The evidence for more democracy at the workplace
Here’s some laboratory evidence that workplace democracy raises productivity:
We report evidence from a real-effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented and worker characteristics.
This is especially impressive because it focuses upon only one channel through which democracy raises productivity, and ignores others – for example that workplace democracy increases workers’ monitoring of co-workers, or increases motivation over longer periods than can be measured in laboratory experiments.
One message I take from this is that a government that was serious about wanting to increase the efficiency of the public sector would consider ways of empowering workers.
At this stage, glibertarians ask: if worker democracy is so productive, why is there so little of it? Why don’t efficient worker-owned firms expand and put inefficient capitalist ones out of business?
In one sense, the premise of the question is false. Only about one firm in 1000 separates ownership from control by being listed on the stock market; co-ops and partnerships are much more common. And they are almost ubiquitous in businesses where worker effort is the key to performance, such as law firms.
In another sense, the question ascribes too much efficiency to market forces. These don’t grind as finely as you might think. In his classic survey of firm growth, Alex Coad writes:
While there is ample evidence suggesting that low productivity helps to predict exit…productivity levels are not very helpful in predicting growth rates. Put differently, it appears that selection only operates via elimination of the least productive firms or establishments, while the mechanism of selection via differential growth does not appear to be functioning well. As a result, the mechanism of selection appears to be rather ‘suboptimal’ in the sense that its effectiveness is lower than it could conceivably be.
A second question is: why am I so keen on worker democracy but sceptical about political democracy?
Simple. The best forms of democracy don’t ask; “what do you think?” This just invites speak-your-branes drivel. Instead, it asks: what do you know? Workplace democracy does this.
In this sense, workplace democracy does what Hayek attributed to markets: it mobilizes dispersed, fragmented knowledge (this is a separate virtue from maximizing efficiency). My enthusiasm for worker democracy probably owes less to Marx’s influence than it does to Hayek’s.
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Chris Dillow is a regular contributor and former City economist, now an economics writer. He is also the author of The End of Politics: New Labour and the Folly of Managerialism. Also at: Stumbling and Mumbling
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Chris,
Commendable as your commitment to workplace democracy is, have you really considered the implications of this:
Simple. The best forms of democracy don’t ask; “what do you think?” This just invites speak-your-branes drivel. Instead, it asks: what do you know? Workplace democracy does this.
So in effect, the proper locus of democracy is the workplace? I believe this was the logic that underpinned several communist regimes – the orgnisation of workers councils in factories and the like. Meanwhile, serious decisions (including those affecting the workplaces) were made by ‘representatives’ of these bodies who had no democratic legitimacy or effective requirement to explain their actions.
What you are suggesting is that democracy is fine for the little things, but that the people should not bother themselves trying to think about bigger issues (I presume the experts can handle this…). Even if you don’t see it yourself, you are advocating the road to serfdom right there.
Which is not to say democracy in the workplace is a bad idea (if implemented in a way where it does not impair the ability to react – you need managers on a day-to-day basis in the workplace or in government), But it should not be contrasted with the necessity of democratic consideration of major issues – it can be complementary, and if you want to advocate it successfully, it should be shown as such.
“Here’s some laboratory evidence that workplace democracy raises productivity”
For a comparison, try reports of the Hawthorne experiment:
“Eighty years on from the Hawthorne experiments, the secrets of employee motivation remain as mysterious as ever
“Go on, admit it: you think happier workers are more productive, don’t you? Of course you do. It is an article of faith not just for personnel managers, but also for liberal democratic capitalism as a whole. We all need to believe it. The implications of a divorce between output and work satisfaction are too much for our market-ordered sensibilities to bear. . . ” [October 2004]
http://www.personneltoday.com/articles/2004/10/19/26126/staff-under-the-microscope.html
By many accounts, the John Lewis Partnership retail stores – a producers cooperative – are hugely successful compared with the competition. The interesting question is why aren’t there more producer cooperatives then?
“The reason we love John Lewis, recently voted the UK’s favourite retailer for the third year in a row, is that it seems so solid, so reliable, in a consumer culture that is dominated by cheap, disposable tat at one end of the spectrum and expensive designer nonsense at the other.”
http://www.telegraph.co.uk/finance/comment/tracycorrigan/7202657/Another-good-reason-to-love-John-Lewis.html
@2
From the article you link to:
“One was that the very fact of being involved in an experiment spurred the workers to be more productive.”
Now correct me if I’m wrong, but any experiment where the subjects know they are being experimented on is completely flawed and any results arising from such research should be taken with a hefty sack of salt.
[2] There is no workplace democracy at John Lewis – it has an identical management structure to that of its rivals. The difference is that you can’t buy shares in it and its profits go solely to its workforce.
I think Chris Dillow is talking about something else.
@ 3
“Now correct me if I’m wrong, but any experiment where the subjects know they are being experimented on is completely flawed and any results arising from such research should be taken with a hefty sack of salt.”
You’re right in this case. Most of the time you have to tell people that they’re taking part in an experiment. The issue is that you’re telling people that their actions are being recorded more than usual when trying to judge a metric that is affected by whether or not you think your actions are being recorded. Even worse if they know that’s the metric you’re studying.
A control group could have fixed this.
@5 Scientifically speaking any measurement affects what is being measured, in the same way that putting a thermometer in a glass of water minutely changes its temperature. Its a problem particularly in experimental psychology where until the late 1960s it was usual to try and conceal the real purpose of an experiment. The introduction, post Millgram of ethical code makes it impossible to do anything remotely “traumatic” without telling the participants first.
Google the hawthorn effect for a work related example of the same principle.
and control groups don’t fix this as both groups have to be told, otherwise they aren’t a control group
@ 6
Certainly, which is why proper studies have set margins of error to take this sort of thing into account. So a successful drug study won’t just show that the drug is more effective than placebo or the competition, it’ll show “statistically significant improved efficiacy”.
Probably harder to do for social studies, especially involving anything traumatic, as you can’t give people a sugar pill for trauma.
@ 7
“and control groups don’t fix this as both groups have to be told, otherwise they aren’t a control group”
Not a problem in this case. Get one group working under the new regime. Keep one working under the old regime. Tell both that you’re recording their output. Compare results.
The real problem would be if you wanted to test the effect of being recorded on output…
@3: “Now correct me if I’m wrong, but any experiment where the subjects know they are being experimented on is completely flawed and any results arising from such research should be taken with a hefty sack of salt.”
That conclusion is rather heavy and closed-minded. True, the subjects in the Hawthorne experiment were aware they were part of an experiment but that was part of the context and the curious aspect – as reported – was that productivity of the group continued to improve even after workshop lighting conditions were made seriously adverse. It’s also possible to make the criticism that the Hawthorne experiments were conducted during depression years in America, which could understandably have affected employee responses to being part of an experiment that changed working conditions alongside knowledge of “management interest” in the outcomes.
The general conclusion that I’m inclined to draw from the experiment is that evident changes in working conditions and known management concerns about productivity are likely to impact productivity. I’m therefore reluctant to attach much weight to generalised claims that introducing worker democracy will positively affect productivity. For a start, I’d like to know whether incentive systems changed as well.
There is the continuing puzzle as to why there aren’t more producer cooperatives seeing as how the John Lewis Partnership is so indisputably commercially successful? Why don’t we see more examples – such as the Tower Colliery in Wales?
http://news.bbc.co.uk/1/hi/wales/7200432.stm
Btw various other social psychology experiments have also produced challenging outcomes:
Obedience to authority – the Milgram experiments
http://www.age-of-the-sage.org/psychology/milgram_obedience_experiment.html
The Zimbardo Prison experiment
http://www.prisonexp.org/
My son recommends a book which surveys these and other social psychology experiments but I’ve not read it yet:
Lauren Slater: Opening Skinner’s Box (Bloomsbury, 2004)
The best performing firms in many sectors are those who find ingenious ways to devolve power and decision making to allow employees to be more autonomous. Workplace democracy is not workers voting on every decision. Giving them autonomy is real workplace democracy in action and it works. Political statism has had its day because it does not work. Centralised autocratic decision making in the workplace works less well than devolving power.
@12:
That’s a really great video clip on work incentives. It almost had me convinced until I reflected on all those practices that bankers engage in to attract bonus payments, like:
- neglecting shareholder interests
- exploiting information asymmetries by mis-selling securities to gullible clients
- insider trading
- concealing conflcts of interest in trades
Referring back to the video, presumably the practice of those dark banking arts is to demonstrate “mastery” of skills relevant for attracting banking bonuses.
Btw I’ve not noticed any clamour from bankers for more workers’ democracy.
The longest running real world experiment in worker participation is Japanese manufacturing, where a variety of techniques and work process break down the divisive worker/manager model and give everyone an equal say in problem solving and how the work is done. JIT, TQM, kaizen, quality circles, the Japaneses economic miracle of the 70s and 80s was drven by them and they were consequently (generally badly) emulated by US and UK firms in the 90s.
@14
It’s arguable whether Quality Control Groups and team working in Japanese companies, along with implicit guarantees of lifetime employment in Japan in the big companies, amounted to greater workers democracy. An alternative credible interpretation is that the combination amounted to a more effective way of exercising greater control over workers, not least since workers were expected to join company sponsored trade unions.
Just-in-time (JIT) contracts for delivery of components were an effective means of effecting tighter inventory control and saving inventory storage space rather than a means for extending workers democracy.
I agree that these developments in work practices and in the capacity of Japanese companies in some industries for technical innovations in production methods and in products were important ways of gaining competitive edge in international markets but the gains were not universal across all sectors in Japan where average productivity was and is lower than in other G7 economies:
http://www.statistics.gov.uk/cci/nugget.asp?id=160
It tends to get overlooked that Japan’s internal market was intensely competitive. Western claims in the 1980s and early 1990s that Japan’s spectacular GDP growth and trade surpluses were all down to MIT’s industrial strategy and cross-shareholdings in component supply chains were grossly exaggerated. Japan’s automotive industry fought off attempts by MIT to develop an industrial strategy for the industry.
If you are being given democracy then you can be sure you are not getting democracy. If workers want democracy in the workplace they are going to have to seize it. That means establishing work place committees to elect management as opposed to having the state or shareholders impose its own lackey management and ultimately it means those enterprises, companies, departments, hospitals, schools, etc being taken into social ownership by a democratic socialist state otherwise those places where rule by the workers has been established will be closed down and re-opened without these democratic structures just as unionised work places are regularly closed in favour of non-unionised work places.
> If you are being given democracy then you can be sure you are not getting democracy
What? So all those born in the West…. who are ‘given’ democracy, you’re saying they don;t get it?
I’m confused…
You could easily compare data from other workforce of a similar size/skill over a similar period of time.not perfect but having a control group within the workforce wouldn’t work as it may affect the performance of the test group.
A Chris morris reference in a blog post.nice.
“So in effect, the proper locus of democracy is the workplace? I believe this was the logic that underpinned several communist regimes – the orgnisation of workers councils in factories and the like.”
@Watchman
No. You are forgetting that Stalinism was the negation of workplace democracy. One of the ideas behind socialism is workplace democracy. The regimes that abused the word socialism to describe their regimes had no workplace democracy whatsoever. Look at Cuba as an example.
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