The virtuous circle of mutuality
A Yorkshire Building Society case study

Page 1: The virtuous circle of mutuality

In recent times there has been much debate in the financial services sector as to whether Building Societies should remain true to their roots and traditions and retain Mutual Status, or whether they should become Public Limited Companies, selling shares to the general public in order to increase their access to finance. This case study focuses on the way in which one Building Society - The...
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Page 2: What is a Public Company?

The owners of a public company are its shareholders. The shares of a listed public company are bought and sold on the London Stock Exchange. The main advantage of this is that large amounts of capital can be raised very quickly. There is the risk, however, that the original shareholders can lose control of their business if large quantities of shares are purchased as part of a 'take-over bid'.
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Page 3: What is a mutual?

A mutual is an organisation which has been set up by a group of people who share a common interest. Traditionally Building Societies were set up as mutual societies. Groups of people would club together and pool their funds in order to build and then buy every member of the group a home. The early societies were known as 'terminating societies' and would disband when every member had a...
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Page 4: The important difference

The key difference between a mutual and a PLC is that in a mutual each voting member has only one vote, whereas in a PLC the number of votes people and organisations have depends on the number of shares that they have in that organisation. If a large institution such as a Pension Fund has millions of shares in a company then it will have more votes on its own than the thousands of small...
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Page 5: Becoming a member of a mutual

All members of a building society are customers. However, not all customers are members. This is because to become a member it is necessary to open a share account. To be able to vote it is usually necessary to be over 18 years of age and to have more than a minimum amount of savings (usually about £100). Each voting member then has one vote regardless of how much they have put into the...
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Page 6: Deciding whether to remain as a mutual

Business strategy is concerned with identifying the direction which an organisation should take over a period of time. It is all about making the decisions as to how the resources will be used, what the main lines will be, and how the organisation should be structured.During the second part of the 1990s, the Yorkshire Building Society has carried out a major strategy review in order to determine...
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Page 7: Creating a new vision

In order to create a successful strategy it is necessary to create a way of thinking and acting that runs right through an organisation. At the apex of this way of thinking, it is essential to set out the values which will filter into everything the organisation does. At the Yorkshire Building Society this is set out in the form of a vision statement."To bring the benefits of membership to an...
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Page 8: Creating a virtuous circle

The Yorkshire Building Society has identified attractive products, high quality service and security as the keys to future success. Attractive products mean higher rates of interest for savers and lower rates for borrowers. Quality service means a fast, accurate and friendly response to the needs of customers. Security means financial strength represented in a healthy reserve ratio.By creating...
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Page 9: Creating the benefits for members

The Yorkshire approach therefore has been to crystallise the focus on meeting the needs of the members of the mutual organisation. The opposite of this would have been to sell out to shareholders, and a completely new way of operating. The Yorkshire Building Society has been able to benefit from the environment of change in which it operates by responding to this change, identifying the needs...
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Page 10: Conclusion

The Yorkshire Building Society case study provides an excellent example of the way in which an organisation has come to terms with the change process and to identify its current core strengths in order to build on these strengths.It shows how the Yorkshire was able to focus on its members, identify the requirements of these members, and then agree a package of changes which best met the needs of...
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