CHAPTER 8

PRACTICE OF MANAGEMENT IN COOPERATIVES

Practice of management in cooperative is classified on the basis of functions of

management like planning, organizing, staffing, directing and controlling. The features of
each function are discussion as follows:-
1. Planning: Planning involves the advance determination of things to be done. The
future course of action is decided at present. Planning consists of formulation of
objectives, policies, programmes, procedures and other names of achieving these
objectives.
2. Organizing: The organizing function means the determination and enumeration
of the necessary component activities which are required to achieve the enterprise
objectives. It means the grouping of these activities, and assigning of these
activities to groups, departments, and so on. Accordingly activities are divided
and each worker is assigned the job. Necessary authority is also delegated.
Coordination is also ensured by the manager for the smooth functioning of works.
3. Staffing: Staffing connotes the recruitment of right and competent personnel to
man the organization at all levels. Staffing includes section, training, promotion,
appraisal, compensation, communication etc. The success of an organization
depends mainly on this function of management.
4. Directing: In directing the activities of the organization guidance is given to the
subordinates. Directing warrants efficient leadership qualities. Directing function
includes decision-making guiding, supervising, motivation etc.
5. Controlling: Controlling ensures whether the activities are proceeding as per the
original plan. Deviations are located and corrected. Controlling includes
performance appraisal, corrective actions, etc. Control is undertaken through
instruments like budget, costing etc.

8.1. Planning in Co-operatives

Co-operatives as business and economic organizations have to plan their future activities,
like any other economic organizations. The planning advantages accruing to any
organization could be bestowed on co-operatives also. ‘If co-operative management is to
become more effective, and the sense of mission of co-operative members is to be
reinforced, then the function of planning must be pursued with consummate skill and
sensitivity. Planning which grows out of the hopes of the people it serves, and is
tempered by an understanding of what is attainable, brought to a sharp focus by an
informed, pragmatic manager’.
1. Planning in co-operatives is needed for the vertical and horizontal growth of
individual co-operatives. Lack of proper planning led to the stagnation of many
co-operatives. The primary agricultural credit societies which are expected to
undertake multi-purpose activities are confining only to credit disbursal in many
states. Only by proper planning additional activities can be undertaken and the
volume of business should be increased.

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 2. Planning in co-operatives can be framed and steps will be taken to move towards
set goals. Objectives can be framed and steps will be taken to achieve them within
a stipulated period.
3. Co-operatives need planning to increase their competitive power. As similar
activities are undertaken by other organizations the co-operatives have to compete
them and must provide efficient service to their member customers.
4. The operational efficiency of the co-operatives must be increased to make them as
viable units and to grow and sustain forever. Planning is very much essential to
guarantee this. Through proper planning responsibilities are fixed for the staff an
they are delegated powers to execute them. If the operational efficiency is lost,
co-operatives cannot attract customers. This warrants planning for each set of
activities. If proper planning is not arranged for recovering and its operational
such maladies.
5. Co-operatives are not only undertaking economic functions but have a mission to
teach the social values of co-operation, namely self help through mutual help each
for all and all for each unity in diversity etc. Their motto and benefits must be
extended to the people who are exploited by evil forces. Proper planning at each
society’s level can make them to spread the above messages to those who are yet
to be embraced by the co-operatives.

Objectives in co-operatives

Co-operatives have two important objectives namely immediate objectives and ultimate
objectives.

Immediate Objectives: Immediate objectives are the objectives which form part of the
objectives that are discussed in management planning. Again, the objectives for
cooperative organizations differ form each other. Co-operative processing units like co-
operative sugar factories, fertilizer units, rice mills, etc are run applying all modern
management techniques. They naturally undertake all the functions of management. On
the other hand small cooperatives like village credit societies, weaver’s societies, etc. do
not follow such management principles. For them planning has no significance in their
working as they undertake the same function in a routine manner.

Immediate objectives of co-operatives are laid down in their by-laws. These objectives in
majority of the cases are uniform to a particular type of co-operative societies. As the
societies follow the model by laws during their registration, number of societies of a
particular type follow uniform objectives. Though provision is there to amend the by-
laws, very few co-operatives attempt to amend their by-laws. For examples, a village
credit cooperative society has the objective of disbursing credit and undertaking non-
credit services. These objectives are uniform for all credit societies in a state. Some of the
objectives laid down in the by-laws are not implemented at all. Though encouragement of
thrift and self-help is considered as an important objective of a credit society, societies
rarely encourage or attempt to achieve this objective.

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Co-operatives which undertake processing activities with heavy investment and co-
operative super markets, to frame objectives as part of their planning process. In addition
to the objectives laid down in their by-laws, they frame practical objectives to face the
changing environment. They involve their managers and sectional heads for such
activities. The Board of Directors takes the initiative for working out the plans.

Ultimate Objectives: Ultimate objectives of co-operatives are long term objectives and
they are not decided like immediate objectives. Achieving the immediate objectives may
lead to the achieving of ultimate objectives. Ultimate objectives are a social process and
they are intended to form part of social reform. These objectives are not confined to a
particular co-operative. The ultimate objectives are to be implemented by all co-
operatives. These objectives are elimination of poverty and backwardness, avoiding
exploitation in the society, ensuring social and economic justice bridging the gap between
the rich and the poor. To achieve these ultimate objectives co-operatives follow the
principles of co-operation laid down by the International co-operative Alliance as
guidelines. These goals are to be achieved by joint effort undertaken by all types of co-
operatives and by embracing the principle of co-operation among co-operatives.

Decision Making in Cooperatives

Decision making stage is an important aspect of the process of planning. After deciding
the alternative courses, the management has to choose a right course of action to achieve
the goals. There are two aspects of decision making in the co-operatives.
1. The role of the Board of Directors
2. The role of the external agencies

1. The Role of the Board: In a co-operative organization the Board takes the
decision on behalf of its members. The chief executive representing the
professional management is also taking part in the process of decision making.
The chief executive must give alternatives to a plan and must place needed
information before the Board. The Board takes the responsibility for the success
or otherwise of a decision. It assigns necessary power to the chief executive and
directs him towards the achievement of goal.
2. Role of External Agencies: In a state sponsored and state aided movement the
government’s control over the co-operatives is very prominent.
The Registrar of co-operative societies, who implements the co-operatives societies’ Act
has enormous control over the co-operatives. Another feature of co-operative institutions
is that the federal structures for various co-operatives have been organized. The lower
units of the federal structure are supervised by the apex societies and thereby they control
the lower units. The above said agencies greatly influence the policies of co-operatives.
Hence planning in an individual society is decided by weighing the controls, suggestions
and policies given by the external agencies. In other words any internal plan of a co-
operative society is influenced by external factors and the total plan must be based
weighing these factors. It is the same case with the decision making which is an
important process of planning.

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As far as government is concerned, many of the decisions are dictated over individual co-
operatives. In respect of reorganization and revitalization of primary agricultural credit
societies an element of compulsion had been introduced. In very many case the Registrar
imposes amendments to the by laws of various types of societies. Central Bank of the
country and the monetary authority of the nation have statutory controls over co-
operative banks. Policies and decisions relating to the rates of interest lending policies,
repayment procedure, etc must be approved by it. It used to give directions to co-
operative banks which certainly influence the decision making process. In other words,
decision making is thrusted over co-operatives in very many occasions.

Organizing Function in co-operatives

After the planning function of management is completed, objectives are established. To

achieve these objectives the tasks are identified through the functions of organizations.

Principles of Organization: Co-operatives which are different from other private

enterprises must organize things differently to achieve the objective. The organizing
functions should be related to the ‘service motto’ K.G. Howard laid down the following
principles of organization for co-operative.
1. The work to be done set out in the objective of the plan, is analyzed and the
specific tasks to be performed are identified and grouped. The numbers and
kinds of position which will be needed are determined.
2. An organizational chart is prepared, providing for maximum co-ordination of
position and effective communication witin organizational structure.
3. An objective is written for each position on the organization chart and in a
few words the main purpose of the position why it exists on the chart is
stated.
4. Responsibilities and corresponding authority for each position are clearly
written.
5. The span of control of each supervisory position is established to ensure that
each such position has responsibility for an appropriate number of key result
areas. It is to be noted that span of control refers to the number of key result
areas for each for which a supervisor is responsible, and not the number of
persons reporting to a supervisor.
6. Unity of command is maintained, by ensuring that a person is not held
accountable to more than one supervisor in the same key result area. An
employee, however may be accountable to two supervisors, if they are in
different key result areas.

Decentralization of Power in Co-operatives:

Power of authority is to be decentralized in order to achieve the objectives and to reach

the goal. One of the preconditions for the successful decentralization of authority is the
availability of trained managers. Co-operatives are still searching to employ qualified and
trained personnel. Co-operative leaders lack knowledge relating to the scientific

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management. They have a fear that sharing of authority with the professional
management may undermine their importance. They want the chief executive to consult
the president for each and very petty-things. This trend is widely prevalent in small co-
operatives. Hence, an important factor in the decentralization of authority in co-
operatives is the leadership and the attitude of the leaders to share authority.

On the other hand, another extreme is prevalent in some co-operatives where directors
and other leaders are not educated or enlightened about the management principles, the
professional management exploits their ignorance and in very many cases misguides the
leaders. All the management functions starting from planning are undertaken by the
professional management and they are approved by the Board because the directors are
ignorant of the working of their co-operative so they not only decentralized authority
completely but surrender themselves to the professional management. This trend should
not be allowed to persist.

As the processing co-operatives and consumer stores like super markets are employing
skilled personnel, the decentralization of authority and delegation of power has not been a
problem. They are business organization run to compete with private organizations. The
co-operative leaders share authority with their professional managers.

Organizational Structure of a Co-operative

The organizational structure of a co-operative is in a pyramidal form. The members who
exercise the ultimate power stand at the top of the organization. They exercise their
power through the general body which is convened whenever called by them. These
members elect the directors and make the Board of directors to act on behalf of them. The
board of Directors frames the objectives of co-operative and lay down policies to achieve
the objectives. The president has to consult and convene the Board very often. The Board
decides the powers to be delegated to the executive, who is usually called as general
manager or secretary. While power is delegated, responsibility for performance is also
fixed.

The professional management is under the control of the chief executive. The chief
executive in consultation with the Board decides the organizational set up for the staff.
Necessary powers are delegated to the section managers and responsibility is fixed.
Control and communication systems are established.

Performance is reviewed frequently and is reported to the Board. The organizational

structure of a co-operative is shown in the following chart, which is in pyramidal form.

In co-operative processing units like sugar co-operatives, fertilizer units and in

consumer’s co-operatives, the organizational aspect of the management is followed
scientifically like any other private organizations. But in small co-operatives and in
agricultural credit co-operatives this function is not undertaken scientifically. Because
they employ few staff and their volume of transaction is also low.

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8.3. Staffing in Cooperatives: Staffing which may ultimately lead to Human Resource
Development for the organization need inter alia include, initiating and implementing
following action stages:
(i) Systematic efforts to undertake manpower planning at unit level as also in
respect of different levels and sectors of cooperative movement.]
(ii) Induction of professionally qualified, competent and dedicated personnel at
various levels of management by systematic requirement based upon pre-
determined norms, qualification and procedures.
(iii) Phased programme of providing need based training – induction, basic,
sectoral and functional – to an entire range of multi-level, multicategory
personnel to ensure management development as may be commensurate with
the dynamics of development.
(iv) Demarcation of the spheres of responsibilities of the elected management and
professional executive in unambiguous terms and devising fine synthesis
between the respective management functions of elected management and
professional management.
(v) Development system of decision making and policy formulation based upon
rational management critical with due regard to objectives of management.
(vi) Development Human Resource Management policies and procedures
including those of placement, promotion, transfer, performances appraisal and
grievance settlement as may be conductive to harmonizing individual goals of
personnel with the organizational goals and management objectives.

Staffing in Co-operatives:

Cooperatives do need qualified and efficient staff to run their business successfully. They
must forecast their staffing requirement and must select the needed staff. The recruitment
and selection of staff are done by the Board of directors and the president is given powers
to select candidates. In certain co-operatives a separate committee called, ‘Selection
committee’ has been formed solely for purpose of conducting interviews and select the
required staff. The posts are usually advertised in newspapers. After the selection is over
candidates are sent for training. Training differs from institution to institution. In may co-
operatives newly recruited staff are asked to work with the regular staff. In this way work
experience is given to them. Co-operatives insist on their employees to undergo co-
operative training organized by co-operative training colleges and institutes. As this
training is compulsory, even while recruiting the staff, candidates who have undergone
co-operative training are selected. In the case of the candidates who have no training,
they are asked to undergo training later at the cost of the institution. Training in co-
operatives is a continuous process and the employees are sent for specialize courses run
by various co-operative training bodies.

Remuneration in co-operatives is also fixed by the Board of Directors. Depending on the

turnover and profit earned, the salaries are fixed.

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8.4. Directing Function in cooperatives

The directing function of management consists of the following:

1. Leadership
2. Motivation
3. Communication
Need for Leadership in Co-operative Management
Strong co-operative leadership is needed for the following reasons:-
1. Co-operative leadership is needed to expand the activities of the co-operative
organizations. Further growth of the existing co-operative and the organization of
new type of co-operative need leadership. The felt need of the mass could be
sensed only by the leaders and they alone can take steps through organizing co-
operatives.
2. Co-operative leadership is necessary to safeguard the interests of the co-
operatives. This job of leadership pertains to the external activities. The co-
operatives, in order to serve the weaker sections need certain protection and
privileges from the State. To initiate such protection the leaders must contact the
State. This contact to protect the interest of the co-operatives is very much needed
in developing countries, where co-operative are used as instruments of the State in
achieving certain goals. As they are viewed as competitive agencies by the private
sector the co-operatives must be given certain concessions till they attain strength
necessary to face any threat. Co-operative leadership alone can perform this
function.
3. In the management of the co-operatives, the policy decisions are to be taken by
the leaders. They must discuss various issues and must give the policies with
strategies to the paid management for implementation. They must also delegate
financial and other powers to the chief executive for achieving the goals. The
efficiency and performance of the professional management depends on the
quality of guidance, given by the co-operative leaders. They must have necessary
background of the business, must know the intricacies relating to the particular
type of co-operative institutions. They should also know the art of delegation of
power and fixing of responsibilities to the professional managers.
4. Co-operative leadership is necessary to act as trustees for the properties of the co-
operatives. Maintenance of the assets of the assets of the society and increasing
the assets of the society must be their avowed duty.
Mr. Weeraman pointed out the role of leadership in well established societies relating to
(a) development policy (b) defensive action (d) training (e) research (f) deofficialisation
(g) consolidation.
Functions of Co-operative Leadership
The main function of co-operative leadership would be the motivation of the members
towards the achievement of the goals of the co-operative. The leaders must motivate the
members to take interest in the affairs of the society. Another function of co-operative
leadership is to create awareness about the working of their co-operative and to inculcate
their rights and responsibilities: In many of the co-operatives, especially in rural co-
operatives, the members do not possess even the elementary knowledge about their
organization and its functioning. It is the duty of the co-operative leaders to educate all

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the members to provide essential knowledge of the co-operative society. They should
also prepare second line of leadership by encouraging the youth to take up various
responsibilities in the management.

Problem of Leadership in Cooperative Organisations

Cooperative organisation exists due to the enlightened leadership of the people to fight
against exploitation. It advocates its own way of socio-economic transformation. Hence,
its success or failure is determined to a greater extent by its success or failure is
determined to a greater extent by leadership quality of its members on the one hand and
managerial leadership on the other. In India, the cooperative organization is facing
mundane problems of leadership reflecting a leadership crisis. Some of the outstanding
problems as noted by AK.Sah are as follows:

Absence of knowledge of Leadership

There is a lack of proper understanding about the meaning, qualities and functions of
leadership among most of the cooperatives, and executives of cooperatives. They move
with whimsical administrative qualities and skills devoid of leadership approach and
ability. The useful approach on the part of cooperators and executives is to develop
judicious combination of leadership talents and executive skills for successful running of
cooperatives.

Poor Framework for Leadership Growth

Poverty, illiteracy, ignorance, various taboos and other such factors inhibit the
development of leadership qualities among the members of cooperatives. So long as these
impediments are not removed or minimized, good leaders cannot emerge to control and
manage cooperatives. Imposition of a cooperative society from above without creating
congenial atmosphere and infrastructure is also a great hurdle in the way to leadership
development.

Inefficient Personnel
Lack of qualitative personnel in most of the cooperatives acts as another barrier in the
making of managerial leaders. Subordinates with poor expertise and knowledge hesitate
to take responsibility. Such employees cannot give good managerial leadership.
Cooperative leader’s area also reluctant to promote manager ship where such scope
exists.
Motivators:
Arch Patton, who did tremendous work on motivation, has identified the following
motivators:
1. The challenge we find in work: If this is to be maximized a man must know the
purpose and scope of his responsibilities; what his authority is what is accepted of
his and have a belief in the value of what he is doing.
2. Status: Although recognized for centuries in church, military and government,
industry has come to recognize it only in recent years: it includes titles,
promotions, and such symbols as office size and appointment executive’ secretary
company car and club memberships.

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 3. The urge to achieve leadership: While difficult at times to distinguish from
power it is really a desire to be a leader among one’s fellow men.
4. The lash of competition: This important motivating factors is present in many
aspects of life.
5. Fear: This takes many forms, including fear of errors, or loss of a job or
reduction of a bonus.
6. Money: While placed last, this by means indicated that it is the least effective
motivator; quite the contrary, it is most often more than more mere money, being
generally a reflection of other motivators.
The other motivators are security of job; search for identify, providing authority, and
promotional opportunities.
Motivation in Co-operatives:
Workers in co-operatives are to be motivated a lot to provide efficient service. One of the
weaknesses of co-operatives it they are paying their employees deplorably low.
Motivation through monetary incentives is lacking in co-operatives and the time has
come for the co-operative leaders to open their eyes in general, Co-operative employees
are over working for a low pay. Though working hours are prescribed, in many of the co-
operatives they work beyond the working hours. They are rarely paid overtime salaries.
The crux of the problem lies with co-operative leaders. A though change in their look -
out as employers is needed. They must expose themselves to the outside competitive
world’s happenings. Motivation through monetary incentives is revolutionizing the
capitalist world. If the co-operatives have to bring efficient people and to retain the
trained people they have to change their salary structure. It is not question of resources
but it is the question of will. Co-operatives with enough resources are unwilling to any
their employees remuneratively, sherry due to the adamancy of their leaders. Where trade
unions are established, their adamancy has been tarnished.

Another aspect of motivation in co-operatives is lack of opportunities for the employees

to climb up the ladder. As co-operatives function independently on unitary basis, they
lack scope for expansion. In many instances, the areas of operations stand in the way to
open branches and expand. The salvation lies with the introduction of management
cadres at various levels. As this may affect the freedom of the societies to select their
own staff, in many states this scheme got scant attention.

Communication is a vital part of direction function. Through communication messages

are sent and received. To communicate is to inform to show or to spread information. It is
the means by which management gets its job done. Lawrence Apply points out the
communication process as follows:-
1. Clarifying the idea or problem.
2. Getting participation in developing a solution to the problem.
3. Transmitting ideas or decisions.
4. Motivating others to take action agreed upon.
5. Measuring the effectiveness of communication.

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Elements in the process of communication:
The process of communication comprises three elements:
1. The communicator or sender, 2. The message; and 3. The receiver.

1. The communicator or sender: In an organizational set-up, the communicator or

sender is the employee with ideas, intentions, opinions, information and a purpose
for communicating.
2. The Message: The purpose of the communicator or sender is expressed in the
form of a message – either verbal or non verbal.
3. The Receiver: In order that the process of communication be completed, the
message in its relevant form is transmitted to the receiver.
Importance of Communication

1. Every aspect of manager’s job, may it be planning, organizing, staffing, directing

and controlling involves communication. Most of the time of the managers is
spent in communicating. No wonder according to expert’s research finding,
managers spends 75 to 90 per cent of his time in communicating, exchanging
information with people.
2. Nothing contributes so much to managerial effectiveness as effective
communication.
3. However, the decisions at the top are, they will serve no purpose unless the
manager can successfully communicate the implications of these decisions to the
subordinates who are to implement them.
4. Communication is the essence of organized activity. It is the basis of direction and
leadership. The managers have to communicate to give instructions, orders to
assign jobs and fix responsibilities.
5. Communication renders the complexity of business intelligible and workable.
6. The better the communication, the more efficient the work performance.

Objectives of Communication
1. To develop information and understanding among all workers
2. To foster an attitude which is necessary for motivation, cooperation and job
satisfaction?
3. To discourage misinformation, ambiguity and rumors.
4. To prepare workers for a change in methods or environment by giving them the
necessary information in advance.
5. To encourage subordinates to supply ideas and suggestions for improving upon
the product or work environment, and taking these suggestions seriously.
6. To improve labour-management relations by keeping the communication channels
open.
7. To encourage social relations among workers by encouraging inter
communication.

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