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

I had an interesting conversation with my wife this morning. This, in and of itself, is nothing new. The topic, however, was.

We were discussing the latest in a string of allegations focused upon the interaction between GOP presidential candidate, Herman Cain, and various women with whom he had become acquainted. Some had accused him of sexual harassment. The most recent person to come forward, however, told a story of an alleged extra-marital affair spanning some 13 years. 

In response to this story, Cain’s attorney dismissed the inquiry as irrelevant, saying:

"This is not an accusation of harassment in the workplace. This is not an accusation of an assault, which are subject matters of legitimate inquiry to a political candidate," he said. "Rather, this appears to be an accusation of private, alleged consensual conduct between adults -- a subject matter which is not a proper subject of inquiry by the media or the public.

"No individual, whether a private citizen, a candidate for public office or a public official, should be questioned about his or her private sexual life," Wood said. "The public's right to know and the media's right to report has boundaries and most certainly those boundaries end outside of one's bedroom door." Source

The question presented was whether Mr. Cain’s attorney was right. Whether the fact that someone may or may not make a lousy spouse had any rightful bearing on whether that person would make a good President. In other words, can one compartmentalize the two? Does honor matter? 

It struck me that business owners face this question all the time…and nowhere more often than in the realm of social media. Does it matter what an employee says or does on his or her own time, provided that: (1) no laws are broken; and (2) the company and its management are not disparaged? 

Whether the issue in question is pirated cable, a narrowly averted stop for driving while impaired, or just bad social judgment, does a business have a right to look behind the doors guarding someone’s private life, even if those doors have been left unlocked and ajar? 

There are, without doubt, reasonable arguments on both sides. This is, after all, an issue on which intelligent people can and do disagree. But the question remains, and it is a nagging one: Does honor matter or, more to the point, does it always matter everywhere equally?

The purpose of this column is not to answer those questions, even if I were qualified to do so. I raise the subject, however, because it is something that cries out for discussion and direction from business owners before they are involuntarily confronted with it.

I’d be interested to know your comments.

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2012 will mark my 25^th year serving as general counsel to small-to-medium-sized businesses. During that time, I have handled innumerable employment-related inquiries. For the first part of my career, my advice concerning personnel files and the building of a defensive wall against potential employee lawsuits was conventional, parroted established wisdom, and was dead wrong.  

You see, it used to be that when a business owner called and asked me if she would be in the clear if she fired someone, I would inevitably ask about the existence and contents of performance reviews. The conventional wisdom being that a paper trail of performance reviews in the file would bolster the company’s defense against a discriminatory or retaliatory firing. 

But I began to notice something curious about these supposedly these company-saving performance reviews. 99% of the time, the performance reviews were entered into evidence, not by the company, but by the disgruntled former employee. 

The reason? The performance reviews, even those preceding the firing decision by just a few months, would inevitably rate the soon-to-be-fired employee as “meeting expectations” or “above average.” Not one item of the laundry list of the employee’s grievous deficiencies could be found anywhere on the company’s own evaluation forms. What’s worse, the presentation of these deficiencies in court by the company would invariably have to come from the person who signed an adequate, if not glowing, performance review immediately prior to termination. 

 The reason? The vast majority of supervisors will check any box necessary to avoid the unpleasantness of confronting an employee with a less-than-positive evaluation. 

Last week, I attended a seminar presented by Garold (Garry) Markle of Engergage echoing and building upon this theme. Markle compared the performance review process to one in which the supervisor tells the employee “you hit yourself in the head with a hammer; I’ll hit you in the head with a hammer, and then we’ll see if both blows felt about the same.”

Instead, Markle emphasized the need for establishing a frank coaching dialog with employees on the things that really matter -- both to the employee and the business. 

Now, I disagree with one of Markle’s apparent assertions that the coaching be conducted primarily on an annual basis. I would prefer to build a system in place for a continuing dialog. 

Where I wholeheartedly agree with Markle is that conventional performance reviews -- whether conducted because “you’ve always done them in the past,” “that’s the way everyone does it,” or “my lawyer insists that I paper the personnel file” should be tossed in the trash never to see the light of day again. 

In place of performance reviews, work to install something that’s rationale, true, and doesn’t come back to bite you in court.

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This week we've decided to give you a better idea of who we are through video. Take a look and tell us what you think!

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We live in an age of cheapened language -- an age in which people become “superstars” at 15 and most every baseball game features an “awesome” hitter, pitcher or manager. But even allowing for the devaluation of language – adjusting for inflation, if you will – Joe Paterno is an icon. 

Paterno has been head coach of the Penn State Nittany Lions since 1966. He has amassed the most wins in college football history. (I hate the pseudo-word “winningest,” but it is often applied to Joe Paterno.) Although still active, he has already been inducted into the College Football Hall of Fame. Paterno has led Penn State to two national championships (1982 and 1986) and five undefeated, untied seasons (1968, 1969, 1973, 1986, and 1994).

This is the career of the man being evaluated in the press and found wanting. This is the career of an icon.

In the developing story about former Penn State Defensive Coordinator and Assistant Coach Jerry Sandusky, the most prevalent question asked of Paterno has been:

“What did he know and when did he know it?”

Sandusky has been accused (and some say confessed) to unspeakable crimes -- crimes which are regarded even in the caste system of prison as being reprehensible. Sandusky preyed on children. And for that, there are no gray areas. There can be no redemption. There are no mitigating circumstances.

Joseph Vincent Paterno, however, is a different story. He is a man who, by all accounts, has done a world of good for his university and for the young men in his charge over the past six decades. He was told, sources say, of inappropriate contact between Sandusky and a minor. I suspect that the extent of that contact and the question of exactly what Paterno was told will be fodder for a tabloid-focused dispute. But this much is clear: Paterno knew Sandusky victimized at least one child. 

Paterno issued a statement saying that he “referred the matter to university administrators” when it came to his attention that one of his coaches witnessed Sandusky sexually abusing a child. That was the end of it...for Paterno, anyway.  Paterno continued to associate with Sandusky and demonstrated through his conduct that Sandusky was still a welcome and accepted fixture at Penn State.

As for the victim of the specific incident witnessed in 2002 and the victims of incidents yet to come -- they were made no better for Paterno's involvement...and that, in and of itself, is deeply disturbing.  Paterno failed those people. He failed them in a deep and profound way. He failed them in a way I’m betting he would pray no one would ever have failed him had it been Sandusky with his son. 

Legally, he may be in the clear.  As a coach, he may be in the clear. But he failed as a man. And as a father, he is indictable. Such is the limit of a legal blog. Paterno seems to have complied with state law but he failed where it most counted.  He failed to comply with the value system he championed.

As a business lawyer, I encounter these issues much more often than you might imagine. Not the precise fact pattern of child abuse and the turning of a blind eye. Rather, I work with companies which encounter circumstances in which their legal duty and their moral duty follow different paths. Clients in these situations will inevitably ask me “what is our legal obligation?” And I tell them. 

But I’m not doing my job – or at least the job I want to do – if we don’t also have a conversation about what should be done in addition to what has to be done. I believe very strongly that core values only mean something when it is inconvenient. 

Earlier this week, I found myself working with a client to make one of its employees whole in a tax situation not of the company's making. It was the right thing for my client to do, though it certainly had no legal obligation. Two weeks ago, I listened to the CEO of a company on the other side of the table explain why he would pay more rent than that called for in the signed lease because he recalled that, in a private conversation, he had actually agreed to more than the document reflected.  That’s the deal he made with my client when no one else was in the room and no one ever doubted that he would honor it.

In both of these instances, hard-nosed, rational business people made the decision to look beyond their legal obligations in order to remain true to their values. Such is the hallmark of great companies and people worth knowing. 

With Paterno and the Penn State administration, we see the reverse. We see a person of status and a powerful institution rendering meaningless the values they claim to promote.  And when the stakes are at their highest, such as in a case involving the protection of children, the failure is writ large and is all the more damning. 

The failure in this case warrants the fall of an icon.

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Hiring is often an impulse buy. It is the candy in the check-out aisle or Chipotle on the way home. Sure, the need may have been there for a while, and (to depart from the analogy) well documented and analyzed. Even the process may have been extremely well thought-out. But at the end of the day, the actual selection of the person from the piles of resumes and the hours of interviews is most often an impulse buy. It’s a gut reaction. Who seems to be the best fit?

Most of the time, hiring managers can’t even put their finger on precisely why Person A got the nod over Person B. Maybe it was a side comment at the interview or a slightly more professional appearance. Maybe the applicant simply had the mannerisms of the person the hiring manager pictured in her head. Whatever the reason, in today’s employment market, where most any help wanted notice is met with a flood of resumes, the answer is rarely clear-cut merit. The answer is a feeling.

Firing is different. When you fire someone, you damn well better have a reason. And that reason can’t be that the employee doesn’t “look the part.” The reason has to be clear, easily articulated, backed up by documentation, and merit-based.

Therein lies the lesson. For the typical business, more thought goes into why people are asked to leave the company than into why they are asked to join it. Certainly, it’s easy to understand why. A good bit of planning precedes the meeting at which an employee is to be let go. The discussion is bound to be tense. The parties’ interests are in direct conflict. What’s more, the firing decision is likely to be scrutinized – by the soon-to-be-former employee, the employee’s soon-to-be-former coworkers, and possibly even by a plaintiff’s lawyer, if not a judge, down the road. The company had better have its ducks in a row.

So what does that mean?

Often, it means that the company has documented the gap between the employee’s performance and the company’s expectations. Drill down a little further, and it means that, at some point, the company put pen to paper in order to clearly describe both the standard of the job and the ways in which the employee’s performance fell short.

In my (almost) 25 years representing business owners, I’ve come to notice a common phenomenon. (And yes, I’m aware that “common phenomenon” is an oxymoron of sorts, but I use the word because what I’ve noticed is, true to the definition of “phenomenon” notable or remarkable.)

I’ve noticed that the expectations of the company, in terms of a clear job description and key performance indicators are often determined only after the person has been hired. This is particularly true in small-to-midsize companies where employees often wear many hats and fewer policies and systems are institutionalized.

Dr. Lee Thayer, CEO coach and author of numerous books including Leadership: Thinking, Being, Doing and The Competent Organization, contends that organizations in hiring usually make 3 mistakes:

1. The person was probably provided with a list of activities to be performed. That’s the way conventional “job descriptions” are constructed. There may have been some past experience or credentials thrown in for the company to hedge its bets.
2. It was likely nothing was said about what was to be accomplished. You can’t measure activities objectively. But you can measure accomplishments.
3. The person was most likely hired for a “job.” He or she was not hired to a role in the organization’s future. It is the future that really matters, not the past. Past performance does not predict well to future performance.

In other words, the person being fired was probably not told, at the time of hiring of specific reasons that might lead to dismissal. Why? Because these reasons had not yet been thought through.

I was trained as a trial lawyer at the outset of my career. The first lesson in preparing a case for trial was to write your closing argument first. Figure out what you want to be able to tell the jury, and then make sure you introduce the evidence and elicit the testimony to back it up.

Hiring, I’ve learned, is no different. If you envision the ending first – the precise reasons why you may have to fire this person you’re thinking of hiring, you are more likely to set the stage for a successful hire.

In other words, fire them first…and you may not have to fire them at all.

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