The Third World War - War for Markets - And how quality management can win this war for co-ops (1998)
(Source: Co-op Dialogue, Vol.8, No.1, Jan-June,1998, pp. 17-19)
The Third World War - War for Markets - And how quality management can win this war for co-ops by Roberto Rodrigues, President, ICA
(The ICA President, Mr. Roberto Rodrigues, was a guest speaker at the Triennial Congress of CCA (Canadian Co-operative Association) in Winnipeg on 24th June, 1998, on the theme `Co-operative Leadership, Deep Roots, New Growth’.
He mentioned that the co-operatives in all countries are facing uncertainty in a `Third World War - the war for markets in the liberalised gloabal economy. We feel this article make interesting reading.
I would like to begin by thanking you for the opportunity to come to Canada this year.
I have a great admiration for the Canadian co-operative movement and, as a farmer myself, especially for your highly developed agricultural sector. The pragmatic and effective way in which your co-operatives operate is an example for the rest of the world. So, thank you all for the opportunity to be here, and thank you especially to my friend Bill Turner.
I would like to reflect a little upon the theme of your Congress ‘Co-operative Leadership, Deep Roots, New Growth’.
During my trips to various countries around the world, I have been in countless
co-operative assemblies, seminars, congresses, and meetings involving co-operators from different sectors, cultures, and ethnic groups. To my surprise, everywhere I go I find people concerned and worried by the future. In both developed and developing countries there is a feeling of uncertainty about how co-operatives will fare in what I refer to as the Third World War - the war for markets decreed by our global and liberal economy.
One might think that these phenomena affect co-operatives more than other sectors.
But such is not the case.
On the contrary, the new economic environment which is characterized by the
re-democratisation of less-developed countries and by structural reform, and also by
the rapid advance of means of communication, affect all sectors of the economy and particularly private businesses, especially those which work with speculative capital. The difference, it seems to me, is that nobody asks these private businesses to account for their financial problems whereas co-operatives, for whom transparency is necessary, must show their financial situation openly to their many investors and members.
A recent ICA seminar in the Philippines looking at the effects of the Asian financial crisis concluded that co-operatives have suffered much less than private enterprises since they rely essentially on their members for capital and are not involved in speculative activities.
Therefore, it is important to underline that globalisation of the economy in no way means the death of co-operatives and, on the contrary, could open up opportunities for them. For this to happen, however, co-operatives generally have to become more competitive in terms of their services and products, and especially in serving their members.
This challenge has to be met through profound changes in the behaviour of the
co-operative movement in terms of ideology, operations, and leadership.
The New Way
The time has passed when co-operatives were a third way for socio-economic growth, occupying the space between capitalism and socialism. We have now entered a different era. The failure of socialism, on one side, and the inability of capitalism to solve social problems on the other side, have created a certain identity crisis for co-operatives.
Today we have a different situation. On one side, like the bank of a river, there is the market in which co-operatives have to compete by offering high quality goods and services at competitive prices. Co-operatives must, through their excellence, make money. Some people might think this is a blasphemy, but it is not. Profits are necessary so that co-operatives can also meet their obligations on the other bank of the river by creating well-being and personal benefit for their members. Without profits there is no way to serve the members. And so this is the co-operative challenge to compete openly in the marketplace in order to offer services to our members. On one side of the river is the market, on the other is personal well-being. I believe this is the concept which should influence our approach to co-operative management.
New Co-operative Management
Many new ideas about co-operative management have recently been discussed, both among co-operative leaders and in the academic world, and many new innovations have been introduced.
I think there is one essential quality of good management today - the ability to take decisions quickly. This is of course a sensitive area for co-operatives, given our attachment to consultation and democratic decision-making. But if members have to be consulted every time an important decision is needed, we are bound to have delays.
There is, however, a way of making quick decision-making compatible with democracy. Instead of voting for people in co-operative elections, we should be voting for programmes. Instead of voting for people because they are honest, serious, and competent, we should be voting for people who have a clear idea of what they want to accomplish. Once elected in a democratic manner, the leader can then decide what decisions to take without feeling the need to go back to his members, who have already given him a mandate.
Such an approach puts great emphasis on co-operative leadership. In the past, a good co-operative leader was one who consulted his base and, on the basis of his interpretation of their wishes, took decisions.
We no longer have time for this approach. The new leader must have a long-term perspective and be able to demonstrate which road to follow. The new function of a leader is to convince his members which way to go, and then , like a boomerang, use their support to help him achieve his goals.
The challenge, of course, is to avoid falling under the influence of a dictator, since we know that in co-operatives this is great a danger as corruption. The leader who cannot convince his base of his opinions should go, for he has outlived his usefulness. For a leader to remain in command, without a real basis of support, is an abuse of power which is a death sentence for the co-operative.
The legitimate co-operative leader must be prepared to make changes, among his other qualities. Why change? In order to get rid of bad officials, bad members, bad leaders,
and bad co-operatives. In today’s competitive environment we cannot afford to have bad elements which destroy the image of co-operatives. We have to be like Jesus, who threw the money-changers out of the Temple.
We also need change in order to promote amalgamations and mergers among
co-operatives. There is no rule which says that co-operatives must be big in order to
be successful. Small enterprises, including co-operatives, can be very successful if they are managed with agility and modern efficiency. But there is also an imperative for growth. Enterprises which do not grow decrease in size, lose market share, and are likely to disappear.
For co-operatives, mergers are a good way to grow for they allow the co-operatives to maintain their own areas of strength. Co-operatives in the same sector can work together, reducing costs and increasing their bargaining power in the market. Throughout the world, gigantic enterprises are being created.
In the financial sector, banks and insurance companies are creating monstruous economic conglomerates. Financial co-operatives are similarly being obliged to seek alliances, both nationally and, when they have no appropriate partners at home, internationally.
The main idea is to add value through horizontal and vertical integration. Mergers are not the only way. Promoting strategic alliances within similar sectors is another way of benefiting members. Above all, pragmatism is what is called for. Enterprises which used to be regarded as ‘enemies’ of co-operatives, even those in the private sector, can be allies of tomorrow. Everything depends on how a joint venture is managed and for what purpose.
The essential thing is that members do not lose control of the co-operative when it changes partners or when, as is necessary, it seeks new forms of capitalisation from outside, in keeping with the new co-operative principle of Autonomy and Independence.
Professionalisation of co-operative management is another essential point. Our elected leaders define the goals, but it is the professionals who find the way. This is why it is so important to invest in human resources, especially in the area of commercial management. A world without borders requires managers who know the theory of management, who go far beyond the mere concept of trader. Knowledge of legislation, international commerce, the rules of the World Trade Organisation, as well as related areas are all necessary.
Other New Problems (and Some Solutions)
Following the demise of socialism, co-operatives have become increasingly subject to attacks from private businesses. Often we find ourselves on the defensive, unable to use our major strength of attacking. This is largely due to the terrible lack of public information about the co-operative difference. We must show why we are better than the `competition' and, in addition to lauding the benefits of our services and products, we must show that they are better because they are based on different principles and values.
We must invest in a positive image of our movement, raising the banner of social responsibility which is ours—in the areas of the environment, food security, income distribution, the fight against unemployment. These are issues of concern to society, and it is good for our image to be associated with them. Similarly, we should not hesitate to support governments when they adopt good policies in these areas.
We must, in short, seek partnerships with governments as long as this does not imply subservience or dependency. Wise governments understand that co-operatives can be allies in the provision of services to society, just as we say in our Seventh Co-operative Principle of Concern for Community.
This fierce struggle for market share in which we are involved sometimes creates another problem each co-operative group or sector tends to interpret the co-operative principles in terms of its own specific needs. The new statement of the Co-operative Identity does in fact allow a certain subjective interpretation which could, in the future, lead to a schism with each sector applying its own doctrine. This would be a disaster, for it would mean the end of our unity, which is our great strength. To avoid this catastrophe, which our enemies would dearly love to see, we must invest efforts in the integration of different sectors.
It is obvious that we must have specialization, for this enables us to be competitive. But it is equally essential that the different sectors understand each other and help each other, both nationally and internationally. If this integration is to lead to a stronger sense of ideological unity, we must develop a strong system of communication among all parts of the movement, coordinated by the co-operatives’ representative organisations.
In this way success stories would become known by all, as would legislative changes and commercial developments. In this way co-operatives would become truly global.
All these issues lead to the conclusion that, today more than ever, co-operative education is essential. Education is needed at all levels - leaders, managers, members - in order to understand clearly our difference, in order to be proud that we are the best. Above all, education must be for young people and women. Without them, our victories will be temporary and we will have no future.
If we are able to accomplish everything I have described, there is no doubt that our
co-operatives will flourish and will increase their market shares. But is this enough in order to ´to be co-operative’? I think not.
Globalisation is a dynamic process, in which societies will be affected in many different ways, and it is impossible to predict how it will evolve. But already two consequences can be seen - the growth of unemployment and the concentration of economic power.
Both represent real dangers for democracy. The two billion unemployed or under-employed people in the world (as identified by the International Labour Organisation) constitute an enormous pool of legitimate discontent and challenge to democratic governments.
Similarly, the political power of the big economic conglomerates encourages governments to make anti-democratic decisions.
Co-operatives are an answer to both problems. On one hand, they are creators of employment, principally in the sector of worker-owned co-operatives. On the other, they are an economic counter-weight to the concentration of wealth. Thus, they are taking on a new role, that of helping to defend democracies. We must continue to play our important socio-economic role and thereby assume our responsibilities as guardians of democracy and of peace.
I am talking here not about a romantic concept, but of a real fact. To manage businesses and to distribute profits is part of our activity, just like winning markets through efficiency and competitiveness.
We are, in fact, in a Second Great Wave of co-operative growth, not unlike the one which gave rise to the first co-operatives during the Industrial Revolution, and which was also based on the needs and sufferings of people.
For all these reasons we should be proud to belong to this huge army which is fighting for peace, in each town of each country and in every continent, following a common ideology based on universal values. With this pride, with honour, and without fear, we must face our adversaries and defeat them so that our children and grand-children will know a better and a more equitable world in the future.