It's interesting that companies are these little island command economies inside the market economy.
Is there a better way to organize them? Would democracy really work? In countries, many consider democracy to be actually worse than an excellent dictatorship/monarchy. But it's a hell of a lot better than the bad ones. And there's no way to prevent a good dictatorship from going bad. Just because the king did a good job, doesn't mean his son will.
Democracy only works as well as the voters are educated and participate. Companies would seem as vulnerable to that as countries are.
Employee owned businesses tend to outperform more traditional top down business models. [1]
The reason we don't see more of them is because employee owned businesses have a hard time existing at the startup phase. That means, you have to transition from a somewhat top down structure to employee ownership. Guess what C levels DON'T generally want to do.
Certainly not to say that democracy would definitely work. You'd probably need a seniority/trustworthiness modifier on votes to really be effective (can't have the Junior devs proposing dumb shit and winning simply because there are more of them).
That being said, a lot of opensource projects are run democratically. That seems to be a good signal for an open source project's longevity.
On the contrary — almost all early-stage startups are part-employee-owned. The meta-analysis of firm performance you're linking to references specifically companies with ESOPs (employee stock option plans); the stock options most early-stage startup employees own are usually higher percentages of the company on an individual basis than public-company ESOPs.
IMO, that's one of the huge advantages early stage startups have over larger companies. Employees are highly incentivized to work together to make the company succeed, rather than climbing internally to higher positions by stepping on their peers.
> almost all early-stage startups are part-employee-owned.
I've never seen seen a startup where more than about 10% of shares was in the hands of non-founder employees and even that was an outlier. Dilution during funding rounds can often reduce this number even further. When talking about employee-owned organisations, we usually talk about companies where > 50% of shares are in the hands of employees. I agree that the study linked does not target that group though.
The biggest problem with employee-owned companies is that there is (by definition) no single person who can push through risky initiatives, so while they are often more stable they also tend to stay medium sized as it becomes harder and harder to develop risky new business units as the company grows.
That's why I said "part-employee-owned" and not "majority employee owned."
(FWIW, at least back in the early 2010s when I started a company, reserving 20% of the company for employees was pretty standard for early-stage startups. It's possible things have changed though, and it's true that dilution will drop that number.)
Is there a specific reason you exclude founders as employees? In the earliest phases of a company they're remarkably similar to "employees" in even like Series B companies... (save for ownership structure)
You say "save for ownership structure" like it isn't the most important thing in this case :)
Because of their majority ownership, the power balance is very much different than with normal employees. It is typically not possible for employees to band together and fire a founder, but it is very possible for founders to fire employees. The risk assumed is also different: founders often put up significant chunks of their personal capital to get off the ground, but I have never heard of a startup employee being asked to put in extra money in order to get hired.
Democracy is easily captured by moneyed interests, unfortunately, which within companies gets called "politics".
I've had much better luck using the techniques of social anarchy. We all generally want the same thing, we are in pretty stable communities, and there is a lot that can be accomplished by facilitators & organizers offering people the opportunity to opt in to certain kinds of improvements. You don't need power-over to bring about change.
Oh I agree - I would suggest that most companies are if not corrupt then corroded. Weirdly I see Elon and SpaceX as an example - NASA found itself unable to escape its own corrosion so intelligently found ways to put its own engineers (I mean who else did SpaceX hire?) in a new organisational form. For ten years that managed to avoid "corrupting" the original vision, probably through sheer force of Elon firing people who weren't drinking the kool aid. Which works fine as long as his is the right kool aid. And something something unions, employees rights, decent conditions.
But anyway - getting out of the wrong organisational form is well hard, and staying out seems ... impossible.
Perhaps the simplest solution is to make a limit to the amount of time a company can exist for. Ten years and then tear it down and return capital to the owners.
It might force rebuilding and recreation into staid forms.
It's unlikely but there we go - I am just amazed as Inlook around that we have a mono-culture of organisational forms globally.
So after ten years, no more Apple? Too bad if you still want to buy an iphone or you want support on the one you bought? Do you think this stuff through?
I think we need to ask what part of the tech-growth S curve does modern civilisation sit? After coal, oil, electricity, chemistry, medicine and silicon, is there another big driver out there? Or are we flattening out and need to find ways to sustainably share control and wealth and opportunity?
Why do you think a tech-growth S curve is the right model for civilization? Companies plateau and then eventually decline as do cultures and countries.
Because everything about the last two hundred years has been explosive tech growth - and the countries who were players in 1800 are basically the same players today (plus the two startups Germany and Japan from 1860s) - they all just held on through steam, turbines, internal combustion and electrical.
What chnaged in those countries and cultures that was not driven by (at minimum) power generation methods?
Plus it may be an observation (I agree with) that companies eventually corrude and decline - but why? what is the mechanism - can we observe it? Chnage it?
Not really though. Portugal, Belgium and the Netherlands were major colonial powers in 1800 and are bit players today compared with how they were back then.
Plus Chinese historians will have you believe they've been the first civilization around for 5k years. (the truth is there has been rise and fall, but each subsequent one claims to be the _real_ dynasty and so continues from the beginning) so is China new or old?
I think the truth is geographical places rise and fall multiple times. They go through cycles both internally (need, growth, comfort, decay) and externally as their characteristics are useful/useless to the greater world around them.
Eg: I doubt China would have established its current power without inexpensive labor, telecommunications, and American debt fueled consumerism. Had China been a middle power in like 1900-1950 then another country might have absorbed the USA's consumer demand
The last paragraph is key. It’s a long term investment. There are companies that are run democratically, they typically grow slowly, but are more stable.
Let employees vote to fire their managers, possibly up to the c-suite (though there may be contention with the board having this control). Keeps management aligned to the employees interests.
I do think this is actually a viable option. Possibly inevitable. And would necessitate actual discussion internally. More so than happens today at even the most "open• companies
Unions are adversarial organizations designed to balance an existing structure that can't be easily removed, but this is about "if you were inventing a new kind of organization that didn't need an adversarial structure, what's the best way to do so?" and you can do much better than management-vs-union there.
Not an expert, but my understanding is that German unions are collaborative with management and not adversarial. Not common, but it would disprove the direct link and make it more of a strong correlation.
Happy to be shown how my understanding of the German system isn’t correct.
You're probably right, but much of HN tends to take a very US (or even very silicon valley centric) view of things. In the US the narrative (and maybe the truth too, idk) has been set up of Company vs Union. I suspect it's been made polarized so that the 2 party system can take advantage of what side they're on.
Is there a better way to organize them? Would democracy really work? In countries, many consider democracy to be actually worse than an excellent dictatorship/monarchy. But it's a hell of a lot better than the bad ones. And there's no way to prevent a good dictatorship from going bad. Just because the king did a good job, doesn't mean his son will.
Democracy only works as well as the voters are educated and participate. Companies would seem as vulnerable to that as countries are.