Workers Rule Ok

By on December 9, 2013

Putting workers in charge might be a suspect idea to most CEOs, but some firms are thriving on it.

It is often said that in the free world the workplace represents something of an aberration. For it is there that we voluntarily submit to the kind of command and control structure more normally associated with dictatorships. True, we do have the freedom to leave, but in practical terms this means finding work at another, usually similarly run, company.

It’s true that companies do have shareholders to call the tune – and that often these shareholders include employees. But it is also the norm that the employee shareholding is not significant: any voice you might have is diluted many thousandfold by huge pension funds and other institutions.

Companies do also on occasion listen to their employees (and often to great effect). But the point is that they don’t have to, and can stop whenever they choose. The result is often lip service rather than real engagement.

So the issue remains – most people work in a place where they have little real say in the decisions that affect them. The best they can hope for is that their goals align with the firm’s and that the dictator (or CEO) is an enlightened and benevolent one.

Of course, there are other, more democratic models. In the UK, the best known is the John Lewis Partnership, which is owned by a trust on behalf of those who work there. There are also mutuals such as the Nationwide Building Society, which is owned by its members (who may include employees).

Other, more recent examples of non-traditional corporate structures include Brazil’s Semco, where Ricardo Semler’s radical vision resulted in a company that was more or less entirely run by its employees, and Mondragon, which is a federation of worker-owned cooperatives employing over 80,000 in Spain’s Basque region.

US business Morning Star has a management structure flatter than the squashed tomatoes it processes. It has no supervisory management at all, and yet it is the world’s largest company in its field.

Most of those who run and work for such overtly democratic (some might say anarchic) workplaces are highly enthusiastic about the experience.

Miranda Ash, chief community evangelist at WorldBlu, which exists to recognise and promote ‘workplace freedom’, says: ‘Our research shows that democratic workplaces give better ROI, they’re more flexible when change happens, and staff are happier at work, enjoy better health and lower rates of employee absenteeism.’

 

What’s more, she adds, they have lower recruitment costs because people tend to stick around.

So why isn’t there more democracy at work? One reason is that people are programmed from an early age to accept hierarchy, says Ash. ‘Schools work in a command and control way, so one of the reasons businesses tend to resist democracy is because hierarchy is so deeply ingrained.’ Another slightly more sinister reason is the increasingly well documented tendency for many businesses to promote those with undesirable traits – the last thing ‘psychopaths in suits’ want to do is cede power to those they control.

A third reason is inertia. It’s tempting to say: ‘Well, if we’d started democratic that would be fine, but we can’t change now.’ Yet it’s worth remembering here that Semco was a conventional company before it became a crucible of workplace radicalism.

Similarly, Indian IT firm HCL – named one of the world’s most democratic places to work – began life in 1976 with a more conventional structure. And in the US there is the remarkable Fortune 500 healthcare company DaVita, where employees refer to themselves as community citizens and ‘boss’ Kent J Thiry, a leading light in the industrial democracy movement, prefers to call himself the mayor of the village, rather than the CEO.

Ash notes that allied to inertia is the power of conventional wisdom and peer pressure. US tech entrepreneur Tony Hsieh, founder of online shoe store Zappos, was famously told by other board members that he needed to grow up and abandon the company’s progressive culture if he wanted to hit the big time. Turns out they were wrong – he sold the business to Amazon four years ago for $1.2bn.

However, for all its upsides, it’s important to note that workplace democracy remains the exception rather than the rule. ‘You can point to businesses that are democratic and very successful,’ says Ian Gooden, CEO of HR consultancy Chiumento.

‘But you can also find very successful examples of autocratic entrepreneurs.’ And, you might add, many of those are also loved by their staff, despite (or perhaps because of) their autocratic nature.

This allows workplace democracy to remain sufficiently outside the mainstream, so that even its most successful exemplars can be held up as exceptions that prove the rule.

Tom Nixon, co-founder of Nixon McInnes (see right), says: ‘There’s not much literature on it. People still refer back to Semler’s Maverick! (which was published in 1993).’

However, there are good reasons to suspect that the future may belong increasingly to the democrats. Nixon says: ‘Generations X and Y don’t expect hierarchies. They don’t like asking for permission – and organisations need to catch up.’

Added to this is a belief that, post crash, capitalism as practised by its Anglo-American proponents serves the few, not the many – and that large companies have not really learned any of the lessons of 2007 or changed their ways.

Moreover, there is a growing recognition that accountability has lagged several decades behind corporate power; if companies are going to be as powerful as governments, they need to be answerable to more people.

Many companies are indeed becoming more democratic – at least in part. Although it’s tough to find a business that fulfils all WorldBlu’s 10 principles (which include ‘transparency’, ‘accountability’ and ‘choice’), it’s increasingly easy to find huge organisations that conform to at least some of them. As Happy’s Henry Stewart (see opposite) says: ‘Even Google is quite democratic in terms of trust and freedom.’

Even so, the widespread adoption of workplace democracy will require a huge cultural change. As the great Semler himself once said: ‘The main problem afflicting all these companies is autocracy. America, Britain and Brazil are very proud of their democratic values in civic life, but I have yet to see a democratic workplace.’ This remains broadly true today.

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