Managing effective cultural transitions in any organization is both an art and a science. In a transition from a traditional business structure to broad-based, democratic employee ownership, it is important to plan for the internal changes that need to take place—in the structures that support how people organize themselves and how decisions are made—and in the culture that enables those structures to operate effectively.
Effective organizational structures
For employees’ participation to lead to effective business decisions, it is critical to have clarity about who makes what decisions, and to have the right systems in place for discussing and voting.
Internal structures typically include the following, and each of these needs to be thoughtfully designed:
- All member meetings (often called general assemblies): Include all employee-owners. Business updates are shared, and all-member votes are held (as defined in the bylaws), including board elections.
- Board of directors: Employee-owners elect a majority of the board of directors. The board elects its officers, whose duties are spelled out in the bylaws, and hires and evaluates the CEO. The board is responsible for financial stewardship, high level policy development, strategy, and long-term goal setting,.
- Management (including the CEO): We don’t expect management in an employee-owned company to differ substantially from that in a traditionally structured business, but democratic governance introduces new reporting relationships. Outside the boardroom, employees report to management, while inside the boardroom, management reports to the board, which includes elected employee-owners. The key is to learn to “wear different hats” to perform both roles effectively.
- Committees: Committees can be appointed (standing or ad hoc) to advise the board, management, or the membership on specific issues.
A culture of ownership
The culture of participation and ownership are what create a thriving business and bring democratic governance to life. In the day-to-day, an ‘ownership culture’ is one in which employees take initiative, solve problems, and demonstrate leadership. On the governance side, ‘ownership’ means that employee-owners actively participate in meetings and are well-informed about issues they vote on and the company in general.
Key ingredients of a strong ownership culture:
- Understanding responsibilities and rights of ownership: Ownership is not the freedom to arrive late or the right to boss others around; it’s about taking initiative and responsibility to do what is needed for the business to succeed, and exposing and mitigating problems as they arise. Ownership is also understanding the connection between one’s effort and business success.
- Training and support: Employee-owners need the requisite knowledge to make informed decisions, and skills to enable effective participation. Quality training and support for interpreting financial statements or strategic plans is key, as well as practice in effective decision-making, handling conflict, communicating opinions constructively, and asking questions to be informed for key decisions.
- Trust: There must be trust among employee-owners and trust in the structures and processes established for participation so that people feel their opinions are valued and make a difference. One of the foundations of trust is transparency: both of information (for example through sharing company financial information) and of the decision-making processes.
New study shows 1,000's of Bay Area businesses at risk, points to employee ownership as a solution.