The Workers' Paradise

January 25, 2010

#20 Payment Solidarity

Filed under: Identity Statement Series — Tags: , , , , , , — John McNamara @ 1:50 pm

The Mondragon Co-operatives maintain the concept of wage solidarity. From the beginning, the ratio of the highest paid position (manager) and the lowest paid (new worker) was locked at 3:1. In the 80’s this changed and today there are some positions that earn a 6:1 ratio and one (the CEO of the International MCC) who receives 9:1. Even with the tripling of the upper end of the ratio, it is still a far cry from the 150 or even 300:1 ratios that modern stock corporations tend to employ.

What interests me about this principle (and I think that it should be in the Identity Statement as well), is that Mondragon expresses the co-operative value of solidarity. It puts solidarity into the operations of the co-operative.

The language of Mondragon follows:

“The Mondragon Co-operative Experience proclaims sufficient and solidarity remuneration to be a basic principle in its management, expressed in the following terms:

a) Sufficient, in accordance with the possibilities of the Co-operative

b) Solidarity, in the following specific spheres:

  1. a. Internal. Materialised, amongst other aspect, in the existence of a differential, based on solidarity, in payment for work.
  2. b. External. Materialised in the criteria that average internal payment levels are equivalent to those of salaried workers in the area, unless the wage policy in this area is obviously insufficient.”

Note that the principle calls upon the worker co-operative to either ensure that its workers receive the prevailing wage or, if that wage is too low, become the wage leader in their industry and area. The prevailing wage must be at least a living wage*  for the community.

The principle of pay solidarity helps flatten the hierarchy in worker co-operatives. The pay differentials are kept small as a means of valuing all work performed to help the co-operative succeed as well as valuing all workers in the co-operative from the very new to the very senior. This principle helps to deflate the ego within the co-operative. Is someone with 30 years in the co-operative worth more as a worker? In some senses, the  experience and knowledge of the industry that comes with 30 years of work can be vital to the success of the organization, but is it worth them being paid 30 times the pay of a new hire?

Does someone who manages the marketing of the co-operative do more to create wealth (by getting customers) than front-line workers? Should that ability earn more than others?

These are very real questions for worker co-operatives and they are questions which can cause a lot of divisiveness. The way that the worker co-operative addresses these issues can dramatically effect the co-operative to enable it to succeed or cause it to fail.

Does a flat compensation system (everyone gets the same pay regardless of their job duties) encourage good management or cause the people who have management skills to seek employment elsewhere? Does a staggered system of seniority and pay levels create an aristocracy within the co-operative?

It is important for worker co-operatives to find the right balance based on their industry and their internal culture. It probably needs to be revisited from time-to-time. One aspect, in thinking about payment solidarity, should be leadership development. If the compensation levels are set too low, then the co-op will likely become a training center for its competitors or other businesses. If it is set too high, the co-operative may create a rift between the high bracket managers and the low bracket workers. Creating an “us vs. them” mentality can only lead to failure of the co-operative.

To truly maintain solidarity in payment, co-operatives must employ measures to develop leadership among their own ranks. When we need to hire managers from outside, who know the industry, we risk a lot. The culture of a worker co-operative can be destroyed by outside management who bring the attitudes of the traditional corporations with them. I’ve seen this up-close and personal and also from a far. Good Vibrations recently demutualized (becoming a standard ESOP) after hiring outside management (and changing the pay ratio to do so). Now, I am sure that the decisions to demutualize were very complicated (and it was a unanimous vote of the membership); however, it was clear that the culture of the organization changed after they increased their pay ratio in order to hire a manager from the mail order industry.

Of course, once we develop management, we also will need to compete with the outside world to keep them. Thus, our development programs must be based on two concepts: the management needs of the industry and the management needs of the co-operative. Whether our management has a traditional hierarchy or done through committee and semi-autonomous collectives, these two concepts need to be part of the discussion. With this in mind, it can be easier to develop a payment solidarity plan that recognizes a member’s experience, knowledge and commitment while also ensuring that the  “floor” for workers (whether by position or seniority) remains suited to a living wage for the community. This is the opposite of the corporations who figure out the senior management pay and stockholder dividends first and then use what is left over for the workers.

From Don José María Arizmendiaretta, “Solidarity is not just a theoretical proclamation, but something that should be put into practice and made manifest, willingly accepting the limitations of team work and of association, since this is the way to enable people to help each other.” (as reported by José María Ormaechea in his book The Mondragon Cooperative Experience)

This marks the end of the Mondragon diversion. I have called these four principles the “worker co-operative user principles”. These four principles should, in my opinion, be part of the Co-operative Identity. Co-operatives, regardless of the sector, require people to do work to benefit the users. Because of this, co-operatives should see the worker as a primary stakeholder and create means for the worker to truly benefit from their experience in the co-operative. I will even go so far as to argue that all co-operatives should either have a membership class for the workers or actively promote the unionization of their workers. Co-operatives must avoid exploitation. If we believe in Fair Trade for farmers producing coffee, chocolate, sugar and the like, then we must also believe in fair trade for the laborers who get those products on the shelf.

*what is a “living wage”? Madison, WI sets their definition as 120% of the poverty threshold for a family of four (currently $11.21/hour). Dane County arbitrarily declared it to be $8.70/hour. I think that worker co-operatives should work on this definition. I think that it should be a wage that allows a family to experience security with regards to nutrition, housing, health, education, clothing and socialization. This number will vary based on the community. I don’t think that it needs to mean a single-income home, but it should mean that someone can take care of themselves and their dependents at a basic level. Probably a topic for another post. . . .

Next: the 4th Principle—Autonomy and Independence

January 18, 2010

#19 Participatory Management

Filed under: Identity Statement Series — Tags: , , , , , , — John McNamara @ 12:05 pm

The next principle from Mondragon is that of Participatory Management. This seems like a no-brainer for worker co-operatives. What is the point of going through all the work of setting up a worker co-op if the workers don’t actually have a say in how the place is run? They would be better off in a unionized Employee Stock Ownership Program.

I’ll get more into this in a second. First, I want to share the language of the principle from Mondragon (translated, as they all are, of course):

“The Mondragon Cooperative Experience believes that the democratic character of the Cooperative is not limited to membership aspects, but that it also implies the progressive development of self-management and consequently of the participation of members in the sphere of business management which, in turn, requires:

a)     The development of suitable mechanisms and channels for participation.

b)    Freedom of information concerning the development of the basic management variables of the Cooperative.

c)     The practice of methods of consultation and negotiation with worker-members and their social representatives in economic, organisational and labour decisions which concern or affect them.

d)    The systematic application of social and professional training plans for members.

e)     The establishment of internal promotion as the basic means of covering posts with greater professional responsibility.”

(source: The Mondragon Cooperative Experience, by José María Ormaechea, 2000)

Second, I want to parse the word management. We manage our co-operative whether or not we have a person holding a title with the word “manager”. Some co-ops manage collectively, some manage through a hierarchy, but we all manage the same things: assets, liabilities, equity, work performance, customer satisfaction etc. In this, as in most posts, I use the term management and manager in the broad sense.

Participatory management does not mean democracy and democracy does not mean participatory management. I say this because they are often linked together in a synonymous manner. A worker co-operative can have a strict top-down hierarchy that allows little or no member input and still elect its board of directors. Likewise, the concept of participatory workplaces can exist in capitalist organizations.

This principle exposes some dangers to worker co-operatives in that it is this area that the co-operative movement may be co-opted. World Blu has created a list of the “most democratic workplaces” for a couple of years now. While I have nothing against their mission, they misuse the word democracy when they mean participatory management. Only a handful of the companies on their list are co-ops or esops. In other words, they are honoring workplaces as “democratic” when the workers have no control over the governance of the organization. While I think that participatory management is a noble thing for a stock corporation to entertain, it isn’t democracy, it isn’t a right. It can be taken away as soon as the stockholders decide the experiment isn’t making them enough money. While I support World Blu’s efforts to humanize capitalism, I don’t think it will ever succeed on a grand scale but am glad that the workers in those business have a decent place to work.

A worker co-operative should abide by the values and principles of democracy. Participatory management should be another user principle for co-operatives even if it isn’t in the Identity Statement. It is the means by which the workers of the co-operative “use” their co-operative. Just as consumers use the products and services of a consumer co-operatives, workers use their ability to participate in decisions affecting their work life (roughly ¼-1/3 of our lives) as their right of membership.

Mondragon has created an excellent definition of participatory management. It isn’t simply deciding what type chairs to get for the office, it involves a complete involvement of the workforce in the operations and planning of the organization.

Note though, that the principle discusses the creation of “suitable” methods. Decisions have to be made and they have to be made in a way that enhances the organization in terms of serving their customers and succeeding in the market place. A restaurant can’t hold a membership meeting to discuss which person serves which table every time a customer walks in for dinner. A cab company can’t hold a debate about call assignment for each and every order. However, the co-operative can create methods of having these discussions about systems that ensure fairness and those methods should involve a wide range of voices from the membership.

Information has to be available to everyone or how can it truly run as a democracy. This isn’t on a “need-to-know” basis, but on the basis of ownership.

Another key point is that the co-operative needs to create bodies that will assist the worker-members in finding their voice. This might be a peer support program, a traditional stewards’ council, or even a labor union (although that is decidedly not what Mondragon is talking about). The bigger point being that management in a worker co-operative (whether run with a hierarchy or not) needs to establish means for worker’s to have a real voice in the discussion. Depending on the size of the organization (and the work week schedule) this will have different levels of formality. Rainbow Grocery is famous for its collectivist approach while Union CabMondragon models the labor movement through a stewards’ council and committee structure. uses a “social committee” in which elected representatives help provide input to the board and management as well as acting as a watch dog.

The last two points of the principle create an imperative of making participation systemic. As with the Sovereignty of Labour, this principle promotes the belief of internal promotion. The top end positions of a worker co-operative should generally not be hired from the outside of the worker co-operative movement. It is better for worker co-operative to create strong in-house training (and utilize professional development programs such as the Masters of Management: Co-operatives and Credit Unions) to develop the future leaders of the co-operative. One of the problems, in the United States, is that our co-operatives tend to be small and this limits opportunity for workers to advance and develop. It also limits the level of education and training that can be provided. However, we need to think beyond our stand-alone co-operatives. Just as Mondragon is a system of 180 or so co-operatives, we should start thinking of US Worker Cooperatives existing as an economic base.

Ormaechea chose this particular quote from Don José: “Co-operation brings people together in a collective task, but it gives each one responsibility. It is the development of the individual, not against the rest, but with the rest.”

By creating a base of strong management of our co-operatives we build the capacity for the movement to grow. We create the means for our co-operatives to cross-pollinate, to occasionally go outside of our stand-alone co-ops and we also create the means for the rank-and-file members to expand themselves, to develop themselves as people.

Next Week: Payment Solidarity

January 11, 2010

#18 The Instrumental and Subordinate Nature of Capital

Filed under: Human Relations,Identity Statement Series — Tags: , , , — John McNamara @ 10:20 am

“We do not aspire to economic development as an end, but as a means.”

–Don José María Arizmendiarrieta, spiritual founder of Mondragon

This Mondragon principle, in practice, operates more closely to the Identity Statement principle of Member Economic Participation. I included it in this side road of the over all series because I believe that Mondragon presents a nuance all too often lost in the co-operative movement and, in the silo-ed environment of the US worker co-operative movement, we often tend to forget the role of capital in our organizations is significantly different from that of our industry and capitalist competitors.

The role of capital in a worker co-operative should be two-fold:

1) ensure the on-going operations of the co-operative

2) allow the co-operative to maintain the highest level of safety and quality of work-life.

Thus, this principle presents the balancing act of worker co-operatives. As the opening quote suggests, if we are just in it for the money, what are we really trying to accomplish? However, DJMA has also said, “Cooperativism without the structural capacity to attract and assimilate capital at the level of the requirements of industrial productivity is but a temporary solution, an invalid formula.”

The definition of this principle is as follows:

” The Mondragon Cooperative Experience considers capital to an instrument, subordinate to Labour, necessary for business development and worthy, therefore, of:

a) Remuneration, which is:

  • Just, in relation to the efforts implied in accumulating capital,
  • Adequate, to enable necessary resources to be provided,
  • Limited in its amount, by means of corresponding controls,
  • Not directly linked to the profits made.

b) Availability subordinate to the continuity and development of the cooperative, without preventing the correct application of the principle of open admission.”

As a tool, the role of capital should not exclude members from participation in their co-operative. This is a key point for worker co-operatives. The level of capital investment by the member should be appropriate to the needs of the industry and the ability of the worker to contribute. Otherwise, the role of capital dwarfs the rights of the workers, the human beings.

Another important diversion for worker co-operatives is the separation of capital from profits. Too often I hear directors (who have come to us from the “for profit” world) talk about the need for “return on investment” or “return on equity” as the means for deciding the correct course of the co-operative. However, that places capital in a position of greater importance than it needs to be or should be. While a surplus (profit) is needed to re-capitalize the organization and to expand, that should be the limit of its effect. We should not seek to maximize ROI because that mindset leads to the disaster capitalism that has plagued our macro-economy for thirty years.

Capital, in a cooperative, exists to serve the needs of the members collectively. In a worker co-operative, Capital should mean ensuring good paying jobs, safe working conditions and the opportunity for human development. Co-operatives exists as a means for socio-economic transformation of the community, not for the further enrichment of the few who control capital. This may be one of the key differences of cooperation from its market based cousin capitalism. Capital, in a cooperative, should be used to elevate the human being, to eliminate (or minimize) exploitation, and create a sustainable community.

This may seem like an obvious concept, but it is not. Too often co-operative managers hear the siren song of the capitalists. When we start hearing managers talking about industry “best practices” we should immediately ask who those practices are best for. Are those practices “best” for the workers or the stockholders? Are they best for the consumers or the stockholders? Are they “best” for managers or the members? Are they “best” for the community or the stockholders? We need to see that our co-operatives must develop their own best practices for the industry. By creating best practices that do not get tied to maximizing ROI or ROE, we can create strong, vibrant workplaces that will, in turn, create sustainable, vibrant communities.

These are, I believe, the questions that Don Jose wants us to ask. We cannot simply pretend that we are at the grown-ups table when we manage our businesses. We cannot model the “industry” without focusing on the unique role of capital in our co-operatives. As the opening quote states, the role of capital is simply a means to a better future. It should never be considered an end unto itself.

Next Week: Participatory Management

January 6, 2010

Going International and Other Updates

Filed under: Site News — John McNamara @ 9:42 am

The Workers’ Paradise has a new contributing author on board. John A. Atherton from the United Kingdom has offered to cross post his blogs from UK Worker Co-operatives on this site to help reach co-operators in the US. We often think of the UK as being the Consumer sector, but they also have a growing worker co-operative movement.

This brings our author group to six (Bernard and Edgar from SF), Matt, Myself and Fred from Madison, and now John from the UK.

Do you have the inspiration, desire, to put your ideas out there? Join the conversation here. Whether it is a simple comment on an existing post or developing your own series, I hope that you will consider sharing with the rest of us. Fred recently started a neat discussion on the idea of neo-syndicalism that may have been lost over the holidays, but it is worthy of a fresh look. If you want to sign up, you can join as a subscriber by yourself. Then send me an email (johnamac<at>me.com) and let me know a bit about you and that you want to write. I maintain a light edit hand (mainly just to format and make sure that tags are in place).

I expect to do some more updating this year. As I noted in the comments on my most recent post, I think that a bibliography of relevant titles might be worthwhile. The US Federation has maintained a reading list at GoodReads, but repetition never hurts.

In any event, welcome John! We look forward to reading about the UK experience!

January 4, 2010

#17 Sovereignty of Labor (Mondragon Priniciples)

Filed under: Human Relations,Identity Statement Series — Tags: , , , — John McNamara @ 1:00 pm

The Mondragon principle “Sovereignty of Labor” created departure from the cooperative movement. While the Rochdale Pioneers had good intentions, they abandoned worker cooperation in the 1870’s. The Fabian Socialist moved even further from the ideals of Robert Owen declaring consumerism as the lowest common denominator for human relationships eschewing workers as merely another stakeholder group. Even the French cooperativist Charles Gide turned away from worker associations. Sadly, this act left the labor movement adrift from the cooperative world even as organizations such as the Industrial Workers of the World and the Congress of Industrial Organizations developed worldviews akin to the ideal of cooperation.

In the US, as in most of the Capitalist dominated world, the idea of labor being sovereign is almost non-existent. Business schools spend a lot of money teaching future managers how to manage workers—increase their productivity and the companies profits Except in the more enlightened firms, managers treat workers as errant children. Likewise, the dominant culture makes work something to be avoided and champions obstruction as “fighting the man”. People who do work hard tend to be treated as suck-ups and “upwardly mobile”. We mock the Ragged Dick stories in which “by luck and by pluck and good boy may succeed”. We have been conditioned to hate work and to distrust anyone who suggests that we work hard. The wobblies ran a cartoon called Blockhead who ridiculed the “company man”.

A part of me says, “damn straight!” why should workers gleefully assist the people exploiting them? The life of a worker under capitalism is not any better than it was under feudalism. In some ways, it is worse. The bond between serf and lord was based on land, food and safety. Capitalism replaced those bonds of survival by monetizing them and making currency the commonality of humanity. The chattel slave became the wage slave in the first round of outsourcing that allowed the owner to reduce or eliminate the cost of housing and feeding the workers in their employ.

The Jesuits had a different tradition, thankfully. St. Ignatius, founder of the Jesuit Order, took his vows of celibacy just a few kilometers from Mondragon in the foothills overlooking Onati. The Basque followers of St. Ignatius believed that work could lead to transformation and salvation. In the Spanish Empire they attempted to covert the native Americans of the Tipu-Guarni* through worker collectives known at Jesuit Reductions and immortalized in the movie, The Mission. It was a modern day member of their order, Don José María Arizmendiarreta (DJMA) who would bring that ethic to the small town of Mondragon and teach five young mean the value of cooperation.

The Principles of Mondragon Cooperative Corporation state:

“The Mondragon Cooperative Experience considers that Labour is the principal factor for transforming nature, society and human beings themselves, and therefore:

a) Renounces the systemic contracting of salaried workers

b) Gives labour total primacy in the organization of cooperatives

c) Considers Labour to be worthy, in essence, in the distribution of the wealth created.

d) Manifests its will to extend the options for work to all members of the society.”

There should be a different culture in worker cooperatives, where the workers truly own and control the company. However, waving a magic wand cannot do it. To this end, it is important for worker cooperatives to adopt the notion of the sovereignty of labor. We need to instill a cooperative work ethic in our organizations. Not a work ethic based on enriching others (or even consumers for that matter), but of social transformation or us and our peers based on honesty, openness, and solidarity and caring for others.

Don Jose spoke often on this topic. “Man transforms and makes nature fertile through his labour,” he wrote”, and labour is the greatest asset that the community possesses: to live with dignity, one must embrace work.” Of DJMA, did not mean a mindless embrace of the protestant work ethic to benefit the sputtering Franco economic engine. He meant that workers should own their labor. They should be, as another Jesuit priest from the previous generation argued, “Masters of their Destiny”.

That is the point of this principle. We, as workers, should honor work. We should give to our cooperatives 100% of our effort. When we do this, we begin to transform ourselves and our community creating something of greater value. We must honor all work and recognize that all of those who work as members of our cooperative (or as people who may become members). Sometimes, this work ethic can turn itself on its head and we regard the presence of “management” or “leaders” as we would in the outside world. This is an incorrect understanding of this principle. Sr. Ormaechea denounces the “duplicity of individualism” which might make those of us in the US wince a bit.  However, the sovereignty of labor is in relation to capital not individuals. In the capitalist world, we have learned that managers and leaders tend to be the agents of capital, not labor (sadly this is even true of some labor leaders). The role of the cooperative should be to empower all workers. Management or leaders (as we shall see) come from the workers and belong to them—they are not alien to the work force, but part of it.

We do not invoke this principle by emulating Talyorist strategies or adopting a proprietor’s attitude towards co-workers. Treating our fellow members as our employees is not the correct method of expressing the sovereignty of labor. Instead, we embrace this principle by developing each other as co-leaders in our enterprise. We operationalize this principle by making decisions that enrich the lives of the workers (in terms of safety, education, and health) over the base need for profit. We honor this principle by treating each other as equals and as humans deserving of our respect and love. By doing these things, we change the nature of work from an act of necessity to one of social transformation. We overcome the cultural animosity acquired from being a wage slave to create a new culture of mutual self-help and self-responsibility.

*The currency of Paraguay is the Guarni, which represents the historic measure of wealth in the region (how many Guarni were owned by the Spanish slaveholders)

Next Week: The Instrumental and Subordinate Nature of Capital

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