Two Co-ops, One General Manager

Can two cooperatives, both successful natural food retails, share a general manager? For a year ending this past April, Davis Food Co-op and Sacramento Natural Foods Co-op, two stores 15 miles apart, similar in size and in methods of operation, did just that.

The key seems to be developing within each co-op a mindset which sees past self interest and myopia and embraces the concepts of cooperation, standardization, and mutual benefit.

In June 1989, the Davis Food Coop (DFC) began a general manager search, with a projected hire date of that fall. As of September, no one had been hired, and the search was extended to January. At approximately the same time, I had an informal discussion with a DFC representative regarding the concept of DFC and the Sacramento Natural Foods Co-op (SNFC) sharing a general manager. I had been with SNFC for seven years and was in my fourth year as general manager.

I approached my board of directors at SNFC, and the DFC board discussed the idea also. After three months of informal discussion, both boards agreed to proceed in a more formalized fashion. The shared general manager concept became more attractive to DFC and less threatening to SNFC. In addition the DFC job search had yet to produce an acceptable candidate.

The proposal

In January, I presented a proposal to DFC outlining the concept. The introduction read in part:

"Whereas the current structure provides for a full time general manager whose job description most closely defines that of an operations (store) manager, . . . serious consideration [should] be given a model whereby one individual would serve as strategist and planner for two independent yet similar operations. A middle management team would be developed with the primary responsibility of managing and insuring efficiency in three areas: personnel, floor operations and finance." The proposal went on to describe the management team functions as well as to list some of the benefits I envisioned.

SNFC was only in its second year in a new store. Our volume had doubled, staff had tripled, and annualized growth was at 25 percent. DFC had been operating with an interim general manager for nine months. Operations were relatively smooth, and growth was continuing at 20 percent or more. The planning process, however, was at a standstill. Many projects had been put on hold.

For my part, I saw the strengths and advantages a shared general manager could provide, but I underestimated the challenges presented by two co-ops simultaneously experiencing strong growth and undertaking immediate change.

Implementation

More than half a year after the scenario was first proposed, following meetings with co-op representatives and an attorney to design contracts that would protect SNFC, DFC and me, I signed individual contracts with each co-op.

During the first month, I spent a larger share of my time at DFC. This was a system which was new to me, and the management team was not as developed as at SNFC. The personnel manager was allotted 6 hours weekly vs. 30 at SNFC. The operations manager shared responsibilities with his department management responsibilities; SNFC had a full time operations manager. Controller functions were handled well at both co-ops. Ken Krueger, the DFC controller, had served as interim general manager for the previous 9 months. He functioned as a liaison between the department managers and myself early on, and this proved invaluable.

I increased the hours devoted to personnel at DFC, and a greater emphasis was placed on physical operations. And I did something else which proved quite valuable, and which I recommend to anyone taking on a management position. I distributed to staff a questionnaire which simply asked, 1) what are the positive aspects of your job, 2) what are the negative aspects, and 3) what changes would you make in the workplace. There were no conditions, and respondents were guaranteed confidentiality. What I received was a picture of DFC as seen through the eyes of experienced staff. I got a good idea of what their priorities were, what needed attention, and what was satisfactory.

The need for one change at SNFC soon became obvious. My management team (controller, personnel manager, operations manager) functioned well while I was a full time general manager. However, there was confusion as to who was ultimately responsible in my absence. The operations manager job description was rewritten, retitled assistant store manager and given the time and support necessary to function as needed.

I seriously underestimated the challenges the two different systems and two different cultures would provide. Similarities between the two co-ops began and ended with the fact that they were both co-ops and both sold food. Everything else about them was different: organizational structure, merchandising policy, product emphasis, member structure, personnel policies, music policy, holiday schedule, store hours, suppliers, pay days, pricing policy -- everything! Learning and differentiating between the two systems was much more demanding than I had anticipated. To maximize shared benefits, I needed to standardize some of the procedures.

In the end, the time and workload proved to be too much. On April 15, 1991, I recommended to the DFC board of directors that my contract not be renewed, and they reluctantly agreed to end the joint agreement.

Benefits

Both Davis Food Co-op and Sacramento Natural Foods Co-op have seen some benefits of cooperation and shared resources from this year of shared management:

• Both stores are sharing advertising. This has given both stores more mileage for their advertising dollar.
• One large distributor has offered an improved discount program based on our combined purchases. We also will begin receiving deliveries twice a week from this distributor. This will allow both co-ops to better utilize already cramped backstock areas.
• One of the major benefits has been the opportunity to combine training sessions. We've had joint board training and sessions on personnel management, marketing and merchandising. This has proven cost effective and has allowed the two coops to make training available to a larger number of staff.
• We have begun talking about consolidating our newsletters, and
• for now are sharing information and reporting more on our sister co-op. Both newsletters are also now available at either co-op.
• Managers from each co-op are talking regularly and benefiting from the knowledge and experience each has to offer. As they compare notes, they are realizing the impediment of maintaining two different systems. Department reports are being standardized. In time, we hope to give new meaning to the term "cross training" by exchanging teams for short periods, providing first hand knowledge of each co-op's practices.
• The controllers have spoken with each other regarding the possibility of standardizing financial statements and assorted reports. I'm confident this will happen in time.
• We have shared promotion and production of several local events. Our combined efforts have allowed us to bring quality "alternative" performers and speakers to our area.
• The co-ops are becoming increasingly more open to accepting and
• implementing procedures which may have been in place at only one store. DFC has instituted quarterly "all staff' meetings in much the same fashion as SNFC. I have implemented regular focus group meetings at SNFC. These have already been very successful at DFC.

As one can see, we are making progress and can see some benefits resulting from shared management. I'm not convinced, however, that this is the extreme to which we need to go to achieve these shared benefits.

Lessons learned

Some lessons learned in this year of shared management include:

1. Long range planning and team building suffer in the absence of strong leadership. This is obvious. What is not so obvious is the effect this has on new leadership, and on the transition period needed for team development and the establishment of new direction and vision. In periods during which leadership is absent, staff and management tend to withdraw and fortify their positions. Self interest or self preservation seem to supersede the good or needs of the organization. The goals of key staff must be drawn to the surface, addressed and incorporated into a game plan. This is a slow process. Staff base their trust to a large extent on management's ability to acknowledge and respond to their input and needs. Determining these needs, particularly when they don't always lie on the surface, is difficult until mutual trust and respect are in place. When there is simply a transfer of leadership, this problem exists to a much smaller degree. The pursuit of a common vision, the team effort, can hold up during a short period of transition. This is not the case when there is a long break in leadership. Interim general managers function as custodians. Staff and management can't be expected to buy into a long range plan which doesn't include consistent leadership.

2. The speed at which two organizations can develop are directly related to the level of standardization already in place. If I were to do this again, I would insure that standardized systems were already in place to a much larger degree than was the case here.

3. We need to learn that it is not necessary to continually reinvent the wheel. A greater effort should be made at sharing information, successes and failures. Then we should be more willing to experiment, take risks. We perhaps should not take ourselves quite as seriously as we do.

4. There is a limited number of staff one person can directly and effectively supervise. Depending on style, history and efficiency in supervision, this number is somewhere between 10 and 15.

To summarize, I would examine closely any plan of this type which involves management of anything other than multiple sites of one corporation. Absent standardized policies and procedures, the element of shared management is severely handicapped. Given these circumstances, the general manager essentially fills two full time positions.

The past year has provided benefits and seen development of a much higher degree ofcooperation between the two co-ops. However, we still have two boards of directors, two planning agendas, two different marketing strategies, different method of reporting and separate policies and procedures. They don't always coincide, and in fact at times conflict. Both organizations, from top to bottom, seem to be most interested in those issues which best serve their individual interests. This may be natural. It is not, however, most conducive to genuine cooperation and shared development.

To truly operate as one, to maximize efficiency and long range planning, some type ofcorporate "merger" seems necessary. This currently is not in the stars. Even hints at pursuing this have been swiftly dismissed. Short of something of this magnitude, we can continue to work more closely together, and we should. The more efficient we become, the more able we will be to develop and promote our niche. This will in turn allow us to more effectively compete and survive in our market. This market is not going to become any less competitive or formidable; quite the contrary.

Our co-op network can be a tremendous resource. Cooperation does equal strength. We need to develop this theme and not let it serve as just another motto.

To this end, I recommend that coops begin taking a hard look at their policies, procedures, methods of reporting and methods of operation. We should make efforts to share information on our successes and failures. When practical, we should work to consolidate our ordering and make our volume work for us. Our distributors and wholesalers are essential to our business.

One of our major challenges is retention of qualified staff. We need to continue to improve our compensation packages. We need more qualified personnel as we grow in size and sophistication. Lowering our costs in some areas and developing greater efficiencies will help us provide more competitive wages and benefits.

Although I don't think shared management worked in this situation, I have seen it work in other situations and in other capacities. Sharing advertising, accounting, newsletter production, training and purchasing are each worth pursuing. The key seems to be developing within each co-op a mindset which sees past self interest and myopia and embraces the concepts of cooperation, standardization and mutual benefit. Once advantages are realized on an individual basis, this process should become self reinforcing. This could diminish the need for shared management and help achieve similar results.

Dave Berner began at Sacramento Natural Foods Cooperative in 1983 and became general manager in 1986; he also managed Davis Food Co-op beginning in mid-1989. In June 1991 he left to manage one of the Puget Consumers Co-op stores in Seattle.