United States

Department of

Agriculture

Rural Business–

Cooperative

Service

RBS Cooperative

Information

Report 11 What They Are and 

the Role of Members,

Directors, Managers, 

and Employees

Cooperatives:
Abstract This is an educational guide for teaching basic information about cooperatives. It

explains what cooperatives are—their business, principle, and structural characterizations, and the responsibilities and roles of cooperative members, directors, managers,

and employees.

Five chapters make up this guide. Chapter 1—What Are Cooperatives?, is the most

extensive chapter and generally describes where and how cooperatives fit into the

American system of business, their unique principles and practices, and their defining

structural characteristics, and it introduces the roles of the major cooperative participants—members, directors, manager, and employees. Chapters 2-5 go into further

detail about the participants. Chapter 2 gives an overview of cooperative members,

Chapter 3 describes directors, Chapter 4 discusses the cooperative manager, and

Chapter 5 explains employees.

Each chapter includes visuals that coincide with and summarize the concepts and

information provided in the text. These are available as PowerPoint slides from Rural

Business-Cooperative Service for presentational use in educational/informational

forums.

Cooperatives: What They Are and the Role of

Members, Directors, Managers, and Employees

This guide, revised by Patrick Duffey and James Wadsworth, combines five earlier

publications (CIR 10-18) on the same subject written by C.H. Kirkman, Galen Rapp,

and Gene Ingalsbe while all were employed by USDA's Agricultural Cooperative

Service. Also used in this revision was Co-ops 101 (CIR 55) by Donald E. Frederick.

USDA's cooperative interest program is now contained in USDA's Rural Development

mission area and housed in Rural Business-Cooperative Service (RBS).

For a catalog of related publications, please ask for Cooperative Information Report 4

and write USDA/RBS; 1400 Independence Ave. SW, Stop 0705; Washington, DC

20250-0705 (phone: 202-720-8381 or FAX 202-690-4083). 

Publications and information are also available on the internet, The RBS Web site is:

http://www.rurdev.usda.gov/rbs/index.html

Cooperative Information Report 11

June 2001
Contents Chapter 1—What Are Cooperatives? .....................................1

Business Characteristics ..........................................1

Unique Principles ................................................1

Cooperative Practices ............................................2

Structural Characteristics ..........................................2

Participation Roles ...............................................3

Summary ......................................................4 .

Chapter 2—Members Make Cooperatives Work ............................10

Commitment and Use ............................................10

Ownership and Control ...........................................10

Financial Responsibility ..........................................12

Summary .....................................................12

Chapter 3—The Cooperative Director ....................................15

Selecting Directors ..............................................15

Director Responsibilities ..........................................16

Summary .....................................................18

Chapter 4—What the Cooperative Manager Does ..........................22

Manager Responsibilities .........................................22

Representing the Cooperative .....................................23

Summary .....................................................23

Chapter 5—What Cooperative Employees Do .............................26

Characteristics of Quality Employees ................................26

i
Chapter 1—What Are Cooperatives?

This chapter focuses on what cooperatives are, and explains

their business, principle, and structural characteristics. It

introduces the major participants—members, directors,

managers, and employees—which are discussed in greater

depth in chapters 2-5.

Business Characteristics

There are many ways of conducting a business in

the United States. Businesses carry different names

and offer distinct products and services. People buy,

sell, trade, borro w, insure, and conduct all kinds of

business transactions. But businesses are organized in

different ways depending on: who owns and controls it,

who buys from (patronizes) it, and who gets the profit

(earnings) from it.

Businesses fall into one of three categories: individually owned businesses (proprietorships) where one

person owns, operates, manages, and receives the

profits; partnerships which have two or more people

who jointly own, control, and operate the business,

sharing proportionately in the risks and profit; and corporations with multiple owners that offer a variety of

goods and services to customers.

Cooperatives are a type of corporation; a State-chartered business organized and operating under its laws.

Cooperatives resemble other businesses—they have

like physical facilities, perform similar functions, and

follow sound business practices. They operate under

bylaws and other necessary legal papers. However,

cooperatives are different from general investorowned corporations, which are operated to make a

profit for those investors.

The cooperative corporation is a business owned and

controlled by the people who use its services. Cooperatives

are controlled by a board of directors (elected by member-owners), derive equity from member-owners,

operate for the benefit of member-owners, and allocate

earnings to members based on use.

Cooperative earnings from business with members are taxed once, either as income of the corporation

when earned or as income of the members when allocated to them. Cooperatives usually have a perpetual

existence—members can routinely join or resign without disrupting ongoing operations. 

There are over 47,000 cooperatives of all types in

the United States serving 100 million people, nearly 40

percent of the population. Financial, consumer service,

and business cooperatives provide credit, transportation, facilities, recreational equipment, food, housing,

health care, child care, wholesale goods and supplies,

electricity, telephone and electronic services, farm production supplies and service, and farm product marketing.

Unique Principles

Three principles distinguish cooperatives fro m

general corporations: user-owner, user control, and

user-benefits.

User-owner— the people who use the

cooperative own it. Member-owners finance the

cooperative’s assets and have an obligation to provide

financing in accordance with their use to keep the

cooperative in business and permit it to gro w.

User-control—members, as owners, control

overall operations and activities of the cooperative.

This control is exercised through voting at annual and

other membership meetings, and indirectly through

those members elected to the board of directors. This is

generally done on a one-member, one-vote basis;

however, some cooperatives may use proportional

voting based on members’ use of the cooperative.

User-Benefit—The cooperative's sole purpose

is to provide and distribute benefits to members on the

basis of their use. Distribution of earnings is a key

benefit based on members' use of the cooperative (or

patronage), not the amount of capital they have

invested in it.

Extensive Benefits—The third principle only

partially explains the benefits members may derive

from owning and controlling their cooperatives. There

are many potential benefits: 

● Improves bargaining power—by combining

resources, needs, or products, members,

through their cooperatives, improve their ability to market, purchase, and serve.

● Reduces costs—volume purchasing of production supplies and pooled marketing of products, lowers the per-unit costs to members.

Cooperative-to-cooperative cooperation

reduces overhead for necessary services.

● Market access—cooperatives often provide services and/or products that are unavailable to

members otherwise.

● Improves products and quality of service—cooperatives work to satisfy members by providing 

1
quality products, facilities, equipment, and service, creating competition with good prices,

and adding value to members’ products.

● Provides opportunity for political action—cooperatives provide a way to organize for effective

political action. They can meet to develop priorities and strategies and send representatives—speaking for many—to meet with legislators and regulators.

● Increases community strength—having a business

owned and controlled on a cooperative basis

helps the entire community. Cooperatives generate jobs and salaries for local residents. They

pay taxes that help finance schools, hospitals,

and other community services.

● Provides a competitive yardstick effect—studies

have shown that cooperatives in the marketplace create an impact on competition that

keeps prices lower for related purchased services and supplies and higher for marketed

goods and products.

● Economic enhancement—cooperatives operate on

sound business principles to create earnings

that are distributed back to members on the

basis of their use.

Cooperative Practices

Cooperatives have basic practices that facilitate

the three distinguishing principles and further differentiate them from other businesses.

Patronage Refund System—Cooperatives

return earnings to members, after costs have been

covered and needed operating capital obtained, on

the basis of their use of the cooperative. This is

most often done at fiscal year end from earnings

generated on products and services supplied

and/or marketing conducted. Earnings are

returned to patrons—as cash and/or equity

allocations—on the basis of the how much

business each patron transacted with the

cooperative during the year. These distributions

are called patronage refunds.

Limited Returns on Equity Capital—Members

form a cooperative to get a service—source of

supplies, market for products, or performance of

specialized functions—not necessarily a monetary

return on capital investment. Most cooperatives

don’t pay any dividends on capital while others

pay a modest return. Limiting returns on equity

supports the principle of distributing benefits

proportional to use.

Cooperation Among Cooperatives—Many local

associations are too small to gather the resources

needed to provide all the services their members want,

so cooperatives work together in many instances.

Federated cooperative structures, joint ventures,

marketing agencies in common, strategic alliances, and

informal networks allow cooperatives to pool

resources and assets to provide services and programs

on a collaborative basis at lower cost.

Cooperative Education—Cooperatives provide

education and training to members, directors,

employees, and others in the community that promote

the cooperative form of doing business. They work to

ensure that members, directors, and employees are

well apprised of their distinct, important roles in the

cooperative and that others outside the cooperative

understand the uniqueness of the organization and its

benefits to the community.

Such education is carried out directly and indirectly—directly by advertisements, public forums,

internal training programs, etc., and indirectly by participation and funding of State cooperative councils

and other like associations that carry out the important

role of cooperative education.

Structural Characteristics

Cooperatives are characterized by the geographical territory they serve, their governance system, and

the functions they perform. This provides an understanding of cooperative differences pertaining to scope

of operations, member structure, and functional service.

Geographical—Cooperatives are often loosely

characterized as local, super local, regional, national,

and international based on the size of area they serve.

These characterizations describe the cooperative’s size

and scope of operations in reference to serving

members.

Local cooperatives operate in a relatively small

geographic area (often a single county) with one or

two facilities from which to serve members.

Super local cooperatives operate in two or more

counties, often with several branch facilities.

Regional cooperatives serve an area comprising

numerous counties, an entire State, or a number of

States.

National cooperatives serve a major portion or

most of the United States.

2
International cooperatives operate in more than

one country, with headquarters in the United States or

another country.

Governance System—Based on membership

structure, cooperatives are classified as centralized,

federated, or mixed. These three classifications

essentially define who the members are and how the

cooperative is organized to serve them.

Centralized cooperatives have individuals and

business entities as members. A centralized cooperative has one central office, one board of directors elected by its members, and a manager who supervises all

operations. Business may be conducted through

branch offices or stores staffed by employees responsible to the central management team.

Federated cooperatives have other cooperatives as

members. Each member of a federated is a separate

cooperative that owns a membership share entitling it

to voting rights in the affairs of the federated. Each

member of a federated cooperative typically has its

own board of directors, manager, employees, and facilities to serve its members.

The federated has its own hired management and

staff and a board of directors elected by and representing the member cooperatives. It performs activities

often too complex and expensive for them to do individually, such as manufacturing production supplies,

tapping major financial markets, and marketing on a

regional, national, or worldwide basis.

Mixed cooperatives have both individuals and

other cooperatives as members. These cooperatives

have features of both centralized and federated cooperatives.

Functions Performed—Cooperatives may

perform one or more of three core functions: marketing

products, purchasing supplies, and providing services.

These functions further explain a cooperative’s

purpose and scope.

Marketing cooperatives assist members in maximizing the returns they receive for goods they produce.

Most cooperative marketing activity involves either

agricultural products or those of producers in related

industries such as forestry, horticulture, and aquaculture. They handle, process, and sell cotton, dairy products, fruit and vegetables, grains and oilseeds, livestock and poultry, nuts, rice, sugar, and other

agricultural commodities. They sometimes add value

by developing raw member goods into desirable consumer products.

Marketing cooperatives enable members to

extend control of their products—and realize additional margins—through processing, distribution, and sale.

Purchasing cooperatives allow members to gain

access to affordable production supplies and goods. By

purchasing for numerous members in bulk, cooperatives reduce member costs and strengthen their purchasing power.

Many local purchasing cooperatives areaffiliated

with other such organizations, often through regional

and national federated cooperatives. Such cooperation

efforts further reduce member costs and strengthen

their purchasing power through direct ownership of

large-scale facilities such as petroleum refineries, fertilizer and feed plants, research facilities, etc. Hardware

stores, independent grocery stores, and fast food

restaurant franchises, among others, have also developed purchasing cooperatives.

Service cooperatives exist in a number of avenues.

They provide farm-specific services such as animal

feed processing and crop harvesting, and recommending and applying fertilizer, lime, or pesticides. Others

provide electricity and telephone service, credit, housing, and health care.

Participation Roles

Cooperative organizations operate through the

participation of the principal parties—members, directors, manager, and employees. These cooperative participators have separate roles, though they share the

common interest of building a successful business.

Members—As owners of the business, they

organize, incorporate, finance, and elect directors to set

the cooperative's policy and govern. Members use the

cooperative and are the reason for its existence.

Directors—Members of the board are elected

by, and serve at the will of, the membership. While

some serve limited terms, others serve multiple terms.

They have two primary responsibilities—hire

competent management and guide the direction of the

business by providing policy and oversight to its

operation.

3
Manager—The manager reports to and works

closely with the board of directors. He or she is

responsible for the day-to-day operations and

performance of the cooperative.

Employees—Hired by the manager, employees

work for the member-owners in carrying out

responsibilities in the cooperative’s operation as

dictated by the manager.

Summary

People and businesses use cooperatives to serve

their common interests and for mutual benefit.

Cooperatives are complex organizations with unique

principles, practices, member benefits, and structural

characteristics. Geographic area, governance system,

and functions performed explain organizational structure and size and scope of member service.

Cooperatives exist in many segments of the

American system of business today providing pur

chasing, marketing, and service for member-owners.

Members use purchasing cooperatives to buy food,

consumer goods, and business and production supplies. Cooperatives are used to market and process

farm-grown commodities such as corn, soybeans,

wheat, and cotton. Others provide transportation,

credit, housing, recreational equipment, and facilities.

Coperatives consist of members, directors, mamagement, and employees. All have important participation roles to play and responsibilities to fulfill.

4
5

A Type of Business Dependent On

Partnership

Individually Owned Business

Corporations

● Who owns the business?

● Who conrols the business?

● Who uses the business?

● Who gets the profis?

One Person

● Owns

● Controls

● Operates

● Benefits/profits

Two or more people

● Own

● Control

● Operate

● Share in risks and profit

● Multiple owners

● Variety of goods and services

● Physical faciliies

● State chartered

● Investors

● Profits shared among investors

A-1

A-3 A-4

A-2

Cooperatives Are a Type 

of Corporation Cooperatives

● Multiple owners who are user members

● Variety of goods and services

● Physical facilities

● State chartered

● Members are investors

● Owned and controlled by members who

use its services

● Are primarily controlled by a board of

directors elected by and from members

● Derive equity from member owners

● Operate for the benefit of member

owners

● Allocate earnings to members based on

use

● Earnings from member business is taxed

once

● Have perpetual existence

A-5 A-6
6

The Cooperative Form of

Business Is Prevalent

Cooperatives Provide

Types of Cooperatives

Cooperatives Have Unique

Principles

User-Owner

User-Control

User-Benefit

● More than 47,000 cooperatives in the United

States

● Serve 100 million people, 40 percent of the

population

● There are several types of cooperatives

serving many sectors

● Credit

● Transportation

● Facilities

● Recreational

equipment

● Food

● Housing

● Health care

● Child care

● Wholesale goods

and supplies

● Electricity

● Telephone and 

electric services

● Farm production

supplies and service

● Farm marketing

● Financial

● Consumer service

● Business

User-Owner Principle User-Control Principle

A-7 A-8

A-9 A-10

A-11 A-12

The people who own and

finance the cooperative are

those who use it.

The people who use the 

cooperative are those who 

control the cooperative.
7

Members Exercise Control By

User-Benefits

User-Benefit Principle

The cooperative’s sole purpose

is to provide and distribute

benefits to members on the

basis of their use.

Cooperative Practices

● Voting at annual and membership 

meetings

● Electing board of directors

● Making decisions on major 

cooperative issues

● Bargaining power

● Market access

● Community

strength

● Political action

● Reduced costs

● Quality products

and services

● Economic

enhancement

● Competitive

yardstick

● Patronage Refunds - distribute earnings

to members based on use

● Limited Return on Equity Capital - members form cooperatives for service, not

for a monetary return on investment

● Cooperative Cooperation - joint ventures, MAC’s, networks, alliances, working relationships, etc.

● Cooperative Education - promote the

cooperative way of doing business and

educate members, directors, and

employees

A-13

A-15

A-14

A-16

Geographical Structure

Geographical characterization defines a

cooperative’s size and scope of operations in

reference to serving members.

Cooperative Governance System

Structure

Based on membership sructure and essentially

defines who the members are and how the

cooperative is organized

● Local - small region (county) covered

● Super local - two or more counties,

branches

● Regional - numerous counties, State or

more

● National - United States-wide

● International - worldwide

● Centralized structure - Individuals are direct

members

● Federated structure - Cooperatives are direct

members

● Mixed structure - Individuals and

cooperatives both are direct members

A-17 A-18
8

Centralized Structure

Mixed Structure

Federated Structure

Cooperative Functions 

Cooperative

Member Member Member

Cooperative

Member

Member

Member Member

Member

Cooperative

Local

Cooperative

Local

Cooperative

Member Member Member Member

Three Core Functions:

● Marketing - extend controlof

members products through processing, distribution, and sale

● Purchasing - provide affordable

supplies and goods

● Service - provide needed services

Marketing Cooperatives

Assist members in maximizing

returns from goods they produce.

Marketing Cooperatives

Assist members to maximize the return they

receive for the goods they produce

● Handle, process, and sell

● Grade, transport, bargain

● Add value

● Research new product development

● Agricultural

● Forestry

● Aquaculture

● Horticulture

● Crafts

Extend control

of their products

and realize additional margins

● Transport

● Process

● Grade

● Add value

● Research

● Distribute

● Bargain

● Sell

Member Member

Products Functions Benefits

A-19

A-21

A-20

A-22

A-23 A-24

Local

Cooperative
9

Purchasing Cooperatives

Allow members to gain access to

affordable production supplies

and goods.

Service Cooperatives

Provide needed services.

Purchasing Cooperatives

Used by members to gain accesss to affordable, 

quality supplies.

Service Cooperatives 

● Purchase in bulk to reduce costs and

increase purchasing power

● Provide direct ownership of refineries,

plants, retail facilities, research facilities

● Meet many needs

● Custom application of purchased supplies,

transport of product, etc.

● Provide utilities, credit, housing, health care,

technology,etc.

● Hardware

stores

● Independent

grocery

stores

● Fast food

franchises

● Reduced

costs

● Volume discounts

● Quality control

● Increased

access

Member Member

Products Functions Benefits

Used by members to gain access to affordable,

quality services

Members Member

Products Functions Benefits

● Producers

● Rural

residents

● Urban

residents

● Public

● Access to

services

● Affordable

services

● Quality

● Increased

access

● Farm applications

● Credit

● Electricity

● Communications

● Insurance

● Health care

● Schooling

● Housing

A-25

A-27

A-26

A-28

Participation Roles

Cooperatives operate through

the roles of principal parties.

Organizational Make-Up

● Members

● Directors

● Manager

● Employees

Board of Directors

Manager

Employees

A-29 A-30

Members

● Refineries

● Plants

● Feed Mills

● W arehouse

● Manufacture

● Buy in bulk

● Deliver
Chapter 2—Members Make 

Cooperatives Work

This chapter focuses on members—who they are

and their responsibilities as owners, with particular

emphasis on control, financing, and patronage.

Members are the foundation of the cooperative.

They organized it and their needs are the reason for its

existence. Member support, through patronage and

capital investment, keeps it economically healthy. And

their changing requirements shape the cooperative’s

future.

Members can be individuals, businesses, or other

organizations drawn together by a mutual interest.

Members own and use the cooperative. They provide

sufficient financial support so the cooperative can

operate; and through active participation and their

elected representatives, members ensure that the cooperative has the right mix of management, personnel,

facilities, and equipment to meet their needs.

Commitment and Use

The success of a cooperative hinges on the commitment of its members. They must be committed to

using it, controlling it, and financing it.

A basic requirement of membership in a cooperative is to patronize and use its services. Benefits accrue

to members through patronage and are thereby directlyaffected by the extent and consistency of patronage.

While member commitment to patronage should

be a given, there are various methods used to compel

it.Patronage is elicited by cooperatives through persuasion—exhorting members to support the cooperative for the common welfare ofall, by legally binding

membership agreements, and by substantial up-front

capital contribution requirements.

Using the cooperative is members’ easiest responsibility to carry out, and by using it as much as they

can, members help the cooperative directly succeed in

several ways:

● A certain amount of business is needed just to

cover the cost of opening the doors each day,

including maintaining buildings and equipment, utilities, and salaries. Greater volume

reduces these costs per unit of sale. Facilities

can operate closer to capacity. Equipment and

employees can be more productive. All together, the cooperative is able to generate more

income above costs and return patronage

refunds to members at the end of the cooperative’s business year.

● Using the cooperative helps provide the financing to keep it operating and growing. Member

financing is provided on the basis of members’

use of the cooperative.

● Using the cooperative is how members gain the

benefits they sought when they first formed

(provided support and start-up capital) or

joined the cooperative.

Members must make a conscious decision to

patronize the cooperative even when short-term prices

or services may be better elsewhere. If members don’t

want to use the cooperative, the need for it must be

reexamined.

Maximum use helps the cooperative and ultimately members as well. The stronger the cooperative,

the more competitive it can be in the marketplace. The

cooperative may be able to influence suppliers to provide products or services specialized to members’

needs. A prosperous cooperative with the solid support of its members is often recognized as a business

leader in its community or industry.

Ownership and Control

As members use their cooperative, it is imperative that they recognize their special role as owners. As

owners, members have certain legal responsibilities:

incorporate the cooperative; approve (and change) articles of incorporation, bylaws, and major policies; sign

marketing agreements and other binding contracts;

elect directors according to State statute and cooperative bylaws; vote on significant actions affecting the

cooperative’s legal status such as mergers, acquisitions, or other asset changes, and if necessary,todissolve the organization; and ensurethat the cooperative

follows general business laws and those unique to

cooperatives such as taxation.

As incorporated businesses, cooperatives give

members limited liability protection. Even though this

means members' maximum loss is only the capital

they've invested, inattention to ownership responsibilities often dilutes the value of the cooperative to them

as users.

For example, capital used to defend the cooperative in a lawsuit or fines for violating regulations

could have been used to enhance the cooperative's

ability to serve its members.

Although members may have many ownership

"partners," each has associated legal responsibilities as

10
if he or she were sole owner. A cooperative's success

depends largely on how well members understand

what it is and how it operates. Members make business decisions (directly or indirectly) through their

elected representatives that benefit all member-users.

Cooperatives must provide members with important documents (e.g., "owner’s manual") so that they

clearly understand its business practices and its reason

for being. Such materials usually include:

● the definition of the cooperative (e.g., mission

statement or clause clearly identifying its major

purpose) and an explanation of its unique principles and practices; 

● the history of when and how the cooperative

started;

● articles of incorporation and bylaws;

● information on organizational structure and

staffing;

● operational scope and products handled and services offered; and

● operating policies.

Members who understand their cooperative can

make wide use of it for their benefit and offer constructive criticism and suggestions affecting its future.

Members carry the cooperative's image to the

community and business environment. Although large

cooperatives often hire professionals trained in communications, public relations, member relations, and

governmental affairs, members are themselves often

the best representatives. They promote the cooperative

to potential members and explain it to others.

Members also make sure it acts as a good community

citizen by contributing funds, providing leadership,

and participating in civic activities.

While cooperatives are politically neutral and

avoid political affiliation, they do attempt to influence

legislation affecting their business environment.

Members and directors may participate in political

activities, but the bylaws usually set conditions for

managers, directors, and employees.

Control Guidelines—Members control their

cooperatives by shaping the legal framework in the

articles of incorporation and bylaws. The board of

directors and hired management must legally abide by

the provisions of these documents. Only the

membership can change them.

The articles list the cooperative's name, place of

business, capital structure, and incorporators, and

describe the type, purpose, operations, membership

qualifications, duties of officers and directors, meeting

and voting procedures, raising and refunding of member capital, and procedures and rights in case of dissolution. Other control documents include membership

applications and marketing agreements.

The policies reflect the operating philosophy and

guide actions it will take to fulfill its mission. Members

delegate the responsibility for development, review,

and change of policies to the board of directors.

Policies cover employee conduct and work rules, office

hours, board/management functions, member credit,

safety, risk management, public relations, and other

topics related to successfully conducting the cooperative's business.

Governance—Members also control their

cooperative by casting votes on major business

decisions (for example, merger) and by the authority

they delegate to the board through a democratic

election process. Level of control is directly related to

members’ degree of participation in this important

process.

Formal decisions are made by members at the

annual meeting such as nominating and electing directors, amending the bylaws, accepting the audit report,

voting on major actions or policies proposed by the

board and management, and voting on resolutions and

motions.

Informal participation covers participation in

cooperative activities such as:

● serving on advisory committees and taking on

special assignments;

● expressing opinions in discussions with other

members or directors; 

● providing feedback to employees and management; 

● responding to surveys about attitudes and

assessments, product and service evaluations,

buying and marketing intentions, and providing other opinions about changing conditions.

Active member participation provides additional

information that helps the board and management better carry out their responsibilities. By active involvement in the governance process, members maintain

control of the cooperative's scope, direction, and operation.

Members place the health of the cooperative in

the hands of directors. Members reaffirm performance

by re-electing directors or seek improvements by electing new directors.

Members must participate in the governance

activities of their cooperative or accept the decisions

made by others.

11
Financial Responsibility

Members have a responsibility to finance their

cooperative in proportion to their use of it. Members

provide operating capital (equity) in three primary

ways: direct investment, retained margins, and perunit capital retains.

● Direct investment—refers to cash purchases of

membership certificates, common and preferred stock, or other forms of equity.

● Retained margins—At fiscal year end when

members receive a patronage refund based on

their share of net income as determined by

their use in the cooperative, they reinvest part

of it as determined by the board of directors.

Federal tax law requires that 20 percent of the

refund be paid in cash. The restisreinvested in

the cooperative and later paid back to members

according to a revolving cycle determined by

the board.

● Per-unit retain—Members use this method to

invest each time they conduct business with

the cooperative. The cooperative retains a specific amount per physical unit (pounds,

bushels, or cartons) involved in member transactions. Retains are accumulated and then

revolved back to members over a period of

years.

Startup capital—When cooperatives are

organized and started, they require an initial infusion

of capital. For a proposed cooperative business to have

a chance at succeeding, prospective members must

invest in the venture. Their commitment must be large

enough to show continuing concern about how their

invested money is being managed and that will

motivate them to accept ownership responsibilities.

The amount of capital required is determined by

economic feasibility studies and financial cost analyses. Some startup costs—legal fees, facilities and

equipment, inventory, salaries, insurance, office furniture, and administrative supplies—will continue as

operating expenses.

Control follows finance—Those three words

explain the importance of members’ responsibility to

finance their cooperative. A desirable goal is to have

members’ contribution of equity capital amounting to

a majority of the cooperative’s total capital

requirement. A high level of member equity capital

provides for greater member control and commitment.

It also usually makes it easier to access debt capital if

necessary.

Financing should be provided by active memberusers. Otherwise, former and long-time members may

pressure the board to allocate funds to redeem old

equity while current members want more money

invested in new facilities and better services. Being

financed largely by current members results in a membership more likely to have common interests and

objectives.

Summary

As owners of the cooperative, members have

associated responsibilities. They must use, control, and

finance their cooperative to gain the economic benefits

for which it was organized.

In taking an active ownership role by patronizing

and financing the cooperative, expressing their views

and needs, participating in the governance process and

decisionmaking, and evaluating how well the cooperative is performing, they gain other benefits as well.

They become educated in business practices and

see first hand the benefits derived from working

together. They often gain valuable leadership training.

The experience they gain from expressing their views

in various meetings, participating on committees, serving on the board of directors, and speaking on behalf

of the cooperative helps develop leadership traits that

they transfer to other personal and business pursuits.

Participation in cooperative business affairs can

add to a member’s personal stature in the community,

in the industry in which the cooperative operates, and

in governmental affairs.

All in all, cooperative ownership can give a member a well-earned sense of personal and business

achievement along with the numerous benefits the

cooperative’s existence provides.

12
13

Exercising Member

Responsibilities

● Commitment and use

● Ownership and control

● Finance

Member-Owner

Commitment and Use

Commit to:

● Use products and services

● Maintain control

● Provide financing

Member-Owner

Commitment and Use

Using the cooperative is members’ easiest

responsibility to carry out, and by using it

as much as they can, members help the

cooperative succeed.

Member Ownership and Control

● Know legal responsibilities

● Understand the cooperative

● Make decisions

● Vote

● Express opinions

● Serve (board/commitees)

Owners Must Understand Their

Cooperative

Know and understand its:

● Definition and history

● Mission or purpose

● Articles and bylaws

● Organizatonal structure

and staffing

● Products and services

● Policies

B-1 B-2

B-3 B-4

B-6

Member-Owners Have Legal

Responsibilities

● Incorporate

● Approve legal documents

● Elect directors according to mandated State law and cooperative

policy

● Ensure that general business and

cooperative-specific laws arefollowed

● Make major decisions that alter

legal status

B-5
14

Using the Cooperative

Is Essential for

W ays Member-Owners Finance

Cooperatives

● Maintaining control

● Achieving business success

● Fulfilling member needs

● Producing continuing benefits

● Direct investment

● Retained margins

● Per-unit retains

● Start-up capital

Member-Owner Financial

Responsibilities

Control follows finance:

● Finance in proportion to use

● Most capital from members

● Distribute earnings according to

use

● Return equity to inactive members

● Revolve equity

B-7

B-9

B-8
15

Chapter 3—The Cooperative Director

This chapter focuses on the board of directors. It covers

characteristics members should consider in choosing a directortorepresent them, alternatives for nominating and electing directors, and functions and responsibilities of directors.

The cooperative board of directors—the key position between members and hired management and the

makers of cooperative policy—is an important body in

the make-up of a cooperative. Elected by members, directors are charged with fulfilling responsibilities within

the parameters of the cooperative’s policies and the

law. They must set overall objectives and chart the

course the cooperative will follow to achieve those

objectives.

Being a director is an extremely important function

in a cooperative and it must be taken seriously.To

effectively carry out their duties, directors have to be

well versed in many critical areas and able to provide

sufficient time and energy. Serving on a cooperative's

board of directors can be time consuming in carrying

out formal and informal duties. While attending board

and committee meetings may take only a couple days

each month, informal duties such as listening, informing, and providing advice to members; writing letters;

reading materials to be informed and prepared for

meetings; and other duties can consume a lot of extra

time.

Directors are also asked to represent the cooperative at community functions and take leadership roles

in community organizations on behalf of the cooperative. In larger cooperatives, directors are periodically

asked to visit State and Federal legislators and officials.

Selecting Directors

In considering attributes of a potential director,

members should look for people who are good conversationalists, can clearly express their views, are good

listeners, and are active in organizations extending

outside the community. A good director must also be

able to establish two-way communications with the

manager, other directors, and members.

A director can be a powerful force for strengthening member support, promoting the cooperative in the

community, and in other ways influencing the business

environment in which the cooperative operates. Thus,

a good potential director has the ability to get along

with others, uses the cooperative fully,isinterested in

its performance, and will actively participate in making decisions.

Cooperative directors need good business judgement, often gained from their jobs or operating their

own businesses (e.g., farms). But, in this case, directors

areresponsible for a service-oriented business owned

by hundreds or thousands of producers.

A good director candidate over time makes the

most of available resources and is known to be a solid

thinker. Members with college degrees or other relevant business experience bring special expertise to the

board.

Selection Methods—Size, structure, and

function of the cooperative may dictate how directors

are chosen. Various systems can be used to produce

equitable representation of the membership. Some are

based on geographical districts with nearly equal

membership numbers, along commodity lines, or

volume of member business.

Cooperatives' democratic control principle has

been interpreted to mean equal voting rights, yet does

not preclude using proportional voting to achieve

equitable voting rights. State statutes offer guidance on

how the cooperative can elect directors.

A nominating committee is often used although

candidates may also be offered from the floor. The

committee may be appointed by the board chairman or

elected by the membership. Former directors are often

named although existing directors, hired management,

or staff should not serve.

A biographical sketch of candidates should be

developed and given to members before the election.

An ideal slate offers at least two candidates for each

position. Some large cooperatives with large or scattered membership may use district caucuses or mail

balloting to nominate candidates. Directors are elected

at the annual meeting.

Many cooperatives elect directors "atlarge,"

meaning the entire membership can vote directlytofill

each director position, and each director represents the

entire membership. As a cooperative grows, or the

composition of its membership changes, or it combines

with one or more other cooperatives, the "at-large"

method may become impractical.

Other cooperatives have other systems to produce equitable representation of the membership.

Some divide the cooperative’s territory into geographic

districts with nearly equal membership numbers.

Others establish roughly equal territories based on volume of member business. And others establish districts
16

along commodity lines. Some cooperatives have provisions for a public "atlarge" director who can contribute

a special expertise, such as an agricultural economist, a

lawyer, or a financial or governmental affairs specialist.

Regardless of the method, the members need to be

familiar with director qualifications, the articles and

bylaws, and leading candidates among the membership.

Director Responsibilities

Understanding the differences between manager

and directorroles is a key requirement for board effectiveness and harmony. Their roles in a cooperative are

unique among businesses. The uniqueness centers on

the employee-only status of the cooperative's manager

compared with the manager of other businesses typically sharing in ownership. A cooperative manager

should not be a member of the board, but must attend

and contribute to board meetings.

More decisive differences exist between the director and manager roles and responsibilities. Directors

have primary control and use a strategic perspective in

determining how to best serve members' needs and in

deriving the organizational and operating policies

required to do that. Directors delegate to the manager,

but should take counsel from the manager when it is

appropriate. Conversely, the manager has operations

control and uses a more tactical perspective—delegated by the board—in running the day-to-day operations

of the cooperative. Decisions made by the manager

must be in line with the cooperative objectives and

general direction set by the board. The manager also

advises the board when asked on policies and programs.

Just as it is important that the manager understand that he/she is not a board member and must

defer to the board of directors on major decisions, policy and overall cooperative direction, directors must

also recognize the division of responsibility.

Preserving Character—Directors are

responsible for preserving the cooperative's character.

Each State has at least one statute related to it. Federal

laws have specific requirements related to Government

programs, antitrust, and taxation. Also, the bylaws and

articles of incorporation state what the cooperative is

and how it must operate. Directors can be held legally

liable as individuals for violating these laws and

regulations.

However, over time, a subtle but very real threat

to the organization's cooperative character may develop. Management and board philosophy can drift fro m

the cooperative's formally adopted mission or may lose

touch with the members' changing needs. Without continual education of the key participants—managers

and staff,directors, and members—the cooperative

character, except that defined by law, can slip away

and become regarded the same as any other business.

Safeguard Assets—Members who invest in the

cooperative expect some kind of beneficial return.

They entrust the board to make sound business

decisions to protect their investment and increase the

value in terms of producing benefits. Directors are

accountable for both their actions and those of hired

management. The board equitably distributes benefits

by weighing the cooperative's business needs and

those of member owners. Each year the board hires an

individual or firm to audit the cooperative's financial

records and presents results in an annual report to

members.

Hire Manager—The board's most important

decision that determines the success (or failure) of the

cooperative is hiring (or firing) the manager. The board

objectively appraises candidates' qualifications—

leadership, compatibility of attitudes and goals, and

knowledge of the uniqueness of cooperatives.

The board delegates day-to-day control and guidance to the manager through bylaw provisions, written

policies, budgeting, strategic planning, reporting

requirements, and performance accountability. The

board also annually reviews the manager's performance and seeks ways to improve problem areas.

Set Policies—The board originates and

approves general policies that relate to the

cooperative's functions and how it conducts business.

The policies cover internal and external activities and

serve as a basis for making consistent decisions that

minimize conflict and maximize accountability.

Policies cover director and manager functions

and relationships; member, employee and public relations; organizational requirements; and operational

activities such as credit, pricing functions performed,

and purchasing, marketing, and services provided.

These written policies should be periodically reviewed

and updated.

These policies are discussed, written in final

form, approved, and reviewed at least annually by the

board. A policy manual is developed and distributed

to each director and the manager.

General policy statements reflect the board's philosophy of what kind of business the cooperative

should be, such as striving to provide leadership and
17

cooperate with other businesses. Hence, the manager

can make minor commitments to participate in community events without first getting board approval.

Policies—may also be specific: "No additional

credit shall be extended to any patron whose account

is 120 days past due." Such a policy gives the manager

authority to refuse extending additional credit even to

a director. Here are some other simplified examples: 

Policy—An independent Certified Public

Accountant shall audit the financial records at the end

of the fiscal year. Implementation—The manager keeps

appropriate records and provides other information

needed for the audit.

Policy—An annual business plan shall be prepared for approval and progress report made at

monthly board meetings. Implementation— Without further specifics, the manager prepares a budget for

approval, then compares it to actual business transacted, and reports any other information that would help

the board understand the cooperative's financial status.

Policy—Employee pay raises will be based on job

performance. Implementation—Job descriptions and

performance standards are written for each employee

and performance is reviewed annually. Amount of pay

raise depends on performance evaluation results.

Policy—An annual membership meeting shall be

conducted. Implementation—Management plans, organizes, and conducts the annual meeting.

Distribute Benefits—The cooperative's

performance is recorded on a fiscal year-end statement

of operations and balance sheet. The board determines

how the net income (or loss) will be distributed. With

net income, it decides how much patronage refund to

pay members in cash (Federal law requires at least 20

percent), how much to place in allocated equity to help

operate the cooperative, and how much to retain for

capital needs. Allocated equity refunds are members'

equity (ownership) in the cooperative, and are

periodically revolved back to the members on a

schedule determined by the board.

Strategically Plan—Knowing the cooperative's

needs, the board provides leadership in developing

plans to meet them. The process starts with an

assessment of the general and changing business

climate that affects both members and the cooperative.

In long-range planning, the board and management

consider challenges relating to internal and external

organizational growth, business volume, membership,

territory served, assets, etc. They develop objectives

and strategies to achieve and they monitor progress on

an ongoing basis.

Self-Evaluate—The board conducts an internal

assessment to assess how well it is fulfilling

responsibilities. Directors should assess themselves,

the board’s performance, and board meeting

effectiveness. Conducting such assessments identifies

weaknesses and allows for the development of

corrective actions.

Elect Board Officers— The board usually elects

the cooperative’s officers shortly after the annual

meeting. Each officer has specific duties as detailed in

the cooperative’s bylaws.

● The president presides at all meetings, watches

over the association’s affairs, and serves as the

main communication link between hired management and the other directors and members.

● The vice president, in the absence or disability

of the president, performs the duties of president.

● The secretary keeps a complete record of all

meetings of the board of directors and general

membership and also is the official custodian of

the cooperative’s seal, bylaws, and membership

records.

● The treasurer oversees the bookkeeping and

business accounts to ensure accuracy and proper handling. The treasurer also presents periodic financial reports.

Appoint Board Committees—The board’s work

may be divided among special or permanent

committees, each dealing with a phase of the

association’s operations, such as finance, purchasing,

feasibility, marketing, and others.

Committees study the problems in their particular field and make recommendations to the board of

directors. In some instances, committees may be given

certain powers to act for the board, subject to later

review by the entire board.
18

Summary

The board of directors is the cooperative’s central

decision center. In carrying out this overall responsibility, the board performs several important supporting roles. It is a listening post, hearing from management and membership. It is a communications hub,

imparting information between members and management. It is an advisory body to members and management, providing recommendations and guidance.

But in every role and action, the board is accountable

to members.

Members choose director candidates and elect

them to office. From their peers, members select individuals with the best judgement and business management skills to represent them and conduct affairs

on the cooperative’s board of directors. Loyalty,

integrity, the ability to make wise business decisions,

and willingness to serve are necessary characteristics

for board members.

Acting as a group, directors set the objectives for

the cooperative and make decisions that set the course

the cooperative will follow in achieving those objectives.

In carrying out their responsibilities, directors

serve much like trustees, charged with a legal obligation to protect the assets of the members. Directors

must fulfill their responsibilities while exercising due

care to act within the parameters of the cooperative’s

policies and the law.
19

Selecting Directors

A good director should be able to:

Directors

Potential Directors

● Hold a key position between 

members and hired management

● Set cooperative objectives and chart

its course

● Make cooperative policy

● Must be well versed in many areas

● Have time and energy

● Listen, inform, advise

● Represent the cooperative

● Show leadership

● Think independently

● Place cooperative’s interests first

● Make good business decisions

● Communicate well

● Express views

● Make the most of available resources

● Promote the cooperative

Furthermore, a Director:

● Gets along with others

● Uses the cooperative fully

● Is interested in its performance

● Participates in decision-making

● Understands that he/she is representing owners in their business

● Understands his/her role in relation to management

● Identify potential directors with a

nominating committee

● Biographical sketch should be studied

by the membership prior to the 

election

● Considered for election at annual

meeting

Elect Directors Elected Directors

Equitable representation:

● At-large system

● Geography

● Business volume

● Commodity

● Personal expertise

Have primary control:

● Use strategic perspective to

better service members’ needs

● Delegates daily opertional control to the manager

C-1

C-3

C-5

C-2

C-4

C-6
20

Directors Recognize Divison of

Responsibility

Directors Preserve Co-op’s Character

Director Responsibilities

Directors Safeguard Assets

Directors:

● Have primary control

● Strategic perspective

● Develop operational

and organizational 

policies

● Take control from

manager

● Big-view decisions

● Provide direction

● Hire/fire manager

Manager:

● Has operational control

● Tactical perspective

● Follows operational and

organizational policies

● Advises board

● Day-to-day decisions

● Acts in line with direction

● Hires/fires staff

Serve according to :

● Protect members’ investment

● Make sound financial decisions

● Hire auditors

● Preserve cooperative character

● Safeguard assets

● Hire the manager

● Set policies

● Distribute benefits

● Plan for the future

● Evaluate

● Elect board officers

● Appoint committees

● Laws

● Bylaws

● Articles

C-7

C-9

C-8

C-10

Directors Hire Manager

● Appraise applicant qualifications

● Delegate day-to-day control

● Appraise performance

Directors Set Policies

● Originate and approve

● Function and business related

● Review and update

● Create policy manual

C-11 C-12
21

Directors Appoint Committees

● Temporary or permanent

● Field of study (finance, feasibility,

marketing, purchasing, etc.)

● Recommendations to the board

● Power to decide

Directors Distribute Benefits

● Amount of patronage refund

● Proportion in cash

● Allocated equity

● Unallocated equity

● Equity revolvement and retirement

Directors Plan

● Assess business

● Evaluate challenges—internal and

external growth, business volume,

membership, territory, assets

● Develop objectives and strategies

● Monitor progress

C-13 C-14

Directors Self-Evaluate

Internal assessments

● Self-ability, performance

● Whole board performance

● Board meeting productivity

Directors Choose Leaders

Elect Board Officers

● President

● Vice president

● Secretary

● Treasurer

C-15

C-17

C-16
22

Chapter 4—What the Cooperative

Manager Does

This chapter focuses on managers and their responsibilities, with particular emphasis on differences between

managing a cooperative versus other forms of business.

All businesses are managed to provide a return

on the investment of stockholder-owners. The manager of an investor-owned corporation basically needs to

satisfy stockholders with the yield they’re getting on

their invested money. The manager of a cooperative,

likewise, needs to satisfy its member-owners but needs

a lot more help from them—information, participation,

and decisionmaking. Because of the active participation level of members, there must be considerable

communication between them and the manager.

Success of a cooperative largely depends on good

board/manager relationships. The working relationship between board and manager requiresrespect and

an understanding of each other’sresponsibilities (the

previous chapter indicated responsibility differences).

Like any other business, cooperatives attempt to

seek the best managers, offering comparable wages

and benefits, performance incentives, and retirement

programs. Managers are hired to operate the business,

focusing energies and efforts on everyday operations

to serve members. When interviewing manager candidates, the board must make the ownership issue clear

and further stress that the manager is accountable to the

board.

The board of directors decides what the cooperative will do; the manager and immediate staff decide

how it can best be done—subject to boardreview—in

achieving the primary objective of serving members

effectively.

Manager Responsibilities

For most corporations, the roles of the manager

and directors are generally the same. Understanding

the differences in a cooperative is a key requirement

for an effective and harmonious relationship. In a

cooperative, the manager does not share in ownership

and should not be a member of the board. This produces a clear separation between manager and director

responsibilities.

Implements board policy—Policies are set by

the board of directors and implemented by the

manager.

Advises the board—Members and their elected

directors may lack experience in operating a business,

much less an agribusiness cooperative with its diverse

functions and operations. The manager advises the

board on how the cooperative can be operated more

effectively and provides technical advice in many

areas such as:

● competitive strategy— cost cutting, pricing policy,

service packages, and cooperative benefits; 

● financial management—credit control, debt

load, cash-flow, and member equity;

● operational efficiency— product storage and handling, pickup and delivery schedules, administrative procedures, storetrafficorganization,

and staffing;

● new technology and equipment— industry innovations, improved machinery, and research

results;

● new products and services— additions or replacements and product information;

● policy changes— made necessary because of

problems with implementation or by changes

in business environment;

● regulatory changes— chemical use, worker safety,

environmental contamination; and

● governmental affairs— new or changed legislation, governmental assistance programs, and

involvement in public policy.

Manages daily operations—supervises and

coordinates, under board direction, the business

activities of the cooperative by managing the people,

capital, and physical resources.

Hires staff—Maintaining a competent staffis

the manager's most important job. How well the

manager selects, trains, and supervises employees has a

direct bearing on how well the cooperative performs.

The board provides the manager with tools to assemble

an effective staff—wage and salary plan, attractive

benefits, and safe working conditions. Employees make

the cooperative work, but the manager provides

leadership, direction, and motivation.

Sets tactical goals and takes actions—

Significant operational planning occurs as

managers direct the daily affairs of the

cooperative. The manager develops tactical plans
23

in line with the cooperative’s major objectives, as

set by the board of directors.

Formal reporting occurs at monthly board meetings. The manager sends financial statements and

information on major issues to directors in advance of

board meetings so they can review the material.

Accurate reports to the board are necessary for good

business management and help build mutual respect

and trust between the manager and board. Major items

include:

● information on special issues and circumstances;

● statement of operations with budget comparisons;

● balance sheet with comparisons to one or more

previous years;

● accounts receivable status that notes delinquent accounts; 

● progress toward objectives set as part of planning;

● summary of operational activity during the

most recent period; and

● proposals for immediate or longer term consideration.

Managers also maintain informal contact with their

boards. Outside of board meetings, managers must

keep the board president and other officers apprised of

significant events that call for immediate action.

Reports to members—Aside from daily

informal contacts as members transact business at the

cooperative, the manager may use special events such

as an open house or appreciation day for more

organized reporting. Letters to members and a column

in a newsletter may be used. District or regional

meetings and one-on-one member visits are used.

Periodic cooperative publications cover a wide range

of information about cooperative operations.

Cooperative bylaws require a formal annual

report be distributed to members at the annual meeting. In more abbreviated form, the report contains

much of the same information already provided to the

board. The manager discusses operational highlights,

issues and problems encountered, special activities,

and outlook for the coming year.

Representing the Cooperative

As the person in charge on a day-to-day basis,

the manager represents the cooperative in many ways.

His/her representation is often guided by the cooperative’s policies and specific board directives. The manager’s own interests may also influence the type and

extent of his or her representation on behalf of the

cooperative. The manager represents the cooperative

in at least four areas: community, cooperatives, industry, and Government.

Community—As a business leader,the

manager is called upon to participate in a variety of

community activities, such as helping raise funds for

charities, speaking at business and social events, and

becoming a member of the chamber of commerce or

community service organizations.

Cooperatives—The board of directors may

select the manager to be the cooperative’s voting

delegate or officialrepresentative to other cooperatives

or cooperative organizations. And at the discretion of

the board, the manager may serve on the board of

directors for other cooperatives.

Industry—Most industries have professional or

trade associations to protect or enhance their business

interests. The manager may get involved in one or

more of the key organizations closely related to the

cooperative’s functions.

Government—Managers who are particularly

convincing speakers are often called upon to speak to

regulatory officials and policymakers on issues

affecting the cooperative or its members.

Even in personal actions and activities, many

people see the manager—even if indirectly—as representing the cooperative. That responsibility requires

constant and careful attention.

Summary

A cooperative manager wears many hats and fulfills a unique position between members, employees,

and the board of directors. In meeting responsibilities,

a manager essentially becomes coach and player,

leader and follower, educator and motivator, diplomat

and dictator, mediator and magician, judge and jury,

and analyst and activist.
24

Manager Responsibilities The Manager

The Manager The Manager

● Implements board policy

● Advises the board

● Manages daily operations

● Hires and trains staff

● Sets short-range tactical goals

in line with long-range plans

● Reports to the board

● Reports to members

● Represents the cooperative

Advises the board

● Competitive strategy

● Financial management

● Operational efficiency

● New technology and equipment

● New products and services

● Policy changes needed

● Regulatory changes

● Governmental affairs

Understands the cooperative’s

purpose and follows the

policies!

Controls daily operations

● Supervises and coordinates functions

● Manages people, capital, and physical

resources

● Is accountable for his/her performance

The Manager

Hiresstaff

● Trains and supervises

● Provides leadership, direction, and motivation

● Appraises their performance

The Manager

Sets tactical goals and 

implements actions in line 

with the cooperative’s

strategic objectives

D-1 D-2

D-3 D-4

D-5 D-6
25

The Manager

The Manager

The Manager

Cooperative Manager—

A Unique Position

Reports to the board

● Issues and circumstances

● Statement of operations

● Balance sheet

● Accounts receivable, delinquent accounts

● Progress toward objectives

● Summary of operational activity

● Proposals for immediate or longer term considieration

Represents the cooperative

● In the community

● W ith other cooperatives

● In the industry

● W ith government officials

Reports to members

● W orking contact

● Open house

● Letters

● Newsletter

● Meetings

● Visits

● Formal report at annual meeting

● Coach and

player

● Diplomat and

dictator

● Judge and

jury

● Analyst and

activist

● Leader and

follower

● Mediator and

magician

● Educator and

motivator

D-7

D-9

D-8

D-10
26

Chapter 5—What Cooperative 

Employees Do

This chapter focuses on employees, what they do, and the

characteristics of quality cooperative employees.

Cooperative employees work for a unique organization because the owners of the business areits

day-to-day customers. This close contact with owners

requires certain sensitivity by cooperative employees

in serving members' needs. Members want and expect

good service and fair treatment from the employees of

their cooperative business.

Cooperative employees are the "glue" that binds

members to their business. This unique business relationship places added emphasis on people skills when

dealing with the member-owners. Employee attitudes

are judged whenever they have direct contact with

members.

Employees promote the cooperative, deliver supplies; handle members’ products, order and maintain

inventories; keep accurate accounting records;recommend products to customers; handle complaints; represent the cooperative in the business and civic communities; educate members and the public about what

the cooperative offers; and adequately maintain facilities to serve members.

Characteristics of Quality Employees

Like all businesses, cooperatives need quality

employees. To be effective and serve the cooperative

well, employees have obligations.

Understand the Cooperative—Quality

cooperative employees understand the uniqueness of

their organization. They understand what a

cooperative is and support its business ideals.

It's hard for employees to deliver quality services

if they don't understand the business that employs

them. Ownership entitles members to services they

may not expect or request from privately held businesses. Cooperative employers are often asked questions about internal operations, governance, and earnings of the business. A well-informed employee knows

how to handle these questions in a way that satisfies

members. For nonmembers, employees must be careful not to reveal information that could be useful to the

competition. All employees must be kept well

informed on the cooperative’s distinctive traits and

operations.

Know and follow policy—W ell-informed

employees keep abreast of current cooperative policies

and rules. The purpose and application of any policy

orrule should be discussed with a supervisor or

explained in an employee meeting. Policies and rules

are implemented to safeguard the member-customer

interests, set good business standards, and ensure the

cooperative's success.

An employee's supervisor and the manager are

responsible for handling and resolving any conflict

with the cooperative's policy. Well-informed employees avoid evaluating policy or rules to fit a particular

situation or circumstance. They should implement policy and rules in a fair and equitable manner towardall

customers. Special treatment for one customer may

generate short-term results, but cause ill will and dissatisfaction among most customers.

Respect all customers/members and treat them

fairly—As customers, cooperative members want to be

treated fairly and honestly by the business they own.

Special concessions shared with selected customers

soon bring dissatisfaction among all customers.

Employees must offer services or products in a sense

of "best-value" to all customers.

Are well trained—Employees must be able to

explain technical information about service areas in

which the cooperative operates. Customers rely on

employees to recommend products or services. The

ability to respond to customer questions and resolve

their problems often determines if customers return to

the cooperative for future needs.

Because of the fast pace of today's business and

changes in technical product and environmental regulations, employees must be continually trained in

product and service areas. Employees must understand the operations and methods the cooperative uses

to provide products and services.

Are team players—Team success, whether in

sports or in business, demands that all players

cooperate to reach predetermined objectives. Each

employee of the cooperative organization should

know the objectives of the cooperative and understand

his or her role in achieving them. They must work

together toward overall achievement of objectives.

Employees working in service organizations

must be aware of the service level required to meet the

organization's objectives and employees’ expected contributions to the team effort.
27

Communicate well—Constant communication

is the key to any successful business operation.

Employees are the eyes and ears of the business and

constantly deal with customers and the public. This

feedback helps shape future procedure and policy

changes necessary to increasing customer appreciation

and satisfaction.

Employee communication with supervisors leads

to implementing desired changes. Unsafe working

conditions or damaged facilities and broken equipment should be reported to supervisors for correction

orrepair.Irregularities in business operations or

planned absences from the job must be communicated

to keep the business operating efficiently.

Effective communication means not only talking,

but also listening carefully to comments and suggestions from customers, instruction from supervisors,

and recommendations from other employees.

Maintain assets—Employees areresponsible

for keeping members’ assets—facilities, equipment,

and inventory—in good condition. Dirty or poorly

arranged merchandise, malfunctioning equipment,

and lower or poor-quality products can be a deterrent

toreaching a cooperative’s goals, just as overpricing or

poor selection of merchandise would be.

Malfunctioning equipment suggests that employees

don't take customer satisfaction seriously.

Participate in community activities—Employees

carry the image of the cooperative to the business

community by participating in civic or service

organizations, school activities, professional and youth

groups, or the Chamber of Commerce. If possible,

cooperative employees should strive to be involved in

community activities.

Volunteering not only contributes to the employee as an individual, but also shows the cooperative is

interested in the needs and welfare of the community.

However, it is important to note that when representing the cooperative, employees must be cautious about

taking a particular stand or participating in an activity

which has a special social, political, or religious orientation. Most cooperatives maintain religious and political neutrality.

Maintain personal appearance—Employees

present the cooperative's image in day-to-day contacts.

A positive impression often is based on an employee's

personal appearance. A well-groomed employee

outfitted with apparel appropriate to working

conditions is a plus and reflects the person's selfesteem and cooperative’s professional image.

Customers/members are more likely to respect their

cooperative if employees present a positive and

professional image.

Information About Cooperatives

The Rural Business-Cooperative Service (RBS)

within USDA’s Rural Development mission area conducts research, collects statistics, develops educational

materials, and provides on-site technical business

assistance to farmers and other rural residents interested in organizing cooperatives. Followup assistance is

provided as needed.

General and specific educational materials on

cooperative operation and organization are available

from RBS. Periodically,itsstaff conducts training

workshops for key participants in the cooperative--

managers, directors, and employees.

RBS also publishes Rural Cooperatives, a bimonthly magazine oriented to the cooperative business community.(Available for $15 per year from: New Orders:

Superintendent of Documents, P.O. Box 371954,

Pittsburgh, PA 15250-7965.) USDA also has a catalog of

publications and videos (CIR 4) related to cooperatives. For a free copy, write: USDA/RD/LAPAS, Stop

0705; 1400 Independence Ave., SW; Washington, DC

20250-0705.

The United States Department of Agriculture

(USDA) prohibits discrimination in all its programs

and activities on the basis of race, color, national origin, gender,religion, age, disability, political beliefs,

sexual orientation, and marital or family status. (Not

all prohibited bases apply to all programs.) Persons

with disabilities who require alternative means for

communication of program information (braille, large

print, audiotape, etc.) should contact USDA's Target

Center at (202) 720-2600 (voice and TDD).

To file a complaint, write USDA, Director,Office

of Civil Rights, Room 326-W Whitten Building, 14th

and Independence Ave. SW, Washington, DC 20250-

9410, or call (202) 720-5964 (voice or TDD). The USDA

is an equal opportunity provider and employer.
28

QUALITY Cooperative Employees

Respect all customers/members and treat

them fairly!

● Are polite and professional

● Do not offer special treatment for some

that might lead to ill will

● Offer services or products in a sense of

“best-value” to all

Cooperatives Employees

QUALITY Cooperative Employees

Cooperative Employees

QUALITY Cooperative Employees

Understand the cooperative!

Are the glue that binds

members

to their business!

● Promote the cooperative

● Deliver supplies

● Handle members’ products

● Order and maintain inventories

● Keep accrate records

● Recommend products/services

● Handle complaints

● Represent the cooperative

● Maintain facilities

● Understand the cooperative

● Know and follow policy

● Are well trained

● Are team players

● Keep supervisors informed

● Maintain assets

● Participate in the community

● Maintain personal appearance

● Know the cooperative form of business

and who the owners are

● Are able to answer questions adequately

● Do not reveal information that could

help the competition

QUALITY Cooperative Employees

Follow cooperative policies and rules!

● Know them well

● Implement them in a fair and equitable

manner

● Seek guidance when there might be an

exception

E-1

E-3

E-5

E-2

E-4

E-6
29

QUALITY Cooperative Employees

QUALITY Cooperative Employees

QUALITY Cooperative Employees

QUALITY Cooperative Employees

Are well trained!

● Understand operations, can perform 

required functions

● Can recommend the right products and

services

● Understand the methods the cooperative

uses to provide products and services

Properly maintain member-owners assets!

● Facilities

● Equipment

● Inventory

Communicate well!

● Are articulate

● Keep supervisors and other employees

informed of pertinent working issues

and problems

● Listen to supervisors, other employees,

and members

Often participte in community activites

● Service clubs

● Schools

● Youth groups

● Business organizations

QUALITY Cooperative Employees

Maintain personal appearance!

● Promote a positive, professional 

image of self and the cooperative

E-7

E-9

E-11

E-8

E-10
30
U.S. Department of Agriculture

Rural Business–Cooperative Service

Stop 3250

Washington, D.C. 20250-3250

Rural Business–Cooperative Service (RBS) provides research,

management, and educational assistance to cooperatives to

strengthen the economic position of farmers and other rural

residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization,

leadership, and operation of cooperatives and to give guidance

to further development.

The cooperative segment of RBS (1) helps farmers and other

rural residents develop cooperatives to obtain supplies and

services at lower cost and to get better prices for products they

sell; (2) advises rural residents on developing existing

resources through cooperative action to enhance rural living;

(3) helps cooperatives improve services and operating

efficiency; (4) informs members, directors, employees, and the

public on how cooperatives work and benefit their members

and their communities; and (5) encourages international

cooperative programs. RBS also publishes research and

educational materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits

discrimination in all its programs and activities on the basis of

race, color, national origin, gender, religion, age, disability,

political beliefs, sexual orientation, and marital or family

status. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for

communication of program information (braille, large print,

audiotape, etc.) should contact USDA’s TARGET Center at

(202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director,

Office of Civil Rights, Room 326-W, Whitten Building, 14th and

Independence Avenue, SW, Washington, D.C. 20250-9410 or

call (202) 720-5964 (voice or TDD). USDA is an equal

opportunity provider and employer.
USDA

RBS

CIR 11 Ch

t

2 

United States Department of AgricultureRural Business - Cooperative ServiceRBS Cooperative Information Report 11http://www.rurdev.usda.gov/rbs/index.html
USDA

RBS

CIR 11 Ch

t

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USDA

RBS

CIR 11 Ch

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2 

•

Commitment and Use

• Ownership and Control• F

i

n

a

n

c

e
USDA

RBS

CIR 11 Ch

t

2 

Commit to•

Use Products and 

Services

•

Maintain Contr

o

l

•

Provide Financi

n

g
USDA

RBS

CIR 11 Ch

t

2 

Using the cooperative is members’ 

easiest responsibility to carry out, and by using it as much as they can, members help the cooperative succeed
USDA

RBS

CIR 11 Ch

t

2 

• Kn

o

w l

e

g

a

l

responsibilities

•

Understand the 

Cooperative

•

Make decisions

• V

o

t

e

•

Expr

ess opinions

•

Serve (board/committees)
USDA

RBS

CIR 11 Ch

t

2 

• Incorporate• Approve legal documents• Elect directors according to mandated 

State law and cooperative policy

• Ensure that general business and 

cooperative-specific laws are followed

• Make major decisions that alter legal 

status
USDA

RBS

CIR 11 Ch

t

2 

Know and understand its• Definition and history• Mission or purpose• Articles and Bylaws• Organizational structure and staffing• Products and services• Policies
USDA

RBS

CIR 11 Ch

t

2 

Control follows finance• Finance in Proportion to Use• Most capital from members• Distribute earnings according to 

use

• Return equity to inactive 

members

• Revolve equity
USDA

RBS

CIR 11 Ch

t

2 

•

Direct Investment

•

Retained margins

•

Per-unit retains

•

Start-up capital
USDA

RBS

CIR 11 Ch

t

2 

• Maintaining control• Achieving business 

success

• Fulfilling member needs• Producing continuing 

benefits
USDA

RBS

CIR 11 Ch

t

3 

Th

United States Department of AgricultureRural Business - Cooperative ServiceRBS Cooperative Information Report 11http://www.rurdev.usda.gov/rbs/index.html
USDA

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CIR 11 Ch

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3 

Th
USDA

RBS

CIR 11 Ch

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3 

Th

Directors

• Hold a key position between members and 

hired management

• Set cooperative objectives and chart its 

course

• Make cooperative policy• Must be well versed in many areas• Have time and energy• Listen, inform, advise• Represent the cooperative
USDA

RBS

CIR 11 Ch

t

3 

Th

A good director should be able to• Show leadership• Think independently• Place cooperative’s interests first• Make good business decisions• Communicate well• Express views• Make the most of available resources• Promote the cooperative
USDA

RBS

CIR 11 Ch

t

3 

Th

• Gets along with others• Uses the cooperative fully• Is interested in its performance• Participates in decision-making• Understands that he/she is representing 

owners in their business

• Understands his/her role in relation to 

management
USDA

RBS

CIR 11 Ch

t

3 

Th

• Helpful to identify by nominating 

committee

• Should be studied by the 

membership - biographical sketch -prior to the election

• Considered for election at annual

meeting
USDA

RBS

CIR 11 Ch

t

3 

Th

Equitable representation

At-large system

Geography

Business Volume

Commodity

Personal Expertise
USDA

RBS

CIR 11 Ch

t

3 

Th

Have primary control• Use strategic perspective to better 

serve members’ needs

• Delegate daily operational control 

to the manager
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors ManagerHave primary control Has operational controlStrategic perspective Tactical perspectiveDevelop operational and Follows operational and

organizational policies organizational policies

Take counsel from manager Advises boardBig-view decisions Day-to-day decisionsProvides direction Acts in line with directionHire/fire manager Hires/fires staff
USDA

RBS

CIR 11 Ch

t

3 

Th

• Preserve cooperative character•

Safeguard assets

•

Hire the manager

•

Set policies

•

Distribute benefits

•

Plan for the future

• E

v

a

l

u

a

t

e

•

Elect board officers

•

Appoint c

ommittees
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Preserve Character

Serve according to laws and regulations!

• Laws

• Bylaws

• Articles

And carry on the cooperative’s spirit!
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Safeguard Assets

• Protect members’ investment• Make sound financial decisions• Hire auditors
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Hire Manager

• Appraise applicant qualifications

• Delegate day-to-day control

• Appraise performance
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Set Policies

• Originate and approve• Function and business related• Reviewed and updated• Policy manual
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Distribute Benefits

• Amount of patronage refund• Proportion in cash• Allocated equity• Unallocated equity• Equity revolvement and retirement
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Plan

• Assess business climate• Evaluate challenges--internal and 

external growth, business volume, membership, territory, assets

• Develop objectives and strategies• Monitor progress
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Self-Evaluate

Internal assessments•

Self -

ability, performance

•

Whole board performance

•

Boar

d meeting productivit

y
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Choose Leaders

Elect Board Officers• President• Vice president• Secretary• Treasurer
USDA

RBS

CIR 11 Ch

t

3 

Th

Directors Appoint Committees

• Temporary or permanent• Field of study (finance, feasibility, 

marketing, purchasing, etc.)

• Recommendations to the board• Power to decide
USDA

RBS

CIR 11 Ch

t

4 

United States Department of AgricultureRural Business - Cooperative ServiceRBS Cooperative Information Report 11http://www.rurdev.usda.gov/rbs/index.html
USDA

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CIR 11 Ch

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4 
USDA

RBS

CIR 11 Ch

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• Implements board policy• Advises the board• Manages daily operations• Hires and trains staff• Sets short-range tactical goals 

in line with long-range plans

• Reports to the board• Reports to members• Represents the cooperative
USDA

RBS

CIR 11 Ch

t

4 

Understands the cooperative’s 

purpose and follows the policies!
USDA

RBS

CIR 11 Ch

t

4 

Advises the board• Competitive strategy• Financial management• Operational efficiency• New technology and equipment• New products and services• Policy changes needed• Regulatory changes• Governmental affairs
USDA

RBS

CIR 11 Ch

t

4 

Controls daily operations• Supervises and coordinates functions• Manages people, capital, and physical 

resources

• Is accountable for his performance
USDA

RBS

CIR 11 Ch

t

4 

Hires staff• Trains and supervises• Provides leadership, direction, and 

motivation

• Appraises their performance
USDA

RBS

CIR 11 Ch

t

4 

Sets tactical goals and 

implements actions, in line

with the cooperative’s 

strategic objectives
USDA

RBS

CIR 11 Ch

t

4 

Reports to the board• Issues and circumstances• Statement of operations• Balance sheet• Accounts receivable, delinquent accounts• Progress toward objectives• Summary of operational activity• Proposals for immediate or longer term 

consideration
USDA

RBS

CIR 11 Ch

t

4 

Reports to members• Working contact• Open house• Letters• Newsletter• Meetings• Visits• Formal report at annual meeting
USDA

RBS

CIR 11 Ch

t

4 

Represents the cooperative• In the community• With other cooperatives• In the industry• With government officials
USDA

RBS

CIR 11 Ch

t

4 

Coach and Player

Leader andFollower

Diplomat and Dictator

Mediator a

Educator and Motivator

nd 

Magician

Judge and JuryAnalyst and Activist
USDA

RBS

CIR 11 Ch

t

5 

United States Department of AgricultureRural Business - Cooperative ServiceRBS Cooperative Information Report 11http://www.rurdev.usda.gov/rbs/index.html
USDA

RBS

CIR 11 Ch

t

5 
USDA

RBS

CIR 11 Ch

t

5 

Are the glue that binds 

members

to their business!
USDA

RBS

CIR 11 Ch

t

5 

• Promote the cooperative• Deliver supplies• Handle members’ products• Order and maintain inventories• Keep accurate records• Recommend products/services• Handle complaints• Represent the cooperative• Maintain facilities
USDA

RBS

CIR 11 Ch

t

5 

• Understand the cooperative• Know and follow policy• Are well trained• Are team players• Keep supervisors informed• Maintain assets• Participate in the community• Maintain personal appearance
USDA

RBS

CIR 11 Ch

t

5 

Understand the cooperative• Know the cooperative form of business 

and who the owners are

• Are able to answer questions adequately• Do not reveal information that could 

help the competition 
USDA

RBS

CIR 11 Ch

t

5 

Follow cooperative policies and 

rules!

• Know them well• Implement them in a fair and equitable 

manner

• Seek guidance when there might be an 

exception
USDA

RBS

CIR 11 Ch

t

5 

Respect all customers/members and 

treat them fairly!

• Are polite and professional• Do not offer special treatment for some -

that might lead to ill will

• Offer services or products in a sense of 

“best-value” to all
USDA

RBS

CIR 11 Ch

t

5 

Are well trained!• Understand operations, can perform 

required functions

• Can recommend the right products and 

services

• Understand the methods the cooperative 

uses to provide products and services
USDA

RBS

CIR 11 Ch

t

5 

Communicate well!• Are articulate• Keep supervisors and other employees 

informed of pertinent working issues and problems

• Listen to supervisors, other employees, 

and members
USDA

RBS

CIR 11 Ch

t

5 

Properly maintain memberowner assets!• Facilities• Equipment• Inventory
USDA

RBS

CIR 11 Ch

t

5 

Often participate in 

community activities

• Service clubs• Schools• Youth groups• Business organizations
USDA

RBS

CIR 11 Ch

t

5 

Maintain personal appearance! • Promote a positive, professional image 

of self and the cooperative
USDA

RBS

CIR 11 Ch

t

1 

United States Department of AgricultureRural Business - Cooperative ServiceRBS Cooperative Information Report 11http://www.rurdev.usda.gov/rbs/index.html
USDA

RBS

CIR 11 Ch

t

1 
USDA

RBS

CIR 11 Ch

t

1 

Who owns the business?Who controls the business?Who uses the business?Who gets the profits?
USDA

RBS

CIR 11 Ch

t

1 

One Person• Owns•

Controls

•

Operates

•

Benefits/profits
USDA

RBS

CIR 11 Ch

t

1 

Two or more people• Own• Control• Operate• Share in risks and 

profit
USDA

RBS

CIR 11 Ch

t

1 

• Multiple owners• Variety of goods and 

services

• Physical facilities• State chartered• Investors• Profits shared among 

investors
USDA

RBS

CIR 11 Ch

t

1 

• Multiple owners who are user members• Variety of goods and services• Physical facilities• State chartered• Members are investors• Owned and controlled by members who 

use its services
USDA

RBS

CIR 11 Ch

t

1 

• Are primarily controlled by a board of 

directors elected by and from members

• Derive equity from member owners• Operate for the benefit of member owners• Allocate earnings to members based on use• Earnings from member business is taxed 

once

• Have perpetual existence
USDA

RBS

CIR 11 Ch

t

1 

47,000 cooperatives in the United 

States 

Serve 100 million people, 40 percent of 

the population

There are several types of cooperatives 

serving many sectors
USDA

RBS

CIR 11 Ch

t

1 
USDA

RBS

CIR 11 Ch

t

1 

• Child care• Wholesale goods and 

supplies

• Electricity• Telephone and electric 

services

• Farm production 

supplies and service

• Farm marketing

• Credit• Transportation• Facilities• Recreational 

Equipment

• Food• Housing• Health care
USDA

RBS

CIR 11 Ch

t

1 

User -

Owner

User -

Control

User -

Benefit
USDA

RBS

CIR 11 Ch

t

1 

The people who own and finance the 

cooperative are those who use it.
USDA

RBS

CIR 11 Ch

t

1 

The people who use the

cooperative are those

who control the 

cooperative
USDA

RBS

CIR 11 Ch

t

1 

Members Exercise Control By

• Voting at annual and 

membership meetings

• Electing Board of 

Directors

• Making decisions on 

major cooperative issues
USDA

RBS

CIR 11 Ch

t

1 

The cooperative’s sole purpose

is to provide and distribute

benefits to members on the 

basis of their use
USDA

RBS

CIR 11 Ch

t

1 

User-Benefits

Bargaining Power

Reduced Costs

Market Access

CommunityStrength

Quality products and services

EconomicEnhancement

Political Action Competitive

Yardstick
USDA

RBS

CIR 11 Ch

t

1 

Implement and Facilitate Basic Principles• Patronage Refunds - distribute earnings to 

members based on use

• Limited Return on Equity Capital - members

form cooperatives for service, not for a monetary return on investment

• Cooperative Cooperation - joint ventures, MAC’s, 

networks, alliances, working relationships, etc.

• Cooperative Education - promote the cooperative 

way of doing business and educate members, directors, and employees
USDA

RBS

CIR 11 Ch

t

1 

Geographical characterization defines a 

cooperative’s size and scope of operations in reference to serving members.

• Local - small region covered, a county or so

• Super local - two or more counties, branches

• Regional - numerous counties, State or more

• National - United States-wide

• International - worldwide
USDA

RBS

CIR 11 Ch

t

1 

Based on membership structure and essentially 

defines who the members are and how the cooperative is organized to serve them. 

• Centralized Structure - Individuals are 

direct members

• Federated Structure- Cooperatives are direct 

members

• Mixed Structure - Individuals and 

cooperatives both are direct members
USDA

RBS

CIR 11 Ch

t

1 

Cooperative

Member Member Member
USDA

RBS

CIR 11 Ch

t

1 

Cooperative

Local

Cooperative

Local

Cooperative

Member Member Member Member
USDA

RBS

CIR 11 Ch

t

1 

Cooperative

Member Member

Local

Cooperative

Member Member

Member
USDA

RBS

CIR 11 Ch

t

1 

Three Core Functions• Marketing - extend control of 

members’ products through processing, distribution, and sale

• Purchasing - providing 

affordable supplies and goods

• Service - provide needed services
USDA

RBS

CIR 11 Ch

t

1 

Assist members in maximizing 

returns from goods they produce

• Handle, process, and sell• Grade, transport, bargain• Add value• Research-new product development
USDA

RBS

CIR 11 Ch

t

1 

Assist members to maximize the return they receivefor the goods they produce!

Functions

•Transport

•Process

•Grade

•Add value

•Research

•Distribute

•Bargain

•Sell

MemberProductsAgriculturalForestryAquacultureHorticultureCrafts

Member BenefiExtend controlof their productsand realize additionalmargins
USDA

RBS

CIR 11 Ch

t

1 

Allow members to gain access to 

affordable production supplies and goods

• Purchase in bulk to reduce costs and 

increase purchasing power

• Provide direct ownership of refineries, 

plants, retail facilities, research facilities
USDA

RBS

CIR 11 Ch

t

1 

Used by members to gain access to affordable, quality supplies

Functions

•Refineries

•Plants

•Feed mills

•Warehouse

•Manufacture

•Buy in bulk

•Deliver

Members•Producers•Hardware stores•Independent grocery stores•Fast food franchises

Member BenefReduced costsVolume discouQuality controlIncreased acces
USDA

RBS

CIR 11 Ch

t

1 

Provide needed services• Meet many needs• Custom application of purchased supplies, 

transport of product, etc.

• Provide utilities, credit, housing, health 

care, technology, etc.
USDA

RBS

CIR 11 Ch

t

1 

Used by members to gain access to affordable, quality services

Functions

•Farm applications

•Credit

•Electricity

•Communications

•Insurance

•Health care

•Schooling

•Housing

Members•Producers•Rural residents•Urban residents•Public

Member Benefit•Access to servic•Affordable servi•Quality •Increased access
USDA

RBS

CIR 11 Ch

t

1 

Cooperatives operate through 

the roles of principal parties

• Members• Directors• Manager• Employees
USDA

RBS

CIR 11 Ch

t

1 

Board of Direct

ors

Manager

Employees