Workers Self-Directed Enterprises Questions AND Answers

I have found WSDE popping up in many threads taking them off topic so this thread is for those who are interested in asking questions and sharing answers about them.
I'm retired so I have little interest in them, other than what they produce in comparison to other businesses they compete with.

 

The standard example is the Mondragon Co-op in Spain, but its really just a couple hundred (abut 275) small businesses operating under a co-op umbrella. Even in those, their own rules are violated, such as the wage ratio (the highest paid person to lowest paid ratio is 9:1 or lower) because they can't hire specialists (like engineers) for the low wages that the wage ratio requires.

And running a large business democratically in which all employees have some say in major decisions does not work. A small business with maybe a couple 100 employees located in a small geographic region and focused in one business area could be run in some sort of democratic manner, but not Image a huge company like GE.

 

Sounds like you don't understand Hayekian distributed knowledge!

 

All you have to understand is logistics and human nature - or have experience in committees - to know that a democratically run large company is going to fail.

 

Understanding of democracy within the company has advanced on two levels. First, the empirical evidence shows that they achieve higher levels of productivity. Second, Hayek- in adding to the socialist calculation debate- ironically highlights how hierarchical relations actually increases the risk of decision-making error.

 

Small companies often run by one or by group have inherent flexibility, enthusiasm, and dedication that larger companies cannot match since the larger the company the more required bureaucracy. A larger company though may have resources not available to smaller companies allowing them to weather difficulties and the more than likely lack of worker enthusiasm. I have worked in small, medium, and global companies and find this to be the rule.

 

Wrong. Actual democracy in a company has only worked in small companies which is not geographically dispersed. Its one thing to say that workers should own the company and thereby have an interest in the company operation, its quite another to claim that workers at all levels should participate in the actual running of the company.

No matter how much someone believes in "equality", people are not equal, and the intellect and talent required to run a large business is not found in the janitor or assembly line worker.

No kidding, that's obvious and has been known for centuries. When all the decision making power rests in one person - such as the king of the empire - and that person makes a bad decision, the consequences can be severe, even catastrophic.

That's why in modern business the decision maker is selected carefully, has input from a variety of qualified people and is overseen by a board of qualified people.

And in almost every business, the "king" has invested his own money and is taking the risk, he will pay the price for failure - if he wants all the power, then he gets all the power.

But that does not at all mean that the decision making power should be dispersed to everyone, that's utterly foolish and will result in an even worse situation than that of a bad king.

 

All true, but that does not mean that a large company can be run by all the employees.

 

That was a statement of fact. The empirical evidence (e.g. Logue and Yate's studies) shows enhance productivity effects. Of course, given the problem of distributed knowledge, we'd expect those effects.

Nope. This is about whether socialist planning could hypothetically mimic the Walrasian auctioneer in perfect competition. Hayek's contributions have been vital. It just happens that those contributions also kick your argument into touch. Democracy is actually more important in larger companies than smaller ones. Without that democracy, there is insufficient diffusion of knowledge and the manager (akin to the socialist planner) will be prone to drastic error.

 

If I second mortgaged the house risking all I had previously earned working for others, and ate beans for years to start a business I'm not giving up total control.

If some employees want to leave and second mortgage their homes, risk all they have, and eat beans to start their competing business, that's their business. I'd only say see the bank, I won't lend money.

 

Spend some time in a committee, and you will see the complete impossibility of running a large company by employee democracy. At the largest extreme, look at national elections in the USA, a true example of large scale democracy - its a failure, just as everyone from Locke onwards stated. The sheer logistics of employees running a global company of 20,000 makes it impossible.

 

Again you're basing your position on nothing more than ideological limitation. You have no economics behind that. When informed of pertinent economics (such as Hayekian knowledge) you just ignore it. There is every reason to assume that worker ownership will increase productivity. That isn't just theoretical. It is supported by empirical evidence.

Now you'd actually be on stronger ground by referring to the importance of the entrepreneur in SME creation. But you missed out on that when you decided to go for a non-economic opinion piece.

 

Wrong. There is no large company run by worker selfdirected activity, the typical example is Mondragon in Spain but that is actually 275+ small businesses operating under a thin umbrella. Your wishful "There is every reason to assume that worker ownership will increase productivity" is disproven by reality.

 

So Hayekian distributed knowledge doesn't hold? Good luck with that!

 

It is virtually impossible because of the bureaucracy required.

 

You argue something that is not the issue and is irrelevant.

A large organization cannot be managed successfully through direct comprehensive employee control. That's a fact which has been know for centuries.

 

I tend to agree, having seen some some small equal partnerships fail. All Chiefs and no Indians can become very destructive of both business and friendships.
However, that said, people are, and should remain, free to create and run any business they wish as long as they break no laws in doing so, fully accepting the risks, rewards and/or losses that result.

 

This amuses me. Hayek used it against the ultimate large firm, complete nationalisation and the socialist planner. And you think its irrelevant? Golly!

Repeating your foot stamping won't wash! Hayekian distributed knowledge is more important for large companies than small ones. That means managerial error will increasingly become problematic.

 

Mondragon employs about 75,000 people and had revenues of $16 billion in 2013.

When Spain was suffering because of the 2008 economic collapse Mondragon had no layoffs and continued to prosper.

So it is a fallacy to say that a large business cannot be run democratically.

 

Mondragon is still going strong after 60 years.

 

Mondragon proves that it can.

 

Mondragon employs 75,000 people proving that it is possible.

 

Look up Mondragon Co-op. It is not a single large business, it is a loose consortium of over 275 small companies. They all agree to operate under common rules, but they don't even meet that requirement. For example, each of the small companies decides on the ratio of the maximum wage paid to an employee to the minimum wage paid to an employee (the ration is usually <10), but they found they cannot hire engineers and specialists and meet that ratio - so they exempt various skill categories from their wage ratio rule.

So Mondragon does not prove that a large business can be run under complete employee democracy.

 

You do realise that the U-form company is old hat and more dynamic structures would naturally be preferred in worker enterprises? I don't see any evidence of you understanding organisational theory

 

What you don't understand is that the Mondragon business model is successful because it is STRONG consortium of CO-OPERATIVES that function to serve the best interests of all of the PEOPLE who work for them.

This business model works for ALL SIZES of corporations from startups to global powerhouses like Mondragon.

The concept that every worker is an OWNER and is looking out for the most cost effective solution to everything that is being done makes it powerful and even more efficient than top down managed corporations.

There is no limitation to the size of worker self directed enterprises and Mondragon is living proof of that fact.