University of Wisconsin Center for Cooperatives
Selecting and Evaluating
The Cooperative Manager
By Frank Groves
Professor of Agricultural Economics and Chair, University Center for
Cooperatives, University of Wisconsin, Madison.
Presented at the ** 1979 NICE Conference, August, 1987.
UWCC Occasional Paper No 9 - September, 1987
As you enter the house you can tell something is wrong by the look on
your spouse's face. "There is an emergency meeting of the co-op board tonight
at 7:30," she said. You ask what it is about and she informs you that there
was no additional message.
On your way to the meeting that night you are thinking about what the
emergency could be. There was a bad storm in the other end of the county;
could the new feed mill have been damaged? Or were there some problems
The president/chairman calls the meeting to order promptly at 7:30 and
drops the bombshell: "The manager quit this afternoon and said his resignation
was effective immediately, and he was leaving for an extended fishing trip
in Canada, and he never wants to see any of us again. Tonight we have to
figure out what to do now."
How many boards are caught in this situation where the central management
person is suddenly gone? If the board and the manager had planned for proper
executive succession there shouldn't have to be a crisis situation. However,
this is a board responsibility that is often neglected. "As long as things
are ok, let's not worry about it," seems to be a common rationale.
When a manager/CEO vacancy occurs, the responsibility often falls on
the board president/chairman to keep things going. Since the president/chairman
and the manager/CEO should have a close working relationship this is a
natural line of reasoning. But is it a good one? Too many presidents/chairmen
have found that they were making decisions that they didn't want to make
or weren't qualified to make. And, these vacancies often occur when the
president/chairman is very busy with farm work.
HOW TO FIND A NEW MANAGER
In our hypothetical situation described above, the conversation might continue
"Has anyone notified the regional? They usually have a stable
of retired managers that can step in. Our regional Rep. should know of
someone looking for a manager's position."
After a certain amount of expected rhetoric, just what should the board
do? One answer might be "all of the above." However, before the board starts
a formal recruiting procedure they should notify the employees, major creditors
and the bank(s), members. select someone to be acting manager, prepare
an up- to- date job description and arrange for an audit.
"My son-in-law is looking for a job. He graduated from technical school
in computer programing and I wish he would go to work. He doesn't like
to farm, and we are sick and tired of the way he hangs around the house."
"How about you, Tom (Tom is the board president)? Now that your son
is helping with the farm, why don't you run things for awhile? We can pay
you a little extra."
"Why don't we promote the manager of the feed department. He is one
of the hardest working people I know. Never takes a break, should make
a good general manager."
The Job Description
Because the job description is the standard that should be used to later
judge the performance of the new manager, the board should invest enough
time to develop a good sound, understandable job description. Sample job
descriptions are available from regional cooperatives, and a general position
description is in appendix I and in Chapman, ** pi4q.
In their book "The Contemporary Director," Chapman and others state
"The single most important task facing a board is the recruitment and selection
of its manager." They also give some minimum requirements for a job description
for a manager. They are:
The American Management Association suggested the following points be covered
in any job description. "Purpose or basic function: includes a broad statement
of the job as a whole and what is to be accomplished.
OBJECTIVE: A position objective which outlines the overall purpose
of the position.
AUTHORITY: An indication of the authority that the board of directors will
grant to the manager.
RELATIONSHIPS: A list of the various individuals and groups with whom the
manager must develop a sound working relationship.
KNOWLEDGE AND SKILLS: A list of the various skills and areas of knowledge
the manager must have to perform his or her job effectively.
ACCOUNTABILITIES: A list of the key areas for which the manager will be
held accountable, including each key performance area of the organization."
Duties and Responsibilities: includes the principle activities to be
performed, usually in a fairly detailed statement.
Jurisdiction: includes the authority to that is associated with the
job and the limits of that authority. This section also may contain a description
of the relationships with other (organizations)." (Parentheses added.)
(Vilstrup & Groves, p 96.)
If the board has access to a regional representative, that person should
be brought into the discussion at an early stage. Regional cooperatives
often have a pool of available talent that can be tapped.
The board must also decide on how much publicity to give the opening.
They may also set a policy on allowing present personnel to apply or not
After the above decisions are made the board should set a timetable
for receiving and reviewing applications, and set a tentative interview
Sources of new managers include:
Internal, promote a present employee
Universities and colleges
Other businesses (if this approach is used the board should check on the
applicant's knowledge about cooperatives. If the person meets all other
qualifications, but has no cooperative background, the board might want
to arrange for some cooperative training.)
THE SELECTION PROCESS
The selection process is complex. Restrictions on recruiting, equal opportunity
laws and forbidden interview questions are among the pitfalls. Applicants
that are not selected must be properly notified so the board won't be sued
later for some perceived, or real, discriminatory action.
A standard application form can often be obtained from a regional cooperative
or a company distributing standard business forms. Using an application
blank has the following advantages:
After all applications are received they should be reviewed by the board,
or a designated committee, and three to five candidates selected for interview.
Before interviewing, references should be checked by personal phone call
or by mail.
"It is a simple test of the applicant's ability to spell and give clear,
concise answers to factual questions.
It can be used as a screening device before interviewing.
It should include references that the board can check
It assures the applicant that his/her record is on file." (Vilstrup &
Groves, p 100)
If possible, all candidates should be interviewed by the full board at
the same time. That way the board can compare the applicants while the
interview is still fresh in their minds.
Some tips for interviewing include:
Allow enough time. Don't make the interviewee feel that you are trying
to complete the interview as quickly as possible.
Follow a plan. Even if you don't have a formal interview schedule try to
ask the same type of questions of all interviewees so their answers can
Check the application. Before starting the interview, study the application
form in order to familiarize yourself with the candidate's background.
Ask short questions, expect long answers. Questions to the interviewee
should be relatively easy to understand and should encourage him/her to
talk and you to listen, Use "Why" and "How" to gain additional details.
Remember, if you talk more than 50 percent of the time, you have been interviewing
yourself, not the interviewee.
Ask open ended questions that cannot be answered "yes" or "no".
Ask questions and listen. Remember who is being interviewed and listen,
listen, listen. (Vilstrup & Groves, p 100 and others)
In their book "The Contemporary Director", Chapman and others summarize
the recruitment process:
It is possible that the board may wish to use outside consultants for the
selection process. They may hire a firm that specializes in executive searches
and will screen the candidates and recommend several to the board for interview.
Job Description. Does one exist? If not, develop and review. Identify desired
personal characteristics. I
Structure recruitment committee. Budget people, time, and money for the
process. Review terms of reference of the committee, including time screening
criteria and short-listing.
Write employment advertisement. Post internally. Advertise externally in
newspapers and co-operative press. review applications or resumes.
Committee short list. Three to five candidates. Check references.
Interviews with full board. Board decision
Contract. Discussion by board. President makes offer. Candidate accepts.
Inform unsuccessful candidates." (p 145)
The selection procedure is summarized in Figure 1. Note, there are.
several points in the process where applicants can be rejected.
After the board decides on a new manager eventually they will need to evaluate
his/her performance. This is often done in conjunction with the annual
salary review and salary setting for the coming year. Wright in "The Effective
Bank Director," suggests that the appraisal be done at some time other
than setting the salary of the CEO. He argues, "if we are going to find
some area in which a better performance is desired (and surely there is
no candid review that would not do this), then the CEO needs to be given
time to improve before coming up to salary consideration." (p 75). Manager
appraisal can be a traumatic time for a board, especially if they **
not usually trained in performance evaluation. Fortunately, most regional
cooperatives and many consulting firms Offer guidance and assistance in
this area. Smith and Zimbelman in their article, "Assessing Management
"The good news is: you're not alone. Many co-op boards of directors
and managers find the prospect of a formal management performance appraisal
very uncomfortable to face.
They further state that "..it is becoming more and more common to find
co-ops where every employee receives a formal annual performance appraisal
except the manager."
The reasons cited for this reluctance tend to fall into three categories:
The bad news is: to avoid management evaluation is to neglect one of the
most important functions of the board and to truly jeopardize the future
of the co-op."
the difficulty of developing a truly objective evaluation process,
an understandable aversion to any additional paperwork, and
a concern that the formal appraisal session itself could prove to be awkward,
unpleasant, and unproductive for all parties concerned.
The first prerequisite for any manager evaluation is to have a standard
for judgement. This standard is the general managers job description and
the goals that he/she and the board have agreed are proper and are a reasonable
guide for judging performance. Without a standard, any evaluation of the
manager's performance is strictly subjective and easily influenced by strong
personalities, either positive or negative. Without a standard, the board
often is left to "manage by crisis."
Douglas Holland in his working paper, "Challenges Facing Directors of
Co-operatives," states "The selection, guidance and appraisal of the general
manager is the board's primary responsibility in relation to the management
of the operations of the cooperative.11(p 12).
In "A Guide to Modern Management" it is suggested that "No man should
accept a management position if he is unwilling to undergo periodic and
careful examination of the results of his efforts. He should insist on
it and he should do the same with his own subordinates." (Chapter 15, p
Even if a formal evaluation is not used an informal system is constantly
in operation. Wright says, "No CEO should delude himself. He is being appraised
all of the time. Directors are forming opinions in the board meetings,
in committee meetings, in individual contacts, and through what they hear
'on the street'." (p 71).
How to evaluate
There are several different ways the board can fulfill their evaluation
duties These include:
Whatever method the board chooses, there should be agreement between the
board and the manager/CEO concerning the evaluation procedure.
Conduct an evaluation discussion with the full board
Have a special committee do the evaluation and make recommendations to
Work with a regional representative in either 1 or 2.
Hire an outside consultant to conduct the evaluation and make recommendations
to the board.
Some combination of the above
Chapman and others suggest the following outline as a guide for the
"A. The board and manager agree to the goals in each key performance
area for the coming year.
Smith and Zimbelman feel that:
B. The board decides on a date to review the performance of the manager.
This should be an in-camera meeting, with no other items of business on
C. The board spends part of a board meeting prior to the appraisal meeting
discussing and resolving some basic items of administration, including
confidentiality, sources of information and the manager appraisal form.
D. The board identifies all sources of information for its appraisal,
including resources from the central organization (if such exists), input
or feedback from individual board members or members of the cooperative
during the year, and previous performance appraisals
E. The manager completes an appraisal form which includes the previous
year's stated goals and a situation analysis
F. A copy of the manager's completed form is distributed to each board
member ten days or so prior to the appraisal meeting.
G. The appraisal meeting is held. When appraising the manager's performance,
directors must: judge results, not activities, relate the manager's contribution
to the co- operative's performance, and judge the manager's achievement
rather than his or her personal traits or habits. The board must document
its thoughts, positive and negative, on the appraisal form." (p 146)
"Regardless of the approach, however, no managerial performance
appraisal system can be completely effective unless it incorporates a number
of key elements:
Dr. Vannevar Bush in a paper titled "Of What Use is a Board of Directors,"
states "That a board should judge and not manage is a key point in proper
relations. Any Executive in any organization, no matter where placed, should
be called upon to justify his important plans and programs before some
individual or body competent to judge them adequately."
It must be candid and honest.
The appraisal should be presented in writing.
The appraisal form itself should be relatively simple.
The comments given should be as specific as possible.
The full board should participate in the appraisal process.
(Because the full board is legally accountable and because the manager
needs the opinion of the full board)
Consider various systems and the input of various parties in designing
an appraisal process.
The appraisal should be kept as impersonal as possible.
The appraisal of the manager should be separated, to the extent possible,
from labor negotiations.
The focus of the appraisal process should be the future, not the ** past."
The appraisal form
The actual forms used in conducting a manager appraisal vary. They may
follow a narrative approach where each director fills out the form in his/her
own words. These could be summarized and presented to the board for discussion
with the manager. Questions on the narrative review form are very general.
For example: "List those areas in which you feel the general manager does
the best job.", "List those areas, if any, where you feel his/her performance
could be improved or strengthened, or where he/she might achieve better
end results." This approach uses about 10-12 questions, forms are unsigned
and the analysis and summary is done by a non-board person.
Another method is an objective and goal-oriented approach whereby the
board and the manager together develop the goals for the next year and
at the end of the year look at how well they have been achieved and what
to do about those that weren't achieved. The review can be conducted by
a committee of the board and then discussed with the whole board. This
approach is probably more objective than the narrative approach.
A third manager appraisal approach is the use of a rating scale. These
scales usually have from three to five different rating points ranging
from unsatisfactory to outstanding. A typical three point rating scale
A. Good, minimal improvement needed
B. Fair, some improvement needed
C. Poor or lacking, much improvement needed
Most scales allow room for comments by the raters. and some have developed
numerical values for each rating cell. These can later be totaled and an
overall score calculated. The overall score is often used in conjunction
with a salary recommendation chart, developed by a regional cooperative
or from some other source, in setting the annual salary of the manager.
An added benefit of using a numerical scoring system is that the manager's
performance can be compared in different time periods and in different
categories. Changes may be noted and compared in different responsibility
Some organizations use a combination of the above methods, and may hire
an outside consultant to assist in the appraisal.
The idea of rating management by comparing performance to a previously
agreed upon set of objectives has been around for quite some time. George
Odiorne, generally considered a major proponent and developer of the management
by objective technique, listed several "don'ts" that should be observed
by the reviewer in any standard performance review. Some of these are listed
below and should be considered by the board in reviewing the performance
of the manager/CEO.
"Don't get involved in personality discussions.
Don't discuss salary and performance at the same meeting.
Don't hold a man accountable for things that are totally beyond his control.
Don't dwell on isolated incidents at the expense of overall results.
Don't make up your mind about the results a man has achieved until you've
had your discussion with him.
Don't nag." (Quoted in Wright, PP 76-77)
In his book "Directors: Myth and Realty" Myles Mace discusses three generally
accepted board practices. These are:
He also lists three important functions of a board of directors:
"Establish the basic objectives, corporate strategies, and broad policies
of the company;
Ask discerning questions;
Select the president." (general manager/CEO) (p 43)
Manager evaluation, as with other employee evaluation, will never be an
exact science. Subjective judgement will always be present and personal
biases will help sway opinions. Remember, the manager can only be
judged against the standard that the board and he/she originally agreed
upon. Chapman summarized it as follows:
"The board provides advice and counsel
The board serves as some sort of discipline
The board acts in crisis situations." (p 13)
"One final caution: when appraising performance of a general
manager, he or she can only be held accountable for decisions delegated
to him or her by the board. If the board has kept control over implementing
certain decisions, then it must be held accountable for performance in
those areas." (p 147)
One measure of how well cooperatives are doing in manager evaluation was
provided by Mike Turner in a paper, "Management Factors Affecting Success
of Farmer's Cooperatives", at the 1987 National Institute on Cooperative
Education (NICE) meeting. He analyzed 63 questionnaires from grain and
farm supply cooperatives in Iowa, Nebraska and South Dakota. His findings
included the following:
" There were only seven cooperatives which had a plan for management
succession ... Nineteen associations used salary surveys of comparable
firms in setting their general managers salary. General managers job descriptions
were present in 37 of the cooperatives. Less than half had performance
standards for general managers or based salaries on performance related
Anderson and Anthony in "The New Corporate Directors" while agreeing with
the observation of Arjay Miller, retired dean of Stanford's Graduate School
of Business and former president of Ford Motor Company that "..the best
bargain, a board can get for the shareowners (members) is to pay a high
salary for a really superior CEO." However, they add. "..but at the same
time we feel that a board must be sensitive to the shareowners, (members)
labor unions, employees, and the public, with respect to what they feel
is appropriate compensation.
"In the midst of these conflicting pressures, the compensation committee
(or the board) must make its decisions. In doing so, there are three principal
guidelines to keep in mind. The CEO's compensation should:
While performance appraisal is an inexact process this should not prevent
boards and managers from developing an acceptable, workable and understandable
system. Some evaluation is almost always better than no evaluation. Each
cooperative is different, as is each board and each manager. What works
in one situation may not work in another. Hopefully this discussion will
provide some broad guidelines that will help many different cooperatives
in many different situations.
Be related to performance.
(p 112, parentheses added)
Anderson, Charles A., & Anthony, Robert N., "The New Corporate Directors",
John Wiley & Sons, 1986.
Chapman, Harold E., Holland, Douglas A., Kenney, Sean D., and others, "The
Contemporary Director", Cooperative College of Canada, #510, 119 Fourth
Avenue South, Saskatoon, Saskatchewan, Canada, S7K 5X2, 1986.
Cooperative League of the USA, "A Guide To Modern Management for Cooperatives"
Garoyan, L. and ** t4ohn, Paul O., "The Board of Directors of Cooperatives,
University of California, 1976
Holland, Douglas A. "Challenges Facing Directors of Co- operatives", Cooperative
College of Canada, Working Papers, Vol. 3 No.1
Hopping, Robert W. "Securing Management Talent: The GROWMARK System", American
Kabat, Robert I., "Appraising the Board", Paper presented at the International
Conference of Cooperative Board Chairmen, Monterey, CA, 1980.
Mace, Myles, "Directors: Myth and Reality", Harvard Business School Press,
Performance review procedures used by Land 01 Lakes, CENEX, Farmland Industries,
Smith, Geoffrey, F., & Zimbelman, Karen, "Assessing Management Performance",
Cooperative Grocer, February- March, 1987.
Trout, V. Kyle and Overman, Charles L., "Board and Manager Appraisals --
Can they work?", paper presented at an NRECA Chairman of the Board conference,
Turner, Mike, "Management Factors Affecting Success of Farmer's Cooperatives",
National Institute on Cooperative Education, August, 1987.
University Center for Cooperatives, "International Conference of Cooperative
Board Chairmen", papers by Don Renquist, Land O' Lakes, "What are the Most
Effective Methods of Evaluating Performance and Setting Fair Compensation
Levels for the Chief Executive and Senior Executives?" and W. E. Bergen,
Touche Ross & Partners, "Co-operative Executive Compensation.", Toronto,
Vilstrup, Dick and Groves, Frank, "Cooperative Communications, No. 2, Techniques",
University of Wisconsin-Extension, 1970.
Wright, Don, "The Effective Bank Director", Bank Administration Institute,
Reston Publishing Co., Reston, VA, 1985.
POSITION DESCRIPTION - GENERAL MANAGER
A. BASIC FUNCTIONS
The General Manager is responsible for the effective management of all
the affairs of the cooperative. The General Manager plans, directs, and
coordinates the programs and activities of the Association for balanced,
comprehensive accomplishment to attain the objectives established by the
Board of Directors.
B. RESPONSIBILITY AND AUTHORITY
Within the limits of the articles of incorporation, the bylaws, and the
objectives and Policies established or authorized by the board of directors,
the General Manager is responsible for the has commensurate authority to
accomplish the duties set forth below.
He/she may delegate portions of his/her responsibilities consistent
with sound operations and authorized policies and procedures, together
with proportionate authority for their fulfillment, but he/she may not
delegate nor relinquish any portion of his/her accountability for results.
The General Manager may, in order to carry out the functions properly,
secure the services of outside agencies or consultants to examine, investigate,
or facilitate changes in operations, procedures, or methods.
Advises and assists the board of directors in consideration and determination
of whatever objectives, policies, and other basic controls required for
the most effective management of the Cooperative.
Maintains a continuing study of economic, industrial, and technological
development and trends, and provides the board with whatever forecasts
and plans are necessary to assure that all phases of cooperative operations
are adequately equipped to meet members' needs and take full advantage
of the long range potentials of the business.
Defines and recommends operating and financial objectives; develops, in
conjunction with department heads, short and long term plans and programs
with supporting budget requests and financial estimates for each department,
and the cooperative as a whole; submits proposals to the board of directors
Interprets and administers policies established by the board; issues standard
practice instructions to members and department heads and other personnel
affected, to assure uniform interpretation.
Directs and generally supervises immediate subordinates in their performance
of assigned duties and in the manner in which they pursue their objectives
and programs; renders advice, assistance, and guidance to subordinates.
Keeps the board of directors regularly informed of the progress and results
of cooperative operations for conformity with established objectives, programs,
and budgets, and of all important internal and external factors influencing
Ensures that the organization structures at all levels of the cooperative
are the most efficient for the type of operations in which the cooperative
is engaged; plans for changes in the organization structure required to
adjust to future trends of cooperative operations, and secures the approval
of the Board when major realignments are required.
Ensures that all funds, physical assets, and other property of the cooperative
are appropriately safeguarded and administered.
Keeps the members adequately informed of the affairs of the cooperative;
encourages their participation, sees that sound relationships are maintained
between staff and members, and that proper consideration is given to member
complaints and suggestions.
Maintains appropriate contacts and develops necessary relations with government
departments, industry organizations, labor unions, and other organizations
which have an influence on the attainment of cooperative objectives.