manufacturing-try2 (1)This idea has been floating around in my head for a while but I’ve never really discussed it except with a few close friends. Unfortunately, not a lot of people in my circle of friends would be considered particularly business savvy. That being said I really think that this idea, given the right opportunities, could succeed.

The concept is a simple one. Take a small, everyday object that isn’t particularly difficult to manufacture and doesn’t require a ton of overhead. Just for example let’s say we’re going to manufacture toothbrushes but honestly the product is of no importance whatsoever.

The idea is to create a company that produces a product that people need. The company would be entirely employee owned. There’s no board of directors, there are no stockholders, only the employees. Obviously we would need to come up with the capital to get the company off its feet and these initial investors would make a predetermined amount of interest for their initial investment.

After the initial investors are paid off all profits and revenue are filtered back into the company and to the employees. The pay structure would be a fixed rate dependent on the position the employee held. The “president” or whatever that position would be called would not be allowed to make more than four times more than the average worker on the factory floor.

All decisions made are made by all employees. Once a month or so a town hall meeting would be held to address any issues that needed to be addressed. As the company grew and made a higher profit that would be shared between all of the employees equally.

The marketing of the company would handle itself. A product made in America by a company owned and operated by its employees. I believe there are a lot of working class Americans that would be willing to bypass the “major” brand name products to purchase a product where they knew their money would be going directly to other American workers.

Right now the average CEO is making in one day what the average American worker makes in an entire year. Imagine if that money were evenly distributed between the employees that actually make that sort of profit possible.

I’m obviously no business major so can someone smarter than I am please comment on this post and tell me why something like this isn’t possible? The largest hurdle I can see is the finding the initial investment but after that what would the major roadblocks to making something like this happen be?

Posted by James Poling

A socialist, tinkerer, thinker, question asker and all around curiosity seeker. If you'd like to reach me you can use the contact link above or email me at jamespoling [at] gmail [dot] com.

8 Comments

  1. […] couple of days ago I shared something that I am passionate about making a reality. A wholly employee owned company from top to bottom. It’s actually one of […]

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  2. There is a lot to this, so I want to break my thoughts into 3 key points.

    1. What we learned in The Business Experiment is that context is incredibly important. When you let people vote, and count all votes equal, everyone may not have the right information, or enough information, to make a good vote. Lots of decisions require expertise and experience, which the masses don’t have. Few people, when left to their own devices, will spend the time to educate themselves appropriately on an issue. Few people understand enough about the various parts of a company to know what should be done. Business decisions, particularly those at the top level, are made under lots of ambiguity and uncertainty. Few people deal well with those kinds of decisions. In fact, humans have built in cognitive biases that make us particularly bad decision makers in these kinds of environments.

    That only applies to the “everybody votes” part though, not necessarily the employee ownership part.

    2. Capping pay at 4x is difficult because some top level jobs are more than 4x as difficult as some junior level jobs. I’ve been a CEO for 4 years now, and prior to this experience, I would have agreed with you that CEOs were paid too much. But the job can be incredibly lonely, and often make you miserable. It is relentless. You are expected to do everything, all the time. You have to make the really hard decisions, and put your job on the line if you are wrong. You hire, and fire, tons of people. You have key executives quit on you. You have people who lose faith in you. There are many people who, after their first CEO experience, decide never to do it again, but to be a 2nd level executive, because even one level down, you cut the stress by half or more. So, it’s a nice idea, and wish as a society we could move more in that direction, but the truth is, it would be hard to find someone to take on all the crap parts of the job for that price.

    3. We live in profit-led economy, rather than a wage-led economy. I’m not one who believes that “maximizing shareholder value” has to be the goal of a company. The goal can be whatever you want. It’s really set by societal standards, and our standard doesn’t have to be wealth creation. although currently it is. There is a whole side of economic theory that says a wage-led economy would have benefits because more people would be employed at better rates, and that the resulting lower return to capital wouldn’t matter. But you have to get everyone to make that mental shift at roughly the same time to get it to work.

    Overall I agree with a few of your points. A company like you describe would get a ton of PR. If you did it as an experiment, where things were open and discussed, the participants could learn a lot. And there are things that could be done to better align employee interests and investor interests.

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    1. I love the points you make in your first point and find it painfully ironic that while it seems obvious that may not be a very smart way to run a company, that is exactly how we run our country. 🙂 I totally agree with you, I’m just saying. The ability for everyone in the company to be in on the decision making isn’t as important as the idea of having people in place that are qualified and do make those decision are making them for the benefit of the employees rather than the shareholders or some other outside influence. Ideally in this company there wouldn’t be shareholders so to speak. That in itself leads to your next point of having a profit-led economy.

      As for the CEO salary cap, four times doesn’t have to be written in stone. The important thing is that the CEO isn’t making in one day what the average worker is making in one year. For many, many years in this country (and still in many European countries) CEO salaries are far closer to the average worker salary than not. Let’s say we cap the CEO at 15%. Then let’s that we are paying our workers a living wage of around $55,000/yr. With these numbers CEO would still be making $825,000/yr. I think if someone is complaining about that salary it’s not the type of person we would want in this “experimental” company to begin with. And don’t forget, that salary isn’t written in stone, the percentage would be, but as the company became more profitable and the workers’ salaries reflected that, everything else would be bumped up as well. Right now CEOs are making an around 273 times more than the average worker and that’s just not sustainable.

      There are quite a few things that this company would have going for it right off the bat. We’ve mentioned the massive amount of PR a company with this structure would get. Not to mention that as we expanded and opened up in new cities we would have little to no difficulty attracting the cream of the crop, knocking own our doors wanting to be a part of this experience.

      So Rob, how do we make this happen?

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  3. Gotta find a way to recruit the first team members 🙂

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    1. Having connections isn’t my strong suit right now. I wouldn’t know where to begin. Unless I could recruit you? 🙂

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  4. How is this different from a Workers Cooperative of old

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    1. en.wikipedia.org/wiki/Cooperative

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    2. I don’t know that is.

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