Adam Smith, the father of economics, pointed out in his book The Wealth of Nations,
"The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company."
In other words, when ownership is separated from those who manage the company, the managers will inevitably neglect the interests of the owners, leading to imprudent decision making within the company.
(Taken from http://www.ask.com/wiki/Criticisms_of_Corporations?qsrc=3044)
Showing posts with label ownership. Show all posts
Showing posts with label ownership. Show all posts
Wednesday, August 25, 2010
Wednesday, December 31, 2008
Top Small Workplaces of 2008 Are All Democratic
All the 15 businesses of the Wall Street Journal's Top Small Workplaces 2008 are proactively transparent, 86% share a large portion of profits with employees, all of the businesses de-centralize and limit managerial power, and all of the businesses inspire a euphoric purpose greater than themselves.
All of the 15 Top Small Workplaces are proactively transparent. At Integrated Project Management Co., "each employee sits down for a weekly one-on-one meeting with his or her manager in which they discuss work progress, the employee's performance, and the skills that need improvement." At Jump Associates LLC, "every morning, all employees meet for a "scrum" -- a short get-together where they're briefed on company news." And, the office is laid out so that "all employees, including senior management, sit out in the open in "neighborhoods" of five or six workers." At Lundberg Family Farms, the President hosts a monthly "Meet the CEO" event "where a small group of seven or eight employees chats with him to provide feedback and discuss any concerns." New Belgium Brewing Co., also holds monthly meetings "where it walks employees through the company's financial statements." And finally, at Rainforest Alliance, "employees can do stints in foreign offices to learn more about the organization and work on the front lines."
86% of the Top Small Workplaces share a large portion of profits with employees, and five of these businesses are 100% employee owned. This is especially impressive because employee owned businesses make up only one per cent of all American companies.
All of the Top Small Workplaces de-centralize and limit managerial power. At ATA Engineering Inc., "At least eight to 10 ATA employees are involved in interviewing every job candidate. If one employee objects to the hire, the candidate may not be offered a job unless that employee changes his or her mind." Also, employees "can pursue projects that s/he feels are good for the company or that s/he is personally interested in without needing more than one person's approval." At J.A. Frate Inc., during the only layoffs in 37-years, "the board of directors asked employees to vote on taking a 10% pay cut, promising to reinstate their normal wages after three months. The majority of the employees voted for the cut and all the laid-off employees were later rehired. At Landscape Forms Inc., "if the whole team agrees on one employee's idea, it can be implemented -- without approval from senior management." Rainforest Alliance "gives many junior employees the chance to spearhead research and other initiatives for the organization, later promoting them to oversee those initiatives." And finally, the President of Redwoods Group Inc. caps his own salary at 10 times that of the lowest-paid employee.
All of the Top Small Workplaces inspire a euphoric purpose greater than themselves. The President of ATA Engineering Inc., was "nominated for a local "Entrepreneur of the Year" award. But he turned down the honor, feeling he shouldn't take all the credit for the company's success." At Decagon Devices Inc., "employees take turns bringing home-cooked meals to work for their colleagues." At Jump Associates LLC, "a coach stops in the office a few days a month to help employees with any issue, such as improving their communications or resolving conflicts with a colleague." At King Arthur Flour Co., "even employees who don't work directly with flour are encouraged to learn about baking." At New Belgium Brewing Co., employees are enthusiastic about supporting the company's environmental cause. "Each New Belgium employee is given a cruiser bike," and each year they "dress in costumes and lead local residents on a bike tour." And, "an on-site recycling center allows employees to recycle goods." And finally, At Redwoods Group Inc., "each full-time employee is required to do at least 40 hours of volunteer work annually for nonprofits of their choosing -- on company time." In addition, the company "donates up to $300 annually per employee to charities where employees volunteer their own time."
These companies empower their employees by being proactively transparent, offering ownership, decentralizing and limiting power, and inspiring a euphoric purpose greater than themselves. Democracy is not just giving people a voice. Democracy empowers the voices that people already have.
(Quotes taken from http://online.wsj.com/article/SB122347733961315417.html)
All of the 15 Top Small Workplaces are proactively transparent. At Integrated Project Management Co., "each employee sits down for a weekly one-on-one meeting with his or her manager in which they discuss work progress, the employee's performance, and the skills that need improvement." At Jump Associates LLC, "every morning, all employees meet for a "scrum" -- a short get-together where they're briefed on company news." And, the office is laid out so that "all employees, including senior management, sit out in the open in "neighborhoods" of five or six workers." At Lundberg Family Farms, the President hosts a monthly "Meet the CEO" event "where a small group of seven or eight employees chats with him to provide feedback and discuss any concerns." New Belgium Brewing Co., also holds monthly meetings "where it walks employees through the company's financial statements." And finally, at Rainforest Alliance, "employees can do stints in foreign offices to learn more about the organization and work on the front lines."
86% of the Top Small Workplaces share a large portion of profits with employees, and five of these businesses are 100% employee owned. This is especially impressive because employee owned businesses make up only one per cent of all American companies.
All of the Top Small Workplaces de-centralize and limit managerial power. At ATA Engineering Inc., "At least eight to 10 ATA employees are involved in interviewing every job candidate. If one employee objects to the hire, the candidate may not be offered a job unless that employee changes his or her mind." Also, employees "can pursue projects that s/he feels are good for the company or that s/he is personally interested in without needing more than one person's approval." At J.A. Frate Inc., during the only layoffs in 37-years, "the board of directors asked employees to vote on taking a 10% pay cut, promising to reinstate their normal wages after three months. The majority of the employees voted for the cut and all the laid-off employees were later rehired. At Landscape Forms Inc., "if the whole team agrees on one employee's idea, it can be implemented -- without approval from senior management." Rainforest Alliance "gives many junior employees the chance to spearhead research and other initiatives for the organization, later promoting them to oversee those initiatives." And finally, the President of Redwoods Group Inc. caps his own salary at 10 times that of the lowest-paid employee.
All of the Top Small Workplaces inspire a euphoric purpose greater than themselves. The President of ATA Engineering Inc., was "nominated for a local "Entrepreneur of the Year" award. But he turned down the honor, feeling he shouldn't take all the credit for the company's success." At Decagon Devices Inc., "employees take turns bringing home-cooked meals to work for their colleagues." At Jump Associates LLC, "a coach stops in the office a few days a month to help employees with any issue, such as improving their communications or resolving conflicts with a colleague." At King Arthur Flour Co., "even employees who don't work directly with flour are encouraged to learn about baking." At New Belgium Brewing Co., employees are enthusiastic about supporting the company's environmental cause. "Each New Belgium employee is given a cruiser bike," and each year they "dress in costumes and lead local residents on a bike tour." And, "an on-site recycling center allows employees to recycle goods." And finally, At Redwoods Group Inc., "each full-time employee is required to do at least 40 hours of volunteer work annually for nonprofits of their choosing -- on company time." In addition, the company "donates up to $300 annually per employee to charities where employees volunteer their own time."
These companies empower their employees by being proactively transparent, offering ownership, decentralizing and limiting power, and inspiring a euphoric purpose greater than themselves. Democracy is not just giving people a voice. Democracy empowers the voices that people already have.
(Quotes taken from http://online.wsj.com/article/SB122347733961315417.html)
Thursday, December 4, 2008
People Are Honest 85% of the Time
While striving for perfection, we may have lost our greatest strategic advantage; i.e., trust.
Paul Feldman understood the advantage of trusting others when he set up a bagel business. Feldman started his bagel days "as a casual gesture: a boss treating his employees whenever they won a research contract. Then he made it a habit. Every Friday, he would bring in some bagels, a serrated knife, and cream cheese. When employees from neighbouring floors heard about he bagels, they wanted some too. Eventually he was bringing in 15 dozen bagels a week. In order to recoup his costs, he set out a cash basket and a sign with the suggested price. His collection rate was about 95 per cent."
"In 1984, when his research institute fell under new management, Feldman took a look at his career and grimaced. He decided to quit his job and sell bagels. Driving around the office parks that encircle Washington, he solicited customers with a simple pitch: early in the morning, he would deliver some bagels and a cash basket to a company’s snack room; he would return before lunch to pick up the money and the leftovers. It was an honour-system commerce scheme, and it worked. Within a few years, Feldman was delivering 8,400 bagels a week to 140 companies and earning as much as he had made as a research analyst."
"When he started his business, he expected a 95 per cent payment rate, based on the experience at his own office. But just as crime tends to be low on a street where a police car is parked, the 95 per cent rate was artificially high: Feldman’s presence had deterred theft. Not only that, but those bagel eaters knew the provider and had feelings (presumably good ones) about him."
"He came to consider a company “honest” if its payment rate was above 90 per cent. He considered a rate between 80 and 90 per cent “annoying but tolerable”. If a company habitually paid below 80 per cent, Feldman might post a hectoring note, like this one: “The cost of bagels has gone up dramatically since the beginning of the year. Unfortunately, the number of bagels that disappear without being paid for has also gone up. Don’t let that continue. I don’t imagine that you would teach your children to cheat, so why do it yourselves?”
Despite losses from theft, not only did Feldman save money by not setting up a bureaucratic system to enforce payment, he appealed to people's most positive, uniting characteristics of trust and integrity.
Feldman scrupulously collected and analyzed data that led to his discovery of two very interesting things that say a lot about people's innate desire to unite and trust one another: (1) offices were more honest when employees like their bosses and their work (2) after 9/11, the theft rate immediately dropped 15% and stayed there.
Most large companies spend thousands of hours and millions of dollars exorting people to subscribe to a "culture" so as to keep everyone in line and increase the bottom line.
What if you created a corporate structure based on the "golden rule", unity, and trust; i.e., democracy? (1) workers would be socially incentivized to be honest, and (2) a small bureaucracy would save a lot of money.
No wonder our founding fathers decided to create a democratic government.
(Quotations from Freakonomics by Steven D. Levitt and Stephen J. Dubner)
Paul Feldman understood the advantage of trusting others when he set up a bagel business. Feldman started his bagel days "as a casual gesture: a boss treating his employees whenever they won a research contract. Then he made it a habit. Every Friday, he would bring in some bagels, a serrated knife, and cream cheese. When employees from neighbouring floors heard about he bagels, they wanted some too. Eventually he was bringing in 15 dozen bagels a week. In order to recoup his costs, he set out a cash basket and a sign with the suggested price. His collection rate was about 95 per cent."
"In 1984, when his research institute fell under new management, Feldman took a look at his career and grimaced. He decided to quit his job and sell bagels. Driving around the office parks that encircle Washington, he solicited customers with a simple pitch: early in the morning, he would deliver some bagels and a cash basket to a company’s snack room; he would return before lunch to pick up the money and the leftovers. It was an honour-system commerce scheme, and it worked. Within a few years, Feldman was delivering 8,400 bagels a week to 140 companies and earning as much as he had made as a research analyst."
"When he started his business, he expected a 95 per cent payment rate, based on the experience at his own office. But just as crime tends to be low on a street where a police car is parked, the 95 per cent rate was artificially high: Feldman’s presence had deterred theft. Not only that, but those bagel eaters knew the provider and had feelings (presumably good ones) about him."
"He came to consider a company “honest” if its payment rate was above 90 per cent. He considered a rate between 80 and 90 per cent “annoying but tolerable”. If a company habitually paid below 80 per cent, Feldman might post a hectoring note, like this one: “The cost of bagels has gone up dramatically since the beginning of the year. Unfortunately, the number of bagels that disappear without being paid for has also gone up. Don’t let that continue. I don’t imagine that you would teach your children to cheat, so why do it yourselves?”
Despite losses from theft, not only did Feldman save money by not setting up a bureaucratic system to enforce payment, he appealed to people's most positive, uniting characteristics of trust and integrity.
Feldman scrupulously collected and analyzed data that led to his discovery of two very interesting things that say a lot about people's innate desire to unite and trust one another: (1) offices were more honest when employees like their bosses and their work (2) after 9/11, the theft rate immediately dropped 15% and stayed there.
Most large companies spend thousands of hours and millions of dollars exorting people to subscribe to a "culture" so as to keep everyone in line and increase the bottom line.
What if you created a corporate structure based on the "golden rule", unity, and trust; i.e., democracy? (1) workers would be socially incentivized to be honest, and (2) a small bureaucracy would save a lot of money.
No wonder our founding fathers decided to create a democratic government.
(Quotations from Freakonomics by Steven D. Levitt and Stephen J. Dubner)
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