The Cooperative Business Model: Topic 1

Introduction

The cooperative business model is an unusual business model where people or the stakeholders play the role of the owner of the organisation. Organisations that follow the cooperative business model are totally different from other organisations in terms of their business objective; the core goal of such organisations is to benefit all of their stakeholders (Reynolds, 2013). It has been observed that employees in such organisations feel more engaged with their brands and communicate with the authority more frequently. This essay, therefore, will focus on identifying and evaluating those causes that are responsible for making the cooperative business model a people-friendly form of business management.

Communication is viewed as a process through which an entity (sender) shares information with others (receivers). In this process, messages get conveyed through signs that are mutually understood by a group of individuals. According to the Cybernetic concept of communication, it is nothing but ‘the flow of information’ which is extremely important for organisations. Communication (internal) helps organisations to earn employees’ trusts, strengthen the relationship with them, increase clarity & transparency within the organisation, and achieve effective collaboration among employees (Rajhans, 2012). Therefore it can be stated that effective communication is the key to employee engagement. Engaged employees are those that are absorbed by their organisation and are extremely enthusiastic about their work. In order for the company to engage its employees, it needs to know its employees through a greater level of interpersonal and group communication. It needs to value their needs & provide them with all the necessary equipment for success (Cacciattolo,  2015). Sharing information regarding the mission & vision of the company and supporting & empowering the employees is also very necessary. And finally, the management should encourage teamwork & staff recognition at the workplace. Cooperative companies successfully perform all of the above-mentioned duties with the help of their people-oriented business approach. People are the most important factors in Cooperative business model. They believe in the interpretative approach to organisational communication, which opines that organisations are nothing but ‘subjective existence’; therefore organisational communication should focus on the ambiguity & complexity of the language, symbol, social interactions etc. People are the main factors here that create & sustain an organisation.

The human relations theory needs to be discussed in this place. This is one type of management theory which started developing during the age of the industrial revolution when people were nothing but a means of production. This theory was proposed by Elton Mayo, who believed that the most important element in the production system is the human relationship (Hegar, 2012). According to him, an organisation tends to become more productive when employees in it feel supported by other members of the same. Employees want to feel that their works have significant impacts on the final organisational output. Therefore employee motivation is extremely important for an organisation to be highly productive (Mone et al., 2018). Unlike traditional companies, cooperative organisations pay more attention to the development of their relationships with their employees and benefitting the employees (and other stakeholders) in different ways. This approach helps them engage their employees easily. Some examples of workers cooperative in the UK is the Edinburgh Bicycle Co-operative, Suma Foods, Infinity Foods Co-operative etc. A report published by the Guardian shows that cooperative businesses will become the fastest growing business and the most preferred model of business by 2020 (Bibby, 2020). According to another report published by the same newspaper, cooperatives are ‘innately’ more sustainable than others as they don’t need to deal with pressures related to profit; thus they can develop long-term business plans easily (the Guardian., 2020).

Modern businesses rely on a few core elements; those are the creditors, the decision-makers and the employees. Whoever owns a percentage of an organisation is known to be the creditor, shareholder and part-owner of the company. The executives (directors etc.) are responsible for making decisions and employees are there to execute the plans made by the decision-makers. The cooperative model can be considered as an alternative and autonomous business model where different groups of stakeholders own and run the business and make sure that it efficiently performs all ethical duties of an organisation (Varzaru and Varzaru, 2013). Owners, in this case, are the customers that use the services & products offered by the company, employees that work for them, suppliers & local communities that are associated with the business in different ways. Based on the ownership style Cooperative businesses can be divided into various categories, such as workers cooperative, a consumer cooperative, producer cooperative, social cooperative, and so on (Rice, 2013).

Figure 1: The Cooperative Business Model

(Source: uk.coop, 2020)

The cooperative business model works on the basis of the triple bottom line concepts. According to that concept, the responsibility of an organisation is not generating profit only; they ought to consider the needs of the people (overall society) and the planet (environment). Therefore people, especially the employees in such organisations have a say in the decision-making process (Doaei, 2012). Cooperatives allow employees to right to purchase the share of the company or granted a percentage of the company by default; therefore, technically, they are owners of the same (Henriques and Richardson, 2013).

The Cooperative business model implements the stakeholders’ theory appropriately. Even though the stakeholders’ theory proposed by Edward Freeman in 1984 is already popular throughout the world, many organisation still promotes the ideas of the ‘agency theory’. According to that theory, the decision-makers are nothing but agents of the people that aid the company financially; therefore, they are required to serve creditors interests and maximise profit at any cost. The employees are nothing but human capitals only and receive a particular amount of monetary compensation on a regular basis (Ballwieser et al., 2012). Most of the organisations these days offer recognition and reward facilities, promotion, non-monetary benefits etc. to the employees to boost their morale. However, the traditional ownership style can never evoke the sense of ownership among the employees, and their opinions are also not very important in such business models (Truss et al., 2013).

Figure:2 The Stakeholder Theory

(Source: economicpoint.com, 2020)

The stakeholders’ theory, on the other hand, holds that a company cannot perform its duties, generate profit and satisfy its shareholders if they don’t receive the support of all those people that are associated with them (employees, suppliers, customers, communities etc.) and get affected by their business. All these people are known as stakeholders. Therefore it is the duty of the organisations to satisfy the wishes, wants, and needs of all of these stakeholders and create value for them in order to achieve sustainable success. The principles that cooperatives follow are people first, equality, and accountability (Fernando and Lawrence, 2014). Cooperative businesses are generally not profit-driven businesses; rather, they aim to bring equity, justice and fairness in the market. Employees in such businesses are comparatively free, and all are treated equally by the management. Each member gets to vote and elect the directors’ board and entitled to a particular percentage of the profit which the company provides them as an incentive. The amount of respect, benefit and autonomy they receive not only increase their level of engagement but also strengthens their sense of responsibility and accountability towards the brand (Andriof et al., 2017).

The leadership styles of cooperative businesses are far more engaging than other businesses. Democratic leadership works for bodies such as cooperatives, non-profit organisations etc. Cooperative organisations are bound to fulfil the needs of the employees, therefore, unlike conventional ownership structure; employee participation in the cooperative model is not optional, it’s compulsory (Bhatti et al., 2012). Cooperative firms run on democratic principles. Leaders, therefore, ask their followers or colleagues to take part in all aspects of the business such as decision-making, responsibility-sharing etc. this type of approach creates a sense of value, authority and ownership within the staffs.  Democratic leaders allow free flow of ideas and information which increase the level of transparency within the organisation and strengthen the internal communication mechanism. Participative (democratic) leadership believes in mutual respect; every individual within this system is treated respectfully and equally. As mentioned earlier, all of these factors affect employee engagement positively (Kane and Patapan, 2014).

Figure 3: Organisational Cultures

(Source: runmeetly.com, 2020)

Not only the leadership style but also the organisational culture of cooperative companies promotes better communication and employee engagement. Cameron and Quinn divided organisational cultures into four groups; those are clan culture, adhocracy culture, market culture, hierarchy culture. Adhocracy culture is an entrepreneurial culture which mostly focuses on risk-taking, agility and innovation (Kołodziejczak, 2015). Market culture is all about achievement and competition. Hierarchy culture believes in control and perfection. Clan culture believes in collaboration, mentorship, nurturing behaviour, communication & teamwork and respectful relationships. The cooperative business follows this family-like organisational culture that allows them to put people on the top of everything. This approach helps them to meet the needs of their employees mentioned the need theory proposed by Maslow.

It has been observed that the level of satisfaction determines the level at which an employee would be engaged with his/her firm. The popular need theory says people have expectations which are beyond mere physical needs such as the need for shelter, clothes & foods.  Maslow presented the different levels of people’s needs through a pyramid. He explained an individual has various types of needs along with the physical needs; those are safety needs, social needs, esteem needs and self actualisation needs. People want to feel safe in terms of financial resources and employment facilities (Heritage et al., 2014). Being a people owned organisation, Cooperatives can meet such needs in a better way. People also want to have a sense of belongingness and be part of a loving & supportive group. The family-like culture of cooperative organisations successfully meets this need of individuals. Individuals also have the desire to be respected and valued; the democratic leadership style of Cooperatives helps people fulfil this need as well. The sense of authority and ownership in cooperative businesses also allow people to meet their self actualisation (becoming the best versions of themselves) need as well (Ganta, 2014).

In order to identify the factors that affect employee engagement, a small survey was carried out. People (24 people took part finally) were selected randomly, and the questionnaire was published through a popular survey website.

Q1. Which kind of business organisations should be respected the most?

Chart 1: Most Respected Business Model

(Source: By the author)

13 out of the 24 people said that they feel a company should focus not only profit-making or people benefit; they should take both of these aspects seriously. Only two people said that they would prefer a profit-oriented brand and the rest of the nine said they would like to be a part of a people-oriented brand. It is true that organisations need to make a profit in order to sustain; however, they should also look at the needs of its stakeholder.

Q2. What makes you feel motivated?

Chart 2: Factors that Motivate

(Source: By the author)

The intention, in this case, was to find out the main motivating factors for people. Most of the organisations provide their employees with financial and promotional rewards to satisfy their needs. However, this survey reveals that the maximum number of people prefer freedom and authority which they can get in cooperative firms. Eight people out of the 24 said that they would like to focus on their personal growth. Least number of people is interested in financial benefits such as rewards and mere financial incentives.

Q3. Which type of leadership will increase your level of engagement?

Chart 3: Preferred Leadership Style

(Source: By the author)

This chart clearly says that what people value the most is the sense of ownership (democratic leadership); they want to feel that they are valuable elements for their teams. However, a considerable number of people also said they would like to work under a leader who nurtures them, help learn something new and develop their skills (coaching leadership). Clearly, most of the people reject the idea of authoritative leadership style.

Conclusion

The above essay tries to find out the reasons that make the cooperative business organisation better than others in terms of employee engagement and communication.  Based on the discussion and the survey it can be concluded that the people (and profit at the same time, not an NGO) oriented approach of such organisations turns them into respectable bodies in front of the public. They successfully provide people with a sense of authority & ownership that makes them different from traditional shareholder-oriented organisations and promotes employee motivation & internal communication.

References

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the Guardian. (2020). Championing The Co-Operative Model | Letters. [online] Available at: <https://www.theguardian.com/business/2019/jul/01/championing-the-co-operative-model> [Accessed 20 April 2020].

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