Masters in International Management
Strathclyde University
21st Nov. 2013

CULTURE AND CORPORATE SOCIAL RESPONSIBILITY

TH...
HISTORICAL BACKGROUND

VIDEOS

CORPORATE PROFILE
MONDRAGON
INNOVATION GENE
CORPORATE VALUES
Father Jose Maria Arizmendiarr...
MONDRAGON GROUP TODAY
•1st business group in the
Basque Country and the
10th in the ranking of the
major Spanish
companies...
Introduction

The MONDRAGON Mission
MONDRAGON Corporación Cooperativa or the MONDRAGON Co-operative
Corporation is a busin...
Introduction

The MONDRAGON Vision

A competitive,
profitable and entrepreneurial
cooperative group
Value added employment...
Introduction: Corporate Management Model

Evolution
 Initial edition in 1996, deeply rooted in Total Quality Models. Asse...
Introduction

¿Why do we need a Corporate Management
Model?
 To foster the development of business management dynamics co...
Introduction

What is a Corporate Manegement Model not?
 A Congressional Rule with a detailed list of articles.
 A detai...
Corporate Management Model

Source: Mondragon, 2012

// 9
Corporate Management Model

Basic Cooperative Principles

Source: Mondragon, 2012

// 10
Corporate Management Model

Basic Cooperative Principles

‘knowledge has to be socialised in
order to democratise power’.
...
Corporate Management Model

Basic Cooperative Principles

Labour is the main factor for
transforming nature, society and
h...
Corporate Management Model

Basic Cooperative Principles

The value of capital is
recognized as a necessary
instrument of ...
Corporate Management Model

Basic Cooperative Principles

All members have equal rights, 1 member = 1 vote
The members sel...
Corporate Management Model

Basic Cooperative Principles

Open to anyone, with no
discrimination due to religion,
race, po...
Corporate Management Model

Basic Cooperative Principles

- Internally: compensation ratio less than
10:1 (least qualified...
Corporate Management Model

Basic Cooperative Principles

- Transparent information
- Internal promotion
- Multiple mechan...
Corporate Management Model

Basic Cooperative Principles

Solidarity with all those working
for social democracy (& Social...
Corporate Management Model

Basic Cooperative Principles

Two principle dimensions:
1) creation of common
institutions/pol...
Corporate Management Model

Basic Cooperative Principles

Aim: the creation of jobs and economic
and social development of...
Corporate Management Model

People in Cooperation

Source: Mondragon, 2012

// 21
Corporate Management Model

Joint Project

Source: Mondragon, 2012

// 27
Corporate Management Model

Participative Organisation

Source: Mondragon, 2012

// 32
Corporate Management Model

Excellent Company

Source: Mondragon, 2012

// 36
Corporate Management Model

Socio-entrepreneurial Results

Source: Mondragon, 2012

// 42
Corporate Management Model

Socio-entrepreneurial Results
Transforming the Business Structure
1. Overall profitability.
2....
Corporate Management Model

Socio-entrepreneurial Results
Sizing

1. Growth.
2. Financial-equity position.
3. Alliances.

...
Corporate Management Model

Socio-entrepreneurial Results
Internationalization

1. Sales.
2. Purchases.
3. International d...
Corporate Management Model

Socio-entrepreneurial Results
Innovation
1. Technological development.
2. Product/service deve...
Corporate Management Model

Socio-entrepreneurial Results
Inter-cooperation
1. Corporate Resources.
2. Projects.
3. Purcha...
Corporate Management Model

Socio-entrepreneurial Results
Commitment & Cooperation Identity
1. Identity and commitment.
2....
Implementation

Source: Mondragon, 2012

// 49
Assessment

Source: Mondragon, 2012

// 53
MANAGEMENT MODEL AND CSR
ISO and social responsibility
- In 2010 ISO (the world’s leading developer of International Stand...
COOPERATIVE VS. CAPITALIST SOCIETY
Company
type

Cooperative = society of Public
&
private
limited
persons who contribute ...
BENEFITS OF COOPERATIVES
• increased productivity and organisational stability (Blair, Kruse
and Blasi, 2000; Lampel, Bhal...
WHY MONDRAGON IS A
WORLDWIDE REFERENCE?
• Cooperatives did not start in Mondragon (1844 Rochdale- Consumer
cooperative)…. ...
CO-OPERATIVES GLOBALLY
• Cooperatives tend to be local organisations bound by
geographical constraints (regional and natio...
CO-OPERATIVES GLOBALLY

Source: ‘Statistical Information on the Co-operative Movement’ ICA. http://www.ica.coop/coop/stati...
CO-OPERATIVES GLOBALLY
Global 300: The world´s 300 major co-operatives and mutual businesses
(Report 2010)

Mondragon:
Ran...
CO-OPERATIVES IN THE UK

Number of co-ops

Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to...
MONDRAGON WORLDWIDE
Expected GDP growth 2010-2015

Why? Cost, market,
competitiveness…

Source: Ugarte, 2010

Source: Ugar...
MONDRAGON WORLDWIDE
50,000
45,000

MONDRAGON Division industrial- Employment a 31/12

40,000

1) First production plant ab...
MONDRAGON WORLDWIDE
NOW 2013

Source: Mondragon Corporate profile 2013

// 67
MONDRAGON WORLDWIDE

Source: Mondragon Corporate profile 2013

Source: Lafuente and Freundlich, 2012

// 68
INTERNATIONALIZATION CHALLENGES
- For many reasons (legal, financial, cultural, etc.) subsidiaries
are not run as co-ops a...
INTERNATIONALIZATION CHALLENGES
- How to maintain solidarity levels
- Education, community development and sensitization
n...
INTERNATIONALIZATION CHALLENGES

‘In any case, it should be pointed out that external expansion
has not been detrimental t...
INTERNATIONALIZATION CHALLENGES

Source: Ugarte, 2010

// 72
INTERNATIONALIZATION CHALLENGES
STRATEGIES:

1. Multi-localisation - “How many new jobs do we need to
create abroad to mai...
TEAM EXERCISE
Ying will work with you in groups…
Based on the case of Mondragon Group, reflect on the following
questions:...
Thank you for your attention

Berrbizne Urzelai
Enpresagintza fakultatea/ Business School
Mondragon Innovation and Knowled...
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Culture and CSR Mondragon

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Session: University Strathclyde- Business School
MSc in International Management
-Managing across cultures: Culture and CSR

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Culture and CSR Mondragon

  1. 1. Masters in International Management Strathclyde University 21st Nov. 2013 CULTURE AND CORPORATE SOCIAL RESPONSIBILITY THE CASE OF MONDRAGON GROUP // 1
  2. 2. HISTORICAL BACKGROUND VIDEOS CORPORATE PROFILE MONDRAGON INNOVATION GENE CORPORATE VALUES Father Jose Maria Arizmendiarrieta // 2
  3. 3. MONDRAGON GROUP TODAY •1st business group in the Basque Country and the 10th in the ranking of the major Spanish companies •Formed by 289 bodies (110 co-operatives, 147 subsidiaries, 8 foundations, 1 benefit society, 10 umbrella organisations, 13 international services) •4 areas: Finantial, Distribution, Industrial, Knowledge HIGHLIGHTS 2012 Total revenues (m €) 14.081 International sales (m €) 4.004 (70% of total sales) Workforce 80.321 Industrial Div. workforce 36.936 (46% of total workforce) Co-op members of 85% Industrial division Industrial Div. workforce 13.903 abroad (38% of Ind. Div. workforce) Source: Mondragon // 3
  4. 4. Introduction The MONDRAGON Mission MONDRAGON Corporación Cooperativa or the MONDRAGON Co-operative Corporation is a business-based socioeconomic initiative with deep roots in the Basque Country, created for and by people and inspired by the Basic Principles of our Co-operative Experience. It is firmly committed to the environment, competitive improvement and customer satisfaction in order to generate wealth in society through business development and the creation of preferably co-operative, employment, which:  Is based on a firm commitment to solidarity and uses democratic methods for organisation and management.  Fosters participation and the involvement of people in the management, profits and ownership of their companies, developing a shared project which unites social, business and personal progress.  Fosters training and innovation through the development of human and technological skills,  Applying its own Management Model aimed at helping companies to become market leaders and fostering Co-operation. Source: Mondragon, 2012 // 4
  5. 5. Introduction The MONDRAGON Vision A competitive, profitable and entrepreneurial cooperative group Value added employment and sustainable development within the community Intercooperation Innovation Promotion Knowledge Globalization Principles and Values through a Management Model as a competitive advantage The Sense of cooperative Experience Corporate Management Model Basic Cooperative Principles Values Mission Source: Mondragon, 2012 // 5
  6. 6. Introduction: Corporate Management Model Evolution  Initial edition in 1996, deeply rooted in Total Quality Models. Assessment with EFQM tool.  Between 1997 and 2000, development of a large number of tools providing methodologies for the implementation of specific aspects.  An in-deptxh review is carried out in 2002, with the tools being replaced by the dynamics of Good Corporate Practices.  A further in-depth review is conducted in 2007 to achieve a model that is embedded more in MONDRAGON’s culture, with its own associated measurement tool.  The self-assessment tool is updated in 2010, increasing the number and requirements of the minimum markers.  The Corporate Vision is incorporated in 2012 and the design of the Dimension of Socio-Entrepreneurial Results is adjusted. Source: Mondragon, 2012 // 6
  7. 7. Introduction ¿Why do we need a Corporate Management Model?  To foster the development of business management dynamics consistent with the Basic Cooperative Principles.  To help increase the business competitiveness of the Cooperatives.  To make our cooperative management style a mark of identity that generates a feeling of belonging, paving the way for inter-cooperation and helping to optimise synergies at corporate level. Source: Mondragon, 2012 // 7
  8. 8. Introduction What is a Corporate Manegement Model not?  A Congressional Rule with a detailed list of articles.  A detailed tool with specific operating procedures.  A magic potion that guarantees business success.  A socio-corporate policy for a strategic period.  A mechanism for the review of the Basic Cooperative Principles. Source: Mondragon, 2012 // 8
  9. 9. Corporate Management Model Source: Mondragon, 2012 // 9
  10. 10. Corporate Management Model Basic Cooperative Principles Source: Mondragon, 2012 // 10
  11. 11. Corporate Management Model Basic Cooperative Principles ‘knowledge has to be socialised in order to democratise power’. Key in the creation of Mondragon Source: Adapted from Mondragon, 2012 // 11
  12. 12. Corporate Management Model Basic Cooperative Principles Labour is the main factor for transforming nature, society and human beings themselves. Wealth distributed according to labour, not capital. The rights derive from labour not capital Source: Adapted from Mondragon, 2012 // 12
  13. 13. Corporate Management Model Basic Cooperative Principles The value of capital is recognized as a necessary instrument of development but always subordinated to labour Source: Adapted from Mondragon, 2012 // 13
  14. 14. Corporate Management Model Basic Cooperative Principles All members have equal rights, 1 member = 1 vote The members select the board of directors/ the governing council which sets the rules, define the mission of the cooperative, the strategy, etc. - Foremost body of participation: the General Assembly (GA) - Governing Council (appointed by GA): the management and governing body -Social Council: advice, information, negotiation and social monitoring. Source: Adapted from Mondragon, 2012 // 14
  15. 15. Corporate Management Model Basic Cooperative Principles Open to anyone, with no discrimination due to religion, race, politics, and ethnic background or gender. Source: Adapted from Mondragon, 2012 // 15
  16. 16. Corporate Management Model Basic Cooperative Principles - Internally: compensation ratio less than 10:1 (least qualified- top executive ratio) Externally: attempt to keep payments equivalent to those in the same sector and geographic area - Corporate level: pay levels 90%-110% and working hours 97%-103% Source: Adapted from Mondragon, 2012 // 16
  17. 17. Corporate Management Model Basic Cooperative Principles - Transparent information - Internal promotion - Multiple mechanisms to promote and channel worker´s opinions and suggestions - Extensive training for management and workforce in participatory and team management Source: Adapted from Mondragon, 2012 // 17
  18. 18. Corporate Management Model Basic Cooperative Principles Solidarity with all those working for social democracy (& Social Economy) by sharing the objectives of peace, justice and development Source: Adapted from Mondragon, 2012 // 18
  19. 19. Corporate Management Model Basic Cooperative Principles Two principle dimensions: 1) creation of common institutions/policies: CLP, Lagun-Aro, Corporation, Mondragon Investments (pooling of profits, transfer of worker members…) 2) Co-op to co-op business collaboration (new tech development, open new markets…) Source: Adapted from Mondragon, 2012 // 19
  20. 20. Corporate Management Model Basic Cooperative Principles Aim: the creation of jobs and economic and social development of the community (in which they operate) - Reinvestment of profits (central intercoop. fund) - Community development initiatives (social project fund) - Co-op. with other institutions of econ. & social nature Source: Adapted from Mondragon, 2012 // 20
  21. 21. Corporate Management Model People in Cooperation Source: Mondragon, 2012 // 21
  22. 22. Corporate Management Model Joint Project Source: Mondragon, 2012 // 27
  23. 23. Corporate Management Model Participative Organisation Source: Mondragon, 2012 // 32
  24. 24. Corporate Management Model Excellent Company Source: Mondragon, 2012 // 36
  25. 25. Corporate Management Model Socio-entrepreneurial Results Source: Mondragon, 2012 // 42
  26. 26. Corporate Management Model Socio-entrepreneurial Results Transforming the Business Structure 1. Overall profitability. 2. Productivity and efficiency. 3. Image and customer satisfaction. 4. Customer loyalty. 5. Competitive position. 6. Transformation. Source: Mondragon, 2012 // 43
  27. 27. Corporate Management Model Socio-entrepreneurial Results Sizing 1. Growth. 2. Financial-equity position. 3. Alliances. 4. Subsidiaries. Source: Mondragon, 2012 // 44
  28. 28. Corporate Management Model Socio-entrepreneurial Results Internationalization 1. Sales. 2. Purchases. 3. International deployments. 4. Management of expatriates. Source: Mondragon, 2012 // 45
  29. 29. Corporate Management Model Socio-entrepreneurial Results Innovation 1. Technological development. 2. Product/service development. 3. Promotion and new businesses. 4. Use of ICTs. Source: Mondragon, 2012 // 46
  30. 30. Corporate Management Model Socio-entrepreneurial Results Inter-cooperation 1. Corporate Resources. 2. Projects. 3. Purchases. 4. Inter-cooperative loans. 5. Management of senior executives. 6. Shared experiences. Source: Mondragon, 2012 // 47
  31. 31. Corporate Management Model Socio-entrepreneurial Results Commitment & Cooperation Identity 1. Identity and commitment. 2. Cooperative behaviour. 3. Involvement in management. 4. Education/development. 5. Quality of employment. 6. Health and safety at work. 7. Management model in subsidiaries. 8. Environmental management. 9. Contribution to community development. 10. Reputation. Source: Mondragon, 2012 // 48
  32. 32. Implementation Source: Mondragon, 2012 // 49
  33. 33. Assessment Source: Mondragon, 2012 // 53
  34. 34. MANAGEMENT MODEL AND CSR ISO and social responsibility - In 2010 ISO (the world’s leading developer of International Standards) launched the development of the future ISO 26000 standard providing voluntary guidance on social responsibility (SR) - ISO 26000 contains guidance, not requirements, and therefore will not be for use as a certification standard like ISO 9001:2000 and ISO 14001:2004 - Specially important to spread a globally common understanding of what social responsibility is and what organizations need to do to operation in that way Research done in MIK has proven that all of the ISO 26000 indicators are present in Mondragon´s Management Model Those indicators are related to the following areas: - Top management - Environment - Clients - Investors/ members - Suppliers - Competence - People in the organization - Public administration - Social aspects // 57
  35. 35. COOPERATIVE VS. CAPITALIST SOCIETY Company type Cooperative = society of Public & private limited persons who contribute labour company= capitalist society Power 1 person = 1 vote in the In proportion to shares general assembly Key element Profits Labour The capital= an interest is paid Distributed in proportion to Distributed in proportion to the contribution of labour capital owned (organizational level) Ellerman defines a worker co-operative as ‘a co-operative where the members are the people working in the company, and where patronage is based on their labour as measured by hours or pay. Thus a worker co-operative is a company where the membership rights, voting rights, and the profit rights are assigned to the people working in the company (McDonnell, 2012) // 58
  36. 36. BENEFITS OF COOPERATIVES • increased productivity and organisational stability (Blair, Kruse and Blasi, 2000; Lampel, Bhalla and Pushkar, 2010); • increased levels of innovation and growth (Erdal, 2011); • more equitable societies and reduced inequality (Wilkinson and Pickett, 2009); • benefits to community (Erdal, 2000); • impact during times of economic crisis and poverty reduction (Birchall and Ketilson, 2009); • as well as more normative conjectures based on notions of economic democracy (Dahl, 1986). McDonnell, 2012 // 59
  37. 37. WHY MONDRAGON IS A WORLDWIDE REFERENCE? • Cooperatives did not start in Mondragon (1844 Rochdale- Consumer cooperative)…. BUT - It has survived for over half a century - It has become very large (over 80,000 workers, total assets 35,88bn euros) - Around 44% female - Divided into 4 Groups: Finance, Industry, Retail and Knowledge - Includes university (around 4000 students) and technology and R&D centers (15) - Competing internationally with local and global multinationals (contracts with General Motors, etc.) - Present all over the world - Successful diversification strategy // 60
  38. 38. CO-OPERATIVES GLOBALLY • Cooperatives tend to be local organisations bound by geographical constraints (regional and national organisations • Co-operatives focus on their members, who share a common need (again usually geographically constrained) • Some co-operatives do operate across geographical boundaries but it presents significant challenges (mainly legal). McDonnell, 2012 // 61
  39. 39. CO-OPERATIVES GLOBALLY Source: ‘Statistical Information on the Co-operative Movement’ ICA. http://www.ica.coop/coop/statistics.html, accessed 29 September 2011. In McDonnell, 2012 // 62
  40. 40. CO-OPERATIVES GLOBALLY Global 300: The world´s 300 major co-operatives and mutual businesses (Report 2010) Mondragon: Ranks 1st in worker coops Source:ICA // 63
  41. 41. CO-OPERATIVES IN THE UK Number of co-ops Source: Co-operatives UK. The UK co-operative economy 2011: Britain’s return to co-operation (Manchester: Co-operatives UK), 2011. p. 23. McDonnell, 2012 // 64
  42. 42. MONDRAGON WORLDWIDE Expected GDP growth 2010-2015 Why? Cost, market, competitiveness… Source: Ugarte, 2010 Source: Ugarte, 2010 // 65
  43. 43. MONDRAGON WORLDWIDE 50,000 45,000 MONDRAGON Division industrial- Employment a 31/12 40,000 1) First production plant abroad 2) MCC holding structure creation 3) 26 Production plants abroad 4) 73 Production plants abroad 35,000 30,000 Total employees 25,000 Employees abroad 20,000 15,000 10,000 5,000 Years 1) 2) 3) 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 0 4) Source: Luzarraga 2009 // 66
  44. 44. MONDRAGON WORLDWIDE NOW 2013 Source: Mondragon Corporate profile 2013 // 67
  45. 45. MONDRAGON WORLDWIDE Source: Mondragon Corporate profile 2013 Source: Lafuente and Freundlich, 2012 // 68
  46. 46. INTERNATIONALIZATION CHALLENGES - For many reasons (legal, financial, cultural, etc.) subsidiaries are not run as co-ops abroad - Conflict with social goals - All the principles and values should be applied in all the units (including subsidiaries), independent from where they are located - Need to look for new ways to foster the participation of all the workers in management and profits (compatible with country specific laws) - Autonomy of the subsidiaries - Social transformation: wherever we are located // 69
  47. 47. INTERNATIONALIZATION CHALLENGES - How to maintain solidarity levels - Education, community development and sensitization needed- to foster cooperative culture abroad - Are the business activities getting international faster than the cooperative model? ARE INTERNATIONALIZATION AND COOPERATIVISM COMPATIBLE? HOW CAN WE FACE THESE CHALLENGES? // 70
  48. 48. INTERNATIONALIZATION CHALLENGES ‘In any case, it should be pointed out that external expansion has not been detrimental to cooperative employment nor to cooperative autonomy. In other words, the principles guiding the internationalisation strategy are to preserve MCC cooperatives jobs and sustain the profitability of MCC firms’ (Errasti, 2003, p. 560)” // 71
  49. 49. INTERNATIONALIZATION CHALLENGES Source: Ugarte, 2010 // 72
  50. 50. INTERNATIONALIZATION CHALLENGES STRATEGIES: 1. Multi-localisation - “How many new jobs do we need to create abroad to maintain one job at home?” 2. Utilise the existing co-operative network – cooperation among co-operatives. 3. Convert subsidiaries into (or close to) co-operatives. 4. Sensitivity to the local conditions. Source: Luzarraga et al., 2007 // 73
  51. 51. TEAM EXERCISE Ying will work with you in groups… Based on the case of Mondragon Group, reflect on the following questions: 1. To what extent do you think the Mondragon Group’s corporate management model can be replicated in their overseas subsidiaries? 2. What are the potential challenges (ethical dilemmas) faced by Mondragon in their transfer of corporate values and management practice overseas? (Discuss this question in relation to each team member’s home country context and compare the findings across countries.) 3. What actions would you suggest Mondragon Group to take to resolve these challenges? // 74
  52. 52. Thank you for your attention Berrbizne Urzelai Enpresagintza fakultatea/ Business School Mondragon Innovation and Knowledge- MIK S. Coop. Mondragon Unibertsitatea/ Mondragon University // 75

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