· Caribbean Cooperative Management Training Programme STEP BY STEP GUIDE TO PLANNING AND STARTING A COOPERATIVE For the English-speaking Caribbean In preparing this training module,

www.ilo.org/caribbean

Caribbean Cooperative Management Training Programme

STEP BY STEP GUIDETO PLANNING AND

STARTING A COOPERATIVEFor the English-speaking Caribbean

In preparing this training module, several ILO training packages were used, including My.COOP (Managing your Agricultural Cooperatives), SYB (Start Your Business) and SIYB (Start and Improve Your Business).

Caribbean Cooperative Management Training Programmes

Copyright © International Labour Organization 2017First published 2018

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Caribbean Cooperative Management Training Programmes: Step-by-Step Guide to Planning and Starting a Cooperation/ International Labour Organization, Office for the Caribbean - Port of Spain: ILO, 2017

English edition ISBN: 978-92-2-131559-9 (print) 978-92-2-131560-5 (web pdf)

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Design: Simone Rudder (DPI)

STEP BY STEP GUIDE TO PLANNING AND STARTING A COOPERATIVE

i

TABLE OF CONTENTS i

1.0 INTRODUCTION 1Why form a cooperative 2

2.0 A - Z GUIDE TO DESIGN AND BUILD A SUCCESSFUL 3 COOPERATIVE ENTERPRISE

A: Understanding the principles, benefits and challenges 4 associated with cooperatives

B: Ensure that the group of members have a “common bond” 4

C: Minimum number and steering committee 5

D: Define the objectives of the cooperative 5

E: Define the mission and vision of the cooperative 5

F: Determine how the cooperative will achieve its objective 6

G: Determine the name of the cooperative 6

H: Location 7

I: Identify the markets 7

J: Establish delivery channels 7

K: Ensure that the cooperative business plan is approved 8 by members

L: Formulate by-laws 8

M: Decide on the governance structure 8

N: Determine functional structures of the cooperative 9

O: Prepare annual budget 9

P: Determine how the cooperative will be financed 10

Q: Fixed asset requirement 10

R: Registration of the cooperative 10

S: Training and development 11

T: Development of systems, controls and policies 11

U: Measuring performance 11

V: Live the cooperative principles 12

W: Membership drive 12

X: Membership meetings 12

Y: Team spirit 13

Z: Determine the committees 14

Monitoring

3.0 CONCLUSION 15

TABLE OFCONTENTS



1INTRODUCTION


Throughout the world – including many Caribbean countries – there are cooperatives of different types: agricultural, retail distribution, manufacturing, service and financial cooperatives, to name but a few.

Assuming that a decision has been taken to form a cooperative and that a study has been carried out which established that the proposed enterprise is feasible; and assuming that a business plan has been prepared for the operation of such an enterprize; the following steps need to be taken to ensure that the organization of the cooperative is on the right track. This Manual is designed to help promoters and organizers eliminate mistakes and minimize risks that may occur during the formation stages of the cooperative and later on when it is fully operational.

Why form a cooperative?It is extremely important that from the very start members and other interested parties are made aware of what a cooperative is.

Having determined that the cooperative is the best vehicle to meet their basic needs, members must be made aware - through ongoing discussions - of how the cooperative will be organized, how it will function, how it will help solve their problems, the role and responsibility of members, as well as their rights and privileges. They must also be made aware of the role and responsibilities of the Board and other elected officers, and the duties of the Management team.

Equally important, members need to be aware of the policies and procedures that will guide the cooperative’s operations.

The A to Z Guides, once carefully followed, will help you to design and build a successful cooperative enterprise.

INTRODUCTION1

A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

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2A - Z GUIDETO DESIGN

AND BUILD ASUCCESSFULCOOPERATIVEENTERPRISE


AUnderstanding the principles, benefits and challenges associated with cooperatives

BEnsure that the group of members have a “common bond”

i) Determine the advantages or benefits that would accrue to the members of the community by forming a cooperative. Although these benefits are initially determined by the organizers, potential members should be made aware of such benefits. It is only when potential members and other interested parties are sufficiently aware of how they will benefit by becoming members of a cooperative that they will be attracted to join.

ii) Introduce the members and potential members to the International Operating Principles as elucidated by the International Cooperative Alliance [See Module 1]. Encourage open discussion, so that the participants fully understand each concept and, as the sum total, The Cooperative Difference.

iii) With assistance from an experienced co-operator, highlight some of the downsides of typical cooperatives so that members can be prepared to mitigate same, e.g. slow decision taking, weak capital formation, high dependence on government/donors, mediocre staffing, low quality products/service, inadequate member education, insufficient training of leaders and employees, poor record keeping and weak financial Management.

i) It is important at this stage that members share common interest on how the cooperative can help solve their common problems or meet their common needs. This shared interest or shared needs among people in similar circumstances is what binds

A - Z GUIDE TO DESIGN AND BUILDA SUCCESSFUL COOPERATIVE ENTERPRISE

2

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CMinimum number and steering committee

DDefine the objectives of the cooperative

EDefine the mission and vision of the cooperative

In order to form a cooperative, there must be a minimum number of persons, as set in the Act. Their names must accompany the application for registration. A steering committee should be elected from among these persons (Five, seven or nine leaders) to address and drive the initial activities of operating the cooperative.

It is necessary from the very start to clearly define what the cooperative sets out to achieve in meeting the needs and expectations of its members. These objectives should be stated as its modest priorities for the long term and should not be overly ambitious.

i) Mission: In a cooperative, the mission arises from a collective, values-driven and inspired vision-of-the-future shared by members. The mission is action oriented and lives in the context of set priorities. It provides a sense of direction and summarizes the numerous visionary elements cherished by the general membership.1 Put in other words, the cooperative mandates itself to achieve its ultimate goal through its members.

ii) Vision: In the cooperative context, the vision is the situation where the members would like their cooperative to be, after a given period of time (i.e. a mental view of their objectives being achieved). Martin Luther King’s “I have a Dream” envisages as the horizon, an America with equal opportunities and without segregation.

iii) In the early stages of formation, the cooperative must clearly define both its Mission and Vision. This should involve not just the organizers but all founding members and other interested parties. They should determine what the cooperative would be within 2 to 3 years. In so doing, they should be realistic, taking into account the external and internal circumstances under which their cooperative will be operating. A SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis would be helpful.

1 Innovative Cooperative Training, ILO COOP Africa, ILO 2009, p.21

them together in a cooperative. It is a common bond. A cooperative cannot function successfully without a common bond among its members.

ii) Promoters and organizers should not lead members and observers to confuse the common bond of social and economic interests with the sphere of operations (Geographic, occupational or associational) that defines the outer limits within which members may be attracted to the cooperative.

iii) The bond and the boundary should be clearly differentiated.

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The name of the cooperative is very important. The name should be symbolic to the type of cooperative, the services to be offered and the market to be served. The name of the cooperative will convey to the creditor, the potential member, the journalist or the policy maker the corporate identity of the enterprise. Therefore, it must be unique to the type and tenor of the cooperative and must not be used by any other cooperative enterprise. In some countries, during the registration process of the cooperative, a name search is conducted to ensure that there are no other cooperatives with the same or similar name. In most Caribbean countries, the Cooperative Societies Act stipulates that the name of the enterprise must include the words “cooperative” and “limited”.

Having defined the Objectives and the Mission and Vision Statements of the cooperative, the next step will be a determination of how the objectives will be achieved. In other words, this exercise will concern itself with finding out in practical terms how to resolve the members’ common problems and how to meet their common needs.

These ways and means should be expressed in achievable, quantifiable targets over time, leading gradually to the expected results.

FDetermine how the cooperative will achieve its objectives

GDetermine the name of the cooperative

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It is important that the organizers determine the market segment to be served by the cooperative. Whereas some cooperatives will be formed to satisfy the specific needs of their members (e.g. a credit union), it may be vital for others to extend the delivery of their products and services to non-members: e.g. a farmers’, fishers’ or manufacturers’ cooperative.

In order for any cooperative to be profitable it must sell its goods and services at a price higher than the cost of production. In a competitive business environment, the cooperative must find creative ways to reach and sell to members and customers. The organizers must first determine what value-added advantages the cooperative should initiate and the best distribution channels through which to reach its differentiated customers.

The cooperative must have a registered office and a fixed business location. In the formation stage of the cooperative, the registered address and the business location will most likely be the same. The business location must be verifiable and a convenient place where members can access the products and services of the cooperative.

JEstablish delivery channels

HLocation

IIdentify the markets

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In planning the cooperative, the organizers will need to consider the structure and nature of the decision-making process. The calibre and mix of persons to form the Steering Committee is important here, since these are the ones who will guide the Founding Members to establishing and registering the cooperative.

The start-up phase should also include sessions to refine the Draft By-laws, with attention paid to the competencies and disposition required for each officer - the President, Vice President, Secretary, Assistant Secretary and Treasurer. All these positions will have to be voted on at the first meeting of members (Inaugural General Meeting).

By-laws are intended to guide the internal governance framework for the cooperative.Specimen or model by-laws can be typically obtained from the government ministry or department responsible for cooperative development. In modifying them to fit the type of cooperative being formed, the founders should be open-minded and creative in crafting the future rules of the business organization.

Adequate scope for competent Management, wide consultation, innovation and competitiveness should be built into the by-laws.

LFormulate by-laws

MDecide on the governance structure

Since all customers will not come to the cooperative for its goods and services, multiple delivery channels will be key to its survival. The Steering Committee, the Board and thereafter the Manager must continuously analyse, segment and excite its markets.

Even at this initial stage where there will be various issues and different views on the formation of the cooperative, it is important that the lead organizers try and attain consensus on most issues before moving forward. A simplified Work Plan for Year One of the business, using the format provided by the Regulator or by the League, helps to plot the operational direction of the cooperative. The Business Plan must include training and development activities, the Organisation Chart, the Budget and the Breakeven Projection. Adherence to the planning process, using the consultative mode, will alleviate some of the misunderstandings in the future.

KEnsure that the cooperative business plan is approved by members

8


Even at the discussion stage, the organizers should have a fairly good idea of the functions to be performed by the cooperative and the expected activity level. From this knowledge, the proposed Management structure, the interface between the Board, the other committees, the Manager and the Regulator must be clarified. The quality and number of employees will also be determined. This is a key component of the business plan.

This is critical in order for the cooperative to account for the members’ money. The financial plan will project know how much money will be received from members’ contribution to capitalize the cooperative, the expected expenditure and the projected revenue. It will also show whether the cooperative will make a profit or loss in the initial year(s).

OPrepare annual budget

NDetermine functional structures of the cooperative

As part of the planning process, the organizers should also consider options and determine the Management structure that would be appropriate for effective functioning of the cooperative. An approved organization chart with the dates when each employee position becomes effective is crucial to guide the annual budget.

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The registration of a cooperative is conducted by the Registrar or Director or Commissioner for Cooperatives, depending on the jurisdiction. The organizers will submit an application for registration in keeping with the guidelines set out in the Act and the Regulations.

The following documents are typically submitted with the application for registration purposes:

RRegistration of the cooperative

Without money the cooperative will not survive. A cooperative can be financed through different means including sale of shares (equity), deposits, fees, loans from members, grants from donors and even a bank loan. The financing mix must be determined by the organizers, having assessed the terms and conditions for each source of funds; and then approved by the elected Board of Directors and the founding members.

Revenue generation and monthly surpluses should become operational priorities, so that fiscal discipline is ingrained early.

In order to effectively deliver goods and/or services, a cooperative will need to determine the fixed assets required. At the initial stage of operation, the cooperative may not have such assets and may even rely on members to volunteer the use of items that are necessary to carry on the business. However, the initial funding of the cooperative will more than likely be used to procure fixed asset items.

PDetermine how the cooperative will be financed

QFixed asset requirement

1) Completed application form to register a cooperative

2) Draft copy of the proposed By-laws

3) Names and signatures of Founding Members with initial shares purchased

4) Business plan

5) Address of Registered office

6) Address of business operation

7) Name and type of cooperative

8) Listing of the Steering Committee Members.

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One of the shortcomings of cooperatives is the limited attention devoted to training and development. When the cooperative is registered, the Board and Management should ensure that there is a developmental plan for members, officers and staff. This should not remain just a plan; it must be implemented as an on-going function of the cooperative.

As in any business enterprise, the actions and behaviour of table officers, other directors and employees must be guided by a policy framework of systems and controls. It is therefore advisable, from the formation stage of the cooperative, that policies and procedures are developed to guide its operations.

UMeasuring performance

STraining and development

TDevelopment of systems,controls and policies

Elected officials and employees, having been entrusted with the members’ monies, information, plans and budget, must be held accountable for the level of authority and responsibility given. A measure of performance must be instituted to allow for periodic assessment of every insider.

This entails outlining what each officer is expected to produce or achieve during a particular period of time. At least once per year for the directorate and at least once per half-year per employee, the assigned expectations should be matched against the actual performance. This should be to determine whether the incumbent (e.g. President, Treasurer, Board or Manager) official achieved his/her assigned deliverables.

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All cooperatives are owned by their members. Members at an Annual General Meeting (AGM) and Special General Meeting (SGM) possess the supreme authority of the cooperative. In order for the cooperative to function properly, it is important for members to attend and participate in all members’ meetings. In this way members can be more

XMembership meetings

WMembership drive

Building on unison of purpose among the initial members who form the cooperative, the organization must embark on a membership drive to strengthen the cooperative – not only by increasing the share capital but also the business turnover. Attracting quality members brings a good mix of skills and contacts; it is also crucial to ensuring effective leadership and business growth.

Increased membership gives the cooperative more voice with regard to lobbying and advocacy. It also imposes a greater responsibility on the operations to impact positively on the lives of more families. Membership growth is pursued through effective information and other awareness-building programmes; but the best seller is the harmony within the group and the quality of its service and its products to customers.

VLive the cooperative principles

Too often cooperatives stray away from the cooperative principles. It is imperative that members and their leaders observe, apply and articulate the cooperative principles and values as appropriate, not only at the beginning, but on an ongoing basis. Each plan component should be grounded in the International Principles.

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The founding members should create an environment for team spirit so that the wider membership can be encouraged to actively participate in the affairs of their cooperative and support its goals and aspirations. Working in groups on various aspects of the Start-up Plan promotes the sharing of the workload, team spirit and builds ownership.

This inculcation of oneness and the building of trust through effective and efficient governance are important to growing a widespread sense of intelligent ownership among the members.

YTeam spirit

aware of what is happening at the cooperative and can even lend support to the Board of Directors and other committees by offering suggestions and advice.

AGMs should be held no later than 4 months after the end of each financial year, if accountability, transparency and good governance are to be upheld.

Likewise, the participation and behaviour at meetings of the Board and the Statutory Committees must be orderly, business-like and effectively chaired. Long, uncontrolled meetings lead to boredom and poor results. The level of absenteeism from such meetings should be reflected in the reports to the AGM and SGM; as well as a summary of the policy decisions taken by the Board during the year under review.

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A major feature in cooperatives is the establishment of committees and sub-committees. These units extend the volunteer corps of the cooperative and can be very instrumental in enabling the Board and Management to achieve their targets and discharge their responsibilities.

By law all cooperatives must have a Supervisory Committee in place, elected by the Board to ensure compliance with the Law, industry best practices and the policies and plans off the entity. Likewise every credit union must also have an elected Credit Committee to oversee the quality and growth of lending activity, collections and the loan portfolio.

Once they have achieved their purpose, sub-committees of the Board should be duly recognized and disbanded. Finance, Planning, Education, Public Relations and other committees are ad hoc sub-committees, unless established in the by-laws.

MonitoringIt is very important to monitor the progress of start-up activities. This would allow the Steering Committee and, later, the Directors to detect lags and shortfalls, make adjustments and take corrective measures if the cooperative appears to be straying from its objectives and agenda, or if the circumstances or data driving the original assumptions change.

ZDetermine the committees

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3CONCLUSION


Application of these guideposts in the formation and development of your cooperative will assist you in avoiding the pitfalls many have made or encountered in the past. Though not exhaustive, this sharing of best practices - culled from the experience of the past five decades across the English and Dutch-Speaking Caribbean, is another example of the Cooperative Difference!

CONCLUSION3

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Documents

· Caribbean Cooperative Management Training Programme STEP BY STEP GUIDE TO PLANNING AND STARTING A COOPERATIVE For the English-speaking Caribbean In preparing this training module,