Working Paper 243

ORGANISATIONAL BEHAVIOUR IN

CO-OPERATIVES

Saswata Narayan Biswas

The purpose of the Working Paper Series (WPS) is to provide an opportunity to IRMA faculty, visiting fellows, and students to sound out their ideas and research work before publication and to get feedback and comments from their peer group. Therefore, a working paper is to be considered as a pre-publication document of the Institute.

Institute of Rural Management Anand

Post Box No. 60, Anand, Gujarat (India) Phones: (02692) 263260, 260246, 260391, 261502

Fax: 02692-260188 Email: corpas@irma.ac.in Website: www.irma.ac.in

June 2013

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ORGANISATIONAL BEHAVIOUR IN CO-OPERATIVES1

Saswata Narayan Biswas

2

Abstract

Co-operative organisations are largely ignored in mainstream Organisational

Behaviour (OB) literature. Yet the contribution of co-operative organisations

in both developed and developing economies is quite large and hence, an

attempt has been made in this paper to highlight certain critical issues

pertaining to the understanding of these organisations from the perspective of

organisational behaviour. While doing so, the existing literature in field has

been taken into account and a background prepared for OB researchers to

consider understanding the peculiar nuances of these organisations in order to

develop a holistic understanding of organisational behaviour area instead of

limiting it to the investor owned firms.

Co-operative organisations emerge from an unfulfilled need of its members. It

is a need that is improperly served either by the investor owned organisations

(aiming at finding the best returns for shareholders) or by public institutions

created for public good. Thus, they are private organisations created for the

benefit of users of their services. The surplus generated by the co-operative

may be distributed amongst members. In a population of organisations co-

operatives as organisational forms are not found in abundant numbers. A

comparison of co-operative and investor owned firms reveals that co-

operatives do not behave differently from non-cooperatives in the market

place. However, co-operatives serve a social function by uniting the

1 The author is thankful to Mr. Suresh B., FPRM participant at IRMA for the kind help

provided in locating the relevant literature during the writing of this draft. This is a work-

in-progress and not to be quoted.

2 Professor, Institute of Rural Management, Anand -388001, Gujarat, India

Email : saswata@irma.ac.in

iii

underprivileged section of productive people, particularly in the primary

sectors. Thus, there is a range of co-operatives from agriculture to credit with

thousands in between. Member control is a critical issue as far as co-

operatives are concerned and much research has been done on the ability of

the members to control their own enterprise. Literature suggests that member

control is also directly related to the performance of co-operatives. If the

members do not exercise control at levels of their own organisation they are

anything but co-operative even with the registered title of a co-operative.

Research suggests that employees in member-controlled co-operatives have a

higher level of organisational commitment, performance-related reward

systems, greater job satisfaction, intention to exhibit organisationally desirable

behaviour, belief in co-op values, and so on compared to co-operatives

controlled by external agencies (like the government). Similarly, member-

controlled cooperatives evince active leadership and they are also more

sympathetic to the cause of members than when the co-operatives are

externally controlled. Most co-operatives suffer from weakness related to lack

of technical, behavioural, and managerial competencies. Hence, it is essential

for the employees to compensate for their weakness by acquiring the required

skills so that they can be more efficient and perform at expected levels. The

complexity of the co-op is attributable to their pursuing both economic and

social goals. Hence, it is a challenge to sensitise and orient the employees

towards both and help the business to sustain and grow.

1

ORGANISATIONAL BEHAVIOUR IN CO-OPERATIVES

INTRODUCTION

While studying organisational behaviour textbook instances of organisations

like General Motors, General Electric, Microsoft, or Google recur ad nauseum.

Cases concerning co-operative organisations occur few and far between. The

truth is, however, that co-operatives contribute enormously to the economy.

In 1994, the United Nations estimated that the livelihood security of nearly

half of the world's population depended on co-operative enterprises (ICA,

n.d.). These enterprises continue playing a significant economic and social

role in communities. Co-operatives in the United States own more than USD

3 trillion in assets and generate over USD 500 billion in revenue and USD 25

billion in wages (ICA). In India, over 239 million people are members of co-

operative organisations spread out all over the country. In the context of

business volume and exerting an influence on the lives of ordinary people co-

operatives continue to top the list of organisations. Yet the truth is that

students of Organisational Behaviour rarely get the opportunity to learn about

the working of cooperatives; be it the rural electricity co-operatives of the

United States, which control 12% of the electricity business or the milk and

sugar co-operatives of India, which dominate their respective sectors of the

economy (ICA, n.d.). Amul is a household name in India and an example of

the outcome of a successful co-operative movement yet little research in the

country has been focussed on Amul and rarely has it emerged alongside names

like General Electric, Siemens, Microsoft, or Google in the textbooks on

organisational behaviour in the country. This paper is a modest attempt to

mitigate this shortcoming in India‟s organisational behaviour literature.

I have attempted to discuss the nature of co-operative organisations from the

existing foundational framework of organisational behaviour literature in this

paper. In the next section, an attempt has been made to differentiate the

essential features of co-operatives from other forms of organisations,

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specifically the consequences of these differences on organisational

functioning. Subsequent sections deal with the nature of the structuring of co-

operative organisations. They deal with how they do not conform to the basic

assumptions of the agency theory of management. As most organisational

behaviour literature is built around the assumptions of the agency theory it has

been argued that depending on an open systems approach, as opposed to the

agency theory approach or the closed systems approach, is better suited to

gaining an insight on co-operatives. The paper also reviews extant

organisational behaviour research on co-operatives before going on to

highlight leadership roles therein relative to the emphasis on the managerial

leadership role that has emerged in India‟s mainstream organisational

behaviour literature

Mintzberg (1996), in his now classic article in Harvard Business Review

(HBR) argues 'because capitalism has supposedly triumphed, the private

sector has become good, the public sector bad, and the cooperatively owned

and non-owned sector irrelevant' (76:1996). He argues that while capitalism

did not triumph at all balance has been brought about by the presence of a

strong public sector, a strong private sector, and specifically two sectors in-

between (the co-operative sector and the non-government sector) in a

capitalistic society. It is not capitalism but the balance that has triumphed. He

goes on to highlight that the co-operative sector contributes to more than 50%

of the consumer requirements of the United States. According to him, there is

a role for these four types of organisations for their different contributions to

society. Any one-type of organisation would have been unable to create the

balance in society required for success.

CLASSIFICATION OF ORGANISATIONS

There are various ways of classifying organisations. An important

classificatory system is based on the ownership of organisations. The Investor

Owned Firms (IOFs), commonly referred to as private sector organisations,

could exist in the form of closely owned by a few individuals or they may be

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held by a large number of individuals in the form of tradable shares. Public

sector organisations, on the other hand, are basically owned by the state.

Functionally speaking, the state owns the controlling shares of these

organisations. There are two other forms of organisations which, while

predominant, do not attract enough research attention. These are the co-

operatively owned and non-profit organisations, also referred to as non-

governmental organisations and co-operative organisations (Mintzberg, 1996).

The co-operatively owned organisations are, by nature, for-profit entities. The

not-for-profit organisations, on the other hand, are created for the public good

by private individuals. Co-operative organisations are created to benefit the

members. Surplus generated by the co-operative may be distributed amongst

the members. Differences in ownership patterns give rise to differences in the

objectives of these organisations impacting, hence, both their structure and

processes.

COMPARISON OF INVESTOR-OWNED ORGANISATIONS AND CO-

OPERATIVES

Co-operatives as organisational forms are not found in abundant numbers

being greatly outnumbered by investor-owned organisations (IOOs),

government organisations, or the not-for-profit organisations. It is largely

because those with capital would rather put their money in ventures that will

yield the highest return on investment; people donate money to not-for-profit

organisations as a means of social service and to help others. However, co-

operatives are for-profit-organisations for those who, with very little capital,

may be willing to pool in their resources to create enterprises for their own

economic betterment. Thus, people who are economically weak, relatively

speaking, still make a positive contribution to the economy through their

labour form co-operatives. People form co-operatives when they become

aware that they are being exploited or are likely to be exploited by those who

invest their capital for maximising returns. Organisational research and

analysis is largely based on investor owned organisations with very few

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focusing on the structure and functioning of co-operatives, which are

membership-based economic organisations of the poor.

CO-OPERATIVES AS A DIFFERENT FORM OF ORGANISATIONAL

ENTITY

A co-operative is defined by the ICA as an autonomous association of persons

united voluntarily to meet their common economic, social, and cultural needs

and aspirations through a jointly owned and democratically controlled

enterprise (ICA, n.d.). The premium body International Co-operative Alliance

(ICA) recommends the principles on which the co-operatives should work.

Co-operatives are based on the values of self-help, self-responsibility,

democracy, equality, equity, and solidarity. In the tradition of their founders,

co-operative members believe in the ethical values of honesty, openness,

social responsibility, and caring for others. Thus, co-operatives are different

from other forms of organisations as far as their stated objectives are

concerned. However, they are also different in their structuring and processes.

BALANCING CONFLICTING INTEREST

Organisational theories have often failed to explain and understand co-

operatives as these theories have largely dealt with closed system

organisations (Scott, 1992). Theories of organisations are often based on a

certain presumption of the differentiation of roles between different

constituents such as buyers, suppliers, manufacturers, etc. However, when a

group of consumers form a consumer co-operative or a group of milk

producers form a dairy co-operative society they merge the different

constituents into one making theorising difficult based on the interests of the

focal entity. For example, a single milk co-operative may earn higher profits

by reducing the procurement price paid to the farmer members. However, the

chief objective of the co-operative is to help farmers get the maximum share

of the consumers‟ money. This will, no doubt, put pressure on the bottom-line.

Co-operatives have to keep resorting to continuous adjustments and, from the

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systems theory perspective (Katz and Kahn, 1978), they are far more open

compared to any other form of organisation. This is largely because the

members of co-operatives are owners as well as users of the latter‟s services.

They happen to be investors, suppliers, buyers, etc., thus often merging several

roles, more often conflicting ones, into one. As far as investor owned

organisations are concerned, however, the investors are only interested in

financial performance and non-financial indicators become important only

when conformity to regulatory requirements is needed. Several researchers

view the inclusion of these critical actors in co-operatives as a co-optation

process to reduce potential resistance to the organisation and its goals by these

different actors (Pfeffer and Salancik, 1977; Oliver, 1991). However, the

governing board of the co-operatives representing the owner members

safeguard the interest of all members (Cornforth, 2004).

MEMBER PARTICIPATION

Dunn (1988) points out that co-operatives by definition are member-

controlled, their reason for existence being to serve the members. Co-

operatives are created as a reaction against the existing exploitative

relationship between primary producers or consumers and traders or

manufacturers. In order to avoid such exploitation people form co-operatives.

Even though financial participation is important individuals do not join a co-

operative to get the best returns on their capital but to use the services it

provides. Utilisation of services is of paramount interest here, not the return

on capital. Therefore, co-operatives have a cap on return on capital. This has

implications regarding the democratic control of co-operatives. Members of

co-operatives exercise control not based on how much equity they hold but on

the basis of either their individual membership or the patronage they extend to

the co-operative. Thus, the voting rights are decided based on either one-

person one-vote or the degree to which a member has participated in utilising

the services of the co-operative, which is also referred to as patronage-based

voting rights. For example, in a primary dairy co-operative society, members

may vote on the basis of one-person one-vote or on the basis of the proportion

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of total milk contributed by the person to the society. The dairy may fix one

vote for every 200 litres of milk. So, if a member contributes 400 litres of milk

then he or she acquires two votes whereas another member who contributes

1000 litres of milk gets five votes. Thus, the degree of patronage determines

the degree of control each person exercises on the co-operative. There has

been, however, a fierce debate over the two methods of democratic control as

far as co-operatives are concerned. According to Dunn (1988), this is

necessary for a co-operative in order to be able to serve the interests of its

members. The principle of democracy is a core element of co-operative

business. However, the agency theory of a firm postulates that member

control may be problematic due to information asymmetry. The signals

conveyed by members to the board of directors and to the management are

based on imperfect knowledge from the members‟ side. Dunn (1988) argues

that the problems associated with control of the firm get aggravated when the

principal is a collective. Additionally, co-operatives may suffer from the

problem of „free-riding‟ (Ostrom 1990) that occurs when members do not

shoulder their share of governance and management expecting someone else

to do so in a „diffusion of responsibility‟. Therefore, a major responsibility of

the co-operative organisation is to design a system that not only minimises

such free riding but makes it unprofitable for members to do so.

Given this backdrop it is not surprising that mainstream organisational

behaviour research rarely focuses on the role of the board in the structuring of

the organisation and the evolution of relationship between different actors

within the organisational context. Mainstream organisational behaviour

research is largely focussed on employee behaviour (managerial and non-

managerial); organisational theory research, which attempts to understand

organisations in the context of external and internal environments, treats

shareholders as an external constituent of the organisation. However, in co-

operatives, the shareholders are an integral part of the organisational design.

Members play a significant role in structuring of the organisation and in the

shaping of the organisational climate. They are not distant and uninvolved

participants in the organisational space who only watch the share price of their

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company. In mainstream organisations the shareholders are free to exit any

time but in the co-operatives exit is often linked to changes in livelihood

patterns making exit difficult. In an investor owned organisation the

shareholders may transact business maximally with the managers once a year-

that is, during the annual general body meeting when the dividend is declared.

However, in co-operatives, the owner members constantly transact business

with the co-operative on a regular basis while the managerial decisions affect

their day-to-day lives. This has an impact on the members‟ support and those

of the participants as far as the affairs of the organisation are concerned.

Nevertheless, in co-operative organisations, the board plays a major role in

determining the relationship between different actors. The board‟s role is two-

fold involving the resolution of the conflicting interests of different groups

and, secondly, setting the overall policy of the organisation in place.

However, the implementation of these roles is left to the managerial staff of

the co-operative. Any board of a co-operative is, firstly, required to manage

diverse and competing demands of its different constituents and, secondly, it is

required to maintain and build trust amongst the members. Pertinent to the

latter, the board is required to manage the perception of fairness, among other

things. Another important role of the co-operative board includes boundary

spanning activity, which is normally undertaken by the top management of an

investor owned firm. The board provides political leadership while managing

the external environment including policy wherein the techno-managerial

leadership with the organisation is focussed on increasing the efficiency of

organisational delivery mechanisms. In India, both sugar co-operatives in

Maharashtra and milk co-operatives in Gujarat have exhibited these patterns.

When the boundary spanning activities including influencing policy and

lobbying are left to the elected leadership, the managerial leadership is able to

concentrate on managing routine activities for maximising efficiency. This is

in direct opposition to the agency theory of management. According to the

agency theory paid management work occurs on behalf of the principal and

the principal is at arm‟s length as far as managing the external or internal

environment is concerned. Shareholders of a company would rarely go on

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strike against a policy of the government. Members of co-operatives act as

trade unions on the other hand. They go on strike to show their displeasure

against governmental policy, among other things.

DIFFERENT MEANINGS OF SUCCESS

The success of poor people‟s organisations, centred on an economic activity,

is largely determined by their patronage (Mishra & Shah, 1992). A large

number of studies have pointed out that patronage and sustained involvement

of the poor towards their organisation depends on a combination of factors

(labelled as stake centrality). Based on the concept of member-centrality

proposed by Shah (1995) and the theoretical perspective built around

Trevsky‟s and Kahneman's (1991) work on heuristics and biases in human

judgment, it has been argued that the poor will participate in the process and

patronise an organisation only under two compelling conditions (Biswas,

2010). One, when they perceive that the organisation is central to their

livelihood/existence and two, when chances of their perceived loss are high in

the event of the organisation‟s failure (Biswas, 2010). Trevsky and Kahneman

(1991) assert that there is an asymmetric relationship between losses and

gains. Poor people are likelier to patronise an organisation on perceiving that

its cessation would culminate in a loss to livelihood. The higher the

perceived loss the higher will be the degree of stake centrality.

PERCEPTION OF EQUITY

In making co-operatives successful the perception of members is extremely

important. When co-operatives are perceived as equitable, transparent, and

competent in addressing their specific needs they tend to produce better results

(Chen, Jhabvala, Kanbur, and Richards, 2007). One may use technology to

bring about transparency, but technology is only an aid. For example, the use

of an electronic weighing machine by itself does not make an organisation

trustworthy (there are examples in which people expressed doubts regarding

the use of electronic machines for weighing and estimating milk fat in several

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places in Rajasthan, Maharastra, etc). It is based on comparing different

activities undertaken by an organisation vis-à-vis others within the locality and

elsewhere besides the ties or bonds that are established with the facilitating

organisation or its professional staff. A combination of factors gives rise to

trust.

SIMILARITIES WITH OTHER FOR-PROFIT ORGANISATIONS

The preceding section highlights how co-operatives are different from other

forms of for-profit organisations. Co-operatives, like all other organisations,

operate within a context; they draw resources from the external environment

and provide inputs to the external environment. Most co-operative members

need to deal with constituents from the external environment either to procure

goods and services required by them or for direct consumption and/or as

inputs to their productive endeavour, or to market goods and services

produced by them. Like any for-profit organisation they may exploit

consumers by charging higher prices or may pay a lower price to non-member

suppliers. Many researchers have found that co-operatives do not behave

differently from non-cooperatives in the market place. Thus, in the method of

functioning and in certain organisational processes they may not exhibit any

difference.

CO-OPERATIVES IN INDIA

The co-operative movement in India was formally introduced with the

promulgation of the Cooperative Societies Act in 1904. The co-operatives in

India have made remarkable progress in various segments of the Indian

economy. There are half a million co-operative societies with a membership

of over 200 million. Despite the keen competition from private organisations

co-operative societies play a dominant role in many of the sectors.

Different types of co-operatives function as agricultural credit co-operatives,

urban co-operative banks, co-operative marketing units, consumer co-

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operatives, weaver co-operatives, sugar co-operatives, co-operative spinning

mills, industrial co-operatives (non weavers), dairy co-operatives, fisheries‟

co-operatives, housing co-operatives, labour co-operatives, and so on. Some

co-operatives that have been working successfully include the Krishak Bharati

Cooperative Limited (KRIBHCO), which is one of the largest fertiliser units in

the world. A few other co-operative organisations that have done exceedingly

well in meeting the demands of their members are the Indian Farmers

Fertilizers Cooperative Federation (IFFCO), the National Cooperative

Marketing Federation (NAFED), the National Cooperative Consumers

Federation (NCCF), the Gujarat Milk Marketing Cooperative, the Co-optex

Weaver Co-operative, and COIRFED from Kerala, to name a few.

Many co-operatives in India are structured so that they can make both

backward and forward integration in a seamless manner. For example, the

dairy co-operative societies at the village level collect milk from members

within the village and many village-level co-operatives pool in their produce

for processing the milk and manufacturing different products. Many such

processing and manufacturing co-operatives join up to market the produce.

This is also referred to as a federated structure. The critical element here is

member control. Whether a co-operative is federated or not its most

distinguishing feature is member control. It is important to ask: Are members

of the co-operative controlling it through its representatives at all levels? If

the members do not exercise control at all levels of their own organisation

they are anything but co-operative even with the registered title of a co-

operative. Organisational behaviour studies on co-operatives have focussed

on different aspects ranging from the demographic composition of staff,

organisational climate, organisational culture, etc.

EMPLOYEE CHARACTERISTICS

Balaji and Reddy (1999) have raised issues concerning organisational

behaviour research pertaining to the characteristics of employees. They cite

authors in their non-empirical writings who have pointed out that employees

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of co-ops are not fully qualified or trained for their jobs and that they are

highly de-motivated with little commitment to the goals and ideologies of the

co-ops. However, little empirical research has been done to substantiate (or

refute) these claims, some of which are described here. A study of co-op rice

mills in Madhya Pradesh by Mathur and Gupta (1982) revealed that many

functions were being manned by low-ranked employees who did not possess

adequate qualifications. Jyothi (1985) found that the motivation of the

managerial staff was not high and observed that co-op employees continued to

stay in the organisation (despite meagre wages and scanty employee benefits)

due to a sense of reconcilement amongst employees rather than due to the

positive aspects of morale and commitment.

Praveen Kumar, et al (1992) identified strengths and weaknesses of officers at

a district-level dairy co-operative in Gujarat. The major strengths identified

were long association with the co-op, ability to adjust to different working

conditions, intra-departmental co-operation, and thorough knowledge of the

job. The primary weakness identified was little knowledge about the activities

of other departments, lack of concern for productivity and performance of the

co-ops, and unwillingness to accept additional work. Many studies have

pointed to successful managers in co-operatives displaying a different set of

behavioural patterns from those of managers from other forms of

organisations. For example, in one excellent piece of research showcasing

case studies of successful co-operative managers, Reddy (1991) found that

these managers possessed characteristics like humility, ability to adjust to the

organisation‟s culture , knowledge of local language, honesty and integrity,

patience and persistence, dedication to the rural sector, clear vision and the

ability to create clear task boundaries. However, no significant association

was found between the socio-economic backgrounds of the managers and their

achievement of success.

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ORGANISATIONAL COMMITMENT

We have already argued in the previous section that co-operatives need to be

member controlled. However, many co-operatives in this country exist as co-

operative organisations only in name. They are not true co-operatives but

appendages of the state and hence controlled by the government. Balaji,

(1984) in a study of 169 managers working in different co-operatives, found

that the organisational commitment of managers employed with co-operatives

controlled by external agencies (like the government) was lower than those in

co-operatives under member control. In another study, Sood and Balaji (1991)

found organisational commitment of employees to be an important variable

because it explained several behavioural intentions. Notably, organisational

commitment was most strongly related to the intention to exhibit extra role

behaviour. Organisational commitment was also found to be a better predictor

of intention to stay on in the organisation compared to organisational

satisfaction (Balaji 1985).

In another study of employees concerning a federated co-operative and an

investor owned firm it was found that employees of the co-operative were

more committed to their organisation than the employees of the investor

owned firm. Moreover, employees of the co-operative, adhering to the values

espoused by the latter, contributed a unique dimension to their organisational

commitment. Besides, the closer the employees were to the members of the

co-operative the greater was their identification with its values and

organisational commitment. They also observed that the co-operative

employees had greater commitment towards their organisation compared to

the population norms (Wetzel and Gallagher 1990). One of the reasons for

such a marked difference could be attributed to their being a self-selected lot;

meaning that those who join co-operatives as employees do so because they

are likely to share some of the former‟s values. Another plausible reason

could be that many co-operative employees are likely to be members of the

co-operatives or they may have a close historical relationship with the co-

operative like a close relative who happens to be a member of the co-

operative.

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MANAGERIAL ATTRIBUTES

If the argument of employee self-selection is to be taken seriously then a

related question emerges concerning if employees of co-operatives hold a

different set of characteristics. Research suggests that co-operative managers

exhibit continued sensitivity to events and higher problem-solving abilities

and creativity compared to their counterparts ;yet balanced learning habits,

relevant professional knowledge, self-knowledge, and mental agility are in

short supply (Arul 1999).

ORGANISATION CLIMATE, CULTURE, AND STRUCTURE

The concepts of organisational climate, and psychological climate and

organisational culture need to be understood clearly in order to avoid semantic

confusion. Although these concepts have been distinguished conceptually

distinctions tend to get blurred while operationalising and measuring them

(Balaji and Reddy 1999). The employees of an organisation normally refer to

„organisational climate‟ while relating to their perceptions of organisational

characteristics (such as structure, processes, policies, practices, values etc.).

The unit of analysis for this construct is the organisation.

The concept of culture, drawn from ethnography and anthropology,

emphasises expressive qualities of action and interaction in organisations and

the emergent, fluid nature of organisational realities. Culture, like art, is hard

to define. At one level, the concept is self-evident. Intuitively, everyone

seems to know what culture is. It has something to do with the interpretations

in organisations-that is beliefs, values, and the meanings that are shared.

Researchers have studied employee perception of organisational climate in co-

operatives. It has been found that co-operatives, which are controlled by the

government and chief executives of these co-operatives, are drawn from the

civil service cadre officers. In such cases, employees have cited lack of

autonomy and undue political and bureaucratic interference (Goel 1984;

Kamra 1987). In another study involving four chronically loss-making co-

operatives in Andhra Pradesh it was found that their CEOs had very little

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power to bring about effective changes in the organisations which were run

like government organisations and not as economic organisations (Rao 1989).

As noted earlier, co-operative employees are likely to be members or related

to members forging, consequently, a close alliance with board members who

play a pivotal role in managing the affairs of the co-operative. Thus, the co-

operatives tend to become more centralised with most powers vested with the

Board and some with the CEO. Very little decentralisation is allowed.

However, few researchers have observed that the Cooperative Act is to be

blamed for such a high degree of power centralisation.

The executive role played by most co-operative boards has led employees to

believe they have a greater degree of centralisation; they also believe that

maintaining an excellent personalised relationship with the top management

and board members could determine their promotion as opposed to hard work

(Praveen Kumar et al. 1992). However, in small district co-operatives the

organisations are characterised by informality rather than formality. These

organisations also enjoy a greater degree of solidarity between different levels

of employees where the distinctions are often blurred and where the Chief

Executive Officers try to reach decisions through consensus. Most successful

co-operatives have receptive CEOs who involve staff members in the

decision-making process. Thus, these cooperatives have developed a strong

culture of consensual decision-making rather than being imposed from the top

(Reddy and Sharma 1990). However, authority delegation for long-term

decisions is generally poor in all co-operatives. Unlike a company board

which has provisions for independent directors and executives on board other

than the CEO, the co-operative board comprises representatives of the

members or the government or financial institutions; employee participation in

co-operative boards is almost non-existent. Researchers have found union

management relations to be cordial, the bargaining power of unions being very

limited owing to a low level of loyalty amongst members of the union;

consequently there is only one employee union in the co-operatives (Jyothi

1985) generally.

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In one study concerning the culture of co-operatives and non-governmental

voluntary agencies professional rural managers reported that the organisational

culture of voluntary agencies was far more conducive to professional

managers compared to the organisational culture of co-operatives. This may

be partly because the co-operatives, which are covered under the Cooperatives

Act, have very little leeway in terms of fostering autonomy and delegating

power within an organisation. Whereas, the voluntary agencies registered

under the Societies Registration Act are more relaxed because the latter does

not impose stringent norms on organisations (PRADAN 1990). It has been

observed that the quality of management and staff, and innovative and growth-

oriented values and attitude that are present in organisations with

entrepreneurial cultures exhibit robust performance rather than the structure of

the co-operative (Kyriakopoulos, K., Meulenberg, M., and Nilsson, J., 2004).

While the co-operatives are essentially business organisations they also

incorporate some elements of a public utility entity. Hence, politicians also

leverage the democratic process involved in co-operatives turning the latter

into their handmaidens. This, again, vitiates the culture of the co-operative.

However, evidence suggests that the co-operatives, in their turn, leverage their

political connections to grow under certain environments. For example,

during its initial years, AMUL benefitted to a large extent because of its close

connection with the then ruling party. In a similar vein Karanth (1988) found

the culture of the Primary Agricultural Co-operative Society (PACS) in

Karnataka to be largely shaped by local mainstream political processes.

Although the mixing of politics with business was generally harmful

(corruption and misappropriation of funds were widespread in the PACS that

he had studied), Karanth (1988) discovered a positive aspect of political

interference. Membership increased tremendously whenever there were

elections in the PACS, as local farmers were induced by the contesting

politicians to become PACS‟ members. After having become members , they

began using PACS‟ services in fairly large numbers.

16

In „strong cultures‟ there is a sense of shared values, and strong cultures within

the organisation have been reported to be linked to their success.. Values

shared across and subscribed to by employees in co-operatives contribute

greatly to the latter‟s success. A case in point being the the Warnanagar

Sugar Cooperative where, it was found, the employees shared the values of the

co-operative and what it stood for. Value sharing cemented employee loyalty

and dedication to the co-operative (Bedi 1986). Balaji and Sood (1999)

examined the data from 132 employees of a district-level milk producer‟s co-

op in North India. The data showed that belief in co-operative values and

organisational commitment was stronger among the procurement and inputs

department employees than in the employees of other departments. This could

be largely because the procurement and inputs department of dairy co-

operatives interact continuously with the producer member. This also suggests

that the closer the employees are to the producers the more they are able to

empathise with the latter and thus, have a higher level of belief in co-operative

values. They understand the difficulties faced by producers and the value of

co-operation.

Biswas and Balaji (1999) in their paper on employee-organisation co-op value

congruence, have presented some findings on employees‟ belief in co-op

values and the congruence between their beliefs and perceptions about the

organisation‟s belief in such values. Data from 189 employees of a district

milk union in Gujarat was used to obtain four indices of value congruence.

The results suggested that employees believed to a relatively less extent those

values that represented some of the essential features of co-operatives (like

who should be members of a co-op and how the profits of a co-op should be

shared). The employees also thought that the organisation did not believe in

these values. The Procurement and Inputs department employees believed in

the co-operative‟s values to a greater extent than did those from most other

departments.

In a comparative study of the organisational climate of District Co-op Banks

(DCBs) and Regional Rural Banks (RRBs) relating to 26 facets of

17

organisational climate and eight dimensions of organisational effectiveness it

was found that the DCBs scored higher than RRBs on climate dimensions

related to reward systems, level of workers‟ control, and communication and

one effectiveness dimension, namely, job involvement. On the other hand, the

RRBs scored higher than DCBs on the climate dimensions of awarding

promotions based on performance, control of middle management, and role

inter-changeability. The RRBs were also seen to be better on the effectiveness

dimension of social responsibility (Biswas, 1999).

Reddy and Nagabrahmam (1999) describe how the culture of a district milk

union in south India developed and changed since its inception and also the

effect of such changes on its performance. This case study, rich in detail,

identified several events, factors, and processes that shaped the culture of the

organisation. The various interfaces between the chairperson and board of

directors and the general manager, relationships among the senior managers

and between the management and the workers (especially the labour and

between the management and the workers (especially the labour union leaders)

were found to have a significant bearing on the initial culture and its

transformation over the years. To some extent, the co-operative‟s workforce

policies and practices, particularly the appointment of senior managers,

including general managers, influenced the changes that took place in Sitapur

dairy‟s culture. A significant finding of this study was that the culture changes

were accompanied by changes in the performance of the co-ops. The concepts

of power and politics in organisations, organisational birth and evolution, and

organisational culture were deployed to interpret these changes.

HUMAN RESOURCES MANAGEMENT AND DEVELOPMENT

Rao (1989), in his study, found that while certain steps (like creation of

common cadres for key posts in certain sectors, reorganisation of the staffing

pattern, rationalisation of staffing recruitment and selection procedures,

appointment of technocrats in place of departmental officers as CEOs, and

providing for direct recruitment of managers (to a limited extent) were taken

18

to improve personnel management in co-ops, several problems still persisted.

For instance, manpower planning was not being done, the Registrar of Co-ops

continued to play a crucial role in personal management issues; promotions

were still based on seniority; direct recruitments were confined to lower-level

posts; training and development of staff continued to be neglected while the

practice of appointing persons on deputation remained in place. Mangala‟s

(1982) study of successful dairy cooperatives‟ workforce policies showed that

recruitments were made not only at lower but at all levels. Local staff

members were appointed to the lower-level jobs. However, there were

imbalances in the number of posts in certain categories between the head

office and the branches or depots. Praveen Kumar et al. , (1992) found that

the co-ops did not have a clear promotion policy, nor was there a proper

system to appraise the performance of employees. They also found that

employee welfare facilities were almost non-existent.

Rudrabasavaraj‟s (1969) study on personnel management practices in Indian

co-ops compared the personnel management practices followed in co-ops and

public and private sector organisations. Data was collected from 12 co-ops, 6

public sector and 14 private sector organisations, all of them being very large

in their respective sectors. The study showed co-ops lagged behind the private

and public sector enterprises in personnel management practices including

workforce selection, recruitment, training, promotions, transfers,

communication, employee morale, employee welfare measures, employee-

employer relations, and status of personnel department.

Jyothi (1985) conducted a study on HRM practices and employee perceptions

in four co-ops in the Vishakhapatnam district: a sugar co-op, a co-op bank, a

consumer co-op and a tribal‟s co-operative. She reported that the personnel

function had a very low status because the Co-operative Societies Act does not

provide for an independent and distinct status for such a function; the

personnel policies and approaches towards the employees were archaic,

unscientific, and paternalistic.

19

REWARD SYSTEMS

The reward system of an organisation is intrinsically related to the culture of

the organisation. Co-operatives do not have a performance-related reward

system, except for the milk co-operatives in Gujarat. Similarly, most co-

operatives outside Gujarat do not have a promotion policy that recognises the

importance of the employees‟ contribution. A study of the promotion policies

of a state-level dairy co-op by showed that while the employees were entitled

to four or five promotions during their tenure with the co-ops, most of them

were promoted only once or twice. The promotion policies were not clearly

defined. This caused delays and uncertainties in actual promotions leading to

considerable demoralisation among the employees (Yojana 1985). Lack of

promotional avenues and career growth debar many qualified professionals

from joining these organisations. Balaji and Bhatt (1999) examined the

seriousness of the issues related to promotions including the number of

promotions, promotional opportunities, satisfaction with promotional

opportunities etc. The results suggested that promotion is a serious issue

prevalent in co-operatives. What the employees wanted was a fair and

transparent system of promotion and creation of promotion avenues.

Promotion was also related strongly to the negative perception about the

organisation.

PUBLIC IMAGE AND HIRING POTENTIAL

Perception of organisational culture by people working within the organisation

is likely to impact their performance that could result in failure. Yet very little

research has been conducted in the area of organisational behaviour on the

public image of the organisation, more specifically perception of the

organisational culture among potential applicants. A negative perception of

culture is likely to affect the hiring potential of the organisation which may be

deprived of high quality personnel which will, in turn, affect its performance.

In an interesting study, Rangarajan and Kalyani (1999) found that a very small

20

proportion of the students undergoing professional courses were willing to

join co-operatives because they were seen as not being professionally

managed, as having a poor performance, and being subject to interference by

politicians and governmental authorities.

Fulton (2008), observed that the previous success of co-operatives did not

guarantee future success. This is partly because of the causal link that relates

to the success of co-operatives to members‟ commitment which is, in turn,

linked to the decisions made by co-operative leaders and the selection of co-

operative leaders by members. He found that co-operatives that believed they

had a well-defined and loyal membership were less likely to hire leaders that

would enhance member commitment. Thus, historical success is no guarantee

of future success and could, in fact, contain the seeds of failure.

In an interesting study of leadership of co-operatives during economic

transition it was found that many co-operatives were going bankrupt.

However, findings show that as far as traditional agricultural co-operatives are

concerned, a more social-oriented leadership helps overcome economic,

social, and psychological barriers arising during the transition, while, in the

case of new co-ops, improved co-operation depends mainly on the increased

level of social capital after the radical reforms have been put in place

(Forg`acs,2008).

LEADERSHIP ROLES IN CO-OPERATIVES

Leadership plays a major role in the success of co-operatives. In

organisational behaviour literature leadership generally centres on the

managerial leadership acts of managers that bring about positive changes in

organisations. However, in co-operatives, the elected leaders play a major role

in transforming the organisation as they actively participate in the

organisational processes. In this section, I will focus on both managerial

leadership and elected leadership. Leadership contributes to the emergence of

a good design for the organisation and it acts as a self-reinforcing mechanism

21

to enhance the performance of that organisation. Leadership and design of the

organisation are not two separate phenomena as they thrive on each other.

Cook (1994) argues that organisational differences between investor owned

firms and user-oriented firms influence management behaviour by affecting

managerial working roles. The major roles of leaders in management

literature include maintaining goal direction, facilitating task achievement, and

ensuring group cohesiveness (Cook, 1994). In the context of co-operatives,

meeting the three leadership demands is challenging. This is because co-

operative goals are multidimensional and often conflict with each other. The

challenge to co-operative leaderships exists with regard to reducing the

opposing interests down to a more balanced interest allowing, thereby, the

convergence of the interests of different groups. Integrating individual needs

with organisational goals is challenging when the owners interact with the

organisation on a regular basis as users of its services. The dividend pay

checks are a year-end formal feedback on how well the leaders have been

behaving so far, but on a regular transaction basis the leadership decisions and

behaviour are evaluated regularly and many decisions of the leaders may

benefit the co-operative but could also run contrary to the immediate interest

of the user member. For example, as an individual member one may be

interested in paying a lower price for goods in a consumer co-operative or a

farmer may expect a higher price for his/her produce. However, sharing all

surpluses with the members may lead to lack of growth because of the low

level of capital formation within the co-operative, rendering the latter very

vulnerable at the time of need. At the time of taking charge, the new president

of a staff credit co-operative society found that the co-operative was almost

bankrupt. This was partly due to erroneous management decisions and partly

due to lack of capital accumulation. Plus, the financial health of the co-

operative being in doubt led the user members to demand their share capital

back. Buying back the shares would have shut down the co-operative. The

management committee at the time decided it would not retire any share

capital. It promised the user members, however, that they would receive

dividends equal to the interest paid on their savings bank account in

22

commercial banks in the following year. There was a hue and cry over the

matter. A few months later, however, the user members observed improved

functions and when the co-operative declared its dividend as being double of

what it had promised people started putting in their money as equity. The

balance sheet improved and the co-operative has now been running profitably

till date. The co-operative leadership‟s role is not limited to the satisfaction of

individual members but also to that of the co-operative itself.

Folsom (2003) observed that co-operatives are excellent tools for promoting

rural economic growth and leadership development of the community in

which they operate.

In a farmers' co-operative in Nebraska a study was conducted to identify

leadership behaviours and to determine the relationship of farmer co-operative

manager behaviours to organisational outcomes. Using the Multifactor

Leadership Questionnaire, the researchers found that managers practised

constructive transformational leadership (contingent reward) and laissez-faire

leadership more frequently than they had realised. The more transformational

a leader, the more positive were the outcomes attained. Another major finding

was that the laissez faire leadership had a significantly negative relationship to

satisfaction.

Co-operative leaders are, in a sense, social entrepreneurs who recognise an

opportunity which they try and maximise by creating an organisation of the

users. Nabar (1992) points that out by citing the success of sugar and dairy

cooperatives.

In Maharashtra and Gujarat, various researchers have identified three major

factors. First, community characteristics of the farmers, chiefly the cultural

factors; second, economic necessity created by capital-intensive processing

technologies; and finally, the outstanding leadership that got attracted to the

co-operative movement due to the power, prestige, and patronage that

leadership roles offered.

23

CONCLUSIONS

The liberalisation policies in force since two decades were foreseen as a threat

to co-operatives. It has been observed that some co-operatives being able to

overcome competition are moving ahead while a few have succumbed. From

an organisational behaviour stance it is important to note the structural

differences between co-operatives and investor owned organisations. A major

role of co-operatives, apart from the economic development of their members,

is to catalyse social change, something that a functional approach to

organisation fails to address. However, co-operatives have to match the

competition posed by investor owned organisations. It is only when co-

operatives will be able to tackle hurdles posed by the efficiency parameters of

the investor owned organisations that they will be able to meet their social

goals. In order to achieve this the co-operatives will have to acquire greater

market orientation and they should be more professional in their approach.

This warrants them to address the issues of human resource practices,

leadership capability development, and the spread of entrepreneurship culture.

Human resource management is sensitive, personalised and context- specific

and without predefined techniques. Human resource, which was once

considered as cost, is now considered as an investment. The success of an

organisation depends on the right kind of policies and practices for building

employee satisfaction. Successful organisations have better HR practices like

learning teams, open policies to address employee grievances, employee

participation in decision-making, etc. Such practices help bring about the

congruence of individual and organisational goals. Organisations use better

human resource management as a strategic tool to build customer-centric

organisations and gain competitive advantage. However, it has been observed

that during recession many producers‟ co-operatives thrived as they were not

dependent on external resources to get their raw material and they remained

competitive in the absence of extreme pressure from the members. Staber

(1989) observed that the co-operatives maintained employment through

difficult economic times, whereas capitalist firms began laying-off workers at

24

a certain point in the recession. Similarly, during the recession of 2008-09, the

Gujarat Milk Marketing Federation (GCMMF) business increased by 26%

(Source: Annual balance sheet of GCMMF).

Several past studies have affirmed that the co-ops employees‟ weaknesses

outweigh their strengths. The strengths are high-level job involvement,

organisational commitment, intention to exhibit organisationally desirable

behaviour, and belief in co-op values. The weaknesses are lacking in a whole

range of competencies, be they technical, behavioural and managerial. Hence,

it is essential for employees to compensate their weaknesses by acquiring

required skills so that they can be more efficient and perform at expected

levels.

The complexity of co-ops has been attributed to their dual characteristic of

pursuing economic and social goals. Hence, it is a challenge to sensitise and

orient the employees towards both and help the business to sustain and grow.

Further studies are required on many of the issues vexing co-operatives. A

majority of the co-operatives operate on a federal structure; studies are

required to understand the consequences of such structures in different sectors

and states. As members are also producers and owners of the organisation

further studies are required on governance issues and identifying how they

affect the employees‟ motivation towards work.

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