At Co-operantics we have a few activities coming up for Co-operatives Fortnight.
We are organising some informal co-op networking in Bristol and Southampton, but of more interest to the rest of you, we will be hosting a series of “Co-operantics Conversations“. We will be talking through some co-operative governance issues with various members of co-ops and publishing their thoughts in a bid to help co-ops learn from each other and spread good practice. Keep your eyes peeled!
Here is a simple proposition. When people pay rent, it is not used to line the pockets of a property owner (e.g. Buy to Let) but used to cover the costs of providing the accommodation, with a little surplus for a rainy day and towards acquiring more properties so the benefit can be shared. The resulting rent would be cheaper as the “top slice” of profit required for the landlord is taken out of the equation.
What’s more, if the property is owned and democratically controlled by those tenants, they will take care of their homes and will seek ways to manage and maintain the property that save money, because it is in their own mutual interest. We are talking about a housing co-operative. It’s a “no-brainer” in a country that is suffering from a housing crisis and in which rent is spiraling out of control to satisfy the needs of investors.
However, there is a problem. In order to buy the property you need to have sufficient money to put down as a deposit. This is the primary reason why housing co-operatives are not as prevalent as you would expect given they are a “no-brainer”. The problem of accessing capital to lever in finance to purchase the house has come up again and again with potential housing co-op start ups. So maybe we need to have another look at the financing of housing co-ops.
I have been involved as a professional advisor to housing co-operatives since 1998 and was an active member of a 70-member housing co-operative which is a Registered Provider (holding various officer roles including Treasurer) for 12 years. In addition to supporting existing housing co-ops to improve governance or operational matters and to acquire properties, I have also worked with a number of capable pre-start groups who have had their intentions and efforts frustrated.
Blue sky thinking
I am challenging some of my own views here. I’m not necessarily saying that what I suggest in this piece is how I want the world to be, but if we aim to grow the co-operative elements of the housing sector we need to broaden our horizons beyond our current focus and personal desires. So, beware…blue skies ahead
There has been a tradition of those who speak for the UK Housing Co-op “movement” to focus on public sector housing and public funding for housing co-operatives. They are doing a great job which needs doing, but this is only part of the housing landscape. To make demands of the public purse to support co-operative housing while all political parties are committed to reducing public spend – winning a bigger slice of the cake while the cake is being reduced in overall size – should not be our only tactic. Additionally access to public monies also brings with it the regulation of being a Registered Provider which carries an administrative burden requiring scale and, from my observations, a tendency to move from a radical to a conservative focus. I used to find myself fighting a battle to retain the members’ interests over the regulators demands – and winning, I might add.
This means that we have a widely accepted construct in the UK that to be a “housing co-operative” worthy of note you have to a) be of a certain size and operate in a certain way, and b) only provide housing for rent for people in need. So what of those who are not technically in need but want to avail themselves of co-operative housing? There’s a gap in the market, and the private rented market is set to boom by all accounts. A case of need, a market, and co-operatives offering member benefit that provides a better offer than the market is fertile ground for co-operative development.
I believe there is room to encourage entrepreneurialism and growth of the co-operative control of housing by being widerin our definition of co-operative housing. To grow co-operative housing we may have to challenge our own sacred cows. There is a difference between what we ought to call “Co-operative housing associations” which is the well developed part of the UK sector and “co-operative housing” meaning housing that has some form of co-operative ownership and/or control.
Moving beyond co-operative housing for renters
In the UK there has been a tendency to downplay any role other than the renter-landlord dynamic. Why is co-ownership ignored? It isn’t ignored in the worker and enterprise owned co-operative sectors (notably the agricultural sector). I am a huge fan of common ownership in general and social ownership of housing but we ought to accept exploring some level of co-ownership as an option if we aim to grow the co-operative movement and to use the advantages of mutuality to address housing issues.
Some people are interested in partial (or whole) private ownership of properties within a co-operative environment. For instance, I have worked with a group who have potential members willing to sell their homes and invest in a co-operative to provide capital for a development in which they will live. We had to unpick the difference between a mortgage holder who completes their loan and then has a vastly reduced household outgoing over time and the renter who pays rent in perpetuity.
People who have valuable properties may be interested in co-ownership, or may want to invest their equity to enable the creation of housing managed co-operatively in which they can live. But do they get equity growth or just a reasonable return on that equity? And what is reasonable in this context – if the return on equity is not enough to cover the rent? They have swapped a completed or near completed mortgage for a rental property and locked up their equity. It throws up challenges. But we should meet those challenges, not ignore them.
Maybe it is time to blaze a new trail for entry into co-operative housing for people other than renters. My clients are still absorbing and considering the issues this has thrown up and what the final “offer” will be to the different “types” of member – all of whom will still have equal voting rights in how the co-operative is managed.
Co-housing is relatively small but growing in the UK. Some schemes incorporate private ownership and some Community Land Trusts offer private ownership but co-housing and CLTs are meeting specific needs (shared space and land ownership) that not all private owners will be interested in.
We have an ageing population who are asset rich but may require low level support if they are to stay independent in their homes. There could be innovative co-operative solutions to meeting the support needs of home owners and the housing needs of others. One brings equity, the other brings time. Together they create a mutual solution.
What of the co-operativisation of leaseholders? There are many leasholder companies for small blocks of flats that are established as share companies and often run by ex-bankers, stockbrokers or solicitors bringing private sector behaviours of hierarchy. Co-operative principles could be introduced to these organisations and empower all the leaseholders, while providing the wider social benefits a co-operative brings over those of a private mutual.
“Buy to co-op”
What about “buy to co-op” instead of “buy to let” i.e. instead of establishing housing associations, we establish buy to let entities that just happen to be owned by the people who rent from them (or maybe even allow in investors in a limited capacity, or staff, using a multi-stakeholder model). They could provide a dividend return (profit share)s rather than the model of pre-distribution in the form of lower rents that UK Housing Co-ops offer.
Is access to capital the problem?
The biggest barrier to developing co-operative housing I have come across is access to sufficient capital to acquire a mortgage. Some co-ops have used loanstock but this is fairly limited. Withdrawable share capital probably isn’t the right approach if you are fully mutual and only want tenants or occupiers controlling the housing, so should we be considering a different approach that enables outside investors to support the needs of tenants without the tenants giving up control over management – a hybrid of the Community Land Trust model and the Housing Co-operative model. Radical Routes have been working to establish a secondary co-op that will own some of the equity in new-start co-ops: Co-operative Principles put into action to grow the movement. Yet the Radical Routes members are a tiny percentage of co-operative housing in the UK. Another innovation could be mutual guarantee schemes (or co-ops mortgaging their existing owned assets to release development capital for other co-ops) which enable new co-ops to establish themselves in the early days when it is not profitability but access to capital that dictates the success, failure or growth rate of a housing co-operative. Rather than ask the government and policy makers to act, I suggest our own movement does something. (Remember those Co-operative Values of self-help and solidarity?)
One innovation that I am certain we need to promote as a movement is inward investment from the co-operative movement into co-operative housing. In particular, we could target pension funds held by large co-operative employers. There must be some mechanism that can be created – even in the current legal framework – which would allow a pension fund to invest in housing developments that just so happen to be co-operatives. Maybe a “co-operative housing fund” that invests bonds or similar – I know nothing about pensions! And if they are start-ups with higher risk then the returns might be higher in the same way the traditional stock holders approach investments in high risk companies.
This would enable models other than the Registered Provider, which allows for a more diverse sector (lots of small co-ops as well as large ones). Some people I have met have been put off housing co-ops by their experiences in poorly run larger scale co-ops which devalue the individual operating on a tyranny by of the minority basis (like the state socialist approach of the needs of the individual being ignored or undermined for the “greater good”…now intone after me “The greater good”). Yes, part of the answer is to improve larger co-ops, but perhaps we need to question scale and encourage co-ops of all sizes.
If we are talking about co-operative involvement in the housing sector (which is what the pre-amble covered), why has the development side been left untouched? Supply is part of the housing economy. Mainstream developers have one goal:shareholder return. What about co-operative developers – either owned by groups of housing co-ops, or as multi-stakeholder co-ops incorporating workers, customer housing co-ops (and maybe even investors) rather than operating purely for profit putting some of their profits into the community by funding CLTs or common ownership housing co-operatives.
Time to innovate?
Should we be innovating to address these capital issues (including more member investment) and move into less traditional areas – growing what for the UK would be a relatively new type of co-op housing? I.e. One that moves beyond the social housing sector and into the private sector.
Should our strategic innovation be to move away reliance on state intervention and toward self-responsibility, self-reliance as a movement and promoting Co-operative Principles 6 and 7 in investment away from government back to member users and other investors from the movement? I am not saying ignore state controlled grant funding, but let’s not be prisoners of it!
What are you doing for Co-operatives Fortnight? At Co-operantics we know the Co-operative Values and Principles can be used as a guide to transact business successfully as a co-operative. This year, for Co-operatives Fortnight, we are focusing on the 6th principle “Co-operation Among Co-operatives”.
During Co-operatives Fortnight we are going to organise some co-op networking in Bristol and Southampton, where our members are based. If your co-op is in either of those areas, get in touch and let’s see if we can work together to the mutual benefit of our co-ops.
Everyone can get involved in Co-operatives Fortnight. Check out the Co-operatives Fortnight website for further details.
So the Co-operative Group Chief Executive has offered his resignation as he considers the organisation to be ‘ungovernable’. His proposed solution, if Robert Peston’s report is accurate, is a more PLC-style Board composed of more executives and fewer elected members. Clearly if such a move is adopted it would threaten the co-operative way the group is managed, but if that’s what Members want, that’s fine. The key issue here is that Members (such as myself) should be the ones to make that decision, not the Chief Executive. It’s not a Chief Executive decision, neither is it a Board decision. A decision of such magnitude, affecting the very nature of governance and strategic control of the enterprise, should be a member decision. Co-operative Boards are elected to oversee strategic management of the business. Co-operative managers are responsible for operational management to achieve the strategic direction agreed by the Board.
But crucially, in a co-operative, on major issues such as structure, election of Directors and levels of Member profit distribution, Members should have the final say. Members own the business, they are the sovereign body, and the Board should seek their views. The fact that the most consultative process the Co-operative Group has carried out in decades – #haveyoursay – was targeted at the general public and not members was a worry. If people want a say they can join. Membership is open and voluntary!
Far from democratic member control being a weakness, as is being reported, it is the strength of the co-operative model. If anything, it is the failure of the Co-operative Group to use its democratic structure to listen to its members that is losing its advantage and causing the current problems. If member economic participation was taken more seriously, we might not be facing the reported financial crisis that the Group is facing.
The Group’s Chief Executive is reported as claiming the business is ‘ungovernable’. Yes, it is ungovernable by an individual, because it is democratically controlled – in much the same way a democratic country is ungovernable by dictators! But that does not make it ‘unmanageable’ which should be the Chief Executive’s concern. He is a servant of the Board not their master and should manage according to their agenda not set the agenda. Board scrutiny of strategic governance decisions is a strength.
One of the main accusations being levelled at the Co-operative Group at the moment is that its Board requires particular expertise in its members. This is only true if your enterprise adopts a ‘management’ style of governance. If you have a ‘representative’ style of governance (adopted by most co-operatives practising the Co-operative Principle of democratic member control) it does not follow that your Board cannot make good decisions. A key duty – and good practice – for Directors of co-operatives, whatever the legal structure, is to act within the bounds of their own skills and experience. When they fail to have significant experience they should take specialist advice and act upon it. You bring the specialists in when needed – you don’t hand the Board over to them! On this, the largest co-operative in the land could learn from the governance good practice used by many of the smallest.
Another accusation that is levelled at the Co-operative Group is that, because the Board is democratically elected, executives cannot get on with their job of managing the business. I believe this is a load of rot that is being levelled by people opposed to democratic member governance or who have personal grudges to bear. If it is the case then the answer is to review the management systems, job roles and responsibilities of executives – not to change the nature of the governing body. If this were a mainstream corporation they would call in management consultants. This is an option open to the Co-operative Group. Again, the largest co-operative in the land can learn from some of the smallest. From small consumer co-operatives running a village shop or pub to the Phone Co-op or other co-operative retailers, the division between strategic governance, strategic management and operational management is made clear and executives have clearly defined job roles, responsibilities and decision making powers that enable them to get on with running the business in line with the wishes of the Board, who represent the interests of the Member owners. Co-operantics, along with many of our co-operative development colleagues who deliver support to smaller co-operatives funded by the Group’s own Co-operative Enterprise Hub, possess the skills and understanding in this area that many corporate consultants do not!
We really hope that the Co-operative Group can resolve this latest crisis, and will not look to the City for a solution, where consultants do not understand democratically-controlled member businesses and will advocate a shift towards their comfort zone of shareholder interests over-riding those of consumers, workers and communities. Instead we hope it will look to its members and its sisters and brothers in the wider movement who are all willing and ready to contribute to a solution. The co-operative model challenges those city assumptions – and provides a more sustainable business model – let’s not throw the baby out with the bathwater!
Sat 8th March saw Co-operantics represented at the Southampton Co-operative City Conference.
In addition to updates from Southampton Area Co-operative Development Agency’s John Merritt & Dave Griffiths, Council leader Simon Letts and Councillor Andrew Pope on the “Co-operative City” idea and its progress, there was an excellent key note presentation from Nick Matthews, Vice Chair of Co-operatives UK and introductions to West Solent Solar Co-operative and Hamwic Housing Co-operative.
During the afternoon Nathan facilitated a workshop on Co-operative Skills. With only a 45 minute slot we still managed to incorporate information about what co-operative skills are and why they are important along with a group session exploring what makes good and bad meetings. Despite the time restraints the group even got to the stage of discussing strategies for avoiding bad meeting behaviours and encouraging good meeting behaviours. The way the exercise worked provided an opportunity for people to work in teams towards a shared task, which in itself may have helped some participants reflect on the way their co-op works! Perhaps the most engaged disccussions were around co-operatives having too many meetings and problems with participation in meetings. Are the two linked? Quite possibly. As participants agreed: there’s got be some purpose to the meeting for it to be worthwhile and if people aren’t attending, maybe it is because they don’t see the value in it. Wise words. There was even debate about whether or not incentives such as food are counter productive bringing people for the wrong reasons! The challenge to co-ops is to unpick the answer to “What’s In It For Me?” for members to attending meet – which may come back to ensuring the co-op is truly delivering member benefit and that the members are in agreement about what that benefit should be and what common goals they want to achieve. That’ll be strategy then!
The fruits of participants’ labour:
If you would like Co-operantics to run a workshop at your conference or event, get in touch!
Our Home page hosts occasional blogs about what we are doing, what we think about what’s going on in the co-operative world and topics of interest. Elsewhere (see links) you will find free tips, tools and techniques to help you work together more effectively, information on our services and how to get in touch.
Cooperantics has recently reviewed the quality of our services in three ways:
We provided the Co-operative Enterprise Hub, to whom we are a sub-contractor, with evidence of: how we carry out personal reviews to ensure our practitioners are able to deliver a quality service to clients; how we keep track of our practitioners’ ongoing personal development; how we conduct reviews of the service our organisation delivers, and how we provide our complaints procedure.
We took part in a service review session with members of two other Co-operative Development Bodies: Principle Six and Co-operative Solutions. The process enabled us to learn from each other’s practice and identify ways in which we could all improve the service we provide to co-operatives.
Each practitioner in Co-operantics underwent a peer appraisal, in which we reviewed our practice with a client. This process helps us identify our strengths, weaknesses and areas in which we would like to develop skills or understanding, which in turn influences our professional personal development plans.
We are confident our ongoing review process maintains and improves the quality of the support we provide and feedback from clients indicates that view is shared!
Media comment about recent events at the Co-op Bank has generated much heat but very little light over the issue of governance in co-operatives. Like others in the UK co-operative movement, we are concerned that apparent failures in governance – as highlighted by the ex-Chief Executive of the Co-operative Group in his recent appearance before a government select committee – are being extrapolated to apply to all co-operatives.
This is far from the case. It’s important to remember that although the Co-operative Group provides generous levels of resources to support the UK Co-operative movement, it is not synonymous with it. Also the Group has a hierarchical and somewhat complex structure – unique in the UK – due to its size and its 150-year history. The current structure has grown over the years, through mergers and transfers of engagements, most recently with the historic merger of CWS and CRS, with a resulting mix at national Board level of representatives of other consumer retail co-ops as well as Group representatives from different regional Boards.
Co-op News reports that the Group has launched an independent review to look at “strategic decision-making, management structures, culture, governance and accounting practices”, and with a new Group Chair, Ursula Lidbetter MBE, Chief Executive of Lincolnshire Co-op, providing leadership and guidance, the future looks positive.
Co-operatives with a flat, democratically managed organisational structure aim to involve more people in decision-making, so good governance is critical, because without it we would be engaged in endless decision-making meetings or be subject to the whim of unaccountable charismatic leaders. We need structures which protect people from themselves and each other, so that we are not totally reliant on individual integrity, (not that integrity is not a good thing in itself!)
How can co-ops avoid problems arising from poor governance? A co-operative organisational structure should facilitate clear lines of delegation and accountability for decision-making. Directors must have clearly defined roles differentiating their responsibilities from those of operational management. There should be agreed policy on election of Board members to ensure a healthy turnover whilst at the same time retaining continuity. Member engagement is critical, with members involved in a range of different ways, including standing for the Board, so that there are contested elections at the AGM. And of course all members need excellent co-operative skills – good communication, efficient meetings and decision-making and effective techniques for coping with conflict. Inclusiveness is key – cliques and cronyism have no place in a successful co-operative.
Co-operantics has recently been part of a team delivering the ILM-accredited training programme: Core Competencies for Co-operative Business Advisors, which addresses these issues in detail, including organisational structures, legal forms, governance and co-operative management. The programme is funded through the Co-operative Enterprise Hub, itself funded by the Co-operative Group.
We are extremely pleased that our good friends Co-operative Business Consultants are organising a major conference on Friday 17th January 2014: Co-op Bank Crisis Ways Forward for the Co-operative Movement where activists, co-operators and co-operative business advisors will debate how we move on from the current crisis, building on the successes of the last few years.
And don’t forget: Co-operative businesses have a higher survival rate than conventional businesses, and the co-operative sector is growing faster than the UK economy, increasing by 20% in the last five years.
For more detailed discussion of the issues we recommend: