Highly Egalitarian Organizations: The Principles of Sociocracy

In 1959, a young Dutchman named Gerard Endenburg started working for his family’s engineering firm, Endenburg Elektrotechniek. Not much later, at the end of the 1960s, Endenburg took over the top leadership position from his father and became the new general manager of the family business.

Driven by a deep passion for both technical and organizational innovation, Endenburg started to develop ideas about organizing the firm more equally, as he believed that all people are different but equal.

This inherent belief began a lifelong search for a management model that does justice to that equality. He believed this way of organizing increased the firm's effectiveness and improved the quality of life in society as a whole.

Highly inspired by Kees Boeke’s work on Sociocracy (Endenburg was a former student of Boeke), he further developed his ideas about equality and tried to apply them to the company his family owned.

After years of experimentation and application, Endenburg developed his own unique management model called the “Sociocratic Circle Organizing Method” (for matters of simplicity, we will refer to it as Sociocracy hereafter), on which he even obtained a doctoral degree in 1992.
 

Sociocracy as Social Design

In his dissertation, titled Sociocracy as Social Design, Endenburg describes how he believes that life is only possible by virtue of a process that can maintain a state of dynamic equilibrium.

As such, it is important to identify the properties of the process whereby dynamic balances can be restored once they have been disturbed. Endenburg’s dissertation is full of ideas and concepts like equal value, equal worth, equilibriums, reciprocity, mutual equivalences, mutual exchanges, elections, voting, and balances.

Based on all this, Endenburg describes organizing as a purposeful, balance-seeking process that is always dynamic, and that people are capable of influencing that balance through decision-making processes.

Four key mechanisms

Sociocracy aims to guarantee an equal basis for each individual within the organization, so this equality also needs to be guaranteed by how individual members can take part in the decision-making processes that happen in the firm.

As a result, Endenburg argues that four mechanisms are necessary to organize oneself in such a highly egalitarian way.

1. Circle organization

First, the organization must be divided into circles. A circle is a group of functionally related people, such as a department, a class, or a team. In Endenburg’s view, circles must be relatively autonomous entities similar to traditional business units or profit centers.

Each circle must have its own common goal or purpose and autonomously decide how to distribute roles, responsibilities, and tasks. It also measures and controls its own performance, solves its own problems, exchanges ideas with others, and deals with its own conflicts.

In short, the circle is the place to turn chaos into meaningful cooperation and individual competencies into measurable responsibilities.

2. Double linking

Each circle must be “double linked” to ensure all circles are “interlinked.” That is, each circle should be linked to the next circle by a double link consisting of at least two people—one acting as an elected representative to the outside world, the other as an elected functional leader for the inner workings of the circle.

These elected representatives meet periodically to align each circle’s interests, balance voluntary commitments, exchange resources, and share information.

The representatives and functional leaders are periodically elected based on the principle of consent (more on that below) and deemed best suited to the tasks and functions covered after an open and transparent discussion.

This means there must always be freedom for people to openly raise any doubts about an elected person's functioning.

Which brings us to the next point.

3. Principle of consent

The principle of consent must govern the decision-making processes in the firm. By applying the principle of consent, one does not ask for a ‘yes’ (as in, consensus guided by solidarity) but does provide an opportunity to come forward with a reasoned ‘no’ (guided by tolerance).

In order to reach consent, colleagues are expected to make decisions by keeping their tensions between their acceptable limits (tolerances).

These acceptable limits are, again, decided by the people themselves based on their own consent. This is valid for one individual just as much as a circle—or the entire organization.

There is only one limit that can never be under discussion: the guarantee that each person in the firm has an equal say in decision-making processes.

4. Profit-sharing

Endenburg believes that profit-sharing should be an integrative part of the reward structure for people’s participation in organizing the firm.

He argues for two parts: a fixed base salary and a variable component.

The base salary, often based on collective bargaining agreements, is an income guarantee providing the necessary space to live a freely chosen life.

The variable component is a profit-sharing part that fulfills a kind of bonus and must guarantee that one’s efforts and contributions that create value for the collective are also rewarded. This profit-sharing is calculated as a factor of someone’s fixed salary and loyalty.

Theoretically, in this model, both the individual and the collective receive the recognition they deserve. This distribution doesn’t necessarily take the form of money—it can also take the form of shares in the company or some other kind of reward.

Freedom within limits of consent

Endenburg emphasizes that this combination of the double-linked circles, profit sharing, and consent decision-making creates a certain well-rounded kind of freedom within the limits established by consent.

It is important to note that Endenburg designed this all so that this particular way of working does not require solidarity. Instead, decisions are made with consent, during meetings, by using the power of reasoning and discussion to find the best possible solutions for problems that arise. In this model, consent is reached with formal arguments, compared to market-based models (like Amoeba), where consent is reached by market dynamics.

In this model, the power of argument always settles the matter by not excluding or sacrificing one’s own individuality or the individuality of the other. Instead, it aims to do justice to both.

Since they are not looking for full solidarity, only people who have an interest in the decision under discussion are expected to be present during the meeting. Therefore, the people not present automatically consent to the decision made in their absence.

But remember, the consent decision-making process is available, at all times, for all members of the organization and can be used whenever the need arises. This makes both decision-making and control equal for all members of the firm.

The modern-day version of Endenburg's Sociocracy

Over the last several decades, Sociocracy and its modern nephews Holacracy (developed by Brian Robertson in 2008) and Sociocracy 3.0 (pioneered by James Priest and Bernhard Bockelbrink in 2015), started to gain more and more traction in the management space. Hundreds of companies—mostly small ones—have adapted these management models and developed them further.

But, although Endenburg Elektrotechniek and most other Sociocracy/Holacracy companies are relatively small, there is no reason to assume that such highly egalitarian organizations only work on a small scale.

There is, for example, the Spanish NER Group, which has proven for years that there is indeed a highly successful method to organize at scale across multiple organizations in an egalitarian way. But that is a story for later.

Book forthcoming...

As I wrote in the introduction, I'm currently writing a new book that captures the story of Inamori, and Endenburg. (Well, those and a lot more.)

Would you like to stay up to date about the progress? Subscribe to our newsletter for book updates and plenty more.