co-op training module i basics of the co-operative model
TRANSCRIPT
Co-op Training Module I Basics of the Co-operative Model
What is a Co-operative?
A legally incorporated business, owned by its members who use its services.
Like other businesses a co-op:– Requires start up capital/equity – Generates revenue to cover its costs– Must provide quality services– Can distribute profits back to its owners– Can retain profits for future needs– Goal is financial self sufficiency– Provides limited liability for member owners– Can borrow money/sign contracts– Pays business taxes
Co-ops are Different From Private Enterprise
Owners benefit from use of the co-op’s services– Not seeking a financial return on their investment
Decision making is democratic – one member/vote– Not based on number of shares held
Profits are allocated based use of the co-op’s services– Not based on number of shares held
A co-ops business assets are owned collectively by local members– Cannot be used for private gain
Co-ops have stated social as well as economic goals– Profit is not the only concern
,
Who are Co-op Members?
They are:– Individuals who access retail, financial, housing & health
care services– Business operators who benefit from bulk purchasing,
sharing facilities & joint marketing activities– CED and other nonprofit groups that share equipment,
office space, etc. to reduce operating costs
Types of Co-operatives in NL
Financial - providing banking, investment services– Nfld. & Labrador Credit Union– Hamilton Sound Credit Union
Retail – groceries, hardware, building supplies– Indian head Consumer’s Co-op– Gander Consumer’s Co-op
Service – health care, housing, childcare– North Shore Central Ambulance Co-op– Advocate Youth Services Co-op
Types of Co-operatives in NL
Producer – fishery, farming, filmmaking, crafts– Northeast Coast Sealer’s Co-op– Nfld Independent Filmmakers Co-op
Worker – provides members with employment– Extension Community Development Co-op
Multi-stakeholder – membership categories– Blueberry Industry Co-op– Fogo island Co-op
Co-operative Profile: International
Ocean SprayAgricultural Co-op formed 75 years agoOwned by 800 cranberry growers in U.S. & CanadaHas over 2000 employeesLeading producer of canned & bottled juice drinks in
North America$1.4 billion in gross sales
Co-op Profile: National
The Co-operators GroupFormed in 1945 by Saskatchewan farmersLargest Canadian multi-product insurance companyAssets exceeding $5.7 billionOwned by 37 co-op organizations in CanadaNL Federation of Co-ops is a member-owner
Co-op Profile: Provincial
Fogo Island Co-opFormed in 1967 to resist resettlementDevelopment process pioneered the use of community
television to organize residents“Fogo Process” used as community development tool
around the worldCo-op owns 3 fish plants, a laboratory, a marine service
centre & has access to a fleet of 30 long-linersAnnual sales of approx. $20 million
Co-op Profile: Provincial
Eagle River Credit UnionFormed in 1984 when BMO pulled out to lack of businessReceived strong support from Caisse Populaire in Blanc
Sablon & local businessesNow second largest credit union in the provinceFull service credit union with 6300 membersHas 6 branches , $79 million in assets & 6550 member
owners
Co-op Profile: Provincial
Advocate Youth Services Co-opFormed by young people in Baie Verte in 2007 to:
– Engage local youth in the community development process
– Undertake community infrastructure projects– Develop other opportunities for youth employment– Engage in training & career development activities– Support member participation in youth camps,
conferences & other provincial events
Next Units
Unit 2: Co-ops as a Business ModelUnit 3: Co-operative Principles, Legislation & GovernanceUnit 4: The Existing Co-operative SystemUnit 5: Developing a Co-operative
Unit 2Co-operatives
As a Business Model
Co-op Structure: Roles & Responsibilities
Members• Are the owner/investors and have ultimate control of the
co-op• Participate in decision making relating to;
– Policy development– Appointment of auditor & annual financial reports– Distribution of profits– Election of the board of directors
• Members participate through the co-op’s AGM & other membership meetings
• Member shares are the basis for the co-op’s long term financial stability
• Member use of services is the co-op’s primary source of revenue
Co-op Structure: Roles & Responsibilities
Board of Directors• Elected by & take direction from the members• Pro-actively directs co-op operations based on co-op
principles, legislation, by-laws & policies• Selects, supervises & provides direction to
management• Manages & protects the assets of the co-op• Provide membership with full accounting of co-
operative activities and directions
Co-op Structure: Roles & Responsibilities
Committees• Appointed by members and/or board• Delegated authority for specific tasks or projects• Reporting relationships outlined in by-laws & terms of
reference• Standing Committees: Finance & Audit, Member
Communications, and Staff Relations• May be appointed for short terms, to address specific
issues as they arise
Co-op Structure: Roles & Responsibilities
Management & Staff• Hired by and reports directly to the Board• Responsibilities & powers similar to those of private
sector manager• Hires, directs and evaluates all other staff• Responsible for successful management of the co-op
business• Understands co-op business structures & governance
processes • Provides operational reports at board & membership
meetings
Smaller Co-operatives
Smaller co-ops may rely on part-time/seasonal staff or none at all
Member responsibilities remain the same as larger structures
Board and committee members may be more involved in day-to-day operations
Rely more on volunteer member and/or other community resource support
Comparison with Other Sectors
Public Sector: federal, provincial & municipal governments that provide public services, paid for by tax revenues
Private Sector: businesses & organizations that provide services for the public to maximize profits for individual gain
Social Economy Sector: non-profit organizations & businesses that respond to socio-economic needs of communities. Co-ops are part of this sector
Co-ops are Unique
Different PurposePrivate Sector: seeks to maximize profitability for investorsCo-operatives: seeks to provide members with needed
services at the lowest possible cost
Different Control StructurePrivate Sector: amount of invested capital dictates the
level of voting control
Co-operatives: each member has one vote, irrespective of amount of capital invested
Co-ops are Unique
Allocation of ProfitsPrivate Sector: profits distributed as dividends on
invested capital, regardless of use of products or services
Co-operatives: profits allocated to members as rebates on proportional use of products and services, not on the amount of capital invested
Member Benefits & Obligations
BenefitsAccess to quality services at reasonable cost Control of a business that places priority on their needsSharing of surplus profits that remain in the communityStable service delivery & and longer business lifePriority on local employment
ObligationsUse their co-op’s servicesBuy shares & maintain their equity investmentAttend AGMs and other membership meetingsBe informed and engage in the decision making process
Co-op Facts
Operate in a wide variety of business sector– Not just grocery stores or credit unions
They are subject to co-op legislation– But not controlled by government
Have a higher survival rate than other businesses– Not “last resort” enterprises operating in marginal
business situations
Make profits, employ local people and contribute to local economies– Not charities or non-profit organizations
Essential Conditions for Success
A co-op must:– Meet the needs of its members– Be economically viable with secure financing – Have strong member patronage & participation– Deliver top quality services at reasonable cost– Make board/staff/member education a priority – Hire competent & committed management/staff– Have strong leadership and a succession plan.– Have a positive relationship with the community– Buy & hire local as much as possible– Be adaptable to changing business environments
Next Units
Unit 3: Co-operative Principles, Legislation & GovernanceUnit 4: The Existing Co-operative SystemUnit 5: Developing a Co-operative
Unit 3Co-operative Principles,
Legislation & Governance
Co-operative Principles & Values
• Voluntary and open membership• Democratic member control• Member economic participation• Autonomy and independence• Education, training, and information• Co-operation among co-operatives• Concern for community
Co-operative Legislation
Canada Co-operatives ActApplies to co-ops that do business in two or more provinces or
territoriesNL Examples: Co-operators Group & Mountain Equipment Co-
op
NL Co-operatives Act Incorporates local co-ops & gives them legal statusRegulates operations including:
– Member investment & profit sharing– Democratic processes– Limited member liability & board indemnification– Non-member investments– Financial & audit requirements– Dissolution of a co-op
Co-operative By-Laws
The NL Act requires co-ops to develop by-Laws to govern their operations. By-laws address:– Structure and objectives of the co-op– Who can be a member– Member share purchase requirements– Meeting quorum & notification requirements– For profit or non-profit status– Distribution of profits– Board size, election, & term of office– Membership withdrawal & share pay outs– Role of officers, committees & manager– Bonding requirements– Procedures for by-law amendment
Co-operative Operational Policies
• Articulate operational & service delivery procedures • Are developed by individual co-ops and articulated in:
– Meeting minutes– Operational manuals– Member information kits
• Build on the Co-op Act & by-laws by & address:– Procedures for decision-making– Actions to be taken in different situations– Stakeholder roles, responsibilities, and authorities
Common Co-operative Policies
Procedures for:– Hiring of staff, personnel policies, working conditions– Member & public relations– Gender equity & responding to harassment issues– Charitable donations & other community supports– Setting of service fees– Terms/conditions for access to services– Treatment/protections - members/customers/clients – Conflict of interest guidelines– Financial management & reporting
Co-op Governance Summary
• Co-op Principles• Canada Co-operatives Act• NL Co-operatives Act• Co-operative By-laws• Co-operative Operational Policies• Membership handbooks• Member/customer service procedures
Next Units
Unit #4: The Existing Co-operative SystemUnit #5: Developing a Co-operative
Unit 4The Existing Co-operative System
An Integrated Co-op Network
First Tier: Local co-operatives in the community that provide services for their members e.g.– Petty Harbour Fishermen’s Co-op– North Shore Central Ambulance Co-op– Terrington Consumer’s Co-op– Eagle River Credit Union
Second Tier: Centrals formed by at the provincial or regional level to represent first tier co-ops & provide them with other services– NL Federation of Co-ops (NLFC) – Co-operative Housing Association of NL (CHANAL) – Co-op Atlantic (CA)
An Integrated Co-op Network
Third Tier: National co-op organizations that represent second tier co-ops and provide a range of other support services e.g.– Canadian Co-op Association– The Co-operators Group Ltd.– Worker Co-operative Federation of Canada
Fourth Tier: International co-op agencies, made up of national centrals, which promote co-operatives on a global level e.g.– International co-operative alliance– World Council of Credit Unions
Canadian Co-operative System(Co-op Sector)
Co-op Sector– Over 10,000 co-ops & over 10 million members– Three of every 10 Canadians are members of a co-op– Over $160 billion in assets & employ over 160,000 people– Over 250,000 producers rely on co-ops for their livelihood
Financial/Credit Union sector– Over 1600 credits unions and caisse populaires – 10 million members at over 3400 locations– Over $170 billion in assets and employ over 60,000– Only financial institutions in over 900 communities
across Canada
Provincial Co-op Sector Overview
Provincial Statistics Over 90 co-ops and credit unionsEmploying 1,400 people57,000 members doing business in excess of $800 million
Types of Co-opsConsumer (Clarenville Consumers Co-op) Fisheries (Torngat Fisheries Co-op)Agriculture ( Eastern Farmer’s Co-op) Cultural industry (Nfld. Independent Filmmakers Co-op) Health services (North Shore Central Ambulance Co-op)Community development (Advocate Youth services co-op)Child care (Confederation Daycare Co-op) Housing (Kilbride Housing Co-op)
Intra-Provincial Co-ops
Co-op Atlantic– Retail & agricultural co-op services– Gander warehouse
Co-operator’s Group Ltd– Insurance & investment services
Others– True Serve Hardware Co-op– Country Ribbon Chicken– Central/Farmer’s Dairy Co-ops– Mountain Equipment Co-op
Unit 5 - Developing a Co-operative
• Overview of the incorporation process• Key questions to be addressed• Requirements for success• Understanding the development process• Steps involved in the development of a co-operative
project• Where to obtain financial assistance & advice
Unit 5Developing A Co-operative
Incorporation
• Understanding of the Co-operatives Act• Minimum of 3 members• Must submit:
– Articles of Incorporation, – Draft By-Laws – Business Plan– Required fee
• Reviewed by the Registrar of Co-operatives • Certificate of Incorporation issued
Opportunity Identification
Key Questions:Would the recipients of the services (potential co-op
members) be better served by owning and having direct control of the enterprise?
Will the services provided by the co-op enterprise provide a clear and direct benefit for the member–owners that would justify their investment in the enterprise?
Are there available sources of technical, advisory and financial support to help with the co-op enterprise development process?
The Development Process
• Elements of a Successful Co-op Start-up• Identifying a common need for a service that requires
a common action• Agreement amongst potential members that the a new
coop can best address this need• An adequate level of trust among potential members
must be developed• Member’s personal and financial commitment must be
secured• Other key stakeholders support must be on side• Capacity to implement business and operational plans
must be in place
Phases of the Development Process
Phase 1: Opportunity Identification– Marketing & Promotion of the Co-op Model– Informed Response to Public Inquiries– Introductory Presentations/Workshops
Phase 2: Development of the Business Idea– Initial Concept & Market Assessment – Initial Agreement re: Co-op Model & Objectives– Development of Concept Paper– Initial Assessment - Project Financing and Feasibility– Development of Initial Budget Estimates
Phases of the Development Process
Phase 3: Building the Co-op Group– Confirmation of Co-op Structure & Membership– Establishment of Steering Committee– Agreement on Tasks & Time Lines
Phase 4: Confirming Business Feasibility– Group Consensus - Potential Feasibility – Development of Business Plan*– Recruitment of Members Initiated– Agreement on Member Equity Contributions– Potential Financing Sources Confirmed
Phases of the Development Process
Phase 5: Co-op Incorporation – Draft By-laws and Business Plan Completed– Provisional Board of Directors Confirmed– Articles of Incorporation Completed– Documents and Fee Submitted – Registrar Confirms Incorporation
Phase 6: Business Start Up– Banking/Accounting Procedures in Place– Member Equity and Business Financing in Place– Staff Hired (if required)– Operational Policies/Procedures Developed– Opening Ceremonies - First AGM Held
Phases of the Development Process
Phase 7: Ongoing Co-op Operations– Policies and Procedures Manual– Monitoring of Operations– Regular Board Meetings– Ongoing Policy Development– Development of Business/Community Networks– Membership in Provincial/Regional Centrals
Support Services
Co-op Zone Newfoundland & Labrador– Regional Co-op Developer’s Network– Co-op Equity Investment Fund– Community Capacity Building Program– www.nlfc.coop
Agriculture & Agrifoods Canada– Co-op Secretariat– Co-op Development Initiative
National Co-op Sector Programs/Services– Co-op Atlantic– Co-operators Development Fund– Canadian Co-op Association– www.coopzone.coop