Cooperative Business Management Functions

The management functions of directors

are often defined as planning, organizing,

directing, coordinating, and controlling

(PODCC). The functions of hired manage-

ment may be identified as planning, orga-

nizing, motivating, and controlling (POMC).

Director Functions

The board of directors provides direction to

the affairs of the business to ensure devel-

opment and growth in products, markets,

and positive financial results. Five functions

are generally recognized—planning, orga-

nizing, directing, coordinating, and control-

ling to fulfill this purpose.

Planning

Planning is the decisionmaking function of

management and requires sound judge-

ment. Collecting information concerning

business alternatives, synthesizing the

information, and evaluating it are important

parts of decisionmaking. Planning involves

deciding when, where, and how to take

action and projecting anticipated results.

The board is responsible for determining

and systematically arranging all the main

Working in concert, both have the same

overall objective but each has separate

and divisible functions. Conflict within the

management team arises when either

doesn’t know, or fails to recognize the divi-

sion of functions.

Relationships

The elected board is the governing body of

the cooperative. It has certain legal respon-

sibilities to the members and others like

financiers, and holders of marketing, sup-

ply, or service contracts. The hired man-

ager reports to the board and is

responsible for the cooperative’s day-to-

day operations.

Management Functions

Functions are actions or activities needed

to perform a particular role. The manage-

ment functions of elected directors and

hired management may appear similar, but

because of different levels of authority and

responsibility, the directors and manager

have different activities and roles for the

same function.

Understanding Cooperatives:

Cooperative Business

Management Functions

Cooperative Information Report 45, Section 11

Business management is the pro-

cess of getting things done by and

through others. In cooperatives, the

management team consists of two

distinct entities—

the board of directors elected by the

members and a professional busi-

ness manager hired by the board.

United States

Department of

Agriculture

Rural Development

Rural Business

and Cooperative

Service

March 1995

factors to achieve the goals and objectives

of the business. The planning function by

directors is usually considered long-term

and broad in scope. Strategic planning and

preparation of a capital budget are specific

examples.

Organizing

When the planning is completed, all of the

cooperative’s resources, both physical and

human, must be grouped according to

function. Organizing involves arranging all

of the groups so the business operates as

a productive unit. The group needing the

most consideration is human resources.

People are an important part of successful

cooperative operations.

The board’s role in human resource activi-

ties is hiring a competent manager and

designing the overall organizational struc-

ture. Board approval of a competitive wage

and salary plan plus a benefits package is

a necessary component. The manager

hires, trains, and makes work assignments

for the employees.

The nature and location of the business

plus the services owner-members want

determine how physical assets will be

grouped.

Directing

The planning and organizing functions

must be accomplished for the directing

activity to be effective. Effective directing

requires setting well-defined, clearly under-

stood, and consistently administered poli-

cies. For the manager to function

effectively, the directors must delegate

responsibility with the appropriate authority

and predetermined measures of account-

ability. Directors engage in contract nego-

tiations, approve membership applications,

and make recommendations on day-

to-day operations. Directors focus on

approving short- and medium-term plans

of the manager, reviewing reports, and

making decisions about long-term plans.

Coordinating

Directors coordinate all phases of the busi-

ness so that each supports the other. The

use of physical and financial assets and

personnel activities must

be integrated to accomplish predetermined

goals and objectives. Specific examples

include overseeing facility use, arranging

timely financing, preparing the manager’s

job description, and purchasing and selling

assets to meet members’ needs.

Controlling

Directors exercise control of the coopera-

tive by keeping themselves informed of the

progress of the business, assuring accept-

able performance in all phases of the busi-

ness. They interpret trends and results and

know when to initiate corrective action.

Directors are responsible for preventing

unauthorized actions and keeping mem-

bers informed of the cooperative’s prog-

ress. Accepting and approving

management reports, reviewing financial

statements, and reviewing physical facilities

are specific examples of director control.

Manager Functions

With certain given resources, the manager

has the responsibility for organizing and

operating the cooperative in a way that will

optimize the benefits members desire.

Resources are the manager’s capabilities,

physical facilities, employees, and the net

worth of the business. Four functions are

recognized for management to meet this

responsibility—planning, organizing, moti-

vating, and controlling.

The board is respon-

sible for determining

and systematically

arranging all the main

factors to achieve the

goals and objectives of

the business.

Board of Directors

Planning

Managers assist the directors in developing

the overall goals and objectives of the busi-

ness. They are an essential part of the

decisionmaking process. Managers set

goals and objectives for day-to-day opera-

tions, design operating procedures and

methods, and make financial projections.

Managers are primarily responsible for

making yearly plans and projections. They

must plan and implement the tasks that

accomplish the goals and objectives estab-

lished by the board. Managers also make

annual projections of balance sheets and

operating and cashflow statements.

Organizing

Managers are responsible for grouping

operational processes, assets, and person-

nel and establishing their relationships for

efficient day-to-day business operations.

Developing personnel organization charts

which show employee relationships, writing

job descriptions, and establishing accept-

able levels of performance are manager

responsibilities. Manufacturing processes,

sales programs, and service schedule rela-

tionships also must be organized to meet

the cooperative’s goals.

Motivating

Coaching and leading the cooperative’s

employees, members, and customers are

essential functions of the manager. The

manager must create positive employee

working conditions and act as a liaison and

spokesperson for the business, its owners,

and other stakeholders. Managers are

responsible for staffing, training, and mobi-

lizing the personnel under their supervision.

Responsibility for internal and external inter-

personal relationships places a heavy time

demand on managers.

Controlling

The supervisory function assures

satisfactory performance in all phases of

business. Measuring and evaluating the

results of employee performance, executing

board policies, and overseeing physical

assets are critical to accomplishing the

cooperative’s goals and objectives. The last

phase of the control function concerns

unmet goals and objectives and decisions

of how, when, and what corrective action is

needed.

Interrelationships—Manager and

Directors

The manager and directors have different

roles within the same management function.

They function as a team to reach the same

goals and objectives established for the

business. To avoid conflict they should:

u Know the differences in the roles each

plays,

u Respect each other’s different role,

u Recognize how the separate roles inter-

act,

u Acknowledge how the same function

relates to separate groups in the coopera-

tive structure, and

u Relate and accept each other’s indepen-

dent role and judgement in the same func-

tion.

Harmonizing Director and Manager

Roles

A harmonious management team starts with

well defined and documented organization-

al charts. Members, employees, financiers,

and holders of other contractual agree-

ments with the cooperative are able to rec-

ognize the point of authority or decision for

business actions. Frequent and open com-

munication between the board and the

manager helps to resolve small problems

The manager and direc-

tors have different roles

within the same manage-

ment function.

Manager

This circular is one of a continuing series that provides training information and presentations for education

resource persons who may or may not be familiar with the cooperative form of business. This series provides the

basic background material they need and in a form that can be readily adapted, with limited preparation time, to a

lecture or other presentation.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all of its programs and activities on the basis

of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental

status, religion, sexual orientation, political beliefs, genetic information, reprisal, or because all or part of an indi-

vidual's income is derived from any public assistance program. (Not all prohibited bases apply to all programs.)

Persons with disabilities who require alternative means for communication of program information (Braille, large

print, audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write to USDA, Assistant Secretary for Civil Rights, Office of the Assistant Sec-

retary for Civil Rights, 1400 Independence Avenue, S.W., Stop 9410, Washington, DC 20250-9410, or call toll-free

at (866) 632-9992 (English) or (800) 877-8339 (TDD) or (866) 377-8642 (English Federal-relay) or (800) 845-6136

(Spanish Federal-relay). USDA is an equal opportunity provider and employer.

tion sessions also permit the manager to

express views on board operations and

decisions in a neutral setting.

Cooperative management is complex. It

often involves managing the affairs of sev-

eral unlike businesses under one structure.

Adding to the complexity, the user-owner

cooperative business must satisfy the

majority of the customers. All have different

needs depending upon how they are inter-

acting with the business. This is not a small

or easy task in any management arena. n

before they become complex or a source of

irritation.

The use of an executive committee from

the board will reduce the time and com-

plexity of solving problems and speed up

the decisionmaking process. Formal and

written evaluations of a manager’s perfor-

mance on an annual or more frequent basis

provide guidelines for making corrections or

adjustments desired by the board. Written

recommendations and agreed upon chang-

es with target dates are desirable. Evalua-

In a cooperative, the

board is responsible to

its members as users

rather than to investors

whose first objective is

to maximize profits.

To see this and

other USDA coop-

erative publica-

tions online, visit:

http://www.rurdev.

usda.gov/rbs/pub/

cooprpts.htm

To order hard cop-

ies, e-mail:

coopinfo@wdc.

usda.gov

or telephone:

1-800-670-6553.