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DETROIT REGIONAL ECONOMY CHOPPING SIDEWAYS

In December, the Detroit Area Business Activity Index declined six points to 113, reversing a similar sized gain in November.  After rising sharply in 2003, the index has been fluctuating in a narrow range in 2004.  For the year as a whole, the index for the regional Detroit economy has averaged 7 %, more than in 2003 after removing the distorting effects of inflation.

"The story for Detroit in December, as it was for the entire year, is that the local economy is struggling to develop any positive momentum.  Production, employment, and sales all are moving sideways," according to Dana Johnson, chief economist at Comerica Bank.

Comerica Bank compiles the Detroit Area Business Activity Index (DABAI) monthly from eight different measures of regional activity which are seasonally adjusted, corrected for inflation, and expressed as an index with 1996 as base year equal to 100.  The Economics Department of Comerica Bank has calculated the DABAI monthly since 1957; depicting Metro-Detroit’s economy over seven full swings of the U.S. business cycle.

Comerica's National Recession Watch Index, which forecasts the likelihood of national recession occurring six to 12 months in the future, registered 17-percent probability in December.  National recession is forecasted when successive Recession Watch Index readings exceed 50 percent. Comerica's National Recession Watch Index also registered 17-percent probability in November.  "Though still within the range predicting good and continued growth for 2005, November and December's readings were the least favorable outlook since July 2001," said David Littmann, chief economist at Detroit-based Comerica Bank.

MICHIGAN ECONOMY LOST GROUND IN 2004

The Michigan Business Activity Index, compiled by Comerica Bank, gained 2 points in December, to close at 108, compared with a revised 106 reading in November. A year earlier the index stood at 114. Through December, Michigan's economy, after removing the effects of inflation, is down 2.2 percent from the same period a year ago.  "With reduced production schedules in the second half of 2004, Michigan's automotive sector shifted into lower gear after July, in contrast with the acceleration in the same period of 2003 following the national tax cuts," said David Littmann, chief economist at Comerica Bank. "This largely explains the negative annual comparisons for Michigan's economic performance in 2004."

The Michigan Business Activity Index (MBAI) represents 10 different measures of Michigan economic activity compiled monthly by the Economics Department of Comerica Bank. The MBAI is seasonally adjusted, corrected for inflation, and expressed on an index basis with base year 1996 equals 100. The MBAI series has been calculated monthly since 1957 and depicts state economic activity over seven full swings of the U.S. business cycle.

Comerica Bank, Michigan's oldest and largest bank, is the lead subsidiary of Comerica Incorporated (NYSE: CMA), a multi-state financial services provider headquartered in Detroit.

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HOW DO WE BRING THIS RUNAWAY COMPLAINER UNDER CONTROL?

Question:  An employee constantly files new complaints about every action he believes is in violation of company policies. Coworkers are frustrated at being subjected to these constant investigations. What is the best way to handle this situation and bring order back into the work environment?

Answer:  In the post-Enron environment, most organizations are doing all they can to encourage employees to use "help lines" and report activity that may violate company policies. Most ethics and compliance officers say that what is not being reported is their biggest risk factor. Instilling a sense of personal accountability and responsibility among employees for the actions of others is a major challenge for human resources.

Still, crying wolf too often can jeopardize the integrity of the entire internal-controls process.  Here’s the first question you should ask: Are the complaints valid? If not, then your vigilante employee needs to know about the extent of the damage he’s causing--both to his own reputation as well as that of the people he works with. It sounds like respect is a value that needs some reinforcement at your organization. If current policies don’t provide a remedy, change them promptly.

But there are other questions to ponder. What if the complaints are valid? Are there in fact ongoing violations of company policy? Or are there at least legitimate perceptions of ongoing violations? If so, then why are the coworkers upset about there being too many complaints?

In many instances, problems arise because the technical policy does not conform to day-to-day practices. In such cases, coworkers may be reacting to a policy that should be changed. Or your outraged coworkers may be reacting to inconsistent enforcement of policies throughout the company.

Imagine if your lone ranger were sitting on the side of an interstate highway reporting the license-plate numbers of all the cars going over the speed limit. The public would be outraged, but each of the cars would in fact be violating the law.

Policies and rules are the foundation of a compliance program. But they’re not worth the paper they are written on if you don’t take them seriously. Bringing "order back into the work environment" requires you to look carefully at the policies you instruct workers to follow, as well as reasons why they aren’t adhered to on a daily basis.

SOURCE: David Gebler, president, Working Values, Ltd., Sharon, Massachusetts, MA.

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WE ARE HELD HOSTAGE TO POOR PERFORMERS.  HOW DO WE REVERSE THE TREND?

Question: We've allowed ourselves to be held hostage to poor performers--a trend I am trying to reverse. Our best welder is chronically absent (without calling) and we've been unable to change his behavior. Counseling, raises, even promotions haven't helped. His manager even developed a system to reward him for improving his absenteeism. Management is planning to cross-train another employee to take his place in case he bails. Short of firing him, how else might we address this problem?

Answer: To be candid, based on what you shared, you have no choice but to dismiss this person. Any employee who misses three days of work without calling in should be considered as having abandoned their job and terminated immediately (check with your state laws for any procedural issues). Not doing so sets your company up for all kinds of headaches in the future.  Dismissing the employee forces your management to focus on the right issues--developing skill depth in the organization and ensuring quality and productivity at all times.

Stop thinking about a cross-training program and start implementing it. As a human resources practitioner, you need to be the catalyst. Begin by looking for contract skills as a temporary stopgap. Check to see if other businesses in the region have people who are underused personnel with the same skill sets that they could contract out to you.

Consider employment agencies that specialize in people with these skills. Your labor costs may go up temporarily, but it'll all pay off in the end.

Also, managers who are not accountable aren't performing as managers. Discuss with the CEO/business owner the need to establish measures of success for each position in your organization--starting with this employee's manager. Once you establish key accountabilities, get the CEO's commitment to support them with appropriate actions if managers don't live up to expectations.

SOURCE: Carl Nielson, principal, the Nielson Group (www.nielsongroup.com), Dallas, TX.

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SURVEY:  HR FACES FUNDAMENTAL PARADOX IN REFERENCE CHECKING
By Steve Bates

While HR professionals need accurate and thorough information about people they are considering hiring, they and their organizations are becoming increasingly reluctant to provide information about former employees to other organizations. That "fundamental paradox" is discussed in a new report, "2004 Reference and Background Checking," released Feb. 1 by the Society for Human Resource Management (SHRM).

Some organizations, fearing lawsuits from current or former workers unhappy about unfavorable references, are refusing to provide vital information about these workers. However, failure to provide a reference has come back to haunt a few employers who have been sued successfully for not warning an organization about a potentially dangerous job seeker, the SHRM report notes.

"HR professionals should be encouraging a good flow of meaningful information on job seekers that is relatively easy to access," states the report. "The ideal would allow employers to get meaningful information and references."

However, the report states, more than half of respondents to the SHRM survey "indicated that their organization has a policy not to provide any references or information about current or former employees."

The report says that more than half of respondents are aware of someone in their organization refusing to provide information for fear of legal action. Three-fourths of poll respondents said they believe that laws shielding those who provide job references in good faith from legal liability would lead to their company sharing more information about current and former employees.

Laws in at least 37 states and jurisdictions shield employers from some liability for harm to an ex-employee based on the information contained in a job reference. The protections typically cover information about the employee's job performance made at the request of a prospective employer.

However, 3 percent of respondents to the SHRM survey reported that an accusation of negligent hiring had been lodged against them within the past three years for hiring a person who later harmed another employee or customer or committed another crime as an employee. Two percent of respondents said they had received a defamation claim as a result of a reference about a former employee that was given to a future employer. And 1 percent said they had been accused of failing to provide adequate warning about the threat posed by a former employee who went on to harm someone or commit a crime at another organization.

Four percent of respondents said they do not always conduct reference checks before hiring, even with candidates for executive and upper management positions.  Other highlights of the report include:

• Ninety-two percent of survey respondents notify job candidates that any false information in their application is grounds for dismissal; 89 percent require that candidates sign and date applications; 81 percent have standardized questions for persons conducting reference checks.

• Eighty-six percent of respondents said they always conduct reference checks for executives, but only 75 percent said they always do checks for nonmanagement hourly employees.

• Eighty-five percent said they always verify eligibility to work in the United States, while 68 percent said they always conduct a criminal record check and 66 percent always verify dates of previous employment.

• Eighty-six percent said they find inconsistencies between applications and criminal records at least some of the time, while 81 percent said they find inconsistencies about certifications or licenses at least some of the time.

• A majority of survey respondents-53 percent-said they never give out dates of employment of former employees; 64 percent said they never say whether the ex-worker would be eligible for rehire at their organization; a similar percentage said they never reveal salary history of former employees.

• HR staff has primary responsibility for conducting reference checks at 61 percent of organizations polled.  Just over half of respondents outsource at least some of their record and background checking work.

"Reference and background checking is a critical part in the hiring process and one in which HR can and should play a vital role," the survey report concludes. "The goal should always be to encourage free and complete sharing of useful information to enable companies to make the best possible hiring decisions."

The survey report can be found at www.shrm.org/hrresources/surveys_published/.
Steve Bates is managing editor of HR News.

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WHAT IS THE BEST WAY TO "REJECT" A CANDIDATE?

Personally and timely.  Personally may be on the telephone, but make sure you are honest with them. After all you may want one of them if your original choice doesn't work out.  Also, don't beat about the bush. Let them now they didn't get the job because a more suitable candidate was identified.

If they ask for feedback on their application procedure then they have earned it after 2 interviews, be honest if there is anything they could improve on.  Thank them for their interest and, if appropriate, tell them that next time you have a suitable vacancy you'll ask them to apply.

Timely, as soon as you've made your decision and the successful candidate has accepted, then the next 2 calls need to be to the other 2 candidates.  They've invested a lot of time and effort in you and were obviously very close.  Remember that these people will identify with your company by how you've dealt with them, and this will be reflected in their future dealings with you, whether as a potential employee, customer or supplier.

I firmly believe that any candidate who has spent a significant amount of time preparing to and actually interviewing with a prospective employer, deserves a personal phone call, besides a standard regret letter. Honesty about why they were not selected is the likely more appreciated by the candidate, although may not be the easiest.

For those candidates that you'd like to see join your organization eventually, do encourage them to either keep in touch with you, or to keep posted to your company website for future opportunities. Just be sure that your encouragement is not mistaken for a implied offer for the future.

I firmly believe that any candidate who has spent a significant amount of time preparing to and actually interviewing with a prospective employer, deserves a personal phone call, besides a standard regret letter. Honesty about why they were not selected is likely more appreciated by the candidate, although may not be the easiest.

For those candidates that you'd like to see join your organization eventually, do encourage them to either keep in touch with you, or to keep posted to your company website for future opportunities. Just be sure that your encouragement is not mistaken for a implied offer for the future. 

Any legal ramifications when being honest?  I had a recent situation where two candidates were both equally qualified, except that one had worked as a consultant for the company. We ended up choosing that candidate because they had company experience. When prompted for feedback from our other candidate, I was honest with him as far as telling him we'd hire both candidates if we could, but that the other candidate had more company experience. I asked if we could contact him if another position opened up, and encouraged him to keep in touch with me. Come to find out, he knows our CEO and complained about the way it was handled. Sometimes you just can't win.

In my experience the best way to end a telephone screen without setting up an interview is to say "Thank you very much for your time today. I have just started contacting potential candidates who qualify for this position. If I do decide to go forward with your application I will contact you again." This gives me the option to call back or not and is respectful of the person's time and dignity.

The Hiring Manager should be the one to let the Senior level candidates know they didn't get the position. In lower lever positions the HR Rep handling the process can call the candidate.

A formal letter is appropriate but since your company may have future need for the candidate you don't want to burn any bridges by not giving the candidate valid feedback on the interviews and decision. A phone call is more personal and lets the person feel the company is sincere where a letter can present a dismissive feeling.

I have experienced with the privacy laws, human rights laws, labor standards laws, etc., that as much as you want to be honest with an unsuccessful candidate, you have to limit what you tell a candidate.  Having worked as a recruiter for a large international transportation company (over 20,000 employees), I've seen the lawsuits that have occurred because a recruiter 'just wanted to help the person out for the next time'.

Based on (very expensive) legal advisement and too many court cases to mention, my standard line became and continues to be 'I am sorry to advise that we have moved forward with another candidate that best meets our needs at this time. Because our recruitment process and selection criteria are confidential and can vary depending on the time and nature of the opening, I cannot comment on what did or did not go well in your interview process. We will keep your information on file for 3 months for consideration in future suitable openings.'  I caution sharing any more information than that, as would many lawyers.

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WHAT PRACTICAL METHODS COULD HELP US ASSESS NEW CUSTOMER SERVICE REPS?

There are four elements of performance that enable organizations to provide stellar customer service. These foundational elements apply across different jobs and functional areas, and form the basis for evaluating how well your employees deliver customer service.

Seamless service is craved by all customers, yet few companies deliver it well.
Your ability to keep service problems "invisible" to the customer helps you stand out from competitors. Customers abhor talking with numerous service people about the same problem, and don't want to worry about behind-the-scenes details. Assess employees on their: knowledge of the organization, including how each functional area contributes to the customer experience.

Ability to communicate effectively within the organization and with the customer.
Trustworthiness speaks to the ability to provide--dependably and accurately--what was promised. Customers want to feel that they're in capable hands and that promises will be kept. They want things to be right the first time. If something goes awry, resolution needs to be quick and thorough. See if your employees require training in the following areas:

Knowledge of products and the ability to provide it accurately and in a timely manner.
Attention to detail wins new customers and keeps existing ones satisfied. Every customer wants attentive service and expects you to provide individual care and attention. They want to be acknowledged quickly and politely, and be treated with respect. Assess your customer service staff on their friendliness, courtesy and patience. They need to understand and act on customer needs. Skills required include a good attitude and communication.  Ability to communicate effectively with customers to ensure that the last impression is a favorable one, despite what might have occurred earlier.

Capability of remedying problems as they arise.
Resourcefulness helps. Customers want a flexible approach to service, and they expect providers to meet and handle their needs in prompt and creative ways. Find out whether your service staff consists of creative thinkers who can accommodate unique requests and respond quickly and effectively.

SOURCE: Todd Beck, senior product manager, service portfolio, AchieveGlobal, Tampa, FL

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STRATEGIC HUMAN RESOURCES ACTIONS
Being strategic is sort of like the weather--everybody talks about it, but nobody does anything about it. Here, San Francisco State University professor John Sullivan gives some examples of actions that he says have proven to be strategic.

1. General management

2. Human resources administration

3. Recruiting

4. Retention and employee relations

5. Workforce planning

6. Compensation and incentives

7. Motivation and communication

8. Development

9. Common strategic errors of human resources departments

GENERAL MANAGEMENT
Integrate your managers through metrics -- Managers often work independently and fail to share best practices among each other. By offering each individual manager on the management team an incentive, based on the overall performance of the management team, you can encourage managers to cooperate. By tying managerial performance together with a common bond, you can encourage top managers to help improve the performance of the below-average managers.

By asking employees to rate the quality of their own management and then rewarding managers with high scores, you can also encourage managers to play closer attention to their people management practices.

Bad management-identification program -- One of the primary reasons that employees quit their jobs is the bad management practices of their direct supervisor. Develop a program that can identify "bad managers," and then develop strategies for fixing these managers, transferring them back to more technical jobs, or releasing them.

Measure and reward managers for good people management -- Managers who practice good people management have the most productive employees. Unfortunately, most firms have no measurement system for assessing individual managers on how they manage their people. Human resources should send a clear message to individual managers that managing people is important by developing a system for rewarding managers for great people management.

Off-cycle actions -- Going "against the grain" might seem unwise on the surface, but in some cases, it can lead to being the first or the only competitor in the field. For example, if the economy is down and no one is recruiting on college campuses, you might find that if you actively recruit, you might get some "superstar hires" that you would have had little or no chance of getting when everyone else was going full speed in college recruiting. Yes, this means creating open positions when the company is not doing well, but it might also mean that you will be able to "explode" out of the box better than your competitors can when the economy improves.

There are other off-cycle actions; for example, intensifying retention programs even though your turnover rate is currently very low. Most employees expect special treatment when they know there is a high demand for their talent. This off-cycle approach is so effective because, when you pay attention and recognize employees when it's not needed, employees tend to appreciate it more. In addition, when the job market improves, they might just remember how well you treated them when you did not have to.

HUMAN RESOURCES ADMINISTRATION
Reward results in human resources -- Human resources managers must be recognized and rewarded for their results in maintaining a competitive advantage over the organization's competitors. Human resources lags woefully behind in the use of incentives for its people and programs, however. Combining metrics with significant bonuses for performance can have a dramatic impact on human resources productivity.

In particular, rewards should be offered to all if human resources meets its overall goals. Incentives are also effective for recruiters, generalists (if their business unit achieved its goals), and those in leadership development. It does not take much; as little as a five percent bonus will improve performance by significantly more than five percent. A note of caution, though; bonuses must be tied to numerical results, not subjective terms like "merit" or leadership.

Reward cooperation -- Human resources is known for having functional silos; this runs counter to the goal of developing a competitive advantage. In order to ensure that human resources functions work together, human resources needs to develop a common metric and reward that crosses all critical human resources functions. This way, human resources professionals are given incentives to work together.

Prioritize programs -- It's not important to be great in every area, just in critical ones. That means that human resources must identify which programs and processes are critical to the firm's success and focus on maintaining a competitive advantage in those areas.

Shifting resources -- In addition to prioritizing programs, human resources leadership must ensure that human resources budget and time allocations continually shift from low priority human resources programs to high priority ones.

Employment brand -- One of the areas that is critical if you are to build a competitive advantage is the organization's "brand" as a good place to work. Because most human resources departments spend little time and effort on building a brand, this is an area where it is relatively easy to provide a competitive advantage.

Managers are your "delivery system" -- It's important to remember that supervisors or line managers "deliver" a great deal of a firm's people management services like policy interpretations, performance assessment, and motivation. Although human resources does deliver some information directly to employees, most of that is filtered or redefined by line managers. As a result, it is important for human resources to realize that the primary delivery system for people-management services is the manager.

Human resources must accordingly design its programs based on the strengths and the weaknesses of the delivery system the manager. It is not enough to develop a human resources program; it must be pre tested utilizing managers in order to see if what you intended actually will filter through to the employees.

Human resources advisory group -- Like most other functions, human resources tends to be isolated from outside criticism. To counter that insularity, human resources should put together an advisory group to provide critical input and ideas, and to act as "beta testers." The group should include line managers, individuals who hate bureaucracy, individuals from finance, and some other diverse thinkers. Ask this group to be critical of everything you propose and offer suggestions in order to make your programs easier to implement and more strategic.

Competitive intelligence -- A significant side benefit of doing a competitive analysis between firms is that you frequently gain competitive intelligence information about the operation of their people-management programs. This information can be used to improve existing programs so that you can leapfrog over your competitors. Cooperate with the competitive intelligence staff within your own business units and piggyback on their processes and sources.

Experimentation -- Constantly try new things in every area of human resources on the assumption that you can't beat them if you don't act differently. Rapidly drop the ones that don't work. Run pilot and test programs to see if great "ideas" really become great "programs."

On demand -- Human resources has a bad habit of offering "flavor of the month" programs to managers. Flooding managers with programs that they don't want can be a tactical error that can result in a lot of wasted resources on "unwanted" programs. A wiser approach is to first identify manager needs and provide information to managers about programs and services that you could provide. But only offer new human resources programs after managers request or "demand" them. Proof that managers really want a human resources program is typically if they are willing to fund it.

RECRUITING
Develop a "most wanted" list -- A "most wanted" list is an element of a recruiting strategy that espouses asking your key managers which individuals working at competitors that are "to die for." By identifying the specific individuals you want to hire, by name, at the beginning of the hiring process, you take a good deal of the "chance" out of the recruiting process.

Pre-identifying targets allows you to focus a significant portion of your recruiting time and resources on convincing a relatively small number of "highly desirable" individuals to come to work with your firm. And the net result is that you can, first, really "wow" your managers and, second, you can increase the effectiveness of your firm dramatically by bringing in these "high-impact" individuals.

Hire to hurt -- Identify key individuals at your competitors who, if they were hired away, would significantly hurt your competitor. Look at competitors as you would a sports team with no backups in crucial positions. Be sure and exclude people who are easily replaceable in the marketplace or who have a strong "second" who can step in easily. Ask your current employees who formerly worked for your competitors to help you identify these key individuals.

Benchmark to recruit -- Call the top firms (or piggyback on others at your firm who are actively benchmarking) to benchmark their best practices. Use that benchmarking process to identify and build relationships with potential recruiting targets.

First day of hire, ask, "who else is good?" -- When you hire someone from a competing firm, it is essential that you use that opportunity to gather the names of employees from their former firm who you might want to recruit. Ask the new hire who else at the firm is really good or will soon be good, as well as who is undesirable. Ask new hires (and reward them) if they will help you in recruiting top talent from their former employers.

Pre-need hiring -- Hire people in key positions before there is an urgent need. If you wait until someone leaves a key job, that means that there inevitably will be a delay before the new hire is up to speed. This can dramatically slow your time to market. Hire people before they are needed so they can ramp up their skills and be ready when you need them. Calculate the learning curve and the time-to-fill periods, and use that to determine when to "pre-need" hire.

On-site professional seminars -- People who continually learn and improve are the type of talent you want to recruit. These are the same kind of people who regularly attend seminars. By holding professional seminars on your site, you can physically draw them to your premises while simultaneously improving your organization's "brand."

When they arrive you can excite them with your facility, get them to meet your people, and show them your cool projects and tools all under the guise of helping them learn to perform their current job better. Bring in outside experts as speakers in order to draw them in. Invite potential hires to speak along with your own top employees. Demonstrate to attendees that your firm and its employees are on the leading edge of knowledge.

Invited open house -- An "invite a friend to work" program has a simple premise. Any organization needs to get candidates "in the door" in order to have a real chance of closing the sale. Car dealers and realtors have used this strategy for decades. A "bring a friend to work program" gets potential candidates to come to your facility and talk to your team. It targets employed but "passive" job seekers who wouldn't apply for a job but might come to an event to see what it's like where "my friend" works.

"Bring a friend to work" is a high-touch variation of the traditional employee referral program. It differs from traditional "open house" programs (that are open to the public) in that individual employees invite people they know on a professional basis and who have the competencies the organization needs. If the "friend" is hired, the employee gets the standard referral bonus.

RETENTION AND EMPLOYEE RELATIONS
Who is at risk of leaving? -- Instead of guessing who is going to leave the organization, it is better to take a proactive approach in identifying who is at risk of leaving. Possible strategies include searching the Web for your own employees' resumes; placing a blind ad to see if your own employees apply; or asking other workers to identify who is "looking." Also consider hiring an executive search professional to tell you who is a prime candidate for other firms, who is looking, and who is safe. By getting real data and outside opinions, you increase the odds of identifying the correct individuals who truly are at risk.

Challenge plans or learning plans -- One of the top reasons employees leave a job is that they are not challenged in their current job. By giving each employee an individual challenge plan, employees can continue to grow and learn. A challenge plan would include new projects, tasks and presentations in front of management. Managers and employees both could choose from a list of "tried and true" challenges if they are unsure of what might challenge them.

Pre-exit interviews -- Instead of waiting until someone quits, it pays to be proactive and ask key employees why they stay By identifying what keeps them in the job and at your organization, you can reinforce the positives and eliminate what frustrates them the most. Interviews should be held every six months for employees who are at risk.

Re-recruit -- Superstar employees often leave because they are courted and praised by outside recruiters. Managers must remember to do the same periodically in order to reduce turnover. Why wait until recruiters call and "sweet talk" your top talent? Every six months treat your employees as potential recruits and "re-do the deal" to re-energize and excite them.

Blocking tools -- In this aggressive world, managers must anticipate large scale raiding by competitors. Managers must develop "blocking tools" in order to protect the organization's talent resources. These tools include anticipating competitors' actions through competitive intelligence, developing a blocking team, re-recruiting top talent, offering "stay-on" bonuses, and doing a competitive analysis of the raider. Other blocking strategies might include tools to make it difficult for competitors to identify your top talent, to know your pay ranges, and to find your weaknesses.

Attention plans -- Many employees desire recognition and attention. One-way to systematically ensure that key employees get exposure is to develop an individual "attention plan" for each of them. Ask the employee what kinds of exposure he or she wants, and plot out a plan to insure it happens. Attention areas might include committee assignments, presentations, write ups, chances to be a team leader, meetings with the CEO, and meetings with members of the board of directors.

Post exit interviews -- Many people fail to give the real reason for leaving a job because they fear potential retaliation by their manager in the form of a bad reference. If, however, you postpone the interview until three to six months after the termination, the chances of getting a candid reason for leaving increase dramatically. Use an independent market research firm to identify why employees have left, what the salary differential is at their present job, and even if they're interested in returning.

Change the players -- Even when sports teams win championships, the next year they frequently change more than 10 percent of their team. Teams change their players in order to stay fresh or to adapt to the changing competition or environment. Unfortunately, such high turnover rates are quite unusual in business. If you are trying to be strategic, a low turnover rate could be a big mistake, especially if you have poor hiring practices, weak training, or ineffective incentive and motivation programs. My advice to managers is that "if you continually lose the game, change the players."

Drop the "deadwood" -- Improve people productivity by dropping the deadwood. Instead of giving everyone a second and third chance, run the metrics to see if investing in poor performers has a higher return than getting rid of the poor performers as soon as it becomes obvious they aren't performing. Instead of crying "we might get sued," quantify the real risks of lawsuits. Develop "no-fault divorce" approaches to termination in order to encourage managers to drop bottom performers quickly.

WORKFORCE PLANNING
Bench strength (back-fill) plan -- In a time of high turnover, it's increasingly essential to have a strategy for identifying and developing individuals who can take over if an employee leaves. A "bench strength" plan differs from traditional succession planning in that it only covers replacing key jobs within a single department. It is not a company-wide succession plan. Individual managers are held responsible (and are rewarded) for developing at least one individual to fill every key job.

Redeployment -- Quite often businesses reduce their productivity not because they have the wrong people but because they have good people in the wrong job. This is especially true in businesses that are undergoing continuous rapid change. Initially placing an "innovator" in a business unit, for example, might have been a wise move when the business was in its early growth stages. Once the business has transitioned into a commodity business, however, it makes more sense to move the "innovator" out and into another business where "innovative ideas" can be put to better use this can have more of an impact as well.

Rather than waiting for the employee alone to figure out where his or her own best internal job placement should be, a better approach is for human resources and managers together to proactively identify and move talent from areas of relatively low return to jobs with a higher return. This process is known as proactive intra placement or redeployment.

Targeted succession plans -- Targeted succession plans are narrowly focused strategies for ensuring that individuals are available to fill vacant key positions. They also tell key employees in advance that they have a future at the organization. Targeted areas often include major software implementation efforts and product development teams. Most succession plans fail because they are too broad and cover too long a period of time. Targeted plans allow the focus and forecasting to be more narrowly applied with the goal of increasing the accuracy of the planning.

Corporate headcount "fat" assessment plan -- Rather than learning at the last minute that the organization needs to do a layoff, establish a set of assessment tools that will let you know in advance where headcount may be excessive. Monitor ratios, such as output per employee, employees to managers, overall department headcount to productivity, and overall labor costs per unit of output, to identify possible "fat" areas.

COMPENSATION AND INCENTIVES
What should I pay? -- Salary surveys can be out of date by the time they are published. If they are, you run the risk of "under offering" top candidates. In order to improve the accuracy of your offers, it is critical to capture the "other" offers that each of your new hires and applicants have in order to confirm what the competitive offers really were. You should also ask your current recruiters and outside executive search professionals what the real market rate is.

Pay for performance -- Increase productivity by changing the way you pay people. Shift from the "money distribution department" to a function that provides incentives to productivity and the behaviors that increase it. Place a significant emphasis on, and allocate resources to, non monetary rewards and recognition. Identify and educate managers on which kinds of pay, recognition, and incentives have the most impact on productivity per dollar spent.

Measure and reward increasing productivity. Increase the percentage of every worker's pay that is "at risk" based on his or her output, because there is evidence for most jobs that, as you increase the percentage of an employee's pay that is at risk, performance increases.

MOTIVATION AND COMMUNICATION
"More of/less of" motivation list -- A simple way of identifying what employees want more of in their jobs (and what they want less of) is to ask each employee what job and environmental factors they wish to have increased and decreased. Done quarterly, this process gives managers a chance to understand what employees want. Surveying employees and new hires about what motivates them helps managers better understand how to keep them excited. Topics should include what frustrates you? What challenges you? What are your learning goals?

You do not have the right to remain silent -- This is a tool that explains the shared responsibility that an employee has in his or her own management and motivation. You must educate each employee (begin on the first day) that employees have a shared responsibility to help their managers and the organization understand what motivates and frustrates them. Employees are also asked about their aspirations and the key aspects of their "dream" job. Two way communication needs to be established at the very start so employees understand they have an important role in educating their manager about what excites and challenges them.

Develop an employee "balance" sheet -- In addition to assessing the economic impact of programs, some managers find it helpful also to provide employees with an assessment of their individual economic impact. One way to do that is to give each of your key employees an employee balance sheet at the end of each year. This sheet compares the economic value of the employee's output with the cost of salary, benefits and training. This format encourages workers to be more aware of their economic impact to the company.

DEVELOPMENT
Employee learning plan -- One of the main reasons that people either accept or quit a job is their rate of learning. Top professionals demand the opportunity to learn continuously. By asking each top performer about their learning goals and how they learn best, managers can develop individualized learning plans to ensure that the employee learns at a speed necessary to excite and stimulate them.

Parallel benchmarking -- Benchmark the best practices in related or parallel industries that traditionally implement advanced programs faster than your industry does. Learn from the advanced programs and processes of other disciplines, industries or geographic regions. For example, I once developed an incredibly fast "speed of hire" process for a Fortune 100 company based solely on information gathered from "fast lube" and fast food chains. I studied the existing processes throughout human resources, but they were all slow, so there was really little to learn.

Part of any strategic approach is being aware of the best practices that exist outside your discipline. In particular, disciplines of finance, marketing, PR, and decision sciences are frequently ahead of human resources in metrics and program development.

Where top performers learn -- In a fast changing world it is essential that everyone is continually learning. Unfortunately, in a fast paced world there's often little time for traditional learning. One way to speed up the learning process is to provide employees with "presorted sources."

By asking top performers directly which resources they use to learn quickly (e.g., what sources have top performers utilized and found effective), human resources can relatively easily identify which sources are effective and which sources have little value. Then provide this "best practice" learning list to managers and employees so that they can begin learning the same way that the company's top performers do.

Virtual learning networks -- A learning network is a group of individuals that exchanges information and ideas in real time. By sharing reading and learning, members can learn faster and from each other. Normally, a learning network consists of four to 10 individuals with a passion for learning. Information can be exchanged through e-mail, fax, telephone, in person, or by a combination of approaches. Information that might be exchanged includes best practices, problems, articles and more.

There are three basic types of learning networks: e-mail, fax and telephone. In the first two types, a problem, article or proposal is sent to the group for comment. Ideas and criticisms are given and the results are summarized and sent to all (or to all who participated). Telephone groups use conference calls and hold roundtable discussions.

COMMON "STRATEGIC ERRORS" OF HUMAN RESOURCES DEPARTMENTS
Now that you've seen a list of provocative and innovative strategic human resources ideas, it's time to consider the opposite. After conducting an audit of human resources department operations, it is common to find the following errors or omissions:

• Not measuring or rewarding managers for great people management.

• Not tracking management satisfaction with human resources.

• Not allocating resources to human resources in line with strategic goals.

• Treating all employees and business units the same in recruiting and other human resources functions.

• Not having a feedback loop to learn and revise the human resources processes when things don't work (i.e., bad hires, bad promotions and losing key individuals).

• Failing to do zero based budgeting to critically assess existing human resources programs, and then dropping the weak ones.

• Promoting managers based on technical skills rather than their people skills.

• Having no formal non monetary motivation team compensation.

• Not including on the job training and job rotations as an essential element of the development function.

• Using the same target pay percentile for all jobs and business units when clearly all jobs do not have the same business impact.

• Having no formal retention department or program.

• Only using cost based and no qualitative human resources metrics.

• Having few transfers to and from line management.

• Having no periodic measurement of individual human resources and business knowledge.

• Having no periodic human resources audit.

• Not developing and continually running "what if?" scenarios to ensure there is a plan "B" for the entire range of possible problems.

• Failing to develop human resources programs that cannot be easily copied by competitors.

• Hiring human resources staff without business or line experience.

• Not coordinating human resources plans with other business functions to ensure a coordinated effort.

• Failing to ask new hires why they considered and accepted the job in order to determine which organization efforts had any direct impact on their decision (pay, training, benefits, career Web site, etc.).

• Not having new human resources programs assessed by someone with "fresh eyes" and by managers that hate human resources.

• Failing to measure human resources response time and on time service delivery.

• Failing to assess the value of the human resources department's "brand name" and market share.

Reprinted with permission from "Rethinking Strategic HR," by Dr. John Sullivan, (c) 2004, CCH Incorporated. All Rights Reserved.

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WHAT "EMPLOYMENT AT WILL" REALLY MEANS TO YOU

Learn more about "employment at will" and what it means for employers, employees and the law.

Learn to build peace with employees by using techniques to soften termination and prevent lawsuits.

By A. Jonathan Trafimow

Included below:

1. An introduction to employment at will

2. Ways employment at will can be encroached upon

3. Discrimination laws, and how they erode the employment-at-will doctrine

4. Replacing whim with cold, steely justice

5. The top five reasons companies lose arbitration cases

An Introduction to Employment at Will

You are at your desk, and your stomach rumbles with fear and tension. You are finally going to do it. For months now, you have been looking at the status reports on Jim from accounting, and you have been noting his gradual but steady decline in performance.

He knows something is up, and he has been avoiding you whenever possible. But the company is in trouble, the whole industry is in trouble, and you need employees who are willing to work, not just show up from time to time. There is a knock at your door, and you tell Jim to come in.

"Jim, I'm afraid we're going to have to let you go."    His first reaction is relief. But then, unexpectedly, he gets angry.  "Why me? What did I do? Where do I go now?!" he shouts. You wish he hadn't left the door open, but you try to be as calm as possible.

"I'll be more than willing to help you transition to a new employer, but as you know, the company is going through a transitional period, and we are being forced to do some downsizing. I've done a great deal of thinking about this, and I wouldn't do it if I didn't have to.  "Why are you doing this to me? You're violating my rights!"

Eventually, he calms down and resigns himself to the situation. But you are nonetheless troubled. Aren't his claims legitimate? What are his rights? And what are yours? 

The hardest part of having employees is occasionally having to fire them. Sometimes it's not so bad. Sometimes they simply stop coming, effectively resigning their position. Sometimes their sloppy, shoddy work or outright misconduct speaks for itself--and firing them is an act of justice that improves morale all around.

Often, the situation is much more complicated, and company protocol becomes a nightmare. It often falls upon a company's human resources department to deal with problem employees. Human resources must determine whether an employee can be salvaged--and if not, how best to work within the law, agreements and policies to ensure a smooth termination.

As in all things, it is easiest to deal with a problem when there is a plan and everybody knows their responsibilities and expectations. In this series of articles, we will explore the ins and outs of the "employment at will" doctrine and try to come up with valuable strategies for overcoming its difficulties and planning ahead to avoid legal difficulties when investigating misconduct.

Whether from a union or nonunion perspective, everyone on all sides of the equation can benefit from a little clarity on this often muddy issue, and we hope to shed some light on what can be a baffling quagmire of conflict, pressure and frustration.

First of all, what is the employment-at-will doctrine? Most of us are familiar with it--at least what it means traditionally. Where employment at will applies, an employer can hire, fire, promote, demote, transfer, discipline or otherwise alter the terms of a worker's employment at will--that is, for a good reason, a bad reason or no reason at all.

At least theoretically, an employer could tell each of his or her employees to pick a card from a deck of 52, and then fire everybody who doesn't draw face cards. Perhaps the joker gets a cushy promotion. While not recommended (you won't win any friends, and you may have a hard time getting people to ever work for you again), you'll at least know who all of the lucky people in your office are.

But, as you might expect, there are definite limits to employment at will, and even warnings to keep in mind.

First, it is possible that employers and employees may agree somehow that employment not be at will. Such agreements may be expressed or implied--written, vocalized or just mistakenly assumed--depending on state law. Disputes usually arise from the language of an employer's policies (contained in employee handbooks), through written agreements or from alleged verbal promises.

Second, illegal termination procedures aren't protected, such as discrimination or revenge. Here's where things get tricky. In between employment at will and the law is a whole mess of claims, counterclaims, lawsuits, disputations and confusion. It's enough to make anybody scratch their head. However, coming to terms with the situation is not impossible.

Ways Employment At Will Can Be Encroached Upon

The materials your company produces speak for you. When you aren't around, the guides, handbooks, publications and memos that your employees turn to for guidance are right there representing what you say. Permanently. Above, we defined the employment-at-will doctrine and the expansive rights it gives to an employer--at least in theory--as far as hiring, firing, promoting, demoting, transferring, disciplining or otherwise altering the terms of a worker's employment. In this part, we will examine the ways in which employment at will can be trumped by careless management and the imprecise wording of documents.

If your goal is not to limit your employees' employment-at-will status, your employee handbooks and manuals must not be drafted counter to what you intend. A poorly drafted employee handbook can be the difference between a good-hearted shake at the end of a term, and messy legal battles that no one really wants. It isn't fair to your prospective employees to lure them in with false promises of unlimited job security, and it isn't fair to your business to risk its integrity on correctable mistakes.

Keep in mind that the law varies from state to state. What's true in California may not be true in Texas. By way of example, let's take a look at case law in New York in order to examine the types of disputes that have come up. Remember: Your goal is not just to win, but to avoid the dispute in the first place. These examples will show you where problems can arise.

In New York, the situation got sticky in a 1982 case. The employment application for the publisher McGraw Hill (which incorporated the employee handbook) stated that the company's "firm policy" was not to fire anybody except for a "just cause," and that the company would take "all practical steps toward rehabilitation or salvage of the employee" before termination. An employee was also given the same verbal assurance by the employer's representative. When taking the job, the employee claimed he relied on these assurances, and the court held that he could therefore assert breach of contract.

A manual dispute happened again in 1999, in Waldman v. Nynex Corp. Even though the employer had put a strong disclaimer in the handbook that nothing inside altered the at-will employment status of its employees, the court ruled that there was something inside that most definitely did. The handbook said that whistle-blowers--employees with knowledge of illegal or fraudulent acts--would be protected if they came forward to discuss their concerns with a supervisor. Since that is what the employee had done, the court ruled that his termination was a breach of contract.

However, New York's highest court had the final say (at least so far) on the issue in Lobosco v. New York Telephone Co. in 2000. The circumstances were similar to Waldman v. Nynex. But the court clarified the matter in this case, saying that if an employee was going to rely on a provision that protected them from getting fired for whistle-blowing, he or she must also be prepared to deal with the provision that says nothing in the handbook alters their at-will status. The court explained that "an employee seeking to rely on a provision arguably creating a promise must also be held to reliance on the disclaimer," and that "routinely issued employee manuals, handbooks and policy statements should not lightly be converted into binding employment agreements."

So what can we learn from all of this? In New York, prominent disclaimers are very, very important in your handbook. Without adequate disclaimers, a carelessly drafted handbook provision can get you into serious trouble. That's not to say that some employers won't actively choose to limit their employment-at-will rights. But, at least this should be a conscious decision--don't be vague about where you stand.

Of course, that's only the situation in New York, and the law in your jurisdiction might be different. But you can see how important an employee handbook or application can be, and how important it is to understand what contracts might be implicitly formed by careless wording.

Discrimination Laws, and How They Erode the Employment-At-Will Doctrine

Now that we understand the ways in which employment at will can be limited by contractual literature, it's time to take a look at the ever-expanding, ever-growing list of ways employers violate anti-discrimination statutes and judicially created employee protections. Each one of these is important to think about, and some might surprise you. Brace yourself. Here are some of the many traits courts in one or more jurisdictions have ruled are protected:

Age, Race, Color, Religion, National origin, Veteran status, Union activity, Disability, Pension rights, Polygraph, Plant Closing, Family and medical leave, Public policy, Retaliation, Sexual orientation, Marital status, Height, Weight, Political affiliation, Genetic trait or test, Tobacco use, Recreational activity and Lawful consumable product.

You have to assume that almost every termination at your business can be somehow challenged on the basis of discrimination. It's not fair, but sometimes juries find against employers even without plausible evidence of intentional discrimination, merely because an employer and employee shared past animosity.

Since this is the case, one has to start thinking about the legal ramifications of employee misconduct as it happens, and make sure that the procedures in place for its investigation are pitch perfect. You may slide by with mediocre procedures 99 times, but it's the 100th time that puts your company on the long list of employers successfully sued for discriminatory termination.

How can you inoculate yourself? Is the situation as hopeless as it seems? Should one just plan and prepare for the occasional lawsuit like one plans and prepares for the occasional trip to the dentist? Perhaps. But just because you know you are going to get your teeth cleaned this year doesn't mean you stop brushing. There are common-sense ways to make sure that when your employees get fired, they get the velvet ax rather than the sharpened sword, and remember more of the good than the bad.

Think about it logically. Employees charged with misconduct are not all the same. For instance, some are guilty and some aren't. Of those who are guilty, some are downright nasty and would do it again given half a chance, and some just made a one-time mistake. Some are otherwise hardworking and productive, and others are actually enjoying the time spent being investigated because it gives them a chance to catch up on their soaps. Some know lawyers, and others do not.

Every employment situation is also different. Some businesses have formal, even extensive workplace rules and procedures; others do not. Some are bound by one or more collective bargaining agreements; others are not. Some businesses aggressively enforce their written rules; others are more relaxed. Therefore, at a minimum, employers must know ahead of time how they will respond when confronted with misconduct, and must be consistent.

Juries are pooled from the real world, and in the real world there are more employees than employers. People want to be treated with dignity and respect, and only rarely should the employer want the situation to get personal. It's in your best interest to be methodical and to at least give the appearance of fairness: You wouldn't want to accidentally fire the wrong person, and you don't want to get a reputation as a soulless tyrant. Jurors put themselves in the position of the person being fired and ask how they would want to be treated, even if they were "guilty" of the alleged offense.

When terminating an employee, consider the following. How would you fire a jury of your peers? What would you say to a collection of people with the ability to pull huge sums of cash right out of your pocket? You would probably go out of your way to be as considerate and thoughtful as possible. You might even take extra steps to avoid the situation entirely. Certainly, you would want the experience to reflect the best of your business, to be professional and positive, fair and impartial. You would want to err on the side of generosity and make sure that you knew all of the facts before sitting down.

Also consider the nonscientific, informal impression that union environments breed fewer discrimination lawsuits. Union employees typically know their side of the story will be heard. They have "just cause" provisions, and expect an investigation where they will be represented, culminating in a hearing in their honor.

Does this mean you should enthusiastically support collective bargaining in your business? Not necessarily. The point is to see whether typical collective bargaining agreement procedures can be implemented, even in a nonunion setting, to provide fair investigations and thereby cut down on claims of discrimination.

Replacing Whim with Cold, Steely Justice

You've thought about it, you've done the research, and you've decided that your usual policy of throwing darts at a picture of last year's employee picnic is no longer the ideal method to determine who you are going to fire this week. The employees you really value are talking about maybe seeking employment elsewhere. It's time to investigate alternative procedures. Perhaps you would like to fire only people who are flagrantly flouting the sensible rules you've struggled so long to put in place. Perhaps you would only like to fire people who are stealing from you, or who haven't shown up in a month.

This is where a good, consistent program for investigating employee misconduct comes into play. If you want to create an atmosphere at your workplace of justice, equality and incentives for doing the right thing, there are at least four critical steps to conducting investigations that meet these qualifications.

These steps are (in chronological order): (1) notice of the rules and a notice of the charges; (2) an opportunity to be heard; (3) deliberation; and (4) rational decision-making. While these can be incredibly formal processes--or just something you are keeping in your head as you go along--they ought to be considered independent components and be separated by some amount of time, even if just a day, or sometimes even less.

Let's look at each step separately

(1) Notice of the rules and a notice of the charges

It's not really fair to punish people for things they don't know about. You want your internal justice system to mirror the rules of the outside world, and one of those rules is trying to make sure everybody knows what's wrong and right. To keep your employees from falling back on claims that they weren't informed, and that they "just didn't know!" it is vital to provide notice of the rules upfront, before they have a chance.

Once you've made sure that everybody in your company knows what's acceptable and what isn't, then you can begin dealing with infractions. Once an employee appears to violate rules that are "on the books," you can consider levying charges.

Once you've told an employee you are concerned they may have messed up, you want to set a separate time and place to meet and discuss the matter. This means that even before you let the employee know that their every move is being watched, you ought to have done some preliminary investigation, even just to find the matter worthy of attention.

The notice can be long, formal and detailed, but it doesn't have to be. It doesn't even have to be written down at all. The size and form will depend on a number of factors, such as the severity of infraction that has been committed and the kind of organization in which it has been committed. Not every piece of misconduct will get the same level of attention, but very serious matters should be treated as such--very seriously.

There ought to be a delay between the notice of charges and any other action taken, so that your employee can consider the charges and think about how to respond. Should they get a lawyer? Should they contact their union representative? Should they meet with other co-workers? Should they find that all-important missing file?

Some amount of delay also contributes to the appearance of fairness. You don't want to look like you are railroading your employees before they even have a chance to think about how to respond. Being confronted with charges of wrongdoing makes anybody nervous, and juries understand this.

But you don't want to wait too long before taking action. If the crime is really serious, employees might start thinking about how to impede future levels of investigation. Should they shred those sensitive documents, close out their Swiss bank account and get a one-way ticket to Peru?

(2) An opportunity to be heard: the investigative interview

The initial interview with the suspected wrongdoer is the heart of most investigations. It is the most difficult and the most important means to getting at the meat of the matter. Everybody will conduct these differently, but you should really consider inviting another manager to the meeting to take notes. Consider asking the employee to review the notes at the end of the interview, inviting him to make any changes to them, and sign at the bottom.

Beware: The employee may have a tape recorder and not share that fact with you. As a general rule, employers should not conclude the interview until three questions have been settled: (1) Is there anything you wish to add? (2) Is there anyone else I should speak to or documents I should look at? (3) What would you do if you were me?

Union employees have the right to a union representative at any investigative interview the employee believes will result in disciplinary action. However, the employee cannot use this right to unduly delay the interview. If the union rep is unavailable, they have three options--choose another union rep, do the interview without representation or not do the interview at all, in which case you may tell them that any decisions will be made without their input.

The National Labor Relations Board frequently changes its mind as to whether these rights apply to employees in a nonunion workplace. Currently, they don't.

(3) Due deliberation

Researchers have concluded that many employers are not very careful and consistent when it comes to punishing wayward employees. Since employers are forced to be judge, jury and executioner, it is imperative that they pay very strict attention to how they conduct themselves. Time should be spent. Foreheads should be knotted, brows should be furrowed, and consequences should be carefully weighed. An employer should wait until the investigation is completely over before coming to any conclusions, even if it intends to exonerate the offender. All evidence should be carefully sifted through, sorted, and considered. The appropriate level of discipline should be meaningfully assessed.

This doesn't mean you should take forever. To everyone else, failure to reach a decision may mean that you've decided in favor of the employee. Delay is a decision itself. Usually not a very good one, either.  Once you've thought it through, it's time to make your decision. That brings us to the next step

(4) Rational decision-making

This article has been intended to convey a simple truth: Appropriate investigative procedures, coupled with an understanding of the risks and benefits of the employment-at-will doctrine, will ultimately lead to fairer discipline across the workforce--with all the attendant monetary and diplomatic benefits.

However, not all managers investigate employee misconduct with the same vigor, and this is a problem when it comes to discrimination lawsuits. It is important to consider why this happens.

Managers do not always react harshly to their subordinates' supposed misconduct, even when it is serious. Often, it is because they have become dependent on them. Their subordinates perform some vital function and they therefore know that they can get away with murder. Their supervisors let them because they have no choice: Both of their careers are at stake. They may even go so far as to cover up for them, or blame their mistakes on someone else.

The problem comes into even sharper focus when somebody less vital is disciplined harshly for the same type of infraction. Then, the appearance of institutional unfairness may be overwhelming to a jury.

But that's not all. Another factor that causes managers to discipline subordinates inconsistently is whether the poor performance is deemed to be a result of internal or external factors. Internal factors include things like personality, effort, attitude and education, while external factors are things that may appear to be the fault of the managers, things like the task being too difficult, a lack of adequate support or insufficient information. Managers tend to punish people more harshly when they consider infractions to be a result of internal factors. That's not surprising: Otherwise, it's the manager's fault.

Finally, the outcome of situations also unfairly determines the level of punishment. If something terrible happens, companies look for a scapegoat. If serious malfeasance occurs but leads to nothing, sometimes it is perceived to be more trouble than it's worth to investigate and discipline.

All of these factors contribute to a climate of inequitable decision-making, which can have serious legal consequences. Rational decision making insists that punishments follow infractions--consistently, appropriately and irrelevant of future consequences. Human resources has the unique ability to step in and take control--to intervene at every level to impose fairness where there is a potential for favoritism to take root.

If employees are terminated in a manner that that does not totally offend their sense of equity and fair play, they are less likely to sue. If they know the rules and see them applied without favoritism or discrepancy, they are less likely to make mistakes. If employees are happy and well-treated, companies will last longer and businesses will prosper. There will always be people who are upset about the loss of their job and who want compensation for insults and injuries--but to the extent that a workplace has a fair, consistent, open policy for dealing with terminations, juries are more likely to deliver favorable verdicts to employers.

The Top Five Reasons Companies Lose

At core, the investigation of employees sets an ambitious goal: exposing misconduct and setting appropriate punishments. Even though employers have the right to fire their employees at any time for any reason, the lawsuit-happy society we live in can make firing even the most troublesome employee a challenge. Human resources professionals should consider the investigative protocols we have outlined, and seek to implement them as comprehensively as possible.

Remember Jim from the first part of this article? Remember how mad he got when suddenly confronted with the termination he was expecting? Imagine how the situation would have turned out had we applied what we know now.

Imagine the same situation--but now you are a canny, savvy human resources manager and you've been doing some reading. The first thing you do is send him a notice of the charges. You inform him formally that due to his recent poor performance, his presence is requested at an investigative interview. If your company is unionized, he will consider finding a union representative to accompany him.

During the interview, you confront him with the situation as you see it, and let him know the potential outcomes. You take notes and he does the same. The interview goes about how you'd expect, and when added up, the evidence certainly seems damning.

"Is there anything you'd like to add?" you ask.  "It's funny," he says, "But I've actually been thinking about moving to a completely new field for some time now. I'm tired of numbers. I've always wanted to drive race cars."

"Is there anyone else I should talk to?" you ask.  "I wasn't going to say anything," he says, "But there's something you should know. As bad as my status reports seem, I've actually been doing 10 times worse. Patricia, my supervisor, has been covering for me because I'm the only one who knows how to use the computer database."

"Golly," you say, "that's terrible. What would you do in my situation?" He shakes his head. He says he honestly doesn't know.  You take some time to think about it, and you decide you still want to let Jim go. The next day, you call him into your office...but you get Patricia instead.

"Jim quit today," she says, "He joined a NASCAR pit crew." You aren't surprised, and you're glad she's here. You've also got a notice of charges for her too now.

A significant body of research literature suggests (1) that there is significant room for improvement in the efficiency and fairness with which employers investigate and punish employee misconduct, and (2) that employer failings lead to unfair results and often to reversals of disciplinary actions by arbitrators. Employers (particularly smaller employers) can take steps to formalize their procedures to promote consistency in their procedures and fairness in their results. It doesn't take a complete overhaul or massive restructuring campaign, but it does take concern, attentiveness and desire to change.

At least one professional researcher has concluded that employers can significantly reduce the number of arbitrations they lose by improving their disciplinary procedures. In Why Arbitrators Overturn Managers in Employee Suspension and Discharge Cases, George W. Bohlander concluded that five reasons accounted for more than 71.5 percent of the cases in which an arbitrator reversed the disciplinary imposed by the employer (in other words, cases in which the arbitrator ruled on behalf of the employee).

1. Lack of supporting evidence. Bohlander found that the most common reason for a reversal (26 percent) was that the employer did not provide sufficiently persuasive evidence to support the disciplinary action.

2. Mitigating circumstances. The next most common reason (18 percent) Bohlander found for a reversal was the presence of mitigating evidence.

3. Procedural due process errors. Bohlander found that the reason for reversal in almost 13 percent of the cases was that "management committed procedural faults serious enough to prejudice the rights of the grievant to a fair defense." Bohlander expressly included denial of the right to union representation among the possible procedural due process errors.

4. Harsh punishment for rule infraction. Bohlander found that arbitrators reduced the penalty (such as firing someone or a lengthy suspension) as too harsh in about 8 percent of the cases.

5. Management partly at fault. In just over 7 percent of the cases, Bohlander found a reversal because the management--and not just the employee involved--was partly at fault.

Based on these findings, Bohlander concludes that "employers need to improve their investigatory skills in disciplinary matters," and includes the training of supervisors among his recommendations. Bohlander's study takes place within the context of the grievance machinery of a collective bargaining agreement; it is at least possible that the results of a similar study in a nonunion environment might be even more dramatic.

The next time you find yourself confronted with a problem employee, don't make a snap decision and fly off the handle. Take the time and follow the steps. Give them the velvet ax: Let them know you've considered the situation thoroughly, and that your decision is neither light nor easy.

You don't want to fire an asset. And make sure that whatever you do, you do it consistently, fairly and without illegal prejudice. In the end, the results will speak for themselves.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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MICHIGAN COMPANY DRAWS FIRE FOR TERMINATING SMOKERS

By Steve Bates

A Michigan health care company has come under criticism for firing or forcing out all of its workers who smoke, even those who do so in their own homes and on their own time.

Weyco Inc., a benefit services company based in Okemos, Mich., gave employees 15 months' warning, offered smoking cessation assistance to employees who smoke and eventually terminated workers who refused to take a nicotine test to prove that they are tobacco-free.

Company officials say they want a healthy workforce and are willing to take criticism for what they believe is an important principle. "We're not telling you you can't smoke," said Weyco Chief Financial Officer Gary Climes. "We're telling you you can't smoke and work here."

Climes told HR News that although the policy was designed in part to cut down on the company's soaring health care costs, "our main goal is to improve the health status of our employees. There definitely are cost issues involved," he added. "We're just exercising our right under the law."

Climes said he could not determine exactly how many company employees resigned between October 2003, when the policy was announced, and Jan. 1, 2005, when it took full effect. Some who smoked and who left might have had multiple reasons. However, he said four people were forced out in recent weeks after refusing to take a nicotine test.

The company's actions-and similar moves by a small number of other organizations-raise significant legal and social issues, say legal experts and others familiar with the practice. Among them: How far can and should a company go to cut its health care costs? How far should it go to try to protect the health of its workers against their will? What other legal activities might become conditions for termination? Occasional social drinking? Gaining a few extra pounds? Engaging in risky hobbies such as skydiving?

And, of course, is Weyco's action legal?  Few court precedents

Legal experts say that few court decisions have addressed such company policies. However, they say that in states such as Michigan, where there is no smokers' rights legislation on the books, Weyco's policy and practices might be legal.

"There's legal discrimination and there's illegal discrimination," said Peter J. Petesch, an employment attorney who is a partner at Ford & Harrison LLP in Washington, D.C. Unless the company's actions can be shown to violate a specific state or federal law-such as discriminating against a protected class, on the basis of race or religion or the like-it might be difficult for employees and applicants to challenge them successfully in court.

"Although we might feel a sense of moral outrage when a class of people is discriminated against," said Petesch, "it may very well be legal. There have been common-law theories advanced" in the effort to have groups such as smokers protected by job bias laws, but "they have not necessarily been successful."

Weyco's Climes, a former smoker himself who knows "how hard it is to quit," said that "our legal counsel reviewed this very closely."  However, Edwin G. Foulke, an employment attorney with the Greenville, S.C, office of law firm Jackson Lewis LLP and a former chair of the U.S. Occupational Safety and Health Review Commission, said Weyco's actions could raise issues under the federal Americans with Disabilities Act (ADA).

"I wouldn't be surprised to see somebody litigate this issue," he stated. Jury members weighing such a policy "might ask themselves, 'Is this really fair?' " he said.

Twenty-nine states have smokers' rights laws. At the same time, many states have laws banning smoking in most workplaces, setting up the potential for confusion and conflict about what workers can do-and where. Some laws and company policies extend smoking bans to outdoor property such as parking lots, and some even try to keep people who have been smoking in the previous two hours from entering a building and bringing some of the haze in with them.

According to the National Law Journal, the Union Pacific railroad company announced last year that it was implementing a no-smoking policy for all employees, both on and off company property. The firm said it questions potential hires about smoking. And Alaska Airlines reportedly has a similar policy, requiring job applicants to pass a nicotine test.

The National Law Journal noted that in a 1987 court case the 10th U.S. Circuit Court of Appeals upheld the right of the Oklahoma City Fire Department to have a no-smoking policy, finding that the rule had a legitimate purpose in promoting health and safety.

But at a private-sector employer whose workers tend to work in offices, a policy barring all smokers appears to be "extremely drastic," said Peter P. Fornal, president of Human Resource Consultants in East Greenwich, R.I., and a member of the Society for Human Resource Management's Employee Relations Panel.

'This is the wrong path'  "It's punitive as opposed to being positive," said Fornal. "If we want to empower and energize our employees, this is the wrong path."

Some organizations are addressing the financial and health costs of smoking in different ways, such as rewarding workers for healthy behavior rather than punishing them for unhealthy habits such as smoking.

And, in fact, Climes said Weyco's no-smoking policy is just part of an overall wellness program that does offer incentives for workers to stay or become fit. The firm's "lifestyle challenge" pays workers cash for lowering their blood pressure or improving flexibility, and the company pays up to $45 per month toward employee memberships in health clubs.

"We are in the employee benefit business," said Climes, adding that "we knew that, being the leader we'd take some heat" for the novel policy. The company's actions have been debated in recent newspaper articles and on The Today Show on Jan. 26.

The official company policy is that "Weyco Inc. is a non-smoking company that strongly supports its employees in living healthy lifestyles," according to the Weyco web site. "We have a flexible, family-friendly work environment and we offer a competitive salary, complete benefits package and ample opportunity to grow professionally."

Said CEO Howard Weyers, "We're doing this for our company. Our intent here is to improve the health status of our employees. That's what we set out to do.  "We told people that we would help them" become tobacco-free if they so desired and that a full-time coach on the company staff would assist them with other health-related issues.

Weyco stopped hiring people who smoke in 2003. Climes said everyone on the payroll was tested in January of this year-right up to the CEO. Seven positive tests came back from a breath test. Follow-up urine tests cleared those employees.

Existing employees will be subject to spot nicotine tests at any time. Any who fail will be suspended but permitted to enter a smoking cessation program. A second failed test will result in termination, said Climes.

He noted that as many as 20 Weyco employees have taken advantage of company-paid smoking cessation programs and have become tobacco-free since the policy was unveiled in 2003. "That's the success factor," he commented.

To date, no legal action has surfaced from former employees of the company. However, the issue is likely to remain in the headlines, suggested attorney Petesch.  "What we're seeing now is a growth in the regulation of off-work behavior that some employers have decided is antithetical to being a good employee for the organization," he said.

Commented attorney Foulke: "The question is: Where does it stop?"

Steve Bates is managing editor of HR News. He can be reached at sbates@shrm.org.

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HOW DO WE PROVE THAT LOWERING TURNOVER BENEFITS THE COMPANY?

Your management team recognizes the financial impact of high turnover, but line employees experience it firsthand on a daily basis in the form of inexperienced co-workers, accidents and lower-than-expected quality and productivity. Persuade management to demonstrate a commitment to lowering turnover by:

• Establishing a selection policy and practice that makes it extremely difficult to be hired by your organization.

• Setting turnover goals for the company and each manager, and include it as an essential portion of the managers' performance assessments. 

• Communicating turnover rates annually.

• Providing orientation to new employees, including clearly defined performance expectations, and training/development of skills for continued employment.

To demonstrate that low turnover benefits both management and staff employees:

• Solicit input from all employees to isolate the reasons why turnover rates are high. Conduct surveys and form focus groups that include a cross section of your workforce.

• If you compensate employees who refer applicants who are subsequently hired, delay the reward until the new employee completes at least one full year of service. 

• Create ways to celebrate decreased turnover by department, being sure to reward both managers and employees.

• Celebrate continued service of employees with their co-workers, possibly including their families.

SOURCE: Lonnie Harvey Jr., SPHR, president, the JESCLON Group Inc., Rock Hill, SC

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OOPS, I DID IT AGAIN:  TEN MANAGERIAL MISTAKES THAT LEAD TO LITIGATION

Employers that fail to adopt and follow basic good management practices will substantially increase their risk of litigation and liability.

By Maxine Neuhauser

Supervisors, managers, executives and even human resources staff often engage in behaviors that, unwittingly, lead employees to feel misled, lied to or otherwise unfairly treated. In doing so, they increase the likelihood of litigation. Ten common mistakes increase the likelihood of employee lawsuits and financial exposure.

1. Forget About Training
Workplaces today are busier than ever. Devoting time to management training takes precious hours away from productive, moneymaking endeavors. A company, however, is its managers. What the managers say and do, the company says and does. Correct behavior prevents lawsuits. Missteps lead to liability. Managers who are not conversant in company policies, and who do not know the basics of setting goals, preparing performance appraisals and proper documentation become the catalyst for lawsuits.

Supervisors need training about how to handle difficult situations--what to say, whom to turn to for assistance and what not to do. Failing to provide management training is shortsighted, and with the rise of potential individual liability, unfair to a company's supervisors.

2. Disregard Company Policies
Policies establish a company's "rules for the road" for both employees and managers. They set company standards and inform employees of management's expectations. Well-drafted policies tied to an enterprise's business needs provide guidance to managers and employees. If followed, policies help ensure consistent treatment of employees.

Disregarding policies heightens the potential for inconsistent treatment. It thus increases the risk that employees subjected to harsher action than their co-workers will interpret the discipline they received as unfair or discriminatory. Ignoring policies also sends the message that the employer believes they are unimportant, and gives license to employees to disregard them as well. An employer that fails to follow its policies not only loses the benefit of having them, but it also sets itself up to be portrayed as mismanaged, uncaring and willfully noncompliant with the law.

3. Shoot From the Hip
Firing without notice may occasionally be appropriate, but rarely. Acting without fair warning--or rashly or arbitrarily--invites resentment. Employees who feel ambushed may be led to seek their revenge through litigation.

Companies can reduce this risk by making employees aware of the probable consequences of misconduct through well-publicized and consistently enforced policies and progressive discipline. Before disciplining an employee, a company should be able to state:

• The legitimate business reason for the action.

• Whether the action is consistent with other disciplinary actions the company has taken in similar situations, and if not, why not.

In addition, employers are usually well advised to give an employee the opportunity to give his or her side of the story before administering discipline. A meeting with the employee often provides a valuable safety valve for both employee and employer.

Often, employees admit the misconduct (or some portion of it). Though unhappy with the discipline levied, employees often will be satisfied with the opportunity to have been heard. Managers need not agree with the employee, and should not argue or apologize. Meeting and listening alone can make employees feel that they have been treated fairly--because, in fact, they have been.

4. Motivate Poor Performers With Raises and Bonuses
The season for annual raises and bonuses brings with it the temptation to give underperforming employees some amount of increase or bonus. Withholding raises and bonuses is a tough decision. We all like to be liked. Withholding raises and bonuses seems contrary to a supervisor's goal of maintaining morale and staff loyalty.

Giving undeserved increases, however, does not spur poor performers to improve. Rather, it reinforces poor performance by telling employees that their performance merited an increase or bonus.

Terminating someone on the grounds of poor performance, after years of raises and bonuses (even small ones), creates concrete evidence of inconsistency between what the employer says now versus what it did then. It raises suspicion of ulterior motives for the adverse employment action and provides strong motivation for the employee to consult counsel.

5. Criticize the Person
Few jobs lend themselves to purely objective evaluation. Subjective criteria nearly always come into play. The challenge lies in relating performance criticism (and praise) to the job and not the person. Reviews that characterize the employee, rather than evaluating his or her performance, may become evidence of bias and discriminatory stereotyping.

Praise an employee for becoming the region's leading sales person in just two months, but not for being "young and enthusiastic."

Similarly, criticize an employee for repeatedly failing to meet deadlines, not for being "lazy." Employees may need to "update their skill sets"; they do not, however, constitute "deadwood." To avoid such pitfalls, companies should encourage and assist managers in establishing measurable goals and creating business-related standards against which to evaluate employee performance.

6. Ignore Problems
Employers ask for trouble when they ignore problems and complaints. Failing to address performance issues has the practical effect of lowering performance standards. It leads employees to believe that they are performing at satisfactory levels because management has not told them otherwise.

Management may be dissatisfied with an employee's level of performance, and may truly believe that the employee ought to know he or she is missing the mark. Unless supervisors confront employees about performance deficiencies, however, and expressly state what employees need to do to meet expectations, change is unlikely. When after years of accepting poor performance a manger finally acts, perhaps by discharging the poor performer or perhaps by passing the employee over for promotion, the employee may react with surprise, hostility and claims of discrimination.

7. Put Nothing in Writing
Without a written record documenting employee performance issues and management's response, employers increase the risks of "he said, she said" situations when taking adverse employment actions. Employees who have not been given (and required to sign) counseling memos or performance evaluations frequently claim that the counseling, the warning or the evaluation was never received. Verbal warnings carry less weight than written warnings with employees, their lawyers and juries.

Employees who have been repeatedly spoken to, but never written up, are likely to discount or even disregard the import of the counseling. Employers who do not document employment issues leave themselves with little concrete evidence to prove a history of poor performance as the reason for discharge, instead of, for example, retaliation for taking medical leave.

8. Understand That Boys Will Be Boys
A hostile work environment, whether because of sexual harassment or harassment based on age, disability or race, may arise from either severe or pervasive conduct. Jokes, e-mails and passing comments when considered individually may be of little consequence. Accumulated and viewed as a whole, however, they can be used to show pervasive misbehavior that has converted a professional workplace into a frat house. That a harassing employee may not intend to harass his co-worker does not constitute a defense nor does it create a shield from being sued.

Employers who know of employee misconduct, such as use of the company's e-mail system to send sexually explicit jokes or photographs, and who fail to take action to stop the conduct, substantially increase their risk of litigation and liability for damages.

9. Lie
When management's fails to tell the truth, employee disgruntlement inevitably follows, and with it a fast track to the courthouse - and potential liability.

Employers do not protect themselves by telling an older employee that he is being discharged because of job elimination when the true reason is poor performance. As soon as someone (younger) is hired to replace the discharged employee, the company's lie, even if intended to protect the employee from hurt feelings, will be seen as a pretext to hide discrimination.

10. Cover-up
Repeatedly, experience shows that a cover-up carries worse consequences than the initial misdeed. Shredding documents, deleting files or throwing away drafts upon learning of an impending lawsuit can all add up to trouble. When confronted with a bad situation, it remains true that honesty is the best policy.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Maxine Neuhauser is an attorney with Epstein Becker & Green in the labor and employment practice group. Prior to joining Epstein Becker & Green, Neuhauser was a deputy attorney general for the State of New Jersey, where she represented regulatory boards and agencies in both civil and administrative litigation.

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