PROBLEMS OF COOPERATIVE MARKETING ASSOCIATIONS 25 



The overhead expense of many organizations is high in comparison 

 with the volume of business handled. As has been shown, an in- 

 adequate volume of business is a common cause of this condition. 

 Other causes occurring frequently are too many employees and 

 inefficient employees. It has been a fairly general practice to organize 

 an office and field force to handle a volume of business anticipated 

 during the wave of enthusiasm attending organization. Often the 

 new organization handles considerably less business than was ex- 

 pected, but there is little decrease in the fixed overhead. Heavy 

 deductions from the receipts for members' products, a dissatisfac- 

 tion of members and a further decrease in the business of the associa- 

 tion have resulted. On the other hand, cooperative associations have 

 started with a small force that was increased gradually as the volume 

 of business justified additional employees. Many of these organiza- 

 tions have been able to operate as cheaply as, or more cheaply than, 

 competing private concerns. As a rule, the membership has increased 

 and volume of business has been satisfactory. 



Cooperation presents new problems of management, finance, and 

 accounting. Men with training in other lines of business have not 

 found identical problems in cooperative organizations, and therefore 

 have been compelled to make readjustments. This has added to the 

 difficulties cooperative associations have experienced in securing 

 competent employees. 



Failures caused by inefficient management are frequently charge- 

 able to the board of directors. The board, of course, is responsible 

 for the employment of the manager. Further than this, it is, or 

 should be, responsible for the policies of the association. The man- 

 ager in most instances will initiate these policies, but the board 

 should give them careful consideration and be the final authority 

 as to their soundness. Failure of the board to perform their duties 

 in this respect endangers the success of the organization. 



FINANCING MARKETING ASSOCIATIONS 



More than half of the reports concerning 927 cooperative asso- 

 ciations, handling various farm products, that went out of business 

 during the period 1913 to 1923, gave unsound or inadequate financ- 

 ing as a whole or a contributing cause. Cooperative organizations 

 should develop their financial plans carefully in order to ensure suc- 

 cessful and continued operation. 



Any plan for financing a cooperative association must take into 

 consideration the nature of the investments that must be made and 

 the expenses that must be met. The kind of product, market con- 

 ditions, and the financial responsibility of the membership all serve 

 to determine the plan adopted. 



All or a part of the following: requirements of a cooperative 

 association enter into the determination of financial policies: (1) 

 Organization expense, (2) permanent investments, (3) operating 

 capital, (4) reserves, (5) advances to members for production or 

 marketing purposes. \Vhether an association is incorporated with 

 capital stock or as a nonstock organization is also an important 

 factor in financial policies. In fact, financial problems more often 

 than not determine the form of incorporation. 



86142°— 26 1 



