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In Search of Business That Cooperates: What We Can Learn From the World's Most Successful Worker Cooperatives

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"That ... cooperatives have grown so large is somewhat a mystery since, unlike capitalist enterprises, cooperatives are not expansionist by nature ... Capitalist enterprises tend towards growth because increased scale generally leads to greater returns for a concentrated ownership ... Contrast this with the economics of a typical worker cooperative. In a worker cooperative, those profits not reinvested are divided among the workers who generated the wealth."
--Tim Huet, GEO #30--

In an industrial, and now post-industrial age, that has turned people into disposable assets, into tools at the service of capital, it is hopeful and heartening to experience business at scale that chooses to honor the essence of humanity over the accumulation of wealth in service of capital.

The success of worker cooperative models in Italy and Spain present a compelling model for building a new sustainable economy in the United States. My recent tour of cooperatives in both countries left me eager for the possibilities of applying these models to our own economy.

Italy

Cooperatives in the Emilia Romagna region of Italy are so pervasive they are virtually invisible. In fact, no one could point me toward the 20-story-high office building housing the regional offices of Legacoop, Italy's biggest cooperative, despite the fact that it's situated in one of the tallest buildings in the city. Other than the "Coop" grocery stores to be found every few blocks, the cooperative business structure is so deeply woven into the culture as to go unnoticed by most inhabitants. It's not branded, advertised, or promoted -- remarkable when you consider that these consumer cooperatives have been in existence since 1854.

Today, the movement includes three primary organizations: Legacoop, AGCI and Confcooperative. Collectively, they represent 43,000 cooperative businesses generating an astounding revenue of 127 billion euros, or 7% of the Italian GDP. Their 1.1 million employees represent 6% of the total population. They are flourishing.

Of the 43,000 cooperative businesses in Italy, 14,500 belong to Legacoop, which employs 485,000 people. Legacoop represents businesses in every industry from banking and insurance to retailing, construction, agriculture, travel and manufacturing. Its role is to advocate, represent, protect cooperative values, build the movement by developing new businesses, and advocate for laws that provide preference to cooperatives, nationally and internationally.

Spain

In 1941, a priest named Don Jose Maria Arizmendiarrieta arrived in Mondragon after finishing seminary school. Though he showed little talent for the pulpit, he displayed a strong interest in social issues and movements, which led him to organize social support services, athletic leagues and a medical clinic through defunct organizational bodies of the church. His success in developing these programs created a base of support that allowed him to continue building institutions in the region for the rest of his life -- the apotheosis of which was Mondragon.

Mondragon was built on the firm belief that the only way to understand and experience democracy was through the creation of cooperatively-organized business. Yet, there was no domestic model of democracy or democratic management to grasp onto in a society controlled by a Franco-fascist dictatorship. Despite the odds, Mondragon prospered.

At the end of 2010, it was providing employment for 83,859 people working in 256 companies, generating total revenues of 14.8 billion euros, making it Spain's fourth largest industrial and seventh largest financial group.

Mondragon holds fast to its founders' beliefs -- it honors democratic methods in all aspects of business and management and in the process of dialogue that precedes every major decision. This commitment is specifically expressed in real terms, such as in compensation, where the maximum salary differential from the lowest to the highest paid worker is now 7-to-1. Never in Mondragon's history has any worker been laid off for financial reasons.

What We Can Learn

My visits to the cooperatives in Italy and Spain left me with powerful impressions of what's possible when you put people before profit. These are just some of the lessons that we can bring to life to create a more sustainable future.

We are all owners and protagonists. As an owner, everyone is responsible to advocate for his or her own point of view. No one's voice is more important that another person's.

One person, one vote. This is foundational to the cooperative movement and a principal that must never be violated. It stems from the original notion of democracy and safeguards the role of each and every person in a world where money and power often drown out our individual voices.

Self-management. There is a basic assumption that the best type of management is always self-management. You are an owner you think about what is best for the whole and act accordingly. Does everyone always manage themselves as well as possible? Of course not, and there are processes for training to build capability where needed. But everything flows from the assumption that we are all capable of managing ourselves.

Decentralized organization. Mondragon is the opposite of centralized, top-down, command and control management. Often, this is painfully slow and can lead to decisions that may be less than optimal. But is doesn't stray. Each cooperative business makes its own decision. Each has its own board and while they may be encouraged by Mondragon leadership to move in a particular direction, all decisions, including the decision to pack-up and leave the Mondragon group, is their own.

Italian coops engage in a decentralized strategy, creating "flexible manufacturing networks" comprised of the highly-skilled work forces of small and mid-sized manufacturers. This approach has helped Italian cooperatives take advantage of labor flexibility and, as Tim Huet pinpoints: "Cooperatives are particularly adept at fostering the critical relationships because of their collaborative cultures. The small size of the productive plants in flexible manufacturing networks facilitates robust democracy for cooperatives involved."

Training, education, innovation. Second to mission and values, education emerges as the second most amazing aspect of Mondragon and profoundly differentiates it from cooperative movements around the world. "Training must precede the establishment of a cooperative! Trained people will build better companies. To enter a cooperative you must value the community ahead of yourself," my guide explained. Mondragon understands the critical role of technology and innovation in a highly competitive global market. Its creation of thirteen universities is a testament to its commitment.

Re-prioritization. As a Board member of an individual coop you must understand the 'whole' of Mondragon. This requires often a reprioritization of your own values to place the 'whole' above the needs of your own coop.

The involvement of everyone in management, ownership and results. Everyone learns the basics: Rules of the board, history, business concepts, how to read a P&L statement and a balance sheet. They also learn how to with one another through teamwork, delegation, sharing, communicating efficiently, being able to explain why a decision was made to other members of the coop, developing priorities, and analyzing data.

Developing leaders. Leadership skills are also taught so members may be better able to manage internal democracy, handle conflict management, and know how to reconcile for the short- and long-term, the local and the global, the balancing of the heart and the head. Finally, they learn the power of generosity. "If you don't have generosity you have nothing," our guide explains.

Advocating for change. Legacoop's role is to advocate, represent, protect cooperative values, build the movement by developing new businesses, and advocate for laws that provide preference to cooperatives, nationally and internationally.

Values. Family. Education. Solidarity. History. Members learn about the significance of the company they are becoming a part of. And it is not without reflecting on the good and the bad, that members learn from the past. As my guide recounted: "Mondragon went through a period of huge growth for 15 years until 2008. Now, we face a time of crisis. When we had growth we paid less attention to our values." That highlights the importance of corporate values to a company -- it's the one thing that will help a company survive through thick and thin -- training employees to pass on those values ensures that the next generation of the business will maintain its commitment to purpose.

For further information about the global cooperative movement please see
People-Centered Businesses: Co-operatives, Mutuals and the Idea of Membership by Johnston Birchall and Humanizing the Economy: Co-operatives in the Age of Capital by John Restakis

About Jeffrey Hollender
Jeffrey Hollender is co-founder and former CEO of Seventh Generation, which he built into a leading brand known for its authenticity, transparency, and progressive business practices. For more than 25 years, he has helped millions of Americans make green and ethical product choices, beginning with his bestselling book, How to Make the World a Better Place, a Beginner's Guide. He went on to author five additional books, including The Responsibility Revolution and Planet Home. He is a board member of Greenpeace US and Verite and also co-founder of the American Sustainable Business Council. Please visit www.jeffreyhollender.com to learn more and visit Jeffrey's blog. He can also be found on Twitter (@jeffhollender) and on Facebook.