Long time no see!!!

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

MCC recently released their financial figures for last year. As a group they had more then €13.19 Billion Euros in sales( $18 Billion) and 677€ million ($911 million) in profit. Approximately half of those sales were from the industrial group, where international sales grew by 24%. In all MCC increased it sprofits by 24% since last year. Clearly, MCC as a whole is in a period of spectacular growth, thanks to the international expansion of the industrial group and the continued growth of the financial and distribution groups. Click here to read more: MCC 2006.

AMPO/POYAM

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 Europe.

However, to reach where it is today, AMPO has undergone remarkable and drastic changes. As recently as 2003, AMPO was losing money, was forced to move workers to other companies within MCC and dismiss its CEO. AMPO was suffering from internal tension, a lack of efficiency and a top down management style which saw management charging overtime (a practice not allowed in Cooperatives). As a result of this crisis, AMPO’s Management Council appealed for help from its incredibly successful neighbor and fellow MCC cooperative, Irizar. Irizar is one of the worlds top luxury bus manufacturer and MCC’s most highly successful and profitable company. In 1991 it began a process that changed itself from a failing, money losing-company, ridden with internal strife and a top down management model, to one that was not only economically successful but hugely efficient and entirely based on autonomous work teams. Irizar’s change was based on creating a company “based on people”, and by the work of a visionary and charismatic leader, Koldo Saratxaga.

In 2003, Saratxaga was invited to help in the restructuring of AMPO. He helped AMPO implement a total reengineering of its management model and the internal structure of the company. This lead to a direct turnaround in the efficiency of the company and it quickly began to turn a profit again, as well as bring back the employees it moved to other coops.

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.

Certain individuals called coordinators, are responsible for certain areas, however each team is responsible for defining and meeting its own goals and deciding how it will work, as well as electing a leader. It is a structure based in a profound belief in the responsibility and creativity or workers and the centrality of the customer.

The two principle structures that define AMPO are its customer satisfaction teams and the customer line teams. The first being responsible for finding customers, communicating their needs to the company and as wells as charging, and providing service. The customer line teams are multidisciplinary production teams (made up not only of assembly line workers, but also engineers and others who provide technical services to the teams). They work closely with the client satisfaction teams as well as others. These two types of teams are central, considered along with the customers and the suppliers to be the Value Chain of AMPO. The rest of the teams provide services to the value chain. There are many types of teams composed of different employees, both direct and indirect workers, and individuals can be on various teams. The teams themselves meet regularly to work on different areas of the business and strategic planning. This structure can be seen below:

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.

A related element to this culture of responsibility, involvement and sense of shared mission is transparency and one that workers at AMPO identify as critical to creating a community where all feel lie the company is truly theirs. The commitment to transparency is paramount. It is extremely important that workers of any stripe are aware of how the company is performing, new customers, costs, new accounts, undertakings and salaries of other workers are all routinely shared. On a weekly basis sales figures are announced to all workers. There is careful emphasis on not overwhelming workers with data, but at the same time destroying the tendency that the management of most company's have (Coops or Capitalist companies) of concealing figures and hiding inconvenient information.

I don’t want to make it appear that there is no room for leadership in AMPO. It is not total anarchy. There are coordinators and leaders and a leader of the entire company. Their roles more then anything are to be sure that the critical processes are achieved and especially in the case of the Coordinator of the project to build a consensus around a shared vision for the future. This is accomplished not by traditional strategic planning, but instead by what they term as “Strategic Thinking”. It is not a process that is carried out by a few managers at the highest level, but instead by two “Piloting Teams” of about 30 people, (one for each division of the company) composed of leaders and coordinators from all the teams in the company, who conceive of goals and initiatives for the near future. They don’t make complex sales projections or goals. Instead they work with more general concepts, becoming leaders in Spain, entering a new market, obtaining a new client, opening a new plant. The concepts are then shared with each group through the representatives are become internalized in each team and related to their daily activities. It is a process where leadership is key, but where the basis of it is creating a shared vision for the future that everyone buys into.

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.

AMPO is a company that has made an impressive and fascinating change and is highly successful economically. This success can be attributed to its emphasis on customers, it orientation towards the market and on its participatory democratic structure. To me it represents the advantages that a coop can potentially have over tradition enterprises because its structure and culture are particularly in tune with the nature and values of cooperatives and take advantage of the creativity of its workers while involving them and creating a sense of ownership and responsibility on a daily basis. AMPO is not only democratic in the sense that workers elect the leaders of the company like in other coops, but also because they have a large degree of participation, autonomy and responsibility over the day to day, as well as the long term vision of the cooperative. It is truly a project based on people, but at the same time with a strong focus on the competing within the market and the customer satisfaction.

Danobat Group Visit April 27, 2007 Elgoibar

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.

MONDRAGON ENGLISH RESOURCE LIST

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.
-Dan

Books:

1. Cooperativism and globalization: The Basque Mondragón cooperatives in the face of changing times.
Mondragon Co-operative Experience
José Ramón Fernández
San Sebastián
Editor MCC 2001
2. Forty years of co-operative history: Mondragon corporación corporativa
Arrasate
Mondragón Corporación Cooperativa

3. The economic system of co-operative societies: determining and applying co-operative results.
Joxe Mari Aizega Zubillaga
Donosita
2003

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.
1997

10. Cooperation at Work: The Mondragón Experience
Keith Bradley and Alan Gelb
Heinemann Educational Books
1983

11. Irizar, Walking Along Three Centuries (A history of the Irizar Coop)
Irizar S. COOP
2001

Scholarly Articles:

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
LANKI

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
David Ellerman
Visiting Scholar
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/
Arizmendiarrietas thinking
Meaning and orientation of the Mondragón Experience
The horizons of self-management
Intercooperation based on solidarity
Participation
Texts dealing with topics concerning the Experience, within the framework of the Testimony Project
Co-operative Education

THE COOPERATIVE CORPORATION AS COUNTERWEIGHT TO GLOBALISM
Greg Macleod
PUBLISHED IN " ECONOMIE ET SOLIDARITE" PRESSE UNIVERSITAIRE DE QUEBEC.. CIRIEC …VOL 3. NO.1,
2002

An Endogenous Group Formation Theory of Cooperative Networks: The Economics of La Lega and Mondragon.
Sumit Joshi
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
2004?

ENABLING ETHICAL ECONOMIES: COOPERATIVISM AND CLASS
J.K. Gibson
Katherine Graham
April 2003
graham@geo.umass.edu
katherine.gibson@anu.edu.au
Critical Sociology
Summer 2003

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
Winter 2004
Voluinter 2004

Movies:
Jose Maria Arizmendiarrieta: A project for Social Transformation DVD www.lanki.coop

The Mondragón Experiment
BBC Documentary
1980

Dissertations (Unpublished):

Collaborative Praxis at Work: Transforming Enterprise and Community
David C. Gabriel
2000
University of San Francisco

Finding Meaning by Participating in Decisions Affecting Us, Our Work, Our Lives: Lessons Learned at Mondragón
David Herrera
2004
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
Mikel Cid
2006
University of Mondragon

Miscellaneous:
MCC Profile 2005 www.mcc.es

This is a response to a comment posted on my previous post:

Bill,

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.