Bob Moore, the owner of Bob’s Red Mill Natural Foods celebrated his 81st birthday by giving the company that he founded to his employees. Moore announced the new Employee Stock Ownership Plan (ESOP) at an all-company meeting at the headquarters office in Milwaukie, Oregon.
Moore said, “It’s been my dream all along to turn this company over to the employees, and to make that dream a reality on my birthday is just the icing on the cake. To me, this is the ultimate way to reward employees for their contributions to our ongoing success and growth. We have many loyal and long-time employees who I expect will be joined by many new faces over the years to run the company.”
Operations VP Dennis Vaughn, said, “The partners could have sold this company many times for a lot more money, but to them this company is about so much more than the money. I’m just proud to wear the Bob’s Red Mill logo because anywhere I go in this country people say nice things about the company.”
Bob’s Red Mill, a leading provider of whole grain natural foods, has averaged an annual growth rate of 20%-30% over the past 10 years and in that time their mostly North America distribution has expanded internationally.
In his Management 2.0 blog, Gary Hamel shares some thought-provoking questions about counterintuitive, yet common, IT policies that seem to discourage productivity and innovation:
- How is it that companies are willing to trust employees with their customers, their expensive equipment, and their cash, but are unwilling to trust them when it comes to using the Web at work or loading their own programs onto their workplace PC?
- Do IT staffers really believe that conscientious, committed employees turn into crazed, malicious, hackers when given a bit of freedom over their IT environment?
- If leading edge IT tools are, as many claim, essential to unleashing human creativity, why would any company force all of its employees to use the same computers, phones and software programs?
Hamel recommends giving employees more freedom over their IT tools. We agree. One of the best ways to cultivate innovation and engagement is to empower people with the ability to decide how they can best do their jobs.
A story published earlier this month on the Economist discussed the recent trend of companies preferring “anonymous” bosses to the “rock star” CEOs who were popular in previous decades. “The corporate world is increasingly rejecting imperial chief executives in favour of anonymous managers.”
We believe that this shift represents another stage in the ongoing evolution in the typical organizational structure – from a top-down, hierarchical system to a decentralized, democratic organizational model.
“The fashion for faceless chief executives is part of an understandable reaction against yesterday’s imperial bosses, many of whom were vivid characters. Some, such as Jeff Skilling of Enron and Tyco’s Dennis Kozlowski, broke the law and helped inspire a dramatic tightening of government regulation, in the form of the Sarbanes-Oxley legislation. Others, such as Home Depot’s Bob Nardelli and Hewlett-Packard’s Carly Fiorina, paid themselves like superstars but delivered dismal results.“
Talented, motivated, and innovative professionals are no longer willing to work for arrogant dictators in exchange for a sizeable paycheck. Instead, employees are becoming more and more selective about the quality and type of work environment that their employers offer, and they are increasingly seeking award-winning employers that share decision-making powers and that do not tolerate workplace jerks.
Capitalism: A Love Story, the 2009 documentary movie directed by Michael Moore, criticizes the current economic order in the United States and capitalism in general while covering the financial crisis of 2007–2009 and the recovery stimulus. In his movie, Moore highlights workplace democracy as an alternative model to capitalism.
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.
Brian Carney and Isaac Getz are the authors of a new book called Freedom, Inc., which is being released today! WorkplaceDemocracy.com spoke with them recently about their book and its connection to workplace democracy.
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.
The following is an interview that WorkplaceDemocracy.com conducted with Traci Fenton. Traci is the Founder and CEO of WorldBlu, a non-profit organization that champions the growth of democratic organizations worldwide. She is also author of the forthcoming book, Democracy at Work.
What makes a company ‘democratic’?
A company is democratic when it operates using the principles of organizational democracy, such as accountability, transparency, and decentralization, as opposed to a top-down, command-and-control model. This mode of operation is fundamentally determined by the design of the organization, and it influences performance on the individual, leadership, and systems and processes levels.
Why should companies consider democratizing their workplace? What are the advantages of democratic companies?
Operating democratically can have a huge impact on the bottom-line. A recent Gallup poll showed that 73% of the workforce in the U.S. is disengaged at work, costing the US economy over $300 billion a year. This is an incredible waste of resources and talent. Democratic workplaces tend to have lower turnover and absenteeism, attract and retain top talent, have higher levels of productivity and efficiency, and are more innovative. Gallup has also found than people who work in democratic or highly engaged workplaces are both physically and psychologically healthier. Plus, the people who work in democratic organization are just plain happier too!
Additionally, in today’s economy, advances in technology are requiring organizations to be faster, more creative, networked, and non-hierarchical. Generations X and Y expect their workplaces to be authentic, personal, and flexible, and they thrive in that type of environment. Customers are eyeing companies with increasing scrutiny and are demanding more transparency and accountability. The current economic crisis has caused companies to rethink their rules of corporate governance, systems and processes, and operating values. Organizational democracy offers a new business design that addresses these challenges.
In addition to being financially successful, democratic organizations can make a social impact, fighting corruption, and increasing economic prosperity, peace, and civic engagement in their communities, according to research by the Ross School of Business at the University of Michigan.
Please tell us about the WorldBlu List of Most Democratic Companies.
The annual WorldBlu List of Most Democratic Workplaces™ is a global award that shines a spotlight on visionary companies successfully practicing organizational democracy.
Any for-profit, non-profit, governmental or non-governmental organization can apply for the WorldBlu List award as long as they have a minimum of five full or part-time employees in have been in operation at least one full year. The process is simple – once they sign up their employees compete a survey evaluating how democratic the organization is based on the WorldBlu 10 Principles of Organizational Democracy. Unlike other awards and certifications, the employees themselves – not an outside panel of judges — let us know if the organization is democratically designed or not.
The WorldBlu List award has been recognized by global media worldwide, including The Wall Street Journal, The New York Times, The Christian Science Monitor, The BBC, BusinessWeek, US News & World Report and Fast Company magazine, to name a few.
We are accepting applications now for the WorldBlu List 2010. I invite your readers to learn more by clicking here. The deadline to apply is November 30, 2009.
Can you give us a few examples of innovative and successful democratic policies that some of the WorldBlu companies have implemented? How have these policies impacted those companies?
One of the companies on the WorldBlu List 2009 that used organizational democracy from the very beginning was Menlo Innovations, based in Ann Arbor, MI. I had the opportunity to visit Menlo back in January of this year and was so impressed with how they work. For example, team members are paired together and do their work on a shared computer. Yes, that’s one computer, two people. The pairs then change each week to ensure transparency and accountability across the organization. By using this system, Menlo avoids bottlenecks that occur when only one person knows information and builds high levels of trust among team members. Menlo’s employees also get to design their open work environment. The space contains lightweight tables and electrical/network drops from the ceiling that provide for infinite flexibility in layout.
Most people think that organizational democracy can only work in small companies. But DaVita, a healthcare company that provides dialysis services, proves that it can work in FORTUNE 500® companies too. But it wasn’t always that way.
Back in 1999, DaVita was struggling and they brought a new CEO, Kent Thiry, on board. He then transitioned DaVita into a democratic company, a decision that resulted in an increase in annual revenue from $1.4 billion in 1999 to $6 billion in 2008. DaVita’s democratic practices include opportunities for employees to vote on significant decisions for the company, regular Town Hall meetings between the senior leadership and staff members, and a decentralized structure that allows each of DaVita’s 1,400 clinics to determine their own rules and guidelines.
What are some initial steps that companies can take in order to become more democratic?
1. Open the books. Provide information to employees about the company’s financial health, strategies, and even salaries, and teach them what the numbers mean. The Great Game of Business and Zingerman’s offer courses on how to practice open-book management.
2. Create and strengthen opportunities for dialogue and listening across all levels. This practice can take the form of DaVita’s Town Hall meetings that I mentioned before, having an employee participate in management meetings at every level, or having seats on the Board reserved for elected employees.
3. Co-create the company vision and purpose statements. This practice give employees a greater feeling of ownership of the company’s purpose and vision, and it also allows each staff person to find the greatest alignment between his or her individual purpose and vision, and that of the company.
4. Give employees a voice in decisions that impact their work. This practice can range from letting employees participate in strategic planning and goal setting, to letting them to choose their work, projects, and teammates, to letting them determine new hires and salaries.
CNNMoney.com recently profiled six worker-owned, democratic companies. These companies, from diverse industries such as software to auto parts to beer brewing, all credit their innovative management structures with having helped them wheather the current economic crisis.
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.