Diapositiva 1

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Crisis Management The case of MONDRAGON
CorporationNaroa Elortza GorrotxategiResearch
er at MIK Mondragon Innovation and
KnowledgeLecturer at MU Enpresagintza Faculty
of Business, Mondragon University
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The Mondragon Cooperative Experience
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Crisis management in MONDRAGON
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Application of the management tools and the
results
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Conclusions
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The Mondragon Cooperative Experience

• Beginnings
• MONDRAGON today
• MONDRAGON as a reference and a successful
  experience

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Crisis management in MONDRAGON
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Application of the management tools and the
results
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Conclusions
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Beginnings

• The Mondragon Cooperative Experience (MCE)
  started in 1943, in Mondragon (Basque Country)
• The cooperative alternative was based on
  Education and Training, Cooperation,
  Responsibility and Egalitarian Enterprise
  Development

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The network

• 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)

Social security and insurance Lagun-Aro
Technology RD Ikerlan (etc.)
Finance Caja Laboral Popular
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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 as a reference and successful
experience

• 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.

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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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The Mondragon Cooperative Experience
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Crisis management in MONDRAGON

• Impact of the crisis on MONDRAGON
• MONDRAGON's crisis management tools
• Firm-level measures
• Network-level measures

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Application of the management tools and the
results
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Conclusions
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Impact of the crisis on MONDRAGON
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Impact of the crisis on MONDRAGON
As a result, a significant decline in overall
investment and in resources spent on social
activities, non-profits
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MONDRAGON's crisis management tools
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
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MONDRAGON's crisis management tools

• 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)

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Firm-level measures

• Principal measures
• Cutting pay and interest payments a General
  Assembly decision
• Interest on internal capital account
• Profit share
• Salary
• Vacation bonuses (2-3 pay periods of 14-15)
• Internal transfer
• Re-training
• Redundancy of temporary and subcontracted
  employees (non-member)

ORDER OF APPLICATION?
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Network-level measures

• Division-level profit pooling
• Network-level funds
• Central Inter-cooperation Fund
• Venture capital and other investments
• Education and Cooperative Promotion Fund
• Cooperative and professional training for members
• Research and technological development
• Corporate Solidarity Fund
• Loss reduction

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Network-level measures

• 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)

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MONDRAGON's crisis management tools

• 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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The Mondragon Cooperative Experience
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Crisis management in MONDRAGON
3
Application of the management tools and the
results

• Employment Assistance Fund and Benefits
• Flexible Calendar
• Relocations
• Relocations and Flexible Calendar
• Employment

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Conclusions
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Employment Assistance Fund Benefits
A significant raise in resources devoted to
employment protection
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Flexible Calendar
A significant increase in co-op workers'
hours financed by the Employment Fund, during the
crisis
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Relocations
A considerable raise in worker-member relocations
during the crisis
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Relocations and flexible calendar
Comparing relocations and flexible calendar
data...
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Employment
Still, a significant decline in employment in
2009 temporary workers made redundant.
Controversy/debate about temporary workers. Law
70, MONDRAGON 85, but still debate.
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Employment
Decline in MONDRAGONs domestic employment,
increase MONDRAGONs overseas employment.

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Basque Autonomous Community and Navarre
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The Mondragon Cooperative Experience
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Crisis management in MONDRAGON
3
Application of the management tools and the
results
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Conclusions

• Crisis management and cooperative principles
• Employment in MONDRAGON
• MONDRAGONs crisis managements incoherence with
  cooperative principles

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Crisis management and cooperative principles

• Crisis management based on solidarity,
  consistent with the MONDRAGONs 7th cooperative
  principle
• 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.
• Worker-members' relocation and pooling of
  profits are signs of cooperatives commitment to
  solidarity. THOUGH
• Solidarity is far from perfect. Temporary
  workers,
  overseas non-member workers, etc.

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Employment in MONDRAGON

• The tools were designed to reduce the negative
  effects of the crisis on the co-ops and society
  broadly
• Their main purpose has been to protect jobs
• During previous crisis periods, MONDRAGON
  managed to mantain and even expand employment
• The cooperatives made massive efforts to protect
  worker-members' jobs during those periods
• Lagun-Aro's Employment Assistance Fund has been
  a key tool

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Crisis mangements incoherences with Co-op
Principles

• 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)
• Proportionally, the number of jobs destroyed in
  the Basque Country (Basque Autonomous Community
  and Navarre) in MONDRAGON is higher than in other
  countries
• The ORDER in which measures are implemented is
  crucial to determining consistency with
  cooperative principles. Mainly regarding
  temporary workers jobs.

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Thank youGraciasEskerrik asko
Naroa Elortza Gorrotxategi nelortza_at_mondragon.edu
Blog http//ilunkaran.com Twitter /
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http//www.linkedin.com/in/naroaelortza