MyCSP style over substance?

I have just read an article in the Financial Times about the new "employee owned" privatisation of the civil servants pension fund. As an exponent of worker co-ops and employee ownership should I be happy?

I can't speak on behalf of the movement, but my own personal feeling is best described as 'uneasy'. I have no personal problem moving the means of production from the state direct to the workers (this may well get a lot of bad comments from trade unions, but so be it).  I'm also in favour of experimenting with new models, innovation and the like.

So I'm interested, but also uneasy; there are elements of employee ownership, enough so that if the experiment fails employee ownership will get stained with that failure, Like the Tony Benn's worker co-ops of the 70's, and privatisation of bus companies in the 80's.

But are there enough elements of employee ownership or "John Lewis-style mutual" in place so that this new entity Ministers are poised to launch is a success? Will the employees get a real stake in ownership and control, driving up productivity and customer service? Will it create good jobs, motivated staff and probably most importantly for the Govt. Will it get public acceptance as a more palatable form privatisation, giving workers a more equitable share of the wealth? Lets have a read.

500 staff in the Department for Work and Pensions will leave the public sector in March and become stakeholders in MyCSP, a privately held company that will handle the retirement funds of 1.5m civil servants, disbursing £4bn ($6.3bn) in pension payments each year.
 
Is it employee owned? 
The MyCSP model, profits will be shared between a private sector provider, which will hold a 42 per cent stake; the government, with 33 per cent; and employees, who will own 25 per cent of the shares. A shortlist of 16 private sector providers has been narrowed to four – Xafinity, Capita, JLT and Wipro.

With a 25% stake I would say no, also its not clear if employees get 25% of the profits (and how this is distributed between employees).

Is it employee controlled?

Clive Bryant, PCS branch secretary in Worthing, said staff would have no real say in the running of the company as they were represented on a shareholder trust by a professional, experienced director, whose position would be advertised, rather than a staff member. The director, advised by employees, would influence decisions over bonuses and charities but would have no control over company strategy. “In reality staff will have an arms-length relationship,” he said. “It’s not as if this is a workers co-op.”

There is an employee partnership council, but information is sketchy, information from PCS the Trade Union is of course bias. If anyone has details of governance and management information I'll be happy to post.

On the face of it I'd say no again.

Will this motivate & empower staff driving up performance?
The Government view taken from Francis Maudes response to a question about consultation with employees is below. Full details here.

Mr Maude: MyCSP is keen to transform its business into an innovative mutual joint venture that offers extensive benefits to employees, customers and the Government.

The Government support this endeavour. Extensive consultation with the employees of MyCSP has been carried out, led by the CEO, including face to face, written and telephone communications. Trade Unions have been consulted and I have met with them personally.

Elections are already under way for employees to sit on the Employee Partnership Council. This body will strengthen the voice of employees and involve them directly in the running of the company.


The view from the Trade Union: "The vast majority of MyCSP members are opposed to leaving the civil service and becoming part of a ‘mutual joint venture’. Ian Pope, PCS DWP group negotiator, told PCS Voice: “MyCSP management has consistently refused to canvass staff views on the decision to move them out of the civil service and into a mutual joint venture. PCS balloted its members in MyCSP and received overwhelming support for action.

Added to that 94% of members in an independent survey conducted by PCS – from a high 55% response rate – said they did not agree with Francis Maude that turning MyCSP would ‘empower staff and drive up performance’.” Full Details here. Their specific response to Employee Partnership Council here.

Conclusion
I'm still interested, but still uneasy.
What do you think?

What we could learn from French co-ops

Shame to see plans for SeaFrance to become a worker co-op have run aground.  This is despite having political, legislative and support structures that promote worker co-operative buy-outs.

"The cooperative, was to be financed by workers' standard lay-off  payments as well as "exceptional" cash of 60,000 euros per worker, paid by SeaFrance's parent company, state-owned rail form SNCF."

Reportedly, not enough workers were committed to investing their lay-off cash in the co-op and the Trade Union was holding out for Government bail-out. Other trade unions representing SeaFrance personnel, and the national CFDT trade union, criticised the hard line stance of the local branch.


So 880 people will lose their jobs and probably the same again indirectly. As well as the reduction in services and competition in the market. I had a good grumble in my head about trade union intransigence (coal mines all over again), unviable businesses being forced upon the workers due to management failures... grumble ...grumble....

But what struck me was, it even got to this point, Nicolas Sarkozy was in favour of the idea! Would this ever happen in the UK?

I know Nick Clegg and David Cameron talk about increasing employee ownership, but would this happen? and if it did how would the workers be supported to make a real go at success? Labour Governments have not had great success at top down saving of industries through worker co-ops. (Meridian Motorcycle Co-op)

Despite the situation with SeaFrance, France has a really good track record of worker co-op conversions and has a Government backed programme (both buying successful business from retiring owners and businesses rescues.)

Given the very large number of SME business owners expected to retire in France of the next few years this area has been a particular focus for the co-operative movement. There have been 70 enterprises converted to worker co-ops each year over the last few years. There is also a specific support network called “APERE” (Association for the Promotion of Enterprise and Takeover of Enterprise) which partners with CG-SCOP the worker co-op federation.

I've linked to this report before in relation to success factors in the Italian worker co-op sector, but there is also a section on France, well worth a read:

Bit of history:
In France, a worker co-op is called a “SCOP”, an acronym for “Société coopérative et participative;”.

The French worker co-op movement dates back to early in the 19th century. A law passed in 1791, the “Chapelier law”, forbid workers’ associations, including worker co-operatives and trade unions. However during the revolutionary periods many worker co-operatives formed clandestinely. In 1878, the Administration repealed the Chapelier law, stopped the attacks and eventually became supportive.

Recent Growth
At the end of 2008, there were 1,893 cooperatives belonging to national federation involving 39,929 employees. Between 1994 and 2009, there was a 40.1% increase in the number of SCOPs from 1392 to 1950 SCOPs, and a 41.8% increase in the number of SCOP jobs, from 28,691 to 40,685.

Since 2007, approximately 200 new SCOPs have started each year through start up, recovery or business transfer and generated an average of 1,500 jobs per year since 2007. During the economic crisis although affected worker co-operatives have proved resilient as recent CECOP reports show.
At the end of 2010, there were 1 959 co-operatives a growth of 3.5% per year over the last 15yrs with survival rates after 3 years of 74% (average in France: 66% - source INSEE)

Success factors
Indivisible reserves
According to Patrick Lenancker, President of CG-SCOP (the national Federation), a significant reason that SCOPs have been so successful is they have substantial stable capital. A minimum of 15% of surpluses must be placed in reserves (in practice,it’s 40% to 45% on average) with the key advantage that the reserves are permanently owned by the co-operative, ensuring financial stability in the long term.

Like Italy and Spain the principle of indivisible reserves in worker co-operatives is strong (a bit like the common ownership worker co-ops of the 70's like Suma or John Lewis being held in Trust on behalf of the workers).

This large indivisible reserve prevents the SCOP from being taken over by external parties; ensures the independence and sustainability of the enterprise in the long-term.

Positive Government and legislative environment
There is a recognised worker co-operative legal form with requirements: The re-investment of surpluses and indivisible reserves mentioned above. Also in a SCOP, the workers must have at least 51% of the capital, and 65% of the votes.

But worker co-operatives receive tax benefits from the French government. SCOPs do not have to pay the professional tax, which is 1.5% to 2.5% of revenues and income on worker shares is exempt from income taxes. There are also financial mechanisms for workers to use redundancy payments as part of wider financing package to buy-out and provide cash-flow for the business once they take it over.

Principle 6 in action with strong Federations and support organisation
One of the other requirements to gain SCOP status is to finance the worker co-operative movement. The membership fees are 0.42% of revenues. Interestingly that would be about £60,000 from current worker co-ops (Turnover around £150m) and £3.7m if you add employee trust owned co-ops like John Lewis. Imagine the support that could be offered to grow the economy if we had £3.7m! (anyway I digress).

SOCODEN (Société coopérative de développement et d’entraide) is a financial institution managed by the SCOPs since 1965 and offers equity loans and financing for working capital requirements.

Finally the sense of solidarity and mutual support between worker co-ops is high. CG-SCOP’s slogan is “A SCOP is never alone.” The “Confédération Générale des Scop” leads and coordinates the SCOPs network and represents SCOPs at the national level in France. There are thirteen regional unions providing day-to-day development, and representation at the regional and local levels. There are also three professional federations that represent the SCOPS in their sector and provide economic, technical and legal advice.

Here is a diagram taken from www.les-scop.coop (your French is probably better than mine.

Further Reading
But don't read my blog go straight to the horses mouth:
http://www.les-scop.coop/sites/en/index.html
English translation of economic stats

Why have the employees bought West Highland Free Press?

This blog was posted at www.businesszone.co.uk by Giles Simon and I have reposted here for members interested in employee ownership.

It’s well known that local newspapers are in crisis. Advertising revenue is down for many in the industry, we’re seeing big changes and vibrant discussions across the newspaper industry about alternative business models. Journalists and employees of a local paper in Scotland – the West Highland Free Press – think they’ve hit on to a viable option. Whether it will work across the industry is a different question, but this option looks set to work for them.

The paper was founded by five friends in 1972 as a weekly newspaper. But as they began to pursue new interests they felt the time had come to sell their shares in the newspaper. Rather than selling the business on the open market, they approached the employees of West Highland Free Press to see whether they would be interested in buying the shares.

Ten employees now own and run the business, and the creation of an employee benefits trust will hold the shares for the employees and ensure that the paper continues to run at the heart of the community.

One of the biggest challenges facing innovative business models like this is securing finance, so when the traditional bank route closed, the Baxi Partnership, which controls a £20 million fund specifically for facilitating employee buyouts, was able to bring together a funding package that allowed 10 employees to purchase the title from the paper’s five founders.

Baxi also worked with other specialists, including Co-operative Development Scotland, which works to increase the number of employee-owned and co-operative businesses in Scotland, and Co-operative and Community Finance, which has been providing loan finance to co-operative enterprises since the 1970s.

Employee ownership is no panacea for a failing business or industry – they have to compete and make a profit like all businesses. So why do the employees at West Highland think that employee ownership can work for them?

Paul Wood, Managing Director there, explains:

“Despite what is happening in the wider industry we are optimistic about the future. The Free Press has always been a breeding ground for talent and employee ownership will not only help us retain that talent but make even better use of it.

“Our readership is loyal and discerning and we think we can build on this base and further develop the business through the greater participation that employees will have in the way the business is run. Through our staff we are already identifying opportunities for developing content, utilising new-media and developing a news agency side to the business.”

This has always been one of the strengths of employee ownership – employees that are motivated, care about the business, put effort in and go the extra mile to ensure that the business continues to grow.

As Ian Taylor of Co-operative and Community Finance puts it, “West Highlands Free Press is a fine example to show how employee buyouts can increase the motivation and job satisfaction of staff. For this company, employee-ownership was the only business model which would enable the paper to continue running at the centre of its community and ensure all members of staff job security.”

Sarah Deas, Chief Executive of Co-operative Development Scotland (CDS), agrees: "Research shows that employee-owned businesses [like John Lewis Partnership, Eaga or Loch Fyne Oysters] are more productive and sustainable, so there is enormous potential for this type of ownership model to contribute to the development of Scotland's economy.”

Employee ownership might not be the answer for every local paper. But as West Highland Free Press have realised, if there’s a market then an employee buyout can create more motivated and committed employees who actively help grow and develop the business.

www.whfp.com