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Why a democratic leadership could be the future of business

Making big decisions as a group can work in the business world

On Feb. 23, something almost unimaginable happened. A corporation put up all the top executive posts for democratic selection by their employees in an anonymous vote. The company, Haufe, is based in Freiburg, Germany.

It’s not a small company, either — over a thousand employees and revenues measured in hundreds of millions of euros; this was no straw poll at the water cooler. The CEO, Marc Stoffel, who was re-elected to his post, explained why risking his job was worth the unity it generates.

“Democracy is not the fair-weather event that it is often believed to be,” he said. Rather, employees have a profound investment in a company, and their judgment should be built into the vision of the company, not merely rented by the hour. Building the knowledge employees have into management decisions also means that they share in the responsibility of “taking decisions that are hard to make and may even be painful.” Demands that are embraced by the entire company, rather than inflicted by management, are more likely to be actively treated as challenges rather than as burdens.

Meanwhile, in a recent issue of Inc. magazine, Leigh Buchanan wrote that research by both the Kauffman Foundation and the Brookings Institution found that the rate of new startups in the U.S. dropped nearly 44 percent between 1978 and 2012 — including in the technology industry — a result that shook the received wisdom that the U.S. is the home of entrepreneurship and risk-taking small business.¬†As Buchanan observed, that finding left both the business and academic world slack-jawed.

Germans are running their companies by direct democracy, while young innovators in the U.S. are opting to work for faceless corporations rather than strike out on their own. Has the world been turned upside-down? We don’t think so. Rather, not all games are zero-sum.

If Silicon Valley has been the crucible for a renaissance in American business, then it’s important to acknowledge its origins in a movement that was not typical of U.S. life, but actually an exception — the counterculture of the 1960s.

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The garage scene of hobbyists, developers and entrepreneurs that built the valley were only a few steps removed from the hippies, the artists and the dissidents. What tied both those worlds together was the soft power of reciprocal informal relationships or trust. Artists and entrepreneurs both worked within a network of peers, framed by a shared dream that was dispensed by the “bards and hot-gospellers of technology,” as the business historian Peter Drucker described Marshall McLuhan and Buckminster Fuller.

We think that trust is made of a few ingredients: a shared vision, collective success, freedom and genuine autonomy. When these factors are in play, you can run a revolution without a leader. They’re the same principles as you have in any direct democracy. Successes and hardships are shared, as are both risk and responsibility.

This is a familiar policy in Switzerland, where democracy is understood not just involving choosing leaders (this is accepted only occasionally as a compromise — and often for dealing without external power structures), but democracy is about how to make each decision.

Swiss citizens are regularly asked to vote on laws, from the major, such as taxes and military service, to the minor, such as the funding of a recycling facility. This voting usually leads to good, considered decisions, and sometimes it leads to bad ones. But when the decision is wrong, the responsibility for it, and addressing it, is collective. And yes, Swiss citizens can and do vote to increase their own taxes.

Archilogic has built the Swiss principles of direct democracy into its business organization. The four founders met in architecture school, and though they all have specialties, there is no hierarchy.

Decisions have to be made by consensus. This process extends throughout the company — the agenda for meetings is set collectively, and the newest employee is not just allowed to raise their voice at meetings, but they are expected to. The level of trust that the company has in its employees allows it to dispense with a lot of the apparatus of management — even fixed office hours are avoided.

What we’re saying is, we don’t really have a leader. It sounds a little crazy, but it’s kept Switzerland going for hundreds of years.

What’s this got to do with real estate? Well, historically, the great leaps in the real estate business took place thanks to cooperative networks of merchants. It’s the principle that the multiple listing service is based on: You help me sell my stock, and I’ll help you sell yours.

In the past years, the MLS has gone from forming a natural monopoly to being one model amongst many as portals try and shift the center of gravity in the marketplace from the participants to the machinery of the marketplace itself. That is, rather than serving the needs of agents, agents feel they are feeding a machine. Dr. Frankenstein is being chased around by his monster.

This has led to an understandable reaction: the “my listing, my leads” credo, which ironically, by giving each agent their own little piece of water frontage, also locks them out from the rest of the foreshore. But, is there another way?

Can we get beyond the question of the market as external? Get beyond competitive games in which each winner makes a loser, and collectively address the nature of the game itself, how it is constructed and what it produces?

When we agreed to the Inman profile of our CEO, Kaspar Helfrich, we felt a little dishonest. We don’t have a single leader; what we have is a common goal — and that’s to make something new.

Archilogic is a Swiss Internet startup that specializes in intelligently generated 3-D interior models. We’re working together to see how our technical insights can help change the way that real estate is bought, sold and understood.

Email Adam Smith.