· 2 min read · Features

What next for the Co-op?

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It’s difficult to read the news of developments at the Co-operative bank without a sense of disbelief at an organisation of such scale and stature getting itself into such a mess. Where the Co-op goes from here is very uncertain.

Comments from the outgoing CEO, Euan Sutherland, about the organisation being essentially “ungovernable” are likely to make finding a replacement difficult. Interim CEO Richard Pennycook has enough of a job on his hands simply to quieten down the noise and get the business back on an even keel.  

What conclusions we can draw from this experience?

The Co-op looks like an institution past its sell-by-date. It is a sprawling collection of unconnected businesses that has more in common with the conglomerates of the 1980s than the highly-focussed businesses of today. Food, banking, travel, funeral care and even car dealerships are all loosely linked under a promise of “here for you for life”. The recent bail-out [or bail-in as it is described to distinguish between private investment rather than public support] of the bank demonstrates the challenges faced by these very different businesses.

The balancing act that all businesses have to manage to satisfy the requirements of their stakeholders is one of the biggest challenges facing leadership teams today. The CEO is inevitably the central focus of the stresses and strains that this brings about and it can be a lonely and difficult place to be. The unflinching commitment and support of the board to the strategy developed by the leadership team is a fundamental requirement for that team to be successful. Where different agendas exist, purposeful change is nigh on impossible. 

The handling of the CEO’s salary package did not help. No public company today could appoint a CEO without the details of their package being known to all. By not following this convention the Co-op left itself open to criticisms of a lack of transparency. 

Senior appointments and lack of diligence

And what about the specific challenges the Co-op has been facing around making senior appointments? I have to question the quality of the due diligence undertaken by all parties in advance of some of these critical senior appointments.

It did not take much digging after the event to have serious reservations about the competency and suitability of Paul Flowers. The questions around whether he had the right level of knowledge to be the head of a banking business are completely over-shadowed by whether he was a suitable person to hold senior office at all. Why wasn't this apparent before his appointment?

It was surely no secret that the Co-operative Group structure was unwieldy, eccentric and likely to be difficult to navigate. Nothing has happened in the last year to make it any more ungovernable – if that is what it is – than a year ago when Euan Sutherland was appointed. Was it really a surprise that the organisation was not structured in a way that would enable him to make the changes he felt were needed? Did he not get the assurances from the board that they would support his objectives to change the governance structure if that were essential? 

Hindsight is a wonderful thing but rigorous selection criteria, proper due diligence, clarity of expectations on all sides and a clear, united commission from the board would seem to be the minimum requirements for successful appointments at this level. My main feelings are for the employees, who are no doubt embarrassed by how the leadership set-up has failed them and uncertain about their future. A large dose of humility, common sense and clarity is urgently needed.

Dennis Kerslake is a mentor at Merryck & Co, which specialises in business leader mentoring