Crisis Management     The case of MONDRAGON Corporation                      Naroa Elortza Gorrotxategi       Researcher a...
1   The Mondragon Cooperative Experience2   Crisis management in MONDRAGON3   Application of the management tools and the ...
1   The Mondragon Cooperative Experience     Beginnings     MONDRAGON today     MONDRAGON as a reference and a successf...
BeginningsThe Mondragon Cooperative Experience (MCE) started in 1943, in Mondragon (Basque Country)The cooperative alter...
The network   Its key INNOVATION was THE NETWORK... two elements:          Support institutions in common, jointly create...
MONDRAGON todayFormed by 258 cooperative enterprises, subsidiaries and affiliated organisationsTotal jobs: 83,859 (2010)...
MONDRAGON as a reference and successful experienceMONDRAGONs mission is expressed in its corporate values: cooperation,  ...
MONDRAGON as a reference and successful experienceBlemishes, challenges and problems. PLENTY (especially overseas plants),...
1   The Mondragon Cooperative Experience2   Crisis management in MONDRAGON      Impact of the crisis on MONDRAGON       ...
Impact of the crisis on MONDRAGON                        18000                          900                        16000  ...
Impact of the crisis on MONDRAGONAs a result, a significant decline in overall investment and in resourcesspent on social ...
MONDRAGONs crisis management toolsCrisis management tools based on the solidarity and mutual assistance (“Intercooperation...
MONDRAGONs crisis management toolsMain objective: reduce the crisis effects on the cooperatives and the societyKey element...
Firm-level measuresPrincipal measures:Cutting pay and interest payments; a General Assembly decision   Interest on inter...
Network-level measures                         15
Network-level measuresLagun-Aro, EPSV  • (Re)Employment Assistance Fund; finances activities to    keep members employed d...
MONDRAGONs crisis management toolsCaja Laboral Popular  First phase... 1959-1990, financed cooperative development with  ...
1   The Mondragon Cooperative Experience2   Crisis management in MONDRAGON3   Application of the management tools and the ...
Employment Assistance Fund & BenefitsA significant raise in resources devoted to employment protection         80000      ...
Flexible CalendarA significant increase in co-op workers hours financed by theEmployment Fund, during the crisis    60000 ...
RelocationsA considerable raise in worker-member relocations during the crisis                                600         ...
Relocations and flexible calendarComparing relocations and flexible calendar data...                           60000      ...
EmploymentStill, a significant decline in employment in 2009; temporary workers maderedundant. Controversy/debate about te...
Employment  Decline in MONDRAGON’s domestic employment, increase  MONDRAGON’s overseas employment.%60,00%50,00%40,00%30,00...
1   The Mondragon Cooperative Experience2   Crisis management in MONDRAGON3   Application of the management tools and the ...
Crisis management and cooperative principleso Crisis management based on solidarity, consistent with theMONDRAGON’s 7th co...
Employment in MONDRAGONo The tools were designed to reduce the negative effects of the crisis on theco-ops and society bro...
Crisis mangement’s incoherences with Co-op        Principleso The vast majority of worker-members jobs have been mantained...
Thank you   GraciasEskerrik askoNaroa Elortza Gorrotxateginelortza@mondragon.eduBlog:                    http://ilunkaran....
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Crisis Management: the case of MONDRAGON

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Crisis Management: the case of MONDRAGON

  1. 1. Crisis Management The case of MONDRAGON Corporation Naroa Elortza Gorrotxategi Researcher at MIK – Mondragon Innovation and KnowledgeLecturer at MU Enpresagintza – Faculty of Business, Mondragon University
  2. 2. 1 The Mondragon Cooperative Experience2 Crisis management in MONDRAGON3 Application of the management tools and the results4 Conclusions 2
  3. 3. 1 The Mondragon Cooperative Experience  Beginnings  MONDRAGON today  MONDRAGON as a reference and a successful experience2 Crisis management in MONDRAGON3 Application of the management tools and the results4 Conclusions 3
  4. 4. BeginningsThe Mondragon Cooperative Experience (MCE) started in 1943, in Mondragon (Basque Country)The cooperative alternative was based on: Education and Training, Cooperation, Responsibility and Egalitarian Training Cooperation Enterprise Development 4
  5. 5. The network Its key INNOVATION was THE NETWORK... two elements: Support institutions in common, jointly created and controlled.Social security and insurance Technology R&D Lagun-Aro Ikerlan (etc.) Finance Caja Laboral Popular Firm-to-Firm Collaboration, mutual support and joint action. Take advantage of new business opportunities AND help each other out in hard times. Organised into Areas and Divisions,and coordinated by Central Services (the Corporation) 5
  6. 6. MONDRAGON todayFormed by 258 cooperative enterprises, subsidiaries and affiliated organisationsTotal jobs: 83,859 (2010)Total sales: 13,989 million euros (2010)International sales: 3,594 million euros (2010), 63% of industrial salesDivided into 4 Groups: Finance, Industry, Retail and KnowledgeWithin the Industrial Group, 12 DivisionsIts own set 10 basic principles based on its experience and on ICAs principles 6
  7. 7. MONDRAGON as a reference and successful experienceMONDRAGONs mission is expressed in its corporate values: cooperation, empowerment, innovation and social responsibilityIt is considered one the most successful experience if not the most successful example of worker cooperativesMONDRAGONs economic and social achievements: ENTERPRISE with social commitment, broad worker ownership and control; and solidarity among cooperativesSupported by several external authors; benefits derive from the business model based on networked cooperative enterprise. 7
  8. 8. MONDRAGON as a reference and successful experienceBlemishes, challenges and problems. PLENTY (especially overseas plants), but save the discussion for another day.Here, our focus: Crisis management policy and tools in MONDRAGON How MONDRAGONs business model and its management tools make a difference in severe economic and social crisis. 8
  9. 9. 1 The Mondragon Cooperative Experience2 Crisis management in MONDRAGON Impact of the crisis on MONDRAGON  MONDRAGONs crisis management tools Firm-level measures Network-level measures3 Application of the management tools and the results4 Conclusions 9
  10. 10. Impact of the crisis on MONDRAGON 18000 900 16000 800 14000 700 Million euros (consolidated results) 12000 600Million euros (sales) 10000 500 Sales in MONDRAGON Sales in the Industrial Area 8000 400 Consolidated Results 6000 300 4000 200 2000 100 0 0 10
  11. 11. Impact of the crisis on MONDRAGONAs a result, a significant decline in overall investment and in resourcesspent on social activities, non-profits 3000 45 40 2500 35 Million euros (overall investments) Million euros (social activities) 2000 30 25 1500 20 1000 15 10 500 5 0 0 Overall investments Resources assigned to social activities 11
  12. 12. MONDRAGONs crisis management toolsCrisis management tools based on the solidarity and mutual assistance (“Intercooperation”) among cooperatives: MCEs 7th principle Takes concrete shape in the 2 network elements we described (1) joint institutions, (2) firm-to-firm cooperation AND in specific policies and tools.Precedents: the Energy Crisis of the 1970s-80s 12
  13. 13. MONDRAGONs crisis management toolsMain objective: reduce the crisis effects on the cooperatives and the societyKey elements: Members participation in crisis decision-making processes Cooperatives balance: economic (profitability, productivity...) and social objectives (employment creation and protection, human and social development) 13
  14. 14. Firm-level measuresPrincipal measures:Cutting pay and interest payments; a General Assembly decision Interest on internal capital account Profit share ORDER OF Salary APPLICATION? Vacation bonuses (2-3 pay periods of 14-15)Internal transferRe-trainingRedundancy of temporary and subcontracted employees (non- member) 14
  15. 15. Network-level measures 15
  16. 16. Network-level measuresLagun-Aro, EPSV • (Re)Employment Assistance Fund; finances activities to keep members employed during downturns. • Relocation among cooperatives; temporary and permanent relocations • Re-training • Flexible calendar • Early retirements • Compensation (when other measures are insufficient) 16
  17. 17. MONDRAGONs crisis management toolsCaja Laboral Popular First phase... 1959-1990, financed cooperative development with local consumers/depositors savings and cooperatives deposits Today cooperative bank business focused on retail banking: consumers, SMEs, co-ops to small degree (Bank of Spain) Can write off cooperatives unpaid debt, though uncommon Consultancy: First phase: “Business Division” inside the bank to assist start- ups and co-ops with problems. Later, converted into Central Departments and LKS Consultancy cooperative 17
  18. 18. 1 The Mondragon Cooperative Experience2 Crisis management in MONDRAGON3 Application of the management tools and the results Employment Assistance Fund and Benefits Flexible Calendar Relocations Relocations and Flexible Calendar Employment4 Conclusions 18
  19. 19. Employment Assistance Fund & BenefitsA significant raise in resources devoted to employment protection 80000 70000 60000 50000 Euros 40000 30000 20000 10000 0 2005 2006 2007 2008 2009 2010 Fund Collection Benefit 19
  20. 20. Flexible CalendarA significant increase in co-op workers hours financed by theEmployment Fund, during the crisis 60000 50000 40000 30000 Flexible Calendar Hours / Month 20000 10000 0 01/09 07/10 09/10 01/08 03/08 05/08 07/08 09/08 11/08 03/09 05/09 07/09 09/09 11/09 01/10 03/10 05/10 11/10 20
  21. 21. RelocationsA considerable raise in worker-member relocations during the crisis 600 40 35 500 30 400 Permanent Relocations Temporary Relocations 25 300 20 15 200 10 100 5 0 0 08/07–08/08 08/01 08/03 08/05 08/10 08/12 09/02 09/04 09/06 09/09 09/11 10/01 10/03 10/05 07/10–08/10 10/10 10/12 Temporary Relocations Permanent Relocations 2121
  22. 22. Relocations and flexible calendarComparing relocations and flexible calendar data... 60000 600 50000 500 40000 400 Permanent Relocations Temporary Relocations 30000 300 20000 200 10000 100 0 Temporary Relocations 0 Permanent Relocations 07/08–08/08 07/10–08/10 Flexible Calendar Hours 22
  23. 23. EmploymentStill, a significant decline in employment in 2009; temporary workers maderedundant. Controversy/debate about temporary workers. Law: 70%,MONDRAGON 85%, but still debate. 100000 90000 80000 70000 60000 Employees Total 50000 Basque Autonomous Community 40000 Navarre 30000 20000 10000 0 2005 2006 2007 2008 2009 2010 23
  24. 24. Employment Decline in MONDRAGON’s domestic employment, increase MONDRAGON’s overseas employment.%60,00%50,00%40,00%30,00 Basque Country * The rest of the world%20,00%10,00%0,00 * Basque Autonomous Community and Navarre 24
  25. 25. 1 The Mondragon Cooperative Experience2 Crisis management in MONDRAGON3 Application of the management tools and the results4 Conclusions Crisis management and cooperative principles Employment in MONDRAGON MONDRAGON’s crisis management’s incoherence with cooperative principles 25
  26. 26. Crisis management and cooperative principleso Crisis management based on solidarity, consistent with theMONDRAGON’s 7th cooperative principleo Decision-making processes based on members participation. Participatorymodel might weaken short-term business efficiency, but fosters memberssense of belonging and motivation and long-term efficiency.o Worker-members relocation and pooling of profits are signs ofcooperatives’ commitment to solidarity. THOUGH…o Solidarity is far from perfect. Temporary workers,overseas non-member workers, etc. 26 26
  27. 27. Employment in MONDRAGONo The tools were designed to reduce the negative effects of the crisis on theco-ops and society broadlyo Their main purpose has been to protect jobso During previous crisis periods, MONDRAGON managed to mantain andeven expand employmento The cooperatives made massive efforts to protect worker-members jobsduring those periodso Lagun-Aros Employment Assistance Fund has been a key tool 27
  28. 28. Crisis mangement’s incoherences with Co-op Principleso The vast majority of worker-members jobs have been mantained, butmost temporary workers have been made redundant (up to 15% ofemployment in some cooperatives)o Proportionally, the number of jobs destroyed in the Basque Country(Basque Autonomous Community and Navarre) in MONDRAGON is higherthan in other countrieso The ORDER in which measures are implemented is crucial to determiningconsistency with cooperative principles. Mainly regarding temporary workersjobs. 28
  29. 29. Thank you GraciasEskerrik askoNaroa Elortza Gorrotxateginelortza@mondragon.eduBlog: http://ilunkaran.comTwitter / Identi.ca: @naroaelortzaLinkedIn: http://www.linkedin.com/in/naroaelortzawww.mik.es

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