Did A California Company Just Prove Marx Right?
Morning Star is a California company that is responsible for processing 40% of California’s tomato crop. They also have no management. (Via Reason.tv):
Morning Star has many of the usual positions that one would expect at an ordinary company: there are floor workers, payroll personnel, folks that handle the mail and outside communications, and so on. The difference is that, from a bird’s eye view, no single person at Morning Star is anybody else’s boss. The entire operation appears to thrive on the power of collective expectations, and by giving workers a direct stake in the success of the company. Workers at Morning Star make their own decisions about how to perform their job, what tools they need to keep the machines running, and how to structure their work day to keep production running smoothly. As one employee put it, there is no bureaucracy that he has to fight through if he needs something for his lab. He just goes out and purchases it.
To some, this may seem like a frightfully inefficient way to run a business. If employees can make instantaneous discretionary purchases of lab equipment on the company dime, then where is the cost control? Such a system seems doomed to failure without a hierarchy of some sort to check potentially unwise exercises of indiscretion.
The answer is that these checks are built into the system of collective expectations. As another Morning Star employee put it, Morning Star’s business model presumes that employees who are closest to a particular business process are the most qualified to make decisions about how to keep that process running efficiently. Thus, one would expect an unwise purchase to be met with scrutiny by one’s peers on the factory floor. Morning Star’s firm model thrives by ensuring that one individual is never and uncontested decision-maker solely responsible for decisions related to a business process at the company. Every worker has a stake in the outcome of everybody else’s labor. The threat of discipline from management is unnecessary to achieve desired outcomes.
Morning Star is not the first company to adopt this business model. Valve Corp., a wildly successful Video Game company that currently dominates the Video Game industry through it’s Steam platform, also has no formal management. Gore Inc., the makers of Gore-Tex, are an 8,500 strong company that has no company organization chart. Though Gore does retain a few corporate officer titles for various purposes within the company, those officials have little direct power over other employees in the corporation. Those same officers are also not unilaterally chosen by the Board of Directors, but rather, in a more democratic fashion:
In Gore’s self-regulating system, all the normal management rules are reversed. In this back-to-front world, leaders aren’t appointed: they emerge when they accumulate enough followers to qualify as such. So when the previous group CEO retired three years ago, there was no shortlist of preferred candidates. Alongside board discussions, a wide range of associates were invited to nominate to the post someone they would be willing to follow. ‘We weren’t given a list of names – we were free to choose anyone in the company,’ Kelly says. ‘To my surprise, it was me.’
Other firms have shown that “non-management management” approach is feasible. At IDEO Corp., a Palo Alto engineering company responsible for such ubiquitous inventions as squeezable toothpaste tubes, or the mouse you are using to point & click things on your computers, there are no bosses, and no management structure. Sun Hydraulics is a $170 million dollar manufacturing firm with no job titles, no organization chart, and even lacks job performance criteria for its employees. There is a Plant Manager, but their job is not to supervise employees: it’s to water the company’s plants.
How are so many companies, in areas as diverse as tomato farming, hydraulics production, and video game production, running successful businesses without traditional management? In a society built on Capitalism, the common wisdom is that productive firms require managers with coercive authority to motivate people to do their jobs. Most ordinary people are shocked when they learn that there are companies who stay profitable with no bosses. How can this be an efficient way to run a company?
As it turns out, there’s a lot of evidence that top-down management is an inefficient form of firm organization. Gary Hamel, writing for the Harvard Business Review, noted several reasons to abandon traditional management hierarchies, one of which is the fact that managers add both personnel costs and unnecessary complexity to a firm:
A small organization may have one manager and 10 employees; one with 100,000 employees and the same 1:10 span of control will have 11,111 managers. That’s because an additional 1,111 managers will be needed to manage the managers. In addition, there will be hundreds of employees in management-related functions, such as finance, human resources, and planning. Their job is to keep the organization from collapsing under the weight of its own complexity. Assuming that each manager earns three times the average salary of a first-level employee, direct management costs would account for 33% of the payroll.
Top-down management also centralizes risk-taking in the hands of fewer decision-makers, which increases the likelihood of a disastrous event:
… As decisions get bigger, the ranks of those able to challenge the decision maker get smaller. Hubris, myopia, and naïveté can lead to bad judgment at any level, but the danger is greatest when the decision maker’s power is, for all purposes, uncontestable. Give someone monarchlike authority, and sooner or later there will be a royal screwup. A related problem is that the most powerful managers are the ones furthest from frontline realities. All too often, decisions made on an Olympian peak prove to be unworkable on the ground.
The personal whims of managers can also kill or disincentivize ideas that are good for the company, especially when ideas have to be filtered through multiple levels of management:
…[A] multitiered management structure means more approval layers and slower responses. In their eagerness to exercise authority, managers often impede, rather than expedite, decision making. Bias is another sort of tax. In a hierarchy the power to kill or modify a new idea is often vested in a single person, whose parochial interests may skew decisions.
Then there’s “the cost of tyranny:”
The problem isn’t the occasional control freak; it’s the hierarchical structure that systematically disempowers lower-level employees. For example, as a consumer you have the freedom to spend $20,000 or more on a new car, but as an employee you probably don’t have the authority to requisition a $500 office chair. Narrow an individual’s scope of authority, and you shrink the incentive to dream, imagine, and contribute.
The success of these business models demonstrate one of the fundamental criticisms of traditional Capitalist modes of production that Marx attempted to illustrate when he was writing Das Kapital. While Marx was wrong (in my opinion) about quite a few things, the success of the companies above demonstrates that Marx was correct to point out that divorcing employees from management decisions related to their own labor is an inherently inefficient means of production. Divorcing employees from the product of their labor separates them from one of the primary motivating forces to perform that labor. This process of alienation itself is what creates the necessity for “bosses”—employees whose primary purpose is to oversee & discipline other employees in their assigned tasks.
Thus, what we really see in Marx’s Theory of Labor Alienation was, inter alia, an argument about firm management: the need for “bosses” in the workplace only arises when employees are completely divorced from the means of production. When workers have a direct stake in the final product of their labor, they no longer need the threat of coercion from superiors to do their job. An employee’s direct interest in the outcome, combined with the power of collective expectations of their peers in the workplace, replaces the threat of, and need for, discipline from above.
With all this being said: I am not attempting to argue here that the success of non-managed firms proves that stateless socialism is viable, or validates Marxism writ large. Indeed, I’m sure that the folks at Reason have a much different view on Morning Star’s success than I do—and moreover, I remain, as I have always been, a fan of mixed economies.
What I think is clear, however, is that Marxist theorists are right to point out that there is nothing inherently “natural” or “necessary” about the way the workplace is organized in most Western societies today. There is plenty of evidence to suggest that top-down hierarchies in the workplace are neither necessary for profitability, nor an extension of natural human activities. Indeed, if Gary Hamel’s observations about the inefficiency of management are true, we appear to have been doing it wrong for quite some time. Though perhaps we could have come to the same conclusion more easily by just reading Dilbert comics:
"The so-called ‘right-to-work’ laws — they don’t have to do with economics, they have everything to do with politics. What they’re really talking about is giving you the right to work for less money."
President Obama • During a speech in Michigan today, clearly laying out his views on a new law that will make Michigan the 24th “right to work” state in the country. Michigan’s House of Representatives is expected to review the bill on Tuesday, and Gov. Rick Snyder could sign it into law by the end of the day. Massive protests took place at the capital building, and union workers opposed to its passage say they’ll be back tomorrow. source (via shortformblog)
"A study published last year by scholars from Harvard Business School and Duke University asked Americans which country they would rather live in — one with America’s wealth distribution or one with Sweden’s. But they weren’t labeled Sweden and America. It turned out that more than 90 percent of Americans preferred to live in a country with the Swedish distribution. Perhaps nothing gets done because, in polls, Americans hugely underestimate the level of inequality here. Not only do we aspire to live in Sweden, but we think we already do."
This this this this this this this!!!
"It’s not a very good example of compassion when you’re philanthropy can only be exercised through the initiation or threat of force. Ron Paul is an ardent believer in voluntary cooperation. How many people who read your blog or my blog or any cross section of the American public would gladly donate money to help find a cure for AIDS? I know I would. Imagine how much more could be given if the burdensome tax code were lifted off our most productive individuals? Why do we have to send armed agents of the State to everyone’s house to collect these funds?"
I’m not going to comment on Ron Paul’s ideology or EvilTeaBagger’s (probably) superb knowledge of research funding but I will provide a few figures from Avert [source],
- In 2008, an estimated $15.6 billion was spent on HIV/AIDS compared to $300 million in 1996.
- Around half of total global funding disbursed in 2009 for the AIDS epidemic was provided by donor governments.
- The American government donates a substantial amount of money for the AIDS epidemic. In 2009 the United States was the largest donor in the world, accounting for more than half of disbursements by governments.
- Overall, the private sector is by far the smallest of the four main sources of funding for the global AIDS response, accounting for around 4 percent of spending.
Even the most generous private donor, the Bill & Melinda Gates foundation, isn’t free of flaws. [Source: The Lancet]
Let’s take a step back, what he’s saying that if they didn’t have to pay tax, the richest (not most productive - there is a difference) would give *MORE* money to things they think is worthwhile?
That’s a lovely thought, but it’s outright untrue; because
- The richest (not most productive) already pay negligible amounts of tax compared to their income
- We cannot rely on the favour of a limited number of individuals to ensure that vital research is being performed
- What is the impetus for a member of the elite to make any contributions to the common good?
"Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.
It’s a simple theory – one that speaks to our rugged individualism and healthy skepticism of too much government. And that theory fits well on a bumper sticker. Here’s the problem: It doesn’t work. It has never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade."
President Obama, Obama on ‘Trickle Down’ Economics: ‘It Doesn’t Work, It Has Never Worked’ (via darkjez)
Why is it easier for you to believe that 150 million people are lazy and stupid than 400 people are greedy and malicious?
Because we have jobs and make a contribution to society.
Your point is…? Most of those 150 million people have jobs, too. Poor people work.
But I don’t know why I’m even responding to you, because anyone who aligns himself with the Republican party clearly lacks a deep, nuanced understanding of poverty, class and economics.
Wow… I’d be fascinated to hear what else separates the working class to make them so unworthy as to be cursed with this chronic poorness.
Why is it easier for you to believe that 150 million people are lazy and stupid than 400 people are greedy and malicious?
"Oddly, one never hears Republicans praise those countries where people are lucky duckies — those where taxation is a small fraction of what it is here."
I’d Rather Be an Unlucky Ducky
Equatorial Guinea: According to the Republican-leaning Heritage Foundation, those who live in this small country in sub-Saharan Africa are lucky duckies indeed. Because of recently discovered oil deposits, the citizens of Equatorial Guinea pay less than 1 percent of the gross domestic product in taxes. The comparable figure for the United States is 26.9 percent of G.D.P., according to Heritage.
However, Equatorial Guinea doesn’t seem to be a very pleasant place to live. The people are poor and have little freedom. Heritage says that “persistent institutional weaknesses impede creation of a more vibrant private sector” and “the rule of law is weak.” This sounds suspiciously as if government is too small to do its job properly. But I’m sure that the citizens of Equatorial Guinea don’t mind having a dysfunctional government; after all, they’re lucky duckies.
Myanmar: The people who live in this small country in Southeast Asia are also lucky duckies, if not quite as lucky as those in Equatorial Guinea. According to Heritage, taxes in Myanmar are 3 percent of G.D.P.
Oddly, this also doesn’t sound like someplace one would want to live. Heritage says “longstanding structural problems include poor public finance management and undeveloped legal and regulatory frameworks.” Apparently, the government doesn’t protect property rights very well, the infrastructure is poor, and there is a lot of corruption. But at least the people get to keep almost all their earnings.
Libya: Why the people revolted in this North African fiscal paradise is a mystery. According to Heritage, government revenues are just 3.4 percent of G.D.P.
Chad: Heritage says the people of this African nation pay just 5.3 percent of G.D.P. in taxes. But for some reason, the nation is mired in poverty. Perhaps because, as Heritage says, “the efficiency and quality of government remain poor.” I wonder why.
Republic of Congo: The people of this country in Africa also pay 5.3 percent of G.D.P. to the government. But it is also very poor. Heritage says a key reason is “the government has failed to provide basic public goods and infrastructure.” This doesn’t really make much sense by the logic of Republican candidates, who seem to agree that all government spending is bad unless it goes to the Defense Department and that public works are nothing but worthless pork.
This, to me, is pretty much a direct refutation of the Anarcho-Capitalist school of Libertarianism. According to the popular wisdom of that school, minimal regulation and taxation should be causing these countries to thrive. And yet their standard of living compared to 1st-world countries with strong central governments is abysmal.
With that being said: you could very reasonably make the argument that the minimal governments of these countries are nonetheless oppressive and larcenous, so what little wealth is accumulated in the market tends to be appropriated by the elites. But the question then becomes *how* that wealth is being appropriated; is it through official channels? Then it would show up as taxation. Is it through thuggery? Then how could the problem be solved without reverting to Somalia-style balkanization (which is better only when compared to the more awful government preceding it)?
The question, then, is one of form: without a strong Constitution to limit government power, and an intellectually vibrant, Independent Judiciary to keep government in check, there is no way for the rights of citizens to be guaranteed as against their unscrupulous peers, and as against the government itself.
All of these mechanisms, of course, cost money. A minimalist State can be just as dangerous to Liberty and freedom as an oppressive one. Norway, whose government accounts for 40% of its GDP, nonetheless has a very libertine criminal justice system. There can be no question that people in Norway are more free than even people in the U.S. (who live under the Patriot Act, the War on Drugs, and the Military Commissions Act). Yet the U.S. government accounts for closer to 20% of GDP.
Does that mean government spending as a % of GDP is dispositive with respect to freedom? Of course not. Form matters. But if you aren’t bringing in enough tax revenue to support the “right” form, then Bartlett’s observation is right: you end up with a government too weak to provide a mechanism for enforcing the rights of its own citizens (i.e. an independent and well-funded judiciary paired with an enumerated Constitution).(via letterstomycountry)
Whatever you do: don’t hurt the job creators!
"Rich people hate class warfare because it’s the only kind of warfare they can’t get poor people to fight for them."
Mike Drucker (via dirkhanson)
But only if the sprinkles are deregulated.
Perhaps that is the biggest disconnect between liberals and conservatives…
A liberal believes that a good government can, will, and should take better care of them than a good corporation.
and it’s one of those disagreements where one side is not necessarily more correct. However I just feel there are more government entities, however flawed, that have my best interests at heart than private ones.
For me, it’s about accountability: It’s easier to hold a gov’t entity accountable for it’s actions than it is to hold a corporation.
A government entity is subject to the will of the electors; in a representative democracy, this covers a large part of the population. A corporation is subject only to the invisible hand of the market and the will of the shareholders as expressed within an AGM.