Phil Kenkel
Bill Fitzwater Cooperative Chair
Your annual meeting is an important opportunity to give you members a brief synapses on how the cooperative is doing (and why) and what the cooperative is investing in (and why). Annual meeting attendance should be judged by quality and not quantity. The challenge is to get active members to attend, vote and provide input. Members need a reason to attend.
One approach is to structure the meeting to provide the answer to one …
Phil Kenkel
Bill Fitzwater Cooperative Chair
Most cooperative managers are open to suggestions from employees at any time. For that reason they have not developed any formal efforts to harvest employee suggestions. Last week I discussed the idea of periodically asking for written or oral suggestions on a specific topic. That’s a great way to get ideas on specific opportunities or problem areas. Another vehicle to both improve the cooperative and enhance employee morale is to hold a brainstorming session.…
Phil Kenkel
Bill Fitzwater Cooperative Chair
Last week I started my list of the key areas that a good board needs to get right. A good board needs the right people working through the right structure of meetings and committees with the right information. Next, on my bill of “rights”, a good board has to have the right processes. While board structure relates to the number of members, meetings and committees, process refers to what happens during the meetings. A …
Phil Kenkel
Bill Fitzwater Cooperative Chair
Tapping into employee ideas allows your cooperative to deliver more value to your members while boosting employee morale and motivation. Each day your employees encounter challenges at work as they interact with your customer members. Each challenge can spark an idea for the cooperative to become more efficient or provide more value. The manager’s challenge is to harvest those ideas to improve the cooperative’s performance.
When an employee is able to provide suggestions on …
Phil Kenkel
Bill Fitzwater Cooperative Chair
In this series of articles I have been discussing reinvestment in equipment and infrastructure. We have seen that the growth or decline of the cooperative is a function of the reinvestment ratio and the cooperative’s return on equity. At first blush you might expect growth to be function of the return on assets. If I invest in my grain assets at a rate greater than they are wearing out (net investment) I would expect …
Phil Kenkel
Bill Fitzwater Cooperative Chair
The wording of the Section 199A provision of the Tax Reform and Jobs Act of 2017 has created great consternation. One aspect of the section provided members with a 20% deduction on “qualified cooperative dividends”. A “qualified cooperative dividend” was defined as “any patronage dividend (as defined in section 1388(a), any per-unit retain allocation (as defined in section 1388(f)) and any qualified written notice of allocation (as defined in section 1388(c),….” Perhaps this is …
Phil Kenkel
Bill Fitzwater Cooperative Chair
When we discuss the circle of responsibility in a cooperative we typically describe four groups consisting of the members, board, CEO and employees. That raises the interesting question of whether any of those groups could overlap. More specifically, should employees who are bona fide agricultural producers be allowed to apply for membership?
The distinction between employees and members varies across cooperative sectors. Not surprisingly, in worker owned cooperatives almost every employee is a member. …
Phil Kenkel
Bill Fitzwater Cooperative Chair
In my last newsletter I described how the growth of a firm is determined by its earnings retention rate (net capital investment as a percent of net income) multiplied by its return on equity. Net capital investment is capital investment less depreciation. The intuition is easy to understand. In order for your cooperative to grow you have to be investing in assets at a rate greater to the rate at which they are wearing …
Phil Kenkel
Bill Fitzwater Cooperative Chair
A sea captain who ignores drift can miss their intended destination by hundreds of miles. The cooperative board faces a similar challenge in accounting for patron drift. Patron drift is the constant evolution of the needs and attitudes of a cooperative’s membership. In most cooperative part of that drift relates to the fact that the membership has become more diverse. It is impossible for a cooperative to evolve in every needed direction at once. …
Phil Kenkel
Bill Fitzwater Cooperative Chair
I came across some interesting research, still in progress, which investigated the impact of specific governance practices with cooperatives return on assets and return on equity. Interestingly enough, size, at least as measured by total sales did not appear to affect profitability. Of course sales is not always a good measure of the relative sizes of cooperatives across different sectors such as grain, farm supply and cotton ginning. The frequency of strategic planning was …
