Democracy Works

From #104, January-February 2003

Democracy Works

Sacramento Co-op Planning Heals Fractures, Yields Overhaul

B Y   P A U L   C U L T R E R A

How do directors and managers give co-op owners the opportunity to be involved in decision-making while still being able to make decisions? How do you bring owners who are averse to attending contentious meetings into the decision-making process? How do you manage to listen to the most vocal owners and still honor those who are most comfortable quietly voting with their dollars? In short, when it comes to democratic decision making, how can you take the time and still get off the dime?

At Sacramento Natural Foods Cooperative, a $17 million a year operation with nearly 9,000 owners, we have wrestled with these familiar problems and have had some success in resolving them. In three years we have come from a situation in which the co-op was seriously fractured over the issue of opening a second store to one in which we were able to completely overhaul our owner financial benefits program. We did away with an ingrained but unsustainable discount program and replaced it with an end-of-year patronage refund, with fewer than 50 owners leaving because of that change. During that same period, sales and the number of owners have grown in the aggregate by 40% and 46%, respectively.

I wish I could say that the process we used was simple and inexpensive. It wasn't. Then again, its basic premises were simple, and it would have cost us a lot more in human and, ultimately, financial terms to try to carry on without addressing our failures to constructively integrate our owners into the decision-making process. For example, in the fall of 1999, the year during which the controversy over the second store erupted, we expended over $100,000 in our planning efforts for a store that never opened and ended up with a general manager resigning, a dedicated board president losing a re-election bid, and a lot of owners and staff disillusioned with their co-op.

At the time, SNFC was financially sound and blessed with a group of managers who had years of experience at the co-op. Our problem was not a lack of ability, but rather a lack of clear direction. When the dust began to settle on the second store struggle, it became clear that most of the people who voiced opposition were upset with what they perceived as the board and management running way ahead of the owners in making the decision to explore opening a new store. They felt left out of the decision and called out for more involvement. Our challenge was to find a way to give owners meaningful access to a process for setting the co-op's direction, honoring their perspective while retaining both the board's ability to act as the co-op's elected decision-makers and management's ability to exercise its expertise. We needed to move beyond a situation in which many owners felt disenfranchised while avoiding another situation in which the loudest and most persistent among the owners could thwart the board's legitimate mandate to act in the best interests of the ownership as a whole and frustrate management's efforts at exercising the judgement that they are hired to exercise.

Our solution was to set in motion a process that would create a strategic plan. The goal of the process was twofold: arrive at a plan that would give the co-op direction for the future, and do so in a way that would build maximum trust and buy-in from the owners. With a general sense of how I thought the process would work best, I began interviewing consultants, hoping to find one who could lead us along the way. We clearly needed an outsider who had not been tainted by the year-long conflict that we had endured. Our first stroke of luck was finding the right person in our own backyard. Eric Douglas of Leading Resources Inc., a Sacramento-based change management firm, was recommended to us, and he proved to be the ideal match. With Eric's help, we designed what we would begin to refer to as "Directions 2000"--the year 2000 had arrived, and, inspired by the Y2K phenomenon, the name conveniently morphed into D2K.

Finding the participants

The premise of Directions 2000 was to start by throwing out a wide net that could bring in as many owners into the process as wanted to be involved. We were intentionally trying to reach those who had habitually refrained from voicing their opinions. Curiously enough, in examining our patronage records, we found that a remarkably high percentage of the owners who had been most vocal (and by their definition "involved") during the second store controversy were also among the lowest ranked patrons of the store. So we wanted to hear from those whose involvement was economic. We also wanted to hear from people who had been owners for a long time, from those involved in our owner-work program, and from those whose livelihoods were tied into the success of the store--our employees.

We set up a series of listening sessions (13 in all) and invited our 200 top owner shoppers, our longest-term owners, our most involved owner-workers, and our staff to two sessions each. The other five sessions were open to the general ownership. The sessions were set up around a free meal, and Eric lead each group through the same format, first asking them to list the values that they believed were fundamental for the co-op, and then what they believed the co-op's vision should be. Each person's ideas were written down and discussed by the group. All the values and visions expressed were collected in a binder that was on display in the store, and they were also all posted on our web site, allowing owners who could not attend the sessions to touch the process.

The sessions drew over 220 participants. All session attendees were asked to volunteer to serve on a planning committee. Eric interviewed each volunteer and came up with a slate of 12 owners for the committee. His criteria for choosing the committee members were two: that the group be made up of a representative sampling of the diverse perspectives that were expressed during the listening sessions, and that each person show a willingness and ability to work constructively as part of a group decision-making body. To the 12 owners were added our seven directors and five senior managers.

Writing the plan

This group met in six daylong all-group sessions and in briefer sub-committee sessions over the course of August 2000-February 2001. Its task was to essentially rewrite the co-op's mission statement, based on the input that was received from the listening sessions and on an extensive survey that was also based on input from those sessions. The survey asked 82 questions, each of which was distilled from the visions and values expressed during the listening sessions. The survey was mailed to every owner, and we receive a 28% response rate.

Eric facilitated each planning committee session. At the end of months of grueling work, the team had a plan ready to present back to our owners. Again, the plan was mailed to every owner, and feedback was solicited on each facet of the plan and on the planning process itself. The result was overwhelming approval for the plan and the process. The plan was then sent to the board, which adopted it in March of 2001.

The plan successfully created statements of purpose, values, and vision, along with related goals and objectives. Importantly, it stated that SNFC's vision was "to provide the benefits of natural foods and products, economic cooperation, and sustainable practices to as many people as possible in the communities we serve." This clearly steers us to an inclusive and expansive approach to the future. The planning team was nearly unanimous in the opinion that one of our goals should be to increase the number of co-op owners. This is what it meant by providing "the benefits of economic cooperation... to as many people as possible."

Implementing the plan

One of the immediate practical challenges presented by this mandate was to examine how we could achieve this vision given the financial benefits program that we offered to our owners. That program was based on a 5% discount given at the register on all owner purchases. The system had worked pretty well for years, but one of its key success factors was that a relatively small (though growing) percentage of sales was going to owners. With sales to owners accounting for about 45% of total sales, we were able to give 5¢ back on the dollar to each owner and still stay profitable. Of course we had to keep prices high to play this shell game. And if we were to succeed in our goal of increasing the number of owners, simple mathematics would catch up with us. It's impossible to promise to give back 5¢ on every dollar when your bottom line before discount is usually from 3.5 to 4¢ on the dollar.

So, flush with our success with the Directions 2000 (D2K) model, we decided to embark on yet another planning process. We named this one Road Map to the Future, and we envisioned it as a scaled-down D2K. We started off by asking co-op consultant Karen Zimbelman to write two articles for our newsletter, to begin to give our owners a sense of the issues at stake and a look at how other co-ops deal with financial benefits. We again started off by inviting owners to meetings where we presented information about the benefits program and how it conflicted with the newly minted vision statement. And we again asked for volunteers for a planning team and had Eric involved interviewing them and picking a team with a broad spectrum of perspectives on the issue. This time the team was smaller (10 owners, two directors, and two managers) and their meetings were fewer.

While the original plan called for arriving at recommendations that would be sent to the owners for their input, a critical turning point came when the team decided that not only did it take them a lot of time and study to understand the financial implications of the then current system, but that asking owners who hadn't had the opportunity to evaluate those implications for their feedback would be irresponsible. That is, the team came to the conclusion that it represented a valid microcosm of owner perspectives, and that it could act responsibly in making a set of recommendations. It was their decision to present their recommendations at two open meetings where owners could ask questions and give their feedback.

In this way, the team became strong advocates for their recommendation to do away with the register discount and replace it with a patronage refund. Having a group of owners standing up amongst their fellow-owners to endorse the change built a strong sense of credibility that would have been difficult to achieve had the board or management been left to advocate for the change (because as we all know, boards and managers subscribe to a secret agenda that seeks to drive the co-op into some form of corporate hell).

Through all the planning activities we carried out over the past three years, we have learned that taking the time to listen is ultimately the most important thing one can do. Often times the mere act of listening can itself create an environment of trust in which people can move forward even when their individual points of view do not prevail. We have also learned that listening does not mean simply hearing the loudest or most threatening voices, but means making the effort to give even the quietest voices a chance to be heard. This means inviting those people into the process in a way that makes it comfortable for them to be involved. Through both D2K and the Road Map to the Future, we were able to engage hundreds of owners who had previously had little or no involvement beyond their significant contributions at the cash register.

Finally, we have learned that there is a time to listen, a time to discuss, and a ultimately a time to act and take the responsibility to lead that is given to boards and managers. Through all of this work, I kept repeating the following words of Anna Quindlen to myself: "I show up, I listen, I try to laugh."

Paul Cultrera is general manager at Sacramento Natural Foods Co-op: [email protected].

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