Workplace Democracy: What It Is

In February, the workers of the general hospital in Kilkis, Greece,  were fed up with their country’s ever worsening political and economic situation.  They decided to occupy the hospital and run it as a democracy. They are now one of many thousands of workplaces all over the world where decisions are made by all workers under the ‘one person, one vote’ maxim, rather than by an owner, manager or board of directors. Given the developing economic situation, particularly in Europe, I thought it would be a good idea to take a closer look at workplace democracy. In a series of articles, I hope to explore what workplace democracy is, how it relates to traditional organizational models, what some of the important characteristics are, what some of the important possible upsides and downsides are as well as look at its history and a number of practical examples.

Image Source: http://libcom.org/blog/greek-hospital-under-workers-control-update-28022012

To start, lets examine how workplace democracy relates to traditional organizational models and lay down some definitions. Important disclaimer:  at least to my knowledge, the literature on workplace democracy lacks a consensus definition on the precise meaning of all of the terms I’m about to define, especially when it comes to how these terms relate to each other. I’ve done my best to find and provide clear definitions and explanations but please keep this in mind when reading these articles and when reading any other writings on workplace democracy.

Workplace democracy describes “a variety of interpersonal and/or structural arrangements which link organizational decision-making to the interests and influence of employees at various levels” (Petersson & Spängs, 2005: 11) and “stretches from participative management and employee involvement, to industrial democracy and self-management” (Heller, 1983: xxxv).

It has also been defined, a little more subjectively, as “a system of governance which truly values individual goals and feelings (e.g., equitable remuneration, the pursuit of enriching work and the right to express oneself) as well as typically organization objectives (e.g., effectiveness and efficiency, reflectively conceived), which actively fosters the connection between those two sets of concerns by encouraging individual contributions to important organizational choices, and which allows for the ongoing modification of the organization’s activities and polices by the group” (Cheney, 1995: 170-171).

So, at its most basic, workplace democracy is a system of organizational decision making in which all employees not only provide input to the decision making process but form a part of the decision making process themselves. This can be through direct or indirect representative democracy and the specific democratic processes can be structured in many vastly different ways. The concepts of participative management, employee involvement, industrial democracy and self-management named by Heller, as well as the concept of employee empowerment, are part of workplace democracy and important to define as well.

Industrial democracy was the original name for workplace democracy, and the two terms can be used interchangeably. The term was most commonly used in continental Europe and originally referred to workplaces run directly by the workers. Due to its history and the word ‘industry’ in the term, it came to be heavily associated with traditional manufacturing industries. Because the ideas it attempts to convey are not limited to those sectors, the term workplace democracy was adopted instead.

Employee involvement means that “every employee is regarded as a unique human being, not just a cog in a machine, and each employee is involved in helping the organization meet its goals. Each employee’s input is solicited and valued by his/her management. Employees and management recognize that each employee is involved in running the business” (Apostolou, 2000: 2).

Employee empowerment is a somewhat different concept. It means that “in addition to involving employees in running the business, employees and management recognize that many problems or obstacles to achieving organizational goals can be identified and solved by employees. Employee empowerment means that management recognizes this ability, and provides employees with the tools and authority required to continuously improve their performance. The management states its expectations about employees recognizing and solving problems, and empowers them to do so.” (Apostolou, 2000: 2).

Self-management, also known by its French and Spanish names, autogestion and autogestión respectively, is a form of decision making in which decisions affecting a group or organization are made by all those who are a part of that group or organization. In the workplace, this means workers together decide what to do, how to do it and where to do it rather than being told by an owner or supervisor. Examples of autogestion in practice include the Paris Commune, the German, Russian and Spanish Revolutions and Titoist Yugoslavia, as well as the recovered factory movement in Argentina and the Mondragón Cooperative Corporation in Spain.

Participative management, also known as participative decision making, has a lot of overlap with employee involvement. Participative management “encourages the involvement of stakeholders at all levels of an organization in the analysis of problems, development of strategies, and implementation of solutions. Employees are invited to share in the decision making process of the firm by participating in activities such as setting goals, determining work schedules, and making suggestions. Other forms of participative management include increasing the responsibility of employees (job enrichment); forming self-managed teams, quality circles, or quality-of-work-life committees; and soliciting survey feedback. Participative management, however, involves more than allowing employees to take part in making decisions. It also involves management treating the ideas and suggestions of employees with consideration and respect” (Helms & Cengage, 2006: 1).

Sashkin (1984) identifies four broad areas in which employees may participate under participative management: setting goals, making decisions, solving problems and making changes in the organization.

Participative management is based on four processes, each rooted in sharing: sharing information, sharing expertise, sharing discretion and sharing rewards (Helms & Cengage, 2006). Sharing of information is concerned with keeping the employees informed about the economic condition, the goals and the performance of the firm. This helps employees understand the big picture, the significance of their tasks and how they contribute to the larger goals. The sharing of expertise in the form of training firstly helps to ensure that employees know how to interpret, evaluate and understand this information, secondly is concerned with allowing employees to develop the skills necessary to use the information to make effective decisions regarding the firm and thirdly allows for developing skills to further the careers of the employees. Sharing discretion allows employees, once they understand what the big picture is and how they fit in it, to decide for themselves how to best exercise their tasks to reach goals. For example allowing employees to set their own working hours. Sharing rewards is the increased compensation tied to achieving goals and introducing beneficial suggestions or ideas. Examples include Employee Stock Option Plans (ESOPs), companywide profit sharing programs and employee ownership of the firm.

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So from the definition and explanation of participative management we find the importance of sharing in workplace democracy. Simply said, in order to effectively make decisions everyone involved in the decision making process (which in a democratic workplace, you’ll recall, means everyone in that workplace) has to be given the pertinent information so they have something to base their decisions on. But having the information is not enough, they must also have to be able to understand that information and then, by definition, be allowed to autonomously make decisions based on that information and their understanding of it. This is all a lot more responsibility than what we’d find in the average traditional workplace, so what is the motive for the employee to take on that responsibility and put in the required effort to make good decisions? Sharing in the rewards that result from those decisions, usually found in the form of profit sharing programs or shared ownership of the firm (ie. Cooperatives, more on those later).

OK so we’ve got the most abstract basics of what workplace democracy is down, but before we go on, I think it might be a good idea to place workplace democracy in the context of the currently mainstream approaches to formulating and implementing strategy. To do that, let’s first look at what those approaches are. For the purposes of this context we can split current thought on strategic management into two approaches: the top-down approach and the bottom-up approach. These approaches and their management techniques are sometimes contradictory, sometimes complementary.

The top-down approach is the oldest and the traditional way to organize a firm. The roots of this approach go back further than the first companies in the world, the colonial and various national East Indies Trading Companies. These companies either had very close ties to the military, or were allowed to raise and maintain their own private military. This explains some of the defining features of this approach, namely its focus on central planning (within the firm) and strict hierarchy. To be very brief, this approach holds that the structure of a firm should be defined by its strategy, which in turn should be defined by the structure of the industry the firm exists in. Strategy here mainly refers to, at its most basic, three generic strategies being cost leadership, differentiation and segmentation. This approach holds that the role of managers is to identify the structure of their industry and of their firm, pick the corresponding generic strategy and then ensure it is implemented as closely as possible. Strategies should not be mixed, as the worst possible situation is one where a firm is “stuck in the middle” (Porter, 1980: 41) and thus ineffective at both strategies.

The bottom-up approach is mostly a reaction to the top-down approach and is more recent. It holds that contrary to what the top-down approach believes, strategy is not something that can be planned once for any given period and then implemented, but instead a fluid and unpredictable process. The environment of the firm is ever changing in ways that cannot be predicted and furthermore what you have planned may differ from what the employees at the bottom of the hierarchy actually do and this combined with the decisions those not at the central strategic management planning department make as a deliberate, possibly on-the-fly, response to that ever changing environment means that not only is strategy a continuous and never-ending process, it is also emergent. Strategy can even be entirely unintended: “if strategies can be intended (…), surely they can also be realized. In other words, defining strategy as a plan is not sufficient; we also need a definition that encompasses the resulting behavior” (Mintzberg, 1987: 12). This approach further holds that not only is involving every employee in providing input to the strategy process inevitable, it is also desirable. Even if it weren’t too complex to collect all the information on all the tasks performed in a firm and their interactions with one another and centrally form a plan as to how best to organize and perform each task, there is still the issue of knowledge and skill. It is highly unlikely that a full-time manager knows more about a job or task than the worker who actually performs that job or task day in and day out. Therefore, that employee providing input to the manager is very valuable. Especially if the firm must be flexible, agile, lean, responsive and dynamic. All buzzwords that don’t exactly go well with rigid planning.

Table : Comparison of different approaches to formulating and implementing strategy

A comparison of the three approaches along the dimensions discussed here yields table 1. Next time, we’ll take a closer look at workplace democracy and how it relates to society, alienation, infantilization and cooperatives, as well as look at a model of how participative management works based on the three human work needs.

Sources

Apostolou, A. (2000). Employee Involvement. Report produced for the EC funded project INNOREGIO: dissemination of innovation and knowledge management techniques. Retrieved from www.urenio.org/tools/en/employee_involvement.pdf

Cheney, G. (1995). Democracy in the workplace: Theory and practice from the perspective of communication. Journal of Applied Communications Research. 23(3) pp. 167-200.

Heller, Frank A. (1983). Foreword to the international yearbook of organizational democracy. In Crouch, Colin & Heller (Eds.), Organizational democracy and political processes (p.xxxv). John Wiley & Sons, New York.

Helms, M.M. & Cengage, G. (2006). Participative Management, Encyclopedia of Management online. Retrieved from http://www.enotes.com/management-encyclopedia/participative-management

Mintzberg, H. (1987). The Strategic Concept I: Five Ps For Strategy. General Strategic Theory. Fall, pp 11-24.

Petersson, M. & Spängs, A. (2005). Semco & Freys: A multiple-case study of workplace democracy. Retrieved from KTH Publication Database DiVA, http://kth.diva-portal.org/smash/search.jsf?rvn=3

Porter, M.E. (1980). Competitive Strategy. Free Press, New York.

Sashkin, M. (1984). Participative Management Is an Ethical Imperative. Organizational Dynamics. Spring 12(4) pp. 4-22.