Workplace democracy

by Martin Oliver December 3, 2012

Many of us live in a democracy but work in a dictatorship. It is common to have little or no say about your working environment, hours and culture. The notion of influencing what goes on behind closed doors in the manager’s office is far-fetched in the extreme for some workplaces.

Amid a fixation on improved “efficiency”, employees are being pushed to work ever faster, with an inevitable human cost. A hierarchical, “command-and-control” management style makes little allowance for the often chaotic nature of the real world and individual idiosyncrasies.

Scientifically oriented management of workplaces is often known as Taylorism, named after industrial efficiency pioneer Frederick Winslow Taylor. It arose in the late 19th century when industrialisation was giving birth to the modern era of mass production.

Without evasive action, companies risk re-creating the parent-child relationship in dealings with their employees, who are inclined to exhibit symptoms of boredom and disengagement, both of which will work against their employer’s best interests.

Searching for a solution

An alternative to the command-and-control model was outlined in Douglas McGregor’s seminal 1960 book The Human Side of Enterprise. This looked at Abraham Maslow’s theories of humanistic psychology and used them to outline a more participative and empowering workplace model.

In recent years, at a societal level, quality of life, happiness and fulfilment have been eclipsing acquisition and competitiveness as core values. If necessary, employees are frequently prepared to trade part of their weekly salary for a workplace where they are not only treated with respect but also encouraged to be creative and reach their full potential. New businesses are increasingly reflecting these preferences, signalling a groundswell in the corporate world.

Suits and ties are often being jettisoned in favour of an informal and friendly work environment that may feature social celebrations, nap rooms, and sports facilities. Stifling hierarchies are being replaced by networks and collaborative teams, particularly in the technology sector.

One notable example is Zappos, an online shoe and apparel retailer headquartered near Las Vegas, which has attracted prolific media attention for its interesting practices that include:

A focus on the best possible customer service as a means of getting repeat customers
One of its 10 core values being “Create Fun and A Little Weirdness”
Spontaneous office parades
Employees being encouraged to decorate their workspaces
An absence of call-centre scripts and no limit on the length of calls
A requirement that managers spend 10–20 per cent of their time goofing off with employees outside the office

WorldBlu is a non-profit organisation whose mission is to promote democratic companies and to facilitate a transition to more participative workplaces. It has an ambitious goal of seeing 1 billion people working in free and democratic companies.

Two notable examples stand out as companies that have over the past decades been pioneering in this field.

Chemical coatings and creativity

In 1958, Bill Gore left his technical research role with the US chemical giant DuPont. To a degree, he was dissatisfied with the company’s policies, which he believed had the effect of stifling innovation. Furthermore, he considered the company was ignoring opportunities to commercialise new uses for the chemical polymer polytetrafluoroethylene (PTFE).

Having obtained a licence for the technology, he set up a small business in his basement. This grew to be not only a model of commercial success but a template for fostering innovation among one’s workforce. W.L. Gore and Associates operates under a culture where generating new ideas is as highly valued as profiting from existing ones. While Gore-Tex is most commonly recognised as a waterproof coating, PTFE has a vast and growing number of applications, including synthetic blood vessels, coated guitar strings, tennis court roofs and as a protective coating for astronaut suits. Annual revenue stands at US $3 billion (AUD $3 billion, NZD $3.9 billion) and there are 9000 employees at 30 different locations worldwide.

What makes W.L. Gore unique is its remarkable horizontal business structure under which there is no management hierarchy and therefore no CEO or Vice-President. Often referred to as a lattice, it was chosen as a means of maximising communication flow, with every staff member able to communicate freely with all the others. In his earlier job, Gore had observed that communication flowed better in the carpool, where there were no bosses overhearing remarks. Company data that in other businesses would probably be a closely guarded secret is made freely available to employees (always referred to as “associates”).

Adjusting to this different system requires associates to change their mindsets and navigate a lack of overt structure where nobody is their boss and there is no one to tell them what to do. Although it generally takes months to familiarise oneself with the W.L. Gore work culture, many on the team later come to appreciate its advantages.

Associates negotiate job assignments and responsibilities with their peers and are encouraged to maximise their individual potential by working in the areas that most interest them. The preferred structure is group brainstorming, which offers the benefits of diverse perspectives and fast decision-making. Gore himself found that these taskforces could make great breakthroughs when given free rein to solve problems. Allowing mistakes to be made is an accepted part of the culture.

Workers are ranked by their peers, and are compensated in accordance with their perceived contribution to the company. With its egalitarian structure, there is no way anyone can use their influence within the company for personal gain, and the open culture prevents corruption. Risks and rewards are both shared, all associates are part-owners via a stock plan, and investment decisions are made with a long time horizon in mind.

Unfortunately, although the company has a commendable structure, there are downsides to their operation, too. The manufacture of Gore-Tex involves perfluorooctanoic acid (PFOA), a persistent environmental contaminant found in the blood of most people living in industrialised countries that has been linked to a range of health effects including cancer, liver toxicity and hormonal effects. As a perfluorocarbon, PFOA is also a potent synthetic greenhouse gas. Gore-Tex coatings are also based on nanotechnology, a technology that has come under criticism for its potential to cause health damage and for still being unregulated.

A Brazilian maverick

Ricardo Semler is the CEO and majority owner of Semco, a large Brazilian company active in the industrial and service sectors. He is most notable for his radical ideas in the field of industrial democracy that have been widely acknowledged, if rarely emulated, by the global business community.

Born in 1959 in the Brazilian city of Sao Paolo, Semler graduated from Harvard Business School at the age of 20. In 1980, he started working for his father Antonio’s business, Semler and Company. Differences of opinion between the two, especially in management style, led to heated exchanges. Antonio favoured an autocratic approach while Ricardo was wedded to workforce empowerment. Furthermore, Ricardo favoured diversifying away from supplying marine pumps to the struggling shipbuilding industry.

Ricardo was about to leave the company but, to avert that outcome, Antonio resigned as CEO when his son reached the age of 21, and passed over to him majority ownership as well as the reins. Moving into his role with a bold managerial style, on his first day Ricardo fired 60 per cent of the top managers and eliminated all secretarial positions. At the same time, he embarked on a program of corporate diversification.

At the age of 25, a fainting spell prompted Semler to rein back his extreme workaholic tendencies, also playing a seminal role in later workplace innovations. The more responsibility his staff assumed, the less he needed to worry. This was put to the ultimate test in 2005 when he was forced to spend several months in hospital recovering from a car crash and the company carried on seamlessly in his absence.

Among other unusual features of Semco’s operations:

Annual employee turnover stands at a very low rate of 1–2 per cent compared to an industry average of 18 per cent
Staff work in small autonomous units of about a dozen, which mimic close family groups
Workers vote to decide on their own wages and hours, choose their technology and hire and fire their managers
Employees’ viewpoints and input are encouraged without fear of negative repercussions. Semler has the view that they should be both challenged and given freedom
Peer pressure and the positive aspects of human nature play an important role in keeping operations on track
All meetings are voluntary and attended only by those who are interested. If nobody attends a meeting, it is assumed that the idea was probably a dud, anyway
Workers’ privacy is respected and personal emails are not monitored by management
Information is freely available and the company’s books are open to all employees
Semler himself has just a single vote in major decisions about the direction of the company and is content to live with those who go against his own preferences
Leadership roles are rotated among the top executives

Today, Semco’s areas of involvement include industrial machinery, property management, environmental consultancy, Internet services, human resources management and inventory control. Over the years there has been a slow but steady shift away from manufacturing into the service sector.

The numbers speak for themselves: Semler has overseen an astronomical growth in turnover from US$4 million (AU$4 million, NZ$5.2 million) in 1982 to US$212 million (AU$209 million, NZ$275 million) in 2003. Although annual growth has averaged 22 per cent, in some years it hit the 40 per cent mark. During the same 21-year period, the number of employees rose from 90 to 3000.

A unique management style

One of Semler’s major inspirations is Bill Gore, and Semco indeed tried to introduce a lattice organisational structure in 1986, but the experiment was ultimately unsuccessful.

Viewing management as an art rather than a science, Semler sees himself as a “Chief Enzyme Officer” who wears casual clothes to work and whose self-described roles within the company include broaching weird ideas and asking dumb questions. He feels comfortable being an iconoclast.

His philosophy is to reject both stress and insanely long hours, with a view that a manager should leave the office at a pre-determined time regardless of what crisis is erupting. In terms of time management, he advocates a focus on what is most important, throwing away non-essential paper rather than hoarding it. Ideally, at least half a day per week should be spent away from the office because working in other neutral environments is good for productivity.

Workplace democracy as a route to success

What is remarkable about Semco, Zappos and W.L. Gore and Associates is their level of success when compared to the average business. Zappos, for example, has grown to be the world’s largest online shoe store. All three are obviously doing something right but the shift in mindset in handing large amounts of power to one’s employees is probably still too great a leap for most of the business community. However, the gains from such a change in workplace practice can be phenomenal. If you treat people like adults, they are likely to behave accordingly, and an engaged adult is a far greater asset to any business than a moody and resentful teenager.

Some memorable Ricardo Semler quotes

“The modern workplace is characterised by disaffection, frustration, inflexibility and stress.”
“We think that 20 per cent to 30 per cent of everybody’s time in business is concerned with boarding-school issues — when do you come in, what are you called, what are you paid, who can you talk to, what can you say to them? It’s a hell of a lot of time. We’re liberating people.”
“The purpose of work is not to make money. The purpose of work is to make the workers, whether working stiffs or top executives, feel good about life.”
“To survive in modern times, a company must have an organisational structure that accepts change as its basic premise.”
“I recommend that people lose their hard disks every couple of months.”