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Social and Value Based Management of Cooperatives



The cooperative model of economy has proved to be the safe and

secure model which can provide a ray of hope to the common masses. Due to strong
roots in the community in which the cooperatives are embedded, the cooperative
model is governed by community consciousness. The cooperative model of
development is unique as it does not depend on external influences like stock markets.
It is a model which is owned and controlled by the people. The democratic principles
of cooperatives are its life-blood.

The cooperative movement in India has a very long and illustrious

history. During these 105 years, the movement has diversified manifold and has
played a significant role in bringing about important socio-economic changes in
different sectors of the economy. It is now a major force in important sectors like
sugar, dairy, rural credit, housing, marketing and fertilizers. Several cooperative
brands have already become a house-hold name, not only in India but also abroad.
However, with the advent of the market economy, the functioning of cooperatives has
undergone changes. They are now transformed through adoption of professional,
financial and administrative skills. The cooperative movement has proved to be an
effective social and economic development model, which ensures inclusive growth.

Traditionally, business firms have placed the highest priority on earning

profits – concern for the employees, concern for the community and human values
have typically received less attention. However, the corporate sector has now started
realizing the importance of maintaining social values. Perhaps, this may be the reason
for the popularity of books on ethical management practices. One such book is ‘The
Power of Ethical Management’ co-authored by the well known management expert
Kenneth Blanchard and Norman Vincent Peale, the famous author of the book ‘The
Power of Positive Thinking’. On the cover of this book it is written in bold letters
–“Integrity pays, you do not have to cheat to win”. The book says that managing only
for profit is like playing tennis with your eyes on score board and not on the ball.

A paradigm shift is gradually taking place and people are realizing that
the values are imperative for ultimate success. Some of the most successful
businessmen today are practicing value- based management. For instance, Bill Gates,
the head of the world’s biggest software company, and who was ranked as the richest
person in the world has announced his intension of giving away his entire wealth,
barring a small percentage for his two children, for the welfare of the poor.

The Excel Industries Limited has got its value system from the mother’s
kitchen – the values like excellence, service, accuracy, consistency, etc. All the
employees irrespective of their position eat together, pray together and work together
in harmony following the principle of ‘saha veeryam’(energetic cooperation). Many
such companies today are practicing value based management and achieving great
The Concept and Objectives:

Value based management is the management approach that ensures

firms are running on values. It includes creation of values, management for values
and measurement of values. It aims to provide consistency of the corporate mission
(business policy), the corporate strategy, corporate governance, corporate culture,
corporate communication, organization structure, decision processes and systems,
performance management processes and reward processes and systems.

Value based management can be simply stated as a management

system in which the entire organization is focused, measured, compensated for
creating value for stakeholders. It includes the following; for the

Organization- encouraging a working climate with innovation & free exchange of


Members- protecting and safeguarding their interest,

Employees- understanding & accepting the needs and rights of employees, providing
adequate wages, good working condition, job security, effective machinery for the
speedy redressal of grievances, suitable opportunities for promotion and self
development and creating a sense of belongingness & team spirit through their close
link with management.

Customers - ensuring the availability of quality goods and services at reasonable


Government – Protect the national interest, act as a supportive system to the

government in investment, creation of employment and production.

Community – (Social responsibility)- Effective use of natural resources, assistance

in community affairs, assistance during natural hazards.

Present Scenario:

In India, at present, the cooperative movement has covered 100 per cent
villages and functioning over 5,45,000 co-operatives of various levels with a
membership coverage of 236 million. This itself indicates the extent of the social
responsibility expected from this sector. Of course, the cooperative sector has been
trying to meet the social values and responsibilities to the level best. But, an
independent evaluation may raise the question, whether the cooperatives in India
could provide value based services to the stakeholders at the maximum level? The
answer is ‘No’.

Many reasons are attributed for this failure. Lack of active participation of
user-members, poor level of response from federal organizations towards the needs of
their member cooperatives, political interference in the administration and
management, absence of professional management, lack of adequate infrastructure,
lack of capability to withstand competition, over-dependence on government for
financial assistance and restrictive provisions of cooperative law are important among
Being the most popular form of organization at the grass root level of the
economy, cooperatives should adapt the value based management system in its full
sense. There is no doubt that "Co-operatives are based on the values of community,
self-help, mutual responsibility, quality, equity, service and stewardship. They
practice honesty, openness and social responsibility in all their activities."

The contribution of the cooperative sector in India has to be viewed as a part of

discharging their social responsibilities as well as upholding the values. Cooperatives
have made remarkable contributions in sectors such as rural credit, marketing, agro-
processing, consumer business, housing, industrial promotion, information
technology, health care, women empowerment and creation of employment.

Undisputedly, there is no alternative other than cooperative credit structure in

order to serve the needs of the rural economy. The cooperative credit structure was
the first to realize that increasing rural incomes through enhancing agricultural
production, generating employment in non-farming activities etc. has been critical for
expanding marketing accelerated investment and industrial growth. This has helped in
boosting the growth rate of the economy by providing a fillip to agricultural
production in the country. The short term cooperative institutions alone have the
capabilities to meet and cater to the agricultural needs of the farmers. Cooperatives
with less than 6% of the deposits of the total banking sector in the country cater to
around 50% of the short term agricultural needs of the farmers. They alone have
issued the largest number of Kissan Credit Cards which are around 65% of the total
Kissan Credit Cards issued in the country.

With a view to provide inputs at the door steps of the farmers and developing
holding capacity of the produce to be sold at the right time to offer remunerative
prices to the growers, marketing cooperatives sprang up in all the states. They have
professionalized the management and get strong support from the governments.
COOPTEX in Tamilnadu, MARKFED in Punjab, HAFED in Haryana, etc. are

Cooperative sugar factories have played an important role in the rural

areas for bringing radical changes in the rural economy (As on 31.3.2009, there were
317 cooperative sugar mills in India). Development of irrigation facilities, laying of
roads, promotion of dairy and poultry, establishment of educational institutions,
medical facilities, area development, generation of employment, etc. resulted in
growth of assets and better living standards of the people.

Price control and supply of good quality consumer items in time to the
people are two major challenges usually faced by any government. Consumer
cooperatives in India also discharge this social responsibility in the most effective
way. The consumer cooperative stores are providing controlled and non- controlled
items to the consumers at very reasonable prices, thus strengthening the Public
Distribution System. The role of cooperatives in price control has been experienced
by the common people, particularly in the light of the ever increasing prices of
commodities at present.

Besides meeting the shelter needs of the needy people effectively, housing
cooperatives foster to the national integration both as an end in itself and as a means
to promoting national development. One of the significant contributions of housing
cooperatives is the improvement of the ecology of the area where they function. They
plant trees and maintain gardens, thus protecting the environment too. Special
attention is paid by them for collection and disposal of garbage and to keep the
surroundings clean. It requires special mention that housing cooperatives play a major
role in many developing countries, particularly in helping informal sector households
to obtain access to land and to key material and equipment. Members of the SEWA
Bank in India benefit as their bank insists that, since a housing loan is in the name of a
woman member, the house itself should be in her name. Housing cooperatives have
an important role in the transitional economies; for example in the former
Czechoslovakia, in 1991, there were 1.5 million cooperative apartments.

Industrial cooperatives in the country have been playing a predominant role in

the creation of employment and entrepreneurship development. This has contributed a
lot in the attempts towards eradication of poverty particularly in the rural areas.

Cooperatives are considered as an important instrument for economic

development to emphasize the values of self-help, responsibility, democracy, equality,
honesty, awareness and caring for others. Its network has almost covered all the
Indian villages and sectors by providing necessary services including information
technology to improve quality of life especially in rural areas. The cooperatives
encourage coverage of weaker sections viz. people below poverty line and those
deprived of basic minimum facilities such as women and youth. The cooperatives are
committed to uplift the standards of entire community as a whole without
discrimination based on caste, gender, religion, etc. Women cooperatives provide
platform for the complete development of women in all fields of human activity. The
well flourished cooperative educational institutions in Kerala are another example for
the commitment of this sector towards the society.

Significance of Value Based management in Cooperatives

Values are some basic aspirations of mankind applicable everywhere, all the
time. The proponents of cooperative movement discovered that human society can be
better with equality, fraternity, spirit de corps, equity, free from conflict and
exploitation, peace, prosperity and happiness, if we conduct our affairs on cooperative
basis. These virtues will automatically emerge in true cooperatives. The values to be
cherished by a cooperator are “cooperatives” based on “mutuality” in true spirit.

The principle of “all for one and one for all” is talked about but in actual
practice, there is hardly any mutuality in cooperatives. Neither the members feel
“belonging” to the cooperative society nor does the cooperative society make them
feel that they are the members in the society. One becomes member of a cooperative
society not because he subscribes to the cooperative ideology and believes in
cooperative values and principles, but due to economic compulsions of deriving
benefits like availing credit from a cooperative credit and banking institution.
Members do not know even their rights and obligations. Otherwise, the problem of
overdue would not occur. Once the loan is repaid, the borrower would like to
withdraw the share capital.

Similarly, deposits are made with cooperatives, not because of any commitment to
the cooperative ideology. It is therefore, necessary to educate the members about the
cooperative principles, cooperative values and socio-economic benefits of coming
together. It has been a general experience observed in most cooperatives in recent
years that the initial zeal and enthusiasm that is found in starting a cooperative is not
matched by sound and proper knowledge and appreciation of cooperative values and
principles underlying it.

Enlightened and very effective leadership is so essential for the growth and
success of cooperatives. Good leadership is a pre-requisite not only for creating and
nurturing a cooperative but also for providing a vision, and inspiring and guiding both
the members and the management so as to enable the cooperative to achieve its
purpose. Elected members of the board and office bearers, it is observed from the
experience, have not played completely the role expected from them and have not
been responsive to the aspirations of the members in many cases. Therefore,
cooperatives have to re-orient their functioning and management by creating
enlightened membership and professional managers.

Since the governments have limitations, in terms of resources, in the

protection of social values, cooperatives are one of the best organizations as they
operate at the grass root level and people’s participation in cooperatives is the highest.
Sincere efforts are, therefore, to be initiated for the implementation of social and
value based management in cooperatives. For this purpose, the members and office
bearers should be made more aware about the need for practicing social and value
based management. The cooperatives can educate not only the members but the
public as a whole on issues such as climate change and its impacts, harmful practices
in agriculture, environmental protection, etc.

In the agricultural sector, a key challenge is to enable the farmers, especially small
holders, to obtain higher crop yields and to adopt sustainable farming practices as they
cope with the challenges posed by climate change. Cooperatives can help by
disseminating knowledge and good practices to farmers, as well as by facilitating
productive investments and expanded access to technology.

In China, health co-operatives achieved universal coverage of basic

health services but became dysfunctional when state support was withdrawn. In
Gujarat, co-operatives have been useful to provide primary health care services and
not as a mechanism to run hospitals and provide medical care for the general
population. In Kerala, health co-operatives could not successfully compete with
expanding state health services and private services unless they were managed like
private enterprises.
With widespread privatization in the health sector, access to health
services is becoming an individual responsibility. As large population segments in
developing countries are unable to access health care, there exists a renewed interest
in a “third realm”, an intermediary between the receding state and the profit-oriented
private sector. Co-operatives are seen as a potential “third realm”, and there already
appears to be a global revival of co-operatives in the social and health fields

Of course, the value based management in cooperatives should focus on

the interests of all the stakeholders . It should be made possible to offer maximum
return to the members in the form of dividends or other benefits, reasonable pay and
benefits to the employees and quality products and services to its customers at
reasonable prices. The existing legislations controlling the distribution of benefits to
the members may have to be modified so as to motivate the members to be more
active. Also the myth of co-operative managers as civil servants carrying out the
policies of the elected board must be replaced by a new reality of a co-operative
professional management that is a part of the co-operative community it serves.

The formal implementation of value based management in cooperatives

involve three important steps; gain commitment of top level management , customize
the value based management framework, and finally, makes value based management
a way of life in the cooperative society. Top level management needs to support value
based management with their words and ultimately with their actions. Redesigning of
its management practices like performance measurement, compensation design,
planning/budgeting, training and communication programs is the next step. Value
based management needs to become a part of the drinking water, so to speak, meaning
we have to turn our efforts to ensuring that everyone in the organization understands
his or her role in creating value in the organization.


Value based management also includes making money. It is not a

question of either man or money. It is a quest for both happiness and profit. Research
shows that value based or visionary companies perform on a markedly higher level –
they earn much more money – than merely profit-based companies.

Cooperative activities need to be carried out with credibility in order to win the
confidence of the public. It is also necessary to take note of the emerging problems
and realities and to equip oneself to cope up with such challenges effectively and with
confidence. The general public should be motivated to join the cooperative movement
to strengthen the economy by making the cooperative movement truly as a people's

Kenneth Blanchard and Norman Vincent Peale, ‘The Power of Ethical management’,
William Marrow and Company, Inc.105, New York, 2001.

United Nations. Cooperatives in social development: report of the secretary-general.

Geneva: UN Economic and Social Council; 2001.

Book, Sven Ake, Co-operative Values in a Changing World.Report to the ICA

Congress, Tokyo, October, 1992, ICA, Geneva, 1992, p197.

Volkers, Reimer, "Report on Management Systems and Corporate Governance",

Review of International Co-operation, Vol. 87, No. 3, Geneva, 1994, p45.