CEOs as entrepreneurs – the leadership dilemma in Farmer Producer Organizations
This blog discusses the possibilities, and associated risks of entrepreneurial initiatives that FPOs are supposed to engage in, much of which mostly falls on the shoulders of the CEO. The stakes only get higher in the cases of a federation of FPOs, thus posing the issue of financial safety nets and support needed for such organisations to sustain itself.
Leadership plays an important role in the success of any organisation. Good leaders have been known to have qualities of being agile, constantly learning from evolving situation. They are also empathetic. But the most important quality of leaders is their penchant for taking calculated risk. In an entrepreneurial setting, these qualities result in the success and sustenance of the enterprise. If the enterprise is a federation of cooperatively owned organisations such as Farmer Producer Organisations (FPOs), the role of leadership and their risk-taking attitude become all the more important. FPOs and state level federations of such collectives are complex organisations. The CEO and the Board of Directors, representing the farmers and their collective enterprise need empathy, risk taking attitude, and agility in order to satisfy the shareholders/members, the partners in the market, the consumers and the stakeholders in the support ecosystem.
In the state of Gujarat, Gujpro Agribusiness Consortium Producer Company Limited (Gujpro for short) is the state-level federation of FPOs. Gujpro began as an informal consortium known as Gujarat Rajya Krushak Manch (GRKM), in 2012. Sajjata Sangh, which is a consortium of NGOs working in Gujarat in the agriculture and natural resource management sector, promoted the GRKM as a federation of FPOs being promoted by its member NGOs.
An entrepreneurial CEO and a proactive board lead to many initiatives
As Gujpro has grown its membership from 10 FPOs to 30 FPOs, it has seen its share of ups and downs. While at one end there are successes like MSP procurement of groundnut and toor, contributing to both revenue and profits in 2016, there have been issues is recovery of dues from buyers both government and private. Also, Gujpro’s initiative to reach the customer directly by moving up the value chain through a pilot shop outlet the Satvik Grahak Bazaar, could not work well due to paucity of funds and manpower. This journey of Gujpro sheds light on the kind of challenges that are faced by state-level federations of FPOs and the importance of individuals who lead the organisation. The CEO Kuldeep Solanki who has been with Gujpro since its inception and the representatives of member FPOs in Gujpro’s Board of Directors have been at the forefront of the efforts to keep Gujpro going even in adverse situations.
When Gujpro started, they hired marketing consultants. The FPC was registered on trading portals like India Mart and Trade India etc. There was no sustainable business model and skilled manpower was always in short supply. The member FPOs located in different parts of the state and having different products wanted to scale up their business and explore different markets. Since, Gujpro was located in Ahmedabad and had access to state level and other markets, the member FPOs looked upon the CEO to provide appropriate market linkages. Thus, Kuldeep took a lead in many initiatives such as “Mangoes without makeup ” campaign wherein it procured mangoes from its member FPOs and sold it in Ahmedabad. In 2015, Gujpro carried out a pilot on groundnut procurement with NAFED and in 2016 exported mangoes worth Rs 7,00,000 to U.K. Even with these initiatives, sustainable business model was elusive.
However, these efforts have been short lived. Kuldeep is very committed and enterprising and keeps on trying new initiatives on behalf of Gujpro but since the other staff is inexperienced, many of these initiatives lose steam as Kuldeep has to manage several fronts at the same time. In addition to revenue generation for Gujpro, he has to look after cash flows, legal compliances, liaison with financial and other institutions etc. each of which are quite demanding and challenging.
Skin in the game: have real stakes in the company!
Apart from Kuldeep, the BoD members also are a key to Gujpro’s sustainability. They are the eyes and ears of Gujpro’s managerial team at the village and FPO level. They are quite familiar with the local market and provide ideas on interventions that can be taken up by Gujpro. BoD members have also been proactively engaged in dues recovery process at the state level and have provided vital support to Kuldeep as he takes up these issues in Delhi.
Both Kuldeep and the BoDs have also helped by being guarantors while taking loans for Gujpro too. Gujpro mostly takes unsecured loans, even though these are risky. The risk is genuine and if default happens, the director’s own creditworthiness would suffer. Gujpro looks to engage proactive BoD members to help with the management at the federation level. Credible BoD members are an asset that are important to Gujpro both as active directorship and after retirement.
Even Kuldeep himself has provided a personal guarantee of Rs 1.5 million. He has no financial incentive as the CEO in becoming the guarantor and he has not received any increment for several years. There is a lot of pressure for scaling up Gujpro’s activities, make profits, recover the dues and repay the existing loans.
One cannot help but notice how much Kuldeep has invested in Gujpro. He literally has skin in the game as an entrepreneur as far as Gujpro is concerned. However, should a CEO be an entrepreneur? Does Gujpro depend too much on Kuldeep’s entrepreneurial ability? Is it possible to build a second line of leadership and expertise amongst the team or from the Board members without unduly impacting the performance of Gujpro? On the one hand, there is a sense of assurance in Gujpro due to Kuldeep and on the other, there is an issue of long-term sustenance of the organisation. It is a dilemma faced by many organisations and Gujpro seems to be no exception.
Sachin Oza is the Executive Director of Development Support Centre foundation.
Abhishek Saxena is an FPRM scholar at IRMA.