The Sociocracy Consulting Group (TSCG) equips clients to respond to the business climate, by tapping the full potential of all employees. TSCG comments on a November Gallup poll that describes engaged employees as “involved in, enthusiastic about and committed to their work.” Sadly, only 32% of employees meet the criteria, with grave economic consequences. The report explains, “employee engagement strongly connects to business outcomes essential to an organization’s financial success, such as productivity, profitability and customer engagement.”
In some cases, such engagement can make or break a company: this was the case for Creative Urethanes, a plastics manufacturer in Virginia and a client of TSCG. On Creative Urethane’s website you will see amazing technologies, from high performance skateboard wheels to abrasion-resistant piping systems. The company is doing well; what made that happen is a fascinating story.
During the 2008 financial crisis, Creative Urethanes lost business overnight, with sales down 50 percent. CEO Richard Heitfield was immobilized, but employees sprang into action, creating a plan everyone could accept.
“All of a sudden, our business was way down,” says Heitfield. “While that was going on, our management-employee group was sitting down and making a plan. It was a very detailed and elaborate plan that happened spontaneously. Folks were comfortable enough with the process to put it on the table and get it into action. That’s a direct result of using dynamic governance [which the company has used since the late 1980s]. If these guys had not come to action and done the work, we would have folded.”
Dynamic governance – also called sociocracy – is an organizational management system where employees at all levels make policy decisions that govern their work. Decisions are delegated to small groups – called circles – with distinct areas of authority and responsibility. The way the circles are linked ensures that information, policies, and feedback flow bottom-up as well as top-down.
“In horizontal governance everyone has a voice in decisions; vertical governance is the traditional top-down hierarchy,” explains Sheella Mierson, consultant with TSCG.. “We usually think of horizontal and vertical as either-or. In dynamic governance it’s both-and. Both the manager hierarchy stays in place and everybody has a voice that can’t be ignored.”
Well-intentioned policies sometimes have harmful results, leading to resentment among employees. Lower-level employees may have valuable ideas and information that could help create more effective policies. In many organizations, however, decision makers under-utilize this knowledge.
These ideas and feedback can make organizations more responsive to customer needs, employee concerns, and business conditions. “Once you get feedback, you get non-linear behavior,” says John Buck, Director of Consulting Services for TSCG.. “Introducing feedback makes organizations more agile and responsive, while benefiting employee morale and retention.”
Such agility makes bottom-line sense. “We saw increased profits within the first year of using the method,” says Heitfield.
Employee involvement can increase employee retention, according to a May Fortune article. The Wall Street Journal suggests it can cost double an employee’s salary to find and train a replacement,only one of many costs of employee turnover.
“Employee involvement improves employee retention because committed and engaged employees are more likely to stay with a company and contribute to their fullest potential,” says Mierson. At Creative Urethanes, the average length of service for employees is 20 years. There are other companies using dynamic governance where employee turnover is low or nonexistent, in industries that are plagued by high employee turnover. This benefits the bottom line by reducing hiring and training costs, preserving institutional knowledge, and increasing productivity.”
Training is needed when implementing dynamic governance because the method involves innovative structures, processes, skills, and mindsets. TSCG helps design an implementation path specific to a particular organization; adjust organizational structure to clarify roles and accountabilities; establish aims and domains for teams, departments, and the board; and train the employees, including circle facilitators and circle record keepers.
According to Mierson and Buck, companies using dynamic governance report increased innovation and productivity, reduced time in meetings, and decreased employee turnover and sick leave.
Mierson often sees a dramatic shift within an organization once sociocratic principles and practices take hold. “Adopting dynamic governance makes for a very positive atmosphere. Employees find having a voice tremendously validating and energizing.”
About The Sociocracy Consulting Group
Inspired by the results from using the method, TSCG formed to introduce, implement, and support dynamic governance in organizations. Clients include organizations of many types, in business, education, healthcare, government, communities, and nonprofit sectors. TSCG consultants are based in three countries; the company is part of The Sociocracy Group, an international consulting firm headquartered in The Netherlands.