What I Learned on my Summer Vacation – Carla Javits, President and CEO, REDF

Just back from a holiday in Northern Spain – Catalonia and Basque country. In addition to enjoying the incredible beauty, and ridiculously good food, I was struck by the vibrancy, industriousness, and pride of the people I met. In fact, these particular regions are the economic engines of the Spanish economy. Both areas continue their pattern of economic growth while asserting their desire for greater autonomy in different ways, much to the consternation of the Spanish government.

Spanish history is fraught with turmoil, peaking in the civil war between the fascistic Franco forces and troops defending the elected government of the republic that proceeded his ultimately successful, and violent bid for power.

A little known, but important story relevant to REDF that weaves together these cultural and historic themes is that of Mondragon Industries. Founded in the 1940’s by a visionary Spanish priest José María Arizmendiarrieta and a group of young men he helped to train as engineers, today Mondragon is the largest set of affiliated cooperatively owned businesses in the world, with 80,000 members. The highest paid employees earn no more than six times that of the lowest paid, whereas the salary ratio of lowest to highest in large Spanish companies is 1 to 100. And every cooperative member has a vote on company policies and a financial stake in business success.

We had the chance to visit Mondragon, hosted by the enthusiastic and knowledgeable Ander Etxberria who generously spent the day sharing the founding story and noting its continued growth. The successes were nourished by the region’s deeply rooted values: hard work, a sense of solidarity and egalitarianism emerging from Catholic teachings (the Jesuit order was founded in Basque country), and a broader history of worker activism.

Ander shared one story that got me thinking about REDF’s work — which is to scale up a growing movement of U.S. social enterprises. These are businesses that provide jobs and training to individuals who otherwise face long odds of getting jobs or keeping them due to histories of incarceration, homelessness, and other hard challenges.

When Father Arizmendiarrieta was first sent to Mondragon, his mission was to improve life for the local residents. The big businesses in town practiced a form of paternalism, offering benefits like education or access to swimming pools to their employees, but not to anyone else in town. He requested their partnership in developing the whole community for all residents. When they refused, knowing that the government, under Franco was not going to ride to the rescue, he went on to organize and educate a group of smart, local young people. Together they founded Mondragon.

In the U.S. today, REDF is part of a larger movement that is both engaging and challenging the business community to take more responsibility for addressing broader social concerns.  As the American Dream dims for many in the wake of the shrinking U.S. share of the world’s economic pie, fewer Americans, working or not, can afford, or are secure in accessing the basics that add up to a decent life – a home, nutritious food, and care in times of illness or infirmity. Government seems outmatched by the problem, without the leadership or resources to make significant change. Public confidence in mainstream institutions is eroding.

At this critical moment, there is fresh interest in the responsibility of business to address societal challenges. Across the U.S., elements of the business community are embracing the vision of a more engaged role. Although rhetoric has outstripped doing, there are signs of progress.

This Mondragon-like challenge to the business community is dovetailing with another development. As the economy has heated up, businesses complain that they cannot find the talent they need. Some contend that job applicants are not well prepared for work, from the front lines, to college graduates. This ‘skills gap’ generates costs due to unnecessarily high levels of turnover at the front lines in retail and other industries; recruitment; and costs to manage workers whose skills may fall short.

Meanwhile U.S. workers, particularly those at median income or below, are contending with a gap between their compensation packages, and the costs of a basic, decent life. Housing and health care top the list of costs that even full time workers struggle to meet. As just one among many other data points, 7.3 million (low income) U.S. households are currently paying more than half of their income for rent.

Mondragon is one international example of what can be done by business to create higher wages and assets for the workforce.

Back in the U.S., three practices worth watching that could turn into the Mondragons of the future:

  • Business Hiring. FSG is leading a multi-sector initiative to develop and share the practices and evidence to transform the way business sources and manages front line talent to include more people who are overcoming various barriers, train and advance that workforce, and compensate them decently. For example, Greyston, a decades old social enterprise that notably bakes the brownies for Ben and Jerry, has just created The Center for Open Hiring to teach other businesses their proven and successful approach to hiring people regardless of their backgrounds. Grads of Life, and its’ many partners which include Starbucks, YearUp, Juma, and LeadersUp, is helping businesses tap the talent pipeline of “opportunity youth”.
  • The Democracy Collaborative has been organizing and instigating new approaches like cooperatives, and most recently has assembled a geographically diverse set of health systems that have pledged to utilize their market power as “anchor institutions” to drive economic growth and workforce inclusion in the markets in which they operate. From its base in California, Project Equity is leading a worker-owned cooperative initiative.
  • Social enterprises. In 2017 alone, 80 social enterprises that REDF supported in 21 states employed more than 10,000 people who are overcoming barriers like homelessness and incarceration – with the capability to employ another 10,000 or more every year, and help them move into mainstream employment with the kinds of companies FSG is cultivating. This vibrant sector is growing dramatically. The practitioner network at REDFworkshop.org alone has 10,000 members. Among others, the Center for Employment Opportunities and Juma Ventures are scaling their work to multiple communities across the U.S. employing, respectively, thousands of individuals exiting incarceration and young adults.

Meanwhile SourceAmerica, the intermediary for the nation’s AbilityOne program that targets federal procurement to companies employing people with severe disabilities, is investing in a future-oriented strategy to modernize and diversify its’ community of enterprises which already employ more than 100,000 people each year.

And many of the companies in the Goodwill network, which is a major participant in AbilityOne, and employs about 100,000 people in total, are also taking steps to modernize and help more of employees move on and up the career ladder – notably in Austin, San Francisco, and San Jose.

There’s an expression in Basque country – ‘sirimiri’ – that means the kind of drizzly fog we often see here in the S.F. Bay Area. When Father Arizmendiarrati challenged the business community, and helped educate home-grown entrepreneurs who founded Mondragon, he had a vision of something that had never been done – that perhaps looked a bit ‘sirimiri’ at the time. With business acumen, persistence, and an unwavering commitment to valuing the entire workforce and helping the entire community, Mondragon has become a force to be reckoned with.

That arc of success is on the horizon in the U.S., and the forward thinking social enterprises and other companies that are part of the initiatives outlined above are the leading edge of a trend with the potential, over time, to blow away the sirimiri clouding the American Dream, brightening the lives and the hopes of millions of American.