Getting Mutual – Co-Ops in the Mix of NFP Mergers

As the Not for Profit sector debates the call for charity mergers, co-operative and mutual enterprises should not be forgotten as a viable alternative, writes Gillian McFee, Chair of the Australian Public Service Mutuals Task Force.

In the race to produce the latest “Not for Profit Merger Tool Kit”, it seems management consultants and professional services advisers can overlook the opportunity for considering co-operative and mutual options.

“Not for Profit Merger Tool Kits” are hitting our inboxes it seems almost daily, most spruiking similar frameworks about how to go about doing a merger in the Not for Profit and charitable sector.

As the hearings in a Senate Inquiry into Co-operative Mutual and Member-owned enterprises are revealing, the sector is challenged by a lack of awareness of the benefits of co-operative and mutual structures and how to form them.

Co-operative and mutual options rarely feature in these how-to kits. Yet for many Not for Profits, especially smaller and medium size ones in rural and regional Australia, the co-op option could be the way to go.

Fear of a loss of control and a loss of identity are two factors which can scare off Not for Profits from embarking on a collaborative journey with other likeminded organisations. Although there may be benefits in terms of efficiencies of scale and market aggregation, many Not for Profits have a strong ethos of localism, community connectedness and niche expertise that they fear might be diluted or lost in the process of merging or being acquired by another entity.

The Business Council for Co-operatives and Mutuals (BCCM) has recently assisted three community transport providers to form a non-distributing enterprise co-operative under the Co-operative National Law.

These community transport organisations had gone down the merger route and decided it was not for them. They feared losing their local identity in a traditional merger and thought a co-operative was more aligned to their values about serving local communities, delivering shared value and mutual benefit.

Since releasing its White Paper on Public Service Mutuals in August last year, the BCCM has been approached by many organisations interested to know more about co-operatives and mutuals and assessing the feasibility of this option over traditional mergers.

A Public Service Mutual is an organisation that wholly or in part delivers public services through a co-operative or mutual structure, and where members of the organisation are involved in decision-making and benefit from its activities, including the benefits from reinvesting surpluses back into the business and in local communities.

Co-operative and mutual structures are particularly well-aligned for Not for Profits and social enterprises motivated by mission or delivering shared social and economic benefit for their members and the communities in which they operate.

In contrast to the UK experience, the BCCM Task Force adopted a broader definition of Public Service Mutuals to include consumer co-ops, employee or producer co-ops and enterprise co-ops.

This broader definition has enabled groups to consider multi-stakeholder co-operatives which seem to work well when consumers, workers and enterprises come together either in a specific location or around an issue, to develop viable business models around complex problems that require more holistic solutions.

Indigenous co-operatives active in the areas of community and welfare services are an example of the benefits of a holistically focused service delivery model owned and operated by its local community members.

Many smaller Not for Profit organisations are challenged by consumer-directed regulatory changes in the NDIS and aged care and find forming co-operatives are one way consumers and local communities can come together to create a market for services.

Recently in Sydney, a group of parents have come together to own and operate the group housing and support service enterprise that provides the care and housing for their children with disability. This model, which embeds the values of consumer empowerment, choice and control, is sparking interest from other consumer groups.

We have been heartened by the recommendations of the Harper Review into Competition Policy and the findings of the McClure Review of the Welfare System, which both acknowledged the potential role for co-operatives and mutuals in the areas of human services delivery and employment services.

Significantly, the Harper Review identified significant opportunities for increased competition and productivity improvement in human services. The four principles that underpin this are totally consistent with an increased role for mutual and co-operative business models – promote user choice and control, separate funding and delivery, encourage diversity, and innovation in service delivery.

Founded on the seven international co-operative principles, co-operatives and mutuals are an alternative to mergers and acquisitions because they lead to diversity in the market and their purpose is to create shared economic and social value from well-run businesses, rather than distributing profits to shareholders.

In response for demand for more information and how-to assistance on forming cooperatives, the BCCM has launched Get Mutual, which also hosts four Pathfinder Case Studies funded by the Department for Social Services about co-operatives operating in the areas of disability employment, housing, aged care and primary health care.

About the author: Gillian McFee is Chair of the Australian Public Service Mutuals Task Force. She is also Managing Director of her own company, Gillian McFee & Associates, and an Associate with management consulting firm, Nous Group.