Workers rule OK

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

by Rhymer Rigby
Last Updated: 28 Feb 2014

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.


CASE STUDIES


Nixon McInnes

'A democratic organisation needs a very clear reason to exist,' says Tom Nixon (above) of Brighton-based Nixon McInnes, which describes itself as a social media and digital transformation consultancy. 'It needs to be very transparent and open.' What this means in practice, Nixon says, is: 'Open-book accounting. There are no secrets and this means people don't fear things that may or may not be happening.'

Pay is transparent. 'Everyone's salary, even the directors', is available to everyone. We have an elected rewards team who scrutinise all pay decisions, including mine. They can reverse decisions - although this rarely happens as peer review means that people put in sensible salary requests.'

The 17-strong company has long had 'open seats' on the board, so any employee can join in, and it even holds full-company board meetings. Involving people makes for better decisions, says Nixon. 'You don't need to get people on board with decisions because they helped make them.' There is also a lot of decentralisation: 'People can make things happen. Clients say this makes us very responsive.'

Nixon says the commitment to democracy has been there since the start, when he and his co-founder discovered Maverick!. 'It made sense to us and was very empowering.'

In future, he adds: 'One objective is to be democratically owned. Right now, there's a small number of private shareholders but I want the company to be majority-owned by a trust with a market in shares so people can buy and sell them.'

Nixon admits that there's one area where democracy doesn't really work: 'You have to retain control of the purpose of the company. The mission needs to be controlled by the leader.' He adds: 'The best democratic leaders are strong ones who have a mission.'

Perhaps the firm's most unusual institution is its 'Church of fail'. Nixon explains: 'We set it up as a mocked-up church. Then, one at a time, people step up front and tell the team something at work they've failed at. Once you've done your fail, you get a huge round of applause - and you can't sit down until it stops. Being able to confess is very powerful - and it helps you see that it's OK to fail.'


Happy

A quick glance at computer training company Happy's website reveals that it's an out-of-the-ordinary company. It's not so much that it has a philosophy and talks about its values. Rather it's that these are detailed in a very concise, concrete way that's free of the usual corporate boilerplate. Hey, you find yourself thinking, perhaps these guys really mean this.

Indeed they do. Happy is regularly lauded as a company that lives up to its name - and one of the main reasons for this is its commitment to workplace democracy.

'One of our beliefs is that people work best when they're trusted and given freedom, so managers get out of the way,' explains Henry Stewart (above), co-founder of Happy. 'We pre-approve projects so if you want to do something, you go ahead and do it.' If you allow people to do what they want, he explains, they take responsibility for themselves - because they can't avoid it.

Like many democratic workplaces, Happy practises salary transparency. But one of its more unusual initiatives is letting its 25 employees choose their boss.

'Managers can be full, but within reason you can have the manager you want,' explains Stewart. 'People change managers for all sorts of reasons. It might be because they want a different experience, or even because they're too close to their manager.'

Workplace democracy, Stewart says, is not the same as electoral democracy. 'You want people to be well informed about what the business is doing, but they don't want to be involved in everything. Rather, they want a say on things that affect them. For instance, when we moved office we had a couple of choices. We took everyone to both offices and we had a vote. We actually came to the decision we wanted anyway, but everyone was bought in.'

Stewart says he started out as a 'typical, stressed small-business owner'. Then, when he employed only three people, he turned his back on command and control for ever. 'The following year, I had a month off with pneumonia and when I came back I only had to deal with two phone calls.'


Gripple

If you expect democratic businesses to be small, in sectors like the web and consultancy and based in the south-east, Gripple is a breath of fresh air.

It's in Sheffield, makes wire joiners and tensioners, has 1,300 staff and significant international operations. Yet it is radically democratic - to the point where it has established Glide (growth-led, innovation-driven employee company limited), a kind of company within a company, with an elected board to represent the interests of its employee-owners.

'All employees own shares in the business,' explains Andy Davies, a Gripple director and the chairman of Glide. 'They have to buy a minimum of 1,000 shares and retain them for the time they work for the business. These pay dividends and enjoy capital appreciation and can be purchased once a year.'

The idea, he says, is for people to have a stake in the company and be committed to it. 'If you leave to go to another job we'll buy the shares back, although if you retire you can hang on to them.'

Each employee-shareholder has one vote and 'people are elected from the various associate companies in the group to the Glide board. When we chose a new MD recently, the executive board had a say but Glide also had a say. In the end, the new MD was interviewed by 30 people representing the business.'

The company's founder, Methodist minister's son Hugh Facey (above), is gradually handing over his shares in the business so that Glide will eventually be the majority shareholder. To prevent takeover, both Glide and the family of the founder own golden shares, and no one individual can have more than 10% of the shareholding.

As with many other democratic businesses, the idea is that by giving your people representation, you get them involved and allow them to make decisions.

Employees, Davies says, are free to take initiatives and should a business in the group want to embark on a project, 'Glide can fund match new ideas'. Finances are transparent and 'every business period, we tell everyone everything'.

Find this article useful?

Get more great articles like this in your inbox every lunchtime