UK: Aging Co-ops at a Crossroad

Not too long ago, the Oxford, Swindon & Gloucester Co-operative Society Limited (O, S & G), in the United Kingdom, faced a difficult situation. In the late 1980s and early 1990s, it twice "enjoyed" the dubious distinction of having the worst losses in the UK consumer movement. It was at this time that Robert H. Burlton was appointed Chief Executive.

Since then, the Society has undergone a successful makeover and absorbed Gloucester & Severnside Society in October 1991. With its 3,600 employees, it became the fifth largest consumer co-operative in the UK and reached annual sales of $612 million. Over the last year, O, S & G hired 500 new employees. It is also widely recognized as having one of the best records in governance and member participation.

What is even more remarkable is that the O, S & G has accomplished all this at a time when the UK co-operative sector's performance leaves a lot to be de- sired. According to Robert H. Burlton, who was the keynote speaker at Co-op Atlantic's annual general meeting in Moncton on March 30, the co-operative sector's performance has been generally unsatisfactory, with low profitability, too many unprofitable societies, failures of governance and low esteem. Co-operatives in the UK face a focused competition and have to deal with a conservative tradition, a lack of focus, a lack of commitment and inadequate policing mechanisms. "Too many incompetent managers refuse to merge or take action and refuse outside help," adds Burlton.

This is why the UK consumer co-operative sector has arrived at a crossroad. Burlton, who is also director of the Co-operative Bank, chairman of the Co-operative Union and governor of the Co-operative College, believes things can change, as they did for O, S & G. "The easiest option would to be to continue down this road. It will take courage and a lot of efforts to choose differently, but as an optimist, I believe we can do it."

Burlton says that in order to improve their performance, co-operatives need to focus on three main areas of change. The UK Co-operative Union, the national non-trading federation of retail co-ops, has been actively working in these three areas.

The first one is performance. In an effort to guide co-operatives in improving their performance, the Co-operative Union has adopted a Co-operative Governance Code of Best Practice. Its objectives are to improve the quality of direction and management, achieve the highest standards in accountability, promote openness and transparency, and re-invigorate membership recruitment and involvement. The Union has also published a Movement Performance Report, which rates co-ops according to four different growth indicators. "This had at least one positive result, which was to help some societies to see that they had no possible future and encourage them to merge, to the benefit of the members," says Burlton.

The second area is structure. "Imagine our co-op movement as an old house," suggests Burlton. "Not working on our structure would be like decorating the house above ground and ignoring that the foundations are crumbling."

Finally, Burlton says that in order to succeed, co-operatives have to stay true to the co-operative purpose. "Renewing our commitment to our co-operative purpose was essential."

The Co-operative Commission, which was appointed by Prime Minister Tony Blair in 2000 and of which Mr. Burlton was a member, has made key recommendations regarding those three areas of change. Its report urges co-operative societies to establish challenging commercial targets for themselves. It encourages co-ops to ensure that the brand identity for each of their core businesses is compatible with and reinforces the national branding of the movement. It proposes a national membership card for members. It also suggests that employees should be recognized as important stakeholders and encouraged to participate in governance.

The O, S & G has already taken some of those measures and now has one of the best performances in the UK consumer movement. It is poised to build on this platform and extend its services. "As a result of some of the changes put in place, the average age of our members has been brought down by 15 years," says Burlton.

See other articles from this issue: #097 November - December - 2001