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Labor Day and This Blog’s Future


HappyLaborDay-WeekendI put this blog on hiatus in early June and said I’d be back around Labor Day. Well, today is Labor Day.

A lot has happened this summer that has and will impact corporate life. I’ve missed writing about many issues, such as

For other examples of what I might have written about, take a look at my twitter feed, where I pass along the best articles I read.

In the months ahead, we could be looking at tax reform, infrastructure, immigration, and other significant policy issues. Those, too, will impact corporations, their leaders, and their workforces. And I will probably want to write about these matters.

Over the summer I’ve given a lot of thought to the role this blog plays in my life. I’ve discovered I miss writing it, even though the weekly commitment to post was a distraction from other projects and meeting other goals.

So I’m going to compromise. I will try posting twice a month, on the second and fourth Mondays of the month. Which means my first substantive post will be up next Monday.

For today, enjoy the end of summer and your Labor Day weekend. And take a moment to think about what Labor Day means as a holiday honoring the contributions workers have made to the strength, prosperity, and well-being of our country.

Thanks for your patience this summer.

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Manage Yourself Before You Can Lead Others


executive-1668932_640I’ve been following the folks at Contented Cows for many years now. Bill Catlette and Richard Hadden call themselves employee engagement experts. The name of their business comes from their first book, Contented Cows Give Better Milk: The Plain Truth About Employee Relations and Your Bottom Line. Although they say they are employee engagement experts, their website states, “We develop leaders, period.” They write about employee engagement, but mostly in the context of how leaders create the kinds of focused and enthusiastic employees who give the “better milk” that all businesses want.

Recently, Bill Catlette wrote a post entitled “Leadership . . . It’s Not a Position,” which really struck home with me. I’ve read a lot about what a new leader needs to do in his or her first 100 days in the job. But in this post, Mr. Catlette goes beyond the “whats” of a new leader’s role to get at the “hows.” He says:

1. First, you manage yourself.
2. You lead others.
3. You manage the system.

If leaders reflected on these three points, I think they’d get to the “whats” of any new role a lot more easily—and to the “whats” of their existing roles also.

Manage Yourself. We have only to look at President Trump to understand the importance of managing yourself. Now, none of us can know how much President Trump manages himself, but from the outside his tweets seem undisciplined and contrary to the message of control and focus that most Americans want from their President.

As Mr. Catlette states,

“No one is going to follow you for very long or very far if you don’t have your own act together. You summon appropriate doses of optimism and humility, and keep your ego very much in check.”

This is the behavior of a leader. If this first step is not done well, then steps two and three may not get the job done.

Lead Others. Most leadership articles focus on this aspect of leadership. We are instructed that leaders should communicate the mission of the organization and how each individual’s work fits into it. They should listen with empathy to those they manage, as well as to their external stakeholders. They should encourage and persuade their followers toward a shared goal.

We’re all taught to do these things. Some of us do them better than others. But none of it matters if we—as leaders—do not model the behavior and performance needed from others in the organization.

Manage the System. Again, as leaders we are taught to examine the technology, decision rights, workflows, and other tools and processes that make up the organization we lead. We’re told to find the weak points and figure out how to improve them. We’re expected to shape the culture to get the job done—to create engaged employees.

But once more, we must recognize that we cannot shape the culture to something different than what we display ourselves.

The primary reason many leaders fail is because of cultural fit. These leaders often do not fit because they do not shape their behavior to the requirements of their role. I’m not arguing for a cookie-cutter look to all senior executives in an organization. But I am suggesting that leaders be conscious of how their behavior is viewed by those they lead and that they adapt themselves to their environment before they expect others to adapt to them.

When have you observed leaders who failed because they didn’t manage themselves first?

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Amazon Expands Vertically and Horizontally


amazon-logoAmazon has recently announced plans to expand in two directions—a vertical expansion into shipping by competing with Federal Express and UPS, and a horizontal expansion into the grocery business in competition with Wal-Mart and other grocers. Initially a business that served as an online alternative to physical stores, first in books and then in a multitude of categories, Amazon now appears to be seeking to become a ubiquitous retailer of all products through all channels.

Will it work?

Over the last forty or fifty years, retailing has seen many changes. From downtown shopping areas in both urban areas and small towns to regional shopping centers; from specialty stores to mass market chains, from physical stores to online shopping. Recently, there has been some movement away from big shopping malls to more pedestrian-friendly environments and multi-use facilities.

Through all these changes, most of us have become comfortable with online shopping for many products that formerly required a personal inspection—such as clothing and electronics. Sometimes we use physical stores to try out merchandise, then buy online.

Amazon has become an online behemoth in many retail categories. As The Wall Street Journal put it in an article on September 27, 2016, Amazon’s move into shipping is “a brazen challenge to America’s freight titans.” There is every reason for Amazon to try to expand vertically to ship the merchandise as well as sell it, if it thinks it can do so more cheaply than the billions in freight costs it pays to carriers such as FedEx, UPS, and the U.S. Postal Service.

If Amazon can make this transition, costs to customers should go down, provided that the shipping companies remain viable competitors. Since even Wal-Mart has not destroyed the freight industry, Amazon would have a difficult time replacing the “freight titans.” Amazon itself told The Wall Street Journal,

“we are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service, and our own delivery efforts are needed to supplement that capacity rather than replace it.”

On the other hand, many big box retailers don’t like being showrooms for Amazon, and some have gone under because of consumers’ shifting buying patterns. Amazon already has around 70 facilities across the U.S. from which it ships to consumers, and over 40% of the U.S. population lives within 20 miles of an Amazon facility. So it’s difficult to predict what limits there are on Amazon’s efforts to expand into shipping.

Through all the changes of the last half-century, food has remained the one thing we typically buy ourselves in a retail environment. I may hate the weekly trips to the grocery store, but other than a few specialty items from proven businesses such as Harry & David or Kansas City Steaks, I wouldn’t want to trust my food purchases to someone else, particularly of perishable items.

And yet, I remember as a child that my grandmother—who didn’t drive—ordered her groceries from the shop around the corner and had them delivered. I remember my mother ordering milk deliveries three times a week. So why not? There isn’t any reason why Amazon shouldn’t attempt to expand its product lines into perishable items.

According to another Wall Street Journal article, Amazon is trying out both home delivery service of groceries and also small local stores where previously ordered groceries can be picked up. They are even trying drive-through. Wal-Mart is trying some of these things as well. Groceries are costly to deliver, so whether this business model will work is questionable.

Regardless which expansions prove successful for Amazon, it is clear that retailing will continue to change in the decades ahead.

What do you think—will Amazon be successful in moving into shipping and into the food business?

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Obamacare Today: Falling Apart Before It’s Fully Implemented


TPI078T0ISIt’s been almost six and a half years since the Affordable Care Act (known as the ACA or Obamacare) passed with only Democratic votes. The roll-out of this complicated statute took several years to implement. Some provisions (such as the Cadillac tax on generous employer plans) still haven’t been implemented. Yet the statute’s complex redesign of our health care system is already unraveling before it has been fully knitted.

Obamacare was not fully debated before it was passed. The Senate passed one version, and the House passed another version. No reconciliation of these bills ever occurred. But because the Democrats in the Senate lost their filibuster-proof majority in early 2010, the House had to adopt the previously passed Senate version to get any health care bill onto President Obama’s desk. Thus, the nation has been stuck with the Senate’s early version of health care reform, warts and all.

Since then, a flurry of regulations has fleshed out the statutory provisions on several fronts—on employer-sponsored plans, Medicaid, health care exchanges, to name a few.

  • Regulations permitted only narrow grandfathering of employer health care plans. Only minor changes were permitted to these plans. Greater changes meant that employer plans would have to comply with all of the Obamacare requirements for employee coverage, benefits, and cost-sharing with employees. (See here.) As health care costs continued to rise, few employers could continue to offer their old plans without modification. Thus, employer plans changed, probably more than Congress or President Obama had anticipated. No, employees could not keep the plans they liked. Those plans were gone, and employer plans incorporated expensive mandated minimum benefits and other provisions that drove up costs.
  • Obamacare offered subsidies to states that expanded Medicaid coverage for those slightly above the poverty level. But many states feared the future costs and refused to adopt expansions to Medicaid, so Medicaid did not cover as many people as expected.
  • For people who did not have the option of employer coverage or Medicaid, health care exchanges provided federal subsidies up to 400% of the poverty level. As we all recall, the exchanges had systems problems during the initial enrollment period, which meant their plans were selected more slowly than anticipated. Yet almost from the beginning of the exchanges—and accelerating this year—insurers have opted out because they have lost money on these plans.

Meanwhile, costs continue to rise under almost all health care coverages. Granted, costs are not rising as fast as they had been prior to passage of the ACA, but they are still rising faster than wages or inflation. So health care continues to take a bigger and bigger chunk of family income.

It is becoming increasingly clear that Obamacare is not sustainable without change. Yet the political standoff does not seem able to address this need for change. And any revisions the two parties propose are likely to be diametrically opposed—Democrats urging the addition of a public option and Republicans seeking more market-based solutions.

I am not arguing that the health care system before Obamacare was in good shape. It, too, lacked transparency and increased consumers’ demand for health care by transferring costs to employers and the government. But every system is perfectly designed to get the result it gets. Today, we’ve got Obamacare, and the results are not satisfactory to anyone. We need to examine the root causes of the problem and change the system.

The basic problem we face is that—despite promises to the contrary by the Democrats who passed Obamacare—health care cannot increase in both quantity and quality and at the same time reduce costs. We are trying for a Cadillac in every consumer’s garage at a Fiat price to the consumer and a Ford price to the government. But if consumers can get a Cadillac for a Fiat price, they will want two Cadillacs. Demand increases to an unsustainable level when the price paid is less than the service received. It shouldn’t surprise anyone that the number of insurers willing to offer coverage on the exchanges  is decreasing and premium costs are rising.

As Greg Ip wrote in the Wall Street Journal on August 17, 2016,

“Selling mispriced insurance is a precarious business model.”

The exchanges are becoming unsustainable, and the fiscal problems of Medicaid and Medicare will have to be addressed at some point. Moreover, employers won’t continue to provide health insurance to workers if the costs continue to rise faster than wages and prices.

As stated above, our health care system includes problems of quantity, quality and cost. At most, we can work on two of these issues, and maybe only one of them at a time. This will require hard choices. To make choices that stick, we will have to consider all viewpoints. For some of my thoughts on how to improve health care in the U.S., see here.

There was a reason our founders designed two houses of Congress and a President to be checks and balances on each other. The Democratic cram-down of Obamacare in 2010 prevented those checks and balances from working, which resulted in what we have today. Until Congress and the White House work together on mutually acceptable changes to the ACA, we are unlikely to improve health care in this nation.

How do you think the U.S. can best improve its health care system?

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Favorite Firing: Terminated for Lying About Leave


police-officer-clipart-black-and-white-nTXoX7MTBYears ago, I used to discuss employment cases I worked on with my kids at the dinner table. I didn’t use names, but I did describe the circumstances. “Don’t ever lie to your employer. You can get fired for lying,” I told them.

A recent court case from Ohio proves I’m still right. In Mattessich v. Weatherfield Township (Ohio Ct. App. Feb. 8, 2016), a police officer who had taken leave for depression was later terminated for lying about his medical leave. This is yet another “favorite firing” case involving law enforcement personnel.

The Facts: After Richard Mattessich, a police officer with the Weathersfield Township Police Department in Ohio, applied for a promotion to sergeant, he alleged that another applicant had been late to work. A video proved that Officer Mattessich’s allegations were false. The Chief of Police considered terminating Officer Mattessich at that time, but gave him a second chance. The Chief did require Officer Mattessich to undergo a psychiatric evaluation. A health care provider concluded that Mattessich needed sick leave, and he was off work for nine months.

Officer Mattessich passed a fitness-for-duty exam and returned to work. Nevertheless, others on the police force thought he lacked confidence and even seemed “dazed” and “out of it.” Officer Mattessich said he was fine and denied having any mental health counseling while on leave.

A few weeks later, his superiors learned that Officer Mattessich had in fact been treated for depression with counseling and medication. He admitted he had lied earlier about not receiving any treatment. Shortly thereafter, his employment was terminated for lying. The Chief of Police indicated that he could not trust a dishonest employee, because honesty and integrity were essential parts of the job for police officers.

Mattessich filed a disability discrimination lawsuit alleging that he had been discharged because of his mental health condition. The trial court granted summary judgment to the employer and dismissed the case, ruling that dishonesty—not disability—was the motivation behind the termination.

On February 8, 2016, the Ohio Court of Appeals upheld the termination. Although Mattessich’s “depression” was mentioned during the termination discussions, it was only mentioned because it was related to the plaintiff’s deception. There was no evidence that his mental health status was the cause of his terminaiton. Just because the employer knew about some mental health condition did not mean that any subsequent adverse decision was the result of discrimination.

The Court of Appeals found that the police department had provided a legitimate, nondiscriminatory reason for Officer Mattessich’s termination. It therefore became the plaintiff’s responsibility to prove that the reason was pretextual. The Court stated:

To establish pretext for a claim under the Civil Rights Act, “a plaintiff must demonstrate that the proffered reason (1) has no basis in fact, (2) did not actually motivate the employer’s challenged conduct, or (3) was insufficient to warrant the challenged conduct.”

Officer Mattessich failed to provide evidence to support pretext under any of these three categories.

One of the three judges on the Court of Appeals did dissent. She argued that the employer regarded Officer Mattessich as disabled and that there were questions of fact about the officer’s dishonesty that should have survived summary judgment.

The Moral: What I told my children is still good practice at work—do not lie to your employer.

This case involved law enforcement, where honesty is critical for the success of the police department’s work with the public and in courts. But honesty is critical in every employment relationship. Every employee owes his or her employer a duty of loyalty, which encompasses veracity. Every employer should have a policy prohibiting employees from lying to their supervisors.

And every employer should investigate allegations that an employee has lied—not only when the lies involve things as critical to the employment relationship as fitness for duty and leaves of absence.

Of course, communicating employment policies and consistency in applying those policies are critical. In this case, the Court of Appeals found that the Weathersfield Township Police Department had disciplined other officers caught committing acts of deception. So consistent application of the policy was important.

As noted above, there was a dissent in this case. These situations can go either way for the employer. The more the employer can distance the termination from the finding that the employee is disabled, and the more similar situations involving employees not in the same protected class as the discharged employee, the better the case is likely to go for the employer.

Involving Human Resources professionals and employment attorneys in these situations prior to discharging the employee is always a best practice.

But in this case, the biggest issue is that it took five years to get an appellate ruling that the employee could legitimately be discharged for dishonesty.

When have you had to deal with dishonesty in the workplace?

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Proposed EEO-1 Regulations on Pay Data—More Government Bureaucracy for Employers With Minimal Value


EEOC sealThe Equal Employment Opportunity Commission has recently proposed regulations adding pay data to the information that large employers must file on their annual EEO-1 form. If these regulations become final in their current form, as of September 30, 2017, employers with 100 or more employees will have to provide information about pay data and hours worked separately for each gender, race, and ethnic category defined on the EEO-1.

In the past, President Obama has added new requirements to federal contractors and subcontractors, including an increased minimum wage, protections for LTBT workers, mandatory paid sick leave, and pay transparency. These policies were all implemented through executive orders. But the new proposal to expand the data collected on the EEO-1 form goes far beyond federal contractors. All employers with 100 or more employees would be affected—data on over 60 million employees will be required.

The EEOC states in its announcement of this proposal that it plans to use this data to investigate discrimination complaints, identify pay discrepancies among males/females and minorities/non-minorities across various industries and job classifications, all in an attempt to discover discriminatory pay practices. The data will continue to be collected based on the ten broad job categories already used on the EEO-1 report and will be divided into 12 pay bands for each job category.

There is little value to the information to be provided on the EEO-1. If racial or gender pay disparities show up in the broad categories, both the EEOC and employees are more likely to file claims. But under current law, valid claims of employment discrimination on the basis of pay require disparities between races or genders in specific job titles. Moreover, there are many legitimate, non-discriminatory reasons for disparities even within a specific job title—such as tenure in the role, prior education and experience, performance, hours worked, etc. The EEO-1 data will not reveal any of these legitimate reasons for pay disparities. Many invalid claims of discrimination and lawsuits are likely to result.

In addition, gathering the EEO-1 data will be time-consuming for employers, not to mention the time spent defending claims and lawsuits based on incomplete information. Confidentiality of the data is also a concern.

The EEOC estimates that it will take each employer 3.4 hours to prepare the EEO-1 pay report annually, after an 8 hour set-up of the data collection system. This is a ludicrously low estimate. One day’s work to program every job into one of 12 job categories, assign every employee to the appropriate role, and calculate average salaries by race and gender? And then less than half a day of one person’s time to determine the accuracy of the report each year?

For all of these reasons, the EEOC’s plan to use the data to target its enforcement efforts and to focus wage discrimination investigations on pay disparities revealed by the aggregate pay data on the EEO-1s is unreliable and inefficient.

The EEOC also proposes to share its EEO-1 data with the Office of Federal Contracts Compliance Programs (OFCCP), which has also proposed collecting similar data. The OFCCP’s Equal Opportunity Survey (since rescinded) collected similar information, but a study of that survey showed that the data was not meaningful in identifying pay discrimination.

Although most corporate leaders would agree that pay decisions should not be made on the basis of race or sex or ethnicity, the value of the proposed regulations seems minimal. And the cost of the regulations and of prosecuting and defending the many claims and questions likely to be raised as a result of this broad-stroke solution does not seem directed at addressing specific pay-equity concerns.

Is your organization prepared to provide pay-equity data? If not, how much time and effort is required to become ready to do so?

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Happy Holidays! I’ll be back in 2016


Because this blog gets few hits during the holidays, I will not be posting again until Monday, January 4, 2016.

In the meantime, please visit some of the top-rated posts, including:

Situational Leadership Theory: It’s Just Common Sense

Analyzing the Causes of Disputes With the Circle of Conflict

Why Have an Independent Board of Directors in a Privately Held Corporation?

How Do You Deal with Conflict? Use of the Thomas Kilmann Conflict Mode Inventory in Mediation

Change the Organization’s Design to Get Different Results; But Be Careful . . . You Will Get What You Design

And for those of you working on performance reviews, see the links about performance management in last year’s holiday post.

Best wishes for the holidays,

Sara

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