Home > Alex, Strategy > Democracy? Nah… we don’t need it here

Democracy? Nah… we don’t need it here

We live in a very strange world where democracy is considered by many to be the best of the worst systems to elect country’s leadership. As pointed out by Winston Churchill: “No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government, except all those other forms that have been tried from time to time.” But at the same time benevolent dictatorship is the governance model of choice in most companies. Of course we are not living in a black and white world and examples of successful countries with authoritative regimes exist (think Singapore). But so do struggling democracies (Greece), failed company dictatorships (Enron), and successful democratic companies (examples are few but check out this WSJ article). But apart for the few exceptions we (Westerners) like our countries democratic and our companies efficient, even if they are dictatorial. Why? What factors made it best to run countries as democracies and businesses as dictatorships? Can a company be managed as a democracy?

I propose several mechanisms that are at play, producing the observed effect:

1. Under a dictatorial regime poor leadership in a country tends to linger, while in a company  such inefficiency is quickly capitalised on by competitors. To put it simple, if you run a bad company competitors will take away all your customers and your company will fail for the lack of financing, which may take several years. On the other hand, dictatorship in a country does not have such competition, aims to preserve itself for decades and tends to fix economic problems at the expense of the population.

2. Democratic systems are inherently slow. For a government this is not a problem, since there is no competition. There is no need to be quick about making decisions. In a corporate world only quick and efficient systems of governance are viable.

3. In a country benefits of having an effective government flow to the population, while in a company such benefits flow to the owners/management.

Overall, the best governance system has to have mechanisms to replace poor leadership. For companies such a mechanism is bankruptcy and for countries such mechanisms are elections. Secondly, the best governance systems have to be efficient, and since in a country benefits of governance flow outside of the government body, voters decide what an efficient government means to them. In a company most of the benefits are confined to the owners/managers and as such authoritative approach is appropriate. Perhaps dictatorship and democracy are all a matter of definition. After all, is democracy not a dictatorship of the voters?

Source:http://spotlight.sites.lehigh.edu /article.php?id=169

Categories: Alex, Strategy
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