Alternative Economy: Mondragon Corporation - Case Study Example

Alternative Economy: Mondragon Corporation Name Course Name and Code Date Introduction An alternative economy is a different form of economic management, which is different from the normal capitalistic approach. It requires the inclusion of different stakeholders who are the members and employees and are also tasked with making a decision and providing financial investment. The aim of this report is to analyze alternative economy from a perspective of an organization. The paper is divided into two parts; the first part presents the overview of Mondragon Corporation which is the organization under study while the second part analyses the benefits of implementation of alternative economies at Mondragon Corporation. Overview of Mondragon Corporation Mondragon Corporation incorporates federation and corporation of worker cooperate, and it is based on Spain, Basque region. Mondragon Corporation was established in 1956 by local technical college graduates who started with the production of paraffin heaters. The ideology of the organization is based on the views and aspirations of Father Jose Maria, which was a collective solidarity. The argument is the success of the society relies on creating an environment and business development under the umbrella of cooperatives. The focus was giving the community and society the skills and experiences to create employment opportunities and other benefits to support the developmental requirements (Errasti et al. 2003). The roots of Mondragon Corporation are traced to the North of Spain a region called Pais Vasco. Five graduates came put together their savings, and through trusting each other, the individuals created the collective investment framework (Flecha and Santa Cruz, 2011). Since the team of five were unable to raise the appropriate funds, Father Jose Maria advanced the philosophy of bringing the community to contribute to the development and fulfill the funding requirements (Mondragon Corporation, 2016). Through effective communication, the five individuals visited bars and cafes to market their ideology and encouraged laborers, bosses, and bartenders to support the ideology. The community supported the idea, and the financial support resulted in opening the first factory called Ulgor; currently called Fagor Electrodomesticos. It is imperative to note the expansion and developments at Mondragon Corporation. The integral component is considering the requirements of the community, and each member is required to contribute to support the development requirements. It is sometimes seen as subscription fee and acknowledgment of the importance of the cooperation (Errasti et al. 2003). Since the focus is the community, the salaries or earning are specified and within a given range. For example, the earnings for managers to employees may be given in a ratio of 1 to 4.5; or, the value is between the earnings of the highest earner compared with the lowest earner (Mondragon Corporation, 2016). Other benefits are non-monetary rewards in nature such as social security, free healthcare, and education. Since the target is the community, these non-monetary rewards are more important compared with monetary earnings. Mondragon Corporation continued to develop because of the needs to supply raw materials and other products to support manufacturing process (Mondragon Corporation, 2016). For example, Ulgor had specific necessities and entities such as the Copreci was founded to provide safety systems and taps and were able to sell to outside companies after satisfaction of its own needs (Flecha and Santa Cruz, 2011). Since these new entities were funded by Ulgor, it had same responsibilities, policies, and structure as Ulgor. As the business continued to grow, Mondragon Corporation faced financial problems because of the speed of growth (Redondo, Santa Cruz and Rotger, 2011). To support the financial requirements, Caja Laboral was created to enable the employees to save their funds and create a financial benefit for the company (Errasti et al. 2003). It meant that Mondragon Corporation did not rely on government support to fund its activities even if the business was generating zero interest (Flecha and Ngai, 2014). The growth continued, and the Spanish government introduced conditions in the social security requirements. It meant a new facility called Lagun Aro was established to provide life insurance, disabilities insurance, and medical insurance, which translates to social protection to the worker members. Mondragon Corporation has continued to grow, and it is a leading company in Spanish business groups. In addition, the company has improved processes and has corporate offices and production subsidiaries in 41 countries. Mondragon Corporation also sells in more than 150 countries with a total revenue of €12.11 million. As of 2016, Mondragon Corporation is made of 261 businesses and cooperatives. It also employs more than 74,335 employees with 15 technology centers (Mondragon Corporation, 2016). Some of the major Mondragon Corporation companies include Dikar, Leartiker Tecnologia de Alimentos, Urkel, Abantail, and Leartiker. The corporate projects Mondragon Corporation undertakes MONDRAGON health, MONDRAGON Eko, and MONDRAGON Green Community. Mondragon Corporation continues to support the community through implementation of different programs and policies (Mondragon Corporation, 2016). However, the original ideology remains the same, and it is contained in the governing and organizational structure at Mondragon Corporation. The governing structure at Mondragon Corporation had the same structure made of Social Council (Consejo Social), Management Council (Consejo de Direccion), General Manager (Gerente), Governing Council (Consejo Rector), Management Council (Consejo de Direccion) and General Assembly (Asembla General). The structure brings together the workers and management in ensuring the company operates effectively (Lopez, Lopez, and Larraaga, 2009). The role of the General Assembly is to vote on issues that affect the cooperatives, and the members meet once in a year to discuss the issues affecting the cooperative (Mondragon Corporation, 2016). The members discuss and approve strategic planning, changes, and projects for the next year (Flecha and Santa Cruz, 2011). Another role for the General Assembly is to dismiss and appoint members of the Governing Council since the position is based on merit. Since the members and the cooperatives increased, Mondragon Corporation decided to form the Consejo Social tasked with making decisions for the team through representing other members (Redondo, Santa Cruz and Rotger, 2011). The representative meets with other members and discuss the issue and determines to support the issue or vote against the issue (Errasti et al. 2003). The Audit Committee is tasked with ensuring the financial and accounting requirements are as stated (Etxagibel, Cheney, and Udaondo, 2012). It is made of three members and operates for four years, and when the financial records are inappropriate, the Committee meets the individual who prepared the transactions and rectifies the problem (Mondragon Corporation, 2016). The team also ensures the management adheres to the proposals and views of the members based on the voting system. For example, ensuring the decisions during the voting period are implemented. Evaluation of the Success of the Mondragon Corporation Some companies such as Mondragon Corporation does not employ the capitalist form of management but focuses on the community to fulfill its operating objectives (Etxagibel, Cheney, and Udaondo, 2012). Organizations employing alternative economies to running of an organization focuses on some factors, which includes sustainability, democracy, equality and solidarity (Redondo, Santa Cruz and Rotger, 2011). The section discusses the success of Mondragon Corporation in the alternative method of operations and satisfying the requirements of the community and other stakeholders. Self-responsibility and self-help Self-responsibility is the fact or the state of being accountable, answerable and responsible for something within one’s management, control or power. Self-responsibility does not mean only those activities within reach of an individual but the general requirements, which are crucial for the development and community sustenance (Flecha and Ngai, 2014). At Mondragon Corporation, the expectations are advancing the requirements of the community and ensuring people have good lifestyles (Errasti et al. 2003). The implementation of Mondragon Corporation ideologies and strategic views have contributed to the improved lifestyle and social fabric because the requirement is to support the community (Mondragon Corporation, 2016). Each of the employees or members at Mondragon Corporation have to ensure their roles and responsibilities are completed appropriately within the identified standards. This is achieved through numerous processes and technique. One of the strategies is the responsibility of voting. Each individual has the responsibility to raise issues and contribute to solving the issues (Flecha and Santa Cruz, 2011). Since different persons have different views and approaches to issues, the aspect of self-responsibility extends throughout the organization resulting in a “member’s responsibility.” It means that each of these members has to contribute based on roles and responsibilities to ensure the organization achieves identified expectations. The requirement also applies to assignments and tasks assigned to an individual (Errasti et al. 2003). The individual has to understand the wider impact of their decisions on the company and take self-responsibility through completing the duties appropriate (Redondo, Santa Cruz and Rotger, 2011). It has resulted in success because the managers and supervisors do not have to manage the employees since the employees are already motivated and have direction rather the managers and supervisors lead the members/employees. Self-help is aimed at the utilization of individual resources and efforts to achieve specified requirements without the need of relying on others (Campbell, 2011). It also means it is targeted at ensuring people achieve their requirements and expectations without the express requirement of support from other stakeholders (Etxagibel, Cheney, and Udaondo, 2012). Mondragon Corporation understands the importance of commitment and appreciating the underlying philosophy and assumptions in driving the business requirements. Self-help includes obtaining the right education qualifications or other similar skills through participating in courses and seminars (Redondo, Santa Cruz and Rotger, 2011). Mondragon Corporation offers training opportunities geared towards improving the general skills and competencies of the members and employees (Mondragon Corporation, 2016). It translates to better welfare to the community since the community becomes more informed and appreciate their different requirements and expectations. Democracy Democracy is the driving force at Mondragon Corporation. The structure allows for shared responsibility and directly influence the decision of the organization through voting and associated activities (Lopez, Lopez, and Larraaga, 2009). The role and expectations of a developing society are the freedom to choose the direction through participative leadership (Redondo, Santa Cruz and Rotger, 2011). In the earlier days, Mondragon Corporation encouraged individual members to vote on issues and determine the strategic direction of the company. It meant any wrong made are a responsibility to the entire team because the team contributed to the decision making (Flecha and Santa Cruz, 2011). Because of the consequences of the participate and collaborative decision making and making independent decisions, each of the Mondragon Corporation members understand the risks and consequences of poor decisions (Mondragon Corporation, 2016). It means Mondragon Corporation members have to make appropriate decisions contributing to the success of the organization. The continuous expansion process required an effective strategy of involving different individuals in making decisions, but the problem was the technical problems associated with bringing people together (Clamp and Alhamis, 2010). The logistics were complex and the decision making process was demanding because each individual required to contribute (Flecha and Ngai, 2014). The success of Mondragon Corporation lies in the democratic process meaning the strategy was ratified allowing the creation of representatives where the representatives meet with the members and decide the way forward (Errasti et al. 2003). For example, the members would advise the representative to vote for or vote against not preferable proposals or strategic requirement (Etxagibel, Cheney, and Udaondo, 2012). Therefore, the continued decision making the process of balancing individuals and representative ensures the continuous participation and engagement. The democratic process ensures Mondragon Corporation operates effectively because promotion and other operational requirements lie on views of the members (Basterretxea and Albizu, 2010). The strategy utilized in the capitalist economy relies on promotions based on qualifications and becomes a challenge for the employees to contribute in determining who becomes a leader and who can be released from the duty (Lopez, Lopez, and Larraaga, 2009). The process ensures the members contribute to promoting the leaders resulting in a framework which each member competes in a collaborative process to make the organization successful (Redondo, Santa Cruz and Rotger, 2011). The assigning of responsibilities such as requiring the Audit Committee to review the financial statements and request clarification from the individual who made the transaction means that it provides equal opportunity for clarification before assigning blame or managerial disciplinary action (Etxagibel, Cheney, and Udaondo, 2012). It illustrates the importance of democratic process and the requirement to be heard before making decisions, which sometimes may negate the roles and positions of the individuals. Equality and equity Equality is an important component in which individuals within a community or social setting have the same status when it comes to the different aspects within the specified settings. It may include equal access to social services and goods, property rights, freedom of speech and civil rights (Lopez, Lopez, and Larraaga, 2009). At Mondragon Corporation, equality is achieved through the provision of equal opportunities such as the medical services and educational requirements (Errasti et al. 2003). Each of the individual as a right to vote and determine the future of the organization. Even though the decision may be made by a representative, it is usually based on consensus meaning the equality aspect of one vote is championed (Etxagibel, Cheney, and Udaondo, 2012). Another aspect of equality evident in the company is the provision and sustenance of welfare requirements. Each individual should understand their responsibilities and the wider contribution to the developmental requirements (Flecha and Santa Cruz, 2011). The available positions, promotions, and benefits can be accessed equally provided the individuals observes the policies, structures, and procedures in place. Such processes ensure an equality awareness and ideology is planted, and the members can extend these processes to other sectors of the society. Equity is the quality of being impartial and fair. Social equity also implies fair access to resources, education and livelihood including other aspects such as self-determination, and cultural life of the community (Redondo, Santa Cruz and Rotger, 2011). At Mondragon Corporation, livelihood depends on the earnings and benefits of the company. The success of the company means that equity is gained and other resources can be shared equally (Errasti et al. 2003). After the Spanish government had stopped funding social security for Mondragon Corporation, the company established an organization that supports the health and related requirements (Etxagibel, Cheney, and Udaondo, 2012). Members have the right to access these resources, and in instances of misunderstandings, the members have a right to be heard and decisions deliberated. Solidarity Solidarity in economic activity is premised on the initiatives of sharing values, which are different compared to the dominant economy (capitalistic economy). Instead of focusing on cutthroat competition, the solidarity aspects seeks to build communities and cultures of cooperation (Mondragon Corporation, 2016). The focus is community development which is achieved through sharing of ideas and strategies for development. It includes creating a culture and creating modalities and strategies in which these components are achieved (Flecha and Ngai, 2014). The community presents their problems, and through teaming and supporting each other, the solution is achieved. For example, five members stated the company through creating lighting equipment, and after sometime, the business expanded. The expansion required financial requirements, but the individuals were unable to fund the requirements (Flecha and Santa Cruz, 2011). It meant that engagement with the community was paramount and through selling the idea to the community, the community contributed to the funding requirements. The solidary aspect is exemplified through requesting the community to contribute resources to attaining the stated objective. The alternative economy fosters relationships of solidarity and mutual support rather than isolation which is evident in the capitalistic economies. The focus is a community and bringing together the entities that form the community (Etxagibel, Cheney, and Udaondo, 2012). From the perspective of Mondragon Corporation, the community includes the environment, individuals, individual’s dependents, infrastructure and other supporting requirements (Mondragon Corporation, 2016). Incorporating these different variables is a challenge in a capitalist economy because of the lack of first information about the local community and the environmental concerns (Flecha and Santa Cruz, 2011). Thus, the alternative economy at Mondragon Corporation is successful because the community contributes to the success of the organization and the organization relies on the community. Failure in one aspect affects the other sector, and the aspect of mutual support is crucial (Lopez, Lopez, and Larraaga, 2009). For instance, it is easier for Mondragon Corporation to develop a framework that incorporates the requirements of the society (Flecha and Ngai, 2014). For example, aligning the learning requirements with the community ensures a balanced approach to the sustainability and developmental requirements. Mondragon Corporation successfully implements the solidary and mutual support to ensure the different entities compliments and support each other. Cooperation The focus of the business is not profitability rather cooperation towards a wider good through embracing a philosophy of inclusivity, equality, and empowerment. Mondragon Corporation appreciates the challenges the community faces and continues to develop processes to address the issue (Lopez, Lopez, and Larraaga, 2009). The source of numerous issues is a lack of employment because the presence of employment creates a multiplier effect. Mondragon Corporation understands the need of creating employment and has created numerous organizations and business, which complements and provides resources for other companies (Errasti et al. 2003). It is based on continuous development released through understanding the problem and creating strategies to address the problem. For instance, after the Spanish government created problems when it came to Spanish Social program, Mondragon Corporation decide to create its products and services to offer medical insurances and other social related requirements (Redondo, Santa Cruz and Rotger, 2011). Through contribution from each of the members, it is possible to fund the activities creating a positive welfare in supporting the community requirements. It is a success because more companies are established since the companies rely on each other through supplying the necessities (Flecha and Santa Cruz, 2011). The approach also means the same structure, procedures, and policies are maintained meaning the original ideology and philosophy does not change even though the size of Mondragon Corporation continues to grow. The positive impact to the wider community is imperative in the entire process of social development and satisfying the requirements and expectations of the members. Sustainability The focus of the alternative economies is the focus on encouraging commitments to the broader work of environmental, economic and social justice. It means continuous developments and improvements are made, but the concern of the society and community is integral (Redondo, Santa Cruz and Rotger, 2011). Mondragon Corporation bases most of its operational requirement on the sustainability aspect. For example, social justice is achieved at Mondragon Corporation through the distribution of privileges, opportunities and wealth within the society and community (Flecha and Santa Cruz, 2011). The focus is challenging injustice and valuing diversity, which is achieved through collaboration and corporation in the running of the business. For example, Mondragon Corporation requires the community to present views and support in making decisions, meaning the aspect of diversity and social justice is integral in the decision making process (Etxagibel, Cheney, and Udaondo, 2012). Social justice also means each individual should have the right to equal treatment and this aspect is capitalized at Mondragon Corporation. Further developmental requirements rely on the views and contributions of the members indicating the importance of diversity, sustenance, and other fundamentals ensuring the community develops in a positive way. The second aspect of sustainability is environmental protection and corporate social responsibility (Mondragon Corporation, 2016). The aim of any organization is championing environmental concerns, and this can be achieved through implementing a strategy that focuses the environmental concerns (Flecha and Santa Cruz, 2011). Most of the members working at Mondragon Corporation have origins in the environment the business is established, and these individuals have a better understanding of the environment because of historical factors (Flecha and Ngai, 2014). Thus, the members can advise the company about environmental matters and process approaches to sustain the environment. Mondragon Corporation has participated in numerous corporate social responsibility activities (Errasti et al. 2003). The important aspect is employing the members of the community and encouraging the members to contribute to the decision making process (Etxagibel, Cheney, and Udaondo, 2012). To advance the corporate responsibility, the company created the Mondragon Corporation Foundation that provides funds and allocations to different entities such as the Inter-Cooperative Promotion and Education Fund, Inter-Cooperation Central Fund, and Corporate Solidarity Fund (Mondragon Corporation, 2016). These funds and other corporate responsibility are further grouped into commitments, internationalization model, innovation model, and corporate management model. Thus, Mondragon Corporation continues to focus on creating a sustainable model that incorporates different facets of the society. Conclusion Mondragon Corporation is an example of an organization that implements alternative economy. The company is a form of cooperative organization in which members are required to contribute and work at the company. Mondragon Corporation benefits the community and society through the use of democratic, solidarity, equality and equity, sustainability, self-responsibility and self-help, and cooperation. The fundamentals and ideologies of the alternative economy continue to drive Mondragon Corporation resulting in expanding the business activities to international standards. References Basterretxea, I., and Albizu, E., 2010. Management training as a source of perceived competitive advantage: The Mondragon Cooperative Group case. Economic and Industrial Democracy, p. 0143831X10377809. Campbell, A., 2011. The role of workers in management: the case of Mondragon. Review of Radical Political Economics, p. 0486613411407715. Clamp, C.A., and Alhamis, I., 2010. Social entrepreneurship in the Mondragon Co-operative Corporation and the challenges of successful replication. 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Mondragon Corporation. 2016. Homepage. Retrieved from http://www.mondragon-corporation.com/eng/ Redondo, G., Santa Cruz, I. and Rotger, J.M., 2011. Why Mondragon? Analyzing what works in overcoming inequalities. Qualitative Inquiry, 17(3), pp. 277-283. Rolland, S., 2006. Mondragon Corporation Cooperatives, People Working Together. UW-L Journal of Undergraduate Research IX. Retrieved from https://www.uwlax.edu/urc/jur-online/PDF/2006/rolland.pdf Read More