Hotel

The hotel has twenty-four rooms and operates a dining room geared to the needs of its hotel patrons. There are no choices on the menu and meals may be purchased by townspeople. The cook is encouraged to offer home-cooked meals. Country foods may be ordered by guests in advance and include caribou, musk-ox, and arctic char. The hours of operation are 7:30 a.m. to 7:30 p.m. There is an in-house bakery, which provides baked goods to the hotel and sells the rest to the public. Ten people handle cleaning, cooking, and baking in the hotel. Most receive on-the-job training, since few have any previous experience. No liquor is served in the restaurant in compliance with a motion supported by local Co-op members banning alcoholic beverages. A liquor license can be obtained for special occasions, for example for a wedding reception, in the meeting rooms.
The bakery was started in the hotel seven years ago as a government project. People who showed an interest in that area were given training. Turnover is high because it is a hot, demanding job. After the Co-op took the bakery over, they tried supplying other communities with baked goods. There was a strong demand for their products but the transportation costs were prohibitive. Bill explains, "I shipped the same type of seventy-five pound package to Resolute Bay, Calgary, and to Norman Wells. It cost $208 to ship to Resolute Bay, $123 to Norman, and $87 to ship it to Calgary. The freight rate from Cambridge Bay to Winnipeg is $1.00 a kilo and to Spence Bay is $3.25 a kilo. The freight rates killed us. They had to start selling a loaf of bread for $6.00 which is too expensive."

Taxi, Courier Contract, and Cable Services

Bill organizes the taxi service, which is offered seven days a week from 9:00 a.m. to 8:00 p.m. The Co-op has three vehicles. Two are used for fares from the hotel, from the airport, and around town. The third vehicle is used to deliver mail from the airport to the government buildings. In the summertime, there are two full-time drivers, with Bill filling in as required. They have four full-time cabbies in the wintertime.
Prior to the purchase of the Cable Company, the hotel received one television station. It now receives thirteen channels.
Licensing requirements are specific to each Co-op business. The Co-op has licenses for import and export, radio, tobacco, fur dealing, food, as well as a local business license. It also carries a firearms certificate.

Bill is heavily involved in all operations at the local and the territorial level. He enjoys travel to other communities but does find the demands on his time with the fishery to be trying at times. He says, "I try to take the weekends off but it's very hard unless I go and hide. My wife is a teacher and usually takes extra courses in the summer so she and I are busy at the same time. She sits on the local Co-op's board of directors and is involved at that level."

Staff

Locating and keeping reliable, skilled employees is the major problem facing the retail outlet, the fishery, the taxi service, and (to a lesser extent) the hotel. There are twenty-seven full-time employees, with seasonal employment at the fishery adding forty or fifty more. Turnover is constant, and people rotate through companies in the community. They will work at the Co-op, the Northern Store, then for the government or a private corporation.
There are few trained local people for the more skilled positions. Many of the people who have been trained work for the government. The Co-op's policy is to hire locally if possible; to bring someone into the community is second best. John describes the difficulties in attracting someone to the community. "I think one of the hardest things is to get mature people for management positions in the North. We want more mature people, but a person in their late forties is usually set in their life. They don't like to move to the North, so it is very difficult for us to find suitable candidates."
These problems of high turnover and a finite skilled labour pool have implications for the five-year plan. The Co-op cannot expand or try business opportunities that require a large number of employees. It seems to have reached a plateau where it can operate successfully with the staff situation. Several strategies are being employed to address these staffing problems.
Education and training are promoted among the young people and adults in the community. A greater number of skilled people to draw on locally will mean more options for further development of Co-op businesses. Bill comments:
"Arctic College provides different courses.

There are problems however, because first of all, people have to want to go take upgrading and other courses; and second, once they decide to try, often courses are too hard because they don't have the required background. For example, to take a good bookkeeping course you need grade 10 or more. I took two courses but I just couldn't go through the whole thing because it was tough."
Older people seem to have a greater desire to upgrade their education than a number of young people, who drop out of school and don't have the skills to get good paying jobs. The kids that have graduated from grade 12 and want to go on to college or university are now working for the government at wages between $11 and $17 an hour. We just can't afford to pay them that kind of money when they come back to the community."
Other strategies include increasing salaries and benefits to compete with the government, better staff recognition, and increased staff responsibility. Bill states, "With better profits, we plan to start paying better salaries. For reliable staff, we will try to accommodate their requests for holidays and sometimes may help pay their airfare."
Bill describes a new policy. "We are trying to let people know that they are doing a good job by presenting awards at our annual meeting. ACL is encouraging all co-ops to recognize their staff in some manner."
Bill will hire anyone who can handle the job. This includes handicapped people and members of the same family. All employees are treated equally and are given a chance to work through any problems. Bill notes, "We try to work out difficulties but we keep that code in mind about three times late or three times not to work without a reason are grounds for divorce between you and your job."
Bill describes his philosophy. "I try to give staff responsibility because it gives them input into the operation and they will be encouraged to perform. It takes time, but it will happen. I have a deaf and dumb girl on the checkout there. I've given her a little responsibility and she's really picking it up. We also have handicapped people in the hotel and at the fish plant. They are tremendous people to work with and if you give them a little bit of responsibility you see them meet the challenge. It's almost like a football player that you work with closely and in the end, you get results."


Competition

The Northern Store is the only competitor operating in Cambridge Bay. The Co-op store prices its goods to remain competitive, with a 15% to 25% mark-up to cover expenses and to contribute to a fund for future expansion. Bill would never engage in a price war with the Northern Store because the Co-op would not gain any advantage. The Co-op relies on local ownership and patronage refunds to build customer loyalty. They also advertise their monthly specials in flyers that are delivered to Co-op members.
There is one other hotel in town. It has five rooms with kitchenettes but no restaurant. Another hotel is being built that will have approximately sixteen rooms, but it probably not operate year round. Bill does not know how this will affect business but he hopes that the hotel restaurant will help attract customers. Advertising for the hotel is carried in regional magazines that are distributed on aircrafts, and travel agents receive quarterly updates through ads in large newspapers. There is no other fishery or bakery in town. There are two other taxi companies, but they are not very active.

Financial Information

The Co-op relies on a variety of funding sources for meeting its needs. Revenues generated by the various business

interests are reinvested in the business according to the direction of the board. Government funding plays a role in expanding existing services and investing in a new business. Finally, the Co-op seeks funding from the territorial Co-operative Business Development Fund or a bank when it is necessary.
Daily reports are compiled and faxed to the ACL office in Winnipeg, where payroll and monthly financial statements are generated on a computer. The Cambridge Bay Co-op receives its information reports in about thirty days; these detailed breakdowns of revenue flows by product and business. Reports are generated for every Northwest Territories co-op so that problems can be identified quickly and remedied immediately.
The following table represents some consolidated financial information for the co-op's business over the five-year period from 1986 through 1990. The return-on-equity (ROE) ratio gives an indication of the return from business profits on the shareholder investment by comparing profits with shareholder equity. As indicated in the table, the ROE for 1986 is very high at 83%. Revenues from the various businesses were very good, and the gross margin was reasonable, and these were reflected in the net profit. In fact, the net profit in 1986 is similar to the net profit earned in 1990, but the shareholders' equity was almost three times greater in 1990. This explains the declining but still healthy ROE.

The rate of growth in shareholders' equity outstripped the steady but slower rate of growth in net pre-tax profit over the period. For every dollar invested by a co-op member, revenue earned ranged from $0.30 to $0.83. Even though ROE has declined, a 30% ROE is an indication of a healthy business.
The sales-to-asset ratio indicates how many times each dollar invested in company assets generates revenue. If the ratio is low, then the company may need to invest in more assets to build the capacity to generate more revenue. The co-op businesses in aggregate generated close to twice the revenue for every dollar invested in assets for the first four years recorded in the table. This ratio dropped to .41 in 1990, which reflects the increased investment in assets during the year. Increased revenues from this investment would not yet be recorded in the financial statements.
Salaries have grown steadily and peaked in 1990 to more than $456,000. This is a 180% increase over 1986 salaries and reflects the increased business activity. Patronage dividends were declared in each year of the five-year period and ranged from $107,000 in 1988 to $325,000 in 1990. Patronage refunds range from 36% to 92% of net profits after taxes. This is a healthy return on the investment made by co-op members. The next sections will identify a number of reasons for the success of the co-op and areas for improvement.

Financial Information for
Ikaluktutiak Co-operative Limited

1986 1987 1988 1989 1990
Return on Equity (%) 83 40 44 42 30
Sales/Assets (times) 1.97 1.85 1.94 2.14 1.41
Wages ($000) 232 265 392 438 456
Patronage Refunds ($000) 164 163 107 236 325