Why Workplace Democracy Can Be Good Business

Letting employees take part in decision making may boost productivity and profits.

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Think democracy and what comes to mind is an image of people lining up at voting booths to pick their country's next leader. But Traci Fenton, founder of consultancy WorldBlu, believes democracy can work just as well in business. To help prove her point, the firm has released its second annual list of companies committed to letting employees have a say in how things get done.

The 25 companies on the list, ranging from Fortune 500 healthcare company DaVita to Equal Exchange, a coffee co-op in Massachusetts, show that workplace democracy is not a far-fetched notion, Fenton says. "I started the list last year, because I wanted to show real companies are doing this," she says.

By democracy, WorldBlu doesn't mean that all employees vote on every decision. Translated to the business world, the idea involves management that is less autocratic and confers more power on individual employees. The list shows that companies, like countries, practice democracy in a variety of ways. 1-800-Got-Junk holds monthly town hall meetings. DaVita leaves day-to-day management of its 1,300 dialysis clinics to each facility manager. Software company Motek allows employees to vote on how to allocate money for benefits.

The trend toward more open workplaces is just starting to make a dent in business thinking, says Tom Malone, a Massachusetts Institute of Technology professor and author of The Future of Work: "For the first time, technology makes it possible to have the economic benefits of large companies and human benefits of small companies." Malone says that because information is much easier to come by these days, it's inevitable that more people will be involved in making decisions at a company.

It's not that top-down management has failed. In most major companies today, a small group of executives lays out the organization's course. But that command-and-control structure makes less sense for companies that need to respond to a fast-moving marketplace with constant innovation, Fenton says. One CEO may make decisions faster than a group, but the execution is often slower because employees will drag their feet if they don't agree with what's being done. Democratic companies may be slower in making decisions but faster in carrying them out because employees are invested in them.

Workplace experts say the results can often be worth the effort of gathering employee input. In the war for talent, they add, the best and brightest employees will gravitate toward companies where their opinions get taken seriously. The younger generation of workers is accustomed to working in teams and speaking out through blogs. After seeing businesses like Enron crash and burn, they are also wary of secretive, autocratic companies.

Including more workers in decision making helps companies boost productivity, says Kenneth Cloke, a mediator and director of the Center for Dispute Resolution. He points to an example of how a sales team that was allowed to decide on its own compensation outperformed teams where higher-ups decided on bonuses. He suggests that secretaries are best suited to hire other secretaries. After all, they often know better than their managers what to look for in a potential candidate. "The downside of such management is that it takes longer and requires more energy," says Cloke, who works with companies as a crisis mediator. Allowing more employees a say in the company's direction means training, relationship building, and teamwork.

Implementation is also key. Cloke estimates that about 80 percent of the time companies mess up their experiments with teamwork because they are halfhearted in how they go about it. One manager may get the bright idea to delegate decision making down the chain of command, but because it cuts against the grain of the entire organization it won't be long before things go back to the way they were.

Even the most committed managers may fail, says Malone, citing the example of someone who tried to create a company over the Internet by allowing everyone to vote on the product and business plan. In the end, he says, everyone wanted a voice, but no one wanted to work.