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I IVE yardsticks for measuring the 

 soundness of farmer-owned co-op- 

 eratives were outlined by Charles 

 B. Shuman, president of the Illi- 

 nois Agricultural Association, in 

 late August before the American Insti- 

 tute of Cooperation at the University of 

 Wisconsin, Madison, Wis. 



In his address entitled "Building for 

 the Future," he pointed out that quite 

 generally the farmer's idea of the func- 

 tions and objectives of a cooperative 

 are quite different from the ideas of 

 social reformers and idealists who look 

 upon the cooperative movement as a 

 means to some end. Most farmers, he 

 said, consider their co-ops as essential 

 farm tools with a completely useful 

 function. 



"The first test," President Shuman 

 said, "that I would apply to a coopera- 

 tive or privately-owned business is 

 whether or not there is a real and con- 

 tinuing need for the services offered. 

 This survey must be factual and realistic 

 and not based on what farmers should 

 want but rather on the services for 

 which they are willing to pay. 



"Strict application of this test," he 

 said, "will not hamper the future ex- 

 pansion of farmer cooperatives as there 

 remains an abundance of areas and 

 fields of activity where existing monop- 

 olistic practices provide a real need 

 for cooperative action." 



His second point posed the question: 

 "Has an adequate capital structure been 

 provided?" In other words, is the co- 

 op properly financed? "During recent 

 years of constantly increasing price 

 levels," he continued, "it has been easy 

 to neglect financial planning. With the 

 return of more uncertain economic con- 

 ditions, it will be suicidal for any co- 



Yardsticks For a 

 Sound Co-op 



lAA President Shuman Lists: 



1. Need; 2. Sufficient Capital 



3. Good Management; 4. Adaptability; and 



5. Fit in with General Farm Organization 



Keynote speakert at the Amerltan Institute of Coopera- 

 tion are shown here left to right: fzro T. Benson, 

 member. Council of Twelve, Churth of Jetut Christ, Salt 

 lake City; lAA president Charles B. Shuman an6 Dr. 

 ICarl D. Butler, retiring president ot the American In- 

 ititute of Cooperation. 



operative to neglect this fundamental 

 of good business." 



President Shuman pointed out that 

 the farmers in Illinois have long be- 

 lieved that the soundest cooperatives 

 were financed by farmers themselves 

 from their own funds through pur- 

 chase of preferred stock. "A coopera- 

 tive," he said, "that builds its financial 

 structure solely or even largely upon 

 earned or 'loyalty' capital may easily 

 spend more time and money in its mem- 

 bership relations efforts than the added 

 interest cost to an organization with 

 greater ownership loyalty." 



His third safeguard pointed to the 

 importance of a strong, experienced, 

 progressive management. "The future 

 progress of cooperatives will depend to 

 a great extent upon the placing of 

 proper emphasis on two fundamentals 

 of good management by boards of di- 

 rectors and administrators. First, the 

 cooperative exists only to serve the 

 membership and not for the benefit of 

 any employee and secondly, continua- 

 tion of an employee in a position to 

 which he is not suited is not in the self 

 interest of the individual concerned." 



His fourth principle called for man- 

 agement sensitive and adaptable to 

 changing conditions and needs. Among 

 the valuable aids to good managerhent 

 with which our cooperative leaders are 

 becoming familiar. Shuman said, in- 

 clude retirement plans, personnel de- 

 partments, job evaluation and descrip- 

 tion, internal auditing, uniform account- 

 ing and controls, business engineering 

 surveys, job efficiency tests, and func- 

 tional organization charts. 



"Like a new farm tractor." he said, 

 "the successful cooperative of the future 

 will need constant repair, moderniza- 

 tion, and alteration. Membership use 



and patronage will continue at a satis- 

 factory level only if the cooperative 

 continues to improve service and an- 

 ticipates the needs of its patrons. 



"My fifth yardstick for measuring the 

 fitness of a cooperative to build into the 

 future is somewhat apart from the more 

 tangible business factors previously dis- 

 cussed. While not yet generally rec- 

 ognized, it is my conviction that the 

 most successful farmer cooperatives of 

 the future will be parts of a coordinated 

 pattern for a better agriculture rather 

 than a special interest or commodity 

 group tending to split into segments. 



"More and more, agriculture is be- 

 coming a minority group in our nation. 

 We cannot afford to stand alone in 

 small commodity or sectional groups. 

 As big government grows bigger and 

 as labor and business groups organize 

 more solidly it becomes increasingly 

 important that agriculture speak with 

 one strong voice. Farmers will cer- 

 tainly insist that their cooperative busi- 

 ness organizations be closely coordi- 

 nated with their general farm organiza- 

 tion. 



"Perhaps these few examples will 

 suffice to illustrate that building for the 

 future is not alone a matter of exact 

 formula. The future of our farmer co- 

 operatives will more and more depend 

 upon the quality of our leadership. We 

 can no longer depend solely upon the 

 momentum of idealism and evangelism. 

 Our continued progress will be earned 

 by building on men and ideas plus 

 loyalty. I am certain that with a proper- 

 ly trained leadership insisting upon 

 maintaining the ideal of service to 

 farm people our cooperatives will grow 

 and prosper through the application 

 of sound business principles by men 

 who are not afraid of new ideas." 



OCTOBER. 1949 



