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

1. Masters in International Management
Strathclyde University
21st Nov. 2013
CULTURE AND CORPORATE SOCIAL RESPONSIBILITY
THE CASE OF MONDRAGON GROUP
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2. HISTORICAL BACKGROUND
VIDEOS
CORPORATE PROFILE
MONDRAGON
INNOVATION GENE
CORPORATE VALUES
Father Jose Maria Arizmendiarrieta
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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
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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
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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
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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
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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
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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
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9. Corporate Management Model
Source: Mondragon, 2012
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10. Corporate Management Model
Basic Cooperative Principles
Source: Mondragon, 2012
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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21. Corporate Management Model
People in Cooperation
Source: Mondragon, 2012
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22. Corporate Management Model
Joint Project
Source: Mondragon, 2012
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23. Corporate Management Model
Participative Organisation
Source: Mondragon, 2012
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24. Corporate Management Model
Excellent Company
Source: Mondragon, 2012
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25. Corporate Management Model
Socio-entrepreneurial Results
Source: Mondragon, 2012
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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
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27. Corporate Management Model
Socio-entrepreneurial Results
Sizing
1. Growth.
2. Financial-equity position.
3. Alliances.
4. Subsidiaries.
Source: Mondragon, 2012
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28. Corporate Management Model
Socio-entrepreneurial Results
Internationalization
1. Sales.
2. Purchases.
3. International deployments.
4. Management of expatriates.
Source: Mondragon, 2012
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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
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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
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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
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32. Implementation
Source: Mondragon, 2012
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33. Assessment
Source: Mondragon, 2012
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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
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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)
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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
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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
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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
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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
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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
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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
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42. MONDRAGON WORLDWIDE
Expected GDP growth 2010-2015
Why? Cost, market,
competitiveness…
Source: Ugarte, 2010
Source: Ugarte, 2010
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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
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44. MONDRAGON WORLDWIDE
NOW 2013
Source: Mondragon Corporate profile 2013
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45. MONDRAGON WORLDWIDE
Source: Mondragon Corporate profile 2013
Source: Lafuente and Freundlich, 2012
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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
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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?
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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)”
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49. INTERNATIONALIZATION CHALLENGES
Source: Ugarte, 2010
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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
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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?
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52. Thank you for your attention
Berrbizne Urzelai
Enpresagintza fakultatea/ Business School
Mondragon Innovation and Knowledge- MIK S. Coop.
Mondragon Unibertsitatea/ Mondragon University
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