the mondragon cooperative experience
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Crisis Management The case of MONDRAGON Corporation Naroa Elortza Gorrotxategi Researcher at MIK – Mondragon Innovation and Knowledge Lecturer at MU Enpresagintza – Faculty of Business, Mondragon University. 1. The Mondragon Cooperative Experience. 2. Crisis management in MONDRAGON. 3. - PowerPoint PPT PresentationTRANSCRIPT
Crisis Management The case of MONDRAGON Corporation
Naroa Elortza GorrotxategiResearcher at MIK – Mondragon Innovation and Knowledge
Lecturer at MU Enpresagintza – Faculty of Business, Mondragon University
1 The Mondragon Cooperative Experience
2 Crisis management in MONDRAGON
3 Application of the management tools and the results
Conclusions4
2
1 The Mondragon Cooperative Experience
2 Crisis management in MONDRAGON
3 Application of the management tools and the results
4 Conclusions
Beginnings
MONDRAGON today
MONDRAGON as a reference and a successful
experience
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4
The Mondragon Cooperative Experience (MCE) started in 1943, in Mondragon (Basque Country)
The cooperative alternative was based on: Education and Education and TrainingTraining, CooperationCooperation, ResponsibilityResponsibility and Egalitarian Enterprise DevelopmentEnterprise Development
Beginnings
The network
5
Its key INNOVATION was THE NETWORK... two elements:
Support institutions in common, jointly created and controlled.
Firm-to-Firm Collaboration, mutual support and joint action. Take advantage of new business opportunities AND help each other out in hard times. Organised into Areas and Divisions,and coordinated by Central Services (the Corporation)
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Social security and insuranceLagun-Aro
FinanceCaja Laboral Popular
Technology R&DIkerlan (etc.)
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MONDRAGON today
Formed by 258 cooperative enterprises, subsidiaries and affiliated organisations
Total jobs: 83,859 (2010)
Total sales: 13,989 million euros (2010)
International sales: 3,594 million euros (2010), 63% of industrial sales
Divided into 4 Groups: Finance, Industry, Retail and Knowledge
Within the Industrial Group, 12 Divisions
Its own set 10 basic principles based on its experience and on ICA's principles
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MONDRAGON's mission is expressed in its corporate values: cooperation,
empowerment, innovation and social responsibility
It is considered one the most successful experience if not the most
successful example of worker cooperatives
MONDRAGON's economic and social achievements: ENTERPRISE with
social commitment, broad worker ownership and control; and solidarity
among cooperatives
Supported by several external authors; benefits derive from the business
model based on networked cooperative enterprise.
MONDRAGON as a reference and successful experience
MONDRAGON as a reference and successful experience
Blemishes, challenges and problems. PLENTY (especially overseas
plants), but save the discussion for another day.
Here, our focus:
Crisis management policy and tools in MONDRAGON
How MONDRAGON's business model and its management tools
make a difference in severe economic and social crisis.
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Impact of the crisis on MONDRAGON
MONDRAGON's crisis management tools
Firm-level measures
Network-level measures
1 The Mondragon Cooperative Experience
2 Crisis management in MONDRAGON
3 Application of the management tools and the results
4 Conclusions
Impact of the crisis on MONDRAGON
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Sales in MONDRAGONSales in the Industrial AreaConsolidated Results
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sults
)
Impact of the crisis on MONDRAGON
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Overall investments Resources assigned to social activities
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iviti
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As a result, a significant decline in overall investment and in resources
spent on social activities, non-profits
MONDRAGON's crisis management tools
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Crisis management tools based on the solidarity and mutual
assistance (“Intercooperation”) among cooperatives:
MCE's 7th principle
Takes concrete shape in the 2 network elements we
described (1) joint institutions, (2) firm-to-firm
cooperation AND in specific policies and tools.
Precedents: the Energy Crisis of the 1970s-80s
MONDRAGON's crisis management tools
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Main objective: reduce the crisis' effects on the cooperatives
and the society
Key elements:
Members' participation in crisis decision-making processes
Cooperatives balance: economic (profitability, productivity...)
and social objectives (employment creation and protection,
human and social development)
Firm-level measures
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Principal measures:
Cutting pay and interest payments; a General Assembly decision
Interest on internal capital accountProfit shareSalaryVacation bonuses (2-3 pay periods of 14-15)
Internal transfer
Re-training
Redundancy of temporary and subcontracted employees (non-member)
ORDER OF ORDER OF APPLICATION?APPLICATION?
Network-level measures
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Network-level measures
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Lagun-Aro, EPSV
• (Re)Employment Assistance Fund; finances activities to keep members employed during downturns.
• Relocation among cooperatives; temporary and permanent relocations
• Re-training
• Flexible calendar
• Early retirements
• Compensation (when other measures are insufficient)
MONDRAGON's crisis management tools
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Caja Laboral Popular
First phase... 1959-1990, financed cooperative development with local consumers/depositors' savings and cooperatives deposits
Today cooperative bank business focused on retail banking: consumers, SMEs, co-ops to small degree (Bank of Spain)
Can write off cooperatives' unpaid debt, though uncommon
Consultancy: First phase: “Business Division” inside the bank to assist start-
ups and co-ops with problems. Later, converted into Central Departments and LKS Consultancy
cooperative
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Employment Assistance Fund and Benefits
Flexible Calendar
Relocations
Relocations and Flexible Calendar
Employment
1 The Mondragon Cooperative Experience
2 Crisis management in MONDRAGON
3 Application of the management tools and the results
4 Conclusions
A significant raise in resources devoted to employment protection
2005 2006 2007 2008 2009 20100
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Fund Collection Benefit
Eur
os
Employment Assistance Fund & Benefits
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01/0
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03/0
8
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01/0
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60000
Flexible Calendar Hours / Month
Flexible Calendar
A significant increase in co-op workers' hours financed by the
Employment Fund, during the crisis
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A considerable raise in worker-member relocations during the crisis
Relocations
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08/0
1
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7–08
/08
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0–08
/10
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Temporary RelocationsPermanent Relocations
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pora
ry R
eloc
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man
ent
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ocat
ions
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Comparing relocations and flexible calendar data...
Relocations and flexible calendar
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07/0
8–08
/08
07/1
0–08
/10
0
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60000
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Temporary RelocationsPermanent RelocationsFlexible Calendar Hours
Tem
pora
ry R
eloc
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ns
Per
man
ent
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ocat
ions
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2005 2006 2007 2008 2009 20100
10000
20000
30000
40000
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60000
70000
80000
90000
100000
TotalBasque Autonomous CommunityNavarre
Em
ploy
ees
Employment
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Still, a significant decline in employment in 2009; temporary workers made
redundant. Controversy/debate about temporary workers. Law: 70%,
MONDRAGON 85%, but still debate.
%0.00
%10.00
%20.00
%30.00
%40.00
%50.00
%60.00
Basque CountryThe rest of the world
Decline in MONDRAGON’s domestic employment, increase
MONDRAGON’s overseas employment.
Employment
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*
* Basque Autonomous Community and Navarre
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Crisis management and cooperative principles
Employment in MONDRAGON
MONDRAGON’s crisis management’s
incoherence with cooperative principles
1 The Mondragon Cooperative Experience
2 Crisis management in MONDRAGON
3 Application of the management tools and the results
4 Conclusions
Crisis management and cooperative principles
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o Crisis management based on solidarity, consistent with the
MONDRAGON’s 7th cooperative principle
o Decision-making processes based on members' participation. Participatory
model might weaken short-term business efficiency, but fosters members'
sense of belonging and motivation and long-term efficiency.
o Worker-members' relocation and pooling of profits are signs of
cooperatives’ commitment to solidarity. THOUGH…
o Solidarity is far from perfect. Temporary workers,
overseas non-member workers, etc.
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o The tools were designed to reduce the negative effects of the crisis on the
co-ops and society broadly
o Their main purpose has been to protect jobs
o During previous crisis periods, MONDRAGON managed to mantain and
even expand employment
o The cooperatives made massive efforts to protect worker-members' jobs
during those periods
o Lagun-Aro's Employment Assistance Fund has been a key tool
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Employment in MONDRAGON
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Crisis mangement’s incoherences with Co-op Principles
o The vast majority of worker-members' jobs have been mantained, but
most temporary workers have been made redundant (up to 15% of
employment in some cooperatives)
o Proportionally, the number of jobs destroyed in the Basque Country
(Basque Autonomous Community and Navarre) in MONDRAGON is higher
than in other countries
o The ORDER in which measures are implemented is crucial to determining
consistency with cooperative principles. Mainly regarding temporary workers
jobs.
www.mik.es
Thank you
Gracias
Eskerrik asko
Naroa Elortza [email protected]
Blog: http://ilunkaran.comTwitter / Identi.ca: @naroaelortzaLinkedIn: http://www.linkedin.com/in/naroaelortza