Democracy geek

Hi everyone,

I’m in San Francisco for a presentation and had a school paper due tonight so not much blogging this weekend. Instead, I’m going to share a version of the paper with about the middle half of it hacked out. I hope this is better for y’all than it was for me. If you want to see the original with footnotes and everything, I’m afraid I can’t figure it out. Sorry.

Meanwhile, enjoy my musings on democratic management…

Of all the cooperative principles, democracy has the most to tell us about the ideal internal workings of a cooperative; but at the same time, it seems to be the principle whose potential impact has been least realized by most cooperatives.

One issue is surely size of operations. As an organization grows, its operations increase in size and complexity, which provides additional challenges to democratic management. Consumer and credit cooperatives, which have formed the bulk of the movement, need large memberships and operations in order to achieve economies of scale and generally require very little engagement by the average member. There have been bursts of democratic management—such as that experienced during the 1970s “wave” of collectively run natural food co-ops in the United States—but these have generally been the exception to the rule.

Even larger worker cooperatives do not generally engage in direct democracy in management. They may create systems of accountability that sometimes go so far as to mandate consent of the supervised for their managers; more often the accountability is indirect. For example, members of the Basque cooperatives of Mondragon elect a board of directors, at whose pleasure the management serves. Members also have the opportunity to serve on elected bodies like the Social Councils, which can provide directives that bind the managers.

It should be noted that the cooperative principle that addresses democracy is specific to “member control. It describes cooperatives as “democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.” This does not call for anything beyond democratic governance, but I will argue that it is not philosophically or ethically consistent to exclude from this democracy the very people on whom its success depends—its employees.

I earlier observed that organizational size has hindered democratic management, but this does not have to be so, as long as the process is decentralized to the point that reasonably-sized groups have reasonably-sized agendas. There have been attempts at large-scale democratic management in some cooperatives. For example, San Francisco’s Rainbow Grocery is managed by nearly 250 worker owners, who are divided into largely autonomous departments that each operate with a high degree of democracy. Mondragon also maintains a more representative style of democracy through setting upper limits on the size of individual firms.

This model might not seem to apply with consumer cooperatives of similar size, and indeed all but a handful of collectively-managed food co-ops have abandoned this approach. Those that press on find it to be a rather challenging path, and my experience of four years in such an arrangement at the Olympia Food Co-op left me with a deep appreciation for the risk that an empowered staff will forget that they don’t own the place any more than the fellow consumer-members they serve.

Ironically, however, some of the most highly developed examples of democratic or non-hierarchical management are found in businesses that have little or no cooperative element to their ownership

Worldblu is a consulting firm that since 2007 has produced a “List of Most Democratic Workplaces™.” This list is created through the completion of surveys by employees, resulting in a scorecard that grades the firm on ten principles of democracy, including transparency and accountability.” It has included many cooperatives, but a majority of firms listed have not been co-ops. There is an obvious reporting bias here, due to the process of getting on the list (i.e. paying a large fee for assessment by a non-cooperative organization) but this development still points to a puzzling problem, that cooperatives might be losing their place as the world’s most democratic businesses.

Some of the world’s most cutting edge industrial democracies are outside the cooperative sector. Two such examples are W. L. Gore and Associates, a transnational majority-ESOP firm based in the U.S. (and creators of Gore-Tex and components in literally millions of patents); and Semco, a privately owned  Brazilian company.

Gore’s website describes it as having “an environment that combines freedom with cooperation and autonomy with synergy.” Rather than bosses, the associates at Gore (which adamantly refuses to call its staff “employees”) find their own leaders in a loose and fluid lattice structure. There are still managers at the upper levels, providing guidance to make sure that the company performs well overall, but this has little or no impact on the shop floor, where associates set their own agendas.

Meanwhile, Semco operates on a similar basis of radical equality, which was launched when the owner, Carlos Semler, discovered that he did not have the right skills and temperament to manage the company he had inherited from his father. He responded to this by essentially tossing out the management structure.  Semco has the added quirk that it is not even a majority-owned ESOP. Indeed, I have been unable to find any evidence of employee ownership beyond a possibly relevant mention of a profit sharing program that “is for real.”

In any case, it is clear that Semler does have a dominant stake in the company, as shown by his comment, “If I veto someone, the next time they’re going to say, ‘Forget it; he’s going to do what he wants.’ They have to go through processes where they know they’re going to prevail.” But regardless of this potential power, Semler casts one vote out of 3000 in elections of top leadership and decisions about major new initiatives.

Even if cooperative governance is democratic, low levels of member involvement, infrequent elections, and a general lack of workplace democracy cast doubt on the extent to which democracy permeates the organization. In contrast, cooperative principles of equality can saturate the daily experience of working at a firm that might have a legal veto by a single majority shareholder, as is the case with Semco, or at least uneven levels of investment by workers, as at W.L. Gore and Associates.

We should note that a lack of hierarchy does not make a functional democracy; indeed, co-ops should be cautious in trying to reproduce Semler’s or Gore’s experiments. Even so, these examples show that a participatory management, consistent with the highest ideals of cooperation, is possible regardless of whether the workers are sovereign.

Cooperatives should explore this challenging territory of democratic management, because it is in daily operations that lives are most deeply impacted. Members’ engaging in occasional votes to guide cooperatives whose daily function is indistinguishable from investor-owned companies is a poor example for the world.

If a privately owned company like Semco can trust its workers enough to offer them nearly free rein and then be rewarded with growth rates over 25% for more than a decade, it seems that cooperatives might at least entertain the possibility of extending democracy into their operations. This should certainly be constrained by a board’s guidance, in the same way that hierarchical management is constrained. However, there does not seem to be an inherent conflict between member and worker democracy, and the latter should be a part of our management framework.

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