The View From Level 3

How cooperatives fail

Posted by Ramsey Margolis on 20 December 2008 | 0 Comments

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Also found on the U.S. National Cooperative Business Association website at www.ncba.coop, the following tips on how cooperatives have failed were gleaned from articles which first appeared in the NCBA's CBJ Cooperative Business Journal, and the U.S. Department of Agriculture's magazine for cooperative business, Rural Cooperatives.

● poor selection of directors, especially those who fail to support their cooperative

● members who join but never use their cooperative and bypass it for a small gain elsewhere

● members who use cooperatives but fail to take responsibility – each member must be ready to accept responsibility when asked, or as the need arises, and every member should have an equal opportunity to be chairperson of the cooperative

● members who never ask questions and who let a few persons make policy

● members who don’t attend annual meetings and directors who fail to attend board meetings

● lack of consistent membership education about the problems cooperatives face and the challenges they must meet

● not supporting the cooperative with enough money (risk capital) to get the job done

● low-cost management – it’s the most expensive item for a cooperative, while high-priced management is usually the least expensive item

● not closely watching the formation of cliques and special interest groups within the cooperative

● concealing facts about a cooperative; all facts, both good and bad, should be placed on and not under the table

● errors in financial policy, such as over-extension of credit, too little capital, poor accounting records, lack of a financially sound, systematic programme for reimbursement of equity

● errors in educational and social work – this begins by failing to teach cooperative ideals to members unfamiliar with how cooperatives function, neglecting general educational programs, failure to develop member loyalty or countering the development of factions within the co-op

● management errors, such as inadequate inventory, poor location, improper equipment, neglected appearance of physical facilities, employee dishonesty, ineffective management, incompetent directors, nepotism, poorly conducted meetings, admittance of disloyal and dissatisfied members.

So, what are your thoughts about these? What do you think makes a cooperative fail? Post your comments.●