Management thinker Peter Drucker is famous for quoting that "you can't manage what you can't measure".  Of course, it goes without saying that any organisation big or small, needs to take stock at regular intervals and answer the simple question, how well am I performing?  

But how exactly should co-operatives go about measuring their performance?  And against what criteria should that performance be measured?  These are questions that have been posed numerous times but, it seems that this is an extremely complex area, with no common approach and perhaps with no common solution.

In this article, we'll take a fresh look at the issue of performance management from the perspective of co-operatives and we make a proposal for how this might be addressed.  We'll first address the question of what to measure and then subsequently, we'll make some suggestions for how to setup a system to measure and track performance.

What to measure?

The first and obvious question to address is, what are we going to measure?  Many co-operatives will reach for their financial indicators as these seem to be the easiest ones to measure and probably also readily available.  Indeed this seems to be the case according to research papers produced by Suraya Mahmood et al and Beaubien & Rixon.

"Performance measurement in co-operatives has mostly remain [sic] to its financial dimension and focus on financial stability".
Indicators for Co-operative Performance Measurement, Suraya Mahmood, et al, 2018
The research found that the insurance co-operatives use benchmarks that are developed for investor-owned companies to evaluate their performance. Furthermore, the measures used by insurance co-operatives reflect relatively little consideration of the co-operative principles and values and there is no comparison to other insurance co-operatives.
Key Performance Indicators in Co-operatives: Directions and Principles, Beaubien & Rixon, 2012

However, sticking to purely financial indicators does not give a full picture about the performance of co-operatives and is definitely not inline with the "The Co-operative Difference".  

As we know, co-operatives are guided by the 7 principles defined by the International Co-operative Alliance, could these principles be used as a basic for measuring co-operative performance?

  • Voluntary and Open Membership
  • Democratic Member Control
  • Member Economic Participation
  • Autonomy and Independence
  • Education, Training and Information
  • Co-operation among Co-operatives
  • Concern for Community

The Co-operatives UK Network has published some useful documents in this area and suggests that this is more complex than it first seems.

"One generic approach to measurement is to test the enterprise on its performance against each of the seven principles.  In practice, this may not always be straightforward to do, as there are many different dimensions to each of these principles. "
Simply Performance: A guide to creating member value, Co-operatives UK

Another way of "slicing" the problem is to look at measuring performance across the 'three pillars':

  • Member value
  • Member voice
  • Co-operative value

In the table below, we give some examples of measurements that can be mapped to the seven principles and three pillars.  This is based on the paper "Key Performance Indicators: A Framework & Guidance for Co-operatives" published by Cooperatives UK.  Note that these are only example measurements, co-operatives are naturally be free to choose their own measurements and objectives that best suit their particular organisation.  

Principle Strategic Pillar Strategic Objective Examples Measurements
Voluntary &
Open Membership
Member Value Increase net member acquisition
  • Net membership growth
Co-op Values Increase member diversity
  • % of members in each segment
Democratic
Member Control
Member Voice Drive member engagement
  • % members participating in elections
  • % members attending events
  • News/Forums posts/comments
  • Member satisfaction surveys
  • "active" members vs "in-active"
Member Economic
Participation
Member Value Drive member trade
  • Avg transaction value of trade between members
Member Value Increase share of member dividends
  • % of profits returned to members
Autonomy &
Independence
Member Value Reduce reliance on
external investment
  • % of annual capital investment from third parties
Education,
Training &
Information
Member Value Broaden membership
skilset
  • Number of training events held vs % of attendees
Co-operation
among
co-operatives
Co-op Values Drive external trade
  • Total value of orders placed with external co-operatives
Concern for
Community
Co-op Values Reduce environmental
impact
  • Carbon Footprint
Co-op Values Contribution to the community
  • Value of grants/donations
"Co-operatives of all sizes can look to understand and monitor the levels of engagement that they have with their members as this goes to the heart of their purpose."
Narrative Reporting: A Framework & Guidance for Co-operatives 2017

How to Track & Measure?

Ok, so let's say we have a way to map measurements to the seven principles and three pillars.  It seems in theory at least possible to measure the progress the co-operative is making against these goals.  But, we're still missing a framework within which to monitor and track the progress and more importantly attach key actions to these goals to ensure that they are ultimately achieved.

OKRs

Objectives and Key Results (OKR) is popular management strategy for goal setting within organisations. The purpose of OKRs is to connect company, team and personal goals to measurable results while having all team members and leaders work together in one, unified direction. OKRs have become very popular in Silicon Valley and within Investor Owned Companies and startups.  OKRs typically change from quarter to quarter to match the particular results that the company wants to achieve in a relatively short period of time.  We suggest that OKRs might not be appropriate for co-operatives to adopt since co-operatives typically take a longer term view on driving member value.  Hence, we will not consider OKRs further in this article.

Balanced Scorecard (BSC)

During a year-long research project with 12 companies at the leading edge of performance measurement, Kaplan & Norton devised a “balanced scorecard”—a set of measures that gives top managers a fast but comprehensive view of the business. The balanced scorecard includes financial measures that tell the results of actions already taken. And it complements the financial measures with operational measures on customer satisfaction, internal processes, and the organisation’s innovation and improvement activities—operational measures that are the drivers of future financial performance.

Traditional Balanced Scorecard from Kaplan & Norton 1992

As stated in their paper "Key Performance Indicators in Co-operatives: Directions and Principles", Beaubien & Rixon make the point that the traditional Balanced Scorecard approach adopted by many of today's Investor Owned Companies (IOCs), might not be appropriate for co-operatives whose principal purpose is to serve their members.

Co-operatives are established to meet member and community needs, and are governed by seven guiding principles.....By contrast, IOCs exist to generate and maximise wealth for shareholders. Given these differences, can the means of evaluation of IOCs suitably be applied to co-operatives?
Key Performance Indicators in Co-operatives: Directions and Principles, Beaubien & Rix

So on the face of it, BSCs don't seem to map well to the co-operative ethos.  However, we can still learn from this model and apply some of the principles to our needs, since BSCs define a way to:

  • Set specific measurable objectives
  • Ensure that the particular objective has a defined 'owner' in the organization
  • Track the progress towards those objects by comparing actual vs target values over time
  • Assign key actions to specific individuals for objectives that are falling below target

Democratic Member Control - an example

Let's take a deeper look with a specific example.  We'll use the principle of Democratic Member Control for our example.  This principle comprises several metrics that we defined in our earlier table.  For each measurement, we define two target levels "Commitment" and "Stretch".  Commitment means we have reached the minimum target level and "Stretch" means we have over achieved on our target.  We also assign weightings to each measurement since we might decide that some measurements are more important than others:

Measurement Commitment Stretch Weighting
% of members participating in elections 30% 50% 20%
% of members attending events 30% 50% 15%
News/forums posts/comments 1,000 1,300 15%
Member satisfaction (1-10) 6 8 30%
% active members 40% 60% 20%
Total 100%

For the moment we'll assume we have an automated way to capture these metrics so that manual interventions are kept to a minimum.  This would allow us to track the progress in real-time.  We'll also normalise our total weighted score on a number line from 1 to 10 so that will be able to visualise the progress more easily, you'll see later.

Commit Stretch Actual Weighting Points Score
% election participation 30% 50% 33% 20% 50 1.0
% event participation 30% 50% 45% 15% 50 0.8
Forums posts/comments 1,000 1,300 900 15% 0 0.0
Member satisfaction 6 8 8 30% 100 3.0
% active members 40% 60% 40% 20% 50 1.0
100% 5.8

Right, so now we have a score of 5.8 (call it 6) out of a maximum of 10 for Democratic Member Control.  This would normally be measured on a quarterly basis.  For any measurements falling below the 'Commit' level for that period, we should define at least one action point to get us back on track:

Forums posts/comments

Action Assigned to By
Carry out awareness campaign for our online engagement platform Joe Jones April 30

Now we're nearly there, we can apply the same model to all of the measurements and principles we have outlined in the earlier table and produce a score out of 10 for each quarter showing the progress towards the seven principles.

"...it might be useful to communicate relevant measures through simple bar graphs or charts that show the trend of the metrics over time.  In this way the co‑operative will be able to articulate to its members how well it is doing at connecting with those members."
Narrative Reporting: A Framework & Guidance for Co-operatives 2017

A Radar chart like the one below gives a nice easy-to-read picture that can be easily understood by co-operative members at all levels.

Co-operative scorecard example

So what is needed to implement such a model?  Clearly, automation is key to this because there is a lot of "grunt work" needed to produce the metrics and track and report on the key actions.  At Anycoop, we are working on such a system and model.  We would love to hear your feedback.  Do get in touch with us, we'll be happy to give you an update on our progress.

We're very interested in your opinion, is this a worthy topic? Is this a problem in your co-operative?  Please take our anonymous survey, and we'll publish the results at a later date.