One of the main problems in today’s workplace is that employees lack a feeling of ownership.  Research by Towers Perrin and Gallup shows that between 71% and 86% of employees fall between being moderately engaged to actively disengaged from their workplace.  And 70% of today’s high school students intend on starting their own companies, according to another recent Gallup poll.  If companies want their employees to act and perform like owners, the employees must feel like owners. 

Workplace democracy is seen by many as the key to developing a culture of ownership in the organization, and is therefore crucial to enhancing competitiveness and productivity, to fostering creativity and innovation, and to combating employee turnover and disengagement.

The foundation of workplace democracy is based on one of the first lessons that we learn as young children – the importance of sharing.  There are three things that successful democratic workplaces share amongst their employees: information, discretion, and rewards.

Sharing Information

If employees are unaware of their company’s goals and performance, it is easy for them to lose sight of the importance or significance of their tasks and how they contribute to the attainment of the company’s goals.  Every employee should therefore know and understand the company’s goals as well as how the company is performing and progressing towards those goals.  If necessary, employees are trained so that everyone is able to understand the company’s financial and other important data.  People are then able to better manage their own activities and to help keep customers happy, sales growing, and expenses to a minimum.

Sharing Discretion

If employees are knowledgeable about the company goals and about how their jobs fit into the overall picture, then employees should also have the discretion to decide on the best way of performing their own tasks.  People who have the power to decide HOW to do their jobs will feel a greater amount of ownership and pride in their tasks, and they will be more motivated to succeed.  In addition, one of the main reasons for the success of democratic governments is the ability of people to elect their leaders and representatives.  Many of the benefits of workplace democracy will remain unachievable without similar processes.   

Sharing Rewards

Employees have always shared (often disproportionately) in the consequences of poor company performance, either via layoffs or decreased compensation.  Employees should also participate in the upside when companies are successful in achieving their goals.  This is the most effective way to align employees’ interests with those of the company.  Examples of shared financial rewards are Employee Stock Option Plans (ESOP) and companywide profit-sharing programs.

Studies show that these three processes must implemented together in order to unlock the benefits of workplace democracy.

“Most of the 3,500 or so American firms in which workers own a majority of the stock are organized as conventional hierarchies. But evidence is growing that the most successful firms are those that find some consistent way of empowering workers.

“A 1993 survey of 188 companies conducted by the Washington State Office of Trade and Economic Development found that employee-owned firms grew no faster than conventional companies unless they gave workers a voice in management. Likewise, broader sharing of information and authority with workers didn’t boost growth unless that was combined with ownership. But firms that put the three together grew about 12% faster than their competitors.

“To see the difference between merely giving stock and letting workers shape their destiny, look at the airline industry. In return for lower wages in 1994, United Airlines pilots and mechanics got more than half the company’s stock. But life inside the cockpit and at loading ramps barely changed. By contrast, Southwest Airlines employees own only about 11% of the company’s stock, but the company works to encourage and implement workers’ suggestions, in part through town hall-style forums with top management. While there are other important differences between the carriers, workplace culture is a big reason United posted record losses last year while Southwest made a healthy profit–as it has for 29 years.

“Corey Rosen, executive director of the National Center for Employee Ownership, says workers “don’t necessarily have to have a vote on the board. What’s really important is to have an influence on the way you do your day-to-day job.” In exchange for that little bit of power and a stake in using it well, most workers will do whatever they can for their company.” (“We’re All the Boss“, Time Magazine, April 8, 2002)