The traditional org chart has the CEO and directors at the top, with power cascading downwards through managers and eventually to the people at the bottom who actually do the work and create all of the value.
A popular idea in the design of democratic companies is to turn the org chart upside-down. In an inverted org chart, it’s the people who do the work, deal with customers, make the product and deliver services who are the VIPs at the top, and the org chart has the layers of management beneath them to support them to be happier and more productive. The CEO is right at the bottom, since they’re furthest from directly delivering value to customers, but have to provide the foundation to the support structure for employees.
An inverted org chart isn’t just a piece of fakery to make the employees feel important. Viewing the organisation structure in this way can lead to innovations that get new levels of performance from more engaged employees. For example, at HCL Technologies (Multi billion dollar IT outsourcing giant,) when they inverted the org chart, they came up with the idea of creating something similar to a customer support ticketing system, but with the regular employees as the customers, and the managers as the support agents. Any employee can open a ticket on the system about anything from a problem with their pay, to a faulty chair or a complaint that their boss smells. The issue is then routed to managers who have to resolve the issue and only the original employee can close the ticket. This system has helped HCL employees to be happier, more productive and therefore provide better service to customers and generate profit.
However, there is another group of people who hold more power than anyone else in the org chart, yet are rarely featured on it. Shareholders. Even in an inverted org chart, the only people who have deep, permanent rights and power are the shareholders, because they alone can remove the CEO, board and in effect do whatever they like to the org chart as is suits their interests, short- or long-term. They alone are the people with rights to the profit made, and they can sell their rights wholesale to anyone they choose without needing any kind of consent from anyone working in the business.
Even in very progressive and democratic companies (even those with innovative, networked org charts) it’s often just taken as ‘the way things are’ that there are shareholders who have all of the power, rights, and entitlement to profit. Even high-performing employees accept that they are ‘hired’ by the company, and effectively rented just like a piece of machinery.
But employee-ownership offers a real alternative to the status quo. Employees who are also owners hold the real power in the company and they have the rights to hold the CEO and board to account and to the profit that they make. This is why employee owned companies like John Lewis in the UK and the Mondragón network in Spain are so successful, because rights, power and profit are tied to the people who deliver the value.
So is this a threat to traditionally owned businesses? Yes and no. Employee ownership (like John Lewis rivals Marks & Spencer and Debenhams know) can create fierce competition. However, there’s a route for founders and other owners of traditional businesses to transition their companies to employee-ownership. This is not altruism and they don’t have to give their shares away. It’s possible to finance all-employee buy-outs which create a fair and exciting legacy to be enjoyed by all future generations of employees, and it gives the old shareholders a fair return for what they have put in.
Check out this short video that gives a flavour for what life is like inside employee-owned companies. It’s hard to fail to see why this model gets the best out of people.