We live in a democracy, but is your workplace a dictatorship? As we celebrate Freedom Day, marking the first democratic elections in South Africa, we ask: How democratic are South African companies? How viable is democracy in the workplace? Do empowered employees with a say in the running of the organisation work more productively, or does a company with a clear hierarchy and chain of command function more efficiently?
In this article we’ll explore what democracy in the workplace means, and look at some examples.
What does democracy in the workplace look like?
Workplace democracy is the application of democratic practices, such as voting, debate and participatory decision-making systems, to the work environment.
This may sound straightforward and a logical status quo to adopt in a democratic society, but the practical application of workplace democracy not only varies widely, it is not always achievable, at least not in its purest form.
Democracy may not be in the best interests of all stakeholders, including employees
This size of the organisation has a major impact on the feasibility of democratic and participatory exercises. Small companies and start-ups often succeed in embracing democratic principles, and not-for-profit organisations usually exercise direct democracy because it is embedded in NPO culture. A co-op is an example of a democratically run business. But as those small companies grow, and start-ups morph into established businesses, the level of employee participation may wane.
A truly democratic model is extremely difficult to manage. If all workers were involved in every decision, very little actual work would ever get done. Furthermore, there is a reason recruiters spend a lot of time describing the skills and experience necessary for positions they seek to fill. Not everyone is qualified or sufficiently experienced to understand the factors involved in a particular decision, which might comprise regulatory requirements, supplier issues, client concerns, rate of return on investment, etc. Managers are present in organisations not only to provide supervision; they bring particular expertise needed to run the business effectively, compliantly and ethically. Leaders must ensure that all the areas that might be impacted by a decision are adequately consulted and considered before taking decisive action. To allow a majority vote on business-critical matters could expose a company to unnecessary risk and ultimately all employees could suffer.
But that doesn’t mean a lack of engagement…
More commonly found are democratic processes implemented within the framework of strong leadership. These may include staff surveys, participatory management and employee share (or stock) ownership plans (ESOPs), among others. Increased participation in decision-making and ownership is associated with heightened employee engagement, which in turn leads to greater productivity and contributes to the success of the business. What is an ESOP? As the name suggests, it is a scheme that allows employees to own shares in the company, usually via a discounted purchase of listed shares. There are various types of ESOPs and there is not scope in this article to go into detail about the legal and financial structures, but ESOPs have become a popular means to attract, retain and reward employees by giving them part ownership of the company they work for and thus a vested interest in its financial performance.
Ownership alone is not enough
The theory of employee ownership may sound logical, but research has shown that employee share ownership alone may not achieve very much. It is the combination of ownership and participatory management that provides a competitive edge. Participatory management happens when employees are encouraged to voice their opinions about their environment or about organisational issues. It does not mean they have a “one person, one vote” level of involvement, but that their views are taken into consideration in management’s decision-making process.
In this scenario, there may be a hierarchy in place, but the structure is flatter than the traditional corporate composition, with fewer layers of management, and channels of communication are more open. Leadership is less autocratic and confers more power on individual employees. Most large organisations globally have moved toward this model or are doing so. Employee engagement in decision-making is vital in a fast-moving environment characterised by constant innovation. Dictatorial decision-making may be quick and expedient, but the execution can be hindered by a lack of buy-in from employees, who may sabotage the decision if they don’t agree with it. So an element of democracy benefits everyone, including customers.
Some examples of democracy at work
William Gumede, Associate Professor, School of Governance at the University of the Witwatersrand, and Executive Chairperson of Democracy Works Foundation, has written extensively on democracy in the workplace, particularly within the South African context. He believes strongly that workplace democracy is a key factor (he goes so far as to call it the “missing link”) in building an economic democracy. But in his Policy Brief on workplace democracy, all the examples he cites of functioning democratically run companies are overseas, suggesting that South Africa still has a way to go in our quest to embed democratic principles throughout society, not just in the voting booth.
John Lewis Partnership
The John Lewis Partnership in the UK, which runs a nationwide chain of eponymous department stores as well as the upmarket Waitrose food stores, has been managed by participatory methods since 1929. Employees sit on representative bodies and are seen as partners, with the ability to vote on key decisions, and to elect representatives to a company‑wide council and the board. All employees are part of a profit-share scheme.
In Spain, Mondragon, which has interests in finance, industry, retail and knowledge, is run as a co-operative. It has been around since 1956, has operations in 30 countries, and employs c.85 000 people. Despite this scale, employees are involved in decision-making on profit‑sharing, strategy and appointment of directors. There is a general assembly, made up of employee co-operatives, which elects a governing council to decide on matters of strategy and finance. A social council also exists to manage internal structures.
In Norway, IT company Kantega has employee and outside representatives on the board – and every employee has a vote on board appointments. All employees are entitled to participate in an annual general assembly, although only employee shareholders have voting rights. But all staff are entitled to buy shares if they wish, and Kantega sets the share price as low as possible as allowed by Norwegian law.
These measures to involve employees in the decision-making machine of the organisation enhance rather than hinder performance. All the companies cited above out-perform their competition, and win awards for being among the best places to work in their respective jurisdictions.
Gumede believes that workplace democracy empowers people, not only at work but also in society at large. Workplace democracy has the potential to teach people, particularly those who have historically been denied their voice, the power of participation and decision-making. It can reduce social inequalities based on race, class and gender.
As we remember the struggle to achieve a democratic society, let’s reflect on the opportunities for participation within our own organisations, and look for ways to improve employees’ right to participate and to have representation in the governance of the company. The evidence suggests that everyone wins.