Fri, Feb 13, 2004 page12

• How democracy works in an enterprise

  ONE WORKER, ONE VOTE? A new book seeks to dispel the myth among managers that it is impossible to let your employees have a greater say in how the firm is run

  • THE OBSERVER
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  To the average chief executive, the idea of a "democratic enterprise" probably falls under "nice on paper, hopeless in practice," rather like stakeholding or being kind to the environment.

  Not so, insists Lynda Gratton, author of a new book The Democratic Enterprise and a professor of management practice -- not theory, she says pointedly -- at London Business School. She maintains that democracy is both necessary and do-able.

  Although few companies can claim to be perfectly democratic just yet (with the possible exception of Brazil's Semco), elements of democracy can be found in firms such as British Telecom (BT), McKinsey and the oil-giant BP, and Gratton uses them as the context for her studies of, among other issues, individuals who are taking charge of their working lives. She sees her role as both illuminating the path ahead and giving people confidence to test it out.

  "There are immense pressures to preserve the status quo," she says. Search most middle managers and you'll find a "right to manage" tattoo somewhere about their person. Much widely applied performance management is simply command-and-control with the edges rounded off.

  The lure of the heroic leader, particularly in times of change, is still strong.

  So why should companies want to want to think about the tenets of democracy? For good instrumental reasons, Gratton believes. One is demographic. An alarming proportion of today's young people -- Generation X and Y -- are voting with their feet, refusing to replicate what they see as the mistake of their parents in tying themselves to companies that later betrayed them. They are asserting their desire for a different balance by turning their backs on the corporate sector.

  A second factor is technology, which is enabling (at least in theory) ever-closer relationships between a firm and its customers -- so why not with employees, Gratton says.

  "Firms do lots of things that cost money and benefit neither the firm nor its people -- like forcing them to commute to expensive city offices when they could work at home," she says. "That's poor management -- and poor management not to change it."

  There are some powerful performance arguments for democracy, too. By promoting justice and fairness and finding solutions -- such as remote working -- that work for both sides, the democratic enterprise benefits from more engaged employees.

  In turn, engaged employees build shared purpose and alignment, creating more agile, adaptive organizations. This is particularly important in times of change and turbulence, and for promoting innovation. Finally, committed employees, confident that they work for a just organization that has their interests at heart, can be the difference between the success or failure of a merger or other large new venture.

  Such an inclusive organization overcomes many of the theoretical and practical disadvantages of present-day organizations: the need for complicated incentives and punishments to deter opportunism and align conflicting interests; hierarchy to tell people what to do; and the denial of any moral or ethical dimension of management.

  Yet Gratton argues powerfully that justifications for enterprise democracy go well beyond the bottom line. Democracy, she says, "exists for the benefit of its citizens, while also advancing the interests of the institution." The two go together. In a democracy, individuals have the opportunity to become themselves, to flourish and find meaning in working lives governed by choice and shared purpose.

  That is important in itself. Yet the implications go wider still. Gratton believes that currently accepted models of state democracy have virtually been reduced to voting for a leader. It is above the level of the individual citizen and a travesty of the real thing.

  The "real thing," to the contrary, is engaged participation in daily affairs and decisions in which participants strengthen the institution as they hone their own democratic skills.

  The idea of the company as savior of democracy may sound strange, but it is objectively no stranger than the idea that -- with all the technological, physical and philosophical possibilities at their disposal -- companies continue to lock themselves into a single organizational model that condemns them to concentrate on constraining human behavior rather than liberating it, and turns management into an exercise in control and manipulation.

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