cooperative-societies

Cooperative Society

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Cooperative societies, often referred to as co-ops, are a distinct form of business organization that prioritizes collaboration, democratic decision-making, and shared economic benefits among their members. These organizations can take various forms, from agricultural cooperatives to consumer cooperatives, and they operate in a wide range of industries worldwide.

Understanding Cooperative Societies

The Essence of Cooperative Societies

Cooperative societies are characterized by several defining features:

  1. Member Ownership: Members are the owners of the cooperative and have a say in its governance and decision-making processes.
  2. Democratic Control: Decision-making is typically based on the principle of one member, one vote, ensuring equal participation regardless of the number of shares held.
  3. Shared Economic Benefits: Profits and benefits generated by the cooperative are distributed among members, often based on their level of participation or usage.
  4. Social and Economic Objectives: Cooperatives are established to address the economic and social needs of their members and the community.

Historical Evolution of Cooperative Societies

The concept of cooperative societies has a rich historical legacy, with key milestones including:

  • Rochdale Pioneers: In 1844, the Rochdale Society of Equitable Pioneers in the United Kingdom established a set of principles that served as the foundation for modern cooperative societies.
  • International Cooperation: Cooperative movements spread globally, with cooperative organizations and alliances established in various countries.
  • Legislation and Regulation: Many countries introduced legislation to support and regulate cooperative societies, ensuring their proper functioning and protection of member interests.

Key Concepts in Cooperative Societies

1. Member Ownership:

  • Cooperative societies are owned and controlled by their members, distinguishing them from other business models.

2. Democratic Control:

  • Decision-making is based on the principle of one member, one vote, ensuring a democratic and equitable process.

3. Shared Economic Benefits:

  • Profits and benefits generated by the cooperative are distributed among members, aligning the organization’s success with member well-being.

4. Social and Economic Objectives:

  • Cooperative societies aim to address the economic and social needs of their members and the broader community.

Advantages of Cooperative Societies

Cooperative societies offer several advantages, contributing to their appeal and positive impact:

1. Member-Centric Approach:

  • Cooperatives prioritize member interests, ensuring that economic benefits are shared among those who actively participate.

2. Economic Empowerment:

  • Members have the opportunity to benefit economically from their participation in the cooperative, including profit-sharing and dividends.

3. Risk Mitigation:

  • Members share both the rewards and risks, reducing individual financial exposure.

4. Social Responsibility:

  • Cooperatives often have a strong commitment to social and environmental responsibility, contributing positively to their communities.

5. Local Development:

  • Cooperatives can promote local economic development and support sustainable livelihoods.

6. Democratic Governance:

  • Cooperatives offer members a democratic voice in the organization’s direction and decision-making.

Challenges of Cooperative Societies

Despite their advantages, cooperative societies face certain challenges:

1. Limited Access to Capital:

  • Raising capital for growth and expansion can be challenging for cooperatives, limiting their ability to compete with larger, investor-owned enterprises.

2. Governance Complexity:

  • Ensuring effective democratic governance and participation can be challenging, especially in larger cooperatives.

3. Resource Constraints:

  • Cooperatives may lack the resources and expertise needed to compete in complex markets.

4. Succession Planning:

  • Ensuring leadership continuity and management succession can be a concern in some cooperatives.

Broader Impact

The presence of cooperative societies has broader implications for communities, economies, and societies:

1. Community Development:

  • Cooperatives often play a crucial role in supporting local communities and contributing to their development.

2. Economic Stability:

  • By providing economic benefits to members, cooperatives can contribute to financial stability in regions with limited access to traditional financial services.

3. Social Responsibility:

  • Cooperatives frequently engage in social responsibility initiatives, fostering a sense of shared values and ethics.

4. Sustainable Practices:

  • Many cooperatives embrace sustainability practices, contributing to environmental and social well-being.

5. Economic Democracy:

  • Cooperatives exemplify economic democracy by giving members a say in how the organization operates and distributes benefits.

Conclusion

Cooperative societies continue to be a vital and resilient form of business organization, promoting collaboration, economic empowerment, and social responsibility. Their historical roots and principles of democratic governance and shared benefits have made them a relevant and enduring model in various industries and regions around the world. As the global economy evolves, cooperative societies will likely continue to play a critical role in addressing the economic and social needs of their members and communities, contributing to a more inclusive and sustainable future.

Key Highlights:

  • Definition: Cooperative societies are characterized by member ownership, democratic control, shared economic benefits, and social and economic objectives.
  • Historical Evolution:
    • Rochdale Pioneers: Established principles in 1844 that influenced modern cooperative societies.
    • International Cooperation: Spread globally with the establishment of cooperative organizations and alliances.
    • Legislation and Regulation: Many countries introduced supportive legislation to regulate cooperative societies.
  • Key Concepts:
    • Member Ownership
    • Democratic Control
    • Shared Economic Benefits
    • Social and Economic Objectives
  • Advantages:
    • Member-Centric Approach
    • Economic Empowerment
    • Risk Mitigation
    • Social Responsibility
    • Local Development
    • Democratic Governance
  • Challenges:
    • Limited Access to Capital
    • Governance Complexity
    • Resource Constraints
    • Succession Planning
  • Broader Impact:
    • Community Development
    • Economic Stability
    • Social Responsibility
    • Sustainable Practices
    • Economic Democracy
  • Conclusion: Cooperative societies play a vital role in promoting collaboration, economic empowerment, and social responsibility. Their democratic governance and shared benefits make them relevant and resilient models globally.
Related FrameworkDescriptionWhen to Apply
Social Capital– The network of relationships, trust, and reciprocity within a community or organization that facilitates cooperation, collaboration, and collective action. Social capital encompasses social connections, norms, and values that enable individuals and groups to work together effectively to achieve common goals or address shared challenges. Cooperative societies cultivate social capital by fostering trust, solidarity, and mutual support among members, creating a foundation for cooperation, resilience, and community development.– Applicable in community development, network building, and collaborative governance where fostering trust, building social connections, and mobilizing collective resources are essential for addressing community needs and achieving social change. Social capital complements cooperative societies by providing a basis for cooperation, empowering members, and enhancing community resilience and well-being through shared networks, resources, and norms that promote collaboration and mutual assistance.
Collective Bargaining– The process of negotiation between employers and labor unions or workers’ representatives to establish terms and conditions of employment, such as wages, benefits, and working conditions. Collective bargaining enables workers to pool their bargaining power, voice their concerns, and negotiate with employers collectively to achieve fair wages, job security, and improved working conditions. Cooperative societies support collective bargaining by empowering workers, providing a platform for collective action, and advocating for workers’ rights and interests in the workplace.– Relevant in labor relations, union organizing, and employment negotiations where protecting workers’ rights, promoting fair labor practices, and improving working conditions are key objectives for ensuring social justice and economic equity. Collective bargaining complements cooperative societies by providing a mechanism for workers to advocate for their interests, negotiate with employers, and secure better wages, benefits, and working conditions through collective action and solidarity.
Solidarity Economy– An economic system based on principles of cooperation, mutualism, and solidarity that seeks to meet human needs while promoting social and environmental justice. Solidarity economy initiatives include cooperatives, community-based enterprises, fair trade networks, and mutual aid organizations that prioritize people and planet over profit, foster collective ownership and decision-making, and promote equitable distribution of resources and wealth. Cooperative societies are integral to the solidarity economy by embodying principles of democratic ownership, shared responsibility, and community empowerment in economic activities.– Applicable in economic development, social entrepreneurship, and sustainable community building where promoting economic democracy, advancing social justice, and fostering environmental sustainability are fundamental goals for building a more inclusive and resilient economy. Solidarity economy principles complement cooperative societies by promoting cooperation, equity, and sustainability in economic activities, empowering communities, and addressing systemic inequalities and environmental challenges through collective action and solidarity-based initiatives.
Participatory Democracy– A form of governance where citizens actively participate in decision-making processes, policy development, and community affairs to shape the future of their societies. Participatory democracy empowers individuals and communities to have a direct voice in matters that affect their lives, promotes transparency, accountability, and civic engagement, and fosters a culture of collaboration and collective responsibility. Cooperative societies embody principles of participatory democracy by providing a platform for members to participate in decision-making, governance, and community development initiatives democratically.– Relevant in political reform, community organizing, and local governance where enhancing citizen engagement, promoting democratic values, and fostering inclusive decision-making processes are essential for building strong, resilient, and equitable societies. Participatory democracy complements cooperative societies by providing opportunities for members to exercise their democratic rights, contribute to organizational governance, and shape collective priorities and initiatives through active participation and dialogue.
Community-Owned Assets– Assets, resources, or infrastructure that are owned and managed collectively by a community or group of stakeholders for the benefit of all members and the broader community. Community-owned assets can include land, housing, utilities, businesses, or cultural facilities that are governed democratically and operated based on principles of equity, sustainability, and community stewardship. Cooperative societies facilitate community ownership by providing a legal framework and organizational structure for collective ownership, decision-making, and management of assets for the common good.– Applicable in community development, asset management, and public services provision where promoting community ownership, ensuring equitable access, and enhancing local autonomy and resilience are strategic objectives for fostering sustainable development and social cohesion. Community-owned assets complement cooperative societies by providing a platform for communities to collectively manage and benefit from shared resources, empowering members, and promoting inclusive and sustainable development that meets community needs and priorities.
Microfinance Institutions (MFIs)– Financial institutions that provide small loans, savings, and other financial services to low-income individuals, microenterprises, and underserved communities to promote financial inclusion, entrepreneurship, and poverty alleviation. Microfinance institutions (MFIs) use principles of solidarity lending, group lending, and community-based banking to extend financial services to marginalized populations who lack access to traditional banking services. Cooperative societies collaborate with MFIs to expand access to financial resources, build financial literacy, and support community-led economic initiatives, particularly in rural and underserved areas.– Relevant in financial inclusion, community development, and poverty reduction where expanding access to financial services, empowering marginalized populations, and promoting economic self-sufficiency are strategic priorities for fostering inclusive growth and development. Microfinance institutions complement cooperative societies by providing financial tools and resources to empower individuals and communities, promote entrepreneurship, and build resilience against economic shocks and vulnerabilities through collaborative and community-based approaches to financial inclusion and development.
Social Entrepreneurship– Entrepreneurial initiatives that prioritize social or environmental impact alongside financial sustainability, aiming to address pressing social problems, advance innovative solutions, and create positive change in society. Social entrepreneurs establish ventures, enterprises, or organizations that leverage business principles and innovation to tackle systemic issues such as poverty, inequality, and environmental degradation while generating social value and promoting sustainable development. Cooperative societies support social entrepreneurship by providing a platform for collective enterprise development, fostering collaboration, and promoting social innovation and impact-driven business models that benefit communities and address unmet social needs effectively.– Applicable in business innovation, community development, and sustainable enterprise where addressing social challenges, fostering innovation, and promoting inclusive economic growth are strategic imperatives for building a more equitable and sustainable society. Social entrepreneurship complements cooperative societies by providing avenues for collective enterprise development, fostering innovation, and creating positive social impact through entrepreneurial ventures that empower communities, drive social change, and promote economic resilience and sustainability.
Community Land Trusts (CLTs)– Nonprofit organizations that acquire, hold, and steward land for the benefit of a community, ensuring long-term affordability, equitable access, and community control over land use and development. Community land trusts (CLTs) separate ownership of land from ownership of buildings or homes, allowing residents or businesses to lease or own structures while the trust retains ownership of the land in perpetuity. Cooperative societies collaborate with CLTs to develop affordable housing, preserve open space, and promote community-led development projects that prioritize community needs and aspirations over speculative interests or market forces.– Relevant in affordable housing, urban development, and land management where ensuring equitable access to land, promoting housing affordability, and fostering community control over development are critical for building inclusive, sustainable, and resilient communities. Community land trusts complement cooperative societies by providing a model for community-driven land stewardship, fostering collaborative land use planning, and preserving land assets for the benefit of current and future generations through democratic and participatory governance structures and processes.
Worker-Owned Cooperatives– Businesses or enterprises that are owned and democratically governed by their employees, who share ownership, decision-making authority, and financial benefits collectively. Worker-owned cooperatives empower employees to control their workplaces, share in profits, and participate in decision-making processes democratically, fostering workplace democracy, economic equity, and social solidarity. Cooperative societies support worker-owned cooperatives by providing legal frameworks, technical assistance, and networking opportunities to facilitate the establishment and operation of cooperative enterprises that prioritize worker empowerment, job security, and shared prosperity.– Applicable in labor rights advocacy, economic empowerment, and enterprise development where promoting worker ownership, enhancing job quality, and advancing workplace democracy are strategic priorities for building inclusive and sustainable economies. Worker-owned cooperatives complement cooperative societies by providing a model for democratic workplace governance, empowering workers, and promoting economic democracy and equity through collective ownership, participation, and shared prosperity in enterprise management and decision-making processes.
Community-Based Organizations (CBOs)– Grassroots organizations, associations, or groups formed by community members to address local needs, advance common interests, and promote social change through collective action and community organizing. Community-based organizations (CBOs) engage residents, mobilize resources, and advocate for policies and programs that address pressing social issues, strengthen community resilience, and empower marginalized populations. Cooperative societies collaborate with CBOs to support community-led initiatives, build capacity, and foster inclusive development processes that prioritize community voice, participation, and ownership in decision-making and action.– Relevant in community mobilization, social advocacy, and grassroots development where building social capital, empowering communities, and fostering collective action are essential for addressing systemic inequalities and promoting social justice and inclusion. Community-based organizations complement cooperative societies by providing grassroots networks, community expertise, and localized solutions to address local needs, advance community priorities, and drive positive social change through collective organizing and collaboration.

Read Next: Organizational Structure.

Types of Organizational Structures

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Organizational Structures

Siloed Organizational Structures

Functional

functional-organizational-structure
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.

Divisional

divisional-organizational-structure

Open Organizational Structures

Matrix

matrix-organizational-structure

Flat

flat-organizational-structure
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.

Connected Business Frameworks

Portfolio Management

project-portfolio-matrix
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.

Kotter’s 8-Step Change Model

kotters-8-step-change-model
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.

Nadler-Tushman Congruence Model

nadler-tushman-congruence-model
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.

McKinsey’s Seven Degrees of Freedom

mckinseys-seven-degrees
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.

Mintzberg’s 5Ps

5ps-of-strategy
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.

COSO Framework

coso-framework
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.

TOWS Matrix

tows-matrix
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.

Lewin’s Change Management

lewins-change-management-model
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.

Organizational Structure Case Studies

OpenAI Organizational Structure

openai-organizational-structure
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.

Airbnb Organizational Structure

airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

Amazon Organizational Structure

amazon-organizational-structure
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.

Apple Organizational Structure

apple-organizational-structure
Apple has a traditional hierarchical structure with product-based grouping and some collaboration between divisions.

Coca-Cola Organizational Structure

coca-cola-organizational-structure
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.

Costco Organizational Structure

costco-organizational-structure
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure. Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue. Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.

Dell Organizational Structure

dell-organizational-structure
Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.

eBay Organizational Structure

ebay-organizational-structure
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

Facebook Organizational Structure

facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).

Goldman Sachs’ Organizational Structure

goldman-sacks-organizational-structures
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.

Google Organizational Structure

google-organizational-structure
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

IBM Organizational Structure

ibm-organizational-structure
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

McDonald’s Organizational Structure

mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

McKinsey Organizational Structure

mckinsey-organizational-structure
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.

Microsoft Organizational Structure

microsoft-organizational-structure
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

Nestlé Organizational Structure

nestle-organizational-structure
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.

Nike Organizational Structure

nike-organizational-structure
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).

Patagonia Organizational Structure

patagonia-organizational-structure
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.

Samsung Organizational Structure

samsung-organizational-structure (1)
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).

Sony Organizational Structure

sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Starbucks Organizational Structure

starbucks-organizational-structure
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.

Tesla Organizational Structure

tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

Toyota Organizational Structure

toyota-organizational-structure
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).

Walmart Organizational Structure

walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

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