volunteers, with beneficiary's, investors and public agencies in the minority.

Social co-operatives are permitted to distribute profits, subject to the following conditions:
  • Distributed profits are restricted to 80% of total profits
  • Profit per share - no higher than 2% of the rate on bonds issued by the Italian Post Office
  • No profits - or other assets - can be distributed if the co-operative is dissolved. (like common ownership co-ops, or the stricter asset locks in Becoms & CIC's
Other usual company/co-operatives things apply: separate legal personality, limited liability and as usual for a co-operative voting is one member one vote.

  • Predominately contracts with public authorities
  • Contracts with 3rd parties
  • Trading direct with the public 
Social co-operatives tend to be small (20-50 employees) and locally based (this was a product of legislation not allowing co-operatives to operate in different areas and thereby remain locally focused)

Co-operative history in Italy
In Italy there has been a long tradition of co-operatives both consumer co-operatives and worker co-operatives. Emilia Romagna in particular is held up as one of the most successful regions in the world for worker co-operatives (Did a blog on them here with further reading).
The social co-operative movement started in the 70's and was born out issues like: the tradition of the family's role delivering health and local care diminishing, lack of state provision to meet this widening gap and the inefficientcy of that provision. They are also less open to corruption and the involvement of organised crime, particularly prevalent in southern Italy.

As mentioned above in 1991 legislation was introduced that recognised the reality of what had been happening since the late 1970s; that a movement of ‘social co-operatives’ became established to provide services to the public, rather than for their own members.  Legislation in Italy also favours co-operatives and social co-operatives specifically as they are seen as inherently in the public good.

For more info on legal/history read this 2002 paper from Social Enterprise London, which is a great read, especially the insight into social enterprise hopes/dreams for the UK 8 years ago.  Shame the main characteristic of  social co-operatives has been forgotten, just imagine what we could have created 10 years ago if we had kept with the concept of democratic member control and not the cult of the "Social Entrepreneur"... but i digress.

Growth of social co-operatives
Italy leads the world with over 800,000 people working in the co-operative sector, about half of which are in worker or social co-ops. At the end of 2005 there were 7,363 social co-operatives in Italy employing over 244,000 people.  They are divided into 4,345 social co-operatives of type A, 2419 of type B and 284 consortium mixed co-operatives (Type A and Type B). These social enterprises engage 244, 223 members. Their entire turnover is estimated at € 6.4 billion. More info here.
(will add more recent figures if I can).

Success factors

From reading the different sources mentioned in the wider reading section, most interestingly an excellent report by the Canadian Worker Cooperative Federation.  There are a number of factors that hve affected the  success of social co-operatives in Italy (and successful worker co-operative economies more generally)

A key element of the strength of Italian co-operatives is their mix of members. It is not compulsory to have members who represent the interests of service users, workers and volunteers, but it is common. And where it happens there is evidence that it contributes to the success of the co-operative.

Government Support
It is recognised in Italy that their social objectives make them very different from profit - orientated, dividend-distributing companies and they should therefore be treated differently both legally and fiscally.

Preferred supplier status
Although there have been issues with "state aid" and private sector lobbying to reduce perceived breeches in EU competition law. Social co-operatives have very often retained preferential treatment when it comes to tendering for public service contracts over traditional private sector businesses. In 1996 the law was changed so that any organisation could tender for contracts, but there were minimum requirements which only social co-operatives would normally meet.

Specific tax breaks and benefits include: reserves are not taxed, lower corporation tax, lower NI on disadvantaged employees, tax exemptions for private donations to organisations, including social co-operatives. There are further tax benefits available to people buying ‘solidarity bonds’ issued to finance not-for profit activities.

To receive tax benefits, businesses have to (obviously) be legally defined as social co-operatives and meet certain standards (% or profits re-invested/passed to central funds etc).

Social co-operatives are typically highly dependent on public contracts - and public bodies pay 60 to 90 days in arrears (sounds familiar). In general co-operatives find it difficult to raise funds from the market/capitalist investors (due to ownership structure, not focused on shareholder return).

There are a number of grants schemes, ethical and patient loan funds, that support the growth in social co-operatives particularly interesting is:

The ‘Marconi Fund’. In return for helpful tax exemptions. Co-operatives in Italy must invest 3% of their annual income in the Marconi Fund to finance new co-operatives.

Co-operatives of all types must put a proportion of there annual net profits (30%) into their indivisible reserves, which over time can become a considerable source of liquidity and soure for future investment.

Since 1992, 3% of a co-operatives profits have to be placed into co-operative development fund. The three largest co-operative federations in Italy each have their own fund. The largest of these is Legacoop’s Coopfond which has a capitalization of $340 million (US$). From 1994 to 2001 alone, Coopfond invested $101 million to help create 7,300 jobs. (original figures here)

Co-operative federations can arrange special loan facilities at low rates of interest, through regional agreements with banks. Every member co-operative has a privileged relationship with that bank through its membership of the federation.  (This would do wonders for our membership recruitment drives)

Co-operative Federations
The Basevi Law mandated that co-operatives had to join a federation. These federations are now well endowed (membership fees are 0.4% of a co-operative’s annual sales) and have members throughout all of Italy. The result is undeniable political influence, and a strong sense of solidarity with the wider co-operative movement.
There are regional and national co-operative federations, that play a pivotal role supporting new, developing and established co-operatives. There main roles are:

To offer a range of common services to members including: payroll, accountancy, training, management consultancy, marketing, preparing joint tenders and fundraising for bigger projects.

Act as strategic advisors and agents in supporting social co-operatives taking on contracts from municipalities. Some actually act as the primary contractor and sub-contract operations to their members.

They act a lobbying/campaigning organisation to ensure co-operatives have voice in Italian and EU discussion on legislation.

They also fulfil a useful role in enabling the sector to grow, without individual co-operatives expanding beyond their capabilities. Rather than co-operatives constantly taking on new contracts, broadening their services having to deal with the inevtaible issues of growth.

They assist co-operatives with the creation of spin-off co-operatives (similar to how mondragon works). In this way, co-operatives remain small and local enough for members identify and a be properly involved in management of the business.

Legal framework
And finally as mentioned throughout, there is a long standing statutory legal and regulatory framework for co-operatives, they are defined and can therefore receive specific support and benefits and responsibilities.

I hope this gives you an insight and do read the sources i have pulled from. I'll end with a question:  

Would your Co-operative?:
  • Put 3% of your income and profit into a fund to support the wider co-operative economy.
  • Be restricted on how much profit you can distribute to yourself and put 30% into reserves.
  • Have a common ownership clause so you cannot sell the business and the assets must be passed to Co-operatives UK if you did wind up?
  • Give Co-operatives UK 0.4% of your annual sales as a membership fee.
But you would:

  • Be legally defined by law and therefore more sure of our status as a co-operatives (and those you might trade with and people who might trade with you)?
  • Receive preferential tax breaks and treatment when tendering for public contracts?
  • Have a fully resourced federal body that can offer business services, advice, support and capital/loans when you need it?
  • Have a size and strength with fellow co-operatives that you can fight your corner and play a significant role in improving society.
Wider reading
The Rise of Social Cooperatives in Italy, Antonio Thomas, 2004 (have a pdf copy but can’t find a free one online)
Italian Social Cooperatives, Wilda M. Vanek

02 September 2010

How do UK worker co-operatives compare to the rest of the world

I seem to be doing a lot of internationally focused blogs at the moment, if anyone wants me to cover a domestic worker co-operative issue, or write one themselves, get in touch.

Ever year Co-operatives UK sends data on worker co-operatives to CECOP (our European Federation). This helps CECOP lobby the EU on behalf of the movement and collectively show our strength. For those interested, here's a summary the information. 

Something to reflect on (if your that way inclined) are the terms social co-operative and artisan co-operative, which are terms we don't use in the UK.  I have loosely defined them below and keep meaning to write a blog on them both. 

None of the figures include social co-operatives as we just don't classify co-operatives in that way. For artisan co-operatives, I've looked for co-operatives of self-employed people that come together in a co-operative to produce stuff/deliver a service. These are usually referred to as consortia co-operatives in the UK but that term also includes consortia of very large buying groups like www.bako.co.uk , agricultural machinery rings etc, so its really isn't comparable.

The 90 collected below are an attempt to record these types of co-operatives and are predominantly: taxi firms like www.dialacab.co.uk (sadly not a member, if anyone can make an introduction...), arts and crafts consortia like: www.woolclip.com and professionals like: www.theverypeople.co.uk, www.uhc.org.uk.

Numbers of organisations

As we do not have data on every co-operative in the UK, this will be an underestimate and should only be used as a general guide to the sector (these figures are always changing as we get new data).

 social 1
Artisans coops2
Number of enterprises39290482
Number of enterprises being SME’s339289481
Number of workers (members and non members)214040026142
Total number of members of all types e.g. volunteers, investors63446577291

1 Social co-operatives are multi-stakeholder (predominantly worker/volunteers) that delivers public services (mainly in Italy).
2 Artisan Co-operatives are consortia’s of self employed people who come together predominantly Arts, Crafts, like pottery etc.
3 Define SME as greater than 250 workers or turnover greater than 50 millions €

Size of Co-operative Economy
Worker co-ops in membership of Co-operatives UK = £129m
Worker co-ops in economy = £146m
Artisan/professional co-operatives in membership = £900,000
Artisan/professional co-operatives in economy = £40.9m 
(predominately down to a few very large taxi firms)
Whole co-operative economy = £33.5bn

Lives and Deaths
185 have been creating since 2005, 101 of them members or affiliated to Co-operatives UK. 
33 have closed down over this period (that we know of).

Gender balance of Directors
Male Directors =565
Female Directors = 429 

Industry Sectors 
CECOP uses an International Industrial Classification Systems, so the figures may not be the same as others  figures I might have published in previous posts. I've attached the Spreadsheet, in Google Doc form here. for the juicy details and sub categories.  Again there is a health warning with this data, as it is our interpretation of information we have available.
ISIC & NACE CodesNACE Description Total

If you have not yet lost he will to live with too many figures, here some tid-bits from the last report from CECOP of how we compare with the rest of Europe:

Number of worker co-operatives in membership of a CECOP member

CountryN° of Co-operatives
Czech Republic252

Industry Sectors (where they have data)

NACEN° of Co-ops

I hope you enjoy, if you have any questions, comments please get in touch