Creating a Governance Structure
Who’s in charge? Who gets to decide?
To answer these questions, groups need to figure out how to create a governance structure. An organization’s governance defines people’s roles and responsibilities so everyone knows what needs to be done, and who does what to make the organization function properly.
This tool outlines the process of setting up a governance structure.
Governance is often defined as “who gets to decide what”. In organizations like co-ops, this means everyone involved need to understand the purpose of the organization, how they fit into this vision, and what they need to do to fulfill their roles.
Here’s the model many organizations use:
The graphic above shows the different roles in the organization and who reports to whom. In a co-op, members as owners have the final say on many important decisions. But they delegate authority to the board of directors. The board, in turn, delegates authority to management (if there is any). Management oversees staff (if there is any).
The first step in figuring out “who should decide what” is answer the question “who owns this?” Co-op members are the people or businesses who use and own the co-operative business.
For this reason, it’s important during a co-op’s start-up phase to be clear about who the members should be. Choosing people or businesses with aligned interests to be in the ownership group is important to the success of co-operative governance.
If we break this down into types of co-operatives, we can see how this works:
Sometimes it’s easy to tell who a co-op’s members/owners should be. If a group of farmers want a co-op to package and ship their vegetables, those producers should own and make decisions about the co-op.
But it’s not always immediately obvious who the owners of a co-op should be. To figure out a co-op’s structure, you also need to determine who has the skills and resources needed, and who is willing to put in the work to get the co-op started and keep it running.
A rural community with a population of about 330 is located between two cities in southern Saskatchewan. Its population has declined steadily over the last decade. Many senior citizens in the community need to move out of their homes to a place that provides more care. Currently, they generally move to a city to find a housing option that works for them. But this means leaving their family and friends behind.
A group of community members see a business opportunity in opening a senior’s facility, but private developers are hesitant to invest in a project that can be accessed within an hour’s drive of a larger center. None of the interested community members have the experience or resources to make the investment themselves. The town has strong charitable spirit and people are interested in providing volunteer time to help seniors stay in or return to the community.
This case study is based on the real story of the Furrows and Faith Retirement Villa Co-operative in Mossbank, Saskatchewan. Generally, residents of a housing co-op should be its members (and therefore owners). In this case, the group did something different.
Instead, Mossbank formed a community service co-op. The co-op has an open membership and is led by volunteers. Three important considerations went into this decision:
This case highlights some important practical decisions groups need to make to ensure the business is sustainable in the immediate, and long-term, future. As your group starts a co-operative business, ask yourselves these questions:
Crafting a co-op’s governance structure and making sure all the necessary pieces are in place can be tricky. Co-operatives First can help your co-op through this process with our incorporation support and good governance workshop. If you’re interested in a deeper understanding of co-operative governance, check out our free, online Good Governance Matters course.
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