Co-operation – the beautiful idea
Including a change agenda for co-operatives and mutuals
By Edgar Parnell
Copyright: 2011 Edgar Parnell
Published by Edgar Parnell at Smashwords
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Website: http//:www.co-oppundit.org
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Author’s note
This booklet seeks to address the organisational issues that inhibit the growth and development of many forms of economic enterprise, but it specifically focuses upon those based upon economic co-operation. An important part of the fundamental changes necessary within many organisations is their need to be based upon the practice of co-operation, which is the central theme of the booklet. It is primarily addressed to those who are actively involved with co-operative and mutual enterprises, but also to all persons who envisage the potential for economic co-operation contributing significantly towards human development. It is clearly not designed to appeal to an academic audience; nevertheless, I hope those who study organisations will find something of value. It is based upon my personal experiences and my observations of what actually happens when people seek to practice co-operation. I have sought to provide readers with a distillation of my involvement in this field in a document that covers the essentials of co-operation within a limited number of pages
Although this booklet has been prepared to meet the needs of people within the United Kingdom, the author believes that most of the issues addressed are equally relevant in most countries of the world. For permission to reproduce this booklet in other languages, and/or in an adapted format tailored to the needs of a specific country, please contact Edgar Parnell.
Acknowledgements
I wish to acknowledge the help of the many people who have contributed to this booklet, both knowingly and unknowingly. In the second category are all those I have met in the course of working with co-operatives and mutuals in many different countries, as well as the many writers and thinkers specialising in co-operative forms of enterprise who have influenced and helped to shape the ideas now presented. Among those who knowingly contributed are Trevor Bottomley (my long-time mentor), Peter Couchman, Jim Craigen, Garry Cronan, Benny Dembitzer, Iain Macdonald, Ramsay Margolis, Barbara Panvel, Mike Perry, Dr. Rita Rhodes, Prof. Alan Robb and Kate Targett; also, thanks are due to my daughter Susan for her help. However, the author accepts sole responsibility for the content of the booklet and the opinions expressed therein.
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Co-operation – the beautiful idea
CONTENTS
Chapter One: What’s it all about?
Chapter Two: Co-operation in theory and practice
Chapter Three: The economics of co-operation
Chapter Four: Co-operation – the enterprise model
Chapter Five: Purpose is paramount
Chapter Six: Equivalence and democratic control
Chapter Eight: Financing co-operation
Chapter Nine: Mutual aspirations
Exhibits:
Exhibit A – The building blocks of co-operation
Exhibit B – Key characteristics of corporate enterprise models
Exhibit C – Types of co-operative/mutual and their purposes
Exhibit D – The practices of the Rochdale Society of Equitable Pioneers
Exhibit E – The International Co-operative Alliance (ICA) – Statement on Co-operative Identity
Co-operatives UK has estimated that the total annual turnover of UK co-operatives and mutual enterprises (CMEs) is now over £100 billion. Facts and figures about the range and scale of UK and international CMEs can be viewed using the links provided.
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Chapter one: What’s it all about?
This booklet is essentially about human organisation. My experiences have led me to two very significant conclusions: firstly, that far too many organisations, especially those that are large-scale, fail to achieve their organisational purpose, and secondly, that the effective practice of co-operation between the people within organisations is critical to success. The fact is that many organisations, of all kinds, need to be substantially changed if human progress is to continue.
The main purpose of the booklet is to address the organisational defects that inhibit the growth and development of many forms of economic enterprise, specifically focusing upon those based upon economic co-operation. An important aspect of the fundamental changes necessary within many organisations is their need to be based upon the practice of co-operation
The beautiful idea
Most of us readily accept that co-operation is a useful practice in everyday life, and we think of it as teamwork, collaboration and working together. In this booklet the term ‘co-operation’ is used to describe a form of human organisation. I am talking not only about formal organisational models, but also the less formal, more arbitrary forms of co-operation and collaboration, including online collaboration, networking and other aspects of informal co-operation. The alternative of just pursuing our own selfish agenda doesn’t get us very far, and unless we are extraordinarily rich and powerful, we just can’t get away with it. However, there is much more to co-operation than this apparently simple explanation – it provides us with a more balanced approach to living and the basis for a more equitable form of economic organisation.
Few ideas can justify being described as beautiful, but co-operation is surely beautiful, both in terms of its simplicity and as a perfect example of synergy – meaning that things together produce a combined effect greater than the sum of their separate effects. Co-operation entails balancing the needs of the individual with those of the group, and becomes the means of creating added value. It allows the individual to maintain sovereignty while benefiting from the rewards of joint action – combining self-help and mutual benefit. The alternative to co-operation is not competition; rather it is acting in isolation. In practice, people often co-operate in order to compete.
The concept of co-operation is most appealing indeed, as it offers an elegant solution to a great many problems. However, the practice of co-operation is far from easy or simple, especially when applied on a large scale. Frequently we lose sight of the basics when simple ideas become buried in a maze of esoteric explanations, and there is sometimes reluctance to accept the need to focus on the core concept. The fundamentals of co-operation need to be expressed in plain words and used in a straightforward way, because they need to be practiced by ordinary people.
Co-operation is clearly no panacea; however, its potential as a form of economic enterprise for improving people’s lives has not yet been fully exploited. The age of grand, all-embracing philosophies is now all but passed. Those belonging to more recent generations have become more inquisitive, better informed, more critical and much more ready to challenge dogma. It is their attitudes and values that will shape the organisations of the future. Ideas can, at the same time, be simple in terms of the underlying concept but complex in application. This is especially true in the case of co-operation when we move beyond the most basic level. For most of us co-operation is essential to our survival, and almost all people practice it, in one form or another, in their everyday lives.
A football analogy – Simple yet complex
Football can be simply described as a game in which the players try to kick a ball between the opposing team’s goal posts. However, to play it properly requires a lot more knowledge than this. It’s the same with co-operation – the basics are simple, but to make it work effectively in practice, we need to know much more.
Economic co-operation
Throughout human history some activities have always been undertaken by groups rather than individuals, simply because this was a better and more economic way of doing things. Such activities are usually described as informal co-operation. More formal types of co-operation, such as the early co-operative and mutual societies, came to the fore during the 18th and 19th centuries. They arose in response to the unrestrained selfish behaviour in the market of the flourishing joint-stock companies, which had emerged as a means of procuring capital for corporate entities.
What do we mean by ‘the Rochdale Model’ ?
In 1844 the Rochdale Society of Equitable Pioneers, an association of working men and women, established a consumer co-operative store at Rochdale, England. Initially it was based on principles of open membership, democratic control, and distribution of surplus in proportion to trade, payment of limited interest on capital, political and religious neutrality, cash trading and promotion of education.
The now-famous Rochdale co-operative model was developed after many less successful efforts, but following the establishment of a pioneering co-operative store this model and its derivatives spread worldwide. At about the same time in Germany, the Raiffeisen credit co-operatives were established, and these too spread rapidly, especially in rural areas.
Probably at least half the world’s population is now in some way involved in, or directly affected by, co-operative or mutual activity. Most people gain their first experiences of formal economic co-operation when they discover that co-operatives and mutuals can provide them with a fairer deal, but many go on to discover that it can also provide the basis for a fairer society. They envisage a much wider and more significant role for co-operation in helping to address some of the most pressing problems now facing the world. In this context we are dealing with a specific model of co-operative enterprise that is based upon self-help and mutual help.
Co-operatives and mutuals
Co-operation underpins a wide variety of co-operative and mutual enterprises, including co-operative societies, building societies, credit unions, friendly societies, community-benefit societies and member-owned enterprises of all types. It also lies at the heart of many other enterprises well beyond the very limited range that is registered under legislation specifically formulated to cover co-operatives and mutuals.
Co-operatives and mutuals are two sides of the same coin. Co-operatives are based upon mutuality, and both mutuals and co-operatives are based upon the concept of beneficial interdependence; both are reliant upon the practice of co-operation. An organisation that is fully mutual should provide services only to its members. The main reasons for the distinction between co-operatives and mutuals arise from their historical origins and the different forms of legislative arrangements that were available to their founders. Throughout this booklet the composite term ‘co-operative and mutual enterprise’ (CME) is used to describe all of the different manifestations of enterprises rooted in the practice of economic co-operation.
What’s in a name?
Within the UK it is possible to register co-operatives and mutuals under a variety of different legislation. This is in contrast to the situation in many other countries, where there is often very specific legislation under which all forms of co-operative and mutual enterprises may be registered. In the UK co-operatives and mutuals may be registered using various Acts of Parliament, including the Industrial and Provident Societies Acts, Building Societies Acts, Credit Union Acts, Companies Acts and Community Interest Companies Acts. This often leads to considerable confusion about what is and what is not a CME. To compound matters, many CMEs have drifted away from their original purpose and have, for all practical purposes, ceased functioning as co-operative or mutual enterprises. Although they may have ‘co-operative’ or ‘mutual’ in their name, they no longer behave as though they are. At the same time, many organisations not specifically designated as co-operative or mutual operate, in practice, as CMEs.
The failure of some co-operatives and mutuals to change with the times has led others to want to disassociate themselves from what they perceive as an old-fashioned image. In some cases communist and other regimes have sought to exploit the co-operative enterprise model for political ends, which has besmirched the reputation of genuine co-operatives, with the result that some have adopted different names so as to avoid being linked to such activities. In other cases those controlling co-operative and mutual enterprises have preferred that their member-owners were not reminded of the commitment to democratic control, and have sought to hide their co-operative and mutual credentials by giving their organisations different names. Whatever the motivation, some have tried to alter the identity of organisations that ought to be properly described as co-operatives and mutuals.
Identifying a genuine CME – the quick test
Many people find it difficult to readily identify what it is that sets genuine co-operatives and mutuals apart from all other forms of organisation. Later in this booklet the co-operative and mutual form of enterprise is examined in depth; however, the following five-point ‘quick test’ can help establish the credence of any co-operative or mutual organisation. These five features are essential, and any genuine CME will be:
An economic enterprise operating within the marketplace.
Run democratically by, and primarily for, the benefit of its members.
Based upon the concept of self-help and mutual help.
Committed to treating all members as having equal value.
Guided by ethical policies and not exploiting any of its stakeholders.
The capacity to deliver
Those seeking to expand the role of CMEs within the economy must first accept and then address the fact that it is essential to secure within the population at large a much better understanding of both co-operative practice and the true nature of the co-operative and mutual enterprise model. Even within CMEs many people involved often exhibit a disturbing level of misunderstanding about the true purpose and nature of their enterprises. Most markedly, it is lack of knowledge about the economics of co-operation (elaborated in Chapter 3) that so often holds back progress. This is especially apparent among employees in large-scale enterprises, but is also prevalent among both their elected and executive leaders. These are serious problems that must be addressed.
Everyone involved in a co-operative or mutual needs to have, at the very least, a basic understanding of the purpose of their enterprise. And significantly, at all levels of leadership (both member-leaders and executive-leaders) there needs to be unequivocal understanding of not only the true purpose of their organisation, but also a clear perception of the co-operative and mutual enterprise model and of the economic precepts upon which co-operation is based. All of these topics are examined in more detail in this booklet.
Despite the unquestionable contribution that co-operative and mutual enterprises have made and continue to make in many sectors of the economy, a great many are in need of extensive reform if they are to rise to the challenge now presented.
Scaling-up CMEs
Small-scale co-operation is vitally important, and there are a great many more opportunities for its further application in a wide variety of situations. However, one of the main constraints to the advancement of co-operative and mutual enterprises has been the failure to adapt the organisational model for effective application to larger-scale operations.
Co-operation is, in many respects, about the relationships between the people that comprise the organisation; therefore, co-operative organisations need to operate on a human scale. Co-operative organisation is at its best when the people involved know each other and value their fellow co-operators on the basis of direct relationships.
It often becomes necessary to implement economies of scale in order to achieve the purpose of the enterprise, and in most cases such economies of scale are best achieved by federal or networked organisations which are, in effect, cellular systems that mirror nature. The optimum scale for CMEs is one that balances the economies of scale with the organisational framework required to support effective co-operation.
The level of understanding required for co-operation to work in major enterprises and within federal organisations (CMEs of CMEs) has not kept pace with the realities of the modern world. Change is now needed in many CMEs, especially in terms of their democratic systems, organisation and governance, their methods of financing and, above all else, the ways in which their leaders are developed and supported. Existing practices are, for the most part, rooted in those developed in a bygone age and designed for small-scale and locally based organisations.
When CMEs grow to any significant size, in terms of the membership and/or turnover, they are frequently beset by multiple problems. They often appear to lose sight of their original purpose, are prone to switch towards serving the interests of senior executives or cliques rather than those of the bulk of their members, and become remote from the members. As a consequence they often become regarded as irrelevant to the lives of their members.
In the worst case, they are hijacked by self-interested groups and are demutualised, as has been the fate of many UK building societies and agricultural co-operatives. It is no coincidence that these very same demutualised building societies were among the first to encounter problems at the start of the current financial crisis, and they should never have been allowed to be hijacked by the directors, managers and advisers who sought to enrich themselves at the expense of future generations.
A consensus appears to be emerging among those concerned by the serious threats now facing the future generations of this planet. These issues include: unsustainable levels of population growth (coupled with the resulting competition for depleted natural resources and consequent prospects of conflict and strife), the potentially catastrophic effects of climate change, the ever-widening gap between rich and poor around the globe and our failure to confront obscene levels of poverty in many parts of the world. This consensus is built around the belief that if we are to survive these threats we cannot continue to act completely on the basis of self-interest, either as individuals or as nations. The really big problems facing civilisation today will only be addressed when we are prepared to adopt a new paradigm, which includes:
Tempering our current obsession with economic growth and greedy consumerism frequently based upon costly credit, and instead shifting our focus towards human development.
Replacing the current main driver of economic activity – profit maximisation – with one based on the concept of resource optimisation.
Revitalising the present market system so that it better serves the vast majority of the populace.
Prioritising models of enterprise that can help to deliver more fairness and more equal access to the available resources.
Many people also believe that co-operation has a very important role in responding to these challenges, and that we need to take a much more co-operative approach to the ways in which we organise our lives.
An agenda for change
If the innate potential of co-operatives and mutuals is to be unleashed, a clear agenda for change must be established. While many CMEs already meet the following requirements, all CMEs should be:
Built upon the foundations of genuine co-operation.
Clear and unambiguous as to their true purpose.
Democratically controlled by their members.
Led by competent and committed leaders (both member-leaders and executives).
Supported by a properly informed membership.
Able to access sufficient finance without sacrificing member control.
Provided with a more appropriate legal, fiscal and public-policy framework that supports their future development.
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Chapter Two: Co-operation in theory and practice
Co-operation is an extension of individualism. Co-operative forms of enterprise came into being when the factors controlling most people’s lives, whether imposed by tribalism, serfdom, religious hierarchies or feudalism, were removed. Co-operation is an activity of free individuals who wish to enhance their lives by associating with others who share their aspirations. Over the past two centuries the ways in which the individual has gained a high degree of self-determination within the framework of the modern democratic state represent a huge step forward in human development. Sadly, our ancestors’ efforts and struggles to secure these freedoms (still not universally available) have been regularly forgotten by subsequent generations.
The emphasis on the rights of the sovereign individual appears to have made many of us lose sight of our need to function within the wider human community. No matter how adorned by consumer goods, a life without joint endeavours and some degree of sharing with the co-habitants of our world is hardly worthwhile. Although not a panacea, co-operation is based upon full acceptance of our sense of individualism, but at the same time provides a more balanced approach to living.
Uniquely, the co-operative system relies upon, and cannot properly function without, the basic premise of human equivalence.
What do we mean by ‘equivalence’?
Equivalence ensures that each and every individual is treated as having equal value. Co-operation must be rooted in equivalence because people will not willingly work together unless they know they can rely on a fair share of the benefits arising from their co-operative endeavours and that they will have equal rights in their joint enterprise.
A co-operative approach
An important feature of the co-operative approach is its acceptance of people as they are – responsive to a complex mixture of motives, but largely driven by self-interest. It also acknowledges that most people are unlikely to modify their self-centred behaviour without a sufficient incentive to do so (particularly if they see others continuing to behave selfishly with impunity). Such incentives may be either positive or negative – the carrot or the stick.
Co-operation recognises that self-centred behaviour can be moderated when a more enlightened form of self-interest takes account of the wider mutual interest. In short, it provides the means to increased individual benefits, while at the same time providing mutual benefits. (Please note, however, that co-operation should never be confused with collectivism, in which group goals receive priority over individual goals, and all assets are jointly owned.)
Co-operation should work in harmony with human nature. Most of us realise that a life led only in pursuit of self-interest offers few rewards, at least not in the longer term. We also accept that happiness, whatever that may mean to us as individuals, is best derived from a balanced approach to living with others. Put another way, our own selfish needs must be balanced with the needs of the people we share our lives with – whether in our family, our workplace, our community or in still wider spheres.
No soft option, no easy option
Co-operation is neither a soft nor an easy option, and passive collaboration with its practice is not sufficient. Co-operation is not for the fainthearted and demands active participation. The fact that people choose to co-operate is not a sign of weakness, but rather an indication that they understand the value of collective strength. History provides ample evidence that entire civilisations have vanished because they failed to co-operate. Effective co-operation requires commitment and real investment – not just in financial terms, but in the development of leaders and the capacities of ordinary members.
Self- and mutual help
The freedoms to associate and to set up organisations with others in order to do things for ourselves were usually hard-won and can easily be lost by default. Sadly, people are often convinced that they cannot accomplish anything for themselves, and the realisation that they can change circumstances and solve problems by their own efforts rarely enters their minds. Instead they rely upon government or big business to meet all their needs and solve all their problems. Even many charities are beholden to government and corporate patronage. Yet human dignity depends upon feeling in control of the fundamentally important aspects of our lives. If we depend for survival and wellbeing upon organisations over which we have no real influence, we can hardly claim to be free individuals.
For the individual, self-help has become increasingly difficult in the modern context. Most of the truly important issues of our time require significant interventions, usually beyond the capacity of an individual. Only by joining with others are we likely to accomplish anything of significance – so self-help must be combined with mutual help. Mutual and co-operative action requires organisation, as well as resources that are not easy to come by. But if we lose the capacity to help ourselves, we sacrifice an important freedom and become dependent, and it is but a few short steps from dependence to enslavement.
The purpose of economic co-operation
The members of small, locally based CMEs invariably perceive the underlying purpose of their enterprise as improving the quality of their lives. When the relationship between the members and their enterprise is close and personal, its purpose is generally regarded as self-evident. However, once the scale of operations, the geographical spread and the number of members involved expand beyond a certain (yet not easily defined) level, the members’ understanding of their CME’s purpose typically becomes confused.
In large-scale CMEs it is not uncommon to find members with all manner of misconceptions about the true purpose of their enterprise. These may range from the impression that their organisation is no different from any other business to the belief that its purpose is totally altruistic. Depending upon the type of enterprise concerned, the opinions held regarding its purpose commonly include that it exists to:
Generate profit for distribution to members.
Generate profit for distribution to charities or community groups or to fund political activities.
Provide the means of effecting a change of ownership.
Extend the practice of democracy.
Conduct business in a more ethical manner.
Of course, any or all of the above are possible outcomes of co-operative endeavour, but clearly none of them is the true purpose of a CME. It ought to be obvious that CMEs exist to provide benefits – including economic benefits – to their members, and that these in turn should improve the quality of their lives in a variety of ways. In practice, these benefits are achieved by means of CMEs intervening in the market in the best interests of their members.
Co-operation and altruism
Some people believe that CMEs exist largely to dispense charitable largesse. However, although they are normally committed to making a responsible contribution within the communities where they operate, CMEs cannot be expected to act as providers of social services. They should promote and support self-help and mutual help, but without falling into the trap of fostering patronage and dependence.
It is a mistake to allow CME leaders to assume the role of ‘Lord or Lady Bountiful’ with resources whose primary use should be supporting the purpose and objectives of their enterprise. When charity is an appropriate response to a social problem, members are best encouraged to work through charitable organisations as individuals. It is not uncommon for commercial businesses to make charitable or cultural donations as a means of securing social acceptability or counterbalancing public disquiet about their commercial activities. Co-operatives and mutuals, provided they are genuinely committed to the communities in which they operate, should not find it necessary to engage in such practices.
Basic values
Many people involved in CMEs believe that their chief advantage lies in the fact that co-operation can reinforce certain basic values, such as the emphasis on sharing, the need to accommodate the interests of others, and commitment to equivalence and democratic forms of organisation.