Differences Between Cooperatives and Corporations

Stephen Wellington's picture

Tom Webb of St. Mary's University (and the Masters in Management program) presented a workshop on how cooperative managers need to manage differently from other enterprises.

He began by commenting that cooperators share, in addition to the values and principles, a common view that people are basically good. Corporations are managed by people and so corporations will act as good citizens. However, unlike cooperatives, corporations must deliver a return on investment and the search for profits may cause good people to make bad decisions. However, cooperatives can also make bad decisions.

It’s not possible to have a management process or team unless they profoundly understand what the cooperative difference is, that they believe that it is worthwhile, know how to create it, and know how to measure it. Only then can they manage the cooperative difference and then market the cooperative difference that they have created.

The public is not amused by coops that have a thin relation between the principles and values. .

Tom asked for volunteers to discuss why their coop started:

Who started and why:

Lusty Lady—in the wake of a unionization drive, the women decided to start the business.

Isthmus Engineering—previous owner lied and cheated and we though that we could do better

Community Builders coop—previous group was unethical.

Did founders buy into the coop?
Design Action Collective—founded out of Inksworks to form coop.
--true then, but not necessarily when I showed up
Isthmus—founders understood, but people today don’t.

Looking Like Us
Tom pointed out (with excellent ads) how common it is for cooperatives and credit unions to look like corporations. For some reason, we have a tendency to mimic the professionalism of our capitalist competitors. At the same time, they are stealing our language and trying to look like us (join a membership at your grocery store or other retailer). If we don't create a different feel, then we can't expect our members to be loyal.

The Four Pillars of Cooperation
The four pillars of cooperation—found on the basis of the belief in the goodness and dignity of people. From that belief comes the four pillars:

Purpose is fundamentally different. It is to meet worker and community need.
Values and Principles are bought into at the beginning—founders understand why they are doing what they are doing.
It is very seldom that a coop is not created in a search for Justice—the commitment to Justice is one of the key things that separate cooperatives. Corporations provide charity, but that should not be considered the same as Justice.

Investor Coop
Values Board/Management intrinsic/inherent
Purpose Max. ROI Member and community needs
Ethical Stance Charity Justice
Bottom Line Single Multiple

Do Corps do good things Yes good people, or, shareholder values
Co Coops do bad things Yes choose to ignore values
Are business people bad ??? They are just people
Are coop people good ??? They are just people

The difference is the structure. The structure allows people to do good things

Worker Cooperative Difference

Consumer—large number of members with small stake, small # workers with large stake
This is a fundamental violation of cooperative values. Where is the self-help, openness, honesty when workers cannot sit on the board? They have a mindset that doesn’t allow them to enlarge the base.

Producer—medium number producers and workers with large stake and a Large # of consumers.

Workers—Large or small number of workers with very large stake. Large number of consumers.

The Values and principles don’t always meet our needs. To this extent the workers of Mondragon have added 3 key additional principles. The principles of Mondragon clearly reflect the unique needs of worker cooperatives that the ICA principles remain silent upon.

Labour is the principle factor transforming nature, society and human beings themselves.
Capital is an instrument subordinate to labour.
Participatory Management

Progressive development of self management and active member participation (many consumer and credit unions simply don’t get it and lose in productivity).

Social Transformation goes to the heart of cooperation. “Social and economic reconstruction of a society which is more free, just, and solidary.

Solidairty with those working for justice.

Believing the Co-operative Difference

Too often, coops spend their time looking like investor owned businesses!
The competition spends their resources looking like cooperatives!

Getting the business right and the coop right are not separate issues. They are interwined with each other. To be successful as a coop business means being successful as a coop business, not a business and a coop.

High Literacy vs. Low Literacy.

Cooperative Flow Chart:
High Literacacy (beginning)→progress and growth→People inflow→Lower literacy→ progress slows..

Have any coops failed for being too vigorous in implementing coops? Not to anyone's knowledge.

Coop Bank

In 1995, the Coop Bank made a dramatic shift to start using the values and principles with a strong ethical stance. Profits increased three-fold over 5 years.

Struggling coops that succeed are the ones that renew their connection with coop values.

Does the world need coops? Never greater need for coops.

Discussion

Issues of individuality in society and the myth of individuality. How do we change the culture? How do we maintain a high level of literacy? Empower education committees. The prairies were not settled by corporations, but by people.

Tom—people are basically good. People have been drifting, but the crisis are forcing a change in society to escape disaster. If we continue to live the way that we live, our grandchildren will not live. What is driving the resurgence of cooperatives in Louisiana? Katrina and crisis.

Creating the Co-op Difference

The board sets the direction but they need managers (or management process) who can create the co-operative difference with daily innovation. Management decisions must show cooperative leadership!

Coop Management Credo:

1. If there is not difference we are not needed.
2. Bankrupt coops do not meet member needs
3. The coop values and principles are not a sea anchor dragging behind the boat but the main mast upon which we hang sails called Co-operative business practice.

Do we know how to make the Values and Principles drive our organization.
What are the needs and problems faced by our members today?
What are the problems faced by society today
What would co-operative solutions look like?

Coop Bank Partnership Approach

Key stakeholder of “past and future co-operators”
Free Trade vs. Co-operative Trade

How Do We Measure It?

Accounting system is designed to measure how resources are used to maximize return on invested capital. The Cooperative Bank started tracking and quantifying their social responsibility. The calculated the amount of CO2 per customer and transaction. They then reduced this number.

The estimated that their adherence to their values cost them 6 million pounds but the same adherence generated 30 million pounds!

This is just a brief summary of an excellent workshop. The basic message is that coops need to manage according to the values and principles of the identity statement. If we aren't sure how to act, it is not enough to simply copy our competitors, we must establish methods to understand the identity statement, embrace it, create it, and measure it.

If our enterprises do not follow the identity statement, then they are irrelevant.

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