Tag Archives: discharged employees

Reputational Risk Management Using the Three Bell Curves

Incremental reputational risk, if not managed correctly, can chip away at a company’s brand for years and eventually result in lower sales and lower retention of customers.

Most risk management initiatives we hear about are “outside-in” approaches.  Managing the Three Bell Curves proposes an “inside-out” method that builds an organizational culture where reputational risk management is woven into the fabric of a company’s DNA.  The only way this can be done is by including the customer’s voice in just about all decision making.

What Is Organizational Culture?

I Googled “organizational culture” and got more than 36,000,000 hits in .32 second.   None of the definitions is wrong—but none is perfectly right, either.  What people miss is that organizational culture is an emergence – an immeasurable state made up of two or more relatively simple ingredients, where 2+2=7. 

Deal and Kennedy (1982) defined organizational culture as “the way things get done around here.”  Of all the definitions I’ve read, this simple one resonates with me most.  Deal and Kennedy’s definition, while not perfect, seems to be the most widely accepted.

“The Way Things Get Done Around Here”

While culture itself is extremely difficult, if not impossible, to measure and manage, the relatively simple ingredients of culture are not.  Because they are manageable, it is possible to guide the organization’s culture without being able to manage it directly.

When we think about “the way things are done around here” from a high level, we see there are really only three key ingredients:  employees, work and customers.  That’s all.  And managing all three well ensures customers get what they want, when they want it, at a quality level they expect (or better).   Guiding culture through the proper management of employees, work and customers results in a maximization of customer retention, brand strengthening and even growth (through referrals). 

The Three Bell Curves

The simple bell curve shows the normal distribution of things in many facets of business.  We use them when gauging success, failure, mediocrity and everything in between.   A bell curve can be assigned to each of the simple ingredients that make up your company’s culture.

Employees

Gallup estimates that 52% of American workers are not engaged and that a further 18% are actively disengaged.  This means  that only 30% are either engaged or actively engaged.    Where does your company stand?  There are several ways to find out.

  1. Employee surveys
  2. Employee giving
  3. Attendance
  4. Customer surveys

The impact of employees on reputational risk is obvious.  Or is it?  When we think about the impact employees have, most of us think about the customer-facing employee – the ones customers actually communicate with.  The fact of the matter is that, in many companies, most employees are back-office or noncustomer-facing.  These workers as a whole have every bit as much of an impact on customer retention and growth as those who are customer-facing.  This is because problems left unsolved in the back office always present themselves in some form or another on the front line.  Similarly, the problem solving that occurs in the back office creates a smoother experience on the front lines, helping those customer-facing employees provide a better experience.  This is even more the case in manufacturing, where a product does all the speaking for itself and there is no customer-facing employee to manage the experience.

While it’s one thing to come up with metrics, it’s a whole other thing to execute strategies for change or improvement.  Fortunately, much work has been done in the field of organizational psychology that has revealed the drivers of engagement.  Sirota Survey Intelligence, out of New York, has been capturing data regarding employee attitudes since the early ‘70s.  Their findings are really interesting.  In terms of drivers of engagement, the three most important areas should be:

  1. *Employee equity (sense of fairness)
  2. Employee camaraderie
  3. Employee sense of achievement

*most impactful

By measuring and managing the workforce’s sense of equity, achievement and camaraderie, a company can make great strides toward reducing reputational risk.

Work

Peter Drucker said, “There is nothing more useless than doing efficiently that which is not necessary.”  Unnecessary work (waste) results in a couple of things.  First, working with processes that aren’t necessary smacks an employee’s need for the sense of achievement in the gut – dead center.  Second, the customer pays for everything your company does, even if the work is considered “waste.”

Necessary work is activities that are required (usually by law) that customers aren’t necessarily interested in paying for but must.  Valuable work is work that customers would pay for.

The measure of value vs. waste comes during the process of problem solving.  Problem solving done the right way eliminates waste.  Done the wrong way, it adds complexity.  Workarounds, for instance, add waste.  Root-cause elimination removes waste and leaves more room for creating value.

Success on the” work” ingredient can be measured in terms of speed, cycle time and quality.  It also presents itself in overall customer satisfaction.  It helps employees to envision the work bell curve as they perform their everyday job duties.  If everyone had an “eliminate waste, maximize value” mindset, think of the ideas employees would come up with!  And once those ideas are acted upon, it leads to the employee’s sense of achievement and the removal of something customers didn’t want to have to pay for.

The Lean Enterprise Institute (Cambridge, MA) has a website that contains a plethora of useful information on working with the principles of lean inside and outside of manufacturing.  Check out http://www.lean.org for more information on thinking and working lean.

Customers

Fred Reichheld, who founded Bain's loyalty practice, was determined to find out why some companies were so successful while others weren’t.  In side by side comparisons, he and his research team found that customer advocacy was very strong among the successful companies while, at the mediocre or poor-performing companies, customer advocacy was weak.  This all makes perfect sense. What didn’t (make sense) was that there was no calculation, no indicator, that could help a company understand where it stands and how to move the needle to the right on the bell curve.

By asking just one question, the team found, a company could develop a benchmark and use it to improve results.  The one questions is: “On a scale of 0 through 10, how likely are you to recommend (company XYZ) to a family member, friend or colleague?” Having listened to answers to that question many times, researchers began to notice that customers who responded with a 9 or a 10 had actually promoted the organization or were going to in the future. Those who answered with a 7 or 8 were neither excited nor disappointed.  Customers who scored between 0 and 6, the team found, were most likely to damage the reputation of the company by speaking about an experience in a negative light.  

So how does a company calculate its Net Promoter Score?

A company’s Net Promoter Score is calculated by subtracting the percentage of detractors from the percentage of promoters:  %PROMOTERS – %DETRACTORS = Net Promoter Score.  Yes, it’s that simple.  NPS is a sign for everyone from the ground up to the corner office to see and work to improve.  It’s the customer’s voice.  It’s your company’s true north.  Measure it.  Improve it.

For more information on The Net Promoter Score , read The Ultimate Question by Frederick Reichheld. 

Conclusion

The inside-out approach to reputation risk management requires an understanding of the nature of organizational culture (the way we do things around here).

Net Promoter, Net Promoter Score, and NPS are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc., and Fred Reichheld

Cumulative Trauma (CT) – The "Wearing Out" Disease

It is time to revisit and re-evaluate the value of this statutory condition (L/C 3208.1), which is rapidly becoming yet another undue burden on both employers as well as the workers' compensation system. Cumulative Trauma claims are currently being used, and in many instances abused, by disgruntled employees who are no longer on the payroll. By filing Post-Termination Cumulative Trauma claims, employees are circumventing the legitimate needs of businesses to make personnel decisions based on the employer's current financial situation and needs.

One need only look at the increase in Cumulative Trauma claims that are being filed after an employee has been laid off. While there has been no specific injury that they can point to, many are now claiming that “work” has worn them out and that they are therefore entitled to even more money than that which was bargained for as a part of their employment agreement.

I would not argue that there are no real and viable events that can lead to a compensable situation. Asbestosis would be the best example of an occupational disease that was unknown to either management or their employees for many years. Litigation over asbestosis has been ongoing since then, and I believe that the compensation awarded to injured workers in such cases is justified.

However, when an employee who is hired to do a job that produces no discernible injuries and who has been laid off for legitimate, non-discriminatory reasons is able to work around the system by claiming a cumulative injury, it is time to reassess the value of that part of the Labor Code. We must decide if both parties to this equation are being properly served. Or, is this an abuse of the system that has been allowed to fester too long?

As a starting point for this discussion, when someone is hired for a job whether it is for either brain or brawn, the employer is taking on the whole person as he/she finds them. When the employee arrives at the jobsite, he/she does not simply place their body in the corner to rest while some mysterious spirit does their job. Employers hire the entire package as he/she finds them and is responsible for same. I would then point out that whether or not we like it, all of us are “wearing-out” as the years pass. The question then is, “Why should an employer be responsible for the normal aging process vs. being responsible for a specific injury?” I argue that they should not.

I therefore offer three possible options for consideration. Any or all of these will allow legitimate cumulative injuries to be raised as part of the work bargain while at the same time making employees responsible for their own “wearing out.”

  • Take “cumulative” claims out of L/C [Section 3208.1(b)] so that it reads: “An injury may be either specific or cumulative occurring as the result of one or a series of incidents or exposure which causes disability or the need for medical treatment” and then remove cumulative trauma from L/C 5412 and place it under 5411.

    This will allow employees to file a cumulative trauma claim just as they would a specific injury. This would also place the burden of proof on the employee to show, just as they must now with a specific injury. In other words, what extraordinary events of employment occurred thereby showing how this cumulative trauma is more than just part of the normal “wearing out/aging” process we all face every day.

  • Change the definition of a Cumulative Trauma injury to more closely mirror that of psych/stress claims (L/C 3208.3). In other words, let the employee show how the preponderance of actual work, absent the normal aging process, had caused a “disability” which should be covered.
  • Since the employer is hiring the entire package, we should set up a “depletion” allowance funded by the employee. There should be a percentage taken from each dollar earned which is placed in a fund similar to a 401K. It will belong to the employee and will be portable so that it follows him/her throughout their working career. At the time they become eligible for Social Security, they would have access to this additional fund of dollars. This would result in taking the burden of the normal aging process off the backs of employers.

Regardless of which of these or any others the legislature feels would be the best solution to this growing problem, the real point is that this is currently just another further drain on employers and therefore the California economy and needs to be addressed.

Performance Evaluations Without Pain … And Without Lawsuits

As the current business culture evolves into one riddled with legal battles and threats of lawsuits coming from discharged employees, many managers and supervisors feel cornered when addressing employee performance evaluations. Even those employers who follow stringent documentation guidelines often feel pressured into keeping unproductive employees in their positions or giving ambiguous performance feedback, due to their fear of employees taking legal action against the company.

Lawsuits charging discrimination typically are a result of negative evaluations or adverse employment actions. Much to their leaders’ dismay, the employees they fired for valid reasons can win such cases thanks in part to their very own performance evaluation procedures. Using subjective performance standards, failing to effectively address performance problems and not clearly warning employees about the consequences of unsatisfactory performance are the three most common reasons why jurors award damages and appeals courts uphold those judgments. While employers do have the right to insist on quality and productivity from every employee, they must also make legally defensible decisions when it’s time to reprimand or terminate an employee.

For any viable evaluation and disciplinary system to work fairly, evaluators must have proper qualifications and training. The more specific their evaluation procedure, the less likely supervisors are to make a costly legal error. Therefore, employers should supply managers with specific guidelines for acceptable supervisory actions. Additionally, companies should build in a level of higher authority for senior management when they must make close judgment calls, analyze unique problems, or terminate an employee for which the prior documentation is less complete.

Good documentation of evaluations and disciplinary action is critically important, as it provides credible evidence to help verify whether an employee has received prior notice concerning a particular rule or deviation from acceptable job performance. It also provides a record of whether an employee has previously been disciplined and, if so, the appropriate form of discipline for subsequent misconduct. In addition, it creates a vehicle for examining precedents when one employee engages in the same or similar conduct that has resulted in discipline of other employees.

When designing a performance appraisal process, managers must be careful to appraise employees based on job-related criteria and maintain adequate documentation. Develop a consistent appraisal process for all company employees. Any deviation from these objectives could result in costly legal battles.

Managers and supervisors can take several concrete steps to ensure consistency, objectivity, accuracy, and fairness throughout the performance appraisal process. Use the following guidelines to manage employees within legal limits, without paralysis.

1. Clearly Communicate Expectations. Managers must consistently communicate standards or expectations to employees and clearly identify each aspect of the required performance. If an employee fails to meet expectations, address the deficiency immediately (or as soon as reasonably practical) and specify where the employee’s performance requires improvement. When employees don’t know their assessment criteria, they can win a legal battle by simply stating, “I didn’t know what was expected of me.” Be sure to specify objectively measurable performance, such as quality, quantity, and timeliness of work, as well as important soft skills, such as teamwork, initiative, judgment, integrity, and leadership.

2. Perform Candid Appraisals. Rather than let a fear of lawsuits affect your ability to conduct performance ratings, address performance issues consistently for all employees on a timely basis. Be accurate and objective in your performance ratings, and remember to always rate poor performance as well as good performance. When you fail to point out poor performance, the problem continues, as employees cannot correct problems they are unaware of. Additionally, failure to document poor performance is legally risky should the employee later be discharged and sue for wrongful (or retaliatory) termination. Consistently addressing issues of concern with employees defends against the “I didn’t know I wasn’t meeting performance expectations” claim.

3. Maintain Objectivity At All Times. Focus the performance evaluations on objective job-related criteria. Examples of objective criteria that courts have upheld include quantity, quality, or timeliness of work and specifically articulated expectations for interpersonal skills, teamwork, exercise of judgment, and displays of initiative. You can establish objective expectations even with subjective standards when you articulate what you consider acceptable behavior. For example, you may say, “You will exercise better judgment if you come to me early and let me know you can’t meet a deadline so that I can help you prioritize your workload.”

4. Stick To Job-Based Criteria. Always relate the appraisal to the employee’s particular job. If an item on the evaluation form is not relevant to an employee, indicate “not applicable” in the appropriate space. Also be sure to consider the full rating period. Avoid the tendency to let recent performance events cloud what may have happened months earlier. Finally, compare the employee’s performance to a norm or performance standard rather than the performance of other employees.

5. Record And Memorialize. Put all evaluations in writing and document any verbal feedback made during the meeting. Keep the language in written proposals simple and as easy to understand as possible.

6. Be Specific. Review appraisals to ensure that both high and low ratings have sufficient documentation and anecdotal information that details what the employee did or did not do to earn the rating. Avoid vague or descriptive personal criteria that others could misinterpret.

7. Address Performance Problems Promptly. Discuss and/or deal with performance problems at the time they occur. If the employee’s performance is unsatisfactory, immediately counsel the employee on deficiencies and suggest concrete ways to improve performance. The courts may question your motive in a poor performance discharge if the incident prompting the discharge occurred substantially prior to the time of the discharge.

8. Specify the Consequences Of Non-Performance. Clearly specify a final warning on the performance appraisal if the employee’s performance is so poor that a demotion, change in assignment, or discharge may occur. This will help defend against the single most common legal deficiency in the performance management process: the employee’s truthful claim that “I didn’t know this adverse action would occur if I didn’t improve or correct my performance.” Employees routinely win lawsuits with such a claim because supervisors often don’t like to give negative feedback due to concerns about defensive confrontations, a desire not to hurt a likeable employee’s feelings, or worst of all, the fear of drawing a lawsuit that alleges discrimination or harassment.

9. Maintain Consistency. Be consistent with performance appraisals and any corresponding pay adjustments. Document poor performance if it is a basis to delay or deny a pay adjustment just as you would document good performance to substantiate a pay raise. Inconsistency will reflect poorly in any subsequent legal proceeding, especially when the employee claims that he or she was singled out for negative action. Consistency further enhances your ability to defend against discrimination claims, as it demonstrates that the needs of the particular job consistently required adherence to concrete, well-articulated performance expectations, and that all similarly situated employees are held to the same standards.

10. Plan Your Documentation. Contrary to popular belief, poor documentation techniques actually increase your chances of liability in a lawsuit. Avoid making any notes on appraisal forms that the courts could view as discriminatory or that reflect a “mixed motive.” Avoid contrived or pre-textual statements such as “the chemistry isn’t right.” Also, minimize your use of labels, such as “self starter,” unless you tie it to a measurable performance standard, in this case “initiative.” When in doubt, have a jury who doesn’t know you or the employee review the appraisal. Can they misinterpret it? Above all else, never backdate appraisals and never attempt to document something that did not occur. Always document events as they occur to assure that your memory is fresh and your examples are relevant.

11. Be Careful When Referring To Job Protected Leave In Performance Evaluations. Front-line leaders often don’t realize that comments they make on performance evaluations can come back to haunt them. That’s especially true when those comments relate to absences that are covered by job-protected leave, such as the Family & Medical Leave Act (FMLA). Several recent FMLA cases have concluded that commenting upon an employee’s absence due to authorized FMLA leave is the legal equivalent of interfering with the right to take such leave, giving rise to substantial damages against the employers.

In Goelzer v. Sheboygan County, An Administrative Assistant got consistently good performance evaluations for 20 years. She took FMLA leave for her own serious health condition and to care for her ill mother. On her performance appraisal, her supervisor wrote, “[Y]ou were out of the office having eye surgery. In the past two years, using sick leave and vacation, you were out of the office 113 days. As the only support person in the office, this has presented challenges in the functionality and duties associated with the office.” When she was terminated on performance grounds, she sued. A Federal Appeals Court concluded that Goelzer presented compelling evidence for a jury to believe that she was fired for taking FMLA leave. The Court emphasized the supervisor’s evaluation language, which expressed frustration with her use of FMLA leave, the total absence of documentation supporting any concern with her deficient skill set, and her consistent good performance ratings prior to her FMLA leave.

Employers cannot interfere with or discriminate against an employee who exercises FMLA rights. Taking FMLA or other job-protected leave does not insulate an employee from performance-based adverse actions. But, in order to effectively establish that the adverse action is due to performance deficiencies and not the exercise of FMLA rights, the facts must support and document an appropriate, job-related and non-discriminatory explanation.

When you know, understand, and implement the criteria for lawful performance management, you enable your company to operate at peak efficiency while you stay within specific legal parameters. The more proactive steps you take to reduce your chances of a wrongful termination lawsuit, the more successful and lawful your company becomes.