A viable system? Why seven is the magic number when it comes to governance

It worked for Suma, but could it work for the Co-operative Group? As the organisation goes through governance changes with the implementation of the council and the building...

It worked for Suma, but could it work for the Co-operative Group? As the organisation goes through governance changes with the implementation of the council and the building of a new grassroots level to replace area committees, Dr Jon Walker believes the viable systems model (VSM) would enable the Group to negotiate its difficulties, increase efficiency and become more relevant to its members.

Jon Walker
Dr Jon Walker believes VSM would enable the Group to negotiate its difficulties – although it would require radical changes

Dr Walker, who has been working with co-ops for 30 years, says the Group needs to make its operations, including shops, funeral homes and travel agencies, far more autonomous. It must empower members, store managers and staff to make decisions about how local branches are run and central management must serve these operations, helping them work together rather than telling them what to do.

“The traditional hierarchical view is everywhere,” Dr Walker says. “The assumption is that managers are smarter, so they have to tell the workers what to do.

“As a co-op, the Group is there for its members. It’s about local autonomy. The higher you go up, the more of a service you should be providing.”

The late Stafford Beer developed VSM in the steel industry in the 1950s, where he found structures based on local autonomy in small groups could lead to more effective working practices. Dividing larger organisations into autonomous bodies that worked together allowed participation to continue and extend, he said.

“The organisation becomes an expanding, interconnected system,” Dr Walker explains. “VSM offers an alternative to the usual approach, which depends upon hierarchy, authority and obedience. It’s of particular interest to enterprises looking for ways of becoming more efficient by encouraging participation and democratic work practices.

“Currently applied in large corporations in central Europe and North America, it has a long track record of making enterprises more efficient and more profitable. But it’s in the co-operative sector that it could make the greatest impact.

“Worker co-ops are doing exactly the right thing. If you can build upon that base you can create extremely efficient organisations which come back to self-actualised people who are given the space to do what they know.”

Dr Walker says that in informal groups, participatory decision making breaks down when numbers grow beyond seven. “Some worker co-ops decide they’ll never have more than 10 people because they don’t want to deal with these issues. But VSM gives you a way of introducing structure to make it work in large organisations.”

He introduced VSM at worker co-op Suma while he worked there during the 1980s. At the time Suma comprised about 35 worker members and was growing rapidly.

Dr Walker remembers: “It was un-coordinated. Some departments had emerged, in transport, manufacturing and warehousing for example. There were two committees which considered financial and personnel matters. But the entire membership was supposed to stop work every Wednesday afternoon for a management meeting.

“As Suma’s only recognised decision-making body, this meeting dealt with all departmental and policy issues, as well as ratifying the committees’ recommendations.

“Agendas got longer. Less was done. Arguments were common. People didn’t like to have specific departmental matters voted on by the entire membership.

“Members were boycotting meetings and taking decisions outside the formal structures. Some wanted to move towards a hierarchical structure. The feeling was, ‘for a bunch of hippies we’ve done quite well but let’s get some proper management in’.”

Stafford Beer, who developed the viable systems model in the 1950s
Stafford Beer, who developed the viable systems model in the 1950s

Looking for an alternative, Dr Walker wrote to Stafford Beer, then based at Manchester Business School. Beer shared his theory with Dr Walker and other Suma workers and they formed an ‘autonomy group’ which began working to transform Suma.

“We had a clear framework to work autonomously, for example in warehouses or sales,” Dr Walker says. “The operations defined their own functions and set their own targets.

“Accountability is a fundamental principle. Usually it’s a control mechanism, but from the point of view of VSM we first need to demonstrate to ourselves that we’re doing the right thing, then communicate to the wider organisation. If we don’t, rumours and innuendo can get out of control.

“We measured performance in a co-operative way, not a hierarchical way, in words you’d use down the pub: ‘I’ve bagged three tonnes of muesli’ or ‘I’ve done 57 drops’. You don’t want too much bureaucracy. Then you start publishing it.”

The autonomous groups had the chance to develop their skills and take control of working practices and personnel matters. Dr Walker says: “This is supported by ‘metasystems’ that hold the operations together, providing co-ordination and synergy, balancing centralisation and decentralisation.”

Suma has grown to become the UK’s biggest independent wholefood wholesaler, employing 200 workers including 137 members and reporting profits of almost £1m in 2013. Today, its elected management committee implements decisions made at general meetings, but day-to-day work is carried out by autonomous teams. It still has no chief executive, managing director or chair.

“Hierarchies work in stable environments, but as soon as an organisation has to respond to challenges and a hostile environment, you have to give autonomy to the people on the frontline,” says Dr Walker.

“It’s no good saying, ‘if you’ve got a problem ask my boss’. You’ve got be nimble on your feet to respond quickly and effectively.

“Whether it’s a worker co-op or the Co-operative Group, the patterns and principles that connect the parts of an organisation are the same.”

The Co-operative Group has over 2,800 food stores with over 62,000 employees. Its food business alone turned over £7.2bn in 2013. “If you were designing the Group from scratch you’d start with the shops and make them as autonomous as possible,” Dr Walker says.

“The shop manager would plan sales, based on local knowledge. You’d have regular meetings with the community and give local people a say in how the shop runs.

“The Co-op is far too centrally controlled. When you talk to shop managers and staff it’s clear they have no control over what happens in their own shop. You get the Co-op selling meat pies in competition with the main employer in town, a meat pie factory. Staff understand the local environment, and need more say rather than being dictated to by centralised policy decisions. That means listening to members and having the autonomy to act.”

Establishing the co-operative buying group was sensible, he says, but adds the Group threw the baby out with the bathwater by taking other management functions into central control.

“In VSM terms, that was a huge mistake,” he says. “Centralisation at the Co-op has been going on for decades. It’s been seen as the answer to everything.

“It’s why the Group has missed opportunities in local food which could – before the sell-off – have been provided by its extensive farming section. What’s needed is a balance between centralised buying, marketing and distribution and locally controlled businesses.

“For the Co-op, adopting the VSM would be a huge policy change requiring participation and self-organisation at every level. The only way to reorganise effectively is to completely rethink the organisational paradigm. Rather than having strong central bosses who are supposed to control everything, we need to develop self-managing working groups, and then build up to provide the synergies and co-ordination which bind groups of autonomous shops into a larger system.”

He adds: “Federations like Emilia Romagna in Italy show how effective this approach can be. But as long as the old paradigm dominates, shop staff expect to be told what to do and members have virtually no say in how their local shop functions, it remains a utopian dream.”

In this article

Join the Conversation