Are We There Yet?
Are cooperatives preparing for the future?

By William Nelson, President of The Cooperative Foundation

This isn't a problem only for the food and farm supply cooperatives. It's true of all companies competing in the broader agricultural industries throughout the industrialized world. There's plenty of evidence to say it's true of basic, consumer products manufacturing and some parts of the high-tech fields as well.

What has emerged in the industrialized world are "mature" industries. Battles for market share in mature markets usually mean narrower margins on operations and lower profits for the bottom line. So nearly all business organizations are searching for ways to expand their portfolios of products, reach new markets, diversify and discover more value-added or higher-valued markets; and do all this both at home and abroad.

Given this environment, cooperative board members do raise questions at conferences and training sessions that start to have a familiar ring. They are seeking ways to revive or renew their organizations within their cooperative traditions while making use of new technologies and information systems that make change possible.

One of the challenges facing today's cooperatives is the need for professional and specific technology management. It brings into question how traditional co-op boards deal with the management of their business.

Cooperatives have become successful in part by drawing on the experience and know-how of other kinds of business organizations. But all such organizations have succeeded and now find themselves in mature markets. Many of these organizations -- or companies -- have reached a point where their structure and continuing operations may be limiting their ability to adapt in a rapidly changing, technology-based society.

For instance, setting a goal and establishing a management-by-objectives system may be an effective way of achieving a specific goal for the company. But this carefully defined or rigid structure may fail to ensure opportunity for multiple goals or outcomes. The limitations of traditional planning systems may especially handicap a cooperative because of its unique participatory ownership.

As John Gardner described this problem in his book, Self-Renewal:

"As it matures [an organization] develops settled ways of doing things and becomes more orderly, more efficient, more systematic. But it also becomes less flexible, less innovative, less willing to look freshly at each day's experience. Its increasingly fixed routines are congealed in an elaborate body of written rules.

"The problem gets serious: In the final stage of organizational senility there is a rule or precedent for everything. Someone has said that the last act of a dying organization is to get out a new and enlarged edition of the rule book."

Members have the same problem. It isn't easy to define their responsibilities in tandem with their need for flexibility.

Any cooperative can look back through its history and find early leaders with vision, dreams and perspectives that rallied the members around what the future could be. These leaders believed they could influence what the future could be by organizing a cooperative. But members were flexible and shared the vision, the dreams and perspectives, and they also believed they could control their cooperative's future while enhancing their own well being.

The future facing our cooperatives going into the 21st Century is very different from that faced by the cooperative pioneers. Not only are conditions of the global marketplace unique to this time, but the changes we anticipate in technologies such as electronics, communications and biological engineering have far-reaching consequences.

The opportunities for cooperatives are as great as the threats to their future. As the Nobel laureate economist Douglass North notes in the new book, International Market Power of Cooperatives, which was discussed at the Regional Directors Workshop in January, the computer may be the greatest invention in history to reduce "transaction costs" -- or the costs associated with doing business and fulfilling contracts. Since this technology is readily available to cooperatives, producer-owned businesses are now in excellent position to provide transaction cost services by supplying business partners with more value-added products and by reaching a broader base of customers.

David Hughes, a food industry business professor at Wye College, the University of London, says most changes in the world food system are consumer driven. And since most consumer demands at the supermarkets are for fresh produce the year around and more convenient, nutritious foods, cooperatives must be more product oriented than they've been in the past. Being the low-cost producer -- a service of successful farm cooperatives -- isn't enough, Professor Hughes says in the book. Farmers must now provide the products the consumers want -- regardless of comparative costs.

How do co-op members shift, or become flexible in their thinking, to allow their cooperatives to become consumer oriented businesses?

Jerker Nilsson, the cooperative business economist at Uppsala University in Sweden, suggests in the same book that members must be active participants for a cooperative to function during periods of change.

"I have experienced that as long as the members are involved, nothing can really go wrong with a cooperative, despite the... challenges," he said. "In Sweden, involvement of the members varies between 30 percent up to more than half the members. If, however, you are facing a membership involvement of next to zero percent -- such as in many cooperative banks, in agricultural cooperatives in France and in consumer cooperatives in Germany, Austria and Sweden -- then you are really heading for trouble."

Because of technological advances in electronic communications, member participation will present extraordinary demands on cooperative boards and managers. And it will also open new opportunities for the flexible cooperatives.

Electronic communications already allow governments to sample citizen reactions, akin to instant referendum. Modern telecommunications are opening the world for farmer-owned businesses. The cooperative will have the same tools to invent methods for members to participate and be involved in shaping their cooperative future.

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