How are you doing today?
If you are a business, then what I am asking about is your performance.
For investor-owned firms, this is typically going to be measured by return on capital over time. For co-operative and mutual businesses, it concerns, on our definition of performance, ‘the delivery of value to members over time and at least cost.’
For co-operatives worldwide, there tends to be a constitutional commitment to a set of core values and principles, which give different flavours to what is meant by value. More widely, over the last twenty years (thinking back to the first Social Audits we did at the New Economics Foundation for Traidcraft, Body Shop and then VanCity in Canada), there has also been a flourishing field of ‘triple bottom line’ accounting – codified in the Global Reporting Initiative and, this week, the welcome International Integrated Reporting Framework.
Understanding performance, however, is not the same as trying to measure it. The beauty of co-operative models is that members own and control the business, so they have a direct line of sight on what is going on, and a voice in shaping it. If you save your village shop, by forming a co-operative to do so (with support perhaps from the award-winning Plunkett Foundation), then the presence of the shop itself is as good a statement of performance and impact as you can get. Trying to do a triple bottom line report (or indeed social return on investment) can strangle the whole enterprise if you are not careful, through sheer distraction. That was one of the lessons perhaps of the ill-starred ‘community business’ models in Scotland in the 1990s.
But for coops and mutuals at larger scale, such as consumer cooperatives running a range of shops, measurement does help to paint an overall picture that would otherwise be far less clear. For a number of years, Co-operatives UK has offered our members a recommended set of key indicators on financial, non-financial and environmental performance. This has been guided by the Co-operative Performance Committee – chaired by Professor John Arnold and a forum that brings together representatives from the co-operative business sector to advise our work around this – such as the annual ‘performance monitor’ we produce for the Boards of consumer co-operative societies.
When we looked across the cooperative and mutual business sector more broadly, what we found was that:
A. the indicators we were recommending were only used by a number of consumer retail co-operatives, rather than more widely;
B. it is hard to select a handful of indicators anyway, given the growing sophistication of ‘triple bottom line’ and social impact reporting; and
C. looking across the co-operative sector, everyone tends to use different measures of performance, that reflect their own area of business.
So, in looking forward, we then engaged with international initiatives around co-operative performance metrics, such as the Canadian-based Co-op Index and the research community on ‘measuring the co-operative difference‘, and we experimented with measures, such as measuring the local economic benefit of co-operatives – with a case study of Lincolnshire Co-operative Society. This tracked what happened to money spent in a Co-op food store in Lincolnshire and showed that every pound spent is recycled five times before the last penny leaves the local economy. Spend it elsewhere or online with other national brands, it is hoovered out, not just nationally but to tax dodging havens overseas.
As is often the case with measurement and reporting, these were of some value, but the methodologies were cumbersome and common sense says that if it is hard to do, then it is hard to get people to do it. As a result, the Co-operative Performance Committee decided that, while we can point co-ops to key sources of advice on triple bottom line reporting, such as the Global Reporting Initiative, our recommendations for co-ops large and small should focus in on a few key indicators only. These ten indicators cover headline metrics on financial, non-financial and environmental performance:
1. Annual turnover
2. Return on Capital Employed
3. Co-operative distributions
4. Staff profile
5. Community investment
6. Resource use
7. Member profile
8. Member satisfaction
9. Trade with members
10. Customer satisfaction
Alongside this, we have published a guide, Simply Performance, free to download, for co-operatives, large or small, wishing to measure their performance, including their wider social and environmental impact. Written by Philip Monaghan of Infrangilis, this includes case studies of co-operatives and mutuals that are tracking their performance in a practical and helpful way – including Midlands Co-operative, SUMA Wholefoods, Anglia Farmers and GLL (Greenwich Leisure).
So, how are you doing?
If you are a co-op or mutual, finding the answer is not that complex. You simply need to know your members, understand what it is they value and keep track of how you are delivering that for them … in line, of course, with the values you profess.