Democratic Company Profile: South Mountain

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.


“The DemoCratic Workplace” Research Paper

Rune Kvist Olsen, a consultant, author, and former lecturer at the University at Tromso, Norway, has written a paper called “The DemoCratic Workplace.”

The paper was written in order “to approach workplace organization through a ‘participatory strategy’ which is based on the involvement and engagement of the individual human being in the workplace.”

Click here to access “The DemoCratic Workplace.”


Workplace Democracy at DaVita

Last week, WorkplaceDemocracy.com spoke with Lisa Joins to get an inside look at one of the nation’s largest and most successful democratic companies.  Joins is a director of people services at DaVita, a FORTUNE 500 company and a leading provider of dialysis services in the United States. 

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.


Workplace Democracy at W.L. Gore & Associates

Last week, WorkplaceDemocracy.com spoke with Steve Shuster about what it’s like to work at one of the nation’s largest and most successful democratic companies.  Shuster is part of the enterprise communication team at W.L. Gore & Associates, his employer for the past 27 years. 

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.


3 Democratic Companies Featured on CNN.com

Fortune Magazine featured seven small companies as ‘great places to work.’ Not surprisingly, three of these top-ranked employers are run as democratic workplaces.

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.


Workplace Democracy at Brainpark

Imagine a rapidly-growing startup company where the CEO answers not only to his board of directors but also to his employees.  Mark Dowds, who founded Brainpark about a year and a half ago, decided that he only wanted to lead a company if the employees accepted his leadership.  As a result, any of the employees, including Dowds, can be removed by a vote of their coworkers.
 
WorkplaceDemocracy.com spoke with Dowds to get an inside look at how this innovative company is embracing innovation in its management practices.  Brainpark has made it a priority to democratize its policies and culture in order to develop a transparent and engaged work environment. 
 
The company conducts off-site meetings every six months to discuss Brainpark’s performance and recalibrate their strategy.  As opposed to many company strategy-setting meetings, where the CEO determine the agenda, Brainpark has adopted an ‘open agenda’ system, where each employee writes down their concerns, interests, and goals on papers which are posted on the wall.  Everyone reviews the papers and votes on which of the items are most important and will be included in the off-site agenda and strategy discussions.
 
Any of the team members can suggest potential candidates for open positions.  The job candidates are interviewed by two coworkers, and the new hires are selected collectively by Brainpark employees. 
 
Managers at Brainpark choose not to exercise their power to fire employees.  Instead, if a manager is having problems with one of their subordinates, then a team is put together to make a decision about whether the person should leave or stay with the company.
 
If anyone, including the top managers and CEO, is not pulling their own weight and delivering value to the company, their coworkers can talk to them to dicsuss the problem and to give them a chance to improve their performance.  If the person in question fails to change by a certain period of time, their colleagues can then decide to find them a replacement.
 
To help facilitate better decision-making throughout the organization, Brainpark has adopted an open book management policy, where company financial data is shared among employees, who are all granted ownership stakes in the company through a stock option program.  
 
New employees are usually very surprised when they learn about Brainpark’s innovative workplace policies, but most adapt quickly and can’t imagine working anywhere else.  The company’s outside investors strongly support its democratic practices after having witnessed their impact on the employees’ engagement and motivation levels. 
 
Brainpark, which has been named to the WorldBlu List of Most Democratic Companies, is proof that employees act like owners when they are treated like owners.


Workplace Democracy at GM and Chrysler?

There has been a lot of discussion going on about whether the workers at General Motors and Chrysler will become the owners of their respective employers and about the kind of impact that this ownership stake will have on the future of the two car manufacturers.

Without decentralizing the management structure and decision-making processes, simply turning the employees into shareholders at GM and Chrysler will have minimal impact on rectifying the core problems and overcoming the obstacles that have crippled these companies.  It is not enough for employees to hold ownership stakes if their employers still function as top-down hierarchical bureaucracies. 

Remaining innovative and competitive in today’s rapidly changing environment depends on a highly engaged and motivated workforce.  Employees can only break free from the confines of bureaucracy if they are able to act and feel like owners in the day-to-day management of the company. 

Employees will not feel like motivated owners until they are aware of the company’s goals and the ongoing progress towards those goals.  Financial and operational data should be shared freely among all employees.  In today’s information age, there is no reason to keep secrets and for executives to hoard information, even with regards to “sensitive” information like salary data.

Employees, especially those closest to the customers, need to have the power to make quick decisions autonomously, without having to wait for approvals to trickle down the management hierarchy.  Team-based, bottom-up decision making should replace the command-and-control, top-down structure that was so successful at stifling innovation, common sense, and competitiveness at GM and Chrysler.

In order for these companies to stand a chance at surviving the current crisis, General Motors and Chrysler must not limit their innovative turnaround efforts to their product and operational strategies.  They must also adopt cutting edge and creative solutions for transforming their organizational processes and culture.

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The Cost of Having a Boss

Management guru Gary Hamel provides an excellent explanation as to why only 21% of employees are highly engaged at work.  Contrary to common belief, it is not the type of job or salary level that determines the extent of one’s motivation, which is why companies such as Wegman’s Food Markets and QuikTrip convenience stores in “unglamorous” industries like retail consistently rank among the best places to work.

“The real damper on employee engagement is the soggy, cold blanket of centralized authority. In most companies, power cascades downwards from the CEO. Not only are employees disenfranchised from most policy decisions, they lack even the power to rebel against egocentric and tyrannical supervisors. When bedeviled by a boss who thwarts initiative, smothers creativity and extinguishes passion, most employees have but two options: suffer in silence or quit.

“In a well-functioning democracy, citizens have the option of voting their political masters out of office. Not so in most companies. Nevertheless, organizations here and there have taken steps to make leaders more accountable to the led. HCL Technologies, a progressive Indian IT services company, encourages employees to rate their bosses, and then puts those ratings up online for all to see. Bullies and bunglers have no place to hide. And W.L. Gore, the Delaware-based maker of Gore-Tex and 1,000 other products, lets its highly decentralized teams appoint their own leaders. These are interesting aberrations from the norm, but in most organizations, power is still allocated top-down.”

Until people are free from a system where their boss wields compete power over their livelihoods, companies will find it difficult to harness and benefit from the full potential of their most valuable asset.

The key to unlocking employee engagement lies in flattening the organizational hierarchy and democratizing the decision-making powers.  A good place to start is to allow employees to set their own salaries.  Teams of employees must also be trusted with the power to hire and fire their leaders and coworkers. 

More and more people are coming to the conclusion that command-and-control is no longer an effective way to manage a company.  There is no reason why responsible adults should be treated like irresponsible and dishonest children as soon as they arrive to work.  In a later post, we will explore additional democratic policies that companies can implement in order to cultivate a more innovative and engaged workforce.


How to be a “good boss”

A recent post on USNews.com listed some nice tips on how to be “a good boss in bad times.” While things such as smiling, listening, and providing feedback would certainly the workplace environment a bit more pleasant, the root causes of most employee disengagement and employee-boss problems stem from a deeper, structural level.

The main reason why most people are unhappy at work boils down to the nature of the boss-employee relationship. The definition of a boss is “a person who exercises control over workers and makes decisions.” Since most people don’t especially enjoy being controlled by someone else or having decisions made for them, it’s not surprising that so many people are miserable and feel unmotivated at work.

The best way for someone to be a good boss is to not be a boss at all, but to be a leader instead. The main difference between a boss and a leader is that bosses are selected (from above) while leaders are elected (by their peers). If you want to become a true leader, try “putting yourself up for election.” Tell your team members that you will lead them only so long as you have their support and that you agree to step aside should the team members decide at some point that you are no longer suitable for the job.


Workplace Democracy and the Layoff-Furlough Dilemma

There is a debate going on about whether companies hit hard by the recession are better off conducting layoffs or ordering furloughs in order to align expenses with rapidly-shrinking budgets.  The opinions of executives differ widely as to whether layoffs or furloughs are less damaging to employee morale and productivity. 

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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