Blog article

Governance and Management structures in worker co-operatives

The other day a consumer co-operative Board member asked if I could send them some info on what worker co-operative governance and management structures look like. I always jump at the chance to inform fellow co-operators. The only problem was I couldn't find what I was looking for. So below is my attempt to set-out some very generalised 'types' of structure.

Most worker co-operatives evolve their own structure and practices as they grow and mature. Also theory and what I've observed won't always reflect the situation in your particular co-op. So please please set me straight and provide examples of how you structure your worker co-op. Also if you know of good web links please share.

www.cultivate.coop does have some interesting articles and I might replicate this blog there, if people think its good enough.

First a quick look at terms:
Governance: Is about how the views/will of the members (who own the co-op) are represented. How they set their: vision, goals and strategic direction of the co-op.

Management: On the other hand is about the achieving these goals, the detail and managing resources on a day-to-day basis.

"Governance pertains to the vision of an organization, and translation of the vision into policy, management is all about making decisions for implementing the policies.".

Governing Body: Is the group of people who govern the organisation on behalf of the members. In a Company this is the "Board of Directors".

For a lot lot more info on Legal Structures and Governance have a look at our www.uk.coop/simplyseries

Below are the types of structure I have seen in worker co-ops in order of scale. I give a brief description followed by a diagram. In the diagrams I attempt to illustrate Governance and Management relationships.

Key

The Collective
When people first come together informally or create a small worker co-operative. They often start as collectives; Governance and Management can be very difficult to separate, usually all members are at the same level in terms of Governance, formally as Directors (or act as if directors) and operate using a flat management structure (everyone gets an equal say on issues).

Some people may take the 'lead' in a certain areas or activities but this may swap and change depending on the circumstance. I've tended to see this structure from 2-10 people.

Growth
As a worker co-operative grows or becomes more complex/specialised (around 8-15 people, some last even longer) it becomes more and more difficult to keep everyone informed and the level of interaction needed for decision making becomes too high (there is also the issue of newer members not being 'experianced' enough). At this point two things happen:

Firstly; Governance moves to a system of representation where some members are elected by the membership to represent their views and these representatives are delegated to make certain decisions on their behalf. Some co-operatives choose Directors on a completely open annual elections basis (at AGM), others staggered elections 3 one year 4 the next etc. Others have certain designated places for certain roles within the organisation (for example the Finance role).

Issues with this approach like any form of representations, can break down if: members don't feel their views are represented or there is a lack of clarity on level/type of decision that has been delegated. Co-operatives UK is currently writing a guide called "Simply Governance" so watch this space for more information.

Secondly; Management changes and this can change in variety of ways:

Self-managing work teams
Usually this means, as co-operatives grows they split into teams; based on areas of the business: Cafe/Shop, Sales/Designers/Printers, Warehouse/Drivers/Buyers etc.

These become self-managing collectives, who then nominate representatives from their own team to the Governing Body

Hierarchy system
Usually this means a general manager is chosen; sometimes elected or specifically recruited/selected by the governing body. They are accountable to the governing body, and have been given authority to manage the organisation. In larger co-ops there may be multiple levels of management. A term used for this relationship is; "Management is not a status but a function"

Even larger structures
Suma is the largest worker co-operative in the UK with around 130 employees. They operate on an equal pay basis and don't have a CEO or executive managers in the normal sense of the term. They also multi-role; which means members work in a least two different "Function Areas" of the Business.

Suma is governed by periodic General Meetings for all the membership, and an elected Board of Directors. On the Management side; the business is divided into "Function Area" Such as: Buyers, Warehouse, Drivers etc.

These like the above operate relatively autonomously with each area having a "Functional Area Co-ordinator" who are elected to co-ordinate an area and come together with other "FACs" to co-ordinate operations as a whole.

Suma is the largest using this structure, and there are a lot of interesting theories about democratic management and social relationships (how far can you go). One theory is Dunbar's number:

"A theoretical cognitive limit to the number of people with whom one can maintain stable social relationships...[1] This says that numbers larger than the Dunbar number generally require more restrictive rules, laws, and enforced norms to maintain a stable, cohesive group. No precise value has been proposed for Dunbar's number. It has been suggested it lies between 100 and 230, with a commonly used value of 150.[2 "

It might be no co-incidence that Suma has reached this size. Is there a natural size for a worker co-operative? What should a worker co-operative do it if wishes to retain a democratic management structure but grow beyond 150? One suggestion is for the co-op to divide or create off-shoots, forming "Consortia" Corporate Group Structures of smaller co-operatives that share common approaches, branding and inter-trade with each other.

Mondragon
Some might say the Pinnacle of worker co-operative achievement is Mondragon in Spain. Governance and Management in Mondragon is very different to UK worker co-operatives; for a start it employs 85,066 people! It also has a very standard management hierarchy (although there are maximum pay ratio's and most managers are trained from within).

Mondragon is not like a traditional PLC either and operates more like an Economy in itself. Mondragon is a type of Consortia mentioned above, where its member co-ops have their own bank, social security, education, research and development services. All the 250+ businesses are split into Group; Divisions; Units. Each individual company is semi-autonomous and may leave the Mondragon Group (and some have).

Modragon's Governance is also on a representative system with workers voting for Board Members of their individual company, who in turn vote for the next level up

This below diagram illustrates one companies relationship to the overall structure.

 

 

 

 

 

 

 

 

 

 

 

 


Further Reading
Durbar's Number
Difference between Management and Governance
The Simply Series of resources

Written by John Atherton
Updated: 27/07/2011