The disadvantages of co-operative societies

THE DISADVANTAGES OF A CO-OPERATIVE SOCIETY

Definition of co-operative society

Co-operatives describes a form of business organisations where a group of consumers or producers come together voluntarily or out of their free will to form an association with the aim to produce, distribute or consume a particular good or service. A co-operative can therefore be seen both as a business organization and an association. 

DISADVANTAGES  

Lack of managerial Skills

In a co-operative society, people who manage the society are members who are elected to be part of a management committee. These people may not be professional managers and therefore may lack managerial skill. This could affect the proper management of the co-operative society. Their performance as manager can therefore become amateur (meaning it lacks professionalism).  

Problems with Raising Capital

There may be problems when the capital of the co-operative is not enough to undertake certain activities. Because in most cases members of the co-operative societies are lower or middle income classes, they are not able to make extra contribution to raise the capital required to finance such businesses. 

Inability to Keep Business Secret

In business, sometimes the only advantage you have over your competitor is the secret of your business which others do not know about. However, in a co-operative society, the business' ideas are discussed in meetings. This could make it difficult to keep as a business secret. This secret once leaked can be exploited by other companies to get an advantage over the co-operative society. 

Over involvement of the state in Co-operative's business

One of the major problems that co-operative societies face is that the government gets too much involved in their activities. Under some jurisdictions, governments appoint one person to be a member of the management team of the co-operative society. This member may influence the co-operative into behaving like a government institution rather than a business which must respond quickly to changes in the business sector in which it is operating. In addition, with the presence of a government personnel, the co-operative is likely to be following strict state rules rather than their own ideas. 

Differences in Opinion 

Democratic decision making is good. However, where everybody in the co-operative has equal power and vote. It is sometimes difficult to get to a decision. The multiplicity of ideas and views can become a problem in that it can slow down the decision-making process. Especially where there are people from different social classes and having different political ideas. 

Lack of motivation

Often in a co-operative, members are not eager to put in their maximum effort and resources. This is because the way co-operatives operate, provides a weak link between effort and resources put in and the reward derived from the business. For example, co-operatives share their profit equally to all members irrespective of the members' effort. furthermore, there are strict laws on how much dividend and bonuses may be distributed in co-operative. Consequently, members are not motivated to put in their maximum effort or money. 

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