Highlights of the culture of co-ops

As you will read in my first article, co-ops share common values with lean. Beyond values, an organization must be efficient and generate income to live. The International Co-operative Summit dealt primarily with the economic issues of co-ops. In particular, many new studies have been presented.

In this second article, I summarize the results of a McKinsey study, presented by Mr. Éric Lamarre.

Successful co-ops

McKinsey uses an internal index, the Organizational Health Index (IHO), to compare the performance of organizations. This indicator based on 170 questions covers leadership, corporate culture and the control system. The study compares the IHO index of cooperatives, with capital-stock companies in the same sectors and countries.

Co-ops are better than capital-stock companies on two speficic aspects:

  • Employees are more engaged and
  • Operations are more aligned with strategies.

These two aspects are factors of success in the implementation of operational excellence. That is why capital action companies should be guided by the Co-operative governance model. This would improve engagement and alignment.

The three organizational issues faced by co-ops are:

  1. Decision making. The democratic process is sometimes long and poorly performing. Best practice is to clearly define the roles of executives and administrators. Co-ops should use new technologies to consult with members.
  2. The pursuit of opportunities close to the core business. Using the capital of the current members to develop the co-operative and serve other members presents membership issues.
  3. The development and the search for talent. As with capital stock companies, the attraction and retention of employees is a major issue. This issue is even more important for co-ops, because of the proximity between their employees and members of the Co-op.

Making democracy effective

One of the recurring questions of the summit was: is the democratic functioning of cooperatives detrimental to their operational effectiveness?

Through my knowledge of operational efficiency and the results of this study, I think that co-ops, like capital action companies, have advantages and disadvantages in their governance model.

Capital action companies need to work on employee involvement and long-term vision. In contrast, co-ops have an effort to make on their expansion and choice of activities. They must diversify in the vicinity of their core business, to perpetuate their assets.

Cooperatives derive a great advantage from their model of democratic governance. But they have to make it effective. To do this they can:

  • Train leaders,
  • Train members,
  • Use new technologies,
  • Implement different Lean principles.

The recruitment challenge is not their own. As they are perceived as obsolete, the capitalist system caricatures them. So they have to work on their brand to attract the best talent. Then the intrinsic values of co-ops help retention.

Co-ops, a model for the future

Jacques Attali made interesting parallels. Cooperatives have been created in Europe to bridge the feudal system with the capitalist system. According to Attali, social networks and new technologies are cooperative. They combine, like cooperatives, the necessities of the economy and those of democracy.
For example, a member of an Internet forum that acts against his community is banned. Co-ops can be a way to bridge the current capitalist model with the future.

Co-ops know how to motivate teams and track their goals. However, they are struggling to adapt to market changes and to find new opportunities. That’s why lean tools can help them.

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