Decision Making in Membership Organizations: A Study of Fourteen U.S. Cooperatives
Henehan, Brian M.; Anderson, Bruce L.
Cooperatives are unique business organizations. Many of their unique characteristics have a direct impact on how decisions are arrived at as well as the ultimate decision made. This study reviews current literature on cooperatives and decision making. A decision making model is developed to arrive at a set of provisional hypotheses. Fourteen U.S. agricultural cooperatives were studied through interviews with chief executive officers and chairpersons of the board of directors. The organizations in the sample were selected by volume of business, tenure of executives, successful performance and type of organization. Cooperatives in the sample were larger and on average better endowed with resou rces to focus on making informed decisions than the general population of agricultu ral cooperative in the U.S. Data collected from interviews were analyzed to identify key factors contributing to effective decision making and to test hypotheses. An evaluation of hypotheses produced several conclusions. The ability of members to voice opinions plays a greater role in influencing economic decisions than voting. Agricultural cooperatives have a distinct corporate culture which strongly influences how decisions are made. Complex and diffuse performance measures make arriving at optimal decisions difficult. Boards tend to select altey?~t)ves directly benefiting members at the expense of the cooperative business organization. CEO's in cooperatives probably face a more diverse set of pressures than their counterparts in other types of firms. Decision making in cooperatives tends to be slow. An effective relationship between CEO and Chair is a key factor in successful decision making. Cooperatives tend to have a rather short planning horizon. Agricultural cooperatives tend to be risk averse. Strategic advantages and disadvantages associated with decision making in cooperatives are developed. A set of management strategies aimed at exploiting the advantages and manag ing the disadvantages are presented. The study is exploratory in nature involving a relatively small number of cooperatives. This initial work provides perspective on the unique characteristics of decision making in cooperatives and makes suggestions for further research in this area.
Charles H. Dyson School of Applied Economics and Management, Cornell University