Cooperative Directors - Asking Necessary Questions

Cindy Houlden
Cooperative Development Specialist
June 24, 2021
People in meeting.

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The cooperative has been successfully organized, capitalized, and opened. The next step – operating the cooperative successfully.

Many times, cooperative directors — especially those with limited business experience — find themselves struggling to identify the basic questions they need to answer to ensure that the cooperative is successful.

The first question new directors will face is “how should our cooperative be managed?” This leads to two more questions: are we planning to hire a manager? How engaged should the board be in management of the cooperative?

A passive board functions at the manager’s discretion. Participation in cooperative operations is limited and the board members have limited accountability for cooperative decisions. The board ratifies the manager’s decisions at board meetings.

A certifying board certifies to the membership that the manager is doing what is expected. The board evaluates for the manager based upon cooperative performance. Board members stay informed of current performance with regular reviews of performance measures, which could include sales, new investment or new members, dependent upon the cooperative model. Additionally, the board establishes an orderly succession process for both board members and cooperative management.

An engaged board collaborates with the manager to provide insight and advice, recognizing its responsibility to oversee the manager and cooperative performance. Engaged, two-way discussion is encouraged regarding key issues and decisions. Clear boundaries of board-manager responsibility are set and regularly reviewed.

An intervening board is the usual board mode during a crisis. The Board is intensely involved in key decisions and in decision-making. There are frequent, intense board meetings.

An operating board makes most key decisions; the manager implements board decisions. The board acts to fill gaps in manager management skills. In the absence of a manager, the board acts as the manager.

The second question, which is closely related to the first, “what policies are needed to direct our cooperative?” Policies are the “rules” under which the cooperative operates. The first policy created by a cooperative are its bylaws. The bylaws are the governing rules by which the cooperative operates. They discuss issues such as who the cooperative officers are, the responsibilities of the board of directors, how they are elected, their terms of office and how and when board and member meetings will be held.

flow chart

Subsequent policies will be developed to address the operational needs of the cooperative. Topics may include job descriptions, employee dress code or who pays the bills. As illustrated by the graphic, the policy development process begins with understanding the need for the policy, researching/developing the policy, adopting the policy at the board level, and implementing the policy. Particularly vital is the fifth step of policy evaluation and adjustment as necessary. As the arrows indicate, the process is circular and ongoing.

The topics above are covered in detail through the Nebraska Cooperative Development Center’s Cooperative Board of Directors Training. Contact Cindy Houlden with the Nebraska Cooperative Development Center at for more information.

Dedicated to assisting people prosper in rural Nebraska through all stages of cooperative business development, the Nebraska Cooperative Development Center (NCDC) is located in the Department of Agricultural Economics at the University of Nebraska–Lincoln. NCDC programs abide with the nondiscrimination policies of the University of Nebraska–Lincoln and the United States Department of Agriculture. NCDC is funded in part by the USDA RCDG Grant Program.