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Mondragon Cooperative: An economic model above Capitalism, for individuals

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By Prachi Mishra

In most of the companies today, there’s a hierarchical managerial structure, which places the employees in a subservient position. Then, there are some companies, which follow the socialist agenda, i.e. the government making the decision for the company and deciding what is beneficial for the company.

These two models are the most common in business enterprises to earn profit.

Mondragon’s unique cooperative structure separates it from the rest of the global companies. Instead of giving authority to a selected few, Mondragon’s cooperative structure takes into account the decisions of its employees. It is owned and managed by the people working in the company.

Despite setting up a different structure from the rest, Mondragon Corporation Cooperative has become one of the biggest and the most successful global cooperative corporation today. Its total asset volume amounts to more than nine and half billion Euros.

The idea of Mondragon Cooperative is not about solely earning profit, it is more about the social good. The corporation also provides many non-monetary benefits, like access to education, free health care, and social security, which are much more important for some members than having higher salary.

Genesis of Mondragon Cooperative

The Mondragon Corporation Cooperative began in the early 1950’s in the Pais Vasco, a region in the North of Spain. The idea of its structure was conceived by Father Jose Maria Arizmendiarrieta. During that time, Spain was coping with economic difficulties, which Arizmendiarrieta believed could be resolved with community solidarity and action. He started imparting the necessary skills to create a corporation to the youth that would not only help to support themselves, but also the community.

Five of his students, Usatorre, Larrañaga, Gorroñogoitia, Otmaechea and Ortubay followed Arizmendiarrieta’s steps, and created the financial basis for Mondragon. They put their savings together to make a collective investment.

In order to increase the financial support, they went to seek aid from the public of the area. Every day, these five entrepreneurs would go to the bars and cafes, and talked to the villagers about their idea of creating a company that would focus not on only creating employment and profits, but most importantly would focus on the people of Mondragon.

They were successful in persuading the people of Mondragon as they loaned amount of 11 million pesetas, a huge amount for the Spain of 1959, to the five entrepreneurs. After raising the funds, the entrepreneurs opened their first factory called Ulgor, which is now called Fagor Electrodomesticos, which employed 24 worker members, and started manufacturing paraffin stoves and heaters.

Cooperative Structure of Mondragon Corporation

At present, Mondragon comprises of 218 operational bodies, all Cooperatives have the same unique basic structure.

This structure consists of a General Assembly, which consist of all the worker-members of the cooperative. This assembly has the power to nominate and dismiss the members of the second category of the cooperative structure, the Governing Council.

The Governing Council selects the members of the Management Council and make sure that all of the plans and objectives proposed by the General Assembly are correctly followed.

At the next level, there is a Social Counsel whose main function is to inform the members of the cooperative about all the issues and proposals that are going to be discussed during the annual meetings. Lastly, there’s a Management Council and the General Manager, which are business professionals, elected by the Governing Council to perform all the basic functions of the cooperative.

The corporation has also laid down certain principles for the workers, some of which are listed below:

1. Sovereignty of labor: Labor is the main factor for transforming nature, society and human beings themselves. As a result, the systematic recruitment of salaried workers has been abandoned, full sovereignty is attached to labor, the wealth created is distributed in terms of the labor provided and there is a will to extend the job options available to all members of society.

2. Participatory Management: The steady development of self-management and, consequently, of member participation in the area of company management which, in turn, requires the development of adequate mechanisms for participation, transparent information, consultation and negotiation, the application of training plans and internal promotion.

3. Payment Solidarity: Sufficient and fair pay for work as a basic principle of its management, based on the permanent vocation for sufficient collective social promotion in accordance with the real possibilities the co-operative has, and fair on an internal, external and MCC level.

4. Inter- Cooperation: As the specific application of solidarity and as a requirement for business efficiency, the Principle of Inter-cooperation should be evident: between individual co-operatives, between subgroups and between the Mondragón co-operative experience and Basque co-operative organizations, and co-operative movements in Spain, Europe and the rest of the world. (Content courtesy- www.mondragon-corporation.com)

How can one become a member of the cooperative?

The new member is required to pay a specific amount decided by the General assembly. It is around €12,000, which can be paid over a period of thirty months.

Is Mondragon’s cooperative model, the ideal business model?

In the cooperative everyone is treated as an equal and have the same power of their votes. In most of the corporations, where the work- force is treated only as a means of production, in Mondragon corporation power is provided to the work force.

NewsGram asked a few people whether Mondragon cooperative is an ideal model.

Himanshu Lohani, an IIM Bangalore alumnus said, “Yes I think it can be considered as an ideal because when employees have a major role in the decision making of the company, they are more willing to work harder.”

Anukriti Kumar, a management student echoed the same thought. She told NewsGram, “I won’t mind receiving a bit less salary, if my opinion is considered important during the decision making process of the company. I think India should also follow the same suit and try to adopt this model.”

However, Nripen Mishra, an Indian School of Business alumnus had a different point of view. He said, “I won’t consider it ideal as it too comes along with a set of disadvantages. Some shareholders might have more involvement with the project than the rest, however, regardless of their efforts; they still will have only one vote. Also it might get difficult for the cooperatives to attract investors who are primarily interested in earning profit through financial return.”

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The goat village of India: the goat selling cooperative – a coalition of women’s self help group!

The tribal women capture the market for the heat standing goats!

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Agali, Kerala, Feb 20, 2017: In the Attapadi region of the Western Ghats, the tribals own lean black goats, known for their sturdiness.

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While the other goats suffer diseases, these black goats are resistant to most of these diseases. Also, researchers say that they have a unique ability and power to prosper in the severely increasing heat of South India.

According to T. Giggin, a professor at Kerala Agricultural University, “Black goats can withstand even scorching heat without much care and attention.”

The Black Goat, Source: Pixabay

 

The region’s livestock dealers have crept into the foothills in the recent years, buying the goat at low prices from tribal families that are suffering and selling them on at livestock markets at much higher prices.

However, the tribal communities have now come together to keep more income at home and cut out the middleman. This has been achieved by creating just one “goat village” where the tribal people from all the regions sell their goats at a fixed price to the visitors and buyers.

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A number of tribal families, who are being forced to sell their livestock due to drying up of many rivers across the region. Under such conditions, this change has helped them and there is no longer a need to migrate to Tamil Nadu and other places for work.

In the Thomson Reuters Foundation’s report on The Goat Village, One of the tribals quoted, “our indigenous black goat is my weapon for this coming summer.”

‘We were able to purchase goats from the drought-hit families for 1000 rupees and then resell it for higher prices. Though almost all other breeds had died, the demand for the black goat continued to be huge’, said a livestock trader.

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However, the traders are now unable to buy many goats because of the new step taken by the villagers. The people now brought their animals together at Agali and sold it for a minimum of 280 rupees a kilo (5000 rupees for a typical animal).

Herd of black goats, Source: Wikimedia

Sundhari, a tribal woman said, “I sold my 20-kilo goat for 5600 rupees and the money was immediately credited to my bank account. Now I am sorry that last year, I sold three goats bigger than this for 1000 rupees each.”

The creation of a women’s self-help groups coalition, the goat selling cooperative is presently assisted by National Livestock Mission and serves 192 villages.

Seema Bhaskar, the coordinator of the project said, “Now no middlemen can loot the tribes. People can sell Attapadi goats only through the goat village and buyers can purchase them only through us.”

“Every day we are getting inquiries from farmers across the state. They want the genuine breed,” Bhaskar said.

The demand for the goats has not gone down even with an increase in the prices. 28 goats have already been sold in a week in January. Centralization of sales has also helped in the buying and selling of other animals except Attapadi goats.

As the temperatures continue to rise, the Attapadi breeders are aware that they may soon face competition as some of their buyers might start breeding the tough animal themselves.

The women still intend to expand the cooperative looking for other products to sell. While Traditional medicines are being offered by one women’s group from Pudur, another group from Sholayur is selling Organic food.

 

– prepared by Nikita Saraf of NewsGram, Twitter: @niki_saraf

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Lijjat, the cooperative of India

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New Delhi: Cooperative societies have played a significant role in the development of the Indian economy, besides empowering the women. The overwhelming success of cooperative societies can be gauged by the fact that 97 per cent of Indian villages claim to have a cooperative society run by its own villagers or by the government.

The Indian co-operative society model

An Indian co-operative society business model involves individuals of the same strata united to promote their common economic interest. It aims at betterment of the members and not on making profits. This model is mostly common among needy people who have the urge to stand on their own legs.

Unlike a company, cooperative is an organization where all the members are the stake holders and the profit is split equally among them.

The Success story of Lijjat:

Lijjat Papad is much more than a household name in India. Shri Mahila Griha Udyog Lijjat Papad has epitomized the overwhelming story of “rags to riches”. Starting with a meager loan of Rs 80 in 1959, the cooperative registers an annual sale of a staggering Rs 301 crore now.

The unique selling proposition of the cooperative is its assurance of quality at a reasonable price. The cooperative has always ensured that every operation runs smoothly. Shri Mahila Griha Udyog Lijjat Papad members have always earned a comfortable profit and its agents get their due share.

Gandhian simplicity and ethical workplace values have spring-boarded to the zenith and made it a model for other aspiring cooperatives.

The modus operandi

A bevy of women goes to the Lijjat branch to knead dough, which is then collected by another group of women for rolling it into papads. When the first group of women comes in the morning, they taste the previous day’s production and the quality gets automatically checked. After the quality check, another set of women pack the tasted papads for distribution.

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Global presence

Lijjat has spread its wings beyond India. Exporting the product to various countries including United States, the United Kingdom, the Middle East countries, Singapore, Hong Kong and Holland, the company has clocked a turnover of Rs 10 crore. Though the cooperative does not export on its own , recognized professional merchant exporters handle the business.  At present, 30 to 35 per cent of the production of Lijjat Papad is being exported.

Recipe behind the success

Sharing of power and the Sarvodaya philosophy has helped the organization achieve such stardom. The authority decides the manner in which profit or loss should be apportioned among the members. A committee of 21 members manages the affairs of the institution. However, all decisions, major or minor, are based on consensus among members. Any single member’s objection can nullify a decision.

The cooperative started by seven women on a terrace of a building in Girgaum in Mumbai has scripted a success story because the members were pledged bound to share the destiny of each other. The tradition is still prevalent.

(Picture Courtesy: www.plus.google.com, www.psbt.org)