Problems with the Consolidation Process: Where are the Co-op Values?

We want to begin by confirming the state of the co-op. The co-op was and is in a strong position, even through the challenges of expansion. Advocates for the consolidation have argued that a stronger financial condition is one of the reasons for this big move but very little information is forthcoming about why or even if we should consolidate.

A cooperative business supported by Owners must be transparent. Putting aside the question of whether we should consolidate, we want to elaborate on the process that led to this consolidation proposal - a process that was flooded with secrecy and hierarchical decision-making. There were many successful processes in place that were dismissed.

EFC operates under the principles of policy governance.  One of the keys to policy governance is a clear distinction between the roles of the GM and the board.  The board sets guidelines that the GM operates within.  The GM has wide discretion over the day to day operation of the co-op.  This distinction keeps board members from attempting to micro-manage the co-op.  Policy Governance also advises that strategic thinking is a function of the board, done in consultation with the GM.  This keeps the strategic thinking process focused on values and visioning.

The idea of consolidation did not grow out of any strategic thinking process.  It began with a conversation among the three GM’s.  It was then sprung on the boards, along with a non-disclosure agreement (NDA).  Board members had to sign the NDA in order to find out what it was they were not allowed to disclose.  This isolated board members from the member-owners we represent. What we didn’t realize at the time was the control of the strategic direction of the co-op was taken away in that small gesture. Beginning with the inability to vote on whether the nondisclosure agreement was necessary or appropriate, and continuing with the sustained decision to keep the Owners out of the process. It is important to stress that the idea of consolidation did not evolve from a discussion of co-op values.  The primary concern has always been operational efficiency.  But what went awry here is the manner in which the non-disclosure document was introduced. It effectively undercut the board’s ability to evaluate the idea, to do the due diligence and vetting necessary for such a huge project.

The board was from then on subject to the direction set by the general managers of the three co-ops involved in this consolidation proposal. All three boards were playing catch up to the plans being discussed for a least a year by the GMs/CEO. The three boards finally met later in the June of 2014. We scrambled to figure out what was going on, what were the motives for such a merger, how this fit into the mission of each respective co-op, how we would proceed. At the time the representatives from each board (three directors each) expressed dismay about the beginning process.

One of the first actions of the three boards was the generation of a charter document (approved by all boards by July 3, 2014). The charter was essentially a series of issues that the board wanted addressed before the feasibility of any plan would be examined.  The GM’s response to the charter was given to the boards in September 2015, well over a year after they were directed to do the work.  This was in the depths of the expansion process, which occupied the board’s attention.  The response had very little detail and ignored several important issues.  The steering committee has chosen not to allow member-owners to see this document.

Despite being in the middle of expansion planning and implementation, the EFC Board called a special retreat in July 2015 to focus on the many questions that arose while the GMs/CEO continued working towards consolidation. These questions encompassed a variety of issues, ranging from relationships with local farmers to continued positive impact on the community, keeping the local economy vibrant, and fair labor practices for the EFC staff. We expected answers to these questions but most, if not all, were deemed irrelevant by the advocates for consolidation who often said that these questions would be considered after the consolidation. We believe these are the very issues that build a solid cooperative economy and should have been addressed prior to a vote for consolidation.

This is the point when the push for consolidation sped up. While the GMs/CEO took a year to minimally (negligibly) answer the questions raised by the Boards, the Boards were forced to speed through the decision points in six months.  

After the boards voted to move into the “feasibility” phase on March 25, 2015, the conversation focused exclusively on implementation and planning.  Critical thinking about the direction we were moving was actively discouraged.  Just as at the Town Hall meetings held this summer, participants were managed to minimize opposing voices and not allow debate. Those who continued to ask relevant questions about alternatives to consolidation and questions about cooperative values were treated as trouble-makers.   At this point there was a clear distinction between directors who were skeptical of consolidation and those who saw it as the best way forward.  The skeptics grew increasingly frustrated by their inability to influence the process and withdrew.   The GMs and the steering committee, made up of self-selected advocates for consolidation, pushed the process forward.

It was only at the September 2016 board meeting that the five remaining board members took a vote that endorsed the idea of consolidation.  Board members opposed to consolidation had been slowly worn down, each deciding to resign when they could no longer support the direction the board was moving.

It is legitimate to ask why the board did not end the process on the first mention of a non-disclosure agreement or at any of the decision points after that.  During this time, the board was immersed in the store expansion.  Planning and fundraising for expansion were the priorities.  Consolidation discussions were a distraction.  Advocates stressed that this would be a long process and the ultimate decision would be made by the co-op’s member owners.  The board did not believe it was making an impactful choice, but simply allowing an exploration of ideas.  Even directors who were highly skeptical of consolidation felt a duty to see the process through.  It only became clear in retrospect that consolidation was the only idea being seriously considered.  The willingness of the board to allow the process to move forward was retroactively interpreted as an approval of the idea of consolidation.  

Our member-owners are now preparing for the most important vote in EFC’s history.  They are justified in assuming that the idea has been thoroughly vetted by the board.  That is not the case.  Rather than discussing whether consolidation fits with cooperative values, the board was distracted by the minutia of board structure and bylaws.  Directors were tasked with choosing a name for the new co-op before we decided that there should be a new co-op.  Legitimate debate was replaced with strawman arguments such as “will the three boards all get along?”  “Should we do this?” became “could we do this?”  Essential questions, like “how many employee positions will be eliminated?” and “how much money will these efficiencies save?” have never been answered.

If the three co-ops consolidate, there will be no untangling them.  There is no way to undo this decision.  If you are not certain that consolidation is in the best interest of the co-op, please vote against it.

Manisha Nordine, Former EFC President Seth Erling, Former EFC Vice President