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  • Writer's pictureD. Maurice Kreis

More Curmudgeonly Co-op Comments (and Compliments)

My last blog post took up one of my favorite subjects -- the Hanover Consumer Cooperative Society, the Upper Valley's customer-owned and democratically controlled grocery empire -- and complained (in loving fashion, I hope) about its public policy agenda and its strategy for recruiting new members for its elected Board of Directors. That prompted a reader to respond, in effect, that I was focused on the deck chairs while the vessel itself founders in the icy waters of the pandemic-ravaged economy.

With that in mind, here's a key excerpt from the materials (published on the Co-op's web site) provided by management for the January 27 Board meeting:

Translation: Although General Manager Paul Guidone elsewhere reported "strong overall sales growth," the Co-op operated in the red for 2020 -- significantly so. On sales of roughly $85 million, the Hanover Consumer Cooperative Society lost $355,000 (before taxes and, signifcantly, without taking into account a hoped-for write-off of a loan from the federal Payroll Protection Program that was offered as a form of pandemic relief to struggling businesses across the U.S.).

In these circumstances -- everyday life upended for substantially all of 2020 and retail establishments especially under siege -- it would be unreasonable and unfair to castigate the Co-op for losing money last year. No doubt the PPP cavalry will come significantly to the rescue. The Co-op deserves the thanks of its members, and the entire community, for being there throughout 2020 as a safe and reliable source of food and services. But . . . there's no virtue exception (and certainly no cooperative exception) to the implacable laws of financial accounting. Sooner or later, a business that spends more than it takes in runs out of money.

If you're a Co-op member, and that's worrying you, the best thing you can do is to stop at the Co-op Food Stores and buy some groceries. Does your conscience bother you if you're driving by the Co-op on your way to Hannafords, Shaw's, or Price Chopper? It should.

The Co-op could do its part by striving to be fully accountable to its members, so that we can all be confident that -- even if the Co-op isn't always beating the investor-owned competition on price -- our grocery dollars are being put to full and effective use (e.g., by paying fair wages and benefits and supporting the local food economy). Here's what accountability does NOT look like:

From the above -- an excerpt of the draft minutes of the December meeting of the Co-op's Board of Directors -- you would have no way of knowing that the Board found management to be faithfully following a "strategic, long-term plan" -- one with a "credible projection of revenues and expenses,separation of capital and operational expenses, [and] cash flow" -- and that management was not "endanger[ing] the fiscal soundness of future years."

The quotes are from the Board's "EL 1" policy, compliance with which the Board was assessing. The Board reviewed a written "monitoring report" from management but, of course, the report is not appended to the minutes so inquiring Co-op members really have no way of figuring out what the heck the Board was reviewing and, thus, whether its conclusions were sound.

All of it -- the jargon, and the evidence missing from the minutes -- is a direct consequence of the Board's slavish fidelity to the "Policy Governance" model invented by nonprofit management consultant John Carver. For reasons I have previously explained, Policy Governance has much to recommend it in theory but in reality complying with the model's strict and complicated precepts is a hindrance to transparency, accountability, and substance.

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