Bottom Line Business Insights : Maryland Business Lawyer & Attorney : Wagonheim Law Firm : Mergers & Acquisitions & Contractual Negotiation

My father’s red, wooden bat stands propped up in one corner of my office. He died on April 1, 2007, but I still think of it as his. The paint is faded and it is on the verge of splintering in spots. By today’s standards, it is toothpick thin – almost like a toy.

It was gigantic to me 40 years ago.

I keep my father’s bat to remind me of two of my father’s most important lessons – one good, one bad. I’m not sure he intended to teach either one. He certainly wasn’t conscious of it if he did. It doesn’t matter, though – what he intended to teach. I learned them just the same…and they shape how I have built this law firm and relate to the people in it.

Lesson #1: The Importance of Balance

Every Sunday morning, spring through summer, my Dad would play softball on one of the fields behind my elementary school. My sister and I would walk up to the school at about eleven o’clock, as his game would be winding down. We’d watch the last few pitches and then, after his friends had left, he’d play ball with us. Then we’d walk home for lunch. 

It was all as unhurried as it sounds.

My father was a lawyer and he ran his own firm. At its height, it was a 4 employee operation, but more typically it was just my father and a secretary. If work didn’t get done, he didn’t get paid. And there was no one but my father to do it. 

But still, we went to Ocean City for vacation just about every year, he came home for dinner with the family, and played unhurried softball with his friends and with his children. My father knew the importance of balance.

I cherish those Sunday mornings, and their memory reminds me that I cannot let my practice become all that I am. They remind me that time with my family cannot become a stepchild to the demands of my business. And regardless of the pressure of retirement, saving for college, and a thousand other life expenses, they remind me that my firm will never cause me or anyone associated with it to become a six plus day per week, 2,000 billable-hour slave.

Lesson #2: The Importance of Planning

As I mentioned, my father died on April 1, 2007. Shortly afterward, I found myself going through paperwork from his practice, trying to tie up the loose ends of his business. Among them, I found an Engagement Letter dated March 1, 2007. He signed up a new client exactly a month before he died. He was already pretty far gone with leukemia by that time, and all but the most fervent deniers would have acknowledged that he faced the coming end of his life. And still he was working to sign up another client.

Why would he do that? 

Some would say that he loved what he did and to give it up would mean…well…giving up. But that’s not the real reason. The real reason was that he did not feel financially secure enough to cut the strings to his business. He was 74 and, if he survived, would not have had the financial stability to retire. He had to keep working until almost literally on his death bed. 

Ira J. Wagonheim was a great father, but a poor planner. And here, I refuse to follow his lead. He never stopped to envision his future and work his way backward to figure out exactly what he had to do this year, next year, and the year after that in order to attain his goal. I keep his red bat to remind me that relaxation is not just something to squeeze in on a Sunday morning, but that it is also something to work toward in a retirement my father never took the time to envision.

My financial planner knows the lessons of the red bat. So too does my accountant and each one of my employees. 

Now you know them too.

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 And Reduce Employee Turnover in the Process...           

For the most part, personnel evaluations are to good business what bleeding with leaches is to good medicine – a practice mistaking activity for benefit. If your company does not understand how to get actual benefit out of personnel evaluations, don’t schedule them. This would be unfortunate, however, as a good system of personnel evaluations can lead to increased moral, and can show benefits that go straight to the bottom line.

To garner these benefits, business owners must take a hard look at what they hope to accomplish through personnel evaluations. If the evaluation is solely used as a mechanism to document performance come bonus or termination time, the business owner is seriously missing the boat. While documentation is important, the primary benefit to an evaluation system has nothing to do with employee discipline. It has to do with value. 

In essence, personnel evaluation can be used by the business owner as a review of business practices and personnel decisions. It is virtually inevitable that employees, particularly those on the front line, know more about the day-to-day operations of any business than does the owner. Consequently, the evaluations should be at least two-way, where the employee is encouraged to provide suggestions and insight into what would make his or her job easier and more productive. The evaluation should be a substantive dialogue in which both participants described expectations and performance of the other. Correctly structured, the evaluation can be the best method of matching person to job, job to function, and function to profit.

Each participant must be adequately prepared for the evaluation. In many cases, this should involve a written questionnaire to be completed by the employee, as well as a standardized evaluation form to be completed by the employer. The integrity of these forms is paramount. If the employee feels that he or she is being evaluated on either unfair or inapplicable standards, the evaluation will be nothing but an exercise in lowering moral.

Once each participant has prepared for the evaluation, the conversation should be structured in a non-threatening exchange designed to evoke the most benefit from the meeting. Both participants should leave the meeting with a clear understanding of the other’s thoughts and positions. In addition, a follow up session, however brief, should be scheduled to air out the inevitable “things I wish I had said.” This is especially true where the employee’s evaluation may be construed as negative in certain important respects. 

In addition to content, scheduling is also a very important consideration. While many if not most businesses schedule annual evaluations, it is frequently advisable to schedule smaller, more frequent meetings – perhaps quarterly. The benefit is not only the reduction of the intimidation factor, but also the greater likelihood that small issues will be caught and dealt with before they develop into large problems.

Business owners with fewer than 10 employees often dispense with evaluations in the belief that close day-to-day contact eliminates the need. While this is true to some extent, there is still a benefit to be had by a scheduled time to discuss performance. Often, particularly in small enterprises, employees are so busy with day-to-day concerns that they do not find the time to consider and address larger, more fundamental issues. Scheduled evaluations provide this time; and it is even more crucial where the employees are a tight-knit and happy group. The reason for this simply lies in the greater likelihood that employees would have and be willing to provide insights into better business practices, if only a specific time were scheduled to discuss them. 

Finally, as alluded to at the outset of this section, documented personnel evaluations are invaluable in substantiating reasons for disciplinary actions, demotions or terminations. Few pieces of evidence are more powerful than paperwork showing that the employee had been repeatedly advised of unacceptable performance when termination becomes an issue.

Bottom Line: Every business owner should establish a well thought-out evaluation policy which matches the tenure and culture of the company. What works for General Electric will not work for a four person landscaping business. Nevertheless, both companies can reap huge rewards and avoid large pitfalls with a well-crafted system.

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Business owners should not run scared. If an employee is not right for the business, he or she should be asked to leave. This is true regardless of the employee’s gender, race, physical limitations, or religion. True, state and federal laws play a vital role in protecting employees from decisions based, even in part, on any of these factors. Nevertheless, a business should never be afraid to make a termination decision for legitimate reasons. 

The primary fear of most business owners is that even legitimate firing decisions will be called into question by disgruntled former employees. The best defense is a rational and documented policy applied evenly across-the-board to all employees. This policy includes documented job descriptions against which each employee’s performance is compared, a consistent evaluation policy, and a well-maintained personnel file.

In certain cases, an employer may terminate on-the-spot without regard to the niceties of documentation over time. These situations involve dishonesty, endangerment to health and safety, use of alcohol or drugs at work, violent behavior, or the unauthorized disclosure of company trade secrets.

Performance and attitude issues, however, are both far more frequent and more difficult to remedy. Where issues involving poor performance, insubordination, poor attitude, abuse of sick leave, or excessive lateness or absence are concerned, documentation over time is vastly preferable to termination on-the-spot where it comes to protecting your company from a future lawsuit. 

There is no substitute for written documentation of failed disciplinary measures, habitual tardiness, or poor interaction with peers and/or customers, where defense of a lawsuit is concerned. Written documentation will always be more effective than even the most heartfelt testimony in the eyes of a judge or an EEOC hearing officer. This is true even for notes placed in a personnel file without the employee’s countersignature. Always follow the rule that “if it is worth remembering, it is worth writing down.”

An exception to the written documentation rule involves peer reviews. It is usually a mistake to request an employee’s peers to comment on his or her behavior. While complaints, particularly those involving sexual or other forms of harassment, are an obvious exception to this rule, asking a non-supervisory peer to provide comments on another’s performance will often backfire.

Once a firing decision is made, it is best to follow a few simple rules:

• Have the conversation in private.
• Arrange the conversation in such a way as to minimize disruption in the workplace.
• In most cases, the employee should be asked to leave immediately, even if severance will be paid.
• The employer should be prepared with written documentation of severance offers and a written statement on the company’s policy concerning the provision of references.
• The employer should be prepared with full calculations of unused leave, overtime, and other benefits to which the employee is entitled.
• The conversation should be direct and to the point.
• Never try to “sugarcoat” the reason for termination.
• Never refer to a need to change the company’s image or mention physical limitations as a reason for the termination decision.
• Treat the fired employee with dignity.

There is a lot of debate on the proper time to fire an employee, but most experts agree that Friday afternoon is the worst. The best thing for a terminated employee is to be able to overcome the shock through activity and turn his or her attention toward the task of finding new employment. A Friday afternoon termination gives that employee nothing to do over the weekend but stew. 

Once the employee has been fired, it is important to tell the remaining employees. A business owner should not be lulled into thinking that “no explanation is the best explanation.” Invariably, employees will notice the empty chair and fill in their own information out of gossip and innuendo. It would also be a mistake to overly dramatize the situation by stating “I am not able to discuss the matter upon the advice of our attorney.” Instead, simply state facts and let the matter drop. An example might be “we had to let Jim go this morning after it became obvious that he was not able to improve his job performance.” Direct and to the point. 

Finally, an employer should always evaluate the possibility of providing severance in exchange for a full and complete release. Often, a company will decide to pay severance out of established practice and will find itself on the wrong end of a lawsuit once the check clears. A far better practice would be to pay severance in exchange for a release of all claims. While Maryland law allows an employee sufficient time to consider the ramifications of signing this release, it frequently benefits both sides to increase the amount of severance slightly and eliminate the possibility of a future claim.

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Success in business, particularly in a small business, often hinges upon how well the entire organization understands the company’s vision, philosophy, and procedures. Unfortunately, these are often the very topics which are overlooked at company meetings where business owners focus on immediate goals and/or problems. Relationships are saved and deals are made by a staff that understands what the business is trying to accomplish, stays on message, and speaks with the same voice. 

Memos won’t do it. Retreats or pep rallies held once every blue moon won’t do it either. Too many business view team building with a binge and purge mentality. These owners seem to feel that one can make up for a lack of consistency with an intensive effort every year or two. I advise these owners to save their breath and their money rather than engage in these pointless exercises. 

Instead, team building is more like a fitness regimen. Effort consistently applied over time, even in short bursts, will always have the desired effect. In contract, we're one to attempt to get in shape by running a four hour marathon once every 18 months instead of adopting a consistent training regimen, one would be much more likely to end up in the hospital than at the finish line.

Similarly, there is no substitute for regular hands-on training in everyday policies and procedures. If your company decides to put in the effort to tighten up its documentation, for example, the effort would be wasted unless each front line person were personally introduced to and trained in the use of the new materials. The training may take five minutes or five days. But in either case, every business owner should know that the best procedures in the world will not overcome the problems caused by a staff ill-prepared to use them.

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Hiring and Firing – the business equivalent of marriage and divorce – stand out among issues facing business owners for several reasons: (1) every business owner runs into both situations repeatedly; (2) few business owners can separate myth from reality where legal issues are concerned; and (3) both consistently rank among the top five “small business killers” when mistakes are made.

Regardless of whether you run a three person company about to hire its fourth employee or operate a large multi-state enterprise, a well thought-out hiring process is the key to increase moral, a healthier bottom line, and a lawsuit-free future and you don’t necessarily need to hire an $80,000.00 per year HR director or pay an arm and a leg in legal fees in order to hire well.

A good hiring policy rests on three legs – a well-crafted job description, the application, and the interview. While the job description is the most overlooked element of the hiring process, particularly for small businesses, it is usually the most crucial and, more often than not, is mentioned by a business owner immediately after the words “I wish we had drafted a …”

There is an art and a science to drafting job descriptions. A well drafted job description has several components:

• A description of duties;
  
• A summary of qualifications;
  
• A summary of pre-requisites (physical, mental, and/or emotional)
  

This is the document that will enable you to hire, promote, and fire without fear that your actions will be interpreted as discriminatory in violation of state or federal law. This is the document that will withstand scrutiny by a judge, jury, or the EEOC when questions of demotion, disciplinary action, or termination arise. Unfortunately, this is also the document most business owners do not take the time to draft. 

Both the application process and the interview must proceed in lockstep with company policies and the requirements set down in the job description. Application forms can (and should) be standardized to avoid any possibility of disparate treatment between candidates. Potentially troublesome practices, such as the request for photos (or copies of driver’s licenses), inquiries into personal information, or discussion of required benefits should be eliminated. 

While applications may be standardized, interviews rarely follow a set pattern, as they are driven by conversation. Nevertheless, a well trained interviewer will understand questions to avoid, subject which, while well intentioned, can expose a company to litigation brought by an unsuccessful applicant, techniques to bring out each candidate’s strengths and weaknesses, and a uniform core message concerning the company’s policies and the specific job at hand.

Frequently, one of the most effective defenses a company can raise to a claim of discriminatory hiring practices is that interviewers and hiring managers were provided with training through a seminar or required reading and certification. And remember, this sort of training is not restricted to big companies. Training is often inexpensive and valuable to any size business.

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