A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
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How to Liberate an Economy
Entrepreneurs understand the importance of freedom in the workplace.
21 October 2009
Freedom, Inc.: Free Your Employees and Let Them Lead Your Business to Higher Productivity, Profits, and Growth, by Brian M. Carney and Isaac Getz (Crown Business, 336 pp., $27.50)
Brian Carney and Isaac Getzs Freedom, Inc. is a timely book. Its also countercyclical and somewhat counterintuitive. After all, most of todays writing about economics and business is haunted by the current crisis: nearly every author and commentator expects that either more or less government intervention will bring the economy out of its difficulties. But Carney and Getz remind us that without well-managed enterprises, there would be no economy at all. Crisis or no crisis, the engine of economic growth has always been, and will always remain, entrepreneurs. Nations without entrepreneurswhether they drive them out with excessive taxes and regulations, or in more extreme cases, suppress, exile, or kill themnever reach prosperity. One can often ascertain the condition of a nations economy by assessing the cultural, legal, fiscal, and social status of its entrepreneurial class.
Carney and Getz profile a dozen visionary business leaders who share a common trait: they believe that liberty works in every aspect of our lives, including the workplace. When entrepreneurs build a culture of freedom and a trusting, liberated, and nonhierarchical work environment, the companies they lead tend to outperform their rivals. In businesses as diverse as insurance, wine-making, advertising, and hydraulics, the shift from traditional, authoritarian, command-and-control structures to a culture that liberates the individual initiative of employees has dramatically enhanced results and workforce morale.
Carney and Getz remind us that this has been well understood for decades. As far back as 1924, William McKnight, the longtime president of 3M, declared: If you put fences around people, you get sheep. Give people the room they need. McKnight unleashed the creativity of 3Ms employees and built one of Americas great companies. Carney and Getz also point out that such thinking wasnt confined to America: in Japan, Panasonic founder Konosuke Matsushita understood that the obsolete, expert-driven model promulgated by Frederick Winslow Taylor had to be replaced by the day to day mobilization of every ounce of intelligence.
But in todays business world, these principles are still more easily praised than applied, which is why Freedom, Inc. does such a valuable service by introducing us to business leaders who actually practice them. François Zobrist, former chief executive of the French auto-parts manufacturer FAVI, describes two kinds of companies: How companies and Why companies. How companies tell workers how to do their job. In a Why company, workers have just one dutykeep the customer happyand the manager doesnt worry too much about how they do it. Unlike power-conscious executives at top-down organizations, Why managers dont display material signs of privilege: no mahogany floors, company limousines, or reserved parking spaces. On the contrary, liberating the workplace begins by de-bureaucratizing and rehumanizing relations based on human fairnessmaking people feel like human beings instead of human resources.
One could object that many top-down, authoritarian firms do pretty well, but Carney and Getz would argue that the cost of such controls looks modest only because its invisible. In economics, as Frédéric Bastiat explained over a century ago, what you dont see is often more costly than what you do see. Authoritarian companies would be even more profitable if they became democratized, Carney and Getz believe. Furthermore, they suggest that the democratic principle can be exported to cultural environments outside the United States. At FAVI, trust and confidence infuse the relationship between management and workers. In France, this is called not democracy but good manners, an aristocratic value rooted in the local culture and based on respecting individual dignity. By any name, its the right way to do things.
American readers may particularly relate to what Carney and Getz say about USAA Insurances call center in San Antonio. Can you really humanize a call center, where employees perform what USAAs CEO, Robert McDermott, admits is the most boring of all work? McDermott was convinced that if he gave his employees, most with limited educations, the right conditions for growth and self-direction, they would reveal their talents no less than extraordinary people do. Today, not only are the customer-service reps happy to help, but theyre effective: claims get settled on the spot, on the first call, with the first person a customer talks to. And USAA has become the fourth-largest home- and car-insurance company in America.
Freedom, Inc. may thus be more relevant to the current recession than it first appears. As Carney and Getz show, freedom itselffrom bottom to topmay be the way to lead America out of its slump.
Guy Sorman, a City Journal contributing editor, is the author of numerous books, including the new Economics Does Not Lie.