Critical Book Review of "Humanity working" by David Erdal
Employee ownership and implications for the future of Human Resource Management
Literature Review 2013 9 Pages
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Critical Book Review
Title of the book: Beyond the corporation: Humanity working
Author: David Erdal
Date of Publication: 2011
Publisher: The Bodley Head, Random House, London
« The more equal and involved community gave people longer, happier lives » (Erdal, 2011: 242). ‘Beyond the corporation: Humanity working’ is a factual and policy text of our modern economic system, in which David Erdal proposes to extend democracy into organisations, contributing to a better distribution of wealth. As a consequence, this view raises substantial economic, political and social debates. It is essential to indicate that the book was published not long after the financial crisis of 2008, which provides the author with an ideal context for supporting organic growth rather than seeking investment through capital markets. David Erdal has progressively built his credentials in the area of humanity working and Human egalitarianism. Starting from leveraging an employee buyout of his family business and being awarded the Scottish Business Achievement Award in 1989, he has then undertaken considerable procedures in creating an Employee Stock Ownership Plan (ESOP). Principally, David Erdal challenges the traditional economists’ approaches to organisational ownership structures, aiming at denouncing the immorality of current practices. Contrastingly, he promotes, in an easy and strong language, the benefits of employee ownership structures to society as a whole and the reason why this practice should be developed, which forms the purpose of this book. To support the feasibility of his thesis, Erdal draws upon personal experiences, through his family business, current business examples, such as John Lewis, but also through substantial academic references.
Throughout this review, we will firstly explore the key questions that Erdal raises and their implications into contemporary and policy debates. Secondly, we will perform an integrative analysis of the book structure and assumptions made, and thirdly we will provide a critical assessment of the author’s conclusions.
In today’s highly precarious political and economic context, Erdal serves the interests of society as a whole, where highly committed employees will be able to complete themselves in their professional lives. He does so, by defending the expansion of democracy in the business world. Indeed, western societies have naturally organized themselves into the form of democracies; it is therefore natural that business follows the same evolution (Dahl, 1985:135 in Dow, 2003). It is even more natural to undertake this change as along with globalisation, operations in western economies have shifted from the need of factories to human intellect and collaboration (Blasi et al., 2003). Indeed, McKinsey’s managing director endorses the fact that a new economic system is primordial for our economy to prosper (Caulkin, 2011). As Kramer states in Caulkin’s article, ‘shared value’ is fundamental for our economic development. Derrick and Phipps claim that it is a « natural moral law » and indeed, it is tough to recognise that ‘capitalism’ today, is perceived as ‘normal’. Hence, the major question is who should benefit from employees’ sweat?
By suggesting this new economic system, Erdal is convinced that it will result in a proportionate distribution of wealth. Hence, the author challenges traditional top-down organisations that seek investment through capital markets and thus, maximize speculation and the risk of financial crisis. Indeed, investors don’t really ‘care’ about the business itself but are exclusively interested in capital gain (Derrick & Phipps, 1969). Undeniably, Erdal argues that seeking organic growth through employee ownership structures is the only way to prosperity. He argues that the productivity achieved by workers would no longer enrich capital markets but will be reinvested in the business itself. This view greatly differs from the economists’ perspectives for which investors play a key role in the development of our economy. Subsequently, managers are focusing on shareholders at the expense of labour and consumers. In contrast, seeing labour as an asset rather than a cost would enable organisations to gain core competencies (Torrington et al. 2011) and thus, achieve sustainable competitive advantage (Porter & Kramer, 2011). Yet, in order to gain core competencies, it is essential to implement core job characteristics represented in Figure 1. In doing so, it may provide workers with a true sense of responsibility and thus, contributing to greater commitment and leading to better outcomes.
Figure 1 : The Job Characteristics Model
illustration not visible in this excerpt
Adapted from Hackman and Oldham (1980)
These core job characteristics expresses the ‘workforce philosophy’ of which one can witness to what degree employees are valued in a company (Kaarsemaker & Poutsma, 2006), which is specifically the approach that Erdal is aiming to establish.
However, there are some key concerns about employee owned companies. Firstly, not all employees are eligible (Pérotin & Robinson, 2002), some might refuse to take responsibilities or prefer to be passive. Secondly, Erdal talks about ‘employee owned’ companies but Dow (2003) argues that it is not correct to claim that firms can be owned as a firm is a ‘set of human agents’ and therefore, not an instrument as such. Accordingly, Dow uses the word ‘Labour Managed Firm’.
In terms of structure, Erdal takes a progressive view in four distinctive steps before establishing his conclusions.
First, investigating and relating real life examples of employee-owned companies, contrasting these with assumptions made by traditional economists. Indeed, Erdal argues that their assumptions are rather more theoretical than practical as these are based on predictions and theory and therefore, uses real life examples that specifically undermine these predictions.