69 How may the structure of the employment relationship vary?

There are many ways to structure the day-to-day relationships between employee and employer. The traditional model in the United States is a hierarchy between top managers such as the CEO, mid-level managers, and other employees. This pyramid-type structure involves delegation of tasks and responsibilities from the top, through a series of managers, and finally to employees who carry out the work. Employees then report back to mid-management, who then report to top management. This hierarchical model enables top-level management to quickly carry out organizational goals and respond to changing circumstances.

An example of this is the organizational structure at Apple. As of the early 2020s, Tim Cook is Apple’s CEO. Beneath him in Apple’s organizational structure are a CFO, COO, and series of departments such as legal, marketing, and software engineering. Beneath the CFO are a number of financial departments, such as Audit and Applecare. Beneath the COO are a number of additional departments, such as Operations, Human Interface Design, and so on.

There are, however, many other ways in which businesses might organize the relationship between employees and company leaders. Consider two examples. The online shoe retailer Zappos uses an organizational method they refer to has a “holacracy”. In the holacracy, employees form parts of “circles” with roles and “subcircles.” These circles accomplish the work of the company, and employees can take part in more than one circle. The goal is to have employees self-manage and self-organize in order to have “the power to innovate, make changes, and have a voice.” Zappos has also used systems that attempt to resemble decentralized marketplaces in which teams act like “small, autonomous businesses.” The ability for employees to exercise greater autonomy through these methods may help increase job-satisfaction and retain employees.

Another alternative model is the employee-owned firm. When employees themselves are the shareholders, the misalignment of financial incentives between those two groups disappears. It also helps solves the principal-agent issues that can plague the employment relationship, because employees have financial incentives not to shirk while working. Investing employees with a sense of ownership may also help make them take care and responsibility for a business which they otherwise might not feel a great deal of loyalty towards. Of course, being employee-owned does not mean the company will always make the best decisions!

Examples of employee-owned businesses are WinCo in the American west and the John Lewis partnership in England. At WinCo, after working at least 500 hours, employees participate in an ownership program. Winco notes “We believe our employees should share in the success of our company in a tangible way. That’s why we created an Employee Stock Ownership Plan . . . more than 30 years ago. Participating in the ESOP program means employees are part owners of the company and benefit financially from a job well done. In this way, there is direct incentive for employees to work hard and take pride in what they do; that is why our stores are cleaner, our prices lower and our smiles are bigger.” The John Lewis partnership calls employees “Partners” and, because there are 80,000 of them, runs the business through a democratic process of voting on leadership committee membership. With this many Partners, this model ends up similar to that of corporate structure, in which shareholders vote on a Board who then direct employees to work.