Cooperative Report
March 15, 2004 | Cooperatives
2003 Board President's Report for the Hanover Consumer Cooperative Society, Inc.
Independent and Interdependent — Creating Our Future Together
The Co-op is committed to running a profitable and responsible business. We are financially strong and our increasing sales indicate excellent customer satisfaction. The Board of Directors has a fiduciary responsibility to guarantee the financial health of the business, and we take that responsibility very seriously. But the financial health of the organization is only the minimum baseline of Board responsibility. I'd like to articulate some of the work the Board does, above and beyond monitoring our financial performance.
Independence
In the early stages of human and organizational development, dependence is inevitable. If they are successful, people and organizations can move from dependence to independence. Independence brings various sorts of responsibility. Here are some of the ways we are trying to be responsible to our members.
Local governance and control. In this era of large conglomerates and remote management, local governance and democratic control are valuable and precious. The Co-op has almost 34,000 individual members who can elect our Board of Directors and vote to modify bylaws on a one-member-one-vote basis. This direct control of the organization provides a solid foundation for our outlook.
Transparent and responsive management. Our books are open, our Board meetings are open, and our managers have an open-door policy. Last year our customer service desks had 146,000 interactions with our members and shoppers. We responded to 1,900 requests for information related to food safety, nutrition, products, wellness, and other issues. We handled 1,300 operational comments and suggestions submitted through the suggestion box, 450 through the web site, and 550 through personal interactions. Because of our local control we view this transparency and responsibility as a benefit, not a cost. The Co-op is unlikely to attempt to "save money" by minimizing customer interaction.
Governance by policy. Our Board governs by policy. This simple statement means that the Board's actions are predictable and considered. In the best case, policies don't vary with the transient personalities of the individual Board members. Instead, the Board speaks with one voice and directs the General Manager with as much clarity and flexibility as possible.
Measuring results. Board presidents frequently serve for more than a single year. Often, some long-term work that one president begins is not completed during his or her tenure. Ruth Sylvester began the move to policy governance, which then was solidified and completed under Steve Maker's leadership. Steve moved us to begin measuring more of the work we do, trying to quantify so many of the important but qualitative aspects of our organization's value. This proved to be a challenging initiative for both the Board and Management, but we have made progress this year.
Measuring our financial health is relatively straightforward. As a $52 million organization, it may involve a lot of effort, but there are entire industries devoted to specifying the rules and regulations of reporting financial performance. By any financial standard, the Co-op is healthy and stable.
It is much more difficult to measure our Ends Policies. Our Ends define what effect we want to have in the world. It is tempting to simply translate everything into a financial measurement. I even did that above: Customer satisfaction? It must be good because sales are increasing. But our desired effect in the world goes beyond increasing sales or net savings or the patronage refund. The Co-op exists to serve its members, and our members want a diverse and complex mix of products, services, and experiences. Throughout this report, I try to quantify these qualitative aspects of the Co-op, based on information provided by our managers when they monitored our Ends policies. We don't think we've captured everything, and I report here only a portion of what we're now attempting to measure, but we're committed to measuring our outcomes, and we expect to improve our quantitative metrics each year.
Interdependence
Once people or organizations have achieved a level of independence, they may choose to create interdependencies that strengthen themselves and their organizations. Some of these "second-order" interdependencies can be intricate and subtle, as in a marriage, or they might be blunt and obvious, as in a business supplier agreement. We are almost always individually and organizationally dependent on others—in acknowledging this we can turn our interdependence into a valuable asset.
A range of stakeholders. At our Board retreat in January 2004, we agreed that when determining the Co-op's Ends—our desired results of continuing operations—we would consider the interests of a range of stakeholders. This decision will soon be encoded in our policies. As a locally owned, locally governed organization, we have "multiple bottom lines" to balance stakeholder needs. We have the luxury of financial stability, and the duty of our neighbors’ trust, to do this fairly.
Co-op members. Our Co-op members are our most important stakeholders—we put their interests first. The share capital that members invest is critical to the stability of the organization. As the organization grows, this capital becomes ever more important as a "ballast" to the Co-op ship.
Non-member customers. Approximately 20 percent of our sales are to non-members, and we welcome the opportunity to demonstrate the Co-op principles and their tangible effect on the shopping experience. Many people think of the Co-op simply as a very good grocery store, and we value their support of the organization through their purchases.
Co-op staff and their families. The Co-op employs 360 people, 82 percent of them full time. Benefits are provided to all full-time employees working at least 32 hours per week. These statistics stand in dramatic contrast to traditional grocery stores, where full-time staff and the requisite benefits are minimized to increase profit margins. Instead, our members and shoppers know that excellent customer service and product knowledge costs more in pay, benefits, and on-going training. Providing stable and humane employment means that 360 Upper Valley families can have a predictable living and participate in opportunities for growth. We are proud that our staff turnover rate is only 32 percent—down from 40 percent last year and significantly lower than the grocery industry average of 52 percent.
Local suppliers. The Co-op loves working with local suppliers, and we do everything we can to help them succeed. Merchandisers at the Co-op provide meetings, product evaluation, market advice, and business consultation for a wide variety of local and regional growers and producers. Our radio advertisements often feature local farm stands, and every month the Co-op News has a Local Producer Spotlight on the back page. Our finance department has set up special payment programs to expedite invoice payments to local suppliers who are very sensitive to cash flow. Some vendor checks are specifically sorted so that small vendors can personally pick up their checks at the Co-op instead of waiting for mail delivery. Other small vendor checks are mailed weekly and include payments for deliveries made through the previous day. Local and regional growers and producers represent over half of the vendors to the Co-op—nearly 200 out of approximately 360 vendors. Look at the following chart and reflect on the diversity of products produced in our region:
Department NH / VT Vendors # Of Items Grocery 59 650 Dairy 21 340 Produce 15 250 Floral 20 237 Health / Body 17 194 Bakery 21 120 Frozen food 7 68 Beverage 14 59 Meat 5 55 Cheese 19 32 Total 198 2,005
Traditional grocery stores make it very difficult for small suppliers by charging "slotting fees" to gain shelf space. For many small vendors these “real estate” payments can eliminate any potential profit, effectively keeping them out of the market. The Co-op does not charge slotting fees to anyone.
Local community. At one extreme, if there were no local community, the Co-op could not—or would not—continue to exist. At the other extreme, a vibrant and thriving local community makes the Co-op vibe and thrive with the best of them! Within our resources, we do our best to educate, encourage, and support many local community organizations. Some highlights from last year:
- We conducted 60 educational presentations for over 2,000 people at local businesses, colleges, schools, organizations, and healthcare facilities.
- We provided opportunities for learning through a summer externship, 14 job shadows, 15 store tours, and on-going support to the Upper Valley Business and Education Partnership (UVBEP). Our Education Director, Rosemary Fifield, is Treasurer of UVBEP.
- We provided child car seat safety inspections and served as a New Hampshire center for distribution of free car seats to eligible low-income families. Last year we provided 42 inspections and 10 car seats.
- We organized and coordinated 630 volunteer opportunities to facilitate giving to local food shelters.
- We offered 58 cooking and other classes to 812 members and non-members.
- We facilitated 75 uses of Co-op space for fund-raising by local non-profit organizations.
- We supported 151 local community organizations with $4,700 in small cash donations and gift certificates.
- To maintain the fun factor, we hosted our annual Dairy Day and Harvest Festival events, bringing over 5,000 people together for food, fun, and family enjoyment.
An important aspect of our community involvement is the Hanover Cooperative Community Fund (HCCF). The HCCF provides the Co-op with a long-term community giving solution. As a permanently endowed fund intended to grow over time, a portion of its annual return is available to be donated to qualified organizations of the Co-op's choice. As the endowment grows, it will provide a source of community funding that is not dependent on year-to-year Co-op sales or operations. This year we will exceed $100,000 in principal endowment.
Larger cooperative community. Our thriving Co-op is but one member of a larger cooperative movement. This cooperative economy, operating under the cooperative principles and balancing the demands of multiple stakeholders, works within our larger capitalist economy. By working together, we can learn from each other, avoid each other's mistakes, and continue to grow as individuals, organizations, and as an industry. As one of the largest consumer cooperatives in the United States, Hanover has the privilege and obligation to participate in the larger cooperative conversation. Last year we supported the larger cooperative community by:
- Serving on the Boards of Directors of other cooperatives, including Associated Grocers, the Cooperative Grocers Association of the North East, and Equal Exchange.
- Contributing materials, information, and ideas to the Cooperative Grocers Information Network (CGIN) listserve and website, benefiting 400 listserve members and 130 co-ops.
- Participating in the Common Cooperative Membership and Marketing group (CoCoMaMa), giving marketing and membership presentations to 95 Co-ops at two national conventions, plus listserve participation.
- Participating in the National Cooperative Grocery Association (NCGA) advisory group on development of a cooperative branding program benefiting 150 member co-ops.
- Providing speakers, panelists, and displays for the annual Consumer Cooperative Management Association conference. Last year, we presented on 3 panels for 350 attending co-ops.
Through all of this work we have learned much and gathered new ideas from co-ops larger and smaller, locally, regionally, and nationally.
Past and future generations of Co-op members. At our January retreat, we watched the Co-op history video “Hand in Hand" detailing the founding in 1936 and the initial growth of our Co-op. If you haven't seen this 25-minute program, it's highly recommended. (You can borrow a copy from the Co-op lending library.) When the Board thinks about our Co-op's future, we try to think about the past and future generations of Co-op members and shoppers. This perspective helps keep our egos in check and hopefully helps us take decisions that last through time.
Systems of Interdependence
Individuals and organizations can create systems of interdependence when several interdependent groups choose to work together. This is an exciting development because it indicates we are healthy enough as people and as organizations to maintain our independence, cultivate our interdependence, and pursue systems of interdependence that create "third-order" benefits. From an evolutionary perspective, systems of interdependence help us to learn faster and increase our chances of survival. Three examples:
National Cooperative Grocers Association. An exciting current development is the re-organization of the National Cooperative Grocers Association (NCGA). Previously, the Co-op participated in a regional CGA, which was a member of the NCGA. If the current proposal is ratified as expected, the regional CGAs will be merged into the new NCGA, providing our Co-op with direct representation at the national level. Functioning like a combination of a trade organization and a shared business services organization, the NCGA will represent a "virtual chain" of over 300 co-ops across the country.
Management-level co-op cooperation. In the past year, our general manager and other management team members have provided time and consultation to other co-op managers from the Putney Co-op in Putney, Vermont; the South Royalton Co-op in South Royalton, Vermont; the Onion River Co-op in Burlington, Vermont; and the River Valley Market in Northampton, Massachusetts. Because Hanover is an older, more established co-op, we have management systems and information that are both easy to share and valuable to other co-ops. We are glad that we can support other co-ops this way.
Board-level Co-op Cooperation. In the past year, our Board has visited and/or hosted Boards from the Upper Valley Community Credit Union in Lebanon, New Hampshire; the Upper Valley Food Coop in White River Junction, Vermont; the Brattleboro Food Coop in Brattleboro, Vermont; the River Valley Market in Northampton, Massachusetts; and Equal Exchange Fair Trade Coffee in Canton, Massachusetts. We invited the Brattleboro Board president to our Board retreat, and Terry Appleby and I attended the Brattleboro Co-op Board retreat, along with Board presidents and general managers from five other co-ops.
Some of this interaction is simply "meeting your neighbors." Sometimes we've learned that we can save each other quite a bit of time, as when Brattleboro provided us a copy of their recently finished Board Member Information and Nomination packet—something that we need to create this year. It is valuable work for Boards to connect with other co-op Boards and explore how we can help each other survive and thrive.
Thank You!
By choosing to become a member and to shop at the Co-op, you not only support a transparent, responsive, fun, and successful business, you also demonstrate how locally owned and locally governed businesses can contribute to a web of community that benefits everyone. (Insert your own thousand points of light reference here.) Instead of waiting for someone else to create what we want, we're doing it ourselves and have been since 1936. Instead of a single focus on the financial bottom line, we are balancing our efforts among many important stakeholders. And instead of trying to exist in isolation, we are actively networking and building connections with other like-minded organizations. Thank you for continuing to support your co-op and your community.
