A Tool for Community Economic Development - Essay Example

Order # the co-op, cooperative group Cooperatives bring tremendous value to people and communities around the world. They are businesses, that are owned and controlled by the people who use them and that return profits back to their members. Cooperatives exist in every industry, every geographic area, in rural and urban areas, serving rich and poor. Cooperatives are organized for many reasons, including providing services that private investor-owned company may not find profitable enough, providing a measure of competition and reducing purchasing costs through volume buying. Co-ops are owned by consumers, producers, farmers, workers, businesses, organizations, municipal and government. In the European Union and in large regions of America, cooperatives, with associations, foundations and mutual funds are considered parts of the social economy. The International Cooperative Alliance, established in 1895, is considered to be the final authority for defining cooperatives and the principles by which they operate. The organization has made three formal statements of cooperative principles over the past 100 years in an effort to keep them relevant to the contemporary world. At its 100th anniversary meeting in September, 1995 in Manchester, England, the Alliance adopted the "Statement of Cooperative Identity." which made the definition, values and principles of cooperatives. Definition: cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise. Values are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility, and caring for others. Principles: Voluntary and Open Membership, Democratic Member Control, Member Economic Participation, Autonomy and Independence, Education, Training and Information, Cooperation among Cooperatives, Concern for Community (Statement of Cooperative Identity 1995) 2. A critical analysis of the organisation's internal structure Like any organization, cooperative has own structure, which may various from number of its members and the area of activity the co-op involved. There are tree main components of internal structure of cooperation: the Board, Management and Members. The rights, duties and coordination of work of governing team are reflected in scheme, which where adopted from the work of Garoyan and Mohn (1976 cited Cooperatives 2006): BOARD MANAGEMENT ACCOUNTABIITY To Members To Board AREAS OF CONCERN Idea Decision , Judge Ends/Purpose Action Decisions, Manage Means/Activities COMMITMENT OF RESOURCES Determine Values Long-Range, Consequestial Set limits, Monitor Intermediate and Short-Range Organize and Control Resources GOALS, POLICIES Determine Implement MANAGEMENT EVALUATION Set Policies Regarding Results to be Achieved and Limitations on Activities Monitor Progress Toward Results Monitor Compliance with Limits Provide Information for Monitoring OPERATIONS Determine Values and Goals Set Limits Monitor Conduct PERPETUATION Assurance of Capable Management and Board Succession Support, Participate BOARD PROCESS Determine Structure, Behavior, Performance Evaluation, Calendar and Agenda None Board of directors by law is legally responsible for cooperative and it's critical that all directors are highly qualified. Furthermore, directors of board need to represent the cooperative membership as a whole. (Cropp 2005) 3. A critical analysis of the organisation's objectives and/or strategy plans Jeffrey Royer (2002, p.12) from University of Nebraska noted that "because cooperatives are complex definition organization, that served to wide variety of purposes, and perform the wide variety of functions, there is no single objective, , that is accepted by board, management and members. A cooperative may pursue the number of objectives simultaneously". For example, to earn a certain level of net come, maximize operating efficiency, maintain and expand its facilities and or increase its sales. However, these objectives can be interpreted as strategies a cooperative might follow in pursuing a single, broader long term objectives such as maximizing member returns. Such objectives are: - maximize profit - minimization of net price - minimization of total member profit - Maximization of per unit patronage refund - maximize the quality of input (Royer 2002). According Wardworth, the strategy plan components include: basic purpose, corporate mission corporate objectives and targets corporate strategy business group charters corporate investments ( Wadsworth 1992) Also the same author noted "while smaller cooperatives may lack the resources to undertake the extensive planning process, it's clear that many principles and practices of strategic planning are relevant on that level as well. Methods of analyzing environment and market position, track on of strategies through financial analysis, the feedback and strategy examination are strategic planning concepts smaller cooperatives could use" (1992, p. 27). 4. A critical analysis of the key drivers in the organisation's external environment, the marketing function, financial management and control, human resources policy etc. There are several issues and forces shaping the external environment of co-operatives. Such are: demographic issue of cooperation (this point is specially important for farming). Cooperatives now must adapt to more diverse membership that requires him different services, products and structures; technological innovation (cooperatives developing strategies in 21st century must consider their role in marketplace that values nimbleness, flexibility and information vs. stationary structures and physical inventory); changing competitive environment; role of the consumer (understanding and accommodation consumer preferences); industrialization; structural change in food processing and marketing; globalization (USDA 2002). The marketing functions of co-operative intersect with main function of marketing in any organization. They are: exchanging functions (buying, selling, pricing); physical functions (assembling, transport and handling, storage, processing and packaging, grading and standardization); Facilitating functions (financing and risk-bearing, market information, demand and supply creation, market research). Actually, these functions are limited, than in large corporations or trade firms, and may get narrow to manufacturing, bargain and processing of products, which is essential for comparatively small business units but important for social economy. Cooperatives need money to start operations, to expand and diversify, and to modernize facilities. When the amount of money needed for the project has been determined, the cooperative should identify the best sources of capital and the desired amount from each source. These sources include common and preferred shares, other types of securities, member loans, and loans from financial institutions. The receiving of dividents may be allocated by the Board of Directors. The amount of this dividend is in proportion to the amount of business the member does with the cooperative. Patronage dividends can be paid in cash or in the form of additional shares. In a worker cooperative, patronage dividends are normally based on hours worked and, in effect, increase the members' wages. The cooperative financing has special principles, which differs them other business of organization. One of these is User-control principle, which implies, that the one member-one vote rule by which cooperatives operate, serves to distribute power equally among all the current member owners. That means each member's involvement and participation through ordinary meetings, which verify, estimates and consolidate balance sheets, strategic plans development programmes. A social audit is made of all the main information and control, which distinguishes the different levels of control: the auditing, the corporate governance bodies, balance-sheet certification. The HR policy in cooperatives, beyond the general principles of human resources policy, includes also the special preferences, which are dictated by the special conditions the cooperative operates. Such conditions include: area of cooperative's activity and essential limits the cooperative operates, limited number of members of cooperatives, possibilities to implement a new decision of cooperative's work in a short time due to specific organization of co-ops. According analysis of Gutknecht, Nolan and Swanson (2002) in Management structure of cooperatives nearly 90 percent of the cooperatives reporting indicate that they operate with a general manager. Four cooperatives use a co-manager system and three co-ops use a management team as top management. Unions: 6 of 69 cooperatives reporting on this item indicate that they are unionized. None of the small co-ops is unionized. Payroll services: About half of cooperatives reporting, prepare payroll in-house, and the other half contract with payroll services. The larger the cooperative is, the more likely it is that it uses a payroll service. The co-ops may have the flexible payroll periods (51% of co-ops pay every other week, 25% pay on the 1st and 15th, and 22% pay weekly) and a various weekly house worked (Full time 32 hours/ week and part time 20 hours /week). Among important points of HR policy, which make people to work and in co-ops, are Health and Dental Insurance, Employee Assistance Programs, member work program. While 86% of Small stores have member work programs (For all co-ops, the median number of member workers, the amount of work, and the discount amount were: (for 25 weekly workers, 2 hours of work for a 15% discount; for 31 monthly workers, 5 hours of work for a 10% discount). Some 56% of co-ops reported on profit sharing, along with staff education and training. Co-op directors receive compensation in purchase discounts and in stipends (Gutknecht, Nolan and Swanson 2002) Bibliography: 1. International Cooperative Alliance, 1995. Statement of Cooperative Identity [online]. Manchester, Available from: http://www.ica.coop/coop/principles.html [Accessed 23 April 2006]. 2. Garoyan, Leon, Mohn, Paul, 1976. The Board of Directors of Cooperatives.In: Cooperatives: A Tool for Community Economic Development, Chapter 8 [online], University of Wisconsin Center for Cooperatives, Available from http://www.wisc.edu/uwcc/manual/chap_8.html) [Accessed 23 April 2006]. 3. Cropp, Robert, 2005. Cooperative Leadership, Bulletin of University of Wisconsin Center for Cooperatives, 9, [online], Available from http://www.wisc.edu/uwcc/bulletins.htm [Accessed 23 April 2006]. 4. Royer J. S., 2002. Cooperative Theory: Neoclassical approach [online], University of Nebraska , 2002, 13-15, Available from http://agecon.unl.edu/royer/theory.pdf [Accessed 23 April 2006] 5. Wadsworth, James. Strategic planning system of large farmer cooperatives [online], ACS Research Report 103, August , 1992, 13-27. Available from http://www.rurdev.usda.gov/rbs/pub/rr103.pdf [Accessed 23 April 2006]. 6. United States Department of Agriculture (USDA), Agricultural cooperatives in 21st century [online]. Cooperative information report 60, 2002, November, 3-5, Available from http://www.rurdev.usda.gov/rbs/pub/cir-60.pdf#search='external%20environment%20of%20cooperatives' [Accessed 23 April 2006]. 7. University of Wisconsin Center for Cooperatives, 2006. Cooperatives: A Tool for Community Economic Development, Chapter 7 [online], University of Wisconsin Center for Cooperatives, Available from (http://www.wisc.edu/uwcc/manual/chap_7.html) [Accessed 23 April 2006]. 8. Gutknecht, D., Nolan, P., Swanson W. HR Survey [online], Cooperative grocer, May-June 2002, Available from http://www.cooperativegrocer.coop/cg2002/hrsurvey2002.shtml [Accessed 23 April 2006]. Read More