Organizational Democracy
Participative Decision Making and Employee Motivation
Should businesses be set up and managed in accordance with democratic principles? Should employees be allowed to vote, either on who gets top jobs or on specific strategic decisions? Organizational democracy has its advocates, but it is really one of those nice ideas that doesn’t really apply to business if you take a hard look at it.
On the surface, it is easy to see why democratic decision making in organizations might appeal to a lot of people. It is well known that involving people in making decisions that affect them has a lot of benefits. It is a means of motivating employees, developing them and fostering ownership or commitment to a course of action. It is pretty obvious that employees are more likely to be motivated if they feel some ownership over plans and outcomes rather than if they are simply told what to do, as if they were robots.
Then there are employee profit sharing and stock ownership schemes that can be a powerful motivational tool. But these ideas don’t quite amount to organizational democracy, because they offer employees a share of business success without giving them a democratic vote in what the business should do. Such schemes can have a constructive impact on employee motivation, however.
Employee Ownership
The ideal type of organization where democracy can work is one that is wholly owned by its employees. In this case, the purpose of the business is precisely to serve the needs of the employees because they are the owners. Naturally, employees, being owners, must have a say in how the business is run. This is no different from a sole proprietorship in principle. The sole owner of a corner grocery store would clearly be the one to call the shots in how that business is run. Large organizations owned by thousands of people, who are also its employees, must similarly be given a say in how the business is managed.
Where Organizational Democracy Cannot Work
The problem with organizational democracy is that most large businesses are owned by shareholders, not by the employees. If we agree that the owners of a business have the primary right to say how the business will be run, then this principle must apply to shareholders for those businesses that are owned by them rather than by employees. In such companies, top executives are representatives of the shareholders. Employees are effectively full time suppliers in such businesses, not owners. To let employees vote on who should be the next chief executive or on strategic decisions would be a violation of the rights of the real owners. This idea would actually violate a fundamental principle of democracy: that we should be free to manage and dispose of our property as we see fit.
Applicable Aspects of Democracy in Business
What is the kernel of useful truth in this idea? How can we reap the benefits of allowing employees to have a greater say in their companies, without the absurdity of trying to set up a full blown democracy? The use of the word “democracy” creates a problem because it implies allowing employees to vote on fundamental issues or on executive selection.
However, it is a great idea to include employees in deciding HOW things should be done. When top management makes a strategic decision, there are often many ways of executing the strategy. In these cases, employees are more likely to buy in to a specific implementation plan if they own it, if they have helped to develop it. But this is simply what has always been called participative decision making or participative management. But making decisions on a participative basis in a team will never be fully democratic because the manager must always reserve the power to overrule any decision made by, or with, employees that is not supportive of shareholder interests or which puts them at risk. The problem with the word “democratic” is that it implies “majority rule” and no business that is owned by shareholders can be run this way.
Encouraging participation in decisions is an excellent tool for employee motivation, but the idea of organizational democracy is untenable and fundamentally confused in the context of shareholder owned businesses.
