Mutual value measurement as a tool to understand stakeholder value
January 20, 2021
Traditional accounting methods and metrics don’t always tell the full story when it comes to relaying the value that an organization is creating for stakeholders.
This is even more true for cooperatives and mutual enterprises (“CMEs”) because they carry out activities not only for profit, but also to fulfill social purposes.[1]
Based on a two-year research study, a group of researchers[2] developed a performance measurement framework specifically for CMEs that could assist them in measuring and communicating the value created for members and the community in a consistent and holistic way.
Known as mutual value measurement (“MVM”), this pioneering measurement framework allows a CME to measure the full value of what it does and communicate it to the wider community, including existing members, potential new members, investors and markets.
MVM is purposefully designed as a generic framework that can be customized by a cooperative or mutual to its local operating environment. The core of the framework is six key value drivers that the researchers found were common across an otherwise diverse sector of businesses. They provide for the first time a common language as to value creation for the CME sector and for understanding these businesses from the outside.[3]
The six value drivers[4] are as follows:
Commerciality captures the economic value created by the business operations of the CME. This value can be measured using standard accounting measures such as net profit.
Shaping Markets captures the value from activities designed to create, shape, and maintain a market by the CME. An example is a credit union that provides banking and financial services to a regional community that would otherwise remain underserved due to the fact that the market is not economically viable for a major commercial bank.
Member Relationships is a dimension that captures value created for members over and beyond the value provided through the commerciality and shaping markets value drivers.
Community Relationships captures the value created by the CME for the community beyond its members. This value can be measured using qualitative measures such as community engagement surveys.
Ecosystem and Reciprocity refers to the value created by the CME for its ecosystem of partners, such as suppliers. Qualitative measures such as stories and testimonials can be used to capture the value created in this dimension.
Mutual Mindset refers to a value driver in which a CME captures value created through a focus on long-term decisions and ethical practices, and adherence to cooperative and mutual values. The mutual mindset enables each of the other five values. Measurement of value for this dimension is carried out through the use of qualitative information, such as stories and testimonials.
Benefits of Mutual Value Measurement
Mutual Value Measurement can help towards:
Improving strategic planning;
Better engagement with customers, employees and other stakeholders;
Developing ideas for marketing to drive sales;
Communicating the firm’s economic and social value;
Accessing impact markets for investment; and
Internal and external management purposes.
CPM & BB
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[1] BCCM, “What are co-ops and mutuals?” Available at https://bccm.coop/about-co-ops-mutuals/what-are-co-ops-and-mutuals.
[2] The research was carried out by Dr. Paul Thambar, Prof. Matthew Hall, Dr. Yolande McNicoll, all from Monash Business School, as well as Dr. Sarah Adams (ANU) and Prof. Yuval Millo, Warwick Business School, UK.
[3] Melina Morrison, “Measuring mutual value,” available at https://www.icmif.org.
[4] Paul Thambar, “Measuring purpose and value: The Mutual Value Measurement framework,” November 26, 2020.
