Professor of Strategic Management Michael Mol gives expert comment on Lord Myner quitting the Co-operative Group:
“The Co-op Group has been facing lots of headwind due to some really poor decision-making. In particular the acquisitions of Britannia, now Co-op banking group, and the Somerfields supermarket chain have not worked out well. There is lots of evidence from academic research that most acquisitions fail and that most efforts at diversification fail, so Co-op Group was never going to find it easy to succeed with these acquisitions. We also know that the chances of success with acquisitions and diversification increase with prior experience and strong management. The Co-op group had neither at the time it made these acquisitions and therefore lacked a platform to successfully integrate Britannia and Somerfields.
“The co-operative structure of the group is not in itself a problem, as around 165 successful years of Co-op Group in the UK have proven. If anything there are probably other areas of the economy, such as the railway system, where a co-operative structure would be beneficial. But the indirect, layered manner in which the Group appointed people to the board meant that it did not necessarily put the most talented and experienced people in charge of the Group as a whole. It is highly questionable whether these acquisitions should have occurred in the first place, and once they had taken place much stronger implementations skills would have been needed.
“Given where the Co-op Group is now it would be wise to implement some of the recommendations made by Lord Myners in his report, such as a smaller and more professional board. It should also consider running its businesses, many of which are successful, on a more stand-alone basis. As the example of Mondragon Group in Spain shows, it is then possible to let parts of the group go bankrupt without the overall group being affected too much. Furthermore there is room for the Co-op Group to be run as a more direct democracy. By using internet-based voting systems Co-op members could directly appoint board members and take major decisions such as whether to acquire other firms, circumventing the fiefdoms that now exist in parts of the group.”
To speak to Professor Mol, contact Ashley Potter, Warwick Business School, Press & PR Officer, +44 (0) 7657 3967, +44 (0)7733 013264, Ashley.email@example.com