Ron Adler - Minimizing legal exposure in an increasingly litigious talent management environment

Steve

Hi, this is Steve Hunt with People Performance Radio. This week we spoke with Ron Adler, who’s the President of Laurdan Associates Incorporated, and Ron, among other things, the company he works for focuses on Employment Labor and Law Audits, helping companies understand what things they are doing that could potentially put them at legal risk, and what to do about that, and Ron shares some interesting thoughts around where companies tend to get in trouble with legal risks, as well as the implications of some of the current litigation, sorry not litigation but employment law that’s changing that will probably lead to litigation, so a very interesting conversation with Ron, and let’s give it a listen.

Hi, this is People Performance Radio, this is Steve Hunt. Today we are very happy to be talking with Ron Adler, who’s the President of Laurdan Associates Incorporated, and Ron, first thanks for appearing here on People Performance Radio.

Ron

Well thank you for inviting me, Steve.

Steve

So maybe to start off with, can you just tell us a little bit about what Laurdan Associates Incorporated does?

Ron

Yes, we’re an HR management consulting firm, and we specialize in HR audits, employment practices, liability risk management, HR strategic issues, HR metrics and benchmarking. That’s the focus of our activities.

Steve

OK, and I know that one of the things that you’ve shared with me is you have special tools to help companies make sure that they’re complying with legal issues related to HR?

Ron

Yes, we’ve developed a leading HR auditing tool, it’s called the Employment Labor Law Audit, or ELLA. It was first introduced in 1990, and we’re realising the 9th edition, and ELLA gives employers the right questions to ask about various employment practice areas, both in the area of compliance as well as strategic areas.

Steve

So can you maybe give an example of, if a corporation was to use Ella, how it actually works, what they actually do, what are the questions, what’s the process and what comes out of it?

Ron

Sure, ELLA’s available both in hard copy version as well as a web-based version, and it’s basically divided into a number of sections, there’s an introduction, so let’s say we’re talking about wage an hour issues, there’s a section, there’s an introduction which gives the auditor or user some background information, then there’s the questionnaire that gives the auditor or organization the right question to ask, that’s followed by an analysis section, so the company or organization can see how their response is matched to recommended or suggested activities. Then there’s a reference section, where we provide links or websites for additional information, and then we’ve added something new, which is the worksheet, and the worksheet actually takes the questions and issues from the various profiles and then categorizes them, or puts them into the five critical components of an HR audit, and those critical components are activities, behaviors, risks and concerns, internal controls and then outcomes or measurements – do they have a compensation policy?

Steve

Just so I can summarize, to make sure I can understand this – so basically it’s a tool that, if I have a company, and I want to know, are we exposing ourselves to legal risks? It’s a tool that I could use to go through and audit my own organization, and say, “Are we doing anything that is really potentially exposing us to significant legal risk?”

Ron

Yes, that’s right, ELLA’s designed to be a self-administered tool, and many users will use it and they have then the ability to audit their own operations, their own activities, and then develop a plan of action to make corrections.

Steve

And that’s what you’re providing then I guess, in that much you’re about to share an example, I’d like to hear that, which is saying, what would be a typical, so a user goes through it and you were giving the wage an hour example, and they find that they’re not, can you give an example of the questions somebody might give the wrong answer to, and then a recommendation that would come out of ELLA from that?

Ron

Well, many of course, many of the questions, some questions are not necessarily right or wrong, it’s just, does it create an exposure, so for instance, are you a federal contractor? – that’s a question in ELLA, now there’s neither a right nor a wrong answer to that; however the answer that you are a federal contractor creates a different additional obligations and liabilities, requirements, so ELLA’s designed to, not only give you the right and wrong answer, but to help you understand the exposures that you may be creating because of the way you’re organized, the states that you’re in, and whether you’re a federal contractor, those things that affect the exposure or liability that the organization has.

Steve

So what are the most, I don’t know if you track this, but what’s the most common area where people get into trouble when the use ELLA, what tends to be the things that people have the greatest, “Oh my goodness, we’d better change, we didn’t realize we weren’t in compliance” – what tends to be the things that emerge to the top the most frequently?

Ron

Well, some of the standard ones, and often what happens is that, because ELLA is a risk assessment tool, often organizations will wait until they have the problem, and then they do the audit, but that’s sort of human nature, but when we look at the standards, and we have a number of insurance companies that use ELLA in their employment practice liability insurance, and the sections that they are particularly concerned about are, one, their recruitment selection hiring activity – are we making the right decisions, are we discriminating in our hiring decisions, are our hiring decisions and employment decisions aligned with business objectives?

So that’s one area, a second area is discrimination-related issues, and there’s a separate profile on discrimination. A third area is sexual harassment, we have a separate section on sexual harassment, and that continues to be an issue for employers. A fourth area is performance management, and of course performance management is increasingly being understood as a key to things like promotion, to salary increases, to decisions as to who maybe retained in a recessionary economy, so performance management is increasingly being seen as an area for attention. Then of course the termination process, as you look at this continuum of hiring through to termination, that’s an area, and then perhaps more recently, and on a continuing basis, the wage an hour area, just because wage an hour issues have been brought to the forefront, either by Supreme Court decisions, or now the new Ledbetter Law that was recently signed by the President.

Steve

So I think that’s interesting, I’d like to talk a little bit more about Ledbetter Law in a second here, but you mentioned performance management, because when you talk about discrimination and pay and termination, I would expect, if the company said, “Well justify your pay decisions, or justify your termination action, or justify your promotion”, what that justification should come from is performance management data, supposedly?

Ron

That's right.

Steve

Ideally, do you think most companies have adequate performance management data to actually stand up in a court of law, if they’re asked to justify their promotion pay, and hiring and firing decisions?

Ron

I would say most don’t, most surveys of employers report that organizations are typically unhappy with their performance management systems, whether it’s a sophisticated, computer-based system, or the old paper and pencil, there’s just this general feeling that performance management is not doing what it should be doing, but this is what we have.

Steve

Any thoughts into what the gap is, when you go in and you have clients that say, hey, we have issues, we’re concerned, we need to beef up our performance management – what is it they typically work with you to do?

Ron

Well, the starting point is developing job descriptions and performance standards, and it’s surprising how many organizations do not have updated job descriptions and performance standards, and I think we’re going to see that more, it’s going to become particularly more visible now as organizations have gone through downsizing, and are re-creating jobs and activities, re-doing their job descriptions and performance standards are going to become increasingly more important, but that’s a starting point, so do we understand what an employee is supposed to be doing, and how we’re going to measure their performance? The tool that’s used, and there’s numerous tools that are used, quite frankly is secondary to understanding what should be done, what standards are going to be used to measure performance, and communicating that. Often it’s merely a situation where employees haven’t had conversations with their supervisors, with managers, to know what’s expected of them, so the expectations that we have of employees becomes an important part of this whole management process of performance management.

Then it requires supervisors and managers to actually implement the job performance activities and as a general rule most supervisors and managers hate performance appraisals – time-consuming, it puts them perhaps at odds with their employees, and so they either don’t perform it, or they only perform it for their best employees, because it’s easier, and of course that begins the process of creating discriminatory pay and promotion practices.

Steve

That’s interesting, I think what’s key on that is, really you’re just saying what you need to do is, you need to define performance expectations for different jobs very clearly, communicate those expectations to employees, then follow up and measure and take action, whether be it people are meeting those expectations, and the one that you, and I totally agree with this is, performance management is easy when people are doing what it is you want them to do, or it becomes hard when they’re not doing what you want them to do, but managers tend to shy away from those conversations.

If you’re in an organization, how can you get managers to realize, look, you need to engage employers, if they’re not doing what the company needs them to do, you can’t just wait around and then fire them all of a sudden, you need to engage them in a discussion, so that they know this and you’re working with them.

Ron

And that’s where managerial training comes in, most managers get promoted to that position not because they have experience managing employees, but because they’re good at some other job, and so now we put them in a management position where, doing their job is often secondary to having their team or unit or location meeting the business objectives, and obviously there’s some natural born supervisors and managers and leaders, but it’s a learned activity, and so the commitment of the organization to train managers and supervisors in a number of areas, including performance management, is critical.

Steve

So one of the things, when you look at this, this is not a new problem, this has been around for a while. I’m curious though, with some of the recent legislation, the change in administration, the change in economic environment, I have two questions: one, are you already seeing, or do you think we will see, an increase in employment litigation, and if so, what do companies need to do now to lessen the chance of them falling into risks with this?

Ron

I think employment litigation has been around now and has been on the minds of senior executives for a number of years, and I know that, in a survey that was done by CFO magazine, CFOs rated employment issues as their number one concern, and then another survey by General Counsel magazine indicated that General Counsels thought that the liabilities from, or claims from, employment issues were their biggest concern, so it’s certainly risen to the top from a litigation standpoint and concern, and I think, as most observers look at the election, and what comes next, there’s a general concern from the employment side that both in new legislation as well as regulatory activity, and the discussion of the new Secretary of Labor, that employers are going to be held to much higher standards and perhaps more frequently assessed than they have been in the past.

So the environment has changed, and I think if you put that together with the fact that one of the dynamics of the recession is that, when people lose their job, they have nothing else to lose, so where they might not complain about discriminatory practices or the perception of discriminatory practices, once they lose their job, they don’t have that concern any more, and so I think just the fact that we’re seeing significant numbers of people being laid off, and a new unemployment figure just came out this morning, and it’s now up to 7.6% unemployment rate, with again over 500,000 workers being laid off, so we have economic forces as well as political forces creating an environment, perhaps there’s now a confluence of forces that are going to put pressure on employers to review their employment decisions to see if they’re discriminatory, and take corrective action before, from a preventative perspective, than waiting till a claim walks in the door.

Steve

Yes, so really it’s the time to critically look at, and the critical decisions, as you touched on, are how much you pay people, whether you promote people, whether you hire people and whether you fire people, those are the critical decisions, are those decisions that you could really justify, and say we did this in a very consistent, clear, transparent manner?

Ron

Well I think that’s right, so what we’re looking at is, the who we hire, who we didn’t hire, although I think the statistics are that fewer, or less than 10% of discrimination claims are based on hiring, so when you look at hiring data, there tends to be some equality in who gets hired, it’s from that point on, who gets promoted, who gets raises, who has opportunities, and that’s one of the ongoing issues is, not only who gets promoted, but who has the career opportunities to be put in a position to be promoted. Often when a promotion comes up, and the organization looks at who can be promoted, if a person hasn’t had years of being groomed for those positions, then they can’t be promoted, even if the employer wanted them to, so decisions as to who has opportunity for training programs, for client assignments, for career advancement activities, becomes a critical part in the analysis of who gets promoted and the type of compensation they get.

Steve

Wow, so really it’s taking a systematic look at how these decisions are made and recognizing that we don’t wait until the final decision that triggers a suit, you’re going to have to go back and talk about all the dominoes that led up to whatever that decision was, in terms of who got promoted?

Ron

That’s right.

Steve

That’s fascinating, well just one last question to wrap up, which is, our listeners are mainly people that work in talent management, work in organizations, I think a lot of them appreciate this but struggle to get the attention of senior level leaders. Are there any things that you’ve seen that have been really effective in terms of how to get CEOs, CFOs to pay attention to this, and say, “Look, only is better performance management going to make us a better company, it’s both going to increase our revenue and also decrease our risk, but we have to invest in it? We can’t just make it happen.” What would you advise as far as, how do you get, in this tight economic times, a company to realize this is actually a place you need to invest?

Ron

Well, I think there’s two things, and one is, and one of the things we do with or clients, both when we’re doing audits for clients, in addition to our auditing tool, we do audits, is one is a greater recognition of what drives the organization, and by that I mean how does the organization make money, what are its strategic objectives, what are its business imperatives, what are its risks, and often in HR the answer to those questions never get asked and answered by HR professionals, so I think the starting point is having better understanding of what the organization’s all about, where its opportunities and risks are, then developing ways of measuring our activities, so it’s not enough to say that training will help increase productivity and reduce employment liabilities, it’s being used to develop measures, that we can go in and say, OK, this is important to you, if this happens, turnover’s going to happen, but if you lose a senior programer, or research scientist, the implications are greater and we can begin to develop measurements around that, then the argument becomes more important as opposed to going in and saying, our turnover rate is 20%. That’s a meaningless metric, because it doesn’t show the impact on the organization, nor can the organization make decisions from that, so we want metric that are really not HR metrics, but are business metrics, and allow the organization to say, well now that I know this information, I can make a decision.

Steve

So really, I think if you walked into any leader, you could say, “Look, we know people drive performance, work with me to demonstrate how, so we can understand how much should we invest in this.”

Well Ron, I want to thank you for spending some time with People Performance Radio, I think that some of the issues that you raised, and also I think certainly the availability of the tool you mentioned, I think that’s something that a lot of people don’t realize, the ELLA tool, something like that allows you to look within your organization and say, “Are we doing what we’re supposed to do”, because I’ve spent some time looking at employment law, and it can pretty darn confusing sometimes, it’s hard to tell what you’re supposed to do.

Ron

Well, that’s why you have lawyers!

Steve

Exactly! Well thank you Ron, very much, for appearing on People Performance Radio, and hopefully we can check in with you, maybe several months down the road, and just as this economic climate unwinds and see how this does change the legal landscape, so thank you.

Ron

Well, thank you, and thanks for inviting me, and I’d love to chat again, maybe we’ll have different impressions of where we’re going.

Speaker

If you would like to be a guest on the show, or sponsor, please drop us a line at podcast@successfactors.com, or you can leave us a message at 650-425-7474. This podcast is copywritten by SuccessFactors. The views expressed are the individual’s own, and do not necessarily represent those of SuccessFactors, SuccessFactors’ partners or customers. See you next week.