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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
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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 Spray • Agricultural Co-op formed 75 years ago • Owned by 800 cranberry growers in U.S. & Canada • Has over 2000 employees • Leading producer of canned & bottled juice drinks in North America • $1.4 billion in gross sales
Co-op Profile: National • The Co-operators Group • Formed in 1945 by Saskatchewan farmers • Largest Canadian multi-product insurance company • Assets exceeding $5.7 billion • Owned by 37 co-op organizations in Canada • NL Federation of Co-ops is a member-owner
Co-op Profile: Provincial • Fogo Island Co-op • Formed in 1967 to resist resettlement • Development process pioneered the use of community television to organize residents • “Fogo Process” used as community development tool around the world • Co-op owns 3 fish plants, a laboratory, a marine service centre & has access to a fleet of 30 long-liners • Annual sales of approx. $20 million
Co-op Profile: Provincial • Eagle River Credit Union • Formed in 1984 when BMO pulled out to lack of business • Received strong support from Caisse Populaire in Blanc Sablon & local businesses • Now second largest credit union in the province • Full service credit union with 6300 members • Has 6 branches , $79 million in assets & 6550 member owners
Co-op Profile: Provincial • Advocate Youth Services Co-op • Formed 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 Model • Unit 3: Co-operative Principles, Legislation & Governance • Unit 4: The Existing Co-operative System • Unit 5: Developing a Co-operative
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 Purpose • Private Sector: seeks to maximize profitability for investors • Co-operatives: seeks to provide members with needed services at the lowest possible cost • Different Control Structure • Private 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 Profits • Private 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 • Benefits • Access to quality services at reasonable cost • Control of a business that places priority on their needs • Sharing of surplus profits that remain in the community • Stable service delivery & and longer business life • Priority on local employment • Obligations • Use their co-op’s services • Buy shares & maintain their equity investment • Attend AGMs and other membership meetings • Be 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 & Governance • Unit 4: The Existing Co-operative System • Unit 5: Developing a Co-operative
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 Act • Applies to co-ops that do business in two or more provinces or territories • NL Examples: Co-operators Group & Mountain Equipment Co-op • NL Co-operatives Act • Incorporates local co-ops & gives them legal status • Regulates 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 System • Unit #5: Developing a Co-operative
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 unions • Employing 1,400 people • 57,000 members doing business in excess of $800 million • Types of Co-ops • Consumer (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
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