Management Tip
How managing a co-op differs
from running an investor-owned firm
By Bill Davisson
Editor’s note: Bill Davisson is the recently
retired CEO of GROWMARK Inc.
was asked to discuss
the differences between
managing a co-op and
an investor-owned
company, from the
vantage point of my 40-year career with
GROWMARK Inc., including the last
12 serving as the co-op’s chief executive
officer.
While I have not had any experience
in managing in a publicly traded
corporation, I do serve as a director of
one, which gives me some insight into
the differences and similarities between
cooperatives and their publicly traded
counterparts.
Both types of entities are in business
to make money and provide a return to
the owner. Both understand it is all
about the customer, and if you don’t
have the right product or service at the
right price, at the right time, they are
likely to take their business elsewhere.
One often hears that cooperatives are
in business to provide an assured source
of supply or an assured market for
products — but not at any price or any
cost. Both types of entities evaluate the
market and attempt to sell their
products and services at a price that will
cover costs and provide a return to the
shareholder.
Both cooperatives and publicly
traded companies understand the
importance of communication, ethics
and disclosure to the shareholder.
Publicly traded entities are somewhat
more formal in their disclosure because
of Securities and Exchange Commission
requirements. But each type of business
is required to have a formal audit
performed annually, with related
disclosures under generally accepted
auditing standards.
Each type of business spends a great
deal of time communicating to shareholders and each wants
to be seen as having high ethical standards.
I believe the differences between a cooperative and a
publicly traded corporation are what every cooperative CEO
needs to understand.
The obvious difference is that a cooperative’s customer is
also the shareholder, making it sometimes difficult to balance
how the shareholder-customers want their return. Do they
want it in price? Do they want it in service? Do they want it
in a market? Or do they want it in profit returned in
patronage or dividends?
Balancing those questions is the minefield that cooperative
CEOs and boards of directors must manage their way
through.
The second major difference is the method of
communication used. The publicly traded corporation is very
formal in this regard, by requirement. The cooperative is
much more informal and hands-on, directly one-on-one with
the customer. Communication is much more open regarding
operations and the direction of the company because
cooperatives do not need to be as concerned that what they
say may affect their stock price. Cooperative CEOs must be
prepared to spend a lot of time with their customer-owners.
The third major difference between co-ops and investorowned
businesses is the focus on quarterly earnings. A
publicly traded firm is often much more concerned about
short-term earnings and the impact on stock price. The
cooperative is usually focused on annual results and the
impact on patronage returns at the end of the year.
The final difference is the close personal relationships that
are sometimes developed with the customer-owners of a
cooperative. Cooperatives view themselves as an extension of
the customers’ operation and take a more personal interest in
their overall success.
I would have to say that there are more similarities
between a cooperative and a publicly traded corporation than
there are differences. It is the close personal relationships and
the feeling of being a part of the customer-owners’ operation
that has been the most rewarding to me.
Davisson oversaw major expansion of co-op
When Bill Davisson joined FS Services Inc. in 1970 as a newly minted
University of Iowa graduate, he had no idea where his career path would
take him. During the next 40 years,
Davisson held positions with GROWMARK
that included transportation accountant at
the Kingston Mines (Illinois) terminal,
financial analyst, controller, vice president
of finance and vice president of member
services before being named CEO in 1998.
He earned his CPA designation in 1985.
In his 12 years as CEO, Davisson
oversaw the expansion and development
of GROWMARK from a three-state
organization to an expansive system doing
business in 23 states and Ontario, Canada.
Sales have grown to $6 billion, with $70
million in patronage returned to members
in 2010.
Co-op leaders say the growth and expansion of the GROWMARK
system has been fueled by Davisson’s vision for growing from the
cooperative’s core businesses, as well as pursuing mergers, acquisitions
and joint ventures. These two strategic directions have enhanced the coop’s
energy, agronomy and grain businesses.
Davisson also focused on creating a strong member system. During
the last six years of his tenure as CEO, the GROWMARK system achieved
its six highest years of profitability. Through patronage, partnership and
participation, the current strength of the system is a large part of his
legacy.
He served on several boards of directors, including National
Cooperative Refinery Association, maltaCleyton, MID-CO COMMODITIES
INC., GROWMARK FS LLC and Seedway LLC. He will continue to serve on
the board of CF Industries Holdings Inc.
Davisson also served on the board of trustees and executive
committee of the Graduate Institute of Cooperative Leadership. He was a
member of the National Council of Farmer Cooperatives executive
council, which he chaired for two years.
