Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘Corporation’

The Consultants Have No Clothes

Monday, April 26th, 2010

Image: Bob RosnerThis week’s blog should get me in a lot of trouble. But I think it’s time that someone points out that many of the biggest business consultants, authors and speakers run really crappy businesses of their own.

Okay, I’ve heard all the jokes about consultants. All go basically down the same path—a consultant is someone who borrows your watch and then tells you what time it is. But this is someone much worse. I’ve discovered that many of the biggest advisors to business run shops that are much more poorly managed than many of the corporations that pay them such lofty fees.

Ironic isn’t it?

Take consultant number one—I’ve confided the real names to my editor, but dear reader you’ll have to give me some slack here, because these guys are my colleagues, and in some cases my friends.

Consultant number one has had a series of best selling books, he commands top dollar on the speakers circuit and chances are that you’ve heard or seen him at one time during your career. He is so volatile that he is barely able to hold on to staff for more than a year. He says he’s a great listener, but his staff says to me that he yells far too much to ever hear a word they say. His office might as well have a revolving door on it.

Consultant number two is one of the nicest guys you’ll ever meet. But his company is remarkably dysfunctional. Its top leadership seems to change with the seasons. More than any other, this company almost seems to be dedicated to violating every principal that it espouses in its publications and presentations with its own people. It is a rudderless, often contradictory and cruel place that talks about sharing the credit but seldom does.

Consultant number three has built a company with some of the lowest morale anywhere. It’s hard to sort out where the battle lines are worse, in the executive suites or in the trenches. At one point I actually got to see some of the company’s internal survey results and couldn’t imagine that any of this company’s customers own results were that pathetic. Employees felt that management was more likely to knife them in the back then pat them on it. Although there was a lot of talk about values, the organization seems to only hold one value dear, and that is making the sale.

Woody Allen once said that those who can, do. And those who can’t, teach. Clearly those who really can’t do something become top-priced consultants.

So what can we do about this? I’m not suggesting that anyone throw out the baby with the bathwater. Each of these three people I referred to above has an important message and strategies to share. I just believe that corporations need to do a better job of due diligence with the messengers it picks before it starts ramming the fad of the week down its own people’s throats.

Look at each possible vendor as a little laboratory for their own principals. Ask for proof that they eat their own dog food and practice the very principals that they are foisting on you, and the rest of the business world.

Many of you are probably saying to yourself that this doesn’t really matter. It all goes back to the “Hawthorne Effect”, remember, that’s where a company turned up its lights and found that productive increased. Then when productivity stabilized they tried turning the lights down and found—like magic—that productivity magically increased again. The lesson, is that over the short haul almost anything you do can potentially increase productivity.

So Corporate America do your homework. Just because someone is a brand name, don’t assume that their principles work in the real world. That’s the bad news. The good news, is that the due diligence isn’t that hard to do. You just have to take the pulse of the employees who work for the company you are thinking about hiring. Ask to see recently survey results and staff turnover rates. I can guarantee that often you’ll be surprised by what you find.

About the Author: Bob Rosner is a best-selling author and award-winning journalist. For free job and work advice, check out the award-winning workplace911.com. Check the revised edition of his Wall Street Journal best seller, “The Boss’s Survival Guide.” If you have a question for Bob, contact him via [email protected].

Bad Distribution of Income Led to Great Depression: History Repeats in 2008

Wednesday, June 24th, 2009

John Kenneth Galbraith wrote The Great Crash 1929, an economic history focused in part on the men of the market who brought on the crash, in graceful and snarky prose. In his last chapter, he tells us of five major weaknesses in the real economy that made it possible for the disaster to destroy a generation. At the top of his list is the badly unequal distribution of wealth.

He points out that the top 5% of the population earned about one third of all personal income in 1929. Those figures comport well with the figures from Emanuel Saez and Thomas Piketty, whose IRS data indicates that the top 5% earned about 37% of gross income in 1929. P. 194 (references are to the Penguin Books 1992 ed.). For a discussion of the 2006 figures, see this NYT article.

Productivity increased steadily from 1920 to 1929, but wages and prices were stagnant. P. 192 Costs fell, and profits increased, but how were the wealthy to dispose of the money? The choices were consumption of luxuries or capital investment. There is only so much even the rich can consume. If anything happened to reduce the flow of money to capital expenditures, consumer spending could not increase to take its place, and the economy was headed down. In the event, it looks like a huge part of it went to speculation. There is insufficient evidence, according to Galbraith, to be certain that this was the central cause, and bless him for his warning about theorizing with incomplete data, but he thinks the explanation is consistent with the observed facts available to him in 1954.

He identifies four other factors.

1. Bad corporate structures. Although the business press praised the businessmen of that day, the fact (P. 195.) was that

American enterprise in the twenties had opened its hospitable arms to an exceptional number of promoters, grafters, swindlers, impostors, and frauds. This, in the long history of such activities, was a kind of flood tide of corporate larceny.

2. Bad banking structure. Galbraith doesn’t think bankers were any worse or better in the 20s than the 50s, but the structure of banks made runs on banks easier and more likely.

3. The balance of trade. The US was a creditor to most of the world. As the decade wore on, that status increased every year. High US tariffs made it difficult for other nations to balance their imports from the US with exports to the US, so accounts were settled in transfers of gold, or in shaky and crooked loans, like the loans made by National City Bank (predecessor, somehow, of CitiGroup) to Peru. P. 198-9. As this became more difficult, other countries had to reduce imports from the US, which caused strains in sectors of the economy, particularly agriculture.

4. Incompetent economic advice. From p. 200:

The economic advisors of the day had both the unanimity and authority to force the leaders of both political parties to disavow all the available steps to check deflation and depression.

Two and three seem unlikely culprits this time. It looks to me like a good case can be made for one, with all the money lost by the great geniuses of Wall Street and their counterparts in the banking and other businesses. What kind of country did our corporate masters think would be left when they exported all the decent jobs to other nations? Actually, it doesn’t affect them a bit. They just whine that they are being put upon by the great unwashed, and have to pretend they aren’t really all that different from you and me. When Newsweek notices it, it must be real.

As to four, judging competence isn’t easy. What do you think about the economic crowd? If you liked them under Bush, you’ll love them in their new form under Obama, including their supporters in the money party, the Blue Dogs and the rump of the Republican party. John Kenneth Galbraith would recognize these people too.

About the Author: Masaccio has a law degree from Indiana University and is a graduate of the University of Notre Dame. He began his career as a corporate and securities lawyer. He then worked in consumer protection and securities law for several years before becoming the securities commissioner of his home state. He has practiced business and bankruptcy law for the past 25 years. Beginning with an expensive and slightly frightening experience with Small Martingale as a young man, he has had an opportunity to see, investigate, sue and prosecute a wide variety of fraud cases, including check-kiting, critter contracts, churning, insider trading, Ponzi schemes, and stock market manipulation. This background is helpful in his work for FDL, which focuses on explaining the financial industry of today.

This article originally appeared in Firedoglake on June 21, 2009. Re-printed with permission by the author.

Third Circuit Sends Wake Up Call to Employers About Discriminatory Hiring Practices

Thursday, April 30th, 2009

In the spirit of National Equal Pay Day on Tuesday, I wanted to share the important gender discrimination case of Donlin v. Phillips Lighting North America Corp. decided by the Third Circuit last week.

Here’s what happened in the case.

Colleen Donlin was hired by Phillips as a temporary warehouse employee at its Mountaintop, Pennsylvania distributions center. Her job was to help prepare orders for shipment.

Like other temporary workers, Donlin applied for a permanent position. She was not hired and her eight month temporary assignment ended.

Donlin got two other jobs after she left Philips. At the first job, Donlin earned  $14.70 an hour, but it was a 32-mile commute.

She left that job and found a job closer to home at which she made $13.00 an an hour. Had she been hired by Philips, she would have earned $14.67 an hour as a base salary

Donlin learned that Phillips hired several men for the position she had applied for after it refused to hire her.  She filed a Title VII lawsuit for gender discrimination,  won the trial and was awarded damages.

In discrimination cases, the compensation which can be awarded by a judge or jury is designed to make victims whole and put them in the position they would have been in had they not been discriminated against.

A winning employee can recover “back pay” and “front pay.”

  • Back pay represents losses from the the time of the discrimination up to the time of trial.
  • Front pay represents the losses that the victim will experience in the future if he or she does not find a comparable position.

Based on the premise that Donlin would have worked for another 25 years, an advisory jury awarded Donlin:

  • $63,050 in back pay
  • 395,795 in front pay
  • for a total of $458,845

The award was based on the difference in pay and benefits between the $13.00 hour job she was holding at the time of trial and the $14.67 hour job she would have had at Phillips had she not been discriminated against when Phillips refused to hire her.

The judge modified the front-pay award by reducing it to account for 10 years of damages instead of 25, finding that a 25 year period was too speculative — so the total award was $164,850.

Phillips appealed and the decision came out last week. The issues decided are very important for both victims of discrimination and their lawyers.

Here are the highlights:

1. Front Pay:

Donlin was in her 30’s at the time of her employment with Phillips and 40 at the time of trial. The question presented was: was how far into the future can a younger employee like Donlin claim economic loss?

For those of us who represent individuals in employment cases, the issue has always been a hard one to deal with when it comes to a younger worker.  The reason is because past damages can be calculated with certainty, but future losses can not:

  • Is the person going to get another job?
  • If so when and for how much?
  • How do we know what someone will be doing 20 or 30 years from now?

When we represent someone in an age discrimination case, and the terminated employee is 55 for example,  it’s easy for us to project damages until age 65 or 70  (whatever the age is that the person was likely to retire).

It’s not speculative to assume that the person would have worked for another 10 or 15 years, and it’s not hard to calculate what he or she would have earned and what the total losses are.

It’s much more complicated when we represent a younger person.  Since the law does not allow “speculative” damages, it’s simply very difficult to predict how far into the future the court will allow us to project.

In this case, the  district court judge ruled that Donlin was entitled to receive damages for economic loss for 10 years into the future. The Court of Appeals affirmed the ruling :

We note that there will often be uncertainty concerning how long the front-pay period should be, and the evidence adduced at trial will rarely point to a singe, certain number of weeks, months , or years.  More likely, the evidence will support a range of reasonable front-pay periods.  Within this range, the district court should decide which award is most appropriate to make the claimant whole …

We find that the District Court did not abuse it’s discretion when it awarded Donlin front- pay for 10 years.

This means that we now we have a decision with a sound analysis for front -pay involving a relatively young employee from a high level court.  It’s a decision that other victims and their lawyers can rely on and it’s a decision that carries considerable weight. It’s very good news.

2. Mitigation

In an employment case, the employee  who has lost a job has a duty to mitigate — which means that she  (or he) must make reasonable efforts to minimize her loss of income. The precise language of the statute says

Interim earnings or amounts earnable with reasonable diligence by the person or persons discriminated against shall operate to reduce the back pay otherwise allowable.

In other words:

  • a person who is claiming damages in an employment case has a duty to look for work
  • damages into the future end if an employee gets an equivalent job or better job

In this case, Donlin first got a job in which she earned $14.70 and hour.  The problem was that it was a 32 -mile commute. She worked at the job for two years, and then found a job closer to home at which she made $13.00 an an hour.

She would have received $14.67 an hour as a base salary had she been hired at Philips.

Phillips argued:

  • Donlin’s “voluntary transfer” to a lower-paying job was inconsistent with her “duty to mitigate”
  • Phillips should not have to make up the difference.

Donlin argued:

  • once you factor the cost of the commute
  • the the two jobs were substantially the same.

The Court of Appeals agreed with Donlin:

An employee need not seek employment which involves conditions that are substantially more onerous than [her] previous position…

It is well settled that a claimant has not failed to make a reasonable effort to mitigate damages when she refuses to accept employment that is an unreasonable distance from her residence.

[T]he job at Mission constituted a substantially equivalent opportunity as that available at Romark.  Donlin should not be penalized for accepting that opportunity.

Accordingly, the District Court’s finding that Donlin sufficiently mitigated her damages was not clearly erroneous …

Certainly our clients still have a duty  to mitigate and make a “reasonable effort” to find comparable work if they intend to claim damages in a lawsuit.  This decision does not change that fact.

But this decision certainly delivers great news since it clearly states that a person is not required take a job which places an onerous burden on him (or her)  in order the meet that obligation.

On many fronts,  this is a hugely helpful case on questions of damages in employment cases. While we deal with these problems every day, it’s certainly not every day that we get federal circuit court case law on these particular issues.

It’s also a wake up  to employers to be careful about their hiring practices.

The bottom line is that Donlin worked as a temp at a company for eight months. Because she was discriminated against when the company hired a man instead of her into a permanent position, she is now entitled to all of her past losses plus 10 years of damages into the future. That’s a big win.

Images: images.businessweek.com

About the Author: Ellen Simon is recognized as one of the foremost employment and civil rights lawyers in the United States. Ms. Simon is the owner of the Simon Law Firm, L.P.A., and Of Counsel to McCarthy, Lebit, Crystal & Liffman, a Cleveland, Ohio based law firm. She is also the author of the legal blog, the Employee Rights Post. Her website is www.ellensimon.net.

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