The democratic company (Part 2)

By Siegfried Lautenbacher By Jeffrey Backus Apr 4, 2015
The democratic company (Part 2)

Translation of the Original Article by Siegfried Lautenbacher

The respective management model, as well as leadership, have an impact on the issue of participation of workers and the relevant necessary structures. This currently leads to the discussion of a democratic workplace or a democratic company.
Picture: (Transparent) ballot box by Pierre-alain dorange under a free license.

Workplace democracy or Democracy at the workplace. Are you crazy? This you could ask yourself, if… - yes, if there weren’t actual and economic obvious reasons for it. This is certainly new at the current discussion, because the basic ideas on the topic of participation at the workplace and democracy at the company are already relatively old. Or rather: there have always been alternative examples that something like this can work. But the concept of a democratic company currently “engages an implication of digitization of organization, which importance can hardly be overestimated” (Hans-Georg Schauffer here). And captures the spirit of the time or hits the bullseye of digital transformation. Economically - or to be more precise viewed the point of efficiency – the idea of a democratic company represents the consistent continuation of considerations about a participatory and collaborative leadership. In a Social Collaboration both will be necessary, as Alexander Klier wrote in part 1 of these blogposts (here). The basic idea derives from the workplace, but should not neglect the associated questions about the structure. Therefore I will also take the (participatory) workplace as a starting point, in order to arrive at the structure of a democratic company. And maybe to go even further.

The democratic workplace

Participation does not necessarily mean democracy. Also, participation in the workplace is at first only that employees or groups can participate in operational decisions. This on the other hand is something that becomes an effective part of target agreements – as long as they are actual agreements. In many companies, it is not a topic how targets are being reached; it is regulated and defined hierarchically. However, the allocation of resources to achieve the objectives remains firmly in the hands of the "powerful" - the hierarchical management. The new forms of work are so ambivalent, because on the one hand (democratic) liberties are being given, but on the other hand, by setting a central factor – the goals (and the provision of resources for that) – the detailed work requirements are not up for discussion. Nevertheless, these freedoms - that become essential for successfully working in groups – enable a theming of participatory principles. Furthermore, there is reason to hope that „participation in workplace decision-making increases the probability of participation in wider politics outside the workplace“(Neil Carter, here). Politics beyond the workplace means, first, that employees are guided not only in terms of leadership, but also to get real influence and choices in strategic business issues. This in turn represents the economic advantage because „high corporate performance […] has been strongly linked to systems of management in which the opinions and interests of workers are at the center of decision-making, rather than being an afterthought“ (Cradden 2007, here).  


Conflict Management

However, there is a second reason why the current discussion about a democratic company has such a significance. Flat hierarchies, decentralization, process orientation and social collaboration are not just successful concepts for a more productive form of collaboration. They are connected to the structural and organizational level with a transfer of many tasks in the range of groups, teams or even in transnational projects. Although a social collaboration lives in that it is not directly linked to the hierarchies and the power structures of management. Precisely this fact brings specific problems, and the solution often does not or cannot consist of bringing about a win-win situation. In other words: not all necessary decisions in deliberative processes (i.e. in the sense of well thought out arguments to convince the hesitant) can be mapped. Moreover, it will not always be harmonious in the groups and teams when making decisions. On the contrary, the communities can only become productive when they conceive including conflicts as an opportunity for further development. So, not just to “solve” them, but take these as a part of the work, and to “cultivate” them. This also applies to the corresponding Error culture. Democratic Leadership doesn’t (automatically) mean “that all powers are being denied to the formal bosses, and that everybody always leads together” (Catherine Hoffmann). A crucial question within a participatory workplace is how to resolve conflicts productively so that the respective groups (and the involved individuals) can develop further. By this time, it appears that there is a central tool for such situations: transparent voting procedures, compromise formation and ultimately democratic legitimacy of the decisions. Therefore, in the sense of successful operational activities, it becomes central that the group members can also obtain competences in the (democratically regulated) conflict management. Again in terms that are somewhat more general: The opportunity for a further structural development of companies in this sense “can only be utilized if clarifications take place, which enable inclusive labor-political compromises. This ultimately requires a new, democratic Corporate Constitution (Klaus Dörre, Thesis 10).

The democratic Business

However, in order for a democratic business to emerge something else – in regards to the working conditions - has to be in place, besides the participatory workplace and democratic decision-making possibilities. Companies are, on a more general level, complex and above all open systems, which can be understood as a reign. The reign (in the sense of exercising power and fundamental objective determination) in companies, develop based on the implementation of (different) interests. At the moment the interests of the owners or shareholder are paramount. This often thwarts the efforts for Leadership and participatory workplaces. Above all, this means - in terms of a strategic goal setting – that the long-term benefit of the company is no longer at the forefront, but many times the short-term aspect of the Yield Enhancement. Interestingly enough, just the aspect of reign now offers an important reference point in the general political system for the solution to the problem. Even democratic societies are not free of reign or power. However, a key difference between state (democratic) powers and the powers in organizational systems is that power is limited in time by regular and free elections. The Dominion is therefore exercised until another party or group is appointed to power. That basically opens up the possibility to influence the general goal setting. From that point of view, the ideas behind a democratic company are not just a consideration based on pure human kindness. It arises (now) also economically, for example due to the question of the use of the creativity of employees, the reliable conflict regulation as well as the long-term benefits for the company. A video worth watching and a good debate on the issue is this talk by Prof. Klaus Dörre at the conference “The democratic Business”. Also noteworthy is the discussion from about 37 minutes regarding work groups and management.

Sociocracy or Holacracy?

The circle is complete now, if you don’t just consider the democratic company as an end in itself but want to reach the reconnection to the active groups therein. This is what the terms Sociocracy and Holacracy are expressing – or at least are supposed to express. The invention of terms is not always helpful and sometimes daunting. This is especially true when terms are very similar in the substantively (historically holacracy is a quite expendable Buzzword). To get back to the subject (here is an explanation about holacracy, and here is a brief synapsis): "Sociocracy is steering an organization through the" socii "[lat. Socius: Comrade, companion, ally], that is, by people who regularly deal with each other and try to achieve a common goal "(Dennis Wittrock, here). The consequent principles are the same in both approaches, but are in detail developed differently and extended (Reading tip: Reinventing Organisations by Frederic Laloux). Regardless how you see the scientific genesis and significance of these two terms, it becomes clear that the core of both concerns point back to Social Collaboration by enabling the people “to provide effective Leadership amongst themselves on equal ranks” (cited above). In contrast to the dispute between management and leadership, however, the necessary structure is very strongly emphasized so that the groups and teams are actually able to exercise political power in the organization. It is certainly a long way to this empowerment. But also a worthwhile task for all sides.

What will happen next?

In upcoming blogposts, we will further deal with this topic on an abstract, intellectual level. We will also precisely report on which experiences we at Beck et al. Services are making, and - in terms of the sense of the new transparency – where we are failing, where we don’t know how to continue and where we are only making small steps. Finally, it should be noted again that we do not see ourselves as evangelists or that we postulate new ideologies in order to be invited as Keynote speaker. We do not know anything better. We see our contributions as comments at a networked debate. A discussion with our customers, partners and anyone who wants to discuss free of ideology and with an open mind about it.