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Phone Co-op bows out, not with a bang but a whimper 1 May 2018

Posted by cooperatoby in cooperative, Social enterprise.
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“And so we had to destroy the co-op in order to save it” was what came to mind after the special general meeting of the Phone Co-op in Sheffield last Saturday.

Ben Reid, Midcounties CEO, addresses the Phone Co-op SGM

It was a remarkably unanimous act of collective suicide, with no fewer than 202 of the 223 votes cast in favour of the merger with Midcounties. It was a good result, but a sad one. The Phone Co-op has grown and excelled for 20 years, but now finds itself out of its depth.
The debate did not start well, with the first intervention being an all-too-minutely detailed account of billing problems at Co-operative Energy 3 years ago – until the speaker was shouted down by members impatient to get to the nitty gritty. But the nitty gritty never really came. I had been secretly spoiling for a showdown, a revelation of the folly of the outgoing board and interim CEO. But the crunch never really came, thanks to the sure-footed leadership of the new chair, Jane Watts (the old chair was detained for family reasons).
The meeting quite rightly asked for the results of the vote on the merger motion to be announced before the second vote was taken, and the 92% majority surprised me (and cost me a pint in a side-bet). I began to feel a little out of control, as if forces beyond my ken had been orchestrating this all along. We had not really got to the bottom of why and how our strategy had gone wrong, or even if it had. Maybe it was meant to be this way.
I regretted the absence of constitutional stickler Richard Bickle – but his expertise was not needed, since the meeting was a procedural marvel, with neatly numbered and perforated voting slips (and even a spare in case of an unexpected ballot) all superintended by Emma Laycock of Co-ops UK, who is standing in as interim society secretary.

A bit more clarity on the growth strategy

The second vote, to approve the growth strategy, was paradoxical. New CEO Nick Thompson said that the board had presented it again because it was “judicious and considered” and hadn’t been properly explained at the AGM in February. But what we got was the same strategy we had criticised first time round – and with very little elaboration. We had none of the risk analysis that Simon Blackley’s motion had called for, and if anything fewer figures. According to Nick Thompson, the investment, which will lead to a £700,000 loss this year, is covered by guaranteed contractual revenues, and to succeed we only have to reach 486 of the 53,000 target business customers. The ‘green shoots’ are already showing. As for risks related to the merger, it seems probable that those brought out in debate – drop in member involvement, less personal service, staff terms and conditions – have been addressed in the heads of agreement between the two co-operatives.
The good point about discussing the strategy again is that it is forward-looking. It balanced the agenda and put the merger into context. Otherwise we might have felt we were at a burial service. It can be argued that Midcounties will find it a helpful starting point, but it can also be said that it was precisely this strategy that precipitated the co-op into the loss of its independence. Ultimately the debate was futile since the board of Midcounties will have to take its own view on what path to take.

Hobson’s choice – but a good choice

The merger is something of a Hobson’s choice. If we did not merge, what would have happened? Probably we would have struggled on for a few more years before running out of cash and merging anyway – if Midcounties wanted us by that stage. So we voted it through, albeit with a significant dissenting minority – the tally was 136 in favour but with 50 against (73%).
Anyway the members followed the board’s advice, as helpfully set out in a letter mailed out just beforehand. The growth strategy has a much higher chance of success given the potential to cross-sell telecoms services to energy customers and vice versa. As for governance, Midcounties plans to enlarge its current Energy Panel into a Utilities Panel, on which two ex-Phone Co-op board members will sit – presumably two of the more recently elected ones. And of course by a supreme irony Vivian Woodell, the Phone Co-op’s founder, is a vice-president of Midcounties.
All that remains is a confirmatory vote, on a simple majority, to take place after the Midcounties AGM in Droitwich on 12th May. And that will presumably be a shoo-in.
The result is a good one for staff, for customers, and for the co-operative movement as a whole. Ultimately, we did what we had to do efficiently and with little drama – and it was precisely this lack of drama that left me with a sense of anticlimax.

For a more balanced report of the SGM see Miles Hadfield’s article in Co-op News.

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Phone Co-op members demand clear limits to risk 6 February 2018

Posted by cooperatoby in cooperative, Social enterprise.
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I am now eagerly awaiting the decision of the Phone Co-op board following the decisions of the AGM last Saturday in Sheffield. The meeting, which was attended by 153 people – about 15 of whom were not members – voted overwhelmingly to support two motions critical of the co-op’s new growth strategy and asking for greater transparency and care with the members’ investment.

Overall the experience of the AGM was very pleasant: a convenient venue right opposite Sheffield station, a copious lunch served in an airy atrium, and a lecture theatre fitted with electronic voting equipment.

Even better were the two guest presentations: the first from Jean-Paul Flintoff introducing the 1 Million Conversations campaign. “A transformative conversation may only take five minutes,” he said, brandishing a mug designed to stimulate exactly such talk. I was disappointed not to pick up one of those mugs myself – I’m sure they’ll become collectors’ items. The second presentation was by Vivian Woodell (ex-CEO) and Dame Glenys Thornton on the plans of the newly-established Phone Co-op Foundation.

The meat of the meeting was however more serious, and concerned the whole culture and strategy of the co-operative.

Part of the solution to inequality?

I moved the first motion, which noted the apparent doubling of pay differentials to a ratio of 10 to 1. I alluded to my previous jobs where pay was much more equal – above all at Suma, which now has 162 workers and has practised equal pay for upwards of 40 years. I mentioned Wilkinson and Pickett’s 2009 book The Spirit Level, which correlates income inequality with a host of social ills from obesity to imprisonment. I said how much I admired the Phone Co-op’s balanced model of development, the way it cares for members, employees and the environment, and the impressive contribution it makes to the co-operative movement. “It is indeed the inspiring ‘better model for business and the economy’ that it claims to be,” I said. I called on the board to continue their commitment to honest and open communication about recruitment – and only 2 members disagreed with that, while 89 supported the motion.

The second motion was moved by Simon Blackley, who chaired the co-op for the first nine years of its life. The motion queried the ‘dash for growth’ strategy that had been briefly set out in the annual report. While welcoming growth, he felt that the upside of the plan was unrealistically ambitious, while the downside was downplayed. That downside has already absorbed a quarter of the co-op’s reserves of ₤1m, and risks eating into the member’s share capital of ₤7m. Seeing as this capital is withdrawable, retaining the members’ trust in the liquidity of the co-op is paramount.

A credible plan?

Interim CEO Peter Murley had already given much greater detail on the new growth strategy he has masterminded since his appointment in the middle of last year. His starting point is that the co-op is “A telecoms business with a co-operative USP, not a co-operative with a telecoms USP”. He believes that the co-op has underinvested in systems as well as in people, and that it must achieve critical mass or wither on the vine. This means achieving a sixfold increase in customers and targeting the business market, which is growing four times faster than sales to individuals. This turnround requires the co-op to sustain losses of ₤2.3m before reaping the reward of much higher profits.

All business plans follow this curve, so the question is whether it is a credible projection – and whether it is fair to risk the members’ investments without a more inclusive debate. In the 3 hours at our disposal, and even by overrunning for ¾ of an hour, debate had to be curtailed. But at the vote, 79 members supported the motion, with 12 against. Some members had had to leave by then, and at least one, attending by internet, reports that he could not vote.

These two reverses leave the board, and the new permanent CEO Nick Thompson, who takes up his post on 19th February, with a tough nut to crack. One solution proposed was that the coop could issue a separate class of shares to fund this investment. Then members would be clear about the risk they are sharing. I for one would buy some.

Video of the AGM: https://www.youtube.com/watch?v=tOw0qFOk3d0 (I am on at 2:44:40)

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