Thursday, February 19, 2009
Tuesday, August 12, 2008
I know it has been too long since I have added to my blog. But I noticed that quite a few people are still checking it out. Plus I have some new writings on MCC coming out. This summer I attended two conference where I presented on MCC, that forced me to put some stuff together in English. I promise it is on the way. I will be posting that material. I am also in the process of posting a copy of my friend and thesis advisors thesis on Mondragon. It will take me a few days. Then I assure you I will have a link.
Saturday, October 27, 2007
I am back in Euskadi finally. Well actually I have been for almost a months. But I have been getting a little lazy I must admit. But I am trying to turn over a new leaf I swear.
Want to start off with a quick up date and an interesting paper:
First of all I am back living in Onati, but instead of taking and am doing an internship at Ideko Technology Center which is the technology center that is owned by the companies of the Danobat group of MCC. Danobat is a Machine Tool group made up of 8 companies, a tech center (Ideko) and three foreign subsidiaries. I will provide a more detailed entry on Ideko and the group tomorrow. I have a previous post on Danobat already available. Quickly I want to explain what I am doing. I am working the Product development part of Ideko, which is the non-technical side. I am specifically in the Competitive Intelligence area, which is a whole system of information on the sector, technology, laws, patents, competitors of the companies that own Ideko with the goal of improving the products of Ideko, as well as helping in the launching of new products and in strategic decision making. I am researching cutting edge methods of carrying out CI for Ideko.
I am going to give the link for an article on the internationalization of MCC. It was written by Jose Mari Luzarraga, Ignacio Irizar and Dionisio Aranzadi Telleria. It was presented by Jose Mari at the CIRIEC conference in Victoria Canada. Jose Mari is the premier expert on the internationalization of MCC, he has visited EVERY subsidiary in China, Turkey, India, Poland, Mexico and Brazil and has investigated the impact of the subsidiaries on the cooperatives.
Here is the abstract:
The stability of local communities is threatened by globalization and the international industrial migration process. This article explores Mondragon’s international multilocalization strategy as an effective strategy to avoid de-localization and defend parent cooperatives employment while creating new jobs in developing countries. At the end of 2006, the Mondragon Cooperative Corporation (here after MCC) located in the North of Spain, had 25 Globalized Cooperatives with 65 production plants abroad employing 14.601 people.
Based on the Mondragon cooperatives activity between 1996-2006, this paper:
- Measures the relationship of creating employment abroad and defending
employment at home.
- Analyses the impact that having production plants abroad has on the number of
members vs. non members’ evolution in the parent cooperative and in the
company as a whole.
This research includes analysis from 40 production plants in China, India, Mexico,
Brazil and Eastern Europe.
Here is the link: Luzarraga
Friday, May 25, 2007
Saturday, May 12, 2007
Recently I visited the MCC cooperative Ampo.
Located in the Gipuzkoan town of Idiazabal, AMPO Cooperative is a divided into two separate activities, POYAM which make valves for liquid gas pipelines and AMPO which is a foundry that mostly serves valve makers. AMPO has approximately 450 workers in its two divisions. Last year they had more then $200 million in sales and $20 million in profit. AMPO is the premier manufacturer of valves for liquid gas pipelines in the world and the foundry is recognized as the finest in the sector in
This was the beginning of a radical departure from the way it had done business during its entire history. Middle management was abolished, as were departmental structures, mandatory hours and the hierarchical structure that is the mainstay of nearly all companies. Instead a more horizontal structure based around self-managed, cooperative work teams with leaders elected by each teamed was established. These teams are organized by area of production or around specific processes or relations to customers or providers.
The structure itself is loose and not particularly easy to visualize. This to me suggests the level of coordination and most importantly communication that is occurring at all levels of the cooperative. It is particular significant to point out that the central teams are composed to a great degree of assembly line workers and that other areas of AMPO “serve” them. That is to say, AMPO is a cooperative where workers are clear at the center of activity in terms of importance and the value given to their contribution.
An indispensable element of AMPO’s model is the freedom and responsibility of workers organized in autonomous work groups around a shared vision for the future of the cooperative and a sense of ownership on the part of all workers. In AMPO there are no set hours, no time clocks, no managers overseeing workers; workers hold themselves and their co-workers accountable, and as a group they elect leaders and representatives to the strategic planning meetings or other higher decision making bodies. Different groups interact to serve clients and the value chain. In addition, there is a strong emphasis on communication, the interaction of so many groups and the autonomy of individuals means that constant and clear communication is indispensable and that meetings and discussion are a critical part of everyone’s job and the lifeblood of the organization.
In order to help create a sense of equality and shared mission AMPO has a considerable equality in its pay scale. Prior to its reorganization AMPO had approximately 40 different pay grades. That has since been changed to four different pay grades based on level of responsibility, level of education and the nature of the job. This policy is designed to create greater solidarity and greater transparency and openness in retribution policy.
Perhaps the most critical element of AMPO's economic success is its orientation towards the customer and emphasis on going out into the marketplace. Prior to its reengineering AMPO had perhaps 5 personnel responsible for customer relation and sales. That number is now somewhere around 40 for each of the two divisions, approximately 7 groups in total corresponding to the different regions of the world. Plus the very structure of the company is one designed to meet customer needs and integrate workers not-traditionally involved in sales in the process of finding customers and satisfying existing ones. This includes assembly line workers, engineers, accountants, etc. The result is that the demands, needs and problems of the customer and the market are much more internalized in the day to day operations of the company and that the number of customers and markets has multiply greatly. In addition AMPO recognizes that they are not the cheapest company in the market. Instead they differentiate themselves based on quality, knowing their customers and their high degree of customer service.
Tuesday, May 08, 2007
As a part of my Masters program we visited the Machine Tool Coop Danobat, and meet with the President Jesus Mari Astigarraga. Danobat is in the machine tool division of MCC. The Danobat Group is actually made up of eight independent Machine-Tool Coops from MCC. Each of the coops in the Danobat Group is specialized in a distinct area of M-T manufacturing: they include grinding machines, milling machines and centers, lathes, saws and cutting machines, punching and folding machines, and machine centers as well as offering re-engineering of machines. While all of the companies in the Danobat Group cooperate closely, each coop is an independent entity with its own management and decision-making abilities and cooperative ownership structure. They have voluntarily joined together to have a stronger brand name, to share technology and know-how, to be able internationalize, take advantage of economies of scale and to develop new products and businesses. The coops coordinate production to avoid competing with each other and offer a wider range of products as well as supporting their own innovation center center. In all Danobat´s sales in 2006 totaled nearly $200 million, 75% of which were international.
Danobat’s innovation center, Ideko, is key to the competitiveness of the business. It has more then 80 staff, plus a high degree of interaction with the technology departments of each coop in the group. The goal of Ideko is not only improve the existing products of Danobat, but to help in the development of new products and new businesses. Last year Danobat invested more than $10 million in Ideko.
In order to recuperate the high costs of R+D, Danobat has had to make a huge effort to internationalize its sales. In the last few years sales in Spain and in Western Europe have continued to decline as a percentage of overall sales. This is due to the growth in Eatern European and Asian markets. Internationalization is also necessary to remain competitive, to maintain market share and to continue creating jobs. Danobat has had a plant in China since 1990 and has since expanded to England, Germany and Croatia and is contemplating opening installations in India and the US. While it has done some international expansion in terms of production, most of its foreign installations are services or supply oriented in nature. Danobat, like nearly all companies in MCC, has a strong commitment to maintaining and creating employment in it home environment. International expansion is always viewed as strengthening the home business. The goal is not to move jobs offshore to cut costs, but to create or maintain employment at home. In fact, Danobat has been the only M-T producer in Europe in the last decade to maintain employment level. While elsewhere it has declined dramatically, the strategy for Danobat has been to look for markets abroad, in emerging markets and in Europe and most importantly look for niches to differentiate itself from the competition.
Danobat´s strategy to remain competitive should be looked at in the context of the increasing competitiveness of the sector. In general it is a the Machine-Tool sector made difficult by two factors: the presence of huge manufacturers which may have 30,000 or 40,000 employees and increasingly of low-cost, emerging companies that may be relatively small, but more and more produce quality products. In order to survive this dual competition, Danobat’s competitive edge lies in its ability to find niche markets. As a whole the group is relatively small about 1,000 workers, so it must find opportunities that are small enough to be overlooked by large firms, but at the same time technologically demanding or where quality, service and the ability to transfer know-how to customers is desirable and allows them differentiate themselves from low-cost competitors. In general, investing in advanced technology is a solution to the problem of competitiveness, but it is not sufficient, Danobat must look for niches, service, quality, getting close to customers, physically and in terms of providing solutions tailored to their needs. Its most important customers include the aerospace industry,
In the last 5 years it has also acquired several businesses abroad, one in Germany and one in England, to add technical capability, but also to have servicing capability in important markets, as well as to be able to sell products with a German brand name. While the size of these companies is very small acquiring them has afforded them important entries into new markets.
The Machine Tool sector has another peculiarity, which is the clock-like nature of its downturns, virtually ever ten years. Part of Danobat´s strategy has been to build long-term solutions for weathering the cyclical ups and downs. This has included new businesses outside of Machine Tool sector and an emphasis on servicing and reengineering machinery. In addition the diversification of business activities is key to long-term job creation and to being able to weather downturns of the sector. In 2005 Danobat Group founded a new cooperative, DanoRail, a company which provides maintenance systems for Railroad companies. It is a business that includes machines as well as other services, although it is a different sector, it utilizes the technical expertise of Danobat in way that expands the business to new areas. This came out of an ideas circle with researcher, MMC managers and Danobat Managers who are focused on creating new businesses that allow them to diversify while utilizing existing or related know-how.
It should be remembered that the Danobat group is made up of eight different companies (the plants abroad are joint ventures of all of the coops in the group) that have there on identities and agendas. But they do cooperate in other ways as well, namely in sharing of profits. At the end of the each year about 40% of all profits from each company are pooled together and distributed based on the size and or losses of each company. In this more successful companies support struggling companies, although all have been though periods of weakness and prosperity. This is a common trait with in all of the industrial divisions of MCC. This is another fact that allows the group to survival downturns.
In 1991 the Machine Tool Institute (located in the same town www.imh.es) was founded in part by Danobat to provide trained personal for the Machine Tool sector and to act as an Innovation Center, which promotes technological dissemination. It provides continuous training as well as, technical degrees, engineering degrees and short training modules. It maintains close contact with the companies in the M-T sector.
Friday, January 19, 2007
Here is a more extensive resource list. Many of these items are difficult to find, however, I have access to all of them. I will post those that I have in Electronic format. Please let me know if this is useful.
1. Cooperativism and globalization: The Basque Mondragón cooperatives in the face of changing times.
Mondragon Co-operative Experience
José Ramón Fernández
Editor MCC 2001
2. Forty years of co-operative history: Mondragon corporación corporativa
Mondragón Corporación Cooperativa
3. The economic system of co-operative societies: determining and applying co-operative results.
Joxe Mari Aizega Zubillaga
4. We Build the Road as We Travel: Mondragon A Cooperative Social System
Roy Morrison 1997
5. Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex
William Foote Whyte and Kathleen King Whyte 1991
6. Values at Work Employee Participation Meets Market Pressure at Mondragon
George Cheney 2002
7. From Mondragon to America: Experiments in Community Development
Greg MacLeod 1998
8. The Myth of Mondragon: Cooperative, Politics, and Working-Class Life in a Basque Town
Sharryn Kasmir 1996
9. The Organization of the Future
Frances Hesselbein, Marshall Goldsmith, Richard Beckhard, editors.
10. Cooperation at Work: The Mondragón Experience
Keith Bradley and Alan Gelb
Heinemann Educational Books
11. Irizar, Walking Along Three Centuries (A history of the Irizar Coop)
Irizar S. COOP
Democracy, cooperation and business success: The case of Mondragon corporacion cooperativa
Forcadell, FJJ BUS ETHICS 56 (3): 255-274 FEB 2005
Cooperativism and globalization the Basque Mondragón cooperatives in the face of changing times
Joseba Azkarraga Etxegibel
Professor of Sociology at Mondragon Unibertsitatea and researcher at
THE INTERNATIONALISATION OF COOPERATIVES: THE CASE OF THE MONDRAGON COOPERATIVE CORPORATION
By Anjel Mari ERRASTI, Iñaki HERAS, Baleren BAKAIKOA, Pilar ELGOIBAR
THE FUTURE, DYNAMICS AND FUNDAMENTAL PRINCIPLES OF GROWTH OF ECONOMIC DEMOCRACY
A four-part paper to be presented to the IAFEP in Mondragon, July 2006 Jaroslav Vanek
Three Themes about Democratic Enterprises: Capital Structure, Education, and Spin-offs
University of California at Riverside
Texts from Lanki, the University of Mondragón’s Co-operative Studies Institute: These texts can be found at http://www.lanki.coop/
Meaning and orientation of the Mondragón Experience
The horizons of self-management
Intercooperation based on solidarity
Texts dealing with topics concerning the Experience, within the framework of the Testimony Project
THE COOPERATIVE CORPORATION AS COUNTERWEIGHT TO GLOBALISM
PUBLISHED IN " ECONOMIE ET SOLIDARITE" PRESSE UNIVERSITAIRE DE QUEBEC.. CIRIEC …VOL 3. NO.1,
An Endogenous Group Formation Theory of Cooperative Networks: The Economics of La Lega and Mondragon.
Department of Economics, The George Washington University
Stephen C. Smith
Department of Economics, The George Washington University
July 4, 2004
COOPERATIVES AS MULTINATIONALS: THE MCC CASE
Anjel Errasti Amozarrain .
Agurtzane Begiristain Zubillaga
Baleren Bakaikoa Azurmendi
Institute of Cooperative Law and Social Economy (GEZKI)
University of the Basque Country
ENABLING ETHICAL ECONOMIES: COOPERATIVISM AND CLASS
Innovations in Corporate Governance: The Mondragón experience Shann Turnbull Corporate Governance:
An International Review, 3:3, pp.167-180, July, 1995)
The Mondragón Corporación Cooperativa: An Interview with Juan M. Sinde, Chief Executive Deputy
Charles M. A. Clark
Review of Business
Volume 25, Number 1
Jose Maria Arizmendiarrieta: A project for Social Transformation DVD www.lanki.coop
The Mondragón Experiment
Collaborative Praxis at Work: Transforming Enterprise and Community
David C. Gabriel
University of San Francisco
Finding Meaning by Participating in Decisions Affecting Us, Our Work, Our Lives: Lessons Learned at Mondragón
University of San Diego
Making the social economy work within the global economy: an empirical study of worker co-operatives in Quebec, Emilia-Romagna and Mondragón
University of Mondragon
MCC Profile 2005 www.mcc.es
Wednesday, January 17, 2007
I posted a response to your comment earlier but the computer got shut off before I could save it.
I am not necessarily in a position to give too much advice on this subject at this point in a very concrete sense.
However I will say this: Your question is one that probably many people who look at MCC from outside and want to apply the model also make. I think nevertheless that is not the right approach. Certainly, there are bits and pieces that would be useful for someone thinking about starting a coop or working in one now. But from my point of view, what is really necessary to look at when studying the coops is looking at the basis of the coops, that is their founding and the development of their values and early institutions.
Many people will tell you that replicating Mondragón is impossible because of the unique cultural of Basques, historic and political situation under Franco and the industrial history of the region etc. I believe thinking about these issues is basically a waste of time when considering applying lessons from the coops. What is significant is that a small group of individuals lead by one dynamic leader (Fr. Jose Maria) founded a school, where they trained scores of young people in the same values and vision and created a community around those ideas. This school was founded 12 or 13 years BEFORE the first coop was started. In addition during this time, students went abroad learned practical skills and engineering, studied other social economic models and businesses. One MCC founder described it as a period of party preparation or formation, in which leaders were developed, values shared and a vision for development clarified.
In my opinion this is by far the most significant lesson of MCC. I am not suggesting that to start a coop it is necessary to found a school for 12 years, but rather that the approach to economic development of this kind starts with a core group of people who have a shared vision and a way of inculcating those values into young people or new comers to the group. The structures that were subsequently created by MCC are a result of the education of the early students and other founders in that school and the leadership of one priest. The subsequent trajectory of MCC is best understood in terms of that period. This is certainly a subject I will be returning to.
Saturday, December 23, 2006
The following are a few emails from an exchange with a friend and professor at Loyola University in Chicago. He asked me some questions about the expansion of the MCC coops in developing countries and inernationally in general. I thought this would be interesting to post. These are themes I will be revisiting soon. Enjoy!
Dan, Concerning the MCC operations abroad: why are they doing these(expanding operations to foreign countries)? What sorts of companies are they? Are the MCC motivations the same as capitalist ones—looking for cheaper labor, trying to avoid import duties? Are these companies producing inputs for the cooperatives? Is it simply a matter of profit maximization, or are there other, more technical reasons for what they are doing
Great questions. This is something that has been on my mind lately. I am hardly an expert yet but here is my take.
Keep in mind there are operations 60 abroad and growing, more than half of which are factories and they belong to a number of different companies each with their own vision, problems and level of commitment to local development. Then there is the distinction of owning a plant in a developing country versus one in Europe. In the cases I am familiar with, Irizar a bus company, Fagor Electrodomesticos (appliances), Fagor Ederlan (automotive) and a few others, the companies tend to be located in highly competitive industries where either some aspect or their production or there entire business can be done much cheaper abroad. These companies often then purchase a key component from abroad, or make simpler versions of their products aboard and make the most advanced, latest and highly value added ones in
Irizar makes its older bus models in
In the case of Ederlan they were invited to be part of a supplier park by I think Fiat in
Fagor electrodomesticos also recently bought the largest appliance company in France, Brandt (which is the same size as they are). That is simply a question of market share.
An interesting thing I learned is that there is a real commitment to expand ownership of an ESOP on the part of MCC. Specifically through a plan called GESPA (which is what EROSKI uses outside of the Basque Region) in which workers own a company which is partial owner of the company they work in. The commitment on the part of MCC is to start implement this in 2008, with 30% of ownership effectively belonging to local workers. Furthermore there are some companies like Ederlan, Fagor and Irizar, which seem to be committed ideologically to turning the companies they have into coops. But it is a much slower process in these cases. Many of these companies are also very convinced of the importance of worker participation as being critical to remaining competitive and thus implement shared management as well.
In addition I recently met with 2 people who work a lot with coops abroad, one is head of member labor relations and one is a grad student who is doing his thesis on soops abroad. Both told me that MCC's stragtegy is to in a way repest their own history in developing countries. Namely, start region division (in this case by country), that can cooperate say in China, or Mexico ( although in different industries) giving them a competiive advantage. Eventually the idea is to expand from the nucleus, form schools, joint ventures, new businesses and begin to cooperatize ownership. This is a long term vision, but it is definitely something that is part of the plan
The idea basically in th short term behind opening these subsidiaries seems to be, how do we remain competitive here? What can we do more cheaply abroad and what can we do effectively here in order to maintain and create employment.
Sometimes the motives are joint ventures, new markets etc. I would say on the whole there is a High Road approach, and that the characterization some have made of MCC companies being just like any old multinational is a gross simplification. In the case of Fagor they are making an effort to cooperatize in
Thanks for the helpful reply. This is a really interesting topic. I don't understand the ESOP idea, workers owning a company that is partial owner of the company they work form. Does this mean they are buying shares of MCC itself, which is the partial owner of their
I'd like to know more about worker skepticism in
story on that? In
opposing the Communist regime, was an advocate of
It's interesting--and understandable--the coop workers outsource simpler
versions of their product abroad. They certainly don't want to
outsource their own jobs. But then what is to be gained by this
outsourcing? Is it simply brand recognition for their own version, or
are they reaping substantial profits from these, which are repatriated
home. Presumably it's the latter--which would seem to involve a certain
amount of "exploitation."
I spoke to Fred Freundlich ( a professor at Mondragon University) about this topic after I wrote you that email and he emphasized the fact that it is really hard to generalize about the situation. There is a lot of diversity in types of project, reasons for going abroad, commitment to local development and coop development. Even here people are not entirely sure of what is going on in other countries, even when there own companies have affiliates abroad. What is the case is that this is a huge issue for people involved in the world of MCC. Everyone thinks about it, has an opinion and is concerned about the future of coops abroad and the challenge of spreading them. What Fred also said was that it would be inaccurate to say that MCC coops behave like regular multinationals. It would be a gross simplification to make any generalization about their role abroad.
The ESOP idea, as least in the case of EROSKI (which is the company that has most done it) is this; workers buy a share in a company that owns thirty percent of the company that they work in. The other 70% is owned by a holding company created by the parent (Irizar, Eroski etc.). Don’t ask me why it is done that way. I am not sure if it would always take on that form in other cases, but that seems to be the dominant form. They are not buying shares themselves but rather buying (in a roundabout way) a share in the company they work in. It was explained to me in the following way: If workers have a stake in ownership that will motivate them to care about the company and not feel exploited, work harder etc. Basically the ESOP idea.
MCC´s central office has created the following framework for future foreign expansion, 1) there should be transparency of information, accessible to all workers 2) the same management techniques used in the Europe should be applied abroad 3) 30% of ownership should belong to employees and 4) 5% of profit should be dedicated to local development. Of course not all companies have to follow these guidelines, so it is not clear that all will do this.
As for the
As for sending production abroad it is a bit complicated. Sometimes it is simply a way of remaining profitable. What is key though is the strategy of not just moving production abroad but the emphasis on technological innovation here, allowing them to produce more value-added products while pushing less value added production abroad. Surely there is a certain amount of exploitation there. One company in particular, Irizar refers to this process as technology sharing, and really talks about improving the capacity of manufacturers in other countries.
As I said this is something I really need to explore, it is complicated and sometimes hard to get a straight answer about
Friday, December 15, 2006
Located in a scenic valley near the town of
Otalora also provides a manager location service for coops that need personal, from within the MCC world. That is they locate qualified managers from other coops in coops that have an opening that the can't fill internally.
Training in coop values is not extremely extensive. In the MBA, mini-MBA and other training they provide at Otalora, it is simply one part of the course, in the personnel management section. This orientation for new members is only a week or so.
Learning coop values, and about cooperativism is something that is mostly done on the job and over the years. Given that there are more than 120 coops in MCC, each with their own culture and history, members get a very different training on what Mondragon cooperativism is depending on where they work. Because once a new member receives the initial orientation to cooperativism they may never deal with issue relating to coop structure, management, renumeration, etc. all members who serve on the Social Councils and Governing Councils ( please see my next entry for a more detailed discussion of the structure of coops in MCC). Partly, it seems there is an assumption that the culture of cooperativism is widely diffuse here and within the coops. This is something I will have to investigate more.
Tuesday, December 12, 2006
FNMC does extensive surveys each year of the customer. These surveys are done mostly by assembly line workers or other workers who are not is sales and don’t usually have contact with customers. In the last five years they have made a concerted effort to adjust the production and customer service to improve areas that customer regard as lacking. This has very direct effects on the production process, design and relation to clients. They specifically create direct linkages from customer to design and production teams (the survey being one of the principal ways doing so). The information received in these surveys may form the basis of a goal for ¨improvement groups¨, for instance if a specific item or piece regularly breaks, it may become the task of certain groups to redesign the assembly process, find a new or better way to make the piece, find a new material, etc. The focus is on meeting the customer needs, while at the same time creating an environment where groups of workers (often working with several other teams of workers from different areas) can creatively respond to problems, improve production etc, in a decentralized way. Collaboration between teams is facilitated by other personal (often customer service people). What I found most important was the degree to which improvement, meeting customer needs is dependant on the ability of improvement groups to independently solve problems, and take ownership of their work. Last year FNMC purchased one of its suppliers Grumal (located in another town in the Basque region), which makes doors for cabinets. The company was formally owned by an American multinational. The company is profitable and twice as large as FNMC. Currently the FNMC has a 70% share of the company while the management owns 30%. In 2010 the company will be fully converted into a coop as a part of FNMC. This seemed to me to be a particularly interesting example of the strategic and nature of Fagor's business model. This is something I have seen reflected in other coops as well. A larger vision of their future and of what remaining competitive consists of, while still remaining faithful to cooperative values although not in a simplistic way. Many coops recognize that it is impossible to compete by expanding in ways that seem like the methods of any other corporation or multinational. They recognize strategic needs and opportunities. In the case of Grumal, it is in the Basque region, in an area familiar with MCC and Fagor, nevertheless transforming this company into a coop will take 5 years. Transforming a company outside of Spain or the Basque region into a coop, becomes infinitely more complicated. However, that doesn’t mean that buying a company and keeping it as a subsidiary or starting up a factory in Poland is qualitatively the same as when a regular non-coop does it. Expanding market share, broadening the base of the coops and increasing the competitiveness of the coop is critically important. Furthermore, working in a company owned by a coop is qualitatively different then working in one owned by another company.
Wednesday, November 29, 2006
The decision to start a joint venture allowed Fagor to take advantage of the sophistication of Vaillant´s German engineering and allowed Vaillant to take advantage of the relative cheaper cost of Basque labor. The quality of the engineering and the ability to innovate in design, materials and fabrication is of critical importance to Fagor, because of the increasingly cutthroat nature of the market for this product. Onsite there are R and D facilities The factory sells exclusively to the Fagor and Vaillant and as a result has no marketing functions. It is exclusively a production plant.
Eighty percent of the workforce are worker-owners of Fagor and the remaining 20% of engineers and some support staff (most of whom are from Germany are not worker owners). The make-up of the company is a little strange because the company itself is not a coop, but is half owned by one. The workers have representation though a social council (just as they would in MCC company) and elect (through Fagor) representatives to the board of directors. Most of the production workers come from other Fagor plants.
This is a sector that his highly sensitive to variations in the cost of raw materials and is increasingly competing with lowcost producers. This plant represents a creative effort to remain technologically advanced and maintain market share while expanding coop employment.
Production is arranged in mini-factories. That is each section of the factory acts as an independent factory, with a leader, goals, separate meetings and a focus on improving production and customer satisfaction.
Tuesday, November 28, 2006
Nevertheless, I feel back on track these days and am starting to have a clearer vision of the areas I want to explore, the companies I want to visit, and the skills I want to learn. Recently, I have visited a few factories and met with some interesting people at a number of key organizations related to MCC.
In the next few days I will relate those experience which include: Fagor Negocio de Muebles de Cocina, Otalora (MCC organization in charge of training managers and new staff in coops values), Lanki (MCC organization in charge of studying coops), MCC Headquarters, Geyser-Gastech (a joint venture between Fagor Electrodomésticos and a German company that makes hot water heaters) as well as some in-depth conversations with professors about MCC.
Tuesday, October 31, 2006
Thursday, October 26, 2006
My father asked for an explanation about how COOP, the Italian Grocery chain and Eroski are part of a development vision that runs counter to and competes with the Low Road retail trend.
Matt knows a bit more about COOP then I do about Eroski, but I can back up the statement he made that Eroski represents an alternative to Low Road retailers like Wal-Mart or Carrefour. First of all Eroski is owned by its employees and allows consumers to join as members (but not owners) with a limited amount representation. As a worker owner, employees are allowed the right to vote on management of the company, are guaranteed secure employment with excellent benefits, and substantial pensions as well as a large bonus when they retire which represent their share of the company. A little more then half of the workers are not owners. There is a commitment to involve them in some form of ownership, (however, the exact type of ownership depends on if they are outside of the Basque country or not it is a bit complex to get into now) and they are significantly better-paid then comparable workers in other chains in Spain. There is also a commitment to develop organic and fair-trade products particularly under Eroski´s own labels and to support Spain agriculture. Finally, Eroski´s expansion was in direct response to the threat of outside chains, Low Road chains flooding the Spanish market, including Basque Country, so the decided to step and expand to limit the space for these retailers to expand.
The very ownership structure is about long-term investment and the wellbeing of local communities. The cooperative structure prioritizes re-investment in the company rather than a focus on quick profits for shareholders or owners. Even the expansion scheme in areas outside of the Basque Region calls for incorporating local, non-profit capital to get projects off the ground and form local partners.
Ikerlan ws founded more then 30 years ago by Caja Laboral (the MCC bank and its central institution) as a way to bring technical solutions to the coops. Ikerlan is one of several innovation centers in MCC, but it was the first and for most of its history the only one. A portion of its work is contract I+D for outside firms, for MCC firms and research on emerging technologies. Ikerlan´s specific areas of expertise are improvement in production processes and production design, product design and energy products and processes.
Prior to the founding of Ikerlan most production by MCC coops was done by buying the rights to use a patent from a foreign company, allowing them to be the exclusive producers of that product in Spain. This allowed companies to develop their sophistication and technical competency. However, it did not help them develop technologically. After the founding of Ikerlan, the idea was that new technology could be developed for coops and that technical solutions could be found for coops with very specific production needs. During this time Ikerlan was funded exclusively by MCC. Work was evenly divided between specific projects for MCC coops and research on new technologies.
In the early 80´s two changes come about, 1st Ikerlan begins to receive money from the regional government (approximately half of its budget) and 2nd they begin to take on research projects from all over Europe. At a certain point Ikerlan begins to have an identity crisis, because the majority of its work is coming from outside of MCC companies, they are being stretched in two directions.
Eventually they change their policy about working with non-MCC firms. They decide they will continue to do these projects, but with the understanding that they will only do projects that are relevant to MCC industries or that will allow them to gain technical knowledge that will be useful to the coops. The strategy of Ikerlan becomes very clear, to develop new technologies for coops, solve technical problems and understand and transfer emerging technologies to the coops from external sources. Outside projects would always be considered based on their degree of utility to the MCC firms.
Mostly he talked about the historyof Ikerlan, so after my meeting with Manolo on Monday, I will try to get a little more info its current situation and relationship with the coops.
Tuesday, October 10, 2006
Today was the second day of my Master's class and we talked for the first art about entrepreneurship and our business plans. For the last four hours of class however we were joined by Antonio Cancelos, Founder of the Eroski (click to see a previous post on Eroski) retail chain and former director of the MCC. He was truly a dynamic and energetic speaker. Cancelos was the head of a local coop grocery store in the town of Eibar (about a half hour away from Mondragón) in the mid sixties he saw the need to join together with other coops in the region to form a larger entity. By 1970 this organization had become Eroski.
As I explained in my previous post on Eroski at a certain point in the 1980´s Eroski underwent a rapid expansion in all of Spain. This was done to head off the arrival of its competitors, such as the French retail chains and perhaps even companies like Wal-Mart. In order to expand they developed Hipermercados (like Supercenters that include food and all kinds of other retail items) and a network of hundreds of smaller stores as well as an alliance with a regional cooperative chain in Valencia called Consum. In order to finance this bold expansion of what had once been two relatively small and regional chains into a national chain capable of competing head-to-head with multinationals, Eroski had to get creative. Aside from forming a partnership with Consum (which fronted only 5% of what Eroski did) they reached out to several investors, limiting themselves to quasi-governmental agencies or non- profits and also the Italian Cooperative chain Coop Italia. With this capital they formed various holding companies and for each individual store the holding group provided 51% of the capital and local partners like ONCE (National Spanish Organization of the Blind) provided the rest of the capital. In this way they were able to multiple their capital to fund the expansion. After a number of years as their new businesses became profitable they were able to fund everything on their own. It also should be noted that they did not recieve money from Caja Laboral.
In the mid-90s Cancelos became the director of MCC, he summarized his six years there in this way: ¨when I arrived there were 28,000 workers in MCC and when I left there were 70,000.¨ He also noted that only about 38,000 of those workers were employee-owners (now days the figure is somewhat higher) and that the rest (that is, non-worker owners) worked abroad or largely at Eroski. He rhetorically raised the question that if the coops were creating non-cooperative jobs at such a large rate would they soon no longer be coops? His answer was that expanding non-coop employment allowed for the creation of more worker owners, made coops more competitive and that during his time as the head of MCC the created on average 2,000 co-operators per year more then during any other period. In addition non-owner workers in MCC companies tend to be treated and paid better then workers in other firms in the same industry.
Meeting Cancelos was even more exciting then meeting Jose María Ormaetxea. He truly embodied the image of an entrepreneur dedicated to cooperativism but open to non-traditional means of growing cooperative firms.
Friday, October 06, 2006
There are 25 five students including me, 6 of us are from other countries one Chilean, a Venezuelan woman and a Columbian and two Mexicans who haven’t arrived yet because of visa problems. The rest are from Spain. They are mostly from all over the Basque region and a few from beyond. The group seems to be a mix of those who are currently working and young people who have never worked. We also got our first assignment, which is to do a business plan in a group. I have three other people in my group, the live about an hour away in either San Sebastian and Bilbao, which should make group work interesting.
The highlight was when José Maria Ormaetxea, one of the five founders of the first Mondragón Coop, ULGOR (which later became Fagor), as well as the founder of Caja Laboral and the first director (the coop bank) and former President of MCC gave a speech about the cooperative experience to us. He 80 years old but still quite vibrant and seems to have an exceedingly clear and sharp memory of the early days of the coops. He outlined the growth of the Coops from a small group of student who were around the Priest Arizmendiarrieta to its current state.
He divided the MCC's history into three phases: 1) the Christian period from the founding of the first coop in1955 until 1973. The period when a small group of people who surrounded Arizmendi spread the coops motivated largely by christian values and because of the Dictatorship in the context often of Christian meetings etc.
2) The second phase he identified was the Romantic phase from 1973 until 1990. This period is characterized by a widening of the cooperatives to individuals who are motivated by idealistic, but now religious beliefs and is also a period of tremendous growth. When many new coops are started, when Lagun-Aro the social service coop was setup and the first research center was set up. The expansion of inter-cooperative support.
3) The third period Ormaetxea identifies is the period of Pragmatism from 1990 to the present. This is the period of increased competition, European integration and huge expansion. It is also the period when Coops begin to incorporate large amounts of non-owner workrs and operate subsidiaries internationally. The Mondragón Cooperative Corporation (although formed in 1987) takes on the leading role in defining the course of the coops.
Ormaetxea also made the point that because of globalization and increased competition that most likely in 50 years there would be no coops. That is, there would be companies with a small token amount of cooperative leadership, but in order to remain flexible and competitive they would not be able to incorporate new workers as owners and would have to do much of their work abroad. When ask about the prospect of turning subsidiaries in other countries into coops, he replied in no uncertain terms that it was impossible and would never, ever happen! Specifically, the company Fagor has a plant in Poland with 1,000 workers who seem uninterested in becoming a coop. However, Ormaetxea, a man who helped lead the fashioning of the world’s premier industrial cooperatives from an impoverished backwater, during the repressive reign of Franco believes spreading coops or even growing them at all is impossible.
He seemed to me like a man who was prone to overstatement and liked to make an impression. He is quite entertaining and it was impressive to meet him in the flesh. I will let you know how the class goes in the next few days.
Wednesday, October 04, 2006
Tuesday, October 03, 2006
Sunday, October 01, 2006
After everything was over there a pro ETA march of a few hundred people calling for the release of prisoners held by the Spanish government. Most of those taking part were on the young side. It was a strange way to end the whole scene, but I guess illustrative of the political leaning of most folks there.
Of course late at night the bars and streets were packed with all kinds of people partying until sunrise. There is still two more days of the festival so I will have more posts on this.
Friday, September 29, 2006
The unique part is the way people are dressed up, one part of the procession is chefs (presumably a nod to the famous culinary traditions of Basques), while another part is made of people dressed as blacksmiths, (which is because of the long tradition of metal forging, and mining etc in the area) others in traditional Basque peasant clothes. For a small town this is quit a party, all of the bars are packed with people, young and old until at least 4:30 (which is when I went home). People seemed to be pretty voracious drinkers, too (I couldn’t keep up). It was really a lively scene on the street, roving packs of young people go from bar to bar to bar, I think I was 7 or 8 myself. Everywhere was full of people and lots of kid playing and dancing in the plaza to the band (especially early). Will have some more posts for the next few nights.
Tuesday, September 26, 2006
Today I went to the birthplace and headquarters of the MCC, Mondragón, or Arrasate as it is known in Basque. Mondragon is a bustling town of at least 30,000. But just like Oñati it is a town that appears much bigger because it is squeezed in a valley (also, there is a huge imposing rocky mountain just outside of town). Consequently, there are a lot of tall buildings narrow streets and a lot of hustle and bustle people in the street in the middle of the day. The middle of town is a picturesque medieval town square. In the main square of Mondragon, on a balcony of the city hall building there was a banner hanging that said a Basque independence slogan and "Zero Pobrezia" or Zero Poverty in Basque. Mondragon, itself is not a poor place. There was a lot of construction, and brand new, fancy apartment buildings and stores. This is clearly a place that is dong well. Nevertheless, the two slogans are about independence and eradicating poverty. That says a lot about the way things are run in Mondragon.
Unfortunately, I didn't spend too much time there or even see any of the industrial coops. I actually went there to go to Eroski, which is Spain's 2nd largest retailer and the largest company in MCC. It is a worker and consumer coop and has about 30,000 workers, only about 12,000 of whom are worker-owners. The chain consists largely of supermarkets, but is increasingly using the Hiper-mercado format which is like the Wal-Mart Super Center. An all-in-one store that has a full service supermarket, clothes, house wares, electronics, a restaurant, cellphone dealer, travel agent, realtor and more stuff, I forget. Affordable stuff, not fancy. Although you have never seen a seafood section like this in a supermarket in the US. All kinds of crazy seafood, eels, unidentifiable stuff. Should have taken a picture.
The predominance of non-owner workers (more than 60%) is due to an aggressive and rapid expansion on the part of Eroski to preempt the competition (large retailers like Carrefour from France) and prevent the possibility of companies like Wal-Mart from coming into the country. The strategy is to go head-to-head with these companies and then go about incorporating the workers into an ownership structure. As for my experience at Eroski it was pretty cool. The bus dropped me off downtown and the Hiper-mercado is located on the edge of town so after a 20 minute walk through a light-industrial zone along the river. As you can see from the picture, there are a lot construction cranes. Lots of nice apartments. The store is huge, super clean, super orderly and the workers really nice. It was very much like being in a store in the US, except forthe fish.
As for my experience at Eroski it was pretty cool. The bus dropped me off downtown and the Hiper-mercado is located on the edge of town so after a 20 minute walk through a light-industrial zone along the river. As you can see from the picture, there are a lot construction cranes. Lots of nice apartments. The store is huge, super clean, super orderly and the workers really nice. It was very much like being in a store in the US, except for the fish.
They have also recently announced that all of the brands they sell under the Eroski name will be ranked environmentally. That is, organic products, recycled paper etc. will be labeled and have priority positions on shelves.
I hope to go back to Mondragon soon and give you an update.
Wednesday, September 20, 2006
Tuesday, September 19, 2006
I want to recommend some resources for those who are interested in learning more about MCC.
Despite its size, complexity and importance as a development model, in the
Here is the list:
We Build the Road as We Travel: Mondragon A Cooperative Social System
Roy Morrison 1997
Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex
William Foote Whyte and Kathleen King Whyte 1991
Values at Work Employee Participation Meets Market Pressure at Mondragon George
From Mondragon to America: Experiments in Community Development
Greg MacLeod 1998
Finally, I give a less than whole-hearted recommendation to read:
The Myth of Mondragon: Cooperative, Politics, and Working-Class Life in a Basque Town
Sharryn Kasmir 1996
I say that not only because it is critical of the cooperatives, but because it clearly written by someone who makes her conclusions first then goes about trying to find the evidence. From a methodological standpoint this book is garbage. Ultimately, her attack on the coops is not based on very much or very solid evidence and is mostly the view of a naïve, utopian mind set. Kasmir was, it seems, disappointed to find out that Mondragon was not paradise, her conclusion then was that it must be really bad for workers, even worse then regular capitalist companies. The leap is rather self-righteous. However, it does include more about life beyond the coops than the other books and raises important issues about democracy in the coops.
Finally a note about this list, some of these books are dated, but are still very much worth reading to learn the history and structure of the Mondragon Coops. At lot is still relevant today.
I will try to post some stuff soon that gives a more up to date view of MCC.
Monday, September 18, 2006
Wednesday, September 06, 2006
While I will be in Spain for the next year or so, I am actually currently employed at the The Center for Labor and Community Research(CLCR) in Chicago, USA. CLCR is a consulting and research organization that specializes in new approaches to community development, having a particular expertise in manufacturing and creating effective partnerships between labor, community, and business. We currently are involved in serveral initiatives that are advancing High Road manufacturing and development in the
We are at the center of numerous projects that have the goal of promoting the "High Road", which seeks to have a long term vision of development, enhance worker’s skills, while making a commitment to innovation, such as developing new niches and markets, adding value to existing products, investing in research and development, expanding market share, and improving the efficiency of the productive process and the productivity of employees.
The influence of the Mondragon Cooperative Corporation on CLCR's vision for developing our City, State and Nation’s economy is critical. Along with the Italian experience in Emilia-Romagna, MCC is one of the most significant examples of a sophisticated, industrial and competitive cooperatives actively participating and competing in the economy. MCC represents a competent and advanced alternative that is not relegated to marginal industries or confined to small scale firms. The structural elements of the MCC, the Caja Laboal, the dedication to reinvesting income, to Research and Development, to providing aid to ailing firms, scientific innovation and an emphasis on worker training are all exceedingly important elements of the Mondragon model that have influenced our vision for development.
Despite the fact that our vision for development is highly influnced by MCC, it is not exclusively focused on developing cooperatives as the only means of transforming and democractizing the workplace and society, instead MMC's model represents one significant trend and an important model for development. However, to truely be transformative cooperatives and the kinds of structures pioneered by the MCC must be part of a larger movement that takes into account the political sphere, as well as organized labor, elements of the business community and the community.