Open Eye: Never mind the windfalls - look more closely at the `third way'

From new ideas for co-ops to the future of friendly societies, the OU explores alternatives to traditional business

As building societies have converted to banks over the last few years, their members have raced to vote in favour of de-mutualisation, accompanied by large cash windfalls. Mutualism, or mutuality, as it is often callled, has seemed a lost cause.

But the tide may be turning. Mutualism, the core principle behind co- operatives, building societies and institutions such as friendly societies, may be taking on a new lease of life. It means ownership and control by members - who may be workers, consumers or savers - rather than by shareholders.

The merits of mutualism are nothing new to Roger Spear, chair of the OU's Co-operative Research Unit which was formed 21 years ago. He believes the co-operative ethic has a place in the society of the next century. As a middle way between state welfarism and free market individualism, `new mutualism' has attracted the attention of New Labour.

"There is a gap in Labour thinking about how to develop a new philosophy: not private, and not state - something which has social objectives and involves a range of stakeholders. They are looking around for options, and mutualism is one. Time will tell how much they take it on board."

Among Roger's latest projects is one looking at what makes co-operatives distinctly different. In conjunction with Leicester University Management Centre and the Co-operative College, he'll be studying examples of innovation and good practice among some of the larger co-ops.

The largest co-op, the CWS, was recently the target of a hostile takeover bid which would have ended its mutual status. The bid failed, but it spurred the movement into funding research by Roger and his colleagues.

"Until the 1950s co-operatives were leaders in innovation - in consumer rights, for example. The `divi' was around long before supermarket loyalty cards."

The researchers hope to home in on new ways in which co-ops can once again become leaders.

The heart of the co-operative movement is not just its financial structure, but a commitment towards social as well as economic objectives. Co-operative principles include: openness to all, non-discrimination, being democratically run, concern for education and concern for the community.

What sort of new strategies can the mutuals adopt to regain the leading edge in innovation? Roger identifies the areas where they might want to look: responsiveness to members; local and regional links; and trust.

"Co-operatives used to be leaders in introducing what their members wanted; now we are seeing that emerging again, with co-ops in the forefront of better labelling.

"They have a tradition of building up strong relationships with the local and regional community - supporting local employment and sponsoring local activities. They have tried to combat social exclusion by maintaining shops in communities where totally profit-oriented organisations would have cut costs by closing them.

"And there is evidence that people are more likely to trust co-operatives because they see the money made is not going to some distant owner."

The success of the Co-operative Bank in marketing its ethical investment policy is encouraging, says Roger, because it shows social values can sell. "Here is where co-operatives can be at the leading edge, and there is potential for a win-win situation."

Ian Hargreaves, former editor of The Independent and New Statesman is another advocate of new mutualism. He forecasts that there will in future be a "rich ecology of institutional forms" - mutuals, traditional companies and perhaps other kinds of institutions yet to be invented, operating alongside one another to provide goods and services.

This is something Roger welcomes: "If you have a diversity of forms, you have a diversity of performance, and you have choice. Not just a choice between products, but between the values they carry - where their raw materials are sourced, how humanely and sustainably they are produced, and how honestly they are marketed."

Yvonne Cook

The Co-operative Research Unit is part of the Public Interest and Non- Profit Management Research Unit. It is based in the OU Business School and involves academics from many disciplines and departments.

PiN researches the purpose, impact, meaning and content of management in public services and non-profit organisations.

There have been more than 3,500 registrations on the OUBS Voluntary Sector Management Programme, designed to meet the needs of staff with management responsibilities working in health, welfare, youth work, the environment and arts.