The future of organized labor is not unions, it is employee-ownership.
Imagine it’s your first day starting a new job. You sign some paperwork with HR, get your name badge, they show you to your desk, and after lunch you hear from two candidates that want to be elected as your new boss. That’s the future of the workforce. Labor organized not by the stratification of muscle vs. management, but by a merging of owners and talent.
First let’s start by saying this is not an indictment of unions. Employee-ownership only works for firms with a profit motive so (ironically) the unions most under threat, public sector unions, are the ones most necessary as employee-ownership grows. Put another way: teachers, firefighters, park rangers, and TSA agents cannot “own” a piece of the government they work for, so a union continues to be the best way for public sector employees to exercise their collective strength.
We should also define what employee-ownership is and could be. Starbucks offers its employees stock options as part of its benefits package, but you would have a tough time making the case that the Starbucks’ Board of Directors is swayed by the 32-hour/week barista who works out if the downtown Omaha location and just happens to own two units of SBUX. Real employee-ownership is not just a legal relationship involving monetary exchange, it’s the ability of the employee to exert influence on the company for which they work. That ability should manifest itself in a formal exercise of power to select managers, write policies, and approve financial decisions like how to use retained earnings or whether to accept venture capital and on what terms.
Existing companies transitioning into such a model would be difficult to say the least, so let’s examine where this model of ownership can truly spring to life: in a revolution of the tech industry.
It’s customary for the early staff of a tech startup to receive equity in the company they work for; this is a nod to the fact that they are taking valuable skillsets like software engineering or industry expertise and putting them into a riskier venture… so they are enticed and motivated to take that risk by having a stake in the company. The real problem in Silicon Valley is that the equity-giving phase ends somewhere around the time company success begins, and that early employees receive restricted stock options that generally do not come with voting rights like a seat on the board of directors.
Employee-ownership could best be modeled by a collective of tech industry workers, maybe 4 or 5, that want to launch a new digital product like a mobile app or software solution. They each bring something to the table: coding development, financial acumen, marketing… whatever they need. They still need direction and a “leader” to interface with potential investors, manage projects and operations, and make decisions. So they elect one of their own to serve as the manager of the company for a year. After that they can elect someone else to take the reins. Maybe even an outsider, a more experienced executive to take them to the next level but an executive that is beholden to the people they manage.
Electing leaders from among a group of equals is nothing new. We used to elect our military officers from among the ranks of all those volunteering to serve; Abraham Lincoln won his first election not to get a seat in the Illinois statehouse but to serve as a captain in the Illinois militia. It seems reasonable that the private-sector could expand the trust we place in our peers by giving them the authority to not just be a peer, but a manager too.
This also has tremendous implications for company culture and hiring. You want a lean startup? Make the hiring of a new employee be contingent upon each current employee giving up part of their ownership to vest it in the prospective employee. You’ll find people achieving their full potential in a hurry before bringing on someone new.
Even where we have unions, they are too often the understandable result of a breakdown in communications and respect between management and employees. JetBlue famously did not have unions for fourteen years, and in that time it achieved financial success and a loyal following among consumers. It’s probably not a coincidence that their founder, David Neeleman, who worked hard to treat JetBlue employees well, was ousted and a few years later its pilots felt the need to organize within the American Pilots Association.
Now envision a new airline coming into existence where pilots, flight crew, mechanics, customer service representatives, and administrators all owned the airline. They would vote to install its executives and set the standards for their customer service. Eat your heart out Southwest.
It would be an airline impervious to the industry’s inability to strike… because the flight crew bringing your soda and peanuts would have leverage in who leads the airline. That power would make a CEO beholden to the workers: if they wanted to remain CEO they must actually maintain the support and confidence of the employee-owners.
The best way for organized labor to maintain its influence in promoting the rights of workers is to entwine itself within the movement toward employee-ownership while maintaining its footing among public-sector employees, the trades, and companies for which a conversion to employee-ownership is simply impractical. To do that though, labor has to be more strategic and nimble by getting to the people who could start companies within a framework of employee-ownership or by working with existing companies that are progressive enough to convert their structure.
Conversion is possible. One example is New Belgium Brewing Company which converted to 100% employee-ownership in 2013, though not exactly with the same level of autonomy for each individual employee as the future holds for other companies.
To do nothing risks organized labor fading into irrelevance. Automation and political pressure will completely reshape union membership; if no corresponding effort on behalf of workers prevails then unions will surrender the most powerful voice on workforce rights to whoever is leading on employee-ownership.
It will only take a handful of companies to form the foundation of a movement toward real employee-ownership. Once a few employee-owned companies exist in diverse enough industries, the workforce will start to be faced with the choice of working for someone else in the traditional ownership models or working for themselves in a company that’s just as viable, just as stable, but with more reward and more say in how your work is managed.
When your annual performance review is you deciding whether to keep your boss in their role for the coming year instead of your boss deciding the raise you’ll get, if any, the nature of our entire working lives will shift for the better.