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

GOVERNANCE AND MANAGEMENT OF SOCIAL AND SOLIDARITY ECONOMY ORGANIZATIONS

ByFredrick Wanyama,School of Development & Strategic Studies,Maseno University, KENYA.

INTRODUCTION• Social and solidarity economy organizations are diverse, but have some

commonalities:– Born out of necessity– Economic ventures, but driven by social benefit motives– Operates on similar principles like:

• Open and voluntary membership; • Collective identity and ownership;• Self-help and mutual assistance;• Independent and autonomous management; • Democratic member control; etc.

• How do SSE organizations govern and manage their activities?• Purpose:

– To draw generalizations on governance and management of SSEOs in order to explore possibilities for improving effectiveness

THE CONCEPTS GOVERNANCE AND MANAGEMENT• Governance– Exercise of authority to determine organizational

activities and use of resources for service delivery• Management– The organization and coordination of people’s efforts

to effectively carry out prescribed activities for achieving desired goals

– Involves planning, organizing, leading and supervising people to perform tasks to achieve goals

DISTINCTION BETWEEN THE CONCEPTS

• Governance:– Identifies and sets the framework for carrying out

organizational activities to achieve goals• Management:– 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?

GOVERNANCE AND MANAGEMENT IN SSE ORGANIZATIONS

• Performance of governance and management roles not strictly separated in most SSE organizations.

• Governance and management in SSE dependent on operating 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

– Collective ownership by stakeholders: members, employees, users, beneficiaries, donors, etc.

– Participatory governance: involvement of various (if not all) stakeholders in decision-making

– Decision-making power not based on capital share ownership: “one member, one vote” rules – democratic?

• What form of Governance & Management in SSEOs? • Three models:

– Self-management– Collective management– Formal or hierarchical management

SELF-MANAGEMENT MODEL• All members use negotiated rules and

procedures 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.

Members’ Roles in self-management

Governors

Managers

WorkersUsers / Beneficiaries

Members

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 that is typical of self-management

• Members simultaneously play different roles in the governance and management of SSEOs

A Collective Management Model

Governance and

management

Governance (Policy-making)

Management (Implementation

of decisions)

Monitoring (Members’ oversight)

Evaluation (social audit)

• Leadership roles 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

HIERARCHICAL MANAGEMENT• Distinction between governance and management

roles• Members play the governance role (association

side) while hired staff perform management functions (business side) to enhance efficiency

• The result is a hierarchical structure of governance and 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

– Executive Director or General Manager answerable to the board or committee

– Management staff under the supervision of Executive Director or General Manager

A Hierarchical Management Model

General Assembly

Management Board or

Committee

General/Secretary Manager

Accounting Department

Marketing Department

Administration Department

Supervisory Committee

HUMAN RESOURCE MANAGEMENT IN SSEOs

• Human Resource Management:– Process of recruiting, developing and motivating people to efficiently 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

• Collective management:– Reliance on members/stakeholders to carry out tasks

overshadows any (if at all) 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

• 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 mainly financial– Lower wage rates have caused high turnover for skilled &

competent staff

RESOURCE MONITORING• 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– Subsidies from local & national governments– Official development assistance from developed countries to the

South• How do SSEOs ensure proper use of resources?

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• Little recorded information on assets and liabilities

• Hierarchical management:– Use of international accounting standards to annually 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.)

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 impact and progress towards

achieving objectives

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

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

• 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 SSEOs• In the EU, there are efforts to develop a balanced legal

framework that can be applied to the different forms of social economy

KEY FINDINGS• Governance and management a function of operating

principles• Different governance and management models: self,

collective and hierarchical• Different human resource management practices

based on the management model• Innovations in resource management and financing,

while remaining people-centered• Absence of, or a weak regulatory framework

QUESTIONS FOR YOUR SUGGESTIONS• What strengths and weaknesses are discernible in the

governance and management of SSEOs? • What needs to be done to improve the management and

governance of SSEOs?• Should SSEOs adopt governance and management practices

in capitalist enterprises?• How can SSEOs be competitive in the provision of goods

and services?• What are the best practices in SSEOs that can be replicated

elsewhere?