Are you a good leader?
Director assessments are building blocks to productive board-management relationships
By James J. Wadsworth
Program Leader, Education and
Member Relations
USDA Rural Development
Editor's note: This article is excerpted from a forthcoming report, CIR 58 "Assessing Performance and Needs of Cooperative Boards of Directors. " The report includes three board assessment exercises: (1) Director's self-assessment, (2) Full board performance assessment, and (3) Board meeting productivity assessment. This article discusses the first-director assessment; a subsequent article to appear in a future issue of this magazine will discuss the latter two assessments.
common concern among cooperatives is the need to enhance or improve the relationship between management and the board. This does not necessarily imply that there are pervasive problems among the relationships of these cooperative leaders. But it does indicate that, at times, issues arise between managers and directors that may be detrimental or disruptive to smooth governance and management of cooperatives.
Managers and directors have distinct responsibilities. While managers are hired with the qualifications to run the cooperative and meet their many responsibilities, directors come from diverse backgrounds and experience levels. Many directors find their many responsibilities challenging. They are not often fully trained or completely able to perform the many duties required when elected to the board.
A learning curve is involved, and gaining necessary experience and skills takes time for directors. Differences in experience levels, ability and points of reference between directors and management sometime create instances of misunderstanding or conflict that may lead to weakened relationships.
Director assessment can help bridge such differences by providing a means for directors to enhance their abilities and better understand their distinct role in the cooperative. Assessments allow directors to visit both the vastness of their responsibilities and the limits imposed. They provide building blocks for more productive relationships between directors and their hired management.
Director assessment can be a very useful tool for all directors. Directors who lack experience and ability can lessen the time needed to gain the pertinent knowledge and skills for being an effective director by completing a self-assessment and then diligently working on areas that need improvement. And experienced directors, who certainly can use improvement in some areas, can accurately pinpoint weaknesses to address. Assessment makes this process easier through a plan specifically tailored to address identified weaknesses.
Knowledgeable, skilled directors better understand their roles and are better able to effectively serve. These directors are more likely to have a professional and productive relationship with management and other directors.


Related responsibilities
Assessment should correspond to directors' distinct responsibilities and duties. To set the stage for assessment, let's review some often-cited director responsibilities/duties (from Donald A. Frederick, Co-ops 101: An Introduction to Cooperatives, RBS Cooperative Information Report 55).
Working as a group, directors have the responsibility of setting the policies and objectives for the cooperative, and making decisions that set the course the cooperative will follow to achieve those objectives. More specifically, directors:
- Hire a competent manager, determine the salary, outline duties and authority of the position and formally review his/her performance at least annually;
- Adopt broad, general policies to guide the manager;
- Develop and adopt short and long-range business strategies;
- Require written monthly financial reports and operating statements for board meetings to be informed of adverse as well as favorable operations;
- Direct the manager to prepare, before the close of each year, an operating budget for the next fiscal year for board approval;
- Employ a qualified auditor to make an independent audit at least once each year;
- With the aid of the manager, plan and conduct the annual meeting to keep membership informed about the status of their business, including operations, finances and policies;
- Determine the patronage refund allocation and per-unit retain level;
- Assure that the cooperative has competent legal council;
- Keep and review records of the board's actions.
Directors are called on to complete more specific duties as well. Some examples include:
Approving and disapproving major capital expenditures;
- Establishing the cooperative's financial structure and the authorization of any basic change in structure;
- Determining the boundaries of districts, divisions, locations of operations offices, etc.;
- Establishing appropriate election and voting procedures to maintain proper representation of members, including filling
vacancies on the board or any other corporate body, committee, or organization that results from resignation, death, disqualification, etc.;
- Making decisions about the proper relationship with other farmer cooperatives and farm organizations;
- Making decisions about corporate membership in other organizations, associations and federations;
- Establishing the responsibilities and duties assigned to individual division boards and the individual committees;
- Establishing basic policies with regard to legislative or administrative decisions on local, state, national and international levels that affect the welfare of the member-producer.
Directors should not expect to receive special favors from the manager or employees and a director does not:
- Act independently on matters that should be decided by the entire board;
- Represent special interests, factions,or political entities.
These are some of the major responsibilities of most cooperative directors. To carry them out, directors conduct a host of actions as individuals, as a group during board meetings and in other membership meetings. They are required to learn and carry themselves as directors, conducting necessary tasks and functions. They must be competent, diligent and active. They use the cooperative and lead it. They need to have an in-depth understanding and knowledge of cooperatives and associated issues.
Areas and items to assess
Simply asking directors if they are able to meet a defined responsibility s too general a question. So, an assessment should include a series of specific statements under several key areas. Director responsibilities and duties can be broken down into a smaller number of significant knowledge and ability areas such as: managerial skills, finance, policies and planning, member relations, board operations, leadership and personal competence. In an assessment, directors determine what areas, or parts of areas, they need to improve.
An assessment is not a complicated exercise. Directors simply react to a series of items or statements associated with each key area to clarify where they have ability and where they need improvement. For example, a number of items (gleaned from work from Harold E. Chapman's "The Contemporary Director: A Handbook for Elected Officials of Cooperatives, Credit Unions, and Other Organizations," Saskatchewan Cooperative College of Canada, 1986) are identified here under the "seven knowledge/ability areas." These areas and statements are directly associated with various director responsibilities and duties.
Managerial Skills
- I am able to help establish the job description for the general manager, including the specific duties and responsibilities;
- I am able to participate in the recruitment, selection and hiring of a general manager;
- I am able to participate in a performance review and appraisal of the general manager;
- I am able to participate in establishing the compensation for the general manager.
Finance
- I am able to define financial objectives and develop policies to guide capital and operational financial decisions;
- I am able to analyze and approve capital expenditure plans;
- I am able to interpret the cooperative's financial statements and to assess the viability of the cooperative;
- I am able to understand financial ratios and analyze trends;
- I am able to analyze budget proposals and approve the annual budget;
- I am able to analyze proposals and participate in discussions on major financial matters;
- I am able to compare actual financial performance to the budget;
- I am able to, analyze and participate in decisions involving the distribution of net savings or losses;
- I am able to understand and analyze the cooperative's financial investments;
- I am able to explain the cooperative's financial position to others when required;
- I am able to explain the cooperative's equity redemption program to members;
- I am able to analyze equity redemption requests and establish equity redemption policy.
Policies/Planning
- I am able to help establish objectives and policies for operations and services of the cooperative;
- I am able to appraise the adequacy of operations and services of the cooperative;
- I am able to understand feasibility studies and analyze proposed changes and their implications for long-term operations and member service;
- I am able to analyze and approve annual plans for services, operations and facilities;
- I understand the cooperative's planning system and am able to actively participate in the process;
- I am able to develop objectives in line with member needs and the cooperative's resource base and operations;
- I am able to take part in brainstorming sessions and provide ideas/strategies relevant to the cooperative's objectives;
- I am able to evaluate the effectiveness of the cooperative's performance against its plans.

Member Relations
- I am able to analyze proposals and approve a program and budget for member and public relations in the cooperative;
- I am able to evaluate the effectiveness of the member relations program;
- I am able to communicate well with members;
- I am able to represent the cooperative at public functions when requested;
- I am able to receive ideas and expressions of concern from members and to initiate appropriate action on their behalf;
- I am able to analyze and approve objectives, policies and strategies for maintaining effective relations with the public, other cooperatives and government agencies;
- I am able to assist in planning the annual meeting program to maximize member involvement and input;
- I am able to encourage members to attend annual and other meetings of the cooperative;
- I am able to analyze and make decisions on applications for membership;
- I understand the cooperative's operating territory and membership districts and boundaries.
Board Operations
- I am able to work well with other directors and the management team;
- I fully understand the procedures for appointing officers and take an active part;
- I am able to plan, prepare and articulate my thoughts to maximize group participation in board decisions;
- I am able to participate as a member of a committee and chair it, if required;
- I am able to effectively communicate my opinions and feelings to the board;
- I am able to take part in all important board discussions, fully representing my member constituents;
- I am able to analyze and recommend appropriate per diem, travel and sustenance allowances for directors.
Leadership
- I am able to inform others of the history, values, principles, organization and functioning of the cooperative;
- I am able to actively support and promote cooperative activity in the community;
- I actively patronize the cooperative and display active cooperative membership;
- I understand the cooperative's system of governance;
- I fully understand the qualifications for board leadership positions;
- I keep attuned to agricultural, business and environmental issues and work to be knowledgeable in all concerns effecting the cooperative;
- I take my role of director seriously and work to improve my performance;
- I do my best to help my fellow directors and members when asked;
- I understand that when the discussion and decision of an issue is completed, I am responsible to support the board's majority's decision;
- I elicit feelings of confidence, trust and respect from fellow members.
Personal Competence
- I am able to assess my personal training needs for the role of director;
- I fully understand the role (responsibilities, duties) of a director and feel competent to fulfill it;
- I contribute to the productivity of meetings by participating effectively;
- I am on time and present at all board and committee meetings (emergencies being exceptions);
- I am able to effectively inform members and the public of the purposes, structure, financing, services, legal framework and operations of the cooperative;
- I am able to listen and speak effectively with individuals and groups;
- I am able to prepare and present written and oral reports;
- I am able to prepare plans for carrying out activities and to measure the results;
- I am able to direct the affairs of the cooperative consistent with the bylaws, articles of incorporation, and other relevant regulations and statutes;
- I am knowledgeable about the potential liabilities of being a director.
Use of statements such as these can provide a comprehensive assessment of directors' abilities. Directors must be candid in rating their knowledge, ability and performance in accordance with each statement. A consistent system for evaluation should be used. For example, statements could be evaluated as: yes this is not a problem and training is not needed; unsure I'm unsure about this and could use some training for improvement; or no I need training and improvement.
Evaluating statements on an individual basis is the first part of assessment. Following evaluation, directors review and identify those statements to which they did not assess a "yes." Then they should provide input on how they might improve some of their self-diagnosed weaknesses.
Individual cooperative boards may wish to re-word some of these statements, add others or subtract some to better fit their unique circumstances. The idea is to create an exercise that will effectively evaluate directors, given their distinct associated responsibilities and duties to their cooperative.
Develop training, track progress
The major goal behind director assessment is not merely to pinpoint individual weaknesses, but to find ways that directors can improve their ability and performance to be better directors. The theme for improvement is simple. Cooperative boards need to proactively identify weaknesses to find and to implement appropriate methods for correction. They need to seek necessary resources and take advantage of materials, programs, classes, work-shops, seminars, conferences and other educational activities.
Informal training may be all that's needed. Simply providing the directors with pertinent reading materials or some type of individual or group tutoring may make some improvements. Directors can also help each other. Experienced, effective directors can be valuable resources for some types of training. Management may also participate in tutoring certain areas.
There are many informational and educational materials available. USDA's Rural Business-Cooperative Service provides many related publications and materials and other cooperative-oriented organizations have readily available resources. Visit the Cooperative Services website at http://www.mrdev.usda.gov/rbs/Pub/coo prpts.htm.
Formal training may be required, too. Director training workshops are an easy way to target numerous weaknesses and teach a number of directors at once. Workshops, of course, are not a new idea. Many have been held in various locations and times over the years. State, regional and national cooperative organizations and educational institutions organize workshops.
For example, state cooperative councils and regional centers often provide this service. Representatives of state departments of agriculture and governmental agencies such as USDA and university personnel also become involved. Cooperative-related institutions also hold other classes, conferences and seminars.
The board of directors should consider discussing some of the major weaknesses identified from the self-assessments to surface ideas on best methods for developing improvement programs. Sometimes a single program can alleviate a problem area identified by a number of directors.
Once training has been developed and implemented, it is important that the board track past director needs and the types of training used. Such information will be useful for future assessments and training programs.
Director assessment should be an ongoing process. Director assessments need to be completed and then actively monitored. Assessments should be active instruments by which progress is regularly checked during the course of a director's tenure. Directors should review their assessments on a regular basis. Most directors will be able to clearly see where they've made progress or need further improvement. However, a director should feel free to take a new self-assessment at any time. Learning to be a competent director with a professional and productive relationship with management is a continuing process which is the goal of self-assessment.
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