When Fagor Electrodomésticos, the flagship cooperative in the Mondragon Corporation, went bankrupt in 2013, cooperative economists began studying the failure hoping to learn more about why it went bankrupt, and also perhaps, to learn how other cooperatives might avoid the same fate in the future. To that end, Imanol Basterretxea, Iñaki Heras-Saizarbitoria and Aitziber Lertxundi from the University of the Basque Country have just published a really interesting paper reporting on their research into Fagor Electrodomésticos: Can employee ownership and human resource management policies clash in worker cooperatives? Lessons from a defunct cooperative.

There is a lot in this paper, so I think I will deal with it in several posts. Here, I would like to start with some interesting observations the authors make about worker-cooperatives in the manufacturing sector, and about the special challenges companies in this sector face in promoting workplace democracy.

The Mondragon cooperatives are interesting in that many are relatively large businesses involved in manufacturing both commercial and consumer products, and they demonstrate that worker-ownership can be successful in this sector, but the authors of this study found that repetitive, assembly-line labour often does not present workers with many natural opportunities to make decisions and control their own work-day, and that this ‘clash’ between employee ownership on the one hand and assembly-line labour on the other may have contributed to Fagor Electrodomésticos’ problems. Here is how one former manager described the clash:

I think it’s counterproductive to have members on the assembly line performing a repetitive job eight hours a day. In those circumstances, however much ownership they have, the reality of their day-to-day existence is a “nightmare”. (p. 12)

The authors call this type of repetitive labour Taylorist production, after Frederick Winslow Taylor, an early proponent of workplace efficiency, and according to former cooperative members interviewed by the authors, there was a clear mismatch between Taylorist production on the assembly line and worker-owners’ expectations of real democracy in the cooperative. Workers joined the cooperative expecting democracy, but found themselves with little opportunity to act as decision-makers in their actual work-day and as the authors discovered, this lead to very low job satisfaction at Fagor Electrodomésticos, absenteeism, and poor work.

Apparently, one production unit in the company, Cooking, recognized this problem and switched from Taylorist assembly-lines to U-shaped cells with a participatory approach to production, and according to the authors: “all satisfaction surveys we had access to show higher satisfaction of workers in Cooking than in Taylorist production units”. Unfortunately, these innovations were not universally adopted at Fagor Electrodomésticos, and overall satisfaction at the company remained low.

Many of the workers at Fagor Electrodomésticos have transferred to other cooperatives in the Mondragon Corporation, and some reported that other manufacturing cooperatives in the corporation were learning from the mistakes made at Fagor Electrodomésticos and had moved their production processes away from Taylorist assembly lines towards participatory processes more consistent with worker-ownership principles. But they note that there was a trade-off: these new production systems rely more on automation for many of the repetitive tasks involved and so employ a much smaller workforce.

To a greater or lesser extent, any group starting a worker-cooperative will probably have to grapple with these issues eventually. Most businesses, not just large-scale manufacturing, will feature at least some low-skill, repetitive labour somewhere in the workflow. This study strongly suggests that finding ways to structure this work (through participatory production systems), or spread it around more evenly (perhaps through job-sharing or job rotation), so that all worker-owners are fully involved in the democratic management of a cooperative, will be critical for avoiding the kind of democratic failure that ultimately contributed to the overall economic failure of Fagor Electrodomésticos.

Photo Robert Scoble, CC 2.0