Co-operative Effectiveness & Efficiency for the Future (Part 1) (1992)

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This document has been made available in electronic format
by the International Co-operative Alliance (ICA)
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October, 1992
(Source: Co-operative Values in a Changing World (1992) 


            VI.  CO-OPERATIVE EFFECTIVENESS AND 
                       EFFICIENCY FOR THE FUTURE
            **************************************** 
  (PART 1)

Some concluding discussions
-----------------------------------  
  
("Many visitors ask me what has enabled the Nada
Kobe Co-op to grow into such a large thriving
organization over this long period of time? In
putting together an answer three underlying
principles become clear: (1) Immutable Spirit
(2) Progressive Management (3) Respect for
Human Dignity. I have always tried to transform
these into a responsibility as a co-operative
leader,
  
-    to encourage the understanding of the
     philosophy of Co-operation
  
-    to develop the basic character of Co-operation
     as associations of persons
  
-    to engage persons in the co-operative movement, 
     who have the capacity and the  will to carry out 
     the basic ideas into economically efficient applications
     in the contemporary society

-    to combine the competence of elected laymen 
     and of the professional skills of our board in decisions 
     and in our daily activities."
  
- I. Takamura, President of Nada Kobe and JCCU
  (interview, 1990)
  
The previous chapters have dealt with some main aspects
of co-operative effectiveness: the basic values (chapter
II); problems encountered in development during recent
decades (chapter III); democracy, participation and
mobilization (chapter IV); and capital formation and
transformation of structures (chapter V). In this chapter
these are discussed within the context of overall
co-operative effectiveness before the conclusion
(chapters VII and VIII): identification of the viable
long-term value orientation and the proper principles for
the future1.
  
1. An overall tendency
---------------------------  
The experiences of the past decades, especially the 80(r)s,
reflect a pattern of priorities behind the overall
co-operative effectiveness. There are individual nuances,
variations and exceptions; but overall, particularly  for
the co-operative organizations of the industrialized
countries, experience seems to indicate the following2: 
  
-  Overall co-operative effectiveness has usually been
   interpreted in a more restricted way in relation to
   the values. Many co-operative organizations have
   begun to identify themselves less as a movement and
   more as organizations, enterprises and companies. 
  
-  The highest priority has usually been put on
    economic efficiency which has been interpreted in
    ways which have tended to move the co-operative
    organizations closer to capital associations. This
    has influenced the character of the whole
    organization and its culture.
  
-  Relatively less priority has usually been devoted to
   methods of co-operative democratic effectiveness and
   efficiency. Perhaps this has, to some extent,
   increasingly emphasized democracy as a means 
   rather than as an end in co-operative contexts (a 
   method for decision-making and participation, rather 
   than a value in itself).
  
-  Relatively less priority has been given to communicating 
   the co-operative message to society at large and to 
   demonstrating the long-term purposes of the co-operative way. 
  
1.1.    Rational priorities for the future? 
-----------------------------------------------  
This gives rise to the crucial question: does this pattern 
of priorities also reflect "co-operative rationality" for 
the future? Is this how we should give priority to the 
intended values? Because, certainly, this will also create 
a corresponding pattern for the realized values. 
  
I have the general impression of the past decades,
especially the 80s, that these tendencies generally
reflect pragmatic adaptation in a period of unusually
difficult environmental changes. Perhaps, to some extent,
these also reflect changing power relations between
overall views on "economy, democracy and ideology" within
the co-operative organizations as well as in society at
large: the 80's was a very "economic" and "capital
associative" decade, and it would be surprising if
co-operative organizations had managed to avoid being
influenced by this.
  
However, I hope that I am correct in my impression that
there is an on-going tendency to turn to broader and
deeper outlooks on co-operative effectiveness expressed,
among other things, by increasing concern about the basic
co-operative values and principles. There are many
examples of this worldwide, especially during the late
80s, when many organizations carried out campaigns,
conferences and participatory processes among members to
discuss and identify the values with a view to the
future. This was also what the Stockholm ICA Congress
(1988) aimed at with its unanimous recommendations. 
   
  
2. Economy and democracy
----------------------------------  
Do these priorities of recent decades reflect increasing
conflicts between economic and democratic effectiveness;
perhaps some inherent and absolute conflicts which have
now been brought to the surface? Opponents to economic
democracy ask us: Why are you co-operators so
economically stupid that you burden your economic
efficiency by introducing an extra obstacle to your
decision-making?
  
The traditional co-operative answers are clear - there
are always short-term conflicts between `democracy' and
"economic pragmatism" when it comes to the use of scarce
resources in contemporary society. This is a commonplace
experience and calls for short-term priorities. In the long run, 
however, co-operative democracy and economy must be 
combined. The challenge is to combine the efficient methods 
for economy and democracy at all levels of co-operative activity. 
And we can see that those co-operative organizations which 
have succeeded in this challenge have also been economically 
successful. A viable co-operative is characterized by a 
combination of a strong economy, a living democracy and 
a relevance to the community at large. These are mutually 
interrelated and support each other.
  
This has been said many times throughout co-operative history, 
which is not surprising, since such statements have always had 
the character of postulates in co-operative thinking and principles 
for practice. What do recent experiences tell us? Are these 
statements also true for recent decades? 
  
When starting my preparatory work I had the intention to
examine this in more detail by identifying the success
criteria of the good examples from co-operative
experience: by stating the "co-operative excellence" so
to speak. This was more complicated than I expected,
because there are few such evaluations, at least few are
easily available. Nor is there much research on such
aspects, because research seems to be oriented more to
problems than to success. Anyway, some tentative
conclusions may be drawn from the experiences expressed
by co-operators and from research contributions. 
  
2.1.    Some experiences
------------------------------  
The consumer co-operative organizations seem to be 
those which have had the greatest problems in applying
democracy effectively during recent decades. Fortunately,
there are some comparative research contributions
regarding this part of the world co-operative sector: one
from the Vienna Co-operative Institute (Brazda/Schediwy,
1989) and one from Saxena/Craig (1990). I draw my
conclusions from the latter, which used the former study
as a basis, supplemented with additional data and
extensive interviews with co-operative leaders. One of
the aims of the Saxena/Craig study was to examine the
thesis about supporting relations between economic and
democratic effectiveness since the 1960's. Its findings
are summed up in the table below:
  
Table 1. Consumer co-ops, market share & management style
--------------------------------------------------------------------------  
Performance    Co-op            Food     (A) Members    (B)Members
since 1960      systems*        market   put in signifi-     involved in 
 			           share     cant capital        70-80s to
                                                                                     shape                                                      
                                                                                     services
----------------------------------------------------------------------------  
Failed            *Netherlands         -%       no                  no
                        Belgium              -%        no                  no
                       *France                -%        no                  no
                       Canada (Quebec)  -%        no                 no
                                   (Ontario)   -%       yes                no
                      USA (Berkeley)    -%        no                 Yes
                      (Washington DC)  -%        no                 no
Losing          *Germany(Ag)     7.0%      no                 no
market          *Great Britain       6.0%      no                 no
  share            Canada(Western 
                                     prov.)       %       no                 no
                     *Finland            37.0%       no                yes
                     *Austria               5.7%      no                 yes
                     *Sweden            21.0%      yes                yes
Market share *Japan                 1.4%      yes                yes
stable/            *Norway           25.0%     yes                 n.a.
increasing      Canada(Calgary)35.0%     yes                yes
                                  (Atlantic)       %     yes                yes
   	         *Germany(Dortm)14.2%   yes                yes
                     *Italy                      2.7%    yes               yes
                      Denmark              33.0%    yes               yes
                    *Switz.(Coop)       12.0%    yes               yes
                              (Migros)             %     yes              yes
------------------------------------------------------------------------  

I have borrowed this table from `Annals of Public and
Co-operative Economics (vol 61/1990).' The figures
indicate trends from 1960 to the mid- or late 80's and
show that (in the words of the report) "The dichotomy
between economic and ideological considerations is
imaginary."
  
Similar conclusions are found in studies of individual
consumer co-operative organizations, for instance in
Sweden, and in detailed studies about the Finnish
co-operative movement. My experience of individual\
co-operatives in Sweden shows the same picture, and
during my preparatory work I was able to visit the
successful Japanese co-operative movement, which also
demonstrates a strong supporting evidence of this.
Regarding the Dortmund consumer co-operative, one of the
surviving successful co-operatives in Germany, the report
says: 
  
  
("To sum up: the principal factors responsible
for the success of the Dortmund society are:
(i) careful short and long-term planning taking
into account the merging future trends in
retail trade; (ii) carefully devised financial,\
educational and training policies; (iii) a
programme for motivating, and ensuring the
loyalty of members and, as a result of all
these (iv) generation of surplus and the
sharing of the results with members leading to
the projection of a positive image of the
society to the public."
  
-Craig/Saxena, 1990)
  
The same type of practical evidence can be found for
producer co-operatives, even if their conflicts seem to
be less serious. The members have a greater stake in
their societies and they usually have no alternatives,
especially not in the short-term. They must keep to their
societies and make the best of them. Nevertheless, there
is evidence, for instance, from worker co-operatives
saying that those which demonstrate a high productivity
are also those which have maintained a good democratic
spirit and a consciousness of the co-operative whole
(discussion with D. Jones, 1990). Experiences expressed
about, and studies of, agricultural and other producer
co-operatives tell the same story5.
  
  
2.1.1.  Development effectiveness
-----------------------------------------  
With regard to co-operative development in the developing
countries, the conclusions seem to be the same. The `new'
approaches strongly emphasize the combination of economic
and democratic efficiency in various ways. Take, for
instance, the concept of AMSAC (Appropriate Management
Systems for Agricultural Co-operation) of the FAO for
human resource development, which from long-term
experience has come to the conclusion that an effective
co-operative performance must be built upon five pillars
(Munkner/FAO, 1991):
  
-  Participation by farmers and rural groups at village levels.
  
-  Professional management by persons who get training
   in both proficiency and co-operative understanding.
  
-  Integration by building up networks for all activities 
   within supply, production and marketing. 
  
-  Diversification of the activities in order to make the 
   farmers less dependent on one single cash crop.
  
-  Training as the predominant tool to improve the
    competence of all persons participating in the
    co-operative process.
  
The famous Anand Co-operatives in India have similar
experiences: a viable co-operative - in order to become
financially strong, achieve efficiency and provide
services responsible to farmers(r) needs  -  must  be
characterized by the following institutional properties
(Singh, 1989):
  
-  Democratically elected boards.
  
-  By-laws which ensure a democratic process.
  
-  Management and ownership of assets by the co-ops.
  
-  Autonomy in pricing, marketing and appointment of
   personnel.
  
-  Employment of professional managers by co-ops.
  
-  Total control of the organization in the hands of members.
  
As I have understood it, the recruitment of management is
the crucial part of the Anand Co-operatives' strategy.
Especially in the introductory stages, management has a
key role to play in leading the co-operatives towards
efficient economy and democracy.
  
  
("The basic philosophy of the Anand co-operatives 
is to combine India's greatest asset, the power of its 
people, with professional management in a vertically
integrated co-operative structure that establishes a direct 
linkage between those who produce the milk and those 
who consume it, either as milk or milk products, 
eliminating all the middlemen."
  
-Singh, 1989
  
  
Many more examples encountered in my preparatory work
tell the same thing: direct observations, reports from
the ILO, Committee for the Promotion and Advancement of
Co-operatives (COPAC), individual research reports, etc.
The old discussions within the ICA at the beginning of
the assistance policy (especially the Congresses of 1960
and 1963), followed up by the ICA development programme
from 1982 and later (survey of B. Thordarson to the 1988
Congress about the past 30 years) are confirmed by
unequivocal experience: economy and democracy belong
together in a viable co-operative development.
  
I will not overdo the search for practical evidence; this
is not overwhelming `proof'  in scientific terms, but it
is sufficient to demonstrate the truth in what many
co-operators have expected and believed. Impressions,
witnesses and examples are enough to demonstrate that the
old co-operative statement is still going strong. 
  
2.2.    Principal considerations
------------------------------------  
Such types of practical evidence always raise the
question about causal relations: does a good economy
create a good democracy, or vice versa? Should
experiences be interpreted as a `recommendation' to first
develop a strong economy, because that induces a strong
democracy? The answer is: there are no such simple
one-way relations in this context; a strong economy and
democracy are interrelated, particularly over longer
periods. Although I use the consumer co-operative
framework, the reasoning might equally well be
transformed to other types of co-operative.
  
It is a basic and common observation that the special
power of co-operatives has always been connected to its
collective character; members have pooled their resources
in order to do what they cannot do as individuals. That
aspect can be expressed in economic terms: as long as the
co-operative association can maintain this character, the
co-operative will be able to keep its costs relatively
low and to more effectively demonstrate the economic
benefits to the individual members and to society at
large. Because, as long as this is the situation, the
co-operative organizations need less resources to
`persuade' the users of the services and their transaction 
costs can be minimized. The `market' will,  so to speak, 
be internal and will be more stable. It will also become 
characterized by relations of solidarity and of mutual 
confidence between the members and their society. 
  
Co-operators are not the only ones who have detected
these advantages. This is the main reason why private
business are starting member clubs etc: to build up such
`inner' markets. In a broader view, this goes a long way
towards explaining the strength of the multinational
enterprises; these have `internalized' the international
market and partly moved it within their "own walls".
Moreover, this is the main motive behind all the current
discussions about "business networks", etc.
  
2.2.1.  A weakening collective base 
-------------------------------------------  
When this traditional character becomes weaker problems
in economic effectiveness will emerge. This might happen
when too low a priority is put on the methods of
reproducing democracy and participation, and/or when the
members are increasingly looked upon as ordinary
customers. The `internal' character of the co-operative
market will become more `external' and the co-operative
organizations have to use similar methods to other
enterprises to sell their services, which involves a
larger investment in marketing. It becomes more difficult
for the members to detect the difference between being a
member and being a customer. The advantage of low
transaction costs will decrease as more resources have to
be used to approach the market efficiently.
  
I have touched upon these theoretical aspects of this
process of development since this is what has been going
on especially in parts of the consumer co-operative
sector, not only at the primary levels between individual
members and their society, but also, and in some cases
more often, at the federative levels between member
societies and their common instruments, usually managed
by the unions. The bonds between the union and its
members seem to have become weaker, the usual "market
idea" being applied to their relationship, the individual
member societies have turned to private business for
services, and facilities such as factories, warehouses
etc. have had to compete for their co-operative business
contacts. Transaction costs have increased, as have the
costs of excess capacity. This has made the services of
the jointly-owned facilities less favourable and increased 
the tendency to turn to private business. 
  
The result is a vicious circle that has eventually ended
up in the necessity to close down jointly-owned
facilities and to look instead to private enterprise.
This is perhaps profitable in the short-term, but what
about independence and strength in the long-run? (These
aspects will become crucial also in our efforts to build
up international economic collaboration, see below).
  
Such tendencies, both at primary levels in relations with
the members and at the secondary levels, reflect the lack
of a long-term balance between efforts to reproduce the
combined efficiency of democracy and of economy. Yes,
there have been increasing difficulties in the environment, 
but we cannot totally hide behind these. The process is 
also self-made, and step-by-step it threatens economic 
efficiency since it erodes the basis for the "inner market", 
one of the main powers of the co-operative way (see 
chapter IV section 4). At the secondary levels this might also 
be looked upon as a result of attitudes which are `too much' 
influenced by the market-oriented philosophy of the 80s. 
  
  
("The EKA Corporation is a conglomerate, owned and
equally influenced by its members. The Corporation`s
aim is the improvement of people`s welfare and quality 
of life by providing products and services to families 
and individual consumers."
  
"The EKA Corporation strives for high profitability,
a sound financial structure and steady growth, in
order to be able to improve the welfare and quality
of life of people."
  
-EKA Corporation, Program of Operation, 1989)
  
There are, however, other interesting reactions to these
kinds of issue during the 80's. Among consumer
co-operatives, the Finnish EKA has moved to the other
extreme and brought the co-operative activities together
within nationally-based organizations. This has certainly
reduced transaction costs, and economically it seems to
be a successful way. The crucial issues, however, are
about the member participation in the longer perspectives6.  
  
2.3.    Investments in democracy are profitable
-------------------------------------------------------  
So, to conclude, economy and democracy belong together 
in a viable co-operative in long-term perspectives.
Experiences and theoretical considerations support this,
and we can, with confidence, rely on the old co-operative
statement, based on long historical experience and
reflected by the co-operative Principles: "Long-term
investments in democracy are profitable investments!"
  
3. Issues concerning overall effectiveness
--------------------------------------------------  
A main theme in the approaches to overall effectiveness
throughout co-operative history has concerned the proper
balance between "economy and democracy", or perhaps
between "economic pragmatism and ideology". It might even
be possible to identify some long-term dialectics between
the more pragmatic and the more democratic and
ideological views on the co-operative way. And perhaps
the pendulum is in swing towards the latter again after
the very pragmatic 80's? 
  
Anyway, my preparatory work has shown that there are many
crucial issues in this context: 
  
-  the balance between economy and ideology (democracy).
  
-  leadership for professionalism and for co-operative
   commitment.
  
-  the co-operative society and the joint-stock company.
  
-  the co-operative federation and the integrated
   organization.
  
-  economic internationalization and participatory
   democracy.
  
-  social responsibility and economic efficiency 
  
-  the visions and the effectiveness.
  
Since these are recurrent issues, I will make some 
comments upon them for our discussion of values. 
  
3.1.    Integrated economy and ideology
------------------------------------------------  
It is a common belief that "economy and ideology" should
be combined in co-operative performance; economy and
ideology should constitute a unity. Co-operation stands
for a system to carry out economic activities in a
democratic way within a framework of co-operative values.
Co-operators might have differing views on the
interpretation and the relevance of the basic values, but
basically agree on this `integrated' outlook. Members,
employees and management should have economy and 
ideology integrated in their minds, as was the case in the 
beginning and still is the case in small co-operatives, and 
in the formation of new co-operatives.
  
3.1.1.  Traditional approaches
------------------------------------  
As soon as the co-operative organizations have begun to
grow larger it has become more complicated to carry out
this ideal of integration in practice. There has been a
continuous discussion about it, which has been influenced
by two approaches to the basic co-operative character:
  
1) The more dialectic-oriented approach that goes back
     to the idea of a "dual character" of the co-operative 
     organization: a social association of persons and the 
     economic instruments of that association.
  
2) The more harmony-oriented approach that rejects the
     existence of such a dual character and stresses the
     unity character of the co-operative organization.
     The distinction between an association and its
     economic instruments is basically artificial.
  
To these we might add a third one: 
  
3) The power-oriented approach that emphasizes the 
    need to guarantee power to the members and their
    representatives. This approach might reflect the
    above, but not necessarily. 
  
It is no use spending time and effort to argue about
which approach is correct; this is metaphysics. What we
can observe, however, are the experiences of
organizational applications and these seem to have
reflected the different approaches. Many co-operative
organizations have chosen to organize the promotion of
"member associative and ideological" issues in more or
less independent bodies and the promotion of the "member
economic" issues in other bodies, almost as in parallel
organizations. The integration is supposed to be carried
out in a variety of ways, basically by education in all its 
meanings, but also through a framework of committees etc. 
and by the overall governing bodies and assemblies. In this 
way, economy and ideology are supposed to `melt' together.
  
These applications resemble the usual way to organize
national democracies; special bodies for polices and
others for executive and administrative functions. In
co-operative contexts the most well-known application is
the British: The Co-operative Union (for education,
auditing, meeting and congress arrangements, research,
information, press, printing and publishing, and contacts
with the community) and the various unions for economic
functions. The practices are similar in other countries.
  
On the other hand, many other co-operative organizations
have preferred to deal with such issues within the same
bodies, in more integrated ways and with a general
manager with overall responsibility (but answerable to
the elected assemblies). There might be a more or less
independent status for member associative functions, for
instance as staff for the president or for an elected
general secretary, but the main character of this way is
the integrated organizational approach. This characterizes 
larger agricultural co-operative organizations and, to 
quite an extent, also Nordic consumer co-operative 
organizations, with the significant exception of the 
Finnish E-movement until the 80`s (Ilmonen 1986). 
One might say that this model is closer to the organization 
of large private companies and enterprises.
  
3.1.2.  Lessons for the future?
------------------------------------  
There are nuances and combinations; this is a
simplification intended to drew attention to some basics.
Both types of application, as said, aim at integrating
ideology and economy into an effective co-operative
whole, but use different ways. So, the natural follow-up
questions are: what are the experiences of recent decades
and for the future? Which application is the most effective 
in integrating economy and ideology as well as efficiently 
promoting economy and democracy? (In other words to 
reflect those essential values?) 
  
There are no simple and clear-cut answers. Experiences
from recent years, however, clearly indicate an overall
trend towards a stronger integrated approach within both
these applications. The division into separate bodies
have tended to make some parts of the organizations
`specialists' either in ideology or in economics and have
even tended to create increasing tensions between such
bodies, perhaps also widening the division between their
views on co-operative issues. The actual development has
demonstrated that the so-called "ideological parts" have
gradually lost their independent status. During the 80's
these have become reduced, and more integrated with the
economic functions. This is obvious in, for instance,
some of the large consumer co-operative organizations:
the famous Co-operative Union in the UK, the big KK in
Finland and the sector for education and information in
Swedish KF have become no more than the remnants of what
they were in earlier periods.
  
This was partly due to lack of resources (priorities),
but also to outspoken ambitions to update the ideals:
"Co-operative ideology should be reflected by economic
practice, and economy and ideology should be integrated
in the minds of the members, the employees and the
management". We are back to the question: do these
experiences reflect the rational way for the future? Will
the integrated whole be better reproduced in this way? Or
is this perhaps more a reflection of an on-going shift in
the balance of the basic power, by which the democratic
and ideological aspects are brought under the `control'
of the economic aspects?
  
3.1.3.  A combination
---------------------------  
The answers to these questions must be left to the
future, since it is too early to make overall predictions; 
the conditions are different, the experiences are new 
and it takes time to observe the effects. Anyway, there 
are some risks connected with this very integrated 
organizational approach. The overall ambition of integrating 
economy and ideology is crucial, especially when it 
comes to the application of democratic and ideological 
aspects in concrete economic activities; the ideological and 
democratic aspects must be there all the time, influencing 
daily decisions. Co-operative organizations cannot use two 
languages in their communications with members and the 
community at large:  one for ideology and one for economic 
practice. That would be disastrous for the credibility of the
co-operative way. 
  
On the other hand, it is also true that a living democracy 
and ideology, especially in these large co-operative structures, 
must be encouraged and reproduced, which requires proper 
resources and a proper degree of independence for such tasks. 
The innovative reproduction of ideology and democracy - 
expressed in terms of co-operative economy - needs conscious 
attention and competence. It also needs independence in order 
to make critical evaluations of existing practice and of the 
alternatives to it. Otherwise, the risk is that such
reproduction will be drawn into the heavy day-to-day
economic problems and subordinated, as currently seems to
be the case, to the "economic realistic" points of view.
However, what is "economic realism"?
  
  
("There is no contradiction between ideological
revitalization and the aim of economic efficiency. On the 
contrary, an understanding of co-operative ideology is 
the same as an understanding of how best to utilize the
opportunities for joint action! Therefore, we must start 
to give equal weight to good co-operative thinking and 
good economic thinking.
  
In order to carry this out we must strive to upgrade the 
(member) organizational functions of the co-operatives 
again. These have been given less priority during recent 
years. I do believe that this is a disastrously wrong
strategy. We are barking up the wrong tree if we do not 
give the organization the opportunities to develop its 
understanding. We may use statutes and rules to create a 
basis for formal power, but we do not create the basis for 
organizational changes and adaptations in this way."
  
-O. Waere, Director of Norwegian Farmers'
 Co-operatives (from LandbruksSamvirke 1991,
 translation)
  
In the long-run the constructive tensions between ideas
and reality belong to the main characteristics of a living 
co-operative organization. The conditions for such
long-term reproduction must be built into and
organizationally `guaranteed' in the larger co-operatives. 
Such tasks might be carried out by bodies headed by elected 
leaders and representatives. This is not to argue for the 
extreme dual approach; the main character of the 
organizational framework should be integrated. But we 
must avoid the risk that a too one-dimensional integrated 
approach will kill the healthy `dialectics' between ideology 
and economic pragmatism in the longer term.
  
3.2. Senior co-operative management
---------------------------------------------  
The above makes crucial the issues of co-operative
leaders and senior management, because they have a basic
responsibility for establishing a proper balance between
economy and ideology, be it in a more integrated or in a
more dual-organizational structure. This is all the more
crucial against the background of recent decades: the
management, especially the employed management, is the
power. 
  
All co-operators agree on the view that employed leaders
in top positions should be both professional and
co-operatively committed. My old Swedish friend (Eronn,
1982) with co-operative experience dating back to the
1940s always said and wrote that the crucial task of the
elected representatives has been, and will be, to appoint
top managers with a professional skill and a co-operative
heart. In earlier times and until the 1970's co-operative
organizations mostly recruited leaders from inside the
movement, from those with a long education in
co-operative practice and ideology. Many co-operative
organizations had, and still have, extensive training
programmes for internal top management recruitment.
Today, more of the top management is employed directly
from other enterprises and institutions, and has a
university background. The crucial issue is of course,
what kind of impact this changed recruitment policy has
on overall co-operative performance.
  
There is not much systematized knowledge and experience
about such issues and this is not the place to speculate;
I have heard and seen both very good and very bad
judgements and experiences. However, what are the
alternatives? There has obviously been, and will be, a
lack of leaders and senior management in many
organizations, mainly because of an on-going change in
generations. Will it be more efficient to make a
professional manager out of a co-operator, or a
co-operator out of a professional manager? 
  
We do not know. Perhaps there is some truth in what one
leader said in my interviews: "If we pay enough, we will
get professional managers who will also learn about the
co-operative way". Yes, perhaps we cannot shut our eyes
to the fact that co-operative commitment might be
expensive at the top levels. Anyway, the basic question
demands our attention: are special characteristics
connected to a co-operative leadership? Or is it the same
as in other types of organization? In other words, is
there a "professional skill" in leadership that is universal 
and applicable to all kinds of organization? If so, we need 
not bother very much about these issues. I would only 
partly agree because in co-operative organizations this 
skill has to be applied to quite another structure, to quite 
other goals and values, to quite other needs to listen and 
argue with many people and to quite another organizational 
culture. At the end of the day, this is to say that a 
co-operative leadership has special characteristics. 
  
  
3.2.1.  A wider view
---------------------------  
The issue  of co-operative leadership also has broader
and long-term perspectives and implications. It is about
co-operative identity, status and reputation within
society, and consequently about how we are preparing it
for the recruitment of co-operative leaders, elected as
well as professional. Among other things, this turns our
attention to the school system, from basic levels up to
university levels. Here, we can make the general
observation that co-operative theories and economics are
not usually taught; students learn mostly about private
business organizations, about their problems and their
logic. This is a negative precondition for co-operative
recruitment, because such an education does not predispose 
young people to a conscious and committed interest in the 
co-operative career. So, it is important for the long-term 
outlook to use our resources to improve the situation. 
Co-operative organizations cannot ignore this important 
source of potential leaders and top management.
  
("Question: What characterizes a good co-operative leader 
                   for the future? What are the most important
                   management values for the future?
  
Answer:     Vision, integrity and banking expertise, coupled 
                  with empathy, understanding and philosophical 
                  belief in a co-operative economic system.
  
Question:   What are the most important tasks for the 
                  co-operative banking sector for the future?
  
Answer:    (i) To so organize themselves in order that they 
                  increase their propensity to survive, (ii) To be 
                  able to understand the need to differentiate and 
                  actually achieve differentiation in the marketplace, 
                  and (iii) To consolidate and group together on a 
                  national and regional basis."
  
 - Terry Thomas, President of the ICA Central Banking
    Committee (interview)
  
There are interesting efforts among co-operative
organizations to learn from in these promotional efforts. 
I mentioned earlier the Japanese experiences of university 
co-operatives, which have been an important "preparatory 
school"  for many co-operative leaders. In many co-operative 
organizations there are also special offers and arrangements 
for young graduates to join co-operative training programmes 
after their first degree in order to get used to co-operative 
ideas, culture and practice. There is a need to look more 
closely at such measures in order to exchange experiences 
and to improve the long-term conditions for recruitment.
  
3.2.2.  Crucial tasks
-------------------------  
We are faced with these crucial tasks for the future:
  
-  To apply efficient programmes of leadership
    education and training for persons inside the
    co-operative organizations. This 'source' of
    leadership cannot be exhausted and is still the most
    important for most co-operative organizations. 
  
-  To carefully select the senior management from
    outside with reference to their capacity to adapt to
    the special co-operative demands and to arrange
    proper training programmes for these leaders.
  
-  To develop international management training for a
    more internationalized world (see below). Why not an
    international "co-operative business school"? 
  
-  To become involved in the school system from basic
    to university levels in order to introduce knowledge
    and education about co-operative theory and economy.
  
Good co-operative leaders and top management with high
levels of professional competence and co-operative
commitment have a key role in ensuring future co-operative 
effectiveness. Bad co-operative leaders, on the other hand, 
can cause much harm to the co-operative way. 
  
3.3. Co-operative society versus the joint-stock company
---------------------------------------------------------------------  
The transformation of co-operative societies into joint-stock 
companies is principally motivated by a  search for economic 
efficiency in a changing environment. What are the 
implications for overall effectiveness and for co-operative 
values other than the economic? It depends (chapter V), 
among other things, on what kind of joint-stock company 
is used and to which part of the co-operative organization
it is applied. It also depends on the ideological strength of 
the members, employees and management and on the 
general ideological culture of the co-operative organization. 
  
Let us consider the extreme, and compare the co-operative
society with the joint-stock company introduced on the
stock exchange market. Without going into details we can
observe some differences in basic principles between the
two forms of organization. The society is established for
purposes other than those of the joint-stock company and
has other ways to define its activities and to exercise control:
  
1) The purpose of the co-operative society is basically
     to serve the needs of its members. The purpose of the  joint-
     stock company is basically to achieve a return  on  invested 
     capital and, in extreme cases, to maximise that return. 
  
    The purpose is more complex in co-operative societies, 
    especially when the long-term goals and basic values 
    are also brought into consideration. The purpose of 
    the joint-stock company is more one-dimensional and 
    the result is consequently more easy to measure in 
    quantitative terms.
  
2) The members of the co-operative society have one
    vote each and are expected to actively participate
    in the decision-making in order to decide upon
    activities to meet their needs. The members define
    the purpose by their participation, and control the
    achievement of it, in a `dialogue' with the society.
       
    The stock holders in a joint-stock company have votes 
    in proportion to their stocks and are not expected to
    actively participate in the decisions about activities,
    etc. They are expected to be interested in an efficient
    management in order to guarantee a good return on their
    capital investment.
  
Transformation to a joint-stock company might gradually
start a process, which in the longer run changes the
organizational culture of the co-operative society, the attitudes 
of the management and the members. The definition of 
the members' needs tends to become oriented towards a 
"business relationship" or a "market relationship"  and the 
purpose tends to lose its complexity and becomes  more 
one-dimensional and more oriented towards economic 
terms. The members will be looked upon less as participants 
in the co-operative work, as active persons who need 
education, arenas to meet and to discuss their needs, etc. 
They will be seen more as receivers of information from 
co-operative headquarters about the business.
  
The approach to overall co-operative effectiveness will
be oriented towards more quantitative and economic
perspectives, while the qualitative aspects and
non-economic values will land up in the background. 
This will gradually influence the use of resources, and so 
the more basic aspects of the co-operative way. The logic 
of the co-operative society will be substituted more by the
logic of the joint-stock company.
  
  
3.3.1.  The organizational culture
---------------------------------------  
A co-operative nightmare, or is it? Yes, of course, but 
I have chosen to demonstrate the extremes. The usual
practice to date has been to use such transformations in
those parts of the organization which are far from the
immediate interests of the members. It is also usual, as
said in chapter V, to introduce special by-laws for the
stock company form in order to maintain the co-operative
character.
  
The most problematic aspect, however, is the prospect
that such a process of change might start before a formal
transformation to a joint-stock company has taken place.
Such tendencies may already have been introduced by the
criteria of effectiveness and efficiency, imported from
capital associations. These might be introduced by
education which is relevant for private business but not
for co-operatives, and by the recruitment of managers
without co-operative knowledge. During the 80's, with its
increasing orientation towards the capital-associative
way of thinking, such tendencies have been knocking more
eagerly at the co-operative door. So, to some extent the
increased transformation to joint-stock companies might
be seen more as a consequence of an already changing
culture of organization than as a cause of it. 

These are highly delicate issues for the co-operative
way, because it is difficult to find concrete evidence of
them. It is always a matter of `soft data', as we have
discussed within the ICA Research Working Party. Because
these trends exist mostly in the minds of the individuals
involved, it is a question of mentality. We have to
prevent it by continued efforts of the kind discussed
earlier: education and training for members, employees
and management; encouragement of participation; careful
leader recruitment and promotion of the co-operative
ideas and principles in society at large (through legislation, 
education and the moulding of public opinion).