Democratic Workplaces

Across the Western world, the prospect of a job out of college causes many recent graduates to salivate like Pavlov’s dog. But will that job be fulfilling? Will it render the worker satisfied, fill the integral part of a person’s life dedicated to meaningful work?

For an increasing number of Americans, the answer is no. A 2013 worldwide Gallup poll found that “13% of workers feel engaged by their jobs…63% not engaged…[and] 24% actively disengaged,” and a 2012 Gallup poll of the United States and Canada determined that out of American workers, 19% felt satisfied, 16% somewhat satisfied, 21% somewhat unsatisfied, and 44% completely unsatisfied.

Considering that the average American spends over 1,700 hours a year at work, extensive unhappiness at work contributes to overall dissatisfaction with life. Numerous psychological studies have identified workplace satisfaction as one of the three most important factors in determining happiness. Work can provide individuals with a sense of purpose, meaning, and fulfillment, especially if workers can have significant control of their work. However, without control, employees find displeasure at their workplaces.

Perhaps the main reason for this chronic dissatisfaction with working life is the lack of control that many employees can assert over their lives. According to a study by the consulting firm Blessing White, 72% of workers would leave their current jobs because they want more control over their work, while 44% would even work for themselves to increase that autonomy. The study concludes that workers are “becoming increasingly individualistic and managed outside of the rigid company-driven structures of yesteryear.”

The most prevalent business model is hierarchical and, in many respects, antiquated; a board of directors of between nine and twenty people makes decisions regarding personnel within the company, profits, production, and distribution. Supervision and management then emanate from the top. As Ricardo Semler, CEO of Semco, noted, while productivity, expertise, and knowledge have increased and sped up production, this pyramid structure has changed little from the 17th century. It inherently minimizes employee control and can potentially lead to worker dissatisfaction. Instead, many workplaces could benefit from embracing a democratic paradigm that emphasizes participatory initiatives.

Businesses have already begun implementing this new paradigm. The John Lewis Partnership (JLP), which runs retail department stores, practices a model of democratic organization and profit sharing. Every employee is also a partner who is entitled to elect administrators. The Partnership also offers an incentive for better work by providing a bonus as a share of annual profits in addition to a wage. In the end, between 40 and 60 percent of profits return to the employees.

The Spain-based Mondragon is another successful example. Founded in 1956 in the Basque region of Spain, Mondragon consists of a series of workers’ cooperatives operating in finance, industry, retail, and knowledge. It employs about 85,000 people and constitutes the 7th largest company in Spain. The workers in the cooperative determine production, distribution, the fate of profits, and their directors. The workers can voice their opinions with their managers as equals. Though Spain itself has seen some economic turbulence, Mondragon has proved remarkably stable.

Ricardo Semler, the charismatic CEO of the Brazilian company Semco, has been the driving force towards a form of industrial democracy and autonomy for his workers. When Semler first took over the company from his father, it was in disarray. He then fired the management and ended all position titles. He resolved to treat his employees like adults, allowing them to set their hours, elect their supervisors, receive compensation for productivity, and deliberate financial statements. His goal was to make working at Semco a “seven-day weekend,” his philosophy a radical restructuring of work. He mused, “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.”

Semco experienced an annual average rate of growth of about 40%, including a 900% growth clip in one ten-year period. The number of employees expanded from about 100 to 3,000. Turnover is now a mere 1%. When Semler first ascended to CEO, Semco was primarily a shipbuilding company but now produces 2,000 other products, some of which are high technology, and manages banking and services for top multinationals like Wal-Mart. It has increased its industry ranking in machinery from 56th to 4th. Through the initiative of one man, Semco has repositioned itself at the forefront of both its industry and worker participation.

Despite fundamental differences in geographical location, each of these companies shares common values in delivering increased worker participation. As the high rate of employee dissatisfaction attests, both workers and businesses can gain from alternative, democratic workplace organization, examples of which have stood as viable options for employees and the bottom line.

Perhaps most importantly, democratic workplaces can increase employee happiness. From a purely utilitarian standpoint, the notion of improving the daily lives of millions of workers is in and of itself worthy of consideration. The key component of workplace engagement is providing for worker control, which serves to motivate and increase the happiness of workers. Dan Pink, a management expert, analyzed various studies and concluded that allowing employees to have autonomy, mastery, and purpose motivates workers best.

Workplace democracy can offer a number of benefits to both the employees and the business as a whole. Through profit sharing and offering rewards to workers based on contribution in extra effort and ideas, businesses can provide incentives. Collective and individual performance-based compensation spurs greater productivity.

Another advantage for businesses that implement democratic models is their ability to attract the best talent. For many bright people, the prospect of participating in key decision-making and controlling their work could provide a large incentive to apply for and potentially work at a specific company. Juxtaposed with a hierarchical model in which executives delegate tasks in a top-down manner, democratic workplaces are much more attractive.

Once the best and the brightest come to a specific company, democratic practices can keep turnover low and employee loyalty high. With increasing levels of worker happiness, companies need not fear workers walking. If employees feel that they control their work and receive just compensation for it, they have no incentive to leave.

While the employees can derive more satisfaction from their work, businesses themselves can stand to benefit from allowing for worker input. Happy workers are productive workers. Workers disengagement, according to Gallup, costs about $300 billion a year, a significant portion of American GDP.

Democratic firms, by harnessing the ideas and input of their employees, can gain increased innovation. Workers can often offer valuable insight into methods for improvement. As they spend hours a day with their jobs, many employees know much about their work. In industries that require high levels of skill, many employees are experts. Tapping into this expertise can lead to innovation. A study of workplace organization from the Canadian Journal of Economics found that “both decentralized decision-making and information-sharing are correlated with innovation.” The company as a whole stands to profit from its workers’ ideas.

Democratic workplaces are now more feasible than ever before thanks to better technology. Advances in technology have enhanced capabilities for information sharing, facilitating the ability of businesses to obtain employee input and provide for worker participation in decision making.

Opposition to workplace democracy often comes from management that does not wish to yield control to employees. However, as both theory and practice attest, relinquishing control and decentralizing decision-making can increase company profits. A transition requires a commitment from management; Semler at Semco, for instance, pushed very heavily for meaningful reform.

While workplace democracy is by no means perfect—it often requires time to exchange ideas and appears to be better-suited for smaller companies—it can have a meaningful impact on even the largest companies. Mondragon, for instance, a company of 85,000, has only deepened its commitment to workplace democracy as it has expanded. In even large businesses, allowing worker participation and providing for a non-hierarchical chain of management can be feasible provided that workers and the company establish procedure. Workplace democracy is by no means chaos—it is highly organized by employees who stipulate certain practices.

Business leaders, workers, and policymakers alike should herald workplace democracy as a worthwhile paradigm. For the former two groups, worker happiness, productivity, and creativity should be paramount goals—they strengthen companies and improve well-being. For the latter group, the ideal of this new birth of democracy corresponds with the chief objective of public policy: increasing opportunity for human potential, fulfillment, and self-determination. In the end, the chance to pursue democracy inevitably fosters the right to pursue happiness. If, following other initiatives, more companies move towards a participatory paradigm, we can also move towards a more democratic and, more importantly, a happier society.