Organizational democracy: Too many chiefs?

Organizational democracy

A few years ago, leading business guru Gary Hamel wrote a critical article in the Harvard Business Review entitled First, let’s fire all the managers. His argument was that organizations are dominated by the inertia created by supervisory hierarchies and he posed the question as to why it is that nobody bothers asking why a certain number of workers (depending on the sector and other factors) seemingly require a layer of bosses to watch over what they do.

And the reality is that these management layers are actually very expensive to sustain: they require high salaries and incur indirect costs such as supportive administrative infrastructure, etc.

As an example of how things can be done better, Hamel cited the case of Morning Star, a US preserves company that has neither hierarchy nor bosses. Employees self-manage through work groups, and create and negotiate what they call memorandums of understanding, or service agreements, between teams and colleagues whereby they agree to meet individual and group objectives that they themselves set. Other well-known companies such as outdoor wear manufacturer Goretex work along similar lines.

These companies are radical examples of what has come to be known as organizational democracy. Obviously, the concept does not carry with it the same connotations as in the world of politics, given that it would make no sense if all employees had the right to periodically vote on a program proposed by differing currents within the management.

Instead, what this approach aims for is a significant degree of worker participation in many decisions, linked to mechanisms to allow for delegation and empowerment. In short, the company’s decision-making capacity is increased, and many workers are given greater autonomy, which of course is not exactly the same as sacking the managers, but it does reduce their power and minimizes the importance of hierarchy in the company.

We can find other examples of this kind in Hewlett Packard, which has proved effective in terms of innovation, one of its major strategic objectives.

Another recent example that is garnering a lot of attention from management experts is the decision by Tony Hsieh, the CEO of Amazon affiliate Zappos to eliminate all management levels and to replace them with what he calls a “holocracy”. This replaces hierarchies with circles that represent different the aspects or functions relevant to the organization.

Posts are replaced with roles that give professionals in the company considerable autonomy in carrying out their jobs. Issues or problems that come up and that require a decision are referred to as tensions, which are resolved in large part on discussion and consensus between the members of the company’s different circles.

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For many readers, this model of organizational democracy will sound very utopian. Who wouldn’t want to get rid of their boss, at least every now and then? Who wouldn’t want to make their own decisions in the belief that the company would work better if it let the workers decide? Furthermore, most surveys show that one of the main reasons that people change jobs is because they don’t get on with their boss.

It has to be said that Morning Star doesn’t have to deal with these kinds of problems, because it already gives its staff considerable autonomy, resulting in what seems to be a very stable management system. For its part, Zappos now appears to be encountering other kinds of problems.

After Hsieh offered three months compensation to anybody who didn’t want to work within a holocracy and preferred to leave, turnover has increased by 14 percent, a figure virtually unknown for such a stable culture. Although the reason for the high figure is not fully understood, proponents of hierarchical systems will doubtless be rubbing their hands with glee at the news.

It has been shown that these kinds of systems don’t necessarily function for everybody. Workers are subject to greater levels of responsibility, which can sometimes increase stress, and in many cases means having to work longer hours to deal with urgent problems; at the same time, such system require greater effort and commitment, which not everybody wants to make to their job.

Furthermore, the consensus that these systems seek to attain, albeit it limited and applied to particular situations, can create delays and conflicts between departments.

In short, there is no such thing as the perfect system; there are only those that best fit our needs and ambitions depending on time and circumstances. I think it was Winston Churchill who said, “Democracy is the worst form of government, except for all the others.” Clearly, democracy’s contribution to business management has yet to be fully assessed.

[This article has been reproduced with permission from IE Business School, a leading business school based in Spain.]. The Opinion expressed by our Contributors are their own.

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