Can companies be run democratically?
The typical company is run like a ship. The captain is primarily responsible to ensure that the ship reaches its destination in good shape, and the crew are responsible to do their own jobs to maintain the course, and listen to the captain for any direction. The ship is one entity and it needs one brain to manage it. A company is a lot like a ship. It has a destination (like an annual revenue target) and works like one team under the leadership of the CEO to achieve that target. A good CEO sets the course and then lets each crew member do their job to ensure that the company reaches its target.
Like all metaphors, there is truth in it and it sounds plausible, but it rarely tells you the entire story. The market is rarely like the typical sea you can imagine, predictable and calm. It is dynamic and keeps changing. A company is more like a ship in a sea of pirates. Or in many cases, it is a pirate ship itself. Or a small pirate ship with a rookie crew and an untested captain. The dynamics in such ships can rarely be stable. Everyday would bring a new opportunity, a new crisis and a new mutiny.
Our thinking of organisations is designed on the basis of the large merchant ship because it is simpler to imagine. It is also what every organisation wants to become in the long run. Our thinking about countries used to be similar to this until a couple of centuries ago. There used to be a monarch who used to rule over the country. The dominant power — violence — used to be controlled by the monarch who used to collect taxes and distribute justice and guarantee safety for the people. The monarch used to enjoy power and luxury in return for the peace and stability provided by the monarchy. This worked as long as resources were scarce and the world was stable.
But all this changed with the rise of industrialisation, discovery of the new world, the declaration of American independence and the French revolution. Suddenly countries that could unlock the power of their citizens were developing technologically far more rapidly than others. People no longer bowed to an autocrat, but had a fairly high amount of liberty to do what they wanted to do. Equality and justice were accessible for everyone with the power of democracy. This idea of liberty (with a safety net) has created incredible wealth and prosperity for the human race. At a human level, it has led to much longer lives with many more human needs fulfilled, and far more humans having a shot at self actualisation rather than just trying to survive a life that was nasty, brutish and short. The modern corporation has had a big contribution in this modern miracle. People had the freedom to choose what companies they wanted to work for, and companies competed to attract the best talent.
While the freedom in society has increased a lot, companies are still run like a monarchy. Our imagination of a company is still this ship with a destination, and it continues to inform our thinking of how companies should be structured. One interesting question is, can companies be reimagined to be like free societies rather than a ship? Can this lead to greater fulfilment for humanity than what is currently offered?
Over the last few decades, companies have realised the value of individual freedom given to their members. Google famously had the 20% rule, where for 20% of the time, each employee could work on a project of that liking and it led to creation of Gmail and Adsense, a couple of their most successful projects. While Google may have discontinued or diluted this program, there is a general trend of offering more autonomy to each person working in the organisation.
What if we could take this even further. Rather than giving 20% of time to pursue projects of choice, what if employees could spend 80% of the time based on their own choice and 20% of the time on work they did for others. What if that was 100%? This may sound ridiculous, but this is exactly what we are trying at Frappe. If you are thinking this sounds foolhardy, there is a strong reasoning behind this. The reasoning is that every person working in the company wants to have a fulfilling career. They want to contribute and do great things. Each person also knows best what they can contribute best. No manager can be more motivated for a person’s success as the person themselves. Somehow like Adam Smith’s invisible hand, this will guide the company to greater prosperity as well. This is the idea behind a self directed, democratic company.
We have been trying to implement this at Frappe since 2020 (yes the pandemic changed a lot of things). Every person working on Frappe has the right to choose how, when and what they want to contribute. If you think people are going to just slack off and do unrelated stuff, then you have to remember that there are no free lunches. Everyone must find a way to contribute in parity to their pay (at minimum). This has led to creation of some amazing products at Frappe, like Insights, Gameplan, LMS, Wiki, Helpdesk, Drive and there are a few more in the pipeline.
People are motivated by all kinds of things. Some are motivated by doing creative things, some by making money, some are motivated just for the fun of exploring and doing radical things. Each kind of person has their place in the organisation and a great organisations helps each one of this type find their rightful place. In a self directed organisation, each person has the opportunity to find it for themselves.
You may wonder, what about things that nobody wants to do in the organisation? The reality is that somehow, most of the things in the company get managed. There was an initial chaotic phase, but finally things have settled down. But we understand that there will always be things that are necessary, but no one wants to do. Just like household chores. For those things, there are three options.
- Redistribute with consent (like support rotation)
- Hire new people for that role
- Outsource the activity
The common decisions of the company are taken democratically — either with a democratic vote or a sociocratic one where each and every member’s consent is taken. Since the list of “common items” is very small, mostly around rules and policies, it does not take as much time as you think. Some people are naturally inclined towards having policy debates and they contribute to making the policies while others give their consent or vote.
This system has been working quite well for Frappe over the last couple of years, even though things are not always predictable. Apart from being self directed and democratic, we also let each member in the team pick their own pay. That is a whole topic in itself, but it is closely linked to this idea that people are not stupid. This kind of culture depends on a high degree of shared understanding that happens with open and transparent communication. The job of leadership is not to direct people, but to help them achieve their own goals.
Frappe operates in the domain of free and open source software that completely turns around the traditional idea of how software should be made and serviced. Frappe’s own “operating system” as a company is also a lot like free software, and an inversion of commonly held paradigms. It took a while, but open source software is now the dominant way of how software is made. It will be interesting to see if democracy turns out the way most companies will be run in the future!
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