Collaboration is a key factor in solving many complex problems, including the one we currently face. In fact, collaboration is a new paradigm that is increasingly finding its way into many traditional practices, including the modern corporation, where it has been introduced via horizontal organizations. Horizontal organizations are based on collaboration and trust as their default strategy. This kind of organization increases employee satisfaction and builds higher profits. In this Advisor, we examine how practices such as an open-book management policy (OBM), consent decision making, and a bold profit-sharing policy lead to greater profit and, ultimately, real customer satisfaction.
At 10Pines, a software development company based in Argentina, we have implemented a sociocratic kind of management (i.e., a model of governance that allows the self-organization of teams of different sizes) in a company with more than 80 people. After working at 10Pines for over a decade, I can identify the top three practices that lead to a superior engagement and a really low turnover rate (around 3%; the industry as a whole is above 30%):
No bosses; consent-based decision making
Bold profit-sharing policy
No Bosses: Consent for Decisions
Instead of bosses making all the decisions because of their positions, which can lead to limited perspectives on subjects and limited creativity around problem solving, 10Pines relies on the concept of the wisdom of the crowd and follows a consent-based decision-making policy. Instead of using the “boss figure” as a hierarchical authority to spread decisions from top-down, we use “consent” to form decisions from bottom-up.
Consent is a tool that borrows from sociocracy. The main idea of the decision making by consent process is to identify any strong objections at the time of decision making and to resolve them in an integrated manner. Objections are not considered as blockages but instead are seen as ways to improve proposals by including other perspectives. When all objections are resolved, consent is said to exist. The question that most often guides consent-based decision making is: could I live with this decision?
The other important feature in consent-based decision making is the encouragement of members of the team to listen to all voices. Space for expression is sought and given in this process (Figure 1 illustrates an example of a meeting using consent at 10Pines); all people involved in the decision can fully express their position.
According to the Sociocracy for All manual Many Voices One Song, the process for guiding consent is as follows:
Giving consent to the motivation of the proposal
Submitting a proposal
Round of first impressions
Straightening out objections and improving the proposal
You can’t make good decisions without the proper information. Therefore, in a group where decision making is collaborative, it is necessary to access information (including financial information) in an open way. This type of practice, known as OBM, originated at the Springfield ReManufacturing Corp. (SRC) in Springfield, Missouri, USA.
SRC CEO Jack Stack is recognized as the creator of the OBM concept. With OBM, Stack proposed sharing operational information in a detailed way and educating and training employees in how to use it. With OBM, this information is not limited to overall company numbers but includes salaries as well. In some cases, salaries are made transparent for all employees. In these cases, contrary to the chaos one might imagine, healthy peer pressure is generated, where each employee feels the responsibility to justify his or her salary to the whole company.
If not implemented with dedication, care, and training, however, OBM can produce a toxic and competitive environment that leads to failure. But, when properly managed, this practice can lead to outstanding results and even to people rejecting salary raises.
Bold Profit-Sharing Policy
When a group of people is involved in making decisions, it is only fair that they face the consequences of those decisions — good or bad. This includes the economic consequences (especially when they make good decisions and generate profits for the company).
Having a profit-sharing policy proportional to the company’s profits is essential for the team to be involved in making decisions and managing the company. In the case of 10Pines, this policy proposed a distribution of 50% of pretax profits, using a formula that aims to reflect a fair distribution. For this purpose, the total amount to be distributed is shared between all employees according to four different criteria: (1) seniority, (2) years in the company, (3) amount of hours worked during the year, and (4) using an egalitarian approach.
This type of policy not only increases involvement and responsibility in the decision-making process, but also encourages general commitment from team members and responsibility in the day-to-day care of resources and customers. This leads to team member satisfaction, which ultimately boasts a customer satisfaction level higher than the market average.
[For more from the author on this topic, see “Want to Improve Employee Engagement? Remove the Boss!”]