Learning How Co-ops Compete
How students are uncovering the secrets of a different kind of business model
Cooperatives are a little-understood form of business: private corporations, not for profit, owned by their users.
But there they are, hiding in plain sight across the United States: 900 locally owned electric co-ops; 300 phone and telecommunications co-ops; 8,200 depositor-owned credit unions; 300 grocery and food co-ops. Then there are the agricultural co-ops, where farmers band together to market their products in a highly competitive marketplace: Sunkist, Welch's, Land O'Lakes, Ocean Spray.
It's a form of business that benefits the American economy, and a three-track program is showing students across Kentucky about the competitiveness of cooperation.
American Private Enterprise Systems
One way to teach our future leaders about cooperatives is through the American Private Enterprise System Program (APES). This two-day business and economics seminar teaches high school juniors throughout the Commonwealth how our country does business.
Greg Whitis, County Extension agent for agriculture and natural resources in McCreary County, explains that APES seminars are coordinated through the local University of Kentucky Cooperative Extension 4-H Programs and are typically sponsored by rural electric cooperatives and local businesses.
"Comprehensive lessons on various types of businesses and how they differ are taught by community business leaders," says Whitis.
The APES program opens the door to many opportunities for Kentucky high school juniors. Those who excel at their county level advance to the Kentucky Youth Seminar (KYS) held at the University of Kentucky campus in June. Whitis, who also serves on the KYS planning committee, says while in Lexington, students receive an in-depth, three-day lesson on cooperatives, investor-owned corporations, and the free enterprise system. "Approximately 35 Kentucky counties participate in APES and each sends their top scholars to KYS," says Whitis. He says the average enrollment at KYS is between 80-100 students each year.
Earning the state trip is just the first step for APES students. While at UK, teens compete for cash awards and college scholarships. Caleb Givan, a recent Hardin County graduate, earned a $700 scholarship in 2009 while attending the Kentucky Youth Seminar. "It's an honor to attend KYS, it's a great program," says Givan. "The educational benefits are invaluable and the scholarships offered emphasize the support KYS gives to the future of some of the most talented students in Kentucky."
Making their case at KYS
Board case studies at the KYS traditionally receive high marks from participants. Groups of 10 students make up each board as they work together to resolve a fictitious dilemma. These case studies replicate real-life issues similar to those presented at a cooperative board meeting. Mary Lou Mayes is a board case judge well-aware of how a co-op operates and what types of situations make their way to the board room. She works for an electric co-op, Inter-County Energy Cooperative in Danville, and serves on the KYS planning committee.
According to Mayes, after cases are resolved, they are judged and the winners must then stand before their peers to present and defend the board resolution. "This part of the seminar proves to be both challenging and exciting, especially between boards that work identical cases, leaving one to win and the others to score below first place," says Mayes.
"My board team worked long and hard and as board chair, I felt pressure to do well in defending our resolution," says 17-year-old Michael Huff of LaRue County. "Winning the case was the highlight of my experience at KYS."
Mayes says teens use a five-step process for making a business decision when resolving board cases. If students follow the proper procedures in reaching a course of action, the best alternative will surface.
Understanding how cooperatives operate, the guiding principles that govern co-ops, and what makes them different from other businesses is just as important as following the five-step problem solver.
"We have an obligation to teach youth about cooperatives and to instill their importance in the business world," says Dr. Lionel Williamson, professor of agricultural economics at the University of Kentucky. Dr. Williamson, who serves as Kentucky Youth Seminar coordinator, stresses cooperative principles. "We must teach students that caring about your members and those who do business with you is one of the most important roles a co-op can have. After all, a successful business is about good relationships. Our youth must be shown by example that the bottom line is not always about money."
Advancing to NICE
Rewards come to those who work hard. At the conclusion of the KYS, students who excel receive college scholarships, cash, and a trip to the National Institute on Cooperative Education (NICE). According to Dr. Williamson, the Kentucky Council of Cooperatives contributes about $15,000 annually in college scholarships and cash prizes to KYS. He says the council also picks up the expenses for the NICE trip winners.
Advancing to NICE is an extremely prestigious honor for the upcoming high school seniors. College-bound student John Ard, Pulaski County, attended the NICE conference in 2009 and returned to the KYS as a youth scholar leader in 2010. Ard says, "The NICE program is a great opportunity that enables youth scholars all over the nation to learn how businesses operate and what is involved in running a business."
Typically 12 states, including Kentucky, and 120 students come together at NICE. Kentucky hosted the NICE Conference in 2005 at the University of Kentucky campus. This year, 21 Kentucky students headed to the University of Tennessee to attend the 2010 NICE Conference in Knoxville.
In addition to resolving complex board cases at NICE, another exciting learning experience is the Student-run Cooperative (STUCO). This exercise gives participants an opportunity to form their own consumer co-op, providing goods and services to conference attendees. Teams strategize to determine an unmet need and create a business plan for meeting that need. Some of the items sold include candy, roses, key chains, and souvenir t-shirts.
Of course, all this hard work deserves a day of fun and leisure. NICE delegates are treated to a day at nearby Dollywood Theme Park, and as one might guess, this proves to be a favorite activity for the teens. Another favorite on the agenda comes on the last evening of NICE and includes a DJ, loud music, and a group of energized teens.
The conclusion of the four-day National Institute on Cooperative Education Conference involves recognition of several outstanding participants. Awards are presented to winning STUCO teams and board case members. NICE Outstanding Youth Scholars are selected and announced at the closing ceremonies, which include a formal dinner and talent show.
Teaching students about cooperatives and how they operate is a great way to preserve the heritage of co-ops. Our challenge is to instill excitement in young people so that they will make sure cooperatives continue to thrive in the future. Those of us in the rural electric cooperative family feel confident we are leaving our core principles and superior reputation in very strong hands.
7 COOPERATIVE PRINCIPLES
Cooperatives are businesses that are owned by their members--the people who use the co-op's services or buy its goods--not by investors. Co-ops return surplus revenues to members and are motivated by service to their members, not by profit.
There are more than 72,000 cooperative establishments in the U.S. providing more than 2 million jobs in every industry, including agriculture, childcare, energy, financial services, food retailing and distribution, healthcare, insurance, housing, purchasing and shared services, telecommunications, and others.
Cooperatives around the world generally operate according to the same core principles and values, adopted by the International Cooperative Alliance in 1995. The International Cooperative Alliance is a global membership association of co-ops and co-op support organizations. Cooperatives trace the roots of these principles to the first modern cooperative founded in Rochdale, England, in 1844.
1. Voluntary and Open Membership: Cooperatives are voluntary organizations, open to all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.
2. Democratic Member Control: Cooperatives are democratic organizations controlled by their members--those who buy the goods or use the services of the cooperative--who actively participate in setting policies and making decisions.
3. Members' Economic Participation: Members contribute equally to, and democratically control, the capital of the cooperative. This benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested.
4. Autonomy and Independence: Cooperatives are autonomous, self-help organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintain the cooperative's autonomy.
5. Education, Training, and Information: Cooperatives provide education and training for members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives.
6. Cooperation among Cooperatives: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.
7. Concern for Community: While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members.
October is when most co-ops celebrate Co-op Month. To learn more about cooperatives, go online to www.co-opmonth.coop.
BUSINESS DECISION MODEL
The five-step business decision model is based on
1) developing a clear picture of the situation,
2) diagnosing the problem properly,
3) listing the promising alternatives,
4) identifying the consequences of each alternative, and 5) deciding on the best course of action to take.
KEYWORD EXCLUSIVE: HOW TO BECOME AN APE
If you are interested in participating in the American Private Enterprise System seminars, or learn more about the Kentucky Youth Seminar or National Institute on Cooperative Education, go to APES.