A Call for an Entrepreneurial Revolution Within Businesses

Isn’t it a little ironic that even though most of us in the Western World live in democratic societies with elected representatives, our places of work (where we spend the bulk of our waking hours) are mostly run like medieval dictatorships? It’s time for a new way of looking at business.

Think about it. Even though modern business practices like profit sharing, stock options, and new freedoms for employees have emerged; the standard business model is still more similar to a monarchy than a democracy. There is still a divide between ownership and labor which puts the two groups at odds.

Even in publicly traded companies with thousands of stockholders, the employees still don’t have any say in the elections of their leaders, and must follow a strict chain of command to get ahead. Since employees ultimately have little stake in the destiny of a company, they also have little motivation to put their hearts into it.

I am not advocating changing our social or political structure to discourage entrepreneurship in any way. As an entrepreneur myself, I wholeheartedly believe that entrepreneurs are the lifeblood of a thriving democracy.

If we could come up with a new business model that allows a person to be an entrepreneur with a company, we could begin the greatest economic boom this world has ever seen. If employees and owners become invested in their companies and have incentives to use their creativity and drive, we could raise productivity to a level that would wipe out poverty.

The United States is the best country in the world for entrepreneurs. Anyone with the right combination of creativity, business skills, determination, and persistence can build a company and live the American dream. Unfortunately, the companies we tend to build are in the mold of the traditional business model where a small group of owners hire a large group of employees to trade their time for money. The same entrepreneurial spirit we used to build our businesses is stifled at the level of our employees.

Democracy vs. the Traditional Business Model

The idea behind a democratic system is that the citizens own the country. The citizens elect their leaders, pay for the government through taxes, and are free to move the country in the direction that they want it to go. While this doesn’t always work out perfectly, it is still the best system that anyone has come up with so far.

As an employee of a traditional company, the company owns you. Yes, you are free to change jobs, but most jobs are with traditional companies. The company sets the policies, tells you what to do, and makes you conform if you want to get paid. As the company succeeds, you might benefit a little by having a more secure job, more opportunity for advancement, or a boost if you have company stock; but for the most part, it is much more exciting for the owners than the employees.

In a democracy, if the people feel that they aren’t being represented by their leaders, they can vote them out. You don’t have this luxury in a company. The CEO is either the owner or chosen by the owners of the company, and has little incentive to keep you happy except to keep you working, keep you from stealing, and to keep you treating customers or clients nicely.

Treating the Symptoms

Organizational behaviorists have recognized this problem and offered company owners some fixes that basically equate to treating the symptoms of a disease instead of treating the problem.

Profit Sharing

When companies started to offer their employees profit sharing, this was a step in the right direction. Employees were offered a reward for their hard work. Unfortunately, in most of these programs it is very hard to see a direct correlation between your increased efforts and a big bonus check at the end of the year.

Stock Options

Giving employees the opportunity to own stock is a huge step toward closing the gap between the ownership and labor, just owning stock doesn’t change the relationship between an employee and his management.

Pay for Performance

Some of the happiest employees out there work under a pay for performance plan. Most sales jobs, contract labor, and some progressive companies have these types of arrangements. If an employee is getting paid straight commission, he is less an employee and more a business partner. A manager doesn’t have to constantly ride them because there is no money lost if the employee isn’t productive.

I used to work for The Gallup Organization, which does the Gallup Poll, market research for major corporations, and management consulting. Most of the positions at Gallup, even the most basic positions, were pay for performance. It was a great system and promoted a great work environment. Even though I think that they happen to be on the right path, there is still a gap between the ownership and labor.

The end of “The Customer is Always Right”

Remember back in the 80’s and 90’s when management consultants and company executives would drill the idea into their employees heads that the customer is always right? What message did that send the employees? That this business relationship is between us, the owners, and the customer. You, the employee, are simply a mechanical means by which we can complete the transaction.

It has only been recently that I have started to hear some management experts tout the fact that the employees are the most important stakeholders in the business relationship. If they aren’t happy, they won’t treat the customers or the ownership right.

While customers must be treated with respect, they should not be allowed to take advantage of the employees or the company. No one, not even the customer, should be given a free pass to behave however badly they want to.

What if

Even with these improvements to the business model, there is still a great divide between the ownership and employees. If an employee wants to become an owner, she has to start her own business. While I love entrepreneurship, I also know that there are a ton of very talented people who don’t have the right mix of skills and/or access to capital to do it. Furthermore, big companies have access to far more resources than a single entrepreneur does.

What if there were a way for an employee to be an entrepreneur within the company she works for? Anintrapreneur, if you will. What if she were encouraged to take a leadership roll by organizing people and resources to take on certain projects within the organization. What if she was able to take a percentage of the new value that she created?

The Traits of a Post Entrepreneurial Revolution Company

Workers are Business Partners

The first change in the revolution has to do with the relationship between ownership and labor. Instead of hiring people for their time, the value of certain tasks will be determined by the market.

For example, in the customer service department, it might be determined that every satisfied customer handled on a phone call is worth a certain dollar amount. There would also be some sort of counterbalance for customers who are out of line.

Once workers are trained, they would be given the opportunity to negotiate with management and the other workers for how many calls they wanted to take on. Since the volume of calls could be approximated, a system could be set up to meet the load of the customer calls. It wouldn’t matter to management if workers were taking on ten hours of calls a week or sixty since they are paying per call.

Tasks that are less quantifiable can be measured by satisfaction surveys or some other type of performance evaluation.

Management concentrates less on employees and more on strategy

Since the company is only paying labor for a quantifiable product, management can worry less about worker productivity and concentrate on company or departmental strategy. Disputes between workers or issues of those who are disruptive can be policed by a council of workers.

Everyone is responsible for a piece of the company

Everyone at every level of the company will be responsible for a piece of the company’s capital. For example, maybe our customer service workers are issued something like $100 a week in a company capital account. This money isn’t theirs, it’s still property of the company, but the worker has control over it if he can turn it into more money, he is allowed to keep half of the profits.

The worker might decide to use all to give concessions to angry customers to help boost their opinion of the company, or they might try to save it. Let’s imagine that one of our workers has saved up $5000 over the course of the year.

He has a really great idea that will make the company a lot of money, but it will take a $20,000 investment. He writes up a business plan and finds three other people in the company that have saved up $5000 in their accounts and makes a presentation.

Everyone loves his idea and they negotiate a deal. Since he came up with the idea, he will take half of the profits and the rest will be divided between the three other “investors.”

If the idea works, everyone makes money and the four “investors” have increased the capital they control and therefore their power. If the idea doesn’t work, the money is lost and the company chalks it up to the cost of doing business.

If the company finds that it is losing more money than it is making, some controls could be put into place to keep people from constantly throwing their money away; but more likely than not, the success will outweigh the failures and move the company forward without the need to limit the accounts.

As a safety net, someone can go work in the customer service phone room if they bet everything on an idea that didn’t pan out.

What we are doing is turning an individual company into an entrepreneurial marketplace with investors, entrepreneurs, and workers to implement an idea. A person can form a sort of company within a company. In doing so, she has the resources of the larger company at her disposal. The company has the added benefit of keeping the entrepreneurship within the company instead of losing the leader and possibly getting a new competitor.

Workers have some say in their leadership

Under this system, the workers would be able to make their leadership accountable. One way to do it would be to give each employee a vote to elect their leaders every so often. Another way would be to weigh the votes based on a person’s capital account balance.

Some form of democracy needs to be established in this new model. By keeping the leadership accountable, the company as a whole becomes stronger. The leaders will lead based on what is best for the company as a whole, not just for the stockholders.

When I was in business school, I was taught that the number one goal of management was to increase the wealth of the shareholders. While this sounds great to the owners, how is an employee supposed to get excited about this goal? To get the owners rich? They’re thinking, what about us?

This goal cannot be changed under the current business model. There is too much pressure on company management from the shareholders to change their focus. A new model is needed to make the management accountable to the employees as well as the shareholders.

The American Dream exists within the company.

The idea behind this revolution is to make the American Dream alive and well inside the walls of every company. While America as a whole encourages entrepreneurship, it is still very difficult for the average person to succeed within a specific company.

When companies change to give the average employee a chance to be an entrepreneur and stay with the company, we will see the greatest economic boom this world has ever seen. Excitement and passion will return to the work place. Owners and Workers will learn to work together for mutual benefit.

Let the Revolution Begin

This is a call to every entrepreneur who reads this. Let’s form a new business model that ushers in a new intrapreneurial revolution.

Let’s build a model that treats everyone in our organization like a partner. Let’s reward people for putting their hearts into their work. When we do, we will finally be able to tap into the greatest resource on this planet: the human mind.