Monday, August 15, 2005

Steal This Society!

A couple of weeks ago, Jonathan Cortis published a piece about The Ownership Centered Workforce. It was a hell of an essay, and in my view has not yet received the attention it deserves. So go read it, now.

Back yet? Okay. I've been a little slow in responding to Jonathan's post, mostly because the matter of which he speaks is something that I care about deeply, and I wanted to take some time to really think about it before posting. In short, I think the transformation Jonathan is describing is a very important development: the slow-mo democratization of American capitalism. What's most amazing about it is that it's happening despite little recognition in the media, and little government involvement. And at the root of it all, as Jonathan says, lies our concept of ownership.

Like Jonathan, I'm someone who buzzes a bit at the words "Ownership Society." For one thing, it's the kind of paradoxical turn of phrase I love, conjoining the selfishness of "ownership" with the communitarianism of "society." It speaks to what I think is a huge problem in the world, the fact that many workers don't feel (or receive) any ownership over the product of the labors, and that most owners are unconnected with the production of their property. This dual alienation is a root cause of many of our struggles over the distribution of wealth.

It also highlights what for me is the core problem with the current administration: they're great at marketing, but they have nothing to sell. As Jonathan also points out, the Bush vision of an "Ownership Society" is terribly, terribly underdeveloped - it basically comes to nothing more than creating further tax incentives for stock investment, as if tax-sheltered IRAs were not enough. It is not transformative, does not try to solve any problems...does not do anything, really, except feed the notion that something is being done.

At the same time, however, the true Ownership Society is busily creating itself, and no one's listening. Jonathan gave the example of American Airlines. Let me provide a few more:

1. The maturation of open-book finance: In the early 1990's, Jack Stack, the CEO of employee-owned Springfield Remanufacturing Corp., wrote a book that has slowly but steadily transformed American small business. That book is The Great Game of Business, and it turned one of the bedrock concepts of business success on its head.

For decades, the majority of American small businesses operated under a simple system of division of labor. Employees were given a single area of responsibility, were expected to do it well, and to not care about what employees in other divisions or departments are doing. This has especially been the case when it comes to the management of a company's finances. Normally, the only people to even see the finances of a company are the owners (or shareholders), the accountants, and top-level managers.

What Stack did at SRC was change the game. At the time, SRC was in a state of crisis. Desperate for solutions, he and the other managers started sharing the financial data with the rest of the staff - and at the same time, taught them how to read and analyze that financial data. The result was a completely different brand of organizing, as the floor employees were encouraged for the first time to think like the owners they were. Because SRC is in a highly cost-competitive industry, this meant brainstorming ways to reduce their costs in order to maximize their profits, dished out through a system of playful yet competitive "games." Their company's fortunes turned around dramatically. He then wrote The Great Game about the effort, sharing tips and strategies for other business leaders interested in trying the same approach.

From the book: "The best, most efficient, most profitable way to run a business is to give everybody in the company a voice in saying how the company is run and a stake in the financial outcome, good or bad."

In the business world nowadays, open book management is becoming old hat. Inc. magazine runs an article on it every five minutes or so; the number of small and large companies that have successfully adapted some or all of Stack's approach seems to be significant (if hard to count). It is amazing to me, however, that the potential political implications of this approach have rarely been considered. Open book management is a sea change in how American businesses are organized; it has a strong track record, and suggests that in many markets, empowerment of workers is key to financial success. Some notably successful businesses, like Whole Foods, Costco, and now American Airlines, have clearly heard the message. But political analysts remain mostly unaware of this development.

2. The transformation of unions: As most everyone knows, the AFL-CIO just broke up, with the most prominent private labor unions seceding. This had been threatening to happen for some time, and has led some smirking commentators to predict the demise of the labor movement entirely. I expect the opposite. The problem with the AFL-CIO in a nutshell is that the private labor unions have very different interests at this point from the public labor unions. To survive, the private unions need to recruit, recruit, recruit. The public labor unions have a far more vested interest in protecting the gains of tenured employees and longterm positions. These two interests are incompatible. As someone who is fairly fervent about the labor movement, I think the breakup is a very good thing.

One significant and underreported aspect of this change is the fact that the private unions understand that the very role of unions must change in order to meet the needs of their members. Consider this Matt Miller article on Andy Stern, head of the SEIU. The idea of reorganizing unions to be employee-service associations is not new, but has gained momentum in recent months, and if anyone is well positioned to try it out, it's Stern.

I'll go a step further than Miller does and propose that this approach is key to solving one of organized labor's biggest dilemmas: unionizing Wal-Mart. Wal-Mart is masterful when it comes to stalling unionizing efforts, but that's in part because the unions have made it easy on them; it's fairly clear that not enough Wal-Mart employees have bought in to the value of organizing. What the unions are selling, they're not buying. So it's time to sell something different. What do Wal-Mart employees want?

The answer: benefits. Health care and child care. These are the areas where Wal-Mart employees remain on the government dole, at tremendous expense to taxpayers. A union that could successfully organize these benefits for Wal-Mart employees without interacting with Wal-Mart itself would go a long, long way towards unionizing Wal-Mart. It would provide just the kind of flexible organization tha Wal-Mart employees need right now.

All of this is to point out that the "new union model" that Jonathan and Alan Stewart Carl have written about is already in development. A union that organized Wal-Mart workers in this way would not only succeed in meeting some of their most crucial needs; it would also give them ownership of that organization in a way that makes sense for them. The best unions have always been vibrantly democratic, attuned to the shared needs of their members. The SEIU's model harks back to this, and can be duplicated elsewhere.

3. The rapid rise of ESOPs, CDCs, and co-ops: (Disclosure: I serve on the board of directors of a food co-op) A few weeks ago in The Nation, Gar Alperovitz published this article (now subscription-only) on the rise of a "progressive ownership society" made up of employee stock-ownership plans, community development corporations, and co-operatives. The article contains some astonishing statistics: there are over 11,000 American companies significantly or totally owned by their employees; over 2,000 CDCs nationwide. From my own experience I know that there are 40,000 co-operatives nationwide, including ten thousand credit unions with over $600 billion in assets.

All of these represent the "ownership society" in a different light: that of shared ownership. And this, too is key: all of these types of organization are currently on the rebound. Co-ops in particular went through a long phase of disintegration in the 1980's, as landmark institutions teetered and fell, not unlike the more recent travails of unions. They simply fell out of touch with what their members wanted; burying themselves in the spirit of the 60's, they could not see the changes going on all around them.

That era of idealistic collectivism is dead, but a smarter collectivism that honors the individual has risen in its place. The last 15 years have been kind to co-ops, especially food co-ops. Some of that is changes in the market - organic foods certainly weren't mainstream items in 1989 - but more of it has to do with changes in the co-ops themselves. Go to a co-op conference like I did in June, and you'll hear about the strength of collective ownership systems in one room -- and fostering entrepreneurialism in the next. Like the ESOPs and privately-owned business influenced by The Great Game of Business, co-ops have learned the value of smart financial thinking, and have wisely recaptured their original mission as self-help organizations that look out for the economic needs of their members.


The "Ownership Society" needs to be saved from itself. It's dangerously close to becoming an empty slogan, which is too bad because the potential for a genuine ownership movement is out there. What I've tried to do in this article is display more of the evidence that an "Ownership Society" could be a real and effective addition to a radical-middle platform.

As Stack himself has written, in the age of a global economy, the era of 10% annual raises is over. There's simply too much low-price competition, and the protectionism espoused by isolationists in both major parties creates more problems than it solves. Yet there remains a need for a political party that speaks to the financial stresses of ordinary people. The broadening of business ownership could help alleviate those stresses in a genuinely American manner.

I'm not sure what role policy would play in all this - it seems quite possible to me that policy doesn't have to play a role at all. The changes I'm describing are occurring in the market; if they ceased to be competitive, they would fall out of existence. Despite their "progressive" results, the success that they've experienced has occurred without any meaningful governmental meddling. That said, I'd love to gather a crack policy team and ask: are there fiscally sustainable changes we could make to our laws and regulations that would support these trends?


At 12:07 AM, Blogger amba said...

This is a really substantive post. I hope it gets wide attention.

At 3:37 PM, Blogger Jerry said...

Both your article and Jonathan's are good examples of where two near-opposite ideologies can find middle ground. For example, I would guess that both libertarians and socialists would find a lot to like in both proposals.


Post a Comment

<< Home