The Co-op shambles shows that mutuals aren’t all admirable

The saga at the Co-op Group continues. Paul Myners, a very experienced businessman (an ex colleague of mine at NatWest many years ago in fact – seemed like a good guy, clearly very smart too), who has worked in politics too, has given up his role on the Group Board although he is going to complete his report on the organisation. That departure seems to be because of lack of support from the decision makers in the process, the many regional Co-op boards that ultimately control the wider organisation.

All this follows huge losses in the Co-op bank, and the scandal (which would be funny if it wasn't sad) of the Chair of the bank, Paul Flowers, who turned out to have a lot more knowledge of recreational drugs and rent-boy etiquette than he did of banking. Now Myners seems to have run into some member groups within the byzantine Co-op governance structure who don't like the modernising proposals he is putting forward.

One person who has been very quiet through all of this is the UK's 'Minister for Procurement,' Francis Maude. He has championed the cause of mutual organisations, of which the Co-op is the largest in the UK  (a mutual being an organisation run by and for the benefit of its members, usually employees and / or customers in the main).  Maude has for the past four years been working hard for instance to persuade government staff to set up mutuals and spin out those organisations from the public sector. He also lobbied for exemptions and special treatment for new mutuals under EU procurement regulations (see here).

Now, we're not criticising him for this – whilst we always had doubts around how many staff would take the plunge, it was, and is, a decent aim to get a broader profile of an organisation to supply and serve government . But if the Co-op demonstrates anything, it shows that any type of organisation, in terms of structure and ownership, can be managed incompetently, incoherency and ineffectively.

The Co-op certainly appears to be in that category, despite the noble intentions of its founders and I'm sure most of the millions of people who have worked for it and used its services over the years. (The first shop I can remember visiting was the Co-op at Sherburn Hill, a mining village near Durham where my grandparents lived, and where the Co-op was THE shop – groceries, hardware, a butchers, clothing ... ).

So, by all means encourage mutuals, community interest companies, or third-sector organisations, both  generally and as potential suppliers. They all add variety to the business ecosystem – and with supplier diversity in mind, that must be a good thing. But procurement people shouldn't think that those organisations are inherently 'better' or better run, or less greedy, or more efficient somehow, than a good old fashioned profit-earning business.

We need to look for organisations that can meet our own needs, and are efficient and effective, whatever their management structure might be.

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Voices (2)

  1. Chris C:

    Meanwhile many very long established building societies quietly carry on giving good savings and mortgage rates with excellent expertise and customer service despite having to contribute towards the cost of bailing out dodgy UK banks….

  2. Dave Mischief:

    A number of years ago I went to a presentation regarding increasing the use of Social Enterprises within the Public Sector.

    One of the speakers was explaining the benefits of SEs but said that once they got above a certain size they could develop the same disfunctional issues with size as large companies. Later in the presentation he championed a Social Enterprise that started in London but had expanded across the UK into Scotland and Northern Ireland.

    I always thought he was shooting himself in the foot as if the SE hadn’t already started to loose the benefits of a SE it soon would do because of the breadth of its operation rather than just being focused on the community is was initially set up to serve.

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