Why W.L. Gore are afraid to have open salaries

W.L. Gore is one of the most famous democratic companies in the world. They are 100% owned by employees; there’s very little hierarchy, with leadership occurring organically by people voluntarily choosing who to follow; and a high level of personal freedom for employees to innovate and be autonomous in their roles. It works spectacularly well. They are massively profitable and market leaders in several product areas.

So I was surprised to learn recently that at Gore, salaries are kept secret, which is contrary to the transparency around financial information in most democratic companies.

For most traditional companies where salaries and other financial details are kept under wraps, it’s usually fear driving the behaviour: Fear of the consequences of unfair salaries being discovered or fear of letting go of control of important information. Gore doesn’t seem to have these fears. Colleagues are evaluated by their peers to ensure salaries are set fairly and they have demonstrated in many areas that they are not afraid to give up control. So what’s going on? Why would they not want the benefits of higher trust and scrutiny that fully open books bring about?

Gore say that they have a different fear: They want leadership to be merit-based above all else and they fear that if colleagues know what everyone else earns then they may show a bias towards following the higher earners rather than the best person in a particular context. I can understand the logic behind this, but to me it’s still a practice rooted in fear rather than freedom, possibility and trust (the mindset of the best democratic leaders) so I wonder if they could do better.

Humans are not purely rational creatures and we are naturally biased in many different ways. Even with closed salaries, it’s possible that people may be biased towards following leaders based on age, gender, personality, physical characteristics and many other traits which are even further removed from true merit than salaries. I wonder if having closed salaries is fighting a symptom of bias, when perhaps a better approach would be to educate and increase awareness of bias among all colleagues to help them make more conscious decisions. If they did this then they could enjoy the benefits of greater transparency, and make better decisions about choosing leaders and more.

How to be an awesome democratic manager in an old-school company

I usually write about transforming entire businesses into democracies. What if you don’t have the power to do this, but would like to realise the benefits to productivity and happiness in your team that democracy brings? Here are some tips for managers.

Old-school companies are secretive by default and only share information with employees when there’s a clear need. This breeds distrust because people fear the unknown. Democracies do the opposite. As a manager in any organisation you can adopt this principle, even if you can’t be as open as you would like to be. Go out of your way to be as transparent as possible about financial matters, strategy and decisions. Look for instances where information is not being shared, but not made explicitly secret and show employees what’s really going on in the company. Transparency breeds trust and avoids conspiracy theories.

Sharing your problems and opening up decision making is another powerful way to build trust. As a manager you don’t have to have all of the answers and solutions. A strong leader isn’t afraid to say ‘I don’t know’ and by doing this, you invite good ideas and a feeling of involvement from your team, plus decisions made with their input will be supported and faster to execute. Involve your team in the things that you are working on and you might be surprised at how much they can help. This is especially true of decisions that directly affect the people on the team.

Understanding what really motivates people at work is well proven by social science but little known to most businesses. Focus your team on these three principles and they will be happier and more motivated at work:

  1. Autonomy: People are most motivated when they have control over how to do their own work. Work with your team to decide what needs to be achieved, then get out of the way and allow them to figure out how to do it. Be there for them as a facilitator, helper and supporter. Not a supervisor.
  2. Mastery: Don’t get obsessed with objectives for performance. Whilst you will probably need success metrics and have to achieve some concrete goals, these are like a scorecard, not a strategy. Instead focus most of your attention on objectives for learning and improving your team’s skills on a path towards mastery. This is extremely motivating and a far more effective strategy for actually getting the best performance.
  3. Connectedness: People are motivated when they are contributing to a higher purpose, together with others. Discuss with your team how their work is helping to make the world a better place for people, societies or the environment (hopefully there is some higher purpose other than making money, otherwise it’s probably time to find a new job!)

Building an informal recognition programme is another very simple but powerful motivator. Take frequent opportunities to recognise great performance and effort as and when it happens, and in person as much as possible. Be very specific in feedback. Not just a ‘great job’ or ‘thanks’ but say exactly what they did well and why it’s appreciated. It has to be genuine. Lead by example to build a culture of feedback in your team by actively soliciting feedback from the team. Reward after the event, not by dangling carrots.

Encourage your team to create its own rituals like the Church of Fail or Ringing the Bell of Awesomeness. This helps you to build your own culture-within-a-culture based on better, more positive principles.

Lobby for change in the organisation. You can start by suggesting that one or two employees come to the board meeting each month, or if you’re not on the board, suggest that regular employees can come along to other meetings that are usually ‘above their paygrade’ to see what’s going on and provide input. The board or senior team will gain from the ‘reality check’ of having regular employees present, and it breaks down fear of ‘them upstairs.’ Question secrecy, making requests for more transparency and communication.

Whatever happens, and no matter how much corporate crap you’re putting up with, don’t ever allow yourself or team to fall into a spiral of negativity and complaining. Become a tribe of happy rebels, not whingers. Push the boundaries of the prevailing culture as far as you can; do things differently within your domain; and be a catalyst for change.

If you begin to work with democratic principles within your team or department, others will notice how much more productive, motivated and happy your team is. When they ask you what your secret is, this might just kick-start a change to make the whole organisation more democratic.

Good luck, and please post your own experiences, questions and ideas in the comments. I’m sure there are lots of other things you can do to be a great manager in a difficult culture.

Becoming a democratic organisation: where to start

Start

When Will and I decided to make NixonMcInnes a democratic company we were lucky in that we hadn’t hired any employees yet. This meant we could be democratic right from the start and didn’t have to go through a large change process.

It’s more difficult for established businesses, particularly large ones, who have a well-established legacy culture, systems and processes and people within the company who may not be compatible with a democracy.

Traci Fenton, the founder of Worldblu has defined 10 dimensions of organisational democracy. These 10 dimensions are inter-related and work together to form a democracy, and to become certified by Worldblu, an organisation much benchmark well across all of the dimensions.

The difficulty is that to change an organisation across all 10 dimensions is probably far too big a change to happen in one go, especially in a large business. So where do you start?

Fortunately there are two excellent case studies for this, both for businesses with turnover in the $100M’s range, but what they did is replicable in much smaller businesses too.

Semco, the Brazilian conglomerate, is perhaps the most famous case study of organisational democracy, described by its CEO Ricardo Semler in his books Maverick and The 7 Day Weekend. More recently, Vineet Nayar wrote about transforming the Indian IT outsourcing company HCL Technologies to a democracy in Employees First, Customers Second. I highly recommend all three of these books.

There is a common theme in both of these transformations which was in order to prepare the company for the large changes that lay ahead, the very first step was to build a culture of trust in the organisation. Only with sufficent trust would the organisation be ready for further change.

At Semco, they removed the clocking-in/out machines and abolished the practice of searching employees for stolen goods. And at both companies they set to work creating a deep level of transparency, opening up company finances, performance information and having public forums for discussion about company issues which are dealt with openly. At NixonMcInnes, we borrowed another idea from Semco which built trust by having two open seats at board meetings so employees could come and participate.

All of this helps to build two-way trust, demonstrating to employees at all levels that they are valued and trusted to have access to the inner workings of the company that would previously be reserved for senior management, and showing that the leaders could be trusted by making their work and information visible for everyone to scrutinise and participate in. This new-found trust changed the businesses from being ‘them and us’ to ‘we.’ Both companies then went on to develop across all of the 10 dimensions of democracy, reaping enormous rewards both in market share and profit and in the happiness of everyone working there.

So if you want to change an existing organisation to a democracy then make sure that building trust is your first step.