CO-OPERATIVE MANAGEMENT

 

 CO-OPERATIVE MANAGEMENT

Co-operative Movement in India has grown up into a huge network of primary, central,
state and national as federal organizations covering the various facets of the economy viz, Banking,
Agriculture, Supply, Distribution, Processing, Marketing, Housing, Transportation and Small Scale
Industry. It means that it covered the entire sectors of the economy such as Primary, Secondary, and
tertiary. But a notable feature is that most of the cooperatives in India are not efficiently working
thereby they incur losses and have not achieved their goals. Lack of member awareness, vigilance
and solidarity and the lack of professional management are some of the causes leading to dormancy
or inefficiency of their performance. Cooperatives alone conform to the requirements of the new
social order based on the values of socialism and democracy which is envisaged in the constitution
of India. 

CONCEPT OF CO-OPERATIVE MANAGEMENT

Cooperation means living, thinking and working together. It denotes a special method of
doing business. In reality, cooperation is as old as man itself. Eg. Formation of social groups is the
outcome of reflexive cooperation. Even in animal we can see that the life of ants, bees, wasps, lions
etc provides the best example of instinctive cooperation. The practice of the principle of
cooperation contributed to the development of human race more than any other biological and
social factor. Right from the hunting age up to the present day the progress and development of
human beings, in all spheres, social, economic, religious and political is marked by a sense of
thinking, working and living together.
 

Cooperation is thus, older than the cooperative movement. The cooperative movement is
only one example of human cooperation among others, eg., joint stock companies, cartels, trusts,
etc. The term cooperation thus connotes several meanings and it is difficult to convey the correct
meaning of cooperation, in its technical sense.
 

Cooperation, thus, is a movement whose theory has evolved with times and experiences
gained by the cooperators. There is no rigidity either in the concept or in the practice. It is the
objective, ideal or the purpose which is to be achieved. The cooperation movement existed because
of its ideals and it is from the pursuits of these ideals that its principles are derived and
characteristic features determined.

DEFINITIONS:

According to one of the school of thoughts deriving its strengths from Schulze-Delitzsch,
Hass, Raifeisen and Horrace Plunkett, ‘A cooperative institution is a voluntary association of
independent economic units, organized, capitalized and run by, and for its members, providing
and/or marketing goods and services on cost-to-cost basis to their members. The chief aim
underlying the organisation of such institutions is the advancement of economic interests of members and protection and maintenance of the economic independence of small producers by
making up the economic deficiency through pooling of resources and thus bringing to them the
economies of large-scale production.’

The second school of thought drawing inspiration from growing socialis of the 19th century
and from men like Robert Owen, Saint Simon, Charles Fourier, Louis Blanc, Carles Guide,
Ferdinand Lassalle etc., believes that ‘cooperative institution should not be merely contented with
improving the economic position of the members witin the existing framework but also aims at
eliminating the competitive, capitalistic system and replacing it by one, which is based on mutual
cooperation.’
 

The third and last school believes that cooperative movement can be an important
instrument in furthering the socialist progress. This is based on Marxist-Leninist theories that,
cooperatives can help the transformation from capitalism and finally to communism. Accordingly,
a cooperative society has been defined as an “economic and social organisation of the working
people, serving not only interest of the members, but also social progress,” which promotes
safeguards and realizes the interests and aspirations of the working people”.
In the words of H. Calvert, cooperation is, “a form of organisation wherein persons
voluntarily associate together as human beings on a basis of equality for the promotion of economic
interest of themselves”
 

According to Herrick, it is “the act of poor persons voluntarily united for utilizing
reciprocally their own forces, resources or both, under their mutual management to their common
profit or loss”.
In the words of Horrace Plunkett, it is nothing but “self-help made effective by
organisation.”
 

The International Labour Organisation has defined cooperative society as, “an association
of persons varying in number, who are grappling with the same economic difficulties and who,
voluntarily associate on a basis of equal rights and obligations, endeavor to solve those difficulties,
mainly by conducting at their own risk an undertaking to which they have transferred one or more
of such of their economic functions as correspond to their common needs and by utilizing this
undertaking in joint cooperation for their common material and moral benefits”.

UNIQUENESS OF COOPERATION

1. Co-operation is based on the principal of self-help through mutual help, abolition of profits
and service above self.
2. In cooperation, individual freedom occupies a very important position.
3. The principles of ‘voluntary association’ and ‘democratic management’ are the guidelines
for the cooperative movement.
4. Cooperation eliminates the employers and provides independence to the workers.
5. A cooperative society is a union of weak and needy individuals who have equal rights and
has one vote irrespective of the number of shares held by him.

MANAGEMENT FUNCTIONS

Overall, management embodies four functions:-
1. Planning
2. Organizing
3. Directing/Motivating
4. Controlling
1. Planning: Planning determines where the organization is going and how it will get there. It
sets organizational objectives and goals, forecasts the environment in which objectives must
be accomplished, and determines the approach by which objectives and goals are to be
accomplished. Planning is used to determine a policy and the procedures for putting it into
effect. Planning usually consider several alternatives. Each should be judged on the basis of
its economic or competitive effect and accompanying problems. Also, it must be consistent
with cooperative principles and the association’s objectives. Planning helps a manager
shape the future of the organization rather than being caught in an endless trap of reacting
only to current crises or problems.
 

2. Organizing: Organizing is concerned with determining the specific activities needed to
accomplish the planned objectives and goals; grouping the activities into a logical pattern,
framework, or structure; assigning the activities to specific positions and people; and
providing means for coordinating the efforts of individuals and groups. Organizing is a
bridge connecting the planned objectives to specific projects for accomplishing these
objectives.

3. Directing: Directing through motivation concerns the people side of the organization.
Cooperatives are people-driven organizations, from the standpoint of both employees and
members. Managers must have leadership skills and be effective communicators. The
manager’s ability to influence members through leadership will help determine the extent to
which both individuals and the entire organization accomplish their goals.

4. Controlling: A manager spends up to 95 percent of the time communicating. Good
communication is essential to coordinating the organization’s human and physical elements
into an efficient and effective working unit. In controlling, management monitors the
progress of planned activities. If progress is lagging, necessary adjustments are made.
Controlling is the checkup part of a manager’s job.

ROLE OF MANAGEMENT

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. Broadly speaking, its role entails formulating and executing operating policies,
providing good service, maintaining financial soundness, and implementing operating efficiencies
to successfully meet its objects.
A successful cooperative is viable in an economic or business sense and maintains or
improves its cooperative character or features. A cooperative may succeed as a business, but
gradually lose its cooperative character regarding member control, serving the needs of members,and distributing net margins. Likewise, it may succeed for a while as a cooperative, but fail as a
sound business institution.

Managing a cooperative is challenging and difficult. It involves not only managing
resources and business operations, as other businesses, but also dealing with problems stemming
from the cooperative’s distinctive characteristics. Because the cooperative’s members are both
owners and patrons, special relationships and problems arise concerning member and board of
director roles and responsibilities. Seemingly conflicting answers to questions arise. What’s
different in managing a cooperative from any other type of business? The answers can range from
“all the difference in the world” to “none at all.”

In reality, managing a cooperative is different from other types of business as ‘Decisionmaking
techniques are identical, but the cooperative’s objectives are different; therefore, the
manager’s conclusions will be different’.

Cooperative principles and objectives present a distinctly different managerial premise. That
premise is revealed in more detail through the following perspectives an executive must acquire to
be good cooperative manager:

1. Adjusting decision-making to a business where the customers are also the owners. In a
supply purchasing cooperative, the manager of an investor-owned firm (IOF) may discover
that many of the successful techniques associated with developing a saleable and
satisfactory product (for the customer) and achieving maximum return on capital (for the
owner) no longer apply. A cooperative manager has to adjust priorities and objectives to the
realization that what’s best for the customer (also the owner)really is best for the
cooperative. This realization may explain why some low- or no-margin services continue to
be provided and why certain related and perhaps high-margin activities are not considered
in a 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 marketing when inventories build up. And 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.

2. Dealing with complex issues of 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 earnings on the basis of individual member volume, such as units marketed
or quantity of supplies purchased, also will be new should he/she become a cooperative
manager. For larger cooperatives that handle many products and involve value-added
activities, the issue of equitable treatment of member owners can be complex. Another
concept new to an IOF manager now heading a cooperatives the requirement that member owners
share equitably in financing the cooperative, and that management communicates
that responsibility to them and develops financing programs they’ll accept.

3. Working in a service-oriented organization is a spotlighted atmosphere. The manager
of a typical cooperative will find that members formed it to provide a needed marketing or
purchasing services both. Hence, every time they 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.

Therefore, a cooperative manager may feel that he/she is operating in an enclosed
environment, compared with the manager of an IOF whose only interface with most
stockholders occurs at annual meetings when they want an accounting of why there were
changes in the market value of their stock or in the dividends declared on it. Even in the
day-to-day routine of a large cooperative, the new cooperative manager may encounter a
different working environment. Senior manager of a regional cooperative once observed, “A
major change I had to face was what I call working under a spotlight.“Soon after joining the
cooperative, I found that the half-million farmers who owned our member cooperatives
wanted to know what I was doing. Their interest was genuine. Thousands toured the
cooperative each year and some wished to meet the executives and professionals. They were
important to us and not just ordinary visitors. Rather, they were managers of local
cooperatives that owned the regional, or farmers who owned the locals.”He concluded, “an
executive or professional joining a cooperative must adapt himself to the publicity
surrounding his work.”

4. Cooperatives have unique management implications of business ownership and control.
Managers perform under the influence of various motivational factors-pay, power, prestige,
and a place in history. Not all are fully transferable from an investor-oriented business to a
member-user oriented cooperative. An example concerns the ownership and control of the
business. An investor-oriented business executive or manager looking for a company to
“gain control of’ either by outstanding performance, political maneuver, or eventual
ownership will be surprised if the company is a cooperative. A cooperative manager can
never acquire “ownership rights,” and must become resolved to always being an employee.
Further, the manager will discover it necessary to deliberately involve a majority of the
member-owners, not just a few principal stockholders, in major decisions affecting
cooperative policy and its business objectives. The prospective cooperative manager,
therefore, needs to carefully assess whether his/her management style and personal
performance motives and ambitions are compatible with the constraints of a cooperative
owned and democratically controlled by member-users.