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Democratic management is all the rage: big time players like Southwest,, and General Electric have all jumped on the populist bandwagon. The democracy evangelists have quite convincingly extolled the strategic value of participatory management. Yet, an illustration of the raw democratic experience has been missing from the literature:

Democracy is your business on shots of bad tequila: open, honest, unavoidably social, and with a peppering of conflict and unmitigated luv.

To give my readers a concrete example, I sat down with Gregg Bone, former CEO of Gordian Engineering, to hear his story of a company with self-set salaries through extreme consensus. Gordian was a small (but highly profitable) general engineering firm that designed hardware and software products from concept to packaging. Each product was designated to an independent, self-managed team responsible for the product from start to finish. The team would receive 5% of the total sales over the life of the product.

Extreme Consensus

The royalty was divvied up during a one-time caucus, where the entire team was forced to find a consensus on who deserved how much. "We considered eliminating bathroom breaks," admits Bone. Presumably, this would have cut short Gordian’s "meetings from hell". "Several of them lasted 7 or 8 hours long" says Bone. "A few of them were 10 or 15 minutes".

What might seem like a recipe for perpetual civil war was actually the basis of an environment of interdependence. Consensus meetings forced employees to look out for one another over the long term. Since project teams were all volunteer, every employee needed to feel appreciated. Undercompensated engineers wouldn’t likely join the same team again, if they stayed at the company at all. Knowing this, employees would often give away a percentage of their royalty to soft-spoken colleagues who were getting shafted. "Was this altruism?" Asks Bone, rhetorically. "No!" Gordian’s consensus process created a culture where what was good for others was also good for oneself.

Rules and Norms

Over the years, rules and norms developed to shield their culture from potentially morale-destroying behavior.

Rule #1: Talking about the allocation of royalties after the "hell" meeting became grounds for being fired.

Rule #2: Everyone signs up for brining dessert on a Friday. If the dessert got a room full of "thumb-downs", a tastier one had to be brought the next week.

Norm: teach a class you think others would find valuable: about engineering, rock climbing, or whatever.

All together, the approach bred an environment where work was fun. "We have a saying", Bone remarks with a sense of pride, "If the office environment is a nicer place to be than your home, you will never leave."

Even though the 20 year-old Gordian closed several years ago (as is typical when people want to try new things), alumni still hold an annual party. "Gordian is a family" says Bone, with a noticeable quiver in his voice.

I cannot think of a better environment for creativity and innovation to thrive,

Greg Ferenstein

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