There is a growing trend to incorporate democratic principles in our workplaces. Rather than comparing and contrasting autocratic and democratic leadership styles in politics, we will do so in our workplaces, where we spend most of our waking hours. When we think of democracy, we should think of democratic principles in the areas of life where we spend the most time, such as our jobs.
Table of Contents
- Most workplaces are some form of autocracy.
- There are very few organizations that have democratic ownership and management structures.
- The transition from an autocratic towards a democratic organization is slow, but can start with changing the leadership and management style.
- Democracy in the workplace can increase engagement and satisfaction, but this requires that all workers have shared understanding of the meaning of democracy in the workplace.
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For those interesting in reading further, let us define the key terms first before diving deeper.
Defining Autocratic and democratic organizations
It is important to first learn the differences between an autocracy and a democracy, i.e. governance by a single person or the few vs. governance by the people.
What is autocracy in business? According to the Cambridge Dictionary, autocracy is a “government by a single person or small group that has unlimited power or authority, or the power or authority of such a person or group.”
According to the same source, autocratic means “demanding that people obey completely, without asking or caring about anyone else’s opinions.”
By this definition, most businesses where a single person or a small group have virtually “unlimited power or authority” (within their organization and the confines of the laws of the country) are autocratic.
What is democracy in business? A democratic business model, or participative ownership and leadership, is an ownership and management system where employees are empowered in the workplace to make company decisions at all levels of importance.
According to Cambridge Dictionary, democracy is “the belief in freedom and equality between people, or a system of government based on this belief, in which power is either held by elected representatives or directly by the people themselves.”
The Cambridge Dictionary defines democratic as “based on the principles of democracy.” In this vein, democratic businesses are ones where there is equality between the workers and power is held by “elected representatives or directly by the people themselves.”
Therefore, democratic businesses are those where workers are equal and they can elect representatives or the workers run the organization.
How many organizations or businesses do you know where the workers are equal, they can elect their representatives and/or where they can manage the organization?
Most businesses and organizations are autocratic
It may be a tough pill to swallow. The fact is that most organizations are autocratic autocracies. If we spend most of our waking hours working, and we mostly work in autocratic organizations, then by logical extension we live, at least in part, in an autocracy.
Autocracy in the workplace applies to both large and small companies alike. Celebrity level examples of “business autocrats” include Elon Musk at Tesla, and, prior to his political responsibilities, Donald Trump at The Trump Organization.
Even non-celebrity, small business owners can be “business autocrats.” It is not the size of the organization that makes it more or less democratic. It is the ownership and management structure. One key question to ask it: are all workers of the organizations equal to others in ownership and decision-making processes?
Given that most SMEs are owned and controlled by a single person or a small group (which rarely includes all employees), then by definition they are autocratic. Ownership and management matter because, through ownership and management, the business owners decide how and to whom to distribute the surplus that all workers created together. In most businesses, non-elected officials make key business decisions.
Autocracy does not mean that the organization cannot achieve positive results or treat its employees fairly or with dignity. Some autocrats are more benevolent than others. The image below illustrates that the business autocrats can be kinder or cruel towards their employees. This gradient can vary during the day or during the relationship between the employer and employee.
Neither does this mean that in autocratic organization there can be no democratic principles or practices infused.
Think of it as a gradient where on the left side, there if full autocracy and on the right side there is full democracy. See the image below for illustration.
Today, it is popular and expected to include employees in decision-making processes. “Business autocrats” can even foster democratic practices and democratize an organization (or part of it) through initiatives such as horizontal management, flat organization or open-book accounting. They do so because research shows that employees are more productive when they feel appreciated and engaged.1“Employee Engagement Does More than Boost Productivity.” Harvard Business Review, July 2013. hbr.org, https://hbr.org/2013/07/employee-engagement-does-more. It is sound business logic.
Fortunately for some, unfortunately for others, only a minority of the companies around the world are democratically owned and managed. In democratically owned and managed companies, employees are co-owners and vote on both small and major company decisions. In democratic organizations, each employee has one vote. One person, one vote, just like elections for a President of a country in a democratic society.
In mainstream companies, a single person, or a small group of shareholders, makes all major decisions in the company, regardless of their competence or the will of most of the employees.
Naturally, there are advantages and hindrances for both the common autocratic model and the less common democratic one; but this article seeks to determine whether democratic leadership is worth the costs. This article also lists a few ways to introduce democracy into the workplace.
Leadership styles in workplaces are the first step towards democratic transformation
We know that the transformation of an autocratic to a democratic organization is a time-consuming process. Just like with governments, the change can happen gradually or abruptly. We are of the belief that gradual changes are more durable and sustainable in the long-term. Abrupt and revolutionary style changes can bring quick wins, but they may destabilize the organization or they may lead to its demise.
The advantage that “business autocrats” have over their workers or employees is the information asymmetry and management know-how. If workers are denied access to information and the opportunity to manage the organization than they cannot master the key skill of management. If the workers overthrew their autocratic boss (or bosses) and ran the company democratically, this does not mean that the organization will achieve its goals.
In Argentina, there are famous examples of workers overthrowing their old management or taking over bankrupt enterprises and turning them into worker cooperatives, i.e. democratically managed organizations. In Argentina they call these enterprises empresas recuperadas (in English: recovered enterprises) and you can read about their challenges in this thesis.
As mentioned earlier, even “autocratic” enterprises can allow their workers more democracy through a piecemeal approach such as horizontal management, which is one step towards democratization.
Workplace leadership and management style affect well-being
More businesses are paying attention to workplace well-being. Given the rise of work-related stress, or occupational stress, even the World Health Organization (WHO) has dedicated some attention and resources to the matter.2Occupational Health: Stress at the Workplace. https://www.who.int/news-room/q-a-detail/ccupational-health-stress-at-the-workplace.Accessed 6 Feb. 2021.
In fact, the WHO agreed on a Global Strategy on Occupational Health for All during the Fourth Network Meeting of the WHO Collaborating Centres in Occupational Health which was held in Espoo, Finland from 7-9 June 1999.
In a 2019 Harvard Business Review article, Dr. Natalia Peart, a clinical psychologist, argues the importance of “making work less stressful and more engaging for employee.”3“Making Work Less Stressful and More Engaging for Your Employees.” Harvard Business Review, Nov. 2019. hbr.org, https://hbr.org/2019/11/making-work-less-stressful-and-more-engaging-for-your-employees. She claims that workplaces need to do organizational-level changes rather than focus on perks, which lose their effects over time. Lasting changes need to become part of the organizational system.
These changes can both exist in autocratic and democratic enterprises.
What are the Characteristics of Autocratic vs Democratic leadership styles in organizations?
Although the US disregards autocracy as a viable governmental structure, autocracy has its advantages when leading a company.
In an autocracy, the autocrat does not adhere to any external influences in his/her decision-making. Without these distractions, it is much faster for a leader to make a decision that may be aligned with the interest of the company. The leader is also required to be strong in his/her decision making. The leader must be persuasive and, using control over the company, can force the rules and regulations on anyone that works for the organization.4Autocracy: What is, characteristics, history, advantages, disadvantages, examples. (2019, August 15). Retrieved January 12, 2021, from https://www.euston96.com/en/autocracy/
There are also disadvantages to an autocratic model, but most of them can be dwindled down to few categories. First, an autocrat with absolute power is free to act however they please. If they are not an ideal leader, they could manipulate their position to advance their personal wealth without focusing on the needs of those under their company. With no method to remove the superior, that person could remain in that position for as long as he/she pleases. In case of a business, as long as the business is financially and legally sustainable. The nature of an autocracy imbeds a sense of fear in people. The employees are expected to follow the rules set or face punishment for not doing so.5Autocracy: What is, characteristics, history, advantages, disadvantages, examples. (2019, August 15). Retrieved January 12, 2021, from https://www.euston96.com/en/autocracy/
By incorporating democratic principles into their business models, employers gain a number of advantages that are naturally part of democracy. For one, the people are finally involved in some decision-making processes.620 Advantages and Disadvantages of Democracy. (2020, March 22). Retrieved January 12, 2021, from https://futureofworking.com/11-advantages-and-disadvantages-of-democracy/ They can express their opinion and challenge those that would regularly be in charge of them in an autocratic system. This freedom directly leads to employees feeling a sense of pride in the workplace when they know that they have directly contributed to the success of the organization.
Participative leadership may sound great, but there are a few disadvantages to using its methods. For one, it is inefficient. Ensuring everyone is heard by collecting the opinions of each employee can take a lot of time. Even if the time is taken to do so, not every employee feels a responsibility to educate themselves on the matter at hand.720 Advantages and Disadvantages of Democracy. (2020, March 22). Retrieved January 12, 2021, from https://futureofworking.com/11-advantages-and-disadvantages-of-democracy/ In that scenario, a business could miss various opportunities in the time that it took to formulate a decision.
Frankly, making a democratic company takes a lot of work. This is especially true when a company formulates a cooperative (co-op) model. In a co-op, most of the employees hold shares of the company. A cooperative environment is exactly what you would expect from the name, a place where the owners cooperate in the company towards a common goal. Many regard a co-op model as one of the most democratic means of operating a business.
Still, co-ops face challenges. With the improved involvement of employees, it has been found that the employee satisfaction is much more susceptible to being affected by performance of the business overall.8Armstrong, T. (n.d.). Democracy is Hard Work. Retrieved January 15, 2021, from https://geo.coop/articles/democracy-hard-work Without proper training and practice in democratic management, it will be difficult to convert a traditional enterprise into a democratically owned and managed worker cooperative.9https://digitalcommons.bucknell.edu/cgi/viewcontent.cgi?article=1110&context=honors_theses
The table below summarizes the arguments made above. In the end, incorporating democratic principles into the office breaks down to sacrificing the time-efficient, self-control of autocracy, for a more involved workplace with equal representation.
Effects of Democracy on the Workplace
A 2013 Gallup Poll found that roughly 63% of workers are not engaged in their job. Gallup also found that American companies lose about $300 billion a year because of disengaged work environments.10Crabtree, S. (2013, October 8). Worldwide, 13% of Employees Are Engaged at Work. Retrieved January 12, 2021, from https://news.gallup.com/poll/165269/worldwide-employees-engaged-work.aspx Henry M. Levin provides an excellent real-world example to examine in his research from 1972.
New United Motor Manufacturing Inc. (NUMMI), in Fremont, California, was a joint venture between Toyota and General Motors. Each year it manufactured about 400,000 vehicles. Previously there had been another plant in its place, but it had been closed because of its poor productivity. On average, it had roughly a 20% absentee rate.11Levin, H. (1972, January 01). Worker Democracy and Worker Productivity. Retrieved January 12, 2021, from https://link.springer.com/article/10.1007%2Fs11211-006-0002-z
To improve productivity, the plant closed its doors for some time and restructured itself. Employees now can regularly meet with management to discuss their ideas on how to improve the production in the company. Also, employees are encouraged to problem-solve how they deem fit, rather than call management to do so.12Levin, H. (1972, January 01). Worker Democracy and Worker Productivity. Retrieved January 12, 2021, from https://link.springer.com/article/10.1007%2Fs11211-006-0002-z By trusting employees in their work and giving them an open line of communication towards their supervisors, NUMMI could empower their employees to take part in the corporation.
To ensure workers would not lose their positions, and so that management could properly test their alternative method, the plant rehired roughly 80% of their previous employees. With only the simple changes stated above, management found a 50% increase in productivity and absences reduced to 0.5%.13Levin, H. (1972, January 01). Worker Democracy and Worker Productivity. Retrieved January 12, 2021, from https://link.springer.com/article/10.1007%2Fs11211-006-0002-z
In a more recent study from 2006, Anit Somech and Maayan Wenderow studied a sample of 100 teachers and seven school principals to determine whether a participatory leadership style would increase the teacher’s performance. Somech and Wenderow note that “the positive effect of participative leadership on teachers’ performance was across and above the specific studied conditions.”14Somech, A., & Wenderow, M. (2006). The Impact of Participative and Directive Leadership on Teachers’ Performance: The Intervening Effects of Job Structuring, Decision Domain, and Leader-Member Exchange. Educational Administration Quarterly, 42(5), 746-772. doi:10.1177/0013161×06290648 If you would like to see their data points that led to this conclusion, view the article here.
Now that there is an increasing trend towards remote work because of the COVID-19 Pandemic, it is important to ensure that remote workers are engaged in their responsibilities. A 2021 Gallup poll reported that teams in the top quartile of engagement experienced 81% fewer absences, 64% fewer accidents on the job, 18% higher sales, and 23% greater profitability than their lower-engaged counterparts.15Robison, J. (2021, January 03). The Emotional State of Remote Workers: It’s Complicated. Retrieved January 12, 2021, from https://www.gallup.com/workplace/327569/emotional-state-remote-workers-complicated.aspx
if we want to live in a democratic world, we must bring democracy in our workplaces too
Introducing democracy in the workplace is a slow and tedious process. The success of transformation from an autocratic to a democratic workplace rests with the shared understanding that the workers have about democratic principles in the workplace and their commitment. The example of the empresas recuperadas in Argentina shows that the abrupt transition from a traditional autocratic management to a democratic management can yield mixed results. For more information, see Stefan Ivanovski’s thesis on the topic.
In a democratic country, such as the United States, citizens can vote for a President who has access to the nuclear codes. If in such cases we trust the outcomes of the elections, where each citizen, billionaire or broke, gets one vote per person, why more of our businesses are not democratic?
How much do we believe in democracy? How committed are we to make democracy our lifestyle? To learn more, please subscribe to our newsletter so that we can answer this and more questions.
It is action time! There are many ideas for actions we can share with you to help you make your workplace more democratic one:
- Engagement Surveys
- Release an engagement survey to find data about how your employees are feeling about their participation;
- Create a committee to analyze the data and to formulate methods to implement the apparent changes needed;
- Issue a follow-up survey after the changes are implemented to analyze the results.
- Improve Communication Methods
- Create a direct means of communication between management and employees if one does not currently exist;
- Ensure employees have opportunities to express concerns;
- Encourage employees to submit smaller ideas and larger ideas and try to implement some of these ideas that are in line with the business goals.
- Share management responsibilities
- Give employees the opportunity to make management decisions;
- Invite employees to buy shares and become co-owners of the business.
- Rotate positions
- Leading corporations, institutions, and cooperatives rotate their employees so they can learn how different departments work, such as sales, marketing, customer care and so forth. Allow employees to try out various positions in the business to find what role they enjoy the most.
- Open-book management
- Raise awareness about the value of open-book management;
- Create and nurture a culture of transparency in the company by providing employees access to all the revenues and expenses the company generates.
- Convert to employee owned and managed organization
- Discuss with employees the plans to convert the existing business into an employee-owned one;
- Create a plan to convert a family-business or a founder business into an employee-owned business;
- Work together to implement the transition plan towards a worker-owned and managed democratic organization.