What's good enough for America is good enough for General Motors

Poll CEOs at Fortune 500 companies and you're unlikley to find more than a small fraction who would support command and control economies at the national level. Yet this is exactly what they create within their corporations. Depending on the measure, of the 100 largest global economies, corporations constitute from one-third to two-thirds of the total. GE's sales and market cap are considerably more than the GDP of most countries. Given how much better market economies perform than command and control economies, this suggests that the corporations' use of centrally-planned, command and control economies represents a huge loss of potential.

Companies try to link performance and rewards now, but most attempts miss the point. The market economy doesn't dictate to people, "Do X and we'll pay you your wage and throw in a bonus of up to 20%." The market doesn't actually give instructions, it simply gives feedback. And the rewards are not bounded by quotas but, rather, by interaction of supply and demand. Players within a market (e.g., labor market) are free to choose what to do in order to best reconcile often conflicting goals of personal satisfaction and cash flow and location and coworkers, etc.

Companies need to allow employees more freedom to choose what to do, just as market economies do. And these employees can make less or more than they might think reasonable, depending on the consequences of their choices. In this post-information age of person-to-person communication and the possibility of auctions (like eBay), internal markets could emerge. There are a variety of ways that smart companies could add enormous value to such internal markets, from mitigating the highs and lows of market swings to providing information about supply and demand trends (e.g., "project teams have recently bid up the price of C++ programmers and MS Project Analysts by over 20%"), helping to facilitate the attainment of new skills and experiences that enhance wages for employees and value for the company.

Such solutions obviously raise a number of questions, but they are the questions whose answers promise progress. CEOs need to stop imposing on their employees conditions that they would reject having imposed on them. If there is ever a assumption that ensures poor leadership, it would be that "They (the commoners) are motivated differently than we are."