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 associated with increased profitability. That result is reassuring to those of us who encourage boards to energize their strategic planning process. The number of annual board meetings did not appear to impact profitability. Before you cancel your next board meeting, I should point out that there is not much variation in the frequency of cooperative board meetings. That would make it difficult to discern any relationship.
I would like to report that participation in educational programs clearly increased profitability. The results indicated a positive effect but it was not statistically significant. Obviously they needed another variable measuring whether I was on the program! The characteristics most clearly related to profitability were the manager’s assessment of board/CEO relationship and the manager’s self reported level of loyalty to the cooperative. The alignment between the board and CEO and their alignment with the cooperative’s mission are factors which are consistently shown to improve the cooperative’s success. Unfortunately those measures are not simple inputs but are rather the result of the entire governance process.
What’s the bottom line? If you want to improve member return concentrate on building teamwork between the CEO and board, commit to strategic planning and stay involved in educational opportunities. That may be more important than increasing size through growth or merger!