In the 1940s, a progressive Catholic priest named José María Arizmendiarrieta sought ways to pull the Basque village of Mondragón out of the doldrums of the post–Spanish Civil War era devastation by creating a polytechnical school to train local people in various trades while advocating a “humanist” approach to business.
Large-scale innovation is where culture, technology and politics collide. Navigating those choppy seas requires strong skills of adaptive leadership at the helm. But it also requires innovation in form and not just in content. New circuits of collaboration –InnoBasque, Euskaltel or the Mondragon Corporation– are the organisational arteries through which Basque innovation flows.
A leading international example of the cooperative movement is the Mondragon cooperative from the Basque region of Spain. Founded by a young Catholic priest and students of a technical school in 1956, Mondragon is now a cooperative of cooperatives, encompassing nearly 300 distinct businesses and employing over 80,000 people. Mondragon cooperative enterprises include banks, manufacturing, skilled and unskilled labor, public schools and a university
The division which produced appliances (Fagor Electrodomésticos) was hit hard by the economic downturn. I have to admire them because the internal insurance company will provide workers with 80% of their salary for two years and provide training to move some to other companies within the cooperative. You just don’t see that in large totally capitalists corporations even though they claim status as people
When a Mondragon factory or store or other operation has to close because of unprofitability, Mondragon retrains and relocates those workers to another of its enterprises. Mondragon’s cooperative ethos makes it so different from other enterprises, one representative explained, that they’re about to have to offer their own MBA program, to guarantee they get trained managers without the bloodsucking, predatory mindset taught and valued at most business schools.
Consistent with a broader international movement to define and promote ethical cooperative enterprise, the pay differential between the highest and lowest paid workers at Mondragon is generally between 3-to-1 and 5-to-1, and the CEO of the entire Mondragon Corporation earns only nine times as much as the lowest-paid worker (this compares with an average ratio of 600-to-1 at large U.S. corporations).
Actually, one of the successes of Mondragon was its ability to create a sense of identity among the workers within the company, encouraging an environment of solidarity and collegiality among them, a feeling that also extended (although to a much lesser degree) to non-worker-owners. The connection felt by the latter group has somewhat weakened, however, exposing a vulnerable point for the cooperative. Otherwise, from a business perspective, Mondragon is an excellent case of matching efficiency with solidarity and democracy.
The response of Mondragon, the overall parent company, to that crisis was quite different, however, compared to what other non-cooperative companies have done in similar situations. Mondragon lent 700 million euros to Fagor to help it recover. When recovery eventually looked impossible, only then did Mondragon stop lending money. But then, it relocated 600 of Fagor’s worker-owners to other companies belonging to Mondragon. Universal solidarity among worker-owners made the collapse of Fagor more bearable than it would have been otherwise.
The success of Mondragon Assembly, one of the world’s top producers of solar-panel manufacturing equipment, reflects the region’s ability to weather a euro zone debt crisis that has forced Spain to ask for up to 100 billion euros of EU aid for its banks.
In 1956 Catholic priest Jose María Arizmendarrieta established the first cooperative, according to the principle that companies are best run when workers are their owners and participate in management decisions. Its success proves that JMA was right. Mondragon, based on this principle, has become one of the largest conglomerates of companies in the world.