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The Incentives in a Cooperative Corporation

Mondragon Cooperative Corporation ( MCC or Mondragon ) can be defined as an association of worker-cooperative houses based in the Basque town of Arrasate-Mondragon, Spain. When it was founded in 1956, it consisted on a proficient school linked to a little house bring forthing electrical contraptions.

In the last 50 old ages the group has experienced a immense growing, and presently, 256 concerted houses make up the MCC, most of them employee-owned. MCC is ranked as the 7th largest Spanish corporation with 33.334 million Euros in entire assets and entire gross of 14.780 million Euros in 2009. The transmutation from a little worker co-op into a big corporation has been lead by the immense growing of the early concerted concerns and the inclusion of new small-medium size worker cooperatives into MCC.

Historical development

Mondragon ‘s first concern started up from a little educational establishment in the 50 ‘s. It experienced a moderate growing until the late 70 ‘s, when the group was formed by few concerted concerns that win within the protected Spanish market.

As the domestic market started to open for foreign investors and transnational companies during the 80 ‘s, an increasing figure of little and average size houses joined the Mondragon group. Most of them were looking for synergisms and economic systems of graduated table in order to maintain being profitable in an progressively competitory domestic market. Meanwhile the early concerted houses grew well and got leading places in some sectors of the Spanish market ( quotation mark: Fagor, Eroskiaˆ¦ ) . This stage of enlargement ended with the creative activity of a new construction in 1991, which gathered all the endeavors and support organisations under one corporate roof: Mondragon Cooperative Corporation.

After some accommodations during the 90 ‘s, all the member houses were grouped in four chief divisions harmonizing to the sector where they operate: Financial/Insurance Servicess, Retail, Industry and Knowledge ( instruction and research ) . With this corporate construction, in the last 15 old ages, MCC has faced an internationalisation procedure with the purpose of being able to vie in the planetary sphere. MCC ‘s investing has focused on building a web of companies around the universe in order to cut down production costs and entree to international markets. Competition in international markets frequently leads to an increasing volatility in concern public presentation, which has induced MCC to utilize a more flexible employment policy. Therefore, the group had the necessity of engaging non-owner workers and get down utilizing impermanent contracts in order to cut down hazard.

[ Grafico sobre La evolucion de resultados, empleo y numero de socios ]

Jesus Larranaga, co-founder of Mondragon, defined as “ Neocooperativism ” the displacement towards a more flexible theoretical account of human resource construction ( Larranaga 1996 ) . Defourny & A ; Develtere ( 1999 ) use the term “ coopitalism ” to depict the inclination of big concerted houses to follow capitalist concern patterns.

Explanations to Mondragons ‘ success so far

Many writers have analyzed the advantaged and disadvantages of the concerted ownership from different theoretical models, such us, Agency theory, Transaction Cost theory, Property Rights theory or Voting theory.

Even though it has been argued that under certain conditions cooperative organisations could execute better than outside investor owned companies ; the fact that by and large concerted organisations tend to be less efficient can be seen as a common decision suggested by economic theory.

However, this is in contradiction with the consequences that MCC has obtained along its 54 old ages of being. Besides, many establishments, research workers and the society in general have recognized the success of Mondragon ( see apendix ) . Therefore, many economic experts have focused their research attempt in analysing Mondragon ‘s organisation, construction and concern theoretical account, in order to place the cardinal factors that allow this concerted corporation to be an exclusion. The following are the most relevant 1s.

From a sociological position, Whyte ( 1995 ) attributes portion of MCC ‘s success to the leading of the laminitis, J.M. Arizmendiarreta, and to the concerted civilization developed by his followings at the proficient school. However, Kasmir ( 1996 ) is critic with the concerted spirit of MCC and analyzes Basque political relations and working-class to happen an account to the enlargement of the company.

Ormaechea ( 1993 ) and Cancelo ( 1999 ) refer to the capableness of accommodating to a invariably altering environment, without diverting from the basic concerted rules, as a cardinal factor for MCC ‘s success.

Among other accounts focused on concern direction, it is worthy to advert Forcadell ( 2000, 2005 ) and Smith ( 2001 ) . The former argues that MCC ‘s theoretical account combines worker engagement in managerial determinations with an agile and efficient corporate construction. The latter high spots the importance of the synergisms achieved by the association of concerted houses, that allow for scale production and increase investing in invention ( joint ventures ) .

However, most of the old accounts do non take into history MCC ‘s transmutation towards “ neocooperativism ” . Among the documents that analyze MCC in the context of globalisation, it is of import to advert one by Casadesus-Masanell & A ; Khanna ( 2003 ) . They argue that, under increasing uncertainness, a decentralized concerted organisation like MCC might execute better than outside-owned corporations due to the higher degree of trust created among employees.

However, none of the possible accounts given so far is based on the expressed inducements for non-owner workers. As the intent of this paper is to analyse those inducements utilizing tourney and inducement theory as a model, foremost, it is indispensable to understand how human resources and administration are managed within MCC.

Forces Structure and Governance at Mondragon

Corporate administration at Mondragon is based on Concerted rules ( quotation mark ) , which imply that determinations are made in footing of one worker one ballot. However, presently, merely about 38 % of the 85.066 workers employed by Mondragon are existent members of the Cooperative, that is, employee-owners. Therefore, non all the workers are allowed to take part in direction neither to vote on corporate determinations.

As the chief aim of this paper is to analyse the expressed inducements for non-owner workers within MCC, it is of import to separate among the three chief types of contract that exist between the Corporation and its employees:

[ Esto tal vez podria ponerse en un cuadrito excel O ppt con colorines y tal ]

Foreigner Employee: the contractual relation between Outsiders and stockholders is the common one in regular companies ( outside owned houses ) : the proprietor ( s ) pay a pay ( fixed and/or variable ) in exchange of employee ‘s attempt.

Self-Employee ( non-owner Employee ) : these workers are lawfully considered as freelance, associated with ( or working for ) one of the Mondragon Group ‘s concerted concerns. The pay scope, fillips, net income sharing and other characteristics of their contract are similar to the Employee-owner ‘s 1s, but they have no 100 % occupation security. As they are non proprietors, if the co-op concern they work for is no longer profitable, they could acquire fired.

Employee-owner: these are the workers who own portions of Mondragon Corporation, every bit good as being employed by at least one of the concerted concerns of the group. To acquire this contractual state of affairs, foremost, a worker has to be a Self-Employee in a concerted concern ; after an vague period of clip, the Employee-owners of that concerted concern can make up one’s mind to advance him/her to an Employee-owner place and acquire a ( about ) 100 % occupation security.

The fact that the bulk of the employees at Mondragon are non Employee-owners makes this paper to concentrate on how does the inducement of a prospective publicity affect non-owner workers ‘ attempt.

To analyse the nature of publicities, it is of import to remember that in resistance to “ centralise pudding stones ” MCC is a decentralised federation of assorted ( consumer and worker ) concerted houses. Although the Corporation can enforce some common regulations, strategic and operational determinations can merely be taken by each co-op ‘s Employee-Owners. Individual concerted houses are independent concerns, which can even make up one’s mind to discontinue from Mondragon group and go on on themselves. The chief deduction of all this for our inducement analysis is that every individual determination about publicities is taken at an single house degree ( current Employee-Owners decide on this ) .

The theoretical model, chiefly tourney and inducement theory, is presented in the undermentioned subdivision. Later, in subdivision four, this theory will be adapted to MCC ‘s construction and compared to a more common inducement theoretical account for Partnership houses.

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