Factors Affecting the Success of Rural Production Cooperatives in

Chaharmahal and Bakhtiari Province with Emphasis on Managerial

Skills

Shakiba Mahdian dehkordi1*, Ali Yousefi 2, Amir Mozafar Amini 3, Hosein Mahdian
dehkordi4

1- MSc Graduate of Rural Development, Department of Rural Development, Faculty of Agriculture,

Isfahan University of Technology, Isfahan, Iran.
2- PhD of Agricultural Economics, Assistant professor, Department of Rural Development, Faculty of
Agriculture, Isfahan University of Technology, Isfahan, Iran
3- PhD of Rural Development, Assistant professor, Department of Rural Development, Faculty of
Agriculture, Isfahan University of Technology, Isfahan, Iran
4- MSc. Student of Industrial Engineering, Faculty of Engineering, Payame Noor University (PNU),
Tehran, Iran.

Abstract
Small scale and fragmented lands are one of the most important obstacles of agricultural
development. Perhaps one of the best ways to deal with this problem is empowering the
units of collective action. The rural production cooperatives are more accepted rather
than the other units due to observing and applying the triple principles namely
"ownership", "governorship" and "subjectivity". Nevertheless, these cooperatives with a
ten year old, have not yet achieved the appropriate position in the production sector. The
aim of this study is to analyze the managerial factors affecting the rural production
cooperatives' success. The statistical society included all members of rural production
cooperatives (RPC) of Chahar Mahal and Bakhtiari Province. Data were collected on a
sample of 160 members of RPC by using probability proportionate to size sampling
method through face-to-face interviews based on a comprehensive structured
questionnaire. The success index in this research has measured using the SERVQUAL
model that analyzes the gap between members' expectations and perceptions of services
quality provided by RPC. Based on the results of Wilcoxon Test, the RPC of Chahar
Mahal & Bakhtiari Province have met the members' expectations merely in the confident
dimension and the mean of members' expectations is significantly higher than the mean
of members' perceptions in other dimensions. The result of Kruskal-Wallis Test shows
that the success of RPC is not same. The influential managerial factors on the success of
RPC were determined by applying a multivariate regression model. Human and
conceptual skills of managers, managers' belief on the importance of members'
participation, educational level and managerial experiences of managers has the most
impact on the success of RPC.
Keywords: Rural Production Cooperatives, SERVQUAL model, Altman model, Katz's
managerial skills.
 Introduction

nearly half of the world's population live in rural areas, the majority of them are
Smallholder farmers and their livelihood are funded through agriculture and its related
activities (Food, Agriculture & Decent Work, 2014). Despite role of yeoman in
employment, income generation for farmers, providing food for rural households and
therefore political stability, especially in developing countries (Odulaja, 1996; Delgado,
1999), unfortunately, according to the World Food Program's report (2013) half of the
world's hungry people were from smallholder farming communities (World Food
Program, 2013). In fact, the smallholder farming due to the low efficiency and not using
the up-date technology, not only prevent the increasing of quantity and improving the
quality of production and increasing the farmers' income and welfare, but also lead to
increasing the waste production, costs and wasting the water resources and human
resources (Abdullahi, 1998).
The experiences of different countries indicate the agricultural development is just
possible through the reducing the number of production units and increasing the average
of land areas in economic size, and forming the new methods of exploitation. These
changes provide the good-crop, appropriate use of tools and machines and modern
agricultural inputs, increasing of productivity and profits, and increasing of the
performance of the agriculture sector (Abdullahi, 1998). In this regard undoubtedly the
agricultural cooperatives have a special role in integrating these units and modification of
patterns related to the exploitation systems of farming. These cooperatives incidentally
have three principles such as: ownership, governance and empowerment, they are caused
to increase bargaining power, access to competitive markets, investment in new markets,
access to the required services and products, increasing the income, reducing the costs
and risk management for Smallholder farmers (National Cooperative Business
Association, 2005). This is caused that today in both of developed and developing
countries the establishment of agricultural cooperatives are supported as a means to
enabling the smallholder farmers and achieving economic development (Lerman &
Parliament, 1991). Justification for continuing the support of the cooperative form of
organization requires evaluation and monitoring the cooperative's performance.
The performance of cooperatives is affected by several factors. For instance Vander
Walt through a research on failed cooperatives in Africa indicated that the debility of
management, lack of education, the conflict between members and lack of capital were
the most important factors affecting cooperative's failure. Van Niekerk considered the
debility of management as the most important reason for failure of cooperatives. Unal
and colleagues (2009) in a review about fishing cooperatives in Turkey concluded that
the management skills is one of the internal factors affecting on these companies's
success. Nyoro (2007) Also studying the successful agricultural cooperatives in Kenya,
indicated that the experience of managers, skills of directors board and employees and
their training are correlated to the cooperatives' successfulness. Carlberg (2006) by
studying the newly established cooperatives in America concluded that technical skills of
managers, management experience, training of managers and to be them full-time, are as
managerial factors on successfulness of these cooperatives. Gholifar & Baniasadi (2013)
introduced the technical and human skills of managers are as internal-organizational
factors affecting on the success of cooperatives in Zanjan province of Iran. Daneshvar
kakhaki and colleagues (2010) also by studying the role of management in rural
production cooperatives' performance in Kermanshah province achieved to this fact that
the practical experience and specialized knowledge of managers are as affecting factors
on the success of these organizations.
The aim of this study is to assess the management factors affecting on the success of
Rural Production Cooperatives (RPC) in Chaharmahal and Bakhtiari province. This
province is located in the South West of Iran, and it is limited to Isfahan Province from
North and East, to Kohkiluye and Boyer Ahmad province from south, from west to
Khuzestan province and from north-west to Lorestan province. Center of this province is
Shahrekord and according to the amount of rainfall and flow of rivers (Zayanderood and
Karun rivers), agriculture is one of the main economic pillars especially in the East part
of this province. The results of this study can help members to select the manager
efficiently. The following sections include respectively theoretical framework, materials
and methods, results and discussion, and conclusions.

Theoretical framework

In this study SERVQUAL satisfaction model was used to measure the success of
cooperatives. This model is based on "Expectation confirmation theory" and for the first time
in 1985 was introduced by Parasuraman and colleagues. Based on this theory, if the
perceived performance is greater than expectations, the person will be satisfy and if the
perceived performance is less than expectations, the person will not be satisfy (Jamal and
Naser, 2002).

Perceived
quality
Person satisfaction

Expectations

Figure 1. Model of the formation of customer satisfaction (Jamal and Naser, 2002)

To measure satisfaction by this model, first service quality gap (Gap) was measured in
five dimensions separately and then the overall index of satisfaction is made. These
dimensions include:
1. Reliability: The ability of service providers to fulfill their commitments
continuously and accurately
2. Responsiveness: The willingness and accountability of the service providers to
support their clients
 3. Empathy: The intimacy with the clients and understanding of their individuals
feelings and problems
4. Assurance: The competence and skill of the staff of an organization to give
confidence and trust to the clients
5. Tangibility: The tidiness and appearance of assets and property of an organization
including its staff (Zeithaml & Bitner, 1996).
The calculation of the Servqual score in a particular service quality dimension
is based on the following formula:
1
Gi= =1

( ) (1)

where Gi is the quality gap (perceived service quality) of dimension i, Pij and Iij
are the performance perception and the excellence expectation for item j in dimension
i, respectively, and ni is the number of items in dimension i. Then SERVQUAL
satisfaction index is calculated as follows:
1
G=5 5
=1 =1
(2)

where G is the overall Servqual score, Gkt is the Servqual score of customer k for
dimension t, and M is the number of customers (Grigoroudis & Siskos, 2010).
Also for measuring the managerial skills of managers, Katz model was used. Based
on this model, having three skills: technical, human and Conceptual are necessary for
effective management that each of them can progress separately (Katz, 1991). Technical
skill involves process or technique knowledge and proficiency. Managers use the
processes, techniques and tools of a specific area. Human skill involves the ability to
interact effectively with people. Managers interact and cooperate with employees.
(Alagheband, 1992). Conceptual skill involves the formulation of ideas. Managers
understand abstract relationships, develop ideas, and solve problems creatively. Thus,
technical skill deals with things, human skill concerns people, and conceptual skill has to
do with ideas (Sayedabbaszadeh, 1994).

Research Methodology

The study as a survey method is a descriptive correlation research. Statistical population

consists of all members of RPC in Chaharmahal and Bakhtiari province (3715 persons).
To determining the sample size, Cochran formula was used (160 persons) (Scheaffer,
Mendenhall, & Lyman, 1990) and then the share of each company were determined by
probability proportionate.
For data gathering, 2 structured questionnaires were used for members and managers of
companies. The questionnaire for members was designed in two parts. The first part of
the questionnaire consisted of demographic information and in the second part the
members' expectations and perceptions were examined separately. SERVQUAL standard
questionnaire contains 22 paired questions that to compliance with these companies
increased to 57 questions. The respondents were asked to rate their opinion on a scale of
5 levels of Likert (from number 1 for strongly disagree to 5 for strongly agree). In
preliminary research, the questionnaire was tested by 30 persons and thus the necessary
corrections were made in the questionnaire. Factor analysis was used to validate the
questionnaire. Also to determine the appropriateness of the correlation matrix of the
variables in the Factor Aanalysis, KMO test was used (Devaus, 1997), and the mentioned
test showed that the variables chosen in this study was suitable and are also highly
correlated with extracted factors. For determine the accuracy of the measurement of
selected method for data gathering, Cronbach's alpha coefficient was used of. Table 1
shows the reliability and validity of the questionnaire and it shows that the modified five-
dimensional SERVQUAL model is an appropriate tool to measure members satisfaction
of the quality of provided services in the companies and can be used in similar cases.

Table 1: reliability and validity of the questionnaire

Perceptions Expectations
Factors Concept
sig Bartletts K.M.O sig Bartletts K.M.O
877
Tangibility 0.000 1909.857 0.845 0.793 0.000 150.173 0.780
0.
902
Reliability 0.000 549.985 0.897 0.743 0.000 167.934 0.640
0.
863
Satisfaction Resposibility 0. 0.000 347.984 0.843 0.681 0.000 43.691 0.764
960
Assurance 0.000 2357.494 0.941 0.761 0.000 1640.257 0.771
0.
913
Empathy 0.000 1153.307 0.905 0.762 0.000 938.183 0.818
0.
Cronbach's Alpha =
K.M.O = 0.825 Bartletts= 16424.273 Sig= 0.000
0.962

Also to measuring the skills cooperatives executives, the triple managerial skills
questionnaire was used (Moghimi, 2009) with adapting by cooperatives. After data
gathering by using SPSS, data analyzing was performed and the frequency distribution
tables were used to describing the gathered information. Nonparametric Wilcoxon test
and Kruskal-Wallis test and multiple regressions were used to test the hypothesis.

Results and Discussion

The average age of the members and managers in the sample is respectively 55 and
49. Among the cooperatives members, the lowest frequency belongs to young group and
the highest frequency belongs to middle-aged category. Also among managers of
companies, the most frequency is related to the middle-aged group and the least belong to
the elder group. Regarding education level, among the members, most frequency is
related to the school and elementary school and among the managers the highest
frequency devoted to higher education group. The least frequency for members is related
to Middle School, and for managers is illiterate group. About 22 percent of the members
are illiterate and 41% have primary education. Obviously the low literacy of members
can cause many problems in the companies. It is a fact that seems the most cooperatives
are grappling with it in Iran (Bazrafshan et al, 1389). In terms of management experience,
49% of the managers have less than 5 years of experience. Based on the findings the
average of managerial experience for managers is only 1.5 year.
For comparing the members expectations and perceptions in each of the five dimensions
the means comparison method was used. Because of non-normality of the data
distribution was proved by using the KolmogorovSmirnov test and Shapiro-Wilk, the
nonparametric Wilcoxon test was used for means comparison of expectations and
perceptions. In Table 2, the perceptions and expectations of the companies members in
each of the five dimensions and the gap between them as well as the significant level are
shown.

Table 2: Members' satisfaction of rural production cooperatives in different dimensions

Performance Tangibility Reliability Resposibility Assurance Empathy
3.3379 3.0438 3.6253 3.2746 3.3543 3.3357
Expectations 3.7490 3.5012 4.2392 3.9097 3.3794 3.8521
Quality Gap -0.4111 -0.4574 -0.6139 -0.6351 -0.0251 -0.5164
Z -5.010 -4.448 -6.263 -6.759 -0.598 -6.233
Sig 0.000 0.000 0.000 0.000 0.35 0.000

As table 2 shows, the difference between the mean of expectations and perceptions of
members of RPC regarding cooperatives' performance is significant at %95 level.
Therefore these companies could not meet the members' expectations. The data also
shows the difference between mean of expectations and perceptions of cooperative's
member in all dimensions of the model, except assurance dimension, are significant at
95% confidence level. Therefore it can be concluded that these cooperatives except in the
assurance dimension, could not meet the expectations of the members in the other
dimensions.
In order to comparing the satisfaction of members in the RPC, the mean of members'
expectations and perceptions regarding cooperatives' overall performance, and the gap
between them was calculated and then were compared by using Kruskal-Wallis test. By
using cluster analysis sorted cooperatives were categorized into three groups, successful,
semi successful and unsuccessful cooperatives. Table 3 shows the mean of expectations
and perceptions and the gap of services quality among three groups.

Table 3: Comparing the rural production cooperatives regarding members' satisfaction

Cooperatives types Perceptions expectations Services quality gap
successful 4.3082 3.7432 0.565
With an average successful 3.3170 3.8346 -0.5176
unsuccessful 1.8805 3.5743 -1.6938
Kruskal-Wallis Sig= 0.000 Df= 12
 As the results of Kruskal-Wallis test show, there is a significant difference between
the mean of members' satisfaction regarding the overall performance at a 95 percent. In
other words, the members' satisfaction of all cooperatives is not the same. In order to
identify the factors affecting the success of the cooperatives, the multivariate regression
model was used. Thus all of managerial factors that were probably influencing on the
success of the cooperatives had entered into the regression equation and for to prevent
errors in the calculation, some of the individual characteristics of members entered into
the equation. After making the managerial triple skills, and managers' believe to
participation of members in the affairs by Factor Analysis, the mean of indices in 13
cooperatives were Calculated separately. Then for each index, three categories was
defined: weak, medium and strong. Afterward the first group or the weak level was
considered as the base and the other levels were separately recoded by using binary
method. Thus, for each index, two indices were made in medium and strong level. Then
the normality of residual from regression model was confirmed by using Shapiro-Wilk
test. Overall, the independent variables in regression equation are shown in Table 4.

Table 4 independent variables in regression equation

Company's contribution of income
Age of members
members
Age of managers Members's marital Status
Education level of managers Education level of members
Experience of managers Agricultural experience of members
Weak (Basic) Weak (Basic)
Conceptual skills Medium Technical skills Medium
Strong Strong
Weak (Basic) Weak (Basic)
Believed to participate Medium Human skills Medium
Strong Strong

After entering the variables in the regression equation, 6 variables had the greatest
influence over dependent variable. The effects of each variable and the variance in the
dependent variable that explained by the independent variablesare shown in Table 5.

Table 5 Multivariate regression to identify factors affecting service quality gap

variable B S.E.B Beta Sig Tolerance VIF
C: Constant 0.932 0.158 - 0.000
Strong human skill -0.940 0.135 -0.518 0.000 0.231 4.326
Strong Conceptual skill -0.851 0.095 -0.475 0.000 0.457 2.187
Strong believe to participation -0.527 0.082 -0.268 0.000 0.729 1.373
Educational levels -0.053 0.012 -0.212 0.000 0.513 1.948
Management experiences -0.068 0.011 -0.334 0.000 0.446 2.246
R2=0.804 F=126.288 Sig=0. 000

According to Table 5, the significance of F at a 95% level, indicate the significant

relationship between the independent variables and the dependent variable in the
equation. In the obtained model, the determination coefficient of model (R2=0.804)
represents 80% of linear change of RPC success variable by the independent variables of
the model. The negative regression coefficients indicate that whatever the independent
variables increase, service quality gap that is resulted from the difference between
expectations and perceptions of members, is reduced, and in other words, the
cooperatives have meet the members' expectations mostly.

Discussion and suggestions

The findings show that the RPC have not been successful in meeting their members'
expectations. Also the results show that the amount of success for cooperatives with
strong human skills is 0.94 units more than the amount of success for cooperatives with
weak human skills (basic level). As based on the definitions, human skill is an ability to
create the understanding and cooperation among members, and also given that the
cooperatives have been established on the basis of members' participation and their
durability is dependent on members' participation, no doubt that human skill of managers
is important for the success of cooperatives. In fact, human skills of managers effects on
the success of cooperatives directly and indirectly.
According to the definition of success index in this study that it is considered by
members satisfaction, stronger human skills of managers cause to forming a more
friendly condition in the mentioned cooperatives. As a result this leads to a higher
satisfaction and a greater absorption of members regarding cooperation and participation.
Also, the amount of success of cooperative managers with strong Conceptual skills is
0.851 units more than the success of cooperative managers with poor Conceptual skills
(basic level).
There was not a significant correlation between the amounts of success for
cooperatives with technical skills of managers. According to studies, in the recent years
the rural cooperative organization of Chahar Mahal and Bakhtiari province has fulfilled a
series of training course on accounting, budgeting, marketing, and insurance & tax laws
and made the cooperatives' managers to participate to the mentioned courses. As
questionnaires were completed in the self-reported manner, the managers who had
attended these courses reported the technical skills as strong, while the application of the
mentioned theory in training courses need to gain experience and these managers have
not enough experience. In addition, the findings indicate that for a unit increase in the
level of education and in the managerial experience of managers, the success rate of the
cooperatives increase to 0.053 and 0.068. In fact, the management experiences greatly
enhance the triple skills of managers, and enable them to overcoming difficulties and
teach them to motivate the members and help them to advance their mutual goals.
According to the results, the amount of the success for cooperatives with managers
believe to members' participation in a strong level, is 0.527 units more than the amounts
of the success for cooperatives with managers believe to members' participation in a
weak level (basic level). As mentioned, although about 40% of managers of cooperatives
have a higher education, but about 30% of them are with a primary and lower level of
education. Perhaps the root of this difficulty is in the selection of directors' board that the
main of them are with a low level of literacy. In fact the selection of directors board
among the members with a low level literacy cause to reduce the power of decision
making for accurate affairs as well as risk power in these cooperatives and prevent the
economic competence of these organizations with the other economic entrepreneurs. So it
is necessary to government encourages the young and educated persons to participate in
cooperatives by amendment the laws of cooperative section, and establishing the essential
infrastructures to empower the cooperatives' members.

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