A workplace and wealth revolution
Employee-employer relationships and the place work has in people’s lives is a vital instrumental focus for western reform, if the power of corporatism is to be broken and free enterprise returned to its natural order. Substantial change in this area should be done concurrently with other reforms to both mirror and support the principled purpose behind them. The example set by a Brazilian company will be my benchmark.
In 1980 a young Ricardo Semler took over his father’s ailing engineering business, Semco. He did so during a difficult hyperinflationary period when many industries were filing for bankruptcy. He started by firing the company’s senior management and instituting a system of worker participation and decentralised business units managed, in large measure, by the workers. He may have been inspired by Sidney Harman’s pioneering work in participative management. The standard norms and rules habitually adopted by businesses were thrown out. Initially, to keep the business afloat, workers had to agree to wage cuts, in return for later profit-sharing rewards. Executive salaries were slashed by 40% and workers were given the right to oversee all expenditure. Over 20 years Ricardo’s reforms took annual revenues from just $4 million (U.S.) to $212 million and employee numbers multiplied from 90 to 3,000. Was Semco’s success entirely due to Ricardo and should all rewards flow to him, or did others play a significant part in Semco’s rise in fortunes?
If you read Ricardo’s book Maverick you will find he puts success down to the parts played by the whole team. Senior executives have their salaries capped at ten times the entry level salary. Workers fully participate in decision-making at all levels and no one is called a manager or a worker– they are partners and associates. There are a host of practices that the bulk of conventional executives would consider dangerous and sacrilegious and yet Semler proved normal conventions can be turned on their head, when you trust and incentivise people to work together for their mutual benefit. It is about returning to the old traditions of mutuality, trust and group dynamics that once marked western societies, before industrialisation and state-ism tore into the fabric of natural law and human cooperation. It draws social capital and human capital into the workplace. This ‘democratisation’ of the workplace does not do away with leadership, management, strategic planning or all the other disciplines associated with business practice, but it does flatten responsibility for decision making and spread the dividends of enterprise more equitably while limiting the ability of large enterprises to work against the best interests of local communities. A return to unionisation is also unnecessary as the workers (sorry, associates) have a real stake in the enterprise.
There is a strong correlation between Semler’s model and the West’s traditional village community and small platoon fraternalism extolled in Part Two. My later recommendations will revolve around re-creating the right conditions for more localised cooperation across the social and economic spectrum from politics to income generation, justice, education and support for the poor. Semler’s system calls for business units no larger than 150 people. Those units are largely run by the workers under a profit sharing regime, in cooperation with managers elected to their positions by the workers, or ‘associates’, in Semler-parlance. It is not hard to see wider village or local co-production and co-operation implications in this model. It is deeply fraternal in character and runs easily with the promotion of the social altruism I have highlighted earlier. Free enterprise and social cooperation are blended in people and business friendly ways. There is every reason to believe that altruism, discussed with reference to Professor Zimbardo’s research (Part Two), can be re-discovered by returning to village and fraternal social models, as suitable and historically proven alternatives to the centralised, income tax, high profit and welfare model to which the West is presently chained. Semler’s methods reflect the research of many management theorists who talk of servant leadership, devolved decision making, high performing teams and group-based performance management. It is a highly motivational model reminiscent of the early discoveries in industrial research, like the Hawthorne experiment.
There is a corollary. It is quite possible that the Semler model would discourage small business formation. Entry level, or small scale entrepreneurs, may have difficulty engaging in work place democracy. A minimum 100 worker threshold will therefore be recommended.
 Harman was also involved in an experimental Quaker school where the students were made responsible for their own learning.