Author: John Park

The annual evaluation of the general manager is a clear duty of a cooperative board of directors. It’s a very important task. An evaluation of the general manager is an opportunity to revisit the direction and performance of the cooperative. When done correctly, the evaluation process will strengthen ties between board and manager and align management with board objectives. Here are three recommendations for improving the manager evaluations at your cooperative.

1. Evaluate What Matters Most

One challenge of manager evaluation is that potentially, there is a lot to evaluate. Further, some of the manager’s duties might be hard to evaluate or observe. If you choose criteria based on the functions of management, you might develop a list like this:

Planning

• Actively and accurately assesses competitive forces
• Makes timely adjustments to the changing business environment
• Helps to craft a successful strategic approach
• Develops and implements effective timelines and goals
• Budgets for current and future operating needs
• Ensures cooperative resources are available and ready for customer use

Organizing

• Effectively hires and trains high-quality employees
• Assigns resources to their best use
• Delegates managerial duties effectively
• Plans and accommodates organizational growth

Leading

• Motivates employees toward excellence
• Cultivates board relations
• Communicates with members
• Promotes the company vision
• Mentors and grooms future managers

Controlling

• Reports financial results in a clear and timely manner
• Monitors cooperative performance
• Appropriately adjusts budgets throughout the year
• Makes staffing changes when needed
• Conducts employee evaluations and gathers employee feedback

Further, you can consider the manners in which the manager conducts their self. The manager’s personal skills, attributes, and competencies might also be important. Additional criteria might include the following:

Interpersonal

• Communication Skills
• Listening
• Empathy
• Emotional Intelligence
• Working with Others
• LeadershipMentoring
• Friendliness
• Technical
• Industrial Knowledge 
• Marketing
• Equipment Operations
• Software Knowledge

Conceptual

• Abstract Thinking
• Problem Solving
• Adaptability
• Analysis
• Diagnosing Problems
• Forecasting and Predictions
• Decision-making

One solution to organizing all these potential criteria is to consider the stewardships of the manager. Every cooperative manager has responsibilities toward the operations of the cooperative, the board, and the members. To help further, consider if your evaluation criteria are focused on the mission of the cooperative. In doing this, better questions begin to emerge:

Cooperative

1. Recruits, trains, and retains quality employees. 
2. Maintains and protects the functionality of cooperative assets.
3. Demonstrates result-driven use of cooperative funds.
4. Focuses on cooperative mission.

Board

1. Provides frequent and thorough reports of cooperative financial condition.
2. Communicates market opportunities and risks in a timely manner.
3. Interprets market conditions affecting financial performance.
4. Informs board of potential legal threats and conflicts of interest.

Members

1. Actively recruits new membership.
2. Is knowledgeable of individual members and seeks their input.
3. Promotes the mission of the cooperative to members.
4. Is focused on customer service.

2. Include Professional Development

Don’t forget that the manager is also a valuable asset to the cooperative. Your evaluation might include goals for self-improvement of leadership skills or industry knowledge.  The manager might self identify some of these goals as well as other relevant criteria for the cooperative, board, and members. Questions might include:

Manager

1. Mentors employees for future leadership.
2. Exemplifies integrity for the cooperative.
3. Listens to member-owner concerns.
4. Analyzes cooperative performance and suggests needed corrections.

3. Give Evaluation the Time it Deserves

Successful manager evaluation is not an annual event – it is a year-long process. When your board approach to manager evaluation is to invite the manager in to award a bonus, or take them to lunch, or any other solitary event, you are failing to protect the cooperative. Proper evaluation starts immediately following the prior evaluation by establishing the evaluation criteria for the coming year. This is to be agreed upon by board and manager. Monthly board meetings should take time to revisit and assess the evaluation, noting evidence of performance. Executive sessions are useful times to briefly discuss management performance and discuss any needed adjustments to evaluation criteria, or management actions. At the end of the year, the board chair can ask for an evaluation from each board member and the manager.  Doing this will help to elevate the annual evaluation to a constructive process for both cooperative and manager. 

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Park, John. “Evaluating the Cooperative Manager.” Southern Ag Today 5(5.5). January 31, 2025. Permalink

Cooperatives are formed based on some collective economic need, for example, to combat unfair market power, to gain cost efficiency, or to access supply chain services that might not otherwise be available. Despite their ability to overcome these challenges, a traditionally structured cooperative might have difficulty growing and sustaining a profitable business in certain situations.

Cooperatives that are formed to further process commodities into branded food products have added challenges. For example, a cooperative of wheat farmers that would manufacture and market pasta may face sizeable capital requirements and a require a consistent flow of production. A traditional cooperative model with open-ended commitments from its members may not be geared to these needs. Food processing facilities are designed for a specific capacity and may not operate profitably if forced to purchase unneeded inputs in a surplus year or to operate below break-even in a short crop year. Furthermore, lags and disturbances in the distribution of value-added, branded products may alienate wholesalers, retailers, and consumers, resulting in lost sales and reduced access to retail shelf space.

Does this mean that agricultural producers can’t cooperate in these value-added markets? No, there is an alternative. A “new generation cooperative” differs from a traditional cooperative in a few important ways: 

1. Membership is closed
2. Participation is contracted
3. Member equity is tied to investment, not use
4. Ownership is transferrable and can appreciate/depreciate in value

Closed Membership

Membership in the new generation cooperative is determined by purchasing a limited number of shares. Each share allows its holder to deliver a specified amount of their crop to the facility. The number of shares available is determined by the annual production needs of the facility. The sale of all shares covers the equity investment needed for the cooperative. 

Contracted Participation

The purchase of a share in a new generation cooperative provides the right to deliver a specified amount of a commodity, but also the obligation to deliver the commodity. This ensures the cooperative that it will receive the required amount of input. Members who did not grow enough of the commodity to fill their obligation can make up the difference by purchasing the commodity on the open market. 

Member Equity

Because the cooperative requires the purchase of shares to do business with the cooperative, equity is received up front, and not tied to participation from year to year. This gives the cooperative an added degree of security and resilience.

Value of Ownership

In a traditional cooperative, profits are allocated to members based on their use of the cooperative. A portion of that allocation is paid to the member in cash, and the rest is held by the cooperative in the member’s name. These “book credits” represent the member’s equity ownership of the cooperative and will be redeemed at some unspecified time in the future at face value. The equity investment in a new generation cooperative lies in the up-front purchase of shares. These shares are transferrable at market value.

The new generation cooperative provides an alternate business form that might help groups of producers seeking to enter value-adding industries. Interested groups can contact their lawyer, accountant, or cooperative Extension specialist for more information.

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Park , John. “What is a New Generation Cooperative?” Southern Ag Today 4(9.5). March 1, 2024. Permalink

Being elected to the board of directors for your local cooperative can be an intimidating experience. An agricultural cooperative may have some fundamental differences from a farm operation that makes it difficult for new board members to assess and direct. Part of these differences are due to business activities in adjacent parts of the supply chain. Additionally, cooperatives have unique financial and legal issues that use unfamiliar terminology, adding to the confusion. 

Not surprisingly, education is a hallmark principle of cooperation. Many states offer educational programs for cooperative directors through their state agricultural cooperative council. Other resources for education include the farm credit system members and, of course, your state Extension service. Many of these offer traditional programs over 1-3 days, with speakers and workshops covering a variety of topics. Programs such as these continue to be widely available and appreciated. 

However, directors are increasingly requesting alternative educational opportunities with online delivery. On-demand education is often a better fit for modern directors seeking a better balance of time devoted to home, business, and life in general. The pandemic of 2020 taught many boards that a lot of their activities can be effectively conducted online if needed. In response to this, a group of Extension specialists from across the nation established the Cooperative Director Foundations Program. This program provides 15 hours of training across 23 learning modules, targeted to directors of agricultural cooperatives. The course is available from Thinkific, on an online learning platform. 

Directors needing cooperative specific training are encouraged to speak to their state Extension specialist for cooperatives and to check out the Foundations course on the Thinkific website at http://cacdd.thinkific.com.

Further Reading

Boland, Michael A., Kopka, Christopher J., Jacobs, Keri, Berner, Courtney, Briggeman, Brian, Elliott, Matthew, Friend, Diane, Kenkel, Phil, McKee, Greg, Olson, Frayne, Park, John L., Secor, William, Schweiss, Kristi, Scott, Hannah and Worley, Tom, (2022), Extension Programming During a Pandemic: The Cooperative Director Foundations Program, Applied Economics Teaching Resources (AETR), 4, issue 2, number 321906.

https://www.aetrjournal.org/UserFiles/file/AETR_2022_001RR%20V4I2.pdf

It is widely recognized that agricultural cooperatives are founded on seven distinct principles.

1. Voluntary and open membership
2. Democratic member control
3. Members’ economic participation
4. Autonomy and independence
5. Education, training, and information
6. Cooperation among cooperatives
7. Concern for community

Although some cooperatives adjust the first two principles, in general, adherence to these principles allow agricultural producers to collectively own assets of production that they might not otherwise be able to access. Simply put, the cooperative business structure works, and it will always be needed by agricultural producers so long as they participate in markets with very large buyers and sellers or lack the ability to effectively transfer cost increases and risk downstream. 

However, these principles add some complexity to successful management. Occasionally managers and directors feel their cooperative is not meeting their expectations. Their frustrations often originate with the challenges presented by cooperative principles and a misunderstanding of how those principles apply to successful cooperative leadership. Here are a few examples of complexities that might describe your cooperative.

We struggle with member loyalty.

Cooperatives are owned by their customers, so one would expect that cooperative members would naturally be loyal to the business they own. However, cooperative managers often complain that their members are only loyal to price. Cooperatives rely on their members economic participation for profitability, but most feature open and voluntary membership. Just like any other firm, cooperatives must offer their customers a reason to do business, but it must be more than just price. If cooperative members are choosing your competitors, they may need to be educated about the value of the cooperative’s services, the value of shared profits, or the value of the cooperative’s influence on market power.    

We struggle with recruiting directors with the skills we need.

Cooperative directors are elected from among the membership. Members, in turn, are users or customers of the business. The implication of democratic member control is that directors are selected from among a group of relatively similar people with similar skills and backgrounds from within a defined geographic region. Compared to other forms of corporations, a cooperative can’t always recruit directors from other industries or with specific professional backgrounds. On the other hand, a cooperative board has incredible customer insight. 

We struggle with directors who want to control managerial decisions.

Another implication of democratic member control is that cooperative directors are not only customers, but they themselves are managers of their own business ventures. Most likely, the directors of your cooperative are also very successful managers. However, the director role is very different in purpose and function from that of management. At times, cooperative directors might fall back on what they know best (operational management) if they aren’t familiar with the role of the director (setting policy and strategy). In addition, cooperative directors may need education about the industry or business model of their cooperative. For example, a director may be very familiar with cotton production, but not understand retail pricing and inventory control at their cooperative farm store. Or a director may be familiar with grain production, but not understand the economics of milling and bagging feed. 

Education is a key method for helping a struggling cooperative. There are many professionals ready to assist a cooperative board with specific knowledge and education to help them overcome these struggles. Look for help from your local bank, accountant, lawyer, and cooperative extension service.

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When speaking to a newly elected director of a cooperative about the challenges they face, I often hear about the typical stresses of responsibility, understanding the cooperative’s financial statements, and, occasionally, comments about board meetings. Sometimes directors view board meetings as an unpleasant task that lasts longer than necessary, lacks focus, full of information without discussion, and generally, does not seem to accomplish anything meaningful. “Why,” they ask, “did I need to interrupt my busy schedule for something that could just as easily been handled with an email?” If this sounds like your experience, I suggest that you are missing out on perhaps the greatest tool your cooperative has for achieving competitive success. Here are four tips to get your cooperative’s board meetings back on track.

1. Know your duty and stick to it.
2. Build connections with other directors.
3. Take the agenda seriously.
4. Speak with one voice.

Know your duty and stick to it.

The responsibilities of a director are often summarized with the phrase, “fiduciary duties”. These duties refer to the trust cooperative members place in their directors to act in good faith on their behalf in an ethical, legal, and prudent manner to the benefit of the cooperative. Your duties as a director are to provide strategic direction, financial oversight, and to set organizational policy. The board is responsible for the hiring and compensation of only one employee, namely the general manager. Any board discussions that address specific managerial decisions, like hiring, raises, inventory, or pricing are in danger of taking the meeting off topic, distracting the board from their true responsibility, and needlessly spending time on decisions that should be left to management. 

Build connections among directors.

A good board meeting thrives on properly focused discussion. However, it is common for some directors to say nothing at all during meetings. This might be due to their personality, a lack of confidence, a lack of familiarity in the topic, or even the participation of another outspoken and highly opinionated director. In any case, silence is not in the best interest of the board. One key to promoting discussion is to create connections among the directors. The psychological or emotional risk from speaking in a group setting is lessened as personal relationships and trust are strengthened. Connected directors not only ask more questions and make more comments, but they are also better listeners. Perhaps the best suggestion for building connections among your board members is to participate in a board retreat or strategic planning session. 

Take your agenda seriously.

One thing that is a frustration to new directors is that meetings don’t start or end on time. To help directors be fully engaged during meetings, you must respect their time. If you find that friendly conversation (which builds connections!) is delaying the start of your meeting, try putting social time on the agenda prior to the start of the meeting. Then, start on time. Some other things to consider – are directors invited to add to the agenda? Do directors see the agenda in the days prior to the meeting? Are times listed on your agenda? If your meeting is going long, do you suggest tabling discussions for the next time, or with group consensus, extend the meeting? The agenda is the best tool for keeping the board on schedule and focused. A proper agenda is set by the board with the help of management. 

Speak with one voice.

Some boards that I work with proudly claim they have complete unity on all decisions. These same board members will also freely admit that they have plenty of disagreements during board meetings. When handled with respect and conscious conduct, disagreements and debates are a healthy part of the board decision process. Not all items require a unanimous vote, but they do require unity once a decision has been properly made. When board members leave the meeting and need to converse with members or the public, references should be about what “the board” decided. Confidentiality is required for board unity. Directors who share board conversations outside the board room or openly criticize board decisions undermine the trust of their fellow board members and destroy open conversation during board meetings. 

What has been described here is a board culture that is conducive to conversation, respect, inclusion, trust, and overall better decision making. Meetings in such a culture will be more productive and leave directors feeling energized, not deflated. Your board chair plays a critical role in leading the board in these efforts. 

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Park, John. “4 Tips for Better Board Meetings.” Southern Ag Today 3(16.5). April 21, 2023. Permalink

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