Managing a Cooperative with Diverse Member Needs

Phil Kenkel

Bill Fitzwater Cooperative Chair

Oklahoma State University

Agricultural cooperatives were formed because a group of individuals perceived that a cooperative firm could provide benefits that they could not obtain individually.  Those benefits typically related to economies of scale and scope, although the cooperative’s value in disciplining the market place and pooling risk was also often recongnized.   As cooperatives mature, the membership becomes more diverse.  These differences may relate to the size of farming operation, crop and livestock mix, location, length of membership and degree of technology adoption.   Because of those differences the members have different economic interests and different opinions on the cooperative’s decisions and operations.

The cooperative board of directors has the fiduciary responsibility for overseeing the financial stability of the cooperative.  They also have a responsibility to represent the members’ interest.  The first responsibility represents the needs of the group while the second involves the often diverse needs of the members.  The board and manager must reconcile and harmonize these competing responsibilities.

There are a number of potential strategies for dealing with diverse member interest.  One path is management by consensus.  In a consensus-based organization the individual preferences and views are communicated but it is understood that decisions reflect the majority of beliefs.  The consensus building process encourages the board and management to consider alternative perspectives in making decisions.  In general, this can lead to better decisions.  It also promotes a perception of fairness in the cooperative’s dealing with members.

Consensus-based decision making also has several disadvantages.  It can lead to a “business as usual” culture where the leadership team avoids new initiatives.  At times it can lead to inefficiencies.  There may appear to be a consensus on offering a particular service or maintaining a location because a minority of the members has strong opinions and the remainder is not engaged.  The major disadvantage with consensus decision making is that it reduces the cooperative’s ability to meet the needs of a changing customer base.  While there may not be a consensus that the cooperative should concentrate on precision agriculture, there may be a subset of members who can use and will pay for those services.  Ignoring the needs of those members encourages them to exit the cooperative and is not in the interest of the overall membership.

In my next newsletter, I will discuss some other strategies for dealing with diverse member needs.