Democracy, Design, and the Future of Work

I was excited to find Traci Fenton from Worldblu on the speaker line-up at SXSW. Traci’s an expert on democratic organisations. NixonMcInnes applied to be on the Worldblu list of the most democratic companies in the world - to be announced next month. Here are my notes from her presentation.

Traci graduated from college 12 years ago. Got first job in a Fortune 500 company and was really excited. On day 1, she walked in and realised she was a cog in a machine. ‘Shut up and do as you’re told’ culture. Realised that wasn’t how she wanted to spend the rest of her work life.

3 years ago had idea to create a list of world’s most democratic companies. Travelled the world trying to find organisational democracy and understand how it works. Advised that people might not care or pay attention to the list. But it has been written about in Wall St Journal, BBC etc etc.

People picked up on the story because it’s an idea that’s time has come.

Companies range from small biz to Fortune 500.

Things that CEOs say about running democratic companies: Helps us to be more customer-focused; give better service; motivates and makes employees happier.

What is democracy? Run a company based on Freedom and possibility, not command and control. It’s not about voting on everything, but about everyone having a voice.

The decision-making process can be slower in democratic companies, but the execution is faster because people are bought into the decision.

Command and control has the adult/child dynamic. Democratic is less hierarchical. Flatter.

Command and control worked well in the industrial age. We’re now in the information age / democratic age.

Gallup has an annual poll – 73% of people are disengaged at work. This is a symptom of command and control. Disengaged means either doing a job, but minimum effort or even actively disengaged – deliberately sabotaging the company.

Why is organisational democracy so relevant now? Incoming generation X and Y expect it; decentralisation of communication structures in the wider world; company loyalty on the decline – free agency is rising; people don’t trust big old institutions.

Is your company designed for the democratic age? 10 principles from a decade of research. It’s about making these principles work for YOUR particular organisation.

1.    Purpose and vision. Higher level than mission. Must be defined and well understood.
2.    Transparency (over information etc)
3.    Dialogue (not monologue from management)
4.    Fairness and dignity. Not sameness. No abuse of rank.
5.    Accountability. The backbone of democracy. Often if democracy fails, it’s because accountability isn’t there.
6.    Individual and the collective. You shouldn’t have to ‘check your individuality at the door’
7.    Choice. Flexibility of work hours, how to be paid etc.
8.    Integrity.
9.    Decentralisation of leadership, power, decision-making.
10.    Reflection and evaluation.

All 10 have to be in place to create democracy – it’s not pick-n-mix.

A story from a democratic company: Semco: used to be command and control. On verge of bankruptcy in 1980. Taken over by son of founder, Ricardo Semler at age 21 and continued to run in command and control style. At 25 became ill from stress. Decided to run the company in a different way: Went from 12 layers of management with 100 employees. Today have 3,000 employees in 3 concentric circles of structure. Were ‘closed book’ with financials, now open with all financials including salaries. Employees had no voice, now listen to employees and vote on key issues. Job stagnation was replaced with job rotation – continual change. Now you choose your boss and your team. 11 different ways of being paid – salary; commission; royalties; profit share etc. Bottom line impact: Grown average 25% per year. Revenue $4M grown to $240M. Staff turnover 2% in industry of average of 18%. Check out Maverick to read the full story.

How to move to open book financials: don’t do it overnight. Start be being more transparent around management then involve employees in the process towards greater transparency. You have to be prepared for people to be upset about what others earn and deal with that.

Can governmental organisations run democratically? Not many examples, but certainly possible.

Co-working spaces can be democratic organisations.

What’s the correlation between political democracy and org democracy? Why do we live in free and democratic society but work in command and control companies? The move towards more democracy in the world should filter through to companies.

How to change a company to be more democratic: You need to have the buy-in from the top leadership. They have to believe it. But even if you don’t hold the power, you can start to live the 10 principles in the best way possible within the confines of the company and see if it and spread. Be the change you want to see. Try emailing Harvard Business Review articles about democracy to the CEO.

The change to Semco took 10 years. It’s an evolutionary process but it can be done faster than that.

Meetup.com have awards that they give to people who start their own initiatives and get results so showcase what’s possible.

Only one publicly traded company on the Worldblu list. Wholefoods and Southwest airlines could potentially be on the list.

Traci believes that people naturally want freedom – it’s an instinct.

It’s not for every employee. Requires emotional intelligence and compassion which not everyone has.

Is the logical extension of organisational democracy to not need a company at all and just work together as independent people, like the co-working model? Quite possibly, yes.

Comments

[Beth Granter]

This is really interesting... good luck with getting listed - if NM achieve all of those ten requirements that is fantastic. I find a lack of transparency (i.e. secretiveness) in the workplace really disconcerting. I find it weird that people are so private about how much they earn for example. How are we supposed to figure out if we're being paid fairly if we each only know our own salary?! I also think it's a shame how rarely 'flexible hours' is actually put into practice. It'd be great to agree a salary then choose your hours and do it pro-rata.

[Malcolm Cox]

Tom

A really interesting article, I have a couple of thoughts, I come from a highly regulated industry, commercial aviation, which is by definition a heirarchial organisation; individuals are approved to complete particular tasks, by virtue of training and qualification, organisations must nominate and have approved by the regulatory authorities, post holders responsible for areas of activity with an Accountable Manager ultimately responsible for that organisation. Secondally, customer expectations with regard to aircraft departure, the general public, delivery from maintenance etc, the aircraft operator, are not compatible with flexibility of working hours, given the choice nobody will work nights!

I agree with your 10 principles, however, I find them difficult to fully reconcile with a regulated service industry, I wonder how you would reconcile these challenging demands on individuals and organisations?

As a consultancy I can, and do try and practice the principles, but, trying to applying them to my clients will be more problematic!

I look forward to your thoughts.

[Tom Nixon]

@Beth - really interesting idea about being paid pro-rata for the hours you work. It's something I've thought about before and I know a guy who runs another agency who does this and says it works well. This would mean you could be flexible with your hours without feeling guilty, and also be paid fairly when you work overtime. I'm not quite convinced myself that it's the way to go. I think most people like the security of a regular monthly salary and take the ups and downs as part of the package (providing it works both ways.) But perhaps the solution is to offer this as a flexible employment option - you can either get paid by the hour or fixed. That could be cool.

@Malcolm I think democracy can definitely be more difficult in certain industries especially where the prevailing culture is very closed, risk averse, process-driven etc. However within the airline industry, Southwest Airlines is a great example of a democratic company. If you do some googling you could probably find out more about how they've made it work. Best of luck!

[technodemocratic]

great notes tom - cant wait for the future!

[Roger (C&M Online PR)]

Hi Tom

Nice list. Thanks. Would agree with your views on salary / pay per Beth's notes. This is a tough one. Stupid to have a lack of transparency. Fixed is also often unsupportable. Pro Rata doesn't share the risk of the business (good times and bad). Commission / royalties seems most equitable, but can encourage selfishness in some roles... What's your mix for NM?

Most interested in project management / consulting roles. These are hardest to figure out. I've tried different things in previous lives with varied success (eg, cash cow accounts get *great* service, others that could be the stars of the future *don't*, etc)...

Cheers

Roger

[Tom Nixon]

We don't have any commission or royalties at NM at the moment. We pay salaries and have a company-wide profit share scheme.

I agree that rewards systems are so difficult to get right. It seems there are two schools of thought:

1. At Semco (uber-democratic Brazilian company) they have a huge number of options so that each employee can tailor how they are rewarded to suit themselves.

2. The back to basics approach, focusing on non-financial motivators: interesting work; good working relationships and giving people a voice and influence within the company. I blogged about this here: http://www.tomnixon.co.uk/2008/12/reward-systems-do-not-improve-the-quality-of-work.html

My instincts tell me that No. 2 is the way forward, but we'll have to see.

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[Alex Linsker]

@Malcolm,

Semco had self-organizing teams, and also had assembly lines. Workers chose when to come to work: and they made the assembly line work.

Democracy, especially representative democracy, has a lot of hierarchy. A difference is that instead of managers, you have representatives who are elected. It is by, for, of the people who work there.

Done well, self-organizing teams and other features of organizational democracy make hierarchical organizations more money, more efficiently, and more happily. Instead of cogs in a machine, you have self-aware people acting proactively, still with organization.

Choice + Commitment = Freedom.

There does need to be commitment for it to be democracy.

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