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Digitalization facilitates greater employee participation – but can also mean more control

Germans want companies to become more democratic

Employees of a company discussing at a table
The whole team at one table - with a elected boss? (Photo: Rawpixel / fotolia.com)

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Electing their own bosses and having a say in the corporate strategy – the majority of Germans would like to see companies managed more democratically. However, corporate day-to-day life often looks quite different: employees lament the narrowing scope for development. Technische Universität München (TUM) and ISF München presented these study findings at an international conference in Munich. Federal Labor Minister Andrea Nahles called for the potential of digitalization to be used for greater freedom.

Digital networking has not only changed everyday life, it is also testing the way work is organized in companies. Employees can and should share their knowledge on a permanent basis, organize interfaces, and interact across department boundaries. However, this also means that companies are more dependent than ever on the active participation of their employees. Can decisions in such companies still be made by lone leaders from their lofty heights?

Companies already exist today where employees can choose their management, switch around in management roles, vote on working hours and salaries, be involved in the run-up to important decisions and inspect the accounts. Entrepreneurs, trade union officials, politicians and scientists met yesterday in Munich to discuss these models and their impact at "The Democratic Company – Dawn of a New Humanization in the Working World?", a conference organized by TUM, ISF München and the Human Resources Alliance.

Federal Labor Minister Nahles: "Need for fresh compromise on flexibility"

Andrea Nahles, Federal Minister for Labor and Social Affairs, emphasized that "democracy begins wherever employees are taken seriously as 'citizens in the workplace'. Digitalization in particular has changed the working world and offers huge opportunities and potential for more freedom and a better work-life balance. A closer look is needed, however: All too frequently, autonomy in the world of increasingly interlacing areas is more illusion than reality. This is why we need a fresh compromise on flexibility. Institutionalizing co-determination at work is indispensable for sustainably anchoring this flexibility trade-off in companies, based on Germany's Works Constitution Act, which is without a doubt one of the most important moves towards democratization that companies in Germany have ever experienced."

According to Thomas Sattelberger, CEO Human Resources Alliance and former board member of German Telekom: "Democratic companies are a new option for corporate development and lead to systemic competition, which Germany’s rigid business world will have to deal with. Especially companies that live from innovation or are in need of disruptive change are now challenged to empower talent. Social innovation in the work culture goes hand in hand with technological innovation.”

Two-thirds of Germans would like to see companies be managed more democratically

The research results from TUM and ISF München presented at the conference confirm that employee expectations, company strategies, and effects of new forms of organization are often (still) incompatible.

In a representative survey by TUM involving around 1,000 Germans aged between 18 and 65 years, some two-thirds of the respondents agreed with the statement, either fully or partly, that companies should be managed more democratically. The majority found the idea of choosing their own managers attractive, and even more so the thought of participating in determining corporate strategies. On average, however, they nonetheless viewed the possibility of their wishes coming true as fairly unrealistic.

Managers believe democracy is difficult in practice

This belief is reflected in the opinions of 45 managers surveyed by the economists in a second study: Senior executives consider most characteristics of democratic work organizations difficult to implement – topping the list was giving employees the option of accessing business data, such as salaries. What is striking is that smaller companies (at least in their view of themselves) went about things in a more democratic way than larger ones. A third TUM study showed that this approach can be an important factor in the competition for personnel and funding: The features of a democratic organization structure make a positive impression, both in terms of employer attractiveness and in the decision to invest in a company. Test subjects were around 200 students and young professionals, as well as 78 investors.

"Wherever people’s perspectives differ, and where it’s important to bring knowledge together that is shared by numerous individuals - that’s where the democratic approach works well," commented Prof. Isabell Welpe, head of the TUM Chair for Strategy and Organization. "Technical change alone, unsupported by social and organizational change, cannot work."

"Managing by figures" instead of empowering employees

The fact that technical possibilities do not necessarily foster democracy is reflected in the research of ISF München. In 14 case studies under the current "WING" and "Digit-DL" research projects, scientists have conducted more than 150 in-depth interviews across all hierarchical levels. They found that many companies with the technical wherewithal to analyze data stick rigidly to the principal of "managing by figures" - which results in more decision-making powers at the top, even with flat hierarchies. Even middle managers said that they felt they were figure-driven executors of constraints. Work areas that in effect lend themselves to a collaborative and independent style, such as "knowledge work", are also not exempt from more control.

In particular, verbal praise was showered on the values of transparency, cooperation and shared knowledge when companies work with crowd and open innovation models. For employees in these companies this does not, however, always come with more scope for development. Instead, they often need to hold their ground against demands from outside and experience this as a feeling of being dispensable.

"We are moving towards a divide regarding democratization of work," commented ISF Board member PD Dr. Andreas Boes. "New possibilities for employee participation and empowerment could be instrumental in helping democratic companies toward a breakthrough. A feasible counter trend might, however, emerge in the form of power wielded by those who own the data.”

PD Dr. Andreas Boes
Institut für Sozialwissenschaftliche Forschung (ISF) München
Tel: +49 89 272921-0

Thomas Sattelberger
Human Resources Alliance
Tel: +49 162 2953123 (TUM Media Office)

Prof. Dr. Isabell M. Welpe
Technische Universität München, Chair for Strategy and Organization
Tel: +49 89 289 24800