Shared Entrepreneurship

Table of Contents

1. Frontmatter

2. Introduction

   1. Introduction

      Stephen B. Adams, Marvin O. Brown, Thomas J. Calo, Wayne H. Decker, Richard C. Hoffman, Charles C. Manz, Karen P. Manz, Olivier P. Roche, Frank Shipper, Marc D. Street, Vera L. Street, Christy H. Weer

      Abstract

      What is “it” that an enterprise should be trying to do in a volatile and expanding global workplace? The “it” is creating a sustainable business model for both employees and society. The twenty-first century has been witness to millions of lost jobs worldwide, many never to return, and the related increasing social and governmental costs of unemployment and lost tax revenue which impact budgets for education, health and public safety. In modern society, one of the worst things that can happen to an employee is losing a job through no fault of his or her own. Perhaps even more serious is the loss or near-loss of a business enterprise which could have been sustained—but it was not—because of either outmoded or unethical practices and decisions which were given higher priority over employee or even social considerations. Again, the twenty-first century has been witness to the large-scale injurious effects of leadership at large corporations such as Enron and Tyco and within whole industries such as US banking and the American automotive industry.

3. Understanding and Developing Shared Entrepreneurship

   1. Frontmatter

   2. Chapter 1. Shared Entrepreneurship: Toward an Ethical, Dynamic, Empowering, Freedom-Based Process of Collaborative Innovation

      Frank Shipper, Charles C. Manz, Karen P. Manz, Bill Nobles

      Abstract

      Shared entrepreneurship (SE) is becoming recognized as an organizational model that can succeed in a rapidly changing global marketplace where the hierarchical command and control model cannot.¹ Hierarchical command and control stifles innovation and often fails to reward those who are responsible for an innovation.² Innovation, whether product, process, or organizational, is the driver of success. This has always been true, but it is more critical today than ever before because of rapidly changing technological advances and consumer preferences. The academic evidence is sketchy because shared entrepreneurship is an emerging and growing practice although a limited number of organizations have been using it for 50 or more years. Those that do practice shared entrepreneurship appear to have a better chance of survival than those that don’t.³

   3. Chapter 2. Shared Leadership: The Do’s and Don’ts in Shared Entrepreneurship Enterprises

      Frank Shipper, Charles C. Manz

      Abstract

      When visiting shared entrepreneurship (SE) enterprises and studying them through formal interviews, conversations, and questionnaires, it became apparent that leadership in such enterprises is different than in traditional hierarchical command and control organizations. For example, Fred Freundlich of the University of Mondragon explained that the roles of the central leaders are defined in terms of facilitation and coordination and not based on typical top-down executive roles. At W. L. Gore & Associates such terms as “manager,” “management,” “employee,” and “employer” are taboo. When employees have the ability to influence who their leader is either through a democratic process such as at Mondragon or Equal Exchange, or through the administrator of the employee stock ownership plan (ESOP) trust, leadership has to be different.

   4. Chapter 3. Shared Governance: Structures and Processes

      Olivier P. Roche, Richard C. Hoffman, Marvin O. Brown

      Abstract

      In this chapter we explore various issues pertaining to the governance of organizations practicing some form of shared entrepreneurship (SE). For the purpose of our discussion, “governance” refers to the structures and processes that regulate the interactions among the senior management team, the board of directors, and the owners of the organization as well as the results of these interactions on the organization’s social and financial performance. Shared governance refers to the governance structure and process of firms practicing SE. Some of the questions this chapter seeks to partially answer regarding the governance of SE firms include the following: Who are the firm’s key stakeholders? Who oversees the stakeholders’ interests? How are the interests of the board aligned with those of the stakeholders? What roles does the board of directors play in the firm’s governance? What is the nature of management authority in such firms?

   5. Chapter 4. Innovation through Shared Entrepreneurship

      Marc D. Street, Vera L. Street, Frank Shipper

      Abstract

      A perusal of the popular business press or any standard strategic management text quickly reveals the tremendously important role innovation plays in the strategic management decision-making processes of organizations. Much of the emphasis involves conceptualizing innovation as a potential source of competitive advantage for the firm, resulting in the ability to produce superior financial returns.¹ But establishing a competitive advantage via innovation is an extremely difficult thing to do: the research evidence on innovation suggests that only 10 to 20 percent of all major R&D projects result in a commercially viable product or service.² Thus, understanding the factors that lead to success in innovation is of critical importance to both academicians and corporate executives.

   6. Chapter 5. Culture in Shared Entrepreneurship Firms

      Thomas J. Calo, Wayne H. Decker, Christy H. Weer

      Abstract

      “Organizational culture” has been defined as a system of shared, taken-for-granted assumptions that holds a group together and that determines how it reacts to its environment.¹ More succinctly, it has been described as “the way we do things around here.”² Organizations with healthy cultures are said to have enhanced employee morale and team cohesiveness, enhanced employee performance, and strengthened alignment toward goal achievement. The purpose of this chapter is to describe the cultural components most typically found in shared entrepreneurship (SE) firms, and to provide support for the benefits to be derived from such cultures in terms of organizational performance.

   7. Chapter 6. Shared Entrepreneurship: A Path Forward

      Frank Shipper

      Abstract

      There can be little doubt both from the prior research cited and the cornpanies highlighted in this book that the business case can be made for a paradigm shift from the conventional hierarchical command and control business model to shared entrepreneurship (SE). By one estimate based on research, companies that practice SE have the potential to be 50 percent more profitable and have a market capitalization value 50 percent greater than those that do not.¹ In addition, the preponderance of evidence suggests that such firms are more profitable, and do not drop as far in a recession and recover faster and stronger than their competitors. For example, Herman Miller increased its market value 115 percent between 2008 and 2012 and its percentage of industry capitalization from 8.88 percent to 18.87 percent, a 106 percent increase. In other words, not only did Herman Miller’s market value increase over 100 percent, but its relative strength in the industry increased over 100 percent too.

4. Shared Entrepreneurship in Action

   1. Frontmatter

   2. Chapter 7. SRC Holdings: Winning the Game while Sharing the Prize

      Vera L. Street, Marc D. Street, Christy H. Weer, Frank Shipper

      Abstract

      In 1981 Jack Stack, SRC’s current chief executive officer (CEO), was sent to Springfield, Missouri, by his employer, International Harvester (IH), to see if there was any hope of saving the small remanufacturing plant located there. Increased global competition, particularly from Japan, and the poor performance of the US economy had wreaked havoc on many US manufacturing firms across a wide range of industries. IH had been particularly hard-hit, laying off thousands of employees and closing plants all over the United States. As Stack recalls “We [IH] closed 17 factories in a two-year period of time. We laid off 1000 people a week for two years … we went from 115,000 people down to 11,000 people in 1981-82.”

   3. Chapter 8. Herman Miller: Unrelenting Pursuit of Reinvention and Renewal

      Frank Shipper, Karen P. Manz, Stephen B. Adams, Charles C. Manz

      Abstract

      Herman Miller is widely recognized as the leader in the office furniture industry and has built a reputation for innovation in products and processes since D. J. De Pree became president over 90 years ago. Herman Miller is one of only four companies and the only non-high-technology enterprise named to Fortune’s “Most Admired Companies” and “The 100 Best Companies to Work For” lists and also to FastCompany’s “Most Innovative Companies” list in both 2008 and 2010. The three high-technology organizations selected for these lists were Microsoft, Cisco, and Google. Unlike most firms, especially those in mature industries and most of its office furniture rivals, Herman Miller has pursued a path distinctively marked by reinvention and renewal.

   4. Chapter 9. Equal Exchange: Doing Well by Doing Good

      Benita W Harris, Frank Shipper, Karen P. Manz, Charles C. Manz

      Abstract

      In 1983, Rink Dickinson, Jonathan Rosenthal, and Michael Rozyne were all recent college graduates and working for a food co-op warehouse in the Boston area. They began to question the system: What if food could be traded in a way that is honest and fair, a way that empowers both farmers and consumers? What if trade supported family farms use of organic methods rather than methods that harm the environment? Almost simultaneously they started to hear about groups in Europe who were doing fair trade. The advocates of fair trade wanted to ensure that the producers of products such as coffee, teas, and chocolate would get a better price for their crops while supporting improvement in their environmental, social, and political conditions. Rink, Jonathan, and Michael liked the idea. According to Rink, they “were basically food co-op people, interested in connecting small, local farmers with consumers to change the marketplace.” It was not their intention to found a company at that time. They took the idea to the board of directors of the co-op warehouse. Half of the board supported the idea and half voted against it. It became apparent to them that if they were going to pursue their vision, they were going to have to develop an organization.

   5. Chapter 10. TEOCO (The Employee Owned Company): Principled Entrepreneurship and Shared Leadership

      Thomas J. Calo, Olivier P. Roche, Frank Shipper

      Abstract

      Fairfax, VA, October 6, 2009. Atul Jain, founder of TEOCO, a provider of specialized software for the telecommunications industry, had been meeting all day to finalize a partnership agreement with TA Associates, a private equity firm. For Atul, the pace of activities had been relentless on this special day.¹ By all accounts, the last 12 hours had been hectic but the closing of the transaction was a success. The event had started with back-to-back meetings between TEOCO’s senior management and their new partner’s representatives and had culminated with the usual press conference to mark the occasion. The senior management teams of both organizations announced to the business community that TA Associates (TA hereafter) had made a minority equity investment of $60 million in TEOCO. It was indeed a memorable day, the culmination of intense and uneven negotiations between two organizations that did not have much in common except for deep industry knowledge and a shared interest in seeing TEOCO succeed.

   6. Chapter 11. HCSS: Employee Ownership and the Entrepreneurial Spirit

      Olivier P. Roche, Frank Shipper

      Abstract

      HCSS (Heavy Construction Systems Specialists, Inc.) was founded in 1986. For the first few years, the company’s office was in the home of its founder and president, Mike Rydin. Mike had previously worked in the estimating department of a large heavy construction company where he understood, firsthand, the importance of bidding and time crunches.² He decided to address this critical issue. Within a few years he hired his first employee, a programmer named Carl, and they created a software package, the DOS version of HeavyBid. This estimating software was made for infrastructure contractors who bid on projects ranging from $50,000 to over $1 billion. A key feature this young company offered was 24/7 product support; this was unusual at the time. Many times calls for help came in the middle of the night and were responded to by the president himself. Today HCSS still offers 24/7 instant support, now to over 3,500 companies.

   7. Chapter 12. MBC Ventures, Inc.: An ESOP with a Union Partner

      Richard C. Hoffman, Marvin O. Brown, Frank Shipper

      Abstract

      MBC Ventures, Inc. (MBC), known as the Maryland Brush Company until a name change in 2011, is a 100 percent employee-owned United Steelworker employee stock ownership plan (ESOP) established in 1990. Throughout its recent history, the 161-year-old business has steadily increased its stock value. However, the future is less certain today as the firm’s traditional brush business has matured, and its recent efforts at diversification have yet to be realized. The firm has proven to be quite resilient over the years having averted closure after being sold by PPG Industries in 1990. In an unusual partnership, the United Steelworkers of America union helped the firm’s new owner-managers convert to an ESOP as part of a reorganization. This effort saved jobs and the company. Since that time, the firm’s employees have proven to be its most valuable asset and a key source of its competitive advantage.

   8. Chapter 13. KCI Technologies, Inc.: Engineering the Future, One Employee at a Time

      Vera L. Street, Christy H. Weer, Frank Shipper

      Abstract

      The company now known as KCI was founded in Baltimore County, Maryland, in 1955 in the basement of one of its cofounders. In 1977, the company was purchased by industrial products conglomerate Walter Kidde & Company and was subsequently merged with three other architectural and engineering firms into an engineering subsidiary that came to be known as Kidde Consultants Inc., or KCI. In 1987, Kidde was purchased by Hanson Trust PLC, a British manufacturing company with diversified holdings worldwide.

   9. Chapter 14. W. L. Gore & Associates: Developing Global Teams to Meet Twenty-First-Century Challenges

      Frank Shipper, Charles C. Manz, Greg L. Stewart

      Abstract

      In 2008, W. L. Gore & Associates celebrated its fiftieth year in business. During the first four decades of its existence, Gore became famous for its products and for its use of business teams located in a single facility. To facilitate the development of teams, corporate facilities were kept to 200 associates or fewer. Due to the challenges of a global marketplace, business teams are no longer in a single facility. They are now often spread over four continents. Products are sold on six continents and used on all seven, as well as under the ocean and in space. The challenge of having a successful global presence requires virtual teams to enable a high degree of coordination in the development, production, and marketing of products to customers across the world. As previously, teams are defined primarily by product, but no longer by facility. Team members are now separated by thousands of miles, multiple time zones, and a variety of languages and cultures. Growth and globalization present significant challenges for Gore as it strives to maintain a family-like, entrepreneurial culture. According to Terri Kelly, the president of Gore and a 30-year associate¹:

      In the early days, our business was largely conducted at the local level. There were global operations, but most relationships were built regionally, and most decisions were made regionally. That picture has evolved dramatically over the last 20 years, as businesses can no longer be defined by brick and mortar. Today, most of our teams are spread across regions and continents. Therefore, the decision-making process is much more global and virtual in nature, and there’s a growing need to build strong relationships across geographical boundaries. The globalization of our business has been one of the biggest changes I’ve seen in the last 25 years.

5. Backmatter