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Insights and News /

01 May 2012

The entire financial services industry can learn from the example of the modern mutual

The mutual is a longstanding business model with many notable organisations of scale, profitability and high regard operating within the financial services industry. Despite such a rich history, in recent times mutuality has not been a model that the wider industry has sought to emulate. The traditional perception of mutuals is that they are slow to react, niche, operationally inefficient and offer limited financial return.

Recent public and political endorsement has come about because of the perceived benefits of adopting modern mutual principles. There are big name success stories such as The Co-operative, John Lewis and LV=, although mutuals themselves accept that the modern mutual model is still a 'work in progress'.

All Financial Service businesses can potentially benefit from improved reputation, financial performance, employee engagement and brand through the adoption of modern mutual principles.

Modern mutuality means centring the business vision and objectives around a differentiated set of principles:

  • By introducing transparency and shared reward for both customers and employees, stakeholder groups will become more invested and engaged. Staff satisfaction levels are often significantly higher in businesses that are owned, in part at least, by employees than those owned only by external shareholders
  • Demonstration of environmental and social responsibility (not limited to philanthropic giving) can enable an organisation to become highly regarded by public stakeholders, including the media and policy makers, as well as regulators
  • Financial stability and risk awareness can be enhanced by building a sustainable and responsible organisation, based onrobust processes and systems with effective governance and stewardship of assets

Whilst each principle has merit, they are most effective when they involve direct staff and consumer interaction and form a fundamental part of the organisations strategy and change agenda.

Modern mutuals have, in some regards, stolen a march over their publicly owned competitors in recent years, though this has been more opportunistic than by design. Recognising current limitations, whether perceived or genuine, and re-affirming and heralding the principles of mutuality could form a powerful and exciting proposition in the future

Non-mutuals face a significant challenge in returning to pre-2008 levels of profitability whilst re-engaging with a disaffected consumer base and improving their media and political image. Identifying, adopting and substantiating the principles of mutuality could be key to confronting this challenge

This is a contemporary subject of breadth and depth, there will be much scope to expand and share our thoughts on it as it evolves