Our firm makes decisions based on rational problem solving and democratic decision making. In theory this leads to a logical solution that pleases the greatest number of people. In practice it makes some decision-making processes so long that the original problem is occasionally lost.
The CPA firm for which I work lost a very large account recently. The reason was not bad. Companies are required to switch CPA firms occasionally. But it lead to a decrease in revenue significant enough that the company was in danger of running a loss for the following year.
The senior partners began to take an informal pole to see how the company would take a postponement of any raises to the following year when, hopefully, the partners could drum up more business. This might have worked at a company not based on economics. However, most employees saw a lack of at least a cost-of-living raise as a pay cut, despite very low inflation rates these days. General discord began to run through the company within a few hours and productivity dropped as people met at the water cooler to gripe.
The next day, in response to the sudden employee dissatisfaction, the partners met to discuss the problem. Our democratic system was a problem here because the managers are owners as well as employees. Any decision they make has the risk of seeming to benefit some employees at the cost of others. The partners sent out a memo that afternoon that began the decision making process.
In the memo, the partners explained that they had cut some costs already and listed them, such as deferring the purchase of new equipment, and that the partners were all taking an actual reduction in their salary through a fall in profits. There was some flexibility in the budget, but not enough to give everyone even a small raise. The partners felt that a change in employee benefits could, if not too expensive, be substituted for a raise and invited suggestions.
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