Ed Mayo: values, trust and a team approach

'It’s an economy and society that is scarred by the corporate and market failures of conventional shareholder companies and conventional banks.

‘Trust in business is low. And the recession makes it a tough time for business right across the piece.’

That’s the assessment of the UK’s economic landscape by Ed Mayo, general secretary of Co-operatives UK. It’s a challenging climate for all businesses but, he believes, there are several reasons why co-operatives may be well placed to respond to the challenge.

One is that they’ve done it before.

‘There is a long history of times of crisis turning into times of innovation, in terms of co-operative enterprise,’ he says. ‘Nobody forms co-operatives for the sake of co-operation. They’re co-operating in order to do something.

‘So, right from the 19th century, rural famine led to the development of credit unions. Poverty in the industrial revolution led to some of the early consumer co-operatives. The new waves of co-operatives emerge in times of need.’

Trust

Another big reason why now could be a good time for co-operatives is that the banking crisis of 2008 has led to a collapse in trust in other forms of business.

According to Mayo: ‘What we’ve found is that trust in UK plc, trust in business at large, has fallen off a cliff. Only 18% of the public say that they trust large, shareholder companies.’

On the other hand, most people do trust co-operatives: ‘The equivalent figure is that 75% of people trust co-operative businesses to act fairly. That’s a reputation advantage that any marketing director would die for.’

Public trust is a good thing to have but it doesn’t necessarily translate into sales of goods and services. There are currently nearly 6,000 co-operative businesses in the UK, contributing £35.6bn to economy, but while the co-operative sector is growing – and outgrowing the economy at large –Mayo is keen to keep this growth in perspective.

‘We are still small in the scheme of things,’ he says. ‘It would take decades to get to a point where that relative growth actually meant markets were characterised by co-operatives and social enterprises, rather than traditional companies.’

Co-operation, not profiteering

Mayo is happy to see co-operatives emerging in key markets, particularly the energy sector where Co-operative Energy, run by independent co-operative the Midcounties Co-operative, now has more than 60,000 customers.

He says: ‘The co-operative model works so beautifully because the whole question in the energy sector is, ‘Is there profiteering going on?’ Prices are going up but is that to pad out the profits of the big six who quite clearly are very profitable?

‘The co-operative model doesn’t say we should be non-profit – we’re not running a charity - but actually the profit is returned to members, so people are not charged any more than they need to be. And that’s a fantastic proposition in the market place.’

Mayo also points to the likely impact of the deal for The Co-operative Bank to take on 632 Lloyds TSB branches, giving it around 7% of the current account market.

‘The possible deal with Lloyds TSB again is a potential gamechanger,’ he says. ‘Co-operative Bank has a long and proud record. This deal would make it into a competitor of scale that we see in European markets –in some countries co-operative banks and mutual banks represent up to 50% of the market.’

Part of the zeitgeist

While co-operatives may be doing better than other social enterprise models in terms of trading in consumer markets, they’re not the obvious choice for people starting new businesses to deliver social change.

In the past, co-operatives have had a reputation as being old-fashioned and bureaucratic organisations. But Mayo feels that this idea is itself out-of-date.

He says: ‘Amongst older segments of the population, they tend to see co-operatives as old fashioned. Among younger sectors of the population they tend to see co-operatives as cool and part of the zeitgeist.

‘They think of very different co-ops, of course. The older people think of the food co-op - the food store down the road. And younger people tend to think of student food co-ops that get set up at university or clean energy renewable energy co-ops.’

On the other hand, Mayo believes there’s a lack of knowledge about alternative business models. ‘I think there is an issue which affects co-operatives and social enterprises more widely – just in terms of ignorance of alternative business models. Co-operatives have the advantage that they are part of the everyday language.

‘As Norman Watson, who established the Tower Colliery, a worker co-operative in Wales, said to me: “Everyone knows the name co-operative. Not many people know exactly what a co-operative is but everyone’s got an idea of what a co-operative could be.”’

Co-operatives are social enterprises

The relationship between co-operatives and the wider social enterprise sector is not always clear. Early co-operators, the Rochdale Pioneers, are lauded from the podium at most social enterprise conferences and many social enterprise support organisations emerged from the co-operative movement, but few co-operatives are prominent on the modern social enterprise scene.

Mayo has a clear position on the relationship. ‘Co-operatives are social enterprises. That’s the place to start. They’re social enterprises with members and that’s the key difference – the key advantage in some situations – of a co-operative model.’

One point of difference between many co-operatives and many social enterprises is the relationship with the public sector.

Mayo notes: ‘A lot of the social enterprise field have come out of Whitehall. There’s a whole raft of state-sponsored social enterprises that focus on public service delivery – that’s a slightly different culture to where co-operatives have come from, which is the mainstream market.’

Rather than emphasise differences, though, Mayo is keen to draw attention to the benefits of co-operative approaches to social enterprise: ‘Take, for example, ‘Who Made Your Pants? You can tell the story. Look, how good is this? You’ve got a social enterprise providing employment for marginalised women – that’s brilliant – but actually Who Made Your Pants? is not just a social enterprise, it’s a worker co-operative enterprise.

‘The difference is that those marginalised women own, and have responsibility within, the business itself. And that’s transformative. One is giving them a job and the other is giving them ownership and control.’

An alternative model

For Mayo, the co-operative model offers added social value to entrepreneurs starting a business to achieve social change.

‘The core insight of the co-operative model is and has always been that the ownership of the enterprise can be given to the groups that are most closely involved in that enterprise,’ he says.

‘If ownership is passed to investors, that can become distant from that enterprise over time, that can lead to a set of trade-offs, the money turns cold and you are at risk of having your enterprise run for the pure logic of return on capital for external investors.’

But isn’t there a tension between the idea of the social entrepreneur as a swashbuckling hero saving the world through their individual genius and the co-operative model?

‘I don’t think it has to be a tension,’ Mayo responds.

‘Yes, co-operatives tend to be more about distributed leadership. Social entrepreneurs - in that heroic model - can tend to be John Wayne-style lone individuals but I’ve talked to enough social entrepreneurs to know that when you get beyond a certain point, some of them are actually lonely.

‘Even with people with all of that individual passion and vision, with all of the energy that they have brought, they also benefit from a team approach and from opening up. And conversely, you’ve got co-operatives where you do have strong individual leaders and you need to find ways to balance that within a co-operative setting.

‘But one of the big risks for the social enterprise sector as a whole is that it moves down a route that is essentially just a parroting of conventional business models and business approaches.

‘A strength of the co-operative movement is that it is a movement. That there is a strong set of values, a willingness to come together and collaborate. It’s not just about individual enterprises, it is about something more.’

This is one of a series of leaders’ interviews by David Floyd, managing director of Social Spider and Beanbags and Bullsh!t blogger