In early 2009, Dialog was in a financial position that most companies would envy, especially given the recession. The Austin, Texas firm was a “phenomenally successful business” with enough savings in the bank to cover 2 years’ worth of operational expenses, according to CEO Bob Gutermuth.For a Limited Time receive a
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“We could have literally gone without revenue for 2 years” and still been able to meet payroll for 24 employees and pay all other expenses, says Gutermuth, who founded Dialog (www.DialogGrp.com), a national marketing consulting firm, in 2004.
But Dialog suddenly found itself in a financial crisis after a call from its financial advisor in February 2009. The advisor said that Stanford Bank—where all of Dialog’s savings were deposited—had been seized by the Securities and Exchange Commission (SEC) and that, within 30 minutes, he would be under a gag order not to speak to Dialog.
All of Dialog’s assets were immediately frozen. “At the time, we thought it was gone,” Gutermuth says. The firm had no cash to pay its operational expenses, including payroll, vendor bills, utilities, parking, and rent. Gutermuth says he could not use his own assets to cover the firm’s costs because his personal savings account at the bank had also been frozen.
Democracy in Action
Had it not been for Dialog’s democratic organizational model, Gutermuth says he would have been forced to lay off all of his employees and start his business from scratch again.
As a democratic workplace, Dialog takes pride in making sure that “everyone has the opportunity to be heard and to impact our decisions,” Gutermuth says.
In a weekly staff meeting, which Dialog calls the “Huddle,” employees are given opportunities to weigh in on major company decisions. Sometimes, a consensus is reached at Huddle; other times an informal committee is created to gather more information and make a recommendation to management.
About 80 percent of the time, management implements those recommendations, but there are times when it overrules such decisions or reaches a compromise, according to Gutermuth.
In general, any decisions impacting employees’ “lives, livelihood, or experience at the company” are taken to a vote. Decisions that need to be made quickly, and those that are more task- or project-based, are made solely by management.
No Paychecks Issued
In February 2009, Gutermuth and his management team turned to employees for solutions in light of the firm’s financial crisis. After explaining the situation in Huddle, employees met individually with their managers and started offering concessions.
Almost every employee went without a paycheck for two pay periods—and some volunteered to go without pay for up to 3 months, according to Gutermuth. One employee took a 3-month leave of absence to set up a farm she had just purchased; another offered to work a 4-day workweek; and yet another said he could take a 20 percent pay cut. “Everyone’s situation was literally different.”
Gutermuth secured a line of credit, revenue continued to roll in, and, by October 2009, the crisis was over. Dialog was able to recover 40 percent of its savings, but it does not expect to recover the other 60 percent, which was invested in Antigua, he says.
The firm kept track of what it owed each employee, and by February 2010—1 year after the crisis began—the firm made them whole. During that time, not one employee left, and the firm emerged even stronger, he says. “We didn’t lose a single member of the team; we were able to navigate the challenges with little impact to the business; and today our company is healthier than it ever has been.”
In large part due to its response to that crisis, Dialog was named one of the Most Democratic Workplaces™ in the world by WorldBlu (www.worldblu.com/worldblu-list) this spring.
Tips to Consider
Gutermuth offers some advice for creating a democratic workplace:
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Take baby steps. Initially, ask employees to weigh in on decisions that have “little to no risk,” he says, and then refine the process before asking them to make larger decisions.
- Make sure management understands its role. “It’s sometimes difficult to step back and let people participate at that level,” he says. Management also must be able to make decisions on certain issues. “It’s very important to make sure you are not slowing down your business by using a model like this.”
- Hire employees who fit the culture. “Culturally, it’s not a fit for everyone,” he says.
- Be open to change. Gutermuth says democracy in the workplace “should be a living organism that grows and changes over time and is not strictly rule-based.”