Factors for Success in Cooperative Operations*

By Jo B. Bitonio Presenter ARD, CDA Dagupan Extension Office

The history of cooperatives in the Philippines is replete with tragic stories for the downfall of many co-ops. It is vital that part of the training deals with the causes of co-op failures, “as an eye opener” for all sectors involved in strengthening cooperatives countryside development. Learning from past mistakes, can pave the way for stronger foundation for successful cooperativism.

Cooperative Values and Way of Life Members of rural communities have common, socio-economic needs of:  Obtaining marketing and purchasing services at lower cost;  Accessing credit at a reasonable rate of interest; and  Securing financial assistance for provident purpose.

There should be a continuing effort to cultivate appropriate cooperative values even before these needs could be answered. 

These are: At the co-op management level  

Avoiding misrepresentations in any form, e.g., weight, quality, cost and others;  

Transparent with complete disclosure at all times;  

Serving as a role model to its members, especially in honoring pledges, contracts, and appointments and in accepting responsibilities/commitments.  

Financially prudent;  Giving what is due to others and overcome destructive competition;  

Encouraging and promoting viable livelihood projects and self- help activities among its membership; and  Being forward-looking, innovative and dynamic.

Dedicated Leadership and Effective Management  

An important factor in the success of a cooperative is the presence of capable and dedicated leaders. These are the people expected to provide guidance and support to the cooperative.  Co-op leaders promote more activities membership participation. In many cases, the absence of qualified leaders turns cooperatives into political instruments of opportunists.  The associations will lack proper guidance and be susceptible to outside control and manipulation without competent leaders.

Board of Directors: Many cooperatives have failed mainly because its funds were used by their treasurers for personal interest or borrowed by the members of the board of directors and never paid. There is always the danger related to handling co-op money. Therefore, it is the task of the members to elect the people whom they can trust to lead and manage the cooperative’s business.• Cooperative leaders, especially the Board of Directors, must be chosen on the basis of good business judgment and proven ability, and not on friendship, neighborliness or favorable financial standing in the community.

The members of the Board should: 

• Assume the role models for capital build-up, savings, transparency, and honoring promises, pledges and contracts; 

• Represent the common interest and genuine welfare of the members of the co-op; 

• Consistently patronize their co-op’s services and refrain from engaging in competing businesses;

The members of the Board should:  Help disseminate information on membership rights, duties and responsibilities in order to gain strong membership support and cooperation;  Spend cooperative money as carefully as they would spend their own;  Manage financial operations with a well studied/rewarded and approved operating budget;

The members of the Board should:

• Select cooperative employees based on appropriate qualifications such as education, training, experience and character; and

• Be able to analyze and consider problems/audit reports as inputs planning, problem-solving, conflict – resolution, and policy review and modification.

Management Officers & Staff Management should focus its operation on efficient service for the members and the co-operative as a whole.

Co-op managers, in particular, should:  have an open mind, willing to adopt new ideas and be knowledgeable in his/her field of operation;  act as the leader. He/she should train understudies to take his/her place in his/her absence or when called upon to take higher and  maintain good record keeping. Well-maintained records are very important in any cooperative. This means that all minutes of meetings, records of membership, and similar documents must be properly filed and maintained.

Management Officers & Staff: This also means that all financial transactions should be properly recorded. Receipts should be issued for all contributions and other collections of members. These receipts must be properly recorded in the books of the cooperative. All expenditures incurred by the cooperative must be supported with invoices or vouchers and properly recorded. Records must be accurately recorded to prevent numerous problems to occur.

Management Officers & Staff practice sound financial management. No one person should be responsible for the release of funds while at the same time maintaining the books and be on top of co-op operations. submit to frequent audits. The financial records of the cooperative should be checked and audited regularly be competent auditors. They may either be co-op member or external auditors to uncover errors in recording and detect irregularities. The audit process should be welcomed to assure the members that their interests (funds and property) in the cooperative are properly spent and adequate protected.

Committed Enlightened and responsible membership who recognize a common need and direction

• The cooperative is of, for, and by the people. The hallmark of a successful cooperative is an enlightened and responsible membership that:• Have definite financial stake in the cooperative;

• Take active interest in voting and in other important matters presented during meetings;• Demonstrate unswerving loyalty to the cooperative;

Specialized Training for Officers and Management Staff, Officers and committee members have specific functions in the cooperative requiring certain knowledge and skills. For example, members of the audit and inventory committee, should learn how to audit the association’s book of accounts. Similarly, the Board of Directors should be able to develop co-op plans and programs and formulate sound policies appropriate for their implementation and the efficient operation of the co-op.

Specialized Training for Officers and Management Staff. The efficiency and effectiveness of cooperative leaders, officers and staff performing their duties will undoubtedly build and strengthen members’ trust, confidence, patronage and loyalty to their cooperative.

Leadership Training Officers, committee

• Values Orientation members and

• Project Management and Monitoring employees, therefore,

• Credit and Collection Management should be well-trained

• Members Saving Operation Orientation for their jobs. Such

• Co-op Financial Intermediation trainings may comprise Development any of the following,

• Co-op Marketing and Business Alliance-among others: Building

• Tellering and Cashiering

• Forgery Detection

• Conflict Management • Membership Training

Cooperative Business Concerns include:

• Sufficient volume and adequate variety of goods on sale to effectively reduce operating cost;

• Availability of quality goods for sale to members at reasonable prices;

• Sale of commodities at the proper time and place to maintain low inventory carrying costs;

• Sustainable networking relationship with viable markets; and

• Active membership in co-op federations and business alliances

Encouraging the internal generation of funds through capital build-up and member savings operation (MSO) to ensure availability of funds for financing co-op and members’ livelihood projects. Every member should have enough investment to feel a definite responsibility and loyalty to his co-op. membership stakeholders and savings deposits can serve as co-op equity for loan financing or the means of gaining the confidence of financial institutions. These funds can also spur co-op business diversification and enhance its on-lending performance:

To be successful, a cooperative must have:  Workable and practical financing program for members’ provident needs;  A program for promptly liquidating all its current borrowings;  A fair policy on lending and collection;  A vigorous members savings program;  An effective program for building up co-op capitalization;  An increasing volume of business;  An established systems and procedures; and  An honest and competent leadership and management staff.

Practicing transparency and self-discipline  Successful cooperatives practice transparency and self-discipline. This implies that these co-ops:  Subject themselves to periodic, unannounced audit;  Have sound and update bookkeeping and accounting systems;  Maintain clean, orderly, and updated files;  Are open to members’ scrutiny of all co-op records and documents at all times during office hours;  Have responsible and competent officers and staff holding accountable positions;  Welcome all recommendations, comments and observation to improve their systems and business operations; and  Are dynamic, flexible and willing to adopt new/improved systems and project;

Benefits of capital formation and savings mobilization When co-ops rely on external funding for their business operations, they lack the flexibility to undertake business ventures that would require additional capital, especially when such projects are not consistent with the lending programs of their assisting financial institutions.  In business alliance, may opportunities for market networking could crop up. The co-ops would be in a position to grab such opportunities and earn additional income if they had managed to raise funds, through capital build-up and member-savings campaigns that will give them more investible resources.

Jo Balucanag – Bitonio
Professor/Program Coordinator at Private and State Universities

*The information provided here is a summary list of items from the original document. It has many helpful points of consideration that may be useful references for business journal readers. Be aware the presentation should be used only as a starting point when comparing Co-operative structure and operation in specific situations. The Southern Oregon Business Journal will have more thorough studies in future issues. – Editor