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?

Will public sector workers fit in the co-operative movement?

Another Guest blog, this time by ChangeAGEnts which exists to create a space for active citizenship and to be a platform for older people.  Cheryl of ChangeAGEnts responded to a Linkedin discussion which got me thinking about the different cultures within worker co-operatives and public services, as ex-public sector workers, here are their views.

A worker co-operative is owned and democratically controlled by the people who work in it: Public Services are owned by The People.

If the Coalition Government is successful in ʻnudgingʻ public sector workers into the co-operative movement, how will they relate to, and with, existing worker co-ops?

Our guess is that the ex-public sector co-operators will create a space within the co-operative movement to deliberate: citizenship, democratic accountability, coproduction, available resources, commissioning and ownership. They will take some time to understand and re frame the co-operative business model, including and expanding upon current government thinking on 'wellbeing'.

They will invite existing co-operators to facilitate their understanding of the values and principles of co-operation and to help them to form multi-stakeholder, partnership based, co-operatives, building on the established core values, policy, practice and legislation relevant to their service area.

A defining principle for worker co-ops is ownership, the public sector ethos is one of service but are we really so different? The co-operative movement and the welfare state share radical roots, shouldn’t we also have a shared future, blending the best of ethical business with the best of citizen empowerment? Might we, redefine ʻownershipʼ together with the public and establish a new paradigm for Public Services

A note of caution, we in Change AGEnts chose to become a co-operative, even so it was for us a challenging, though exhilarating journey, for others, who in reality will have very little choice or control as to if and how their service is transferred, there will be pain, loss, anger and disorientation.

We’ve seen a lot written recently about the ʻspinning outʼ of Public Services, most of it focusing on reducing costs (terms and conditions of workers) or increasing profit. We have not yet heard the ʻvoiceʼ of the public or public sector workers, nor has it included the current discourse on public sector reform beyond the political ideology of the coalition government.

If essential public services are mutualised but not made sustainable and they collapse, who will the public hold to account?

A recent survey by Ipsos MORI (2010) indicates that the public want public services to be distributed fairly. Fairness in this instance being about equity and uniformity of access, the notion of a variation in quality of service’s across different localities was unpopular and considered unacceptable. 82% of respondents supported greater public involvement in public policy and service design, 53% supported individual budgets only 41% supported free schools. The Coalition Government’s agenda of shrinking the state seems at odds with the majority of the citizens of the UK, who define their ʻBritishnessʼ not by colour, class or ethnicity but by fairness, as exemplified by the welfare state.

In relation to Public Services, people do not define themselves as service users, nor do they see themselves as retail customers. (Clarke et al 2007) ʻItʼs not like "shopping” was the response from focus groups, when asked for their views on health care, it is the quality of the relationships with health care workers that is valued, along with trusting workers to reach decisions based on need not profit.

The Co-operative movement is similarly trusted and valued by the public, for example Older People that we work with, frequently recite their national insurance number, along with their co-operative membership number as proof of active citizenship. We are often given life course narratives, where good neighbours and the Co-op were essential to the survival of a family or a community. The notion that a barely elected government can transfer that sense of ʻownershipʼ or re-negotiate a cherished relationship without permission or participation, we believe is risible.

So what might happen when worker co-ops and the public sector newbie’s get together?

A radical and powerful paradigm shift that moves us out of our current silos, bringing us to a new and shared understanding of ownership, taking us beyond
Thatcher and Blair’s consumer model for Public Services, applying instead the legacy of the Rochdale Pioneers, reflecting ʻbottom upʼ the aspirations and expectations of the wider public.

Climate change, obesity, chronic disease management, inequality, the financial crisis, the ageing of society and social justice across and between generations are challenges which demand co-operative principles and shared ownership, not to come together now, may be considered by future generations as not just a missed opportunity but as a betrayal.

Co-operative Public Services that re-create the Beveredge dream for and with the 21st Century Citizen, that’s the enterprise that we would want to own in common.

Cheryl Barrott
Mervyn Eastman
ChangeAGents

What is an employee owned co-operative?

If you work in a public service, you're probably asking the question: What is an employee owned co-operative? If you're an owner/member in a worker co-operative you might well be asking the same thing, but for a different reason; I'll get on to that later.

But first the answer:

Answer

Unsurprisingly its kinda in the title: An employee owned co-operative is an organisation owned & controlled by the people who work in it, that either consciously or unconsciously follows co-operative principles .

Ok what does that mean?

The first bit means: for it to be genuinely employee owned the employees should at a minimum control 51% of the voting shares or indirectly own the business via an employee owned trust (like John Lewis).  This ownership also has to be spread throughout the workforce, not just by the managers and come with a real sense of control over the business. Giving 10% of shares to employees is not an employee owned business.

You could just stop there and be an employee owned business, which is fine (damn site better than being investor owned), but I believe the bit that adds the real value (and makes it more palatable for me regarding public service delivery) is the co-operative bit.

You can read the internationally agreed Co-operative Principles here. But essentially they say that a co-operative is a business where:

1. You can't be forced to be a member, and if you fit the criteria (length of service, commitment, etc) you can't be turned down.
2. If your a member, you get a say in the running of the business and that say is equal to others not based on how much money they have invested.  (This doesn't preclude managers by any means, but does change the dynamic).
3. You control the capital; you should also benefit from the performance of the business.
4. Significant when it come to public services, as a business you should be independent, from the state or anyone else's influence.
5. Members should be fully trained and supported so they can play a full role in running the business.
6. Where possible you should co-operate with other co-operatives, to develop the whole co-operative economy.
7. You should also have a wider concern for the community around you.

So if you're a public sector worker whose stumbled here I hope that helps. If you want to make an enquiry about setting up public services  mutual or employee owned co-operative click here. If you are interested in my own views on what model could help us create a big society click here.

My more regular readers might be asking, why I've essentially restated what a worker co-operative is. Why? because when you go on wikipedia, co-operative websites, or talk to people in the co-operative movement no-one really uses the term "employee owned co-operative".

In the US, Canada and UK we use the term worker co-operative, or if were really old-school "producer co-operative". As with most things in the English language the why has been lost in history.
The more pedantic people like me might argue that "worker" is technically a broader legal term than employee. But for most people the two phrases are interchangeable. (or are they? If you disagree please leave a comment)

I've heard grumbles that the use of this new term by Government and others is to distance these new entities from co-operatives of the past; or because "worker" sounds a bit too socialist for people's liking.

There are good examples of public service co-operatives out there.  But I do understand the need to look if exhisting models will fit and what these public service mutuals are going to really look like. Co-operatives UK provides a point for accessing information and signposting for people interested in starting a co-operative delivering public services. At the moment we are working with the Government particularly in relation to the Post Office.

And that's the real point of all this, what is being proposed by the coalition Government is going to break new ground, if public sector workers really are going to opt for some sort of mutual / employee owned co-operative model then they probably will be different from the worker co-operatives we have at the moment.

But if they share enough of the same characteristics, they are going to be dealing with the same issues worker co-operatives face.  How can we pass on our learning, and what can we learn? What are the opportunities (or threats) from some potentially massive new worker co-operatives that could easily dwarf the existing worker co-operative economy in the UK.

I'll end by saying; you can’t bluff it; if you say something is a co-operative it has live up to it. If its called employee owned, it has to be genuinely owned and controlled by those employees.

This is something I'd really like your comments on both from worker co-operatives and those in the public sector trying to understand how this might work for them.

Wider Reading:
Demos - John Lewis vs easyCouncil
Respublica - Turning public servants into service partners

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.. 3:11 PM May 19th via web"

The section of the paper that excited me:
"We will give public sector workers a new right to form employee-owned co-operatives and bid to take over the services they deliver."

Our initial response as good co-operators; was to admit that UK worker co-operatives didn't have a history delivering public services and using principle 6, we asked around our European colleagues for people who did; and did it well. 

This led us on fascinating journey to Italy (sadly only proverbially speaking) and the "social co-operative" a term we don't use the UK. In this blog I want to explain a bit more about social co-operatives in Italy, whether this model might offer a more well rounded or sustainable solution than the current thinking,  I will leave to you to muse (and to comment below).

Do read my blog, but to summarise:

Social co-operatives are: businesses where the primary purpose is to benefit the community through delivery of public services, they have a proper asset lock (not like ex-CIC like ECT spring to mind...), and most importantly are democratically owned by a combination of: the people who work in them (paid or unpaid), beneficiary's and investors.  With my own ethos being, workers should make up the majority of that membership and shareholding. 

They don't act alone but are part of regional and nation federations, so that they can remain small and locally based but have the economies of scale and specialist services to compete.


They operate in a legislative and financial framework where they can grow and become sustainable as a sector by receiving tax advantages for re-investing their profits into the support and development of the sector, creating a positive feedback loop.


Definition of an Italian social co-operative
A social co-operative in Italy is defined in the law (law 381/91):

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.

Income:

• Predominately contracts with public authorities
• Contracts with 3rd parties
• Trading direct with the public 

Size:
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)

Membership
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.

Taxation
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).

Finance
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

Social co-operatives in Italy: Lessons for the UK ,Social Enterprise London

The Rise of Social Cooperatives in Italy, Antonio Thomas, 2004 (have a pdf copy but can’t find a free one online)

The social economy in Italy 
Economics, Cooperation, and Employee Ownership: The Emilia Romagna model Logue, J, 2006.

Social enterprises in Italy- The experience of social co-operatives, Carlo Borzaga and Alceste Santuari (2000)

Italian Social Cooperatives, Wilda M. Vanek