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.
WorkplaceDemocracy.com recently interviewed John Abrams, the co-founder and CEO of South Mountain Company and the author of COMPANIES WE KEEP: Employee Ownership and the Business of Community and Place. COMPANIES WE KEEP celebrates the idea that when employees share in the rewards as well as the responsibility for the decisions they make, better decisions result.
South Mountain Company, Inc. is an employee-owned design/build and renewable energy company founded in 1975. Located on the island of Martha’s Vineyard in Massachusetts, their worker cooperative’s 30 employees (more than half of whom are full owners) provide a full range of integrated environmental building services: planning, architecture, building, interiors, energy efficiency services, and renewable energy.
Can you talk a little about South Mountain’s history and how the workplace democracy idea began?
In the early days, we never thought of ourselves as a company. My original partner and I were hippies looking for a way to pursue our craft. The last thing we were interested in was business. When we arrived on Martha’s Vineyard, we found ourselves, ironically, in business. After a few early mishaps, I found myself interested in and wanting to learn more about business. Once I got my bearings, and had some long-time employees who wanted to stay with the company, I was ready to return to my roots and develop a community-based business that belonged to the people who did the work.
What inspired you to make South Mountain a democratic company?
When my original partner left, I was left with a great company and a great team. The inspiration for organizational restructuring came from two long-term employees who said they wanted to stay with the company rather than spin off their own buisnesses, but that they needed a greater stake. Together we looked for models that would do more than address their situation, assuming that if we did our job well this same situation would arise again and again over time. We heard about the Mondragon Cooperatives in the Basque region of Spain and were excited by their values and their success. The Industrial Cooperatives Association in Boston (now the ICA Group) helped us implement a similar cooperative ownership model in our organization on a much smaller scale.
How does democracy work at South Mountain?
In terms of governance, our employees make decisions by consensus about significant policy issues. South Mountain has 18 employee-owners out of 30 total employees. We hold meetings once every two months and the group deliberates about issues that concern the company’s future. Consensus decision-making has worked for us and has been very valuable. Fortunately, we have a backup 75% supermajority voting system for times when consensus is stalemated. Over 22 years we have only had to use it three times, but it is key to the success of the system.
In terms of the day-to-day operation of the workplace, there is a tremendous amount of collaboration at South Mountain, and all voices are heard. We are always looking for the right balance and seeking the best way to make decisions by learning the skills of facilitation and fostering utterly productive and engaging meetings.
What effects have South Mountain’s democratic workplace had on your employees?
I can tell you one thing, they are still here! People stay for 3 to 4 years, or they settle in and stay for good. People are extremely energized by the company culture; they truly care about the company and give their best.
This also affects our hiring practices. When we recruit new people, we are not just looking for people with specific skill sets; we are looking for great future owners.
What have been some of the main challenges in cultivating a democratic workplace?
Early on, people were used to their roles, so a lot of people had a hard time making the switch to ownership and leadership roles. But once we made that shift and people actually became owners, discovered their opinions and voices and relished the opportunity to take part in the decision-making process.
Even though 2009 has been a difficult year because of the recession, it has been a great year for South Mountain in many ways. We had to think differently and address issues we hadn’t had to before. For 35 years, for every day of every week of every month of every year, everyone came to work with productive work to do. Layoffs were unknown. But now we had to consider the unthinkable. What if there was not enough work for all? Good discussions led to a tiered group of actions:
1. We would offer voluntary, temporary, rolling furloughs.
2. We would use the company’s capital to support projects that would not generate immediate revenue but that might provide us with a return later on, or community projects that would keep as many people working as possible.
3. We would have a reduction in hours.
4. We would have a reduction in pay.
5. Finally, if there was no other choice, we would initiate involuntary furloughs.
Surprisingly, during this year’s annual evaluations, even though it was a tough year, employees gave the company higher ratings than they did last year (8.7 in 2009 vs. 8.4 in 2008), mainly because they were impressed with the internal communication, the supportive atmosphere, and how the company is performing and weathering the recession while many other companies have been doing poorly, conducting massive layoffs, etc.
Do you think that employee ownership is an integral part of workplace democracy?
Absolutely. I don’t really believe in ‘responsibility without accountability’. Sharing ownership is critical. When people will personally benefit or suffer as a result of their decisions, they will naturally make better decisions.
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.