United States

Department of

Agriculture

Rural Business/

Cooperative Service

October 1994

Reprinted October 1997

developed by

Tammy M. Meyer

Understanding Cooperatives:

Who Runs the .Cooperative Business?

General Manager and Employeq.$&~ ,-i?lr-

,“_ ,, ~; as’* ,

Cooperative Information Report 45, Section 6

. . .

When you buy a car, there are

key considerations in doing so -

the right vehicle (make, price,

options, and color), the right

financing (affordability, interest

rate, terms, and length), and the

right sales job (sales person’s

honesty, believability, and pressure). When the parts all come

together, it’s the right time to buy.

. . . . . . . . . .

Cooperatives, as a form of business

owned and controlled by the people who

use it, can be compared to buying a car,

in that several parts must come together

to make it right. The most essential one

is the people:

+ Members, as the owner-users;

+ Board of Directors, as the policymaking body;

+ Hired Management, as the supervisor;

and

+ Employees, as the work force.

Each has specific roles and responsibilities in the overall operation of a

cooperative.

Cooperative Management

Management of a cooperative is often

incorrectly thought of as including only

the hired manager and his key staff. This

is far from the truth. Cooperative management should be regarded as a team consisting of four elements - members

(owners), board of directors (elected), the

manager (hired), and other responsible

employees (paid). Each part of the team

has its own distinctive duties and responsibilities for performing management

functions in a cooperative. This allows

them definite, reserved rights in the ownership and control of the business. These

important rights give them the privilege 01

taking an active part in the management

of the business. To be effective, each must

exercise these rights; otherwise they will

have no voice in management.

Successful management of a cooperative, therefore, is based on intelligent and

active cooperation of the members with

the board and with the manager/employees, each group shouldering its own

responsibilities to the best of its ability.

Board/Manager Relationship

This section now specifically discusses

the responsibilities of the hired management and employees. (Sections describing the responsibilities of the members

and the board of directors are numbers 4

and 5, respectively.)

EMPLOYEES

MANAGER

1
The working relationship between a cooperative’s board of

directors and general

manager is one

requiring respect and

an understAnding of

each other’s responsibilities for it to

function properly.

._

”

_ ,I

MANAGER

The working relationship between a

cooperative’s board of directors and general manager is one requiring respect

and an understanding of each other’s

responsibilities for it to function properly.

The manager is an employee of the

board and accountable to them for

his/her actions. He/she should therefore

not be a part of the board that hires or

sets the salary for the position. The manager should be required to attend all

board meetings though, and be an active,

nonvoting participant.

The manager is responsible for the

overall operation of the cooperative, as

delegated by the board, relating to the

management functions of planning, organizing, directing, coordinating, and controlling. This includes such operating

decisions as planning the co-op’s day-today activities, directing personnel, and

coordinating operations.

Responsibilities of General

Manager

In a cooperative, the board of directors

decides what the cooperative will do;

the general manager and immediate

staff decide how it can best be done -

subject to board review - so as to

achieve the basic objective of serving

members effectively.

Under ideal conditions, the general

manager’s principal tasks are planning,

reporting to the board of directors, conferring with key supervisors, maintaining

good organizational relations, and controlling the cooperative’s operations.

Responsibilities of the general manager are:

+ Supervises and coordinates, under

board direction, the business activities of

the co-op by managing the people, capital, and physical resources.

4 Oversees the detailed operations of

the cooperative, within the policies

established by the board of directors,

and recommends changes and additions

to the board when necessary. Management’s job is to implement those policies, for example, the purchase of

inventory and sale of commodities, the

general appearance of the co-op, and

employees of the cooperative.

4 Hires, trains, supervises, and sets compensation for employees. He/she also

needs to review their performance, and

replace those employees not meeting

acceptable performance levels. This reinforces the need for having clear job

descriptions for all employees. Development and additional training of employees

also should be provided as an opportunity

for personnel to acquire new skills and

qualify for added responsibilities.

+ Maintains, and revises as necessary,

an adequate bookkeeping and accounting

system; develops for board approval a

financial budget annually: prepares proper financial reports regularly for board

review; and presents to the cooperative

membership at the regular annual meeting, a report of the cooperative‘s

operational highlights.

+ Furnishes information needed for

long-range planning. This will bring matters, such as fixed asset additions or revisions, to the board’s attention for review.

He/she also should make recommendations that will assist in reviewing the

organization’s objectives and goals in

establishing policies, regulations, and

programs, and making related plans.

Based on those objectives, the manager

sets goals and makes short-range plans

involving the daily business of the co-op,

subject to board approval.
+ Represents the cooperative and portrays a positive image to members and

others in the community. He/she needs to

I) encourage membership and active

patronage; 2) communicate

developments of the cooperative with

members; 3) educate the general public

about the cooperative and its activities;

and 4) keep current on issues, local,

State, and Federal regulations, and pending legislation affecting cooperatives.

Selecting a General Manager

Selecting a qualified and imaginative

manager is the most important single act

of the cooperative’s board of directors.

The success of the cooperative depends

more on the manager than on any other

individual. It is the manager who directs

the day-to-day operations, the one in

charge full time.

There are not necessarily any behavioral, physical, educational, age, or gender standards that assure success as a

manager. The men and women who

move businesses forward successfully

come from a wide variety of

backgrounds. Some of the leadership

skills and qualities important to the business they serve include:

+ experience as a manager and leader;

+ ability to convey ideas and communicate effectively;

+ genuine interest and belief in the

cooperative system;

+ a desire to succeed and continually

improve performance;

+ ability to carry forward the details of

operating the business;

+ ability to recognize differences in people and be flexible in dealing

with them; and

+ good oral and written communication

skills.

Responsibilities of

Employees

1. Understand the purpose and objectives

of the cooperative. Employees need to

know what cooperatives are and how

they compare with other methods of

doing business. By understanding cooperative purposes, objectives, operations,

and their role as employees, they can

help improve member relations, the

cooperative’s image, and the general

public’s understanding of cooperatives.

Management can inform employees

about the cooperative through staff meetings, training programs, and printed

materials. Many employees may be hired

right out of high school or college and

have received little or no education about

the cooperative form of business before

employment. This means that while

employees are the ones responsible for

understanding the purpose and

objectives of cooperatives, management

must pay particular attention to providing

this type of employee education and

training program.

2. Fully perform duties. In many cooperatives, like other business firms, the largest

operating expense is for personnel. In

addition to salaries and wages paid, these

costs include interviewing, hiring, training,

and fringe benefits. Training and developing employees, both formally and informally, must be the result of planned

conscious efforts. It is a continuing

process and may include on-the-job and

programmed outside training. This

requires sizable investment in employees

to help them become productive.

Cooperatives, like other business

firms, expect fully performed duties for

the invested training, compensation, and

benefits provided. Cooperative

managers know they must pay competitive salaries and provide comparable

Selecting a qualified

and imaginative manager is the most

important single act

of the cooperative’s

board of directors.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EMPLOYEES