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Mastering co-op management: can managers really build healthy businesses based on co-op principles and values? How is success measured?

Editor's note: Livingston is a freelance writer based in Maine who specializes in coop issues. Contact her at: mejane@g~wi.net.

As senior project manager for the 100-year-old Scottish Agricultural Organization Society, Bob Yuill works with 80 member cooperatives that have combined annual sales of $2.8 billion, accounting for well more than half of Scotland's annual $4 billion in total ag sales. His job is to ensure that the Society meets its purpose: "To strengthen the profitability, competitiveness and sustainability of Scotland's farming, food and related rural industries and communities through the development of cooperation and joint activity."

It's a challenging, complex job, so Yuill was eager to learn more when he first heard of the Master of Management Cooperatives and Credit Unions (MMCCU) degree program.

"I knew I didn't want the standard program based on profit maximization," Yuill says. "Even most of the co-op education courses I'd discovered seemed to be the basic MBA with a co-op module attached at the end. That doesn't work. You're not using the fundamentals of cooperation as the groundwork for building the business. If you start with the premise of maximizing return on capital, you will always get to the wrong conclusion." Yuhill's boss has already signed the Society up as a member of the Cooperative Management Education Cooperative (CMEC), which produces the MMCCU accredited degree program (the only one of its kind in the English language). Tom Webb manages the program from its home base at St. Mary's University in Halifax, Nova Scotia.

International scope

CMEC has more than 55 members that represent every sector of cooperative enterprise. They are located in Canada, the United States, the United Kingdom, Ireland, Finland and Oceania. Included are such well-known names as Co-op Atlantic, Co-operators Insurance, Credit Union Central of Canada, and the gigantic Co-operative Group in the U.K.

Credit Union National Association, the National Co-op Bank and the National Cooperative Business Association in the United States are members, as are the Co-operative Federations of New South Wales and Victoria (Australia) and the New Zealand Co-operatives Association.

Faculty and students enrolled in the MMCCU program are scattered widely, too. After an initial, week-long orientation at St. Mary's in Halifax, they telecommunicate with one another from home and at work. They also go on at least one study tour together, to co-op 'epicenters' such as Mondragon, Spain, or Emilia Romagna, Italy. The complete course is rigorous. It requires 144 weeks of classes, assignments and a major project linked to the sponsoring employer co-op/organization.

"We operate the program on two premises: One, that bankrupt co-ops don't meet their members' needs; and, two, that if there isn't any difference between your co-op and a regular business, no one really needs you," Webb says. "It's the combination of these two that drives the course.

"We keep asking the question over and over: 'This is how it's done in a regular business. How is it done in a co-op or credit union? How would you design a store differently? How would you treat your workers differently? How would you do the accounting or the marketing differently?'

"I dislike it when I hear people say, 'Co-ops aren't about making money'," he continues. "It's dishonest. Otherwise, they're bankrupt. The real difference is about the purpose of the business and who gets to decide how the surplus is used for the good of members and the community. The problem is, we either think about it from a consumer's point of view--'I want to pay the lowest cost'--or from the producer's: 'I want to get the highest price.' This doesn't reflect the cooperative concept of interdependence."

Unique curriculum

As the MMCCU curriculum was being designed, an accountant for Coop Atlantic asked Webb what they were going to do about teaching accounting. Webb said, "Accounting is accounting."

"So you've written us off as bean counters, eh?" the accountant replied. "Well, your program won't achieve what you want it to."

Webb explained what he meant this way: "You're the manager of a co-op and I'm the chairman of the board. You have four goals, but I measure you only on one, not the other three. You'll do your best on those others, but you're really going to focus on the one. So in three years, how will you know how successful you've been on your other three goals?"

The trouble, says Webb, is that co-ops can't measure their success with the accounting tools that exist today. "The job of an accountant is to show how to use our resources to achieve our goals. But we don't do it. We don't account for our other bottom lines. Where are the tools that let a co-op know if we've balanced our multiple bottom lines?"

Its challenges such as these that the first class of MMCCU students has been grappling with for two years.

Yuill is in the home stretch. He'll complete the courses this spring and earn his Master's degree next spring. How have he and the Scottish Agricultural Organisation Society benefited from his participation? He lists several concepts that he's introduced to his member-owners, which have helped them improve the Society's operation.

"The organization's awareness of these areas of opportunity has grown significantly," he explains. "But even more fundamental is that we never really had the confidence to base what we do on co-op principles. This course gave us the confidence to say, 'This can be done.' Now, we recognize that we are in a unique place in the market. We're much more focused on what we are."

Internal marketing

Yuill refers to this as "internal marketing," where the employees and members of the organization internalize the co-op principles and core values. This in turn enables everyone to be part of 'marketing our cooperative advantage' (or MOCA, a key concept of the MMCCU program, and one which Webb helped develop).

"As a result," Yuill emphasizes, "our effectiveness and influence as an organization is growing, on the basis of people's trust in what we say. Our relationships with our members, clients, and other stakeholders are much clearer. And because we have greater clarity in our approach, the solution that's conveyed by cooperation is more readily understandable."

When he talks to someone in government now, that straightforwardness enables Yuill to sell the co-op solution more easily, whether he's addressing a civil servant, a minister or a member of parliament.

"They're more supportive," he says. "The agricultural strategy developed 5 years ago didn't refer to co-ops, except in broadest terms. The new one, to be published this spring, we are sure, will be much more focused on the cooperative solution."

Building strong leadership

Steve Lepp is general manager of the Pioneer Gas Co-op in Alberta. Incorporated in 1970, the co-op's 350 members are mostly farm families who use the gas for heat, water pumping and other needs within the area's diversified agriculture sector. He says the fact that most of the MMCCU program is pursued from the students' home communities hasn't led to feelings of isolation.

"After we get face-to-face at orientation for a week, we pretty much know everybody," he says. "It's interesting that, although we're nothing at all alike and come from different types and sizes of co-ops, many of our problems and issues are identical."

Lepp enrolled in the program because he knows his coop will need good leadership in the years ahead. He doesn't mince words about it: "We are one of 60 similar co-ops in the province. By now, everyone in Alberta who wants gas has it. We've achieved that goal; our growth is done.

"So how does the co-op keep going, without growth? That's a management challenge, and that's where this course has come in handy. It's shown us some options we have in working cooperatively with others...Re-engaging our members is a huge part of what we need to do, not just give good service for a fair price." For example, the co-op is now looking at several alternative energy technologies.

Lepp says he's been able to apply "pretty much everything they've thrown at me" in the Master's program. One change he made was to open the door more widely to employee innovation. During a study tour to Mondragon, he was impressed by their commitment to innovation.

"If an employee comes up with an idea, they'll haul you right into the process," he says. "Now, we explain to members all the ways the money they invest is reinvested in the employees and the community. We also emphasize that because they are owners of the system, they have a role to play in how the co-op is run. They can come to meetings, speak their minds and run for director if they want to."

Co-op management style varies greatly

Co-op Atlantic has 129 member cooperatives across Atlantic Canada and the Magdalen Islands. It is one of the largest integrated wholesale agri-food operations in the region, and also has significant holdings in real estate, housing and petroleum. In 2004, these diverse businesses served more than 200,000 families, employed more than 5,000 Canadians and had consolidated sales of $517 million.

When Robert Lemoine came to Coop Atlantic to head the Food Division 3 years ago, he had some idea of what he was getting himself into. Even so, he was not prepared for the differences between cooperative management and his previous management positions.

"I came in with my eyes open," he says. "But actually living in a cooperative culture has shown me a lot more than I anticipated. And since being here, I quite like what I see. In the corporate world, there's a lot of backroom politics and old boy clubs, and I don't get that sense here. Here, there's more of a need to have a discussion. It may take longer, but when you work it through, you come out with a better product."

Enrolling in the MMCCU program was, for Lemoine, "a good way for me to get up to speed quickly, which was important at my entry level. I wanted to make sure I would be able to contribute to the co-op's growth."

He was impressed right away by the fact that the MMCCU students and faculty were committed to rigorous business practices. Lemoine had an image of cooperative members as a bunch of soft-hearted, but impractical, idealists. Instead, he found a lot of practical knowledge pertaining to issues he cares about: employee and member loyalty to the co-op and the co-op's commitment to the bottom line and the coop values that support that.

New territory

Lemoine appreciated the business courses, but says, "I've been reading balance sheets for quite awhile. But when we got into social audits and social accounting--that's new territory."

As the learning accumulates, it all starts to come together: the history, the philosophy, the accounting. "The closer we get to the end of the course," he remarks, "the more interesting it becomes and the more usable it is for me."

Webb sums up his view of the future of the cooperative business sector: "There is no perfect cooperative. But we need to ask: what are the new, innovative thoughts that are even more consistent with our values? Where are self-help, openness and solidarity in the way we treat our workers? If we had workers and consumers sitting at the same table with the problems on the table rather than under it, would that help?

"Some version of the stakeholder model is the solution--that's the real cutting edge."

Webb talks about a board of directors composed of workers, consumers and producers where "every topic is discussed, where there is a basis of trust and no conflict of interest because everyone there represents the co-op. The power of the cooperative business alternative," Webb concludes, "is that it can nurture what is best in people and enable us to meet our needs in ways in which everyone wins: consumers, workers, producer and, ultimately, families and communities."

The deadline to apply for next cycle in the MMCCU program is May 31, 2006. Call (902) 496-8170 or (902) 863-0678 or visit www.smu.ca/mmccu.
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Author:Livingston, Jane
Publication:Rural Cooperatives
Date:Mar 1, 2006
Words:2018
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