International Journal of Cooperative

Management Education and Development.

Co-operatives and credit unions in economics and

business texts: changing the paradigm

Abstract

Neither economics nor management textbooks spend any appreciable time or space on co-operative forms of business. The dominant paradigm is investor-owned, for profit businesses competing for market share and profit. As a result of this, few graduates of business

programs are well prepared to manage in a cooperative environment.

Yet co-operatives represent a large portion of the U.K., U.S., and Canadian economies, so competent management is important for the overall economy as well as for co-operative owners, employees, suppliers and customers.

The sense among co-operative leaders is that business program graduates (whether undergrads or MBAs) have a very limited appreciation of how to manage co-operatives, while those imbued with the cooperative spirit but without formal business training may have limited management skills. To redress this problem, a number of co-operative leaders have come together with Saint Mary’s University in Halifax, Canada to offer a web-based, masters level program in management of co-operatives and credit unions.

The program involves twelve one-semester courses and a thesis. It targets mid-career managers of cooperatives and credit unions.

This paper describes the program, how it is shifting the graduate business program paradigm, and the creative way it is being financed.

Introduction

Lynch et al. (1989) reported that co-operatives were de-emphasized in introductory economics textbooks used in the United States.

Parnell (1996) argued that because the co-operative form of business has been largely ignored in primary, secondary, and post-secondary school texts it has become a “much maligned and often neglected option.”

Hill surveyed twenty-five introductory economics textbooks used in Canada for their content concerning co-operatives. Four of the 25 were U.S. texts, ten were Canadian versions of originally U.S. texts, and the balance were Canadian. He expected to find co-operatives dealt with under alternative business forms, or comparative economic systems, or under money and banking, or in a discussion of who controls the firm. (Hill, 2000, 282). What he found was that while almost all texts mention credit unions, only one discusses why they exist. Non-financial co-ops fared less well. About half of the texts do not mention them at all, and when there is a mention it tends to be cursory. The largest coverage in any of the texts was one page. As Hill put it, “Clearly, in most introductory textbooks, cooperative economic organizations are either entirely ignored or receive only a passing mention. (Hill, 2000, 283).

A survey of the most popular introductory business texts used in Canada (see Table 1) shows a similar pattern. Of the six texts surveyed, one had no mention of co-operatives or credit unions, two had about two pages of material, and the balance some lesser amount. Of the two texts with the largest coverage of co-operatives, one had two pages in a twenty-nine page chapter on “Forms of Business Ownership,” the other used half of the space allocated to co-operatives describing the move of one large Canadian farm co-op to privatization and applauding the bankruptcy of a Japanese cooperative which had allegedly gouged its members. In short, the treatment of co-operatives in Canadian introductory business textbooks ranges from nonexistent to hostile. Only Furhman (2000) has anything like an unbiased, non-cursory treatment of co-ops.

A recent survey of introductory business texts deposited in the United States Library of Congress (see Table 2) reinforces these findings.

The dominant paradigm for both introductory economics and introductory business is investorowned, for-profit businesses competing to maximize shareholder wealth. This is an unfortunate paradigm for a number of reasons:

·         Co-operatives have over 700 million members in 100 countries (Williamson, 1994). So they are an economic force that cannot or, at least, should not be ignored.

·         In the U.K., the Coop Group has 70,000 employees and an annual turnover in excess of £7 billion. This is significant by any standard and, while The Coop Group is the largest co-operative in the U.K., it is by no means the only one (Co-op Group).

·          In Canada, 10,000 non-financial co-operatives employ over 150,000 people and the largest of them had in 2001 revenues of CDN $3.3 billion (Agriculture Canada).

·         In the U.S., the top 100 co-operatives had 1996 sales of over US$ 100 billion. More citizens are coop members than own stock market shares, while over 2 million residents of New York City live in co-operative housing (Thompson, 1997). Based on size and economic reach alone, co-operatives are a significant feature of everyday life, are significant employers, and should be understood by graduating students.

·         As Hill (2000, 287) points out, the discussion of co-operatives can “raise a variety of interesting positive and normative questions” that should be part of a business student’s introduction to economic understanding. Among these are: the extent to which democracy should be part of our economic lives as well as our civic lives; how do economic units actually behave outside of economic theory; what impact does the form of business have on economic incentives; are there alternative economic systems beyond pure capitalism or central planning; in the real world, how does the co-operative form impact on power in the market place?

·          John Stuart Mill raised many of these questions in the mid-19th century. So it may be time to make some effort to acquaint business students with the arguments that surround them. As Mill put it: The form of association, however, which if mankind continue to improve, must be expected in the end to predominate, is not that which can exist between a capitalist as chief, and work people without a voice in the management, but the association of the laborers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves. (Mill)

·         Co-operatives have an abiding need for competent managers who embrace both the principles of cooperation and the latest in managerial best practices. This need was recognized almost 80 years ago:

. . . we have two theories regarding the administration of co-operative businesses, and they differ sharply. . . . “We are interested in starting a store . . . and we intend to get the best technical expert that the business world has to offer . . . [or] . . . if we buy up the superlatively efficient managers of Private Business . . . We have the body and form of Co-operation and have lost the spirit. (---, 1924) And is echoed in a recent Australian paper: The board needs to be careful that it does not assume that its role is to manage the co-operative and that the manager’s role is to manage the business. This creates an unhealthy division that will not necessarily be noticeable in the short-term but will have long term unintended consequences. There should be no separation between “co-operative” and “business.” Instead, there is a need to recognize that co-operative managers need to integrate co-operative values within their management practice. Griffith (2003)

Current offerings

There are currently three types of courses / programs available for post-secondary school students with an interest in co-operatives:

• Courses in functional techniques for co-operative employees and supervisors. Organizations such as the Co-operative College in the U.K. (which offers, for example, training programs for retail cooperative sales clerks) or the Credit Union Institute of Canada (CUIC) (which trains employees of credit unions in technical aspects of their jobs) do a great service to the co-operative sector by facilitating employee upgrading.
• Single courses that can be taken as part of MBA or B.Comm/BBA programs. These give students the flavor of co-ops in much the same way that a single course in insurance or tourism might scratch the surface of those specialty areas.
• What can best be called “co-op appreciation” courses typically offered as electives in a B.A. program. These courses are useful in spreading public appreciation of the role of co-operatives and their communities.

Alas, none of these types of offerings answer the managerial needs of co-operatives and credit unions as they struggle to survive and prosper in an increasingly competitive and multinational world. Parnell (2000) writes eloquently of these needs: Senior managers of large scale cooperatives, directly recruited from investorowned businesses frequently, rarely have access to any appropriate development or training; as a consequence they are often left to discover for themselves how they should function within a cooperative organization. Many never learn what it means to properly manage a co-operative undertaking, often with disastrous consequences.

Davis and Donaldson (1998) concur:

“Co-operatives are different enough from mainstream management to require their own principles, concepts and training materials.” And as sound a retail capitalist as Edward Filene had this to say about co-operative stores:

“A good co-operative manager must be as familiar with the ideas and principles of cooperation as he is with the business principles of store management.”

Yet there was not, to the best of my knowledge, any program in English that combines the principles and practices of co-operation and business in a way that would produce tough-minded managers imbued with the co-op spirit.

Why not? Although there are a large number of cooperatives spread around the English-speaking world, they are not so geographically concentrated as to be instantly recognizable as an obvious educational market. Moreover, the research and teaching skills needed for a viable program (especially at the postgraduate level) are not to be found in a single university. They, like co-ops, are spread throughout the world.

This led the advocates of the new paradigm – a tight blend of co-operative values and managerial techniques – to come together to push for a program that reflected the new paradigm. It was concluded that such a program could only succeed if it drew on both students and faculty from around the English-speaking world. The advocates, through their respective co-operatives and credit unions came together to form the Cooperative Management Education Co-operative (CMEC) of which more later.

                       

The program

To meet the expressed needs of co-operatives and credit unions, a new program, reflecting the new paradigm, was developed. It is hosted by Saint Mary’s University, Halifax, Canada and has attracted students from Canada, the U.S., and the U. K. The second intake will be in September 2004.

• Program: Master of Management – Co-operatives and Credit Unions
• Degree Granter: Saint Mary’s University
• Target: Mid-career managers of co-operatives and credit unions. The first class includes candidates from the U.S., the U.K. and Canada, from banking, credit union, insurance, retail, and primary producer co-operatives.
• Language of Instruction: English
• Admission Requirements: Undergraduate degree or significant managerial experience in a cooperative or credit union that might be weighted into degree equivalency; current employment by a co-operative or credit union; willingness of current employer to allow reasonable time off for study; willingness of current employer to facilitate use of the workplace as an object of study.
• The Program: Eleven half-courses (11 x 3 semester hours) plus a study trip, plus a full course thesis (1 x 6 semester hours). All courses are purpose built for the program. Course titles are shown in Table 3.
• Delivery Mechanism: Distance education, web-based delivery using Web CT. Candidates take four half-courses per calendar year.
• Program Developers and Faculty: Drawn from academic institutions in Australia, New Zealand, the U.S., the U.K., Ireland and Canada.
• Financing: Program development is being financed by co-operatives and credit unions through CMEC (see below). Program delivery is on a full cost recovery basis.

Financing program development

As most universities that have been involved in webbed development can attest, development of web courses is a costly proposition. It may be thought that delivery cost can be reduced later as less skilled course administrators take over course delivery from more skilled and more costly

academics (Is my bias against universities that try to eliminate academic positions showing?). But there is rather more up-front cost when technical web skills must be included and when, as with this program, academics are working “outside the box.”

The cost of developing the Saint Mary’s Master of Management – Co-operatives and Credit Unions program could never have been covered from internal sources even if the university had been prepared to front development costs in the expectation of recovering later from what could  euphemistically be called “teaching efficient.” Infect , Saint Mary’s had and has no intention of replacing the professoriate (and there is a strong faculty union to keep it that way), and the delivery of the program is on a full cost recovery basis with no significant “profit” expected.

Happily, the individual co-operatives and credit unions that first approached Saint Mary’s to create the post-graduate level program have undertaken to finance the program development effort. They began by forming the Co-operative Management Education Co-operative (CMEC) which has now grown to include individual, co-operative, credit union and educational institution members from Australia, New Zealand. Ireland, the U.K., the U.S., and Canada. (see www.smu.ca/mmccu for a list of members). A major fund raising initiative is under way, with well over half of the target now pledged.

It is obviously very gratifying to begin program development with a strong and tangible demonstration of demand for the program. The fund raising also serves as a means of encouraging enrollment in the program. On the one hand, the publicity surrounding fund raising makes the existence of the program known. On the other hand, co-operatives and credit unions that have contributed to the development fund have a clear vested interest in sending their own staff to take the courses.

Conclusions

The program is an interesting example of partnering universities and the public to achieve a variety of diverse goals.

From the perspective of the co-operative sector, an internationally developed, world-class program is available to help co-operatives and credit unions to compete successfully in a globalizing world. The program encourages, indeed personifies, cooperation among co-operatives across industry and political boundaries.

For academics and universities in general the program is an opportunity to develop skills in cooperating across institutional and national boundaries. The notion of accumulating learning from a variety of sources and then distributing it to scattered students is not yet commonplace but may become so.

For Saint Mary’s the program helps us make the logical skill set progression from creating individual web-based courses to developing whole programs based on distributed learning. It also opens up a significant new international market.

Bibliography

(1924) Co-operation (Monthly publication of the Cooperative

League of the USA) Vol. X January/December

(1945) Manager’s Manual for Co-operative Stores

(Boston: Edward A. Filene Good Will Fund Inc.)

Berg, Ivar (ed.) (1968) The Business of America (Orlando:

Harcourt Brace)

Boone, Louise E., David L. Kutrz & Ronald A. Knowles

(1999) Business: First Canadian Edition – 1999 Update

(Toronto: Harcourt)