Reforming the Irish economy – The co-operative way

“Going back to where we were is not an option. We need a new business model for Ireland.” These were among Minister for Finance Michael Noonan’s opening remarks at Reinventing Limerick – The Cooperative Way, a conference on worker co-operatives that took place over the weekend at the Kemmy Business School in the University of Limerick. Organised by Bill Kelly and Meitheal Mid-West, the conference brought together pioneers of the co-operative movement from across the UK and Ireland to share their vision and experiences of the co-operative way of doing business. By Deirdre Hosford.

If you’re wondering exactly what a typical worker co-operative looks like, there’s no single answer. According to one co-op member, comparing cooperatives is like comparing football, basketball and golf: yes, they all use a ball, but each is a different game played by a completely different set of rules.

The ‘purest’ form of co-operative was outlined to the Limerick conference by Bob Cannell of the Suma Cooperative, a wholefood wholesaler based in West Yorkshire. Suma has no managing director and no CEO. Counting 130 staff, it’s currently one of the largest worker co-operatives in the UK, but it still manages to maintain a ‘flat hierarchical’ structure, in which the business is 100% employee-owned and managed, and pays out equal net wages to all staff members. Suma operates a democratic system of management, which Cannell terms ‘network governance’. A committee of managers is elected at a general meeting of members, along with coordinators and officers, but they maintain a consensual management approach. Cannell reckons that private takeover of co-operatives is usually preceded by a process of de-democratisation, so Suma members make a policy of consistently disempowering their own executive.

Multi-skilling and job variety are just some of the benefits available to staff at Suma, as well as flexible work hours to suit their lifestyles and needs. Suma pays its staff about twice the ordinary rate for warehouse staff, and they can do this because they don’t compete on wage costs, they compete on quality. Bob Cannell is often asked how they manage to make the staff pull their weight if there’s no boss at Suma. He replies by reminding them that the staff have both rights and responsibilities. After all, there are 130 bosses to answer to in their workplace, instead of just one.

Co-operative businesses are dynamic organisations, quick to evolve in response to changing climates or expansion. An example of this process was provided by Dan Hammond, a member of Welsh co-operative Dulas Engineering, which operates in the sustainable energy sector. Dulas was first incorporated in 1982 with four directors, but the structure was revised in 1989 to one of employee-shareholder-directors. By 2010, Dulas had approaching 100 members of staff, so they agreed to a series of structural and governance changes, by consensus. In 2010, Dulas sold part of the business to a German company, a decision which was also agreed by consensus among all staff, including the part of the business that was to be sold off. Then, in 2012, the members agreed to buy out a supplier and competitor based in Scotland.

Manufacturing co-ops make up a relatively small percentage of the co-operatives in the UK, but there are even fewer high-tech co-ops.  Chris Nicholl is a member of one such high-tech co-op called Delta-T Devices, which trades in high-tech sensors out of Cambridge. He points to the lack of visible business models available to those who might otherwise consider establishing themselves in a high-tech enterprise under a co-operative structure. Entrepreneurs with great ideas tend to think, “How can I sell this to Apple?” instead of considering the co-operative option.

Delta-T has 37 members, three temporary members and no other shareholders. There are four management committee members, who are elected every two years, and everyone is encouraged to put themselves forward for a management role. Ethical business is central to Delta-T’s operations. For example, they won’t work with armed forces, unless the purpose is to further demining programmes. Flexible hours are available to members, and the highest pay ratio across the company is 2:1. In return, the company benefits from strong staff commitment; only two colleagues have left Delta-T over the course of the past 20 years.

Delta-T faces its fair share of commercial challenges, such as high development costs and dependence on specialists. Nonetheless, they have weathered the storm well. When times were bad, they decided together to take pay cuts and defer earnings when necessary. Co-operatives are often “difficult to start, but even harder to kill”, and they have demonstrated their resilience by consistently outperforming the conventional UK economy during the recession. Delta-T doesn’t operate in a niche market, so they have to be highly competitive. They’ve grown steadily over the past six years, averaging growth rates of between 10% and 20% per year, with a turnover of £4 million. Turnover at Dulas Engineering also rose from £8 million in 2008 to £21 million in 2011, and they average a 5% net profit.

Profitability and competitiveness are also key for the Unicorn Grocery Co-operative in Manchester. Unicorn has an annual turnover of £4 million and is growing by 10% year on year despite the recession. Like Suma, Unicorn operates a flat pay and power structure among its 48 members. The co-op functions using a system of team reps for day-to-day management, but all strategic and policy decisions are made at members’ meetings. According to Unicorn member Debbie Clarke, this does mean that decisions take a bit longer, but once made, they’re implemented very effectively by an active and engaged workforce. Unicorn is highly efficient, with low sickness levels and high staff retention. The staff pay themselves performance-related bonuses based on quarterly targets. When their premises were put up for sale in 2002, the members made the decision to buy the property to prevent relocation. They also bought land locally to facilitate a growers’ co-op to supply them with extra produce.

The profits that flow from the co-operative ethos are more than just financial, a point that was made very clearly by Alice McLarnon of the Belfast Cleaning Co-operative. The Belfast Cleaning Co-op works with women’s groups at the interface of sectarian conflict, in an area that ranks among the top ten most deprived in Northern Ireland. The co-op was born out of the blue in 2011, when McLarnon was asked if she knew of anyone locally who could do cleaning work for an MTV showcase that was coming to town. Within one hour, the co-operative had been set up. The members have since received four full days of legal support and training from the UK’s Co-operative Enterprise Hub, and in May 2012, they agreed on a governance structure and business plan. McLarnon stresses that setting up a co-op is hard work, because you have to learn how to work democratically. But their reward is that the co-op is achieving its aim of getting members out of unemployment, and providing them with a living wage and dignity at work in a fully-unionised, worker-controlled business. Stephen Nolan of Trademark points out that the cleaning co-op staff are paid above the average in the sector, but they still undercut their competitors, because they’ve cut out the need for management costs and shareholder dividends.

Veronica Barrett of the RHS Home Services Co-operative makes a similar point. RHS is a client-owned, not-for-profit homecare provider that has been active in Roscommon since 1996. RHS identified and acted on a need in their community long before the for-profit providers began to move in. Despite increasing competition from for-profit competitors in recent years, RHS continues to thrive and expand.

A running theme throughout the day-long conference was the need to provide the supports and information necessary to develop the co-operative economy. Tiziana O’Hara of the Northern Ireland Co-operative Forum identified some of the key elements, such as resources, representative bodies, media interest and local examples. She also emphasised the need for political support. The NI Co-operative Forum helped to establish an All-Party Group on cooperatives, which now works in parallel with All-Party groups in Wales, Scotland and England to further the co-operative agenda.

Micheal Gavin of the Bridge Street Co-op, a retail co-op and café in Kenmare, believes that the infrastructure in Ireland is hostile to the development of co-operatives. Despite this, the Bridge Street Co-op has managed to create jobs for people in Kenmare at a time of high unemployment. It can be difficult to account for and analyse the number of worker co-operatives in Ireland, because there is no tailor-made legislation to support worker co-operatives as a distinct category, as in the case of credit unions. Some decide to establish themselves under the Industrial and Provident Societies Act, while others opt to incorporate under the Companies Acts and specify the co-operative model in their Memorandum and Articles of Association. Gavin’s co-op went down the Industrial and Provident Societies Act route, but in hindsight he wonders if it would have been better to have incorporated Bridge Street as a Private Limited Company, so that they could avail of benefits available to small businesses, such as the audit exemption.

The ILO recognises three types of employment: employee; worker co-operative member; and independent, which encompasses the self-employed, sole traders and partners. Bill Kelly of Meitheal Mid-West believes that Ireland doesn’t give adequate recognition to worker co-op members as a distinct employment type. He also points to the need to legislate for indivisible reserves, since many co-ops are bought out when they become successful. Indivisible reserves ensure that co-operatives can’t be captured by the private economy, and that a percentage of surpluses and all residual value are returned to a central co-operative organisation to support the development of other co-operatives.

2012 is the International Year of Co-operatives. While Ireland has a strong tradition of credit unions and agricultural co-operatives, general worker co-operatives are still a fledgling element in the Irish economy. So what one piece of advice would the speakers offer to someone thinking of setting up a worker co-operative in Ireland? Their answer was unanimous: “Just do it. It’s easier than you think.”

Deirdre Hosford is the Education and Policy Officer in Labour Youth.

To find out more about worker co-operatives, see:

The Irish Worker Co-operative Network:

The Irish Co-operative Organisation Society:

The Centre for Co-operative Studies at UCC:

The European Confederation of Co-operatives:

The Unicorn “Grow a Grocery” Guide: 

Image top: Food Ethics Council.