Advantages of the Co-Operative Organizations

As we seen some advantages of the co-operative organizations in our earlier posting, those are interested opening up the co-operative business must understand the following limitations or disadvantages as before venture into the business.

As against the advantages of co-operatives, the following limitations and drawbacks of this form of organization must also be noted:

1. Limited Capital- Cooperatives are usually at a disadvantage in raising capital because of the low rate of return on capital invested by the members.
2. Incompetent Management- The management of a co-operative society is generally inefficient because the managing committee consists of part-time and inexperienced people. Qualified managers are not attracted towards a cooperative on account of its limited capacity to pay adequate remuneration.
3. Absence of Motivation- A cooperative society is formed for mutual benefit and the interest of individual members is not fully satisfied. There is no direct link between effort and reward. Hence, members are not inclined to put their best efforts in a co­operative society.
4. Differences and Factionalism among Members- Once the initial enthusiasm about the co-operative ideal is exhausted, differences and group conflicts arise among members. Then, it becomes difficult to get full co-operation from the members. The selfish motives of members begin to dominate and service motive is sometimes forgotten.
5. Rigid Rules and Regulations- Excessive Government regulation and control over co-operatives affect their functioning. For example, a co-operative society is required to get its accounts audited by the auditors of the co-operative department (SKM) and to submit its accounts regularly to the SKM. These regulations and control may adversely affect the flexibility of operations and the efficiency of management in a co-operative society.
6. Lack of Competition- Cooperatives, generally, do not face any stiff competition. Markets for their goods and services are more or less ready and assured. Hence, there is possibility of slackening of efforts.
7. Cash Trading- The members of the societies are generally from poor sections of the society. These persons need credit facilities. On the other hand, private traders extend credit facilities to the consumers. Though the societies sell goods at lower prices, but absence of credit facilities compel them to go to private traders for meeting their requirements.
8. Lack of Secrecy- The affairs of a co-operative society are openly discussed in the meetings of the members. Every member is free to inspect the books and records of the society. Therefore, it becomes difficult to keep the secrets of business.
9. Weightage to Personal Gains- Mutual co-operation erodes away over a period of time and the members start giving weightage to their personal gains.
10. Lack of Incentive and Initiative- In a cooperative society form of organization everybody is the owner of the society and over a period of time it becomes lifeless due to a lack of incentive and initiative as everybody is the owner, but business does not belong to any one of them.
11. Corruption- It is the worst demerit from which co-operative societies suffer, it is the biggest hindrance in the development and growth of business.
12. Slow Decision-Making- The process of making a decision as a co-operative can be a lengthy and frustrating task because every member gets an equal vote and say in the business decision.