Assessment as Strategic Approach to Co-op Development

cutonce

In the home economics and woodshop classes of our formative years, there was certainly a bespectacled and beleaguered instructor who continually intoned, “measure twice, cut once” throughout the duration of the semester. On the day all the things were due, nobody could argue with the value of double checking those measurements as the project progressed. Unless you are architect Frank Gehry, mismatched proportions usually look like a mess. But why was it that of the 20+ kids in class, only a handful actually succeeded in making something recognizably decent? Is it because only a few had any desire or real talent for the work?

Not really. It’s human nature to want to take shortcuts. What those teachers knew is that it’s so much easier in the heat of the moment to ditch proven methods. Accepting readily accessible subjective realities (“that looks about right”) is usually easier than finding out the facts and then acting on those.

The same holds true for any kind of organization with a system—periodic analysis and assessment can help identify problem areas that can be fixed or fine tuned before they turn into an issue or full-blown crisis. It’s the ultimate in proactive management. It may sound obvious, yet it seems like an easy step to skip when things are going fine.

Bill Gessner, a CDS consultant for expansions, said, “A store doing an audit or assessment is a good sign from a development point of view. It’s always good to evaluate your outside market as well as do an internal audit of systems. Co-ops often have the greatest need to assess, strengthen and improve operations.”

One of the best internal assessment tools available for cooperators is the CoCoFiSt program (Common Cooperative Financial Statements) that allows a co-op to compare itself to comparable stores around the country, as well as determine best-practices based on the highest performers. In the program’s CoCoWorks and CoCoGap sessions, stores get the additional benefit of working as a group to close the gaps in performance among their stores to focus on improvement and create greater peer accountability. The approach is based on a continual assessment rather than a one-time occurrence.

Kate Sumberg, the CoCoFiSt product manager, said, “For example, Willy St. Co-op in Madison, Wis. was considering a back room addition in order to accommodate produce inventory. They compared their turns in produce with other co-ops and changed their ordering system significantly so that now they don’t need a back room addition like they originally thought.” Walden Swanson, the CoCoFiSt product assistant manager, also stressed how Willy St. Co-op’s willingness to look at other stores’ performance allowed them to learn more about their own operation.

“If you have an annual gap of $100,000 between what you are earning and what you could be earning in your grocery department in a year, bringing in outside help may bring in a solution faster. So if you spend $10,000 to earn $100,000 more every year, you’ve made a great investment. Often people jump to solutions without a thorough assessment. They could be solving the wrong problem, and that’s a waste,” Swanson said. He noted the Midwest Co-op Grocers Association’s use of the CoCoGap tool has saved them over $600,000 collectively this year. “They are using the right tools for assessment and getting the right context for peer accountability. Several co-ops have even created a culture where management teams have learned to use the CoCoFiSt tools and participate in assessments.

Ann Waterhouse, governance expert, also pointed to the importance of board assessment that allows the co-op to address its long range vision. Waterhouse recommends boards do an assessment on an annual basis, and that includes looking at how they relate to other co-ops. “Why be part of a movement if you are not coordinating with others? There are so many resources co-ops can use like the CCMA conference, the co-op grocers associations, the magazine Cooperative Grocer.” She’s also developed a 54-question board assessment that addresses bottom-line board responsibilities and best-practices.

“It’s especially important to look at internal and external assessments when going into the planning process,” Waterhouse said. “It’s part of the board’s whole relationship to asset protection.”

Often an outcome of board and management’s internal assessment is that it naturally leads to questions about external forces, like market and trade area considerations, that give the co-op even more information that can affect the bottom line.

At the Davis Food Co-op in Davis, Calif., general manager Eric Stromberg says the co-op does a market study periodically to “get a sense of the threats, opportunities and changes” in their market. Although he believes he has a good handle on the co-op’s market—Davis is a 60,000 population town with limited population and development growth (by design)—every time the co-op does a market study he learns something new that is critical to the co-op’s $13 million operation. Stromberg said information they got from the market study they did this year with Pete Davis, a CDS location research consultant, “was like going back to college. Every co-op should make sure to have an updated market overview.”

In a low-growth town like Davis, it would have been easy for the co-op to assume it knew all there was to know about its market.

In the last year a number of grocery stores went out of business in Davis. The co-op board wondered if it should be taking one of those sites and looking at opening a second store. The research showed that they would just split their market. Why go through the considerable expense for not much gain in market share? Out of that conclusion came a plan to expand their office space and begin a long-term planning process for what the co-op will do once they reach the critical $1,000 sales per square foot (currently they are at $600 per square foot).

Pete Davis noted how critical trade area assessments are to any store’s operations. “Typically an expansion can be looked at as a panacea that might cloud over potential problems. It’s easy to say we need a bigger store to compete and get more sales. That can be true, but not universally. You may not need to expand, you may need to look at what you can do to improve current operations. Assessment is always the foundation for a good project.”

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By |March 1st, 2003|Categories: Uncategorized|Tags: |

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