5. Empirical Results

Organisational Culture of Examined Organisations

Five co-operative and three private companies in Kenya’s dairy and coffee sectors were examined in the study. These businesses were selected according to the following criteria:

· comparative relevance⁵ of coffee and dairy cases in terms of capital formation,

⁵ Comparative relevance in case studies refers to the selection of interesting, even contradictory cases, which provide researchers with exploratory and intriguing findings for further elaboration. Case studies, being qualitative in nature, seek to understand and explain reasons for behavioural aspects of organisational decision making and, thus, do not attempt to generalise their findings into larger populations. “Generalisation” in qualitative research refers to generalising the findings back into the theoretical discussion. For further discussion, see Yin (1990).

· perceived quality of management (well vis-à-vis fairly well managed cooperatives in terms of member service and capital formation),

· ability and willingness to provide annual financial statements for past 8-10 consecutive years,

· willingness to participate and provide information as well as to organise member interviews.

Both “well-managed” and “fairly well-managed” co-operatives were included the sample. Well-managed co-operatives are here defined as having comparatively advanced management in developing the co-operative for future competitiveness. “Fairly well-managed” are considered poor from the same point of view. Table 2 below classifies the selected cases according to their respective activity sector, managerial quality and organisational culture.

Table 2: Researched organisations, classified by sector, managerial quality and organisational culture orientation.⁶

⁶ Detailed description and analysis of each case are reported in Jämsén & al. (1999).

Well-managed co-operatives displayed more of a “future orientation,” better transparency in transactions and the use of formal planning procedures, which indicated a more business-like attitude towards co-operative management. On the other hand, fairly well managed co-operatives were more rigid. They appeared less able to meet environmental changes and more likely to face difficulties in the future if they did not change their organisational culture.

Co-operative vs. Private Organisation Cultures

The three private companies were characterised by shareholder-oriented cultures, where short-term profitability was the key issue. This was the basic tendency in all private companies. In marked contrast, the examined co-operatives displayed more supplier-oriented and government-oriented cultures. This fundamental difference in culture between the two groups is important. In the private companies studied, business activities were evaluated by their owners in terms of how they contributed to improving current year profitability by increasing efficiency and lowering expenses. At the same time, it was evident that such over-emphasis on short-term profitability concerns could lead to a lower level of capital investments and less attention being given to the technical aspects of production. Such was the case in two of the private coffee companies examined.

The general cultural focus in the surveyed co-operatives was, on the other hand, on keeping member service costs low and maintaining an adequate quality of service, which focus is typical for supplier-oriented cultures; however, supplier-oriented co-operatives do not tend to emphasise improving the quality of member production. Members may demand that their society improves the range and quality of its services to members, but management seldom requires members to improve the quality of the production they supply to the co-operative. In government-oriented cooperatives, emphasis on tight cost budget control often leads to strict requirements that no expenses are to be exceeded beyond a certain point. This is a way to ensure that the production in the co-operatives is realised with the foreseen budget. On the other hand, this kind of budget control can actually produce just the opposite effect. Expenses are inflated in the budget proposal and during the budget year, the management may attempt to use budgeted expense allocations fully before the end of the financial year in order to guarantee a higher cost budget allocation for the forthcoming year.

In some of the co-operatives studied, an interesting combination of government-oriented culture was observed where a shareholder-oriented culture was used for rhetorical purposes. Surprisingly, urban real estate has been one of the major investment targets of some of these co-operatives and they have invested in rental properties in Nairobi. According to several members interviewed, these buildings are a consequence of an incompetent and corrupt management who benefited personally and financially from these investments. When these buildings were constructed, the decisions were justified to the membership on profitability basis. In other words, management applied a shareholder-oriented culture to explain to members that these buildings would be sensible investment targets and provide all members a good return. The study findings, however, gave no evidence to support the argument that these buildings had brought any major wealth increase to the members.

Co-operative and Private Sector Response to Changing Markets

There is evidence, though, that recent liberalisation of the market environment in Kenya has begun to change organisational cultures. Private coffee companies have an interest to develop new brand names to differentiate their products better and emphasise the quality of their coffee production, while in the dairy sector, private dairies now offer a range of new dairy products. These changes within the private sector are examples of customer-oriented culture where customer satisfaction is viewed as an important business objective. This externally induced cultural change may lead to profitability in the long run as was the perception in the examined private companies.

Some change towards a more shareholder-oriented could be seen in the coffee and dairy co-operatives studied, especially in well-managed co-operatives. Evidence of shareholder-oriented culture was found both at the union and society levels; however, since profitability figures were not presented in an appropriate manner, the visibility of owner-interest was lacking.

Balancing Member and Customer Needs

The fairly well-managed co-operatives surveyed did not seem to pay enough attention to satisfying their member suppliers’ needs. Consequently, member loyalty was at a low level. Even the private dairy estate surveyed had been able to create better supplier loyalty than the fairly well-managed dairy society by providing prompter and higher payments. Indeed, a well-managed co-operative could fulfil its members’ needs including good and prompt producer payments and farmer training, whereas the quality of artificial insemination services (AI) was insufficient even in the well-managed co-operatives.

Since customer and member needs are constantly changing, the key to success seems to be to adopt an adaptive and flexible approach to the environmental changes. Unfortunately in the fairly well-managed dairy co-operatives surveyed, government-orientation and conflicts made it impossible to adapt to the changing environment. While a small society can communicate better with its members and adapt more quickly to change, they do not meet the technology and the scale of operations requirements. To compete effectively in liberalised markets, a society should be large enough to build its own dairy or invest in a proper coffee processing facility without jeopardising the level of member payments. Thus, the union level might be at the right level of operations to support such investment in dairy plants, in joint sales organisations or in large coffee processing factories. It may also be in a better position to attract good management for large-scale operations. This would allow independent operations without a need for interventions by external stakeholders, such as the Government, Dairy C, a co-operative in-transition, provided a good example of how better operational autonomy in decision making could be achieved by establishing its dairy plant investment as a private limited company.

To summarise, in private companies the current state of corporate culture is well on the way towards a position where market liberalisation is considered to be an opportunity. A similar transition has only recently started in the well-managed cooperatives. However, we could not find any signs of transition in the fairly well managed co-operatives. This rigidity will make it difficult to cope in the liberalised markets and there will be a danger that the role of co-operatives will diminish.