THE DEMOCRATIC ENTERPRISE
The Democratic Enterprise by Lynda Gratton, (Associate Professor of Organisational Behaviour at London Business School ) offers a detailed vision of democracy in big organisations.
Democratic organisations offer choice, trust and respect to employees. The book explores the idea of the democratic organisation through the eyes of the citizens (employees) with well detailed case studies. In these case studies, citizens state their preferences as a democratic right (i.e. their choice) and staying within Gratton's “Democratic tenets” (described below) the organisations can accommodate them.
After a brief introduction to the history of democracy, Gratton describes what she calls as ‘The tenets of Democratic Enterprise'. There are six tenets; the first three are of paramount importance. The first tenet is an adult- to- adult relationship between the enterprise and the employee - not a parent-child relationship. The underlying belief in this relationship is ‘Theory Y' rather than ‘Theory X', assuming shared responsibility, self insight and self – direction.
The second tenet recognises individuals and investors in the current knowledge economy. The employee as an investor possesses tacit talent and resources which he/she decides to invest (or withhold) in the development of their personal human capital.
The third tenet, the expression of diverse qualities , is the capacity of an individual to be true to themselves whilst causing ‘no harm to others'. They act as responsible citizens in the performance of their respective organisations.
Having described the first three tenets, the next three are woven around them. The fourth tenet speaks about participation in the determination of conditions of association, specifying individual rights in an enterprise.
The fifth tenet is that the liberty of some individuals is not at the expense of others - the choices made by autonomous individuals are not to the detriment of their colleagues and peers. Gratton cites an example of Nina's wish to spend less time in the evenings with clients which has an impact on her immediate colleagues and therefore on the organisational culture.
The sixth tenet: accountability and obligations of an employee is at the centre of the Democratic Enterprise. The implicit contract consists of obligations and rights. It points to a psychological contract of shared responsibilities, in contrast to the traditional command-control model.
Having set out her six tenets and identifying the fragility of democratic enterprise, Gratton goes to identify the drivers which are affecting the rise of the Democratic Enterprise.
So, chapter four explains the “shift in individuals” and the shift in technology as the drivers to democracy. Shift in individuals' mindset highlights the contrast between the baby boomers and generations X and Y. Generation Y are the ambitious, confident, optimistic employees who started working in the early years of this century. It is clear, says Gratton, that Generation Y wants more autonomy and choice and that it has an increasing inclination towards the use of technology. She states that advances in information technology will give greater opportunities to employees to exercise autonomy and express their diverse qualities (e.g.: upfront and pragmatic attitude, self-reliance, confidence) through the assimilation of information.
Chapter five describes how companies can use the drivers of democracy to build a democratic enterprise. The citizen investor is focussed on becoming ‘the best one can be' (Human capital) but the challenge for companies is to create a favourable environment in which they can achieve this. The author powerfully argues that the combination of Intellectual capital, Social capital and Emotional capital builds open relationships, which are keys to the development of trust between the enterprise and citizen. The case study of TESCO in building its employees insight to serve its customers is truly innovative and is worthwhile reading.
Chapter six recognises the increasing variety of jobs enhancing the intellectual ability of the citizen. The numerous case studies clearly demonstrate the shift towards the democratic nature of organisation and citizens as investors expand their knowledge through a variety of jobs. The most striking case study is of Sony. In 1995, on the 50 th anniversary of the corporation, Sony launched its vision for the next 50 years, intending to re-enter the PC business with VAIO. Sony began to focus on communication and sharing of knowledge, so its engineers could develop an explicit and more engaging picture of the VAIO project and its potential customers. The engineers working on VAIO project had the autonomy to choose the way they worked and make their own decisions about the priorities. They also had the choice in both the access to, and in the allocation of resources. This called for the increase in competence, confidence, effective independent bottom-line decision making. Every engineer's priority and commitment was in alignment with Sony's strategic intent. They had a sense of ownership about their organisation. Due to rapid feedback and coaching on individual performances, everyone understood how well their team was performing and this occurred in a very supportive environment. In 1997, the first VAIO notebook was launched establishing Sony in the highly competitive PC market, transforming it from an analogue-based company of the past to the digital-based firm of the future with democratic values.
In Chapter seven Gratton asserts ‘once the genie of democracy is out the organisational bottle, it is no longer possible to rely on traditional hierarchical control or paternalistic arguments to lock people in'. If this strategy is adopted by an organisation, it is not possible to reverse the process but only to create shared responsibility and purpose. Accountabilities and obligations are at the heart of the democratic enterprise. To make it function well, every individual is linked through mutually reinforcing obligations and accountabilities. The author summarises the obligations of clients, firms and the members. Supported by Mckinsey's example (see figure 1), the author defines obligation as ‘True commitment to people', which is the soul of democracy.
Figure 1: Obligation and accountability at Mckinsey
Chapter eight considers Leadership and citizenship which are defined as purely an adult- to- adult relationship. The role of a leader, Gratton believes, is to develop intellectual curiosity, acknowledge the importance of conversation and the means of engagement in an enterprise. Leaders are widening discretion through offering choice and variety in subtle ways. The author concludes that “trials and experiments” by the HR team and leaders create opportunities to evaluate what works best for the enterprise and its employees.
In the last chapter, the author identifies the five good reasons to become a democratic enterprise. She believes that employees become more engaged, creating win-win situation for the enterprise and its employees, equality and fairness, enhanced agility of enterprise which is more suitable for today's fast-moving, fluid business environment.
Adoption of the concept of democratic enterprise will improve the work/life balance of employees by reducing passivity and cynicism by involving them in making choices. Employees will enjoy the freedom to choose, learn and share knowledge respecting the six tenets framework. It increases the strategic growth for the organisation.
However, while this strategic vision is suited for big organisations and highly skilled knowledge workers, I have some doubts about its suitability for smaller organisations with less “dynamic” jobs - manufacturing for example.
It is also unclear how the other stakeholders in such an organisation feel about this approach.
I believe this concept is best suited for organisations that are global, seeking agility for the future who can balance highly skilled workers and other employees.
