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The word Sociocracy is derived from the Latin and Greek words socius (companion) and kratein (to govern). It is English for the word sociocratie, coined in 1851 by Auguste Comte, a French positivist philosopher (who also came up with the word sociology) and later used by the U.S. sociologist Lester Frank in a paper he wrote for the Penn Monthly in 1881 and later still by Dutchman Kees Boeke, who applied the concept to education. It literally means rule by the "socios," people who have a social relationship with each other - as opposed to democracy: rule by the "demos," the general mass of people.

Ward later expanded on the concept in his books ‘Dynamic Sociology’ (1883) and ‘The Psychic Factors of Civilization’ (1892). Ward, although rarely studied today, was very influential in his time and had a worldwide reputation as a groundbreaking sociologist. He believed that a highly educated public was essential if a country was to be governed effectively, and he foresaw a time when the emotional and partisan nature of present day politics would yield to a much more effective, dispassionate and scientifically-based discussion of issues and problems. Democracy would thus eventually evolve into a more advanced form of government, Sociocracy.

Dutch pacifist, educator, and peace worker, Kees Boeke updated and greatly expanded Ward's ideas in the mid-20th century creating the first sociocratic organizational structure. Boeke saw Sociocracy as a form of governance or management that presumes equivalence of individuals and is based on consent. This equivalence is not expressed with the 'one man one vote' law of democracy but rather by a group of individuals reasoning together until a decision is reached that is satisfactory to each one of them.

To make sociocratic ideals operational, Boeke used a system of circles to organise decision-making within a large organisation.

Members of each circle were responsible for decisions within their domain. Rather than using ever larger circles to make decisions affecting more than one domain, each circle elected is representatives to a "higher" circle. Use of representatives maintained the efficiency of a hierarchy while maintaining basic equivalence of the members of the organization.

In the 1970s, Gerard Endenburg, a student of Boeke's, further developed and applied Boeke's principles in his electrical engineering company. As an engineer, Endenburg added the understandings of physics, cybernetics, and systems thinking to the social, political, and educational theories of Comte, Ward, and Boeke. This resulted in a formal organisational method named by Endenburg the Sociocratische KringorganisatieMethode (Sociocratic Circle-Organisation Method).

Challenged by Boeke with whom he remained friends, Endenburg first applied Boeke's principles and over the period of a decade, developed governance principles designed for a business but that could be applied in all organizations. Sociocratic governance principles apply to policy decisions within an organization, those that include allocation of resources and the constraints of operational decisions. The circle determines how the day-to-day operational decisions will be made. The operational leader is then responsible for applying these policies in managing the functioning of the department or group.

Endenburg's policy decision-making method is composed of four governing principles:

Decision Making by Consent.Decisions are made when there are no remaining "paramount objections." Objections must be reasoned and argued and based on the ability of the objector to work productively toward the goals of the organization. All policy decisions are made by consent although the group may by consent decide to use another decision-making method. Within these policies, day-to-day operational decisions are normally made in the traditional fashion.

Circle Organization.The sociocratic organization is composed of a hierarchy of semiautonomous circles. This hierarchy, however, does not constitute a power structure as autocratic hierarchies do. Each circle has the responsibility to execute, measure, and control its own processes in achieving its goals. It governs a specific domain of responsibility within the policies of the larger organization. Circles are also responsible for their own development and for each member's development. Often called "integral education," the circle and its members are expected to determine what they need to know to remain competitive in their field and to reach the goals of their circle.

Double-Linking.Circles are connected to the next higher circle by a double link composed of the operational leader and a circle representative. These linking circle members function as full members in the decision-making of both their circle and the next higher circle. The operational leader of a circle is selected by the next higher circle and represents the larger organization in the circle's decision-making. A representative is selected by the circle to represent the circle interests in the next higher circle.

At the highest level of the organization, there is a “Top Circle,” similar to a traditional board of directors, that connects the organization to its environment. Typically these members include representatives with expertise in law, government, finances (including investors), community, and the organization's mission. The top circle also includes the CEO and representatives of general management circle. Each of these circle members participate fully in decision-making.

Elections by Consent.Individuals are elected to roles and responsibilities in open discussion using the same consent criteria used for other policy decisions. Members of the circle nominate themselves or other members of the circle and present reasons for their choice. After discussion, people can (and often do) change their nominations, and the discussion leader will suggest the election of the person for whom there are the strongest arguments. Circle members may object and there is further discussion. For a role that many people might fill, this discussion may continue for a few rounds. For others, this process is short when fewer people are qualified for the task. The circle may also decide to choose someone who is not a current member of the circle.

These four governing principles are requirements in order for an organization to function sociocratically because they are interdependent, each one supporting the successful application of the others.

In addition to these four principles, sociocratic organizations apply the circular feedback process of directing-doing-measuring to the design of work processes, and in businesses, compensation is based on a market rate salary plus long-term and short-term payments based on the success of the circle. With the exception of proprietary knowledge, all financial transactions and policy decisions are transparent to members of the organization and to their clients.

Consent as defined and practiced in sociocratic organizations is a more efficient decision-making method than autocratic decision-making because it builds trust and understanding. The process educates the circle members about the needs of the other members in doing their work and participating happily in the organization. One company, for example, reported a reduction of 50% in the number of meetings after it introduced sociocracy. In addition to reducing friction, the well-defined, information-based, and highly disciplined process helps the group stay focused and move swiftly through examination of an issue and actual decision-making.

Sociocratic principles are now applied to many organizations around the world. These include corporations, small businesses, nursing homes, university departments, ecovillages and cohousing communities, private schools, and international professional and educational membership organizations.

The Sociocratic Circle Organization provides a way of producing and leading organization on the basis of equivalence in decision making through the principle of consent.