Friday, December 12, 2008

How Do You Define Democracy?

Every day I talk to at least one person about democratic business, usually for the first time, and most everyone I talk to has the first impression that democratic business means that employees vote. While voting may be involved, it does not define a democracy. A truly democratic business is defined by these four elements:

(1) The company is proactively transparent. If the average employee is expected to make critical decisions for the company the average employee must have access to the most critical information. Examples of transparency include (a) the manager's cubicle is placed in the middle of the action like at GE/Durham (b) every employee has access to daily company financials like at Linden Lab (c) employees switch jobs for a day like at Southwest airlines (d) everyone knows how much everyone else makes in the organization like at Semco (e) each employee sits down for a weekly one-on-one meeting with his/her manager like at IPM Co.

(2) Everyone has ownership in the company. I am referring to literal ownership of shares in the company and also ownership of work and tasks. Examples of ownership of work include (a) each team is given a due date for when their work is to be finished and the team decides how they will get it done like at GE/Durham.

(3) The companies management is limited. This means that there are few layers of management and that power is decentralized. Examples of limited management include (a) the company only has one, two, or three layers of management even though there are hundreds or thousands of employees like at GE/Durham (b) Employees, not managers, hire and fire employees like at Semco.

(4) The company's purpose inspires a euphoric feeling. In all democratic businesses there is a sense among everyone in the company that they are all contributing to something bigger than themselves and bigger than profits.

If I were to give a definition of a democratic business, it would be this...

A democratic business is a business that encourages an ownership mentality from bottom to top.
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How Will You Measure Your Life?

I recently read this article by Clayton Christiansen out of Harvard entitled, “How will you measure your life?” It is what he tells his students on the final day of his class.

One of the items that he mentions sticks out to me. It reads as follows:

“One of the theories, . . . . . how to be sure we find happiness in our careers—is from Frederick Herzberg, who asserts that the powerful motivator in our lives isn’t money; it’s the opportunity to learn, grow in responsibilities, contribute to others, and be recognized for achievements. I tell the students about a vision of sorts I had while I was running the company I founded before becoming an academic. In my mind’s eye I saw one of my managers leave for work one morning with a relatively strong level of self-esteem. Then I pictured her driving home to her family 10 hours later, feeling unappreciated, frustrated, underutilized, and demeaned. I imagined how profoundly her lowered self-esteem affected the way she interacted with her children. The vision in my mind then fast-forwarded to another day, when she drove home with greater self-esteem—feeling that she had learned a lot, been recognized for achieving valuable things, and played a significant role in the success of some important initiatives. I then imagined how positively that affected her as a spouse and a parent. My conclusion: Management is the most noble of professions if it’s practiced well. No other occupation offers as many ways to help others learn and grow, take responsibility and be recognized for achievement, and contribute to the success of a team. More and more [people think] that a career in business means buying, selling, and investing in companies. That’s unfortunate. Doing deals doesn’t yield the deep rewards that come from building up people."

I’m sure you can see why it sticks out.