The Most Successful Start-up Organization in the World!

Hello...

What can we learn from an organization that created a new business paradigm that resulted in learning the value of innovation at the verge of differences? A lot. Here is an example:

Mondragon is a cooperative in Spain that is employee owned, more than 50 years old. It has a track record of 80% of their start-ups being successful over the long term.  No other organization in the world is even close!  I believe we can learn many lessons from their paradigm.

Below is an except from an article about them. I wrote the article for the Peter Drucker book series. I've also included a link to the full text article in PDF: 

The Mondragon Model
A New Pathway for the Twenty-First Century
Excerpt from an article by Joel A. Barker
Organization of the Future

In the last years of the twentieth century, capitalism and the marketplace have regained global preeminence. Socialist and Communist economies are considered failures, and based on their performance, that is as it should be. However, what has begun to reemerge is an attitude toward jobs and work that we have not seen since the Great Depression. Job security is considered part of an old paradigm that is rapidly disappearing. Enormous job cuts across the industrialized world are blamed on market forces that require the "leaning down" of organizations.

Bill Gates, head of a twenty-first-century organization, has said that the only security his employees have is their skills, and he supports their education to maintain and improve those skills. President Bill Clinton has repeatedly stated a similar theme: we must educate our people so that they can be employed in well-paid jobs. But one need only look at the number of well-educated people in the United States who are severely underemployed or out of work completely to know that education alone is not and cannot be the sole solution. This dilemma is repeated throughout the world.

Somehow, the for-profit enterprises, those organizations that create the jobs from whose wealth all other jobs are derived, must not accept the prevailing paradigm of lack of job security. To assume that it is impossible to create job security in the twenty-first century is to set a boundary that I believe is illusory. At least one significant experiment already exists that suggests otherwise. I would like to share that experiment as a model. I have been following it for fifteen years, and the success it has enjoyed is, at least in part, the result of reversing one of the most important premises of capitalism.

The old rule of business is this:

When you are faced with the choice of risking your capital to protect jobs or risking jobs to protect your capital, always protect your capital.

The reversal is:

When you are faced with a choice of risking your capital to protect jobs or risking jobs to protect your capital, always protect your jobs!

The organization that has reversed the old rule is the Mondragon Cooperative, located in the Basque region of northern Spain. Mondragon represents a paradigm shift for organizational structure and thinking. I believe that an understanding of it, history, structure, and success offers a profound alternative to the singular corporate vision of the future that is now in ascendancy.

The History of Mondragon
The Mondragon Cooperative was started in 1954 by a Jesuit priest named Don Jose Maria Arizmendiarreta (I will refer to him as Don Jose from here on) and five young men. Don Jose was a fascinating man whose background shows courage and a willingness to stand up for his beliefs. Upon his ordination, he was sent to the Mondragon region to minister to the people. When he arrived in 1941, he found great unemployment, poor education and no positive vision of the future. The assets of the region were few but important: industrious people who knew how to work hard, solidarity based on being treated badly by the Spanish government for hundreds of years, and a strong social structure.

Don Jose began the construction of his paradigm shift by starting an industrial apprentice school in the
late 1940s. He also taught classes on ethics to young men who planned to start business someday. As the school grew, so too did the unemployment in the region, reaching 20 percent in the early 1950s. Don Jose had read the papal edict that said that the work should he considered part of spiritual development, and he was deeply disturbed by the number of his parishioners who, because of their lack of a job, could not participate in that aspect of their own growth.

In 1955, he began to take action to change the future of Mondragon. He invited five young men who had been in his business classes to go with him to raise money, in order to buy a business and bring it to Mondragon. They put out the word that they were looking for loans. They had no business plan; they didn’t know what they were going to buy or what they would produce. Yet on the strength of their reputations, plus their own personal financial commitment to the project, they raised $361,604! This in a
community with high unemployment. In 1990 dollars, that would be about two million dollars.

With the money in hand, the five went shopping and purchased a small manufacturing company that made Aladdin kerosene heaters. One year after they purchased it, they moved it to Mondragon and the cooperative was born. They named it ULGOR after the first initials of the five principals’ names. When they asked Don Jose what they were going to do next, he answered, “We will build the road as we travel.”

In 1956, the company had 24 employees. In 1958, it had 149 employees. In 1990, the Mondragon Cooperative Complex, of which ULGOR was the first of many connected cooperatives, had 21,241 member employees. It consisted of a complex of more than one hundred enterprises and was worth more than $2.6 billion. In the last half of the twentieth century, Mondragon has grown and developed a unique worker democracy in which the employees own the enterprises, the capital-worker relationship has been
inverted and entrepreneurship flourishes at a rate of success unparalleled anywhere else in the world.

Read the full text article (PDF) by Joel Barker to learn about the Principles of Mondragon and the key conclusions that came from my observations:

http://www.globaldialoguecenter.com/Joel-Barker-Mondragon-article.pdf

Your thoughts? I look foward to hearing from YOU!

-- Joel 

Joel Barker
futurist, filmmaker, author
Innovation at the Verge by Joel Barker
2009 film release