Manager on Contract Program Strengthens the Co-op System

Northeast Cooperatives' Manager on Contract program was developed to strengthen our system of co-op management. Management of retail food co-ops is not getting any easier as the natural foods market matures and evolves. One of the most difficult tasks of a co-op board is to have a general manager vacancy to fill. Many co-ops have found that there is not always a ready pool of candidates for general manager openings. Overall the labor market is very competitive, with many companies seeking experienced natural food retail managers. In addition, cooperatives have their own set of organizational leadership skills, which often narrows the field of qualified candidates even further.

Recruitment and hiring is not the only management challenge for retail co-ops. It is challenging for a board of directors to support and supervise a general manager (GM). Having the support of a larger system for this responsibility is a benefit to both the co-op board and the GM. The rise and successes of the Cooperative Grocers' Associations testify to the benefits of collaboration among co-ops. In many ways the Manager on Contract Program provides similar benefits of collaboration while retaining the autonomy of the retail co-ops.

In a tight labor market, a supportive system is an advantage for recruiting, developing, and retaining managers. This inspired several co-ops to collaborate with Northeast Cooperatives in jointly developing the Manager on Contract program. Harvest Cooperative Supermarket in Boston and Brattleboro Food Co-op in Vermont helped set up the framework of the program in 1996.

Purpose and goals

The purpose of the Manager on Contract (MOC) Program is to provide general management for independent retail co-ops. Program services include general management hiring, supervision, and ongoing support. The goals of the program include providing continuity of general management, providing a professional and supportive work environment to maximize the development of management skills, and to create a more supportive network fostering the growth and development of consumer-owned retail cooperatives.

This is a new program that currently includes three participating co-ops: Onion River Co-op, Berkshire Cooperative Market, and Concord Food Co-op. It is modeled on the Co-op Atlantic Manager on Contract system. Co-op Atlantic is the cooperative warehouse serving independent co-op retails in Canada's Maritime region, where the co-ops overall have about 19% of the total grocery market. The Manager on Contract program there is given much credit for the successes of Co-op Atlantic member co-ops. Many U.S. retail co-ops participated in Co-op Atlantic study tours and brought the idea here.

The motivation for developing this program was the challenges of GM recruitment. However, this program addresses key weaknesses in our co-op management system that have led to these challenges, rather than narrowly focusing on the recruitment process itself. The key weaknesses identified in our management system include lack of coordinated development of systems, management development, and the challenge of a lay board providing supervision and support for general managers. The Co-o Atlantic model was again what inspired this larger picture point of view.

How Manager on Contract works

• The retail board of directors decides to participate in the program. The retail co-op and Northeast Cooperatives enter into a contractual agreement that outlines the respective responsibilities of the GM, the retail board of directors, and Northeast Cooperatives. There is an annual fee, based on a sliding scale according to the retail sales volume. Northeast provides recruitment services to the retail and facilitates the hiring process in conjunction with the local board. The Area Manager leads this process.
• The Northeast Cooperatives Area Manager and the local board collaborate on the hiring decision. The local board sets salary parameters, and the Area Manager negotiates the agreed-upon hire. The GM is a Northeast employee subject to Northeast personnel policies, which include a 3-month probation period, 6-month evaluation, and annual evaluation thereafter. The retail co-op pays the GM salary and benefits expenses. Note that there is not a contractual agreement with the individual manager through this program.
• The GM prepares an organizational audit of current retail operations.
• The local board and GM meet for a strategy session based on the organizational audit and board goals.
• The GM implements the strategy.
• The Area Manager supports the board by supervising the GM, participating with the GM in board meetings, and facilitating the development of program services to meet the needs of its participants.

Training resources

Manager on Contract participants are eligible for use of the University of Wisconsin Center for Cooperative (UWCC) Retail Co-op Operations Training Manuals at no additional charge ($2,000 value). Many educational expenses are paid by Northeast. Costs vary according to the annual individual GM development plan. Examples of educational expenses paid by Northeast in the Past include UWCC Co-op Manage Institute tuition, CCMA conference tuition, tuition for Northeast Cooperatives managers meetings, and computer course tuition.

Decision-making

The GMs in the program have the same function as GMs in co-ops outside the program. This makes decision-making in the co-op participating in the program very similar to decision-making without the program.

The participating co-op retail board has a key role in the hiring and evaluation of the GM Managers in the program are accountable for all general management responsibilities and for meeting goals set by the retail co-op board. Northeast Cooperatives provides an Area Manager for the program participants, who supports the retail board and directly supervises the GM.

The contract itself is very explicit in stating that the manager's job is to manage the retail in a manner that meets the goals set by the retail board of directors. There is no intent that co-ops participating in this program will be managed to meet the goals of the warehouse. In fact, to protect against possible conflicts of interest, the contract outlines that any significant change in purchases from Northeast Cooperatives must be approved by the retail board of directors.

Joining the program

The decision to join the MOC program is made jointly by the local retail co-op board of directors and Northeast Cooperatives. The first step for both parties is to gather information, beginning with a presentation by Northeast Cooperatives about the program to the local co-op board. The next steps include deeper exploration of the compatibility of our co-ops for working together at this level of partnership. These include:

• local board decision and resolution to proceed in concept;
• mutual review of strategic plans, financial statements, and bylaws;
• local board resolution regarding philosophy on growth;
• local board resolution regarding employee compensation;
• agreement to terms of contract;
• sign and notarize contract;
• GM hiring. Once the co-op has joined the program, Northeast Cooperatives and the retail board begin the GM hiring process. Northeast Cooperatives may hire the co-op's current manager, or in the case of a vacancy put an interim management plan in place and begin the recruitment and hiring process.

Why Join Manager on Contract?  Board Presidents Testify

Anne Renner, President of Concord Food Co-op, Concord, New Hampshire:
  Joining the Manager on Contract program is the best thing that has happened to our co-op in my four years of active involvement. In management crisis when we signed on, Northeast Cooperatives immediately found us a highly skilled and motivated interim manager with years of experience, Lisa Johnson. Lisa has within a year's time re-inspired our staff and board and established solid operating and personnel systems for the store. Although we are very sad she is moving on, with Northeast's support we are smoothly making the transition to hiring a new long term Manager on Contract GM.

William Hebherz, President of Common Market Co-op, Frederick, Maryland:
  At the Common Market, a small expansion about three years ago resulted in a large increase in sales and staff. With the decision by our GM to resign and move back to full-time grocery merchandising, the board had an opportunity to seriously evaluate its increased operating and human resources requirements. Our hiring committee found what I believe other co-ops in our geographical area are finding when it used the traditional recruitment venue of newspaper want ads. Midway through this process the board discovered the Manager on Contract (MOC) services. Northeast Cooperatives has been very responsive. We have come to see the MOC program as an investment in the cooperative ideal. We can obtain services from a GM that walks in the door with the right skill sets. The GM can utilize Northeast as a resource, and our staff has an avenue toward the training they deserve. One of the benefits in going through the exercise of considering the program has been opening up communication between board, management and staff. We look forward to continuing the steps needed to arrive at a signed agreement.

Beth Skinner, President of Berkshire Co-op, Great Barrington, Massachusetts:
  Rochelle's ability to lead, listen, be flexible and optimistic has built trust between management and board. The board has taken on some major projects this year with Rochelle's guidance: adopting the policy governance model, redoing our bylaws, researching incorporating in another state, reviewing our discount policy and looking at patronage dividends as an important next step in increasing profitability. By encouraging training and networking regionally and nationally, she has plugged our little co-op into the big cooperative picture, enhancing our current vitality and safeguarding the future viability of consumer owned co-ops. Our MOC GM, Patrick Wyman, has extensive natural foods retail management experience, which has been a tremendous boost to the efficiency and effectiveness of our store operations."

Don Schramm, President of Onion River Co-op, Burlington, Vermont:
  Our Manager on Contract agreement with Northeast Cooperatives worked gloriously well when our store manager suddenly submitted his resignation. If we had been on our own, we would have had to pull together a recruitment committee, designed and approved a hiring process, advertised the position, followed up on references and eventually negotiated a contract and salary -- all procedures that none of us do on a regular basis. Northeast did not miss a beat -- all those procedures were already in place. With MOC we still needed an interview committee, and fortunately Rochelle had been building a pool of available candidates. Within weeks we had an interim manager in place and a very highly experienced one at that, Ned Flynn. On our own, Onion River Co-op might have been searching and struggling for months.

Contract length, tools provided

The contract should be reviewed annually by the board. It is a self-renewing contract unless there is a decision to sever or modify the agreement by the local board or Northeast Cooperatives.

The contract includes a provision that either party may sever the contract due to dissatisfaction. There is a provision allowing 6 months from the time of notice for improving unsatisfactory performance; however, the contract can be severed sooner by mutual consent.

The Manager on Contract program provides the following:

• Area Manager (for supervision of GM and general board resource);
• GM job description;
• GM evaluation process;
• customized GM skill development plan;
• weekly monitoring of key operating results by Area Manager;
• UWCC Retail Co-op Operations Training Manuals;
• GM recruitment and hiring services;
• excellent benefits package for GM.

What are the costs?

The program fees are based on a sliding scale according to sales volume. The fee is $1,752 for the first $100,000 in annual sales plus $144 for every additional $100,000 in annual sales. For example, a co-op with annual sales of $700,000 would pay an annual fee of $2,616. A co-op with annual sales of $2.5 million would pay an annual fee of $5,208. A co-op with annual sales of $6.5 million would pay an annual fee of $10,968. The maximum fee is $16,000 per year, for co-ops with sales of $10 million or more.

What's next?

All co-ops currently in the program are considering expansions in the near future. With three additional co-ops in the process of joining, we anticipate a total of six MOC participants by the close of 1999. This will change the dynamics of the program and lead to more joint systems development and peer support. One co-op is joining with their current manager, a first for the program. As the program evolves, I expect this practice will be more common.

As the number of participants increase there will be a need to add Area Manager positions to maintain service levels to the co-ops that are outside an easily accessible range for regular on-site meetings with the boards and GMs. Experienced co-op GMs will be eligible for these Area Manager positions. Ideally, as the system develops there will be more opportunities for advancement for managers. Ultimately, this should lead to more promotions from within and more enthusiasm for management development from within our co-op ranks.

Reflecting on my one and a half years as the first full-time area manager for the MOC program: I moved to Vermont to work for Northeast Cooperatives with enthusiasm about the potential for this program to facilitate highly effective cooperation among cooperatives.

I was fortunate that Marilyn Scholl had set up the operating structure and systems before I arrived. These carefully designed structures clarify how the collaboration, decision-making and supervision function between the local co-op board and Northeast.

Much of my effort has been focused on helping to stabilize co-ops going through management turnover. I've led the process to place four general managers. Days during which I've worked with co-ops' management hiring and management evaluation committees have given me the strongest sense that this system is a means for co-ops' long-term success.

The most rewarding aspects are developing relationships with different co-op communities. It is continually enriching to be so involved with a variety of co-ops. It is a strength of this system to have an Area Manager within the co-op management structure to help bring a broader perspective. The balance of distance and involvement with the co-ops' operations puts me in the most effective possible position for providing supervision and support to general managers.

I look forward to expanding the pioneering group of cooperators I am working with and further developing the program to meet their needs.