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Have member associations or cooperatives “lost their way” or “forgotten their roots” in Alabama? No, according to a recent AAES survey of cooperative managers and directors that was conducted to determine the cooperative operational environment perspectives of these leaders. In fact, results indicate strong support for traditional cooperative principles, such as democratic voting, open membership, owner/member provided equity, and exchange of goods and services at market prices, among directors and managers of cooperative organizations. Clearly,
times and operating environments change and thus affect businesses, including
cooperatives’ policies and decision making. Historically, democratic
voting or equality of governance was considered synonymous with equality
in member treatment for operational policies by many cooperatives. For
example, all members often were expected to be charged or paid the same
price by supply or marketing cooperatives or interest on loans was expected
to be equal among borrowers for credit cooperatives. Today’s more
competitive environment has resulted in differential pricing to maintain
the business of large-volume members and more risk-based lending by credit
cooperatives. Also, open membership has been challenged with so-called
“New Generation” cooperatives. Provision of equity by farmer/owners
has become more difficult because of declines in farmer numbers and lack
of availability of discretionary income for investment in a cooperative
by farmers. In
addition to support for traditional cooperative principles, managers and
directors were asked to express and evaluate their knowledge/capabilities
relative to the division of responsibility between management and the
board of directors, decision making, and financial analysis. Managers
had more positive self-assessments of their business knowledge/capabilities
than did directors and both groups’ self-assessments were generally
consistent with performance measures developed from actual responses provided
in the survey for the various business decision areas. Both groups showed
the most confidence and competence in the decision-making area that represented
responses to selected scenarios of events or issues that might confront
them in day-to-day operations. Performance
scores were lower but still above the 70% level and acceptable for knowledge
and application of cooperative principles, financial analysis, and manager-versus-director
responsibility. However, a higher level of performance was expected in
the financial area because questions represented basic relationships for
the particular cooperative type (finance, marketing, or supply) and the
particular performance area (profitability, liquidity, efficiency, and
solvency). Today’s
highly competitive environment and narrow margins accentuate the need
for financial acumen. Management and financial training were more frequently
available for managers (88% and 90%) than for directors (31% and 19%).
Also, lack of such background and training does not lessen their fiduciary
responsibilities to the cooperatives’ membership. Additional financial
training seems desirable for both groups. Also, training relative to proper
roles for managers and directors and strategic planning would be beneficial
to both directors and managers, and ultimately to members. Statistical
models evaluated the relationship of cooperative, manager, and director
characteristics to performance scores derived for the business knowledge/capability
areas of cooperative principles, finance, and decision-making plus a cumulative
score for all areas. Results showed no difference between managers and
directors. However, managers scored 8.6% higher in the manager-versus-director
responsibility area. Size of firm, as represented by sales, and participation
of the director or manager in a financial training program improved scores
in the financial area. These items had negative impacts in the decision-making
area while experience as a manager had a positive impact. Age resulted
in positive impacts initially and then the score declined at higher levels. The rapidly evolving agribusiness sector requires cooperatives to adapt and adjust or possibly face financial difficulties. Aggressive, knowledgeable, and competent cooperative managers and directors will foster implementation of structures, policies, procedures, and practices that will help ensure efficiency and competitiveness of their cooperatives and thus service and benefit to the membership.
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