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The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of SnoQap, any other agency, organization, employer or company. Assumptions made in the analysis are not necessarily reflective of the position of any entity other than the author(s). These views are subject to change and revision.

The Efficiency of the Mondragon Model

The Efficiency of the Mondragon Model

In analyzing workplaces and companies in the US, it is important for scholars to reconsider how jobs can better serve the interests and well-being of employees. Through this analysis we can see that the efficiency of capitalism is derived from the exploitation of labor and fierce competition with other firms. These measures often include the lengthening of the working day as well as pressure by managers to meet lofty goals. With such an imperative enforced on extracting surplus value and profit squeezing, the goal of maximizing revenue has occurred at the expense of household and, more specifically, employee welfare. In order to ensure that this disparity does not exceed tolerable levels, policymakers need to ensure that households can achieve what is necessary for subsistence. In analysis of present-day economic trends, if current wealth gaps continue to widen between capitalists and households, the phenomenon would increasingly jeopardize the ability of middle class citizens to live comfortable, competent lifestyles (i.e. health care, housing, education). To ensure that this demise is avoided, the US firms should strive to follow Mondragon and its associated ideology

Created by Father Jose Maria in 1956, Mondragon consists of 102 internationally competitive cooperatives that offer employment to over 73,000 employees. The Mondragon Cooperative Corporation is a business-based, socioeconomic program that is committed to serving the interests of the environment, individual competitive improvement, and customer satisfaction (Tremlett, 2013). Mondragon uses this organizational approach to augment the involvement of workers in Mondragon’s initiatives as well as their participation in the management of the company. To provide further incentive, employees are also granted a share of corporate earnings (Tremlett, 2013). Essentially, by replacing worker satisfaction with profit maximization in the company’s mission statement, Mondragon presents the quintessential example of a company that values the opinions of its workers while also deterring internal wage disparities. Most of the cooperatives are deemed as economically sustainable, constituting a small, less competitive niche market (Wolff, 2012). In addition, due to the highly technical and specific nature of the cooperatives, the cooperatives are, more or less, shielded from foreign competition, thereby allowing for financial stability. Furthermore, although mechanization is heavily used within the different cooperatives, manufacturing procedures are customized for specific applications (Wolff, 2012). As a result, all manufacturing processes within the cooperatives require continued human intervention, thereby providing continued, secure employment opportunities for workers.

Although Mondragon does embody a profit motive and operates to create revenue and jobs, profits remain second in importance to employee care and social values. Specifically, unlike most traditional US firms, Mondragon does not seek profit maximization at the expense of employee welfare (Tremlett, 2013). Historically, profit-driven motives have been complementary to longer workdays and, more specifically, lofty output and revenue goals. Although this has been believed to help boost output and enhance the overall economic welfare of companies, such practices have harmed overall household wellness, as longer working days essentially indicate less leisure time enjoyed (Wolff, 2012). Therefore, Mondragon, in offering employees shorter working weeks and paid time off, places value on worker happiness.

Another significant aspect of Mondragon is the cooperatives’ mission in helping individuals accomplish personal development as well as foster collective achievement. Essentially, the workers of Mondragon own their labor as well as the products of their labor. As a participatory organization, Mondragon employees don’t necessarily have managers or supervisors (Wolff, 2012). Therefore, rather than completing tasks under the alienating eye of a supervisor, employees of Mondragon work out of passion for their occupation and their drive to excel (Wolff, 2012). As motivational incentives, workers are granted portions of corporate earnings and also have the ability to decide how company surpluses are spent. Therefore, by structuring the cooperative in this way, higher productivity and healthier work environments can be achieved.

Mondragon’s core values also entail the promotion of healthier relationships between workers and management. Specifically, one notable privilege that is bestowed upon Mondragon employees is their ability to choose management. One common issue within US firms has been poor relationships between workers and management. Consequently, workers can be less motivated, or even alienated, by their occupations. Mondragon, by granting workers with the democratic ability and autonomy to choose who supervises their cooperative, is allowing employees the ability to select supervising officials they believe are best suited for their cooperative which, in turn, enhances worker-supervisor relations (Tremlett, 2013). Trust among coworkers and supervisors within the Mondragon Cooperative reduces the need for managers to closely monitor employees. This notion is different than capitalist firms where hierarchies inadvertently deter healthy relationships among workers and supervisors and avert the ability of workers to select the manager they think best for their corporation (Wolff, 2012).

In analysis of the current state of the US’ economy, some of the most significant issues facing households are wage solidarity, structure of management, education, and perspectives on capital utilization. Amidst the fierce increasing competition among workers for employment in the United States’ economy, finding a means of subsistence has become increasingly harder for the population of skilled American households. As populations of skilled labor continues to increase, capitalists increasingly have the power to exploit wages and extract greater margins of surplus value from the fruits of their workers’ labor. Essentially, these populations of low skilled labor lack the bargaining power to achieve higher wages (Wolff, 2012). Therefore, by lowering labor costs, capitalists are able to receive higher profit margins. This has, in turn, affected household ability to afford even necessities, such as adequate health care and nutrition – all of which entrap families in generations of financial hardship. However, cooperatives, such as Mondragon, consist of significantly compressed wage scales compared to capitalist firms, as members of the cooperative have the ability to vote on the distribution of wages and employee benefits (Wolff, 2012). Therefore, the wage gap among Mondragon workers is significantly lower. As a result, the wage compression creates greater internal productivity as workers receive a higher share of profits, thereby offering employees greater motivation in their work.

When looking at the Mondragon model as a whole, one of the major inefficiencies of the model is significant production costs. Although beneficial for domestic workers, efforts to cultivate better work environments and conditions have lead to increases in capital costs and, ultimately, prices of final goods that are produced by the cooperative. In order for cooperatives, such as Mondragon, to be economically successful, they must be able to offer goods and services that are within households’ marginal propensity to consume and embody enough utility for them to even consider purchasing. Also, although Mondragon is efficient at maintaining low internal layoff rates, due to the fact that income is evenly distributed, it is easier for Mondragon employees to achieve subsistence, but very hard for them to thrive. As wages are more equally distributed among the cooperative’s employees, you will seldom see Mondragon employees driving Rolls-Royces. One may argue that the Mondragon model is promoting socialist economic concepts. However, this might just be the answer to some of the problems currently surrounding wage labor in the United States.

References

Bowles, Samuel, Richard Edwards, and Frank Roosevelt. n.d. Understanding Capitalism. 4th ed. Oxford University Press.

Tremlett, Giles. 2013. "Mondragon: Spain's Giant Co-Operative Where Times Are Hard But Few Go Bust". The Guardian. https://www.theguardian.com/world/2013/mar/07/mondragon-spains-giant-cooperative.

Wolff, Richard. 2012. "Yes, There Is An Alternative To Capitalism: Mondragon Shows The Way". The Guardian. https://www.theguardian.com/commentisfree/2012/jun/24/alternative-capitalism-mondragon.

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