Category Archives for "Third Sector"

Experimental Projects in the Economy

Alternative economic systems include everything else that follows the principles of self-interest or mutuality.  These are usually experimental projects, although some have been around for many years.

Credit Unions

Credit Unions are a mutual bank that makes loans to people who need small amounts of money. Small loans are very expensive and so conventional banks are not interested.

Credit Unions also find small loans expensive and their interest rates show this. However, they are nowhere near as high as rates charged by loan sharks, the amounts owed are low because the principles are small and the way they administer their loans supports the person who takes out the loan.  Consequently, credit union repayment rates are frequently higher than conventional banks.

Micro-credit

Micro-credit is similar to credit unions and found in disadvantaged parts of the world. Usually, the bank makes a single loan to a small group of business start-ups. The members are jointly and severally responsible for the loan and so it is in their interest that all the participants are successful. Mohammed Yunus is the founder of micro-credit and his auto-biography, “Banker to the Poor: The Story of the Grameen Bank” is a good introduction to the topic.

The Grameen Bank, founded by Mohammed Yunus has made significant inroads into poorer communities.  However, I find it difficult to see how micro-credit might work in the UK.  I’ve heard of a few attempts but nothing that has proved significant.  One major problem is equipment and raw materials are more expensive in the west.

Local Economic Trading Schemes

Let's do it!

Maklay62 / Pixabay

Local Economic Trading Schemes (LETS) are an alternative currency. In Sheffield, where I live, they trade in Stones, which sadly were not named after the late lamented local Stones brewery! A group of people who know each other, trade in stones. You gain them for offering a product or service and give them away for receiving a product or service. A healthy LETS is where most members often cross zero stones. There is no central bank (apart from a record of transactions) and everyone starts with zero stones. Accumulation of stones in either direction tends to reduce the activity in the LETS.

I’m sceptical about similar alternative online currencies. Once people don’t know the others involved and the currency can be converted into conventional currency, I think it is much easier for trust to be lost.

However, LETS might work online, so long as it is within a small group of people who trust one another. For example, website designers might meet online for mutual support. A LETS might work where they do work for one another. I’ve no idea whether any groups of designers have tried this.

Do let me know of other alternative economic systems you encounter, off or online.

Self-Interest

What are the values behind the co-operative principles? I call the cooperative ethic is self-interest, which may come as a surprise. Bear with me.

Self-interest is understanding that by helping others, I help myself. The patron saint of this ethic is St Martin of Tours. The story goes that he shared his cloak with a beggar, by slicing it in half. God approves because God loves Martin and the beggar equally.

We must not confuse self-interest with selfishness. The latter is where I act solely out of what I perceive to be my own interests. Many people on the right believe “Greed is Good”. They confuse self-interest with greed. Self-interest understands putting the interests of others first to be most beneficial to me.

Altruism is not morally superior to self-interest for several reasons. It does not seek mutual benefit but assumes moral superiority of the altruist. However, self-interest accepts we all have mixed motives and it is effective because it seeks the benefit of all.

Self-Interest in the Marketplace

Self-interest actually applies to the conventional market, not just mutuals.  A mutual is a formal type of organisation, designed to embody self-interest. However, you don’t need a mutual organisation to act out of self-interest. A small business builds relationships with its customers because all concerned benefit from that relationship. As it grows a mutual business structure may help it to maintain its ethical basis.

The marketplace at its best embodies the principles of self-interest. The exceptions are fraudulent operations and larger businesses that accumulate massive wealth in the hands of very few people.

Accumulated wealth does not benefit everyone because it restricts money flow (trickle down was always a myth). The current UK government’s austerity policy restricts the flow of money and so everyone suffers apart from those who hold onto mountains of wealth. In these circumstances trust breaks down and the market can no longer function.

The internet contributes two contradictory trends. First, capital concentrates into fewer hands. Think of the big players such as Google, Facebook or Amazon. On the other hand it has undermined the old marketing methods, such as advertising. Online marketing gives away information to build trust with potential customers. The earliest people to cotton on to this, sometimes known as gurus, have made massive fortunes. I don’t see how this can continue for everyone. On the other hand, it does suggest it is possible for more people to make a living from online marketing based on self-interest.

Do you agree self-interest is a superior ethic in the marketplace? If not, what would you suggest is the best ethic?

Co-operative Principles

So, what makes a mutual distinctive? Last time I showed mutuals are primarily about organised people, not organised money.  The members jointly own the wealth that accumulates within a mutual.

In 1844, the founders of the Rochdale Retail Co-operative adopted a set of principles. The International Co-operative Alliance adopted them with adaptations in 1937, last reviewed in 1995.

There are seven principles. Other types of organisations may embody some or all of them but the expectation is all seven apply to mutuals.

Voluntary and open membership

If you wish to join a co-operative they must permit you to do so without reference to your sex, sexuality, race, religion or anything else. Co-ops can impose certain conditions of membership such as residence in a geographical area or fees.

Democratic member control

The rule is one member, one vote, which should come as no surprise. This applies to the lowest level, eg your local branch. Representatives sent to higher levels also follow one member, one vote.

Perhaps we do not appreciate how radical this principle was, especially when combined with the first. Co-operatives were among the first organisations where women were able to take on leadership positions.

Member economic participation

Control of the co-operative’s assets are always in the hands of the members. They belong to the membership and not to a company or  individuals. So, co-operatives limit the assets that can be removed from ownership by the co-op.  De-mutualisation of co-operative assets must be difficult if not impossible.

However, it is possible to distribute surpluses among the members. This is known as a dividend (or divi) when applied in retail co-ops. In its best days the divi was a significant contribution to the income of many households.

Autonomy and independence

Co-ops and mutuals belong to their members. They can work in partnership with non-mutuals but cannot enter into agreements that compromise the members’ ownership of their mutual.

Converting co-operative assets to shares for example, may be attractive on the surface. In practice it means assets owned in common now belong to individuals. Those individuals who control the most shares effectively own the company. Within mutuals it is the common bond between the members that empowers the members.

Education, training, and information

So, it is crucial that members understand co-operative principles, to preserve co-operation and to empower the membership to new co-operative ventures. The first retail co-op in Rochdale had a library and meeting room above the shop, still preserved in the co-operative museum on the site today.

Cooperation among cooperatives

Co-ops collaborate with other co-ops. This ensures that mutual assets remain mutual.

Concern for community

We can understand this in various ways. There is a community among the members. If the co-op has a geographical common bond, its members support their neighbourhood. In the earliest days, one of the concerns was adulteration of food. Co-ops have always upheld the quality of their contribution to the economy.

I am somewhat sceptical about the ethical stance taken by the co-operative bank. Whilst co-ops are ethical, there is a danger that we confuse a generalised ethical stance with economic mutuality. Ethics do not substitute for mutuality.  Do you agree?

 

It does sound as if the UK co-operative movement is in severe trouble and it seems they have breached a number of these principles.  I think the key is education because it is too easy to forget principles or fail to understand them.  Commitment to education has fallen away as members no longer attend meetings.  Perhaps education could be promoted online but without people meeting and learning together, it is hard to see how understanding can be shared effectively.  What do you think?

Why Mutuals?

One current frustration in the UK is the sorry state of mutuals.  In the 80s most of the building societies demutualised, to the benefit of carpetbaggers, who joined mutuals to organise votes to turn them into conventional businesses.  Legislation to strengthen the common bond and so help mutuals resist such attempts is long overdue.   Now we’re seeing the car crash that is the retail co-operative movement.  The management believe their own rhetoric about inclusive membership, whilst in reality as few as  100 people have a say in running the co-op.

Then a few days ago the Chancellor announced what amounts to demutualisation of pension funds.  Instead of purchasing an annuity, fund owners will now be able to withdraw their funds.  People don’t realise pensions are mutuals.  Those who die early effective subsidise those who live long lives.  Is this fair?  Work it out.

The problem is people do not understand mutuality.  Mutuals emphasised education from the very start and equipped their members to take part fully and understand what it was they were participating in.  The first retail co-op on Toad Lane is now a museum, and the first floor preserves the original library and meeting room.

I’ve written about the origins of mutuals, through the worker and retail co-operative movements.  I described how they inspired many of the institutions we take for granted these days, even though many are exploited by big business.

The very wealthy, sometimes called the 1%, never create anything new.  Their main purpose is to own stuff and exploit it.  Their motive is ultimately personal power.

Community activism has always opposed the impact of the powerful on disadvantaged communities; without money the only approach available is organised people. (The co-operative movement was organised people; financially successful because they were organised.)

The pity is community development has itself become the playground of statutory sector in the UK.  Statutory and professional voluntary sector organisations fund community development to a greater or lesser extent (lesser at present).

Since the 1970s, the community sector has ignored the UK the private sector.  They ignore the contribution small businesses make to the local economy and demutualisation has spread because no-one understands or values the contributions made by mutuals.

Mutuals are the historical roots of community development.  To understand community activism pre-1970s, review the century to 1950 (roughly), when working people created institutions through mutuality.  Prior to that the principles of mutuality were laid down through the late eighteenth century evangelical revival.

As the new industrial poor learned to organise, via movements like Methodism, they discovered mutuality as an effective way to get things done through organised people; far more effective than organised money.

Why was this?  In my next Monday post I’ll write about the main features of mutual organisations.

Is Social Enterprise an Undisputed Good?

So, twenty years ago, community business was not well-known in England and it is interesting to see how the movement  developed.  The term “social enterprise” caught on, which suggests the enterprise model won out over the business model.

It seems hard to a community or social business; almost everyone says they’re in business when they’re actually a grant aided project.  Maybe this is an improvement if projects run in a more business-like way.  However, the criticism of the enterprise model  in 1990s Scotland was it masked what community businesses were trying to do.

Grant-Aided Projects

Most social enterprises are in neighbourhoods where there is multiple deprivation.  These neighbourhoods may not be able to support a business that provides the job opportunities a grant aided project can offer.  The survivors are the projects that have understood the basic disciplines needed in the private sector and use them to find grants, loans or contracts.  They need grants or loans or contracts because that is the way to bring some social infrastructure into such neighbourhoods.  I support these projects but my concern is the likely result of loss of funding.  Building the necessary capital assets and a market that allows them to be sustainable is a real challenge.

The voluntary-sector mindset is grant-orientated and so I wonder how effective social enterprises are in the medium to long-term?  I know the amount of work that goes into establishing social enterprises and the ones that survive over 20 years build a capital asset base and a market.  I’m also aware many fail, largely because they were unable to find a market and so were unsustainable.

Has the idea of social enterprise slipped its moorings?

Today anyone with social aims can declare themselves a social enterprise and pitch to funding bodies who are desperate to make grants or loans.  You can receive grants and loans for a good idea, whether you have a market for the idea or not.  By market I don’t mean an idea about who ideally you might sell to but an actual list of customers and prospects.

I have seen projects that are really small conventional businesses, masquerading as social enterprises to receive funding.  They have social aims but no organisation other than the people who run it.  Some projects lack both the customers they need to be a business and the community support they need to be a social enterprise.  Their vision may be excellent but their execution leaves much to be desired.

The Self-Employment Route

Why not start out as self-employed?  Because you get no money that way.  Why not test an idea in the marketplace before making it a social enterprise?  If your idea is such a good one, how else can you prove it?  Receiving a grant or loan proves you know how to complete an application form; not viability as a business.

I can understand why an entrepreneur would not want the added complication of a committee, so why not set up a conventional business and find a market?  Prove the idea works before you apply for grants.  Is that really too much to ask?  After all if you can’t show its viable, why put it into the marketplace at all?  For a good idea the problem is lack of business management skills and not viability.

Once an idea works, it can be re-launched as a community business if the owner is so minded.  Many successful businesses start out as enterprises where the entrepreneur takes the risk; the time to decide it is a community business is when it is ready to become a company.

Who Takes the Risk?

Yes, I’m saying the entrepreneur should take the risk, show their idea is viable and then take it into the third sector.  At that point they can apply for funding to expand a viable business, increase the workforce, appoint apprentices, etc.  People who are not entrepreneurs run the grant and loan making industry.  Their goal is to meet outputs and this is not usually compatible with business aims.

Community development workers should take the marketplace much more seriously and their focus should be on helping small businesses become viable and where appropriate choose the social enterprise route.  It may take time and risk individual’s assets but it can build sound foundations for local regeneration.  What do you think?

Community Business and Community Enterprise

In my review of third sector organisations, I’m moving on to where the third sector intersects with the private.  In this and future posts I shall consider social enterprises, mutuals and then various other projects that don’t fit under either heading.

The term social enterprise has come into vogue in recent years and I’d cheerful send it back out of vogue. What has happened is the statutory sector and the grant making industry have discovered community businesses and enterprises.  The whole currency of the movement is debased as a result.

Back in the early 1990s, Community Business Scotland (CBS) was doing the best work in this area.  I toured Scotland for 2 or 3 days in what must have been about 1993.  CBS was very clear about the distinction between a community business and a community enterprise.

On the surface they are similar.  They were both set up by community groups.  Their profit could be invested into the community in various ways:

  • The business can donate its surplus to the community group.  The community group is a charitable trust and so can reclaim tax.  The surplus would be used to support community projects.
  • The business can support local residents by offering services at no or reduced charges, eg photocopying, use of meeting rooms, etc.  Businesses count these services as part of their profit, especially as these services further social and not business aims.
  • The turnover employs local people and  is often the main advantage of running the business.

A community business measures its success by the amount of surplus generated or better, the number of jobs created.  The community enterprise measures its success by meeting objectives agreed with its funding bodies, it would have to account for every penny and so would not normally have any surplus.

Enterprises funded through grants or contracts do not have to follow strict business guidelines.  I remember we visited an enterprise that included a training café, used by local people.  The manager commented they ought to pay more attention to portion control when we remarked on the generous portions.  A business would have to do that.

In early 90s Scotland, community enterprise continued the usual grant-aided path, whilst the businesses were trying to create  physical and economic assets in the community.  Whilst they can appear similar, they are completely different.  Do you think this debate is still relevant today?

The Genesis of Voluntary Groups

Last time I discussed the nature of volunteering and today I’ll write about how voluntary groups evolve.

Most large professional voluntary sector organisations never plan to be successful.  They start as small groups, discover a successful formula and grow.  For some, their growth was so long ago, the public have long forgotten their roots.

Groups often start as small self-help groups in a neighbourhood or else people with a common interest collaborate across a city, region or country.  With the Internet, common interests across larger areas, maybe even continents, is a possibility.

Most groups have a short life-span.  They have an objective, meet it and dissolve.  Or else they get nowhere and their members move on to other things.

How Voluntary Groups Evolve

A common example is churches, either on their own or perhaps several churches within a neighbourhood, find an issue and set up a group to tackle it.  Church members will have a variety of aims for their work; to relieve the consequences of the issue, to tackle the issue through campaigning or as church’s mission.  In a secular group, you will find parallel mixed motives.

I’ll stay with churches to illustrate the conflict that plays out.  Some church members emphasise the interpersonal aspects of the work; they speak in terms of caring or sharing the love of God and for them the issue is less important than the opportunity to befriend and care for people in need.  Others might emphasise the professional aspects of the work; for them, they understand caring as doing things properly, so the standard of care can be guaranteed.

Professionalisation

The longer a project persists, the more likely it is the professional approach will prevail.  This can be a healthy development, but not because professional groups are better than amateur groups.  As a project grows into a voluntary organisation and eventually cuts away its roots, two things should happen:

  • an issue identified by a church or community group moves into the mainstream.  If it is successful, it becomes less urgent for the activists, as paid staff take over responsibilities and the change guarantees the care it offers is reliable.
  • it frees up the original church or group of activists to take a rest and perhaps find a new need. Their experience may mean their response to the new need will be more effective.

It is easy to assume the organisations we see around us are somehow fixed.  The reality is most organisations have a relatively short life-span and are at some stage of a life-cycle because the environment they operate within is protean.

Community and Voluntary Groups

Whilst the third sector includes community and voluntary groups, there is an intersection between them where one evolves into the other.  People move between organisations; learning and sharing their experience and expertise.

I’m not sure there is that much understanding of how to represent the protean nature of the third sector online.

What might be the priorities whilst building web presence for evolving and transforming organisations?  How do websites evolve with their organisations?

What is a Volunteer?

This is another post in the series about third sector organisations.  Today it’s voluntary organisations.

I’ve heard there was no such thing as the voluntary sector until the 1970s and I do have a slight recollection of the idea becoming current around the time I started as a community development worker.  Of course, there were any number of charities, mutuals and self-help groups going way back but these did not self-identify as voluntary sector organisations until the 70s.

I’m not convinced it was a positive move.  The idea of mutuals is people work together to benefit together, an idea that survives in an attenuated form within community organisations and some co-ops.

In voluntary organisations though, the volunteer works for someone; typically a wealthy professional voluntary sector organisation delivers services through the agency of volunteers recruited, trained and supported by paid staff.

The old Councils for Voluntary Service, now Voluntary Actions, tried to count community groups as voluntary sector.  But are they?  Community organisations whilst finding Voluntary Actions helpful, have been a little suspicious, they were not exactly in the same game.

A community organisation is typically a self-help group, they’re not volunteers but work for themselves.  Indeed some community organisations employ staff.  We can use the term volunteer loosely to cover self-help but I think we should attend to the nature of community organisations more carefully.

The way in which local authorities for example, expect local people to take part in their schemes can be particularly galling.  I’m sure this attitude depends on the idea members of community groups are volunteers.  It is little wonder from time to time members of community groups ask to be paid.

They may have a point but there is a place for self-help groups and if people always expect to be paid, most would never get off the ground and their members would not experience the benefits of community activism.

There may be a case for local people getting together and establishing mutuals where they pay themselves for their community work.  If groups can find ways to trade and benefit themselves and their neighbourhood, they should be encouraged and supported.  Where this works it is likely to build more stable structures than the grant aided fiefdoms that periodically collapse, depriving local people of valued services.

Volunteers supported by grants have never been a stable way of developing community.  A more entrepreneurial approach might be better all round.

Do you know of successful grant-free local enterprises, owned and run by local people?

How Community Groups Work

Last Monday I explored what community groups do.  Today, how do they work?  First, some terminology.  It is easy to be self-deceiving.

What is the difference between neighbourhood and community?  Neighbourhood is a geographical area and the people who live there are residents, not “the community”.  “The community” is a fiction; nobody represents “the community” because it does not exist.

One example of how this can impact an organisation is the idea every resident belongs to your community group because they live in the neighbourhood.  This implies the group represents the views of people who don’t take part and may not even know it exists!

Residents must have a right not to be a member and to refuse to be co-opted to the community group’s plans.  With a constitution this can be easily covered by defining a member.  Groups can charge for membership but it is often someone who signs up to a mailing list.  These days this should be an email list.  If people sign up at meetings it is essential they understand their email address will be added to an email list, if they declare it.

Using an Email List

An email list is a good way to penetrate a neighbourhood.  People on the list can forward a link to the group’s website, so recruiting more members.  A big list can remind people of forum meetings and may be more effective than leaflets through the door, so long as you design an effective sequence of emails.

  • Early so that people get it into their diaries, with request for agenda items.
  • Maybe one reminder about a week before the meeting, with the final agenda.
  • Final reminder 24 hours before the meeting.
  • Not too many reminders overall.

Link your list to a Facebook page and you have a simple online forum that can support the group’s meetings.  Quarterly meetings supported by online media plus specialist groups meeting between them can work well.  Remember though the strength of community groups is meetings where issues can be debated and consensus sought.  You can’t do this properly online, although I’d be delighted to hear of examples where an online forum has worked.  (A free lunch is particularly helpful but can’t be delivered online.)

These are foundations for good practice and if you want to meet one or more of the three objectives in my last post, you must get these basics right.

Do you have examples of local groups using online media?

What Community Groups Do

Last Monday, I wrote about churches within the community sector, which is a part of the third sector.  Today I write about the role of community groups in the third sector.

Community groups can be even more diverse than churches.  When residents find common cause, they seek recognition by other agencies as a group.  Recognition is essential to the success of community groups and so they often form alliances with statutory or voluntary sector agencies.

The reason for statutory and voluntary sector alliances is usually outputs because funding bodies often set working with the community as a condition.  I’m sure this can work but funding can skew objectives and community groups need to be alert to the dangers of mission creep, where someone else’s funding body overwhelms their objectives; this possibility increases when a community group applies for its own funding.

A Community Development Model

You can find in my sequence about community development a community development model, with three objectives.  Whatever the concerns a community group has, they find their activities fall under these headings.

  1. Representation – as a group develops, it needs to show it represents the views of most residents and not a small group of activists.  There’s nothing wrong with being a small group of activists, it can be very effective; just don’t claim to be something you are not.  Do you wish to campaign or to be a forum to express local views?  Citizens’ Organising is one approach that combines both.  Sadly it has not taken root in the UK.
  2. Planning –  If you seek to influence service delivery in your neighbourhood, you need a community plan.  Statutory and professional voluntary organisations will welcome you onto their committees but don’t care if you don’t have your own plan.  I’ve never seen the point of sitting on a committee where everyone else has a plan but you don’t.  You are simply endorsing their plans; you need a mandate.
  3. Delivery – some groups take on service delivery.  It’s usually best to separate delivery from representation.  If you don’t, it means the representative group may be competing for funds with its members.  Also, as the delivery arm becomes more like a voluntary sector organisation; accountability is sometimes easier if it’s arm’s length from the representative group.

I like to see independent campaigning organisations working locally. The need for funding inevitably leads to control of the agenda by funding bodies.  This leads to an ethos of control where communities cannot make a real difference to local policy.

What is your experience?  Can you share stories of campaigns where community groups have brought about real change?