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FACTORS ASSOCIATED WITH THE EFFECTIVENESS
OF COOPERATIVES IN THE THIRD WORLD:
A CONCEPTUAL MODEL FOR
THE PHILIPPINES

presented by

Alfredo B. De Torres

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FACTORS ASSOCIATED WITH THE EFFECTIVENESS
OF COOPERATIVES IN THE THIRD WORLD:
A CONCEPTUAL MODEL FOR
THE PHILIPPINES

BY
Alfredo B. De Torres

A DISSERTATION

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Resource Deve10pment

1983

ABSTRACT
FACTORS ASSOCIATED WITH THE EFFECTIVENESS
OF COOPERATIVES IN THE THIRD WORLD:

A CONCEPTUAL MODEL FOR
THE PHILIPPINES

By
Alfredo B. De Torres

Three basic questions loom large in using cooperatives as
a development policy tool in the developing world, particularly
in the Philippines: 1) Why is it that cooperatives are easy to
organize and hard to sustain?; 2) How can successful cooperatives
be developed?; and 3) How can cooperative growth be accelerated
and economic efficiency be improved? These questions are
addressed in this dissertation. The objectives of the study
were to: 1) Review the cooperative approaches conducted in the
Philippines with emphasis on causes of failure as a background
cooperative agenda; 2) Review the development trends and
prospects of Area Marketing Cooperatives in order to discern or
identify problems or operational weaknesses and strengths of
the organization; 3) Identify the factors associated with the
effectiveness of an organization and categorize them for a
more systematic analysis; 4) Identify major research gaps and
direction as future action-agenda for cooperative evaluation and
research; and 5) Design a research study for measuring coopera-
tive effectiveness.

Government-sponsored cooperatives in the Philippines have

followed Euro-American models. It has been a "top-to-bottom"

policy generally implemented nation-wide without pilot—testing.
More often than not, cooperatives have become a "state welfare
enterprise" with inadequate local action resource commitments,
or participation of the clientele-system.

The review of literature presented in this study suggests

that the cooperative "failure factors" of the past include:
1) mistakes in personnel management and member-public relations;
2) mistakes in organization and mistakes in business operation;
3) inadequate linkages; and 4) limited decision-making partici-
pation by the clientele system.

Two frameworks were identified in this study as being
useful for analyzing cooperative performance: 1) organization
theory, which provides a framework for understanding, explaining,
and predicting organizational effectiveness; and 2) community
resource economics theory, which involves the study of the
situation, structure, conduct and performance of an institution.

The major cooperative "research gaps" pinpointed in this
study revolve around implementation analysis (change-agency
and clientele-system) and specification assessment of the
cooperative organization. Because cooperatives demand con-
siderable local action and participatory commitment, emphasis
should be placed on a bottom-up approach and on conducting
multi-disciplinary action-research to monitor and improve
cooperative effectiveness. Guidelines for conducting an action-

research program are discussed.

ACKNOWLEDGMENT

Like any other change process, this study has sur-
vived the difficulties through the encouragement and support
of numerous individuals and institutions. It is however,
impossible to enumerate or mention them all.

The author is particulary indebted to his Guidance
Committee: Professor Frank A. Fear (Dissertation Research
Director and Sociologist) for his constant and persevering
supervision. His most energetic posture in guiding this
study has substantially improved its quality; Professor
Milton H. Steinmueller (Chairperson, Guidance Committee,
and a Resource Economist) for his flexibility and liberal-
mindedness in handling my ideas and my academic program;
Professor Robert D. Stevens (Agricultural Development
Economist) a mentor and adviser whose matured ways of
handling my "troubled ideas" kept me on course at that time
when the going was rough; Professor Warren H. Vincent (Farm
Management and Production Economist) as a mentor and intel-
lectual stimulator whose research exposure in Third World
countries has improved the quality of my critical outlook
in development field.

The author acknowledges with many thanks the USAID-

Philippines-Kansas State University's Integrated

ii

Agricultural Production and Marketing Project for under-
writing the bulk of finances required by my graduate work.
I should thank particularly the efficient coordination
provided by Dr. William J. Jorns, Assistant Director,
International Agricultural Programs of Kansas State Uni-
versity.

The study would not have been carried out if the
author had not received the approval of the University of
the Philippines at Los .Bafios, particularly through the
active support of Dr. Rodolfo M. Matienzo, Director, Agri-
cultural Credit and Cooperatives Institute and concurrent
Executive Director of the C00perative Foundation of The
Philippines, Incorporated. Also many thanks to Chancellor
Emil Q. Javier, Dean Pedro Sandoval and Director Ed
Quisumbing.

The author also wishes to acknowledge the contribu-
tions of friends and fellow Philippine students at MSU for
their constant support and inspiration.

Finally, special thanks to Jo McKenzie who neatly

and professionally typed the manuscript.

iii

TABLE OF CONTENTS

LIST OF TABLES O O O O O O O O O O O O O O O O O O 0

LIST OF FIGURES O O O O O O O O O O O O O O O O O 0

Chapter

I

II

INTRODUCTION 0 O O O O O O O O O I O O O

The Relevance of the Agricultural
Sector in the Third World . . . . . .
Cooperatives as a Strategy for
Agricultural Development. . . . . . .
Elements of Cooperatives. . . . .
Constraints on Cooperatives . . .
Importance/Relevance of
COOperatives . . . . . . . . . .
Rural Development Perspectives and the
Cooperatives Strategy: The

Philippine Case . . . . . . . . . . .
Research Focus . . . . . . . . . . . .
Study Objectives. . . . .

Rationale for Studying the Area
Marketing Cooperatives . . . . .
Organization of the Study . . . .

THE PHILIPPINES COOPERATIVE PROGRAM. . .

Background on COOperatives in
the Philippines . . . . . . . . . . .
The Philippine Cooperative History . .

The Economic-Administrative
Crisis Stage (1900-1950) . . . .
The Post-war and Social Upheaval
Stage (1951-1971). . . . . . . .
The Martial Rule Stage (1972...).

The Failure of Cooperatives in

the Past. . . . . . . . . . . . . . .
The New CooPerative System . .
Brainstorming Scheme. . .
Blue Print Scheme . . . .
Trends and Prospects of AMC. .
Policy Context. . . . . .

iv

mow l—‘

\l

10
ll

11
12

14

14
16

16

19
21

21
24
24
26
32
35

Chapter

Organizational Context. . . . . .
Operational and Financial
Context. . . . . . . . . . . . .
Statement of Financial Condi-
tion and Operations. . . . . . .
Measures of Financial Viability .
Financial Stability/
Liquidity. . . . . . . . .
Growth Potential/
Solvency . . . . . . . .
Efficiency/Activity Ratio
Profitability . . . . . .
Problem Identification . . . . . . .

III TOWARDS A FRAMEWORK FOR ANALYZING
FACTORS ASSOCIATED WITH COOPERATIVE'
EFFECTIWNESS O O O O O O O O O I O O O

The Concept of Cooperatives. . . . . .
Ways of Viewing Cooperatives. . .
Three Schools of Cooperative

Thought. . . . . . . . . . . . .
Cooperative Principles. . . . . .
Cooperatives and Corporations:

Comparative Nature of

Organizations. . . . . . . .

A Conceptual/Analytical Framework for

Organizational Effectiveness. . . . .

Organization Theory . . . . . . .
Theory of Community Resource
Economics. . . . . . . . . . . .

Indices of Organizational
Effectiveness. . . . . . . . . .
Organizational Goals. . . .
Social Systems Criteria of
Organizational Effec-
tiveness . . . . . . . . .
Measures of Effectiveness . . . .
Single-Criterion Measures .
Multiple-Criterion Measures
Research Gaps . . . . . . . . . .
Rationale Towards Organizational
Renovation for the Philippines .
Implementation Analysis and
Assessment . . . . . . . . . . .
Implementation as a
Research Question. . . . .

Action-Research.Towards Organ-

izational Renovation . . .
Components of COOperative
Participatory - Interdis-

43
45

45
45
47

47
48

51

51
52

53
56
57

62
63

64
70
71
72
75

80
85

87
89
93
94

Chapter Page

ciplinary Research for

the Philippines. . . . . . . 97
List of Participatory and
Interdisciplinary Research
Projects . . . . . . . . . . 99

IV TOWARDS AN ACTION RESEARCH DESIGN: THE
PROBLEM, REVIEW OF LITERATURE AND
ANALYSIS DESIGN FOR ORGANIZATIONAL
EFFECTIVENESS . . . . . . . . . . . . . . 101

Problem Definition . . . . . . . . . . . 102
Research Plan . . . . . . . . . . . 104
Review of Literature . . . . . . . . . . 105
Success and Failure Factors . . . . 106

Mistakes in Personnel Manage-
ment, Member and Public
Relations. . . . . . . . . . . . . 107
Mistakes in Organization. . . . . . 108
Mistakes in Business Operations . . 109
Concluding Notes. . . . . . . . . . 121
Research-in-Action: A Case Analysis . . 122
Origins of Action-Research. . . . . 122
Definition of Action-Research . . . 125
Justification for the Use
of Action-Research . . . . . . . . 126
Underutilization of Research. . . . 131
The Research Practice Gap . . . . . 132
Action Research Today . . . . . . . 134
The Farming Systems Research
(FSR). . . . . . . . . . . . . . . 137
Implementation Sc eme of FSR. . . . 141
Farmer Circumstances as a Basis
for Research . . . . . . . . . . . 144
The Policy Environment. . . . . 146
Station-to-On-Farm—Research . . . . 146
Steps in The Adaptive
Research Cycle . . . . . . . . . . 150
Research Design. . . . . . . . . . . . . 150
Factors Affecting Change
Performance. . . . . . . . . . . . 152
Mechanisms of Control 0
Cooperative Members. . . . . . . . 157

V SUMMARY, CONCLUSIONS AND IMPLICATION . . . 162

Section A: The Philippines Cooper-
ative Program. . . . . . . . 165

Section B: Towards a Framework for
Analyzing Factors Asso-
ciated with Cooperative
Effectiveness. . . . . . . . 169

vi

Chapter

REFERENCES.
APPENDICES

I.

II.

III.

IV.

Section C: Towards Action-Research
Design: The Problem

Review of Literature and

Analysis Design for

Organizational Effec-

tiveness . . . . . .

Section D: Conclusions and
Implications . . . .

List of Organized Area Marketing Co-
operatives as of December 31, 1978.

Presidential Decree No. 175:
Strengthening the Cooperative
Moveme n t O O O O O O I O O O O O 0

Conceptual Models I - III. . . . .

A Rejoinder on Organizational
Effectiveness and/or Performance.

vii

Page

174

183
193

201

203

228

231

Table

11-1

11-2

11-3

III-1

III-2

III-3

III-4

III-5

III-6

IV-1

IV-2

LIST OF TABLES

Main Events in the Cooperative
History of the Philippines . . . . .

Balance Sheet for Area Marketing
Cooperatives, 1979 and 1982. . . . .

Ratio Analysis of Area Marketing COOpe-
ratives, June-December, 1981 . . . .

Differences Between COOperatives and
Corporations (Economic Indicators) .

Differences Between Cooperatives and
Noncooperative Corporations. . . . .

A Summary of Goal Transitions: AGIL
Model, Organizational Ends,
System Goals . . . . . . . . . . . .

A Partial Listing of Single-Criterion
Measures of Organizational
Effectiveness. . . . . . . . . . . .

Evaluation Criteria in Multivariate
Models of Organizational
Effectiveness. . . . . . . . . . . .

Frequency of Occurrence of Evaluation
Criteria in 17 Models of Organiza-
tional Effectiveness . . . . . . . .

Comparison of Positivist Science and
Action Research. . . . . . . . . . .

Procedural Steps in the Adaptive
Research Cycle . . . . . . . . . . .

viii

43

45

58

S9

75

77

81

83

130

151

Figure
11-1

11-2

11-6

III-1

III-2

III-3

IV-1

IV-2

IV-3

IV-4

IV-5

LIST OF FIGURES

Stages of the Cooperative Develop-
ment Program . . . . . . . . . . . .

Organizational Institutions of the
Philippine Cooperative System. . . .

Operation/Location of Area
Marketing Cooperatives . . . . . . .

The Five Basic Parts of Organizations.

An Illustration of Members and Units
of the Parts of a Manufacturing Firm

General Organization Structure of a
Grain Area Marketing COOperative . .

Framework for Analyzing Organizations.

Interrelationships of Structure,Situ-
ation, Conduct and Performance . . .

Stages and Analytic Assessment
Activities in the Policy and
Experimentation Process. . . . . . .

The Cyclical Process of Action-
ResearCh O O O O O O O I O O O O O 0

Schematic Representation of Some
Determinants of the Farming System .

Schematic Framework for Farming
Systems Research at the Farm
Level (Downstream FSR) . . . . . . .

Overview of an Integrated Research
Process. 0 I O O I O O O O O O O O 0

Various Circumstances Affecting Farmers

Choice of Crop Technology and Its
Relation to Farmers Cooperative. . .

ix

28

33

39

65

67

91

124

138

140

142

145

Figure
IV-6

IV-7

IV-8

Interactions Between Station-Based
Technical Research and On-Farm
Adaptive Research. . . . . . . .

Factors Affecting a Member's Per-
ception of the Need to Change
Performance. . . . . . . . . . .

Diagram Depicting Analysis Design
for Exit, Voice and Loyalty
Perspectives in Cooperative
Organizations. . . . . . . . . .

. 148
. 153
. 158

CHAPTER I

INTRODUCTION

The Relevance of the Agricultural
Sector in the Third World

 

 

The interrelated issues of poverty, unemployment,
population growth, rural stagnation, and international
dependence are key problems experienced by the so—called
"developing countries." These problems can be classified
according to the following criteria:

1. income criteria (e.g. low levels of living);

2. structural criteria (e.g. low levels of pro-

 

ductivity in an agrarian dominated economy);

3. demographic criteria (e.g. high rate of popu-

 

lation growth and dependency burden); and

4. social and political criteria (e.g. negli-

 

gible middle class; political instability
and dominance-vulnerability in international
relations).

Among the developing nations, these characteristics
are more pronounced in rural areas. Thus, program inter-
vention efforts have been commonly waged in the country-
side to alleviate these problems (Nichols, 1964; Mellor,
1966; Todaro, 1981). Furthermore, this view is inherent

l

2
in the statement that "it is in the agricultural sector
that the battle for long-term economic development will be
won or lost" (Myrdal, as cited in Todaro, 1981).

The significance of the agricultural sector is
reflected in its special characteristics and its role in
the process of economic growth.1 Typically, 40 to 60 per-
cent of the national income is produced in agriculture
and from 50 to 80 percent of the labor force is engaged in
agricultural production (Johnston-Mellor, 1961). The role
of the agricultural sector can be described as providing
surpluses for, and interrelationships with, the industrial—
urban sector. These surpluses consist of: food (wage good)
surplus, labor surplus, income (increased purchasing power)

surplus, savings/capital formation and foreign exchange

 

earnings.

A comprehensive, yet concise, analysis of the func-
tion of agriculture is offered by Heuberger (1974).
Agriculture:
1. contributes to the nourishment of the popu-
lation which can be determined by the demand
and food supply;

2. is a source of manpower requirements which

 

are related to the labor transfer and prob-

lems of rural employment;

 

1For a discussion of agricultural development
theories, see Stevens and Thompson (1982, forthcoming
agricultural development textbook).

3

3. contributes to overall economic capital forma-

 

tign, which refers to the extent of savings
and capital formation through investments,
capital transfer or imports; and

4. is part of the intersectoral exchange of pro-

duction output [for instance, in its role as a
supplier of raw materials and as purchasers

of industrial products and services, (Emphasis
added)].

The inference that agricultural development should
precede, or take priority over, industrial expansion is
inherent from these functions. It primarily underscores
the importance of developing agriculture in such a way as
to: 1) minimize its demand upon resources most needed for
industrial development; and 2) maximize its net contribu-
tion to the capital required for general economic growth
(Johnston-Mellor, 1961).

Cooperatives as a Strategy for Agricultural
Development

 

Various strategies to alleviate rural poverty have
been conceived. For instance, integrative vs. non-inte-
grative (Sukahar-Lukito, 1982); Agricultural, Rural and
Agricultural-Rural Component Strategies (Stevens, 1977);
and Community Development, Rural Cooperatives, Green
Revolution, and Integrated Area DevelOpment (Kori, 1982);
Basic Human Needs (BHN) and Agricultural Development

Strategy (ADS) and Appropriate Development Strategy.

Cooperatives have been viewed as a particularly
useful medium for development--especia11y for rural and/or
agricultural development. It has been realized that, un-
less small farmers are organized together into a well-knit
group, it would be difficult to affect significant improve-
ment in their material condition (Rahman, 1970). It is
believed that, by pooling farmers' resources, the coopera-
tive and bargaining effect is achieved (DeTorres, 1979).
Thus, through c00peration,farmers can share benefits
among themselves. These advantages include: 1) obtaining
information on financial assistance; 2) procuring farm
supplies, machineries and equipment on a timely basis;

3) developing a more coherent strategy for marketing pro-
duce; 4) promoting local leadership;and 5) learning to

practice and carry out modern farm practices.

Elements of Cooperatives

 

The definition and principles governing the cooper-
ative society have always been, and still are, the subject
of heated debate. Thus, a consensus definition is
impossible. However, as a means to a certain goal, and as
it is capable of operating under various economic systems,
cooperatives can be classified into three main schools of
thought (Helm, 1968; Kori, 1982):

1. The COOperative Enterprise School. This per—

ceives the cooperative society as a voluntary

5
association of independent economic units.
The cooperatives serve as a means of
"checking the evils" of the capitalistic
system and correcting these defects within
the system;

2. The Cooperative Commonwealth School. This
aims to replace the competitive, capitalistic
system with that based on mutual cooperation;
and

3. The Socialist C00perative School. This promotes
c00peratives with socialism as the chief goal.

With these thoughts as a background, Helm (1968)

defines c00peratives as:
. . . a voluntary organization of economic units,
based on equality, carrying out an allocated or
self-given economic objective.
And, as cooperatives pertain to the agricultural sector,
the focal point is that:
c00peratives begin with the member, exist for the
member, and is an off-farm extension of the members
business activity in acquiring inputs, services
and marketing his products forward in the market
place (Torgerson, 1978:261).
The theoretical framework inherent in cooperatives
is in its collective impact and bargaining power.3 COOper-
atives can result in superior market position, increased

market adaptability, investment capability, economical use

of facilities, technical specialization, transfer of risks,

 

3For a review of the "Cooperative Theory" see
Vitaliano (1978: 21-42).

6
and enhanced influence on the individual members (Helm,
1968).

The bargaining power reflects the greatest contri-
bution of cooperatives. The rural poor, when acting indi-
vidually, are powerless and generally are recognized as
price-takers. But, through organized activity, they can
develop market influence. It serves as a device for
achieving economies of large-scale Operations in the
handling of farm products. Thus, a real market (bargaining)
power is achievable through a high degree of horizontal
integration, product differentiation, and a form of

restricted entry.

Constraints of COOperatives

 

Against this background of cooperative effects and
bargaining power, c00peratives have to contend with the
following deficiencies (Marion, 1978: 322). Cooperatives:

1. Are a loose association of individuals that

 

are saturated with a tendency for disassoci-
ation through internal disruptive forces;

2. Rarely include all the producers of the

 

products (free-riders are a common problem);
3. Cannot control the production of members (with
respect to both quality and quantity);
4. Have less than absolute control over the

decision to sell;

 

5. Are limited by virtue of their member-related

.7

business constraints; and

 

6. Are facing increasingly important financing

constraints.

 

Helm (1968) has indicated that limitations exist
both with respect to the persons unsuitability for coopera-
tive action and the nature of functions unsuitable to be
delegated to the cooperatives. This is related to what
Chinchankar and Namjoshi (1977) have referred to as
"internal and external" barriers to the introduction of
the cooperative system. Internal barriers are inherent
in the very nature of the rural environment; external bar-
riers emerge from outside the rural environment.

However, despite their inherent weaknesses/limita-
tions, cooperatives have been expected to serve a broad
set of socio-economic and political objectives--ranging
from self-help and grass-roots participation to welfare
and distribution (including exploitation of economies-of-
scale and social control over resource allocation and
mobilization (Uma Lehe 1981). In addition, the economic
importance of agricultural c00peratives rests in two main
areas: 1) production and/or productivity; and 2) distri-

bution or equity.

Importance/Relevance of Cooperatives

 

The relevance of the cooperative strategy to many

developing countries can be described as follows:

 

8

l. Cooperatives have a universal appeal to many
developing countries in its political (sta-
bility), social (equity) and economic (pro-
ductivity) objectives. For example, in the
agricultural development context, an agricul-
tural innovation requires social interaction
(collective action) for three major reasons:

a. the economies of scale (such as in
marketing);

 

b. the free-rideryproblem (i.e. how to ensure
that everyone contributes his share to
building or maintaining collective goods
and/or services); and

 

c. the external diseconomy problem (e.g.
rational actions of one person do not
harm others).

 

2. Cooperatives reinforce the argument for general,
rather than selective, development. It can
broaden the national consumer base through in-
creased purchasing power. Thus, it fits
particularly well With other development
policies that direct growth efforts at labor-
intensive, mass participation projects.

3. Cooperatives link production with distribu-

tive or equity objectives.

Rural DevelOpment Perspectives and
The C00peratives Strategy: The
Philippine Case

 

 

 

The Philippines is an interesting case study for

developing a more effective cooperatives strategy for two

 

9
major reasons. First, the economy is exhibiting both
economic growth and rising inequality, overtime(Mangahas,
1976).. Secondly, a concern for*redistribution with
growth policies" is being offered under two types of rural
development programs: the social-equity improvement pro-

grams (SIP) and the scientific-technical development pro-

 

grams (STDP) .

 

In addition, the Philippine Development Plan states
that: "c00peratives are important because they promote
the objectives of more equitable income distribution and
economic growth, based on the philosophy of enlarging
small economic units" (NEDA, 1977).

With this as a background, an increasing effort
towards SIP“s,particularly the cooperative development
program, is predictable. The massive organization of

Samahang Nayon (a village prec00perative) and Kilusang

 

Egygg (a cooperative) is just one of these indications.
However, looking at the Philippine experience from a his—
torical point of view, it can be observed that many types
of cooperatives have been organized only later to falter
(Velasco, 1975). Apparently, cooperatives success can be
viewed as an "exception rather than the rule." However,
despite these failures, the Philippine government has re-
newed its interest in the so called "New Cooperatives
Development Program."

It should be emphasized that the focal point of this

treatise is the governmental attempt to promote, organize,

10
and supervise agricultural cooperatives. The author believes
that there are cooperatives organized and supervised by pri-
vate agencies and institutions that may have been more suc-
cessful vis-a-vis government-sponsored programs. However,
the focus of this study will be on governmental attempts

in cooperative planning and development.

Research Focus

 

From the discussion of the cooperative ideals/
promises, and focusing on cooperative development as a
program or project, a research question worth asking is:
why is it that cooperatives are easy to establish, yet
hard to sustain? This is a question of organizational
survival. Thus, a significant issue may well be not
whether cooperatives should be promoted, but how their
growth can be accelerated and their economic efficiency
be improved. And, with the current cooperatives develop—
ment program, perhaps the most important issue is not
whether the cooperatives program can succeed, but whether
the Philippines can afford another cooperative failure.

The main area of concern, which is hypothetically
advanced in this study, is that several factors affect
the success or failure of cooperatives (i.e. influence
organizational effectiveness). These factors may include
1) the locational (spatial) pattern (including the agro-
climatic conditions of the area); 2) the organizational

and/or operational context; 3) the managerial (behavioral)

11
context; 4) the development policy(ies) pursued both by the
government and the cooperatives organization; and 5) the
socio-economic and cultural profile of farmer-members

(including their attitudes and commitment).

Study Objectives

In general, this study is being conducted in an effort
to provide a basis for understanding a coherent research and
evaluation of the government sponsored agricultural coopera-
tives in the Philippines. More specifically, the study aims
to:

1. Review the governmental models and/or approaches
conducted in the Philippines. This will in-
clude the analysis of causes of past failure.

2. Review the development trends and prospects
of Area Marketing Cooperatives in order to
discern operational strengths and weaknesses;

3. Identify major conceptual frameworks to deter-
mine a set of factors that influence the
effectiveness of cooperatives and categorize
them for more systematic analysis;

4. Identify major research gaps and propose a
future action-agenda for reformulating the
cooperative development program;

5. Design a research study for measuring cooper-

ative effectiveness.

12

Rationale for Studying_the Area
Marketing C00peratives (AMC's)

 

The reasons for studying the AMC in the Philippines

involve the following:

1. AMCs are the second-level structure in the
new cooperative development program. The
members are composed of the precooperative
village association which was organized as
its basic foundation. AMCs viability as a
business entity will induce the further
development of the village association.

2. AMCs typify a traditional marketing associ-
ation more or less similar to the functions
of producer (supply) and marketing cooperae
tives. It is comparable to the first major
attempt in Philippine agricultural coopera-
tion: the Farmers Cooperative Marketing
Association (FaCoMa).

3. It is made more interesting when after the
setbacks of the past FaCoMa, it seems apparent
that same problems are recurring. It may well
be that we have not learned from the past.
This may refute the contention that experience

reduces the c00perative "mortality" rate.

Organization of the Study

 

The rest of the study contains four chapters.

Chapter Two deals with the evolution of the Philippine

13
cooperative programs through the enabling legislation of
c00peration. The problems, causes of failure and the
recent development and prospects are presented. The next
chapter identifies conceptual frameworks for organizational
effectiveness, its measurement criteria, research gaps and
the needed research agenda for organizational renovation.
Chapter Four presents a discussion of action-research
concepts and a study design for control mechanisms con-
sidered as one approaCh in determining organizational
effectiveness. The last chapter includes the summary,

conclusion and implications of the study.

CHAPTER II
THE PHILIPPINES COOPERATIVE PROGRAM

This chapter will review the cooperatives program
attempted in the Philippines. Three major aspects are
included: 1) the major events in the Philippines coopera-
tive history; 2) the causes of failure with those past
attempts; and 3) the most recent developments. These are
the elements that will serve as the background for our
research and evaluation agenda.

Basically, the information generated in this chapter
comes from benchmark surveys conducted by the Agricultural
Credit and Cooperatives Institute (ACCI), University of
the Philippines at Los Banos, and the Cooperatives
Foundation Philippines Incorporated (CFPI). Other secondary
sources are materials documents or reports of the Bureau of
Cooperatives Development (BCOD) (now under the Ministry
of Agriculture) and educational materials of ACCI.

Background on Cooperatives in the
Philippines
Cooperativism in the form of "Bayanihan" (mutual
assistance) has long been practiced in the Philippines
culture. However, the cooperative, as an economic insti-
tution was introduced during the American regime in the

14

 

15
1900's. The idea of consumer c00peratives was believed
to be imported from England, while the credit cooperative
of the Raiffeisen-type was imitated from Germany. These
European models were believed to be brought by the Ameri-
cans to the Philippines in light of felt needs resulting
from the process of social change, legal adjustments, and
decantation of utopian ideals.

It should be noted that the cooperative movement
in the Philippines did not emerge from the rural masses.
Cooperatives were generally imposed from above (i.e. the
so called "tap-to-bottom" planning). Laws were made be—
fore having practical experience. Concepts were widely
implemented without having been pilot-tested. As
Ofreneo (1980) has contended, the program so far has
been only good "in the planning board" --not in implemen-
tation. Although the program planners are reminded that
c00peratives should be built from the bottom up, needed
attitudinal changes from below (through the learning pro-
cess) have not been experienced.

There are many reasons why past attempts in cooper-
ation have been launched in the Philippines. Many of
these reasons were inherently politically motivated: l) the
need to pacify an "aroused peasantry"; 2) the desire to
counteract the adverse effects of depression brought
about by World War II; and 3) the need to promote or
promise a new life in depressed areas. Thus, for these

reasons, COOperatives have been promoted in periods of

16

economic crisis, violence or threats of rural violence.
More recently, it has been promoted as a complementary
mechanism to agricultural-related programs, the most popu-

lar among which is the agrarian reform program.

Philippine Cooperative History

 

The Philippine cooperative system may be classified
into three periods: the economic (including administrative)
crisis (1900-1950); in the post-war period (1951-1971) and
during the Martial Law Rule period(September 21, 1972 to
date). Table 11-1 shows the breakdown of cooperative
"main events" in terms of date or year the cooperative

legislation occurred, the title, and its purpose(s).

The Economic-Administrative Crisis Stage (1900-1950)

 

Under the Rural Credit Law (Act. No. 2508;
February 5, 1915) the organization of rural credit associ-
ations was started. By 1939, there were 571 agricultural
credit c00peratives organized. A good number of these
cooperatives did not continue to Operate, while others
remained dormant, as practically all capital was accordingly
loaned out. It was indicated that, by 1935, only 10 percent
remained operating (ACCI, mimeo undated).

The second attempt at cooperatives was the enactment
of cooperative marketing law (Act. No. 3425; December 9,
1927). By 1939, only 20 percent of the registered
societies were still active; only 33 associations reported

their sales of agricultural products.

7
1

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18

 

 

 

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VOSGHHCOUIIHIHH mdmda

19

The third attempt at COOperatives was triggered
by the Bureau Of Commerce. The Consumer Cooperative
League Of the Philippines was organized on October 18,
1938. By 1940, Act. NO. 565 was enacted to give tax
exemption privileges to COOperative organizations. The
National COOperative Administration was established tO
supervise cooperative projects. Following the outbreak
and duration Of the war (about 1941-1944), cooperatives
were utilized as a means Of helping the masses and for

distributing relief goods.

The Post-War and Social Upheaval Stage (1951-1971)

 

The fourth attempt was the creation Of Agricultural
Credit and COOperative Financing Administration (ACCFA on
August, 1952; Republic Act 821). The Farmers COOperative
Marketing Associations (FaCoMa) were created under this
law to tender loans tO the farmer-members. By fiscal year
1963-64, the Agricultural Credit Administration (ACA)
reported that, Of 539 registered FaCoMas with a recorded
membership Of 311,000 farmers, only 30 percent were fully
stable and were practically on their own; 43 percent were
in a very weak financial condition; 27 percent were under a
revitalization program (ACA, Annual Report, 1963-64).

The fifth attempt consolidated the non-agricultural
cooperatives through R.A. 2023 (or the Non-agricultural
Cooperative Act). Based on the data for the years 1967-

70 (available through the now defunct Cooperatives

20
Administration Office) only about 36 to 45 percent Of all

types Of registered cooperatives are Operating and the
bulk Of these (62-77 percent Of the total credit unions)
was accounted for by credit unions (Velasco, 1975).

The sixth attempt assigned a new role to cooperatives
via land reform. The Land Reform Code (R. A. 3844, 1963)
renamed ACCFA into Agricultural Credit Administration (ACA)
which primarily extends non-collateral credit tO cooper-
atives (FaCoMa) and members and supervises farmer cooper-
atives. It also renamed the Bureau Of Agricultural Ex-
tension tO Agricultural Productivity Commission (APC) which
has as one Of its functions the promotion and organization
Of farmers cooperatives.

The seventh attempt was in 1971 with the enactment
Of R.A. NO. 6389, known as the Code Of Agrarian Reform in
the Philippines amending R.A. 3844. The law vested in
the ACA the power to register, finance and supervise,
not only agricultural cooperatives, but also farm associ-
ations or organizations like the "compact farms."

Prior to the launching Of the new cooperatives
program in 1973, only 368 Of the 968 registered agricul-
tural cooperatives in the country were considered active;

a majority Of the inactive were inoperative. Of the 700
FaCoMas registered with ACA, only 17 percent were Oper-
ating. In the non-agricultural sector, Of the 4,673

registered cooperatives, only 13 percent reported their

business activities tO the Cooperatives Administration

21
Office (CAO) Of the National government.
For June, 1972, the Economic Development Founda-
tion, Inc. (EDFI) reported that a total Of 726 COOperatives
and 5568 Of non-agricultural cooperatives (45 percent and

. . 4
55 percent Of the total, respectively). were Operat1ng.

Martial Rule Stage (1972...)

 

The proclamation Of Martial Law (September 21, 1972)
paved the way for the overall integration and supervision
Of all cooperative development activities under the created
Bureau Of Cooperatives Development, then under the Depart-
ment of Local Government and Community Development (DLGCD).
On April 13, 1973, Presidential Decree (P.D.) 175 entitled
"Strengthening the Cooperative Movement" was issued by
the President as a parallel measure to the emancipation
Of tenant farmers from feudal bondage (P.D. 27 dated 21
September, 1972). On July 9, 1973, the letter Of imple-
mentation NO. 23, implementing P.D. NO. 175 governing
the organization, administration and supervision Of

Samahang Nayon (village associations) and Kilusang Bayan

 

 

(cooperatives), was issued by the President.

The Failure Of Cooperatives in the Past

 

A typical assessment Of the Phillippine coopera-
tives experience is that the results have been far more

modest than the promise. Failure, rather than success,

 

4For more information, see EDF (1973).

22
is the by-word in the cooperative movement. Several Of
the reasons advanced for cooperative failures are:

Creation for the wrong reasons/approaches. We can

 

deduce that many Of the cooperatives were established
due tO the existence Of government incentives. For
instance: 1) FaCoMas were organized tO enable members
to Obtain credit and as an economic weapon tO counter
the "communist movement" (i.e. an explicit redirec-
tion Of the original intentions); and 2) the con-
sumers cooperatives were frequently established as
government instruments tO distribute relief goods

and other "welfare goods and services." As expected,
both types Of cooperatives closed the moment these
loan incentives and the "welfare goods" were exhausted.

Failures attribute to government, cooperative
institutional operations, and to membership, etc.

 

1. On membership:

 

a. lack Of proper understanding Of the
principles, practices, true aims and
purposes Of cooperative associations;

b. dominance Of an individualistic attitude;

c. improper use Of credit (misapplied loans
for "unproductive" purposes); and

d. absence Of substantial loyal membership
support;

2. On cooperative institutions and Operations:
a. lack Of economic justification;

b. inability tO secure adequate capital;

23

c. incompetent management and lack Of com-
pensation for Officers;

d. competition and Opposition Of established
business and vested interests;

e. related tO (d) is their dependence on
alien (competitors) suppliers and dis-
tributors;

On government promotion and supervision:

a. ineffectiveness Of the government
machineries to supervise COOperatives;

b. lack Of adequate safeguards against un-
scrupulous officers who take advantage
Of their position for personal advance;

c. uncommitted and inadequate long range
goalsfor the cooperative sector; and

Political interference particularly in the

collection Of overdue accounts.

In summary, three major reasons loom large as to

why COOperatives have failed:

1.

inadequate membership participation and lack
Of resource commitment; lack Of solid local
action and involvement; lack Of membership
education, understanding, commitment and,
consequentially, poor membership participa-
tion and resource commitment.

inadequate management/leadership competence --
lack Of competent leadership for cooperative
business desirable direction; ineffective two-
way information flow between the COOperatives
and its members.

inadequate economic enterprise -- low volume

24
Of business or those requirements for "big—
ness" or being an independent economic enter-

prise.

The New COOperative System

 

This section will serve as an introduction to the
development Of Area Marketing Cooperatives. The evolution
Of the new cooperative system can be divided, for our
purposes, into 1) the "brainstorming" scheme; 2) the
"blue-print" scheme; and 3) the "implementation" scheme,

i.e. the most recent development and prospects.

Brainstorming Scheme

 

Based on past experiences with cooperatives, three
major principles/concepts were conceived as the basis for
develOping a new and, hopefully more effective, strategy
in Philippine COOperative development:

1. the organization Of the village-based asso-
ciations which would facilitate coordination,
communication and supervision;

2. the institutional differentiation Of credit
from the marketing function; and

3. the establishment Of institutions at an area
level to encourage economies Of scale in
Operation.

Therefore, the original cooperatives program envi-

sioned three distinct, but interdependent, entities or

structure: 1) the village-level production unit (VLPU);

25
2) the area-level marketing unit (ALMU); and 3) the area-
level financing unit (ALFU).
The VLPUs, or production associations, form the

backbone Of the program tO carry the following functions:

 

1) Production -- as an avenue for agricultural extension
or cooperative production activities; 2) Lending -- tO
screen and recommend approval Of loans; 3) Savings -- to

encourage a proportional amount (e.g. tO his value Of
seeds, loan amount or size Of farm) Of continuous savings;
4) Farm supply distribution -- to sell farm supplies; and

4) Marketing -- to act as an assembly point for delivery

 

to area marketing cooperatives.

The ALMU will be engaged in the following business
activities for the VLPU's and their members: l)supply Of
farm input; 2) trucking services; 3) assembly, storage,
and processing Of produce; 4) technical assistance in pro-
duction, organization, and management; 5) cooperative edu-
cation; and 6) marketing Of VLPU's produce.

The ALFU, or the Farmers Bank, will mobilize the
farmers own capital through the VLPUs and, thus, create
a banking structure with a private equity base.

The national linkages institutions, at that time,
were also thought Of, although not prOperly delineated.
Among them are the role Of the Central Bank, Department
Of Savings and Loan Association (CB-DSLA), the Agricul-
tural Credit Administration (ACA), the Grain Marketing

Cooperatives and the Management Training POOl.

26

The Blue-Print Scheme

 

The cooperative experts Of the Philippines have
developed an "implementable" program. On paper, this
national scheme, called the new cooperative system, lOOks
fine. In practice, however, the formation Of the full-

fledged cooperatives is slow and halting.

The system is divided into four stages:

Stage 1: The organization and development Of
Somahang Nayon (SN), a village preCOOperative
association. SN is a village-based association
composed Of some 25 to 200 farmers.

Stage 2: The organization and development Of
full-fledged cooperatives, such as SN, into AMCs
and cooperative rural banks (CRBs).

Stage 3: The establishment Of consumer coopera-
tive markets in key urban centers Of the country
for the purpose Of linking cooperative producers
to the consumers on a more steady and regular
basis.

Stage 4: The integration Of cooperatives into a

whole system with the National COOperative Union

as the apex organization. This consists Of fed-
erating cooperatives at the national level and
establishing continuing linkages among different

types Of cooperatives. Figures 11-1 and 11-2

show the different stages Of the program and the

organizational institutions by level, respectively.

Stages 1 and 2 relate well to our study and will

further be described below:

1. The Samahang Nayon DevelOpment Program (SNDP).
SNs are "body corporate" composed primarily Of
small farmers residing and/or farming
within the geographical limits Of a barangay

(village) for the purpose Of improving the

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29
quality Of life Of the people (L.O.I. NO. 23,
Regulation NO. 2). It was massively launched
in 1973 and "completed" in 1982 for two simul-
taneous purposes: 1) as a direct support tO
the agrarian reform program; and 2) as the
rural foundation Of the whole COOperative
development program. TO date, twenty thousand
SNs with a membership Of more or less one
million farmers have been organized. Each SN
has a minimum Of 25 and a maximum Of 200 mem-
bers. It has a business relationship with
established area COOperatives that provide the
product marketing, farm supply and financial
credit services functions to them.

The SNs: l) facilitate land transfer under the
agrarian reform program; 2) provide experience in formal
organization, self-government and encourage participation
in community life; and 3) implement capital formation
schemes through savings program for specific purposes
(e.g., guaranteeing payments for land amortization and
buying shares Of stock in area cooperatives.

Operationally, the SN organizations have been con-
fronted with the following major problems (in the order
Of their gravity): 1) non-payment Of their savings/capital
formation contribution; 2) low income Of members; 3) gen-
erally declining interest Of SN Officers/lack Of dedicated

Officers; 4) waning interest Of SN Officers and members;

30
and 5) undisciplined/uncooperative members/disciplinary
action was taken for granted (ACCI, 1980: 49).

2. The Area Marketing Cooperatives (AMC): "Kilusang

 

bayan" or COOperatives shall mean only organizations com-
posed primarily Of small producers and consumers who
voluntarily join together tO form business enterprises
which they own, control and patronize (P.D. 175, Section 2).
Their Objectives as stated in LOI NO. 23, Regulation 16;
are to:
1. Encourage scientific production and marketing
among the members;
2. Provide goods, services and other requirements
to the members;
3. Encourage thrift among the members;
4. Create funds and extend credit tO the members
for productive and provident purposes;
5. Build houses or tO acquire lands for the
members;
6. Insure against losses Of the members;
7. Promote and advance the economic, social and
educational conditions Of the members;
8. Undertake such other activities calculated tO
help the members solve their problems on a
cooperative basis;
9. Coordinate and facilitate the activities Of the
Kilusang Bayan; and

10. Establish, own, or Operate rural banks,

31
cooperative banks, development banks, co-
operative insurance, and COOperative wholesale

and retail complexes.

More Operationally, the AMC's specific Objectives

revolve around the first four Objectives mentioned above.

The specific Objectives have been used by CDFI in their

assessment Of AMC's performance. These are to:

1.

Purchase and/or market the SN/cooperative
members products at reasonable prices;

Purchase and sell tO members the following:
production inputs, agricultural machineries,
equipment and other implements; prime com-
modities and household requirements needed

by SNs/COOperative members;

Provide extension services to enable SN mem-
bers tO learn, acquire and employ skills and
use modern methods Of marketing;

Provide common facilities for marketing, stor-
age, processing, grading and standardization,
packaging, transportation and other facilities;
Provide advances on deliveries made by Samahang
Nayon/COOperative members;

Borrow funds or secure credit needed to carry
on the business Of the AMC; and

Provide bookkeeping, accounting, auditing and
other services to member SNs.

(CFDI, 1982)

32

Trends and Prospects Of Area Marketing
Cooperatives (AMC)

 

 

Our research and evaluation agenda requires problem
identification and analysis. This section describes the
trends and prospects Of AMCs in the Philippines. By so
doing, the problem issues can be identified, thus facili-
tating the relevant specification Of research gaps in the
cooperative system.

As described in the preceding sections, the AMC was
launched as the marketing arm Of the SN. It is envisioned
to undertake activities related to the supply Of inputs
and the marketing Of outputs, as well as providing exten-
sion services and encouraging active participation in
their COOperatives.

Thus, by the year 1975, the AMCs had mushroomed
throughout the country. Figure 11-3 shows the location
Of the AMCs. Appendix Table II-l shows the list Of organ-
ized area marketing cooperatives as Of December 31, 1978.

Since then, a series Of reports have indicated
that a very unhealthy picture Of the status Of the AMC is
unfolding. Therefore, a question that comes to mind with
reference to the Philippine COOperative experience is:
"Will the history Of failure repeat itself?" Ofreneo
(1980: 70) Observes:

The present cooperative program is still far
from being successful. There are signs that it
may even end up like the various governmental
attempts to promote COOperation in the past,

which started with a great deal Of fanfare but
ended in failure.

33

REMONI V . neoiou u 0
aenluet AMC
La Tnmded. Beneuel
chos Sut AMC .
Vum. eroi Su:
Lo Umon AMC
San Fernando. Le l'ruon
Euler-n Panusmm AMC
L'rdnneu. Paneumm
Horus None AMC
Western Pmusman AMC

Hm label: AHC

Canyon. label:
Gonna-Kenna Mano AMC

Kenna “memo. Cannon
Nueve Vina" AMC

Sohno. Nuevn Vino-1e

 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
  
  
 
 
 
 
  

nzoxON xv 9

hm AMC
REGION m 0 uwttmmc cm
North hmbales AMC ”gags"
e

Mounloc. Lumbales
South Nuevu Eeun AMC

Sm Isidro, Nueve Ecue
North ~lueve [cue AMC

Gumbo. .N'uevu Ecue Lamb .
Central Nuevn Ecue AMC

NGA Compound. Cabmtum City
Non: Bulacu: AMC

wau. Bulacm

Mme de 010 AMC

Sen Jone. Camden‘s! Mmdoro
Mm Quezon AMC

Annonm. Quezon
Cantu] Quezon AMC

Ohm“ SL. Snmpdoc. Quezon

N V 0
Panama AMC R8610

Sm Fernando. Futon-tn
Tartar AMC announc- Alb-v AMC

     
 

80 San \ ncente. 71:14.. Tan-c
Central But-car. AMC
Tablas. Handel” Sui-coo

   

  
 
 

Consumes None Amt]

Gunman Sut AMC
Neu CH7

Sonoeon AMC

No.3. "

(3%

    
  
  

azozou vi I

Eastern

Sm REGION va

on

Alden AMC All“:
Kuhbo. Ahlua

Fun: Dodo AMC
Su. Barbara. llodo 1

Second llouo AMC
Porous. Douo

Antique AMC

Cam: AMC

Negros Occidental AMC

Southern Leyte AMC
Same: AMC

Douro Sunu AMC

NOMCI’ Same: AMC

 

 
   

REGION vn -k

.9 3050| AMC
o ' Neuoe Onenul AMC ,,,,,,,
Mnbmey Negro- Onenul ..

REGION [X o

locum Del Sur AMC

 
   

escrow rm 0 a

stoma Ccubeto AMC squ REGION x: U

Kid-Dunn. North Coubuo .. ° ‘. “26’0” X ‘
Suit-en Kuduu AMC (5 South Coubuo AHC 0

Tnfluone. Sultan Rude"! é Devon del None AMC M 0"“‘NOYA’éC
Lanna del Sut AMC Ted ’ Dena 6e! Sut AMC 8373:} ° "V
South Coubato AMC J \ Dunn Onenul AMC °°

rim sum-o Get 3.: AMC “4"me- ““4900

Muens- Oeetdenu.‘ AMC
Mm del Nam AMC
Mun-n del Sm AMC

FIGURE II-3. Operation/Location Of Area Marketing Cooperative

SOURCE: Perilla (1980).

34

The serious drawback attributed to the program has
been the planning and programming imposed from the top.
Considering this critique, evidence exists that failure
factors may be repeated because Of restrictions under
which the program are forced tO Operate.

An initial evaluation Of the ACCI-UP (1979) has
indicated that:

As a whole, the 15 AMCs under study did not
present a very encouraging performance both in
terms Of financial stability and management
efficiency. These AMCs were found tO have a
very weak financial structure and a generally
inefficient management Operation (ACCI-UP, 1979).

On May 22, 1980, the function Of the COOperative
development was transferred totthe Ministry Of Agri-
culture from the Ministry Of Local Government and Commu-
nity Development. Soon after, an evaluation Of all area
cooperatives and SNs in the country was ordered by Agri-
culture Minister Arturo R. Tanco, Jr. It was found that:

Of the 42 registered and Operational AMCs

all over the country, eighteen (18) were
nominees for COOperative Marketing Project
(CMP) financing at which five (5) were classi-
fied under profitable Operations, i.e. with
positive net worth, nine (2) fell under pre-
vious losses -- current Operations profitable
category and four (5) new AMCs. Eleven (11)
were categorized under losing Operations --
net worth not totally impaired and thirteen (13)
were strong candidates for rehabilitation or
liquidation (CFPI 1982).

 

The CFPI (1982) study also quoted the Institute Of
Social Order's report that this state Of affairs would be
traced to: l) faulty organization; 2) disloyal members;

and 3) insufficient volume Of business or lack Of

35
cooperative orientation. One will note that these basic
reasons are not far from the ones cited earlier as causes
Of failure in the past cooperative programs.

The Economic Development Foundation in another
recent report entitled, "The CMP - An Evaluation," has
indicated that the CMP loan requirements appear tO be un-
realistic. Appealing tO the concept Of "limited resource
institution" and/or the "infant industry" argument, the
Foundation contends that:

By and large, the AMCs are not bankable by con-
ventional standards, if they were, there would
be no need for a special type Of financing.
Cooperatives should not be coddled tOO much or
tOO long by easy and handout kind Of loans, they
would never graduate into mature, self-reliant
and competitive business enterprise thus the
issue need some recasting.

Policy recastings can be viewed with respect tO
the following three major areas Of concern: 1) public

policy context; 2) organizational context and 3) Opera-

tional and/or financial context.

The Poligy Context

 

The public environment Of COOperatives consists
Of physical, social, economic and political dimensions.
Not much can be analyzed in the political framework
except the usual enabling legislation and the government
executive participation. The former specifies the condi-
tions relative tO Objectives, structure, method Of Oper-
ation, and financing (see Presidential Decree NO. 175,

Appendix II-2). Sometimes, and more Often than not, the

36
specified conditions are so difficult to meet that the
growth Of cooperatives is suppressed or retarded. Per-
haps, the universal (country-wide), mechanistic and
systematic (gradual) application Of the COOperative pro-
grams has stultified the growth Of the already eager and
somewhat enthusiastic established institutions, like the
SNs. The lack Of program flexibility in the organization,
and Operation Of precooperatives and existing COOperatives
may have contributed to the loss Of enthusiasm among the
participants: a case Of institutional Obsolescence
(Shaffer, 1969).

The government participation, in developing a
limited resource community, must develop a long-range
plan for the membership to gain experience and under-
standing. Local action must be stressed to shift the
control from the government tO the people. Larson (1969)
had stated that "if government organizes, finances, and in
fact controls the life and death Of cooperatives, one
might legitimately question whether these organizations
are COOperatives or mere appendages Of the government."
This brings to light more difficult question Of: Whgg,
ghy and hog is the best way to start a cooperatives with
the government at the front line Of develOpmental activi-
ties?

In fact, it is inevitable for the government 22E
to be concerned and determined in the cooperative develOp-

ment program. This major concern has some bearing with a

37
recent "Delphi" survey Of 100 Pilipino eXperts who expect
that "the income distribution will probably get worse
before it gets better (by 1995-2000), that absolute real
incomes for most everybody will increase while differences

in relative incomes will persist such that the magnitude

 

Of social disenchantment will rise (Mangahas, 1976; empha-

 

sis added). However, looking back at the series Of
development plans, one will note that not much emphasis
has been accorded to COOperatives (except through the
linkage to the agrarian reform program). Except for this,
and the provisions Of P.D. 175, the government is rela-
tively silent on the issue Of cooperativism as an inde-
pendent rural development tool. If development policy
has tO be devised tO attack rural poverty (and glaring

inequality), cooperatives have to be institutionalized.

The Organizational Context

 

An organization is a social system that shares
like perceptions concerning its goals, roles and norms.

It consists Of five basic parts: strategic apex, middle

 

line, Operating core, technostructure and support staff

 

 

 

(see Figure 11-4 and 11-5). These organizations, tO
be effective, require two principal Objectives:
goal achievement and environmental adaptation.
The organizational set-up Of the AMC is simply com-
posed Of the General Assembly, members Of the Board Of

Directors and the manager and his/her employees/staff.

38

 

w

Sltdlcgtc
Apex

Middle
Technostrueture Lune

 

Gun-tating Cote

 

Figure 11-4. The Five Basic Parts Of Organization

SOURCE: Perraut (1982).

39

 
 
 
  
  
 

 

   
  
 
 

Board 0' Director.
meh-m

Execmwe Presio‘m l:
COmmlucL' Stall

  

Lcljol
Cmmscl

  

Strategic
Plunnmq

   

 
      

Public Relations

 
 
 

Conlmllo-r
Industrial Relations

  
  

 
 
 

Pmumm-I Tnmmug

  

vp vp Research and DevelOpment

Cum Market
ations mg

   

Pricing

  
 
 

 
 
 

Olwtalmns chmtch

  
 

Pt oducltou Schodulmg Payroll

 
 
 

Plant Regional

Managers Sales
Manager 5

  
 

Rt‘CL‘flIlOfl

 
 
  

Won: Study

  
 

Meiltoom

  
 

  

Teclmoctatic .
Coletem

Cluncal Sta" Forum:n Dcsmct

Sales Markup-ts

    

 

   

Purchasing ' Mach-m- Assembler: Salcsucttom Shippers
Agents Operators .
' \

 

An Illustration Of Members and Units Of the Parts

FIGURE II-5.
Of a Manufacturing Firm.

SOURCE: Perraut (1982).

40

An example Of the organizational chart is shown in Figure
II-6 (Perilla, 1981).

The General Assembly. These are the investors

 

representatives tO the AMC, mostly coming from the SN.
They conduct their regular meeting, usually a month after
the end Of the fiscal year. From experience.the common
agenda includes a discussion Of the financial position Of
AMC, management problems, amendments, election or replace-
ment Of board members, plans and new business ventures.

The AMC Board Of Directors. The board responsibi-

 

ties include: policy formulation, decision-making, con-
sultancy, campaign for increased subscription, collection
Of receivables, and audit Of financial records. The board
is composed Of 5-15 members. Leadership, experience with
cooperatives, educational attainment and socio-economic
status are the factors that influence the selection Of the
board. A CFPI Study (1982) has indicated that ages range
from 30-73 years or an average Of 53 years (CFPI, 1982).
The Officers Of the board consist Of Chairman,
Vice-chairman, Secretary-Treasurer and Auditor. Their
ages range from 23-73 years with an average Of 54.
About sixty-five percent are more than 50 years Old.
Thirty seven percent are college graduates, 29 percent
college undergraduates. Twenty-six percent have finished
their secondary courses; the rest are elementary and
vocational graduates. The majority (71 percent) depend

on farming as their major source Of livelihood.

41

 

 

 

 

General Membership

 

 

 

Board Of Directors

 

 

 

 

 

 

Committee on
Education

 

 

 

 

Figure 11-6.

SOURCES: BCOD (1978); Perilla (1980)

aelected committee

COmmittee on
Audit &
Inventory

 

 

 

 

Committee on
Education &
Training

Committe on
Finance

 

 

 

Manager

 

 

 

 

 

Hired Management

Staff

 

bappointed committee

General Organization Structure Of a Grain
Area Marketing Cooperative

42

Non-farmers are retired public school teachers, govern-
ment and private employee and small scale businessmen or
proprietors.

Considering these qualifications and/or character-
istics, a continuing adult education or functional leader-
ship training is urgently needed. This will serve as a
forum for the improvement Of their attitudes, managerial
and other skills.

The Manager. The manager is responsible for the

 

day-to-day Operations Of the AMC. A typical AMC manager
is 45, male, married and with a length Of service ranging
from a few months to four years (CFPI, 1982).

AMC management support staff is relatively young.
The age range is 19 to 55 years with an average age Of 33.
Employees, who are college graduates and undergraduates,
occupy positions in the administrative division. High
schOOl graduates are employed in processing, warehousing,
storage and trucking services. About 87 percent Of the
total workforce are regular/permanent employees (CFPI,

1982).

The Operational and Financial Context

More specifically, the business Operations Of the
AMC consist Of: 1) trading farm inputs, i.e., purchase
and sales Of farm supplies and purchase and sales of farm
commodities; and 2) warehousing, storage, processing

(milling and drying Of rice and/or corn) and trucking.

43

The extension services Of the AMC consist Of: l) Educa-
tion and training; and 2) technical assistance (mostly on
credit and SN management assistance) and campaign for
savings program. The financial aspects consist Of measures
Of financial viability: liquidity, activity, solvency,

and profitability ratios. Both the ACCI (1979) and CFPI
(1982) studies reported a declining performance with
respect tO Operational and financial aspects. The most
pressing problems that seriously impair the AMC Operations
are receivables accumulation, heavy reliance on outside

financing, and declining membership support.

Statement Of Financial Condition and Operations

The financial composition Of AMCs are briefly de-
scribed in Table 11-2, which shows the findings Of the two
studies. The more recent study (1982) indicated that Of the

total assets, 61 percent are current Of which the bulk are

trade accounts receivables (46%), inventories (29%) and
unliquidated cash advances (5%). The fixed assets (32%
Of the total assets) are made up largely Of buildings
(39%), machinery and equipment (32%) and transportation
equipment (12%). The liabilities are-composed Of long
term payables (32%) and short-term marketing loans.
Interest payables are noticeably high owing to heavy

creditor financing (CFPI, 1982).

Gross margin on sales accounted for 57 percent Of
gross Operating saving with other savings from Operations

(milling, warehousing, trucking and other related

44
TABLE II-2

BALANCE SHEET FOR AREA MARKETING
COOPERATIVES, 1978 AND 1982

 

 

 

 

 

 

1 2
Balance Sheet ACCI Study CFPI Study_
E . 000 Per- 000 Per-
ntr1es
Pesos cent Pesos cent
Current Assets 1,250 83 443 61
Fixed Assets 211 14 233 32
Sundry or Other Assets 40 3 49 17
Total Assets 1,501 100 725 100
Current Liabilities 812 54 341 47
Long Term Liabilities 374 25 160 22
Total Liabilities 1,186 ‘12 501 ‘52
Members Equity 315 21 224 31
Total Liabilities and
Members Equity 1,501 100 725 100

 

 

SOURCES: 1A Benchmark Evalution Of 15 CMP covered AMCs

conducted in 1978, ACCI - University Of
Philippines at Los Bafios.

2A Benchmark Evaluation Of 9 CMP covered AMCs
conducted in 1982 by COOp Foundation Of Phil.
Inc. Quezon City. . . . recalculated and
organized by the author.

services) accounting for 43 percent. Trading margin was
roughly 8.5 percent Of net sales. Expenditures, par-
ticularly Operating expenses, were astronomically high,
exceeding gross Operating savings plus other savings by

26 percent. This contributed to the net loss Of AMCs.

45

Measures Of Financial Viability

Table II-3 shows four indicators (financial sta-
bility, growth potential, efficiency ratio and profitability
ratio) that reflect the precarious position Of the AMCs.
This condition can easily be gleaned by comparing the sug-
gested value for each indicator to the value calculated for
the AMC.

Financial Stability/Liquidity. This indicator

 

reflects the ability Of the AMCs to meet short-term Obli-
gations and to remain solvent in the event Of adversities.
The current ratio, with a suggested standard Of 2:1, is
the most frequently used under this indicator. The aver-
age current ratio Of 1.30 indicates that the AMC have
thirty centavos more to cover one peso Of current Obli-
gations. The "acid test" ratio with an ideal standard Of
1:1, is 0.92, which means that only ninety-two centavos
are immediately available to cover a peso Of current
Obligations. Solvency ratio (fixed liabilities tO member
equity) exceeds the standard while member equity to total
assets is less than the standard.' This reflects dependence
on outside financing.

Growth Potential/Solvency. This indicator reflects

 

the COOperatives reliance on creaditor-financed Operations.
About 70 percent Of total assets are creditor-financed
with the other 30 percent made up Of members' equity and
reserves (appropriated retained earnings). Debt-to-equity

ratio is 2.24 which implies that debts are more than

46

TABLE II-3

RATIO ANALYSIS OF AREA MARKETING COOPERATIVES
June - December, 1981

 

 

 

 

 

 

 

 

 

Ratio Suggested Value
Value
Liquidity or Financial
Stability Ratio
O Current ratio 2.0 or greater 1.30
O Acid test ratio 1.0 or greater 0.92
O Solvency ratio .50 to .60 or less 0.72
O Member Equity to total assets .55 or greater 0.31
Growth Potential/Solvency
(Long Term Liquidity)
O Debt to equity ratio 0.90 or less 2.24
O Fixed assets to long
term liabilities 1.5 or greater 1.45
O Fixed assets to members equity -- 1.04
O Members equity tO total assets .55 or greater 0.31
Efficiency or Activity Ratio
0 Asset turnover rate -- 1.32
O Plant turnover rate -- 4.11
O Inventory turnover rate -- 7 times/yr
O Inventory period -- 49 days or 1.5 mos.
O Receivables turnover rate -- S times/yr
O Collection period Of receivables -- 77 days or 2.5 mos.
Profitability/Returns
or Benefit to Members
0 Return on year-end
total investment (assets) .10 or greater .05
0 Return on owners equity .20 or greater .18
O Cost Of sales/net sales -- .92
O Gross margin/net sales -- .09
O Operating expenes/net sales -- .16
O Net savings/net sales -- .04

 

SOURCE: Cooperative Foundation Of the Philippines, Inc. (CFPI), August, 1982.
Recalculated and organized by this author.

47
double the funds put up by investors. Fixed assets tO
long-term debt to facilities and equipment owned by the
cooperatives. The value 1.45 is close to ideal such that,
for every peso Of long-term liabilities Of the cooperative,
it owns 1.45 worth Of depreciated fixed assets. Fixed
assets tO members equity and members equity tO total
assets are extremely low at 1.04 and 0.31, respectively.

Efficienoy/Activity Ratio. This indicates the

 

liquidity Of receivables and inventories. An average in-
ventory turnover rate (7 times per year) vs. average
receivable turnover rate (5 times per year) shows that
inventories are faster-moving than accounts receivables.
It takes 49 days, or about 1% months, to move out stocks,
whereas average receivable collection is 77 days or 28
months, which indicates that trade receivables reduce
the availability Of funds for reinvestment/replacement
Of inventory.

Profitability. This reflects the amount Of

 

returns generated on investment and Operations. Average
return on year-end total investment provides the measure
Of the earning power Of capital funds poured in by both
creditors and investors. Return on owner's equity shows
the earnings rate on resources provided by SN investors.
The rest Of the indicators reflect the frustratingly

low (negative) values on average return on members' equity

and total investment.

48

Problem Identification

 

The CFPI (1982) study has delineated several major
problems and related issues which, if analyzed, have some
bearing on the past failure factors and the inherent prob-
lems or weaknesses Of the cooperative enterprise. These
interdependent issues can be classified into: membership,

managerial, area Of Operation and financial aspects.

Membership Issues

 

Again, the misorientation (or lack Of understanding)
Of the farmer-investors about the economic and service
orientation Of the cooperative enterprise has surfaced.
At this time, it is appropriate to call the members atten-
tion to "what they can do for their cooperatives and
not what the COOperatives can do for them)’ This issue is
inherent from the existing predicament; the AMC should be
viewed as an economic enterprise in the country and

not as a welfare institution.

Managerial Issues

 

This basically refers tO the management inprofi-
ciency due to management conflicts and losing business
propositions. The inability tO revive the ailing cooper-
atives only reflects the kind Of business management
capability Of the AMC board and the manager and the

"taken-for-granted-attitude" Of the general assembly.

49

Area Of Operation

 

This problem is inherent with the relatively low
paid-up capital and broad geographical Operational service-
base that spawned apathy and flagging interest among

those who do not have access to AMC services.

Operational and/or Financial Issues

 

This is interdependent with the first three problem
emeasand can be classified into: 1) inefficient business
Operations; 2) weak management and membership control
systems; 3) financial problems brought about by working
capital shortages, heavy loan exposure, slow capital
build-up rate and excessive Operating expenses.

All Of these issues have contributed to the Area
Marketing COOperatives unsatisfactory state Of affairs.
But these are not new problems. Sacay (1974) recounting
the FaCOMa days reported that only one out Of ten in the co-
operatives organized had survived as an ongoing business and
even half Of these survivors Operate on the red. .Why?
Most Of the reasons, we have just stated above. He further
added that nO matter how beautiful the cooperative philOSOphy,
the term cooperative in this country has acquired the conno-
tation Of a venture doomed to failure (although failure in
COOperatives was not a monopoly Of the Philippines).
Cooperatives as a development tool had been a weak
proposition because a) members Of coop don't know what it

is all about; or even if they know they don't practice what

50

is known; b) cooperatives are organized by the low-income
society with very meager capital resources--a society
dependent on agribusiness with high level Of uncertainty
and where farmers are gainfully employed for six months
(4 month's on farm and 2 month's Off-farm) and another six
months idle; and c) managers Of cooperative cannot be paid
much and temptation for graft and corruption have surfaced.
With this background, Sacay prior tO his appointment
as Undersecretary for Cooperatives, never believed that co-
operative would ever work in this country. He sets his
"Cooperative theory" against the loopholes Of the past and
has been determined tO do the best tO change performance.
The question for problem analysis now is whether (with his
theory) the situation has been changed.
Perhaps the glaring picture Of the recent reports
Of the decline Of AMCs should remind us of his own state-
ment 10 years ago:
Those Of us who at one time or anOther tried
tO help farmers have felt that they failed‘
us. Perhaps it is more accurate to say that
we have failed them. Often we organized them
not for their purposes, but for our own
(Sacay, 1974: 12).
Furthermore, it is appropriate tO add what W. A.
Lewis and T. W. Schultz had been saying in the 1950's and
1960's which is still very relevant today:
What now has become part Of the conventional
wisdom is that successful development is likely
to depend more heavily on the quality Of human

resources available than the simple accumulation

p§7§pe more traditional physical inputs (Ranis,

 

 

CHAPTER III

TOWARDS A FRAMEWORK FOR ANALYZING FACTORS
ASSOCIATED WITH COOPERATIVE EFFECTIVENESS

Following the rise and decline Of the cooperative
programs, it has been fashionable to decry the continuing
problems that plague the "movement" and seek new and/or
alternative approaches. This perceived need for change
and development Of organization (institutional innovation)
is brought about by the decline in performance, change in
members definition Of acceptable performance, and the
belief that performance can be improved.

This chapter will review a potential framework for
analyzing organizational (cooperative) effectiveness.
More specifically, we shall review: 1) the concept Of
cooperatives (its relevant definitions, cooperative
schools Of thought, and its basic differences with ordinary
corporations); 2) describe an analytic framework with
respect tO organizational theory and community resource
economics theory; and 3) suggest implications/directions

for research.

The Concept Of Cooperatives

 

A simplified definition Of cooperatives is that "it
is a member-owned firm (MOF) mainly engaged in supplying

51

52

or marketing products and services for farm businesses"

(Van Ravensaay, l982:2). Here, the typical member Of a

COOperative is a farm-firm business and the cooperative

organization is an extension Of this business.

(Torgerson, 1978: 261).

Ways Of Viewing Cooperatives

 

Looking more deeply into the literature on coopera-

tives, one notes that there can be three ways to conceive

the idea Of cooperatives (Vitaliano, 1978).

l.

A group Of investigators treat COOperatives

as loose associations Of individual economic
entities engaged in a common activity to
further their own individual ends. These
researchers concentrate on the member's
behavior, the interrelations between the
members in a cooperative, and the manner in
which individual members could receive maxi-
mum benefits from participating in the com-
mon activity;

A second group treat the cooperative as a non-
profit business firm, and through modifications
of the theory Of the firm, investigated the
market performance and welfare impacts Of co-
operatives in the larger setting;

A third group, representing recent work, has

attempted to construct more general theoretical

53

analogues Of the cooperative. They increas-
ingly base their work on economic concepts
other than the marginalist theory Of the firm.
The above three conceptions are inherently economic
in nature. In this context, we should take note that:
A cooperative consists Of two essential elements,
a democratic association Of persons and an economic
enterprise. In separating these elements for pur-
poses Of analysis the essential is lost, since it
is the manner in which the two are coordinated that
forms the basic problem Of cooperative . . . George
Fauquet, 1935 (as cited in Vitaliano, 1978:21).
Considering the aspect Of "democratic association
Of persons" also requires the role Of participation and
socialization as control mechanisms vs. that Of a real

free market (economic concept) system. In essence, co-

operatives have been popularized as a non-profit or saving

 

enterprise, unlike enterprise firms that are assumed to
maximize net gains or net income.

These bi-polar issues Of economic vs. non-economic
orientation Of cooperatives (including profit vs. saving
goal) lead to the fact that cooperation is not an 229 in
itself, but a means to a goal. TO this it should be added
that cooperatives must be treated as a "going-concern goal,"
rather than as a problem-solving "stop gap" enterprise

(i.e. in response to crises, problems or difficulties).

Three Schools Of COOperative Thought

 

As a going concern, three schools Of thought have

evolved (Roy, 1964; Helm, 1968): l) the COOperative

54
Enterprise School; 2) the Cooperative Commonwealth
School; and 3) the Socialist COOperative School.
The COOperative Entegprise School. This school

perceives cooperatives as a means Of "checking the evils

 

Of the capitalistic system and correcting these defects

 

within the system . . . COOperatives do not constitute an
economic system Of their own" (Helm, 1968: 3-6).

This schOOl Of thought, also called Pace-makers or
COOperative Yardstick School, contends that cooperatives
are independent economic units voluntarily organized, cap-
italized and managed by, Of, and for its member-patrons.
The purpose is to furnish and/or market, at cost, goods
and/or services to patrons. This type Of cooperation is
the legal practical means by which a group Of "self-
selected, selfish capitalists" seek to improve their indi-
vidual economic position in a competitive society.

The COOperative Commonwealth School. This school

 

goes beyond the aim Of the cooperative enterprise school,
i.e.,improve the member's economic position. The long-
term Objective here is an economic system based on mutual
cooperation. COOperatives are the dominant type Of busi-
ness organization and profit-type corporations only serve
secondary functions. This principle lingers in many con-
sumer societies and in the emerging socialism Of develOping
countries.

The Socialist Cooperative School. Cooperatives are

 

seen as a transitory medium to a Marxist-Leninist type Of

55
state socialism, that "promotes, safeguards and realizes
the interests and aspirations Of the working people
(Clayre, 1980). The revolutionary or historical develop-

ment is the transformation from capitalism to socialism

 

 

and, eventually, to communism. This view is rejected in

 

capitalistic societies, but predominates in socialistic
and communistic economies (Roy, 1964).

Helm (1968: 5) seeks a common denominator tO define
cooperatives amidst these wide and diverging scope Of
Opinions. He indicated that in the widest sense:

Cooperatives are voluntary organizations Of
economig units, based on eguality, carrying
out an "allocated or self-given" economic

Objective. It is a neutral means Of organ-

ization which can serve various aims and
economic systems (emphasis added).

 

 

 

 

 

Speaking Of cooperation and social systems,
Chinchankar and Namjoshi (1977: 414-418) have noted that
COOperation has now acquired a global status in the condi-
tions Of underdevelopment as well as development. It is
capable Of application under a variety Of social conditions
and systems and Operates well in mixed economies. The
Objectives and coverage of COOperatives in mixed economies
go far beyond the limits set in the capitalist system
and in the communistic system. Cooperatives in the former
are confined to limited sectors as a means tO insulate
against competitive conditions or as a countervailing
power to fight economic injustice. COOperatives in com-

munist system are mostly used to promote collective action

56
or decentralized develOpment. A case Of a mixed system
is Israel, where the "cooperative movement" is not
engaged in transforming the existing economy, but in
creating a new economy and society (Namjoshi and Chin-

chankar, 1977).

COOperative Principles

 

The basic principles Of cooperation laid down by
Rochdale Reformers in England in 1844 are still followed

by many cooperatives today. These are: 1) ownership is held

 

by member-users; 2) control (democratic) is based on volume
Of transactions provided or on the basis Of one vote per

member; 3) Operations have an "at cost" non-profit Objec-

 

tive; 4) interest on capital is limited and distribution
Of savings based on patronization Of business is encour-

aged; and 5) education is necessary for understanding and

 

support.

These principles constitute a simple model Of
ownership and membership control. The details and mech-
anism Of control are constrained by the original prin-
ciples, but ultimately must be left to the cooperators
discretion. As discussed earlier, the form Of cooperation
will vary according to the goals and systems where the
cooperative business has tO Operate in addition tO the
needs and requirements Of the cooperators. This view
is illustrated by the statement:

Indeed, grain farmers who need a large grain
elevator do not form cooperations which take

57

over farms and make farmers into employees; in-
stead they form a cooperative to own and Operate
the elevator (Perraut, 1982: 4).

COOperatives and Corporations: Comparative
Nature Of Organizations

 

 

An analysis Of cooperatives requires an under-
standing Of the differences between cooperative and profit-
seeking corporations. Table 111-1 shows the differences
in: l) motivation; 2) performance criteria; 3) capital
base and capital access; 4) owner involvement; 5) respon-
siveness to changing needs and Opportunities; and 6) selec-
tivity Of activities (Torgersen, 1978).

The Torgersen classification basically represents
an economic enterprise COOperation. A broader and more
detailed set Of differences is provided by Schaars (1971)
in Table III-2. The differences are primarily in the
relationship between the owners and their organization and
in the way net savings are distributed. More specifically,
the differences are based on: 1) purpose; 2) organiza-
tion; 3) control; 4) sources Of capital; 5) distribution
Of net profits; 6) stock dividends; 7) Operating prac-
tices; 8) transactions; and 9) tax treatment.

With these basic differences, the key is that for
true cooperatives to exist the basic requirements are the
three principles and the two major COOperative practices.

These principles are service at costs, democratic control

 

 

and limited return on capital. The two major practices

 

DIFFERENCES

58

TABLE III-1

BETWEEN COOPERATIVES AND CORPORATIONS

(Economic Indicators)

 

 

 

Diacriminating Differences Between:
Variables Cooperatives Corporations
Motivation:
. Ownership . Vested in same people . Stockholders
. Control . Majority stock-
. Patronage holders
. People other than
owners
Objectives/Emphasis . Provide services at . To earn profit for
cost; competitive stockholders

Measures of
Performance

Financial Base and
Capital Access
. Equity capital

. Capital access/
borrowed capital

Owner-Involvement

Responsiveness to
Changing Needs

Selectivity in

environments

. Extent members eco-
nomic interest are
best served

Supplied by user-
patrons in proportion
to use of services

. Mainly banks for co-
operatives and other
financial organiza-
tions; has limited
advantage on invest-
ment credits.

. Owner-patron: same
persons separate hired
management that Oper-
ates day-to-day busi-
ness activities.
Therefore, a separate
policy and implemen-
tation.

. Guided and controlled
by the need of members
legal constraints on out-
side members activities

. User-related in market-

Profits and eco-
nomic benefits to
stockholders

Supplied by in-
vestors interested
in return on in-
vestment

Mainly from banks

and insurance com-
panies; useful with
significant advant-
age with investment
credits.

Owner different from
customers voting con-
trolled by managers
and directors.
Therefore, policy-
making and implemen-
tation held by same
people. '

Can shift easier from
one activity to an-
other where returns
on investment are
greatest.

Can engage in all acti-

 

 

Activities ing, purchasing and vities where more
related services. attractive returns are
available.

. The story starts with . The story starts with
members felt-need and attractive return on
cooperatives serve them invested capital.

SOURCE: From Torgerson (1978).

59

TABLE III-2

DIFFERENCES BETWEEN COOPERATIVES AND
NONCOOPERATIVE CORPORATIONS

 

 

 

 

 

 

 

 

Difference Standard Corporations Cooperatives
Purpose To earn profits for in- to maximise net and reel
vestors; increase value income or member/users: pro-
of shares: provide sm- vide goods and services at
ployment for owners of cost to member/users
small corporations
To serve the public To serve its members
generally primarily
Organ- Incorporated under state Organized under state cooper-
ization general incorporation ative law: some. such as
law; no federal charter federal credit unions. under
federal charter also
Except where stockholders Ownership generally
agree otherwise. anyone limited to its member/users
may own stock
Organized and owned by Organized and owned by
investors member/users
Stock is freely transfer- Memberships are not
able and may have its own freely transferable
market
Control By investors. the stock- By member patrons

holders

 

Policy determined by
stockholders and
directors: voting usually
on basis of ownership.
according to number of
shares held

Policy made by member/users
and directors: voting usually
in local associations on a
one-man-one-vote basis. or
patronage basis. in federa-
tions, locals vote either on
number of members represented
or volume of business done
with the central organization

 

Proxy voting permitted:
control frequently exer-
cised by inside cliques

Generally, no proxy voting
permitted; internal cliques
can seldom.get control

 

Sources of
Capital

Prom investing public

Primarily from member users

 

60

TABLE III-2--Continued

 

Difference

Standard Corporations

Cooperatives

 

Sources of

From investing public

Primarily from member/

 

 

Capital users
Prom successful business Prom net earnings on
operations: all or part successful operations.
of the profits reinvested with reinvestment of all
or part of retained
Agprofits
Distribution To stockholders in To patrons on a patronage

of Net Profits

Stock Dividends

Operating
Practices

Transactions

TEX Treatment

proportion to member
of shares of stock held

No limits: depends on
amount of profits and
distribution policy

Use of conventional

methods of financing:

sale of stock, issuance

of bonds, bank loans. rein-
vestment of all or part of
profits ‘

Usually purchase products
on a cash basis

Business done with public
generally: clientele not
restricted except in ex-
ceptional cases

Charge competitive prices
based on ”what the
traffic will bear"

Purchase or sale from or to
public does not normally
give rise to subsequent
rebate

Subject to many taxes.
including state and
federal corporate income
taxes

basis. after modest divi-
dend on stock has been
paid: reserves and. in
some cases. an educational
fund or bonus for em-
.ployees,4g£e set aside

Limited to nominal
amount: generally does
not exceed 8 percent

Use revolving capital
plan or financing. based
on the amount of business
transacted with patrons:
also use conventional
financing

Usually pool sales
receipts and pay average
Aprices for product received

Business done primarily
with (and in some cases.
exclusively with) member/
users

Charge competitive or
'breakeven" prices

Purchase or sale from or

to a member is a condi-
tional transaction subject
to a refund or additional
payment at the end of the
accounting period. if there
are net earnings or savings

Subject to many taxes: how-
ever...can...be exempt from
federal corporate income
taxes; net earnings are
taxable to recipients

Adapted from a chart in Marvin A. Schaars, Cooperatives, Principles.

and Practices. revised edition (Madison:

Extension, 1971). pp. 54-56.

SOURCE:

French et al.

(1980).

University of Wisconsin

61

 

 

are political and religious neutrality and the promotion

of cooperative education (see also Anschel et al., 1969:

 

Helm, 1968).

These practices emanate from the characteristic of
Open membership and the need for informing both members
and the community-at-large of cooperative benefits. How-

ever, open membership in cooPeratives should be qualified

 

in this manner: 1) the voluntary character of cooper-
ation allows free change of membership, as no person
should be forced to join or to remain in a COOperative
society. (In developing countries, compulsory cooperation
can be allowed on a transitory basis and should be accept-
able in the interest of accelerated development);and 2)
open character of cooperation must be maintained (a society
should accept all qualified persons for membership and
restrict expulsions to those cases where these qualifica-
tions are no longer valid or where members act against

the interest of the society [Helm, 1968]).

Effective cooperative management (i.e., combined
responsibilities of members, board of directors and hired
management) depends heavily upon an enlightened and well-
informed membership: the owner-patrons of their own
enterprise. In contrast, corporate effectiveness depends

heavily on the business acumen of the top management staff.

62

A Conceptual/Analytical Framework for
Organizational Effectiveness

Organizational effectiveness is a complex topic
because of wide-ranging dimensions or interpretation
performance. Thus, more and better concepts have been
advocated due to the absence of clear-cut tools for
analyzing the environment. The need is inherent in the
failures of most social programs to produce the results
intended by the program planners. Two major views
regarding why programs have failed can be attributed to
the principal actors in the developmental change process:
1) in the conduct (implementation) of the agencies
responsible for carrying out the programs; and 2) in the

predictions and assumptions about behavior of the public in-

 

volved in the programs (Schmid, et al., 1982; emphasis added).

An alternative pragmatic view is that the program
was not adequately designed or structured because of
limited knowledge about the specification variables and
the necessary incentives to achieve the desired perfor-
mance. In reality, choice and trade off games are com-
plex. Analytic frameworks are needed to provide infor-
mation on alternative ways of doing things.

The analytical framework presented here will in-
clude the following elements:

1. The applicable concepts that can be cate-

gorized into two major areas will be

described. They are the "traditional

63
organization theory" and the "emerging
theory of community economics." The analy-
tical concepts suggested by both have been
referred to as, "organizational effective-
ness" and "performance," respectively;

2. The organizational goals and indices of organ-
izational effectiveness that have been viewed
in different perspectives will be presented.
The most frequently mentioned evaluation cri-
teria of organizational effectiveness and the
ultimate criterion will be described; and
finally

3. The research implications suggestive of the
trends and/or directions we have to undertake
in the course of organizational change and

development will be presented.

Organization Theory5

 

Organization theory provides a framework for under-
standing, explaining, and predicting organizational effec-
tiveness. In any organization, two basic aspects are

assumed: the structure, and how compliance is ensured—-

 

 

both being influenced by the context of the organization.
The three contextual factors that influence organizational

compliance are environment, technology, and size. Other

 

 

 

5A major reference for this section is Dessler
(1980).

64

factors that influence effectiveness are: 'leadership,

 

work groups, intergroup conflict, and organization change

 

and development (Dessler, 1980).

 

Figure III-l shows one of the hypothesized frame-
works for analyzing organizational effectiveness. In

terms of this framework structure, compliance and social

 

 

influences (including leadership, groups, conflict and
organizational change and development) interact in determi-

ning organizational effectiveness.

Theory of Community Resource Economics6
Community (Resource) Economics is the study of the
relationships of the situation, structure, conduct and

performance of political economic systems. The situation

 

(Si) refers to the varying characteristics of resources,

goods, and services; structure (st) refers to all of the

 

predetermined social characteristics of the community
system and its members which influence the members choices;
conduct (c) refers to all of the choices, decisions or
strategies that the members adopt within the Opportunity

set established by the structure; and performance (p)

 

refers to all of the consequences of the members choices.
What has been labelled as the "si—st-c-p" frame-
work is meant to be a vehicle to help identify important

features of community problems and policies. Part of

 

6Two major references for this section are Schmid,
et al. (1982) and Shaffer and Schmid (1982).

65

 

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66

this analysis is learning what aspects of "sist

to be taken into account. Another name for this general

c p" need

approach is "Environment-Behavior-Performance" sequence
(EBP). The sequence implies classification of the char-
acteristics of environment and the participants of the
behavioral modes. The classification of outcome and the
develOpment of meaningful hypotheses about their relation-
ships is also considered. Figure III-Z shows the inter-
relationships of situation, structure and conduct towards
performance.

Applying the framework to cooperative business, one
will note that the different characteristics of goods and
services handled by the cooperative enterprise affects
performance outcomes. The key point is that knowing
whether the COOperatives, with the goods and services
they handle, have real economies-of-scale (the situational
variable) which helps in hypothesizing and predicting out-
comes of alternative policies. Another concept that
describes this is "institutional access situations."

The problems of access situations could also affect per-
formance in the following manner (Harvey et al. 1979):

l. The access procedures (for goods and services

handled) are off—putting;

2. The problem of eligibility;

3. The timing and waiting period go wrong; and

4. What is distributed is not necessarily what,
in fact, is wanted.

67

 

 

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.coflumsuflm .OHSDUSHDm mo mmfismcoflpmHmnmmch

 

 

 

 

 

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BUDDZOU

 

 

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onsaosHm

 

68

Other factors that affect institutional access
are: l) the multiplicity and uncoordinated programs for
farmers; and the 2) failure of penetration (access situ-
ation) chosen.

The structure, as indicated by the arrow in

 

Figure III-2, is very much interdependent with the

situation to produce particular outcomes. The structural

 

conceptualization refers to the property rights/rules
alternatives: the rights and obligations established by
law, custom and covenant which define the relationships
among members of a community with respect to their control
over the resources of the community. The concept of
property rights and rules refers to the recognition of
the opportunity to participate in decisions; a claim to
a set of benefits and a set of obligations with respect
to the use of property.

Another relevant concept in the context of struc-
ture refers to transactions between individuals that can
be seen as one of status, administration, or exchange. In

a traditional status system, transactions are prescribed

 

by roles/customs associated with social position. In

threat or administrative system,transactions are governed

 

primarily by authority or decisions made by people in

power. In a market or bargained exchange system, transac-

 

tions are governed by market processes. These general
labels tell us little about the details of structure,

more so when each transaction has bearing on cooperative

69
practices, which makes prediction of performance rela-
tively ambiguous. For example, as applied to COOperative
organizations, the legislative provisions and executive
machineries can be analyzed in terms of how supportive
and stimulative they are in developing a cooperatives
program.

The conduct is the linkage between specific aspects
of structure and performance and depends upon the conduct
of the participants. Failure to understand the conduct
will lead to very poor public policy, planning and pro-
gramming. Both the conduct and/or behavior of the gov-
ernment personnel, and the public involved in the program,
must be considered in the analysis.“ Following this line
of thinking, some questions applicable to cooperative
organizations are:

1. What assumptions in the cooperative theory

(e.g. COOperative effect and bargaining power)
are held in some cases, but not in others?

2. Has there been an inadequately designed

structure or has there been dishonesty and/or
incompetency of some of the participants?

Performance is defined as the flow of consequences

 

from a particular situation and structure, given the
conduct of the participants in a system. The consequences
may be viewed analytically as a set of benefits and costs.
Here, the economic rationale is to maximize the benefits

(objectives) and/or to minimize the costs (inputs).

70

However, there are other discussions of performance rele-
vant to the objectives and preferences of the community
involved. More often than not, the dimensions we referred
to are the objectives and impacts that decision-makers
consider as relevant in making community economics deci-
sions. There are two major questions in the documentation
of performance: 1) to establish the categories and to
relate policy and program alternatives to the categories;
and 2) to aggregate the performance categories into in-
dices which can express change over time. The succeeding

sections will explore more details on this aspect.

Indices of Organizational Effectiveness

 

We have shown in the preceding sections that organ-
izational effectiveness can be defined and measured as an
end-product of both economic and organization theory. In
fact, the literature is inconclusive not only because of
the differences in disciplinary views7 but also due to
criteria and measurement problems. This section will add
to our understanding of the concept of organizational
effectiveness through a discussion of organizational goals
and a review of the purported single and multiple criteria
measures of organizational effectiveness (Dessler, 1980;

Steers, 1975).

 

7Three disciplines that have focused attention on
organizational effectiveness are: l) organizational
psychology; 2) social psychology;and 3) economics.

71

Organizational goals. An organization is a social

 

system which is effective to the degree that its members
share like perceptions concerning its goals, roles, and.
norms, and apply these perceptions in the daily life of

that organization. An organizational goal is defined by
Etzioni (1960: 257) as "a desired state of affairs which
the organization attempts to realize."

Talcott Parsons (1956) an organizational sociologist
has been considered the major proponent of the goal
approach to organizational effectiveness. Organizational
effectiveness is defined as "the extent to which an organ-
ization (as a social system), given certain resources,
and means, fulfills its means and resources without placing
undue strain upon its members" (Sweeney, 1971). In
organizational analysis, this "goal effective-
ness" approach has often been used as a general theoretical
framework (e.g. Georgopolous and Tannenbaum, 1957). How-
ever, one comment against this "goal model" seems appro-
priate:

. . . it may not supply the best possible frame
of reference for effectiveness . . . it compares
the ideal from real therefore a quite low level
of performance or that the organization fails
considerably short of goals

It should be noted that organizations, as social

units, are multifunctional. Therefore, other than devoting

 

all their means to goal activities, some have to be devoted
to other functions; e.g., creation of further means to the

goal and maintenance of units performing goal activities

72
and service activities (Etzioni, 1957: 259). Therefore,
the goal approach to organizational effectiveness
ordinarily yields only limited insights about an organiza-
tion. This is largely because of the modefs failure to
take note of the essentially open, multifunctional nature
of organizations (Ghorpade, 1970: 34).

Social Systems Criteria of Organizational Effective-
ness. The social systems approach assumes an organization
must consider Parson's "four functional requirements,"
simply labelled as Adaptation, goal attainment, Integration,
and Eatency. The AGIL model can be described as (Parsons,
1956).

1. Adaptation. This involves the problem of

 

securing from the environment sufficient

facilities and then distributing these

 

 

facilities throughout the system. It deals

 

with the problem of procuring all the human

 

and material resources which are necessary
for the achievement of organizational goals.
It includes the processes of financing, per-
sonnel recruitment, and procurement, and
acquisition of the entrepreneurial skills.

2. Goal Attainment. This refers to the problem

 

of establishing priorities among system goals

 

and mobilizing system resources for their
attainment. It involves decision-making and

other processes concerned with the problem of

73

fitting means to ends.

Integration. These denote the problem of co-

 

ordinating and maintaining (solidarity and
cohesion) interrelationships among system units.
Latency. This involves processes concerned
with harmonizing participants multiple roles
(e.g. organizational role, family head, church
members, etc.) and develOping individual com-
mitment to organizational objectives. This
concept embraces the two related problems of

pattern maintenance and tension management.

 

 

Pattern maintenance pertains to the problem of
how to insure that actors in the social system
display the appropriate characteristics or norms;
tension management concerns the problem of
dealing with the internal tensions and strains

of actors in the social system.

The following criteria of organizational effective-

ness have been used by several writers. For example:

1.

Georgopoulos and Tannenbaum (1957). Their

 

study was based on Parson's functional impera-
tives if the following correspondence can be
made: adaptation as flexibility; goal achieve-
ment as productivity; absence of conflict be-
tween organizational subgroups as integration,
and absence of strain as tension management

(pattern maintenance).

74

Hage (1965) adapted his four organizational

ends from the functional imperatives. Adaptive-
ness is equivalent to adaption; production is
equivalent to goal achievement; efficiency to
integration and job satisfaction to tension
management.

Warren and associates' (1975) analysis of farmer co-
operatives closely correspond to Hage's organ-
izational ends: Hage's adaptiveness (flexi-
bility) is called flexibility; job satisfaction
(morale) is called satisfaction; efficiency
(cost treatment) remains efficiency; and pro-

duction (effectiveness) as productivity.

Warren and associates (1975) provided a summary of

goal transitions from Parsons to Hage and finally to systems

goal (see Table III-3). They offered the following definitions

for the four matched categories:

1.

Efficiency - the ability to obtain the
greatest possible return from the resources
at hand;

 

Satisfaction - a situation where the employees
as a group are happy with their jobs and work-
ing conditions such that the product and ser-
vices satisfy patron demands and needs.

 

Flexibility - the ability to quickly and easily
make changes within the cooperatives as needed
to meet the changing demands of patrons.

 

Productivity - the ability to obtain a high
volume of business.

 

75

TABLE III-3

A SUMMARY OF GOAL TRANSITIONS: AGIL MODEL,
ORGANIZATIONAL ENDS, SYSTEM GOALS

 

 

Parsons Ha e Warren
9 et. al.

Adaptation Adaptiveness Flexibility
Goal-achievement

(goal attainment) Production Productivity
Integration Efficiency Efficiency
Tension Management

(pattern main- Job Satisfaction Satisfaction

tenance)

 

Source: Warren et a1. (1975).

Measures of Effectiveness

 

As stated earlier, organizational effectiveness
may mean different things to different evaluators or
analysts. For our purpose, we shall describe the classi-
fications adapted by Dessler (1980): the single-criterion
measures (earlier models) and the multiple criterion mea-
sures (current models).

Single-Criterion Measures. Various single-cri-

 

terion measures of organizational effectiveness,

(such as productivity, flexibility and stability) are

still widely used.

76

Profit maximization is the most popular and con-

 

venient economic proposition as a single criterion measure
of performance. It is the desired maximum difference be-
tween total revenue and total costs. On the other hand,
there are managers who want their firms to be as large as
possible and, therfore, seek to maximize not only their

profits but their sales revenue. Nonetheless, the assump-

 

tion of profit maximization has been associated with organ-
izational viability; it provides a general theory of

firms, markets and resource allocation that is successful
in both explaining and predicting business behavior.

Satisficing. Organization theorists have proposed

 

this criterion which, in many ways, is closely related to
profit maximization. Perhaps the only difference is that
to "satisfice" means a minimum level of acceptable profits
is set and managers (firms) must not exceed this level. If
ever the profits exceed the target, the option is to
return the "excess" to the customers to better enhance
"public relations." In this case, the initial requirement
to satisfy the "satisficing function" of the managers
(firms) is still how to earn profit at a preset level.

Other single-criterion measures. Many other single-

 

criterion measures have been prOposed (Table III-4). Of
the 19 different variables, the four most widely used are:

1. Overall performance as measured by employee
or supervisory rating;

 

2. Productivity as measured typically with out-
put data;

 

77

TABLE III-4

A PARTIAL LISTING OF SINGLE-CRITERION MEASURES OF

ORGANIZATIONAL EFFECTIVENESS

 

1. Overall
Effectiveness
2. Quality

3. Productivity

4. Readiness

5. Efficiency

6. Profit or
Return

7. Growth

8. Utilization
of Environ-
ment

The degree to which the organization is accom-
plishing all its major tasks or achieving all
its objectives. A general evaluation that
takes in as many single criteria as possible
and results in a general judgment about the
effectiveness of the organization.

The quality of the primary service or product
provided by the organization. This may take
many operational forms primarily determined
by the kind of product or services provided
by the organization.

The quality or volume of the major product
or service that the organization provides.
Can be measured at three levels: individual,
group, and total organization. This is not
a measure of efficiency; no cost output
ratio is computed.

An overall judgment concerning the probability
that the organization could successfully per—
form some specified task if asked to do so.

A ratio that reflects a comparison of some
aspect of unit performance to the cost in-
curred for that performance. Examples:
dollars per single unit of production, amount
of down time, degree to which schedules,
standards of performance, or other milestones
are met. On occasion, just the total amount
of costs (money, material, etc.) a unit has
incurred over some period can be used.

The return on the investment used in running
the organization from the owners' point of
view. The amount of resources left after all
costs and obligations are met sometimes ex-
pressed as a percentage.

An increase in such things as manpower, plant
facilities, assets, sales, profits, market
share, and innovations. A comparison of an
organization's present state with its own
past state.

The extent to which the organization success-
fully interacts with its environment,
acquiring scarce, valued resources necessary
to its effective operation. This is viewed
in a long term, optimizing framework and

78

TABLE III-4--Continued

 

10.

11.

12.

13.

14.

15.

16.

17.

Stability

Turnover or
Retention
Absenteeism

Accidents

Morale

Motivation

Satisfaction

Internalization
of Organiza-
tional Goals

Conflict-
Cohesion

not in a short-term, maximizing framework.
For example: the degree to which it acquires
a steady supply of manpower and financial
resources.

The maintenance of structure, function, and
resources through time and more particularly
through periods of stress.

Frequency or amount of voluntary terminations.

The frequency of occasions of personnel being
absent from the job.

Frequency of on-the-job accidents resulting in
down time or recovery time.

A predisposition in organization members to put
forth extra effort in achieving organizational
goals and objectives. Includes feelings of
commitment. Morale is a group phenomenon
involving extra effort, goals communality, and
feelings of belonging. Groups have some
degree of morale while individuals have some
degree of motivation and satisfaction. By
implication, morale is inferred from group
phenomena.

The strength of the predisposition of an
individual to engage in a goal-directed action
or activity on the job. This is not a feeling
of relative contentment with various job out-
comes as a satisfaction, but more akin to a
feeling of readiness or willingness to work
at accomplishing the job's goals..

The degree of feeling of contentment felt by a
person toward his organizational role or job.
The degree to which individuals perceive
they are equitably rewarded by various aspects
of their job situation and the organization
to which they belong.

The acceptance of organizational goals by indi-
viduals and units within the organization.
Their belief that the organization's goals
are right and proper.

A bipolar dimension defined at the cohesion end
by an organization in which the members like
one another, work well together, communicate
fully and openly, and coordinate their work
efforts. At the other end lies the

79

TABLE III-4--Continued

 

organization with verbal and physical
clashes, poor coordination, and ineffective

communication.
18. Flexibility- The ability of an organization to change its
Adaptation standard operating procedures in response to

environmental changes, to resist becoming
rigid in response to environmental stimuli.

19. Evaluations Evaluations of the organization or organiza-
by External tional unit by those individuals and organ-
Entities izations in its environment with which it

interacts. Loyalty to, confidence in, and
support given the organization by such groups
as suppliers, customers, stockholders,
enforcement agencies, and the general public.

 

SOURCE: Dessler (1980).

80

3. Employee satisfaction as measured by self-
report questionnaires; and

4. Profit or rate of return based on accounting
data. (Dessler, 1980).

Multiple Criterion Measures. From the above
mentioned measures, one will note that profit or rate of
return (either expressed as absolute value, percentages
or ratios) continuously reappear. Related organizational

concepts are organizational productivity, efficiency,

 

 

growth, stability and turnover or retention. Thus, this

 

lends to a multiple criteria model that defines effective-
ness in terms of several interdependent factors (Table III-
5). Illustrative examples of these criteria are:

1. The bargaining_position: the successful
acquisition of scarce and valued resources
and the control of its environment.

2. The organization's worth to members and to the
society in general: the degree to which it is
productive, profitable, self—maintaining; the
degree to which it is of psychological and
sociological value to its members; and

3. Survival and adaptability in increasingly un-
certain and turbulent environment with access
to an open spirit of inquiry.

Table III-6 shows that the latter illustration,

labelled adaptability-flexibility,is the most frequently
mentioned evaluation criteria along with productivity,

satisfaction, profitability and resource acquisition of

81

TABLE III-S

EVALUATION CRITERIA IN MULTIVARIATE MODELS OF ORGANIZATIONAL EFFECTIVENESS

 

Study and Primary
Evaluation criteria

Derivation
of Criteria*"

 

 

Georgopoulos and Tannenbaum (1957)
Productivity, Flexibility, Absence

of organizational strain

Dennis (1962)

Adaptability, Sense of identity,
Capacity to test reality

Blake and Mouton (1965)
Simultaneous achievement of high
production-centered and high

people-centered enterprise

Caplow (1964)

Stability, Integration, Voluntarism,

Achievement
Katz and Kahn (1966)

Growth, Storage, Survival,
Control over environment

Lawrence and Iorsch (1967)
Optimal balance of integration

and differentiation

Yuchtman and Seashore (1967)
Successful acquisition of scarce and
valued resources, Control over

environment
Priedlander and Pickle

Profitability, Employee satisfaction,

Societal value
Price (1968)

Productivity, Conformity, Morale,
Adaptiveness, Institutionalization

Mahoney and Weitzel (1969)

General business model

Productivity-support-utilization,
Planning, Reliability, Initiative

R and D Model

Reliability, Cooperation, Development

Schein (1970)

Open communication, Flexibility,
Creativity, Psychological

commitment

Generaliz-
Type of ability of
Measure* Criteria'*
N A
N A
N B
N A
N A
D B
N 1!;\
N B
n A
D B,R
N A

Ded. ; followed by
questionnaire study

Ded.: no study

Ded.; no study

Ded.; no study

Ind.: based on review
of empirical studies

Ind.; based on study
of 6 firms

Ind.; based on study
of insurance
agencies

Ded.; fellowed by
study of small
businesses

Ind.; based on re-
view of 50 pub-
lished studies

Ind.; based on study
of l3 organizations

Ded.; no study

82

TIBLB III-S-Continued

 

 

 

 

 

Generaliz-
Study and Primary Type of ability of Derivation
Evaluation Criteria Measure“ Criteria" of Criteria***
Mott (1972) N A Ded.: followed by
Productivity, Flexibility, questionnaire study
Adaptability of several organ-
izations
22M
Goal attainment, Integration, N A Ded.; followed by
Adaptation study of 22 deci-
sion units
Gibson et al. (1973) N A Ind.; based on
Short-run review of earlier
Production, Efficiency, Satisfaction models
Intermediate
Adaptiveness, Development
Long-run _
Survival
Negandhi and Reiggnn (l973) N B Ded.; followed by
Behavioral index study of Indian
Manpower acquisition, Employee organizations
satisfaction, Manpower retention,
Interpersonal relations, Inter-
departmental relations, Manpower
utilization
Economic index
Growth in sales, Net Profit
Child (1974, 1975) N B Ded.; followed by
Profitability, Growth . study of 82
British firms
Mebb (1974) D C Ind.; based on
Cohesion, Efficiency, Adapt- study of religious
ability, Support organizations

 

*N - Normative models, D - Descriptive models.

"A - All organizations; B - Business organizations; C - Religious organizations;
R - Research and development laboratories.

*“Ded. - mductive, Ind. - Inductive

SOURCE: Steer (1975).

83
TABLE III-6

FREQUENCY OF OCCURRENCE OF EVALUATION
CRITERIA IN 17 MODELS OF
ORGANIZATIONAL EFFECTIVENESS

 

No. of Times
Evaluation Criteria Mentioned

(N=l7)

 

Adaptability-Flexibility 1
Productivity
Satisfaction
Profitability

Resource acquisition
Absence of strain
Control over environment
Development

Efficiency

Employee retention
Growth

Integration

Open communications
Survival

All other criteria

HNNNNNNNNNWWWO‘O

 

Source: Steers (1975) and Dessler (1980).

organizational effectiveness. Dessler (1980) has cited
that many writers have indicated that the effective organ-
ization is the one that satisfies the demands of those in
its environment from whom it requires support for its
continued existence. For example, the stockholders of
a firm who consider effectiveness in terms of profits or
rate of growth.

Thus, considering the multifaceted notion of
effectiveness, it can be more appropriate if it is described

according to particular interest groups or participants.

84
It can also be described according to the functions for
which the organization is expected to fulfill. For in-

stance, Cotterill (undated) has noted that:

Consumer food cooperatives have failed and will
continue to fail when they are failures as mar-
keting organizations. Marketing is at least
tridimensional, i.e. time, form, and lace

must be in harmony for success. What this means
is that food items must be in the "correct"
place, and form and at the "correct" time. The
situation is "correct" when sellers and buyers
actually exchange goods and services at a price.
A transaction takes place

Therefore, it is safe to assume that the ultimate
criterion for organization effectiveness is the ability

of the organization to endure, survive and adapt to crucial

interest groups and/or the environment and the require-

 

 

ments demanded in the locality. To manage the environ-
ment, the organization can react to environmental demands

defensively, offensively or both. Defensively, it can

 

 

engage in organizational change and development, thus

changing its structure, group norms, reward system to

 

 

tune-up organizations under new environmental demands.
Offensively an organization can reduce dependence on
"outside factors." It can manage environmental demands by
"avoiding influence, altering dependencies, negotiating
with the environment, or legislatively creating a "new

environment."

85

Research Gaps

 

Marion (1978) has sorted out the policy issues
and research needs identified during a recent seminar-
workshOp on "Agricultural Cooperatives and the Public
Interest" (1977). Among others, the list includes theo-
retical treatises and empirical testing of COOperatives
as a form of business organization. Here are the per-
tinent research needs identified in the workshop (with
headings provided by this writer):

1. Cogperative Theories: To test the critical

 

assumptions underlying alternative coopera-
tive theories (e.g. objective function for
coops and their members).

2. Financial Need vs. Growth: To determine the

 

relationship between capital growth and mar-
ket performance; and to analyze the capital
needs and source of cooperatives and the
effects of alternative patronage refund
policies.

3. Cooperative Business/Operational Performance:

 

a. To develop a taxonomy of cooperatives
based on features related to perfor-
mance;

b. To determine factors which affect cooper-
ative market power.

c. To examine policy variables (e.g. market-
ing contracts/orders) that influence the
situation, structure, conduct and perfor-
mance of relevant markets and the compe-
titive impact of COOperatives;

86

d. To determine the structure of relevant
producer-processor markets (including
the market share and relative size of
cooperatives); and

e. To determine the influence of coopera-
tives on competitive conduct in rele-
vant markets and the resulting compe-
titive performance.

4. Market Power: To analyze the market power of

 

free riders and to analyze the effects of
different types of cooperatives on the six
major agricultural problems: oligopsony buyer
concentration, price determination and dis-
covery, price and income stability, subsec—
tor coordination, market access and control

of agriculture. For each of the problem
areas, a germ needs to be established against
which the alternative cooperative strategies
can be evaluated.

5. Memberships' Mechanism of Control: To deter-

 

mine the impact of alternative organizational
forms of cooperatives on member control,
economic performance and the long-range struc-
ture of the food system; and to examine the
relationship between the size and organizational
characteristics of cooperatives and the

responsiveness to and control by members.

 

 

It should also be noted that, among these major
research needs, the nature and mechanisms of control exer-

cised by members loom large in a cooperative organizational

87
performance (Van Ravensaay, 1982; Apthorpe, 1971).
Key issues revolve around: 1) What control mechanisms
are being used by members of a cooperativeqr2) Which con—
trol mechanisms would be most likely observed in practice?;
and 3) what responses to these mechanisms are we to ex-
pect from the COOperative management?

Related to the above problem of control mechanisms
in cooperatives, Apthorpe (1971: 67-82) has reported two
themes that recur in evaluating agricultural cooperatives:
1) the social value theory of development; and 2) the
development administration theory. The first refers to
members' attitude and motivations; the latter refers to
the qualifications of the COOperative leadership.

1. Social Value Theory of Development: puts the
blame when things go wrong on socially and
culturally-based obstructive, destructive or
indifferent motivations or attitudes.

2. Development Administration Theory: attributes

 

what success has there been to the technical
qualities of the officials or committee mem-
bers (i.e., who planned, managed or admin-
istered it).

Rationale Towards Organizational Renovation
For the Philippines

 

As the 1980's unfold, one begins to wonder what
lies ahead for the cooperative system, in general, or of

area marketing cooperatives, in particular. This question

88

can be raised because of the diminishing interest in, or
disenchantment with, the members of village (Samahang
Nayon) precooperatives (ACCI, 1979). In addition, the
findings of import, although not exhaustively presented
here, give us an indication that the program urgently
needs some recasting to provide an adequate framework for
the develOpment of a viable agricultural cooperative system.

In fact, the success of the entire program has
been doubted because the cooperative scheme "was thought
of, and imposed from, the top" and that the response from
the bottom was weak to support the viability of the
scheme" (ACCI, 1979; (Ofreneo, 1980.) There are signs that
it may even develop like past governmental attempts to
promote cooperatives, which started with a "great deal of
fanfare, but ended in failure" (Ofreneo, 1980: 70).

Considering this critique as the major trend of
cooperation in the Philippines, one area of concern is
the usual "revitalization or reactivation" scheme. To
start with, the earlier described problem areas are sug-
gestive of what solutions to undertake, which include what
research needs and opportunities are urgent and apparent.
The agenda appears very simple, but the complexity of
the issues involved actually mean that one hardly knows where
to begin. Yet we must start somewhere and proceed with

orderly, alternative approaches.

89

Implementation Analysis and Assessment

Researchers have different ways of seeking solu-
tions to the problem. Depending on one's point of view,
they might use different analytical frameworks or models
to explain the same phenomena.

Howard Freeman has suggested that, in evaluation
research, practicality has demanded a definition of limits
to the scope of evaluative research and of critical points
on which projects should be assessed. In the design of
evaluation research, the first question is: What is the
purpose of the evaluation? (Jones and Borgotta, 1980). The
objectives should be stated in terms of measurable change
in intended directions. Froomkin (1976) has counterargued
this emphasis in his "A New Framework for the Analysis of

Governmental Programs":

Policy analysis is often hampered by limiting
the evaluation to the stated objectives of the
program. He points to the need for an overall
model to understand the scope of the program and
its cost. He urges that programs be planned more
carefully than has been the rule hitherto. More
emphasis in planning and analysis could contri-
bute to greater effectiveness of the programs.
The analysis of human program can be limited to
two questions,i.e., Is the program properly de-
signed? Is it cost effective in reaching the
goal?

A more detailed exposition of a policy analysis
framework has been presented by Williams (1975). He has
categorized two aspects of policy analysis into "program
design and program implementation." He has pointed out
that "the major problem is not in develOping relatively

sound policy alternatives, but in failing to consider the

90

feasibility of implementing these alternatives." Six stages

can be conceived to occur when policy decisions are made

or when a social experiment is undertaken (Figure III-3).

The analytic and assessment activities shown in panels

2, 4, and 5 in Figure III-3 need to be emphasized:

1.

Implementation Analysis. Scrutiny of: a) the

 

preliminary policy specifications to deter-
mine their clarity, precision, and reasonable-
ness; b) staff, organizational, and managerial
capabilities, to determine the degree to which
the proposed policy alternative can be speci-
fied and implemented in its bureaucratic and
political setting.

Specification Assessment. Assessment of the

 

final policy or design specifications and
measurement procedures, including interim
feedback devices, to ascertain the degree to
which the specifications correspond to deci-
sions, are amenable to successful implementa-
tion, and are measurable.

Intermediate Implementation Assessment. Assess-

 

ment of the degree to which a field activity
is moving forward successful implementation
and/or is providing useful feedback informa-
tion to improve the implementation effort.
Final Implementation Assessment. Assessment

of: a) the degree to which a field activity

91

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92
corresponds to the design specifications;
and b) the level of bureaucratic/political
functioning to determine whether or not there
is a valid basis for testing a theory or for
deeming a field activity fully operational.

If implementation analysis is to be of value,
planners and policy makers ought to have reasonable esti-
mates of the organizational capacity to carry out alterna-
tive proposals. In this respect, Williams (1975: 534) has
further indicated that:

. . . early assessment is critical even before the
effort (stage 4) is made to move into the field.
There should be a specification assessment to deter-
mine whether the final design corresponds to the
decisions reached at the end of stage 3, provides
sufficient program information and operational
details and is amenable to measurement.

He has further stressed that program failure can

be viewed into three aspects: theory, implementation and

 

 

specification failure:

 

A new program or project may be thought of as
representing a theory or hypothesis in that the
decision-maker wants to put in place a treat-

ment expected to cause certain predicted effects
or outcomes. If the program or project is un-
successful, the explanation may be that it "did
not activate the "causal process" that would have
culminated in the intended goals (i.e. a failure
of program), or it may have set the presumed
"causal process" in motion but the process did not
'“cause" the desired effects (i.e. a failure of
theor ). The specification failure may include:

a what is to be done (the element of the treat-
ment); b) E2! it is to be done (guides for
implementation and operation); c) what organiza-
tional changes (outputs) are expected; and d) what
the specific measurable objectives are.

 

 

 

 

93

With respect to implementation success, the objec-
tive is performance n93 conformance. In the ideal situa-
tion, those responsible for the implementation would take
the basic idea and modify according to the needs of the
local environment where it is to be implemented. Success-
ful conformance is not enough. It is conceived as an
intermediate stage in a process of moving toward improved
outcomes (performance).

Implementation as a Research Question. An imple-

 

mentation seeks to determine whether an organization can
bring together people and material and motivate them in
such a way as to carry out the stated objectives on a

sustained basis. The problem can be approached from several

 

perspectives. For instance: a) in terms of development

of sound organizational structure; from the perspective of

 

interpersonal motivational factors; and c) with respect to

 

incentives.

 

Perhaps the most immediate research need for those
concerned with enhancing the effectiveness of the Philippine
cooperatives is to focus directly and carefully on case
studies of successful cooperatives. Perhaps this is what
is being called for as a major technique of implementation
analysis and assessment.

Implementation analysis should investigate: l) the
technical capacity to implement; 2) the political feasi-
bility; and 3) the technical and political strategies for

implementation.

94
With these basic considerations, it may make
sense to try out a new idea or program renovation on a
small scale before making a full commitment to a national
program. And one more reminder to the program analyst is
that, by far, the most important step toward planned

change/improvement is the strong commitment--both on part

 

of target clientele and the management (tOp decision-
makers down the field-level line)--to deal with program
innovation and implementation problems. The naive over-
confidence that has resulted in disappointments reflective

of "limited success stories" calls for a realistic approach,

 

not only about the organizations who are "doing the

change," but regarding the skills and techniques which "guide,"
rather than "dictate," the process of change. This is

raised, not to dramatize the intensive case study technique

or the limited scale approach; rather it emphasizes a

slow but sure, research-education program. This is in-

 

tended to seek "safe" revitalization schemes and/or insti-
tutional alternatives towards more effective and viable
farmers organization.

Action-Research Towards Organizational Renovation.
Applied research provides information on which informed
judgements and action-decisions can be made. It has been
the contention of various contemporary writers (e.g. Rogers,
1973; Schumacher,l976) that "appropriate" development pro-
grams must be locality-relevant, site-specific and enjoin

clientele participation and commitment in order to insure

95
long-term success. Cooperatives should be no exception
to this observation.
One research approach to an appropriate coopera-
tive development strategy that is being proposed here is

action, interdisciplinary and participatory research.

 

 

 

The growing pOpularity of this approach can be attributed
to:

l. The concern for enhancing the research-
action linkage in community planned change
efforts has accentuated the importance of
researcher-citizen collaboration. The
greater the commitment of program partici-
pants, the greater will be the success of
the action program; and

2. The concern for the poor and powerless who
are often manipulated by those who control
projects and programs (Van denberg and Fear,
1982).

The blending of "action" and "research" serves

as:
A tool used by a community with the objectives of
acquiring, through resident participation, valid
and reliable information that can be used to en-
hance the community's problem-solving capabilities
(Voth, 1979).
The self-help/local self-reliance approach also

applies in participatory research. Witness the following

passages:

96

People have the basic right and ability to come
together and to form appropriate structures and
procedures for the settings in which they must
or choose to function. The people can become
meaningful participants in a developmental pro-
cess and have considerable control over the
process.

 

 

Action research . . . is a special kind of

research process that actively engages the

citizenry in studying and analyzing the com:

munity, not merely in order to coopt the people

into supporting a course of action, not merely

in order to "educate," "delineate" or "de-

apthize" the citizens, but to place the respon-

sibility for decision-making squarely on them (Voth, 1979L

 

 

 

 

 

This special kind of research process is based on

the assumption that residents are better able than per—

 

haps anyone else to define their problems and propgse solu-

 

tions to those problems. Two reasons can be cited why

 

this is so: 1) residents are more knowledgeable of their
own situation; and/or 2) they can be helped to develop a
"critical awareness" of their own situation and from there
take-off with more appropriate solutions.

Resident participation is one of the key vari-
ables that is associated with the success of action pro-
grams (Zaltman and Duncan, 1977). It can contribute to
program success by (Fear et al., 1981):

l. insuring that the population's needs are

squarely taken into consideration;

2. increasing the population's commitment to

the action program because of their partici-
pation in the research process;

3. providing locally-defined "legitimate"

97
reasons for conducting the action program;

4. improving the population's ability to collect
information, analyze information, and conduct
appropriate programs based on research results;
and

5. cultivating the development of researCh skills
among members of the population and thereby con-
tributing to "self-reliance." In contrast,

a research or program intervention done for
people (i.e. devoid of resident participation)
encourages a dependency relationship.

Components of Cooperative Participatory - Interdis-

 

ciplinary Research for the Philippines. Two major com-

 

ponents of this kind of research are suggested towards a

more effective and viable farmers organization: Component 1.

 

The Cooperative Management (CMA); and Component 2. The

 

Pilot Program Establishment (PPE).

 

The usefulness/applicability of this research to
this study can be gleaned from the following process: it
will be necessary to place priority on the research projects
suggested for component one and hold development of com-
ponent two for at least one year. Overall program
development must be coordinated by an interdisciplinary
team of professionals,and while one specialist may co-

ordinate a specific research project, a periodic review

 

must be done by the entire interdisciplinary team.

Component two would be selective or purposive

98

in nature and would utilize the feedback of the first
assessment. This is done for two major reasons: 1) it
will permit the efficient use of available resources ascnr-
posed to the overwhelming task of attempting a nation-wide
assessment; and 2) it will facilitate more effective
implementation of component two. The assessment informa-
tion will be specifically oriented to the preselected
study areas.

With reference to rural development, participatory
planning which serves as drawbacks of the past approaches,

Fear, et al. (1981) has recommended this scheme:

Involvement of appropriate audience-user groups should
be incorporated into each area of study. They
will be involved in planning, implementation and
evaluation of suggested research projects. This
involvement leads to: l) a better understanding
and acceptance of the program innovation; and 2)
an increased capacity to design and develop rele-
vant program materials (e.g. assessment instru-
ments, educational materials, evaluation data,
etc.). Recruitment and establishment of these
advisory groups will be based on the specific
characteristics of individual research projects.

In summary, five critical points apply to this

type of study:

1. The program innovation proposed for coopera-
tives consist of two action-research com-
ponents: the Cooperative Management
Assessment (CMA) and the Pilot Program
Establishment (PPE);

2. CMA should be implemented at least one year

ahead of component two, i.e. PPE. CMA

99

constitutes a "state of the art study
towards evolving PPE.

3. A broad-based interdisciplinary team should
coordinate program develOpment;

4. The entire program innovation should be
implemented on a number of a pre-selected
areas; and

5. Involvement of appropriate clientele systems
group should be incorporated into each area
of study.

List of Participatory and Interdisciplinary Research

 

Projects. Embodied in the above critical points, a number
of projects can be identified. Although not intended to be
exhaustive, the list is indicative of the "state of the

art" for cooperative program innovation.

Component 1. COOperative Management Assessment.

 

Project 1. Identification and Assessment (IA)
of their current cooperative man-
agement problems and practices.

 

Project 2. IA of social, situational, personal
and attitudinal factors involved in
the COOperative perception, under-
standing and management.

 

Project 3. IA of information forms, sources and
dissemination efforts in cooperative
understanding and management.

 

Project 4. IA of social and economic factors
involved in cooperative understanding
and management.

 

Project 5. IA of alternative rural development
institutions--other than cooperative

programs.

 

Project 6.

 

Component 2.

 

Project 7.

 

100

IA of apprOpriate evaluation models
for COOperative programs and related
institutions.

Implementation of a Pilot Cooperatives
Program innovation in each of the
selected and diverse communities.

CHAPTER IV

TOWARDS AN ACTION RESEARCH DESIGN: THE PROBLEM,
REVIEW OF LITERATURE AND ANALYSIS DESIGN
FOR ORGANIZATIONAL EFFECTIVENESS

This chapter, giggg identifies the problem of
organizational effectiveness both as a background problem
agenda for organizational development and change and as a
problem of measurement-criteria. The top-to-bottom nature
of the program with disciplinary-chauvinism and research-
practice gap (or under-utilization of research) is
described to be the major drawback in organizational
development of agricultural cooperatives. With this back-

ground, a description of study plan enumerates justifica-

tions why an examination of the nature and mechanisms of

 

control is resorted. Second, a review of literature on

the success and failure factors of cooperative associations
and the survival and/or growth strategies of cooperative
organizations axapresented. Thiii, the analysis design
follows the concept of action-research (AR). A review of
AR literature provides guidance to formulate appropriate
development scheme for farmer cooperatives. A social
laboratory for organizational effectiveness (particularly
for cooperatives which have long suffered its moribund
stage) has to be tampered with caution from the joint

101

102

efforts of researchers, practitioners, and the clientele-
systems. A multi-disciplinarian consensus should be
attained. Therefore, this design--however tentative-—
serves as an action agenda for those technocrats who are
willing to shed their chauvinistic-disciplinary-biases in

order to be organizationally cooperative themselves.

Problem Definition

 

A problem exists whenever "what is" diverges from
"what ought to be" or wherever there is a divergence be-
tween what currently exists and what is desired. To define
a problem, therefore, it is necessary to state the condi—
tions that exist (positive description) and the conditions
desired (normative state).

This treatise has been concerned with better under-
standing the major problems that plague the cooperative
development program, such as the decline in organizational
performance and its evaluation criteria towards more
effective organizational development. This is an attempt
to set a meaningful basis for research and evaluation of
agricultural cooperatives in the Philippines. The problem
of organizational effectiveness or performance (other than
the definitional problems with the notion of effectiveness
and/or performance) has been dealt with in the literature,
both in economics and in a management-organizational frame-

work, for understanding why such a phenomenon continuously

103

These aspects, as we have reviewed conceptually,
include organizational structure, processes, environments,
strategies and organizational effectiveness. Applying
these issues to cooperatives, most of the studies were
conducted on a "top-to-bottom" identification, specifica-
tion, implementation and assessment approach. Moreover,
the approach favors a disciplinarian-chauvinism bias, e.g.
economic and organizational (internal) criteria. As con-
flict occurs between assessors and assessees on the desired
assessment of criteria (i.e., ambiguous standard of desir-
ability) the criteria become more social and comprehensive
for organization (multidisciplinarian-based) and external
for the individual. Therefore, development programs ought
to be judged in their entirety and not on a piecemeal and
non-continuing basis.

This type of problem analysis has not been examined
much for COOperatives as a member-owned-firm (MOF) organiza-
tion and as a form of limitedly endowed community. The
difficulty has been more pronounced with two prominent
issues. First, cooperative managers can pursue personal
goals or goals that reflect only a subset of the cooper-
atives membership (i.e., the vested interest groups or
the most accessible members), which do not reflect all
members collectively viewed. Second, cooperatives
differ from corporations in many respects. Thus, relating

assessment just like any ordinary firm is short of under-

 

standing the peculiarity of cooperatives as a unique type

104
of organization. Therefore, and as a general rule, it is
not surprising that cooperatives have always shown a
decline in organizational performance.

No amount of progress can perhaps be gleaned if the
seedbed (clientele—system) of cooperation does not have the
required condition of felt need or receptivity to the seed
of cooperation. The problem is compounded when the
clientele system does not understand the control mechanisms

available to them.

Research Plan

 

The initial approach in analyzing our problem is

to investigate, in an exploratory way, the issues raised

 

by examining the nature and mechanisms of control exercised

 

by members of cooperative. This approach will give us a
better perpective an: the identification, specification,

implementation and assessment of appropriate organizations

 

in a particular locality.

Therefore, our study plan towards program
renovation will involve intensive case (multidiscipline)
studies for the following reasons:

1. The need for bottom-up planning vs.

the usual top-to-bottom approach in pro-
gram design and implementation. This is
reflective of "participatory research"
idealized for community improvement studies.

2. The need to deemphasize managerial dominance

105
(top-to-bottom non—participatory management),
in favor of member control mechanisms (bottom-
up participatory involvement) under the pre-
text that no amount of good management can
induce a non-willing and non-cooperating
clientele towards effective organizational
performance;

3. The need to deemphasize the treatment of co-
operatives as a mere form of business organ-
ization in favor of multifirm social and
economic "going concern" organization (even
ideological for that matter) that demands a
holistic approach in community improvement;
and finally

4. The need to study the influence of struc-
ture, environment, appr0priate technology,
size, and attitudinal behavior of the

clientele system in performance analysis.

Review of Literature

 

As stated in the problem definition, the major
problem that plagues the cooperatives program is its
decline in organizational performance brought about by in-
appropriate organizational approaches and inappropriate
evaluation criteria. The appropriate approach is with
reference to the nature and control mechanisms of the

clientele system via participatory research involving the

106

audience-user. The underlying assumption of this refer-

ence is the local action/resource commitment and partici-
pation of the willing and capable clientele-system. The

literature is reviewed with this notion in mind.

A review of literature can be organized into two
parts: (1) the failure factors or why cooperatives have
failed; and (2) the success factors or why cooperatives
have succeeded. The review will culminate with growth
strategies and, consequently, conclusions that will empha—

size indicators needed as a guide regarding where to direct

 

research and evaluation efforts.

The Success and Failure Factors

 

These factors are hard to generalize. However,
an attempt is made here to elicit possible indicators that
have bearing on the experiences of other COOperatives in
various countries.

Why do cooperatives fail? It is perhaps easy

 

to stress the failure side of the cooperative organiza-
tion inherent from its limitations and/or disadvantages.
The theory simply indicates three ingredients are neces-
sary for cooperatives to survive: (l) a good and locally-

adapted seed of cooPeration; (2) a good and felt need

 

receptive-type society that will be the seedbed of coopera-

 

tion and (3) the appropriate cultivation with a long-range

 

plan and commitment to the proper role of cooperatives

in the economy. Stephens (l958:2) has this analogous

107

picture:

Poor seed will not produce a healthy plant. A
poor seed bed will not produce a satisfactory
crop, even though the seed is of the very best
quality. Good seed planted in a good soil but
improperly cultivated will produce a poor crop
or will result in a crop failure. A combin-
ation of good seed, good soil and proper culti-
vation will generally produce a good crop.

 

 

 

 

 

The practice of cooperation is replete with mis-
takes and/or misgivings about the wrong approach undertaken
by the organizers. Commenting on this, Jones'(l958:6)
statement is still relevant today (specifically in LDCs).
He has noted that:

Experience has been a dear and occasionally a
fatal teacher. . . but others can reap some
profit (benefits) from th ese fatalities by
avoiding those missteps. Case histories re-
vealed what not to do in a cooperative . . .
unless one really wants to kill it.
Abrahamsen (1953) has emphasized three major mis-

takes in Farmers Cooperative Management:

1. Mistakes in personnel management, members

 

relations and public relations;

 

2. Mistakes in organization; and

 

 

3. Mistakes in business operations.

Mistakes in Personnel Management,
Members and Public Relation

1. Members did not realize the importance of
cooperative management;
2. Directors did not realize that they must pay

adequate salaries for competent management;

Mistakes in

108
Directors were paid employees of the
association;
Relatives of managers and board members were
hired;
One-man organizations developed;
Associations lacked young members (no pro-
visions for rejuvenation);
Rubber-stamp directors were kept on the
board;
No provisions were made for airing complaints;
Some associations had dishonest officials; and

Associations failed to train personnel.

Organization

 

1.

Cooperatives were set up too hurriedly with-
out full knowledge of existing facts or a
full appraisal of some of the factors neces-
sary for success;

Organizers made extravagant promises;
Members expected the impossible and were
improperly advised as to what cooperatives
could and could not do;

By-laws failed to provide for rotation of
directors; and

Coops failed to provide for adequate
accounting, bonding, and general control

of operations.

109

Mistakes in Business Operations

 

1.

Associations bought too much property instead
of leasing until definite needs of the organ-
ization were more clearly established;
Objectionable policies of officials resulted
in distrust and rebellion on the part of
members;

Operation was attempted with insufficient
volume;

Operating costs were too high;

Associations attempted to operate at too
many points;

Managers and directors engaged in commodity
speculation;

Facilities were poorly located;

Associations followed incompetent pricing,
credit, inventory policies and methods of

handling farm products and supplies.

In selected country studies in Asia, Singh (1970)

has identified the problem areas of cooperatives which,

when analyzed, pertain to the indicators we have just

enumerated in addition to the two institutional-structural

support mechanisms of the government and other linkage

 

 

institutions:

 

1.

Area and Membership - the rapid expansion
6f cooperatives; inadequate and/or ineffec-
tive area and membership coverage;

 

110

Financial Resources - inadequate financial
resources including high cost and limited
capital both internal and external to co-
operatives;

 

Operational Procedures - ineffective/weak
organizational and operational procedures;

 

Managerial Improvement - includes the ime
provement of—the role of directors, paid
employees and members in response to ineffi-
cient and/or inadequate management capa—
bility;

 

Role of Government - refers to the unstable
and/or uncommitted government support;

 

Role of Apex Institution - uncoordinated role
and untimely support of'the secondary and
apex institutions.

 

Alasdain Clayre (1980) in "The Political Economy

of Cooperation and Participation: A Third Sector" added

the need for forward and backward linkages among coopera-

 

tives. He stressed that the main causes of failure per-

tain to four traditional difficulties:

1.

2.

Management — worker coops have generally
failed to attract good managers;

 

Finance - the finance available to worker
coops Has normally been much less than that
available to their conventional counterparts;

Structure - the enterprise structures adopted
by the vast majority of worker coops have been
faulty in that they have not ensured that
there should be an identity between those who
work in the cooperative, on the one hand, and
those who own and ultimately control it on
the.other; and

 

Linka es - most worker coops have been working
on their own in a largely hostile environment.
To survive they need to be linked together

in mutually supporting groups.

111

When does a cooperative fail? In survival stra-

 

tegies of cooperatives, much depends on farmers themselves
and their chosen cooperative leaders. Activist constitu-
ents are much desired particularly the owner-patrons of
the cooperatives. Five "whens" that focus on members
could be used as safeguards, namely:

1. Whoa member-producers have more confidence in
private marketing agents than in the manage-
ment of their own c00peratives;

2. Whon its purposes and plans are not under-
stood by its own members;

3. Whgn its only foundation is the promise to
members of "cost of production plus a profit";

4. Whgn_a large group of the membership per-
sists in acting upon rumors destructive to
the organization without first getting an
explanation from cooperatives; and

5. Whon_members are not given the "truth and
nothing but the truth" about the operations
of their organization.

A glimpse of the social and behavioral orientation
of cooperatives has been noted by Miracle (1969) and the
alternative to cooperation has been proposed by Smith (1969).
More specifically, Smith has cited the nature of the Philip-
pine rural bank organization as an alternative form of
institution. Miracle's social perspectives are focused

in Tropical Africa. He has noted that cooperatives

112

attempted in Africa have failed in the sense that they
could not make enough profit to sustain or expand the

original membership. The inadequate handling of funds,

 

stemming partially from lack of bookkeeping and managerial
skill, has been cited as the most common reason for
failure. Cooperative leaders, who are not from the local
area are regarded with suspicion; local leaders waged a
concerted campaign to discourage participation in the
cooperative and to precipitate its failure because they
regarded it as a threat to their own status and power.
Disloyalty and apathy of members both can be the result
of mismanagement of funds or failure to favorably respond
to cooperative leaders. They may also reflect inconsis-
tencies in marketing policies or the possibility of
collusive action by traders with vested interest in seeing
that COOperatives fail (Miracle, 1969).

In other words, what Miracle is saying is similar
to the Asian experiences in that: "successes are con-
siderably less common than failures." Perhaps this
observation is inherent in the social and behavioral
determinants that are not conducive to cooperative via-
bility. He had indicated this with reference to the
strong ties on family orientation:

. . .selection of such personnel from within
the village or tribe results in misappropri-
ation of funds because of greater loyalties
to tribe and kin than to the government which
supplies the funds. Correlated with this is

the lack of an effective and uncorrupt civil
service with which to assure compliance with

113

rules of accountability for funds and other pro-
cedures important to organizational effective-
ness (Smith, 1969: 364).

Smith has also provided several reasons (e.g.
bureaucracy, social and cultural obstacles) as explana-
tions of failure of cooperatives and alternatives to co-
operation:

. . . in countries or areas where bureaucratic
systems and administrative manpower resources
are not highly developed, where significant
social and cultural obstacles to a particular
organizational form such as cooperation are
present, and where there is no "going concern"
which can be adapted to different basic pur-
poses, a careful assessment of alternatives to
cooperative action is indicated: 1) the sub—
stitution of organizational forms,e.g" the
rural banking system of the Philippines; and
2) the alternatives of simply ignoring the
problem in order to devote scarce bureaucratic
and financial resources to higher priority needs
(Smith, 1969: 364-72).

At this juncture, a glimpse of the problem areas
of the Philippines' Area Marketing Cooperatives could
perhaps help us reflect upon our own comparative status.
The problem areas or constraints of the Area Marketing
Cooperatives have been categorized by Perilla (1980)
into the following: organization and management (0 a M),

marketing, financing and institutional linkages. On the

 

other hand, the AMCs chairmen of the Boards and Managers
had perceived, in their early operations, that their most
pressing problems were: lack of adequate operating cap-
ital, lack of discipline/education of SN farmer members,
weak support of the SN's and the supervising agency's

field workers, inadequate facilities, and lack of

114

extension personnel (ACCI, 1979).

Under 0 & M,Perilla has underscored the lack of
skilled and trained managers to manage cooperatives, the
high turnover of staff due to low salaries/incentives of
hired management, and the delayed audit reports. The

marketing problems are premised on the competitive dis-

 

advantage (ability) of AMCs to the well-entrenched middle-
men/private traders, inadequacy of facilities for ware-
housing, drying and milling, and the "disloyalty" of
members, i.e., of not patronizing their AMCs. The

financial problems reflect the undercapitalization,

 

credit insufficiency, and the lack of government budgetary

support. The institutional linkages appear to be weak

 

because the expected supervision, cooperation,
and coordination between and among cooperative institu-
tions,the SN-farmer/members and supervising agency field

workers are very weak (Perilla, 1980: 52-60).

 

Why do cooperatives succeed? It is not uncommon

 

among the literature to look first, and foremost, on the
failure side of cooperation. On the other hand, another
approach is to look at the success indicators often con-
ducted through case analysis.

For example, in the United States two successful
farm supply marketing cooperatives in Missouri have been
studied by the Department of Agricultural Economics of
the University of Missouri-Columbia (Ratchford, _et al., 1981).

The major factors that are reported to be responsible

115

for the success of the first case were:
. . . strategic location, capable management,
continuous investment to keep the physical plant
modern, effective marketing strategies, communi-
cations and member relations, affiliation with
regional COOperatives, a reputation for good
service, and a consistent policy of conservative
innovation (Ratchford, et. al. 1981: 21).

In similar vein, the second case indicated the

following:
. . . good management, continuous investment
in physical plant, operating as a single firm
in multiple locations, competitive pricing with
aggressive merchandizing, affiliation with
regional cooperatives, and good communications
(Ratchford et al.1981: 21).

The study also pointed out the contributions to
the welfare of local business communities, including par-
ticipation in local activities and leadership.

In another recent U.S. study of agricultural
cooperatives, measures to indicate "growth issues" of
the organization were reported (French et. al. 1980).
Cooperative growth is defined as "successfully adjusting
the operations of a cooperative in line with current
business conditions." Cooperatives can grow under two
methods: internal or external. Internal growth includes
an adjustment of operations to meet current business con—
ditions through construction of new facilities, increasing

membership or business volume, or market development.

External growth includes merger, consolidation, acquisi-

 

tion, multicooperative arrangements, or joint ventures.

The strategy for growth of coops has been categorized

116

into three aspects:

1. General Marketing Strategies include:

 

a) forward and backward integration
and coordination; b) bargaining
collectively and c) maintaining and
improving the Open market.

2. Organizational Strategies include:

 

a) horizontal integration; b) diversifi-
cation; c) multicooperative; and d) joint
ventures.

3. Facilitating Strategies include:

 

a) Operationalizing the plan and b) team
work Of board of directors and the man-
agement.
The first strategy requires the following to be
successfully implemented:
1. Full membership and board support;

2. Producers commitment to the cooperative;

3. A sophisticated set of managerial skills
in marketing the product;

4. Maintenance and improvement in relations; and

5. Knowledge Of the available product markets
at the newly integrated level.

In other words, specific requirements for success
vary by commodity. However, the following play an impor-
tant role regardless of commodity: l) managerial exper-
tise, i.e., the need for specialists with an increased
number Of managerial functions and higher salaries for top
management; 2) capabilities Of top management with board
and membership support; 3) producer commitments to their
products and capital; 4) member relations; 5) available mar—

kets; and 6) a conducive legal-political-social environment.

117
Bargaining strategy requires organized group
action to effect market or countervailing power, usually
with public sanction and Often built upon a commodity
orientation. Important factors for effective bargaining
are:
l. Enabling legislation that will give

farmers certain rights, such as exclu-
sive agency bargaining;

 

2. Association members must be committed tO
bargaining;

 

3. Production control is required if commodity
surpluses and price fluctuations are to be
avoided;

 

4. The bargaining agency must receive recog-
nition Of the buyers;

 

5. Collective bargaining requires good
leadership; and

6. Information (market information) regarding
all aspects Of the commodity should be Ob-
tained and shared among buyers and sellers.

The Open market strategy can be maintained or im-

proved through grading standards, government regulation,
and increased market information to the participants.

Other than these marketing strategies, Porter

(1961), Rahman (1970) and Holmquist (1973) have reported
the most basic and necessary conditions for the successful
Operation of marketing cooperatives. Porter (1961) has
reported on seven necessary conditions for the successful
Operation Of a marketing cooperatives:

1. The economic need for an organization;

2. A capable sales manager;

He

118

An adequate volume Of business;
Use Of sound financial practices;

Fulfillment Of responsibilities by the
board Of directors;

Utilization Of effective channels of
communication; and

Members loyalty.

further added the following qualifications in

relation to membership retention and volume Of business

Operation:

1.

The greater the economic need, then the
greater the retention Of members and the
higher the volume of business;

The greater the number Of members involved
in the decision-making process at board Of
directors meetings, then the higher the
volume of business and membership retention;
The greater the frequency Of personal con-
tact among individuals within a cooperative,
then the greater the tendency toward reten-
tion Of active members and maintenance Of a

high volume Of business.

Porter concludes that "the degree of success Of

the cooperatives has depended more upon the actions or in-

actions Of the board of directors than any other indi-

viduals within the organizations.

Rahman (1970), in a similar vein,has enumerated

eight essentials for the success of cooperative marketing

119

in East Pakistan:

1. A real felt need for a cooperative
marketing in the area;

2. A provision Of enough economic benefits;

3. An adequate volume Of business for economic
Operation;

4. The tendency to avoid middlemen;

5. The suitability and viability Of institu-
tions involved;

6. Effective and efficient management;

7. Loyalty of members; the desirability that
members understand the functions, methods,
principles underlying the operation of the
cooperatives; and

8. The enforcement Of discipline with the
democratic framework.

Holmquist (1973) has stressed capital availability
as the major prerequisite for cooperative success. In
simplest terms, he has listed three essential prerequisites:

l. Recognized need and interest on the part Of
cooperatOrs;

2. Leadership and management ability;

3. Capital resources.

He further emphasized that "to judge the economic
viability Of limited resource cooperatives, one should
examine the internal and external sources Of capital"
(HOlmquist, 1973: 3).

Anschel, et al. (1969), in "Agricultural Coopera-
tives and Markets in Developing Countries," have reported
four topics relevant to this section, namely: 1) the

hypothesis concerning the success of cooperatives, or why

120
cooperatives fail; 2) impediments to growth of cooperatives;
3) measurement of cooperative success; and 4) social and
behavioral determinants Of organizational effectiveness.

On the other hand, Apthorpe(l971) in his edited
volume "Two Blades of Grass" indicated, among other things,
the traditional/social bonds and motivation, the social
characteristic of members and ideological mobilization or
political ideals to be factors that may influence success
or failure of COOperatives.

Social bonds and motivation. The likelihood Of

 

success for the COOperative really depends upon an
extremely complex set of factors among which is the nature
of existing traditional social bonds and the nature Of
motivation. The chances of success are likely to be
higher where support, rather than Opposition, has existed.
The presence Of a "common enemy" can be a factor promoting
solidarity. However, the enemy must not be too strong.
The replacing or substituting institution must be capable
Of becoming stronger tO survive. On the other hand, the
ultimate ineffectiveness Of cooperation is where the

”push from below," consciousness and commitment on the
part of the cooperative members, is tOO feeble.

Social characteristics Of members. Populations
categorized as immigrants, resettled populations, refugees,
squatters, existing population in citu have different pre-
disposition towards cooperatives. This predisposition

may influence the success or failure Of cooperatives

121

through the members commitment/participation to the
cooperative ideals.

Other qualifications are variability in the quality
Of land in the cooperative area, the nature of the cooper-
ative organization,and its position in the national economy.
The government sponsorship, the hostility Of established
interests, the characteristics of those who manage the
cooperative are all crucial to the success or failure of
cooperatives.

Some writers even regard ideological mobilization
as a generative force needed for economic success. Others
have regarded the infusion Of political ideals (ala

Mao Tse Tung's) into cooperatives.

Concludinngotes

 

The major points discussed here can be summarized

as follows:

1. Governmental support, i.e., the need for more
functional consolidation in approach and a
more geographic decentralization;

2. Organizational structure, i.e., is there a
real need for mechanistic, systematic and a
legislated approach to cooperation?;

3. Cooperative personnel, i.e., manpower needs
with respect tO competent leadership and
management needs;

4. Education, communication and information needs;

122

5. Membership Attitudes, i.e., individualistic
vs. communistic;

6. Financial needs;

7. Size; and

8. Expectations

The most crucial elements in determining the
future of farmers cooperatives have been largely cate-
gorized with respect to the major roles Of its farmer-
members (French et al., 1980). These are: l) farmers'
attitudes towards cooperation; 2) member commitment;
3) non-cooperative competition in the marketing of farm
products; 4) the skill and progressiveness Of boards and
management; 5) the availability Of capital; 6) the in-
volvement Of cooperatives in general public policy issues;

and 7) the maintenance of public sanctions.

Research-in-Action: A Case Analysis

 

Origins Of Action-Research

 

The term "action-research" was introduced by Kurt
Lewin in 1946 to denote a pioneering approach towards
social research which combined generation of theory with
changing the social system through the researcher acting,
on, or in, the social system (Susman and Evered, 1978).
Lewin's greatest contribution, on the abstract level, may
have been the idea Of studying things through changing/
manipulating the variables generated by the known theory(ies)

and experiences and seeing/recording their effects.

123

Action-research consists Of analysis, fact-finding, con-

 

ceptualization, pianning, execution, more fact-finding_or

 

 

 

 

evaluation and then a repetition Of this whole circle of

 

activities (Sanford, 1970). This process was later modi-
fied by Susman and Evered (1978) into five cyclical phases:

diagnosing, action planning, action-taking, evaluating and

 

 

 

specifying learning. The infrastructure within the

 

client-system and the action-researcher maintain and
regulate some or all Of these five phases jointly (Figure
IV-l) .

This cyclical process essentially contains the
main features Of Lewin's model, i.e. analysis, SEES

findings, planning, execution, and evaluation. Sanford

 

 

 

(1970) has described the first three Of this model:

1. Analysis. Analysis determines what kinds Of
questions are to be asked. These should be
practical, although somewhat general and Open-
ended. He added that most social science
questions should be Of this general kind:
how to arrange the environment, institution,
or the social setting in such a way as to
promote the development of all the individuals
concerned.

2. Fact Finding. The aim of promoting indivi-

 

dual group development has several important
implications: 1) it is necessary to have a

conceptualization Of the person and theory

124

 

 

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125

concerning how he actually develops; 2) an
approach that is concerned with individual
development must be comprehensive and field
theoretical. TO understand the person we
must see him in his total setting. This
means that research-action is properly
multidisciplinary; 3) we must behave toward
our subjects in a way that is favorable to
development; 4) research must serve the pur—
poses of its subjects; and 5) the subject is
the client, and reporting to him is an action.
3. Planning. There is no point in planning for
people who will upset all such plans as soon
as they find out that they have not been
permitted to take part in the planning. Con-
tinuous experimentation "forward looking

arrangements" by and for the people is needed.

Definition Of Action-Research

 

Lewin (1946) characterized action-research as a
"comparative research on the conditions and effects Of
various forms Of social action and research leading to
social action." Lewin's laboratory is the change experi-
ment on the social system in which the practitioners and
the social scientist collaborate to find ways to bring
about needed change. It is indeed an approach that recog-

nizes the need to generate action-oriented knowledge that

126

requires collaboration between researcher, practitioner,
and client.

The most frequently quoted definition states that:
"Action-research aims to contribute both to the practical
concerns Of people in an immediate problematic situation
and to the goals Of social science by joint collaboration
within a mutually acceptable ethical framework [Susman and
Evered (1978)].

However, a comprehensive definition must include
the five phases of the cyclical process: diagnosing, action
planning, action taking, evaluating and specifying

learning.

Justification for the Use Of Action-Research
The action-research approach is based on the
premise that the new understanding generated from the
action-research effort will enable organizational members
(clientele) to plan interventions to improve organizational
effectiveness and that the behavioral scientist
(researcher) is able to revise theories to better explain
the relationships discovered among variables.
The use of action-research approach can be
explained in terms Of the following factors:
1. Organizational members have first-hand data
and a keen sense Of awareness that are vitally
important in understanding their problem;

2. The top-down approach and the separation Of

127
research to action to deal with the problem
has been ineffective;
A joint inquiry among the interrelationships
Of the actors of the organization (employees,
managers, board of directors and members,
etc.) can provide a new workable experience;
The decline in organizational performance is
considered representative Of member-management
(MOF) issues that were simply not amenable to
traditional research methods that cast the
member in the passive, non-committed and non-
participative role of subject and fear of
reprisal for voicing out (i.e.,silent exit);
Action-research can reduce feelings of mis-
trust by allowing the actors tO abandon their
roles when inquiring on issues concerning
their interrelationships, and seeing the

organization for what it is.

Susman and Evered (1978) have further argued that

there is a crisis of relevancy or usefulness in the field

of organizational science:

1.

The principal symptom is that,as our research
methods and techniques have become more
sophisticated, they have also become in-
creasingly less useful for solving the
practical problems that members Of organ-

ization face;

128
Many Of the findings in the scholarly manage-
ment journals are only remotely related to
the real world of practicing managers and to
the actual issues with which members of organ-
izations are concerned;
The crisis is also reflected in the failure
to recognize latent values behind the claim
to neutrality about how knowledge is gener-
ated, e.g.,knowledge generated toward improve-
ments in the effectiveness and efficiency at
the expense Of the quality Of life Of working
members; and
The crisis reflected in a conception of
research as an accumulation of social facts
that can be drawn on by practitioners when
they are ready to apply them. This conception
separates the researcher from practitioners.
As a result, practitioners and clients com-
plain about the lack of relevance and the
lack of responsiveness of researchers to
meeting their needs.
Action-research (AR) has six characteristics
corrective of the deficiencies of positivist
science:

a. AR is future oriented;

 

b. AR is collaborative;

 

c. AR implies system development;

 

129
d. AR generates theory grounded in action;

e. AR is a ostic, i.e.,the past is subject
to reexamination; and

f. AR is situational

 

6. The researcher Ought to be skeptical Of
positive science when the unit of analysis is
a self-reflecting subject, when relationships
between subjects (actors) are influenced by
definitions Of the situation, or when the
reason for undertaking the research is to
solve a problem that the actors have helped
to define. For this purpose, a comparative
summary Of differences is provided below as
a useful guide and relevance Of action-
research (Table IV-l).

Furthermore, the use of action-research is justi-
fied by describing the phenomenon of research under-
utilization and research-practice gap. These two concepts
have been described as causal factors for the misuse of
research.

First, let us consider research utilization. It
is both a process and an end-Object. The process refers

to transmitting research data from producers to consumers

 

in a manner that is comprehensive and useful tO appropriate

user-audiences. The end-Object refers tO the actual use

 

Of such data to formulate policy and to prescribe the cor-

responding practice based on experiences and theories.

130

TABLE IV-l

COMPARISONS OF POSITIVIST SCIENCE AND ACTION RESEARCH

 

Points of
Comparison

Positive—Science

Action-Research

 

VALUE POSITION

TIME PERSPECTIVE

RELATIONSHIP
WITH UNITS

TREATMENT OF
UNITS STUDIED

LANGUAGE FOR
DESCRIBING UNITS

BASIS FOR
ASSUMING EXISTENCE
OF UNITS; EPISTE-
MOLOGICAL AIMS

STRATEGY FOR
GROWTH OF
KNOWLEDGE

CRITERIA FOR

Methods are value
neutral

Observation Of the
present

Detached spectator,
client system members
are Objects to study

Cases are of interest
only as representatives
Of populations

Denotative, Obser-
vational

Exist independently Of
human beings

Prediction of events
from propositions
arranged hierarchically

Induction and
deduction

Logical consistency,

Methods develop social
systems and release
human potential

Observation Of the
present plus interpre-
tation of the present
from knowledge of the
past, conceptualization
of more desirable
futures

Client system members
are self-reflective
subjects with whom to
collaborate

Cases can be suffi-
cient sources of
knowledge

Connotative,
metaphorical

Human artifacts for
human purposes
Development Of guides
for taking actions
that produce desired
outcomes

Conjecturing, creating
settings for learning
and modeling of be-
havior

Evaluating whether

 

CONFIRMATION prediction and control actions produce in-

tended consequences
BASIS FOR Broad, universal and Narrow, situational,
GENERALIZATION free Of context and bound by context
SOURCE: Susman and Evered (1978).

131

Three definitions support these elements of "process and
end-Objects." Research Utilization (PCF, 1978):

l. Implies that something must happen after the
message is received, something beyond mere
acknowledgment that it is there. The
receiving organism must do something with it,
either by taking "something from it, adding
to it, inserting it in something, or trans-
forming it in some way (Havelock, 1971).

2. Is an ongoing process by which research re-
sults are produced in answer to client needs,
and communicated to clients for their use.

It also conceives of utilization not merely
as a transfer of knowledge but also as in-
volving action and change from one system to
another system (Rogers, 1973).

3. Is the facilitation of the application Of
research results and scientific knowledge tO
the solution of practical problems in the
field, and the gathering of feedback from the
field tO help frame future policy and

research (PCF, 1978).

Underutilization Of Research

 

This is a phenomenon which has been a disenchant-
ment to the researchers, activist academicians/scholars,

and potential target users. The misuse Of research has

132

been bluntly addressed to academicians in their "ivory
tower" and/or to program managers. Witness this kind Of
quotation:

Many researchers look upon the program managers

(and his academic counterpart) as an intellectually

dishonest power seeker who uses research the way

the drunk used a lamppost -- for support rather

than for (guiding) light (PCF, 1978: as cited from

Esmundo, 1976).

Underutilization of research is observed in three
aspects: 1) the majority Of research findings do not find
their way into policy and program formulation; 2) most
existing research data have undergone analysis only on the
primary or univariate level, i.e., considerable information
is locked up in previous research; and 3) some research

findings are judged to be academic or non-utilizable, if

not irrelevant for the current environment.

The Research — Practice Gap

 

The second consideration is the research-practice
gap, a phenomenon that is causally related to research
underutilization. This can be gleaned from the following
propositions:

Prospective users Often do not know research—
based resources exist.

Even if they know what exists, they do not
know where it is available

Even if they know what exists and where it is
available, they cannot understand it.

Even if they know what exists, where it is
available, and can understand it, they cannot
apply it (PCF, 1978).

133

Five factors can be gleaned from the research

practice gap literature that need be resolved if research

is to become useful:

1.

The world of research and practice are two
separate enclosures with defined set of

rules, values, common perceptions, languages
and communication patterns;

Socially research-oriented programs are diffi-
cult to spply in practice because of the
underdeveloped concept Of social engineering.
This is in contrast to agriculture, biology,
physics, chemistry and engineers, etc. which
have good linkages with research and practice;
There appears that no sustained or conscious
efforts have been attempted for scholars or
academicians to share their work with their
counterparts in the field;

The research then speaks in a language that
differs greatly from that Of the user. Thus,
reports are not read because they are rarely
understood, if not difficult to understand; and
The variables analyzed in research may not

be the same as those under the control of

the administrators and practitioners.

With this background (research underutilization

and research-practice gap), the importance Of linkages

between program managers, researchers and the target

134

clientele system is imperative. Such linkages can be pro-
vided by persons/institutions who stand outside or are on
the periphery Of either system. Examples of these link-
age role are: 1) people retrieve relevant information

and pass it on to the users; 2) some translate user needs
into researchable problems to be transmitted to researchers;
3) some package the knowledge generated from research in

a manner that can be directly used by practitioners;

4) others actively help in the diagnosis Of users' prob-
lems and the development of users' capability to integrate
into, and implement, useful research knowledge within
their system; and finally 5) still others use a combina-
tion Of these approaches and integrate both research and

practice on a continuing basis.

Action Research Today

It must be noted that action research is still
very much alive and is being utilized and modified in
other fields of studies. For example, it has been used,
and is still being used, in clinical or social psychology,
public health, social welfare, criminology, community
psychology, community development, and in population edu-
cation (Lewin, 1946; Sanford, 1970;Fear et al. 1981; and
PCF, 1978). More recently, the concept has been used in
the field of agricultural economics under the label Of,
"Farming Systems Research" (FSR). It has been popularized

by Norman (1980) and Collinson (1982).

135

During this period (1946-1982), programs clearly

labelled as "action-research," have not been hard to find.

Examples are (Sanford, 1970 and PCF, 1978).

1.

After-School School - a program for Offering

 

people of high school age what they seem to
need for their develOpment but do not get in
school;

Collaborative Problem Solving - with teachers

 

and administrators Of the Berkeley School
System, an action-research program with some
distinctive new features;

New Careers Program - which demonstrates that

 

prison inmates can be an important source of

manpower in the human service fields;

Wilbur Hoff Program - trains poor peOple for

 

jobs -- tO be defined and instituted in hos-
pitals and clinics;

Wright Institutes New Doctoral Program in

 

Social-Clinical Psychology - this program was

 

based on some knowledge of the situation and
needs Of graduate students and has been guided
by theory Of individual development and organ-
izational processes;

Research Utilization Project in Population

 

Education - employing a problem-solving

 

strategy that contained literature reviews

136

and feedback conferences among four levels

Of decision-makers: practitioners, adminis-

trators, policy-makers, and researchers. The

issue considered was that of curriculum

development for in-school pOpulation-educa-

tion. The activities were undertaken in the

following sequence: a) problem diagnosis and

identification; b) research and information

retrieval; c) transformation and translation;

and d) communication.

These programs are solid evidence of the importance

Of AR. The familiar story of the science (biological and
physical-engineering) model in which the discoveries are
first made (in the laboratory as it were) and thereafter
"applied" has been refuted with the utility-focused Objec-
tive of AR. What then appears to be a lowly subject (AR),
then receiving "cool" reception from funding agencies, now
becomes a useful technique, particularly for activist pro—
gram managers or academicians. Indeed, there is a grain
Of truth that what belongs together should not be sepa-
rated. Therefore, what is needed now is a contemporary
model for action research or what might be better termed
as research in action. FSR represents a recent example

of AR.

137

The Farming Systems Research (FSR)

 

Farming System is viewed as consisting of a com-
plex interaction of a number of interdependent components
(Norman, 1980). FSR aims at analyzing the two main ele-
ments of the small farmers environment, namely: the tech-
nical and human elements (Figure IV-2). These two elements
are described in the following manner:

1. The technical element is characterized by

 

the following -- the types and physical
potential of livestock and crop enterprises,
and includes physical and biological factors
that have been modified to some extent by man
Often through technology development.

2. The human element is characterized by endoge-

 

nous and exogenous factors. The former differs
from the exogenous in the following respects:
unlike the exogenous factors (the socio-cultural
and institutional structures), the endogenous fac-
tors are controlled by the farmer himself who
ultimately decides on the farming system that will
emerge, given the constraints imposed by the
technical elements and exogenous factors.
The combination, magnitude and direction Of these

elements, inputs/factors, and processes vary according to

the two basic types Of FSR. These are the "upstream and

the downstream" FSR. We have been familiar with the

technocratic-centered upstream type of FSR, i.e., the

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139

technocrats know best what is good for the farmer. The
downstream FSR comfortably fits within our purpose of a par-
ticipatory development program, i.e., the farmers know best
what is gOOd for them. The definitions of the two basic
types Of FSR are:

l. Upstream FSR is research from experiment

 

stations to find prototype solutions to the
major constraints on agricultural improvement
in a relatively large region or area;

2. Downstream FSR is a farm-level research

 

approach whereby farmers and a multidis-
ciplinary research team work together to
diagnose, design, modify and improve farming
systems in a local area (Figure IV-3).

Downstream FSR is a revisionist approach in the
sense that the classical top-down approach to technology
development mainly concentrates in innovating the technical
components. On the other hand, downstream emphasizes the
target-farmer-clientele as key figures in a research-action
strategy.

As a research effort, the four successive stages
must be carried out through the collaborative efforts of
small farmers and the multidisciplinary research team.
These collaborative efforts in problem solving in FSR
clearly indicate that AR's cyclical process is closely
related. Note this description Of the four stages

(Norman, 1980):

140

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4<--.----<----------------.-~--~---------------------:--.------------a

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Seaman acmstee
anemone Co memocmmwo
to eemoa_tommo .—

 

muo<hm zum<wmum
zwhm>m uz_2¢<u

141

The diagnostic or descriptive stage identifies
the constraints and flexibiIity in the current
farming systems. Based on interviews with far—
mers, this information is used to design, test
and extend programs for improving farming systems.
These programs are then assessed by applying eval-
uation criteria derived from farmer interviews.

 

 

In the final analysis, the end product of this
continuing process Of adjustment is a new and appropriate
farming system relevant to the needs Of the small farmers:

the target clientele-system of farmers coop organization.

Implementation Scheme Of FSR

 

The collaborative research process between the
multidisciplinary team and the farmers aims at developing
appropriate technologies relevant to farmers' own circum-
stances (i.e., readily adopted by farmers). Considering
this conceptual background, Byerlee, et a1. (1980) gives an
overview Of an integrated program Of research for small
farmers (Figure IV-4).

There are three components Of this program:

1) On-farm Research; 2) Experimental Station Research; and

3) Policy Context Of Agricultural Research.

On farm research. This research is conducted in

 

farmers' fields with the participation Of farmers. An
important prerequisite at this base Of the program is an
effective communication between researchers and farmers to
ensure a greater awareness of the constraints and problems
Of farmers in the design of appropriate technologies.

Indicated in Table IV-4 are various activities or stages

142

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A, mmmmnd .v

 

IV

 

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ca muomfifiummxw uosoooo
a usefiuemxm . N

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Ob mswanono one nooomumsoo
rw Inwo seesaw mo unfloosumnwo
Ids oom omowasoox m ofimuoo

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schooner summnoo ouow nouns meHDAHOflnm nonmemem pom
loonoocH mucmoomsoo 3oz mommmmmm Emmanzo newsman Deanna mo OOHOBU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

143

Of on-farm research: 1) Planning - the research team

identify priority technical components; 2) Experimentation -

 

the priority components are further investigated in the
the experimental stage in order to formulate improved
technologies that improve upon farmer's existing practices;

3) Recommendation - technologies are then recommended to

 

farmers after careful testing against farmers' locations

and after careful economic analysis; 4) Assessment -

 

farmers' experiences are assessed with the idea of promoting

recommendations to farmers. In this final stage, promotion

 

desires a feedback mechanism in this manner: a) If recom-
mendations are accepted, researchers can turn to other
problems while extension focuses on the task Of further
promotion Of the technologies; and b) If recommendations
are rejected or substantially modified, then an under-
standing Of the reasons might lead to a change Of
recommendations/ experiments. This research cycle is
essentially dynamic as information is generated from
farmers circumstances, technology performance, and far-
mers' experiences with the technologies.

Experiment station research. This emphasizes the

 

development of new technological components such as new
varieties. Also, it can be used tO screen technological
components that might have undesirable effects on farmers'
fields, such as herbicides, and inputs/outputs that have
some "external" effects. The promising technological

components generated from experiments are further refined

144

and evaluated in on-farm experiments to detect its appro-
priateness.

Agricultural policy. This sets much Of the economic

 

environment, such as national goals, input prices, and
supply (price supports and subsidies), product market
(guaranteed prices) and infrastructures (e.g. irrigation
systems) in which researchers and farmers make decisions.
Policies, therefore, refer here to actions and rules Of
government implemented in order to meet regional or
national development goals. In other words, these are
given conditions that influence the behavior (e.g., pro-
duction decisions) Of the farmer and the research-orienta-

tion of the research stations.

Farmer Circumstances as a Basis for Research

 

Byerlee and Collinson (1980) have also contended
that successful research begins with the farmer for whom
the technology is intended. They have defined farmers'
circumstances as those factors that affect farmers' deci-
sionswith respect to the use Of crop technologies (or
in a comprehensive context, the farm technologies).
Figure IV-S illustrates various farmer circumstances.
They include natural and socio-economic circumstances.
Socio-economic circumstances may be internal in which a
farmer has some control (e.g. farmer's goal and resources)
and those which conditions his external economic environ-

ment (e.g. cooperative institutions on top Of the diagram).

145

FARERS
CWPEATIVE

 

ECONOMIC CIRCUMSTANCES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNAL EXT RNAL ‘ A

FWWVS' GWIS- Market: Institution:
Incomu.food preferences. ..____, Product Land‘l'enure ._ NATIONAL
risk ~ Input ‘. Credit POLICY
Resource Constraints- Extension ..
Land, labor, capital i

I FARMERS . ..

E DECISIONS

       
 
    
  
     
  
 

 

  

Overall Farmlno System ‘ '

Cropping Pattern. Rotations, Food
- Supply. Labor Hiring, etc.

 
 

Technology
For the Target Crop

 
 

Time. Method,
' ' Amount for Various

 

 

’,a" Practice:
I
I ’ ’
’.
I”
”

Climate 9‘30".”wa .
Rainfall '3: Soul Type'ufi-- I
FTOSIS ‘ 1.3,“ SI°P'~6~."+)?‘I 2.1::

I_I """' "‘ .. ' I ' ‘Th" ‘

 

 

 

 

 

NATURAL CIRCUMSTANCES

-- wClrcumstances which are often major sources of uncertainty for decision-makinn

FIGURE IV-5. Various Circumstances Affecting Farmers' Choice of a
Crop Technology and its Relation to Farmers Cooperative

SOURCE: Byerlee and Collinson (1980) as modified.

146

The natural circumstances impose biological con-

 

straints on the farm enterprise and, hence, influence farm
decisions. It also creates an environment of uncertainty
which must be considered by risk-averting farmers. These
natural circumstancesinclude climate (e.g. rainfall) soil
and topography and incidences Of pest and diseases.

The external socio-economic circumstances include
the community organization and structures, physical infra-
structure, product markets, labor and machinery markets,
input markets, land tenure and settlement patterns, credit
and extension services.

The policy environment. This is noted as an im-

 

portant factor that strongly influencesthe external socio-
economic circumstances Of farmers. The government policies
and their implementation has to be analyzed with respect to
its impact on the external socio-economic circumstances of
the farmer. Moreover, as Byerlee (1980) has stressed, it
is important to distinguish between those influences that
conform to the stated goals of government policy and those

that relate to problems in policy implementation.

Station-To-On-Farm-Research

 

Two major developments in research organization
and planning are required for FSR to be implemented
(Collinson, 1982):

1. Recognition Of the need for both technical

 

and adaptive research; and

147

2. Recognition of the role a Farm Systems

 

Economist (FSE) can play in the adaptive

 

research cycle.

He further qualified the elements (research sta-
tion, on-farm adaptive research and the role of FSE) of
this develOpment as essentially an economic problem:
1) Research stations seek new materials and methods which
are technically feasible in the environment Of the country
or region served by the station; 2) On-farm-adaptive research
selects and tests components Of the body Of knowledge identi-
fied as apparently relevant to the needs and circumstances
Of target groups of farmers normally within, but occasion-
ally even outside, that general region; and 3) the role of
the FSE is to understand farmers' decision criteria (i.e.,
allocation of inputs to different enterprises to best
satisfy his and his family's priorities), and to identify
how and why, in managing his farm, the farmer compromises
on the Optimal technical management Of any one enterprise
in order to raise the productivity of the whole system.

The research process for this implementation
scheme is shown in Figure IV-6. Also outlined below
are the six stages in the research process and the

team designated as responsible for the activity.

The illustration Of the six stages and the team

responsible for it are as follows:

(I)

(4)

148

Target Group Farmers
of a Recommendation

Domain In a Region‘5\\\\\\\\\\\\

Survey diagnosis of Experiments on apparently
fagmer_pntor1tles, relevant materials (3)
resource and environment and techniques under
problems and development farmers' conditions

opportunities.‘“

 

(2)

\53 Identification & Evaluation .
of materials and techniques
offering potential for problem
solution and the exploitation

of opportunities. 'K\\\\\\\\\\\\\

\

Unsolved technical
problems and possible
new practices and

Body of Knowledge of
materials and techniques,(6)
materials relevant TECHNICAL suitable for the climate

to farmers' development 'ESEARCH and soils of the Region

opportunities.
(5)
Commodity and Disciplinary
///'

      
 

research. solving priority
technical problems and
Investigating possible
new materials and practices

FIGURE IV-6. Interactions between Station-based Technical Research

SOURCE:

and On-Farm Adaptive Research.

Collinson (1982).

149

The description and interpretation of the
farmers' situations and the identification of
management problems and possible development
opportunities -- the locally based adaptive
research team (ART) carry out this stage;

The identification of improved agronomic
practices and farming methods which, if used,
have a potential for improving the welfare of
farmers -- the responsibilities are shared by
the technical research team (TRT) at the station
and the ART;

On-farm testing of potential improvements
selected as relevant and feasible for target
group farmers, given the conditions they face
in production -- the main responsibility of
executing this is through the trained ART;

The identification of unsolved technical prob-
lems of farmers and the incorporation of these
problems as priorities in technical research
process -- mainly a responsibility of ART and
linkages are established with the TRT;
Commodity and disciplinary research -- major
responsibility of the multidisciplinary
research team at the base-research station;and
Body of Knowledge -- stored for audience
utilization at the research station by the

technical staff or TRT

150
The perspective taken here is that on-farm adap-
tive research can potentially help a research station pro-
duce results relevant to the conditions and circumstances

of small farms.

Steps in The Adaptive Research Cycle

 

The steps in the adaptive research cycle are listed

in Table IV-2. Steps are broken down into preparatory steps

 

(Steps 1-3); diagnostic steps of the implementation cycle

 

(Steps 4-11) and the experimental side (Steps 12-17). The

 

time required assumes that experienced professionals are
implementing the procedures as part of an on-going program
and that logistical support (e.g. transport) are readily

available.

Research Design

 

This research design is written to develop, refine
and promote action-research of the FSR-type in order to
help improve the usefulness and relevancy of farmers co-
operative organizations. If it is to become effective, any
farmers association must fulfill (or satisfice) the needs and
demands of the board of directors, its member-owners, the
management, and the relevant members of the society with
which it transacts (e.g., its community, its government,
its suppliers, its creditors, etc.).

In this proposed action-research, we shall start
with the principal actors: the member-owners and the

management staff. They will be surveyed in order to

151

TABLE IV-Z

PROCEDURAL STEPS IN THE ADAPTIVE RESEARCH CYCLEl

 

 

 

 

 

 

 

 

St a Time
ep Required
1. Identification of the general region of the country
with a priority for adaptive on-farm research
2. Collation of secondary information on the natural
and economic conditions of the region 2-3 months
3. Identification of recommendation domains and tar-
get groups of farmers operating a homogeneous
farming system within the region 2-3 months
4. Review of available background information on
the recomendation domain 1 week
5. Informal survey
— Discussions among farmers 2 weeks
- Conclusions (written) 1 week
6. Design of formal verification survey
- Sampling and fieldwork plan 1 week
- Questionnaire development 1 week
7. Enumerator training and questionnaire testing 1-2 weeks
8. Formal verification survey-administration of the
questionnaire to a sample of target group
farmers 2 weeks
9. Post coding, tabulation of data and specifica-
tion of analyses 1 week
10. Data input and processing 1 week
11. Data interpretation and experiment planning 2 weeks
12. Selection of representative farmers and sites
for on-farm experiments 2 weeks
13. Preparation and layout of experiments
14. supervision and recording of experiments crop cycle
15. Harvesting of experiments, measurement
and recording of yields
16. Statistical and economic interpretation of data 4-6 weeks
17. Planning for the next season's experiments 4-6 weeks

 

‘FSR demonstrations generate reports within 7-9 months

after initiation of research.

SOURCE: Collinson (1982).

152

explore the extent to which the organization fulfills

the needs of these components.

Factors Affecting Change Performance

Organizational behavior has been greatly influ-
enced by the commitment of the principal actors -- in
the NOE case -- the member-owners. The relationship between
commitment and behavior very likely depends on the form
that commitment takes as perceived by the member. Figure
IV-7 illustrates factors that might increase the likeli-
hood that a member will perceive a need for change in the
performance of a COOperative (Van Ravensaay, 1982).

These factors have been classified under: 1) change in
members definition of acceptable performance; 2) decline
in cooperative performance; and 3) opportunity to improve
COOperative performance.

The change in members definition of acceptable
performance may be influenced by: l) the environment
where the organization operates; 2) the felt-need that
changesthe needs and demands (requirement) of the members:
and 3) dissatisfaction, i.e., if other cooperative par-
ticipants are dissatisfied. For example, if the COOpera-
tive organization facilitates the land transfer operation
of the agrarian reform program, the environment (the tech-
nology and the conducive social landlord-tenant relation-
ship), the requirements (package of complementary support

services) and the satisfaction (completion of the transfer

153

 

 

 

 

 

INDICATORS SET OF FACTORS IMMEDIATE
CONSEQUENCE
Environment:
Does it offer better

performance?

 

 

 

(A)

 

 

 

 

 

 

Felt-Need: Change 1? .
Change in require- member deflnl-
ments of members? .tion Of

acceptable
performance

 

 

 

Dissatisfaction:
Other coop partici-

 

 

\l/

 

 

 

 

 

 

 

 

 

 

 

 

 

pants dissatisfied
and their influence
to members?
Perceived
Need.for
External
Policy of Context: Change in
Change in coop
policy? (B) Cooperative
Decline in the Perfomnce
cooperative (...—.4;
Internal performance
Management Context:

 

 

 

 

 

 

 

 

 

; y

 

Inefficiences?
(C)
External Opportunity
Environment Context: to improve
. cooperative
Change in coop

. performance

env1ronment

 

 

 

 

 

FIGURE IV-7. Factors Affecting a Member's Perception of the
Need to Change Performance.

SOURCE: Van Ravensaay (1982).
(adapted and modified)

154
and support services on a sustained basis) must be present
to be acceptable to the members.

Declines in the performance of cooperative may be
perceived by a member because his definition of acceptable
performance has changed. If the satisficing function of
the land transfer operation in our example is not met
through the environment, felt-need and participants' satis-
faction behavior, then through this measure, the perceived
acceptable performance will change. On the other hand, if
the yardstick or measurement has changed even though the
actual level of performance of cooperative may not have
changed, the definition of acceptable performance corre-
spondingly changes. This is precisely the reason why the
organization has to be adaptive, flexible, efficient,
effective and integrative (Parson, 1956; Hage, 1965).

The perception of the member about the performance
of his cooperatives can be changed by the following events:
1) when the existing services and supplies of the coopera-
tive are no longer adequate with respect to amount, time-
liness of delivery and efficiency; 2) the influence or
calling of other participants that convince the member
that performance, once thought adequate, is actually inade—
quate; and 3) the discovery of superior services or sup-
plies offered by other non-c00perative organizations.

The greater the amount of change in a member's own busi-
nesses, the larger the number of participants seeking

change. Also, the greater the number of alternative and

155

competitive sources of services and supplies in the envir-
onment of the cooperative, the greater the likelihood that
the member will change his definition of what constitutes
acceptable performance.

The decline in the organizational effectiveness or
COOperative performance is really not clear-cut. External
and internal factors have been broadly categorized here
into "policy and environmental context," and "management
context," respectively (Figure IV-7 Set of Factor B).

1. Policy context: A policy is considered here

 

both from abgyg (government, i.e.,the apex
institutions) and bglgw_(cooperative organ-
ization,i.e.,those formulated by the board of
directors). A policy change (i.eulimplemented
or discontinued) may lead to change in per-
formance (positive or negative). The occur-
rence and extent of a policy change will in-
crease the likelihood that the member will re-
evaluate his predisposition towards the co-
operative organization and consequently in
assessment of its performance. This type of
information can be analyzed thru minutes of
the board meetings and files of memorandum
circulars and other policy sources/materials
both from the apex agency(ies) and the organ-
ization itself.

2. Environmental context: Environment refers to

 

156

the entire surroundings that influence

the service-Operation base of the organiza—
tion. Some types of changes in the environ-
ment may lead a member to conclude that
improvements in performance are beyond the
control of the cooperative, e.g., changes in
agro-climatic variables and the technological
environment. Consequently, a change in the
environment may lead to increased cost and

uncertainty or it may lead to decreased cost

 

(innovative technology), expanded Opportuni-
ties, and the opportunity to improve the co-
Operative performance. Therefore, the nature
and type of these changes need to be specified.

Managerial context: In most cases, the quali-

 

tative information or biographical information
(e.g., age, education, years of experience) of
management staff are associated with organiza-
tional performance, particularly an organiza-
tional and operating features (see: Sarmago,
1978). However, from the point of view of
members of the cooperative, the occurrence of
inefficiency is ill-defined. It goes beyond
organizational and operational inefficiencies.
Again, the single and multiple criterion (in-
cluding its composite nature) have to be

defined as perceived by members. It is

157
surmised that the more inefficiencies are
perceived by members, the more likely the
decline in performance.

Members perception of the need for change in co-
operative performance will greatly depend on these set of
factors. The more factors occurring at any one time, the
greater the likelihood that a member perceives a need for
change. It identifies the condition by which control
mechanisms of members are likely to evolve. The greater
the number of members affected by these factors, the

greater the likelihood that such attempt will be observed.

Mechanisms of Control of Cooperative Members

 

A conceptual framework is offered by Hirschman
(1970) to analyze the responses of clients to declining
organizational performance. This framework depicts our
analysis design for exit, voice, and loyalty perspectives
in cooperative organization. The behavior exhibited by
the members towards their cooperative will determine the
viability and/or effectiveness of the organization. For
instance, a question may be asked whether they believe that
the organization can still be improved. Two sets of
decision-responses with their perceived belief can be
analyzed, namely (refer to Figure IV-8):

l. The First Decision - involves two responses

namely to exit (GO) or to stay-put (NO GO);

and

158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Decision Decision
I II
cu- r-
:1
SILENCE u 8
E g
STAY-PUT -L
H
(NO-GO) g
VOICE S E
-__ m
....
:2
m
e I a
Belief in
o
. m
cooperative z
improvement '4
0
__ H
r ; g} u
SILENCE .2 c:
g o
EXIT H U
(6
>1
(GO) 3
m
-H
VOICE QL

 

 

 

 

FIGURE IV-8. Diagram Depicting Analysis Design for Exit, Voice
and Loyalty Perspectives in Cooperative Organizations

SOURCE: Van Ravensaay (1982); and Hirschman (1970).

trol
Mechanism

159

2. The Second Decision - involves four responses

under exercising voice or remaining silent.
The four possible responses to decline in the per-
formance of COOperatives or to whether members believe in
the possibility of cooperative improvement are: l) Stgy:

put-Silence; 2) Stay-put-Voice; 3) Exit-silence; and

 

 

 

4) Exit-voice. Except for the first one, which is a form

 

of compliance, the rest are mechanisms of control.

They are mechanisms of control because of their effort at
obtaining changes in performance (Van Ravensaay, 1982).

As conceptualized, these four responses are described below:

1. Staying-Put-and-Silent. This response means

 

no change in the member's purchases, invest-
ment, voting, associational activities or
gossip with existing and potential members;

2. Staying-Put and Exercise Voice. Speaking up is

 

a matter of degree that involves, among others,
who is the object of the "voice," the scope,
nature, type and form,etc..of the complaint

or request lodged. The "who object" may in-
clude other members, operating/management
staff, the board of directors, and other
influential organizations outside of the co-
operative. The type of complaint, request or
other categories for "voicing out" may vary
from indicating dissatisfaction, to demanding

specific reforms, threatening to organize for

160

reform, or threatening to use various forms of
exit. The form of voice may be private or
public. It could be verbal, written, in the
form of a vote, or in the form of grievance
procedures.

3. Silent-Exit. This is also a matter of degree.

 

It may be limited to diminished patronage to
cooperative business. Another form of exit is
to abstain from associational duties and obli-
gations. For example, in savings/capital forma-
tion and attendance in regular meetings. A more
drastic type of exit is to withdraw from
membership in the COOperative.

4. Exit-Voice. If a member terminates his member-

 

ship: 1) he would not have access to voting and
grievance procedures; and 2) he cannot demand
specific reforms. However, he can voice public
or private complaints to any participant in

the cooperative or to influential or concerned
organizations outside the cooperative.

Responses of a member to perceived declines in per-
formance are reactive strategies for avoiding unacceptable
performance. However, it is also possible that a member
might want to see an improvement in the performance of
COOperative without reaching the conclusion that performance
is declining. This phenomenon leads to two kinds of members'

perception with improving cooperative performance: a

161

perception of opportunities, as will as problems. Thus,

 

it is imperative that our case analysis will explore the
ramifications of these perceptions among those cooperaé
tives with high (resource) performance, low (resource)
performance and, comparatively, for both high and low per-
formance. Therefore, the first two will be dealt with in
terms of an intensive case technique in action-research
and, consequently, a comparative approach of the perception

behavior of the two categorically classified coooeratives.

CHAPTER V
SUMMARY, CONCLUSIONS, AND IMPLICATIONS

The subject of this study is the member-owned firm
organization (cooperatives) in agriculture and its role as
a develOpment tool. Despite its promises and limitations,
this type of organization has been used persistently both
in develOped, and more particularly, in the Third World
countries. The latter has used COOperatives as a develop-
ment policy tool and supported them as a limited resource
institution. The rise and decline of this unique organiza-
tion is a common scenario in the Third World countries. In
view of this, most of the research issues revolve around
organizational (effectiveness/performance) theory. Most
of the issues covered are: 1) Why is it that cooperatives
are easy to organize and hard to sustain? 2) How can c00ps
growth be accelerated and economic efficiency be improved?
and 3) How can we develop a successful COOperative and/or
alternative organizational model for development?.

These issues set the basis for conducting a theo-
retical treatise towards a research and evaluation agenda
for agricultural cooperative development. A review of lit-

erature and other documents concerning COOperatives and

162

163-
organizational development (effectiveness) perspectives
has been conducted. In the process, a conceptual frame-
work has been established and research gaps have been
identified. Then, a particular and urgently needed
identification and assessment study was proposed for organ-
izational renovation: an action-research design for co-
operatives.

More specifically, the study has been conducted

with the following objectives:

1. Review the cooperative approaches conducted
in the Philippines with emphasis on causes of
failure as a background COOperative agenda;

2. Review the development trends and prospects of
Area Marketing Cooperatives in order to dis-
cern or identify problems or operational weak-
nesses and strengths of the organization;

3. Identify the factors associated with the
effectiveness of an organization and cate-
gorize them for a more systematic analysis;

4. Identify major research gaps and direction as
future action-agenda for cooperative evaluation
and research; and l

5. Design a research study for measuring coopera-
tive effectiveness.

The Philippines has been used in this study as a

case in point for the following reasons:

1. The country has recently launched a systematic

164
(stage-by-stage) model of organizing and im-
plementing a COOperative development program;

2. The country has a mixed economy that exhibits
both economic growth and rising inequality,
overtime. Therefore, the social-equity im-
provement programs (SIP) will remain as a
development policy for a long time. Under this
policy, complementary programs of agrarian
reform and cooperatives development confort-
ably fit well.

3. More recently, an unfolding scenario from
various studies reported an apparent decline
of both the precooperative and cooperatives
performance. This dampened the enthusiasm of
those who are closely watching the program,
particularly the planners and implementors.
This further stressed the importance of a
theoretical treatise towards develOping an
effective organization.

This chapter includes a synthesis of key issues
addressed in this study. Sections A and B summarize the
key issues that were raised in Chapters 2 and 3, respec-
tively. In Section C, a research design is presented,
suggestive of "participatory or "bottom-up" research to-
wards cooperative renovation. Concluding observations

and/or implications is presented in Section D.

Summary

165
SECTION A

THE PHILIPPINES COOPERATIVE PROGRAM

The objectives were to review the approaches
and causes associated with the failure of

the program, to describe the trends, and to
consider prospects of the Area Marketing
Cooperatives (AMC).

The first objective was traced according to the
legal development of cooperation. The histori-
cal epoch or attempts can be categorized into
three stages: the economic-administrative
crisis stage (1900-1950); the post-war and
social upheaval stage (1951-71); and the
Martial Rule Stage (1972 and onwards).

The first stage covers the colonial, the com-
monwealth and the government of then a new
republic (including the war and the early

part of post war era). Under this period,
cooperatives on various occasions took the
form of transplants of Euro-American models.
Limitations were made without pilot testing to
fit local-specific conditions. It was a "tOp-
to-bottom" policy generally imposed from above.
The second stage covers the post-war community

develOpment and, a little later, the "green

166

revolution." The top-to-bottom scheme and

the country-wide application was again
mobilized. The cooperatives were used as
instruments in distributing relief goods and
agricultural credit. The main idea was to
overcome peOple's dissatisfaction during those
periods of socio-economic and political crisis.
The emphasis on cooperative growth is in terms
of quantity as opposed to quality. This can

be gleaned both from the mushrooming expansion
of numerous types of cooperatives organized and
the proliferation of government agencies super-
vising the cooperatives.

The third stage has also been categorized as a
top-to—bottom, policy-oriented organization.
This time, it can be differentiated with respect
to its gradualistic/systematic approach based
on the experience specifically of the second
stage. "Bigness" with respect to its capital
formation and area of Operation, the separa-
tion of credit, supply-marketing (CSM) func-
tions, institutional linkages and cooperative
education and technical information became the
guiding principles of COOperative develOpment.
It has also been classified as a "holistic and
a continuing model" of rural development.

The major specific events for each stages can

7.

167
be described in the following manner:

Stage i. Enactment of . Rural Credit Law
(credit needs), cooperative marketing law
(procurement and marketing needs), general
law on cooperatives (tax-exemption needs)
and the commonwealth act of creating super-
vising agency(ies) for cooperatives to
supervise and distribute relief goods.

Stage ii. Enactment of the Agricultural
COOperative Act (i.e., creation of ACCFA)

to extend credit financing for farm oper-
ations and facilities. Also, the enactment
of the Non-agricultural Cooperative Act con-
solidating and integrating non-agricultural
cooperative supervising agencies into one
body.

Stage iii. Enactment/Decreeing the estab-
lishment of a sole government agency, both
for agriculture and non-agricultural cooper-
atives. This was founded basically for a
limited resource group of peOple that have
to be mobilized in a gradualistic and syste-
matic manner.

 

A number of failure factors can be gleaned

from stage one to three. These are: weak-
nesses inherent from top-to-bottom policy
orientation, lack of local action or partici-
pation, inadequate management/leadership compe-
tence and the organizational inadequacy as an
economic enterprise. It often ended as "state
welfare enterprise," i.e., as it existed with
overdue/prolong overdependence on government
assistance.

The New Cooperative System is basically founded
on the past experiences. "A Task Force" com-

posed of cooperatives and organizational experts

168
brainstormed on past issues and came out with
a "blue-print" —- the four stages of the new
cooperative development program. These are:
Stage 1. Organization and development of a
precooperative village association called in
the vernacular as Samahang Nayon (SN) whose

main functions are savings/capital formation,
education/training and discipline.

 

Stage ii. Organization and development of a
full-fledged cooperatives called in the
vernacular as, Kilusang Bayan, to handle busi-
ness operations mainly with the SN. The co-
Operatives are the Area Marketing COOperative
(AMCs) and Cooperative Rural Banks (CRBs).

 

Stage iii. The establishment of consumer
cooperative markets in key urban centers of
the country for the purpose of linking co-
Operative producers to the consumers on a
more steady and regular basis.

Stage iv. The integration of cooperatives

into a whole system with the National Cooper-

ative Union as the Apex organization. This

consists of federating cooperatives at the

national level and establishing continuing

linkages among different types of cooperatives.
The trends and prospects of the AMCs showed
solid evidence of the decline in performance,
particularly in its operational and financial
aspects. Measures of financial viability, such
as financial stability, growth potential, effi-
ciency/activity and profitability were all below
the suggested standards.

The problems identified cover all the following

areas:

a. Membership issues, i.e., misorientation
and lack of understanding;
b. Managerial issues, i.e., inadequate --

 

Summary

169

if not poor -- management;

c. Area of operation, i.e. relatively low
paid up capital and broad geographical
coverage;

d. Operational/financial issues brought about
by the first three problems, which has
resulted in the decline in business per-
formance.

 

 

SECTION B

TOWARDS A FRAMEWORK FOR ANALYZING FACTORS

ASSOCIATED WITH COOPERATIVE
EFFECTIVENESS

In this tOpiC, cooperatives are treated as a
unique form of organization. The determinants
or factors that influence the organizational
effectiveness was reviewed with the goal of
evolving an analytical framework. With this
objective, two categorical frames of reference
were established: organization theory and the
community resource economics theory. Both were
described and the concept of organizational
effectiveness was further elaborated. Finally,
research gaps were identified.

The concept of cooperatives was described with
the following elements: definition, schools of
thought, and the comparative nature of COOper-
ative and non-cooperative organizations.

Two versions of cooperative definitions were
described: a simplified form that "a cooper-

ative is a member-owned firm (MOF) or an

170

extension of farm-firm business entities that
is mainly engaged in supplying or marketing
products and services for farm businesses;
and a comprehensive definition that "cooper-
atives are 'voluntary' organizations of economic
units based on equality, carrying out an 'allo-
cated or self-given' economic objectives." It
is a neutral means of organization that served
various aims and economic systems.
Cooperatives as a "going concern" in various
economic systems can be categorized according
to three schools of thought: the COOperative
enterprise school, the cooperative commonwealth
school, and the socialist COOperative school.
The distinctive qualifications of the three
schools of thought are:

Cooperative entegprise school perceives co-

Operatives as a means of checking the evils

of the capitalistic system and correcting

these defects within the system. Cooper-

atives do not constitute an economic system
of their own.

 

Cooperative commonwealth school goes beyond
the improvement of the members economic posi-
tion, but aims in the long-run to be an eco-
nomic system based on mutual cooperation.

The consumer societies and the emerging
socialism in the developing countries em-
brace this ideal with the c00perative being
the dominant type of business organizations.

 

Socialist cooperative school perceives co-
operatives as a transitory medium to Marxist-
Leninist type of state socialism. The his-
torical transformation is from capitalism,
socialism and, eventually, to communism.

 

171
The comparative nature of cooperative and non-
cooperative organizations revolves around the
three principles and two major cooperative
practices: service at cost, democratic con-
trol and limited return on capital political
and religious neutrality; promotion of cooper-
ative education. Seventeen other indicators
were reported to distinguish cooperatives from
other types of organizations.
One of the important analytical frameworks is
organization theory. This provides a framework
for understanding, explaining and predicting
organizational effectiveness. In this concep-
tion, the organizational structure and design,
motivation and compliance, and social influ-
ences, including leadership, group conflict,
and organizational change and develOpment
interact in determining organizational effec-
tiveness.
As applied to COOperatives, the framework
demands understanding of organizations with
respect to the "how, when, and why" of their
designs, structures, coordination and control
mechanisms, evaluation procedures and adminis-
trative devices. Considering the constraints
(e.g. task uncertainty) member-users strive to

rationally attain the goals of the dominant

 

10.

172
coalition (majority's interest) within the
context of an open-systems environment. The
task uncertainty is determined by the nature
of the task environment (e.g., organizations
range of products and services rendered, and
populations and area of operations served and
by the technologies of the organization).
Another analytical framework concerns the
emerging theory of community resource economics.
This refers to the study of the relationship of

the situation, structure, conduct and perfor-

 

mance (SiStCP) of political economic systems and
the like. Another label to this general

approach is the Environment-Behavior-Performance

 

(EBP) sequence. This implies classification of

the characteristics of the environment and par-
ticipants of the behavioral modes, as well as
classification of outcomes, and the development of

meaningful hypothesis about their relationships.

As applied to COOperative business, one will
note that the different characteristics (e.g.,
profitability) of goods and services handled
by the cooperative enterprise affects perfor-
mance outcomes. The key point is that knowing
whether the cooperatives with the goods and
services they handle has Egg; economies of

scale (the situational variable) which helps

11.

12.

173
in hypothesizing and predicting outcomes of
alternative policies.
Our conceptual frameworks have indicated that
organizational effectiveness can be defined
and measured as an end-product of both com-
munity resource economics (performance) and
organization (effectiveness) theory. However,
this end product is Still inconclusive because
of various criteria (e.g., organizational and
social systems goal; single vs. multiple/
composite criteria and measurement problems
(perceptual, indexing, scaling or other
numerical problems).
The major research gap revolves around imple-
mentation analysis (change-agency and clientele
system) and specification assessment (decision-
makers) of the cooperative organization.
Since a cooperative, as an MOF organization,
demands considerable local action and par-
ticipatory commitment, emphasis should be
made on research that identifies members'
perceptions regarding how it could be
made more effective. In other words, a
"bottom-up" approach in organizational
development is a relevant approach to

cooperatives.

Summary

13.

14.

174

The bottom-up approach in organizational
development has identified the following
critical points:

. The program innovation proposed for co-
operatives should consist of two com-
ponents: the Cooperative Management
Assessment (CMA) and Pilot Program
Establishment (PPE).

. CMA should be implemented at least one
year to component two, i.e.,the PPE-—a
sort of the "state of the art" towards
evolving PPE;

. A broad base interdisciplinary team should
coordinate program development; the entire
program innovation should be implemented
on a number of preselected pilot areas; and
involvement of appropriate clientele-
systems group should be incorporated
into each area of study.

Other research gaps revolve around research
needed in the areas of cooperative theories,
financial needs vs. growth, cooperatives busi-
ness and operational performance, membership

control mechanisms and market power.

SECTION C

TOWARDS ACTION-RESEARCH DESIGN: THE PROBLEM

REVIEW OF LITERATURE AND ANALYSIS
DESIGN FOR ORGANIZATIONAL
EFFECTIVENESS

This tOpic satisfies the last objective of the
study, i.e., to evolve a research design for
organizational (COOperative) effectiveness.

It consists of three parts: a) the problem

175
of organizational effectiveness is considered
as both a background problem and as a problem
of measurement-criteria; the nature and
mechanisms of member-control is presented in
response to conceptualizing organizational
effectiveness. Though it primarily serves the
behavioral-attitudinal model (BAM), the idea is
to integrate the processual model (PM) and goal
attainment model (GAM) in the evaluation; b) a
review of literature on the success and failure
factors of cooperative associations and the
survival/growth strategies is presented; and
c) an action-research design has been reviewed
as an apprOpriate scheme for cooperatives.
The problem definition and study plan enjoined
a multidisciplinary approach that can be
rationalized in the following manner: a) the
need for bottom-up planning vs. the usual top-
to-bottom approach in program design and imple-
mentation. This is reflective of "participatory
research;" b) the deemphasis on managerial
dominance (top-to-bottom schemes) to membership
control (bottom-up schemes) under the assumption
that no good management can exist without the
COOperation of members of the organization;
c) the deemphasis on subject-matter area treat-

ment of cooperatives as a business enterprise

176
to a multifirm social and economic "going
concern" organizations (even ideological for
that matter) that demands a holistic approach
in community improvement; and finally d) the
influence of structure, appropriate technology
and size, and attitudes of the clientele-system
helps in performance analysis.
The review of literature is conducted with the
notion that the effectiveness of the organiza-
tion is reflected in the local action/resource
commitment and participation of the willing and
capable clientele-system. Two major parts
have been presented: the failure factors and
the success factors including the survival/
growth strategies.
Foremost among the failure factors are: a) mis-
takes in personnel management and member-public
relations; b) mistakes in organization; c) mis-
takes in business operation; d) inadequate
viable linkages, and e) those that pertain to the
the attitudes behavior of farmer-members and
their "low profile" characteristics..
The major factors reported to be responsible for
the success of cooperatives are: strategic
location, capable management, cautious invest-
ment to keep the physical plant modern, effec-

tive marketing strategies, communications and

177
member relations, affiliation with viable
regional cooperatives, a reputation for good
service and a consistent policy of conservative
innovation (e.g., competitive pricing with
aggressive merchandising).
The strategy for growth of coops has been cate-
gorized into three strategies:
a. General farm product marketing strategies
that include forward and backward integra—
tion and coordination; bargaining col-

lectively; and maintaining and improving
the open-market.

 

b. Organizational strategies: The above con-
ceptual strategies can be operationalized
into one or more of several organizational
strategies: horizontal integration,
diversification (and conglomeration),
multic00perative organizations, and joint
ventures.

 

c. Facilitating strategies include Operational-
izing the plan and team work of the board of
directors and the management.

 

The most crucial elements in determining the

future of farmer cooperatives are heavily focused
on members attitude and the skills of the board and
management. Specifically, the variables include the
following: a) farmers' attitudes toward cooper-
ation; b) member commitment; c) non-cooperative
competition in the marketing of farm products;

d) the skill and progressiveness of boards and
management; e) the availability of capital;

f) the involvement of cooperatives in general

public policy-issues, and g) the maintenance of

10.

178
cooperative public sanctions.
Action-research is deemed a more appropriate
research and development (R&D) technique. It
denotes a pioneering approach towards social
research that combines the generation of theory
with changing the social system through the
researcher acting on or in the social system.
It consists of a whole circle of activities
common in problem-solving: analysis, fact-
finding, conceptualization, planning, execution,
more fact-finding or evaluation; and then a
repetition of these activities. It was later
modified into five cyclical phases: a) digg:

nosing; b) action-planning; c) action-taking;

 

 

d) evaluatigg and e) specifying learning.

 

 

The use of action research is justified on the
following grounds: a) that there is a crisis
of relevancy or usefulness in the field of
organizational science and b) that there exist
both underutilization or misuse of research and
the research practice gap. These two concepts
have been described as causal factors for the
misuse of research.

Action-research is still being used today.

 

It is being used in clinical or social psychology,
public health, social welfare, criminology, com-

munity psychology or community development and

ll.

12.

13.

179
in population education. More recently, the
concept has been used in agricultural economics
under the label of Farming Systems Research (FSR).
The FSR aims at analyzing the two main elements
of the small farmers environment, namely: the
technical and human elements. The human element
has been given more emphasis particularly with
the "downstream" type of FSR. Farm systems
are develOped through collaborative efforts be-
tween the target farmer (cooperators) and the
farm systems researcher. Four stages of FSR
relate well to our AR cyclical process:
description or diagnosis of present farming
system, design of improved systems, testing of
improved systems, and extension of improved
systems.
The implementation procedure of FSR revolves
around three components: a) on-farm research;
b) experimental station research; and c) the
policy context of agricultural research.
Briefly described: a) on-farm research is con-
ducted in farmers' fields with the participa-
tion of farmers, i.e., effective communication
between researchers and the farmers is ensured
in designing appropriate farm technologies;
b) experiment station research emphasizes the

development and screening of new farm

14.

15.

180
technology(ies) -- the apprOpriateness of which
is further refined and evaluated in on-farm
experiments; and c) agricultural policy refers
to actions and rules of government implemented
in order to meet regional or national develop-
ment goals.
The research process of FSR is illustrated in
six stages. The steps in the adaptive research
cycle are broken down into 17 steps and will
take about 7-9 months to generate feedback
reports after the initiation of research.
The six stages are: a) the description and
interpretation of the farmers situations and
the identification of management problems and
possible development Opportunities; b) the
identification of improved agronomic practices
and farming methods which, if used, have a
potential for improving the welfare of farmers;
c) on-farm testing of potential improvements
selected as relevant and feasible for target
group farmers, given the conditions they face
on production; d) the identification of un-
solved technical problems of farmers and the
incorporation of these problems as priorities
in technical research process; e) commodity and
multidisciplinary research; and f) the gener-

ation of a body of knowledge.

16.

17.

18.

181
The action-research design for organizational
effectiveness (ARDOE) is a continuing social-
organizational laboratory project. It is of
the FSR-variety and links FSR to COOperative
activities. This will help the usefulness and
relevancy of farmers cooperativeslorganizations.
The proposed action-research will basically
start with a survey of the principal actors-—in
the MOF case -- the member-owners. The DAM
model will be used as the technique; factors
perceived by members as needed for changing
the performance of COOperatives will be elicited.
These conceptually determined set Of factors
are: a) change in members definition Of accept-
able performance; b) decline in the cooperative
performance; and c) Opportunity to improve co-
Operative performance.
A brief explanation of these set of factors is
in order: a) the change in members definition
of acceptable performance may be influenced by:

(l) the environment where the organization

 

Operates; (2) the felt-need that change the

 

needs and demands (requirements) Of the members;

and (3) dissatisfaction, i.e., if other COOper-

 

ative participants are dissatisfied; b) Declines
in the performance of cooperative may be per-

ceived by a member because his definition Of

19.

20.

182
acceptable performance has changed; and c) the
perception of the member about the performance
Of his cooperatives can be changed by the
following events: (1) when the existing ser—
vices of the cooperative are no longer ade-
quate; (2) due tO the influence of other
cooperative participants notion of inadequate
performance; and (3) as a result of the dis-
covery of superior services or supplies
offered by other non-cooperative organ-
izations.
The mechanisms Of control of members of a

cooperative involves: a) stay—put-silence

 

(a compliance group therefore not a control

mechanism-participants); b) stay-put-voice;

 

c) exit-silence; and d) exit-voice. The

 

 

description according to their character-
istic (profile) and responses to the set of

factors'will be explored.

A tentative description of the categorical
groupings for purposes Of analysis is in order:
a) staying-put and silent -- those without
change in purchases, investment, voting, asso-
ciational activities or gossip with existing
and potential members; b) staying-put and

exercise voice (speak-up) -- those who indicate

21.

183

dissatisfaction, demand specific reforms,

threaten to organize for reform or use

various forms of exit; c) silent-exit -- those

 

who patronize the cooperative business at a
diminishing rate or abstain from associational

duties and obligations; and d) exit-voice --

 

those who conceptually terminate membership

and voice complaints or dissatisfaction to con-
cerned organizations (private or public) out-
side the cooperatives.

Two kinds Of members' perception with improving
cooperative performance are: a perception of

opportunities which must be pursued and of

 

problems that must be solved. The ramifica-
tions of these perceptions will be explored
both for high and low resource/performance type

of cooperatives.

SECTION D

CONCLUSIONS AND IMPLICATIONS

The rise and decline of rural service cooper-
atives has been a disturbing phenomenon in
most of developing countries that have expe-
rience in using this instruments Of

rural development policy. By service rural

COOperatives is meant a type of organization

184
called to service farmer-members in such basic
domains as credit, supply, marketing and con-
sumption. Despite their wide geographical
coverage and a quite large membership, the
effectiveness of service cooperatives has been
frequently questioned. Success is considerably
less common than failure.
The approaches conducted in the Philippines
are the usual top-to-bottom-technocratic nature
Of develOpment planning in LDCs, i.e., the gov-
ernment and the technocrats know best "what
is good for the clientele-system." The initial
stages of COOperative promotion and development
emphasize the number (quantity) that will serve
the government's Objective Of distributing wel-
fare goods and services. Considering the gov-
ernments goal of wider coverage, the quality
type Of the organized cooperatives (i.e.,sur-
vival in the long run) has been relegated.
Grass-roots participation in development plan-
ning has been minimal if not totally neglected.
This basically explains the lack of local
action and resource commitment to development
projects among the clientele-system. With
emphasis in quantity, rather than selectivity
and quality, cooperative programs have fallen

short Of their expected performance.

185

3. The farmers cooperative can be analyzed
according to many disciplinary frameworks.

The popular approach is by using a formal
organization perspective. This study extends
the validity Of formal organization theory

and, more appropriately, suggests a compre-
hensive approach by including both the internal
and external factors that may influence the
effectiveness of the organization. This sug-
gestion is based upon the inadequacy of former
organizational constructs that mostly concen-
trate on the theory Of the organization (socio-
psychological studies) and/or the so called
"theory of the firm" (economic and business/
financial studies).

4. It is concluded here that the piecemeal appli-
cation Of the theory of the firm/organization
is inadequate to analyze the complex inter-
actions among socio-economic activities and
the environmental/natural circumstances of the
principal actors (members, management and the
society/community Of the farmers c-Operatives).

5. Furthermore, the received theory of cooperation
appears to be a theory of developed organiza—
tions in developed economies Of European
countries and America. The success indicators

appear to be present and the timing and needs

 

_
A

7.

186

for such an organization have been felt from
within and by the members. Therefore, if this
generalization is valid, the practical applica-
tion of principles and practices of cooperation
is not merely a matter Of transfer Of cooper-
ative forms, but requires a systematic and
appropriate framework to identify which forms
are apprOpriate to the unique role that COOper-
ation will play in a particular situation.
Organization exists for members because of one
of the following concepts:

a. Inducement-contribution concept, i.e., as
long as a person receives more inducement
than they would from their contribution
alone.

b. Goal-centered aggregation, i.e., a pur-
posive aggregation Of individuals who
exert concerted effort toward a common
and explicitly recognized goal.

c. Transaction cost-minimization, i.e., organ-
izations exiSt beCause they can mediate
economic transactions between their members
more efficiently than market mechanisms
under certain goals and performance.

d. Socialization—indoctrination mechanisms,
i.e., socialization (a motivationally-
induced concept) refers to the process by
which a new member learns the value system,
the norms, and the required behavior pat-
terns Of the society, organization or group
which he is entering. Indoctrination
(mostly a government induced-type) refers
to formal socialization Of an organization
for its own benefit.

The controversy over the concept of cooperatives
revolves around how the organization is treated:

a. Cooperatives like all other organizations
can also be viewed as a system Of human

187
interactions. Whether it is appropriate
as an economic instrumentality is deter-
mined by the manner in which it changes
behavioral relations among its partici-
pants, particularly the members. This
affects the behavior Of the firm, other

individuals, private and government
agencies, which bear some relation to it.

b. Farmers' cooperatives are member-owned
firms or an extension/vertical integration
Of farm firms jointly Operated to provide
themselves goods and services at cost.
Given this notion, cooperatives cannot
pursue an independent "career" of their own.

c. Another conceptuation treats the cooperative
as an independent managerial or entre-

preneurial entities, which can pursue an
independent career of its own.

It is simply a fact that COOperatives, whether
treated as a "going concern" framework, a
"vertical integration" of independent units, a
"managerial or entrepreneurial independent
entity" or any of these combinations, do not
become an automatic collective representation

of their members and their aspirations and wants.
Therefore, to understand the farmers cooperative
in its entirety, data must be collected simul-
taneously on its historical perspectives along
areas of policy and institutional development,
production, consumption, investment, and trans-
action activities. The joint viability of the
independent units determine the success of the
cooperative enterprise as the dependent unit.
The flows of goods and services among farm

households, its joint plant (farmer's organization)

10.

11.

12.

188
and its outside interactions can be consistently
documented through the action-research
design.
It is further concluded that the study design
should start with the members as the principal
actor in organizational development and change.
This view is inherent from the nature of suc-
cess experienced in the received theory of co-
operation ... that members know best and act
upon rationally. The mechanism of members con-
trol in their organization is purportedly
designed to test the validity of the bottom—up-
technocratic-reformist approach in development
planning.
It takes more than a cooperative enabling act
to provide the foundation for effective cooper-
ation. Even if the European models are
appropriate in LDCs, a variety of complementary
and sustained reform, as experienced in Japan
and Taiwan, may be required. It is to be noted
that in pre-war Japan and through the entire
history Of Taiwan, the food and commodity policy,
price stabilization, and subsidization Of agri-
culture have been executed through the agricul-
tural cooperatives.
Other than the legislative support needed, the pri-

mary Obstacle to a viable cooperative development

13.

14.

15.

189
program is the "unwillingness of the government
in LDCs to alter the institutional environment
so that the movement has a better chance of
success."
Therefore, granting this government "all out"
support, there is a need to focus assistance on
those cooperatives where we can derive maximum
benefit and Obtain greater impact on the economy
(members, management staff and the society).
This policy Of selectivity demands a challenge
that cooperatives can be made to succeed.
The past Observation on cooperative experiences
suggest that the emphasis has been on supportive
activities rather than on stimulating or sus-
taining activities. Technical consultancy or
utility-focused research per requirements of
the area is barely present, if not totally
absent.
Stimulating activities seem to be undertaken
more as seasonal production activities
rather than in a systematic phase manner
(flexible enough to identify the felt-needs
and the situational demands Of the particular
area at a particular time). It is sug-
gested, therefore, that farm system
research be undertaken to sustain pro-

duction activities. The marketing innovation

16.

17.

190

has yet to be developed as a counterpart of

the production innovation.

It is also suggested that attempts to promote
responsive farmers organization should be backed
by comprehensive, long-term policies and
supported by well-organized and effective insti-
tutions. A balanced program Of stimulating

and sustaining activities should be

integrated as a function of these institutions.
A systematic and monitored utility-focused
research should be added along with effective
training and educational programs for all the
participants in the cooperativelorganizational
development.

Finally, reiterating our understanding, the pro-
ponents of COOperativism maintain that COOper-
atives can be a vital rural development tOOl by
bringing the limitedly endowed people and their
community into the mainstream of economic
activity. TO do this, cooperatives must first
be an economically viable organization. This
viability or other measures Of organizational
effectiveness depends upon the several set Of fac-
tors, namely: 1) those that belong to organ-
izational (firm) factors; and 2) those that can
be categorized into community resource (industry)

factors.

191

Organizational Factors. It can be con-

 

cluded that the necessary conditions for
successful operation of a marketing co-
operatives, at least, on farm-firm basis
are:
1. Economic need for an organization
2. A capable sales manager
3. An adequate volume Of business
4. Use of sound financial practices
5. Fulfillment Of responsibilities
by the board of directors
6. Utilization of effective channel
Of communication both for tech-
nical information and cooperative
matters
7. Members loyalty.

In addition, the greater the economic Oppor—
tunities in terms of commerciability of the
product, the greater the number of members
involved in the decision-making process. Also,
the greater the frequency of personal con-
tact among the participants within the co-
Operative, the greater will be the tendency
toward retention of active members and,
consequently, the maintenance Of the high
volume Of business: the basic requisites
for successful performance.

Community Resource Factors. The differences

 

in: l)the ethnic origins and the cultural
heritage of the people; 2) their natural
resource; 3) geographic and socio-economic
circumstances; and 4) the institutional
infrastructure among the different regions
of the country, may have caused substantial
disparities in individual/group predisposi-
tions, their income, employment, growth of
institutions and economic development. In
view of this, it might have been possible
that the effectiveness of organizations
serving the farmers was influenced by

these developmental factors, including
environmental, situational, institutional
and other policy variables beyond the con-
trol of the farmers. In this treatise,
these are labelled as "community resource
factors" superimposed over the structure,
conduct, and performance Of the organization.

Therefore, in creating appropriate organiza-
tions, organizational features must be

selected by reference to the background, or
nature, of the problem at hand and consider

192

the social, economic, natural and insti-
tutional circumstances surrounding the
clientele-system. Herein lies the funda-
mental policy, administrative, and research
problem that is resolvable through explora-
tory and the case-to-case approach in
organizational change and develOpment.

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Quarterly. Vol. 20, December, 1975, pp. 546-558.

D. 1971. Organizational Dynamics: An Analysis
of the Michigan Agricultural Cooperative Marketing
Association. M.S. Thesis. College of Social
Sciences. Michigan State University.

Stephens, H. C. 1958. "Case Histories Show Reasons for

Sukahar,

Susman,

Todaro,

Failure." In Some Reasons Why Farmers Coop Fail.
Reprint. News for Farmers Cooperatives. FCS-USDA.
Washington, D.C.

L. 1982. Factors Influencing the Extent to
Which Farmers Practice New Farm Inputs: A Study
Focusing on Small Farmers in Rural Subang, West
Java. Ph.D. Dissertation. Department of Resource
Development. Michigan State University.

G. I. and R. D. Evered. 1978. An Assessment of
the Scientific Merits of Action-Research. Adminis-
trative Science Quarterly. Volume 23. December
1978.

M. P. 1981. Economic Development in the Third WOrld.
Longman, Inc. New York.

Torgerson, R. E. 1978. An Overall Assessment of COOpera-

tive Market Power. In Agricultural Cooperatives
and the Public Interest. N. C. Project No. 117.
Monograph 4. North Central Regional Research
Publication 256. September, 1978.

Uma Lele. 1981. Cooperatives and the Poor: A Compara-

tive Perspective. In World Development. Volume 9,
pp. 55—72.

Van Ravensaay, E. 1982. Mechanisms of Organizational

Control by Cooperative Members. Department of
Agricultural Economics. .Michigan State University.
(mimeo).

200

Velasco, E. T. 1975. A Theoretical Economic Explanation
of the Failure Of Cooperatives. The Philippine
Review of Business and Economics. Volume XII.
NO. 2, pp. 135-154.

Vitaliano, P. 1978. The Theory Of Cooperative Enter-
price: Its Development and Present Status. In
Agricultural Cooperatives and the Public Interest.
N. C. Project 117. Monograph 4. North Central

Regional Research Publication 256. September,
1978.

Voth, D. E. 1979. Social Action Research in Community
Development. In J. Blakely (ed.), Community
Development Research: Concepts, Issues, and
Strategies. New York. Human Sciences Press.

Williams, W. 1975. Implementation Analysis and Assess-
ment. Policy Analysis. Volume 1, No. 3. Summer,
1975.

Yuchtman, E. and S. E. Seashore. 1967. A System Resource
Approach to Organizational Effectiveness. American
Sociological Review. 32, pp. 891—902.

Zaltman, G. and R. Duncan. 1977. Strategies for Planned
Change. New York: John Wiley and Sons.

APPENDICES

APPENDIX 1

List of Organized Area Marketing
Cooperatives as of December 31, 1978

201

23.590
2:52.: 2.0
2:32.253
...........5......

2252.225
2:52.225
2252225

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APPENDIX II

Presidential Decree No. 175:
Strengthening the Cooperative
Movement

 

203

MALA CANANG
Manil:1

PRESIDENTIAL DECREE NO. 175
STRENGTHENING THE COOPERATIVE MOVEMENT

WHEREAS, a parallel measure to the emancipation of tenant-
farmers from feudal bondage, as provided for in Presidential Decree
No. 27 and dated October 21, 1972, is a provision for a strong
social and economic organization and system to ensure that they
will enjoy on a lasting bases the benefits of agrarian reform;

WHEREAS, there are equally less fortunate segments of our
society who are in need of social and economic amelioration and
should have the right to enjoy the privilege of self-development,
social growth and economic independence under a truly just and
democratic society;

WHEREAS, There is a need to increase income and purchasing
power of the low-income sector of the population in order to
attain a more equitable distribution of income and wealth:

WHEREAS, the co perative institution is a means of attaining
a more equitable distribution of income and wealth and providing
the common man a dignified level of existence;

WHEREAS, the Bayanihan spirit is an inborn trait of the
Filipino people which if properly guided can serve a strong
foundation of cooperative institutions;

NOW THEREFORE, in order to effect the desired changes and
reform in the economic, social and political structure of our
society, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution as
Commander-in-Chief of the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972,
and General Order No. 1 dated September 22, 1972, do hereby
order and decree the following:

Section 1. Declaration of Policy - It is hereby declared
the policy of the State to foster the creationzuulgrowth of
cooperatives as a means of increasing income and purchasing
power or the low-income seetor of the population in order to
attain a more equitable distribution of income and wealth.

Section 2. Cooperative Defined - Cooperative shall mean
only organisations composed primarily of small producers and of
consumers who voluntarily join together to form business enter-
prises which they themselves own, control and patronize.

A small producer shall mean a self-employed individual and,
by' iiinnwe>]§' 03' xvi\;h hi:a fzuni li' p1‘<\;i(has: Elie’ px'ininx'y 1:1bfir T<x§ttllN--

!RCUTSS‘)f his Inhsiness tultflrpldtw3 or (nn- thrieq,rns :u, leis.

204

(f) To own and dispose of property to enter into contract
to sue or be sued and to do and perform such other acts as may
be necessary in the pursuit of its objeCtives.

Section 5. Privileges of Cooperatives - Cooperatives shall
enjoy the following privileges:

. (a) Exemption_ from income taxes and sales taxes provided
that a substantial portion of the net income of the desperative "’
is returned to members in the form of interest and or patronage
refunds; Provided, further, that for income tax purposes, non-
agricultural cooperatives shall be exempt for a period of five
(5) years and agricultural cooperatives for a period of ten (10)
years reckoned from the date of registration with the Bureau
of Cooperatives Development; Provided, finally, that the taxable
income shall mean that portion of the cooperative's income
after deducting the interest paid to members and patronage
refunds;

(b) In areas where appropriate cooperatives exist- the pre- 4
‘ferential right to supply rice, corn and other grains, fish and
other marine products, meat, eggs, milk, vegetables, tobacco
and other agricultural commodities produced by members of the
cooperatives concerned to State Agencies administering price
stabilization programs; and

(c) In appropriate cases, exemption from the application of
the Minimum Wage Law upon the recommendation of the Bureau of
Cooperatives Development subject to the approval of the Minister
of Labor.

Section 6. Financial Assistance to Cooperatives - There is
hereby created a Cooperative Development Loan Fund for the
development of the cooperative movement.

(a) Sources of funds - This fund shall be financed from the
following sources:

1) General appropriations
2) Proceeds of sales of US Public Law 480 commodities

 

 

3) Foreign loans or proceeds of sales of commodity
loans

4) Grants and donations

5) Levies imposed by existing laws on agricultural
commodities for the development of cooperatiwte
and

6) Such other sources as are now provided by exist-
ing laws or as may be provided for in the future.

(b) Uses — This Fund shall be utilized for the following
purposes:

1) Source of loanable funds to cooperatives;

205

2) Serve as a guarantee for loans granted to
cooperatives; and

3) Source of advances to cooperatives for the
purchase of equity of rural banks.

In no case shall any portion of this fund be utilized for
direct loansatouffixmgr members. As far as practicable, funds
shall be channelled through existing”gbvernment”andmprivaéé——~—— ~-i
financial institutions.

(c) Administration of fund - For purposes of administering
the fund, there is hereby created a Management Committee composed
of:

1) A representative of the Ministry of Local
Government and Community Development who shall
serve as Chairman;

2)'A representative of the Central Bank of the
Philippines;

3) A representative of the Philippine National Bank;

4) A representative of the Ministry of Agriculture
and Natural Resources;

5) A representative of the Ministry of Agrarian
Reform; and

6) Two representatives of the Cooperative Movement
designated by the Minister of the Ministry of
Local Government and Community Development.

The Management Committee shall have the power to administer
this fund and prescribe rules and regulations for its utilization.

(d) Other financial assistance - the Agrarian Reform Fund
Commission, Food Terminal, Inc., National Development Corporation
or their subsidiary instutitions or the subsidiary institutions
of any government financial agency or any government agency is
authorized to CStabliSh or acquire fixed facilities such as
storage facilitiest-requiring large long-term investment which
shall be leased or sold to cooperatives. Likewise, COOperatives
shall have preferential right to purchase or lease existing
facilities as herein above specified belonging to other government
institutions and agencies.

Section 7. Management and Training Assistance - There is
hereby established a Management and Training Assistance Program
It shall create a Central Management and Training P001 to be
composed of top caliber managers, who may be assigned to actively
manage a cooperative or cooperatives for the prime purpose of
training an understudy or understudies to assume management
thereafter. In this connection, it may contract for an defray
the cost of professional managers and/or firms who shall actively
manage cooperatives as part of the training program. Cooperative

206

managers contracted for this purpose shall be exempt from WAPCO
salary rates. Training programs to develop cooperative managers
may be undertaken by any existing educational or other insti-
tutions on contract basis.

Suitable and practical management materials and guides shall
_be developed for the use of cooperative managers.

-..-y. . ._-. ..
A

The Management and Training Assistance Program shall be ad-
ministered by an Advisory Board of five members to be appointed
by the Minister of the Ministry of Local Government and Communi-
ty Development, at least two of whom shall come from the coopera-
tive system, and one from the Ministry of Agrarian Reform.

The Management Training Program shall be financed from the
following sources:

(a) General appropriations;

(b) Income from the Cooperative Development Loan Fund;
(c) Grants and donations; and

(d) Contribution from cooperatives.

Section 8. Powers of Regulatory Agency - The Ministry of
Agriculture through the Bureau of Cooperatives Development is
vested with full authority to promulgate rules and regulations
to govern the promotion, organization, registration, regulation
and supervision of all types of cooperatives. Specifically,
it shall have the following powers:

(a) To call on any office, agency, instrumentality or in-
dividuals belonging to the government or private sector for
such assistance as may be needed.

(b) To register new cooperatives, re-register existing
cooperatives and regulate and supervise the following types of
cooperatives

1) Barrio Associations which shall have the pro-
visional Status of a cooperative and serve the
requirements of Presidential Decree No. 27 in
the issuance of certificates of land transfer;

(\3
V

Local or primary cooperatives which shall be
composed of natural persons and/or barrio
associations;

3) Federations which shall be composed of cooper-
a tives which may or may not perform business
activities.

4) Unions of cooperatives which shall not perform
any business activities.
Provided that, in the case of re—registration. the cooperative

shall file its application or petition for re-registration within
a period of six (6) months from the date of promulgation of this

207

Decree, and its corporate existence shall be deemed to continue
until the application or petition is approved or denied; and
Provided. further, that for purposes of re—registration, Section
2 and 5 (a) hereof shall not be applicable to existing coop-
eratives which do not meet the qualification requirements
provided for in this Decree.

-.....

(c) To determine ta€”6§ahé? and extent by which powers,
privileges, assistance and support granted to cooperatives
provided by this Decree shall be exercised or enjoyed by

cooperatives;

(d) To suspend the operation or cancel the registration of
any cooperative after hearing and when in its judgement and based
on findings, such cooperative is operating in violation of this
Decree, rules and regulations, existing laws as well as the
bylaws of the cooperative itself;

(e) To liquidate and to determine disposal of assets and
settlement of liabilities of any cooperative which has been
inoperable, inactive or defunct or any cooperative violating the
penal provisions herein provided;

(f) To recommend charges to be filed against any official of
any cooperative who has committed crimes against the cooperative
or who has violated the penal provisions herein provided; and to
establish rules and regulations governing the suspension and/or
expulsion of any_members of a cooperative; , --i-

(g) To condone the principal and/or accumulated interest on
past due production and/or farm improvement_loans extended by
the defunct Agricultural Credit and Cooperative Financing Admin-
istration and the Agricultural Credit Administration to farmer
members of agricultural cooperatives, and to authorize writing
off of bad debts or bad accounts of agricultural cooperatives
arising from loans granted by the Agricultural Credit Admini-
stration subject to the rules and regulations to be promulgated
jointly by the Ministry of Local Governments and Community
Development and the Ministry of Finance;

(h) To recommend charges to be filed against non-farmers
who through misrepresentation have secured loans from the Agri—
cultural Credit and Cooperative Financing Administration or the
Agricultural Credit Administration through Agricultural COOper-

atives;

(i) To authorize the collection by barrio associations and
cooperatives past due loans granted by the Agricultural Credit
and Cooperative Financing Administration or the Agricultural
Credit Administration on a commission basis; and

 

(j) To authorize cooperatives to collect amortizations on
lands under Presidential Decree No. 27.

208

fifty percent of his gross income from the payment proceeds or
income of the labor he provides.

Section 3. Cooperative Principles - A cooperative shall be
governed by the following principles:

(a) Open membership - Membership in a cooperative should be
‘vsiuwfary'and available without artificial restrictionior any
social, political, racial or religious discrimination to all
persons who can make use of its services and are willing to accept
the responsibilities of membership.

(b) Democratic control - The cooperative is meant to be
collectively owned and controlled by its members. As such, the
supreme power in a cooperative society resides in the general
membership, where each member is entitled to one vote, regardless
of the amount of capital he has contributed. The affairs of
the cooperative shall be administered by persons elected or
appointed in a manner agreed by the members accountable to them.
In other than primary cooperatives, administration shall be
conducted in a suitable democratic form.

(c) Limited interests to capital — Share capital shall earn
only limited interests, the maximum rate of interest to be
established by the Bureau of Cooperatives Development, Ministry
of Agriculture from time to time.

(d) Patronage refund - Net income after the interest on
capital has been paid shall be redistributed among the members
in proportion to their patronage.

Section 4. Powers of Cooperatives - Cooperatives shall
have the following powers:

(a) To exercise the same rights and privileges given to
persons, partnerships and corporations provided under existing
laws;

(b) To establish and operate business enterprise of all
kinds as their needs dictate and their capabilities allow subject
to the provisions of existing laws:

(c) To establish rural banks under the Rural Bank Act and/
or to purchase government held preferred shares of rural banks
which may be conve~ted to voting common stocks, under the rules
and regulations to be promulgated by the Monetary Board of the
Central Bank and the Agrarian Reform Fund Commission;

(d) To enjoy all the privileges and incentives granted by
the NACIDA Act and those granted by all government agencies to
business organizations under existing laws. provided that all
requirements are met;

(e) To petition the government to expropriate idle urban or
rural lands for agricultural production, cottage industry,
blhilfhfiSFs 01‘ haulsizig [iniqiosx’s; arr)

209

Section 9. Penal Provisions - (a) No person or group of
persons other than cooperatives registered pursuant to the pro—
visions of this Decree shall use in its name the word coopera-
tive or its equivalent in the vernacular with intent to defraud.
Violators shall be fined Two Thousand (P2,000.00) pesos. In
case of insolvency, a subsidiary imprisonment of not more than
.sith6)_months.shall;be.imposedw.—»——- ~ -~v

(b) Any official of the COOperative, elected or appointed,
who commits crimes against the cooperative shall be penalized
in the same way as if such official were a civil servant, with
disqualification of holding any elective or appointed office.

(c) Any official of the State, elected or appointed and
not belonging to the Ministry of Local Government and Community
Development, who willfully and unduly interferes with the bus-
iness activities and internal affairs of any cooperative shall
be penalized by a fine of not more than five thousand pesos
(P5,000.00) and/or imprisonment of not more than six (6) months.

(d) Individuals who are found to have organized cooperatives
for the evident purpose of taking advantage of the privileges
granted to cooperatives under this Decree and who operate such
organizations in clear violation of cooperative principles
herein set forth as adjudged by a competent court shall be sub-
ject to attachment of all their assets in such organizations and
such organizations shall summarily be stopped from operating
without prejudice to other penalties as provided for by existing
laws.

Section 10. Separabilty Clause - If any provision, provi-
sions, part or parts of this Decree is declared unconstitutional,
such declaration shall not invalidate the other provisions hereof.

Section 11. Repealing Clause - All past cooperative laws
are hereby repealed. Portions or parts of any other laws incon-
sistent herewith are likewise repealed. The Ministry of Agri-
culture through the Bureau of Cooperatives Development shall
promulgate within thirty (30) days from date hereof the rules
and regulations for the effeCtive implementation of this Decree
and upon approval by the President of the Philippines shall
have the force and effect of law. These rules and regulations
may be amended, modified or abrogated as the circumstances may
so demand.

Done in the City of Manikr this 14th day of April, in the
year of Our Lord, nineteen hundred and seventy-three.

(SGD.) FERDINAND E. MARCOS
President
Republic of the Philippines
By the President:
(SGD.) ALEJANDRO MELCHOR
Excmnitixwe SeCIwitary

210

LETTER OF IMPLEMENTATION N0. 23
RULES AND REGULATIONS IMPLEMENTING
PRESIDENTIAL DECREE NO. 175

IMPLEMENTING PRESIDENTIAL DECREE NO. 175 DATED APRIL 14, 1973
GOVERNING;THE‘GRGANIZATTONT"ADMINISTRATI0N“AND“SUPERV*S¥GNLOF
SAMAHANG NAYON (BARRIO ASSOCIATIONS) AND KILUSANG BAYAN
(COOPERATIVES).

Pursuant to the provisions of Section 11 of Presidential
Decree No. 175, dated April 14, 1974, the following regulations
governing the organization, administration and supervision of
Samahang Nayon (barrio association) and Kilusang Bayan (coopera—
tives) are hereby promulgated for the information and guidance

of all concerned.

Regulation 1. Title - These regulations shall be known as
the regulations implementing the provisions of Presidential
Decree No. 175, dated April 14, 1973, entitled "Strengthening

the Cooperative Movement."

REGULATIONS ON SAMAHANG NAYON AND OTHER
PRE-COOPERATIVE ORGANIZATIONS

.Regulation 2. Samahang Nayon (Barrio Association) - Sama-
hang Nayon is a body corporate composed primarily of small
farmers residing and/or farming within the geographical limits
of a barrio for the purpose of improving the quality of life of

the barrio people.

The term farming refers to the culture and production of
grains, livestock and dairy, poultry and eggs, vegetables in-
cluding mushrooms, fruits, fiber, forest and forest products,
pasture land, sugar, palm and oil trees, as well as the activities
of fishing and other marine products, horticulture and apian
culture.

A small farmer is one who is the actual tiller whether
full-owner, amortizing owner or lessee of not more than seven
(7) hectares of rice or corn land or their equivalent in other
crops as determined by the Ministry of Local Government and
(Community Development, hereinafter referred to as the Ministry.

Regulation 3. Who May Organize - Twenty-five or more persons
larimarily small farmers, Filipino citizens, residing and/or
farming in the proposed area of operation, may organize them—
selves into a Samahang Nayon. For purposes of registration, at
least fifteen incorporators must sign the aritcles of incorporation.

 

 

211

Regulation 4. Articles of Incorporation - The articles of
incorporation duly signed, shall be acknowledged by the incor~
porators before a Notary Public or other officers authorized to

take acknowledgments.
No articles of incorporation shall be registered unless the

same conforms substantially with the model articles QfLEQQQEPQr- a_.

ation prescribed by the Bureau of COOperatives Development,
hereinafter referred to as the Bureau.

Regulation 5. By—laws— All Samahang Nayon shall adopt for
their management a code of by-laws.

No by—laws shall be registered unless the same conforms sub-
stantially with the model by-laws prescribed by the Bureau.

Regulation 6. Effects of Registratnwi- Upon registration and
the issuance of the corresponding certificate, the Samahang
Nayon shall be a corporate body with the following powers:

a To own and dispose of property;
b. To enter into contracts;
c

To sue and to be sued; and
d. To do and perform such other acts as may be necessary in
the pursuit of its objectives.

Regulation 7. Membership — Persons of fifteen years of age
or over, or who are heads of a household residing and/or farming
within the geographical boundaries of the barrio may apply for
tnembership. Before one is accepted as a member, he shall be

required to:
a. Complete a prescribed pre-membership training course;

Pledge to adopt improved farming practices;
Pledge to comply with a savings program
Pay the required membership fees; and

Agree to comply with the stipulations of the Samahang
Nayon membership agreement. All agreements shall conform substan-
tiall.y with the model membership agreement prescribed by the
Bureau.

No person shall be a member of more than one Samahang Nayon.

(0900'

Regulation 8. Grounds for Suspension/Expulsion of Members —
'The following are the grounds for suspension/expulsion from a

Samahang Nayon .
a. Failure to pay membership fees, dues or contributions;

b. Failure to comply with any of the duties of membership;

C- Failure to comply with the terms and conditions of the
membership lif-EI‘eeznent;

......

 

212

d. Act or omission injurious or prejudicial to the Samahang
Nayon: and

e. Such other grounds as may be provided for my the Ministry.

Regulation 9. Barrio Guarantee Fund and Barrio Savings Fund -
All Samahang Nayon shall adopt and implement the barrio guarantee
fund and barrio savings fund programs as prescribed by the
Ministry through the Bureau.

A Barrio Guarantee Fund for the Samahang Nayon is hereby
constituted for the following purposes:

a. To guarantee the payment of land amortizations of members
within the purview of Presidential Decree No. 27;

b. To capitalize full-fledged cooperatives;

c. To purchase shares of stocks of and/or to capitalize
rural banks and development banks; and

d. To be used for other purposes as may be authorized by
the Ministry through the Bureau.

Members of the Samahang Nayon shall contribute to this Fund
a minimum of one cavan of palay per hectare per harvest or its
equivalent.

To implement the barrio saving fund program, the Agricultural
Credit Administration, the rural banks, the Philippine National
Bank and other authorized financial institutions are hereby
directed to automatically deduct from every production loan of
members of Samahang Nayon an amount equivalent to five percent
(5%) of such loans. Such amount shall be deducted at the time
the loan is released and shall be held in a special time deposit
account in the name of the Samahang Nayon for the account of the
member. Members who do not obtain production loans shall contri-
bute a minimum amount of five pesos (P5.00)per month).

The mechanics for the administration, utilization and dis-
position of funds under the barrio guarantee fund and the barrio
savings fund programs shall be as prescribed by the Ministry
through the Bureau.

Regulation 10. Grounds for Suspension/Cancellation of Cer—
tificate of Registration - The operation of a Samahang Nayon
may be suspended or its registration cancelled by the Minister
of the Ministry, after hearing, in the following cases:

a. Where such Samahang Nayon fails to function within a
period of six months from the date of registration;

b. Where such Samahang Nayon fails to exercise any of its
powers or discharge any of its duties and responsibilities under
the membership agreement;

c. Where the percentage of amortizing owners in default in
such Samahang Nayon exceeds 20%: and

213

any law of the Philippines; and the marketing contracts and
agreements entered into by kilusang bayan and their members
shall be considered not to be illegal nor in restraint of trade
nor contrary to the provisions of any law or statute enacted
against pooling or combinations.

 

. ..Regulation 18. Who May-Organize.=1Any group of small to.“ _
ducers and of consumers““F'Ilp1no citizens, of legal age, residingf':
working in the proposed area of operation, may organize a kilu-
sang bayan subject to the rules and regulations promulgated
by the Ministry through the Bureau.

A group of Samahang Nayon or other pre-cooperative organiza-
tions may organize a kilusang bayan.

Regulation 19. Articles of Incorporations - Articles of in-
corporation of a proposed kilusang bayan shall be signed by at
least fifteen (15) incorporators if the membership is composed
of natural persons, or by at least ten (10) incorporators
represented by their presidents if the membership is composed
of Samahang Nayon or other pre-cooperative organizations, and
acknowledged by them before a notary public or other officers
authorized to take acknowledgments.

No articles of incorporatioh shall be registered unless the
same conforms substantially with the model prescribed by the
Bureau.

Regulation 20. Treasurer's Sworn Statement - The Bureau
shall not register a kilusang bayan unless the articles of in-
corporation is accompanied by a sworn statement of the treasurer
elected/appointed by the incorporators showing:

a. In the case of a kilusang bayan with capital stock, that
at least twenty per centum (20%) of the number of authorized
shares of capital stock has been subscribed and that at least
twenty per centum (20%) of the subscription has been paid to him
in cash; or

b. In the case of a kilusang bayan without capital stock,
the number of members and the amount of their capital contri-
bution paid to him in cash. The payment/or transfer under
clauses (1) and (b) of this Regulation is for the benefit and
to the credit of the kilusang bayan. The Director of the Bureau
shall satisfy himself that the capital contribution of members
under this Regulation is sufficient for the initial operation
of the kilusang bayan.

Regulation 21. Code of By—Laws - Each kilusang bayan to be
registered shall adopt a code of by-laws. The by-laws shall
be filed with the Director of the Bureau at the time of the
filing of the articles of incorporation.

No code of by-laws shall be registered unless the same
conforms substantially with the model prescribed by the Bureau.

214

 

Regulation 14. Merger/Amalgamation - Provisional coopera-
tives are authroized to merge or amalgamate in order to qualify
for registration or re-registration as kilusang bayan, in which
case, the procedures set in Regulations 25 and 26 shall be
followed.

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Regulation 15. Organizations Considered as Kilusang Bayan -
Kilusang bayan shall mean only organizations which have complied
with the requirements of Presidential Decree No. 175, these rules
and regulations, as well as the requirements of the Ministry
through the Bureau.

For purposes of Section 9 of Presidential Decree No. 175,
the term kilusang bayan shall be considered as the equivalent of
the term "cooperatives” in the vernacular.

Regulation 16. Purposes - A kilusang bayan may be registered
for the mutual benefit of the members thereof, who have for their
common objectives any lawful purpose or purposes, more particularly
the following:

a. To encourage scientific production and marketing among
the members;

b. To provide goods, services and other requirements to the
members;
c. To encourage thrift among the members;

d. To create funds and extend credit to the members for
productive and provident purposes;

e. To build houses or to acquire lands for the members;
f. To insure against losses of the members;
a To promote and advance the economic, social and educa—

g.
tional condition of the members;

h. To undertake such other activities calculated to help
the members solve their problems on a cooperative basis;

1. To coordinate and facilitate the activities of kilusang
bayan; and

j. To establish, own or operate rural banks, cooperative
banks, development banks, cooperative insurance and cooperative
wholesale and retail complexes.

Regulation 17. Kilusang Bayan are not in Restraint of Trade -
Any registered kilusang bayan shall be deemed net to be a con—
spiracy nor a combination in restraint of trade nor an illegal
monopoly, nor an attempt to lessen competition or to fix prices
arbitrarily or to create a combination or pool in violation of

 

215

The resolution stating the reasons for and the decision
for the transfer and the resolution of acceptance both approved
by a vote of two-thirds (2/3) of all the members entitled to vote
at the general assembly of the kilusang bayan transferring and
the kilusang bayan accepting the transfer held separately for
the purpose, shall be transmitted to the Regional Director of
,tQ21Mifll§ktxmflhaushaiizpzocess;theisameland_tranemit—thempéperé-«~
together with his recommendation to the Director of the Bureau.
If the Director of the Bureau approves the transfer, he shall
cancel the registration of the transferring kilusang bayan
and order the transferee kilusang bayan to prepare a financial
statement together with its schedule.

Regulation 27. Division of Kilusang Bayan — Division of a
kilusang bayan into two or more kilusang bayan is to be effected
when the exigencies of the business warrant and demand, pro-
vided that the viability of the groups is assured. All such
divisions shall be approved by a vote of two-thirds (2/3) of
all the members entitled to vote at a general assemply called
specifically for such purpose. The board shall place for
approval the plan for the division of membership, business,
assets, and the liabilities of, and claims against the kilusang
bayan. The approved resolution duly certified to by the
secretary and attested by the board of directors of the kilusang
bayan shall be submitted to the Regional Director of the
Ministry who shall within ten (10) days from receipt thereof,
transmit the pepers to the Director of the Bureau, together
with his comments and recommendation. If the Director of the
Bureau is satisfied of the need for the dividion, and the pro-
posed kilusang bayan have fair chances to success, then he shall
approve the division.

Upon approval of the division, each division shall submit
a new set of articles of incorporation and by-laws and other
papers that are required for registration to the Regional Dir—
ector of the Ministry who shall process the same and transmit
the papers together with his recommendation to the Director of
the Bureau.

The new kilusang bayan shall become bodies corporate upon
the issuance of their respective certificates of registration
by the Director of the Bureau. The Director of the Bureau shall
thereafter cancel the registration of the old kilusang bayan.

Regulation 28. Claims of Creditors - The Director of the
Bureau shall not approve any division unless there is a reso-
lution binding the new kilusang bayan to be jointly and severally
liable for valid claims of creditors. In case of mergers, the
new kilusang bayan shall bind itself to be liable for valid
claims of creditors.

 

216

Regulation 22. Limited and Unlimited Liabilities - A
kilusang bayan which has for its purpose(s) one or more of those
specified under Regulation 16, may be registered with limited or
unlimited liability; provided, that the liability of a kilusang
bayan which has a kilusang bayan as a member shall be limited.

In the case .of a kilusang bayan with limited liabilityrlan
member shaII‘56”11able for the debts 6f the kilusang bayan to
the extent of the unpaid amount of his subscription to the cap—
ital stock or to the membership capital.

In the case of a kilusang bayan with unlimited liability, a
member shall, upon the liquidation of the kilusang bayan, be
jointly and severally liable for the debts of the kilusang
bayan.

Regulation 23. Evidence of Registration - A certificate
of registration signed by the Director of the Bureau shall be
conclusive evidence of registration unless it is proven that
the same has been cancelled.

Regulation 24. Effect of Registration - Upon registration,
the kilusang bayan shall be a body corporate.

Regulation 25. Merger - Two or more kilusang bayan may
join together as a single kilusang bayan upon a resolution of
each kilusang bayan as approved by a vote of two-thirds (2/3)
of all the members entitled to vote in a membership meeting
held for the purpose. The resolution shall state the reasons
for such consolidation and shall be certified to by the secre—
tary and attested by the board of each kilusang bayan.

The kilusang bayan which have decided to consolidate shall
make a physical inventory and valuation of their total assets
and a statement of their total liabilities. The sum total of
the assets and liabilities shall constitute the assets and lia-
bilities of the new kilusang bayan. The certificate of regis-
tration of the consolidating kilusang bayan shall be cancelled
and a certificate of registration shall be issued to the new
kilusang bayan.

Evidence of membership contributions shall be surrendered
to the new kilusang bayan and new forms for membership contri-
butions shall be issued in lieu thereof.

Regulation 26. Transfer of Assets and Liabilities of
Kilusang Bayan — A kilusang bayan transferring its assets and
liabilities to another kilusang bayan shall make a physical
inventory and valuatHXIOf its assets and its liabilities to be
duly certified to by the treasurer/manager and attested by the
board of directors. Said transfer shall be duly acknowledged
in writing by the manager of the transferee kilusang bayan and
concurred in by its board of directors.

217

b. Having conflicting interest with the business of the
kilusang bayan;

c. Having been absent for three (3) consecutive board or
committee meetings without being excused.

d. Having been removed from office by the general assembly;

'3'

.. 13nd.1_;;__1..---_ 3:211 -11: ':-:L 1 1...- .. 11.1.1.2 .... 112.11...- 1 :1
e. Being a full time employee of the kilusang bayan concerned.

Regulation 34. Revomal of Officer, Director or Committee
Members - An elected officer, director or committee member may
be removed by a vote of the majority of the members entitled to
vote at an annual or special general assembly. The person in—
volved shall have an opportunity to be heard at said assembly.

Regulation 35. Contract for Profit Prohibited - No director,
officer, committee member or employee, during the term of his
office, shall be directly or indirectly a party to a contract
for profit with the kilusang bayan.

Regulation 36. Illegal Acts of Cooperative Officials and
Employees - The directors, committee members, officers and em-
ployees of the kilusang bayan shall, in the discharge of their
respective duties, act in accordance, with the Decree, regula-
tions, by-laws and resolutions of the general assemblies, and
for any willful and deliberate violations of the above, those
responsible shall be held jointly and severally liable up to
the extent of the damage or prejudice suffered by the kilusang
bayan.

Regulation 37. Purchase of Shares of Stocks of Rural Banks -
Samahang Nayon(s) and kilusang bayan(s) shall have the option
to purchase government- -held preferred shares of rural banks as
well as common stocks therein.

For this purpose, Samahang Nayon are authorized to utilize
the sum of money existing under their barrio guarantee fund and
barrio savings fund programs. In any case, any government held
preferred shares so purchased shall be converted to voting
stocks. Where any of the shares of stocks are owned by Samahang
Nayon or kilusang bayan, they shall be alloted membership in the
board of directors of the rural bank in proportion to the equity
they hold vis-a-vis the equity of other stockholders. In any
case, at least one member of the board of directors of the
rural bank shall be duly authorized representative of the Sam-
ahang Nayon(s) and/or kilusang bayan(s).

Regulation 38. Establishment of Rural Banks - Samahang
Nayon(s) and/or kilusang bayan(s) are authorized to establish
rural banks in any province(s) or locality and may operate
branches as needs of members would require. Credit cooperatives
may register as rural bank or private development bank. Such
rural banks shall conduct business within the area of Operation

 

“"1

218

MEMBERSHIP

Regulation 29. Membership in Kilusang Bayan — The following
may qualify for membership in a kilusang bayan:

a. Any naturaliperson who.is:.- . ,.;—

.... -_ .-- “-

1. A citizen of the Philippines;

2. Of legal age and with capacity to contract or head
of a family; and

3. A small producer or a consumer in the area of Opera-
tion of the kilusang bayan.

Any member of a Samahang Nayon.

A registered Samahang Nayon, or other pre-cooperative
organization.

d. Any registered kilusang bayan.

Regulation 30. Membership of Minors - Persons of at least
15 years of age who have visible means of income through their
own independent work and effort and who can in addition comply
with the qualifications for membership may likewise qualify for
membership in a kilusang bayan.

Regulation 31. Final Authority in a Kilusang Bayan - Final
authority in every kilusang bayan shall be vested in the general

assembly of the members.
BOARD OF DIRECTORS AND COMMITTEES

Regulation 32. Board of Directors and Committees - A kilu-
sang bayan shall'be managed by a board of directors of not less
than five nor more than fifteen directors elected by the general
assembly for a term fixed in the by-laws but not exceeding two
years and shall hold office until their successors are elected
and have qualified or until are removed. The by-laws may provide
for such committees as its business and operations may require.
Officials of the Ministry and the Bureau may serve as members
of the board of directors of any kilusang bayan upon authoriza-
tion of the minister of the Ministry.

Regulation 33. Disqualifications - Members under any of the
following circumstances are disqualified to be voted upon
to the position of director or committee member or to continue

as such in any kilusang bayan:
a. Holding any elective position in the government except
barrio council men;

219

Common stock shall be issued only to members and shall
receive an interest rate which shall not exceed the rate
established by the Ministry.

b. Loan capital, including deposits of any kind;
c. Retains authorized on a percentage or per unit basis; . 1L
. ~mr' M! ‘

in.
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"‘ d “Revolving capital, by deferment of the payment of patron-
age refunds and/or by authorized retains from patronage refunds;
and

e. Fees, dues, levies, subsidies, grants, donations, fines
and such other sources as may be agreed upon by the members or
may be authorized by the Ministry.

Regulation 42. Loans, Grants and Donations - The Philippine
Government or any of its political subdivision is empowered to
give loans to kilusang bayan and grants or donations in any form
to duly registered Samahang Nayon and/or kilusang bayan. Samahang
Nayon and kilusang bayan may receive grants or donations in any
form from any source, local or foreign.

Grants, donations, gifts, bequests under this section shall
be exempt from any and all forms of donor and donees' taxes in-
cluding gift taxes. Such grants, donations, gifts, bequests
shall be allowable deductions under the provisions of the National
Internal Revenue Code for income tax purposes.

Regulation 43. Computation of Net Income - The net income
of every kilusang bayan shall be the amount remaining after de-
ducting from the gross income the cost of operations and other
expenses provided for in the approved budget.

Regulation 44. Distribution of Net Income - Unless a dif-
ferent percentage is prescribed by the Bureau, the net income
of every kilusang bayan shall be allocated in the following manner:

a. At least ten percent (10%) for General Reserve Fund;

b. Ten percent (10%) for cooperative education and training
which amount shall form part of the operating expense of the
kilusang bayan. One half of this amount shall be utilized by
the kilusang bayan for the education and training of its officers
and members. The other half shall be remitted to the COOpera-
tive Education and Training Fund which shall be administered by
the Advisory Board created under the Presidential Decree No. 175;

c. The remainder shall be allocated for interest on capital
and/or patronage refunds, as determined by the board of directors.

Existing Reserve Funds of cooperatives established under
previous cooperative laws shall form part of the General Reserve
Fund provided herein.

Regulation 45. Cooperative Education and Training Fund —
There is hereby created a Cooperative Education and Training Fund.

 

 

220

of the Samahang Nayon(s) and/or kilusang bayan(s). Such rural
banks may receive deposits from the general public: provided
that deposits from the general public shall in no case exceed
the deposits of members of such rural banks. Such rural banks
shall extend loans only to their members, members of the Sama-
hang Nayon(s) and kilusang bayan(s).

Regulatf6h‘39¥¥Salary;Déduction Agreement - (altarmemnerr**r—“
of a kilusang bayan may,notwithstanding the provisions of
existing laws, execute an agreement in favor of the kilusang
bayan authorizing his employer such amount as may be specified
in the agreement and to pay the amount so deducted to the
kilusang bayan in satisfaction of any debt or other demand owing
from the member to the kilusang bayan.

(b) Upon the execution of such agreement the employer shall,
if so required by the kilusang bayan by a request in writing
and so long as such debt or other demand or any part of it
remains unpaid, make tne deduction in accordance with the
agreement and remit iorthwith the amount so deducted to the
kilusang bayan.

(c) The term "employer" as used in this section includes
the Government of the Philippines or of any local authroity
and any other person, antural or juridical, who has under his
employ a member of a kilusang bayan.

Regulation 40. Exemption from Bidding Requirements - Kilu—
sang bayan transacting business with the Government of the
Philippines or any of its political subdivisions or any of its
agencies or instrumentalities, including government-owned or
controlled corporations shall be exempt from bidding requirements
upon approval of the contract by the Bureau.

CAPITAL AND FUNDS

Regulation 41. Sources of Capital ~ Kilusang bayan may
derive funds from: '

a. Members' capital contribution, which may either be in
the form of shares of stock (if stock cooperative) or members'
contribution (if non-stock cooperative).

The capital stock of kilusang bayan may consist of common
stock as well as preferred stock, if the latter is provided for
in the by-laws.

Preferred stocks shall not be entitled to vote. They shall,
however, have preference as to assets in case of liquidation or
dissolution of the cooperative. They shall receive interest
rates higher than common stocks. Such stocks may be issued to
members as well as non-members.

 

. .-——“

—.-

221

f. If the kilusang bayan has persistently violated Presi-
dential Decree No. 175, orders of the Ministry and the Bureau,
these regulations, or its by-laws; or

g. If the kilusang bayan is no longer found in the area of
operation; or

«_1Q;3L£,there is fraud anmiaxepzesentationnduring themreg¥SA——-

tration of the kilusang bayan; or

i. If there is grave abuse of its charter or privileges
authorized under the Decree.

In all cases wherein it appears that the appointment of a
liquidator is unnecessary, the Director of the Bureau shall
after hearing, issue an order cancelling the certificate of
registration of a kilusang bayan. Upon the cancellation, the kil-
usang bayan shall cease to be a body corporate.

Regulation 47. Types of Kilusang Bayan - Kilusang Bayan may
fall under any of the following categories;

Producers;
Marketing;
Credit;
Consumers; and

(DO-00‘”

Service

Kilusang bayan for producers are those which are organized
primarily for the production of a particular product or commodity.

Kilusang bayan for marketing are those which are engaged
primarily in the marketing of products of members as well as
the supply of production input.

Kilusang bayan for credit are those which are engaged in
receiving deposits and granting loans. Kilusang bayan for
credit singly or in association with one another may register
as rural banks, cooperative banks, development banks and Other
forms of banks. Such banks may qualify for the Management
Training and Assistance Program as well as the Cooperative De-
velopment Loan Fund.

Kilusang bayan for consumers are those which are engaged
in procuring and distributing goods to members and non-members
for their mutual benefit.

Kilusang bayan for service are those which are engaged
primarily in rendering service to meet the special needs of
members of a community and includes. among others, housing. labor
and insurance COOperatives.

 

222

The funds, assets and properties of whatever name or nature
of the defunct Central Cooperative Educational Board are hereby
constituted to form part of the abovementioned fund.

Proceeds from sale of printed materials provided by the
Bureau to the Samahang Nayon, registration fees and audit fees
shall likewise form partlofgthistund. ;; 111-

.- ...-...
...-as. -‘ ‘

flu.” .---....

This fund shall be transferred to an appropriate pambansang
kalipunan ng mga kilusang bayan (national cooperative union) as
soon as one is organized and registered. In the interim, such
Fund shall be administered by the Advisory Board created under
Presidential Decree No. 175.

LIQUIDATION

Regulation 46. Liquidation — Liquidation shall be effected
upon dissolution of a kilusang bayan either voluntarily or
involuntarily.

In a voluntary dissolution, the resolution dissolving the
kilusang bayan adopted and signed by two-thirds (2/3) of all the
members entitled to vote at a general or special assembly called
for the purpose shall be submitted to the Director of the Bureau
through the Regional Director of the Ministry for approval. It
shall be accompanied by a sworn statement of the board of direc-
tors certifying among other:

5 a. That the resolution is genuine and authentic;

b. That the dissolution shall not prejudice its members or
any person whomsoever; and

c. That the members' investments including equities, if any,
have been returned to them.

In an involuntary dissolution, the Director of the Bureau
through the Regional Director of the Ministry may order in
writing that the kilusang bayan be dissolved for any of the
following:

a. After an audit or inquiry the report theron shows that
the kilusang bayan is inoperable; or

b. If the kilusang bayan has not commenced its business
within one year without just cause from the date of registration;
or

c. If the kilusang bayan has ceased working for one year; or

d. If the kilusang bayan has failed to provide financial
and other reports to its members; or to send to the Ministry the
annual reports required by the Ministry through the Bureau; or

e. If the kilusang bayan has been doing business liable
to (:atnse injiirx° tr» the> DifllllCT; or:

223

COOPERATIVE DEVELOPMENT LOAN FUND

Regulation 54. Cooperative Development Loan Fund - The
Cooperative Development Loan Fund created under Section 6 of
Presidential Decree Np. 175‘isvhereby vested with corporate _g...
personality, with powef’ ' en éf‘into contracts, to own and
dispose of property, to sue or to be sued, and such other powers
necessary to carry out the objectives of the Fund.

The Management Committee charged with the administration
of the Fund shall represent the said Fund and shall have in
particular, the following powers, duties and responsibilites:

a. It shall have the power to contract, to receive grants,
donations and other funds from the sources identified in Section
6, Item (a) of Presidential Decree No. 175 as well as to obtain
loans from local and foreign agencies;

b. It shall administer the funds of the Cooperative Devel-
opment Loan Fund and disburse the same for the purposes and
within the limitations set forth in Section 6, Item (b) of
Presidential Decree No. 175;

c. It shall adopt and promulgate realistic standards for
the development loan fund to be used either as loan fund, coop—
erative guarantees for loans, or advances to kilusang bayan for
the purchase of equity of rural banks;

d. It shall invest idle funds of the Fund as it deems
best;

e. It shall have power to do any and all acts necessary
for the discharge of any of the above powers, duties and res-
ponsibilities; and

f. As soon as it is constituted, the Management Committee
shall meet to promulgate rules of procedure to govern its workings
as a body.

Regulation 56. Term of Office of Members — Members of the
Management Committee coming from the cooperative sector shall
hold office for a term of two years; Provided, however, that of
the first two appointees, one should hold office for a term of
one year only, to be determined by drawing of lots. Thereafter,
all shall hold office for two years.

Nothing in this regulation shall preclude re-appointment
to the Committee.

MANAGEMENT AND TRAINING ASSISTANCE PROGRAM

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224

KATIPUNAN (FEDERATIONS) NG KILUSANG BAYAN

Regulation 48. Who May Organize Katipunan (Federation) ng
Kilusang Bayan - Two or more kilusang bayan may form a katipunan.

.1.. Re ulation 49. MgggggshinJguflgmpership shall be open1oniyzaare.
to E1 usang bayan. Registered kilusang bayan may unite to form
katipunan on the provincial, regional and/or national levels.

Regulation 50. Distribution of Net Income - The provisions
cnfRegulation43 and 44 concerning computation and distribution
of net income shall apply to katipunan, except that the general
reserve fund to be set aside shall at least be twenty (20%)

percent of the net income.

 

KALIPUNAN (UNION) NG KILUSANG BAYAN

Regulation 51. Who May Organize Kalipunan ng Kilusang
Bayan - Two or more kilusang bayan may form a kalipunan.

Regulation 52. Pambansang Kalipunan ng mga Kilusang Bayan —
There shall be registered only one pambansang kalipunan ng mga
kilusang bayan at the national level, to which all types of
kilusang bayan, provincial, regional and national katipunan and
kalipunan may affiliate. Such a kalipunan may:

a. represent all the kilusang bayan in the Philippines at
home and abroad.

b. acquire, analyze and disseminate economic, statistical
and other information regarding kilusang bayan;

c. conduct studies in theemcnomic, legal, financial, social
and other phases of cooperation and publish the results thereof;

d. promote the knowledge of cooperative principles and
practices;

e. develop the cooperative movement in the Philippines
within the framework of the national economic plan of the
government;

f. make available audit services to its members;

3. plan and implement a program of cooperative education; and

h. advise the appropriate authorities on all questions
relating to kilusang bayan.

Regulation 53. Applicability of Provisions for Katipunan ng
Kilusang Bayan to Kalipunan - The provisions of the regulations
on Katipunan ng kilusang bayan shall as far as practicable
d})p1}' tti ka] iptnian.

225

MISCELLANEOUS PROVISIONS

Regulation 62. Bar of Suit During Liquidation - No court
shall take cognizance of any civil matter connected with the
liquidation or dissolution of a samahang Nayon/kilusangwbaygpm g
underanhesezxegnlations. When a liquidatfén‘orfle?‘Has“beefl“fiade‘
no suit or other local proceedings shall lie or be proceeded
with against the Samahang Nayon or kilusang bayan except by
leave of the Director of the Bureau and subject to such terms
as he may impose.

Regulation 63. Acts of Kilusang Bayan not to be Invalidated
by Certain Defects - No act of a kilusang bayan or board or
committee or of any officer or liquidator done in good faith in
the course of the business of the kilusang bayan shall be deemed
to be invalid by reason only of some defect subsequently dis—
covered in the registration of the kilusang bayan or in the for—
mation of general assembly or in the constitution of the board
or committee or in the appointment or election of directors,
committee members, liquidator or officer or on the ground that
such person was disqualified for his appointment.

No act done in good faith by any person appointed under
these Regulations shall be invalid by reason only of the fact
that his appointment has been cancelled by or as a consequence
of any order subsequently passed under these Regulations.

The Minister of the Ministry shall decide whether any act
was done in good faith.

Regulation 64. Collection of Past Due Loans — Samahang
Nayon are hereby authorized to collect past due loans to farmers
granted by the Agricultural Credit and Cooperative Financing
Administration and the Agricultural Credit Administration. They
shall be entitled to a commission of ten (10%) percent of the
amount collected for loans that are past due as of September
21, 1972 and five (5%) percent for every additional year of
deliquency prior to September 21. 1972: Provided, that in no case
shall such total commission exceed fifty (50%) percent of the
amount collected.

All collections shall be turned over to the neareSt branch
office of the Agricultural Credit Administration, together with
the list of cooperatives and their respective members and the
amount paid by each.

The commission shall be transmitted immediately to the
depository bank of the Samahang Nayon for the account of the
Samahang Nayon which shall accrue to the Barrio Guarantee Fund.

 

 

226

and training assistance program shall have the following powers,
duties and responsibilities:

a. To enter into contract with any educational institution
or organization for training programs;

b. To disburse funds for the cost of professional managers,
training programs and training materials;

c. To identify and select kilusang bayan to be placed
under the program, as well as the educational institutions or
organizations which will participate in the program;

d. To build up a corps of well—trained and highly competent
professional managers of kilusang bayan;

e. To assist the cooperative movement in developing a
movement wide career system;

f. To administer the Cooperative Education and Training
Fund as provided for in Regulations 44 and 45; and

g. To perform any and all other acts as may be necessary
to carry out the duties, responsibilities and objectives of the
management training and assistance program.

As soon as constituted, the Advisory Board shall meet to
promulgate rules of proéedure”to govern its workings as a body.

Regulation 58. Personnel Policies - The Advisory Board
may adopt and implement policies for its corps of managers which
may include, among others, security of tenure, financial in—
centives, leave, retirement, and other benefits.

Regulation 59. Exemption from Regulation of Kilusang Bayan
Under the Management and Training Assistance Program — Kilusang
bayan placed under the Management and Training Assistance Program
may be exempted from these regulations by the Minister of the
Ministry, upon recommendation of the Advisory Board.

Regulation 60. Term of Office of Members - Members of the
Advisory Board coming from the cooperative sector shall hold
office for a term of two years; Provided, however, that of the
first two appointees, one shall hold office for a term of one
year only, to be determined by drawing of lots. Thereafter, all
shall hold office for two years.

Nothing in this regulation shall preclude reappointment to
the Board.

Regulation 61. Exemption from Bidding Requirements - Con—
tracts entered into by the Advisory Board within the purview
of Regulation 57 shall be exempt from bidding requirements.

 

227

Regulation 65. Rights Acquired - Members of existing
cooperatives as of the promulgation of Presidential Decree
No. 175 who are disqualified on the ground of nationality
may continue their membership therein until terminated by
resignation, death or removal for cause.

...l.rJ:Done in the Ci ”hfs‘gth day of fifify,w in

the year of Our Lord, nineteen hundred and seventy-three.

 

(SGD.) FERDINAND E. MARCOS
President
Republic of the Philippines

 

APPENDIX III

Conceptual Models

228

 

Agricultural Credit and
Cooperative Financing
Administration (ACCFA)
(A Government Agency

 

 

 

18 Cooperative
Supervising
Agencies

 

 

 

 

.3Y

 

Farmers Coop Marketing
Association
(FaCoMa)
Municipal-based

 

 

 

    
   

 

 

 

 

 

Village Village ...
Y Z
Farmers Farmers Farmers
... F ... F F ... F
le an 1y my 21 n2

 

 

 

 

 

 

APPENDIX FIGURE 1. Conceptual Model 1 (1953-70)
(Top-Down Model)
(Nation-wide Policy)

Ministry of Agri-
cultural/Ministry
of Local Govern-
mental Community
Development: Bur-
eau of Cooperative
Development (BCOD)

   

  
 

Village
ssociation

Samchang
Nayon

7

 
   
     
 

 

 

 

 

APPENDIX FIGURE II.

229

 

 

Cooperative Marketing
System of the
Philippines (CMSP)/
National Cooperative
Union of the
.Philippines (NCUP)

 

 

 

 

 

Area Cooperatives
(AMC/CR3)
Multi-municipal/
Provincial-based

 

 

 

  
 
    

Village
Association
Samchang
Nayon

Y

  

 

 

Farmers

Fly .0. Fny

 

Conceptual Model II (1972-1983)
(Top-Down Model)
(Nation-wide Policy)

  
 
 

 
 

Village
Association
Samchang
Nayon
Z

     

     

 

Farmers

F ... F

12 n2

 

230

 

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APPENDIX IV

A Rejoinder on Organizational
Effectiveness and/or Performance

231

A REJOINDER ON ORGANIZATIONAL
EFFECTIVENESS AND/OR
PERFORMANCE

Organizational Effectiveness (OE)

 

1.

Although the literature on OE is large and growing,
there seems to be little consensus on how to conceptu-
alize, measure, and explain effectiveness. Measurement
criteria fall on either one or two of these classifi-
cation: single, multiple and composite (Dessler, 1980;
Steers, 1975; Campbell, 1976; Child, 1974).

 

Researchers conceptualize OE in one of these models:

a. Behavioral-Attitudinal Model (BAM);
b. Processual Model (PROM); and
c. Goal Attainment Model (GAM).

BAM is claimed to be the most popular and most precise
measure of OE. Examples of criteria are:

a. Employee satisfaction

b. Absence of tension and conflict
c. Psychological commitment

d. Turnover and absenteeism

e. Interpersonal relations

f. Morale

PROM describes the organizations internal operations
and those that describe the link between organization
and environment. Examples of criteria are:

a. Flexibility

b. Open communication

c. Manpower acquisition, retention and utilization

d. Creativity

e. Adaptability

f. Control over its environment

9. Ability to compete successfully in acquiring
scarce and valued resources

GAM defines OE with respect to goals/objectives.
Examples of criteria are:

a. Prescribed goal

b. Derived goals from functional theory
0. Private goals of leaders/participants
d. Actual goals vs. official goals

232

Effectiveness criteria may reflect the perspectives
of at least 3 different reference groups:

a. Profitability for theowners;
b. Satisfaction for the employees:
c. Societal value for society at large.

 

 

 

Performance

 

7.

Most of performance studies are internally focused and
covers two theoretical propositions:

a. Universalistic Theory (UT)
b. Contingency Theory (CT)

UT comprises arguments that the presence of certain
attributes will be conducive to superior performance in
most if not all circumstances. Some propositions are
as follows:

a. Youthful management as a good manager. This holds
that successful leadership of any organization will
depend on the presence of certain qualities of
character, personality, and ability among its
senior managers.

 

b. Compatibility of objectives and managerial attitudes.
This holds that the company objectives and the
attitudes of the management staff towards the objec-
tive influence success.

 

c. Ownership and control. A general assumption among
economists interested in the "theory of the firm"
is the extent to which an organization is controlled
by its legal owners, as opposed to professional
managers, will influence the objectives which it
pursues.

 

d. Allocation of manpower resources. A further argu-
ment applied universally to any kind of organization
is that the internal allocation of manpower and
other resources between different functions will
ineluence the kind of performance that is achieved.
For example, if more resources are put into market-
ing, sales should increase. If more are put into
design and development, the rate of innovation
should increase.

 

e. Size of company. A universalistic thesis that
larger organizations should achieve a superior
level of performance if their managers are able
to take advantage of technological marketing and

 

10.

233

other economies of scale.

f. Bureaucracy and performance. This holds that
above average companies are less bureaucratic
and are less formalized with their research and
development (R&D).

 

CT contains propositions that the attributes favorable
to higher performance will alter according to circum-
stances under which an organization is operating.

This alternative theory of performance has attracted
more attention in recent years. Factors associated
with high performance are expected to vary along with
differences in an organizational context -- specially
with differences in its environment, size and tech-

nology.

a. Environment -- problem of environment variability
among and within industries, i.e. not necessarily
homogeneous. Environment is influenced by tech-
nology and internal attributes of the organization
including their product market.

 

 

b. Size of organization. This influences structural
variables.

 

c. Technology -- performance will be enhanced if
organization is designed to suit the prevailing
type of technology.

Finally, we shall conclude this rejoinder that in all
likelihood, social and behavioral scientists who have
studied OE/performance resemble the blind men who tried
to describe the whole elephant after each one felt one
of its parts; none of the descriptions are wrong, but.
each one is incomplete and at its best can only offer
partial ggidance.