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MONDRAGON Corporation
Type Worker cooperative federation
Founded 1956
Founder(s) José María Arizmendiarrieta
Headquarters Mondragón, Basque Country, Spain
Area served International
Key people Jose María Aldecoa (Chairman)
Revenue 16.8 bilion € (2008)
Employees 92,773 (2008)
Divisions Finance, Industry, Retail, Knowledge
Website mondragon-corporation.com

The MONDRAGON Corporation is a federation of worker cooperatives based in Spain. Set up in the Basque town of Mondragón in 1956, its origin is linked to the activity of a modest technical college and a small workshop producing paraffin heaters. Currently it is the seventh largest Spanish company in terms of turnover and the leading business group in the Basque Country. At the end of 2008 it was providing employment for 92,773 people working in 256 companies in four areas of activity: Finance, Industry, Retail and Knowledge. The MONDRAGON Co-operatives operate in accordance with a business model based on People and the Sovereignty of Labour, which has made it possible to develop highly participative companies rooted in solidarity, with a strong social dimension but without neglecting business excellence. The Co-operatives are owned by their worker-members and power is based on the principle of one person one vote [1]

Contents

History

The determining factor in the creation of the Co-operatives that today make up the MONDRAGON Corporation, was the arrival in 1941 of a young priest José Mª Arizmendiarrieta in Mondragón, a town with a population of 7,000 that was suffering the painful consequences of the aftermath of the Spanish Civil War: poverty, hunger, exile and tension. He decided to do all he could to promote coexistence and come up with formulas to create employment based on solidarity. Gifted with an extraordinary mix of idealism and pragmatism in 1943 he set up a Technical College that was open to anyone, and which would become, with the passing of time, a seedbed for managers, engineers and skilled labour for local companies and, above all, for the co-operatives [2] .

Before setting up the first co-operative, Arizmendiarrieta spent a number of years educating young people about a form of humanism based on solidarity and participation, with Christian roots, and the importance of acquiring the necessary technical knowledge. In 1955, he selected five of these young people who were working at the Unión Cerrajera company (Usatorre, Larrañaga, Gorroñogoitia, Ormaechea y Ortubay) to set up Talleres Ulgor (an acrostic from their surnames), today Fagor Electrodomésticos, the pioneering company of the Experience and industrial embryo of the Corporation.

The first fifteen years were characterised by an enormous dynamism. It was a time when, taking advantage of the autarky of the market and the awakening of the Spanish economy, many co-operatives were set up. During those years, also with the encouragement of Don José María, two bodies were set up that were to play a key role in the development of MONDRAGON -Caja Laboral (1959) and the Social Welfare Body Lagun Aro (1966)- and the first local group was created, Ularco, the embryo of the industrial co-operative associativism which has been so important in the Corporation’s history. In 1969 Eroski was set up, as a result of the merger of nine small local consumer co-operatives, anticipating back then the need to join forces to be able to be competitive.

Over the period from 1970 to 1990 the dynamism of previous years continued, with a strong increase in turnover, the launch of new Co-operatives promoted by Caja Laboral’s Business Division, the promotion of co-operative associativism with the forming of local groups, and the setting up of the Ikerlan Research Centre in 1974.

With big changes on the horizon like Spain joining the European Economic Community, scheduled for 1986, it was decided to take an important step in the organisational area, by setting up the Mondragon Co-operative Group in 1984, the forerunner to the current Corporation. In-service training for managers was also strengthened with the creation of Otalora, which was to dedicate itself to training and co-operative dissemination. The Group had 23,130 workers at the end of 1990.

On the international stage, the aim was to respond to the growing globalisation process, strongly promoting expansion abroad by setting up production plants in a number of countries. The first, the Copreci plant in Mexico in 1990 was followed by many others taking the total to 73 by the end of 2008. This was part of a strategy aimed at: increasing competitiveness and market share, bringing component supply closer to important customers’ plants, especially in the automotive and domestic appliance sectors; and strengthening employment in the Basque Country, by promoting the export of products manufactured by the Co-operatives by means of the new platforms [3]

In October 2009, the United Steelworkers announced an agreement with Mondragon to create worker cooperatives in the United States.[4] .

Business Culture

The ties that link the MONDRAGON Co-operatives are strong, as these bonds emanate from a humanist concept of business, interrelated by a philosophy of participation and solidarity and a shared business culture rooted in a number of Basic Principles, a shared Mission and the acceptance of a set of Corporate Values and General Policies of a business nature [5].

Over the years these links have been embodied in a series of operating rules approved on a majority basis by the Co-operative Congresses, which regulate the activity of the Governing Bodies of the Corporation (Standing Committee, General Council), the Grassroots Co-operatives and the Divisions they belong to, from the organisational, institutional and economic points of view as well as in terms of assets.

This entire framework of business culture has been structured on the basis of a common culture derived from the 10 Basic Co-operative Principles, in which MONDRAGON is deeply rooted: Open Admission, Democratic Organisation, the Sovereignty of Labour, Instrumental and Subordinate Nature of Capital, Participatory Management, Payment Solidarity, Inter-cooperation, Social Transformation, Universality and Education.

This inspirational philosophy is complemented by the establishment of four Corporate Values: Co-operation, acting as owners and protagonists; Participation, which takes shape as a commitment to management; Social Responsibility, by means of the distribution of wealth based on solidarity; and Innovation, focusing on constant renewal in all areas [6] .

This business culture translates into compliance with a number of Basic Objectives (Customer Focus, Development, Innovation, Profitability, People in Co-operation and Involvement in the Community) and General Policies approved by the Co-operative Congress, which are taken on board at all the Corporation’s organisational levels and incorporated into the four-yearly strategic plans and the annual business plans of the individual co-operatives, the Divisions and the Corporation as a whole.

Wage Regulation

At Mondragon, there are agreed-upon wage ratios between the worker-owners who do executive work and those who work in the field or factory and earn (in theory) a minimum wage. These ratios range from 3:1 to 9:1 in different cooperatives and average 5:1. That is, the general manager of an average Mondragon cooperative earns 5 times as much as the theoretical minimum wage paid in his/her cooperative. This ratio is in reality smaller because there are few Mondragon worker-owners that earn minimum wages, their jobs being somewhat specialized and classified at higher wage levels.[7]

Although the ratio for each cooperative varies, it is worker-owners within that cooperative who decide through a democratic vote what these ratios should be. Thus, if a general manager of a cooperative has a ratio of 9:1, it is because its worker-owners decided it was a fair ratio to maintain.[7]

In general, wages at Mondragon, as compared to similar jobs in local industries, are 30% or less at the management levels and equivalent at the middle management, technical and professional levels. As a result, Mondragon worker-owners at the lower wage levels earn an average of 13% higher wages than workers in similar businesses. In addition, the ratios are further diminished because Spain uses a progressive tax rate, so those with higher wages pay higher taxes.[7]

Areas of Activity

The Corporation’s companies operate in four different areas: Finance, Industry, Retail and Knowledge, with the latter something that characteristically makes Mondragon stand out as a business group. In terms of figures, in 2008 the Corporation posted a Total Turnover of 16.8 billion euros, of which 6.5 billion corresponded to Industry, 9 billion to Retail and 1.2 billion to the Finance area [8] .

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Finance

This area includes the banking business of Caja Laboral, the insurance company Seguros Lagun Aro and the Voluntary Social Welfare Body Lagun Aro, which had an asset fund totaling 3.8 billion euros at the end of 2008. The yield obtained from this fund is used to cover long-term retirement, widowhood and invalidity benefits, complementary to those offered by the Spanish Social Security System.

Caja Laboral, for its part, ended 2008 with 14 billion euros of Deposits in a year in which it granted loans worth 16.6 billion, mainly to household economies and small and medium-sized enterprises. Its extensive experience with the Corporation’s Co-operatives enables it to offer SMEs services typical of large companies.

Industry

This area includes the activity of a large part of the Corporation’s companies engaged in the manufacture of Consumer Goods, Capital Goods, Industrial Components, products and systems for Construction and Services to Business.

In the Consumer Goods sector, with sales totaling 1.8 billion euros, MONDRAGON produces white goods: refrigerators, washing machines, ovens, dishwashers and boilers, under the brands Fagor, Brandt, Mastercook, and maintains a leadership position in Spain and France and co-leadership in Poland and Morocco. It also offers a wide range of office furniture and home furniture for different environments. In the leisure and sports area, it manufactures Orbea bicycles, exercise equipment and items for camping, the garden and the beach.

In Capital Goods, MONDRAGON posted a turnover of 1.16 billion euros in 2008, and is the leading Spanish manufacturer of chip removing (Danobat Group) and sheet metal forming (Fagor Arrasate Group) machine tools. This equipment is destined for the automotive, domestic appliance, iron and steel, railway and aeronautical sectors.

These machines are complemented by automation and control products for machine tools, packaging machinery, machinery for automating assembly processes and processing wood, forklift trucks, electric transformers, integrated equipment for the catering industry, cold stores and refrigeration equipment. Specifically focusing on the automotive sector, the Corporation also manufactures a wide variety of dies, moulds and tooling for casting iron and aluminium, and occupies a leading position in machinery for the casting sector.

In Industrial Components, MONDRAGON posted a turnover of 2 billion euros in 2008, a sector in which it operates as an integrated supplier for the leading car manufacturers, offering from the design and development of a part to the industrialisation and supply of components and assemblies. It has different business units such as brakes, axles, suspension, transmission, engines, aluminium wheel rims, fluid conduction and other internal and external vehicle components.

It also produces components for the main domestic appliance manufacturers, in three business areas: White Goods, Home Comfort and Electronics. And, moreover, manufactures flanges and pipe accessories for processing oil-gas, petrochemical plants and power generation, copper and aluminium electrical conductors and components for conveyors.

In Construction, sales totalled 1.26 billion euros in 2008. This is a sector in which MONDRAGON has participated in and continues to participate in the construction of emblematic buildings and important infrastructure projects, at both home and abroad. In this respect, it designs and builds large metallic (URSSA), laminated wood and prefabricated concrete structures; supplies prefabricated parts in polymer concrete; offers solutions for formwork and structures (ULMA Group), as well as public works machinery and the industrialisation of the construction process, including engineering and assembly services. It also produces lifts and vertical transport systems (ORONA Group), applying modern technologies in safety, energy saving and taking advantage of space.

Finally, in Services to Business, sales totalled 248 million euros in 2008, in a wide-ranging field that includes Business Consultancy Services, Architecture and Engineering, Property Consulting, Design and Innovation (LKS Group), Systems Engineering for Electromechanical Installations and Integrated Logistics Engineering. It also offers a modern language service, manufactures educational equipment and is very dynamic in the Graphic Arts sector (MccGraphics).

There is a strong international dimension to MONDRAGON’s industrial activity, as demonstrated by the fact that in 2008 58.2% of total turnover came from international sales. Sales resulting from the export of products abroad and production generated in the 73 subsidiaries located in 16 different countries: China (13), France (9), Poland (8), Czech Republic (7), Mexico (7), Brazil (5), Germany (4), Italy (4), United Kingdom (3), Rumania (3), United States (2), Turkey (2), Portugal (2), Slovakia (2), Thailand (1) and Morocco (1).

Overall, in 2008 these 73 plants produced goods worth 1.5 billion euros (23% of industrial sales) and provided work for 13,759 people (34% of the industrial workforce). It is worth highlighting the corporate industrial park developed by the Corporation in Kunshan, close to Shanghai, which currently houses seven subsidiaries.

Retail

Led by Eroski, it is one of the leading retail groups in Spain, posting a turnover of 9 billion euros in 2008. It operates all over Spain and in the south of France, and maintains close contacts with the French group Les Mousquetaires and the leading German retailer Edeka, with whom it set up the Alidis international partnership in 2002. The worker-owners and consumer-members are involved in the management of Eroski, with both groups participating in the Co-operative’s decision-making bodies.

At the end of 2008, Eroski was operating an extensive chain of more than 2,400 stores made up of 115 EROSKI hypermarkets, 1,029 EROSKI/center, Caprabo and EROSKI/city supermarkets, 274 branches of the EROSKI/viajes travel agency, 53 petrol stations, 44 Forum Sport stores, 300 IF perfume stores, 6 Abac leisure and culture outlets and 27 goods depots. In addition to this chain, there are 567 self-service franchise outlets. Moreover, in the south of France it has 4 hypermarkets, 16 supermarkets and 17 petrol stations and 4 perfume stores in Andorra.

At an Assembly held In 2008, its worker-members approved by a majority vote the process to expand the transformation into co-operatively run businesses to the Group as a whole. So work started on turning the Group’s subsidiaries into co-operatives, as well as on making their salaried workers worker-members. This process will be carried out gradually over the next few years.

The Retail Area is also home to the food group Erkop, which operates in the catering, cleaning, stock-breeding and horticulture sectors and has as its leading name Auzo Lagun, a co-operative engaged in group catering, cleaning of buildings and premises, and also offers an integrated service in the health sector.

Knowledge

This area has a dual focus: education-training and innovation, which have both been key elements in the development of the Corporation. Training-education is mainly linked to the dynamism of the University of Mondragón, the significant role that Politeknika Ikastegia Txorierri, Arizmendi Ikastola and Lea Artibai Ikastetxea play in their respective areas and the activity of the Management and Co-operative Development Centre Otalora.

The University of Mondragon is a university of a co-operative nature, which combines the development of knowledge, skills and values and maintains close relations with business, especially the Co-operatives. Technological Innovation is dealt with through the Co-operatives’ own R&D Departments, the Corporate Science and Technology Plan, the work of the Corporation’s 12 Technology Centres and the Garaia Innovation Park. energy and sustainability, health and business management. For their part, the 12 Technology Centres, with a workforce totalling 748 people and an overall budget of 50.7 million euros in 2008, continue to play a fundamental role in the development of the sectors in which they focus their activity.

See also

Further reading

  • Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex (1991), William Whyte. ISBN 0875461814
  • We Build the Road as We Travel: Mondragon, A Cooperative Social System, Roy Morrison. ISBN 0965890317
  • The Mondragon Cooperative Experience (1993), J. Ormachea.
  • Cooperation at Work: The Mondragon Experience (1983), K. Bradely & A. Gelb.
  • Values at Work: Employees participation meets market pressure at Mondragon (1999), G. Cheney.
  • Mondragon: An economic analysis (1982), C. Logan & H. Thomas.
  • The Myth of Mondragon: Cooperatives, Politics, and Working-Class Life in a Basque Town (1996), by Sharryn Kasmir, State University of New York Press.
  • From Mondragon to America: Experiments in Community Economic Development (1997), by G. MacLeod, University College of Cape Breton Press. ISBN 0-920336-53-1
  • "Jobs of Our Own: Building a Stakeholder Society" (1999), by Race Mathews, Pluto Press (Australia) and Comerford & Miller (London). ISBN 1 86403 064 X. US reprint 2009, The Distributist Review Press. ISBN 978-0-9679707-9-0. ISBN 0-9679707-9-2.

References

  1. ^ "In 2008, MONDRAGON provided 3.6 % of the Basque Autonomous Community’s total GDP and 6.6% of its Industrial GDP". http://www.mondragon-corporation.com/ENG/Press-room/articleType/ArticleView/articleId/1377.aspx. Retrieved 4 december 2010.  
  2. ^ Molina, Fernando (2005). Jose Maria Arizmendiarreta. Caja Laboral. ISBN 84-920246-2-3.  
  3. ^ Ormaetxe, Jose Maria (2003). Medio siglo de la experiencia cooperativa de Mondragon. Azatza. ISBN SS-1433/2003.  
  4. ^ Wilson, Amanda. Bendable Business: Cooperatives less likely to break in economic crises. The Dominion. 4 Dec. 2009.
  5. ^ Larrañaga, Jesus (1998). El cooperativismo en Mondragon. Azatza. ISBN 84-88125-12-7.  
  6. ^ Foote, William (1991). Making Mondragon. ILR. ISBN 0-87546-182-4.  
  7. ^ a b c Herrera, David (2004). "Mondragon: a for-profit organization that embodies Catholic social thought.". Entrepreneur. http://www.entrepreneur.com/tradejournals/article/116926710_1.html. Retrieved 2009-12-30.  
  8. ^ "Yearly Report". 2008. http://www.mondragon-corporation.com/language/en-US/ENG/Economic-Data/Yearly-Report.aspx. Retrieved 4 December 2009.  

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