We visited 3 cooperative business assistance centers which all work just in the Basque region.
Saiolan, located as Mondragon University, is the Mondragon cooperatives’ business start-up center though it assists conventional business start ups as well as cooperative start ups. It was started in the early 1980s, a time of high unemployment of university graduates in the Basque region and when, coincidentally, the Bank of Spain required that the Caja Laboral, the Mondragon cooperatives’ bank, get out of the cooperative development business. Saiolan provides a startling range of services to new businesses, be they co-ops or conventional firms. It maintains an inventory of business ideas which have been vetted for feasibility and which are available with assistance to groups wanting to start new businesses. Saiolan will also do prototypes for new products; it is, after all, located in an engineering school that developed out of a metal trades vocational school.
Saiolan’s success rate is impressive: 89% of the business start ups it assisted are still in business after 5 years and 83% are in business after 10 years.
Elkar-lan is the cooperative development center for the Basque region which is jointly supported by two cooperative associations (one representing worker, finance and social service co-ops, the other representing farmer and consumer co-ops) and the Basque regional government’s cooperative agency. It has a staff of three professionals who provide start-up services for new co-ops including information, training, feasibility studies, software for business plans, legal services for incorporation, and monitoring and mentoring services for a year. The last includes regular review of financial statements, attendance at co-op meetings, forwarding official governmental information, and handling all sorts of queries. Each new co-op gets a staff member assigned for a year who serves as its advisor during its first year of business.
Elkar-lan doesn’t handle ongoing payroll, tax, and legal services for co-ops on an on-going basis, but it does provide co-op specific advice to the consultants who provide these services as needed.
Elkar-lan has been setting up 30-40 co-ops a year since it was set up itself in 2003, typically creating 150-300 new jobs annually. About nine-tenths of these are new businesses, largely in the service sector; the remainder are ownership conversions.
Elkar-lan’s success rate: Of the 38 co-ops set up in 2003, 35 – 92% – have survived for 5 years.
ASLE, discussed above, is the umbrella organization for SLs in the Basque region. About one-third of the SLs by number with about three-fourths of the SLs by employment are ASLE members. ASLE provides a remarkably broad range of services both through general services available to all members and through specific consulting services on a fee for service basis. These services include accounting, legal services, human resources management, occupational health and safety, agreements with financial institutions, marketing, assistance with government programs, IT advising, quality assurance, and training services. It has a staff of 28.
For new SLs, ASLE assists in preparation of feasibility studies, and screens them for the unemployment compensation system in order to determine whether the employees starting the SL receive a lump-sum distribution of unemployment compensation to capitalize the new business. It does the legal work for incorporation and business set up. It estimates that it assists about 30 new SL start ups annually out of the roughly 90 established annually in the Basque region.
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The impact of this series of measures has been the creation of a vibrant sector of start-up employee-owned businesses. The Spanish system encourages employees who have worked together, but been laid off, to start new businesses that preserve the social capital built over years, capitalize the new firms with lump sum unemployment compensation and/or severance pay, and provide substantial support in the first several years of business.
This is obviously not a panacea for the ills of modern economies, but it has helped to create one thousand or so new employee-owned businesses employing 13,000 in a region with the population of greater Cleveland with a survival rate that we can only envy.
Sidebar: Izar Cutting Tools
I visited one of the largest of the SL’s, Izar Cutting Tools SAL, to see how the form works in practice. Located just outside of Bilbao in a brand new factory when opened in March 2008, Izar traces its origins to 1910. It began as a division of a family-owned automotive supplier, producing cutting tools for the parent company’s use. Now it produces drill bits and milling machine tooling for CNC machining centers.
Under the government of Francisco Franco (1939-1975), Spain sought to achieve complete economic self-sufficiency ("autarky") behind high tariff walls. It sought to be self-sufficient in everything: cars, trucks, etc. At its peak employment before the crisis, Herramientas de Amorebieta had more than 1000 employees. As Spain prepared to enter the European Union in 1986, it was apparent that many things had to change. The local Basque government sought to achieve international competitiveness by marrying local companies to foreign "technological partners." By that time, the family had already sold Herramientas de Amorebieta which was split into an automotive supply company and a cutting tool company. The latter was sold to an Italian investor based in France "who put into nothing but drained a great deal from the company," according to Izar General Manager Carlos Pujana.
This absentee investor was ousted after pressure from the workers which included strikes, demonstrations, assemblies, and picketing his home in Paris. "He basically got the plant for nothing and we got it back from him for nothing" in a purchase in 1991, says Pujana.
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