Ben Telfer:

Hello everybody, and welcome to today’s virtual session. Delighted you could join us today.

For the next hour, we’ve got a very interesting topic. We’re hopefully going to provide some answers to a question that we get asked quite a lot at ICMIF: For mutual and cooperative companies, how do they demonstrate the full value of their mutuality, of their cooperative identity, when traditional KPIs and financial metrics only capture part of the picture and don’t really show the true uniqueness and strengths of the mutual cooperative insurance model?

We’re very pleased to be joined by Alastair. I’ll introduce him properly in a second, from Economics of Mutuality Alliance. They’re going to explore how mutuals can redefine what good performance looks like, and how embedding mutual purpose at the heart of their performance can make a difference.

Alastair will talk through the Economics and Mutuality framework, which his organisation has developed to enable organisations to manage and measure multiple forms of capital: financial, social, human, and natural.

Alastair Colin-Jones is Executive Director of Mutual Values Labs, which is part of Economics of Mutuality Alliance. Alastair will explain the framework and structure of Economics of Mutuality and Mutual Value Labs. We’re excited for him to join us and present a framework for how holistic performance metrics can strengthen strategy, decision-making, and stakeholder relationships for mutual insurance companies.

Today’s session will include an introduction to this concept and framework. We’ll have an opportunity for questions and answers, and hopefully also open the floor to other organisations within the room for a chance to share experiences and insights about how you approach the holistic measurement of mutuality within your organisations.

Alastair, thank you for joining us. I’ll hand over to you to share your screen with the audience.

Alistair Colin-Jones:

Thanks, Ben, and thank you all for joining on a Monday. It’s great to be with you. As Ben said, I’m the Executive Director of Mutual Value Labs, which is part of an alliance of four different organisations exploring how you can put mutuality into the core of your business model.

Often, this kind of work is called purpose work. It gets pulled into discussions about ESG and sustainability, but we are really pushing forward the language and thinking of mutual value. Given your membership of MIF, I’m sure you’ll find the language and mutual value compelling and one that you probably already use within your own organisation. Hopefully, you don’t mind us elaborating on that in our own way.

I’m going to share a case study of some work we’ve done, but before we dive into that, just to take a step back: The temptation with measurements and metrics is to start getting into the fine detail without orienting ourselves on the why and the what. We just begin to start doing the how kind of questions, and that can be true of purpose work in general and the mutual value creation space that we’re a part of.

What we’re seeing in the sustainability world over the years is more of a kind of hyperactivity—a lot of work going on, but it doesn’t really scale. We’re not quite sure of the impact, but isn’t it better that we’re just doing something rather than nothing? Actually, we’re reaching a time where we’re talking about green hushing and greenwashing, where that hyperactivity around sustainability work and purpose-led work is now becoming counterproductive.

In Ben’s introductory remarks about your work, it also makes it harder for your genuine, deep, mutual-based business model to come to the fore when there’s just a lot of noise around positive impact and so on. So I think we’re at a really interesting inflection point for the quality of this kind of work.

That’s why we like to say that mutual value creation should begin with this one statement: it’s a better way of seeing and doing business. You don’t need to overcomplicate that. I would say mutuals are just a better way of seeing and doing business, but the temptation of the business leader is to focus on the verb “doing.” So let’s just keep doing more, right? We don’t need to worry about whether that’s having an impact or whether it’s the right thing or the optimal strategic activity that we could undertake, as long as we’re doing something.

Then what happens is you have Paul Pullman go to a UN event and say we’re $30 trillion short of achieving the SDGs. Meanwhile, in our work, we’re seeing cocoa farmers, Mars, Mondelez, and Nestle pay the same NGO to do exactly the same sustainability program within 25 miles of each other.

My personal story in this work is that our methods are grounded in discovering what’s going on within a community so that businesses can solve it. I was on the ground in the Ivory Coast a few years ago, interviewing farmers of one of Mars’s largest sustainability programs, where a farmer was receiving training on good agricultural practices in the hope that he would run a more productive farm.

To reach that training program, he had to travel quite a long distance away from his farm into the nearest town. I asked how long he was in town for, and he said, “I’m here all week.” I said, “But the training’s just a day, so why are you here all week? Don’t you need to get back to the farm and put all of these things into practice?” He said, “Yeah, but I’m going to another training course tomorrow.” I asked, “What’s that on?” He said, “It’s the same one.” And the day after that? “Another training program.” Let me guess, it’s the same one? “Yes, it’s the same one.” Why are you doing the same training program three days in a row? “Don’t you need to get back to your farm?” “Yeah, but I get a free lunch and I get free fertilizer. Once I have those three times, I’ll go home.” It was Mondelez, Mars, and Nestle running exactly those programs.

So the doing doesn’t necessarily mean that we’re doing better business; it just means that we’re doing more. What we want to do, and what every business leader needs to do, is ask themselves: How can I improve the quality of my seeing so that I can improve the quality of my business? Doing doesn’t necessarily mean that you do something better; you could just be doing the same bad thing over and over again. But if you take the time to see better, you might end up doing better.

What do we mean by that in terms of a model? We think that what we’re seeing now is this evolution of doing well and doing good. We’ve had this shareholder value moment that has really dominated the way businesses have talked to one another, defined success, and engaged with their value chains. I think that’s moved on. The way they can augment the negative impacts they have is through CSR programs. I think we’re quite firmly entrenched in stakeholder value now rather than shareholder value. So a company is now recognizing that it has to serve stakeholders that aren’t just its shareholders—the environment, communities, governments, you name it. It has to serve those and be able to articulate value to them. That’s where we get our ESG work, our sustainability work.

If you know Michael Porter and Kramer, they’ve come up with this idea of creating shared value. The classic definition within this stakeholder value moment for business is in the ESG definition, which is to look at the non-financial drivers that are financially material to your business. So this is where we get the acronym soup of all these organisations saying, “You need to measure these things and you need to deliver. You need to be able to show your progress on these non-financial metrics—on social, governance, and environmental sides.”

But we think that actually this is just creating yet more compliance burden and not actually offering a strategic way forward for mutual value creation. There are two reasons for that. The first is that it hasn’t opened up the scope for innovation on the value creation side. Why? Because rather than treating the problems of people and planet as an opportunity to solve beyond simple financial measures, it actually reduces them back to financial measures. So that’s the bit that says, “What are the non-financial topics that are financially material?” If they’re not financially material, they’re not worth looking at or measuring. So rather than broadening your strategic scope of value and the value you can engage in and create, you actually worsen it because you turn the non-financial topics into financial ones.

The second reason is because of the last bit of that definition of ESG: financially material to whom? To the firm. So rather than the firm seeing itself as a collaborator and a co-creator within a wider system of stakeholders, it maintains its dominance at the centre of the system. We all like to use the language of systems thinking, but actually what happens is companies treat their stakeholders in very bilateral ways—this is my corporate affairs message to the government, this is my climate message for environmental groups, this is my social message for human rights groups. Rather than creating systems that could be greater than the sum of their parts, it puts itself at the centre and reduces the systemic element back to a series of bilateral relationships.

The evolution we want to create, and are continuing to do with large multinationals like Mars, is to make two fundamental shifts in thinking around value creation. The most obvious one is that rather than the firm being at the centre, purpose goes at the centre. The firm just becomes another member of a system. When we say purpose, we mean that the firm needs to begin to engage with the idea that the purpose of a corporation is not to maximize profits for distribution to shareholders, but to solve the problems of people and planet profitably, and not to profit from causing harm to people and planet.

So this kind of innovative, problem-solving engine, we like to say, goes alongside the “no harm” component. If that’s the purpose of your organisation, what’s the problem your organisation wants to solve? When you’re a large organisation, like Mars, you might be the largest buyer of cocoa in the world and therefore can influence smallholder communities. But in Mars’ case, it also has extended distribution channels into some of the poorest places on the planet—slum areas and inner-city urban areas—where it could also have an influence.

So that ESG question of the non-financial topic—what are the non-financial issues that are financially material to my business—doesn’t open up the full spectrum of these opportunities. What we’re saying in mutual value creation is: What are the problems of people and planet that my business is material to solving? That’s the decentred view that purpose brings you, so you can begin to show up in strategy meetings in the way you think about the value creation potential of your business through the lens of being outside the centre of systems, but actually material to solving a lot of problems of people and planet.

One for the discussion later: What are the problems of people and planet that my business is material to solving?

The second thing we do is deliberately want to participate as systems. We often get accused of peddling the myth around purpose and profit. In the end, it’s all about money, isn’t it? It’s not that often that you can deliver purpose and profit together. There’s a truth in both sides of that. If you just think you can do good and make money and it’ll be very easy, that’s wrong, that’s misled, because the system doesn’t work toward those kinds of outcomes. It does put money first. But if you actually work within systems that are decent, where you’re creating shared outcomes and shared targets, you can begin to orchestrate systems that are greater than the sum of their parts and able to produce these outcomes. In that case, it isn’t wishful thinking and hoping beyond hope that you can combine profit and purpose. You can do both, but you need to take some of those steps.

There are three shifts that we argue need to be made to unlock this mutual value creation mindset. The first is to go from being company-centric to being purpose-centric. The second is to go from transactional value chains to mutual value ecosystems. Stop thinking about just the areas where you are contractually responsible because there are stakeholders within your supply chain or value chain, but actually begin to recognise the many systems that you’re a part of and see them as value creation opportunities.

The last one, which is absolutely critical and why ESG is not the solution to our measurement woes or what we want to accomplish from an impact perspective, is because we need to shift away from seeing money as the dollar value that we need to provide—whether we’re measuring social capital, natural capital, or human capital—and into a world where we allow the capitals to speak of the value in their own right. So we don’t put a dollar value to trust. For us, trust would sit under social capital, and there’s a lot of pressure to turn that into an integrated reporting card that says trust has a dollar value of X hundred million. Similarly, there’s pressure to turn human capital or employee wellbeing—something we would fit under human capital—into a dollar value of a happy workforce.

What we’re saying is that rather than feeling the force of needing to turn these into dollar values, we should begin to see them as valuable in their own right, but recognise that there are investments and costs associated with creating those. They can just be seen in the overall financial performance of the firm when you begin to integrate them in the overall picture of success, rather than treating them as isolated metrics.

That’s the case study I want to share with you this afternoon: how you can take what is at core a non-financial metric, or at least a metric that involves non-financial components, and treat it as the core metric that begins to define the performance of the firm overall. We’re not trying to make the separation of financial and non-financial and calculate a dollar value, but actually, when you look at how they enrich each other, you have a fuller picture of the performance of your firm without needing to reduce it to a dollar value.

This case study will walk us through those shifts. This is a large financial services organisation based in the UK that we’ve worked with for the last three years. They’re intent on getting this mutual value picture right and putting their purpose into practice. There will be plenty of applications across businesses, whether that’s insurance, etc. It is a commercial retail bank rather than an insurance firm, and it’s not a mutual, so they’re not on the call right now.

The result of our mutual value work with them: Step one, from being company-centred to being purpose-centred. This is probably a mind map that many of us have of how a business works. We have some kind of goal, whether implicit or explicit. This is probably true for just about every firm: they want to be the leading whatever it is within their industry or geography. That’s another way of putting themselves at the centre and saying, “Here are the stakeholders I need to serve. I need to understand what my investors need, what the regulators are asking for me.” Of course, we want to tell everyone we’re customer-centric as well. So they’re in there, and I land on that customer stakeholder because it’s the most revealing. When we begin to label people customers, it’s already a signal that we’re putting our view and our lens on them rather than being shaped by the customer themselves. They would never define themselves as customers; they would define themselves as members of a community, or parents, or something else.

The first step of unlocking the opportunity is to decentre the company. Now the company is no longer at the centre, and we’ve put a problem of people and planet in the centre that they are material to solving. This is a commercial and retail bank. They can be part of improving the financial wellbeing of the UK. So they said, “This is a strategic objective of ours: to have this goal. This is what it would mean for us to create mutual value. This is what it would mean for us to be purpose-centred.” Look how that ecosystem of stakeholders changes. Half of the stakeholders on this map would have been embedded in the label “customers” before, because this bank is the bank for utility providers, housing associations, GP charities, etc. All of those stakeholders would have been just nested under the label “customers.” Rather than thinking about the full influence this bank could have on this problem, it had reduced it to just thinking of customers, rather than seeking to explore who in this ecosystem could be part of improving the financial wellbeing of the UK.

Just as a quick example: GPs who they bank—you’re probably wondering what on earth GPs have to do with financial wellbeing. They’re medical doctors, not debt advisors. But if you’re a GP, one of the biggest things you have to do is sign off people who are on state benefits. When we interviewed GPs, one of their biggest worries was that they were being asked to be the financial gatekeeper for so many families. If they didn’t put their signature on that piece of paper, they could plunge that family into a real crisis. So they were saying that on purely medical grounds, maybe they shouldn’t sign, but on the total impact on the individual’s or family’s life, they couldn’t not sign. We were beginning to discover just how important GPs were, and GP physical space was, for conversations about money and financial wellbeing.

That combination between a problem that’s being solved and actually beginning to see people as they are, rather than through a company-centric view, begins to unlock real innovation.

The metrics piece was very clear. They already had a definition around financial wellbeing—they called it financial health at the time, but have evolved toward financial wellbeing now. They had a section of the bank that covered financial resilience, one that did inclusion, one that did capability. These were the metrics they were running. But again, it suffered from the company-centric issue. Especially in the financial capability component, they were thinking that the biggest problem with people struggling with money or in debt is that they don’t budget well enough, can’t define interest rate, or don’t know what a good financial product is. There is a patronizing undercurrent to the way this work was being done within the bank.

When you see these targets at the bottom—are they managing their ins and outs, do they have the right savings level, are we reaching them with our banking products and services—they’re defining a bunch of reporting metrics that have defined financial wellbeing in terms most conducive to a bank, not in terms that would necessarily create the most mutual value or impact. These metrics also were not part of the core measure of success for the bank; they were sub-KPIs for specific teams. Inclusion had the metric on access to products and services, capability had the ins and outs, and resilience had the savings metric.

What we evolved them to was to replace, within the retail part of their bank, their dominant success metric—which was something they called customer value, the number of products and services sold plus a net promoter score component. We said, “If you really want to create mutual value and embed all these reporting metrics, you need to integrate these metrics into the core delivery of your strategy, i.e., the definition of success for your firm.” The argument was that if you can evolve your definition of financial wellbeing to be more purpose-centred and less company-centric, this can give you both the financial, profit-making elements and help you deal with regulatory pressure, as well as build trust and loyalty as your retail business model is being eroded by digital banks. It will actually deliver on your promises to improve the financial wellbeing of communities because you’re measuring the things that matter on the ground, rather than what a banker thinks about in terms of budgeting and definitions of interest.

This financial wellbeing metric was the result of research, survey work, and being on the ground doing innovative research. Financial wellbeing was made up of three core outcomes: resilience, being in control, and being joyful. The metric should be measured by both observed components.

So things that were coming through included the number of times people were logging onto an app or the number of days people spent in debt. These are things that could be observed, but also needed to be augmented by a more qualitative survey that probed how people actually were feeling about their money.

This whole point of feeling is important. Of the three outcomes, I’d say they understood the “in control” bit really well. So their metric captured one third of this kind of financial wellbeing space really concretely, and it captured probably half of the resilience piece. It captured none of the joy piece. And so they may be operating with half of the full space or innovation space of the financial wellbeing concept.

The work that we did was to really illuminate the full availability and full innovation power of this concept. What we did was a little picture of our mobile ethnography work. When it comes to something like financial wellbeing, there’s no way that you can just do a one-hour interview and ask people, “How many bank accounts do you have?” and this kind of stuff. Money is such a sensitive topic, and how people are—their relationship with money—even more sensitive, because it goes into family history and what they were taught and so on. So you need really thoughtful methods to begin to probe this kind of topic around money.

What mobile ethnography does is it enables you to journey with people in quite a low-key way over five or six weeks. So what we did was, we did this over five weeks with 40 households, and we never once asked, “How many bank accounts do you have?” or “Are you in debt?” or “How many credit cards do you have?” We asked things that actually showed their relationship to money.

For example, we did this at Christmas time. My favourite one was asking our entire group what their favourite Christmas tradition was. Some people said, “Oh yeah, we save up and we fly to Barbados together for a week and have some time in the sun.” Instantly, I know an awful lot about that family. If that’s your family vacation and you go for some winter sun in Barbados, I know a lot about your relationship with money.

Then we had others who said, “We could never even afford the three-pound hot chocolates at the Christmas markets, but we love Christmas. So what we used to do is put down the back seats of our car, put in blankets, make homemade hot chocolate, and drive around together in the back of our car looking at Christmas lights.” That’s my favourite Christmas tradition. And my goodness, have I just learned a lot about your relationship to money and how you grew up, and it becomes a platform to begin to probe someone’s true financial wellbeing.

That just gives you the feel of the work we did. We did much more besides, but these three insights or outcomes really come from that kind of work where, because you’re decentred, because you’re looking for the opportunity that’s latent in these communities, you can actually begin to design metrics and innovation products that are really unique.

This was in the backend of 2022 and the start of 2023. At the time, if you were living in the UK, you would have seen ads from a lot of banks saying, “We’re the bank that’s going to help you stay warm this winter.” We’ll probably have similar ads this year from certain companies: “We’re going to keep your lights on during the cost of living crisis,” etc.

This came from that place of financial capability assumptions—assuming that people didn’t know how to budget, assuming that people would make the mistake of overspending on non-essentials and forget to pay for the essentials. But actually, very few people had that poor a grasp of their financial situation. Much more often, what we heard was, “I’m really sad because in this cost of living crunch, what’s actually happening is that I know I’m going to have to spend more to keep my lights on. I’m going to have to spend more to keep the heating on, and so I’m going to have to stop doing my favourite thing of the week, which is to have coffee and croissant with my best friend at the local cafe. I figured out that probably costs me £40 a month, and that £40 is going to need to go into heating bills. So actually what I’m saddest about is what I’m having to give up in order to keep the lights on, not the fact that I need help to keep them on.”

So it was this classic case of missing the real tone and the real message of what was going on in the communities, and then scratching your head around why this spend was so ineffective or this product was so ineffective—because it’s not the right need.

What we were able to do is say, actually, your tone isn’t “We’re the bank to keep you warm this winter.” It’s “We’re the bank that’s going to help you continue to enjoy your everyday treats this winter.” That’s the difference between being purpose-led and not being company-centric, versus really trying to solve a problem. Not “We’re the bank,” not the patronizing “We’ll help you keep the lights on,” but the true decentred understanding of “We’re the bank that’s helping you access everyday joy, the things that bring you meaning, because we know that you can keep the lights on for yourself.”

The second point was this bank thought that it understood its customers. “We’ve tracked all the transaction data, we know what they spend on, what they don’t spend on. We get our customers.” Actually, they didn’t. They got their rich customers, but they didn’t get the ones that were in the lowest kind of wellbeing bracket.

What we began to see was that there are these vibrant, invisible economies. For example, three moms who were all single parents, each with two or three kids of their own. In order to be able to work part-time, they all got together. Rather than each of them picking up their own kid every day, they created a rota where one mom would pick up everyone’s kids, and then the next day a different mom would pick up everyone’s kids so that the other two could keep on working. They can’t afford a babysitter, they can’t afford extra childcare. So these are all innovative solutions that were happening within these communities that, again, the bank didn’t have the eyes to see.

They kept on doing things—training programs to improve budgeting habits, more money to track ins and outs, access to an app, building in some budgeting module onto the app so that you can budget better. They’re just missing the point. They haven’t seen that these people—these single moms—have done this remarkable kind of their own spreadsheeting and organizing to see how they can cope and manage tight budgets whilst being single parents. They need recognition for that and support to enable that, not a patronizing budgeting app delivered to them. Again, missing the point, not seeing the economy that was real, not understanding their customers even though they think they did.

Another example: a single mom recognised that she was spending an inordinate amount of time cooking for her kids and going to supermarkets. She was in the classic poverty trap of having to buy small amounts of meat and food because she didn’t have enough cash to buy big amounts. She lived in a small apartment with a tiny fridge, so she couldn’t store very much. She was actually spending a lot of time going back and forth to the supermarket when she had the cash, cooking for her kids because she didn’t want to just give them microwave meals or pizzas all the time.

She realised that she could probably work an extra day a week if she could bulk cook on the weekend and freeze the meal. So she realised what she needed was a larger stack of cash and a bigger fridge, and that would unlock a whole extra day of wages a week. Again, this woman would have been offered training programs, budgeting apps, all of it, and she’s done her own analysis to recognise what’s the big ticket item that she needs to unlock something different. She had to go to a charity who would fund the fridge and the first purchase of ingredients for her to cook.

Now, we brought this to the bank, and there is no reason why the bank could not step in and do this. There’s no reason why a mutual couldn’t step in and do this, because actually the knock-on consequences of this one act mean that her average income is essentially a quarter higher every month than it would have been without the act, without this fridge that she got, because now she’s freezing meals and just defrosting them and not having to do all the trips to the supermarket and not having to cook. So she’s able to squeeze in extra jobs instead.

This is the kind of insight that comes when a company is being purpose-led, where it’s seeking to create mutual value and where the metrics that sit behind it incentivize this kind of behaviour.

Before we can have a discussion, what’s in red here is all the things that they missed from their analysis, from their creation of their metric, because they were doing the reduction of everything into a financial metric, because they weren’t thinking in systems. So they hadn’t made any of those three shifts. They were stuck in the mental models of financial dominance, essentially.

We revealed the networks pieces: how could they plug into networks, create partnerships with charities, create simple changes to their products in order to help people access joy. So that effective piece—all they needed to do was actually the thing that was part of a, and I’m sure many of us have it, you can declare to the bank your three favourite shops that give you a bit of cashback, but to do that, you have to pay two pounds a month. Rather than have to make that paid, why don’t you make that available to your so-called vulnerable customers, knowing that they want to go to this particular coffee shop or they have a habit to go there because it’s important to them, and help them make those everyday treats more accessible just in a small way. These are literally things that are small tweaks within the backend of their system.

Making visible this kind of thing from a metrics perspective and a strategic perspective and combining them was incredibly powerful for the way that they’re innovating their retail offering.

So this work of bringing to life mutual value opportunities, defining a metric that can actually say, “This is how we define success, and this is how we can begin to think about what true performance means as a firm,” and then breaking those down into outcomes. So that outcome here—of joy, of resilience, of being in control—can then begin to find its home in very specific teams through core KPIs. There you have different teams contributing to an overall picture of financial wellbeing in the UK by driving very specific outcomes that their products and services are material to.

That kind of architecture of metrics and strategy and insight is really what can help a firm deliver both purpose and profit, and in the process create mutual value.