Project Management for Cooperatives

Cooperatives undertaking special projects such as a move or major expansion should distinguish between "operations" and "project." I will make such a distinction, present a view of project management, and suggest how it can function within our cooperative businesses.

The challenge of managing a retail natural foods cooperative is one that is steeped in many dimensions, ranging from the daily detail to the large long-term vision, from employee relations to member relations, from customer service to serving a board of directors, from community relations and market presentation to systems development. Often, to those aware of these needs, the list of priorities can be overwhelming.

While some of these challenges can be viewed as unique to cooperatives, they are not unlike the general challenges of management. In any context, it is important to keep the management process simple in order to be effective. Partly for this reason, it is useful to distinguish between operations management and project management.

"Operations" vs. "project"

Operations represents ongoing activities or flow, defined through systems and formula. The daily operations of a grocery store are a series of related systems that have an ongoing and sustaining synthesizing energy: buying, receiving, stocking, merchandising, front end, accounting, etc. It is a struggle to build successful systems (and they always need refinement and modifications) that will yield a perpetual or near-perpetual process of ongoing desired results. Once those results are forthcoming and somewhat stable, a basic formula is in place: For every dollar of sales, x percent goes to cost of goods, x percent to labor, x percent to other expenses, and x percent to net profit.

Of course there is constant change within these operational systems and formulas, but the basic structure maybe sustained. "Operations" has a life of its own. Complacency is dangerous, and analysis, review, training, change, and innovation should be built into the formula. The formula will require fixing from time to time. Generally, the more the operational formula encompasses -- such as market and financial awareness, opportunities for innovation, focus on the big picture, mission, and vision -- the stronger the business will be.

A project, on the other hand, represents change or innovation and is temporary or short term. Projects are usually untested and risky. Unlike ongoing operations, a project has a specific beginning and end. A project has a clear goal to achieve, and the achievement of that goal represents the end of a successful project. Of course, many projects can also end in failure. Projects can range from short and small to long and large. Development of a new system for cutting cheese, creation of a new newsletter format, introduction of a new product line, development of an annual promotion calendar, and moving to or opening a new store can be viewed as projects.

Healthy "operations" should generate, support, and integrate "projects." Unlike manufacturing production, where research and development have a clearer and more recognized role, wholesale and retail distribution often overlook innovation because daily operations dominate. Project development can thus be a valuable means for operations/distribution to develop and keep innovation as priority. A healthy "operations" should have lots of productive and successful projects continually beginning and ending. As these projects become part of the ongoing formula, there is less need to label them as projects.

All projects have a number of things in common: A clear goal or objective, a timeline, a "sources and uses' budget, and their own energy, excitement and support. Most importantly, they all have a need for effective project management.

Viewpoints

"Four important aspects of good project management are: 1) the effective handling of people, 2) always maintaining a focus on exactly what needs to be done next, 3) honestly assessing yourseif and your situation at all times, and 4) remembering that you need all the help you can get from within and outside of your co-op."

- Peg Nolan, Project Manager, People's Food Co-op, La Crosse, Wisconsin
 

"The challenge is to truly have a vision of what a store could and should be, and balancing that with the realities of nuts and bolts, equipment and conunittees, bankers and lawyers, and timelines and budgets."

-- Jeff Helkenn, Project Manager, Community Mercanlile, Lawrence, Kansas
 

"The key to successful project management is assembling a qualified and committed team of people and managing them effectively."

-Dan Foley, Project Manager, Wedge Co-op, Minneapolis, Minnesota
 

"When we were all trying to carry the project, it was a burden to everyone. Once we separated the project from the operation of the store and designated a project manager, it became a lot easier for all of us."

- Christine Sloan, Project Manager, Hungry Hollow Go-op, Chestnut Ridge, New York

Why project management?

Cooperatives of all sizes must be able to respond rapidly to today's changing economic conditions in order to survive and prosper. Private business has successfully used project management to adapt to different conditions. There are clearly many opportunities and needs for project management within cooperative businesses. We can illustrate the primary features and concerns of project management by focusing on relocation/expansion of retail natural food cooperatives.

Project management is a term that originated in the engineering and construction fields. It was originally technical, rigid, specialized, and confining in its usage. In recent years, project management has broadened in acknowledging and emphasizing the process and human factors in- volved in projects. Cooperatives might find value and special relevance in this broader concept at a developmental level. Cooperatives often are slow to respond or make decisions, and tend to be overly bureaucratic. The basic tools ofproject management, properly used, can help cooperatives overcome these tendencies and be more responsive.

By clearly defining the process involved in relocation and expansions and by developing high quality project management, cooperatives will be better able to compete and survive in the marketplace. New stores will be opened in a shorter timeline, without reinventing the wheel each time.

The basics

Project management can be defined as the planning, organizing, directing and controlling of resources, aimed at achieving a relatively short-term goal or objective. The standards for successful project management center around time, cost and performance.

The performance standards are clearly and briefly specified in the project goal and should be reviewed throughout the project at or before key decision points.

Development Timeline

Stage IFeasibilityCommitment, planning, strengthening, positioning, initial contacts with lenders, site search and securing(3 months - 3 years) Stage IIPreparing for Leasehold Improvements or Construction
Design, bids
Financing(2-6 months) Stage IllLeasehold Improvements or Construction(2 - 6 months) Stage IVPrepare for Opening(1 - 2 months) Note:End of Stage I -- Sign lease or purchase agreement with contingenciesEnd of Stage II-- Close on financing, remove contingencies, final decision point. No turning back!

The primary tools of project management are a timeline and a budget.

A realistic project timeline is a very helpful planning tool. The timeline will be modified a number of times, but it should be developed and used from the beginning of the project. Relocation/expansion projects typically have four stages, with each stage having a number of components -- many of them occurring simultaneously. (See sidebar.)

"Sources and uses" budget

The "sources and uses" development budget is the simplest and most powerful of tools, yet it is so often forgotten, neglected, or misunderstood. (See my article and sidebar on "Sources & Uses Development Budget," CG#33, March-April 1991.) It is simply a listing of all the sources and uses of funds, with total funds equaling total uses. Generally, any of the sources can be applied to cover any of the uses.

In the case of a co-op retail relocation project, sources include: the co-op's cash reserve (or a large portion of that reserve), new equity from members, member loans, donations, sale of equipment, landlord's contribution, vendor loans, vendor credit (extended terms), community or city funds (loans or grants), regional loan funds, the National Cooperative Bank, and local banks. The owner's share (i.e., the co-op's) should be 25-40 percent of the total, and the owner's share plus subordinated funds should be 40-60 percent of the total.

The uses include acquisition, construction or leasehold improvements, equipment, additional inventory, fees (consulting, architect, legal, financing) and project management costs, start-up promotional, staffing, and training costs, business disruption, occupancy costs prior to opening, moving costs, working capital allowance to cover first year operating losses, and a 10 percent overrun alllowance. There are standard guidelines for ratios and costs per square foot that are used to create a sources and uses budget.

The key is to be creative. List as many sources (and uses) as you can. Costs (and hidden costs) are almost always higher than you originally plan for. Play with the numbers. After an initial draft of sources and uses has been created, develop a financial pro forma and model for at least years 1, 2 and 3 of the new operation. The pro forma should include income statements, cash flow, capital budgets, balance sheets, and a special section that shows the co-op's ability to service debt.

It is important to acknowledcge and again emphasize the role of creativity among the qualities of successful project management in cooperatives. Relocation/expansion projects are extremely challenging for cooperatives, requiring creativity, innovation, and commitment to change in order to overcome all the hurdles that will be encountered along the way. The project timeline and "sources and uses" budget are planning tools and management tools that allow you to manipulate and massage the plan. They enable you to see the whole project on one or two sheets of paper. I view them as stretching tools, enabling you and your group of supporters or potential supporters to expand to the possibilities and realities of the project.

The job

What does it take to be a successful project manager for a cooperative relocation/expansion project? Foremost, it requires a person with enormous dedication and perseverance to see a project through from start to a successful finish. These projects are very challenging and consuming of energy and resources. Skilled management is required to develop and effectively utilize those resources in a responsible and timely manner, while building and sustaining positive energy throughout the project.

The obvious candidate for a relocation/expansion project manager is the co-op's general manager. A general manager should be able to provide the required leadership and focus the project requires. However, the general manager is also responsible for ensuring continued strong performance from the current store as well as planning for the operation of the new store. If the general manager is to be the project manager, then a capable assistant manager or management team will need to assume a large share of the general manager's duties, as the project requires 25 percent, then 50 percent, then over 75 percent of the general manager's time.

If the general manager is not the project manager, then the general manager (or management) should hire or contract with a project manager who will report directly to the general manager. Potential candidates include employees (preferably mid-management), professional project managers or consultants, or a candidate found or recruited through an open hiring.

Key qualities

A project manager for a retail cooperative relocation project should have skills and qualities in the following areas:

• Organization and decision making: Be well organized and able to achieve timely and successful results. Demonstrate an ability to manage multiple tasks and focus, both within the project and in addition to the project. Be able to work independently and be selfmotivated, without becoming lost, isolated, or unaccountable. Be a creative and effective problem solver and a timely decision maker, knowing when and how to seek appropriate support, both within and outside the co-op. Seek and coordinate professional advice and services.
• Leader and champion: Serve as a strong and credible leader and champion for the project. Be an effective team builder throughout the project, promoting excitement and good energy among a diverse group of stakeholders and supporters. Respect, praise, and cultivate all participants. Motivate, and push the project as needed, again, with respect, honesty, positive energy, and a desire to learn more every day.
• People skills: Demonstrate effective people skills and clear communication to all involved in the project. Be flexible and responsive. Delegate responsibility and authority with successful results. Be an effective negotiator and fund raiser at all opportunities.
• Analysis and financial management: Bring appropriate analysis into the project as a means to test and support your good intuitive judgment. Have a full overview of the project's financial goals and status in your head, and provide effective and timely financial management of the project.
• Commitment and humor: Offer strong commitment to your task, combined with common sense. Have or acquire an abundant sense of humor. Enjoy yourself as well as others.

Formidable challenges

After working as a project manager, and also providing consultation and support to other project managers, I'd like to conclude this review by commenting on some of the major challenges a project manager will encounter:

• Combining project management with one's regular job. Or more aptly, adding a project manager role to a job that is already full time or more. Some general managers are able to do this and effectively delegate. Respect your abilities. don't take on the imossible.
• Becoming isolated from the organization. A project manager needs access to and support from operational resources, and should seek to involve all elements of the organization at different stages of the project. The organization needs to take ownership of its project.
• Managing stress and sustaining positive energy. Project managers can't sacrifice themselves as martyrs to the project without inviting failure. Take care of yourself during a project that seems to lengthen each day. The project manager sets the tone and by serving as an example should encourage other participants to take care of themselves. When the project is finally over and the new store opens, the real demanding work begins. Be ready.
• Developing clear channels of accountability and support within the co-op. The project manager needs to be fully empowered to do their job. There should be clarity as to the roles within the organization, the key decision point in the project timeline, and who makes those decisions.
• Developing an effective base of outside support and assistance for a project manager. An informal "development team" composed of a few key people within the co-op and a handful of outside supporters who have particular areas of strength and expertise can be loosely brought together on an as needed basis by the project manager to provide support and honest critique. The makeup of this development team can fluctuate and depends in part on the current stage of the project. The group itself has no formal authority, but serves as a valuable resource to the project A project manager who is confident and secure with their own abilities and limitations can gain immeasurably by openly seeking assistance and support from avarietyofsources. A project manager needs to organize, facilitate and build their own support team.

Summary

The challenges confronting cooperatives require innovation and a commitment of resources to focused projects. Project management in a broad sense can fit well with and serve cooperatives. The horizontal approach resulting from project management (as contrasted with vertical, line, or hierarchical forms of management) is complementary with forms of management such as work teams and quality circles that encourage worker participation and innovation. Well-managed projects of all kinds, from large to small, can improve the quality of life and opportunities for growth and success within cooperatives.