Practices, perceptions and performance: a Texas cooperative study

Agricultural cooperatives are a unique form of business whose performance is tied closely to the financial health of their farmer members. The changing business environment in Texas and other parts of the Midwest has put strain on farm and ranch owners as well as the cooperatives that serve them. As margins diminish and customer base grows smaller, cooperatives must become more financially efficient to remain economically viable. This study was aimed at identifying those operational decisions and company characteristics that separate successful, growing cooperative agribusinesses from stagnant ones through empirical analysis. In addition, through the use of directed acyclic graphs and econometric techniques, the study sought to explain the connection of manager practices and perceptions to organizational performance. The analysis was based on a survey of managers in the state of Texas operating a diverse group of agricultural cooperatives. It did not include financial or utilities cooperatives. The results indicated that successful cooperatives were larger in size, had a smaller number of close competitors, and perceived loyalty to be a large issue for the cooperative. Strategic planning was utilized equally by successful and stagnant cooperatives. Successful cooperatives were more apt to have a formal equity redemption plan, but this did not appear to have a significant impact on financial performance. The directed graphs showed a strong impact of manager perceptions in the area of member loyalty and performance. Further econometric analysis brought us to the conclusion that performance group and perceptions have some measurable impact in the areas of competition and loyalty. This is evidenced by the coefficients of the slope and intercept shifters for performance group being different from zero. An understanding of the factors that have the greatest impact on performance, such as competition and loyalty, can assist cooperative management teams in making operational decisions to mitigate their greatest risks and weaknesses, leading to a stronger financial position.