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Cooperative entrepreneurship as a response to restructuring

After successfully overcoming previous waves of industrial restructuring, the Basque Country is now facing new challenges caused by globalisation and industrial delocalisation. The region's industries are showing reduced growth and being forced to follow their competitors, opening factories in cheaper countries like China. This is especially sensitive in a region with one of the strongest co-operative cultures in Europe – a culture which has always stressed a commitment to its territory and people. In this context, the EQUAL project ARIADNA aims to create a new model for co-operative entrepreneurship in the region by specifically targeting the potential of disadvantaged groups.

The organisation entrusted with the coordination of the ARIADNA partnership is MIK, the centre for Innovative and Management of the Mondragón Cooperative Corporation (MCC). MCC is a giant at European level with 78,000 workers, representing 10% of the active population of the province of Guipúzcoa. However, of the 1,700 jobs created by Mondragón enterprises last year, only around 200 were for people of the Basque Country; 1,500 were created abroad as a result of globalisation.

The partners of ARIADNA recognise that this situation can create an increasingly segmented labour market in the Basque country with many of the most vulnerable groups losing out. So cooperative movement organisations have joined forces with the regional government, local authorities, local development agencies and organisations like Caritas, with a long experience in helping disadvantaged people gain access to the labour market. Their aim is to create new cooperatives that have strong links with the territory and cannot be delocalised. In this way, they hope to fulfil guideline 18 of the Integrated Guidelines for Growth and Jobs and ensure an "inclusive labour market for job seekers and disadvantaged people" in the face of severe restructuring.

Creating new cooperatives that resist delocalisation

ARIADNA aims to create five new cooperatives and support recently established cooperatives and thus create around 40 new jobs for people in Guipúzcoa and Vizcaya. However, in doing this they are testing alternative methods for both creating and sustaining cooperative enterprises with strong roots in the territory, run by disadvantaged groups.

The partnership has developed a three-stage process to promote the development and long-term sustainability of new cooperatives. The first stage involves exploring various methods for supporting the creation of new cooperatives. The second is the support and development of the cooperatives. Here they can benefit from an "early warning system" developed by another partner Elkarlan which helps newly created cooperative ventures to anticipate and prepare themselves for potential problems. In the third stage, the project partners withdraw from the cooperative, selling their share to the workers, and leaving them with a fully functioning business that they can continue to operate and benefit from.

In the first stage of the process, that of creating new cooperatives, the partnership has explored two approaches. Coordinator Iñigo Urkidi explains that "Caritas, the official confederation of charity institutions of the Catholic Church, proposed to start from specific enterprise ideas and work to find the people who could create them. Saiolan, the Business Innovation Centre of Mondragon, suggested starting from the target group of people and generating the idea of the cooperative from them."

Rather than choose between the approaches, ARIADNA decided to pilot both of them, with each organisation leading on its preferred approach. This has enabled the project to learn how best to support new cooperatives amongst disadvantaged groups. "These cooperatives are our guinea pigs from whom we can better understand the problems faced," says Iñigo Urkidi.

From the business idea to the organisation

In its daily work on labour insertion, Caritas starts by identifying business ideas and then provides training on the specific sector. However, its focus under the ARIADNA project is different. "We are no longer talking about insertion enterprises, which are supposed to be a transitory stage," says Manuel Moreno from Caritas, "The key point of ARIADNA is that we train people with the objective of making them stay and become worker-partners of the cooperative." Caritas thus decided to adapt its training methodology to meet the specific requirements of creating cooperatives.

According to Manuel Moreno, the crucial issue in cooperative creation is the development of strong interaction and interpersonal relations within the group of individuals concerned. Caritas has therefore introduced a new phase in its training to empower groups through the promotion of team work and by looking at the role each individual can play within the cooperative. "In this phase of the training we try to create what we call the glue," explains Manuel. "That glue is needed in a cooperative, where every worker is a partner."

A group of 13 people has followed training along these lines for the creation of a cooperative for recycling electrical appliances in Muzkiz, Vizcaya. Following an idea from Caritas, they have been learning how to repair electronic devices in order to then sell them on second hand. It is intended that six out of the group will stay on to form a cooperative, where each of them will play a role; this means six new jobs. The participants can already see the potential benefits of it. "In a cooperative you can have a real say on how things are done," points out Cristina, a young woman from the area. For Victor, a Chilean immigrant man in his fifties, the cooperative provides a welcome second chance: "I had my own company and lost everything. Now I have to start from zero again."

Fifteen people are following training on tourist management in the Debagoiena area with the aim of establishing a new cooperative closely linked to the territory. The partnership realised that many people travel to Mondragon for business reasons or European projects, but that no activities were organised for these people. This cooperative is an excellent example of ARIADNA's approach of developing key links with the local territory.

Training people to have business ideas

Saiolan is piloting the second approach of building cooperative initiatives up from people on the ground based on their experiences and helping young people to create their own enterprises. "The plan was to run a communication campaign within the organisations to encourage people with or without business ideas to come to our training course," explains Antonio Verguizas from Saiolan. "We thought we would get 200 applications and would have to select among them the ones that could follow the course."

However, the project soon identified that this approach would not work with ARIADNA's target groups. Rather than tapping immediately into the entrepreneurial spirit of the target individuals, the first wave of communication failed to attract enough people to set up a training course. It became clear that a more proactive approach was necessarily to encourage individuals to make the step into entrepreneurship. It was not enough to simply offer a course and expect people to come; disadvantaged groups need to be supported from the very beginning of the process, including deciding to attend a course in the first place.

From this learning process, Saiolan launched a second wave of communication with intensified efforts, both in terms of reaching a greater number of groups and following up the established contacts more closely. "We have adapted our approach to our target group, since they were not going to simply adapt to us," admits Antonio. The project now approaches each group individually and develops training as specific support to each interested group. As Antonio puts it, "If a group has an idea, then it is important to build on it immediately. Do not mess around, but just go for it and train the group while you are developing their ideas."

This more flexible approach is increasing the take up of training and ensuring that the entrepreneurial spirit that does exist amongst the disadvantaged groups is tapped more effectively. Four groups with business ideas have so far been identified following this adapted methodology. Digi, from Brasil, Luz Mary and Carlos from Colombia and Isabel from Paraguay want to open a Latino restaurant in Bilbao. They are met every week by a team from Saiolan in order to continue both the development of their idea and their training. This is organised in cooperation with the beneficiaries so that it fits with their availability and ensures the process continues.

The project has also chosen different kinds of recently created cooperatives to learn from their approaches and experiences. In the context of EUSKARRI, a social cooperative providing services of support to older people created in June 2006, three new jobs are being created in support services for people with Alzheimer's.

Three of the partners of Ariadna with the worker of the Brazilian restaurant they are supporting. EUSKARRI employs women who have been living on social benefits. "They are also older women, with no other possibilities, that may have some health problems but still have some years to work," says Maria Luisa from EUSKARRI, "We aim at making this activity a profession. They give their sense of humour and tenderness to older people, and they have the possibility of feeling useful and appreciated."

ARIADNA made a diagnosis for EUSKARRI and assists them in their first steps of building this cooperative from the family members of people with Alzheimer's as a cooperative of insertion. "We receive orientation in dealing with the problems of these women," says Blanca, "The project helps us to work with them on punctuality, formalities, image, how to deal with people, and so on."

ARIADNA is both helping and learning from cooperatives of young people keen on climbing who are looking to work on repairing big buildings such as the Guggenheim Museum in Bilbao, a group interested in music to work with sound systems (IKUSENTZUN) and individuals keen to protect local heritage (SERJOIK).

Extending partnership to ensure success

The ARIADNA partnership brings together groups that are experts respectively in making cooperative business initiatives work and in working with disadvantaged groups. This combination enables the partnership to offer effective new alternatives to the negative effects of industrial delocalisation. The Centre for Innovation and Management (MIK) of Mondragon saw that Caritas, with its long experience of helping disadvantaged groups to access the labour market, was the perfect partner when it took the decision to work with disadvantaged groups for the first time. Similarly, Saiolan, the Business Innovation Centre of Mondragon, brought another vision of how to promote business creation by disadvantaged people that the project could test and work with.

This level of partnership was effective for creating new cooperatives, but it was also crucial to extend the partnership to ensure adequate support for the cooperatives in their early development. Elkarlan, a partner specialised in helping to constitute cooperatives, provides support to the cooperatives created by the project by helping them to identify their difficulties and anticipate problems.

The project has also developed innovative links with already established businesses in the form of mixed social cooperatives wit the aim of strengthening the possibilities of business success. A deal has been made with the industrial laundry Zuri-Zuri in Bilbao. This already functioning business wanted to expand its operations; an agreement was therefore made to develop a collective as an additional productive unit for the laundry and thus create seven new jobs.

Under this innovative business model the established business gets 40% of the participation of the cooperative, but receives no profits for the first three years of the operation of the new unit. During those three years Caritas gets 33%, Mondragon 7% and the workers 20% of the collective. The workers are therefore supported by the experience and desire for success of Zuri-Zuri and the expertise and training provided by the project partners as they establish their collective.

The model means there is a commitment within the partnership for mutual advantage. The business agrees not to receive profits early on in return for a stake after a set period of time; the workers agree to share some of their future profits in return for support in creating a cooperative that gives them employment closely linked to their territory. This is particularly important to the success of the project.

Ensuring long-term sustainability

At the end of the three years in the above industrial laundry example, Caritas and Mondragón sell their participation to the workers; Zuri-Zuri maintains its participation and starts to receive profits. This methodology provides three main benefits towards the long-term sustainability of the cooperative's business. Firstly, the workers are able to benefit from the help and support of the project partners for three years. They can continue their training, resolve problems and receive support and guidance as they learn to run the cooperative independently. Secondly, the workers know throughout the process that they are working towards a 60% stake in the cooperative and therefore a controlling share. This means that they are motivated to work for their own benefit and do not feel that they are working hard to have most of the benefits taken by someone else.

Thirdly, Zuri-Zuri remains as a long-term business partner within the cooperative and will continue to provide its experience and support to ensure that the unit is a success. The already existing business is motivated to help build up the cooperative because it will also gain from its success. Manuel Morena explains the particular benefits of the three-stage process: "After the creation of the cooperative, they still have our support, because we are partners of it. The plan is that after 3 or 5 years, we sell our part to them, but the other cooperatives stay as partners."

This type of model ensures that the benefits of the project are not limited to the duration of the EQUAL funding; the cooperative is not reliant on the project partners or project funding for their long-term survival. The cooperative is built up to become a self-financing activity with support coming from long-term independent partners. This means that the cooperatives will become mainstreamed economic activities able to provide long-term employment opportunities to disadvantaged groups.


DP ID: ES-ES20040258
Transnational partners: Sweden: Kooperativ Utveckling Uppsala Län (self-employment); Czech Republic: Centrum pro komunitní práci střední Morava (support of rural unemployed)
TCA id code: 4286
Contact: Iñigo Uriquidi Diez
Telephone: +34 94 371 91 91