Challenges for the Board of Directors

By Phil Kenkel, Vice Chair, Cooperatives CoP and Bill Fitzwater Cooperative Chair, Oklahoma State University,

In a recent national project, academic researchers, cooperative managers and members, USDA, agricultural foundations and other stakeholders collaborated to identify the critical issues facing agricultural cooperatives. A two-stage Delphi survey was conducted, followed by expert panel sessions in Washington, D.C. and Minneapolis, Minnesota. The material below summarizes some of the findings from the project.

A wide variety of governance issues including board member recruitment, orientation, training, effective board operation and member involvement were identified as pressing issues for cooperatives. Comments by Dr. Mike Cook, a recent inductee into the Cooperative Hall of Fame during the Critical Issues Pre-Conference to the 2012 Farmers Cooperative Conference, provide insights into these issues.

Well-Defined Purpose
A key challenge for the board is to have an extremely well-defined purpose. The board must be driven and it must be driven in the same direction. That drive or purpose must encompass the board’s fiduciary responsibilities of care, diligence and loyalty. It must also include a linkage to member owners. Above all, it must focus on perpetuating the success of the cooperative. An interesting exercise is to have every board member and the CEO write one sentence describing the purpose of the board of directors. If the statements are all similar, your board has an extremely well-defined purpose. If they are dissimilar, you still have work to do.

Board Perpetuation
Another key issue of the board is the perpetuation of the board itself. As an exercise, ask yourself, “If I could select individuals for the board, what criteria would I use to select the ideal board?” The next step is to consider what you could change in your board member recruitment, nomination, orientation and development process to achieve that ideal board composition. The perpetuation of a strong, effective board of directors is a key board responsibility, and one that is often overlooked.

Qualified Personnel
The third challenge for cooperative directors relates to knowledge and people. The traditional factors of production (or wealth generation) have been land, labor and capital. We are entering an age where knowledge is the key factor in wealth generation. Directors must find the resources and provide the incentives for management to hire the level of talent that will drive future success. Bankers (and occasionally, agricultural economists) push cooperatives to reduce personnel costs and increase efficiency. While personnel expense efficiency is critical, the cooperative’s human capital is an asset that is not reflected on the balance sheet. The board’s challenge is to simultaneously demand efficiency while incenting the manager to build the “bench strength” needed for the future.

Five Challenges for the Cooperative Community

  1. When you go home, challenge colleagues or peers to answer the following question in one sentence: “What is the well-defined purpose of our cooperative?” If there is a lot of variance in the description, you have work to do.
  2. Cooperative managers need to hire people who are better than you. This can be an intimidating concept. In a knowledge economy, cooperatives must upgrade their talent by attracting and hiring people with the skills to turn knowledge into wealth.
  3. Cooperative leaders need to consider how to create a culture of collective caring in their organization. In times of natural disaster or other crisis, cooperatives demonstrate an impressive commitment to assist. This has an impact on young people. This generation wants to care.
  4. Give some creative innovative thinking about how to generate a sense of engagement with members. For most people, money is not the most important thing in their life.
  5. How do we create an ability to develop a sense of belonging? This is a huge issue in today’s world. We need more belonging. In cooperative terms, this involves engaging individuals as owners rather than concentrating only on the customer relationship.