The Critical Importance of Co-Ops and Mutuals

While recent analyses of the evolving relationship between Government, the Not for Profit sector and communities is compelling but there is a vitally important element missing – the roles for and contribution of co-operatives and mutuals writes Les Hems, Director of Research, Net Balance Research Institute.

Over recent months Pro Bono Australia News has reported on a number of thought provoking articles about the future of the Not for Profit Sector from Brotherhood of St Laurence Executive Director Tony Nicholson and Melbourne University Professor Paul Smyth.

Their analysis of the evolving relationship between government, the Not For Profit sector and communities is compelling but there is a vitally important element missing – the roles for and contribution of co-operatives and mutuals.

Co-operatives and mutuals are a fundamental part of Civil Society many of which already provide public services.

Nicholson and Smyth paint a pessimistic future where Not for Profit organisations will become increasingly more businesslike to compete in public service markets, lose sight of their mission and values, and “erode their distinctive contribution to society and economy”.

Smyth refers to Nicholas Fyfe’s conceptualisation the Not For Profit sector ‘as lying within a triangular tension field, the cornerstones of which are the state, the market and the informal sector, with the role of the voluntary sector being constantly shaped and reshaped by the influences emanating from the other sectors’.

They are critical of current public service reform initiatives, especially those in Victoria, which are based on the withdrawal of government delivered services in favour of the increasing use of competitive markets. Smyth reflects on the evolution of the Not for Profit Sector and how organisations have become bigger and more bureaucratic – emulating the Government apparatus which is of course the dominant source of funding.

Simply stated Nicholson and Smyth conclude that Not for Profit organisations have over decades evolved to become more like government and are now being asked to evolve to become more like business. In response, they call for greater engagement with communities and the use of place based mechanisms such as Collective Impact but do not acknowledge that there are long established structures of Civil Society which can facilitate this i.e. co-operatives and mutuals.

On this basis the Not for Profit Sector should therefore be pursuing a new strategy to become more like communities – more like co-operatives and mutuals – and not more like government or business.

This community driven strategy would provide a vehicle for Not for Profit organisations to rediscover their mission and values, and re-engineer their distinctive contribution to society and economy. In addition, the strategy could also help them compete in public service markets.

Next week Minister Andrews will launch a White Paper commissioned by the Business Council of Co-operatives and Mutuals, it comprises a set of recommendations that focus on an expanded role for co-operatives and mutuals in delivering public services – Public Service Mutuals. This third way for delivering public services seeks to complement and interface with government, business and Not for Profit organisations.

The rationale for Public Service Mutuals was presented in a Green Paper and focused on the comparative advantage of co-operatives and mutuals based on the ownership and active involvement of members – whether they be service consumers, employees or service providing organisations; and the reinvestment of surpluses for the benefit of their members.

Public Service Mutuals have the potential to empower individuals and communities. Consumer owned Public Service Mutuals can help individuals to operate collectively in client directed markets, such as the National Disability Insurance Scheme, to achieve real choice and control.

People with disabilities owning a Public Service Mutual will allow them to design and specify their services and negotiate with service providers to purchase services in bulk. They will be able to get better services which offer real value for money – not only for them but also for government and the tax payer.

For existing Not for Profit disability service providers the NDIS market presents both opportunities and challenges. These organisations are driven by delivering quality services to their clients but some will fear that increasing competition will over time make them obsolete. A co-operative response to this problem is for these existing providers to work collectively through an enterprise owned Public Service Mutual which allows them to retain their relationships with clients whilst also allowing them to achieve economies of scale, increase productivity, and increase market power – to complete in the public service market.  

Federal and State Governments are now divesting themselves of the remaining government delivered disability services. In the United Kingdom this divestment process has been dominated by the spinning out of employee owned Public Service Mutuals – which now number over a hundred employing 3,500 workers and delivering billions of dollars of public services. The current divestment process in Australia provides an opportunity to adopt this alternative Public Service Mutuals approach.

Nicholson identified a specific problem in relation to the future public service workforce, newly established employee-owned Public Service Mutuals will offer an alternative approach to building a growing quality workforce for delivering public services. Employee-owned Public Service Mutuals will provide a supportive environment for those seeking a career in public services, ensure appropriate working conditions, and allow employees to focus on delivering quality service to clients in a commercially sustainable way.

Finally, this strategy could also provide an opportunity for Not for Profit organisations to engage with existing large member owned mutuals such as those operating in health insurance and motoring services.

These long established commercially sustainable social organisations may be critically important partners in a new strategy focused on individuals and communities. Hopefully the launch of the White Paper next week will stimulate further thinking on the future of the Not for Profit Sector.

About the author: Les Hems is Director of Research at the Net Balance Research Institute and is a former Director of the Centre for Social Impact at the University of New South Wales.