New report: director remuneration in agricultural co-operatives

017cf519dc37a9b5eadec2243d6044f5b5b2b6e5e0A new survey of how agricultural co-ops reward their directors has highlighted a set of important recommendations around good governance for farmer-owned businesses.

The analysis was conducted by SAOS and Co-operatives UK to establish current practice around director fees and expenses and help with decision-making around the remuneration of non-executive directors in agricultural co-ops.

Director recruitment is critical to a business’s success and a remuneration package can play an important role in attracting directors with the right mix of skills and experience.

 

Some key findings from the report:

  • Director remuneration and the amount of time spent by directors on their roles varies widely, even among those with similar levels of turnover and employee numbers
  • Boards need to make sure that they have a formal process in place that monitors director remuneration to ensure it reflects the business’s needs and its ability to recruit directors of an appropriate quality
  • With only 12% of the co-ops surveyed having a formal process to review board performance, more agricultural co-operatives need to build regular director and board performance reviews into their governance planning
  • As only 37% of those co-ops surveyed have a director development programme in place and only 36% are confident that the co-op is recruiting enough directors of the necessary calibre, more co-ops need to implement processes around recruitment and remuneration
  • Many co-ops need to establish a strategy to increase gender diversity on their boards, with only 13% of respondents having women on boards.

Jim Booth, SAOS’ Head of Co-op Development, commented: “Whether through performance reviews, board development, or ensuring there are appropriate levels of diversity and the right mix of skills, there is a clear need for more co-operatives to put systematic processes in place to ensure boards are best placed to drive the business forward.”

“The quality and calibre of directors is arguably one of the most important factors in ensuring the future success of a co-op.  Farmer directors don’t expect to make lots of money while serving on their co-op board, but equally they should not subsidise the rest of the membership. The remuneration level for directors needs to be appropriate to attract and retain the right calibre of people.”

Richard Self, Agricultural Manager at Co-operatives UK, added: “The board is the engine powering your co-operative. It is vital to regularly service your board just as you would your car. What the figures in this survey show is that, alongside some best practice, many agricultural co-operatives are not taking the time to time to ‘tune’ their boards.

The full report is available to members of SAOS and Co-operatives UK that participated in the survey.

For more information, contact jim.booth@saos.coop

 

SAOS is recruiting! Your opportunity to help farmers and supply chains to innovate through co-operation and collaboration

If you want to make a significant contribution to the future of Scotland’s farming, food and drink industry, and you’re motivated by a challenge, this opportunity will interest you.

We are seeking an experienced leader and project manager to join the SAOS team in our work designing and delivering change and innovation through co-operation and collaboration.

While farmers seek more certainty about markets and returns, food and drink manufacturers wish to secure supplies of quality Scottish raw materials as they invest in opportunities for growth. At the same time, the industry is dealing with volatile commodity markets and exchange rates, a changing policy environment, powerful data-tech solutions, and climate change. These present a challenging, but highly stimulating, set of change drivers that must be addressed by more collaborative activity.

In Scotland, SAOS accepts responsibility to lead in designing and facilitating programmes that improve farm profitability and the effectiveness of value chains through farmer co-operation and supply chain collaboration. SAOS is a founder member of Scotland Food & Drink, which, in its Ambition 2030, identifies more industry collaboration as a “pillar of growth” towards achieving the target of doubling the industry’s output to £30 billion in 2030.

As an SAOS team member, you would join a unique culture that is collegiate, collaborative and supportive, and where new thinking and new solutions are encouraged as an everyday aspect of our work. But most satisfying of all, is the delivery of solutions that make a real difference to people and to business, and to Scotland.

If this interests you, click on the link below to find out more. If you wish to apply, please get in touch before
5th September 2017.

What’s in it for you? Promote your co-op difference and its value to members

Keen to improve your co-op’s performance? SAOS has the answer…

A co-op’s purpose is to provide benefit to their members, but few co-ops actually measure the benefits of membership, in part because of the complexity.

The aim of this new service is to measure and report how a co-op delivers value to its members on an annual basis – to produce an annual ‘Member Value Statement’.

SBP MBS 2 SBP MBS 1

The main advantage of doing this is to drive your co-op’s business performance. Other benefits include:
• Developing a better understanding of how your Co-op delivers value
• Validation of the benefits of membership
• Ensures you have a better understanding of your members and their needs
• Route to grow your business – evidence of benefit and value for existing members
• Supports the recruitment of new members
• Produces benchmarks on which to measure and monitor future co-op performance
• Route to motivate your staff and increase their confidence
• Increased member pride from their participation and association with the co-op.

What is involved?
It’s not an onerous process and won’t require much of your time. It involves us sitting down with you to scope out what your co-op does, the services it provides, and all the ways in which it generates value to the members. Another key stage is speaking to your members to get a better understanding of why they joined your co-op and what they value? The next stage is to test and verify the list of benefits and for members to specify their priorities and assess how well you perform these services.
The whole process is straightforward and we’ll lead you through all the stages. The end result will be a simple one-page statement, largely involving ‘informatics’ diagrams that clearly and effectively display the member benefits you’ve delivered over the year.

What is the cost of this service?
We are fortunate in having secured funding from Scottish Government to help with this project, so the cost of the service to each co-op is only £1,500. For that you’ll get between eight and ten days of SAOS staff development time, as well as all the benefits mentioned above. We are really excited about this initiative as it has the potential to be a real game changer for farm co-ops. We are limited to working with 12 co-ops, so please note your interest as soon as possible.

To register your interest, or for more information, Click here to email Jim Booth

Here are some more great examples of Member Value Statements already produced with our member co-ops:

FarmStock MVS 2017-2 FarmStock MVS 2017-1

 

Tayforth MBS-1 Tayforth MBS 2

 

 

 

 

SAOS Summer newsletter now available online

Our Summer newsletter, packed with news from and for Scotland’s agricultural co-ops, has arrived from the printers. Printed copies will be winging their way far and wide this weekend, but you can get a sneak preview here: 

Our previous newsletters are available at: Previous SAOS Update newsletters

Scotland’s Machinery Rings – thirty years and thriving!

IMG_3162SAOS newsletter’s headline story in Spring 1987 was “Borders Machinery Ring is a UK First.”

It is fascinating that despite the passing of 30 years, the article continued “Given the present economic climate in agriculture in the UK, with continuing pressure on farm incomes as costs tend to rise, farmers need more than ever to look at ways in which some form of co-operative activity can help to rationalise production and input costs.”

The case for the establishment of Machinery Rings in Scotland had been propounded for some time by the late Sandy Mackay, Senior Agricultural Adviser with the East of Scotland College of Agriculture, who could see the potential of machinery rings to contain on-farm fixed costs. Sandy’s presentation to a conference in 1986 prompted Melrose farmer and agricultural contractor, Alastair Cranston, to consider the possibility of establishing a ring in the Borders. Also, in December 1986, SAOS and Food from Britain had organised a study tour to Germany, for interested parties to visit and learn from several of the rings there (at the time there were 260 rings in Germany). The final element, according to Alastair, was probably the disastrous harvests of 1985 and 1986 which effectively concentrated the minds of many farmers who had been “well-off and skeptical” in the 70s and early 80s, and thus the idea of the ring system began to be strongly considered in several areas in Scotland.

Following two initial meetings in early 1987, it was decided that sufficient interest and enthusiasm existed in the Borders and, with the help of SAOS, the first ring was established there with 23 founder members.

Much hasn’t changed since the early days of the rings. In his Nuffield Scholarship report of 1993, Alastair Cranston reflected: “The idea is simple – it works in practice; it helps in time of difficulty and it is an aid to increased profit in times of relative prosperity.” What has changed over the years is the strength and breadth of Scotland’s machinery rings, and their pivotal role in Scottish agriculture and rural business, optimising efficiency and generating economic activity.
The minutes of the inaugural meeting of the Scottish Machinery Ring Association, held in May 1990, reflect how quickly the ring movement caught on. There were nine members, as there are now, but the composition has changed, along with exponential changes in turnover and member numbers, as well as the work that they carry out.

Initial SMRA details as at May 1990:

Borders MR:   3 years old  -   130 members
Perth MR:   3 months old   –  60 members
Skye MR:   2 years old   –  65 members
Highland MR:   in 2nd year  -   78 members
Caithness MR:   Completed 1st year  -   42 members
Tay Forth MR:   Completed 1st year  -   120 members
North East MR:   9 months old  -   104 members
Mearns & Angus MR:   End of 2nd year  -   184 members
Buchan MR:   End of 1st year  -   120 members

SMRA member and turnover details at the end of 2016:

BMR   –   930 members   –   £6 million
Tayforth   – 1001 members  -   £11.3 million
Rural Services Scotland   –  204 members  -   £1.8 million
South West   –  94 members  -   £0.5 million
Caithness  -   180 members  -   £0.6 million
HBS   –  1201 members  -   £6.2 million
Ringlink  -   2724 members  -   £38.8 million
Lothian   –  260 members  -   £2 million
Orkney  -   326 members  -   £1.9 million

Total    -   6,920 members  - £69.1 million

Since the end of last year, many new members have joined the rings and we can now safely say that membership of Scotland’s Machinery Rings exceeds 7,000.

We asked current ring managers for some thoughts on today’s rings. Graham Bruce, Managing Director of Ringlink Scotland (who was at the first SMRA meeting representing Mearns and Angus MR) told us: “As a co-operative, the business is owned by its members and it is the members that provide the direction on which the machinery ring has to focus, this has been made very evident by the vast range of services that have evolved over the years and that are now available to Ring members.

“There have been many milestones over the years, from being a one man operation to having a team of 37; the first member to the two thousandth member; from a sitting room to having four purpose-built offices. But the ongoing achievement is knowing that we can and will continue to support and provide solutions to hard working people and businesses on a daily basis.”

Jayne Ward, Manager of South West Machinery Ring concentrated on the variety of rural services that the ring can provide: “Don’t let our name deceive you. We are about SO much more than just machinery. Why not find out what else we can do for you?”

Alan McLean, HBS Manager told us: “It is fascinating to see how diverse an operation most of the Scottish Machinery Ring businesses are nowadays. Members can purchase or hire ‘almost anything’ through the Ring businesses that they are members of, with the list of commodities and services available to them being far too long to even contemplate scribbling down.”

Bruce Hamilton, Manager of Tayforth, added: “Machinery Rings were born in difficult times and with uncertain times ahead they have an even more relevant place in Scottish agriculture. Tayforth was delighted to welcome our 1000th member this spring and we have taken on a 6th member to join our team to help manage the increased level of demand from our members. We are the first port of call for our members when they are sourcing extra help or commodities for their businesses and we are looking forward to continuing our expansion in the future.”

In a fine example of the (roughly translated) French saying “the more things change, the more they stay the same”, we quote again from Alastair Cranston’s Nuffield report: “The economics of agriculture in the EEC for the foreseeable future appear such that the relevance of fixed cost husbandry will be as important to the future of individual farm viability as enlightened stock and crop husbandry.

“Machinery Rings, properly run and operating within a structured and inter-linked framework will be of increasing importance…”
Alan McLean, HBS Manager, concludes: ”With regard to the future of Machinery Rings in Scotland – who knows? I see Rings surviving long into the future but they may have to change to do so. However, over the past 30 years, the Scottish Machinery Rings have proven to be very adaptable, flexible, resourceful and resilient with a real willingness to change. These key ingredients will ensure that Machinery Rings remain an important tool in the Scottish farmer’s tool chest for long into the future.”

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