Helping Build a Thriving Future for Food Cooperatives

Long before "just do it" became part of the American lexicon, the teenaged Homer Hickam, inspired by the launch of Sputnik in 1957 and fueled by a desire to beat the Russians at the space race, decided he also needed to launch a rocket. Never mind that he was a naive kid living in a hardscrabble coal mining town, or that his first experimental blastoff accidentally sent his mother's picket fence flying. That didn't stop him or his friends, and they became known as the "Rocket Boys" of Coalwood, West Virginia, now widely known to the public through the feature film "October Sky."

People are drawn to the story of Homer and his friends. It's moving to hear about how a group of people set out to change the course of their lives by applying themselves to the idea that "outer space" could belong to anybody and in doing so they changed their communities. It's especially inspiring because they didn't know a thing about rocket building when they got started.

The vision and ingenuity of co-op boards and members is not being tapped to address today's issues in the way that our founders did. The board's role is not only to assess management performance, but also to guide in a way that reflects the co-op's values.

When new wave food co-ops were founded in the 1960s and '70s, the idealism of a generation rallied to establish food stores that could provide for a previously unmet need for whole and natural foods. Few of our founders had a lot of business savvy -- to put it more bluntly, we really didn't know what we were doing. That didn't stop us from learning as we went along, and many of our co-ops are now community success stories. Like the Rocket Boys of Coalwood, the new wave food co-op story is a lesson in mutual self-help development.

Now, however, food co-ops are dangerously near the fringe of a multi-billion dollar natural foods industry. The products that were once so difficult to source are now ubiquitous -- they are not only at your neighborhood co-op but also in major retail chains like Wal-Mart, small town grocery stores, and even in convenience stores. Giant food conglomerates have bought out many of the small natural food producers that were once nurtured by local co-ops. Our co-ops were founded, in part, in order to get access to products we didn't have, and this founding need no longer exists.

At many food co-ops, the vision and ingenuity of co-op boards and members is not being tapped to address today's issues in the way that our founders did. Today our co-ops run the risk of becoming irrelevant to the consumer. There will probably always be individuals who prefer smaller stores or choose to support independent businesses. But what about everyone else? Natural food consumers (and they are now found in all sectors of society) can get what they need in other stores, and in some cases with better prices, service and selection. So why do our co-ops exist now? What human needs can best be met in cooperatively owned food businesses? How should our co-op mission change in the next 20 years to address these questions?

There is an emerging discussion on a national level about what kind of structure(s) could help ensure that our food co-ops have a thriving future. These exchanges have taken place here in the pages of Cooperative Grocer, at the annual Consumer Cooperative Management Association (CCMA) conference, and within activities of the National Cooperative Grocers Association (NCGA) and regional Cooperative Grocers Associations. Through these organizations cooperators can see the value in working together and begin to engage the possibility of a more unified vision of where to take our co-ops.

For myself, I have more questions than answers. I am not advocating any particular solution. But I do want to encourage more co-op leaders, especially boards of directors, to begin tackling these big questions. The purpose of this article is to suggest some questions for discussion by boards of directors. It is my hope that by addressing these questions boards will not only become more focused on what leadership they want to provide for the next 20 years at their local co-op but also help guide a unified strategy that will ensure that, throughout the country, consumers have access to cooperatively owned food stores for generations to come.

Developing board focus on future issues

Currently our co-ops have a diffused, decentralized system, but even a decentralized system needs leadership from its core areas. Too few local co-op boards are initiating conversations about a national plan, yet board leadership will be a necessary component in the formulation of a potentially new co-op system.

A critical question for every board to ask is: What do food co-ops uniquely offer to today's consumers? We could analyze this from two vantage points: from the perspective of our market niche (the competitive advantage for food shoppers) as well as from cooperative principles and values. The board's role is not only to assess management performance, but also to guide in a way that reflects the co-op's values. Most cooperators would agree that the board plays a critical role in determining the direction of our co-ops locally -- but what about nationally?

Along with eagerness to discuss a national vision at the local board level, we need the tools and systems for getting started. This includes having a governance system in place that allows time on board agendas for broad thinking and visioning and time for looking at how the path of the local co-op may be inter-related with food cooperatives nationally.

Boards need an efficient system that allows them to guide and to hold management accountable. It's all too common for boards to spend valuable governance time discussing operational and staff issues. A board should clearly define success for the co-op, set succinct parameters within which management can operate, and verify that actual performance complies with board guidance through written reports that include data. Then boards can fulfill their oversight responsibilities while significantly reducing the time spent on operations, in order to focus on their extremely important governance role. Once those oversight mechanisms are in place, there is time to initiate more far-reaching discussions on the future of food co-ops.

It's important to carve out blocks of agenda time to identify future issues. One way is to devote one meeting each quarter to such far-reaching discussions. If it's impossible to address these topics quarterly, pick at least one board meeting each year to devote to examining the ongoing relevance of food co-ops to people's changing needs and the co-op's potential relationship to other food co-ops.

Some might argue that a co-op may risk losing its focus on serving its own members' needs by looking outside of its immediate community. However, it may be even riskier not to be engaged with other co-ops. Could your co-op survive if it were the only one left? Is investing time and other resources towards ensuring that all co-ops thrive an act of charity or a strategic imperative? Boards could start by addressing pertinent questions such as the following:

• What are the trends in our market?
• What are our competitive pressures?
• What do customers need from co-ops now that our products are available elsewhere?
• What do "local ownership" and "local control" really mean?
• How are we interdependent (or not) with our fellow co-ops?
• What is the basis for the cooperative principle mandating "cooperation among cooperatives"? How can food co-ops best adhere to and gain advantage from this principle?
• What resources should co-ops invest in research and development for regional and national cooperative strategies?

A continuum of structural options

One way for boards to consider those questions is within a continuum of structural options put forth in other discussions about a national vision.  For example, should co-ops merge into national or regional cooperative chains or remain completely autonomous?  Is there something preferable in between?

Merger: National or Regional Chains

As costs, margins, and pressure from competitors rise, many of our co-ops could go out of business, leaving only the very strongest. Many consumers already won't pay more at co-ops for purchases they could make for less at other places.  One solution to this challenge is for co-ops to drive down costs by become more efficient at what they do. By merging into one entity, co-ops could gain in economies of scale and operational efficiencies. There are other examples of food cooperatives in other countries, such as the Oxford, Swindon and Gloucester Co-op in England (see "UK: Aging Co-ops at a Crossroad," CG #97/Nov.-Dec. 2001) that have been successful at mergers that better serve members' shopping needs while remaining responsive to their local communities.  However, mergers of stores of different types or formats could also carry the risk of increased costs.

Systemization, Standardization: Chaordic Approach

As a term, chaordic is an integration of the words "chaos" and "order" derived by Dee Hock, the founder of VISA International, and described in his book, Birth of the Chaordic Age.  The idea behind a possible chaordic system for food co-ops is to combine the "disorder" of creative and entrepreneurial forces of local ownership with the "order" of unified store performance expectations.  For example, stores might standardize financial systems, staff training, membership benefits, operational standards, etc., with contractual agreements. In this way, stores as a group could formalize and agree on the parameters for their interdependence without stifling independent initiatives.

Collaboration: Cooperative Grocers Associations

Regional Cooperative Grocers Associations (CGAs) already exist and are providing an example of how the benefits of working together can enhance both the identity and operations of individual co-ops. (See report in CG #99, March-April 2002.) Cooperative work from the CGAs around the country hgas resulted in programs like the Co-op Advantage Program that provide benefits to the participating stores and their consumers.  CGAs have been built on a model that assumes interdependence with other co-ops, but so far these associations have minimal formalized expectations and accountability for store performance.

Autonomous Co-ops

Autonomy has been the prevailing and founding model for our new wave co-ops for the last thirty years. While fully independent coops may be members of associations and cooperate with other co-ops, operational control is completely self-governed. This model presumes an independent co-op's whole identity rests within the individuality of its membership. Autonomous businesses can sometimes be more flexible, fast acting, and responsive to the local marketplace. But independent stores can also become isolated, stagnant, and slow to change.

Should co-ops remain completely autonomous or merge into chains? These structural options are end points on a continuum of interconnectedness, and most likely the best answer lies somewhere in between. Questions about whether and how much our co-ops have an interconnected relationship are workth asking by any board. Do other co-ops help ensure each other's success? Does associating with other co-ops make individual co-ops stronger? Again: could your co-op survive if it were the only one left? What resources should your co-op invest in exploring and implementing a national strategy?

What about local control?

When a discussion of national structure is broached, boards are inevitably faced with the need to examine what local ownership and control really means to their co-ops. Local control is an important issue, and some co-op members may fear that any loss of local control could lead to the loss of the co-op's "soul."

Typically only a small fraction of our members actually vote in co-op elections. Co-op surveys have shown that the majrity of people join consumer co-ops because of product selection, not community ownership. The opportunity to participate or to control the co-op locally is usually ranked further down the list. So what are we actually talking about when we say "local control?"

There are many related questions we could ask. If our members are only mildly interested in having a vote, do our co-ops manifest true democracy? If only a small percentag of members participate in decision-making, are those decisions really democratic? Are our co-ops answering to narrow agendas, be it from management or the board or a small minority of members? Is it possible to strengthen certain aspects of democracy and local ownership while at the same time increasing interdependence with other co-ops?

There are steps co-ops can take that will help them stay viable that may cause some loss of local control but that will not impact the member's relationship with their co-op. For example, if we unify accounting systems to have the most efficient nationwide system, will this change how members would perceive their co-ops from a local control standpoint? Probably not.

There is growing evidence that it will become harder for coops to be viable without some level of interconnectedness. We could be stronger if we were more interdependent. From a stronger poisition, could co-ops have a greater influence on how food is grown and distributed? Can food co-ops be a model for how communities can take charge of their own destinies? Can co-ops influence the way businesses accumulate, use, and reward capital? Will co-ops be strong enough to focus and deliver on our dual bottom lines, meeting economic and social needs? Boards need to respond to these challenging questions and move our co-ops forward as we examine the next level of our movement's development.

What board can do

• Have courage. Do not be fearful of discussing new ideas designed to move co-ops forward together.

• Allocate time to discuss these far-reaching issues. Develop efficient governance structures to ensure accountability that will free board time for big questions.

• Share outcomes of local discussions with regional and national organizations.

• Allocate resources for your co-op to participate in regional and national organizations and for research and development for a national food co-op strategy.

• Pay attention to what these groups are doing.

• Guide and support management's efforts to achieve a stronger financial and market position for your co-op.

In addition to board participation, we need resources to carry out this development process. Collectively, food cooperatives have not allocated adequate resources for research into these areas, to gather critical information for boards and co-op leaders. If every co-op allocated just one-tenth of one percent of sales annually to participate in developing a national co-op strategy and identity, we would have nearly $750,000 per year to invest in our future. If every co-op allocated $1 per member per month we would have over $3 million dollars annually. That money could be used to fund co-op leadership groups and consumer research that could help us refine our purpose and carry out our vision. If we don't invest in our own future, who will?

It's also important for boards to direct and support management's participation in regional and national co-op activity. And managers can play an important role by helping their boards be more informed about co-op development.

Sharing ideas and what local boards have learned with other boards and co-op organizations is also critical. This could be the beginnning of a new way of expressing local control. The circular power of listening and seeing the work of others, discussing it from your local perspective, and feeding this conversation back to others could generate powerful national solutions from local boards.

Unlike Homer Hickam and his home-made rockets, we don't have to start from scratch. We have group resources like Cooperative Grocer, Cooperative Grocers' Information Network (CGIN), and national and regional Cooperative Grocers Association that provide a ready platform for information and dialogue. Let's use them, and let's get talking.