Measuring the effectiveness of the Top ...

STRUGGLING! THE BOARD OF DIRECTORS IN ACHIEVING THE GOALS AND TARGETS

(A STUDY OF CONSUMER CO-OPERATIVE SOCIETIES IN THE STATE OF KUWAIT) By Ayoub Al-Muzaini Dr. Ahmed Al-Zamil Dr. Talal Al-Azimi INTRODUCTION Consumer Co-operative Societies are central to the Kuwait Society. They play an important socioeconomic role that cannot be isolated from the general economical activity. They form an important part of the social life of Kuwait because of their concern with both economic and social objectives. The societies enable consumers to buy a wide range of goods and services. In recent years, they have contributed to the progress and achievement of national industry by influencing trade, employment, investments as well as strengthening production and demand. A large numbers of private supermarkets that are in existence in the State of Kuwait, find it difficult to compete with the cooperative societies because of the advantages of the Co-operative system. The most important merits of the system include the return on buying, profits, the cheap prices, varieties of goods, and more importantly the extension and establishment of cooperative societies in the residential areas in the form of centers and branches. Indeed, these incentives encourage consumers to buy from cooperatives and accrue benefits to the economy as a whole. Today, co-operatives operate successfully in every country and they are involved in every form of activity, viz agriculture, fisheries, manufacturing, banking, insurance, retail and wholesale trade and increasingly in such areas as health and social care (Langmore, 1997). Consumer researches show that people value cooperatives and believe that cooperatives offer quality goods and services (Benander, 1999). Among the distinguishing features of Co-operative form of organization, are its voluntary and democratic character, participatory nature and above all its commitment to high ethical standards such as honesty, openness and social responsiveness and above all caring in all its dealings and activities (Krishan, 1998). Consumer Co-operative Societies are very important to the country’s economy, because of their concern with the social and economic objectives. Co-operatives draw community business into regional and national network and they are based on true value and self-help, self-responsibility, democracy, equality, equity as well as solidarity. Following the tradition of their followers, members of the cooperative believe in ethical values of openess, social responsibility and caring for others (ICA 1996). Infact, the co-operative uniqueness with its own customers as owners, gives the cooperative vital advantages in the market through member oriented activities and benefits to the members who are becoming more and more loyal customers – a tendency which has given birth to the idea of members club among the private competitors (Sivertsen, 1996).

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In this paper an attempt has been made to measure the managerial effectiveness of Board of Directors while achieving the goals and targets.

METHODOLOGY The subject studied consisted of top management including Board of Directors as well as Executive Managers, working in the consumer cooperative societies in the State of Kuwait. These are the key individuals responsible for the overall management of the cooperatives. They are familiar in fixing the goals and targets for the organization. Needless to mention, the sample population included in this study holds a highly visible position in their respective societies and assist in achieving the organizational goals of the cooperatives. The sample group consisted of the top management of consumer cooperative societies as follows:a) b)

Board of Directors – Members’ category. Executive Managers (middle management) of cooperative societies.

As the purpose of the study is to determine as to what extent Board of Directors of the Consumer Cooperatives is able to achieve the goals and targets. With this objective a six item questionnaire were designed, developed and distributed to the Board of Directors and Managers working on the key positions in Consumer Cooperative Societies of the State of Kuwait. The questionnaire contained information relevant to available managerial tactics for achieving the goals and targets. A Likert scale was used for the questions included in the study. Each respondent was presented with an attitude statement and then asked to place himself on a continuous scale running from Strongly Agree” to “Strongly Not Agree”. It was originally decided to use a score scale of 1 for strongly disagree to 5 for strongly agree for positive statement. However, to simplify the analysis of the study the 5-point scale was changed to 3-point scale i.e. “Agree”, “Neutral”, “Not Agree”. A total of 177 questionnaires were distributed covering all the six governorates throughout the country. Out of the distributed questionnaire 172 complied the questionnaire instructions completely and 5 failed to complete some sections of the questionnaire they were contacted again in order to maintain absolute sample population 177 (100 percent response rate).

WHY EMPHASIS ON GOALS AND TARGETS?

Organizations, being deliberate and purposive creation, have some set goals. The ends for which they strive, are variously referred to as “purpose”, mission, goal, target or objective” though there is some difference in these terms. However, the differences are not clearly defined, these terms are used interchangeably. An organizations mission articulates its fundamental purpose in such a way that it defines both the business of the enterprise as well as unifies the use of human, technical and financial resources (Cook et al., 1997). Mission is a statement which defines the role that an organization plays int eh society. The definition of mission has gradually expanded to represent a concept that embodies an organization's purpose of existance (Kazmi, 2004). A mission statement has to be operational, otherwise it’s just good intention. A mission statement has to focus on what the institution really aims

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to do so that everybody in the organization can proclaim, 'this is my contribution to the goals' (Drucker, 1990). A good mission statement should be specific and focussed on the principal reason for the existence of the organization. It must take a long-term perspective and be inspirational for the workers. They should take a pride in executing the mission to benefit others, condense and distel the mission statement into clear and direct language so everyone knows what you are aiming to achieve (Geoffery, 2004). Objective must be realistic and should be updated on an annual basis. They should be big, bold and highly motivated (King, 2004). It can easily be said that the cooperative societies in Kuwait are working on achieving two main goals. The first, the economic goal, that directs attention to development in economic fields through coordinating individual efforts towards fulfilling public needs and interests within a definite framework of the cooperative society. Among the most important features of this form of organization is the provision and utilization of all available human and material resources aimed at ensuring that the services provide benefit to the individuals forming the organization. The second one, the social goal, directs attention to social development by means of a series of official and unofficial measures. Such measures are basically formulated with the intention of protecting those with low incomes, against exploitation and greed. The social goal also incorporates the aim of spreading democratic and equality concepts among the people and consolidating the social links between them, by training qualified cooperative leaders and spreading cooperative values, concepts and practices with the aim of establishing social harmony and solidarity among the various sections of Kuwaiti society. Clearly these goals focus on serving specific needs of the society (James & Jerry, 1991). A well-framed goal has a target and a time frame for its attainment. Leaders are the bosses, and they have to formulate the purposes, objectives and limits of the organizations. Most writers on setting objectives and targets argue that they should be set by the members of the Board. By law, Board has primary function to protect the interest of all concerned i.e. members, employees, customers and members of the society (Hunt, 1979). Establishing goals and objectives is the justification for the existence of any organization and it is essential to the planning and organization of individual activities and measuring the employee’s effectiveness. While fixing the goals and targets for the organization, some foresight is needed to look at the wider international picture, particularly in view of new and future development in technology (Geoffery, 2004). Ideally, organization plan for long-terms and develoop long-term objectives. These objectives covers various areas viz return on investment, competitive position, leadership in defined field, productivity, public image, employees development and profitability etc. It is important that objectives set by the organization should not be ambiguous and on the contrary these should be clear and measurable. The objectives are results one expects to get out of business one does, and the way one does this business is called the business process which must be long-term (Lomash & Mishra, 2003). The role of Directors in any organization has a vital impact on the character and functioning of the organization. It hardly matters that the organization is dynamic, mechanical, conservative or risk taking which is basically determined by the top management. Keeping in view the importance of effectiveness in achieving targets by the management of Kuwaiti consumer cooperative societies, we put forward a questionnaire to the top management containing information relevant to managerial tactics in achieving the goals and targets.

Analysis The study examined the perception of the top management regarding achieving the goals and targets. The results presented in Table 1 have been obtained from the relevant questionnaire responses. It was found that 94.7 percent of the Directors and 70.7 percent of the Managers, working in the consumer

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cooperative societies in Kuwait agreed with the statement that “The cooperative society’s Directors are suffering from the absence of a plan with strictly predefined targets which result in the inability of accomplishing tangible achievements on the society level”. Interpretation of the results showed that goals and targets have not been defined clearly by the Directors and the framed goals have not been linked to the proper planning and strategy. Admittedly, without a clear goal and attainable target, managing is haphazard and random and no individual or group can be expected to perform efficiently. The second item on the questionnaire pertaining to effectiveness in achieving targets by the top management was “The cooperative society is suffering from the shortage of qualified and experienced members which resulted in the inability of achieving the targets of the society in the appropriate manner”. By examining the Director's responses to this variable, it was found that 75.8 percent of the Directors and 63.4 percent of the Managers agreed that the shortage of qualified and experienced personnel is the probable reason for not achieving the targeted goals. It was found out that the Kuwaiti Cooperative Law does not stipulate any minimum level of qualification and experience for Directors. It can be seen (Table 1) that 47.4 percent of the Directors and 37.8 percent of the Managers agreed that the deprivation of an opportunity for executive panel in decision-making resulted, in the inability of achieving the targets of the society in the appropriate manner. This indicates that the top management is not familiar with the participative approach because on an average only 35 percent of the top management were be not agreeable to this statement. Participation in goal setting is an important element both in determining their own abilities and in setting the attainable goals for themselves. Analysis of the raw data showed that the shareholders, i.e. owners of societies, are not given any opportunity in decision making. Approximately 74 percent of the Directors and 66 percent of the Managers agreed with the variable that “ The deprivation of an opportunity for the shareholders to participate in objective setting and planning of the societies resulted in the inability of achieving the targets of societies”. These findings give some indication towards the effect of the level of participation by shareholders in realization of the objectives and targets by the top management. During the course of this study, an attempt was also made to examine the perception of Mangers towards the applicability of International Cooperative Principles by the Directors in their societies. Accordingly, the following item was put forward to the top management of the societies: Some Directors do not apply the International Cooperation Principles due to the following reasons: (i) (ii) (iii) (iv)

Religious, political, sectarianism and tribal prejudices. Not participating in spreading the cooperative consciousness, education and training. Not participating in providing miscellaneous social services to the shareholders and the residents of the area in the appropriate required level. The general assembly (shareholders) is not engaged in its assigned cooperative roles in the society”.

On examining the perception of the top management, it emerged that 71.6 percent of the Directors and 61 percent of the Managers are not applying the International Cooperative Principles because of religious, political and tribal prejudices. It was also found that 91.6 percent of the Directors and 84.1 percent of the Managers i.e., on an average about 89 percent of the top management surveyed, responded that the Directors are not participating in spreading the cooperative consciousness/education

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and training to the members of the cooperative societies. On an aggregate, 36.2 percent were agreed that the Directors are not providing social services to the shareholders and to the residents of the area. Surprisingly, the analysis revealed that on an average 84.2 percent of the top management agreed that the shareholders were not engaged in its assigned cooperative role in the societies. From examining these prerequisites, it can be seen how poorly familiar the Directors are in applying International Cooperative Principles while discharging their authorities and responsibilities. The last variable put forward to the top management was “The current candidacy conditions for the membership of the cooperative society’s Board of Directors give a wide room for attracting inefficient and unproductive elements who do not contribute in achievement of the society’s targets”. Responses of the Directors showed that 82 percent of them agreed that current candidacy system for the membership of the cooperative societies is not a balanced one, as a result it gives wide room for attracting unproductive elements which is not helpful in contributing society's short as well as long term targets.

CONCLUSION The Consumer Cooperatives in the State of Kuwait, symbolize the success of the Cooperative movement in the field of distribution of goods and services. There is interest in creating strategies among various co-operative sectors to work together including co-operative identity, branding and cross-sector marketing campaigns. It was revealed that Directors do not have clearly defined goals and targets and set goals also have not been linked to proper planning and strategy. It was also found that the Kuwaiti Cooperative Law does not stipulate any minimum level of qualifications and/or experience for the top management. Admittedly, without adequate qualifications and expertise, managing is haphazard and random and no individual or group can be able to achieve the targets. Analysis of the data showed that deprivation of an opportunity for shareholders to participate in objective setting and planning of the societies resulted in the inability of achieving the goals and targets. Furthermore, Directors are not familiar in applying the International Cooperative Principles while discharging their responsibilities. Interpretation of the results, leads to the conclusion that the present candidacy system for the membership of the Board is not a balance one, as a result it gives wide room for unproductive elements. This situation is not helpful in achieving societies short term and long term objectives. Observations of this study may enable top management of consumer cooperatives to adapt to changing needs of the societies. Improving business effectiveness of the Cooperative socieites of the State of Kuwait will be outstanding task in a short-term as well as long-term perspectives. Current Cooperative Law of Kuwait needs to be amended in order to change the composition of Board. At present Board Members of cooperative are elected from amongst what we could call every day people. Very often, they are earnest people with good judgement but without necessary educational background for strategic decisions in the business world. Hence, there is a need to provide adequate training to the Directors and Managers to become proficient. This kind of behavioral adaptability will go a long way in improving managerial effectiveness of Top Management. Finally, results of this study may enable top management of the societies to adopt changing tactics of managing people because the Cooperative Societies are Central to Kuwaiti Society and are indeed its most distinguishing features.

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