What is a co-operative manager?

David Griffiths

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What is a co-operative manager? The obvious answer is - the manager of a co-operatve. But, the question goes beyond the literal - it is a critical question for all co-operatives because managers of co-operatives require co-operative specific commitments and skills.

In appointing managers who do not have the necessary co-operative commitment and skills, co-operatives are introducing a risk that could eventuate in co-operative failure - as a co-operative if not as a business.

See also the paper: Why do co-operatives fail as co-operatives?

The boards of co-operatives are accountable to members for the managers they appoint. Boards have to recruit managers who have the competencies required to manage the co-operative but also to reflect and reinforce co-operative values and principles.

A board must have a capacity to judge the required competencies of a manager for the co-operative- including how and when a co-operative manager reflects and reinforces co-operative values and principles. There are general competencies required of all managers and these include:

Understanding and setting goals and targets.
Staff management.
Time management.
Financial management.
Making effective and efficient decisions.
Distinguishing between data and information.
Understanding the differences between causes and consequences.
Using technology effectively and efficiently.
Selecting and using advisers.
The management of conflict.

In addition, there are the specific competencies required for a co-operative that depend on the nature of the business, its developmental stage, its size and its technological complexity.

 

Reflect and Reinforce

But, this is only the beginning of a manager selection process. While business competencies are essential, the board must also be able to judge whether or not a manager will reflect and reinforce co-operative values and principles i.e. the business decisions and practices will be based on a co-operative management practice:

Co-operative democracy
Co-operative education and training
Co-operative management
Members as owners, users and beneficiaries.
Co-operative values and principles

The challenge for the board is to recognise that co-operative management is unique and, therefore, the role of the co-operative manager is unique, that there are co-operative-specific management skills and this is critical to the role, recruitment and accountability of the manager. This, of course, also depends on the values and principles of the co-operative being explicit and recognised and accepted by the co-operative's members and directors - that business decision-making and practices must reflect and reinforce co-operative values and principles.

The ICA's Statement on the Co-operative Identity.

Members and directors need to develop an explicit understanding of the co-operative's values and principles:

What are the co-operative's values and principles?
How are these expressed in the co-operative's management practice?
Who defines and interprets the co-operative's values and principles?
What standards are used to assess these values and principles?
How does decision-making in the co-operative reflect and reinforce these values and principles?

In the absence of recognition of the need for a co-operative management practice, it is being de facto assumed by members and directors that management is a science and that managers are independent professionals capable of working for all or any business and that the form of ownership and values and principles are not relevant to the exercise of their competencies and that, therefore, there is not a distinct co-operative management practice.

Value Free

The reality is that management is not value-free.

All business enterprises have a philosophical underpinning - the values and principles that inform the operations of a business and the decision-making process. The philosophy may be implicit or explicit. Managers also are not value-free - conditioned by their experience and training. Managers, therefore, can either implicitly or explicitly strengthen or undermine co-operative values and principles.

The following table summarises the differences between the management values and principles of investor and co-operative businesses:

Investor Business
Management Values and Principles		 Co-operative Business Management Values and Principles
Maximise dividends to shareholders Maximise service to members
Maximise profit Reasonable profit
Unlimited economic growth Limited economic growth
Consultation with minority shareholders Consultation with majority of members
No shareholder education Ongoing member education
No limit profit distribution Limit on profit distribution
Reinforce and reflect plutocracy Reinforce and reflect democracy

What these differing values mean is that the management practices are different and boards and managers must recognise and understand these differences and how it impacts on management practices. Some of the key issues, therefore, for a co-operative manager are:

How do you maximise service to members?
What co-operative education policy should be adopted?
What co-operative education programs should be provided?
What is co-operative democracy?
How do you reflect and reinforce co-operative democracy?

De Facto Co-operation

Without the co-operative difference being recognised by boards and managers, the threat is that a manager will, and be allowed to, make decisions and take action in the belief that these are in the best interests of a co-operative as a business as interpreted and determined by the manager yet these may be explicitly or implicitly inconsistent with co-operative values and principles.

In this default situation, the co-operative will be increasingly dependent on the manager and the manager will de facto determine the co-operative's ethos - and future. Managers will be able to use their power to internally privatise the values of the co-operative andultimately enrich themselves. Unfortunately, the process could proceed without members and directors being aware of the erosion of co-operative values and principles. It could be argued, for instance, that once a co-operative has external shareholders that demutualisation is inevitable. Yet, the decision to allow external shareholders was critical in demutualisation because it undermined the essence of co-operatives being user owned and created a conflict of interest between internal member shareholders and external investor shareholders.

This has been a critical influence on the demutualisation of Pivot and the attempted demutualisation of the Warrnambool Cheese and Butter Factory.

Actual Co-operation

The key issue, then, is that the board must determine the co-operative's policy based on co-operative values and principles and ensure that management objectives and strategies are consistent with this policy - and co-operative values and principles. The board cannot assume that management objectives and strategies are consistent. The board must be able to judge this consistency. The board's own decisions must, of course, be based on the integrity of co-operative ownership and control.

A co-operative may, for instance, have a need for further capital and have difficulty in convincing and raising this capital from its members. A manager whose focus is on the capital raising requirements may suggest, therefore, that the co-operative has no option but to restructure the co-operative to raise the necessary capital through external investors.

A manager who is committed to raising the capital but within the structure of a co-operative has a more complex challenge - to work with the board to educate members about the capitalisation requirements and work through the options of how to raise the necessary capital and remain a co-operative. This would include the problem of external shareholders, the possibility of increased member equity and addressing the relationship between member equity and co-operative ownership.

Indifferent or Neglectful

While there is a clear differentiation between the roles of managers and boards, the board does have a responsibility to the co-operative and its members to ensure managers are accountable to the co-operative and that management practices reflect and reinforce co-operative values and principles.

The onus is on the board to enforce this accountability. Managers who ignore co-operative values and principles only do so because boards are indifferent or neglectful.

The demutualisation of many co-operatives throughout the world has been capital-driven and explicitly and/or implicitly encouraged by managers, boards and advisers who have focused on business growth independent of co-operative growth. Consultants employed by co-operatives have reinforced the need for demutualisation - particularly when the managers and boards have demonstrated their lack of commitment to co-operative ownership.

Healthy Co-operative Management

What, then, are the attributes of a healthy co-operative management practice? These can be summarised as including:

Without these co-operative management practices, it will be difficult for a co-operative to remain and justify itself as a business that reflects and reinforces co-operative values and principles. A co-operative manager, therefore, is a manager who has the necessary competencies to manage the co-operative as a business and as a co-operative.

Assessing Co-operativeness

It is crucial for co-operatives to regularly and effectively assess the performance of the Manager/CEO.

The basis of this assessment must be the job description, the annual goals and objectives of the co-operative and the actual performance of the Manager/CEO.

The areas for assessing the performance of the Manager/CEO include:

Vision, Mission and Strategies

Accomplishment of agreed objectives

Effectiveness in member relations

Effectiveness in co-operative development

Fiscal management

Operations management

The Manager/CEO and Board relationship

The Manager/CEO and staff relationship

External liaison including co-operative organisations

External public image including marketing the co-operative difference

Last updated: 05-Oct-2003 1:16 PM