Elements of a Successful Co-op

Director Peggy Burkosky has been researching what it takes to build a successful co-op. She has come up with one item everyone should read. She says:

"Although this is a U.S. site, it provides a good overview of the potential success or failure of co-op development"
 


 A successful cooperative has committed members and effective leadership. In addition, starting a cooperative requires a great deal of time, energy, and technical resources. The recognition of a common need which the cooperative can fulfill is essential to the success of the cooperative.
 
 To ensure success, members must actively participate in their cooperative. Members have the responsibility to finance the cooperative and use its services. Critical to the success of the cooperative is the members' willingness to provide an initial investment for start-up costs, to permit the retention of earnings so that the cooperative may grow, and to provide prompt payment of bills due the cooperative.
 
 Strong and effective management is also a key to the success of the cooperative. Good board/manager relations are also critical. As noted, the board acts as the responsible entity for establishing policy and the manager carries it out. The board and management must recognize and respect their different roles and work together for the good of the cooperative.
 
The following tips for cooperative success are adapted from articles printed in the NCBA Cooperative Business Journal and the U.S. Department of Agriculture's magazine for cooperative businesses.

 

Why Cooperatives Thrive

• providing only the goods and services members use
• financed by the members. The greater the financing (risk capital) supplied by the members, the more efficient the cooperative.
• using all major fixed assets at the 75 percent level, or more
• members who do the majority of their business with the cooperative
• low administrative and overhead costs
• more individualized and specialized services, particularly in the marketing area
• maintaining an open line of communication with members. Individual members will then become more influential
• selecting and developing a quality management team.
• placing more emphasis on electing business-oriented directors
• developing and implementing a systematic method of cooperative education for members, employees, directors and paid management
• aggressively positioning for changes in operations, markets and member needs.

Why Cooperatives Fail

• poor selection of directors, especially those who fail to support their cooperative
• members who join but never use their cooperative and bypass it for a small gain elsewhere
• members who use cooperatives but fail to take responsibility. Each member must be ready to accept responsibility when asked, or as the need arises. Every member should have an equal opportunity to be president of the cooperative.
• members who never ask questions and who let a few persons make policy
• members who don't attend annual meetings and directors who fail to attend board meetings
• lack of consistent membership education about the problems cooperatives face and the challenges they must meet
• not supporting the cooperative with enough money (risk capital) to get the job done
• low-cost management - it's the most expensive item for a cooperative. High-priced management is usually the least expensive item.
• not closely watching the formation of cliques and special interest groups within the cooperative
• concealing facts about a cooperative. All facts, both good and bad, should be placed on - not under - the table.
• errors in financial policy, such as over-extension of credit, too little capital, poor accounting records, lack of a financially sound, systematic program for reimbursement of equity
• errors in educational and social work. This begins by failing to teach cooperative ideals to members unfamiliar with how cooperatives function, neglecting general educational programs, failure to develop member loyalty or countering the development of factions within the association.
• management errors, such as inadequate inventory, poor location, improper equipment, neglected appearance of physical facilities, employee dishonesty, ineffective management, incompetent directors, nepotism, poorly conducted meetings, admittance of disloyal and dissatisfied members.

Information was provided by the National Cooperative Business Association