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More power to the people

Sun, 8th Feb 2004

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 , (FT Prentice Hall) and a professor of management practice - she says pointedly - not theory , 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 BT, McKinsey and 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 reasons. '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 organisations. This is particularly important in times of change and turbulence, and for promoting innovation. Finally, committed employees, confident that they work for a just organisation 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 organisation overcomes many of the theoretical and practical disadvantages of present-day organisations: 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. By far the most important economic and social institution in most people's lives, the company could- and should - have a large role to play in pro viding fresh energy to redden our thinning political blood.

The idea of the company as saviour 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 organisational model that condemns them to concentrate on constraining human behaviour rather than liberating it, and turns management into an exercise in control and manipulation.

Gratton's book is timely and important. She is one of a small but influential band of business academics who have begun to question the 'ideological gloomy paradigm' - the overwhelmingly negative assumptions about human nature that historically underpin management theorising. The Democratic Enterprise is one of the first interventions to crystallise these dissatisfactions and offer steps to a positive alternative model.

A 'delightful organisation', one that you would be happy to have your children join? Why not? 'There's a sea change going on,' she believes. 'The economic view of people has gone as far as it can. The pendulum is beginning to swing back to a more rounded vision of human nature.' The revolution is democracy, and it starts here.

The Observer, 8 February 2004


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