CO-OPERATIVE MANAGEMENT NOTES

CO-OPERATIVE MANAGEMENT

Introduction
Management has greatly improved as co-operatives have become larger, more diversified, and integrated to match similar advances in the marketplace. In the early years, local co-operative managers not only supervised operations but also maintained accounting records, waited on customers, and swept floors. Many co-operatives failed because of inept operating management and poor monitoring the board.
Specific examples included overextension of credit and unsound collection practices, poor technique in produce marketing, inadequate attention to keeping products in condition, overexpansion of facilities, underfinancing, and over advances to growers in pooling operations, dominance of the hired manager, and interference in management of operations. Both surviving and new co-operatives learned important lessons from these experiences.
As regional co-operatives developed and became stronger, they began providing more assistance to local boards and managers through general field representatives. This included helping recruit and train managers and assistants. Later, several provided financing and direct management service to the weaker locals, and auditing and analysis service to all member locals.

With the advent of the Co-operative Bank, and the co-operative college valuable management and financial counsel became available to co-operative borrowers. In many cases, this perhaps is more valuable than the funds loaned to them. Regional co-operatives now employ university graduates with training in business administration, agribusiness, or sales management and place them in management trainee programs before moving them to managerial positions. Some regional co-operatives provide management training for local managers, using their own staffs or management consulting firms as trainers. Most regionals send key employees to management schools or seminars.
Co-operatives have increased in size and diversity of products and services, and have departmentalized their operations. Most farmer-directors have become more business-minded as their own farm operations grew. They give more attention to their co-operative’s management. They employ managers with more training and expect them to improve their knowledge and skills. Also, a growing number of directors seek to become more proficient in directing the affairs of their co-operatives.
Public concern about food safety, pollution control, health and the environment, monopoly, and related issues focuses attention on the competence, integrity, and behavior of co-operative directors. As a result, co-operatives are becoming more aware of the need to indemnify directors who are subject to increased legal exposure. The growing impact of world markets, even on the individual family operation, is changing the management perspective from the local co-operative level. The local is being viewed less and less as an independent entity and more and more as part of a system.
Therefore, planning and strategy are evaluated in terms of the local’s relationship to neighboring co-operatives, other areas, agribusinesses, the regional co-operative in which it has ownership, to the markets into which members’ products flow, and to the ultimate use of those products.

Role of Management
Management combines ideas, processes, materials, facilities, and people to effectively provide needed services to member-owners. Management is the decision making element of the co-operatives. Broadly speaking, its role entails formulating and executing operating policies, providing good service, maintaining financial soundness, and implementing operating efficiencies to successfully meet its objects.
A successful co-operative is viable in an economic or business sense and maintains or improves its co-operative character or features. A co-operative may succeed as a business, but gradually lose its co-operative character regarding member control, serving the needs of members, and distributing net margins. Likewise, it may succeed for a while as a co-operative, but fail as a sound business institution.
Managing a co-operative is challenging and difficult. It involves not only managing resources and business operations, as in other businesses, but also dealing with problems stemming from the co-operative’s distinctive characteristics. Because the co-operative’s members are both owners and patrons, special relationships and problems arise concerning member and board of director roles and responsibilities.
Seemingly conflicting answers to questions arise. What’s different in managing a co-operative from any other type of business? The answers can range from “all the difference in the world” to “none at all.” A former regional co-operative chief executive officer offered this answer: “Decision making techniques are identical, but the co-operative’s objectives are different; therefore, the manager’s conclusions will be different.” Co-operative principles and objectives present a distinctly different managerial premise.
That premise is revealed in more detail through the following perspectives an executive must acquire to be a good co-operative manager:
i) Adjusting decision making to a business where the customers are also the owners.
In a supply purchasing co-operative, the manager of an investor-owned firm (IOF) may discover that many of the successful techniques associated with developing a salable and satisfactory product (for the customer) and achieving maximum return on capital (for the owner) no longer apply. A co-operative manager has to adjust priorities and objectives to the realization that what’s best for the customer (also the owner) really is best for the co-operative. This realization may explain why some low- or no-margin services continue to be provided and why certain unrelated and perhaps high-margin activities are not considered in a co-operative.

The manager of marketing co-operatives must understand why the co-operative often is obligated to take all of the members’ products and attempt to find a market for them. The manager is not at liberty to pick and choose among such product suppliers and cut off marketing when inventories build up. And certainly to allow the member-producer to dictate the terms on which the co-operative business should receive the product would be a situation foreign to non-co-operative managers.
ii) Dealing with complex issues of equitable treatment of owner-patrons, the manager of an IOF will discover that distributing the net earnings of a co-operative is much more complicated than declaring a dividend on capital stock.
The standard co-operative practice of distributing net earning on the basis of individual member volume, such as units marketed or quantity of supplies purchased, also will be new should he/she become a co-operative manager. For larger co-operative that handle many products and involve value-added activities, the issue of equitable treatment of member-owners can be complex.
Another concept new to an IOF manager now heading a co-operative is the requirement that member-owners share equitably in financing the co-operative, and that management communicates that responsibility to them and develops financing programs they’ll accept.
iii) Working in a service-oriented organization is a spotlighted atmosphere.
The manager of a typical co-operative will find that members formed it to provide a needed marketing, purchasing or service. Hence, every time they use the co-operative they evaluate the service performed its employees. Often, members may wish to express their views directly to the manager or to get management advice about supplies to use or when to market their products.
Therefore, a co-operative manager may feel that he/she is operating in an enclosed environment, compared with the manager of an IOF whose only interface with most stockholders occurs at annual meetings when they want an accounting of why there were changes in the market value of their stock or in the dividends declared on it.
Even in the day-to-day routine of a large co-operative, the new co-operative manager may encounter a different working environment. “an executive or professional joining a co-operative must adapt himself to the publicity surrounding his work.” iv) Co-operatives have unique management implications of business ownership and control
Managers perform under the influence of various motivational factors-pay, power, prestige, and a place in history. Not all are fully transferable from an investor-oriented business to a member-user oriented co-operative. An example concerns the ownership and control of the business. An investor-oriented business executive or manager looking for a company to “gain control of’ either outstanding performance, political maneuver, or eventual ownership will be surprised if the company is a co-operative. A co-operative manager can never acquire “ownership rights,” and must become resolved to always being an employee.
Further, the manager will discover it necessary to deliberately involve a majority of the member-owners, not just a few principal stockholders, in major decisions affecting co-operative policy and its business objectives. The prospective co-operative manager, therefore, needs to carefully assess whether his/her management style and personal performance motives and ambitions are compatible with the constraints of a co-operative owned and democratically controlled member-users.

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