Business – 4

What types of business model should we have in today’s society?

With multi-nationals getting bigger and bigger such that they have much power and influence over Governments with regards to employment and tax incentives, it is about time that we had another look at what models of business are best for everyone, not just the relative few millionaires.  As with the concern about companies hiding their money in tax havens, not knowing who the beneficial owners are, and issues about ethics, sustainability, the environment and provenance, there needs to be a re-think of how we do business.  Also, we need to get away from having one main employer in a town because if it closes it effects the whole community directly and indirectly.

Therefore, I believe, we should do a mixture of  models which are both ‘local’ and ‘franchised’, through employee ownership, co-operatives and social enterprises, all coming together.  Through changing to such models will help make sure that people feel part of the business, helping to make a real difference to society as well as seeing jobs becoming more interesting and satisfying, as well as better paid.  Also, most of the ‘profits’ stay in the community as they are re-invested.  It would be good also if a proportion of the income is used to help other similar organisations to get off the ground and for giving to suitable local, national and international charities that meet certain criteria.

Let us now have a look and the three models.

1 – Social Enterprises

‘A social enterprise is an organization that applies commercial strategies to maximize improvements in financial, social and environmental well-being—this may include maximizing social impact alongside profits for external shareholders. Social enterprises can be structured as a for-profit or non-profit, and may take the form (depending in which country the entity exists and the legal forms available) of a co-operative, mutual organization, a disregarded entity, a social business, a benefit corporation, a community interest company, a company limited by guarantee or a charity organization. They can also take more conventional structures. What differentiates social enterprises from other organizations is that their social mission is as core to their success as any potential profit.’

Economic criteria:

  • Continuous activity of the production and/or sale of goods and services (rather than predominantly advisory or grant-giving functions).
  • A high level of autonomy: social enterprises are created voluntarily by groups of citizens and are managed by them, and not directly or indirectly by public authorities or private companies, even if they may benefit from grants and donations. Their members have the right to participate (‘voice’) and to leave the organisation (‘exit’).
  • A significant economic risk: the financial viability of social enterprises depends on the efforts of their members, who have the responsibility of ensuring adequate financial resources, unlike most public institutions.
  • Social enterprises’ activities require a minimum number of paid workers, although, like traditional non-profit organisations, social enterprises may combine financial and non-financial resources, voluntary and paid work.

Social criteria:

  • An explicit aim of community benefit: one of the principal aims of social enterprises is to serve the community or a specific group of people. To the same end, they also promote a sense of social responsibility at local level.
  • Citizen initiative: social enterprises are the result of collective dynamics involving people belonging to a community or to a group that shares a certain need or aim. They must maintain this dimension in one form or another.
  • Decision making not based on capital ownership: this generally means the principle of ‘one member, one vote’, or at least a voting power not based on capital shares. Although capital owners in social enterprises play an important role, decision-making rights are shared with other stakeholders.
  • Participatory character, involving those affected by the activity: the users of social enterprises’ services are represented and participate in their structures. In many cases one of the objectives is to strengthen democracy at local level through economic activity.
  • Limited distribution of profit: social enterprises include organisations that totally prohibit profit distribution as well as organisations such as co-operatives, which may distribute their profit only to a limited degree, thus avoiding profit maximising behaviour.

Ongoing research work characterises social enterprises as often having multiple objectives, multiple stakeholders and multiple sources of funding. However their objectives tend to fall into three categories:

  • integration of disadvantaged people through work (work integration social enterprises or WISEs)
  • provision of social, community and environmental services
  • ethical trading such as fair trade ‘

https://en.wikipedia.org/wiki/Social_enterprise

Social Franchising

‘Social franchising is the application of the principles of commercial franchising to promote social benefit rather than private profit.

In the first sense, it refers to a contractual relationship wherein an independent coordinating organization (usually a non-governmental organization, but occasionally a governmental body or private company) offers individual independent operators the ability to join into a franchise network for the provision of selected services over a specified area in accordance with an overall blueprint devised by the franchisor. Once joining the network, operators are given the right to employ previously tested incentives including: professional training, use of brands or brand advertisements, subsidized or proprietary supplies and equipment, support services, and access to professional advice. Members also gain beneficial spin-off effects such as increased consumer volume and improved reputation due to brand affiliation. Franchisees must adhere to a range of requirements including: providing socially beneficial services, meeting quality and pricing standards, undergoing mandatory education on provision of services, subjecting outlets to quality assurance mechanisms, reporting service and sales statistics, and occasionally, paying fixed or profit-share fees.[1][5] Social franchises have been used for primary health services, pharmaceutical sales of essential drugs, HIV testing and counseling, and reproductive health services in the developing world.

A second application of social franchising is as a means of enabling social enterprises and the social economy to create more employment for disadvantaged people and achieve social aims. This is done principally by enabling joint working and knowledge sharing and transfer. The European Social Franchising Network has identified over 60 social franchises of this type in Europe, which employ over 13,000 people and more recently in 2012 The International Centre for Social Franchising identified 140. The largest of these is De Kringwinkel in Flanders employing 5,000 people. Others, like the Le Mat hotel and tourism social franchise or the School for Social Entrepreneurs operate in more than one country. Social franchising provides an opportunity to rapidly grow the sector to the benefit of disadvantaged people and society more generally.

Support Organisations

The international Centre for Social Franchising (ICSF) was founded to help replicate proven social ventures to scale. They have a number of useful resources and have published papers such as Investing in Social Franchising which looks at the viability of investment into franchised social enterprise in the UK and Social Franchising: Innovation and the Power of Old Ideas which is a comparison between McDonald’s and the social franchise Foodbank.

https://en.wikipedia.org/wiki/Social_franchising

2 – Co-operatives

A cooperative (also known as co-operative, co-op, or coop) is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise“.[1] Cooperatives may include:

Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative. The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion – which, if they were to be a country, it would make them the seventh largest.

One dictionary defines a cooperative as “a jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit, typically organized by consumers or farmers”.] Cooperative businesses are typically more economically resilient than many other forms of enterprise, with twice the number of co-operatives (80%) surviving their first five years compared with other business ownership models (41%). Cooperatives frequently have social goals which they aim to accomplish by investing a proportion of trading profits back into their communities. As an example of this, in 2013, retail co-operatives in the UK invested 6.9% of their pre-tax profits in the communities in which they trade as compared with 2.4% for other rival supermarkets.

The International Co-operative Alliance was the first international association formed (1895) by the cooperative movement.It includes the World Council of Credit Unions. A second organization formed later in Germany: the International Raiffeisen Union. In the United States, the National Cooperative Business Association (NCBA CLUSA; the abbreviation of the organization retains the initials of its former name, Cooperative League of the USA) serves as the sector‘s oldest national membership association. It is dedicated to ensuring that cooperative businesses have the same opportunities as other businesses operating in the country and that consumers have access to cooperatives in the marketplace. A U.S. National Cooperative Bank formed in the 1970s. By 2004 a new association focused on worker co-ops was founded, the United States Federation of Worker Cooperatives.

Co-operative principles

Cooperative principles are the seven guidelines by which coops put their values into practice, often called the seven Rochdale Principles:[28]

  1. Voluntary and open membership
  2. Democratic member control
  3. Economic participation by members
  4. Autonomy and independence
  5. Education, training and information
  6. Cooperation among cooperatives
  7. Concern for community

Co-operatives values, in the tradition of its founders, are based on “self-help, self-responsibility, democracy, equality, equity and solidarity.” Co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.’

https://en.wikipedia.org/wiki/Cooperative

3 – Employee-owned businesses

‘Benefits for Business

The employee owned business sector in the UK is growing because co-owned companies tend to be more successful, competitive, profitable and sustainable.

Because they’re co-owners, staff in employee owned businesses tend to be more entrepreneurial and committed to the company and its success.

Because they have high employment standards, involve staff and give everyone a stake, employee owned businesses are better at recruiting and retaining talented, committed staff.

Because they’re run in an open way, employee owned businesses tend to have a strong commitment to corporate social responsibility and involvement with the communities they operate in.

Independent research suggests that a combination of shared ownership and employee participation delivers superior business performance.

Employee owned companies are more innovative because managers go out of their way to consult, share information about the company, and give staff responsibility.

Benefits for the Economy

Successive Governments have promoted employee ownership because they recognise its potential contribution to the economy. A range of factors combine to make employee owned businesses an asset to the UK economy:

Independent research suggests that a combination of shared ownership and employee participation delivers superior business performance.

The employee owned business sector adds to the diversity of Britain’s economy by offering a vibrant and different model for achieving business success.

Companies which are employee owned, or who have large and significant employee ownership stakes, now contribute £30 billion to GDP.

The sector is growing because employee ownership is proving to be a durable, successful business model that’s extremely well suited to the challenges of 21st century management.’

http://employeeownership.co.uk/what-is-employee-ownership/employee-ownership-benefits/

Types of employee-owned businesses

‘Employee Stock Ownership Plans (ESOPs)

The main vehicle for broad-based ownership in the U.S. is the employee stock ownership plan (ESOP). An ESOP is a type of retirement plan that invests primarily in company stock and holds its assets in a trust, in accounts earmarked for employees. Plan participants do not directly own the stock and are, for the most part, paid out after they leave the company. Most ESOPs are in privately held companies, not companies that trade on the stock markets.

Equity Compensation Plans

The other main category of employee ownership is equity compensation, which refers to a grant of stock or its equivalent from the employer. A stock option plan grants employees the right to buy company stock at a specified price during a specified period once the option has vested. An employee stock purchase plan (ESPP) is a little like a stock option plan. It gives employees the chance to buy stock, usually through payroll deductions, and most often at a discount. Restricted stock plans grant or sell employees stock that they can possess only once certain restrictions (such as vesting) are met. A company may also offer an unrestricted direct grant of shares.

Creating an Ownership Culture

Companies that adopt employee ownership plans do not have to treat employees any differently than before, but it will be to their advantage if they do. Many employee ownership companies have found, and research confirms, that a more participative approach to management makes for a workplace that is not only more pleasant but also more productive; see our article Employee Ownership and Corporate Performance.’

https://www.nceo.org/employee-ownership/id/12/

Concluding Remarks

It would be great if all businesses were to become small and local with employees, locals, and customers all having a say in the way a company is operated.  That way, there would be an increase in accountability, hardly any corruption, ethics and sustainability would be central, and the impact on the environment vastly reduced.

This form of business (incorporating all three of the models above) could be used in all forms of enterprises including ownership of land and property.

For this to happen, would require a huge change in our culture, but I believe it is achievable if councils and governments got together with those that already involved in the three models to formulate a plan which would include funding and legislation to make sure standards are met.  I am sure it would also help those disadvantaged and possibly reduce the poverty that exists here and overseas.

Is there anyone out there who is willing to be a ‘champion’ for this to take place?  It will involve taking on multi-nationals and many other business owners, as well as engaging thousands of individuals who hopefully will believe in such a campaign.

 

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Business – 3

Provenance

With our ever increasing demands on the ethics and sustainability of products, both food and non-food, we are becoming more and more concerned with their supply chains.  Unfortunately, in today’s world, it is quite difficult to identify who makes what and where.  Take a food product with many ingredients like a ready meal.  Each component is made in a different place, either in this country or overseas.  For example, the e-numbers mentioned could each have come from a different source.  Taking it a step further, we do not know why the various e-numbers are needed and what effect they have on our bodies.  Then, there are the animals that are the main ingredient we need to know how they were reared and whether they meet animal welfare standards.  Or what about the vegetables – are they grown organically without pesticides.  (If they are grown with pesticides – why does one use each one and what effect they have on the plants and us?).  What about the working conditions like of the people who make the component or the whole product?  Do they meet living wage and health and safety standards? (Are those standards any good?)

Most products have symbols stating how much of your daily diet the product meets.  It also may have the amount of fat, sugar and salt content and whether it can give you energy.  It would be impossible to put supply chain information on a product, especially small things like gravy cubes.

What we need is a bar code on each product, which can be put on any product, even fresh produce, without harming the product or us.  Then, the retailer will supply a hand-held code reader to scan the bar code to show all the above information (including on the bar code itself) in plain English.  The retailer will need to make sure that all the information is up to date, correct and one could do one own traceability, if one so wished.  If one is a small business, then they will need to be part of a consortium who maintains the appropriate database.  For each product there needs to be the following accurate information;

  • for each ‘ingredient’ one should be able to trace the source along from each manufacturer involved, as well as the various transport and other stakeholders involved;
  • each business or individuals involved, one knows who the beneficial owner is, along with details of working conditions (pay, environment, health and safety, whether children are involved, and their environmental impact);
  • details on fat, sugar and salt content, as well as how it meets one’s daily nutritional requirements, and how it affects one’s body by saying the maximum one should eat, drink or use it;
  • there should also be information on the packaging as to whether it is recyclable, as well as its provenance;
  • advice on product waste and whether it can be recycled, and if not how to dispose of it in an environmentally-friendly manner;
  • links to the law on the products, and standards for the product’s industry, and whether the various stakeholders in the supply chain are meeting them.

To make sure that there is complete provenance in each industry, one will need to write to our MPs and Governments to encourage them to insist that all companies publish their supply chain information on a central database to increase transparency and improving the quality of goods sold.  Also, we should be talking about it on social media, including leaving messages on the various manufacturers’ website and other sites.

By insisting on this transparency, it will lead to making sure that animal welfare standards are maintained and overseas workers are treated properly.

A few links for further information:

https://www.provenance.org/

http://www.foodqualityandsafety.com/article/provenance-britains-form-transparency/?singlepage=1

http://fcpacompliancereport.com/2010/10/provenance-in-the-supply-chain-transparency-and-accountability/

https://hbr.org/2010/10/the-transparent-supply-chain

Business – 2

Every now and then there is a big row about someone’s income or bonus.

I think that we need a change of culture about money.

The fact that someone has ‘earned’ a lot of money says that the ‘customer’ has been overcharged along the way or as ‘buyer’ the business has underpaid a supplier. These questions need to be asked as they affect the cost of living for the vast majority of people, and in some cases as to whether they survive or not.

Take for example footballers. Part of the reason they get large sums is that their career as a footballer is short, due to either injuries or age, but yet they still don’t need that sort of money, as they can get another job after their time is up in that sector. These high salaries mean that the clubs have to charge large amounts of money for the fans to attend matches.

Another example is with the supermarkets and suppliers. Because they buy in ‘bulk’, suppliers are often at their mercy over prices paid. In some cases this causes them to go bankrupt eventually and the supermarkets then have to go overseas. And this happens in all sectors.

Then there is the issue as to why someone needs so much money. And from that is the ‘ethics’ of what one does with all that money. Is it all about self, or is it about using it to serve and help others less fortunate than you? If it is about self, it shows how deep one’s insecurity as they are ‘worshipping’ money and never will have enough as one’s desires get greater, the more one has. Then there is the curious situation where senior staff are paid bonuses, even when a business makes a huge loss!

Maybe, we need legislation to change all this, and not just in the area of taxation like getting rid of tax heavens. Being a generous person that I am, maybe a limit of £1 million a year should trigger a situation whereby any income from whatever source above that amount should be re-distributed to charities, or setting up of businesses to create jobs which are creative, enjoyable and well-paid (especially overseas). Maybe, bonuses should only be paid if the company makes an actual profit after taxes. What about reducing prices! I am sure others have other ideas – do let me know about them.

Business – 1

There is often talk about creating new jobs by the business world, the governments of the day, trade unions and the public.  But, the real issue is about what sort of jobs, and more importantly, what sort of businesses we should have.  For if we do not get that right, we will continue to have recessions and the gap between the rich and poor will grow wider which does not help anyone.  So, I would like to suggest that all businesses, large, medium and small check themselves against the following possible criteria as to whether they are likely to last.  Obviously, more work needs to be done in this area, but I hope it starts the debate rolling.

1. Is the business ethical?

This area covers honesty, morality and integrity.  Are the finances transparent? Is the business above board in all areas of its work, even if competitors gain an advantage?

2. Is the business environmentally-friendly?

Does the product/service have an impact on the environment and the local community, if so, does the business take appropriate actions to mitigate it? Does the business operate to ISO standards in production, property and services?  Are local ethically-sourced products and services used and activelly supported?  Can the products they make be recycled into other products when no longer required.

3. Is the business owned equally by employees, customers and other investors?

Are customers and employers encouraged to participate in decision-making processes?  Is each multi-site business unit manageable and distinctive in its own right?

4. Is the business model sustainable for the long-term?

Is the business model based on long-term sensible profits at a level that is sustainable and most of which are re-invested in the business and the community?  Are the products or services of such a nature that they are adaptable to changing situations and markets?

5. Is the business model based on quality, sensible prices, transparency, service and longtivity?

Are all products made using high quality materials, ethically and environmentally-sourced, that will last a life-time.  Is the customer service based on a life-long relationship, which is genuine?  Are they charging fair prices and is the business transparent in all its dealings with its stakeholders?

6. Is the business based on relational principles?

Are all employees treated equally and fairly in terms of pay, conditions, health, safety, and well-being?  Is the business based on mutual relationships between suppliers, customers, employees, and the local community?  Does the business collaborate with other businesses so that competition is not intense or under-hand?  Businesses do not seek to close down other businesses or provide over-competition in any locality or area of business.  Pay for senior staff is no more than 10 times the trainee non-managerial member.

7. Government support

Government to encourage an even spread of these businesses across the country, particularly in areas of high unemployment, and where various ISO standards are met, bureacracy and legislation is eased.  ‘Beacon’ status is encouraged whereby such businesses help others, through mentoring relationships, get established.