[Off-Topic] Mea Culpa: Democratic Organizations Don't Work

April 25, 2011 · 💬 Join the Discussion

Those who have been following me over the past 4 years in my discussions about forms of management and organization of companies will remember that I often not only flirted with but tried to defend a type of “democratic” organization. That concept was always incomplete, and I imagined that sooner or later the equation would close. Instead, I’m returning to zero and redefining these concepts. The first thing I need to correct is the use of the word “Democracy.” That word doesn’t fit the type of organization I describe.

My line of thought is always based on Darwinian Evolutionism. It’s the only way in which Chaos can tend toward a certain Order through self-organization. This process involves several mechanisms, and it’s where I’ve already given talks on Scale-Free Networks, on Complex Adaptive Systems, and how all of that leads to processes, methodologies, including the much-discussed Scrum. This line of study — which you can follow in my blogs and talks of the last 3 years — passes superficially through topics of biology, sociology, psychology, philosophy, physics, mathematics. Ultimately it seemed to me that the most coherent path was around what today has become known as Democratic Organizations, especially because of famous cases like Semco, of Ricardo Semler and aspects of democracy in organizations that can be observed in companies like Southwest Airlines, Dreamhost, Groupon, Zappos.

However, I myself was a victim of what I always criticize: a group of positive evidence about a model, however good they may seem, never proves the model! Concluding based only on positive evidence is the same as cargo cult. So the first thing I must correct is: the type of organization I describe and defend has nothing to do with “Democracy,” so in my conception, the term “Democratic Organizations” is a mistake.

Democracy vs Republic

Thank goodness our country is called “Federative Republic of Brazil.” Currently I don’t know anyone who speaks ill of the word “democracy.” I won’t pretend to give a politics lesson since I’ve studied almost no political science. Without dwelling on all the ramifications, I want to go down first to the minimal definitions of the term and the original ideas. Again, as I’ve been repeating, going down to the “definitions.”

I don’t defend the owner of this site nor all of his ideas, but the text he wrote serves my purposes, so I decided to translate it directly. For the original, access this article by Gary McLeod. If you search Google for “democracy vs republic,” you’ll find hundreds of articles explaining the differences in more detail. But for now this one serves. Here’s the translation:

Government by Law vs Government by Majority

Right after finishing signing the Constitution, in response to a woman’s question about the kind of government the Founders created, Benjamin Franklin said, “A Republic, if you can keep it.”

Not only did we fail to keep it, but most don’t even know what it is.

A Republic is a representative government run by law (the Constitution). A Democracy is a direct government (Akita’s note: yes, there is representative democracy, but as I said I won’t go down all the ramifications) run by the majority (mob government). A Republic recognizes the inalienable rights of individuals, while democracies only care about the wishes and needs of the group (the public good). Making laws is a slow deliberative process in our Constitutional Republic, requiring the approval of 3 branches of government, the Supreme Court, and individual jurists (jury nullification). Making laws in our lawless democracy happens quickly, requiring the approval of a whim of the majority as determined by polls or referendums. A good example of democracy in action is lynching.

Democracies always self-destruct when the non-productive majority realizes it can vote for its own gain at the expense of the productive minority, electing the candidate who promises more benefits from the public treasury. To maintain their power, these candidates must adopt ever-larger taxes and greater spending to satisfy the ever-growing desires of the majority. As taxes grow, the incentive to produce decreases, making the few who were producing give up and join the non-productive. When there are no longer enough producers to finance the government’s legitimate functions and socialist programs, the democracy will collapse, always to be followed by a dictatorship.

Even though almost all politicians, professors, journalists, and citizens believe that our Founders created a democracy, this is not true at all. The Founders knew very well the differences between a Republic and a Democracy, and they repeatedly and emphatically said that they founded a Republic.

Article IV Section 4, of the Constitution “guarantees to each state in this union a Republican form of government” … Conversely, the word Democracy is not mentioned even once in the Constitution. Madison warned us of the dangers of democracy with these words,
“Democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths …”,
“We may define a republic to be … a government which derives its powers directly or indirectly from the great body of the people, and is administered by persons holding their offices during pleasure for a limited period, or during good behavior. It is essential to such a government that it be derived from the great body of the society, not from an inconsiderable proportion or a favored class of it; otherwise a handful of tyrannical nobles, exercising their oppressions by a delegation of their powers, might aspire to the rank of republicans and claim for their government the honorable title of republic.” James Madison, Federalist No. 10, (1787)
“A wise man will not leave the right to the mercy of chance, nor wish it to prevail through the power of the majority. There is little virtue in the action of masses of men.” Henry David Thoreau (1817-1862)

Our military training manuals contain the correct definitions of Democracy and Republic. The following comes from Training Manual No. 2000-25 published by the War Department, November 30, 1928.

DEMOCRACY:

A government of the masses.
Authority derived through mass meeting or any other form of “direct” expression.
Results in mobocracy.
Attitude toward property is communist — negating property right.
Attitude toward law is that the will of the majority shall regulate, whether based on deliberation or governed by passion, prejudice, and impulse, without restraint or regard to consequences.
Results in demagoguery, license, agitation, discontent, anarchy.

REPUBLIC:

Authority is derived through the election by the people of public officials best fitted to represent them.
Attitude toward law is the administration of justice in accord with fixed principles and established evidence, with a strict regard to consequences.
A greater number of citizens and extent of territory may be brought within its compass.
Avoids the dangerous extremes of tyranny or mobocracy.
Results in statesmanship, liberty, reason, justice, contentment, and progress.
Is the “standard form” of government throughout the world.

The manuals containing such definitions were destroyed without explanation around the same time that President Franklin D. Roosevelt (F.D.R.) made private ownership of our legitimate money (minted Gold Coins) illegal. Shortly after people handed over their $20 gold coins, the price rose from $20 an ounce to $35 an ounce. Almost overnight, F.D.R., the most popular president of this century (elected 4 times), plundered almost half the wealth of this nation, while convincing people it was for their own good. Many of F.D.R.’s policies were suggested by his right-hand man, Harry Hopkins, who said,

“Tax and Tax, Spend and Spend, Elect and Elect, because the people are too dumb to know the difference.”

It Can’t Be Democracy

If you research at least the Wikipedia articles on Democracy and Republic, you’ll see that the subject is much more complex than this.

What I most admire when we talk about the Founding Fathers of the United States was that philosophical and political clarity that led them to describe a Republic based on inalienable Individual Rights, generating solid foundations like the Declaration of Independence and the Bill of Rights. Of course, I’m not saying they were perfect people — they all had a thousand flaws, but don’t get hung up on that (after all, that would be the Straw Man Fallacy).

The so-called Democratic Organizations fail precisely at this point, in their foundation. It simply doesn’t exist. And worse, it’s incompatible with the Constitution from a philosophical point of view.

There’s no “official” document that describes its principles, so I’ll borrow the list of principles described by WorldBlu, an organization that tries to spread the idea of Democratic Organizations around the world. Read on their page for more details, but in summary, we have the following principles:

Purpose and Vision — normal, any company needs to have this clear, what its core business is, and what it exists for.
Transparency — there are controversies, not everything can be open, including some things are actually legally protected.
Dialogue + Listening — I agree, the concept is valid, and against top-down authoritarianism.
Equality + Dignity — hard to define, some differences in treatment are more cultural than mandatory.
“Accountability” — hard to translate into Portuguese, but it’s something like “Responsibility,” but in this concept it’s more about better defining who is responsible for what.
Individual + Collective — this is where the whole concept starts to fall apart.
Choice — implementable, but within limits.
Integrity — mentions “morally” and “ethically” correct. That’s a problem.
Decentralization — instead of centralization, I’m always in favor of this, but within limits.
Reflection + Evaluation — a “touch” of Toyota’s Hansei+Kaizen model.

The last two points, Decentralization, Reflection and Self-Evaluation are the only ones I would consider “principles.” If you read my articles linked in the introduction of this text, you’ll better understand these principles.

My problem with these principles: they are rhetorical, and therefore don’t serve as principles. Simply saying, “it has to be transparent” is rhetorical. I can tell you I never told a lie — and who’s going to disprove me?

The same goes for “dialogue,” “dignity” — they’re good rhetoric, but they’re descriptions of conduct, that is, they’re the process and not the foundation. They don’t deal with the real principle: “Why should I act this way?”

And this falls on the “Integrity” point. About doing what is morally and ethically right. And who defines what is morally and ethically right? Without a philosophy behind it, this is undefined and open to interpretation, because again there’s no objective, unambiguous principle behind it.

Private Property

Finally, the points about “Individual + Collective” and “Choice.” These are the points where “Democracy” is directly addressed. These two points completely break any other. Democracy and Collective are not good principles. Any system where the majority can crush the minority, and the minority has no objective, defined property rights, doesn’t work by definition.

And “rights,” to be clear, isn’t just anything. Like, for example, “right to bonuses,” “right to more rest hours per week.” Everything needs to fall into the fundamental problem of any organization: “And who pays the bill?” If for one individual to have a right, another individual needs to work for free, that defines slavery and, by definition, cannot be a right. Read my article on Rights of Man to understand this.

More than that: “Transparency” in the sense of unrestricted access to all company data, Choice over all relevant company matters, should never be automatic rights of employees.

Let’s get to the foundation of all this: every company and organization is private property of its owner, partners, or shareholders. It does not belong to the employees unless they are also shareholders of the company, for example, via a stock options program or something of the sort.

Employees are individuals who are trading their capabilities and voluntary work hours, in a voluntary negotiation with the company for a value called “salary.” It’s a fair, voluntary negotiation, for mutual benefit. The employee’s right ends where what is written in their work contract, duly signed, ends. There’s nothing to be “claimed.”

Want more access to confidential company information and more access in strategic decisions? Earn it! Make yourself deserve it! Don’t think it should fall into your lap automatically. Show good work, show an excellent result, and demonstrate capacity to make decisions, and only then earn the merit of being part of it. The principle of an organization from the point of view of its employees should always be meritocracy.

But what about the various companies that are “positive evidence” that “democratic organizations” work?

Here’s the key point of this whole article: these cases of Democratic Organizations are not necessarily Democratic. At least not as people imagine it should be.

In reality, if you read my articles on animal groups, chaos leading to order, self-organization, it makes full sense within limits. That is, it doesn’t make sense for an organization to try to control even the color of the sock each employee wears. That makes no sense, it’s not efficient, it’s not productive. The “way” teams work, what hours, with what tools, with what codes of conduct, etc., is something that the team itself can decide. But understand that to get to that point, the company’s goals, where it wants to go, what it wants to produce, how it wants to enter the market, and all these other decisions, have already been made.

What the teams will “democratically” decide is how that strategy will be implemented. That is, the “upper echelon” still exists, the company still belongs to its owners and they do what they want with it, and the strategy arrives ready. What is left to the employees is the tactics, the implementation. This is the natural path for organizations. If you want to call that “democratic,” fine — I prefer not to give any name or label and to consider that this is just one more evolutionary step of “Organizations.”

That is, leaving “the way of implementing the strategy” to the choice of the employees who will implement it is just another way that seems efficient to manage a business. It’s not necessarily valid for all businesses. And in the companies considered cases, I believe we’ll find more evidence that they are not “democratic organizations” but rather organizations that employed more efficient means of production. It’s like the Toyota Production System (TPS, or Lean for us) employed by Toyota. It doesn’t appear listed as a “democratic organization” in the most popular lists, and probably doesn’t fit WorldBlu’s principles, but it does employ “democratic” or “participatory” tactics in the implementation of production. And that’s the real goal.

And don’t worry, I also don’t think the correct term should be “Republican Organizations” — just because I talked so much about Republic at the beginning of the article. It’s neither one nor the other. Organizations are Private Properties that need to be managed. The organization as a whole, in its foundation, cannot be “democratic” to its non-shareholder employees, by definition. A publicly traded company or something similar can have an organization up to almost “republican.” But where we want to study and intervene, which is the day-to-day management of employee teams, is a “silo” with “participatory” implementations within a wrapper that is not democratic.

And the goal of this lengthy explanation is that if you think too long about the colloquial definition of the term “Democracy,” it quickly evolves into “Collectivism,” “Populism,” “Communism,” and “Socialism.” I am absolutely against this line of evolution. It’s philosophically unhealthy. In the political realm it should stop at “Republic.” And in the business realm it’s simply “Capitalism,” without taking away or adding anything.

Of course, as a change of pace, the title of this article “Democratic Organizations Don’t Work” is an obvious provocation to the fact that I’m correcting myself on the wrong use of the term “Democracy,” when in reality we’re talking about “Organizations with Efficient Processes,” particularly those that grow organically with concepts in the evolutionary-Darwinist style, like Lean/TPS.