In a surprising development, the Wall Street Journal reported that “Apple engineers were aware of the risks associated with the new antenna design as early as a year ago, but Chief Executive Steve Jobs liked the design so much that Apple went ahead with its development, said another person familiar with the matter.”

Steve Jobs has been described as a cruel and manipulative manager who, as Forbes reported, ”periodically reduces subordinates to tears, and fires employees in angry tantrums,” and Apple is known for its top-down, hierarchical structure.

It’s hard to imagine problems like this, which were previously known within the organization but not solved because employees feared or were intimidated by the CEO, occurring at decentralized, democratically-run companies.

Many would argue that workplace democracy should not be considered a replacement to the capitalist economic system.  Instead, workplace democracy is a highly effective management strategy that helps enable companies to engage and motivate their employees and to maintain a competitive advantage in their industries.

Workplace democracy is not limited to a specific type of company ownership structure.  Democratic companies come in all shapes and sizes and range from high tech start-up companies such as Brainpark, to small worker-owned cooperatives such as South Mountain, to large privately-held companies such as W.L. Gore and Associates, to large publicly-traded companies such as DaVita.

Workplace democracy is an innovative management strategy where company information and decision-making powers are shared and distributed among employees so that customer-facing workers (who are closest to customers and usually know them best) are aware of the company’s goals and performance and have the ability (and motivation) to make smart decisions quickly, which is essential in today’s fast-moving and hyper-competitive marketplace.

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What is Freedom, Inc. about?

Freedom, Inc. is a book about the most important corporate movement of the last two decades, a movement that has been quietly transforming the fortunes of dozens of businesses and the lives of thousands of employees by using a source of benefits neglected by most—complete freedom and responsibility for employees to take actions they—not their bosses—decide are best.

Each of the unusual bosses and amazing leaders profiled in Freedom, Inc. have performed near-miracles in driving their companies to unheard-of levels of success, often from unlikely or disheartening beginnings. And each has something in common with the others—he believes that the key to business success is freeing up the initiative and genius of every, even the lowest-ranked employee in the firm, every day. How they set their employees free—and how their lessons can be applied to firms in every industry, of any size, anywhere in the world—is the story of this book.

After four years of research, thought and debate, we have identified three stages that each leader went through to build a radically free workplace—rejecting the command-and-control structure, enlisting employees in building a free workplace, and staying put in spite of setbacks;  and in each successive stage this leader relied on one corresponding personal strength: values, creativity, and wisdom . Among the leaders of the companies we studied, these three strengths set them apart from other executives while binding them as a group.

Were most of the companies featured in Freedom, Inc. founded as democratic companies or did their management structures evolve from more hierarchical structures?

I’ll reply to all your questions considering that “democratic” means “freedom-based”–the term we use in the book to describe the companies we studied.  We avoid “democratic” mainly because it focuses too much on the instruments (and none of our companies used, for example, formal voting for making decisions). Our companies, each with their own instruments, all focused rather on the end: freedom of action and initiative for every employee.

What inspired these companies to develop freedom-based workplaces?

Each company had what we call a liberating leader at its head, who initiated the changes.  The leader was either frustrated with command & control companies and/or admirative of the freedom-based ones such as WL Gore & Associates.

How does democracy work at these companies?

Freedom of action is achieved when an environment satisfies universal human needs instead of hampering them. These needs are intrinsic equality, growth, and self-direction, according to the most advanced psychological research carried out by University of Rochester psychologists Edward Deci and Richard Ryan.

What have been some of the main challenges in cultivating democratic workplaces?

Workplaces struggle to evolve the often authoritarian managers’ practices into freedom nurturing practices.  Some liberating leaders had to remove certain managers (albeit keeping their salary) from the positions of authority.

Why should companies consider decentralizing their workplace?  What are the advantages of freedom-based or democratic companies?

Freedom of action is a tremendous advantage because in freedom-based companies, employees facing a sudden surge in competition, a downturn, a new government regulation, or an inadequate business process don’t simply wait for their higher ups or some new policies to tell them what to do. Instead, they take action that they—not their bosses—deem is best for the company and they do it right away—not when it’s too late. Add to that that frontline people always know better what’s going on and what needs to be done. So letting them take action is pure common sense.

What is the most important step that companies should take in order to become more democratic?

The most important step is for the liberating leader to stop telling people how to do their work and instead ask them how they want to do it.

Here are the companies that were profiled:

• We Can Do It! Women’s Cooperative (Si Se Puede! in Spanish) was founded in Sunset Park, Brooklyn, in August, 2006, to bring together immigrant women to create a women-run, women-owned, eco-friendly housecleaning business. All members have an equal vote in decisions regarding policy and operations. In addition, members work together to promote the business and meet bi-weekly for on-going training and support.
• Full Sail Brewing Company is a craft brewery in Hood River, Oregon, United States. Founded in 1987, Full Sail was the first commercially successful craft brewery to bottle beer in the Pacific Northwest for retail sale, and one of Oregon’s early microbreweries. For years, they had been thinking and talking and dreaming about the idea of becoming an employee-owned company. Full Sail became an independent, employee-owned company in 1999, divvying up the company between their 47 employees. Of all our accomplishments, this is the one that makes them most proud.
• Since 1980, Isthmus Engineering and Manufacturing has provided custom machinery to address the needs of first-time automation users as well as companies well-versed in the benefits of automation. From their beginning as an engineering partnership to their incorporation as a workers’ cooperative, Isthmus Engineering has evolved into a world-class builder of automated equipment. Established as a “worker’s cooperative”, the success of our employee-owned company is contingent on the performance of the entire team. Management decisions are made democratically: one member – one vote. Each member shares in the responsibility of managing the business.
• Founded in 1994, Mushkin is best known for producing “Enhanced” memory modules. Located at the base of the Rocky Mountains in Denver, Colorado, Mushkin provides performance enhanced computer products to users worldwide. Mushkin products include an enhanced power supply line and a complete selection of memory upgrades for desktops, servers and notebooks. With customers including everyone from Apple Computer and NASA to gamers and web browsers, Mushkin knows what is important to customers – enhanced performance with uncompromised quality.
• Pelham Auto Parts was founded in the 1970′s by Pelham Auto Service, a group of mechanics in the Pioneer Valley of Western Massachusetts who specialized in small car repair. At the time imported car parts were much harder to come by than they are today. Pelham’s founders took it upon themselves to make sure they had the parts they needed for themselves and their customers by creating a parts store. Pelham Auto Parts was born and began to supply other local garages, mechanics and do-it-yourself’ers, always maintaining a desire to sell good parts at good prices and abide by a work ethic than included more than just showing up and doing a job. Pelham is a brick and mortar parts store, owned by the people who work there, rooted in their community but accessible to the world.
• Ronin Tech Collective is a worker-owned and operated technology collective, focused on workplace democracy and promoting a democratic society while supporting progressive businesses, non-profits, and cooperatives by providing open-source website development and consulting. Through their work, Ronin hopes to create positive change in our world by providing the best possible software and highest quality support for their customers. Ronin is located in Brattleboro, Vermont and serves clients all over the country.

Click here to read the entire story from CNNMoney.com.

“Accountability is to the customer and to the team, not a boss, so FAVI people are free to experiment, innovate, and solve problems for customers. They’re known for working off-shift to serve customers or to test out new procedures. Equipment, tooling, workspace, and process redesign all rest in the hands of those doing the work. FAVI people are encouraged to make decisions and take quick action to improve their daily work and respond to the needs of their customers. Control rests with the front lines, where it adds the most value.”

Click here to read the entire article.

DaVita has serves approximately 115,000 patients in over 1,500 outpatient dialysis facilities and acute units in over 700 hospitals. DaVita has been selected by FORTUNE as one of the World’s Most Admired Companies for the past 4 years and has been ranked by Modern Healthcare as one of the 100 Best Places to Work in Healthcare.

DaVita has been selected to the WorldBlu List of Most Democratic Workplaces.  Can you talk a little about DaVita’s history and how the workplace democracy idea began?

The idea of workplace democracy began when DaVita was formed in June 2000.  Kent Thiry, our CEO, saw that the company was in need of a different level of leadership with the team concept as its driving force, so he decided to make the company culture one of the areas of priority.   He made a concerted effort to ensure that everyone had a voice promoting full buy-in to our new strategy and direction.

How does democracy work at DaVita?

Each local area of the company is managed independently by its local leadership team. And it is that team’s responsibility to be creative to meet and maintain the company’s strategic goals.  Each area gets to decide on how to best achieve its goals according to their local market.  This philosophy includes not only the senior leaders but those who sit on the front lines of the organization.  DaVita is unique in how we communicate with each other, and this speaks to all levels within our organization.  Our CEO is very active in communicating with the teammates about the company’s progress.  Virtually every large team meeting provides an opportunity for a question and answer session.  For example, we conduct local town hall and homeroom meetings.  We also host ‘Voice of the Village’ calls where all teammates in our Village are invited to call in and to receive company updates  from our core senior leadership team.  Anyone participating in these calls can ask the CEO and the core team any questions about the business, policies, etc.

Another example is our profit-sharing program, which is given on a regular basis multiple times per year.  At many other companies, the top managers determine the specifics of their profit-sharing programs.  At DaVita, each leadership group together with the help of their local teams chooses their goals of measurement.  These goals are used as the key factors for measuring the success of the team and profit-sharing payouts are tied to those accomplishments.

There is a village atmosphere here at DaVita which helps people feel as though they are part of a community and less like they are part of a large company full of “red tape”.  Local teams are given the opportunity to name themselves and create identities.  Ongoing communication plays an important part in helping the teammates connect with each other and to the company.   And this feature is critical in keeping a company that has 30,000 plus teammates alive and full of energy.  There are daily ‘Homeroom’ meetings that are hosted in local clinic/office environments and weekly ‘Village Voice Communications’ go out in email to all teammates.  These venues give teammates the opportunity to receive valuable real-time information regarding policies, company updates, items of recognition, etc.

There are a number of village-level programs that help enrich the lives of teammates.  For example, there is a program called the ‘DaVita Village Network,’ where people can donate money to emergency funds to help other village teammates in times of need.  There are also educational funds which are given to teammates and their families, and there are vacation award programs that our CEO personally donates to reward teammates for outstanding work and service to the Village. We also have many programs that reach out beyond our company such as the Bridge of Life.  The Bridge of Life program gives our teammates an opportunity to participate in starting dialysis clinics in several under developed countries around the world.

What is the hiring process at DaVita? How does it differ from the hiring process at other companies?

First of all, DaVita places a great deal of importance on promoting from within.  We are constantly evaluating our internal talent and looking at these individuals for promotional opportunities.  DaVita offers ‘stretch assignments’ where people can learn and apply new skills.

Prospective job candidates often have the opportunity to interview with a team of representatives from the department so they can meet all levels with the team and learn more about the company from those who hold different levels of roles.  Job interviews at DaVita are very interactive, and we encourage candidates to ask questions about the role, team, the company and culture.  During the onboarding process, we make strategic efforts to ensure that our new teammates receive an in depth acclamation to DaVita’s philosophy, culture and our “village-like” way of operating. 

Is the process of firing an employee different at DaVita than at other companies?

Yes, we do our very best to ensure that every teammate who is performance managed receives every opportunity to improve, receive “on time” feedback and get back on target in their role.  We have a multilayered progressive discipline process that includes not only reviewing performance but also evaluating whether or not a teammate who is not successful has the right attributes for the requirements of the position.  Often times, we will consider looking at other roles within the organization for teammates who we find are great teammates who add value but are not in the right role for their levels of experience.

What is it like to work at DaVita?

It’s the best company I’ve worked for.  DaVita is a fun, energetic company that stresses collaboration and a team-based environment.  The company offers tremendous opportunities to its teammates for growth and development.  This is the first company that I’ve had the opportunity to work for where the culture resonates throughout all facets of the organization.

With more than $2.5 billion in annual sales and 8,000 employees in over 50 facilities worldwide, Gore is a leading manufacturer of thousands of advanced technology products for the electronics, industrial, fabrics and medical markets.  Gore is one of only 12 companies that have been on the Fortune 100 Best Places to Work list since it began.

What is it like to work at Gore?

You feel like you’re part of a family.  I have been working at Gore for 27 years, and I still get excited coming to work each day.  There is a sense of being among family, and this creates a special bond between associates and a connection with the company.  

Everyone is an owner in the company and shares in the good times and in the bad times.  Everyone works in teams, and there is very little hierarchy at Gore. 

How would you describe Gore’s company culture?

The company culture at Gore gives people a sense of belonging and gives us a sense that we are making an impact on society via our products.

There are four principles that are the foundation of Gore’s culture: fairness, freedom, commitment, and waterline.  The waterline principle means that it’s ok to make a decision that might punch a hole in the boat as long as the hole is above the waterline so that it won’t potentially sink the ship.  But, if the decision might create a hole below the waterline which might cause the ship to sink, then associates are encouraged to consult with their team so that a collaborative decision can be made. 
 
Our culture is based on integrity and a high level of ethics.  The organization operates as a flat, or ‘lattice,’ organization, where all employees are referred to as ‘associates.’   There are no bosses, only ‘sponsors’ who are similar to sports team coaches.  Sponsors are responsible for leading the teams and who are mainly focused on their team members’ growth and development.  The process of becoming a sponsor is through followership, and each group chooses their own sponsor.

Do team members have the power to remove or replace their sponsors?

In the event that a sponsor is not doing a good job, the team members speak with the sponsor about the problems.  If they are unable to resolve the problem, then the sponsor or team members might suggest an alternative team member to become the team’s new sponsor  This type of situation happens fairly often at Gore, as the teams are fairly fluid and adapt to the changing environment and market. Often when associates change commitments, they will seek out a new sponsor.

Do team leaders have the power to remove members of their team? 

If a leader doesn’t feel that a certain team member is contributing sufficiently but the other team members disagree, then the team will first meet to decide about how to make the decision.  Most often, the decision will be made collaboratively with all of the team members  being able to voice their opinions and vote on the outcome. Leadership at Gore is defined by followership, not by being given a title.

Gore has been described as having a democratic workplace.  Can you give us a few examples of innovative and unique HR/management policies that Gore has implemented?

Gore’s lattice, team-based organizational structure and the opportunity to provide feedback about other team members are two of our innovative work practices.  Associates get to manage what type of projects they are working on.  Also, associates’ compensation is based in part on their contribution to the enterprise.  All associates rank each of their colleagues according to what they feel their contribution has been to the enterprise.

What is the hiring process at Gore?  How does it differ from the hiring process at other companies?

The main difference is that Gore looks for individuals who fit Gore’s unique culture.  We look for people with an entrepreneurial spirit who are not focused on titles and hierarchy.  We conduct behavioral interview questions to help determine whether candidates fit our culture.  Gore includes several team members and representives from the business in the interview process to ensure the right candidate is selected.  Gore is not for everyone; some people don’t mesh with Gore’s culture because they can’t work without a title, or because they want to be directed.

How does Gore encourage its associates to be more innovative?

The innovative culture, which started with our company founder Bill Gore, helps foster innovation and gets people working towards a common goal.  The company culture makes associates feel that it’s ok to take risks and make mistakes.  For example, Gore asked me early on how many mistakes I’ve made so far.  He then told me that if I’m not making mistakes, then it means that I’m not taking enough risks and trying to innovate as much as I should be.

Companies that have adopted participative management practices typically have more highly engaged employees who are more hardworking, creative, and feel greater loyalty towards their employer.

The South Mountain Company of Martha’s Vineyard, is a design and construction company with annual revenues of $9 million that provides integrated development, architecture, building, and energy services. South Mountain has been practicing workplace democracy for over 20 years.

Currently 17 of its 33 employees are owners, and the rest are on the five-year process to become ‘employee owners.’ Employee ownership has played a big part in helping South Mountain retain its workers, who have been with the company for an average of 12 years.

Each employee owner has an equal vote in major strategic decisions, one of which authorized a profit sharing program which distributes 33% of South Mountain’s profits amongst all employees.

Similarly, the New Belgium Brewing Company credits workplace democracy with helping them become the third largest craft brewery in the US, with $93 million in revenues. All of New Belgium’s 320 employees become owners after their first year of employment, and the company’s open-book management policy ensures that all workers know where the company is going and how it’s progressing.

Another democratic company that shares financial data and strategic information with its employees is Badger Mining Corporation, which is the fifth largest manufacturer of industrial silica sand, limestone and other aggregates.

The company has been operating under a flat organizational structure for close to 25 years. Bosses are called coaches, employees are referred to as associates, and the executive management is called the advisory team. All 170 employees share 20% of the company’s profits.

Treating its workers like responsible adults and sharing information, decision-making abilities, and profits among all team members has helped Badger minimize employee turnover, which is very expensive and disruptive to a company’s operations.

What’s interesting is that this is the type of decision that, purportedly because of its highly sensitive and potentially damaging nature, is made by executives behind closed doors without consulting with the very employees whose motivation the managers are trying to preserve.  The decision, once made and finalized, is then revealed to employees (who are often shocked and traumatized) and hastily executed.

This gut-wrenching dilemma does not have to be one that keeps executives up at night.  Executives do not have to try to guess which option would be less disruptive to workers.  In fact, many problems in the workplace originate from miscalculations by managers about how their decisions will affect their employees. 

There is a much better way to reach a decision about which would be the lesser (and more effective) of the two evils: ask your employees. 

Managers should inform employees about the company’s financial situation and should encourage an open discussion about which cost-cutting measures should be taken.  Having participated in the decision-making process, workers will take ownership of the final decision and its outcome, and management won’t be blamed for a decision that was dictated to the employees without seeking their input. 

Involving workers in the decision-making process is one of the best ways that companies can boost loyalty and employee engagement.

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