1. Crisis Management The case of MONDRAGON Corporation Naroa Elortza Gorrotxategi Researcher at MIK – Mondragon Innovation and Knowledge Lecturer at MU Enpresagintza – Faculty of Business, Mondragon University

2. 1 The Mondragon Cooperative Experience 2 Crisis management in MONDRAGON 3 Application of the management tools and the results Conclusions 4 2

3. 1 The Mondragon Cooperative Experience 2 Crisis management in MONDRAGON 3 Application of the management tools and the results 4 Conclusions Beginnings MONDRAGON today MONDRAGON as a reference and a successful experience 3

4. 4 The Mondragon Cooperative Experience (MCE) started in 1943, in Mondragon (Basque Country) Education and TrainingCooperationResponsibility Enterprise Development The cooperative alternative was based on: Education and Training, Cooperation, Responsibility and Egalitarian Enterprise Development Beginnings

5. The network 5 Its key INNOVATION was THE NETWORK... two elements: Support institutions in common, jointly created and controlled. 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 Social security and insurance Lagun-Aro Finance Caja Laboral Popular Technology R&D Ikerlan (etc.)

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 ICA's principles

7. 7 MONDRAGON's 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 MONDRAGON's 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. MONDRAGON as a reference and successful experience

8. Blemishes, 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 MONDRAGON's business model and its management tools make a difference in severe economic and social crisis. 8

9. 9 Impact of the crisis on MONDRAGON MONDRAGON's crisis management tools Firm-level measures Network-level measures 1 The Mondragon Cooperative Experience 2 Crisis management in MONDRAGON 3 Application of the management tools and the results 4 Conclusions

10. Impact of the crisis on MONDRAGON 10

11. Impact of the crisis on MONDRAGON 11 As a result, a significant decline in overall investment and in resources spent on social activities, non-profits

12. MONDRAGON's crisis management tools 12 Crisis management tools based on the solidarity and mutual assistance (“Intercooperation”) among cooperatives: MCE's 7 th 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

13. MONDRAGON's crisis management tools 13 Main objective: reduce the crisis' effects on the cooperatives and the society Key elements: Members' participation in crisis decision-making processes Cooperatives balance: economic (profitability, productivity...) and social objectives (employment creation and protection, human and social development)

14. Firm-level measures 14 Principal measures: Cutting pay and interest payments; a General Assembly decision Interest on internal capital account Profit share Salary Vacation bonuses (2-3 pay periods of 14-15) Internal transfer Re-training Redundancy of temporary and subcontracted employees (non- member) ORDER OF APPLICATION?

15. Network-level measures 15 Division-level profit pooling Network-level funds Central Inter-cooperation Fund Venture capital and other investments Education and Cooperative Promotion Fund Cooperative and professional training for members Research and technological development Corporate Solidarity Fund Loss reduction

16. Network-level measures 16 Lagun-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)

17. MONDRAGON's crisis management tools 17 Caja 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

18. 18 Employment Assistance Fund and Benefits Flexible Calendar Relocations Relocations and Flexible Calendar Employment 1 The Mondragon Cooperative Experience 2 Crisis management in MONDRAGON 3 Application of the management tools and the results 4 Conclusions

19. A significant raise in resources devoted to employment protection Employment Assistance Fund & Benefits 19

20. Flexible Calendar A significant increase in co-op workers' hours financed by the Employment Fund, during the crisis 20

21. A considerable raise in worker-member relocations during the crisis Relocations 21

22. Comparing relocations and flexible calendar data... Relocations and flexible calendar 22

23. Employment 23 Still, a significant decline in employment in 2009; temporary workers made redundant. Controversy/debate about temporary workers. Law: 70%, MONDRAGON 85%, but still debate.

24. Decline in MONDRAGON’s domestic employment, increase MONDRAGON’s overseas employment. Employment 24 * * Basque Autonomous Community and Navarre

25. 25 Crisis management and cooperative principles Employment in MONDRAGON MONDRAGON’s crisis management’s incoherence with cooperative principles 1 The Mondragon Cooperative Experience 2 Crisis management in MONDRAGON 3 Application of the management tools and the results 4 Conclusions

26. Crisis management and cooperative principles 26 o Crisis management based on solidarity, consistent with the MONDRAGON’s 7 th cooperative principle o Decision-making processes based on members' participation. Participatory model might weaken short-term business efficiency, but fosters members' sense of belonging and motivation and long-term efficiency. o Worker-members' relocation and pooling of profits are signs of cooperatives’ commitment to solidarity. THOUGH… o Solidarity is far from perfect. Temporary workers, overseas non-member workers, etc. 26

27. o The tools were designed to reduce the negative effects of the crisis on the co-ops and society broadly o Their main purpose has been to protect jobs o During previous crisis periods, MONDRAGON managed to mantain and even expand employment o The cooperatives made massive efforts to protect worker-members' jobs during those periods o Lagun-Aro's Employment Assistance Fund has been a key tool 27 Employment in MONDRAGON

28. 28 Crisis mangement’s incoherences with Co-op Principles o The vast majority of worker-members' jobs have been mantained, but most temporary workers have been made redundant (up to 15% of employment in some cooperatives) o Proportionally, the number of jobs destroyed in the Basque Country (Basque Autonomous Community and Navarre) in MONDRAGON is higher than in other countries o The ORDER in which measures are implemented is crucial to determining consistency with cooperative principles. Mainly regarding temporary workers jobs.

29. www.mik.es Thank you Gracias Eskerrik asko Naroa Elortza Gorrotxategi nelortza@mondragon.edu Blog: http://ilunkaran.com Twitter / Identi.ca: @naroaelortza LinkedIn: http://www.linkedin.com/in/naroaelortza