This work was presented in Manchester in an international conference.

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
4 Conclusions
2

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

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. 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. 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
6

7. MONDRAGON as a reference and successful experience
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.
7

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

10. Impact of the crisis on MONDRAGON
18000 900
16000 800
14000 700
Million euros (consolidated results)
12000 600
Million 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. Impact of the crisis on MONDRAGON
As a result, a significant decline in overall investment and in resources
spent 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. MONDRAGON's crisis management tools
Crisis management tools based on the solidarity and mutual
assistance (“Intercooperation”) among cooperatives:
MCE's 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. MONDRAGON's crisis management tools
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)
13

14. Firm-level measures
Principal 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. Network-level measures
15

16. Network-level measures
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)
16

17. MONDRAGON's crisis management tools
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
17

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

19. Employment Assistance Fund & Benefits
A 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. Flexible Calendar
A significant increase in co-op workers' hours financed by the
Employment 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. Relocations
A 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. Relocations and flexible calendar
Comparing 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. Employment
Still, a significant decline in employment in 2009; temporary workers made
redundant. 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. 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. 1 The Mondragon Cooperative Experience
2 Crisis management in MONDRAGON
3 Application of the management tools and the results
4 Conclusions
Crisis management and cooperative principles
Employment in MONDRAGON
MONDRAGON’s crisis management’s
incoherence with cooperative principles
25

26. Crisis management and cooperative principles
o Crisis management based on solidarity, consistent with the
MONDRAGON’s 7th 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
26

27. Employment in MONDRAGON
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

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.
28

29. 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
www.mik.es