What the Finnish experience can teach the UK co-operative movement

Co-operation was born in Finland from a survival instinct. While the first indications of co-operative models go back to the 16th century, the nation’s first co-op was set...

Co-operation was born in Finland from a survival instinct. While the first indications of co-operative models go back to the 16th century, the nation’s first co-op was set up in 1899.

With the average adult being a member of two co-operatives, Finland is, arguably, one of the most co-operative countries in the world. Finnish retailers are market leaders with over 44% of the market share, but co-ops exist in other sectors, such as banking, tourism, insurance or agriculture.

“It is in our nature to work together,” explains Anu Puusa, professor at the University of Eastern Finland’s Business School. She was a keynote speaker at the UK Society for Co-operative Studies annual conference in Newcastle.

In her presentation, Prof Puusa explains how Finnish people started co-operatives centuries ago out of the need to face common challenges. They started cultivating land and harvesting together, which laid the foundations for the co-operative enterprise model.

In the late 19th century, Hannes Gebhart, considered the father of the Finnish co-operative movement, began promoting co-operatives to address problems in rural Finland.

“He was educated and had been travelling around in England, Germany and Ireland. A few others before him had tried to promote the idea and weren’t successful. But he was very knowledgeable and was able to give examples of successful co-operatives elsewhere,” adds Prof Puusa.

Finland was part of the Russian Empire at that time and the co-operative model was seen as a means to bring people together and assert a common identity. During these turbulent times co-operatives took different sides, which cause division within the movement. Ever since they have sought to stay politically neutral to avoid division.

“Hannes believed that the co-operative movement would unite the nation against Russification and enforce a Finnish mentality, creating an identity. The time was right; it was a matter of becoming independent and enforcing the national identity. What is distinct in comparison to other countries is that the forces promoting the idea were very strong.

“But it is not a matter of survival anymore, and we are facing the dilemma of how to educate young people about co-operative ideas. When they learn about co-operation they are attracted by it, but co-ops nowadays have to figure out what makes them distinct. In the past, there was a factual need. Today the need is there, but not so self-evident anymore.”

Since its beginnings, the Finnish co-operative movement has had to overcome multiple barriers, surviving two world wars and a civil war. And Prof Puusa thinks the Finnish experience can serve as an example for other countries.

She highlights some key points from her research, which, she says, could serve as lessons from all co-ops.

Her first tip is to understand and honour the dual role of co-ops: meeting the needs of members and being a successful business.

“There is a misunderstanding that a co-operative should not aim at making a profit – that is not true, they have to make profit,” she says. Finnish retail co-ops were slow to urbanise, being faithful to their rural roots. This means that when they started opening stores in cities, they were behind competitors. “People [in cities] didn’t know about co-ops, it was no longer a natural way of living, so co-ops instead wanted to emphasise they were as good as any other retailer. They forgot the ideology, and focused on the business role. Only now they are finally finding the balance,” she said referring to the experience of Finland’s S Group (SOK).

Founded in 1904, S Group is a retailing co-operative organisation consisting of 22 regional co-operative enterprises and 13 local co-operative enterprises, which together have around 1.7 million members (2007). SOK Corporation, which is owned by the S Group co-operatives, provides central service functions.

The role of subsidiaries is important, says Prof Puusa. She highlights the need for a “healthy” relationship between local co-ops and subsidiaries and the central organisation. “Nowadays S Group is providing regional consumer co-ops a lot of benefits in terms of logistics and markets, but in the past the relationship was unhealthy. In the 1960s locals didn’t feel they needed to be profitable because SOK would save them. Local co-ops may even start competing against each other or act against each other’s interests. Similarly, the central co-op sometimes might forget their role is to support the local co-ops,” she explains.

Another lesson from the Finnish experience is that members should be at the core of the business, says Prof Puusa. She adds that in Finland members pay €100 to join a co-operative, but the benefits they receive after joining total €200. “Co-ops cannot exist for themselves, they have to exist to serve the members. In the past, co-operation was a necessity, now the question is what makes them relevant.

According to Prof Puusa, successful co-ops also need managers who understand the dual role of the business. “Our history shows that concentration of power should not be typical in co-ops.” She explains that co-op managers need to have the required competence to run the business but also be familiar with the co-operative model. “But how can they get that information of the co-operative model is not taught in schools anymore?” she asked.

Three weeks ago, Prof Anu Puusa was awarded a national Teacher of the Year prize for combining teaching and co-operating with businesses. The award recognised her course on co-operative enterprises as a positive case study. The course has been running since 2012 and is a result of a collaboration with consumer co-ops.

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