Wednesday, April 28, 2010

Small Can Succeed

Can you ever hear the words "solidarity, flexibility, and entrepreneurship" in a single sentence? When the sentence is about a small, egalitarian, democratic, and highly profitable employee-owned, open-book business named SRC, you can.

(Hat tip: John Médaille.)


Matt said...

It turns out to be extremely hard for employee-owned companies to both remain profitable and to remain truly employee-owned, if that means owned by most employees. The almost universal trend is for the employee-owners to hire an increasingly larger percentage of contract work until it gets to the point where it's somewhat doubtful to call such places employee-owned. (Law firms are an excellent example of this.) Given that there are pretty strong tax advantages of having firms set up as employee-owned, but that few manage to stay as such and stay profitable, I think there's good reason to think that such things are niche items at best. On this topic (and others) I'd strongly recommend, especially for you, Russell, Joseph Heath's very nice recent book, _Economics without Illusions_. (The subtitle on the Canadian version should appeal to you- "Economics for people who hate capitalism".) It's really quite nice, but does a good job of showing why this is very unlikely to be a larger part of any modern economy.

Russell Arben Fox said...

Thanks for the book recommendation, Matt. I've just inter-library loaned it; it looks interesting, and I'll try to give it a read this summer. Perhaps once I've read it I can better understand your comment, which doesn't seem to address at all what the case of SRC demonstrates fairly clearly--or at least appears to demonstrate to me, insofar as I understand their story. Perhaps the key is their "open-book" philosophy, in which the owner-employees are required to be centrally involved in basic fiscal decisions, thus discouraging a reliance upon contract workers who would bring different priorities to the decision-making table? It's worth thinking about anyway. The kind of work which SRC performs (rebuilding automobile engines and the like) hardly seems "niche"; on the contrary, it's maintaining a foothold in an industry that most Americans probably assume has been overwhelmingly outsourced to other countries. (Though, along the same lines, perhaps framing the question that way simply gives the game away? What, in principle, is wrong with attempting to re-orient the modern economy along lines that favor "niche" operations, as opposed to larger, standardized, corporate ones?)