The Workers' Paradise A Discussion of Workers Cooperatives and Building the New Economy

November 9, 2010

The Three Dimensional Business Integration

Filed under: Education,Human Relations — Tags: , , — John McNamara @ 7:26 pm

The people who work in our businesses are not two dimensional, why should the structure be?

If you have studied business, or even US history, you have likely heard the term “vertical integration”. This concept was developed by US Steel as a means of controlling the industry through control of the supply lines and distribution networks. It allows a company a lot of control and the ability to benefit from making expenses profit centers since the different parts of the supply and distribution chains can be used for non-competing products as well.

Another common concept is that of horizontal integration. This allows economies of scale as the company can create similar products within a market. General Motors was a great example of this format with the Pontiac, Oldsmobile, and Chevrolet nameplates have a number of common designs with slightly different features.

Well, those of the two external dimensions which notably ignore depth. Is there an example of a company engaged in depth integration? What would that look like? Further, what would a company look like if it engaged in all three forms of business integration to create a three-dimensional business model? There is a great example–Mondragon.

The depth integration develops from something that few US corporations would really care about (or it they did, it would likely end up as The Company Store). Depth, after all, creates an internal dynamic and this means attending to the needs of the workers and sustainability of the business. Of course, this is exactly what Mondragon has done.

First, however, they do have a fairly vertical integration in which they develop co-operatives to handle supply lines and distribution lines. Horizontally, ULGOR has been working hard to keep their place in the market by buying the smaller companies (most recently was the Brand corporation which was just behind ULGOR in market share). So far, Mondragon looks like a standard corporation operating on the global scale. This is where the third dimension arrives:

The Depth integration of Mondragon involves creating co-operatives to provide the social and human needs of the workers. This area of integration means a K-University school system, a Social Security system that provides a horn of plenty in terms of benefits and services, a banking system to meet the members needs and soon assisted living communities for the aging population. All of this works together to provide the basic needs of the workers and families.

Depth integration does more than simply keep the money in the Mondragon system. The presence of a university, management institute and trade school allows workers in unemployment to return to school and learn new skills. this not only benefits the worker, but helps Mondragon keep the correct number of workers to maintain decent wages and benefits. It provides other avenues for workers to use their knowledge and skills. A worker who can’t do the physical labor in the plant may transition to a teaching position. It allows workers to develop themselves as human being through their work. This was the ultimate idea of Mondragon’s spiritual founder, Don José María Arizmendiaretta.

In the US, we often marvel at Mondragon and people fall over themselves to either create Mondragon in the US or to expose every chink in the armor. Fortunately, there are plenty of grad students up to these tasks! However, something that we should consider is this revolutionary form of integration. We don’t need to re-create Mondragon in America, but we should consider how to develop a three-dimensional integration in our existing co-operatives. We need to see where we can partner with existing institutions and create the institutions that we don’t have.

2 Comments »

  1. Three-dimensional business integration is a thoughtful topic. Mondragon´s level of co-operative development is revelatory given the aggressive propaganda of American capitalism. Fortunately, for one, the academic community represents an important sector, granting its diversity of viewpoints. Similarly, civil society, the NGO sector, is another, both offering rich perspectives which inform the possibilities of business integration, I would like to suggest.
    I recall my own personal experience as an undergraduate in Cambridge, MA, when my university still had co-op dorms. That was my second exposure to co-ops, though I hardly recognized the significance of the first, the Harvard Coop consumer co-op. The term “co-op” was never elaborated into its semantics, which would involve its synonyms, for example, co-participant in that case. There, we made orders of food from a local natural food store of things like Erewhon organic cereals. That´s a simple example of a kind of “whole cost” vertical integration in the connection of a college´s alternative, participatory dormitory with an alternative ecologically-oriented food store.
    In the absence of a large enlightened co-operative entity like Mondragon in the U.S., I think compiling examples of smaller collaborative arrangements makes sense. While at the Park Slope Food Co-op, for example, I became aware of their membership in the NCBA, and their financial interaction with the National Co-op Bank, NCB. In East New York, a food co-op was attempted as the result of a collaborative project involving Cornell U. and a local NGO in Queens, NYC, for one. Another effort of interest would be the National Center for Employee Ownership based in Oakland, CA. Corey Rosen et al´s book Equity describes a range of companies who are involved in employee ownership to one degree or another. From Publix Supermarket´s apparently huge program, to ACIPCO pipe company´s trust, to Southwest Airlines and Starbucks ESOPs, the NCEO provides a clearinghouse for apparently unconnected efforts. The late John Logue and Jackie Yates also contributed to academic literature with a 2006 article in Economic and Industrial Democracy.
    In terms of university supports, I´m not aware of much activity out of Cal Berkeley, despite the areas historical and sector strengths, not least of which includes the nearby U.S. Federation of Worker Co-ops. David Ellerman has been located at UC Davis for some years now, and puts them on the map by his presence alone. UWI Madison´s Co-op center is another national treasure, while Kent State in Ohio I believe has some connections to the Ohio Center for Employee Ownership.
    Another organization which provides an important opportunity for conceptual links is the international co-operative organization, the ICA. Their members include various industries, including banking, insurance, and industrial and their co-operative associations. While I had more success identifying co-op insurance through researching newspaper accounts, ICA provides a significant basis for
    identifying established co-operative businesses. CICOPA, for another example, is an international association of industrial co-ops. Whether such co-ops maintain a solidarity-oriented basis characteristic of the solidarity economy is another issue. Meanwhile, Southern New Hampshire College has a program in community development which has come to my attention. At least one of their scholars has been writing about Mondragon. Christine Clamp I think is her name.

    Comment by Mark Rego-Monteiro — November 17, 2010 @ 9:49 am

  2. In reviewing John McNamara’s post, I read again about the K-University school system of Mondragon.
    While I’d need to read or re-read about the specifics, I think we can assume it is a co-operative, participatory and enfranchising type of system.
    I just went to Southern New Hampshire University’s website and found a 2009 article by Christine Clamp, confirming my recollection of her, and which describes the presence of co-op education in the University’s master’s program and some diverse efforts by various students in the program.

    http://www.snhu.edu/8859.asp

    I had also taken a look at the Arizmendi Association of Co-ops in California and found some interesting details in their approach to co-op education and enterprise promotion.
    On a related note, in researching my thesis on community renewable energy strategies, I had come upon an interesting concept articulated by Miguel Mendonca et al. in a 2009 article “…Renewable Energy Policy…” in the journal Politics and Society. They term it the “concrete market institutions and innovative democracy” approach. I think it offers a powerful viewpoint in helping to think about issues of conceptual integration, and for example, in viewing the Fuel Buyer’s Group of NYPIRG, the New York Public INterest Research Group. Like another operation I know of in Pennsylvania, the FBG itself provides no financial discounts in renewable energy per se, but provides wholesale, co-operative discounts on conventional fossil fuels. In turn, this helps in reducing costs of their conventional renewable energy program premiums. While I personally made some efforts to promote the NYPIRG program, I think we can observe that they are not engaged in a more concerted effort to promote their program which limits its effectiveness at the present. For example, simple efforts to link NYPIRG’s FBG program for study by the NCBA, the SNHU program, or the local Green Worker Co-op’s co-op training could have some fundamental benefits.
    I can see that this topic could be extended, and I’ll think about reflecting on this at my blog at http://www.socioeco-econ.blogspot.com.

    Cheers, and thanks for the good thoughts at this blog, John.

    Comment by Mark Rego-Monteiro — November 18, 2010 @ 11:16 am

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