Why Richard Pennycook changed his mind and took the chief executive job at the Co-op

Pennycook, who had held the top role on an interim basis for six months, was part of the turnaround team assembled by former boss Euan Sutherland to rescue the mutual.

It faced the prospect of extinction amid problems at its banking arm, which eventually erupted into lurid scandal, and Pennycook was seen as the perfect numbers man to get to grips with some of the problems.

When Sutherland quickly fell victim to the viper pit that was Co-op politics, Pennycook stepped into the breach as interim chief executive.

Given the poisonous atmosphere at the business, Pennycook showed no inclination to hold the top role for any longer than was necessary to do the right thing and ensure the Co-op’s survival.

But he rose to the challenge and played a key role in convincing Co-op traditionalists of the urgent need for reform – notably at a crucial meeting in Manchester in May when he eloquently put the case for change and evoked the spirit of the organisation’s founders, the Rochdale pioneers.

Co-op reforms

Last weekend the Co-op’s took what, for Pennycook was the final crucial step to modernise the business’s governance at a further members’ meeting.

That decision prompted him to reconsider his determination only to run the business temporarily and, at the request of the board, he happily accepted the chief executive’s role on a permanent basis.

It is easy to imagine Pennycook as one of the original pioneers. He combines a calm, sober and thoughtful personality with a sharp commercial mind.

“For me, the defining moment was the governance change”

Richard Pennycook, Co-op

Having made an impact at Plcs such as grocer Morrisons, often under tough conditions, he is keen now to apply similar disciplines at the Co-op and to rekindle the unique mix of principle and enterprise that made its business model so unique.

Pennycook says: “For me, the defining moment was the governance change. That unlocked the attractiveness of taking it [the chief executive’s role] up permanently.

“A lot of my background is in business similar to those that the Co-op operates in.

“I arrived with a very strong view that this is a unique organisation that should be important to the nation. I think we are the only people whose purpose is to champion a better way of doing business.”

Co-op chair Ursula Lidbetter paid tribute to Pennycook’s commitment to co-operative values on the day of his appointment, which coincided with interim results showing that progress was being made in restoring its fortunes.

She said that during the time Pennycook had stepped up to safeguard the business’s future, his strengths had shone through.

“Richard impressed us with his integrity, amazing rapport with members and a frankness and honesty that absolutely cut through,” she said.

Half-year results

Pennycook’s impact was evident in the Co-op’s first-half figures, although nobody pretends that there is not a great deal more still to be done.

Landmarks passed in the interim period, other than the governance changes, included a return to overall profit – although at a lower level than formerly achieved – and a much improved balance sheet.

Pennycook oversaw the disposal of businesses such as the Co-op’s farms and pharmacies, raising £910m. That leaves the Co-op free to focus on its priorities, notably its food retail c-stores that generate the lion’s share of sales and profits.

On that front, there are encouraging signs.

While food sales overall were flat in the first half and operating profits down, like-for-likes at the core c-store business advanced 4%.

The earnings fall partly reflected investment in improving the business, such as lowering prices and overhauling ranges to enable it to compete more effectively in a ferociously fought market.

Pennycook’s elevation makes him one of the few retail finance directors who has gone on to become a chief executive.

Having negotiated his way through the treacherous labyrinth of the Co-op’s politics to win over its membership, acted decisively to address its financial crisis and set out a direction for the future he has won his spurs.

If the Co-op can now make the most of its new lease of life Pennycook will perhaps be seen in the longer term to have played almost as important a role as the famous Rochdale pioneers.