Giving people a cause to live and die for

Peter Drucker once wrote an insightful article entitled, "Business Can Learn from Non-Profits". He observed how non-profit organizations scrupulously use their resources and become "more money conscious than business enterprises", precisely because they lack these resources. However, non-profits do not "start their planning with financial returns…they start with the performance of their mission."

This focuses the efforts of non-profits on the nobility of their cause–be it education, poverty alleviation, religion, health or environmental conservation. Their single-mindedness drives them to discover or uncover creative strategies. They are driven from one extreme of high-profile, high-risk advocacy to the opposite extreme of humble begging.

Volunteers, including professionals, flock to them because they believe in their chosen cause. Those who receive pay are willing to receive less even if they work far longer hours than their counterparts in the business world.

Managers of non-profits measure their performance in terms of what happens to their beneficiaries (i.e. customers). Are they receiving good education? Learning to lead better lives? Getting out of poverty? Becoming closer to God? They mentor and coach their apprentices and volunteers very well because the "stakes" are quite high if they commit a mistake. They can lose lives or souls. This propels them to perform even more.

In fact, cause-oriented groups do seem to attract selfless individuals willing to give their all. They work without counting the hours, sometimes even forgetting the consequences to their personal health. But why is this? What lessons can entrepreneurs and businessmen learn from non-profits? How can they extract this kind of fervent commitment from their staff?

Brazilian Example

Perhaps, we can learn from SEMCO, a highly conventional enterprise that acts like a non-profit organization in Brazil. It has been recognized as the best company to work for in Brazil by management associations, labor unions, and media. It is such an attractive company that up to 300 applicants queue for every available job, without need for advertising.

The president of SEMCO, Ricardo Semier, shares the company’s secret. "We treat our employees like responsible adults. Most of our workers set their own working hours. All have access to the company books. The vast majority vote on many important corporate decisions…and more than 150 of our management people set their own salaries and bonuses."

SEMCO sounds like the epitome of a people-run enterprise. It goes beyond the short-run profit orientation of most enterprises. It anchors its success on values or, more accurately, ideologies. It believes that people should assume full responsibility and accountability, which is mere lip service to most enterprises but is gospel truth in SEMCO.

Empowerment

In order to do this, the company gives its people the three critical ingredients of empowerment: (1) access to resources and information; (2) control over their own lives; and (3) the capacity to manage themselves, their work, and their workplace.

In SEMCO, the pyramidal hierarchy has been discarded. In its place are three concentric circles of management. At the core are counselors; in the middle circle are partners; and at the outer circle are associates. There are no titles, just responsibilities. The factory of service units are kept to a small size (at most, 50) to keep these collegial, interactive, and participatory.

Economies of scale and the efficiencies associated with such have been chunked in favor of "small is business" efficaciousness. Everyone is totally involved in the decision-making process and develops a high sense of belonging. Manuals, rules, regulations, and procedural do’s and don’ts give way to common sense, consensus, and cooperation. Time clocks are taboo. In their place is peer group pressure brought to bear by cellular work groups. Each cell is self-managing, self-propelling, and self-policing, which rises and falls with its performance.

As a truly democratic corporation, SEMCO espouses an egalitarian view towards profits. Each division of the enterprise has a separate profit-sharing system. Twice a year, SEMCO calculates the after tax profit and gives 23% to each division. Three representatives elected by the employees of that division invest the money until the majority decide to vote on what to do with it.

To ensure that everyone is able to participate and get involved, employees can access all the vital information on costs, expenses, sales, payroll, taxes, productivity indices, absences, tardiness, budget variances, months others.

SEMCO’s president believes that giving the "real numbers will always have positive consequences over the long term." He sums up his management philosophy: "Participation gives people control of their work; profit sharing gives them a reason to do it better; information tells them what’s working and what isn’t."

The SEMCO ideology seems to be a curious mixture of capitalism, socialism, communism, and humanism. It was probably inspired by the ideological turmoil in Brazil and in other South American nations where military juntas, mirroring the traditional corporate set-up, have given way to various people’s movements, including Liberation Theology, Marxism, and the like.

Most entrepreneurs would cringe at the radical ways of SEMCO. Their most cherished principle is secrecy. They think that their success depends a lot on their "trade secrets". This is a lot of bull.

Side By Side

Michael Porter, in his well-researched book, "Competitive Advantage of Nations", points out that countries which have become very successful in certain industries have one common trait–their highly successful industries are found in clusters where competitors locate side by side.

In this intimate convergence, they eventually "steal" designs, technologies, systems, people, and information from one another. In the process, everybody strives to continuously innovate in order to get ahead. They are voluntarily or involuntarily making themselves obsolete everyday because holding on to secrets becomes a dangerous practice. It glues them to the past. It is better to shed the old and create something new.

Another nightmare of entrepreneurs is "losing control". They do not trust the very people they hire. Everyone is simply a laborer, a peon. But the people they hire are, in reality, used to greater responsibilities. They take care of their children and parents. They participate actively in (and even lead) their communities. They volunteer their services for their churches.

And yet, when they enter the corporate world, they are bound by rules resembling those of the national penitentiary. Because they mistrust people, entrepreneurs overstretch themselves, hire dozens of relatives, and impose all sorts of controls in order to monitor every single movement of their people. Consequently, innovation is stifled.

This is very true as well for multinational corporations, which dish out volumes and volumes of policy and procedural manuals. Then, they wonder why their employees have no creativity, no initiative, and no sense of urgency. They do not realize that they have imprisoned their people in rules.

Checklist

Entrepreneurs must learn from non-profits and companies like SEMCO. They have to unleash the full potentials of their people by making their enterprises "a cause to live and die for". How can enterprises do this?

• Entrepreneurs should endeavor to make their employees identify with the company. Everyone in the company must know what it stands for, what its dreams are, what it wants to achieve, and what it is willing to give to its people. This must be communicated all the way down the line to the lowest rank.

• Entrepreneurs should organize their enterprises into smaller, more manageable, and more entrepreneurial units where responsibilities and accountabilities can be properly defined. This also means setting goals and keeping score for each unit.

• Entrepreneurs should not be afraid of full transparency. Everyone must know and understand what’s happening. Otherwise, how can they keep score and meet their goals? How can they monitor their progress towards meeting their targets?

• Entrepreneurs should device structures, systems, and mechanisms to promote greater employee participation and involvement. There should be frequent "huddles" and "get-together" to discuss problems, issues, objectives, and opportunities for growth.

• Entrepreneurs must de-layer their organization to foster better communication and faster decision-making.

• Entrepreneurs should allow their employees to design their workplace, innovate on their work practices, and establish their own ways of doing things.

• Entrepreneurs should make their leadership accessible to all by regularly walking about the various units of the company to discuss directions, receive feedback, and generate suggestions.

• Entrepreneurs must nurture a culture of mutual respect and caring to develop a deep sense of belonging. Too many titles and protocols inhibit teamwork and the free flow of ideas.

• Entrepreneurs must treat their employees like adults who have free choice and full decision-making power.

• Entrepreneurs must share their "vineyard" with their workers. When everyone has a stake in producing more fruits from the vineyard, the harvest becomes more bountiful indeed.

(Eduardo A. Morato, Jr. is on the faculty of the W. SyCip Graduate School of Business of the Asian Institute of Management. For comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).