£30,000 PRIZE FUND FOR BEST NEW CONSORTIUM BUSINESS IDEAS

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Co-operative Development Scotland (CDS) is offering £30,000 worth of cash and support to develop new consortium co-operatives in Scotland.

The inaugural Collaboration Prize aims to encourage businesses to consider working with others to form a new consortium co-operative. Co-operatives are collaborative vehicles that play an important role in creating globally competitive businesses. They enable employees, businesses and communities to work together to fulfil shared interests.

CDS is calling for interested parties to pitch an idea for a new consortium co-operative with up to three winning concepts each receiving a cash prize of £5,000 and a further £5,000 of support to get the business off the ground.

First Minister Alex Salmond, who has backed the initiative, said: “I am determined that the Scottish Government does everything possible to get more businesses thinking about how they can work better together, and the Collaboration Prize is a very valuable opportunity.

“I hope the new prize will stimulate new thinking.”

With a combined turnover of £4bn and employing around 28,000 people, Scotland’s 550 co-operative businesses currently play a key role in driving Scotland’s economic growth.

The deadline for entries is 31 July 2012 and winners will be announced later this year in August.

For more information about the Collaboration Prize or Co-operative Development Scotland, please visit: www.scottish-enterprise.com/cds-collaboration-prize or call 0141 951 3055.

The Big Society, mutually employee owned, John Lewis style, social enterprise public service delivery vehicle!

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It has been rather a strange month or so for the co-ops, mutuals and employee owned sector.  And education.

 First we had the news that Central Surrey Health (CHS) , held up as the employee owned model to create the Big Society, had not succeeded in the tendering processes for other parts of the Surrey NHS.  This brought forth claims of unequal playing fields and too much emphasis on financial costs at the expense of social benefit.  Then we learn that Circle, again a company who describe themselves as an employee owned social enterprise (can someone tell me what that is along with an employee owned mutual) were successful in securing a hospital contract and £40M of debt.  (Maybe someone should inform the board of Glasgow Rangers FC about this organisation which is willing to shoulder massive debts, just in case they lose their tax tribunal with HMRC).  The coalition were adamant this was not a privatisation but the media invariably referred to Circle as a private concern with no reference to the employee involvement or Big Society (Haven’t read the Guardian yet)  So we have a flagship “Big Society” business losing out and an employee owned privatisation (or not) succeeding.  Confused?  You should be! 

 To add to my confused state of mind, I then encounter the news that the NAHT has balloted its members and found them in favour of strike action.  The first time in their 100 or so year’s history.  Their spokesperson suggests that this is an indication of how dire the economic situation is but I can’t help thinking how you could be a trade union for over 100 years and never have considered strike action!  Did they miss the Great Depression and the 1970s?  Again, much of the media coverage focussed on the disruption to parents child minding needs, presumably because they perceive education as much of a child minding service as an investment in society?

 Next up to highlight the confusion and unrest in the public sector we had students marching against fees.  As someone who had their university tuition fees paid plus an enhanced grant as a mature student I am wholly supportive.  When are we going to accept the fact that education is necessary investment in our younger citizens and not a cost to be minimised.  Yes, we have decisions to make with limited resources about where we incur public expenditure.  We had them before the greedy bankers blew a hole in our PSBR – it’s called economics, deciding the best use for scarce resources and recognising that if you spend on one item , you can’t spend on lots of other things (opportunity cost).  Surely, investing in our future workforce and citizenry is a fairly basic concept in any civilised, modern democracy.  Instead we are trying to create a market in education services.  I have said before and will keep saying, if I am being asked to buy a degree at £36.000 then I will be demanding (yes, in a market economy the customer is always right and his demands have to be satisfied) a first class honours.

 So, are we on the road to a new Big Society or are we simply looking to reduce the role of the state. 

Are we as confused as the US Republican presidential candidate who was most certainly for reducing government but couldn’t, despite some very helpful prompts from competitors and the audience, decide exactly which parts he wanted to cut.  Does the creation of a public sector as commissioning agent rather than the delivery mechanism fundamentally change a national health or education service so long as it continues to provide on a basis of need and not an ability to pay.  If it is on the basis of need, does it matter who delivers as long as the quality is assured and value for money is achieved.  But what about wider social benefits, which brings us back to Central Surrey Health and level playing fields.

 I have come across a couple of academic papers in the past week making the point that when we try to measure the performance of co-ops with traditional scientific management tools they don’t necessarily come out looking too good in comparison to investor driven models.  Co-operatives are not profit maximising, rational economic entities.  Until we get government and society to stop measuring everything in monetary terms and start recognising and accounting for wider social benefits then we will remain stuck in the mind blowingly confused state highlighted above.

 If Big Society is simply about motivating employees to be more productive then it totally misses the point.  If those who advocate public sector delivery can’t take on board the need to be more efficient with our scarce resources then we are in danger of doing a Berlusconi on our economy.  We need, more than ever, to get across the message that co-operatives understand the need to be viable and efficient but at the same time recognise the need to consider social and community objectives.  There is an opportunity cost in pursuing social goals, in terms of reduced profitability but there is also the need to generate surplus to support the pursuit of those social goals.  That’s a balancing act the co-operative sector has always had to perform.  Let’s hope government and the rest of our society can finally get their heads round that and we get to the point where I could have headed this piece “The Co-operative Option” and it would have been clearly understood.

Co-operative innovation: lessons from the Basque country

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Diarmuid, Hugh and Morag from the Co-operative Education Trust Scotland, as well as three students from the Scottish Agricultural College, visited the Basque country in Northern Spain to research co-operative models of enterprise. For the next week, we will publish a series of blogs on our experiences. In this post, Diarmuid outlines some of the ways in which the Basque co-operatives have developed innovative solutions to meet member needs.

A trip to visit the co-operatives of the Basque country, in particular the Mondragón Co-operative Corporation, is quite a popular excursion for global co-operators; Mondragón itself facilitated over 5000 visitors in 2010. Rather than recount the details of these co-operatives (much better examples exist – see the notes at the end of the article), I will share the most important insight I derived from the trip: the willingness to innovate to meet member needs.

1. Dealing with the downturn

While co-operatives have dealt with the current economic crisis better than other models of enterprise, they haven’t been immune to its effects. Mondragón has attempted to negate some of the worst effects by implementing measures aimed at protecting member interests. Some of the measures they take include withholding the 7.5% dividend paid on members’ capital accounts; reducing the working week to four days; letting non-member workers go; and relocating members from poorly performing co-ops to ones that are not in financial difficulty. These range of measures are designed to protect employment levels amongst members and to dilute the amount of risk borne by any one member or co-operative.

2. Getting capital onside

Day three of our trip took us outside of Mondragón to a potato processor, Udapa. Udapa is a secondary co-operative consisting of three member classes: a producer co-operative, a worker co-operative, and a credit union. Now, there is nothing hugely innovative about secondary co-operatives but I was intrigued by the role the credit union played; I just couldn’t figure out the need the secondary co-operative solved in terms of the credit union. It turns out that the credit union’s role is central to the financial stability of the co-operative: as well as contributing 20% of the capital requirements of the co-operative, the credit union forgoes its claim of the surplus in return for the co-operative conducting its banking with it. Udapa’s financial support might just be replicable here in the UK and could significantly increase the probability of smaller co-operatives surviving and subsequently prospering.

3. Involving multiple stakeholders

Following on from the previous innovation, the Mondragón co-operatives are particularly adept at productively managing multiple member classes. Take Eroski, the equivalent of the Co-operative Group. It successfully balances the needs of worker and consumer members to operate a multi-billion euro business. Representation on the board is equal: 6 worker-members and 6 consumer members. The co-operative bank, the Caja Laboral Popular, is no different: the needs of its co-operative members are balanced with those of the bank’s workers. In this case, representation is weighted 8:4 in favour of co-operative members but the result is the same i.e. a highly successful enterprise. And finally, Mondragón University is a secondary co-operative whose members are the different faculties, who in turn have three member classes: students, lecturers and collaborative partners (local businesses, authorities, community organisations). Co-operative practitioners and scholars will be aware of the challenges associated with operating a hybrid co-operative but the Mondragón experience, while not offering an off-the-shelf solution, could possibly offer a way of galvanising the disparate consumer and worker movements here in the UK.

Many co-operators consider the Mondragón co-operatives to be one of the best examples of a co-operative network in the world. They are not without their problems though. The key for the UK movement is to analyse its strengths (a well established consumer movement and an increasing presence in local communities) but look to the lessons from Mondragón to help address some its weaknesses (a divide between the consumer and worker movements, insufficient support structures for new and established co-ops). With the 2012 Year of the Co-operative fast approaching, now is the time for the UK movement to draw inspiration from Mondragón and instigate its own program of innovation.

Notes:

http://www.solidarityeconomy.net/2011/03/16/mondragon-as-a-bridge-to-a-new-socialism/ contains details of some of the great pieces of work that discuss Mondragón. Have a look at the work of Oakeshott, Ellerman and Whyte for further analysis also.

CETS Competition Winners!

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 Author: Morag

This week I am not “ranting” but “raving”! (well, ok, maybe a wee rant towards the end!)

We were delighted to receive so many excellent entries for our competition and it is good to know that so many young people are now aware of and looking to set up a business, using the co-operative model. The competition challenge was to write a business plan showing how they could set up and run a successful Young Co-op in their school and community. In true democratic fashion, we had allocated 3 equal prizes of £500 and congratulations must go to the 3 worthy winners of our competition who are:

They will each receive £500 to develop their co-operative, Well done!

I had the pleasure of visiting Whitehills Primary last week to deliver their prize and have a chat with the talented pupils in P7. I was impressed with the knowledge and understanding they had on a variety of topics relating to the setting up and running of their Fairtrade café. The level of enthusiasm and commitment to this “real” project confirmed, for me, that Curriculum for Excellence, when translated into a inter disciplinary project such as this, has a positive impact on learning.

The pupils who have been involved with the cafe will be moving on to the high school after the summer. However, their legacy of the ground -work in setting up this project will be continued by the current P6.  The P7’s have committed to “training” the P6 class in how to run their business and most, when asked, would happily volunteer to come back and help them even after they have moved on to the High School!

Now that the school has had the boost of an additional £500, they are planning to expand the project into growing food in their own garden to sell in their café!  This will perhaps lead to forming more community links with the local farmers market and offering different products in their cafe. The possibilities for linking all of this to the curriculum across all stages in the school are endless.

I will at this point out another great TED talk  which I believe would endorse this type of learning. He is promoting the concept that learning is organic and not linear and that we need a revolution in education, not just a change, to enable our young people to feel that they can happily and effectively contribute to society.

If schools across Scotland can use this seed of their idea to spread and grow this type of project, then I think they will, like many other primary schools, be embracing organic rather than linear learning. Ultimately, the youngsters in our schools now will be the educators of the future and will no doubt wonder why it took us so long to see the light!

Perhaps the revolution is already underway in Scotland’s primaries? Although I haven’t visited Hillhead and Govan myself, judging by feedback from our director, they are  two of the secondaries schools leading the way in implementing Curriculum for Excellence but the process in secondary sector is, for a number of reasons, much slower. However, if the young people moving into secondary now, help to spread the revolution more widely to the secondary sector in the coming years, this may help speed up the process? But only if we empower our students as we have promised!

Something Better Change

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Change.  We are all subject to it but it is still the natural reaction of the majority to be resistant to change.  Conservatism with a small “c”.

I had a bit of a Eureka moment this week (stay with me, it isn’t about my bathing habits) about change in politics, economics and education.

I started reading David Erdal’s new book (Beyond the Corporation: Humanity Working) which produces sound evidence and practical examples of employee ownership confounding the predictions of neo-classical economics.  However the prevailing economic orthodoxy will not accept these facts.   This resistance is particularly acute in our business schools but also across our education system in general.

The irony of this inability to offer alternative choices in organising enterprises and the economy seems to be completely lost on these learned academics.  One of the key premises of achieving equilibrium in a perfectly competitive economy is that rational economic man makes rational choices based on perfect information provided by the market.  There seems to be a flawed logic in not even making any attempt to provide information on alternative organisational structures such as co-operatives, mutuals and employee owned enterprises and then claiming that the traditional structures achieve an optimal solution.

Erdal’s book repeatedly makes the point that the people who generally make substantial gains in business transfers are the advisors and providers of capital.  The de-mutualisation of the financial sector along with soft touch regulation led to lots of fees being earned by the City; a handful of senior bankers making a killing and you and I being left to foot the bill.  Again, the irony is that the proponents of Adam Smith’s “Invisible Hand” totally ignore the fact that he warned against greedy individuals corrupting capital markets.  Selective amnesia?

Erdal also makes the point that very often the “Invisible Hand” is invisible because it is just not there.

The key point here is that intellectually lazy civil servants, academic advisors and acquiescent politicians need to be challenged on the orthodox assumption that the market will provide the optimal solution.  It may, and sometimes does, but it is far from automatic and we need to offer alternatives.  There is a need for change.

Which leads me to the political arena.

In last year’s Westminster elections many people thought they were voting for a new approach to politics.  In the sense that we have the first UK Coalition government in the best part of a century, that’s new.  In the sense that within days of taking control the Coalition was proclaiming to be more radical than the Thatcher administration, it would appear that we are still lurching from one end of the two party system to another.

There is an interesting connection here to Erdal’s writing, in that amongst the people he cites as providing the inspiration for his conversion to employee ownership are an American corporate lawyer, who adapted the leveraged buyout, beloved of free market financiers, to creating ESOPs where the employees all shared in the wealth (we’re all capitalists now!) and a Jesuit priest who saw worker co-operatives as the antidote to fascism. (Socialism!)  Confused?  You should be but get your hands on the book and Erdal will explain it a lot more lucidly.  The point again is that something isn’t working in the best interests of the majority in our democratic society and needs to be fixed.  There is a need for change.

You might now be asking what all this has to do with education.

Curriculum for Excellence requires significant change in the way we educate our young people.  We seem to accept the need to move from a Victorian factory system  of churning out batches of awards in”the skills that are easiest to teach and test and are also the easiest to digitise, automate and outsource” to one where we enable learners to “undertake meaningful, problem-based inquiry, which might be multi-disciplinary, supported by blended teaching methods and hybrid resources”.  It’s certainly a major challenge for teachers but one we think CETS can help with.  We are supporting several schools and their pupils to attain the “Asdan –  Certificate of Personal Effectiveness through Co-operative Studies” and are confident it fits substantially within the new educational paradigm.

We offer co-ops as a context for this new learning and a way to adopt self help and self responsibility to build democratic enterprises and create a better (Big, Medium or Small) society

Change is happening in the teaching arena but I’m not sure the accreditation is keeping pace.  I have recently seen SQA proposals for qualifications in economics and business which adopt the same lazy orthodoxy of the market and offering little understanding of alternative forms of enterprise such as those showcased in David Erdal’s book.

Change can be for the good.  We have elections for Holyrood this year with the potential for change and from that might flow increased opportunities for changes in how we run the economy and how we educate our future citizens.   Co-operatives, mutuals and employee ownership can and need to be at the heart of that change for the better.  Revolutions can be bloodless although they do tend to take longer.

You need to participate to make change happen.  You need to challenge the orthodoxy, the status quo, you have to offer alternatives.

As the song says, something better change.

P.S.  Name that tune and win a copy of David Erdal’s book.  Answer to info@cets.coop

Employee Ownership News

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Interesting news this week in the employee-owned sector. Eaga, who deliver  heating and renewable energy services to businesses and communities, have been bought by Carillion, one of the UK’s largest providers of support services for the construction industry. Eaga’s shares were valued at 120p, with Carillion paying around £307m for the company. The largest shareholder in Eaga is the employee benefit trust, with 37.5% of the shares. The employees thought they were in line for a massive payout on their shares (between £28,000 – £30,000 per employee), however the trustees decided to accept shares in Carillion (valued at 390p at time of writing) instead of cash.

Understandably, this has angered some employees. The purpose of a trust is to act in the best interest of its beneficiaries and who could argue that £30,000 isn’t in someone’s best interest? What the trustees have done is protect the employees’ stake in the company, rather than making a fast buck. As Ken Temple, chairman of the employee trust, stated: “There are people who are very disappointed we haven’t simply given them the money,…One point to remember is in a trust the assets of the trust don’t belong to the beneficiaries.”

It would be interesting to hear if the majority of the employees agreed with the decision of the trustees. Eaga’s situation is another example of the need for high levels of employee engagement and employee financial paticipation in a company. These concepts are not mutually exclusive and are key to the success of  an employee owned company. Clearly, some of Eaga’s employees desired nothing more than to take the money and run, while others were satisfied to retain a large ownership and governance stake in the company. It will be interesting to see how the future round of redundancies tests the employee trust. Watch this space.

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