Management of Co-operatives
Financial statements and terms: Statement of changes in financial position
A statement showing all sources of funds and all uses of funds, with the change in working capital, for an accounting period.
Financial statements and terms: Balance Sheet
A statement showing the assets, liabilities, and equity (net worth) of a cooperative on a specified date, which is usually the end of the fiscal year.
Local margin
All income minus all expenses from the cooperative's own operation. It may also be referred to as local savings.
Patronage refund
An allocation of net margin (savings) distributed to patrons on the basis of patronage (use of the cooperative)
Governance Terms: Hired Management
An individual hired by the board of directors to manage the day-to-day activities of the cooperative. This person is accountable to the board
Governance Terms: Outside Director
An individual who is not a member of the cooperative but sits with the board of directors, and is elected by the cooperative membership. Outside directors are usually selected and approved by the board of directors and have no votes on the board, instead serving in an advisory capacity. An exception is the federal requirement that those cooperatives that are part of the Farm Credit System have an outside director with voting rights.
Financial statements and terms: Operating statement
An itemization of business income and expenses with net income (net savings, net margin, net profit) for a given period such as a month, quarter, or year. It may be referred to also as a statement of operations, income statement, or profit and loss statement
Incorporation
Any group of: At least three people aged 18 or older and who are not bankrupt, Any group of at least two corporations, and Any cooperative entity may apply to incorporate a cooperative. there must be at least three directors
Canada Co-operatives Act
Applies to co-ops that do business in two or more provinces or territories Manitoba Examples: Co-operators Group & Mountain Equipment Co-op
Balance Sheet Terms: Assets, Current Assets, Cash, Account's Receivables, Prepaid Expenses, Inventory, Investments, Liabilities, Current Liabilities, accounts payable and accrued liabilities
Assets - all the resources owned by the co-op as of the date of the balance sheet Current assets - all the resources which are or will be turned into cash or used up by the co-op within the year Cash - cash on hand or on deposit with a financial institution with a term of less than one year Accounts Receivable - money owed to the co-op usually by customers who have set repayment terms (15 or 30 days to pay) Prepaid expenses - expenses that have be paid in the current accounting period, but all or part of them will apply to the next accounting period. Inventory -the value of goods on hand including all costs in securing or processing the goods. Goods are valued at the lower of cost or market value. Investments - deposits being held for more than one year or investments in other organizations Liabilities - debts of the organization, what the organization owes its creditors Current liabilities - debts payable within the next year Accounts payable - amount owing to trade suppliers Accrued liabilities - other expenses such as holiday pay which have not been paid at the end of the accounting period
Accounting Equation
Assets = Liabilities + Member's Equity
Financial statements and terms: Other Assets
Assets on the balance sheet such as investments in other cooperatives (e.g., regionals, CoBank) or other types of investments.
Financial statements and terms: Current Assets
Assets which are expected to be converted into cash or to be used up within one year of the balance sheet
John Stuart Mill: Co-operative Economist
Banking defect: argued in 1841 that depressions caused by failure of businesses to access productive capital Faulty markets: markets good at creating economic values but poor at distribution - distribution is a social and political matter Solutions: Producer Co-ops, land reform, suffrage (men and women) and inheritance tax Capitalism (Piketty) - Outlines the increasing role of inheritance in the economy as growth slows. Fewer people inheriting more. Inspired development of municipal land reform in Europe, Single Tax on land and helped pass first law for Co-ops
Consumer Sovereignty:
consumers get to make free choices about what to buy and this helps drive production (Demand drives Supply).
360-degree performance review:
process that gathers feedback from a review panel of about 8 to 12 people, including co-workers, team members, subordinates, and sometimes customers
Member's Equity
the amount left after liabilities are subtracted from assets
Nash Equilibrium:
A Nash equilibrium is a situation in which no one has a dominant Strategy and each player makes his or her best response
Equity redemption plans: Targeted base capital plan
A base capital plan that sets a targeted equity capital investment for each member-patron (such as $2.00 for each bushel of corn normally marketed annually through the cooperative), and then allows member-patrons to either invest their amount up front or to build up this amount up over time through annual retained patronage refunds.
New generation cooperative: Define and list 3 ways they are different from traditional cooperatives
(1) closed or restricted membership rather than open membership; (2) members provide a substantial amount of equity capital up front with the purchase of shares that give them the right and obligation to sell a certainquantity of product to the cooperative (3) equity shares can be transferred, when the member no longer uses the cooperative, at their market value
Craft Regulations:
- All prices were regulated - Craftsmen could take work outside where it could be seen. - To regulate competition between members the guild forbade advertising - Because of lack of artificial light, work at night was prohibited. - No member was ever allowed to corner the market by purchasing a large supply of a product or commodity so as to be able to fix the price.
6 Types of Cooperatives:
- Bargaining cooperative - marketing cooperative - new generation cooperative - service cooperative - supply and purchasing cooperative - worker-owned cooperative
What are some characteristics of Management in Larger Co-operatives?
- Complex operations. - Large pool of human resources. - Extended logistics - National, International. - Member engagement. - Policy setting board. - Loss of co-operative mission, vision and values. - Are they still co-operatives?
Robert Owen
- Considered to be the father of cooperation - Industrialist - Manager of Chorlton Twist Mills Saw women and children labourers. Poor working conditions. Long working days.
Financial management in a co-op includes:
- Considering funds available and source for additional capital; - Allocating funds among assets to be financed; and - Ensuring that all aspects of financing are dealt with in a manner consistent with sound business practices and cooperative principles.
Command Economies:
- Economic questions answered by the government Very little economic choice - No private ownership - Communism e.g., Old Soviet Union, old Communist China, Cuba and North Korea
The responsibilities of the grievance committee would be to:
- Hear the grievance of an employee against management, where direct attempts to solve the problem have been unsuccessful. - Evaluate the grievance and arrive at a binding decision on resolving it. - Evaluate and recommend. - Keep written records of resolutions reached and actions taken. - Monitor use of labor hours in each grievance procedure, and keep within the established budget and timeline. - Report annually to the board of directors on the number of grievances heard and recommend changes in the mechanics of the grievance procedure as needed.
Recruitment and Selection
- Human resource managers strive to match applicants' skills with organizational needs - Finding Qualified Candidates - Selecting and Hiring Employees - There is a local and long-term component to the co-operative human resource manager's role. - Are the needs of the community considered in the human resource manager's assessment of needs?
Steps in the Recruitment and Selection Process
- Identify Job Requirements - Choose sources of candidates (e.g, Internet, Schools etc) - Review Applications and Resumes - Interview Candidates - conduct employment tests and check references - conduct follow-up interviews - select a candidate and negotiate an offer (compensation, benefits, job performance expectations, accommodations for disabilities etc)
Owen's Beliefs:
- Man has no inborn aspiration to freedom. - Man was conditioned by his environment. Improve man's surroundings Give him the opportunity to improve He will become a better man. - Promoted mass education. - Eight hours labour, Eight hours recreation, Eight hours rest
Why did the Industrial Revolution begin In England?
- Natural resources such as coal, iron ore, and developed farmlands - New technologies such as the steam engine and textile machines - Population growth due to previous agricultural boom - Business class risked their capital to start new ventures.
Motivation: Tips for motivating employees;
- Offer a positive work environment - Keep lines of communication open - Provide opportunities for advancement - Have fair compensation packages - Recognize and Reward your employees - Encourage teamwork
Challenges of social accounting:
- Re-thinking the way we understand and measure success. - Putting a spotlight on the value of things which are essential to quality of life. - Defining sustainability for environment and social.
The current trend for retirement plans in Canada:
- Reduction in Defined Benefit Plans - Increase in Targeted Benefit Plans (TBP) - TBP collects defined contributions to secure a targeted benefit in retirement. Pension benefits and contributions adjust over time depending on the plan's performance. If the returns are lower than expected, the plan increases contributions and/or reduces benefits. If the returns are higher than expected, benefits can increase or contributions can decrease. - CPP enhancement - Forced saving by Canadians for future costs. - Provincial Pension Plans - Top up to the CPP
Opportunity Cost:
- The best alternative that we forgo, or give up, when we make a choice or a decision - Arises because time and resources are scarce. - what we give up in order to obtain something
7 Principles of Co-Operatives
- Voluntary and open membership - democratic member control - Member Economic Participation - Autonomy and Independence - Education, Training and Information - Co-operation among Co-operatives - Concern for Community
Cooperative structures:
- acquisition - centralized - consolidation - federated - horizontal integration - international cooperative - inter-regional and national cooperatives - local cooperative - marketing agency in common - merger - regional cooperatives - vertical integration
Urbanization
- mass migration of people from rural areas to cities - Rapid growth of cities due to industrial demand of workers
Charles Fourier: Beliefs
- oined the term feminism - Intentional community is a planned residential community designed from the start to have a high degree of social cohesion and teamwork. - Called for abolition of private capital. Elimination of competition. Cooperation occurring in communities he called "phalanxes," based around structures called Phalanstères or "grand hotels. - Similar to Owen's communities.
Liabilities
- the obligations of the Co-op to outside creditors
What is a Co-operative?
A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.
Define: Federated
A cooperative in which the members are individual cooperatives. For example, local farm supply cooperatives are members of Land O'Lakes, Inc., and CHS, Inc., two regional cooperatives, via their purchases of feed, seed, agronomy, and petroleum products.
Worker-owned cooperative:
A cooperative owned and controlled by the workers (employees). Most workerowned cooperatives are in the processing or service sectors
Marketing cooperative:
A cooperative that physically handles a commodity or product and may store, process, and package the commodity or product for sale to wholesalers and/or retailers.
Define: International Cooperative
A cooperative that serves members and operates in more than one country.
Service cooperative:
A cooperative that solely or primarily renders services (such as housing, financing, insurance, artificial breeding, electricity, or telephone) as distinguished from handling commodities.
Bargaining cooperative:
A cooperative whose sole or principal function is to bargain for terms of sales. It does not handle the actual products as would a marketing cooperative
Define: marketing agency in common
A federated cooperative with membership of two or more cooperatives, created for the purpose of negotiating terms of trade on behalf of the membership. The cooperative does not take title to product and leaves the actual marketing up to the members.
Equity redemption plans: Base capital plan
A financing plan in which the cooperative obtains capital by focusing directly on the current proportion of capital that a member-patron should have invested in the cooperative at a particular time. It is based on the degree of member-patron use of the cooperative during a base period, such as the average of the past three years.
Equity redemption plans: Revolving fund plan
A financing plan in whichcapital funds are obtained from member-patrons through retaining patronage refunds or per unit retains, are used for a period of time by the cooperative, and are later (e.g., 10 years) repaid to the member-patrons or past members.
Equity redemption plans: Percentage of all equities plan
A financing plan that redeems a specified percentage of the designated equity pool, without regard for the age of the equity or age of the member or past member. For example, all members or past members receive a redemption of 10 percent of their allocated equity account.
Zero vs. Non-Zero-Sum Games
A game is said to be zero-sum if wealth is neither created nor destroyed among the players. A zero-sum game is also called a strictly competitive game A game is said to be non-zero-sum if wealth may be created or destroyed among the players (i.e. the total wealth can increase or decrease). Non-zero-sum games can be either competitive or non-competitive.
Craft guilds
A group of artisans engaged in the same occupation, e.g., bakers, cobblers, stone masons, carpenters, etc. would associate themselves together for protection and mutual aid. - maintain a monopoly of a particular craft
Charismatic Leadership
A leader that behaves so that others see them as charismatic. Advocate a vision that is different from the status quo, but still acceptable to followers Displays confidence for the idea, mission and vision Uses visioning and persuasive appeals to influence instead of formal authority
Legal Terms: Articles of incorporation
A legal document filed with the appropriate state agency showing the purpose, capitalization, address, and names of the incorporators of a cooperative.
Define: Consolidation
A merger of two or more cooperatives in which a new cooperative is organized to replace the original cooperatives.
Governance Terms: Member
A person who joins a cooperative organization. The bylaws of a cooperative define the requirements of membership, such as purchasing one share of common stock, paying a membership fee, conducting a minimum annual dollar amount of business with the cooperative, or simply using the services of the cooperative.
Governance Terms: Patron
A person who purchases products or services from the cooperative, including members and non-members. Cooperatives may have patrons who do not meet the membership requirements. The business from non-memberpatrons is often simply referred to as "non-member business.
Equity redemption plans: Equity redemption plan
A plan detailing how the cooperative will redeem equity to current and past members.
Financial statements and terms: Dividend
A return paid to investors on preferred stock or other invested capital. Most state cooperative incorporation laws limit dividends to an annual 8% return.
Legal Terms: Bylaw
A standing rule, not included in the articles of incorporation, which specifies operational practice and policy of the cooperative.
Statement of cash flow
A statement showing all gross cash flows of the cooperative over an accounting period, usually twelve months. It records cash provided by sources and cash consumed. It contains three components: (1) cash flow from operating activities; (2) cash flow from investing activities, and (3) cash flow from financing activities.
Karl Marx:
Government should control economy and distribute goods and services to the people Founder of revolutionary socialism and communism.
3 types of social capital:
Bonding social capital: close relationships between similar people; social ties in your immediate life such as family, friends; "within the group structure"; the informal realm Bridging social capital: establishing relationships of respect and mutuality between people who are not personally close, but who are at similar hierarchical levels; these help people get ahead; the civic realm, connections with different groups or communities Linking social capital: newer term; like bridging but these relationships are with people across different hierarchical levels and power (vertical ties); the institutional realm; helps people gain resources to bring about broader change.
Communications in a Co-Op business plan:
Both internal and external communications must be part of a co-op's business plan
Financial statements and terms: Preferred stock
Capital stock that has a stated dividend rate and takes preference over dividends paid on other stock and/or patronage refunds to members. It is equity capital, since any dividends paid are at the discretion of the board of directors. Preferred stock may be sold to members and nonmembers alike.
Financial statements and terms: Debt Capital
Capital that is borrowed. It has a fixed repayment period and fixed annual interest payments.
Financial statements and terms: Equity-Capital
Capital usually supplied by members (preferred stock, which is equity capital, may be sold to non-members, and net profits from non-member business may also be included). Equity capital has no fixed repayment period nor annual fixed interest or dividend payment. On the balance sheet it is equal to total assets minus total liabilities.
Financial statements and terms: Direct Investment
Cash investment in the cooperative via the purchase of membership certificates, shares of common or preferred stock, or other forms of equity.
Civil Society:
Civil society performs inevitable roles in eradicating poverty, promoting democracy and good governance, promoting sustainable development, resolving social conflict-among myriad of other areas related in enhancing total human development. Co-operatives represent a form of civil society.
Development:
Co-op is a tool used for poverty reduction and human development. Concern for the Community Education, Training and Information Human development The development of people investing in their education and health Generating adequate income, Satisfying their basic needs (what is meant by this) and Offering sufficient employment opportunities Allowing them fully participate in every process of their lives.
Alliances
Co-operation among Co-operatives - An understanding or at most a contractual agreement, bur rarely a separate legal corporation. - Involves two or a small number of entities. - Entities are often corporations. - The partners may be in different industries, but they have a common interest. - Their skills/talents/capabilities are complementary. - Organized to provide a very specific task, product or service.
ICA Identity and : Define a Co-Operative and Values
Co-operative A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. Values Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.
Managements Role in Co-operative Startups
Co-operative Startups - Cooperative managers not only supervised operations but also maintained accounting records, wait on customers, and sweep floors. - Basically, all functions of the co-operative. - Professional management is difficult to find.
Co-operative economics:
Co-operative economics is a field of economics that incorporates socialist economics, co-operative studies, and political economy toward the study and management of co-operatives.
Principle #4: Autonomy and Independence
Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.
What are the values of Co-operatives?
Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.
Principle #2: democratic member control
Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.
Incentive system
Co-operatives are to develop a proper incentive system so that individual initiative by talented people is encouraged. An incentive system should ensure that intelligent people are not forced to do work which is unsuitable for them, or be paid the same wages as ordinary workers. If skilled workers get paid more than unskilled workers there will be an incentive for all to become skilled and work harder. In this way the co-operative will encourage the educational and skill upgrading of its members.
Principle #1: Voluntary and open membership
Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
How do co-operatives develop?
Co-operatives develop from a market failure, a social interest, or a community need. Current economic system does not see a sufficient profit in the operation.
Principle #5: Education, Training and Information
Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation.
ICA Principles: Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.
Principle #6: Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.
Principle #7: Concern for Community
Co-operatives work for the sustainable development of their communities through policies approved by their members
ICA Principles: Concern for Community
Co-operatives work for the sustainable development of their communities through policies approved by their members.
CSR in Cooperatives:
Co-ops have a special responsibility to ensure that the development of their communities- economically, socially and culturally-is sustained. They have a responsibility to work steadily for the environmental protection of their communities.
Marketing or Communications? Co-ops must operate as a business to ensure they sell their product. Co-ops maintain a membership base that require information for decisions.
Co-ops must operate as a business to ensure they sell their product. - Marketing Co-ops maintain a membership base that require information for decisions. - Communication
Hallmarks of a Motivated Workplace
Commitment to results and responsibility for actions Open communication Low employee turnover Creativity and ingenuity, especially in solving problems Collaboration Excellent customer service, both internally and externally
Which co-op principles relate to social accounting?
Concern for the community - Accounting for the impacts the co-operative has on its community. Education, training and information - Educating the community and membership on the role of the co-operative in their community. - Gathering information to effectively run the co-operative according to membership needs and wants.
Janice Dresbach
Cooperative mangers said training was highly important in the areas of improving: Customer relations, Educating members about the cooperative way of doing business, Working effectively with a board of directors, and Identifying member needs.
Human Resources in Co-Operatives
Cooperative mangers said training was highly important in the areas of improving: Customer relations, Educating members about the cooperative way of doing business, Working effectively with a board of directors, and Identifying member needs. Management should also motivate and reward employees. Co-operative managers are in the spotlight. They must be charismatic in their leadership.
Membership Requirements:
Cooperative members have to be local people who, by virtue of their established residence, can make a commitment to the cooperative and the region it services. Anyone who wishes to be part of the socio-economic life of a region can settle there and become a member of a local cooperative.
Membership Terms
Cooperative members must be at least 16 years old. In its articles, the cooperative sets out membership restrictions or conditions. The cooperative's by-laws must stipulate the obligations of members, including the obligation to use the cooperative's services and membership fees. A written membership application must be submitted and approved by resolution of the board of directors or by someone who, by resolution, is authorized to approve membership applications. To become a member, the person must have purchased the minimum number of member shares or paid for the membership fee established in the by-laws and must comply with all other prescribed membership terms and conditions.
Define: Centralized
Cooperatives that are owned and controlled directly by their members. These are typically local cooperatives with a single branch. Regional, interregional, and national cooperatives may also be centralized, having one corporate office but operating several branches or retail outlets, although this is not common.
Time Value of Money
Cooperatives work within a long-term time frame. They do benefit from long-term perspective in their investment strategies through community development. They are modest and realistic in planning the Growth of the Business with manageable controls on costs and aspirations giving them a greater power of flexibility.
What does marketing help a cooperative accomplish?
Create awareness Build positive images Identify prospects Build channel relationships Retail customers
Current Earning
Current Earning - the earnings (losses) generated in the current accounting period.
Social Accounting Cycle
Define boundaries (environmental, social, etc...) Identify stakeholders Create impact map Identify appropriate indicators Set up social accounting system Collect Data
Marketing Model
Define your company's strategy and how your products or services support that strategy. Develop programs that support the strategy. - Promotions - Lead generation - Partnerships Generate awareness for the programs that support your products and services - Internal communications - Community relations - Public relations
What are the Rochdale Co-Op Principles?
Democratic Control Membership is open. Equity is provided by members. Equity ownership share of individual members is limited. Net income is distributed to members as patronage refunds on a cost basis. Dividends on equity capital are limited. Exchange of goods and services at market prices. Duty to educate. Cash trading only. No unusual risk assumption. Political and religious neutrality. Equality in membership (no discrimination by gender).
Benefits of marketing:
Describe your product or service to potential buyers Establish your brand and any philosophy or values associated with it. Explain what needs are being met with your product or service. Develop relationships with possible partners. Explain to potential buyers and partners how to purchase your product or service.
Expanded Value Added Statement (EVAS)
EVAS - Broader look at an organization. - Integrates social and financial information. -Takes a stakeholder approach. - Aims to create behaviours that move toward sustainability, i.e. reducing environmental degradation and improving quality of life. EVAS can be used to value environmental, social or other programs associated with your co-operative firm.
Marshall:
Economics is not restricted to material things, non material things like health and education, entertainment are also important, Welfare is subjective and varies from person to person, It is difficult to segregate material welfare from other types of welfare, The concept of welfare is not fixed but subject to change and interpretation, It differs from time to time, country to country
What is economics?
Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. It is the study of economic problems. Wants are motive for economic activity.
What are employee benefits?
Employee Benefits—rewards such as retirement plans, health insurance, vacation, and tuition reimbursement provided for employees either entirely or in part at the company' s expense.
Co-Ops Employee engagement through... what are the major issues with an employee owned business?
Employee engagement through Employee empowerment Control over the economic system - attractive? What are the major issues with an employee owned business? - The incentives that ownership gives; - The participative mechanisms available to workers to act on those incentives; and - The corporate culture that battles against tendencies to free ride.
Motivation Myths:
Everyone is in agreement in a motivated workplace Motivated employees work plenty of overtime Employees who are motivated don't need much input from management A formal plan for motivating employees is unnecessary Money motivates best
Financial statements and terms: Liabilities, Current and long-term
Everything a cooperative owes to someone. a legal obligation. Current liabilities: Liabilities that are due within one year of the balance sheet. Long-term liabilities: Liabilities that are due beyond one year of the balance sheet, such as a long-term loan on land and buildings.
What does conventional accounting exclude?
Excludes non-monetized inputs and outputs: Volunteer contributions Environmental impacts - Externalities
An operating surplus may be used to:
Expand the cooperative's business, Deliver or improve common services for members, Establish a reserve fund, Pay interest on loans to members or dividends on share capital, Promote collective wellbeing or the expansion of cooperative businesses, or Pay returns to members according to the volume of business they carry on with the cooperative. By-laws are not part of the incorporation application
Financial and Managerial Accounting in Co-ops
Financial accounting provides information regarding the financial position of the co-op and the results of its operation Managerial accounting provides information for making better managerial decisions
Breakeven Plus Target Profit
Fixed Costs + Target Profit/(Unit Price - Unit COG/unit) = # of units
Breakeven Analysis
Fixed Costs/(Unit Price - COG Sold/unit) = # of units Fixed Costs/Contribution Margin = Dollar Sales
Financial statements and terms: Per unit retain
Funds held from patrons, or a check-off applied on the basis of per unit of commodity marketed through the cooperative (e.g., 5 cents per bushel of wheat), as a means of building equity capital in the cooperative. Also referred to as per unit capital retains.
Co-operative accounting:
Goals are both economic and social. Optimal outcomes are determined by members. - Provide value to co-op members - Support community needs - Provide employment for co-op members
Canadian Co-operatives Act
Harmonized with Canadian Business Corporations Act and federal Not-For-Profit Act with changes to reflect special nature of cooperatives Special features of the Coop Act Must operate and have fixed place of business in at least 2 provinces or territories One vote per member No proxy voting Articles must include statements about being organized and operating on a cooperative basis In the Act, "cooperative basis" includes: membership that is open and non-discriminatory one member one vote with no proxy vote maximum interest on member loans and dividends on membership shares is fixed in the articles constraints on use of surplus funds members are source of capital to the extent feasible education of members and public on cooperative principles
Utopian Socialism
Henri de Saint-Simon, Charles Fourier and Robert Owen Presentation of visions and outlines for imaginary or futuristic ideal societies, e.g. Utopia, Plato's Republic. Positive ideals were used as road maps to develop the perfect society.
Marginalism:
How do you weighing the costs and benefits of a decision Important to weigh only the costs and benefits that arise from the decision Marginal Cost = Δ Total Cost/ΔTotal Quantity (Δ=difference in values)
HR Planning; What do HR Managers do? Some of the things Co-op HRM do in addition to IOF HRM?
Human Resource Managers: - Develop staffing plans based on the organization's competitive strategies - Responsible for adjusting their company's workforce to meet requirements of: - Expanding in new markets - Reducing costs - Adapting to new technology - Formulate long and short-term plans to provide needed employees Are there additional criteria for the co-operative human resource manager? - Employee engagement and participation - Employee democratic rights
Along with the principles and values co-op managers must also consider:
Human Resources Issues - Founders syndrome - Authority issues - Unclear Responsibilities - Board indifference Capital Resource Issues - Accounts management - Over extension of credit. - Unsound collection practices - Poor record keeping. Facility Issues - Underfinanced - Over expansion of facilities. - Lack of technical knowledge for operations.
What is HRM? What are their responsibilities?
Human resource management—function of attracting, developing, and retaining enough qualified employees to perform the activities necessary to accomplish organizational objectives. Human resource managers responsible for: - Developing specific programs and activities - Creating a work environment that generates employee satisfaction and efficiency
What are some of the Management Challenges in a supply purchasing cooperative?
In a supply purchasing cooperative, an investor-owned firm (IOF) manager may discover that many of the successful techniques associated with developing a salable and satisfactory product (for the customer) and achieving maximum return on capital (for the owner) no longer apply. Why? - Balance of needs between the co-operative and the supplier. - The supplier is a member/owner. Horizon Problem Who's needs are more important? How do you determine this?
Utopian Socialists
Instigators of the current co-operative movement
Co-op Definition: Capital
Interest on member loans and patronage loans is limited by the articles of incorporation (maximum percentage fixed in the by-laws). Limited return on capital. Dividends on member shares are limited by the articles of incorporation (maximum percentage fixed in the by-laws).
What is the ICA?
International Co-operative Alliance The co-operative principles are guidelines by which co-operatives put their values into practice. Voluntary and Open Membership Democratic Member Control Member Economic Participation Autonomy and Independence Education, Training and Information Co-operation among Co-operatives Concern for Community
Adam Smith:
Invisible hand of the market: - voluntary trades in a free market = unintentional widespread benefits - benefits are greater than those of a planned and regulated economy Laissez-faire - Government stays out of business practices "hands off" to let the market place determine production, consumption and distribution. Individual freedom and choice emphasized.
Efficient Market
Is one in which profit opportunities are eliminated almost instantaneously Supply and Demand match each other to produce the exact price for a product or service. Profit opportunities are rare because, at any one time, there are many people searching for them. Purchasers for deals - Demand Suppliers for profit - Supply
Define: inter-regional and national cooperatives
Large cooperatives that serve a major portion of the United States.
Define: Regional Cooperatives
Large cooperatives that serve one or more states. An example is CHS, Inc., headquartered in Inver Grove Heights, Minnesota.
Retention Drivers
Link to Recruitment - Attraction is part of retention, so this information also informs recruitment practices - Employees will be attracted to organizations that have well-developed mentoring programs, career development initiatives, and job enrichment opportunities
Financial statements and terms: Total net margin
Local net margin plus patronage refunds from regionals or other cooperatives.
Management Roles in Cooperatives:
Management combines ideas, processes, materials, facilities, and people to effectively provide needed services to member-owners. Management is the decision making element of the cooperative.
Managers Motivational Factors:
Managers Motivational Factors: - Pay, Power, Prestige, and A Place in History. - Not all are fully transferable from IOF to a co-operative. An example concerns the ownership and control of the business. An IOF manager looking for a company to "gain control of' either by outstanding performance, political maneuver, or eventual ownership will not be happy with a co-operative. A cooperative manager can never acquire "ownership rights," and must become resolved to always being an employee. Servant Manager
Supply and purchasing cooperative:
Two types of cooperative through which member-patrons obtain the supplies and services needed for their own business or personal use at competitive prices. Example: farm supply co-ops purchasing fertilizer, feed, seed, and other inputs for farmers
Which country has the most Cooperatives?
USA
Marketing vs. Communications Differences:
Marketing: -Targets the customer whereas Communications targets multiple stakeholders - has a defined set of channels - communications has multiple channels - controlled communications vs a variety of communications -positions a product or service; communications positions an entire organization - more room for creative messages; communications consists of basic messaging - marketing needs to be consistent with product/brand attributes - communications needs to be consistent with corp. identity/corp brand attributes
Prescriptive approach to CSR:
Measured through the achievement of certain standards regarding the ethical behaviour of business in the market-place and treatment of employees and suppliers The notions of individual human rights, employee rights, and supply- chain management are key tenets of the majority of the CSR standards that take a prescriptive approach to social responsibility.
A co-op can succeed as a business but lose its co-operative character regarding:
Member control, Servicing member needs and Distribution of dividends based on patronage.
Member Loans
Member loans - loans made by members to the organization which may or may not have fixed interest or repayment terms
Principle #3: Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.
Members equity
Members' Equity - the members' share of ownership of the assets of the organization Assets - Liabilities = Members' Equity
Manitoba Co-operatives Act For the purposes of this Act, a cooperative is organized and operated, and carries on business, on a cooperative basis if:
Membership in the cooperative is open, in a non-discriminatory manner, to persons who can use the services of the cooperative and who are willing and able to accept the responsibilities of membership (Open Membership: Principle 1) Each of its members or each delegate representing a division of its members has only one vote (Democratic Member Control: Principle 2)
Merchant guilds
Merchants from a city or town organized to support their interests and to provide protection. Guilds looked after those who were not part of the productive class.
2 types of communication concepts:
Mission: - overriding purpose in line with the values or expectations of the stakeholders Vision: - desired future state: the aspiration of the organization
Orientation, Training, and Evaluation: 2 Types
On-the-job training prepares employees for job duties by allowing them to perform the tasks under the guidance of experienced employees Classroom and Computer-Based Training Forms of classroom instruction such as lectures, conferences, audiovisual aids, programmed instruction, and special machines to teach employees everything from basic math and language skills to complex, highly skilled tasks
Governance Terms: Director
One of several members of the cooperative who is elected by the membership to a board of directors to govern or control the affairs of the cooperative.
Financial statements and terms: Certificate of equity, of investment; revolving fund certificate
Usually a certificate without a maturity date issued as evidence of retained patronage refunds or per unit retains.
Financial statements and terms: Capital
Money, or the dollar value of plant and equipment used in the cooperative; may be supplied by members as owners and/or borrowed.
types of market failure:
Monopoly power - Markets may fail to control the abuses of monopoly power. Missing markets - Markets may fail to form, resulting in a failure to meet a need or want, such as the need for public goods, such as defence, street lighting, and highways. Incomplete markets - Markets may fail to produce enough merit goods, such as education and healthcare. De-merit goods Markets may also fail to control the manufacture and sale of goods like cigarettes and alcohol, which have less merit than consumers perceive. Negative externalities - Consumers and producers may fail to take into account the effects of their actions on third-parties, such as car drivers, who may fail to take into account the traffic congestion they create for others. Property rights - Markets work most effectively when consumers and producers are granted the right to own property, but in many cases property rights cannot easily be allocated to certain resources. Failure to assign property rights may limit the ability of markets to form. Unstable markets - Sometimes markets become highly unstable, and a stable equilibrium may not be established, such as with certain agricultural markets, foreign exchange, and credit markets. Such volatility may require intervention. Information failure - Markets may not provide enough information because, during a market transaction, it may not be in the interests of one party to provide full information to the other party. - Efficient markets ensures the free flow of information for proper valuation of resources - Information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. - This creates an imbalance of power in transactions, which can sometimes cause the transactions to go awry, a kind of market failure in the worst case.
The Process of Motivation:
Need (produces)->Motivation (which leads to)->goal-directed behaviour(resulting in)->need satisfaction
Define Need and Motive as it relates to Motivation:
Need—simply a lack of some useful benefit Motive—inner state that directs a person toward the goal of satisfying a felt need
Net Income formula
Net Income =Revenue - COGS - Sales Exp - Adm/Gen. Exp
Succession Planning and Employee Retention
Numbers of people retiring and numbers of people entering workforce Loss of organizational memory Skills shortages are acute Retention of talent Future of work - different needs for generations of employees
Benefits of social accounting:
Ongoing record of activities over and above standard accounting. Communicates performance measures to a wider variety of stakeholders. Defines what is considered important at a local or community level.
Financial statements and terms: Common Stock
Ownership capital in a cooperative, divided into shares or stock certificates that carry voting rights (unless otherwise indicated) and are eligible for dividends. Common stock may be split into Class A common stock with voting rights and Class B common stock without voting rights. Often as a condition for membership, a member must purchase one share of common stock.
CHANGING "HR" ROLES: Some Generalisations: Past vs. Future
PAST: HR ROLE WAS CLEARLY DIFFERENTIATED - mechanistic (Personnel Admin) - ritualistic, legalistic (IR) - CEO's eyes and ears with the troops distinct professional career paths - HR is HR's responsibility FUTURE: PEOPLE/LEADERSHIP ROLE IS DISTRIBUTED AND DIFFUSE - knowledge management - relationship management; teamwork - legal compliance - change management - no distinct HR profession - new hybrid roles emerge People/Leadership is everyone's responsibility
What are performance appraisals?
Performance Appraisals—evaluation of an employee's job performance by comparing actual results with desired outcomes. Based on this evaluation, managers make objective decisions about compensation, promotions, additional training needs, transfers, or firings
Financial statements and terms: Fixed Assets
Physical items not readily convertible to cash; includes items such as land, buildings, and equipment
Equity redemption plans: Special or unsystematic plan
Plans that redeem equity by age of member, when settling estates, for hardships and the like.
Two approaches to CSR:
Prescriptive Approach Process Approach
Principles of Capitalism:
Private Property - Individuals and businesses MUST be able to get the benefits of owning their OWN property. Government does not control land. Is this the case? Land claim settlements are still unresolved. Reservation land is Crown land. Natural part of Capitalism is the"Business Cycle" Ups and Downs of the economy - recession, depression.
Four Forms of Incentive Compensation:
Profit Sharing: - Bonus based on company profits Gain Sharing: - Bonus based on surpassing predetermined performance goals Lump-Sum bonus: - one-time cash payment or option to buy shares of company stock based on performance Pay for Knowledge: - Salary increase based on learning new job tasks
Minimum Required Net Income for a Co-op
Profit is required for the viability of the co-op. Each year the co-op has cash dispersements which must be made out of the co-op's profits, by new member investments or by increased borrowings. Since the capacity to borrow and invest is limited the money must come from profits. For example: principal repayments on term loans, purchases of new or replacement equipment, redemption of member share capital (due to retirement or withdrawal of membership)
What are internal communications?
Regular meetings with employees Keep employees interested and satisfied: e.g., Newsletters, Fun work initiatives, Get-togethers (Company Christmas Party!!!)
Link to Employee Engagement
Research shows positive correlation of engagement scores with: Employee attraction and retention Engagement scores also have a positive correlation with: Customer satisfaction Revenue growth and shareholder returns Employee productivity Employee attendance
Assets
Resources owned by the co-ops
Retained Earnings
Retained Earnings - the cumulative earnings (losses) from previous accounting periods that have be retained by the co-op to support its financial viability and long term development.
Equity redemption plans: Equity redemption
Returning to current or past members retained allocated equity
Robbins:
Robbins confined economics definition to human behavior, and he strove to separate economics from the natural sciences in general and from psychology in particular.
What does the managements role entail?
Role entails: - Formulating and executing operating policies, - Providing good service, - Maintaining financial soundness, and - Implementing operating efficiencies to successfully meet its objects. Balance between economic sustainability and co-operative character.
Most firms base their compensation policies on five factors:
Salaries and wages paid by others Government legislation Cost of living Firm's ability to pay Worker productivity
Management responsibilities in a service oriented cooperative:
Service-oriented co-operative is working in the spotlight. The manager of will find that members formed the co-op to provide a needed marketing or purchasing service or both. Every time members use the cooperative they evaluate the service performed by its employees. Often, members may wish to express their views directly to the manager or to get management advice about supplies to use or when to market their products.
Share capital
Share Capital - share capital is the members' direct investment in the organization as an owner
ICA Principles: Democratic Control
Similar to: - Democratic Control. - Rochdale Society of Equitable Pioneers - Rochdale Pioneers - First to allow women to vote in 1844 Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner
ICA Principles: Education, Training and Information
Similar to: Duty to Educate Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation.
ICA Principles: Open Membership
Similar to: Membership is Open Rochdale Principle 1844 Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. Heterogeneity of Needs A diversity of people creates a diversity of ideas, concepts, requirements. (Heterogeneous agents)
ICA Principles: Economic Participation
Similar to: - Equity is provided by members Members must support the store through purchase of a membership. - Net income is distributed to members as patronage refunds on a cost basis. - Dividends on equity capital are limited - Exchange of goods and services at market prices. (Rochdale, 1844). Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership. Makes raising capital difficult for co-ops as it limits the pool of potential shareholders.
ICA Principles: Autonomy and Independence
Similar to: Political and religious neutrality Equality in membership (no discrimination by gender) Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.
Social Accounting
Social accounting is the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large.
Social Capital:
Social capital through co-ops is about the ability of people to be architects of their own personal and social histories on the basis of their shared norms, value and collective empowerment. The habit of citizenship is formed among the members, and they acquire ability to identify local needs and ways of meeting these needs in a unified action. e.g., Distribution of scarce resources.
Social Networking:
Social networks are the networks formed by social ties They can be ego-centric (personal networks) or community-centric. - Generally they are both Social networking is an activity aimed towards the creation of new ties or the maintenance of one's social network (usually for professional advantage)
Define: merger
Two or more cooperatives are brought together under one name. The acquiring cooperative continues but the acquired cooperative is liquidated.
HR EXECUTIVES' VIEW OF THE FUTURE: What are the top 5 business challenges? Top 3 HR issues?
TOP 5 BUSINESS CHALLENGES Developing new markets Improving profitability Market share growth Becoming the recognised global market leader Building shareholder value TOP 3 HR CHALLENGES Attracting and retaining talented people Improving organisational capabilities Developing leadership skills
Special Provisions
The Cooperatives Act includes special provisions applicable to specific cooperatives: housing cooperatives, worker cooperatives and multi-stakeholder cooperatives.
Define: Horizontal Integration
The act of combining two or more similar production units or marketing agencies under central control and management, e.g., two fertilizer plants or two retail stores.
Define: Vertical Integration
The act of combining two or more units in the marketing channel, e.g., a dairy cooperative making cheese expands into wholesaling and retailing activities. An example is Land O'Lakes, Inc., a cooperative that manufactures and markets butter, cheese, and other dairy products to the food service industry, to food wholesalers, and to food retail stores.
Legal Terms: Incorporating
The act of setting up a corporation by filing incorporation papers with the appropriate state agency.
Game theory:
The analysis of competitive situations (or situations of conflict) using mathematical models Market: Pricing of a new product when other firms have similar products Deciding how to bid in an auction, or request for proposal (RFP) Networking: Choosing transportation networks Politic: Deciding whether to adopt an aggressive or a passive stance in international relations
Legal Terms: Charter
The articles of incorporation under which a corporation (including cooperatives) is legally organized. It is the authority to proceed as a corporation subject to the constitution and laws of the state in which the incorporation took place. In Wisconsin most cooperatives are incorporated under Wisconsin Statute Chapter 185.
Governance Terms: Officers
The board of directors elect amongst themselves, usually shortly after the annual meeting, a president (or chairperson), vice president (or vice-chair), a secretary, and a treasurer.
Financial statements and terms: Assets
The capital resources of a cooperative or everything that the cooperative owns.
Prescription Approach in a Cooperative:
The co-op principles suggests an aspiration goal: Anti-discrimination—the first co-op principle addresses discrimination against membership; Employee development—co-ops hold as a principle the education and training of their employees so they can con- tribute effectively to the development of their co-op; and Community development—the seventh principle, concern for community, encourages co-ops to work for the sustain- able development of their communities. The notions of individual human rights, employee rights, and supply chain management, however, are not specifically touched on within the co-op principles.
What is managements role in a Marketing cooperative?
The manager of a marketing cooperative must understand why the cooperative often is obligated to take all of the members' products and attempt to find a market for them. The manager is not at liberty to pick and choose among such product suppliers and cut off markets when inventories build up. Certainly to allow the member-producer to dictate the terms on which the cooperative business should receive the product would be a situation foreign to non- cooperative managers.
Management Challenges: Equitable treatment of owner-patrons
The manager of an IOF will discover that distributing the net earnings of a cooperative is much more complicated than declaring a dividend on capital stock. The standard cooperative practice of distributing net earning on the basis of individual member volume, such as units marketed or quantity of supplies purchased, also will be new for an IOF manager. Dividends are normally calculated on the stock purchased not on variable purchasing or supply to the firm. The larger and more complex the co-operative becomes the more difficult it is to provide Equitable Treatment to owners/members. There is also the requirement that member-owners share equitably in financing the cooperative. The Manager must communicate that responsibility to them and develops financing programs they'll accept.
Board Composition
The minimum or maximum number of directors must be indicated in the articles of incorporation. It must never be fewer than three. Persons under the age of 18 may not be directors or managers of the cooperative. The majority of the board of directors must be individuals who are not full-time managers or employees, except in the case of worker cooperatives. The majority of the board of directors must be made up of Canadian residents. Up to 20% of the board may be made up of non-members.
Management of Cooperatives; Define Management
The process of getting activities completed effectively and efficiently with and through other people. The process of dealing with or controlling things or people.
Financial statements and terms: Allocated Equity
The share of net margin (savings) from member business that has been allocated to individual member-patrons based on their patronage but retained by the cooperative for operating purposes. There is an obligation to redeem this equity to members or past members at some point in the future.
Financial statements and terms: Unallocated equity
The share of net margin (savings) from member and/or non-member business retained by the cooperative for operating purposes. This is considered permanent capital in that there is no obligation to redeem this equity to current or past members unless the cooperative is dissolved
Retained patronage
The share of net margin (savings) retained by the cooperative for the purpose of operating the cooperative.
Financial statements and terms: Capital Credits
The term used by electric cooperatives for retained patronage.
Process approach to CSR:
The way in which organizations relate to and are accountable to their stake- holders. The process approach to improving a company's social bottom line focuses on the notions of stakeholder accountability and engagement. This approach views social sustainability as the "totality of the relationships that an organization has with all its stakeholders."
From a CSR practitioner's perspective, co-operatives that aspire to CSR leadership will need to pay particular attention to managing:
Their environmental bottom line; - The social aspects of individual human rights, employee rights, and supply chain management; and - Their financial performance, as none of these aspects is addressed within the co- operative principles. Co-op principles go further than most corporate CSR in: - Addressing basic sustainability issues of fairness and the equitable distribution of wealth. - Unique CSR leadership opportunities exist for co-operatives in the area of economic sustainability.
Grievance:
There would not be a standing grievance committee, but every time a grievance is filed, a committee would be assembled consisting of an odd number. Two or more of its members would be co-op employees, one a manager and the other a non-manager (or an equal number of both). They should be selected by and mutually agreeable to the employee with the grievance and the general manager. One member would be an outside third party who is a paid professional with education and/or experience in mediation, labor relations, human resources, or some other qualification that makes them skilled in dispute resolution. This person would serve as the grievance committee chair.
Cooperatives are organizations with human face and soul. Explain. How does this fit with social capital?
They are in position to retain their workforce and continue to provide services to members at reasonable cost & affordable prices.
What is a Communications challenges for Co-ops:
To what extent is it an individual co-op's responsibility to educate the public on what a co-op is? Should co-operatives not co-operate on this point?
Financial statements and terms: Working capital
Total current assets minus total current liabilities.
Financial statements and terms: Gross Margin
Total sales minus cost of goods sold.
Define: local cooperative
Usually refers to a cooperative that operates in a relatively small geographic area. Often it has one facility only, although mergers and acquisitions have enlarged the operating size of local cooperatives. Some farm supply cooperatives and grain local cooperatives today are now as large as regional cooperatives were in the 1950s, covering a multi-county area and often having several locations. An example is Landmark Services Cooperative, headquartered in Cottage Grove, Wisconsin.
Owen's work:
Villages of Cooperation - report for House of Commons. - Developed the foundations for the International Alliance of Co-operatives (ICA).
Grievance; What if everyone isn't happy?
Violation of existing policies; Inconsistent application of policy to different employees in similar situations; An unfair situation for which no policy exists; or, An unfair situation caused by an inherently unfair or discriminatory policy.
ICA Co-Op Principles
Voluntary and Open Membership. Democratic Member Control. Member Economic Participation. Autonomy and Independence. Education, Training and Information. Co-operation among Co-operatives. Concern for Community.
Define: Acquisition
When a cooperative purchases another cooperative or other type of business
Workforce Motivation
Without a sense of personal ownership people do not work hard or care for property. Suppression of personal ownership sentiments results in sluggish production and oppression. In co-operatives, there is personal ownership, subject to: - Social limitations on concentration of wealth; and - A mechanism to ensure progressive increase in everyone's living standards.
How does the co-operative differ in compensation?
Worker Co-ops - most provide at or above market rates of pay. The one exception is with the managers in the larger co-ops. What is the exception? Higher, Lower and why?
How does membership in a co-operative play into human resource management?
Worker's or shareholder's have a longer term commitment to the cooperative.
Bonus distributions
Workers (or worker/shareholders) who give the greatest service to the co-operative should get the greatest bonuses. Bonuses should be paid in proportion to wage rates and should reflect both the skill and productivity of the worker.
IOF vs Cooperative Manager; Operational Environment
a cooperative manager may feel that he/she is operating in an enclosed environment. - Limited Capital. - Membership patronage dividend requirements. - Equitable treatment. - In the spotlight Compared with the manager of an IOF whose only interface with most stockholders occurs at annual meetings. -They want an accounting of why there were changes in the market value of their stock or in the dividends declared on it.
