Understanding Cooperatives: Cooperative Business Management Functions Cooperative Information Report 45, Section 11 The management functions of directors Business management is the pro- are often defined as planning, organizing, cess of getting things done by and directing, coordinating, and controlling United States (PODCC). The functions of hired manage- Department of through others. In cooperatives, the ment may be identified as planning, orga- Agriculture management team consists of two nizing, motivating, and controlling (POMC). Rural Development distinct entities— Director Functions Rural Business the board of directors elected by the The board of directors provides direction to and Cooperative the affairs of the business to ensure devel- Service members and a professional busi- opment and growth in products, markets, ness manager hired by the board. and positive financial results. Five functions March 1995 are generally recognized—planning, orga- nizing, directing, coordinating, and control- ling to fulfill this purpose. Working in concert, both have the same overall objective but each has separate Planning and divisible functions. Conflict within the Planning is the decisionmaking function of management team arises when either management and requires sound judge- doesn’t know, or fails to recognize the divi- ment. Collecting information concerning sion of functions. business alternatives, synthesizing the information, and evaluating it are important Relationships parts of decisionmaking. Planning involves The elected board is the governing body of deciding when, where, and how to take the cooperative. It has certain legal respon- action and projecting anticipated results. sibilities to the members and others like The board is responsible for determining financiers, and holders of marketing, sup- and systematically arranging all the main ply, or service contracts. The hired man- ager reports to the board and is responsible for the cooperative’s day-to- day operations. a n a g e Management Functions M r Functions are actions or activities needed to perform a particular role. The manage- ment functions of elected directors and f D i hired management may appear similar, but o r e d c t r because of different levels of authority and o a r o responsibility, the directors and manager s B have different activities and roles for the same function. 1 factors to achieve the goals and objectives to-day operations. Directors focus on The board is respon- of the business. The planning function by approving short- and medium-term plans directors is usually considered long-term of the manager, reviewing reports, and sible for determining and broad in scope. Strategic planning and making decisions about long-term plans. and systematically preparation of a capital budget are specific examples. Coordinating arranging all the main Directors coordinate all phases of the busi- factors to achieve the Organizing ness so that each supports the other. The When the planning is completed, all of the use of physical and financial assets and goals and objectives of cooperative’s resources, both physical and personnel activities must the business. human, must be grouped according to be integrated to accomplish predetermined function. Organizing involves arranging all goals and objectives. Specific examples of the groups so the business operates as include overseeing facility use, arranging a productive unit. The group needing the timely financing, preparing the manager’s most consideration is human resources. job description, and purchasing and selling People are an important part of successful assets to meet members’ needs. cooperative operations. The board’s role in human resource activi- Controlling ties is hiring a competent manager and Directors exercise control of the coopera- designing the overall organizational struc- tive by keeping themselves informed of the ture. Board approval of a competitive wage progress of the business, assuring accept- and salary plan plus a benefits package is able performance in all phases of the busi- a necessary component. The manager ness. They interpret trends and results and hires, trains, and makes work assignments know when to initiate corrective action. for the employees. Directors are responsible for preventing The nature and location of the business unauthorized actions and keeping mem- plus the services owner-members want bers informed of the cooperative’s prog- Board of Directors determine how physical assets will be ress. Accepting and approving grouped. management reports, reviewing financial statements, and reviewing physical facilities Directing are specific examples of director control. The planning and organizing functions must be accomplished for the directing Manager Functions activity to be effective. Effective directing With certain given resources, the manager requires setting well-defined, clearly under- has the responsibility for organizing and stood, and consistently administered poli- operating the cooperative in a way that will cies. For the manager to function optimize the benefits members desire. effectively, the directors must delegate Resources are the manager’s capabilities, responsibility with the appropriate authority physical facilities, employees, and the net and predetermined measures of account- worth of the business. Four functions are ability. Directors engage in contract nego- recognized for management to meet this tiations, approve membership applications, responsibility—planning, organizing, moti- and make recommendations on day- vating, and controlling. 2 Planning Controlling Managers assist the directors in developing The supervisory function assures The manager and direc- the overall goals and objectives of the busi- satisfactory performance in all phases of tors have different roles ness. They are an essential part of the business. Measuring and evaluating the decisionmaking process. Managers set results of employee performance, executing within the same manage- goals and objectives for day-to-day opera- board policies, and overseeing physical ment function. tions, design operating procedures and assets are critical to accomplishing the methods, and make financial projections. cooperative’s goals and objectives. The last Managers are primarily responsible for phase of the control function concerns making yearly plans and projections. They unmet goals and objectives and decisions must plan and implement the tasks that of how, when, and what corrective action is accomplish the goals and objectives estab- needed. lished by the board. Managers also make annual projections of balance sheets and Interrelationships—Manager and operating and cashflow statements. Directors The manager and directors have different Organizing roles within the same management function. Managers are responsible for grouping They function as a team to reach the same operational processes, assets, and person- goals and objectives established for the nel and establishing their relationships for business. To avoid conflict they should: efficient day-to-day business operations. u Know the differences in the roles each Developing personnel organization charts plays, which show employee relationships, writing u Respect each other’s different role, job descriptions, and establishing accept- u Recognize how the separate roles inter- able levels of performance are manager act, responsibilities. Manufacturing processes, u Acknowledge how the same function sales programs, and service schedule rela- relates to separate groups in the coopera- Manager tionships also must be organized to meet tive structure, and the cooperative’s goals. u Relate and accept each other’s indepen- dent role and judgement in the same func- Motivating tion. Coaching and leading the cooperative’s employees, members, and customers are Harmonizing Director and Manager essential functions of the manager. The Roles manager must create positive employee A harmonious management team starts with working conditions and act as a liaison and well defined and documented organization- spokesperson for the business, its owners, al charts. Members, employees, financiers, and other stakeholders. Managers are and holders of other contractual agree- responsible for staffing, training, and mobi- ments with the cooperative are able to rec- lizing the personnel under their supervision. ognize the point of authority or decision for Responsibility for internal and external inter- business actions. Frequent and open com- personal relationships places a heavy time munication between the board and the demand on managers. manager helps to resolve small problems 3 before they become complex or a source of tion sessions also permit the manager to irritation. express views on board operations and In a cooperative, the The use of an executive committee from decisions in a neutral setting. board is responsible to the board will reduce the time and com- Cooperative management is complex. It plexity of solving problems and speed up often involves managing the affairs of sev- its members as users the decisionmaking process. Formal and eral unlike businesses under one structure. rather than to investors written evaluations of a manager’s perfor- Adding to the complexity, the user-owner mance on an annual or more frequent basis cooperative business must satisfy the whose first objective is provide guidelines for making corrections or majority of the customers. All have different to maximize profits. adjustments desired by the board. Written needs depending upon