Why it Pays to Run Your Company Democratically

Yesterday, WorldBlu released its fifth annual list of the world's Most Democratic Workplaces, with Groupon and Hulu as notable additions to the growing community, which also includes Zappos, Great Harvest Bread Company, Orpheus Chamber Orchestra, and others. This year, says WorldBlu CEO Traci Fenton, there are 52 companies from 55 countries on the list with total revenues of $15 billion compared to $3 billion five years ago. "You usually don't equate fast growth with democracy," says Fenton. "People think of democracy as slow and cumbersome. What they don't understand is that it can be that way when you're getting people aligned, but after you build a collective brain trust, you're able to move very rapidly."

Fenton founded WorldBlu in 1997 with the intention of studying the principles of workplace democracy, and creating a scorecard for measuring those principles and their effect in companies worldwide. Her big goal is to "see 1 billion people working in free and democratic workplaces." That may sound a little hippie dippy to you, but what Fenton has discovered over the years is that when companies really do practice democratic principles at work (and that doesn't involve voting on every little thing, just fyi), it has a direct impact on the bottom line. She shared a few thoughts with us on the benefits of workplace democracy.

Democratic companies appeal to the growing GenY workforce. "We've moved from the industrial age to the information age, " says Fenton. "But I also think we've moved from the information age to the Democratic age, and that's because of social media. The message is 'power to the people,' which reinforces the worth of individuals. People realize at a younger age that they are important and that they don't have to wait 20 to 30 years to have a voice. So they want to work in an environment where they're valued." A great example, says Fenton, is Groupon, where the average age of an employee is 26.

Workplace democracy can get you through tough times. Being open with your employees can help you solve what may seem to be insurmountable business problems. For instance, says Fenton, HCL Technologies, a software development and outsourcing company based in Noida, India, was faced with the dilemma of either finding $100 million in cost savings, or laying off employees during the recession. CEO Vineet Nayar, whose motto is "employees first, customers second," went to his 80,000 employees and explained the company's financial troubles. Employees came up with 76 ideas to save the company $260 million. "No one was laid off," says Fenton. "And since then the company has tripled its revenue and doubled its market cap."

Democracy can help grow your company. According to Fenton, I Love Rewards, a Toronto-based employee rewards and recognition company, increased billings by 108% during the recession. "They attribute that to their democratic culture," she says. "They have a vision document that is constantly updated by employees, their board of directors, and their clients. When they wanted to expand to San Francisco, they were concerned about maintaining their democratic culture. And so they created a committee of new and more tenured employees to make sure that the company remain true to its values."

It seems to me that as we slowly emerge from our recession woes, employees are, once again, likely to opt out of command and control work environments. So it makes good sense for company owners to do a little soul-searching, and think about how their corporate culture may be hurting their ability to attract and retain the kinds of employees that will help them grow. WorldBlu's 10 principles of organizational democracy may not be a bad place to start.

More from CBS News