The Perils of Co-Management

Is it inevitable that all "new wave" co-ops founded in the 1970s will end up with general managers? While only a few have had a general manager from the beginning, many co-ops have followed a path from management by volunteers, to management by collectives of paid staff, to some form of co-management or management team, to a single general manager. (This typical path is explored in "Evolution and Revolution," a case study on organizational growth and change at Mississippi Market, which I coauthored with Dave Gutknecht and Karen Zimbelman in 1993.)

Nevertheless, a significant number of co-ops either have never had a general manager, or experimentwith another form of management after some years of experience with a general manager. On the premise that management structures evolve to adapt to the external and internal pressures in a co-op's environment, I'd like to examine the circumstances under which co-ops choose some form of co-management, or equal power sharing among two or more managers.

Some definitions

In this article, I define the term co-management as shared accountability for the performance of the co-op between two or more managers, who supervise other employees and report to the board of directors. I won't be discussing collectives where all employees are supposed to have equal power, responsibility and pay. I'm not using the term "co-management" here as it is used in Europe to describe powersharing between owners and employees, usually through union participation on the board. Also, keep in mind that the term "management team" does not necessarily exclude the presence of a general manager.

Most general managers in my experience meet regularly with a core group of managers to get input on decisions and disseminate information throughout the co-op; this core group is often called "the management team."

Why co-management?

Sometimes a general manager's departure leaves a gap that is temporarily filled by a co-management arrangement while the board searches for a qualified candidate, a process that can take the better part of a year. For example, the board of New Pioneer Co-op in Iowa City appointed a management team of five to oversee store operations and report to the board while they sought to replace their general manager. In the same way, Central Co-op in Seattle asked the financial manager and merchandising manager to serve as acting co-general managers.

Co-managers don't seem to feel empowered to redirect each other's priorities or ask each other to justify use of time. In reality, when there is more than one manager, the board often finds itself acting as the general manager, supervising the co-managers.

In other cases, the co-op may not be able to afford to offer a competitive salary to an experienced general manager, and no one currently on the staff has enough of the needed skills or confidence to take on the general manager position. Under these conditions, appointing co-managers to divide up the general manager's duties may seem like the best alternative. The co-managers can combine their strengths and support each other in taking leadership roles. Cooperative Market in Akron, Ohio and Ukiah Co-op in California are examples of this approach; both have three-person management teams consisting of merchandising, operations and financial managers.

Then there are co-ops where the commitment to an egalitarian staffing structure is a paramount value, equal to or greater than a commitment to member ownership. When the number of employees becomes unwieldy for collective decision-making, the egalitarian ideal persists in the creation of a two-tiered staff structure in which a smaller number of managers supervise the other employees, share equal pay and status and are jointly accountable to the board. They may refer to themselves as a collective, but they may more accurately be called a "management collective." Eventually this structure tends to evolve into a management team with each member assigned individual responsibilityfor a specific area. Mississippi Market, Central Co-op, Brattleboro Food Co-op, First Alternative and countless others went through this evolution. When co-ops with co-managers debate the merits of hiring a general manager, there is often a faction that advocates retaining co-management because they perceive such a system as inherently more democratic than a single general manager.

Pitfall #1: accountability

Whatever reasons lead a co-op to decide to have co-managers instead of a general manager, there are many pitfalls to avoid. The greatest of these is the lack of accountability. When a general manager fails to follow through on agreements with the board, the board's choices may not be easy, but these choices are relatively clear. But when two managers meet all their objectives, and a third manager does not, the board is all too easily pulled into co-op operations and personal dynamics among the managers.

Theoretically, a group of managers can hold any one of its members accountable, but I have yet to see this demonstrated in real life. Co-managers don't seem to feel empowered to redirect each other's priorities or ask each other to justify use of time. The financial manager may get the statements done on time and the operations manager may successfully install the new cash register system, but together they can't seem to get the merchandising manager to do anything about the slipping gross margin. In reality, when there is more than one manager, the board often finds itself acting as the general manager, supervising the co-managers.

To allow one co-manager to serve as the board liaison puts that person in an untenable role. S/he must give the other managers the board's directives but has no authority to ensure that fellow managers carry out those directives. I think co-manager systems work best when all managers attend board meetings and take direction from the board in person, rather than through another co-manager.

Piffall #2: planning

A serious weakness of co-ops that are co-managed is that planning seems to fall through the cracks. Co-managers rarely have the time to maintain an overview, think ahead and be proactive. Growth issues go unaddressed, and sometimes market share is lost to competitors because no one in the organization is taking the lead. Perhaps this problem could be solved if there were just two co-managers and one of them had specific responsibility for planning, with time set aside from routine store operations. Another point to ponder: if one co-manager is spending time on planning, s/he will often become the general manager in fact if not in name. This occurred at Mississippi Market. I think it is also happening at some co-ops that nominally have co~management structures.

Pitfall #3: personal dynamics

Another pitfall of co-management is its utter dependence upon the personal chemistry between the co-managers. While the personality of a general manager will be a dominant influence within a co-op, individual personality is even more accentuated with co-managers. When the fit is just right -- when the comanagers complement each other's strengths and compensate for each other's weaknesses -- a management team can be as successful at running the co-op as a general manager. They speak with a unified voice to the board and employees, and meet the goals they agreed upon with the board. When the fit is not right, the co-op's management becomes dysfunctional, and the process for addressing problems is murky and complicated.

The larger the management group, the more subtle and complex the personal dynamics become. Two co-managers with sharply defined spheres of authority are easier for a board to manage than three or more. Threesomes seem to degenerate into twosomes with an odd person out. I don't know if this is inherent in human nature, but it seems to be the rule more than the exception in management teams I've observed. Management teams of four or five are more unpredictable and even less stable. With multiple managers, employees get different answers from different managers and may sometimes play them off against each other. And the more managers there are, the more the board tends to get drawn into operations, particularly when there are operational problems that the management group is unable to solve.

Given the importance of personality, I think a co-management system only makes sense when the potential co-manager candidates are already known. It is far too much of a gamble to hire a co-manager from outside. If a co-management system is adopted it should be with the understanding that if one co-manager leaves, s/he will not be automatically replaced with another co-manager. Instead, the board and remaining managers should take that opportunity to evaluate the system and decide whether the co-op should now hire a general manager.

In conclusion

A co-management arrangement can be a viable strategy under certam circumstances. It can buy time for a co-op with no qualified outside candidates and one or more potential inside candidates who need more time to develop skills and confidence. It can work if the co-managers have complementary strengths and a great deal of trust and honesty between them. The duties of the comanagers should be clearly delineated, and the board should be vigilant about holding each manager individually accountable, not expecting the other co-manager(s) to do so. The fewer the co-managers, the easier the board's interface with management becomes, and the less the whole system depends upon individual personalities. Finally, no particular management structure should be seen as permanent. The co-op needs to be flexible, to continue to adjust its management structure to its environment.

See other articles from this issue: #051 March - April - 1994