THE MODEL OF THE CO-OPERATIVE CHALLENGES By Michel Lafleur, 2006, Sherbrook university

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1 THE MODEL OF THE CO-OPERATIVE CHALLENGES By Michel Lafleur, 2006, Sherbrook university 1- STRATEGY AND THE CO-OPERATIVE To control the strategy is a central task of the work of the manager. "One of the most important tasks which deals with the manager consists of the determination of the strategy of its organization - or at least in the supervision of the processes by which other people and itself work out a strategy." (Mintzberg, 1989: 47) For the researcher, the study of the strategy is the discipline privileged to include, understand and explain the success of an organization (Mintzberg, 1979; To carry, 1994). The result of his researches will allow him to propose a model of the various elements allowing the analysis, the decision-making and the installation of strategy carrying out a company towards success. The schools of thought are many in strategy. Today, two principal approaches hold the attention of the researchers particularly. Initially, we adopt the prescriptive approaches with a linear methodology to apply with the assistance of specific tools and experts. In the second time, there are the emergent approaches stressing the training like methodology of definition of the strategies and on the participation of a greater number of actors. Between these two poles, there are several ways of conceiving the strategy. If the strategy developed with the changed realities of the companies, few researchers are however leaning on the formulation of strategy according to types' of organizations, and particularly according to realities' of the cooperatives. In the few researchers who are leaning on the strategy at the cooperatives, they tried mainly, starting from the existing theories, to insert the cooperative in the models of strategic planning developed for the traditional company. Often, these models were inadequate to emphasize fully the values of the co-operatives and their project of development. To our knowledge, little study on the strategy tried, starting from the co-operative differences, to propose a step and tools for analysis adapted to the reality of the co-operatives. For the manager of co-operative, the tools at its disposal never reflected completely its reality of collective company turned towards the optimization of a relation of use. 2- CO-OPERATIVES For more than 100 years, the co-operatives have succeeded in developing, everywhere on planet and in all the economic sectors, with much more successes than of failures. One counts today more than 760 million co-operators who, with their families, represent a quarter of the world population. On a world level, the co-operatives offer more employment than the unit of the multinationals (Cooperation Council of Quebec, 2003). As of the birth of the cooperatism, the precursors saw in the co-operative an entrepreneurial solution with developed 1

2 imbalances of then (Fairbain, 1999; Leclerc, 1982; Lambert, 1980). The six principles of co-operative development (seven since 1995) guide the strategy of the co-operative and must contribute to a better development for the greatest possible number; it is in these values and principles that its single identity is. The co-operative is "an autonomous association people voluntarily brought together to satisfy their aspirations and needs economic, social and cultural common by means of a company whose property is collective and where the capacity is exerted democratically" (International Co-operative Alliance, 1995). This definition represents operation, but overlooks the raison d'être of the cooperative: a development centered on the human one, the person (Marango, 2004). The humanistic project behind the co-operative values and principles would have interest, in our opinion, being better clarified in this definition. The limit, a great multinational or SME could answer this definition: it is after a a whole autonomous association people who have a financial capital. These people voluntarily gathered in order to satisfy certain aspirations and certain needs by means of a company whose property is collective (the shareholders form a collective with laid down rules). Also, according to certain definitions of the democracy, the capacity of these types of organizations is exerted democratic (traditionally, an action, a vote). Thus, the essence of the co-operative project of a humanistic development with at the base the co-operative values translated into seven principles remains with all fine practice absent in this definition of the co-operative. It should be remembered that this type of entrepreneurship at was born following criticisms made by certain thinkers on the gaps from incipient capitalism. The first co-operative to be success, the Company of the equitable pioneers of Rochdale, in England, is the result of a synthesis of certain thinkers of time (Furrier, King, Owen, Saint-Simon, Buchez, Plockboy, Proudhon, etc). From a developed point of view, the pioneers of Rochdale thus succeeded in concretely applying principles of development in an entrepreneurial dynamics. Their criticisms on the gaps of capitalism incipient and their transpositions in the form from principle rise from an innovative vision from the development. For the co-operatives, this vision developed is summarized in their fundamental values which are: the assumption of responsibility and the personal and mutual liability, the democracy, equality, equity and solidarity. In a general way, these criticisms turned around two broad topics. The first element touches the role of the capital. In their criticisms, these thinkers reproach the capitalist system being born to grant to the only holders of capital all the benefit of the company thanks only to their financial investments without the latter really does not taking part in the creation of this richness. For these thinkers, it is not in the capital (investment) that the true richness of a nation is, but in work, the production or consumption. These thinkers thus denounce the incomes without work (co-operative of work) or the fact that the intermediaries invoice an overload at the prices of the products without those not adding a real 2

3 value to the product (co-operative of consumers and producers). In short, the fact is criticized that the holders of capital only obtain all the benefit of the company for them. Consequently, starting from this critic of the model of development, one proposes that the capital is not the single engine, decision maker and recipient of the development. Thus are explained, in way developed, the co-operative principles of the democratic capacity exerted by the members, of the economic participation of the members and the autonomy and the independence of the cooperative. The second element touches the organization of this change. One reflects on the best possible form of organization to lead the changes in order to solve the problems of development. One can gather the various solutions suggested around three schools. One finds a step of defense of the rights of the workers which passes by the trade-union organization. Others preach major political changes at the company by a political organization of type socialist or communist. A third school, that of the cooperatism, proposes an entrepreneurial solution, that is to say the co-operative organization. The authors of this school describe the situation of poverty in which the working classes in spite of the richness of the industrialists lived. For them, if one wanted to modify this situation, only a revolution by this working class could reverse the situation; one could not proud with the governments or the industrialists. The people were to take themselves their own development in hand, to be interdependent and allow all, in a democratic dynamics, to take part in this development. It was thus necessary to create an entrepreneurial organization which would rest on these bases. Thus are explained, in way developed, the co-operative principles of the adhesion voluntary and opened with all, of education, the formation and information, co-operation between co-operatives and of engagement towards the medium. The finality of these two elements is a centered development one and by the human one. As the money is average towards a better development (not an end nor a mode of decision-making) is that the mode of organization put at the center the members (consuming, producing or hard-working) where those try, collectively and democratically, to improve a situation via a company which establishes a relation of use between the members, their community and the company, the result is necessarily a better development. Then It is from this single project and of the co-operative identity which results the model of the co-operative challenges was built. 3- DEFINITIONS OF THE THEORY OF THE CO-OPERATIVE CHALLENGES: The model of the co-operative challenges summarizes and connects in a dynamic way eight single characteristics of the co-operative identity. Also this model connects four concepts: co-operative challenges, strategic results, 3

4 strategic actions and the environment. The strategic application of the cooperative characteristics must carry out to an offer of services and/or products competing integrating dimensions of price, quality and co-operative value-ad. A co-operative challenge translates into a strategic terms a characteristic of the co-operative identity by describing the relation between this characteristic and the control of the management and the development of the co-operative in a competing context. A strategic result is an anticipated objective in the medium term that a whole of strategic actions must produce on two dimensions of the co-operative, that is to say the member and the co-operative. The number of strategic results determines the success or not co-operative challenge. A strategic practice is an action taken only or in synergy with other actions by the co-operative with an aim of putting strategically and concretely in practice the cooperative identity. The practices of management make it possible to take up the co-operative challenges concretely. Finally, the elements of the environment are contextual variables which have an unquestionable influence on the strategic choice of actions but which escape from immediate control from the co-operative. The formulation of the distinctive character of the co-operative in eight challenges is the fruit of a construction carried out by using the co-operative values and principles twinned with a step of gathering and analysis of data of the ground. The formulation of each co-operative challenge formally states the values and co-operative principles which associated, are followed there of a description of the co-operative challenge CO-OPERATIVE CHALLENGES Initially, we present the summary of each one of co-operative challenges. At the base of those are interrelated the co-operative values and principles. 1- Challenge of the Good Co-operative governorship (CGC). By the principle of equality, by the constitution of a General meeting with full powers, by the periodic election of administrators, the values of assumption of responsibility, solidarity and personal and mutual liabilities, the capacities and democratic duties of the co-operative are well established as well on the level of the local co-operatives as of the federations or confederations. These characteristics define in good part the structure of the good governorship of the co-operative and the structures of second and third level. Strategically, that results by a right and an obligation of participation of the members and in a series of rules of delegation of powers between the 4

5 members, the administrators, the managers and the employees. A participative step is on the one hand impossible to circumvent in a cooperative in order to ensure a single contribution of the members the destinies of the co-operative and on the other hand, essential to make sure that the decisions of the co-operative are done in the interest of the members. This participative step must also produce concrete results for the cooperative: improvement of the fidelity of its members, the contributions in strategic information, a better feeling of membership, etc. 2- Challenge of Interco-operation (CIN). The principle of co-operation between co-operatives testifies the dynamics of regrouping of the co-operatives of federation or in confederation mainly according to their sector by keeping a dynamic where the basic co-operatives remain owner of the federation and the federations of the confederation. At the strategic level, this sectored Interco-operation must allow the cooperative the development projects of regroupings with an aim of controlling, for example, a new organization in order to offer to theirs member better services, additional services, to benefit from economies of scale, etc. 3- Challenge of the Investment and Capitalization (CIC). By the co-operative principles of the limited remuneration on the funded capital, of the inalienable reserve and the need for being member-user to sit at the board of directors, the dynamics of the investment and capitalization pose a particular challenge in term of sources of financing and capitalization. Strategically, this obliges the co-operative to find the money necessary to its starting and its development mainly among its members with same their assets and/or their shares of the surpluses. That poses the challenge to adequately remunerate the investments of the members (cash or by dividends) and to establish the bond between capitalization and cost price all while maintaining an investment internal and adequate for the development of the co-operative. These the first three challenges can be summarized by three key words: proximity (decision, information, feeling of membership) for the challenge of the good co-operative governorship; financing for the challenge of the investment and of capitalization and networking for the challenge of the Interco-operation within the sector. These intern co-operative characteristics, summarized in three co-operative challenges, direct the managers and the administrators of co-operatives towards reflections, evaluations and differentiated decision-makings. 4- Challenge of the Co-operative Values (CCV). 5

6 The basic idea of the co-operative is to gather people who have a common need, that is to say to buy a service (co-operative of consumers), to sell a product (producers' cooperative) or to be an employment (workers cooperative) or a mixture of these elements within the framework, for example, of a co-operative of solidarity. By doing this, these people gathered in cooperatives want to build a project according to quite precise values, the values of the cooperatism. This starting point makes so that the co-operative must develop in order not to create co-operative inconsistencies and to apply the co-operative values to the whole of its relationships to its fascinating parts. For example, a co-operative of consumers must not only live its cooperative values with its members, but also with its employees, its suppliers and his community. Strategically, the decision-making vis-à-vis to the various actors of the cooperative must reflect this engagement towards the co-operative project and produce a differentiation marked of its product or service. 5- Challenge of the relation of use (CRU). All the dynamics of management of the co-operatives aims at optimizing the relation of use or the co-operative advantages of its members. This characteristic of the co-operative identity is also used as guide for a development centered on the needs for the members in a precise sector. Strategically, the dynamics of development of the co-operative will have to always be in bond with this relation of use and not with a financial relation. Consequently, the strategic analysis for the development of the co-operative will rest not on a maximum profitability, but on a maximization of the relation of use or, in a more co-operative vocabulary, on an optimization of the cooperative advantages. The strategic planning and objectives are, consequently, forts different from the traditional company. 6- Challenge of the Development of Community (CDC). The first objective of a co-operative is to give the best produced and services to the members. But, by carrying out this objective, the co-operatives, individually and collectively, must also take part, according to their means, with a harmonious development of their community. That formed part of the vision developed of the co-operatives. This participation in a better development of the community is innate with the co-operative. This one belongs at its community from the source of its members, and, traditionally, the co-operative annually pours a social rebate at its community. From its inalienable reserve and its capitalization coming only from its members, it cannot be the object of speculations which would leave it its community. Strategically, the development of the co-operative will have also to be centered on its community. Thus, the manager will have to take into account 6

7 dynamic local work of his co-operative and to evaluate the best ways of making a beneficial use of the potentialities of his co-operative identity. These three challenges are thus in direct bond with the type of development which a co-operative must produce. Strategically, three watchwords summarize these challenges: a development centered on the needs for the members (challenge of the relation of use), on his vision (challenge of the cooperative values) and on its community (challenge of the development of the community).the two next co-operative challenges are particular in the direction where a challenge is in the center of the model and the other includes it. 7- Challenge of Co-operative Education (CEE). Bathing in an ocean of traditional companies where the management tools and the index of success are summarized with the return on the investment, the co-operative must put forward its success according to these values and principles. Starting from the fact that any management tool reflects the philosophy from which it results, the manager and the administrator of a cooperative will have to obtain tools for analysis, of establishment and decisionmaking which traditionally reflect the co-operative identity in a direction broader than one definite co-operative education. The management tools of the co-operative must reflect the co-operative values and principles, from where the challenge of co-operative education. In this context, this challenge exceeds the traditional horizon of the education of the principles co-operative to become the prism through which the practices of management are built. By the challenge of co-operative education, the co-operative must strategically make in kind on the one hand, that the strategic leaders to put at the center of their reflections and actions, the co-operative, single identity and source of inimitable key competences. In addition, the members and its fascinating parts also must, in their daily relations with the co-operative, to perceive and develop the co-operative differences. As wants it the cooperative proverb, a co-operative without co-operative education is not a cooperative. This education is the prism through are analyzed the situations and through which the products and the services are offered to the members and to the fascinating parts. 8- Challenge of the service/product (CSP). The co-operatives are created with an aim of meeting a need by the offer of a product or a service within a framework for co-operative development. Thus, the product or service of the co-operative goes beyond the traditional equation quality/price. Even if this equation remains an element impossible to circumvent of its provision of services, the co-operative must also produce a co-operative appreciation. The whole of the challenges of the model must 7

8 thus concretely produce an appreciation in the offer of the product or the service of the co-operative. Strategically, the co-operative must thus offer a product and/or service with a competitive price, a competing quality and a series of single co-operative appreciations. This last challenge is thus the result of the work of the co-operative, all its legitimacy and its survival as undertaken is summarized by an offer of product differentiated (challenge of the product/service). The whole of the characteristics of the co-operative identity that the eight challenges enumerated summarize previously must thus generate a series of distinctive elements in the delivery of the product or the service which the co-operative offers. In this direction, the first seven challenges must have a real impact on the offer of the product and/or the service of the co-operative, the challenge of the product and service being the result of the attack or not of the first seven co-operative challenges. The originality of the model rests, in good part, on this dynamics: all the characteristics resulting from the co-operative identity are combined to find their result in the product and/or the service offered by the co-operative. The model does not propose an approach called "out of silo" with side association and other the company. The model of the co-operative challenges proposes an integration of the elements of the co-operative identity in an entrepreneurial and developed dynamics. The following figure illustrates this dynamics. Figure 2 Illustration of the theory of the co-operative challenges CIN CCV CGC CPS CDC CIC CRU Limit of the Community Limit of the Co-op 8

9 This illustration summarizes the whole of the characteristics of the cooperative from the point of view of the co-operative challenges and constitutes the first concept of the model. The next part will summarize the second concept of the model, that is to say the good practices associated with each challenge CO-OPERATIVE PRACTICES The analysis of the case studies made it possible to the researchers to better systematize the good practices which make it possible to take up the cooperative challenges. For the needs for the study, a strategic practice is a good practice of management which, at one time and according to precise circumstances', reliable proved to carry out to a desired result. The good practices of management make it possible to take up the co-operative challenges concretely. The strategic practices presented were indexed in at least two co-operatives and are presented for each co-operative challenge. Challenge of the co-operative governorship. Inside this challenge, the researchers summarized the good practices of management. Thus, the researchers noted practices of diffusion of information internal via newspaper, Internet site or briefings. With these practices of diffusion, practices of transparency where the direction showed an opening towards the whole of the members of the co-operative. Also, of the practices of representatives were noted and made so that the whole of the categories of members, in certain co-operatives or, in other co-operatives, the whole of the geographical sectors were represented by an administrator within the Board of directors. Finally, to the activities of consultation near the whole of the members, such internal survey, briefings and others testified to practices of participation widened within certain co-operatives. To the level of the strategic results, these various good practices carried out, for the co-operative, with better knowing its vision of organization and developing a better capacity to make good enlightened decisions. Thus, at the studied co-operatives, when there were practices of information near the members, transparency and representatively, the co-operative had thus developed single assets for good knowledge this why it exists and, consequently, to make good decisions. For the member, these practices increase his feeling of membership, it is consulted and it has space to follow and decide future of its co-operative. At the same time, he says himself more inclined to imply himself within his co-operative. Challenge of the Interco-operation. Within the framework of this challenge, the researchers indexed federative practices the division of personnel, expertise, buildings, etc. Also, of the practices of division of risks, of joint 9

10 purchases and promotion were indexed. Another subcategory emerged during research, which is to say that of the practices of non federative alliance including actions of partnership with other co-operative sectors and partners other than the co-operatives. The whole of these good practices contribute, in term of strategic results, to develop in a very pointed way, at the co-operative, of better capacities of management and development. For the member, the practices of the challenge of the interco-operation contribute to a better offer and of quality of the products or services offered. Challenge of the investment and capitalization. Well-known practices were indexed for this challenge, that is to say practices of rebates (which part of the surpluses are refunded), of the practices of going level of the shares of shares symbolic systems to 5$ with higher shares being able to go to a few thousands of dollars. In a general way, plus a co-operative the practice had not to refund the whole of its surplus for end of capitalization and more the various shares of financing were significant, plus the strategic results of the co-operative were positive on the level of this challenge. A particular practice was listed, that is to say a practice of information-popularization where the direction of the co-operative developed tools for better rendering comprehensible the dynamics of finance near members, famous not very expert on this question. In bond with the latter, of the practices of determination of the financial health of the co-operative were noted where, from the beginning, this one had determined its own financial ratios to reach. Finally, from the practices of investments vis-à-vis to the annual rebate and the various shares of the members came to supplement the actions of capitalization of the co-operative. When the co-operative develops these good practices of the challenge of the investment and capitalization, it obtains strategic results concerning its autonomy of management, that is to say the capacity to make its decisions according to its members, and improves its capacities to ensure its development; it thus gives itself the means of its development. We observe at the member that its feeling of owner develops and that it feels more responsible for his co-operative. Challenge of the co-operative values. The practices indexed for this challenge go from practices of setting in market which reflect values cooperative (in its policies of purchases for example where one joins suppliers having similar values), to the establishment of a code of ethics for the whole of the fascinating parts of the co-operative, to practices of diffusion of the values near the fascinating parts and population in general. Also, certain cooperatives had practices of participation which exceed the members of the co-operative (for examples, employees at the co-operatives of consumption and the co-operatives of production while respecting the capacities of the 10

11 members) and of the practices of formation aiming at diffusing the cooperative values. On the level of the strategic results, these practices make so that if all feel implied and share the values of the co-operative, this one profits from a contribution improved on behalf of these various fascinating parts. For the member, knowledge that his co-operatives has good practices which are conform to its values (investment in the community, melt for the environment, good treatment of the personnel, etc.) increase its level of satisfaction to be member and to make deal with its co-operative. Challenge of the development of the community. This challenge gave place to relatively thorough and quite widespread practices within the cooperatives observed. Thus, of the practices of donations at the community were observed, as well as practices of partnerships with local organizations being able to receive logistical support or spaces of intervention. Also, of the practices of development of policies of implication and support were developed within co-operatives in order to target the possible actions of the co-operative well. Finally, of the practices of establishment of funds dedicated to the development at the community were observed (funds of a company, funds for the environment, etc). These practices have like strategic results for the co-operative that, in addition to its project of businesses towards its members, it carries out his raison d'être in term of vehicle of development. The co-operative is thus significant on the level of the businesses for its members and on the level of the development of its community. For the member, in addition to his relation direct of use, the service of the co-operative improves its quality of life in general (maintenance with residence, services increased in its vicinity, parks and improved parks, etc). Challenge of the relation of use. Inside this challenge, the researchers identified four practical. Initially, of the practices of staff training were indexed as of the practices of differentiation of the offer near the various segments of members. Certain co-operatives had developed practices of establishment of the co-operative appreciation (in term of price, quality, implication in the medium, democracy, etc.) and finally, of the practices of establishment of a ceiling of the profit margin were observed. The strategic results of these practices make so that the co-operative improves its capacity of reading to short, average and long term of its environment and the needs for these members. Thus, the administrators like the direction, from practices which place in the center of the development of the co-operative the bond of use, have the reflexes and information for good lira its environment. The member, of dimensioned sound, sees his co-operative able to meet his changing needs. 11

12 Challenge of co-operative education. The practice of formation is that which is most often observed near the studied co-operatives, this practice aims mainly the members, the administrators but also the employees (in the case of the co-operative of consumption and production), and the public in general. Practices of publicity and posting on the co-operative difference were also observed, as well as practices of information and practices of public relations specifically centered on the co-operative identity. These good practices carried out the co-operative to results strategic where it is different and this differentiation is based on its co-operative identity. For the member, there is recognition of this difference. The next figure represents the synthesis of our case studies. Thus, for each challenges, we find the good practices of management like their impact on the strategic results for the co-operative and the member. Figure 3 Illustration of the results of the case studies GP: Federation, share of risks, alliances, promotion Result: C: Add improved M: Satisfaction GP: marketing, code of ethic, values, participation, hours of work training Result: C: Differentiation M: Recognition GP: Training, posting, public relation, information, posting Result: C: Good Capacity M: Offer & quality of services CIN CCV GP: Donations, Politics, fund dedicated, Partnership GP: Information, transparency, representatives, large participation Result: C: Good Vision & decision M: membership & implication CGC CIC CPS CRU CDC Result C: Why existence M: Quality of life Result: C: ability to read SMLTerme M: answers of changes of needs C: Co-op M: Member Result C: Autonomy & development M: Owner & responsible GP: Return, investment, social share, determinate finance heath GP: training, distinct offer, establish value-add, max membership 12

13 4- The conclusion Thus, the whole of the indexed practices could be classified in the various cooperative challenges. In this direction, it does not matter the type of cooperative or the branch of industry, the studied cases came to confirm the relevance of the various challenges as being a summary of the co-operative identity. Several actors of the co-operatives affirmed us that the model helped them on the one hand to establish the link between their daily decisions and the cooperative identity and, on the other hand, to bind good practices and strategic results. In this direction, the theory is not only one tool for analysis, but also a tool of decision-making. These results thus enable us to conclude that the theory of the co-operative challenges is sufficiently robust to explain the sources of strategies gaining of the co-operatives. The researchers want however pursue their research in order to look further into the bonds of cause for purpose between the good practices and the strategic results. Also, the implementation of the strategies of the co-operatives and the evaluation of those will have to be excavated. 13