In this week’s Principle 6 Newsletter, Mike Mercer makes the case for membership in co-op associations.
“Leaders in the siloed U.S. co-op community are realizing that being different (i.e., ‘being co-op’) will be a lucrative competitive strategy in the years ahead,” Mercer writes. But to capture that opportunity, cooperation among co-ops will need to be the co-op community’s first instinct.
Read the full newsletter below, and consider how co-op associations could help “de-silo the co-op system.” NCBA CLUSA is on a mission to document Principle 6 collaborations across the country so we can identify trends, document best practices and share this knowledge with you—our fellow cooperators!
Principle 6 Newsletter – Co-op Associations Matter
Jume 8, 2022
The Neighboring Food Co-op Association (NFCA) is a co-operative federation bringing together more than 40 Food Co-ops and Startup initiatives that are working together toward a shared vision of a thriving co-operative economy, rooted in a healthy, just and sustainable regional food system and a vibrant community of co-operative enterprise. – “About,” Neighboring Food Co-op Association website, 6-5-22
From growing suburbs to rural farming communities, America’s electric cooperatives have distinct challenges and opportunities that require innovative solutions. Working together, our electric co-op members accomplish things that would be costly, difficult or even impossible to do alone. That’s the cooperative way, and it’s the foundation of NRECA’s commitment to be a strategic, solutions-focused partner to our members and a powerful force for bringing co-op leaders together to share ideas and solve common challenges. – “Value of Membership,” NRECA website, 6-5-22
As cooperators, we know better than anyone that to achieve our mission and vision, we need to work together to embrace our cooperative distinction and act on our shared values and principles. We are tremendously grateful for the cooperatives and associations that embrace this opportunity and choose to be members of NCBA CLUSA. We know that the only way that we can truly build a more inclusive economy is by moving forward. Together. – “Message from the Chair and CEO,” NCBA CLUSA Annual Report, 2021
“There are too many ticks on the dog.” A colorful refrain with universal application. Boat operators upon learning that there is a new port fee to cover the cost of rebuilding the lighthouse. Business owners besieged with requests for charitable contributions in the local community. And co-op managers expressing frustration with annual dues solicitations from industry trade associations.
“There are not enough dogs for the tick.” Likely you’ve never heard this one; I made it up. But fundamentally, this is what’s driving the consolidation of state trade associations in the credit union sector over recent years. The number of credit unions has dropped from more than 23,000 in the 1970s to just over 5,000 now. Less visible, co-op associations of all types are turning to fee-generating business activities to pay the bills as the number of dues-paying members shrink. At some point, the tail (fee business activities) will start to wag the dog (association priorities).
Enough about dogs and ticks…
Worldwide, all successful cooperative systems have effective associations and other support infrastructures in place. Some say that the associations build the movements. Others insist that successful co-ops build strong associations. Doesn’t matter which version of evolution one subscribes to—successful cooperative systems have both strong co-ops and effective associations.
There are several critical functions for an effective association. Excelling in these areas leads to an assessment of value that justifies membership in the eyes of co-op decision-makers. At a minimum, these areas include:
Expand and Protect the Franchise
Ask 100 co-op association members what they want most from their associations. At least 90 of them will say “advocacy.” In most cases, that means representing their interests with government lawmakers and their appointed rule makers. Most co-ops have or want a defendable franchise. Those that have a franchise want to protect what they have and to expand it when possible. Credit unions have unique laws, tailored regulations, a self-funded mutual guaranty system (deposit insurance) and meaningful tax benefits. But they would like the freedom to serve anybody, own technology partners, pay directors and the like—expanded franchise benefits. Franchise benefits exist in other sectors as well. Some industry sectors and some governmental jurisdictions are virtually devoid of franchise uniqueness for co-ops.
Job number one for co-op associations is to expand and protect the franchise. Job number one for the associations serving investor-owned utilities, banks and other for-profit providers is to expand and protect their franchise benefits. Co-op associations find themselves in a zero-sum game with franchise expansion/protection. Their wins are regarded as losses to the associations serving the for-profit sector. The opposite holds true as well. Banks succeeded in getting the Savings & Loan tax preferences removed in 1951. By 1990, the S&L franchise was worthless. Expanding and protecting the co-op franchise is work that faces significant political and competitive headwinds. The risk of under-resourcing this work is potentially huge, and strategically insane.
To succeed in this area, co-op associations must stand on the shoulders of legitimate license to represent. There are few issues where universal agreement among members exists. It is usually difficult to assemble even simple-majority consensus on an issue of transformational policy. In the credit union world, it is probably safe to say that a numerical consensus did not exist for associations to seek the authority to serve business accounts at the time the opportunities started to surface. It was the same with checking accounts in the 1970s, mortgages in the 1980s and director compensation in the 1990s. Often, it turns out, franchise expansion initiatives require the association boards to provide license (and cover) for pursuing the break-through opportunities. License to protect the existing benefits of the co-op franchise encounter less consensus friction. But a recommendation to abandon an existing franchise benefit can lead to internal civil war.
The Cooperative Network (serving co-ops in WI and MN) keeps an extensive list of policy resolutions (Our Resolutions – Cooperative Network) which are designed to establish consensus and license for their work in advocacy. With marching orders in hand, associations must develop the strategy and articulation that will be necessary to achieve their franchise enhancement and protection objectives. Beyond that, the relationship capacity to influence lawmakers or rule makers must be in place. On occasion, that capacity needs the assistance of co-op leaders and/or their members. The work of franchise enhancement/protection cannot be under-prioritized.
Accelerate Knowledge Development
Co-ops look to their associations for formal and informal assistance in the broad area of knowledge development. But they don’t easily put it into the value acknowledgment calculus at dues collection time. “We train our own people” or “we have access to lots of conference options.” When the question of “what do we get for our dues?” morphs into the more difficult question: “what do we not get if we don’t pay?” Losing access to the knowledge development elements seems like an easily replaceable thing. But engaged members of the most effective associations usually point to the learning acceleration value-adds of membership.
Most associations hold annual gatherings. Good networking, provocative speakers, governance events. Standard fare. Many associations also provide or source a litany of technical education programming that is scheduled throughout the year. Increasingly, co-op associations are building learning networks (councils) around various work specializations. These are peer-to-peer interactions, often facilitated by virtual technology and association content sourcing. Written communications are moving from newsy updates to pearls of wisdom, often written by others. Less scoop, more insight. Associations get credit for gathering and synthesizing information because it’s hard to stay current and curate out on the firing line. The value proposition is in the acceleration—learning more, better, sooner.
Catalyst for Cooperation
Cooperation among co-ops is not always the first inclination for problem solving, especially among co-ops in different sectors of the economy. It has even been said that cooperation is not natural behavior—at least not in the land of cowboy individualism. But cooperation has been essential for leveraging influence on behalf of co-ops in all sorts of ways. Referring to the ICA Guidance Notes for Cooperative Principles:
…co-operatives co-operate with each other in competitive markets through
forming co-operative groups, secondary co-operatives and federations to realize the co-operative advantage and create common wealth for mutual benefit.
Associations form consensus around opportunities to benefit from co-op cooperation. Then they are involved with efforts, usually in a coordinating role, to develop commitment to cooperate. Leadership is essential for durable cooperation. The most effective associations serve in the role of catalyst for cooperation.
Champion the New
As co-ops scale, attention must focus on efficiency and continuous incremental improvement. Expertise is specialized. Core technologies groove processes. Finance and risk management gravitate toward predictability. These are not the ingredients for seeing and seizing opportunities for transformational change or anticipating and mitigating environmental “black swan” events. Historically, associations have been reluctant to venture too close to the edge of the known order of things.
In the future, the most effective associations will help co-op practitioners learn about the transformational possibilities. They will not be clairvoyant. They will not be risk junkies. But they will organize convenings that provoke thinking around the game-changing things that could be out on the horizon. We often hear about climate change, about the societal upheaval from too much wealth disparity, about the electrification of transportation—there’s a long list. But there should be more transformational scenario contemplation. Associations can productively be in the “what if?” business. Why? Because innovation is so critical to the vitality of co-ops in the decades ahead. And ideas are the fuel for innovation. Associations can/should traffic in idea cultivation.
National Cooperative Business Association CLUSA International
One hundred and six years ago, cooperators organized the association that became the National Cooperative Business Association CLUSA International (NCBA CLUSA). Over more than a century, NCBA CLUSA performed many of the functions listed above. But, unlike any other national co-op association, it directed its work for the benefit of co-ops across all economic sectors. Along its path, in-sector associations (like NRECA and CUNA) and sector-specific support organizations (like CoBank and CUNA Mutual) emerged. In-sector state associations blossomed as well. In some sectors (energy, finance and agriculture to name three) NCBA CLUSA began to look a mile wide and an inch deep. The majority of co-op association resources were being directed to “mile deep” organizations for the work of franchise expansion/protection—i.e., job number one.
In recent years, disenchantment with concentration of wealth and polarized/paralyzed government has grown to the point that smart people are looking for alternatives. It has occurred to more than a few that cooperatives are well positioned to be part of the solution. Leaders in the siloed U.S. co-op community are realizing that being different (ie: being co-op) will be a lucrative competitive strategy in the years ahead. We have written often about this here. In any case, for co-ops to seize the opportunity, someone will have to de-silo the U.S. co-op system, at least enough to enable coordinated approaches to markets.
More important, there will need to be a bigger, all-inclusive tribe that can be projected into the economic and social mix of the future. The Cooperative System. There could be a trademarked “Genuine Co-op” seal of authenticity bestowed by an apex organization like NCBA CLUSA. So anointed, co-ops could use and promote the .coop web domain (likely in addition to existing web pointers). NCBA CLUSA and the International Cooperative Alliance own the .coop infrastructure. These are things that American Express, Monsanto and Con Edison can’t pretend to be part of.
NCBA CLUSA is already structured to advance the generic “co-op franchise.” It is already a member of the International Cooperative Alliance, representing all U.S. co-ops. It already helps to channel government resources to other countries where efforts are underway to use co-ops to build more inclusive economies. To succeed in elevating the value of the co-op franchise, NCBA CLUSA will need to collaborate extensively with all the in-sector co-op associations. It will also need to help strengthen and integrate effort with the network of state-level cross-sector organizations (councils and development organizations) as well as the state/regional in-sector associations. Most important, it will need support and engagement from co-ops in the U.S., especially the larger ones.
In the months ahead, NCBA CLUSA will be in contact with leading co-ops about its strategic relevance for co-op success in the decades ahead. The starting place for co-op engagement will be to consider the strategic importance of NCBA CLUSA membership. This important organization is not a tick—and your co-op is not a dog.