Implementing and sustaining organisational democracy: insights from mutual social enterprises
This blog highlights the transformative potential of organisational democracy in social enterprises, addressing challenges of participation and governance while advocating for diverse ownership structures to promote social equity and sustainable economic practices.
Blog by Ian Vickers
Democratic forms of enterprise and responsible innovation are essential to tackle pressing societal and planetary welfare challenges where traditional top-down managerial decision-making and governance approaches are clearly failing. Recent years have seen a growing interest in alternative spaces for organisational democracy, driven by evidence that economic growth benefits are increasingly concentrated in private ownership and control of essential services and other valuable assets. This pervasive form of oligarchic ownership and control, known as rentier capitalism, not only contributes to widening inequalities in income and wealth distribution but also stifles productive entrepreneurialism and responsible innovation.
However, implementing viable democratic alternatives that are genuinely inclusive and collaborative is not easy and demands specific skills, capacities and resources. This is the focus of a recent paper by CUSP researchers at Middlesex University which examines the role of collective capabilities – the skills and abilities that people develop through interaction and cooperation in order to achieve shared aims and benefits.
The analysis builds upon a previous study that examined the success factors and challenges faced by mutual social enterprises – organisations that trade with a social purpose. This recent study of 12 such organisations that emerged from a process of ‘spinning-out’ from the public sector now illustrates how social enterprises (and other organisations aspiring to be democratic) must address three fundamental areas of challenge in order to be successful.
(i) Designing and implementing democratic structures and processes
As organisations initiate or transition to new democratic ownership forms, the adaptive design of governance structures and processes is essential to balance multi-stakeholder democracy (incorporating diverse voices) with the strategic agility of representative leaders to enact change and innovation. Building on work around dynamic capabilities in social enterprises and small businesses, the case study organisations were found to be developing capabilities to respond to business opportunities and innovate in ways that furthered their social missions and democratic ideals.
A stewardship approach combined with an entrepreneurial dimension was found in organisations delivering non-statutory services and operating in uncertain and volatile market conditions where speed and agility is key to respond to external opportunities, and where detailed formal consultative procedures may be too slow and restrictive.
In contrast, other mutual social enterprises took forms that prioritised democratic multi-stakeholder approaches through direct ownership by staff and service users, with more detailed procedures for democratic participation and accountability. Although decision-making could be slow, interviewees felt that this deliberative multi-stakeholder approach often resulted in more robust decisions with greater shared ownership of the outcomes compared to previous experiences of top-down decision-making in the public sector.
Other social enterprises were found to occupy the middle ground by pragmatically combining top-down stewardship and strategic/entrepreneurial agility with bottom-up multi-stakeholder democracy.
(ii) Embedding, extending and revitalising democracy by supporting the voice, capabilities and confidence of workers and users
Although the evidence aligns with previous findings on social enterprises’ ability to engage employees and user communities in co-producing vital services, it also explains why successful bottom-up engagement may not readily translate into active membership and participation in higher-level governance processes. Even large membership or shareholding numbers may not translate into expected levels of participation. Some social enterprises reported difficulties in filling posts for staff and service users on their boards or representative bodies. Employees might be reluctant to participate due to day-to-day work demands as well as the additional constraints and pressures from public sector austerity affecting many public and community services.
Disappointing levels of buy-in are common among workers and users who may remain unaware of or are unenthused by the new mutual/democratic model, or simply lack the capacity or confidence to participate. Supportive measures and leadership facilitation and coaching are therefore needed to motivate and build understanding and buy-in to the new democratic identity and way of working, while also clarifying the different levels and options for participation. Additionally, support may be necessary to encourage employee and user representatives to look beyond immediate concerns and grievances, and engage with strategic issues facing the organisation within its evolving market and institutional context.
(iii) Fostering deliberative learning to navigate tensions
Finally, there is a need to foster deliberative dialogue and learning in order to navigate tensions and differences between diverse perspectives and steer towards collectively agreed outcomes. This capability is crucial for addressing areas of tension and conflict around resource allocation, funding and diversification opportunities, and the practical implementation of democratic principles within the organisation’s strategy and policy. This entails combining the socio-emotional skills of democratic participation with deliberative processes to build understanding and trust among different perspectives and negotiate robust and collectively agreed decisions.
However, some fundamental areas of difference and conflict may resist resolution through deliberation and idealistic appeals to a mutual ‘all in this together’ ethos, remaining in an uneasy balance. Moreover, deeper and broader institutional measures and policy changes may be needed to shift ingrained habits and mindsets, even within social enterprises highly committed to democratic governance. This is particularly relevant in the UK and other nations with neoliberal policy-institutional contexts that lack a broader culture of participation in economic democracy.
A strong underlying theme emerging from interviewees’ reflective accounts was that of organisational democracy as a journey or learning experience, of exploring and understanding different viewpoints, debating the potential and limits of democracy, adjusting expectations, and experimenting with new ways of working to overcome setbacks. In the words of interviewees from three of the participating organisations:
“We’re still learning about what things we can change and what things we can’t and how we can influence the direction and how we can’t.”
“Decision-making is a mix of the promise of participation and the reality […] we are learning about which decisions to consult on and which not to consult on […] every decision [can’t] be a collective one, ’cause it’s not efficient and it doesn’t really work like that.”
“You head for a utopia and every step you take towards utopia it recedes another step, but actually you’ll never get there, but it’s the journey that’s important.”
Our study contributes to a substantial body of research questioning the ‘common sense’ managerialist view that inclusive democracy and collaborative decision-making within enterprises would be impossible or inefficient. Despite the challenges, democratic ownership models that tap into the energy and enthusiasm of their members and other stakeholders can be adapted and applied in varied organisational and service settings. By responding to calls for a more diversified ecosystem of ownership forms beyond the binary choice of purely private or nationalised state provision, these findings are relevant to the wider debate on advancing a more socially just and sustainable form of economic prosperity.
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The full open access paper can be downloaded on the Wiley website.
Vickers, I., Lyon, F. and Sepulveda, L. (2024) ‘Collective Capabilities for Organizational Democracy: The Case of Mutual Social Enterprises’, British Journal of Management, https://doi.org/10.1111/1467-8551.12840
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