Session 2: Organization

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Building Development Oriented Rural Enterprises
Training and Project Development Workshop
Session 2 Organization
Workshop Presentation
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DOCUMENT OVERVIEW
ORGANIZATION TYPES OWNERSHIP ORGANIZATIONAL
STRUCTURE HUMAN RESOURCES PERFORMANCE
MANAGEMENT GROUP ACTIVITY
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ORGANIZATION TYPES
Arranges services like technical support and
buyer identification in exchange for membership
fees and service fees
Service Provider
Collects members produce so that it can be sold
in large batches, but doesnt actually buy it
(farmers retain risk)
Aggregator
INCREASING COMPLEXITY, CAPITAL REQUIREMENTS AND
FARMER BENEFITS
Collects and buys members produce for re-sale,
but performs little or no value-added activities
Distributor
Collects and buys members produce for re-sale
after carrying out value-added process
(integrates several stages of the value chain)
Integrated Business
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DISTRIBUTOR AND INTEGRATED DORE
4. Makes payment (less cost of inputs)
7. Delivers produce needed for fulfillment of
order
8. Delivers produce as ordered
3. Delivers produce as contracted
Sales Marketing Unit
Purchasing Logistics Unit
Suppliers groups
Customers
1. Makes production contract with farmers and
supplies inputs
6. Conveys customer order
5. Places order
9. Makes payment
2. Provides agricultural training to improve
quality
On-farm improvement unit

• Distributor adds no value, just assembles
  produce and sends to customer
• Integrated DORE adds value through processing or
  extensive handling

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CASE STUDY DOI KHAM FOOD COMPANY, THAILAND
Production Purchasing
Postharvest Handling
Sales Marketing

• Sales team estimates demand for next harvest and
  sets purchase target
• Purchase target is divided up amongst all
  Cooperatives who want to produce for Doi Kham
• Cooperatives divide allocation amongst
  individual farmers
• Farmers sign production contract with Doi Kham
  and get credit from Bank of Agriculture and
  Cooperatives
• Farmers produce according to production
  guidelines

• Farmers deliver produce to collection centre
• Farmers are paid within 1-2 days less cost of
  credit
• Produce is dispatched to Chiang Mai Packing
  House
• Produce is cleaned, trimmed, sorted, packed and
  randomly tested for chemical residue
• Handling is according to GMP and HACCP standard
• Heat-sensitive produce stays in cold chain

• Sub-grade produce sold unbranded in wet markets
  or processed
• High grade produce sold with Doi Kham brand
• Produce either sold through own stores or sold
  to restaurants, hotels, supermarkets, etc
• Produce promoted through expos, newspaper
  advertising, books, leaflets and media relations

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SERVICE PROVIDER DORE
3. Pays for service (via membership fees, fee
charges)
1. Makes agreement to provide service and pays
(via donor)
External Service Provider
Suppliers groups
DORE Management
2. Provides service (e.g. extension, credit,
sales contacts)
Doesnt take possession of farmer produce,
provides the smallest benefit for farmers
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CASE STUDY LI JAO MARKETING ASSOCIATION, CHINA
Background

• Li Jao village marketing association is a
  2nd-level association
• Members are 600 pomegranate farmers in Binchuan
  District of Yunnan Province in Southern China
• Financed by membership fees, fees charged for
  services like grafting, and a commission of
  0.1RMB on every kilo sold by the farmers.
• In 2005, farmers in the association produced
  1,000 tons of pomegranate, and in 2006 the amount
  produced and sold was about 3,000 tonnes (all
  sales facilitated by association)

Services provided to members

• Standardizing varieties of pomegranates
• Improving farmer cultivation skills
• Helping farmers to carry out basic sorting and
  grading
• Gathering and disseminating market information
• Gontacting traders and wholesalers on behalf of
  individual farmers

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AGGREGATOR DORE
8. Makes payment, less service charge
5. Delivers produce needed for fulfillment of
order
6. Delivers produce as ordered
2. Delivers produce
Sales Marketing Unit
Purchasing Logistics Unit
Suppliers groups
Customers
4. Conveys customer order
3. Places order
1. Provides agricultural training to improve
quality
On-farm improvement unit
7. Makes payment
Aggregator has no advance purchase/contract- it
pays farmer after receiving payment, so farmer
retains risk
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OWNERSHIP MODELS
Farmer owned and managed but not incorporated
Cooperative/Association
Company with shareholders, formal management, but
shareholders are farmers
Farmer-Owned Company
INCREASING CAPITAL AND MANAGEMENT SKILL,
DECREASING PARTICIPATION
Company with share ownership distributed between
farmers and outsiders such as government or
private sector
Farmer-Outsider Joint Venture

• Company or other marketing enterprise entirely
  outside owned, can be
• Private (e.g. contract-farming company)
• Public/Non-profit (e.g. public sector, NGO-owned)

Outside-Owned Enterprise
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OWNERSHIP MODELS EXAMPLES
Farmer-Owned Company Olamsa, Peru
Cooperative El Ceibo, Bolivia

• Oil Palm company in Pucallpa, Peru, making
  400,000 profit per month
• Owners are 350 oil palm farmers who established
  business- a further 150 farmers who did not join
  from the start have no ownership stake
• GM is outsider, other managers are owners

• Cocoa cooperative with 2m sales p.a. in Yungas
  region of Bolivia
• Associated of 38 smaller farmers associations,
  over 500 families in total
• All managers and most technical staff are
  farmers or family of farmers

Outside Owned Mok Chau Tea Co, Vietnam
Joint Venture Fruitimacizo, Colombia

• Tree tomato company in Popoyan, in southern
  Colombia
• Established by the government investing 66.6,
  and the farmers investing 33.3 (in the form of
  their orchards)
• Outside management team

• Tea company in Son La district in central
  vietnam
• Owned 100 by the government
• Managed by government officers

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DOCUMENT OVERVIEW
ORGANIZATION TYPES OWNERSHIP ORGANIZATIONAL
STRUCTURE HUMAN RESOURCES PERFORMANCE
MANAGEMENT GROUP ACTIVITY
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ORGANIZATIONAL STRUCTURE TEMPLATE

• Provide strategic oversight
• Represent the owners
• Make fundamental decisions

Ultimate Authority

• Develop strategy
• Ensure managers and senior implement strategy

Management Group

• Run day-to-day operations in accordance with
  strategy

Day-to-day Controller
Line Unit 2
Line Unit 1
Line Unit n
Sub-Unit
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MAKING AN ORG CHART I IDENTIFY THE TASKS
Spell out the main operating-level tasks, based
on the business process
4. Make Payment (less cost of credit)
7. Deliver produce to Sales Marketing - Sort,
grade and pack - Ship to city
8. Deliver produce to customer - Check - Repack
- Deliver
3. Ensure delivery of produce - Design delivery
practices - Control system
9. Get customer payment - Issue invoice -
Follow up on invoice
1. Make contracts - Set terms - Sign agreement
2. Give training - Manage training area - Design
program - Run training courses
5. Receive orders from customer - Maintain
customer relationship - Do sales calls and
promotion
6. Convey orders
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MAKING AN ORG CHART II GROUP THE TASKS
Group the main tasks so that similar tasks are
together identify the common theme
7. Deliver produce to Sales Marketing - Sort,
pack and grade - Ship to city
3. Ensure delivery of produce - Design delivery
practices - Control system
Collection and Packing
8. Deliver produce to customer - Check - Repack
- Deliver
5. Receive orders from customer - Maintain
customer relationship - Do sales calls and
promotion
Marketing
1. Make contracts - Set terms - Sign agreement
6. Convey orders
4. Make Payment (less cost of credit)
9. Get customer payment - Issue invoice -
Follow up on invoice
Agricultural Production
2. Give training - Manage training area - Design
program - Run training courses
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MAKING AN ORG CHART III FILL IN BOTTOM LEVEL
Ultimate Authority
Management Group
Day-to-day Management
Collection and Packing Unit
Agricultural Production Unit
Marketing Unit
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MAKING AN ORG CHART IV DEFINE GOVERNANCE
Define major roles and responsibilities of
managers, management group and ultimate authority

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MAKING AN ORG CHART V SET MEMBERSHIP RULES
Define the membership of the main management
groups and give them names
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MAKING AN ORG CHART VI PUT IT ALL TOGETHER

• Chairmen of all local farmers associations
• Monitor appointment of senior manager
• Monitor and evaluate implementation of strategy
  and fund raising

Farmers Assembly

• 5 Members elected by Farmers Assembly
• Hire and monitor Operations Manager
• Define strategy

Executive Committee

• Experienced manager hired by executive committee
• Implement strategy
• Hire and manage line managers staff

Operations Manager
Collection and Packing Manager
Agricultural Production Manager
Marketing Manager
Experienced managers

• Make contracts with farmers
• Provide training and credit
• Make payment

• Ensure proper delivery of produce to collection
  centre
• Manage sorting, packing, grading, shipping

• Manage promotion and sales
• Ship produce to customers
• Manage invoices

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POSSIBLE LINE MANAGEMENT PROVIDERS
Choice
Positive
Negative

• High skill levels
• Availability

• Expensive
• Less committed to community
• May have problems generating community interest

Professional Manager

• Low cost
• Local knowledge
• Commitment to community

• Lower skill
• Many farmers cannot spare time

Local Manager

• Generates community interest
• Low cost
• Local knowledge
• Commitment to community

• Bureaucratic
• Lower skill
• Many farmers cannot spare time

Committee
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CASE STUDIES MANAGEMENT LEADERSHIP
External Manager Olamsa, Peru
Internal Manager ABAPI, Bolivia

• Oil Palm company in Pucallpa, Peru, making
  400,000 profit per month
• GM is experienced manager with knowledge of Oil
  Palm industry hired by farmer-owners because they
  recognized they did not have needed skills to
  manage and grow business

• Large farmer-owned banana and pineapple company
  region of Bolivia
• GM is farmer and former deputy of Bolivian coca
  growers union
• GM manages all functions including logistics,
  finance and sales

VS.
Committee Management Red Ecolsierra,Colombia
Individual Management Fruitimacizo, Colombia

• Tree tomato company in Popoyan, in southern
  Colombia
• General Manager and line managers were all
  outsiders/professionals
• They were good at managing the business but
  weaker at community development

• Farmers Association in the Sierra Nevada,
  northern Colombia
• Main functions of certification,
  commercialization and technical support are
  managed by farmer committees
• Has commercialized coffee and honey

VS.
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CASE STUDY MIXING INTERNAL EXTERNAL MANAGEMENT

• Red Ecolsierra is a DORE from northern Colombia
• It is commercializing coffee, cocoa, honey and
  eco-tourism
• There is one senior manager who is a
  professional (the GM) and many technical staff
  such as sales supervisors and inspectors, but
  most of the governance groups are made up of
  community members

Community Group
External/professional staff
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DOCUMENT OVERVIEW
ORGANIZATION TYPES OWNERSHIP ORGANIZATIONAL
STRUCTURE HUMAN RESOURCES PERFORMANCE
MANAGEMENT GROUP ACTIVITY
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HUMAN RESOURCE MANAGEMENT
Type
Need
Management Issues

• People able to function in councils/assemblies
• People able to be non-executive directors

• How to empower local people to play role

Governance

• People who can execute agribusiness management
  functions

• How to get ideal balance of professional skills
  and local knowledge, connections and commitment

Management

• People who can provide technical services like
  extension, engineering

• How to develop skills
• How to manage performance
• How to retain

Technical Staff

• People who can provide functions like
  administration or skilled industrial roles

• How to manage performance
• How to retain
• How balance needs of business and needs of
  beneficiaries

Semi-skilled staff

• People who can provide basic roles like packing,
  delivering, etc.

• How to manage performance
• How to retain
• How balance needs of business and needs of
  beneficiaries

Labour
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DOCUMENT OVERVIEW
ORGANIZATION TYPES OWNERSHIP ORGANIZATIONAL
STRUCTURE HUMAN RESOURCES PERFORMANCE
MANAGEMENT GROUP ACTIVITY
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TARGET SETTING
Methods to achieve target (mission)
Performance Management begins by setting the
overall target for the organization
To raise beneficiary production quality up to
levels required by the modern trade market
To use local production to supply high-value
customers with the produce they demand
Overall target (goal)
To promote the welfare of its beneficiaries by
profitably commercializing the agriculture in the
area
To build the capacity of beneficiaries to
participate at all levels of the business
To create economic value on behalf of the
beneficiaries
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STAKEHOLDER FRAMEWORK
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DOCUMENT OVERVIEW
ORGANIZATION TYPES OWNERSHIP ORGANIZATIONAL
STRUCTURE HUMAN RESOURCES PERFORMANCE
MANAGEMENT GROUP ACTIVITY
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BREAKOUT GROUP ACTIVITY

• You will be given a case describing a new DORE in
  Afghanistan, giving
• Background conditions
• Business process
• You should recommend an organizational system for
  this DORE including
• - An ownership model
• - An organization chart (including composition
  and role of each unit, e.g. saying if each unit
  is a committee or an individual, and if
  individual, whether they are a farmer or an
  outsider)
• - A performance management framework
• Make sure that the design is appropriate for the
  ownership model- if it is a Cooperative there
  should be a lot of committees and farmers in the
  management, if it is outside-owned there will be
  many professional managers
• Use the worksheets, manual and content of this
  presentation if it is helpful

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Thank You