“Governance and Management in FPOs” Venue: APMAS, Hyderabad Date:  12th July, 2019. © Vrutti | 1

Presentation Structure About Governance and Management 1 Different forms of Producer Organisation, 1 Challenges in Governance and Management 2 Best Practices in Governance & Management 3 © Vrutti | 2

What is Governance in FPOs? Governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility FPOs are created to perform and function as a Business and have responsibility to ensure economic benefits to its members. Why do we need Good Governance? For increased efficiency – so that we can maximise the benefits we provide to members with limited resources For effectiveness – so that our work actually benefits those who are not adequately served by the state and the market institutions For ethical behavior, so that we can influence actors in state and market institutions as well to behave ethically About Governance 3

What comes to our mind when we think of good governance and successful farmer groups ???? © Vrutti | 4

Membership base and member owned, controlled & managed   Membership base and member owned, controlled & managed Organizational structure, constitution and legal recognition Management systems, regularity of statutory meetings Responsible and responsive leadership, accountable to members Internal knowledge and skills, professionalism of the organization Culture, values and integrity Open communication and internal trust Financial management and accountability Financial autonomy, independence from external financial support Political independence, no Government interference Relations with other stakeholders Quality of service provision to members Governance & Management 5

Elements of Good Governance FPO Process 6

POs are accountable to their communities Why do we need Good Governance in FPOs POs are accountable to their communities POs have to be committed to the highest level of accountability especially to its members For a PO, being accountable means Demonstrating regularly to members that it uses its resources wisely and Ensuring inclusive and equitable support to all members The Board/Managements does not take advantage because of their special status and decision making powers. An accountable PO has to be Transparent and ethical in all transactions with its stake holders Prepared for public scrutiny of its accounts and records by funders, beneficiaries, and others. Main reasons POs run into difficulties or collapse: Poor governance and the breakdown of trust between members, leaders, and managers. Managing a group of producers with different priorities is a difficult task, especially when POs become larger. Need of Good Governance 7

Second level is made up of the leaders elected at the AGM. How will Good Governance happen in POs? In almost all POs governance is by a two-level structure. First level is made up of all the PO’s members also known as the General Body. All major decisions are made at the General Body meeting – either an Annual General Body Meeting (AGM)or Special meetings called for. Second level is made up of the leaders elected at the AGM. These leaders or ‘directors’ farm a management group, which is often called the board of directors. Role for the Board of Directors should be clear Role of Management of the company and the Chief Executive Having transparent and efficient systems and procedures and MIS Decision making is done by a committee of representatives of the Board and Management. Diligent and efficient staff to carry out the directions of the decision making authority. Levels of Governance in POs 8

Who Should be on the Board? Elected representatives from the members The “ideal” Board size is between seven to eleven Ideally the Board Members should have an inclusive composition including with representation from women The “ideal” tenure for a Board member is six to eight years, split into two terms of 3-4 years each. Members should have different specialisations External Experts can be inducted to the Board – but they have no voting rights New Board members must be systematically identified and one or two inducted every year. New Board members must be given an orientation to the PO’s mission, strategy, operations and history. Boards should annually appraise their own contribution to the PO. Board in Pos 9

A Good PO should have the following characteristics A well developed vision and mission - goals and objectives Goal-oriented constitution that is understood by all members A vision of running the PO on clear business parameters – making it a good business for the members as well as the PO itself Clear definition of responsibilities, both for leaders and members Elections of group officials as per constitution Democratic and transparent leadership Set rules and procedures to control decision making Strategic planning Open two-way communication and feedback mechanisms Regular meetings Proper record keeping and accountability procedures Effective conflict management procedures and capacities Strong Internal Systems – Financial, Risk and Inventory management Characteristics of Good PO 10

Producer Organisation Governance Structure Annual General Body Meeting of Members ( Primary Producers) Professional Managers appointed by Board Board of Directors 11

Challenges in Governance and Management Regularity of meetings at primary groups – mostly need based Less or no leadership experience at lower level institutions and directly becomes as board member Second line and down the level leadership development is missing Leadership growth path is not well defined Gap in Expectations Vs Capacities of Board & CEO Business management skills of board and staff Women participation is ignored and very nominal space in FPO board Activity focus more at FPO level and missing at primary groups and individual Cost/legal implications in frequent change in leadership Challenges in Governance & Management 12

Quick and timely decisions – seasonality, stop or scale up activities Some Good Governance Practices in POs The Board must meet at least once in every 3 months, on dates pre-specified well in advance – ideally once in a month A member who is absent, even with leave, for three consecutive meetings should step down The Board should seek detailed staff presentations / interaction at least once every alternate meeting The Board must meet part of the time in each meeting without the staff, and the CEO if needed Formation of functional and sub committees – more leadership space and focussed monitoring Quick and timely decisions – seasonality, stop or scale up activities Close coordination with eco system players – local and distant Post promotion engagement model with promoting agency Leadership rotation and withdrawal of false leaders Utilisation of IT enabled technology for monitoring and management Timely adherence of legal compliances – Audit, IT & ROC filing The Board should lay down policy and work only through the CEO and not be involved in operations POs can be governed in many different ways and there is no single, ‘best’ approach. Separation of governance and management- board governs and the staff manages Best Practices 13

Risks and dilemmas Staff often have a higher educational level than leaders or immature & less capacitated Staff setting the direction, or even taking over leadership of the organization. Vested interest of few board and staff when FPO reaches remarkable profits Staffs are recruited and may stay longer in office than elected leaders. Staff, through their executive functions, may become the actual fund managers, with risks of financial mismanagement Staff get a salary, while leaders (in principle) work on a voluntary basis Board members have political roles and staff has a technical role. Risk & Dilemmas 14

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