GOVERNANCE AND MANAGEMENT OF SOCIAL AND SOLIDARITY ECONOMY ORGANIZATIONS

1. GOVERNANCE AND MANAGEMENT OF SOCIAL AND SOLIDARITY ECONOMY ORGANIZATIONS By Fredrick O. Wanyama, School of Development & Strategic Studies, Maseno University, Kenya.

2. DEFINING THE KEY CONCEPTS • Governance • Exercise of authority to determine the use of resources for worthwhile service delivery in society • Management • The organization and coordination of people’s efforts to carry out prescribed activities for achieving desired goals • Involves planning, organizing, leading and supervising people to perform tasks to achieve goals

3. DISTINGUISHING THE CONCEPTS • Governance sets the framework for carrying out organizational activities to achieve goals • Management deals with the day-to-day performance of organizational activities to achieve goals • Governance is broader than management: the former sets the policies that guide the latter • What is the nature of governance and management in SSEOs?

4. GOVERNANCE AND MANAGEMENT IN CAPITALIST ENTERPRISES • Separate performance of governance and management functions • Owners (based on shareholding) as principals play governance roles: • Set goals to be achieved through the enterprise • Make policies for achieving the goals • Executive staff employed by owners as agents play management roles: • Planning, organizing, leading and supervising the performance of activities for realizing goals

5. GOVERNANCE AND MANAGEMENT IN SSE ORGANIZATIONS • Governance and management roles not strictly separated in most organizations. • WHY? • Organizations governed on the basis of the following principles: • Open and voluntary membership: members are free to join and exit the organization • Autonomy: created by a group of people who govern them without public or for-profit influence

6. Collective ownership by various stakeholders: members, employees, beneficiaries, donors, etc. • Democratic governance: involvement of various (if not all) stakeholders in decision-making • Decision-making power is not based on capital share ownership: “one member, one vote” rules • Small size of some SSEOs: members switch back and forth between governance and management roles

7. Legal frameworks in some countries provide for separation of governance and management roles in SSEOs • Anglophone countries in Africa have cooperative legislation to this effect • Operating principles, size of organizations and the context of operation have produced three governance and management models: • Self-management • Collective management • Hierarchical management

8. SELF-MANAGEMENT MODEL • All members use negotiated rules and procedures based on collective action and social control to perform organizational activities • Solidarity structures used to generate goods and services for members/stakeholders • Each member assumes the responsibility of both governing and managing the organization • A flat leadership structure: all members alternate as governors, managers, workers, users, etc.

9. Members’ Roles in self-management

10. COLLECTIVE MANAGEMENT MODEL • Sharing of governance and management responsibilities among members without ceding the controlling authority of all • The performance of assigned tasks does not enhance the power of one member over the others • Flat leadership structure typical of self-management • Members play different roles as their contribution to governance and management

11. A Collective Management Model

12. Leadership roles are negotiated and agreed upon by all members • Roles assigned either through simple elections or selection based on ability • Leadership roles considered a service to all members who are equal • A leader is a first among equals who does not command others, but consults, facilitates, etc. • All members collectively participate in governance and management, playing different roles but exercising controlling authority

13. HIERARCHICAL MANAGEMENT • Originates from the legal framework or demands for efficiency and competitiveness of SSEOs • Legal: legislation separate performance of governance and management roles in SSEOs • SSEOs are viewed as associations of people, but also as economic undertakings to be managed like any other business • Efficiency assumed to be enhanced by separation of governance and management functions • Members (association side) play the governance role while hired staff (business side) perform management functions

14. The result is a hierarchical structure of management: • Members are the supreme policy-making authority through the General Assembly (GA) • A management board or committee elected by members is responsible for the implementation of policies • Management board or committee hires staff to execute the day-to-day management of the organization • Management staff answerable to the board or committee through the highest ranking officer

15. A Hierarchical Management Model

16. HUMAN RESOURCE MANAGEMENT IN SSEOs • Process of recruiting, developing and motivating people to work for the achievement of organizational goals • Different SSEOs management models have varying human resource management practices • Self-management: • No assessment of staffing needs: members fit in the tasks • Members do all tasks for themselves: no staff recruitment • No formal training: SSEOs rely on members’ ingenuity • Members improve task performance through self-awareness and continuous reflection on what they do: self-supervision • The organization becomes a “learning hub” that develops its member-workers • Remuneration includes goods and services; not just money

17. Collective management: • Overreliance on members/stakeholders to carry out tasks overshadows staff recruitment • No formal training: peers contribute their skills • Self-supervision and awareness results into self-assessment for improved task performance • Collective responsibility brings along peer pressure to accomplish tasks • Motivated to work not just by a wage, but the goods and services generated as well as peer pressure

18. Hierarchical management: • Like in formal capitalist enterprises, there is assessment of organizational staff needs • Use of professional recruitment process that follows a typical procedure of job description; advertisement; short-listing; interviewing; and selection • Training of staff; e.g. Kenya, Tanzania and the UK have cooperative colleges for training cooperative staff and members • Remuneration pegged on market rates • Lower wage rates have caused high turnover for skilled & competent staff

19. MANAGEMENT OF RESOURCES • Diverse sources of resources: • Members’ share contributions • Members’ periodic subscriptions • Material contributions by members • Voluntary work • Philanthropic donations or bequests • Returns on goods and services provided to all • Subsidies from local & national governments • Official development assistance from developed countries to the South • How do SSEOs ensure proper use of resources?

20. Accounting • Gathering, compiling, reporting and archiving information on an organization’s activities and resources (to inform decision-making) • Varying accounting practices in SSEOs: • Self-management & collective management • Use basic bookkeeping to record transactions like sales, purchases, payments and income • Keep minutes of meetings as records of their activities • Reliance on individual memory to generate and report information on activities and resources • No clear information on assets and liabilities

21. Hierarchical management: • Use of international accounting standards to regularly report assets and liabilities to members • This includes: • Revenue reports • Expenditure reports • Annual budgets • Variance reports • Cost projections • Assets and liabilities • Financial statements (income statement, balance sheet, statement of cash flows, etc.)

22. Auditing • The evaluation of the organization’s operating and financial procedures for accuracy, validity and reliability in meeting members’ goals • Sparingly applied in the management of SSEOs • External auditing commonly done by cooperatives, social enterprises and foundations • Rarely used in mutual benefit societies and associations that rely on members’ oversight • Internal auditing rare in most SSEOs, except in cooperatives (mainly by the Supervisory Committee) • Social audits being embraced to report on progress towards achieving objectives

23. Monitoring • All members and stakeholders monitor the performance of the organization • Different management models have varying mechanisms for monitoring • Self-management model: • Worker-members directly monitor performance • Collective management: • Peer pressure and mutual responsibility provides the required oversight • Hierarchical management: • General assembly and management committee or board monitors performance using audit reports

24. REGULATIONS ON GOVERNANCE AND MANAGEMENT OF SSEOs • No uniform regulatory framework for all types of SSEOs in most countries • Anglophone African countries: • Legal framework for governance and management of cooperatives enforced by regulatory agencies • No such framework for mutual benefit societies, associations and community-based organizations

25. Francophone African countries: • Legal recognition of mutual benefit societies and cooperatives • No uniform regulations on governance & management of SSEOs • Regulations on the provision of specific services, like health insurance, tend to exclude small mutual benefit societies • In the EU, there are efforts to develop a balanced legal framework that can be applied to the different forms of social economy

26. FINANCING MECHANISMS FOR SSEOs • Financial innovations on the traditional grants and loans for the social economy: • New grant steams, e.g. venture philanthropy • Trading shares at the conventional capitalist stock market to raise more capital • Creation of social stock exchanges for SSEOs, e.g. in Brazil and south Africa • Creation of financial institutions to provide long-term investment capital to SSEOs, e.g. La Fiducie du Chantier de l’economie sociale of Quebec

27. KEY FINDINGS • Guided by principles of open and voluntary membership, equality and participatory leadership • Different governance and management models: self, collective and hierarchical • Different human resource management practices • Innovations in resource management and financing, but remains people-centered • Absence of, or a weak regulatory framework

28. QUESTIONS FOR YOUR SUGGESTIONS • What are the strengths and weaknesses in the governance and management of SSEOs?