What is the main objective of a cooperative form of organization? Explain its merits and limitations?

Cooperative organizations basically work to provide self-help and mutual help. The primary objective of any cooperative organization is to provide service to its members. This is totally different from the other forms of organization because others work to gain profits. Its important features are service instead of profit, mutual help in place of competition, self-help instead of dependence and moral solidarity in place of unethical business practices.

Merits of Cooperative Form of Organization:

Limited liability : In cooperative societies, liability of members is limited. It is just like the company form of organization (in case of liability).

Easy formation : As it is a voluntary association, long and complicated legal formalities are not required at the time of formation. An association can be formed with any ten members and they have to get it registered with the Registrar of Cooperatives.

State assistance : As cooperatives are adopted by the government, lot .of grants, loans and financial help are offered by the government to cooperatives in order to help them function effectively and efficiently.

Social service : Cooperatives inculcate fellow feeling among its members and even provide moral and educative values to the members so that they can live in a better way.

Open membership : As there is no limit to the maximum =fiber, members are free to join cooperatives irrespective of economic position, caste, color or creed. Such societies are open to everyone.

Supply of goods at cheaper rates : The work of the societies is to purchase goods directly from the producers and sell them further to the members at cheaper rates.

Middlemen are not required in such a process. Consumer cooperatives provide help by giving essential goods to the members even at the time when there is scarcity of goods in the market. Even capital goods like tools, machinery etc are directly purchased from the producers and supplied to the members.

Limitations of Cooperative Organization

No organization is perfect. Every organization has got some positive and some negative points. Some disadvantages of cooperative societies are as follows:

Lack of business acumen: People who become members lack in having business experience. Cooperatives cannot take the help of the personnels other than members for making the management more competent.

Absence of mutual interest: If the members cooperate with each other, a cooperative society can easily succeed. There are some members who use the cooperative society to fulfill their personal goals and objectives.

Lack of interest: A business with sustained efforts over a period cannot be successful. After a cooperative society starts, within a short period, it becomes lifeless and inactive in its operation.

Lack of coordination: Many cooperative associations come to an end due to the absence of coordinated and joint action. Internal rivalries among the members can cause many problems in the working of cooperative associations.

Corruption: Corruption is one of the reasons that can bring a cooperative society to an end. A cooperative society cannot sometimes function properly due to the corrupt practices that prevail in the management and functioning of such societies.

Lack of secrecy: Secrecy can only be maintained if the working or functioning is not told to its members. The affairs or functioning of cooperatives are generally told to its members. It is very difficult to maintain secrecy in affairs of the business.

Insufficient motivation: Members do not feel involved in the affairs of the society because of the low rate of return on capital. If the member don’t get motivated to work, how can a ‘society survive. Because of insufficient motivation, a cooperative society may come to an end.