The Worker Self-Managed Firm

I. Introduction

Although Worker Cooperatives already exist and writing about a system that already exists may seem a bit repetitive and unexciting, I wish to dissect this system of a worker self-managed company. I am writing this paper in hopes that you may understand what it is that I am fighting for; I believe that the individual is entitled to the fruits of his labors at its fullest potential possible and that the individual ought to realize their potential. I have not betrayed individualism, but have aided in a way to allow it to realize its promise, however no individual can really realize their potential unless in a community, because it is the means to find out our weaknesses and develop our strengths. The workers self-managed company is a means to facilitate that realization, because nothing is more motivating then truly owning your own livelihood. I have broken up this essay into four sections. The first section I will compare the socialist approach of a workers self-managed firm as opposed to its capitalist counterpart. After this section I will expand on the organizational structure and power both within and outside the individual worker controlled firm. Finally one interesting point that always aroused my interest in this, is how will the workers get paid or who will pay the workers? After this I will conclude with my thoughts and feelings that a workers cooperative will be much more effective on the free market.

II. A Comparison on The Socialist / Capitalist Approach

The comparison of a firm where the laborers own the means of production as opposed to the capitalist "boss" owning the means of production is a big one. However, I believe that organizational structure dictates where power goes and power also dictates where the wealth goes as well. In the capitalist system, there is an authority figure called the manager or the management, an authority figure implies if not outwardly proves the fact that there is a top-down hierarchy of control that has been setup. However in the capitalist system there is a severe displacement of energy expelled and where power/responsibility rest. Imagine a pyramid divided into three sections: The Bottom is where the majority of energy is expelled, the middle is where less energy is expelled, and the top is where very little laborious work is expelled. Yet In this system, power and responsibility resides not at the bottom but at the top where not only do the higher ups not know where the proper energy ought to be expelled but also collect the most amount of money from the work of those at the bottom. There is a displacement of worth here, to be honest everything that one does at the top (whether it is inside an individual firm or not), can be done and organized by those at the bottom. Yet in the capitalist system this is not the case, the man at the top puts in 5% of the actual labor yet can collect the majority of the wealth from everyone else's labor, to make this even worst it is excessively arbitrary and too much arbitrary power centralized in one figure is dangerous to everyone the figure has control over.

Let us explore the socialist form of organization in the workplace. Everyone is equal in power and worth. Unlike the capitalist system, workers here can choose their leadership, if it is needed at all. They organize and discuss the concerns and questions both within their own group of specialists and departments and as a large firm that they could be as well. The division of labor exists, but unlike the capitalist system, leadership and innovation will be commonplace because everyone has the incentive to see their workplace/livelihood succeed. Also, rather than leaving important business decisions (pay, agenda, goals, etc -- ) to one individual or a small group of individuals who do the least amount of work, all important decisions are arrived at by consensus in the worker self-managed firm. Some may think, "Couldn't the laborers vote then to just give themselves a pay raise all the time?" They could but consider this, if you own a home or a business yourself, don't you want to invest in the business to improve its conditions and productivity to make it more attractive and successful? Remember, everyone now has their livelihoods truly in their hands now, and unless the person has something wrong with them, most will seek to improve their operations in response to the demands of people that keep their operations going.

So allow me to conclude with the Thought Experiment Scenario below, I ask you to think if it is right and I ask you to really put yourself in the circumstances shoes (Sourced: http://world.std.com/~mhuben/wilson_1.html):

"Jones is an individual who has zero access to capital, which excludes him from being self-employed. He must find somebody who will share access to capital if he is to continue to eat. Fortunately, Smith has plenty of capital, and is willing to share it -- under certain conditions of course. Smith says to Jones that he can use Smith's capital to produce, *provided* that Jones engages in 90% of the productivity while Smith engages in 10%. Also, Jones will only receive 10% of the revenues despite all of his hard work, while Smith gets to keep 90% for his hoggish self. Jones *VOLUNTARILY*(emphasis mine) agrees to these conditions because he has no other option. Is Jones morally bound by his agreement to allow Smith to keep 8 in 9 parts of what Jones produces? The capitalist, of course, answers, "Yes", and I once would have given the same answer, even though I knew intuitively that such an arrangement would be grossly unfair. My current answer is "No" -- this relationship between Smith and Jones is inherently exploitive, and Jones is entitled to much better."

It would seem to me that the corporate/business hierarchy is just as parasitic as the State political bureaucrat. One says, "you pay me for the privilege of living here" and that is called a tax or rent on the land you use and occupy and yet that they themselves do not, and the other one says, "you pay me for the privilege of using these means to produce and work here" and that is called in one sense profit which is like a tax and rent scheme on the means of production that you are really using and occupying and yet they themselves do not use and occupy the very means of production they claim ownership over. Do you not see the hierarchy, the exploitation and domination inherent in both systems? End the Management the same way one ends the State.

III. On Organizational Power: Within and Without The Individual Firm

Inside the firm there are many specialized workers, carrying out their specialized role in the workplace for the sake of the firm's advancement. It is from the bottom-up that decisions ought to be made since they are putting in the most amount of work and in effect know what should be done. However let's assume that the firm is a large firm, made up of 50 people and in the firm there are 10 people in each department. If the workers can't make it to general meetings or emergency meetings at the same time or there ought to be a person in each department to refer to for keeping the lines of communication going then there is a need to know who that person will be and how will that person get there. Enter the Department delegate/organizer that people turn to for help, takes on additional responsibility with their own labor contribution and who is the voice of the department if the whole department cannot make it to a general/emergency firm meeting.

The delegate/organizer (D/O) is like his fellow laborers he does what he his specialized to do. However, he has the added responsibility of being a D/O. The D/O is elected by the people within the department. Unlike the capitalist system where this leadership is imposed from on high and where the department head gets a major pay increase and ceases doing the same level of work, in this system the person is elected from the bottom with factors deciding the persons promotion like personality, experience and skill. In the capitalist system, although these things are important they more often than not take a back seat to the favoritism of the higher up, this favoritism I equate with as the same favoritism that you see in the political sphere as well. Like I said earlier, this person maintains the same level of power that his fellow peers have and does the same work as them but just has the added responsibilities of being a D/O and of course through this added responsibility comes with it additional compensation. This is different from the capitalist system where as I said earlier, the management is doing less of the work and yet gets paid more.

Therefore, to summarize the D/O position it is merely an organizational tool that exists for the laborers in the department to report to and share information with the rest of the firm delegates; they are still laborers but with added responsibility and this will justify any additional compensation for the role. If leadership is needed it is selected from below, it can be changed at any moment the laborers see fit and if needed different levels of delegates can be created but this ultimately would depend on the size of the firm. The term delegate simply is a person who speaks on behalf of those unable to attend and carries with them the important information and decisions of the group, they are not representatives acting independently of the departments/firms decisions or suggestions. This leadership option is only needed IF the people below so desire.

So now let us assume there is a large firm with 5 individual firms in a given area, how would they collaborate with each other? What reasons would they have to collaborate with each other? As you can tell this is a discussion on voting power within a company as well as potential decisions that need to be made that go outside their individual firm's bounds. So let's first explore what potential reasons these firms with the same name would need to collaborate on. One issue I can think of already is money matters, where each of these 5 firms voluntary agrees to set aside a portion of their surplus for the sake of the larger company as a whole. What could the money be used for? Well the potential is limitless, but I am going to limit the reasons to 3 potential reasons.

The first would be projects that go beyond the bounds of one individual firm (e.g. improving the computer networks and communication between the firms). The second potential reason could be that the larger firm is so successful that they are ready to expand business operations and open up an additional firm. Of course if the second reason was something good then third reason ought to be in the event that something bad happens, say one of the firms is located in a location prone to destructive weather patterns (e.g. Tornados, Hurricanes, Wild Fires, etc -- ) and that firm is destroyed the firms can with the money they put to the side vote to help re-establish the firm in that area. Another possible use is if one of the individual firms has money troubles and the firm needs help, the other firms could choose to cover the expenses of that firm. The point here is that the decisions are coming from below, they are not being arbitrarily imposed from above, because there is no above to have the imposition placed.

You begin to see the point that through this money matter issues other things could also occur, general meetings can be called or if the firm wants to find a new supplier of goods they could do that to and send the Organizer/Delegates to discuss the deal. So to continue the example, each department in each of the 5 firms is elected, so say there are 3 departments in each of the firms that is 15 D/O's that have been elected from the bottom-up to be the voice of the firm and represent each individual firms decisions, again they are NOT acting independently, as if they were representatives.

IV. Payment and Salary

Now that there is no longer one person or small group of people telling how people will get paid, there is a variety of new alternatives presented to the laborers to decide how they will get paid together. I have three scenarios that I thought of one probably sounds like it has the most equity to it but there are a variety of ways to go about this; I will also give examples of each scenario so that way one can understand how it is being done. The great thing about workers owning the means of production is that now they have the ability to make these decisions together as it ought to be. One of the greatest concerns that people who are against this way of thinking will be that, "workers/co-owners will always simply vote for a pay raise" but this is absurd. Everyone has different set of values and since everyone has control over their livelihood now the last thing they are going to do is neglect it. If I own a home that needs fixing up, am I going to neglect it? No, I am going invest money into fixing it up. If I own a home and want to improve it, am I going to waste money all the time on trivial things? No, I am going to invest in the property so it has more worth. The same is true for a business, if a unit of the means of production is broken, am I going to continue voting for a pay raise? No, I am going to repair/replace the broken item. If my customers are demanding something be done, am I going to tell them to "go fish?" No, if my customers are looking for something I will invest the firm's money to bring in more people. If my place of business has poor working conditions, am I going to fix them up or am I going to continue giving myself a pay raise? Well maybe the capitalist will go for the pay raise, but in this setting everyone owns the firm and they need to put up with the conditions or they need to fix them, but at least it's in their power to do so. I can keep going on and on, but you get the point, nonetheless I digress, here are the scenarios.

The first scenario I like to call, "Payment by Departmental Contribution to Firms Overall Income." What does this mean? Well I can see this type of payment being made possible in firms where a variety of products and services are offered together in an individual firm. In this case, each department adds up their total income and the D/O of the group presents it to the other D/O's of the other departments in the firm to arrive to the surplus generated. Retail stores and Supermarkets come to mind. Let's use a retail chain structured in the manner of say, "Retail Pharmacy Coop" you know what these firms usually sell, they have products on the sales floor, and they normally offer the services of pharmaceuticals and photo development as well. Here is my examples; to show how the whole system would work, keep in mind this is all hypothetical:

It's the end of the week, and each of the departments has added up their income generated. We find out that this week the Pharmacy generated $60K for the firms income, the Front End/Sales Floor generated $10K for the firm's income, and the Photo Department had generated about $5K for the firm's income. The Total generated income for the whole firm is $75K for the week. Now the firm obviously has expenses both any bills needed to pay to maintain the store (plumbing, electric, other maintenance, etc -- ) as well as to restock the departments. So after figuring out the expenses, we find out that we need to deduct $30K and an additional $4.5K to store savings, for any future projects, rainy day funds, etc -- This makes the company surplus, $40.5K for the end of the week. So now how do we determine who is going to get paid more? Well as the name of this form of payment suggests it would be called "Payment by Departmental Contribution to Overall Firm" The department that contributed the most FINANCIALLY to the firms' income, gets a larger piece of the pie. The math reveals the following in this scenario:

Pharmacy: $60K / $75K = 80% ($40.5K x 80% = $32.4K for Payment in Department)

Front End/Sales Floor: $10K / $75K = ~13% ($40.5K x ~13% = $5,265 for Payment in Department)

Photo: $5K / $75K = ~6% ($40.5K x ~6% = $2,430 for Payment in Department)

So now let's say there is a firm recognized D/O in these departments and in keeping with the idea that: The more added responsibility, the more compensation you get. Let's say that all D/O's get an additional payment of $1000 on top of the standard pay that would divided equally among people. How would this look, assuming there are 3 people in each department (this includes the D/O)? The Example below reveals that:

Æ'†''¯Æ'" 'Æ'"¹ -- " In Pharmacy: ($32.4K - $1K = $31.4K) $31.4K/3 = ~$10,467/person But The D/O is paid $11,467 for the added responsibility of not only being the pharmacist but being the delegate and organizer of the group in relation to the rest of the firm.

Æ'†''¯Æ'" 'Æ'"¹ -- " On Front End/Sales Floor: ($5265 - $1000 = $4265) $4265/3 = ~$1421/person But The D/O is paid ~$2421 for the added responsibility of not only being just like all the other people on the sales floor but being the delegate and organizer of the group in relation to the rest of the firm.

Æ'†''¯Æ'" 'Æ'"¹ -- " In Photo: ($2430 - $1000 = $1430) $1430/3 = ~$476/person But D/O is paid ~$1476 for the added responsibility of not only being a photo technician but being the delegate and organizer of the group in relation to the rest of the firm.

Before concluding my thoughts let me summarize briefly this system in the following order: (1) End of the Week each Delegate reports on income from their department. (2) The sum of all incomes is added to the sum of all expenses, this gives us the total surplus. (3) However, if the firm feels it must divide a certain percentage to any store projects or previous obligations that they voluntarily agreed to that percentage is removed and once this percentage is removed, (4a) you arrive to the percentage that will be the true grand surplus from which people will get paid based on the income contribution for the whole firm, and (4b) D/O's get slightly more for their added responsibility. Some may think, "Well couldn't one department vote against another department's improvement?" Potentially they could but it would be foolish to do so, because that means the department is not as optimal as it could be and money is being lost, this hurts all in the firm because that means they are not getting that slight boost in their paycheck either, so it would be very wise to allow improvements to be made to the firm if it is possible to do so.

Sometimes however you have firms that are structured differently than a retail store or supermarket. Yet it is their contribution that makes the whole firm operate and be successful. The payment form of departmental income contribution could be seen as exploitative because, maybe one group that is visibly charging a price for their customers, while the other groups in the firm can't really charge a price for their service. A perfect example of this is the Hotel business (after all it is the combined effort of many departments that make the hotel able to charge their rates for guests, but for example, look at the restaurants in a hotel, the people in the kitchen department can charge and have an income generated all on their own) or even factories. For arguments sake I am going to use the Hotel Business. This form of payment is what I like to call "Department Contribution by Labor Hours" and the example is similar to the one above:

Okay, so let's assume "Hotel Coop" has 100 rooms in it and they charge $100/night and business is good so all 100 rooms are occupied for a week. The math reveals that this alone would generate: (100 x 7 = 700 x $100 = $70K/week) and the people in the kitchen/restaurant generate an additional $10K for the hotel. The total income is going to be $80K for the week. However, oddly enough this hotel does not have a pool, anywhere on the property and customers a demanding a pool. So the firm does some shopping and finds out it would cost $10K for an in-ground pool to be produced, and they go through with the project for the sake of customer demand now the surplus is down to $70K again. But wait there is also the expenses for operating the firm these expenses go to $20K to resupply each department and pay for the general maintenance of the hotel, this brings the Grand Surplus to $50K for the week. Now in keeping with the payment form of Department Contribution in Labor Hours, we find out that this week the following departments worked in the longest to shortest order: Room Service, Kitchen, and Maintenance (the total hours accrued for the week is 1050 Hours). How do we figure who ought to get paid:

Room Service (15 people): 5 Hrs daily/person = 75 Hrs X 7 days = 525 Hours/Week (50% Labor Contribution)

Kitchen (10 People): 6 Hrs daily/person = 60 Hrs X 7 days = 420 Hours/Week (40% Labor Contribution)

Maintenance (5 people): 3 Hrs daily/person = 15 Hrs X 7 days = 105 Hours/Week (10.0% Labor Contribution)

So now we see that each group has contributed to this week's Grand Surplus of $50K. So now let the math reveal who will get how much:
Room Service: $50K x 50% = $25,000/15 people in Dept. = ~1667/person

Kitchen: $50K x 40% = $20,000/10 people in Dept. = $2000/person

Maintenance: $50K x 10% = $5,000/5 people in Dept. = $1000/person

Please keep in mind, that the D/O Math I had not done here, although I do believe that a D/O will exist in such a large group as this, please understand that each person will collect a little less to pay for the D/O compensation. Also this math assumes the each person has indeed worked the hours provided in there department each day, obviously this is more time that would go into specifics but one can assume that the more labor one puts into the firm the more pay they will get out of it. Someone may say, "Well couldn't I just come in a work and work to get more pay?" To this I would say, so long as the quality of one's work is good than what is the problem? The whole point is that the laborer already does the real work already so what is the point in complaining too hard if he now truly owns the company. It is a different story if the quality of one's work is poor or if the laborer didn't actually own the means of production.

The final form of payment is going to be the one that most people think of and that is going to be equal pay regardless of contribution, but I find this system dead and it discourages rather than gives incentive. Everyone does something in these organizations, and each part contributes and that compensation ought to come in the form of time spent working or in the form of income contributed to the larger firm. In this society that I envision some people may ask "Yes, but how will people build new and innovative things?" I would say with the way people get paid in this society they would have enough money to secure anything they want for side projects that could be shared with all, rather than needing to go to a capitalist bank to secure a line of credit to fund your groups' projects. Then again in my society mutual aid banks would exist rather than capitalist banks, but that is for a different writing. Let's use the example above to demonstrate why I think this final form of payment is dead and discouraging:

$50K Grand Surplus / (15 Room Service Staff + 10 Kitchen Staff + 5 Maintenance Staff) = ~$1667/person REGARDLESS of individual labor contribution and / or income contribution. This will only serve to keep the lazy workers lazy and the hard workers carrying the backs of the lazy workers, this is parasitism and this is not acceptable, because then we are back to where we do not want to be.

V. Conclusion

What good is the management for anyway? Managing? Managing can be done by the people on the ground floor; they can choose who will organize the department if there is a need to do so. The management is getting paid exorbitant sums of money to do very little, and the little they do the laborers can collaborate together for a much better future for both themselves and the fruit of their labor as well as the firm overall. In firms people cooperate, and there is only cooperation in the firm, all desires of lazing out would be null and void if the laborers were truly in charge of their livelihood and would be checked by their fellow owner. Gone are the days of favoritism and nepotism, here are the days of a free and equal workplace where merit comes before title and position! Might I also add, that there is no taxation in my system for the state is abolished as well, the full fruit of one's labor is kept, victory!