Why do we accept giving up all of our rights at work?

I’m reading Beyond the Corporation by David Erdal at the moment and so have been thinking a lot about employee ownership. It’s making me wonder why we accept so little in the way of rights at work than we otherwise enjoy in the free and democratic societies we live in.

In a democratic country we have the right to choose the leadership and hold them to account; we have a right to transparency and information and we have the right to speak our minds, dissent, make our voice heard and participate.

In almost all businesses the employees have no equivalent rights. The rights belong only to the owners of the business – the shareholders. The shareholders are the only people with rights to information, to appointing or removing the management and ultimately deciding what the business does. Further, the shareholders are the only people with the rights to the profit and capital gains that it generates. Shareholders can sell these rights to whoever they choose in spite of any feelings the employees may have about it. The employees in the business create all of the value that it generates, yet they are merely ‘rented’ in return for pay, like a piece of machinery.

Why is it that we accept so little in the way of rights at work that we take for granted in society? Perhaps it’s because life is generally OK and we don’t feel hugely repressed, in spite of the lack of rights. Perhaps it’s because the status quo is so deeply entrenched in our history that we accept it as ‘the way things are’ and it cannot be changed. I wonder if this the same as the burgeoning middle classes in China who have decent jobs and access to consumer goods and perhaps don’t worry too much about the fact they cannot oppose or hold their politicians to account or have access to free information. But surely we can do better than this.

I am convinced that the solution is more than just democratic organisations. It is full ownership of companies by the employees. Only by the transfer of all rights from external shareholders to employees can we have true democracy at work.

Many democratic organisations are not actually true democracies at all. Whilst there are 10 principles of democratic organisations, what sets a true democracy apart is inalienable rights, not just operating principles which can be changed at the whim of the owners.

Most ‘democratic companies’ are actually benevolent dictatorships. The company I co-founded (and have now left but am still a shareholder in), NixonMcInnes, is a classic example. The company truly buys into democracy and has been independently assessed and shown to be living by the 10 principles. There is a huge level of transparency and employee involvement, from fully open financial information to guest seats for employees to attend board meetings. Employees have a say in selecting and evaluating managers, contribute heavily to strategy and planning, and have the right to ‘dissent’ by raising their own ideas, challenging anything that they are not happy with, and know that they will be listened to. There is also a generous profit sharing scheme in place. However, none of these things are actually rights – they are the policies set by the owners and can theoretically be reversed at any time, and the owners still have the right to sell the business to anyone they like who would be free to do as they please.

At NixonMcInnes, the concept of employee ownership has been discussed at length. I remember when we first talked to the employees about the idea and all of the rights that it would give them, they weren’t as excited as I thought they would be. The reason for this was that they felt they were already enjoying a lot of the benefits through the democratic principles, and the only real difference would be a big chunk of debt to pay off the old shareholders. In other words, life was OK under the benevolent dictatorship. I had to agree that this was a fair point, but I think there is something bigger at stake here.

Perhaps I am wrong, but I can’t help thinking that there is something hugely important about concrete rights that are set in stone forever – hopefully hundreds of years in the case of NixonMcInnes and certainly beyond the lifetime of everyone working there today. Rights that cannot be eroded over time or given up to new masters who want to do things differently. I think there is a massive difference between principles and true rights.

This is all sounding very socialist which is not a notion I’m terribly comfortable with to tell you the truth. In talking to socialist friends, they often say that the solution is for workers to unionise and to force (usually begrudging) employers to give them better rights. Personally I think the goal of better rights for employees is spot on, but the further polarisation of the situation into ‘them’ and ‘us’ is incredibly negative. It actually accepts and reinforces the status quo of the shareholder-employee relationship and misses out on huge opportunities to build amazing businesses that benefit the employees as well as society and the planet as a whole.

I would like to see far more employee ownership in order to give people these enduring rights at work. Perhaps unions could work towards raising finance to buy companies outright for the employees. I would also like to see bids for public companies to be taken out of the hands of short-term investors on the stock markets and into the hands of the people who work there.

This is not just social ideology. It is actually great business sense too and this is what gets me excited as an entrepreneur. In Beyond the Corporation, the myths about the supposed flaws in employee ownership (lack of innovation, inability to make tough decisions, bureucracy, short-termism etc) are thoroughly debunked by the reality of employee-owned companies like John Lewis, Arup and Publix who consistently out-perform their peers across all traditional measures of business success. It’s clear that employee owned companies can actually be more agile, innovative and better able to cope with tough times.

There are compelling reasons why employee ownership would be a far better and fairer standard framework for business than the current shareholder model. To test this theory, imagine for a moment that employee ownership was already the standard and employees had parallel rights at work as they do in society. Would any sane person suggest that it would be a good idea to remove all of these rights and give them up to owners who don’t actually create the value within the firm? Would anyone believe that these businesses would perform better? Would anyone think it would be better for society? Of course not. The current model only hangs on by virtue of the fact that it is ‘the way things are.’ But I don’t think it should or even can hold on forever. The day of the employee-owned firm is coming.

Networks and employee ownership: The future of the corporation

I believe that the draw towards democracy in organisations will prove to be just as irresistible as the draw to freedom and democracy in dictator-led countries. Like an Arab Spring at work. Why? Because I believe that humans have a fundamental desire to be set free. Freedom unlocks our potential making individuals happier and organisations perform better.

On the Worldblu list every year there are examples of how leading companies implement democracy, and I have shared a few crazy town ideas for taking it even further. But aside from the individual democratic systems and processes, what will the organisations themselves look like?

I think that the evolution of organisational democracy will lead to two super-species which will dominate the business world.

The first type of organisation, which I touched on previously, doesn’t even have a single entity. It will be a loose connection of individuals – a network – that creates connections and works together on projects. In a network there is no hierarchy, but you still have very clear roles, responsibilities and accountability in order to get a job done. These networks will make heavy use of technology. For example LinkedIn to find new connections and keep your network of collaborators alive; Etsy.com to organise the means of production; group collaboration tools like podio.com to communicate and manage the work; and telepresence to help alleviate the need for physical proximity.

The advantages of networks are enormous. You can put together the very best team for each project, instead of being forced to use the team that you happen to employ – a dream team for each and every assignment. They can also be highly efficient too because you don’t have a huge amount of company overhead – both financial and bureaucratic getting in the way of the actual work.

For individuals, they can have the ultimate personal freedom of deciding what they work on and taking breaks between projects whenever they like. Rewards are much more directly shared, with everyone on the team benefiting directly from their work. Performance is reviewed by peers not by a boss and success will speak for itself: Do a good job and you will be more sought after for future projects. You will be able to pick and choose the most interesting projects to work on, and your rewards will increase. No political struggles for a promotion or a pay rise. The ultimate meritocracy.

In the future I think we will be surprised at the size and scope of what informal networks, outside of traditional corporate structures are able to achieve.

But what about businesses that require more capital investment such as expensive machinery, and where the work is more ongoing rather than project based? Networks my not be ideally suited in these cases (although I wouldn’t rule out what a smart group of networked individuals might be able to pull off.) I do think though that networks won’t completely replace larger corporations altogether, but these corporations might look radically different to the ones we see today.

I believe that the future of the corporation is employee ownership. It’s not a new idea, and it’s one that has already proven to be a more productive, innovative, faster moving vehicle for long-term success. For example, see John Lewis (most successful retailer in the UK), consultants Arup (leading engineers of projects like the Bird’s Nest stadium in Beijing) or supermarket chain Publix (winner of the best customer service award in the US every year since 1995.)

Despite their undoubted success, when it comes to large companies, the employee owned variety are still a very small minority in an economy dominated by large publicly listed companies. I believe it’s inevitable that this will change – the free market will force the issue.

Employee-owned companies perform better because unlike listed companies there is no pressure for short-term financial results from the markets at the expense of building long-term value. Shareholder interests are not put before employees because they’re one and the same. It’s hard to have a more engaged workforce than one that actually owns the business, and that leads to high productivity, faster innovation, better products and services and happy customers. All of this leads to better performance in traditional terms like profit and capital gain.

Employee ownership is rarely considered as an exit option for entrepreneurs starting businesses who usually opt for a trade sale or IPO but I believe this will change over time. Many economists and business advisors still shun employee ownership based on incorrect assertions in the face of the evidence. It’s hard, although not impossible right now to fund employee buy-outs (we looked into it at NixonMcInnes.) I believe that this will change as faith in public companies and the stock market declines and employee-owned companies continue to thrive.

Within employee-owned companies, the structure will look very different to traditional corporations. Power is completely subverted with the most senior executives accountable to the employees instead of external shareholders and analysts who pass power down via the directors and managers.

We may also see organisations that internally look and function more like the loose networked model. They have all of the freedoms to self organise, but the resources of a larger corporation to call upon. Just look at software company Valve who already work in this way and are enjoying enormous success.

I believe that we are set to see a bright future as the short-term profit dominated world is gradually replaced by work with people at its centre.

More on employee ownership in my next post.

Building a team from the bottom up

I’m working on a business plan for a new venture at the moment which I’m hoping to get going next year once I’m settled back in the UK (disclaimer: all plans are subject to change, especially whilst I’m still travelling!) I will make the plan publicly available for comment soon (the anti-non-disclosure-agreement) but I can tell you now that it includes setting up a large cafe/restaurant.

I’ve got a fair bit of entrepreneurial experience, but the hospitality business is completely new to me. So I figured that the first team member I need to get on board is a restaurant manager. Then I got to thinking, I wonder if you could run a restaurant without a manager at all and instead share the responsibilities with everyone working there. It would be unusual (I think) for a large restaurant and you would need to carefully implement some democratic systems and processes to make sure that the place runs smoothly, but I think it could be do-able.

My next thought was that to build a new team, instead of starting with the traditional approach and recruiting a manger first who then hires the rest of the team, how about hiring some junior employees first then working with them on the business plan (after all, they will be in the front line of actually delivering it and I’m sure will have some brilliant idea of their own too.) Then together with them you could talk about the management responsibilities and see if they could be effectively distributed. And if not, then the employees could hire their own manager. Not as their boss, but as an equal, just with a different set of responsibilities.

I think the benefits of this could be enormous. The employees would see that they really are the most important people in delivering the service to customers. They’re not just working ‘for’ a manager who has the real responsibility. And who knows how it might lead to a better team and customer experience if all front-line staff share the responsibilities and power of a manager.

What do you think? I would particularly like to hear from anyone who has worked in a restaurant but all views are welcome.

10 crazy town ideas for extreme organisational democracy

Crazy Frog

Here are 10 ideas that take the principles of organisational democracy to the extreme. In the context of mainstream business today they seem far-fetched but there are organisations in the world who are pushing the boundaries of democracy every year. If you think that these ideas are just too radical for your business, imagine how you will attract and retain the very best employees if you have a competitor who is bold enough to do these things. Will you be able to stand out and remain relevant when someone in your market is doing this? Welcome to the world of extreme organisational democracy.

1 Purpose and Vision

The radically democratic company has a vision and mission that transcends itself and its people. It describes a world that is richer not just for its shareholders but for all of humanity, and the planet. How about a soft drinks company that sets out to alleviate the problem of thirst and water shortage in all of its forms for every human and animal on the planet. Now that would be a real purpose.

2 Transparency

Radical transparency can build an incredible level of trust both within an organisation and with the outside world. It shows you have nothing to hide and beyond that you invite criticism and input into your business. How about publishing every single line item of expenditure in the business? How about turning the 20th century wisdom of ‘secrecy and closedness unless there’s a very good reason to do otherwise’ on its head and publish every item of income, profit, loss, remuneration and even decisions by default – available to all employees, and anyone else in the world including competitors to see. Opening a pandora’s box? Certainly. But who wouldn’t trust an organisation brave and open enough to do this? And what new insights would the company gain from having their inner workings opened up for others to analyse?

3 Dialogue & Listening

What would happen if you invested in training every single person – from the cleaners to the CEO in an organisation – to a professional level as relationship counsellors? OK it might fill you with fear to think of a business full of shrinks and endless meetings on comfy chairs with tea and biscuits. But what would the outcome be when you have truly professional standards of listening and understanding other human beings and a deep ability to forge and maintain great relationships. What would it be like to work somewhere like this? What would relationships with customers and other stakeholders become?

4 Fairness & Dignity

Decisions that impact fairness happen every day in businesses, from allocating work to setting pay. Typically its people with power (managers, directors) who make these decisions and others have to live with being treated fairly or not. How about having a rule that states that any decision made in the company which could impact feelings of fairness or dignity to a group or individual must be scrutinised by a peer-selected group of their colleagues. Yes, it will slow down some decisions, but the gains in loyalty and the removal of the politics of favouritism or discrimination will more than make up for it.

5 Accountability

Democracies are not soft. As Worldblu puts it, ‘they are crystal clear about who is accountable to whom and for what.’ In most businesses, employees are accountable to their managers. In an extreme democracy, people are accountable to everyone they work with or even influence indirectly, AND the outside world. 360 degree reviews don’t go far enough, especially for senior managers. People need to be able to hold anyone to account where necessary, regardless of who they are. Local communities and even activists can be brought closer to the organisation to create deeper accountability with the outside world. But accountability isn’t about blame. In extreme democracies, accountability creates a tight support network.

6 Individual & Collective

Google and other companies famously have ’20% time’ where they are able to work on projects of their own choosing for one day per week. How about upping this to, say, ’100% time’? In other words, employees choose ALL of their tasks and projects. To get this right, the collective mission of the company will have to be not just well-defined and understood, but genuinely bought into so that all work supports the mission. You also need to have good accountability in place from peers.

7 Choice

Throw away the rulebook for dress code, working hours, work location, pay reviews and holiday entitlement. Take a punt on assuming that employees can be trusted to make decisions that are fair to them, the business and their colleagues and customers. Crazy right? Not really when you think that this is how millions of freelancers and self-employed people work. Many of the most talented people in the world opt out of the corporate world because they have more choice by going it alone. It works because they are ultimately accountable and have direct alignment with the purpose of their 1-person business. But if we can create this alignment and accountability in a larger business, then why not give them this freedom and choice? The business that is brave enough to do this may never lose a talented employee to a competitor again.

8 Integrity

Google started a change in the corporate world with their mantra ‘Do no evil.’ But that’s just the foundation. ‘Extreme integrity’ is about doing GOOD in all your actions, not just avoiding evil. Imagine a company that has a set of ‘values’ that are more than just filler on the boardroom wall. Values that were created by, and truly believed in by every person throughout the organisation. What if in your culture, every decision and idea is checked against these values as a matter of everyday routine such that it becomes instinctive and automatic. Could you build extreme integrity such that a company can be trusted as much as a close family member or friend? Businesses are made up of human beings with the capacity for enormous integrity so I believe they can.

9 Decentralisation

Do away with the ‘centre’ or ‘top’ of an organisation altogether. A network structure is the ultimate in decentralisation. It is possible to create an organisation that has no ‘top leaders,’ board of directors or even any sort of legal entity. In the extreme democratic future there will be large organisations with the power and impact of large publicly listed companies today that are a mesh of individuals and relationships. The network can swarm together around projects and customer needs, then disassemble and re-form as needed. No formal ‘lines of responsibility’ or control, just agreed roles, responsibilities and accountability that are completely dynamic. Networks are incredibly resilient. That’s why it’s hard to fight al-Qaeda and BitTorrent because there is no ‘head’ to cut off.

10 Reflection + Evaluation

Why not reverse the current trend of business needing to become faster, faster, faster and instead spend more time reflecting and evaluating than actually ‘doing?’ Sounds hopelessly inefficient? Well how about all of the rushed, high-pressured years of ‘doing’ that led to the effective collapse of the global banking system? What would the world look like now if more time had been spent reflecting and evaluating? Perhaps sanity would have prevailed. At Mindvalley, a company in Malaysia, they already hold group meditation sessions to envision the future and reflect on what they are doing. Sounds almost cult-like, and it’s uncomfortable to expose our souls at work, right? But imagine the wisdom and breakthroughs that could surface if we slowed down more, and became more mindful. Perhaps not so crazy after all.

DALAI LAMA

The secret to out-aping a primate boss

Much of human behaviour, specifically at work, mimics the behaviour of our hairy ancestors and cousins.

The WSJ cites an author who observes two colleagues talking over coffee and how the more powerful one ‘stares down’ the subordinate when a contentious issue is raised in the conversation. Classic non-verbal alpha male behaviour of the kind we’ve all seen at work.

But what’s not mentioned in the article is that by being a human rather than an ape we can transcend this kind of primate behaviour using the very human skill of empathy. A less ‘dominant’ but smart and empathic human can say something like ‘Gosh you look like you tensed up when I said that. Are you OK? Did I offend you? How are you feeling about what I just said?’ Suddenly, the non-verbal ‘threat’ is made much more visible and the dominant is forced to interact at a higher, more human level. At that point the primate advantage is lost and you’re on a level playing field for a fair and constructive conversation.

If it were true that alpha male types are better suited to, and more succesful in leadership roles then wouldn’t we see the majority of positions of power filled by men like this? Hmmm oh dear, yes unfortunately we actually do. BUT this is changing fast.

I can’t recall any serious article in recent times advising on aggressive, domineering alpha male behaviour as a recipe for success at work. However I do see a big trend towards empathy, communication and, frankly, more female traits as the recipe for success.

Next time anyone tries to use alpha male tactics on you, don’t ignore it or try to fight it head-on, just use a little empathy to uncover their true feelings.

Dangerous and wrong assumptions about human nature

Human Nature

In almost every decision made within a business there are embedded assumptions about human nature. We make assumptions about what customers want or how they will behave, and we make assumptions about human nature to try to get the best out of the people working there.

The danger comes when these assumptions are made subconsciously, or worse still, based on folklore or narrow experience rather than the truth about our species. The best companies deeply understand what makes humans tick and build their culture, products and services around this.

So what are the assumptions we make about the nature of the humans inside a business? These assumptions, conscious or not, shape the very fabric of a company: It’s structure, values, culture. Everything else that the business does follows this. But how much time is spent actually making conscious and wise decisions that really reflect what makes humans tick? By most businesses, not much.

Here are two scenarios:

First off, what happens if you assume that humans are fundamentally selfish? Assume that they care about themselves and those closest to them and everything else is deeply relegated. Above all else, they are motivated by what they can get out of the company for themselves. This is the assumption implicit in much of business-as-usual today.

These kinds of assumptions lead to hierarchies (because you need clear lines of ‘control’), ‘line management’ (because you can’t trust people to do their job of their own volition) and carrot-and-stick motivation tactics. If these assumptions are true, the only way you can really get people to do what’s best for the business is offer rewards for cooperation and punishment for behaviour you don’t want to see. The most visible example of this is offering bonuses or rewards for hitting performance goals. The reason it’s so popular is that it can generate short-term results (or motivate people performing highly procedural simple tasks – not the direction work is heading today). However, the inconvenient truth is that there is no social science research that I’m aware of to back up the usefulness of these assumptions, whereas conversely there is research to show that it can actually cause worse performance and lower motivation over the long term. It’s actually even been shown to be true in apes! In one experiment with children it was proved that kids who naturally enjoy drawing can actually become demotivated and will draw less if you introduce rewards for doing it.

To make it personal, how would you feel at work if you believed that your employer held these assumptions about you? Would you be able to deliver your best work in these conditions? Would it inspire your creativity and ability to innovate? Would it foster good relationships with the people you work with? I expect the answer to all of these is ‘no.’ Sure, you might work harder for a while if a bonus was dangled in front of you, but it wouldn’t sustain optimal performance and you’d probably leave as soon as you could find something just a little bit better.

In the second scenario, what happens if you assume instead that people certainly care about themselves and their families, but these are base needs and can be relatively easily satisfied by fair pay and good working conditions. Once these are met, there are much higher things that humans need and strive for which a business can tap into for the benefit of the individual as well as the company. This is the theory put forward at Abraham Maslow with his famous Hierarchy of Needs model, and something I wrote about before. If you follow Maslow, you satisfy base needs to take things like money and survival off the table, and create a culture that works up the hierarchy of needs, providing recognition and social belonging (not replacing family with work but recognising that great relationships help us to enjoy work and perform better.) Then further up still there is the opportunity to create ‘self-actualising’ experiences’ for employees. Setting up the conditions for them to be the best they can be and to master their craft.

Social science has also given us the ‘Theory Y‘ of motivation. This is the insight (which is bloody obvious to anyone who’s ever worked in a job they enjoy) that there can be ‘intrinsic motivation’ at work. Essentially – shock horror – that we can be motivated by the actual task itself, and to exercise self control outside of any rewards on offer.

If we believe this second set of assumptions, we can make radical changes to business-as-usual. We can throw out hierarchies and sometimes even management altogether (because we don’t need to control people) and we can focus on setting up the environment and culture to give people autonomy, great relationships and the opportunity to master their craft – the things that have been proven to actually motivate people.

Social science has offered us this second scenario and it is backed up with 50 years of research. It’s not a naieve and fluffy view – it’s created by neutral boffins – and it is finally starting to catch on. You can read some of the descriptions of how the ‘Most democratic workplaces in the world‘ operate and you can see these assumptions in action.

I think it’s time for all businesses to face up to the assumptions that they have been making about human nature and start a process of recognising the true potential of our species which can improve everyone’s life as well as generate success for the business.

Two things that travel has taught me about consumerism

1. Poor countries do not develop in the order you expect

When I stayed in Batu Puteh in Borneo last year, the family home I lived in had no sink in the bathroom and you washed by pouring cold water over yourself from a big barrel that filled up with rainwater. Yet in the living room there was a large flat-screen TV and satellite. This really showed me how poorer countries don’t always develop in the ways and order that we in the rich world might expect. You might expect people to be struggling for the basics and working up from there, but poor countries can see on TV the lives of the rich and they want a slice of that now. If you’ve washed in rainwater all of your life you don’t see that as a problem which needs fixing, whereas satellite TV is new and exciting.

2. It’s easy to get away from the consumer lifestyle. But hard to stay away.

When you live out of a rucksack for a year you learn to get by with the very minimum of possessions. It’s actually very liberating – you can walk through a shopping mall and not feel tempted with all of the ‘stuff’ on offer simply because you don’t have space for it in your backpack and don’t want to be encumbered with the added security risk of carrying more valuables. And of course when you’re out in the world experiencing new people and places, ‘stuff’ just doesn’t seem exciting. The only things I find myself really ‘wanting’ are very practical items like replacing worn out trail shoes.

The sad thing I noticed though from when I popped back to the UK last August is that once I was back in a very consumer society, the craving for ‘stuff’ came back quickly and I found myself shopping for trainers, watches, new clothes and other bits I didn’t actually need at all. I enjoyed the consumer buzz you get from buying something new even though I know it wears off quickly and doesn’t give you long-term happiness. I am going to try to fight this one hard and know I’ll probably fail to some degree. But being away certainly makes you aware of the forces at large in our society.