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Case Study 6 Solution -
Expansion of a Cooperative Business
1. How was the decision made for the
cooperative to acquire FertX, Inc.?
- First, the board
of directors, after studying and discussing the potential purchase
with input from the general manager and others, made the decision to
proceed with the acquisition and bring it to the membership.
- Then, a quorum of
the cooperative's membership (at the annual meeting, or at a special
meeting) voted in favor (according to what the bylaws specify) of the
acquisition.
2. Who develops the cooperative's overall goal for
completing the acquisition? What is that goal? Are there any
sub-goals that should be defined? If so, what are they?
- The board of
directors develops the goal.
- Overall goal
- a smooth transition of all operations and employees into the
cooperative in a manner that will create maximum efficiency, effective
overall management, and enhanced member benefits and service.
- Sub-goals - to
maintain quality management and member service in the fertilizer and
chemical business, which is new to the cooperative. To retain the
business of most or all of FertX, Inc.'s
clientele and volume, in addition to gaining new business and volume
from members.
3. What issues/problems might arise from trying to
bring the manager and all the employees of FertX,
Inc. into the
cooperative when the acquisition takes place
(identify the pros and cons)?
- If Mr. Blum is
brought into the cooperative in an assistant management-type position,
his lack of cooperative knowledge could be a negative factor. There
could also be some conflict between Mr. Blum and Mr. Johnson since
both are experienced managers and only one (Mr. Johnson) will be the
boss.
- The employees
from FertX, Inc.,
will likely feel out of their element and will need training if they
are shifted to different positions other than fertilizer and chemicals
in the cooperative. Their lack of cooperative principle experience and
knowledge could also be an issue.
- The cooperative
could end up with too many employees creating an overlap of duties and
also resulting in increased wage costs for the cooperative.
4. Who makes the decision as
to what employees from FertX, Inc. should be
retained by the cooperative when
the operations of the two businesses are combined?
- As general
manager, Mr. Johnson has the ultimate authority to decide how many and
which employees from FertX, Inc. should be
brought into the cooperative. However, the board of directors might
provide Mr. Johnson with some input on what they know of the employees
given that some of them did business with FertX,
Inc. The board might provide some input on how many employees they
think should be retained given the cooperative's employment policy (if
such a policy is in place, it might be prudent to revisit it).
- Once Mr. Johnson has
made his personnel decisions (based on information, interviews, and
operational structure planning), the board must give him ultimate
authority to hire and manage the employees, as is his charge as
general manager.
5. What other actions should
take place to ensure an effective and efficient blending of operations,
employees,
and member services?
- Mr. Johnson and
the board should collect as much information about the new business
and employees that they can prior to making all the decision necessary
when combining operations. Such information will help Mr. Johnson with
making more effective hiring and delegation of employee decisions and
will assist the board in its policy making and longer range planning
of the cooperative that will now include greater assets, services, and
a more complex structure.
- The new employees
(including Mr. Blum if he is retained) that the cooperative keeps from
FertX, Inc. should be educated about
cooperatives, cooperative principles, and the unique structure,
governance, and operations of cooperatives.
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