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The Start-Up Phase. After years with a major IT services company, two engineers start their own consulting firm, InfoSys-IT, with a friend who will run the business side as CFO. They contribute capital, rent space, and bring on experienced subordinates and a few customers. Two years later, the fifteen employees celebrate their successful anniversary at the Tyson’s Palm. As the founders give bonuses to the entire Info-Sys “family,” they discuss expansion into the homeland security sector. With shared corporate vision, culture, and success, no one at InfoSys is thinking about employment law or policies. The Growth Phase. After InfoSys lands a DHS subcontract, its key commercial customer opens several out-of-state facilities, requiring expanded personnel from InfoSys. Its founders begin to recruit, set up satellite offices to serve their customer, and quickly promote and hire new managers based on technical expertise. The original employees are so busy they rarely interact, and few of the forty new staff shares the corporate vision. The CFO, who reluctantly handled start-up personnel matters, has no HR expertise. Nonetheless, she learns that with more staff, InfoSys must comply with federal employment laws. The new managers, without specific guidelines, each adopt practices from prior employers for interviewing, hiring, and resolving HR issues for an expanding staff, which includes women, employees born outside the U.S., and recent college grads, whose collective presence creates unresolved social/cultural issues that begin to affect productivity. Overtime and work hour requirements are applied inconsistently, and employees are uncomfortable with the stormy romance between a female analyst and her manager. At the close of year three, employees are grumbling about overwork, sexual harassment, overtime violations, and discrimination. The three founders (without executive employment agreements) argue over the expansion, and the founder tied to the key commercial client threatens to start his own company, while the other two consider their options. The New Professional Services Model. In contrast to the old manufacturing industry approach, where the machines were critical and employees fungible, our region’s private economy is driven by professional services companies whose most valuable assets are employee knowledge and experience. In this environment, the frequent lament of business owners is that things would be easy if they did not need staff. However, just as successful entrepreneurs approach new ventures with a business plan integrating finance, production, distribution, and marketing, the same principle applies to employee management. In major metropolitan areas, there is a convergence of federal, state, and local laws that affect most aspects of the employer/employee relationship, including between corporations and their executives. Affected subjects range from the payment of bonuses to the wearing of nose rings, and even include an employee’s right to discuss these matters by email messaging. Most recently, Sarbanes-Oxley has expanded whistleblower protection to employees who complain about certain financial improprieties; and highly-paid employees have become sophisticated in using employment laws to promote their own agendas. Strategic Personal Management System. Employers, particularly those seeking rapid corporate growth, need a platform for personnel growth and management aligned with strategic business goals and employment laws. The process begins with recruitment and hiring, and ends with protection of the company’s confidential information and customer base when an employee leaves. Without policies and procedures, managers, who are often promoted due to their technical rather than management expertise, waste time attempting to resolve personnel issues by instinct rather than through processes designed to promote the company’s business and protect it from liability. Among the most disruptive forces on employee morale, and a major impetus for discrimination claims, are personnel issues that are resolved inconsistently or not at all. An effective antidote to the ad-hoc approach is a centralized personnel management framework, whereby one manager or human resources department is responsible for guiding all HR/employment law decisions. Whether this authority resides in a COO, HR director, or CFO, having a centralized authority responsible for company-wide employment issues fosters multiple benefits of streamlining the resolution process, creating company-owned expertise, aligning HR management with business goals, and preventing internal inconsistencies that lead to employment lawsuits. The company must also adopt a uniform set of policies and procedures, distributed and well-communicated to each employee, such that common issues never reach a supervisor or become a source of conflict. Due to recent legal developments, there are “must have” provisions to protect employers, e.g., employment-at-will, EEO, harassment, electronic communications, family and medical leave, and whistleblower rights (Sarb-Ox), on which the company should also provide employee and management training. Likewise, as much of a services company’s value is in its employees and customer relationships, there should be restrictive covenants agreements prohibiting employees who leave from using confidential information, soliciting customers and company employees, and, in some cases, competing with the company. With critical issues covered, the employer is free to establish policies on performance and salary reviews, bonuses, promotions, leave, benefits, and employee responsibilities, to promotes its business goals. Of equal importance, especially for companies with multiple facilities or in rapid growth, is to empower supervisory staff with management HR and legal guidelines and procedures to minimize time and liability on such common functions as applicant selection, performance reviews, discipline, discharge, overtime, discrimination, and harassment. Similarly, companies should incentivize supervisors to succeed by including employee management as a component in compensation reviews. A key element in the “management system” is that personnel decision leading to liability be made in consultation with HR management personnel, who in turn have the discretion to consult employment law counsel for a preventive “reality check.” Particularly for a company in a growth mode, employee disputes can be costly distractions for management and staff, and can adversely impact the ability to attract outside investment. Perhaps the most cost effective advice employment law counsel can provide is the quick review of significant personnel decisions to determine, for example, whether to discharge an employee or first place him on a performance improvement plan to protect the company. In the employment context, change can be the driver for success, but can also create disruption and liability. Thus, while all companies in the midst of growth should implement HR and employment law polices, companies can be more efficiently served with less risk by managing staff growth based on an existing personnel management system that is integrated into the overall business expansion plan. REPRINTED FROM:
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