October 11, 2002 | By: Gidget High, Ag. Communications Intern

The large increase in new cooperatives in Kentucky seems to have a common theme: sound business planning and strong management build successful cooperatives. The Kentucky Center for Cooperative Development at the University of Kentucky offers many opportunities for co-op leaders.

In 1999 the KCCD was formed to support the needs of Kentucky's strong network of cooperatives, which many producers rely on cooperatives as a business structure to market value added products.

"Cooperative management starts with a strong board of directors, and then follows with a strong manager to carry out the board of directors wishes," said Heath Hoagland, cooperative development specialist.

The member and owners of a cooperative elect the board of directors. The health and viability of the cooperative business is the board's number one responsibility. This makes it challenging since tough choices must be made on a regular basis. Some choices include developing a manager job description, evaluation procedures, developing overall directions for the cooperative, and determining the dividend to be paid back to the producers and members.

"Boards should operate within their articles of incorporation and bylaws. Failure to operate within guidelines can result in legal consequences," Hoagland said. "Boards should also develop policies to help oversee the activities of the cooperative. Having policies help the board deal with complicated situations such as payments to growers, manager evaluations, terminations and enforcement of producer's contracts."

The board of directors should understand and accept their roles and responsibilities as a management arm of the cooperative, he added.

"A manager is very important for any business, but especially for cooperative businesses," Hoagland said. "A manager is the hired person who carries out the goals and directions set forth by the board of directors."

The manager is critical because they are in charge of the day-to-day operations of the cooperative business. A manager should understand a variety of management topics including marketing and sales programs, staffing, physical operations and financial management.

"This can be a huge job for anyone," Hoagland said.

The manager and board of directors should have good communication. They should work effectively with one another so the manager is able to carry out his or her job. The manager and board of directors are very important to a business.

Cooperatives can be successful with either a strong manager and weak board or strong board and weak manager. The most effective way is a strong board and a strong manager. A weak board and weak manager will result in a failed business opportunity.

"The Kentucky Center for Cooperative Development can help cooperative boards of directors and managers understand their roles and responsibilities within a cooperatives business," Hoagland said. AKCCD provides one-on-one training for cooperative and also hosts an annual board of directors and manager training program in the winter months."

USDA Rural Cooperative Development Grant, Kentucky Agricultural Development Board and KDA provide funding for the KCCD, with in-kind support from University of Kentucky College of Agriculture. For more information, please contact the Kentucky Center for Cooperative Development, the UK Department of Agriculture Economics, or your local Cooperative Extension agent.


Heath Hoagland  859-257-6527