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Working Paper 243
ORGANISATIONAL BEHAVIOUR IN
CO-OPERATIVES
Saswata Narayan Biswas
The purpose of the Working Paper Series (WPS) is to provide an opportunity to IRMA faculty, visiting fellows, and students to sound out their ideas and research work before publication and to get feedback and comments from their peer group. Therefore, a working paper is to be considered as a pre-publication document of the Institute.
Institute of Rural Management Anand
Post Box No. 60, Anand, Gujarat (India) Phones: (02692) 263260, 260246, 260391, 261502
Fax: 02692-260188 Email: [email protected] Website: www.irma.ac.in
June 2013
ii
ORGANISATIONAL BEHAVIOUR IN CO-OPERATIVES1
Saswata Narayan Biswas
2
Abstract
Co-operative organisations are largely ignored in mainstream Organisational
Behaviour (OB) literature. Yet the contribution of co-operative organisations
in both developed and developing economies is quite large and hence, an
attempt has been made in this paper to highlight certain critical issues
pertaining to the understanding of these organisations from the perspective of
organisational behaviour. While doing so, the existing literature in field has
been taken into account and a background prepared for OB researchers to
consider understanding the peculiar nuances of these organisations in order to
develop a holistic understanding of organisational behaviour area instead of
limiting it to the investor owned firms.
Co-operative organisations emerge from an unfulfilled need of its members. It
is a need that is improperly served either by the investor owned organisations
(aiming at finding the best returns for shareholders) or by public institutions
created for public good. Thus, they are private organisations created for the
benefit of users of their services. The surplus generated by the co-operative
may be distributed amongst members. In a population of organisations co-
operatives as organisational forms are not found in abundant numbers. A
comparison of co-operative and investor owned firms reveals that co-
operatives do not behave differently from non-cooperatives in the market
place. However, co-operatives serve a social function by uniting the
1 The author is thankful to Mr. Suresh B., FPRM participant at IRMA for the kind help
provided in locating the relevant literature during the writing of this draft. This is a work-
in-progress and not to be quoted.
2 Professor, Institute of Rural Management, Anand -388001, Gujarat, India
Email : [email protected]
iii
underprivileged section of productive people, particularly in the primary
sectors. Thus, there is a range of co-operatives from agriculture to credit with
thousands in between. Member control is a critical issue as far as co-
operatives are concerned and much research has been done on the ability of
the members to control their own enterprise. Literature suggests that member
control is also directly related to the performance of co-operatives. If the
members do not exercise control at levels of their own organisation they are
anything but co-operative even with the registered title of a co-operative.
Research suggests that employees in member-controlled co-operatives have a
higher level of organisational commitment, performance-related reward
systems, greater job satisfaction, intention to exhibit organisationally desirable
behaviour, belief in co-op values, and so on compared to co-operatives
controlled by external agencies (like the government). Similarly, member-
controlled cooperatives evince active leadership and they are also more
sympathetic to the cause of members than when the co-operatives are
externally controlled. Most co-operatives suffer from weakness related to lack
of technical, behavioural, and managerial competencies. Hence, it is essential
for the employees to compensate for their weakness by acquiring the required
skills so that they can be more efficient and perform at expected levels. The
complexity of the co-op is attributable to their pursuing both economic and
social goals. Hence, it is a challenge to sensitise and orient the employees
towards both and help the business to sustain and grow.
1
ORGANISATIONAL BEHAVIOUR IN CO-OPERATIVES
INTRODUCTION
While studying organisational behaviour textbook instances of organisations
like General Motors, General Electric, Microsoft, or Google recur ad nauseum.
Cases concerning co-operative organisations occur few and far between. The
truth is, however, that co-operatives contribute enormously to the economy.
In 1994, the United Nations estimated that the livelihood security of nearly
half of the world's population depended on co-operative enterprises (ICA,
n.d.). These enterprises continue playing a significant economic and social
role in communities. Co-operatives in the United States own more than USD
3 trillion in assets and generate over USD 500 billion in revenue and USD 25
billion in wages (ICA). In India, over 239 million people are members of co-
operative organisations spread out all over the country. In the context of
business volume and exerting an influence on the lives of ordinary people co-
operatives continue to top the list of organisations. Yet the truth is that
students of Organisational Behaviour rarely get the opportunity to learn about
the working of cooperatives; be it the rural electricity co-operatives of the
United States, which control 12% of the electricity business or the milk and
sugar co-operatives of India, which dominate their respective sectors of the
economy (ICA, n.d.). Amul is a household name in India and an example of
the outcome of a successful co-operative movement yet little research in the
country has been focussed on Amul and rarely has it emerged alongside names
like General Electric, Siemens, Microsoft, or Google in the textbooks on
organisational behaviour in the country. This paper is a modest attempt to
mitigate this shortcoming in India‟s organisational behaviour literature.
I have attempted to discuss the nature of co-operative organisations from the
existing foundational framework of organisational behaviour literature in this
paper. In the next section, an attempt has been made to differentiate the
essential features of co-operatives from other forms of organisations,
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specifically the consequences of these differences on organisational
functioning. Subsequent sections deal with the nature of the structuring of co-
operative organisations. They deal with how they do not conform to the basic
assumptions of the agency theory of management. As most organisational
behaviour literature is built around the assumptions of the agency theory it has
been argued that depending on an open systems approach, as opposed to the
agency theory approach or the closed systems approach, is better suited to
gaining an insight on co-operatives. The paper also reviews extant
organisational behaviour research on co-operatives before going on to
highlight leadership roles therein relative to the emphasis on the managerial
leadership role that has emerged in India‟s mainstream organisational
behaviour literature
Mintzberg (1996), in his now classic article in Harvard Business Review
(HBR) argues 'because capitalism has supposedly triumphed, the private
sector has become good, the public sector bad, and the cooperatively owned
and non-owned sector irrelevant' (76:1996). He argues that while capitalism
did not triumph at all balance has been brought about by the presence of a
strong public sector, a strong private sector, and specifically two sectors in-
between (the co-operative sector and the non-government sector) in a
capitalistic society. It is not capitalism but the balance that has triumphed. He
goes on to highlight that the co-operative sector contributes to more than 50%
of the consumer requirements of the United States. According to him, there is
a role for these four types of organisations for their different contributions to
society. Any one-type of organisation would have been unable to create the
balance in society required for success.
CLASSIFICATION OF ORGANISATIONS
There are various ways of classifying organisations. An important
classificatory system is based on the ownership of organisations. The Investor
Owned Firms (IOFs), commonly referred to as private sector organisations,
could exist in the form of closely owned by a few individuals or they may be
3
held by a large number of individuals in the form of tradable shares. Public
sector organisations, on the other hand, are basically owned by the state.
Functionally speaking, the state owns the controlling shares of these
organisations. There are two other forms of organisations which, while
predominant, do not attract enough research attention. These are the co-
operatively owned and non-profit organisations, also referred to as non-
governmental organisations and co-operative organisations (Mintzberg, 1996).
The co-operatively owned organisations are, by nature, for-profit entities. The
not-for-profit organisations, on the other hand, are created for the public good
by private individuals. Co-operative organisations are created to benefit the
members. Surplus generated by the co-operative may be distributed amongst
the members. Differences in ownership patterns give rise to differences in the
objectives of these organisations impacting, hence, both their structure and
processes.
COMPARISON OF INVESTOR-OWNED ORGANISATIONS AND CO-
OPERATIVES
Co-operatives as organisational forms are not found in abundant numbers
being greatly outnumbered by investor-owned organisations (IOOs),
government organisations, or the not-for-profit organisations. It is largely
because those with capital would rather put their money in ventures that will
yield the highest return on investment; people donate money to not-for-profit
organisations as a means of social service and to help others. However, co-
operatives are for-profit-organisations for those who, with very little capital,
may be willing to pool in their resources to create enterprises for their own
economic betterment. Thus, people who are economically weak, relatively
speaking, still make a positive contribution to the economy through their
labour form co-operatives. People form co-operatives when they become
aware that they are being exploited or are likely to be exploited by those who
invest their capital for maximising returns. Organisational research and
analysis is largely based on investor owned organisations with very few
4
focusing on the structure and functioning of co-operatives, which are
membership-based economic organisations of the poor.
CO-OPERATIVES AS A DIFFERENT FORM OF ORGANISATIONAL
ENTITY
A co-operative is defined by the ICA as 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 (ICA, n.d.). The premium body International Co-operative Alliance
(ICA) recommends the principles on which the co-operatives should work.
Co-operatives are based on the values of self-help, self-responsibility,
democracy, equality, equity, and solidarity. In the tradition of their founders,
co-operative members believe in the ethical values of honesty, openness,
social responsibility, and caring for others. Thus, co-operatives are different
from other forms of organisations as far as their stated objectives are
concerned. However, they are also different in their structuring and processes.
BALANCING CONFLICTING INTEREST
Organisational theories have often failed to explain and understand co-
operatives as these theories have largely dealt with closed system
organisations (Scott, 1992). Theories of organisations are often based on a
certain presumption of the differentiation of roles between different
constituents such as buyers, suppliers, manufacturers, etc. However, when a
group of consumers form a consumer co-operative or a group of milk
producers form a dairy co-operative society they merge the different
constituents into one making theorising difficult based on the interests of the
focal entity. For example, a single milk co-operative may earn higher profits
by reducing the procurement price paid to the farmer members. However, the
chief objective of the co-operative is to help farmers get the maximum share
of the consumers‟ money. This will, no doubt, put pressure on the bottom-line.
Co-operatives have to keep resorting to continuous adjustments and, from the
5
systems theory perspective (Katz and Kahn, 1978), they are far more open
compared to any other form of organisation. This is largely because the
members of co-operatives are owners as well as users of the latter‟s services.
They happen to be investors, suppliers, buyers, etc., thus often merging several
roles, more often conflicting ones, into one. As far as investor owned
organisations are concerned, however, the investors are only interested in
financial performance and non-financial indicators become important only
when conformity to regulatory requirements is needed. Several researchers
view the inclusion of these critical actors in co-operatives as a co-optation
process to reduce potential resistance to the organisation and its goals by these
different actors (Pfeffer and Salancik, 1977; Oliver, 1991). However, the
governing board of the co-operatives representing the owner members
safeguard the interest of all members (Cornforth, 2004).
MEMBER PARTICIPATION
Dunn (1988) points out that co-operatives by definition are member-
controlled, their reason for existence being to serve the members. Co-
operatives are created as a reaction against the existing exploitative
relationship between primary producers or consumers and traders or
manufacturers. In order to avoid such exploitation people form co-operatives.
Even though financial participation is important individuals do not join a co-
operative to get the best returns on their capital but to use the services it
provides. Utilisation of services is of paramount interest here, not the return
on capital. Therefore, co-operatives have a cap on return on capital. This has
implications regarding the democratic control of co-operatives. Members of
co-operatives exercise control not based on how much equity they hold but on
the basis of either their individual membership or the patronage they extend to
the co-operative. Thus, the voting rights are decided based on either one-
person one-vote or the degree to which a member has participated in utilising
the services of the co-operative, which is also referred to as patronage-based
voting rights. For example, in a primary dairy co-operative society, members
may vote on the basis of one-person one-vote or on the basis of the proportion
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of total milk contributed by the person to the society. The dairy may fix one
vote for every 200 litres of milk. So, if a member contributes 400 litres of milk
then he or she acquires two votes whereas another member who contributes
1000 litres of milk gets five votes. Thus, the degree of patronage determines
the degree of control each person exercises on the co-operative. There has
been, however, a fierce debate over the two methods of democratic control as
far as co-operatives are concerned. According to Dunn (1988), this is
necessary for a co-operative in order to be able to serve the interests of its
members. The principle of democracy is a core element of co-operative
business. However, the agency theory of a firm postulates that member
control may be problematic due to information asymmetry. The signals
conveyed by members to the board of directors and to the management are
based on imperfect knowledge from the members‟ side. Dunn (1988) argues
that the problems associated with control of the firm get aggravated when the
principal is a collective. Additionally, co-operatives may suffer from the
problem of „free-riding‟ (Ostrom 1990) that occurs when members do not
shoulder their share of governance and management expecting someone else
to do so in a „diffusion of responsibility‟. Therefore, a major responsibility of
the co-operative organisation is to design a system that not only minimises
such free riding but makes it unprofitable for members to do so.
Given this backdrop it is not surprising that mainstream organisational
behaviour research rarely focuses on the role of the board in the structuring of
the organisation and the evolution of relationship between different actors
within the organisational context. Mainstream organisational behaviour
research is largely focussed on employee behaviour (managerial and non-
managerial); organisational theory research, which attempts to understand
organisations in the context of external and internal environments, treats
shareholders as an external constituent of the organisation. However, in co-
operatives, the shareholders are an integral part of the organisational design.
Members play a significant role in structuring of the organisation and in the
shaping of the organisational climate. They are not distant and uninvolved
participants in the organisational space who only watch the share price of their
7
company. In mainstream organisations the shareholders are free to exit any
time but in the co-operatives exit is often linked to changes in livelihood
patterns making exit difficult. In an investor owned organisation the
shareholders may transact business maximally with the managers once a year-
that is, during the annual general body meeting when the dividend is declared.
However, in co-operatives, the owner members constantly transact business
with the co-operative on a regular basis while the managerial decisions affect
their day-to-day lives. This has an impact on the members‟ support and those
of the participants as far as the affairs of the organisation are concerned.
Nevertheless, in co-operative organisations, the board plays a major role in
determining the relationship between different actors. The board‟s role is two-
fold involving the resolution of the conflicting interests of different groups
and, secondly, setting the overall policy of the organisation in place.
However, the implementation of these roles is left to the managerial staff of
the co-operative. Any board of a co-operative is, firstly, required to manage
diverse and competing demands of its different constituents and, secondly, it is
required to maintain and build trust amongst the members. Pertinent to the
latter, the board is required to manage the perception of fairness, among other
things. Another important role of the co-operative board includes boundary
spanning activity, which is normally undertaken by the top management of an
investor owned firm. The board provides political leadership while managing
the external environment including policy wherein the techno-managerial
leadership with the organisation is focussed on increasing the efficiency of
organisational delivery mechanisms. In India, both sugar co-operatives in
Maharashtra and milk co-operatives in Gujarat have exhibited these patterns.
When the boundary spanning activities including influencing policy and
lobbying are left to the elected leadership, the managerial leadership is able to
concentrate on managing routine activities for maximising efficiency. This is
in direct opposition to the agency theory of management. According to the
agency theory paid management work occurs on behalf of the principal and
the principal is at arm‟s length as far as managing the external or internal
environment is concerned. Shareholders of a company would rarely go on
8
strike against a policy of the government. Members of co-operatives act as
trade unions on the other hand. They go on strike to show their displeasure
against governmental policy, among other things.
DIFFERENT MEANINGS OF SUCCESS
The success of poor people‟s organisations, centred on an economic activity,
is largely determined by their patronage (Mishra & Shah, 1992). A large
number of studies have pointed out that patronage and sustained involvement
of the poor towards their organisation depends on a combination of factors
(labelled as stake centrality). Based on the concept of member-centrality
proposed by Shah (1995) and the theoretical perspective built around
Trevsky‟s and Kahneman's (1991) work on heuristics and biases in human
judgment, it has been argued that the poor will participate in the process and
patronise an organisation only under two compelling conditions (Biswas,
2010). One, when they perceive that the organisation is central to their
livelihood/existence and two, when chances of their perceived loss are high in
the event of the organisation‟s failure (Biswas, 2010). Trevsky and Kahneman
(1991) assert that there is an asymmetric relationship between losses and
gains. Poor people are likelier to patronise an organisation on perceiving that
its cessation would culminate in a loss to livelihood. The higher the
perceived loss the higher will be the degree of stake centrality.
PERCEPTION OF EQUITY
In making co-operatives successful the perception of members is extremely
important. When co-operatives are perceived as equitable, transparent, and
competent in addressing their specific needs they tend to produce better results
(Chen, Jhabvala, Kanbur, and Richards, 2007). One may use technology to
bring about transparency, but technology is only an aid. For example, the use
of an electronic weighing machine by itself does not make an organisation
trustworthy (there are examples in which people expressed doubts regarding
the use of electronic machines for weighing and estimating milk fat in several
9
places in Rajasthan, Maharastra, etc). It is based on comparing different
activities undertaken by an organisation vis-à-vis others within the locality and
elsewhere besides the ties or bonds that are established with the facilitating
organisation or its professional staff. A combination of factors gives rise to
trust.
SIMILARITIES WITH OTHER FOR-PROFIT ORGANISATIONS
The preceding section highlights how co-operatives are different from other
forms of for-profit organisations. Co-operatives, like all other organisations,
operate within a context; they draw resources from the external environment
and provide inputs to the external environment. Most co-operative members
need to deal with constituents from the external environment either to procure
goods and services required by them or for direct consumption and/or as
inputs to their productive endeavour, or to market goods and services
produced by them. Like any for-profit organisation they may exploit
consumers by charging higher prices or may pay a lower price to non-member
suppliers. Many researchers have found that co-operatives do not behave
differently from non-cooperatives in the market place. Thus, in the method of
functioning and in certain organisational processes they may not exhibit any
difference.
CO-OPERATIVES IN INDIA
The co-operative movement in India was formally introduced with the
promulgation of the Cooperative Societies Act in 1904. The co-operatives in
India have made remarkable progress in various segments of the Indian
economy. There are half a million co-operative societies with a membership
of over 200 million. Despite the keen competition from private organisations
co-operative societies play a dominant role in many of the sectors.
Different types of co-operatives function as agricultural credit co-operatives,
urban co-operative banks, co-operative marketing units, consumer co-
10
operatives, weaver co-operatives, sugar co-operatives, co-operative spinning
mills, industrial co-operatives (non weavers), dairy co-operatives, fisheries‟
co-operatives, housing co-operatives, labour co-operatives, and so on. Some
co-operatives that have been working successfully include the Krishak Bharati
Cooperative Limited (KRIBHCO), which is one of the largest fertiliser units in
the world. A few other co-operative organisations that have done exceedingly
well in meeting the demands of their members are the Indian Farmers
Fertilizers Cooperative Federation (IFFCO), the National Cooperative
Marketing Federation (NAFED), the National Cooperative Consumers
Federation (NCCF), the Gujarat Milk Marketing Cooperative, the Co-optex
Weaver Co-operative, and COIRFED from Kerala, to name a few.
Many co-operatives in India are structured so that they can make both
backward and forward integration in a seamless manner. For example, the
dairy co-operative societies at the village level collect milk from members
within the village and many village-level co-operatives pool in their produce
for processing the milk and manufacturing different products. Many such
processing and manufacturing co-operatives join up to market the produce.
This is also referred to as a federated structure. The critical element here is
member control. Whether a co-operative is federated or not its most
distinguishing feature is member control. It is important to ask: Are members
of the co-operative controlling it through its representatives at all levels? If
the members do not exercise control at all levels of their own organisation
they are anything but co-operative even with the registered title of a co-
operative. Organisational behaviour studies on co-operatives have focussed
on different aspects ranging from the demographic composition of staff,
organisational climate, organisational culture, etc.
EMPLOYEE CHARACTERISTICS
Balaji and Reddy (1999) have raised issues concerning organisational
behaviour research pertaining to the characteristics of employees. They cite
authors in their non-empirical writings who have pointed out that employees
11
of co-ops are not fully qualified or trained for their jobs and that they are
highly de-motivated with little commitment to the goals and ideologies of the
co-ops. However, little empirical research has been done to substantiate (or
refute) these claims, some of which are described here. A study of co-op rice
mills in Madhya Pradesh by Mathur and Gupta (1982) revealed that many
functions were being manned by low-ranked employees who did not possess
adequate qualifications. Jyothi (1985) found that the motivation of the
managerial staff was not high and observed that co-op employees continued to
stay in the organisation (despite meagre wages and scanty employee benefits)
due to a sense of reconcilement amongst employees rather than due to the
positive aspects of morale and commitment.
Praveen Kumar, et al (1992) identified strengths and weaknesses of officers at
a district-level dairy co-operative in Gujarat. The major strengths identified
were long association with the co-op, ability to adjust to different working
conditions, intra-departmental co-operation, and thorough knowledge of the
job. The primary weakness identified was little knowledge about the activities
of other departments, lack of concern for productivity and performance of the
co-ops, and unwillingness to accept additional work. Many studies have
pointed to successful managers in co-operatives displaying a different set of
behavioural patterns from those of managers from other forms of
organisations. For example, in one excellent piece of research showcasing
case studies of successful co-operative managers, Reddy (1991) found that
these managers possessed characteristics like humility, ability to adjust to the
organisation‟s culture , knowledge of local language, honesty and integrity,
patience and persistence, dedication to the rural sector, clear vision and the
ability to create clear task boundaries. However, no significant association
was found between the socio-economic backgrounds of the managers and their
achievement of success.
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ORGANISATIONAL COMMITMENT
We have already argued in the previous section that co-operatives need to be
member controlled. However, many co-operatives in this country exist as co-
operative organisations only in name. They are not true co-operatives but
appendages of the state and hence controlled by the government. Balaji,
(1984) in a study of 169 managers working in different co-operatives, found
that the organisational commitment of managers employed with co-operatives
controlled by external agencies (like the government) was lower than those in
co-operatives under member control. In another study, Sood and Balaji (1991)
found organisational commitment of employees to be an important variable
because it explained several behavioural intentions. Notably, organisational
commitment was most strongly related to the intention to exhibit extra role
behaviour. Organisational commitment was also found to be a better predictor
of intention to stay on in the organisation compared to organisational
satisfaction (Balaji 1985).
In another study of employees concerning a federated co-operative and an
investor owned firm it was found that employees of the co-operative were
more committed to their organisation than the employees of the investor
owned firm. Moreover, employees of the co-operative, adhering to the values
espoused by the latter, contributed a unique dimension to their organisational
commitment. Besides, the closer the employees were to the members of the
co-operative the greater was their identification with its values and
organisational commitment. They also observed that the co-operative
employees had greater commitment towards their organisation compared to
the population norms (Wetzel and Gallagher 1990). One of the reasons for
such a marked difference could be attributed to their being a self-selected lot;
meaning that those who join co-operatives as employees do so because they
are likely to share some of the former‟s values. Another plausible reason
could be that many co-operative employees are likely to be members of the
co-operatives or they may have a close historical relationship with the co-
operative like a close relative who happens to be a member of the co-
operative.
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MANAGERIAL ATTRIBUTES
If the argument of employee self-selection is to be taken seriously then a
related question emerges concerning if employees of co-operatives hold a
different set of characteristics. Research suggests that co-operative managers
exhibit continued sensitivity to events and higher problem-solving abilities
and creativity compared to their counterparts ;yet balanced learning habits,
relevant professional knowledge, self-knowledge, and mental agility are in
short supply (Arul 1999).
ORGANISATION CLIMATE, CULTURE, AND STRUCTURE
The concepts of organisational climate, and psychological climate and
organisational culture need to be understood clearly in order to avoid semantic
confusion. Although these concepts have been distinguished conceptually
distinctions tend to get blurred while operationalising and measuring them
(Balaji and Reddy 1999). The employees of an organisation normally refer to
„organisational climate‟ while relating to their perceptions of organisational
characteristics (such as structure, processes, policies, practices, values etc.).
The unit of analysis for this construct is the organisation.
The concept of culture, drawn from ethnography and anthropology,
emphasises expressive qualities of action and interaction in organisations and
the emergent, fluid nature of organisational realities. Culture, like art, is hard
to define. At one level, the concept is self-evident. Intuitively, everyone
seems to know what culture is. It has something to do with the interpretations
in organisations-that is beliefs, values, and the meanings that are shared.
Researchers have studied employee perception of organisational climate in co-
operatives. It has been found that co-operatives, which are controlled by the
government and chief executives of these co-operatives, are drawn from the
civil service cadre officers. In such cases, employees have cited lack of
autonomy and undue political and bureaucratic interference (Goel 1984;
Kamra 1987). In another study involving four chronically loss-making co-
operatives in Andhra Pradesh it was found that their CEOs had very little
14
power to bring about effective changes in the organisations which were run
like government organisations and not as economic organisations (Rao 1989).
As noted earlier, co-operative employees are likely to be members or related
to members forging, consequently, a close alliance with board members who
play a pivotal role in managing the affairs of the co-operative. Thus, the co-
operatives tend to become more centralised with most powers vested with the
Board and some with the CEO. Very little decentralisation is allowed.
However, few researchers have observed that the Cooperative Act is to be
blamed for such a high degree of power centralisation.
The executive role played by most co-operative boards has led employees to
believe they have a greater degree of centralisation; they also believe that
maintaining an excellent personalised relationship with the top management
and board members could determine their promotion as opposed to hard work
(Praveen Kumar et al. 1992). However, in small district co-operatives the
organisations are characterised by informality rather than formality. These
organisations also enjoy a greater degree of solidarity between different levels
of employees where the distinctions are often blurred and where the Chief
Executive Officers try to reach decisions through consensus. Most successful
co-operatives have receptive CEOs who involve staff members in the
decision-making process. Thus, these cooperatives have developed a strong
culture of consensual decision-making rather than being imposed from the top
(Reddy and Sharma 1990). However, authority delegation for long-term
decisions is generally poor in all co-operatives. Unlike a company board
which has provisions for independent directors and executives on board other
than the CEO, the co-operative board comprises representatives of the
members or the government or financial institutions; employee participation in
co-operative boards is almost non-existent. Researchers have found union
management relations to be cordial, the bargaining power of unions being very
limited owing to a low level of loyalty amongst members of the union;
consequently there is only one employee union in the co-operatives (Jyothi
1985) generally.
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In one study concerning the culture of co-operatives and non-governmental
voluntary agencies professional rural managers reported that the organisational
culture of voluntary agencies was far more conducive to professional
managers compared to the organisational culture of co-operatives. This may
be partly because the co-operatives, which are covered under the Cooperatives
Act, have very little leeway in terms of fostering autonomy and delegating
power within an organisation. Whereas, the voluntary agencies registered
under the Societies Registration Act are more relaxed because the latter does
not impose stringent norms on organisations (PRADAN 1990). It has been
observed that the quality of management and staff, and innovative and growth-
oriented values and attitude that are present in organisations with
entrepreneurial cultures exhibit robust performance rather than the structure of
the co-operative (Kyriakopoulos, K., Meulenberg, M., and Nilsson, J., 2004).
While the co-operatives are essentially business organisations they also
incorporate some elements of a public utility entity. Hence, politicians also
leverage the democratic process involved in co-operatives turning the latter
into their handmaidens. This, again, vitiates the culture of the co-operative.
However, evidence suggests that the co-operatives, in their turn, leverage their
political connections to grow under certain environments. For example,
during its initial years, AMUL benefitted to a large extent because of its close
connection with the then ruling party. In a similar vein Karanth (1988) found
the culture of the Primary Agricultural Co-operative Society (PACS) in
Karnataka to be largely shaped by local mainstream political processes.
Although the mixing of politics with business was generally harmful
(corruption and misappropriation of funds were widespread in the PACS that
he had studied), Karanth (1988) discovered a positive aspect of political
interference. Membership increased tremendously whenever there were
elections in the PACS, as local farmers were induced by the contesting
politicians to become PACS‟ members. After having become members , they
began using PACS‟ services in fairly large numbers.
16
In „strong cultures‟ there is a sense of shared values, and strong cultures within
the organisation have been reported to be linked to their success.. Values
shared across and subscribed to by employees in co-operatives contribute
greatly to the latter‟s success. A case in point being the the Warnanagar
Sugar Cooperative where, it was found, the employees shared the values of the
co-operative and what it stood for. Value sharing cemented employee loyalty
and dedication to the co-operative (Bedi 1986). Balaji and Sood (1999)
examined the data from 132 employees of a district-level milk producer‟s co-
op in North India. The data showed that belief in co-operative values and
organisational commitment was stronger among the procurement and inputs
department employees than in the employees of other departments. This could
be largely because the procurement and inputs department of dairy co-
operatives interact continuously with the producer member. This also suggests
that the closer the employees are to the producers the more they are able to
empathise with the latter and thus, have a higher level of belief in co-operative
values. They understand the difficulties faced by producers and the value of
co-operation.
Biswas and Balaji (1999) in their paper on employee-organisation co-op value
congruence, have presented some findings on employees‟ belief in co-op
values and the congruence between their beliefs and perceptions about the
organisation‟s belief in such values. Data from 189 employees of a district
milk union in Gujarat was used to obtain four indices of value congruence.
The results suggested that employees believed to a relatively less extent those
values that represented some of the essential features of co-operatives (like
who should be members of a co-op and how the profits of a co-op should be
shared). The employees also thought that the organisation did not believe in
these values. The Procurement and Inputs department employees believed in
the co-operative‟s values to a greater extent than did those from most other
departments.
In a comparative study of the organisational climate of District Co-op Banks
(DCBs) and Regional Rural Banks (RRBs) relating to 26 facets of
17
organisational climate and eight dimensions of organisational effectiveness it
was found that the DCBs scored higher than RRBs on climate dimensions
related to reward systems, level of workers‟ control, and communication and
one effectiveness dimension, namely, job involvement. On the other hand, the
RRBs scored higher than DCBs on the climate dimensions of awarding
promotions based on performance, control of middle management, and role
inter-changeability. The RRBs were also seen to be better on the effectiveness
dimension of social responsibility (Biswas, 1999).
Reddy and Nagabrahmam (1999) describe how the culture of a district milk
union in south India developed and changed since its inception and also the
effect of such changes on its performance. This case study, rich in detail,
identified several events, factors, and processes that shaped the culture of the
organisation. The various interfaces between the chairperson and board of
directors and the general manager, relationships among the senior managers
and between the management and the workers (especially the labour and
between the management and the workers (especially the labour union leaders)
were found to have a significant bearing on the initial culture and its
transformation over the years. To some extent, the co-operative‟s workforce
policies and practices, particularly the appointment of senior managers,
including general managers, influenced the changes that took place in Sitapur
dairy‟s culture. A significant finding of this study was that the culture changes
were accompanied by changes in the performance of the co-ops. The concepts
of power and politics in organisations, organisational birth and evolution, and
organisational culture were deployed to interpret these changes.
HUMAN RESOURCES MANAGEMENT AND DEVELOPMENT
Rao (1989), in his study, found that while certain steps (like creation of
common cadres for key posts in certain sectors, reorganisation of the staffing
pattern, rationalisation of staffing recruitment and selection procedures,
appointment of technocrats in place of departmental officers as CEOs, and
providing for direct recruitment of managers (to a limited extent) were taken
18
to improve personnel management in co-ops, several problems still persisted.
For instance, manpower planning was not being done, the Registrar of Co-ops
continued to play a crucial role in personal management issues; promotions
were still based on seniority; direct recruitments were confined to lower-level
posts; training and development of staff continued to be neglected while the
practice of appointing persons on deputation remained in place. Mangala‟s
(1982) study of successful dairy cooperatives‟ workforce policies showed that
recruitments were made not only at lower but at all levels. Local staff
members were appointed to the lower-level jobs. However, there were
imbalances in the number of posts in certain categories between the head
office and the branches or depots. Praveen Kumar et al. , (1992) found that
the co-ops did not have a clear promotion policy, nor was there a proper
system to appraise the performance of employees. They also found that
employee welfare facilities were almost non-existent.
Rudrabasavaraj‟s (1969) study on personnel management practices in Indian
co-ops compared the personnel management practices followed in co-ops and
public and private sector organisations. Data was collected from 12 co-ops, 6
public sector and 14 private sector organisations, all of them being very large
in their respective sectors. The study showed co-ops lagged behind the private
and public sector enterprises in personnel management practices including
workforce selection, recruitment, training, promotions, transfers,
communication, employee morale, employee welfare measures, employee-
employer relations, and status of personnel department.
Jyothi (1985) conducted a study on HRM practices and employee perceptions
in four co-ops in the Vishakhapatnam district: a sugar co-op, a co-op bank, a
consumer co-op and a tribal‟s co-operative. She reported that the personnel
function had a very low status because the Co-operative Societies Act does not
provide for an independent and distinct status for such a function; the
personnel policies and approaches towards the employees were archaic,
unscientific, and paternalistic.
19
REWARD SYSTEMS
The reward system of an organisation is intrinsically related to the culture of
the organisation. Co-operatives do not have a performance-related reward
system, except for the milk co-operatives in Gujarat. Similarly, most co-
operatives outside Gujarat do not have a promotion policy that recognises the
importance of the employees‟ contribution. A study of the promotion policies
of a state-level dairy co-op by showed that while the employees were entitled
to four or five promotions during their tenure with the co-ops, most of them
were promoted only once or twice. The promotion policies were not clearly
defined. This caused delays and uncertainties in actual promotions leading to
considerable demoralisation among the employees (Yojana 1985). Lack of
promotional avenues and career growth debar many qualified professionals
from joining these organisations. Balaji and Bhatt (1999) examined the
seriousness of the issues related to promotions including the number of
promotions, promotional opportunities, satisfaction with promotional
opportunities etc. The results suggested that promotion is a serious issue
prevalent in co-operatives. What the employees wanted was a fair and
transparent system of promotion and creation of promotion avenues.
Promotion was also related strongly to the negative perception about the
organisation.
PUBLIC IMAGE AND HIRING POTENTIAL
Perception of organisational culture by people working within the organisation
is likely to impact their performance that could result in failure. Yet very little
research has been conducted in the area of organisational behaviour on the
public image of the organisation, more specifically perception of the
organisational culture among potential applicants. A negative perception of
culture is likely to affect the hiring potential of the organisation which may be
deprived of high quality personnel which will, in turn, affect its performance.
In an interesting study, Rangarajan and Kalyani (1999) found that a very small
20
proportion of the students undergoing professional courses were willing to
join co-operatives because they were seen as not being professionally
managed, as having a poor performance, and being subject to interference by
politicians and governmental authorities.
Fulton (2008), observed that the previous success of co-operatives did not
guarantee future success. This is partly because of the causal link that relates
to the success of co-operatives to members‟ commitment which is, in turn,
linked to the decisions made by co-operative leaders and the selection of co-
operative leaders by members. He found that co-operatives that believed they
had a well-defined and loyal membership were less likely to hire leaders that
would enhance member commitment. Thus, historical success is no guarantee
of future success and could, in fact, contain the seeds of failure.
In an interesting study of leadership of co-operatives during economic
transition it was found that many co-operatives were going bankrupt.
However, findings show that as far as traditional agricultural co-operatives are
concerned, a more social-oriented leadership helps overcome economic,
social, and psychological barriers arising during the transition, while, in the
case of new co-ops, improved co-operation depends mainly on the increased
level of social capital after the radical reforms have been put in place
(Forg`acs,2008).
LEADERSHIP ROLES IN CO-OPERATIVES
Leadership plays a major role in the success of co-operatives. In
organisational behaviour literature leadership generally centres on the
managerial leadership acts of managers that bring about positive changes in
organisations. However, in co-operatives, the elected leaders play a major role
in transforming the organisation as they actively participate in the
organisational processes. In this section, I will focus on both managerial
leadership and elected leadership. Leadership contributes to the emergence of
a good design for the organisation and it acts as a self-reinforcing mechanism
21
to enhance the performance of that organisation. Leadership and design of the
organisation are not two separate phenomena as they thrive on each other.
Cook (1994) argues that organisational differences between investor owned
firms and user-oriented firms influence management behaviour by affecting
managerial working roles. The major roles of leaders in management
literature include maintaining goal direction, facilitating task achievement, and
ensuring group cohesiveness (Cook, 1994). In the context of co-operatives,
meeting the three leadership demands is challenging. This is because co-
operative goals are multidimensional and often conflict with each other. The
challenge to co-operative leaderships exists with regard to reducing the
opposing interests down to a more balanced interest allowing, thereby, the
convergence of the interests of different groups. Integrating individual needs
with organisational goals is challenging when the owners interact with the
organisation on a regular basis as users of its services. The dividend pay
checks are a year-end formal feedback on how well the leaders have been
behaving so far, but on a regular transaction basis the leadership decisions and
behaviour are evaluated regularly and many decisions of the leaders may
benefit the co-operative but could also run contrary to the immediate interest
of the user member. For example, as an individual member one may be
interested in paying a lower price for goods in a consumer co-operative or a
farmer may expect a higher price for his/her produce. However, sharing all
surpluses with the members may lead to lack of growth because of the low
level of capital formation within the co-operative, rendering the latter very
vulnerable at the time of need. At the time of taking charge, the new president
of a staff credit co-operative society found that the co-operative was almost
bankrupt. This was partly due to erroneous management decisions and partly
due to lack of capital accumulation. Plus, the financial health of the co-
operative being in doubt led the user members to demand their share capital
back. Buying back the shares would have shut down the co-operative. The
management committee at the time decided it would not retire any share
capital. It promised the user members, however, that they would receive
dividends equal to the interest paid on their savings bank account in
22
commercial banks in the following year. There was a hue and cry over the
matter. A few months later, however, the user members observed improved
functions and when the co-operative declared its dividend as being double of
what it had promised people started putting in their money as equity. The
balance sheet improved and the co-operative has now been running profitably
till date. The co-operative leadership‟s role is not limited to the satisfaction of
individual members but also to that of the co-operative itself.
Folsom (2003) observed that co-operatives are excellent tools for promoting
rural economic growth and leadership development of the community in
which they operate.
In a farmers' co-operative in Nebraska a study was conducted to identify
leadership behaviours and to determine the relationship of farmer co-operative
manager behaviours to organisational outcomes. Using the Multifactor
Leadership Questionnaire, the researchers found that managers practised
constructive transformational leadership (contingent reward) and laissez-faire
leadership more frequently than they had realised. The more transformational
a leader, the more positive were the outcomes attained. Another major finding
was that the laissez faire leadership had a significantly negative relationship to
satisfaction.
Co-operative leaders are, in a sense, social entrepreneurs who recognise an
opportunity which they try and maximise by creating an organisation of the
users. Nabar (1992) points that out by citing the success of sugar and dairy
cooperatives.
In Maharashtra and Gujarat, various researchers have identified three major
factors. First, community characteristics of the farmers, chiefly the cultural
factors; second, economic necessity created by capital-intensive processing
technologies; and finally, the outstanding leadership that got attracted to the
co-operative movement due to the power, prestige, and patronage that
leadership roles offered.
23
CONCLUSIONS
The liberalisation policies in force since two decades were foreseen as a threat
to co-operatives. It has been observed that some co-operatives being able to
overcome competition are moving ahead while a few have succumbed. From
an organisational behaviour stance it is important to note the structural
differences between co-operatives and investor owned organisations. A major
role of co-operatives, apart from the economic development of their members,
is to catalyse social change, something that a functional approach to
organisation fails to address. However, co-operatives have to match the
competition posed by investor owned organisations. It is only when co-
operatives will be able to tackle hurdles posed by the efficiency parameters of
the investor owned organisations that they will be able to meet their social
goals. In order to achieve this the co-operatives will have to acquire greater
market orientation and they should be more professional in their approach.
This warrants them to address the issues of human resource practices,
leadership capability development, and the spread of entrepreneurship culture.
Human resource management is sensitive, personalised and context- specific
and without predefined techniques. Human resource, which was once
considered as cost, is now considered as an investment. The success of an
organisation depends on the right kind of policies and practices for building
employee satisfaction. Successful organisations have better HR practices like
learning teams, open policies to address employee grievances, employee
participation in decision-making, etc. Such practices help bring about the
congruence of individual and organisational goals. Organisations use better
human resource management as a strategic tool to build customer-centric
organisations and gain competitive advantage. However, it has been observed
that during recession many producers‟ co-operatives thrived as they were not
dependent on external resources to get their raw material and they remained
competitive in the absence of extreme pressure from the members. Staber
(1989) observed that the co-operatives maintained employment through
difficult economic times, whereas capitalist firms began laying-off workers at
24
a certain point in the recession. Similarly, during the recession of 2008-09, the
Gujarat Milk Marketing Federation (GCMMF) business increased by 26%
(Source: Annual balance sheet of GCMMF).
Several past studies have affirmed that the co-ops employees‟ weaknesses
outweigh their strengths. The strengths are high-level job involvement,
organisational commitment, intention to exhibit organisationally desirable
behaviour, and belief in co-op values. The weaknesses are lacking in a whole
range of competencies, be they technical, behavioural and managerial. Hence,
it is essential for employees to compensate their weaknesses by acquiring
required skills so that they can be more efficient and perform at expected
levels.
The complexity of co-ops has been attributed to their dual characteristic of
pursuing economic and social goals. Hence, it is a challenge to sensitise and
orient the employees towards both and help the business to sustain and grow.
Further studies are required on many of the issues vexing co-operatives. A
majority of the co-operatives operate on a federal structure; studies are
required to understand the consequences of such structures in different sectors
and states. As members are also producers and owners of the organisation
further studies are required on governance issues and identifying how they
affect the employees‟ motivation towards work.
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