Dynamic governance in UK co-operatives – a rolling review

At the time of writing in early 2019, we are experiencing a rise in interest in the use of dynamic governance also known as Sociocracy in UK co-operatives.

UK Co-operatives currently implementing/exploring sociocracy:

• Unicorn Grocery (worker)
• Green City Wholefoods (worker)
• Equal Care Co-operative (multi-stakeholder)
• Organic Lea (worker) - although they probably wouldn't describe themselves as sociocratic.
• Outlandish (worker)
• Bristol Cable
• Platform 6 Development Co-operative (added July 2019)
• Ethical Consumer Research Association (multi-stakeholder - added by MG 2020)

The drivers for this interest in sociocracy include:

• The growth of distributed co-operative enterprise (particularly platform co-operatives) where the members may never physically meet. This creates a need for systems to ensure efficient accountability, communication and decision-making.
• The growth of co-operatives in the tech. sector, which are using methodologies such as Agile and Lean around the development of the software products which they then apply to their own management and governance.
• The perception of a break-down in efficiency of both management and governance function in long-standing worker co-operatives due to their growth in number of members and turnover.
• The resurgence of co-operative approaches to neoliberal capitalism – those looking to recreate commons and take control of livelihoods, wish to hard-wire their aspirations around reducing inequality and “walk the walk” - these models particularly enshrine workplace democracy.
• The emergence in 2014 of of Sociocracy 3.0 a body of Creative Commons licensed resources around sociocracy, agile and lean methodologies.
• The creation of the organisation Sociocracy for All. Earlier sociocracy practitioners were proposing something akin to an organisational operating system, which simply needed to be implemented. This approach also led to commodified versions such as Holacracy. Sociocracy 3.0 rather defines a series of principles and tools, which are being used and evolved by a worldwide community of practice, which includes many organisations which are not co-operatives.
• The growth of co-operatives that promote and market products that facilitate decentralised organising. A good example would be multi-stakeholder co-operative Enspiral that developed Loomio in order to facilitate their decision making.
• A revival of interest in the co-operative world of the work of Stafford Beer and the Viable Systems Model (VSM). Some consider VSM, which simply aims to increase organisational efficiency by learning from natural systems, to be the pre-cursor of sociocracy. VSM replaces hierarchy and authority with participation and feedback. Jon Walker (ex Suma and Out of this World) has created a VSM Guide, which includes case studies of co-op instances of VSM including Suma in the mid 1980s.

Further reading:

• Sociocracy - Wikipedia

The video below explains Sociocracy from the point of view of Sociocracy for All, describing both the structures and decision-making process.

Traditional Co-op Governance
Co-ops (or at least Company and Society models) are comprised of their members who meet at least once a year in General Meeting (GM) to hold the Board to account and elect that Board. The members in GM have reserved powers around changing the constitution and winding up the organisation. Members of the co-op can vote in their own interest at GM.

The Board have delegated powers from the members - all powers apart from those reserved to the members. The Board is elected by and from the membership and is accountable to them. The board has the power to create sub-committees which are accountable to the Board. Board Members (Directors) have additional duties in law by virtue of the trust placed in them by the members. They have to act in the best interest of the co-operative rather than their own or that of any particular section of the membership.

In a collective structure, all Members are also Directors with the legal duties of Directors.

Some co-operatives also have an executive function separate to the Members and Directors. The executive is responsible for the management of the organisation and the implementation of the strategy owned by the Board. The Chief Executive is generally the link beween the Board and the Executive.

Sociocracy in UK co-op governance - initial thoughts

The greater distribution of power within groups and the use of consent based decision-making are certainly consistent with co-operative principles, and it would be perfectly possible to implement many of the decision-making processes without the circle structures. There may, however, be some clunkiness around fitting the use of circles to UK co-operative and corporate law.

Sociocracy uses circles to represent regular meetings of people associated with different areas (both strategic and executive) within the organisation. Circles can have subsidiary circles in the way that most Boards can have sub-committees. Sociocracy also has a double-linking of circles - a parent circle appoints a representative to a sub-circle and the sub-circle appoints a representave up to the parent circle. All circles are co-ordinated through a central circle from which all other circles radiate.

The interesting conundrum then becomes - where do the general meeting and the Board meeting sit within this arrangement of circles.

There are various options:

Option 1 - The Board is the Central Circle

Pros:

• This may fit with how worker co-operatives are already functioning.

Cons:

• The Board should be elected by the members of the co-op rather than comprised of appointees from other circles. It might be possible for the GM to approve appointments as a way around this.
• Depending on the co-op, it may be that it is more appropriate for the day to day executive function to be separate to the traditional strategic oversight function in order to allow oversight. Making the Board the executive co-ordination focus runs contrary to this.

Option 2 - The GM is the central circle

Pros:

• All members involved in the activity of the co-op.

Cons:

• Inconsistent with the double-linking and appointment from sub-circles to central circle as all are members of it anyway.
• Election of Board (even as sub-circle) is inconsistent with double-linking.
• Blurs the distinction between strategic (systems 4&5 in VSM) and executive (systems 1,2,3 in VSM) functions.

Option 3 - The central circle is a collective CEO

Pros:

• Allows the central circle to concentrate on operational co-ordination and be the interface of that separate system with the strategic oversight of the Board. The membership could be the parent circle of, and with multiple links to the Board circle, which then interfaces with the general circle - a collective CEO.

Cons:

• It still requires the breaking of the double-linking in order for the membership to populate the Board with Directors.

Further thoughts:

1. Whatever is implemented must be consistent and coherent with the constitution of the organisation.
2. The members of the Board cannot delegate their duties as Directors.
3. The General Meeting can only delegate powers to the Board.
4. The Board can further delegate powers.
5. There needs to be direct inter-circle communication without routing through the central circle.
6. All circles need clear terms of reference.
7. Members need to easily understand the system and how they relate to it.
8. I think it is necessary to maintain the traditional separation of strategic and executive function. If so, then building on that separation and depending on the scale of the overall entity, could there be different domains, within which circles can operate, with the central circle in each domain being different (General Meeting, Board, Collective CEO)? Perhaps this ducks the question at the heart of it which is how coordination happens.
9. It may be necessary to break the "law" of double-linking of circles to ensure coherence between sociocratic and co-operative models.