Meet the New Boss(es)

It’s called workplace democracy, and at the local companies leading the movement, employees can set their own pay, veto new projects—even demote the chief exec. But as some are finding, that's still not always enough to make coworkers get along.

“Hot coffee coming through!” yells an employee rushing into the annual board of directors election at Equal Exchange. It may be the least necessary warning ever: Pots of dark roast and Colombian have been brewing all morning at the coffee company’s West Bridgewater headquarters, and just about everyone is clutching a steaming mug as they enter the conference room where the voting will take place. Inside, the dress code is business casual in the loosest sense of the term—jeans and khakis mixed with visible tattoos, flowing skirts, a tie-dye or two.

Since its founding 20 years ago, Equal Exchange has been a pioneer in the fair-trade movement, paying farmers above-market rates for coffee beans, then jacking up the price for earnest health-food shoppers who don’t mind paying extra for a more compassionate cup of joe. Less noticed, however, is the equally innovative way the company handles its internal affairs. At most businesses, workers aren’t even invited to board elections; here, they not only attend, they run for the bulk of the seats.

Milling about before the meeting, Rodney North, the company’s head of public relations (his business card lists his title as “The Answer Man”), declares the vote “up for grabs.” Short with spiky hair and a graying beard, he is running for reelection, and is one of three candidates for two open seats. His competition includes Jim Desmond, a salesman with a patchy red beard and a dark blue button-down. Addressing the room, Desmond describes himself as an “effective communicator” with “strong analytical skills,” and says he looks forward to helping the company adapt as it continues to grow. When it’s his turn to make his pitch, the third candidate, roasting-plant supervisor Steve Bolton, at first talks so low he’s almost mumbling. He sums up his qualifications thus: “I have a pretty good financial background, pretty good operations, pretty good safety and personnel background, and pretty good technological background.” He finishes, though, with a bang. “I just want people to know that I am not a person who came from corporate America with a screwed-up mindset. I really think that capitalism the way we see it is going to be gone someday. It is inevitable.”

The room erupts in hoots and cheers. For these staffers, electing their own board members isn’t merely a matter of business principles. It’s nothing short of a revolution in American office life. In fact, Equal Exchange’s employees aren’t just workers; they’re “worker-owners,” a term that’d have Karl Marx drooling into his wurst. Yet this is not a communist throwback, but rather “workplace democracy,” a rare but growing breed of corporate governance that gives workers unprecedented control over their employers. So empowered, Equal Exchange workers have called the shots in choosing a new headquarters, doubling their profit-sharing plan, and in one case deposing their own boss, a company cofounder who’d helped implement the very system that led to his removal.

This spring Washington, DC, think tank WorldBlu selected Equal Exchange as one of the firms on its first-ever list of “most democratic companies” in the world. It was one of several in Massachusetts—which was disproportionately represented on the list—to make the honor roll, which WorldBlu created as a way to celebrate this emerging business niche. “We give people the right to vote for president, and have children, and join the PTA, and drive a car, but they have to ask at work to use the bathroom,” says Traci Fenton, WorldBlu’s upbeat, thirtysomething founder. “We are fighting for democracy all over the world, but we so easily give up our freedoms walking in the door every day.”

And indeed, it is ironic that here in the land of the free, most of us spend the majority of our waking hours toiling in totalitarianism. Offices, after all, are strictly hierarchical environments, where orders flow in one direction (down) and employees are kept in line by the threat of retribution (being fired) or promise of reward (getting a raise). No wonder a recent Gallup poll found 73 percent of employees at U.S. companies were either “not engaged” or “actively disengaged” on the job. Meanwhile, average vacation days are declining and healthcare premiums are rising. In that environment, what employee wouldn’t want to be able to vote to increase his take-home or can his supervisor?

At the same time, the phenomenon also raises a few questions—like how the hell a CEO can get anything done when he’s constantly on guard against his potential overthrow, or how companywide elections can be kept from descending into popularity contests. But Rodney North, the Equal Exchange Answer Man, says such concerns have proven unfounded, at least if his company is any indication. “The immediate presumption is that if you have the inmates running the asylum, they are going to pay themselves too much, and give themselves more power,” he says. “Well, no. At other companies, the same decisions have to be made. The change is just who makes them.”

Though it won’t find a warm reception in many corners of corporate America, there’s evidence that workplace democracy is catching on among more than the counterculture types at places like Equal Exchange. WorldBlu’s list includes GE Aviation’s plant in Durham, North Carolina, which built the jet engines for Air Force One, and has a workforce divided into teams that make most decisions by “open consensus,” soliciting opinions from all members and not proceeding until every one agrees on a course of action.

That the Bay State should be so well represented among WorldBlu’s honorees is hardly surprising. After all, our founding rabble-rousers kick-started American democracy right here. Adherents of the new movement see the workplace as simply another institution in need of revolution. “Boston has a long democratic legacy,” North says. “It’s a little sad we even have to do this, 200 years later.”

As far-fetched as a connection between the shot heard round the world and the drone of the copy machine might seem, North isn’t the only one making it. Cambridge social theorist Frances Moore Lappé argues that workplace democracy is beneficial not only for employees, but also for society as a whole. In her 2005 book, Democracy’s Edge, she contends that for our government to function properly, citizens must have representation in all areas of their lives: school, church…and yes, the office. “If we spend our entire day as serfs basically just following orders,” she says, “how can we be expected to be problem-solvers in our families, our communities, and our nation?”

WorldBlu’s Fenton started thinking about workplace democracy when she spent several months as a college student in Indonesia, where she was struck by the lack of freedom under the Suharto regime. After graduation, she took a job as an account executive at a “media company that shall remain nameless,” and was amazed by the similarities. “It was a one-way monologue where management told me what to do. It was sort of a punch to the gut.” Fenton resigned after four months. Though she would later do a stint working in the belly of the beast—the NASDAQ stock market—an activist had been born.

Based on what she’s learned through her research, F
enton argues that the principles and practices that qualify a workplace as democratic—including transparency, decentralization, fairness, and accountability—can be good for the bottom line. “If you look at the organizations on the list, every single one of them is an industry leader,” she says. That’s probably a bit generous. Equal Exchange, it’s true, is a leader in the fair-trade coffee field, and has been ranked among the Boston area’s fastest-growing companies three times in the past decade, expanding 700 percent in that time to nearly $25 million in sales—but it hardly has Starbucks quaking in its clogs.

And wider adoption of workplace democracy faces an uphill climb, according to Thomas Kochan of MIT’s Sloan School of Management. Kochan is sympathetic to the movement’s goals—he authored a book titled Restoring the American Dream: A Working Families’ Agenda for America—but pessimistic about its broader prospects. Democratic workplaces “are very anti–American business culture,” he says, adding that almost all of the organizations on WorldBlu’s list “are younger and come out of private ownership and aren’t subject to hostile takeovers and buyouts and pressure from investors.”

Still, with the traditional champion of the working man and woman—labor unions—on the ropes, there’s an opportunity for workplace democracy to gain a wider following. Worker co-ops have proved an effective business model in Europe, where Spain’s Mondragón cooperative corporation employs 70,000 people in 150 separate firms. And closer to home, in rural New England, agricultural collectives like Cabot and Ocean Spray are owned and operated by family farmers. Perhaps the moment has arrived for the idea to take root in the American office park as well.

Four years ago, Equal Exchange outgrew its Canton headquarters. A consultant brought in to help with its space crunch suggested that to save money, the company look for its next headquarters in western Massachusetts, where commercial real estate is cheaper. The prospect of a major relocation divided the worker-owners, who after a long debate authorized the executive directors to move to any site they felt was suitable—so long as it was within a 15-minute drive of the current location. Bound by the decision, the board narrowed its list to a half-dozen options, and organized scouting trips to each one for every single employee. “I remember taking 45 people around to kick the tires,” says coexecutive director Rob Everts. “People who saw us were like, ‘What in the world?’”

Equal Exchange didn’t arrive at its democratic leanings by happenstance. “From the beginning, the vision was a hybrid mode with worker control but strong management,” says coexecutive director Rink Dickinson, one of three food co-op veterans who helped launch the business in 1986. That initial vision has grown into a legislative machinery so complicated it makes the federal tax code look like a recipe for ice cubes. Daily decisions are made using a “governance matrix” that spells out the choices to be made, and who gets to make them. The executive directors create the budget, for example, but it must be ratified by the board. The board sets personnel policy, while it’s left to the execs to determine what those personnel earn. Bigger, strategic decisions require a vote by everyone. It can be enough to make you want to put your head down and just do your job.

That’s not lost on Equal Exchange, which has developed a rigorous process to ensure it hires only candidates who buy into its unique way of doing things. Getting a job at the company is like applying to college, with a required essay and multiple interviews. And after accepting an offer, employees have to go through a two-hour orientation to learn the basics of Equal Exchange’s philosophy, then attend weekly “exchange time” sessions over a yearlong probation period before finally receiving their ownership stake. Given all that, it’s no shock that most of the company’s employees are young and decidedly left-leaning.

Erbin Crowell, who started a division of the company that sells coffee to religious congregations, says, “I can’t think of one employee where my problem has been to motivate them to work harder.” Along with the self-selecting nature of its workforce, the company’s compensation system helps keep productivity up. This year its worker-owners split 10 percent of the profits (the take was $850 each), with another 10 percent invested in internal accounts they get when they leave; next year, those percentages will double, per a recent vote. The company also has a rule that the highest-paid staffer can make no more than four times the lowest-paid one. That way, says Crowell, “everybody knows no one is getting rich off their backs.”

Just as democracy takes many forms, depending on which country is practicing it, Massachusetts’ democratic workplaces use a range of internal structures and procedures to pursue their aims. What they share, though, is a deep commitment to their novel approaches, even in industries in which a traditional org chart would be the much more obvious route.

Take the South Mountain Company, a Martha’s Vineyard homebuilder. Clearly, you can’t put up a house by committee, letting individual carpenters construct each room by their own whims—and accordingly South Mountain’s sites are run as dictatorships. “Our people would be terribly distressed if there was a crew on a job and they sat around and drew straws to decide who should build the stairway,” says cofounder John Abrams, a soft-spoken 57-year-old with glasses and a bushy beard. “A culture of expertise really rules.” But during the 1980s, when his two best workers came to him saying they were willing to spend their careers at South Mountain—but only if the company would pay them more than just an hourly wage—Abrams had a choice to make. He opted to turn South Mountain into a cooperative, offering any employee who’s been with the company for five years both an ownership stake and a seat on the board. “When the people who are making a decision are going to bear the consequence of that decision, better decisions result,” says Abrams, who writes about his experience in The Company We Keep. “I no longer have to be right all the time. And what a relief.”

To qualify as democratic, a company doesn’t have to be employee owned, and egalitarian practices can fit into a white-collar firm as easily as a blue-collar outfit—both points proven by Continuum, a business-consulting shop in Newton. When CEO Kory Kolligan commissioned a brand analysis of the firm itself upon taking over, he discovered a familiar complaint: Employees felt management was too secretive. “The more you scream there’s nothing hidden, the more people think there is something hidden,” he says. So he opened the company’s books to employees, implemented a monthly town meeting in which no question was off-limits, and had Continuum’s offices remodeled into one big shared workspace.

When the circumstances are right, a company can do away with more than cubicle partitions. It can choose, like Amherst-based copy chain Collective Copies, to dump any semblance of hierarchy whatsoever. In 1983, its founders, then employees of another copy chain, went on strike to protest low pay, lack of benefits, and dismal working conditions in a hot, dark basement space. The company simply packed up and left town a few months later, so the employees bought the equipment and reorganized, with one major change: no bosses.

When customers come into a Collective store, they are served by whichever employee is free; if the order is something the e
mployee doesn’t know how to do, he consults with his nearest colleague. If it sounds like anarchy, well, it is. But anarchy turns out to have its advantages in the copy business. “It’s an odd thing, but it’s one of those industries where things run better when you don’t have to run things through a third party,” says Steve Strimer, a Collective Copies “member.” And because there are no management costs, Collective can pay from $13 to $20 an hour (this in an industry where the starting wage at Kinko’s is closer to the $7.50 minimum), which helps limit turnover.

Regardless of how it’s set up, no democratic workplace can completely eliminate employee conflict. To deal with such discord, Collective has a “judicial branch” with the Orwellian title of Intra-Collective Communications Committee (ICCC). Members rotate through assignments to the committee alphabetically, and interview both sides in a disagreement before issuing a binding judgment. In the 10 years he’s been at the company, Strimer says, he’s seen the ICCC convened three times: once for chronic tardiness, another time for “anger-management issues,” and once (in an “only in the Pioneer Valley” situation) when employees clashed over political differences after 9/11. “I know it sounds utopian,” he says. “I’m not saying there isn’t conflict and cliques and people who get along better than others. The missing component is a boss who becomes the scapegoat for a lot of problems.” And without that outlet, workers either have to accept the status quo, or make the effort to fix things themselves.

Last year, Ballard Market in Seattle asked Equal Exchange to open a café inside its store, a potentially lucrative venture. But the idea ran into resistance from some of the company’s employees, who moved to block it by invoking their authority to approve changes in operations. Dickinson and Everts, insisting the café was merely a “pilot project,” quickly approved the launch anyway, and after a few heated board meetings, the workers decided to let their bosses proceed—but only for 18 months, at which point a recertification vote is required. Even if the café flourishes, Equal Exchange workers have the power to pull the plug.

As contentious as that episode was, it’s nothing compared with what happened when the board demoted cofounder and executive director Jonathan Rosenthal. About eight years ago, Rosenthal started chafing under what he saw as the company’s conservative approach to decision-making—he wanted to more aggressively market its fair-trade mission and establish franchises in other parts of the country—and after poor health forced him to take a brief medical leave, the board and other cofounders called an emergency meeting and voted to ask him to step down. At a traditional company, Rosenthal could have sued. Instead, disenchanted, he eventually left the company altogether. The two sides have long since reconciled, with Equal Exchange owning a 20 percent share in Rosenthal’s new fair-trade banana company, Oké USA. To this day, however, Rosenthal hasn’t had a complete airing of the ouster with his old coworkers.

In the wake of Rosenthal’s departure, the balance of power at Equal Exchange continued to shift toward the workers, and away from the cofounders. That, in turn, has changed the cast of board elections, and the company; whether for the better is open to interpretation. “When I started, it was much more personal,” says sales manager Kristin Howard. “Everyone was lobbying everyone else and we all used to hang out all the time. Now it’s formalized it in a more positive way that has made it less personality-driven.”

When it’s finally time for Rodney North to make his speech to his fellow employees and ask them to reelect him to the board, he points to his experience in navigating the slippery shoals of self-governance. “As a worker co-op we are going to disagree on particulars, but we are going to agree on the process,” he says, “and sometimes that is going to be messy or ugly. That’s something I have some experience grappling with.”

After all three contenders have spoken, their coworkers cast their ballots, ranking each candidate on a weighted vote of 1, 2, or 3. A few minutes later, the tally is read: Jim Desmond, 97. Steve Bolton, 148. North gets the second seat with a tally of 131. “My head is spinning right now. It’s a whole new world,” says Bolton over the din as employees head into the staff kitchen for a barbecue celebration.

With the election behind him, Desmond offers a few thoughts on where his candidacy might have gone wrong. “Someone said I should have talked more to the guys in the warehouse,” he says. “I never even thought about campaigning like that.” Then again, had he won, Desmond adds, he would have had to give up other responsibilities, like his ongoing push to get solar panels installed on the roof.