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

2. 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

3. 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

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

5. 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

6. Elements of Good Governance
FPO Process 6

7. 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

8. 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

9. 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

10. 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

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

12. 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

13. 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

14. 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

15. 15