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.

March/April Table of Contents