The power question that will help you to overcome a challenge

This week I’m at BluCamp in beautiful Missouri, USA – a retreat for leaders wishing to build freedom-centred, democratic workplaces. I’m here partly to help out but mostly to learn, and already it’s been mind-blowing.

The biggest thing I’ve learnt today is that the first step towards building a freedom-centred workplace is to adopt a freedom-centred mindset. Sounds obvious, but it’s very easy to dive into adopting crazy new working practices or trying to change the culture before working on yourself first.

At WorldBlu, when we talk about ‘freedom’, we mean freedom from fear, since it’s fear that narrows our thinking, causes us to try to control rather than develop opportunity and at a most basic level, it’s a whole lot more fun feeling a sense of freedom than fear. Unfortunately most workplaces are dominated by fear and control which makes us unhappy and leads to poor performance. It’s not about being fearless. It’s natural to feel fear. The important thing is to recognise and free yourself from fear by taking action.

So how do you begin to go about adopting a mindset of freedom? Here’s a very simple exercise that we did today which really opened my mind.

1. Write down up to three challenges that you are facing in either your personal or work life which give rise to any kind of fear. This could be a direct, adrenaline-fuelled fear; more subtle, long-term or unconscious fear; or even well-intentioned fear. Write down how the fear manifests itself as well as the specifics of the challenge.

2. Now ask yourself the question: ‘What would I do if I wasn’t afraid?‘ and write down the solution for each challenge.

3. Reflect on how you feel about the challenges. Do you feel different?

It’s as simple, yet powerful as that. When I answered this question for three meaty challenges I’m facing, I was amazed how easily the answers flowed onto the paper. And not only that, it genuinely did change my mind-set from one of fear to one of opportunity, confidence and even excitement. This is the power of freedom.

Please give it a try it now and let me know in the comments if it worked for you.

Disadvantages of cooperatives and how to overcome them

McKinsey have produced an extremely useful report on cooperatives. It’s well worth a read if you’re setting up or running a coop, but I wanted to highlight the section I found most useful: The relative strengths and weaknesses of coops compared to shareholder owned companies, and most importantly how to overcome the challenges. I think this is likely to apply more widely to other democratic organisations too.

The McKinsey study showed that cooperatives outperform public companies in many key areas: leadership, direction, culture & climate, motivation and accountability. These strengths are a powerful foundation for a successful business. However, cooperatives lag their shareholder-owned peers when it comes to business agility. Specifically: Co-ordination & control, capabilities, external orientation and innovation & learning. This suggests some massive flaws in how a coop builds on its foundation to actually execute and build a dynamic and successful business.

However, in each case there are examples of coops which have very successfully overcome these challenges and built world-class businesses that can out-compete shareholder-owned enterprises. According to McKinsey, the three areas to work on in order to improve agility are decision-making, pursuing new opportunities and sourcing and developing talent.

Let’s look at how to improve each of these and highlight a few examples of best practice. There are further examples in the full report.

How to improve agility in decision-making

  • Clearly distinguish respective roles and responsibilities of executives and elected officials.
  • Create more efficient processes for consulting with members on strategic direction (in other words, stay democratic, but don’t get too bogged down in the process.)
  • Improve performance-management systems to enable rapid identification and correction of areas of under-performance.

Example: The Co-operative Group in the UK uses technology to facilitate consultation and discussion amongst members to work on issues and gain consensus, which greatly speeds up the process.

I would also add that there are new systems like Liquid Feedback that facilitate mass decision-making as well as more established online social tools like forums and wikis that enable collaboration.

How to improve agility in pursuing new opportunities

  • Expose the coop to more external viewpoints and ideas.
  • Put in place explicit processes enabling different parts of the organisation to work together.
  • Develop opportunities to finance emerging opportunities that might not have immediate benefit to the current membership base.

Example: The Mondragón Network in Spain developed specific R&D facilities to focus on new opportunities. They also convene working groups from across the network to explore new business ideas, and 10% of the coop’s gross profit is diverted to a development fund that finances research, innovation and business development.

I think there’s a huge advantage of coops in that they exist for the long-term benefit of members, not short-term financial results for shareholders, which means they should be able to think and invest more long-term.

How to improve agility in developing and sourcing talent

  • Identify top talent and create leadership-development tracks.
  • Adopt recruiting and training practices that change perceptions of working in a coop vs. a public company.

Example: The Farmer’s Cooperative in Iowa, USA, rolled out a recruiting programme in conjunction with Iowa State University, working closely to offer education, scholarships and mentoring involving very senior personnel from the coop. This helped them to double their intern pool and improve retention of top people.

At the International Summit of Coops this week, education was a recurring theme. Economics and business degrees simply do not seem to cover cooperative economics despite the huge size and potential of the cooperative sector. The coop movement needs to work in education at all levels to increase awareness and forge links that will lead to more talent entering coops.

My conclusion

All of the evidence I have seen is that cooperatives can perform equally or better than shareholder-owned companies, and have the enormous, unique benefit of directly acting in the interests of customers, employees and wider society – now and for future generations. They do not just make a few external owners better off and hope that an ‘invisible hand’ (which may not be there anyway) will do some good along the way. This is why cooperatives hold so much hope for creating a better, post-industrial capitalism. There are certainly challenges for coops to overcome, but in each case there are shining examples the prove it is possible.

Being a coop isn’t enough. You still need Ambition

The UK’s Cooperative Group CEO (and Ben Kingsley look-a-like) Peter Marks spoke in a refreshingly candid way yesterday at the International Summit of Coops about the challenges the group in the face of hardcore capitalist competition like Tesco and Walmart. As a coop, they don’t have the same access to capital as their publicly traded rivals, and in the past have been out-innovated. However in recent years, with the confidence gained through successful acquisitions which generated an additional £70M in profits, they have had the confidence to sharpen their brand, bring stores up-to-date and are on the path to recovery.

I managed to grab him for a chat afterwards. On my street in Brighton, within 400 metres there were already too many supermarkets, and then The Coop got hold of the lease for the bar next door, knocked the wall through and doubled the size of their shop. This was depressing because we really didn’t need more supermarkets on the road and it just added to the homogenisation of the area.

Thinking about what Marks said about competition I told him that although The Coop has a huge differentiator being owned by members, for their interests and it is not beholden to the stock market, inside the store it’s exactly the same as all of the other supermarkets selling mostly high sugar, fatty, poor nutrition food. I wondered if they were just playing the competition at their own game instead of inventing a new game or taking it to a new level. Fighting stuff competition head on is never a good strategy.

For example, look at the success of Whole Foods – selling nutritious food instead. Tesco have tried to copy them with their Fresh & Easy brand, but it’s failing badly because they’re faking it. Tesco doesn’t actually stand for anything other than making money. However, The Coop has a big advantage in that they genuinely care for their customers because they’re the owners. The Coop could pull off something far more meaningful than their rivals.

Marks, who was charming and approachable, dismissed the idea out of hand, crushing me like a naive idealist, saying that Whole Foods is tiny and The Coop just sells customers what they want – which they believe to be the same poor food that everyone else sells. I walked off feeling deflated.

But reflecting on this afterwards, I realised it’s not just about selling better food. That’s just one possible ambition that the Coop might work towards. What they seem to lack is any sort of inspiring ambition to challenge them and strive for. A vision for a better world that they want to bring about for their members.

Take Walmart as a counter-example. For all of their evil, Walmart has some incredible ambitions to become a zero waste company; to use 100% renewable energy and to only sell products that benefit people and the environment. If you think this is just green-washing, think again. They have NGOs and pressure groups working inside the company with the power of veto over products and practices to make sure that they stay on this path. Walmart realise it’s in their long-term interest to become sustainable.

I’m sure that The Coop could use its unique position as a member-owned company to strive for a much higher ambition. They will never be inspired to innovate and reach greater heights with a defeatist attitude that settles for me-too mediocrity. Marks is actually on his way out of the company next year, and I understand that they have been working recently on an updated ethical policy, so perhaps the new leader will channel some Gandhi and take this the challenge of developing a greater ambition. I hope so.

Cooperatives need bottom-up thinking

I’m at the early stages of working on an idea to see many more cooperative businesses in Brighton. I’m at the International Summit of Coops in Quebec to learn more and make some new connections in this area.

Coming from the traditional private ownership business world – even though I have long been a fan of democratic business – I’ve realised how I naturally gravitate towards top-down thinking. People smarter than me keep correcting me and getting me to think bottom-up. Here are two examples:

1) Thinking about how to go about building a network of cooperatives (like the enormously successful Mondragón in Spain) I thought I needed to put together a group of people to work on a constitution, then recruit or set up coops to join the group. Classic top-downness. I did have a nagging doubt about the approach – it felt like I was creating a bureaucracy. Actually, the best way to do it is to start with people: The needs of the people in the local community and with people in existing and potential new coops. Once you are fully engaged with the people involved you can start setting up a network from the bottom, with one coop, linking to the next one and so on, and eventually build whatever group structure might be needed.

2) Ownership & Finance. I’ve mused about innovating business ownership models before – how you can structure ownership of a business in a combination of employee, customer, community and private ownership. In top-down fashion, I’ve been trying to figure out the most optimal model which could then be applied to coops in Brighton. Again, the far better approach is to accept that there’s a lot of flexibility and many possibilities and to work with the people involved to find the best route as needed. For example, more capital intensive businesses like manufacturers may require more private investment; those in service sectors could be more employee-owned; and those selling to consumers may benefit from greater customer and community membership.

I’m sure there are many more examples of where bottom-up thinking will provide a better approach, and although cooperatives may formally delegate power for some centralised decision-making which at times may be more effective, I’m going to make it a rule to make bottom-up my default approach.

Are humans selfish or cooperators?

I’ve previously written about dangerous and wrong assumptions about human nature. That the view of humans as fundamentally self-interested limits us to ineffective methods of motivation, and that we actually have evolved to cooperate.

I’ve heard more evidence over the last few days at the Imagine conference that humans are naturally cooperators. Let me give you a couple of examples.

David Erdal, author of the brilliant book Beyond the Corporation looked at first contact reports of hunter-gatherer tribes. He found that across the world they all had one thing in common: When they hunted meat, it was shared amongst all members of the group. You might expect that it was shared mostly with close family to help propagate ones own ‘selfish genes’ or shared in reciprocal agreements between individuals, but in every case it was discovered that ‘the criteria for receiving meat was simply having a mouth to feed.’

This is group selection in action – something that for many years even Richard Dawkins denied (but I believe has since come around to in the face of the evidence.) Beyond an individual’s own genes, it’s advantageous for the whole group to be well fed. Hunting meat is sporadic and tribes where nobody goes hungry are ultimately better for everyone within them.

Bringing this up-to-date, there are modern studies which show that in more equal societies which have smaller gaps between rich and poor, there are lower instances of social problems like infant mortality, crime, teenage pregnancy, alcohol and drug abuse and domestic violence. Most interesting is that beyond a certain point in wealth, it’s income equality rather than extra income that correlates with healthier societies. And surprisingly, both rich and poor people in less equal societies suffer more from social problems. In other words, you are likely to enjoy a higher standard of wellbeing being slightly less well-off in a more equal society than richer in a less equal society. So cooperation with others in your society to create equality is actually in everyone’s best interest.

There is also cognitive psychology research (G. Cory, 2006) which indicates that humans have dual motives – ego and empathy. We have a drive to protect out self-interest but also others. This makes sense based on the evidence about cooperation. Further, it seems that the binary question of whether people are selfish or cooperators is actually wrong. I heard a speaker assert that studies have shown that around 40-45% of people are indeed more selfish dominated and the slight majority are inclined more towards cooperation. This is why the hiring process is so important for organisations which want to set up a high-performing team that works together towards common goals rather than an under-performing team of selfish individuals working solely in their own interests.

There are many examples which break the theory of the ultimately selfish human. In the hugely successful, employee-owned retailer John Lewis, partners (owners) have consistently invested in their own company on timescales that would benefit future generations of employees rather than themselves. They understand that empathy for future generations gave them the business that they benefit from today and they work to improve it for those that will follow them.

I talked to a director of a credit union in Australia over the weekend which is 100% owned by its members (customers.) He was planning to direct some of the organisation’s surplus (profit) into a new charitable fund and he expected that the members would be supportive of this and not only that, contribute more of their own money on top. There’s no explanation for this kind of behaviour in the model of the purely selfish human but it is very heartwarming to know that humans can and do think beyond themselves and behave cooperatively.

So yes, humans can be selfish, but we are a sophisticated species which has evolved to cooperate in order to reach higher levels of wellbeing for ourselves and the societies in which we live.

The state we’re in and the call for a new economy

I’m at the Imagine 2012 conference on cooperative economics in Quebec City. Here are some thoughts after the first full day. It’s a pretty frightening picture, folks. But there is hope.

The industrial age economy, and indeed the neoclassical model of economics underpinning it has reached the end of its useful life. Whilst it helped lift many millions out of poverty, we are now seeing greater inequality between rich and poor countries and even between rich and poor people within countries. A model of business based on maximising shareholder value in a world where only a tiny proportion of people are shareholders will only cause rising inequality. This is not just bad news for the poor. In unequal societies, the rich suffer from many more social problems than in more equal ones.

GDP growth brings about improvements to wellbeing, but only up to a point before tailing off and in many cases declining (for example, increasing obesity and mental illness in the United States.) Research by Manfred Max Neef suggests that this tailing off happened around the 1970’s or 80’s for most developed nations.

The economy is a sub-system of planet earth – an inherently closed, finite system, therefore the economy cannot keep growing indefinitely within it. This can be easily explained to young children. Yet this inconvenient truth is ignored by all large political parties who argue about whether growth needs investment or austerity, and we still have an economy based on ever-increasing, unsustainable consumption. There are about 1.8 hectares of workable land to support each human being on the planet. In rich countries like the US, the use is in excess of 4 hectares and growing. Not to mention the hundreds of millions of people in the newly developing middle classes in India, China, Brazil and others who are now joining the consumer party.

The key message is that we have to move away from a fixation on growth (getting bigger at any cost) and towards development – becoming happier, healthier, wiser, safer and with better relationships.

This is not a call for left-wing politics. Far from it. Socialism and industrial age capitalism have both failed. Capitalism, for all of its fundamental shortcomings is the best way humans have come up with to organise ourselves to produce the things we need. But we need a very different capitalism.

The cooperative movement – businesses based on ownership of members (be that customers, employees or other stakeholders in the community) offer an alternative to maximising shareholder value. Instead, they use capitalism to maximise social outcomes – in other words, the things that really matter to humans and the planet now and for future generations. This is the concept of development rather than growth in action.

This view of capitalism is remarkably well established. Cooperatives world-wide have 1BN members and the largest three manage assets in excess of 1.6TN (and guess what, they have been extremely resilient through the recent economic turmoil because they did not engage in the insane activities like shareholder-owned banks.) It’s extremely worrying that despite the size of the cooperative movement and the promise it holds in playing a part in a development rather than growth based new economy, there is no representation of the cooperative movement on the B20 – the business forum that advises the G20. Business as usual, the old model is there in abundance.

We have an economy and consumption that cannot grow indefinitely. We are close to irreversible climate change together with huge natural resource depletion and energy shortages. We have to act now to protect the planet for future generations, and we need to start by creating a new economy, and fast before it is too late.

Tribal Leadership

This is one of those books that you read and then wish you’d read years ago. I thought it was going to be full of examples of quirky management practices, but it’s actually based on a huge 10 year research project into company culture and leadership.

The authors have a very simple five-stage model of company culture which I think is extremely useful. Rather than focussing on a set of behaviours as most culture change folks do, the authors look at the language that individuals use in the company to determine what stage they are at. The goal is to lift individuals, one stage at a time up to stage 4, with ‘peak’ moments of stage 5.

As you read about these five stages, think about where your culture is at the moment. And also note that people tend to think their culture is at least one stage ahead of where it really is. They key thing is to listen to the language people use.

Stage 1. “Life sucks”

This is where life at work is so bad that people can’t even imagine that things could be better or that they could be happy. Think Enron on the verge of collapse, or the disaffected employee who turns up to work with a shotgun. Fortunately it’s pretty rare for individuals or entire cultures to be at this stage.

Stage 2. “My life sucks”

The big difference as people drag themselves out of stage 1 is that there is hope. They can see that life could be better, but often use language around why they are having a tough ride, the barriers in their way or why other people are getting all the breaks. Think The Office or the movie Office Space. Dysfunctional, broken and demoralising with a feeling of “why is this happening to me?”

Stage 3. “I’m great”

This is the most common stage for companies that are performing well. People are positive and achieving results, but if you listen carefully to their language it’s all about them. When they talk about work, it’s mostly “me” and “I”. The subtext to ‘”I’m great” is “…and others aren’t.” It’s all about them hitting their targets; how they are building their own career; and how they are beating the competition inside and outside the company. People protect information, contacts and other assets to keep their ‘edge.’ Stage 3 companies can do well, but they are a long way from optimal. I found this interesting as often we unwittingly design companies to only reach stage 3, for example with very individualised targets, objectives and evaluations – all that matters is that YOU are doing well, and we hope that means the company as a whole will be performing well. We’re encouraged to write resumes that talk about ‘my achievements.’ Also, most personal development books (the famous Getting Things Done springs to mind) are all about YOU: Tips, tricks and hacks to ‘get ahead.’

Stage 4. “We’re great”

This is where the magic starts to happen, as people realise that the job of creating truly outstanding results is beyond any one individual. The language changes from “me” and “I” to “we” and “us.” When people talk about work they talk about the results that the team or company is getting. People actively share contacts and information and a culture of collaboration is established where the whole becomes greater than the sum of its parts.

Stage 5. “Life is great”

At stage 5, something important about the nature of competition changes. It’s when the group is committed to a higher purpose beyond making money, and a set of values which set their standards for ethics and behaviour (what they will and won’t do in order to fulfil their higher purpose.) For example, a pharmaceutical company where people talk about the ‘competition’ or ‘enemy’ being cancer or HIV, rather than a rival firm. In comparison to the real challenge of fulfilling their higher purpose, external competition just seems mundane. This level of peak performance is difficult to sustain, but the best companies are stable at stage 4, and have peak moments where they achieve stage 5. Steve Jobs’ team at Apple when they were working to bring previously unimaginable computing power into the home to enrich people’s lives with the first Macintosh computer is another example.

Moving up through the stages

The book offers tips and ideas to spot what stage individuals are at and how to raise them up through the different stages. A key insight is that you have to move people one stage at a time. If you replaced the boss David Brent from The Office with Steve Jobs and tried to immediately get everyone to world-changing teamwork and performance, it would be too much too soon. People need to be moved one stage at a time. For example, having a colleague who’s at stage 3 provide coaching and help to someone at stage 2 so they can start to get some personal results. And once you have a dominant stage 3 culture, begin to set tasks for individuals that are impossible to achieve alone, so that they start to realise collaboration is the only way to achieve outstanding results. Perhaps many culture change projects fail because they try to move too quickly to the optimal and don’t take people on a journey.

Tribal Leadership and strategy

The book also offers a very simple and powerful model for creating strategy that high performing groups will buy into and actually execute. This is a great example of democratic planning. Everything starts with the higher purpose of the company within the constraints of its values. Yet more evidence that ‘higher order’ clarity in a company is the foundation of success.

In a nutshell, the planning process defines ‘outcomes’ (subtly but importantly different from goals in that it’s about the journey as much as the end result.) The group then looks as what assets they already have to help them achieve the outcomes (technology, relationships, brand etc) and decides if the assets are sufficient. If not, then the strategy is re-framed with new outcomes to create the required assets. Once the assets are sufficient, the group then defines behaviours – things they will actually do – to use the assets in order to achieve the outcomes. Members of the group volunteer to take responsibility for each behaviour enthusiastically because they know that they already have the ingredients for success.

With this approach, you notice how a leader acts as an instigator and facilitator for this process, but it’s the group that actually produces the plan and takes responsibility, without the need for old-fashioned delegation. It’s easy to see why the companies that the authors studied who work in this way tended to produce better plans that the people bought into and actually put into motion.