Top 5 Mistakes Employers Make That Can Cost You Big Bucks

printer Printer Friendly Version

Author John Towler, Ph.D.

(In Employee Morale, Wasted Time, Lost Income, Lawsuits or Unemployment Claims)

1. "It's very informal here. We don't need anything in writing."
Most companies start out with no written policies whatsoever. When issues arise, as they always do, owners and managers make decisions on a case-by-case basis. As employees compare notes, resentment arises because one employee was treated more favorably than another. This is unintentional on the part of management. It happens because someone doesn't know how another manager handled it, or they can't remember how they handled the same issue themselves the last time. Employees become unhappy, even though you're doing your best to treat them fairly.

In addition, you eventually notice that you're dealing with the same situations over and over. Instead of dealing with an issue once, you're spending your time repeating what you've already done and trying to remember how you did it. You can save yourself a lot of time and a lot of grief if you make the decision once and put it in writing. Everyone then knows the ground rules, everyone is treated consistently, and you're not constantly spinning your wheels.

The employer's ultimate nightmare is when you think you're doing the right thing, but an employee for whatever reason decides they have been treated unfairly (e.g., didn't get a promotion they wanted, or were fired for not performing) - AND they decide the reason they didn't get what they wanted is that you are discriminating against them because of their gender, race, age, etc. - anything that is protected by law. They file a lawsuit or a claim of discrimination. That's when you find out the awful truth about employment law: THE EMPLOYER IS GUILTY UNTIL PROVEN INNOCENT!! If you have nothing in writing that says you do not discriminate, it's your word against theirs, and you don't have a chance of defending yourself successfully. In employment law, it's not enough to have good intentions or even to do the right thing. You must have it in writing!

2. "We'll just write up our own policies as we need them."
Lots of companies don't see the need or don't want to take the time to decide on their policies in advance and put them all in writing. Policies are only developed after the company has had a problem with a given issue or failed to handle it correctly. Then someone writes a memo on how it should have been handled and what to do when it happens again.
The problem with learning through your own experience is that this is the hard way and the expensive way. There are a very large number of issues that can lead to problems and even to lawsuits. Operating without a comprehensive set of written policies is like driving your car without insurance. You may be lucky for a while, but one lawsuit can totally wipe out all the assets you have devoted your life to building.

3. "We'll do it ourselves. That costs us nothing."
Many companies do recognize the need to have employee policies in writing. But they feel they can't afford to pay an attorney or a consultant thousands of dollars to develop them "from scratch". So they assign someone on their staff to write up a set of company policies (in addition to the dozens of tasks this person is already responsible for). There is the assumption that if we don't pay cash for it, it doesn't cost us anything. But this is an illusion. There are two very significant hidden costs.

The first cost is that whatever time your own staff spends on this task takes them away from their "real job", which is running the company and generating business. So the first cost is lost income that could have been generated if your people weren't pulled off to research and write your policies.

The second cost is that you are running the risk of being without written policies for a very long time while your people are working on them. And, what they are able to come up with is probably not going to be as comprehensive or effective as you need. It takes literally hundreds of hours and a great deal of experience to research and write a comprehensive set of employee policies. It's unlikely that anyone on your staff has the time or the expertise to do it effectively. This is an area where "do-it-yourself" is inefficient and risky. As the saying goes, it's "penny-wise and pound-foolish".

4. "We'll show our employees that they can't get away with anything."
If you write your policies as though you are expecting trouble and don't trust or respect your employees, this can create resentment and resistance. It can destroy the morale and rapport you have worked very hard to establish. Employees will see the policies as something negative that is being forced upon them and will not respond with the cooperative spirit you are looking for.

Your policies should convey your commitment to provide a work environment that enables every employee to reach the highest possible level of professional and personal fulfillment. In return, you expect that every employee will put forth maximum effort towards the performance of their jobs and the achievement of the company's goals. The way you express your policies and the reasons behind them will determine how your employees respond.

5. "Documenting everything is way too much trouble."
Some companies go to all the trouble of putting their policies in writing, then fail to take the final steps that give them the protection they need: They forget to have the employees "sign off" on the policies, and/or they don't bother to document problems when employees violate the policies or fail to perform the essential functions of their jobs.

If you are involved in a dispute, you must be able to prove not only that you have certain official policies, but that these policies have been communicated to your employees and they have agreed to comply with them as a condition of their employment. This means that you must not only have a written set of policies distributed to every employee, you must also have each employee sign a form stating that they understand it is their obligation to read and understand these policies and that they agree to comply with them. Then keep these signed forms on file. This is not difficult to put in place; it's just a matter of doing it.

If employees violate your policies or fail to do their jobs adequately, you will ultimately need to take some action to correct the problem. Often you end up having to fire the employee. If this happens, you will need to justify your actions, or you will be paying these people for not working.
When an employee is fired, generally the first thing they do is file a claim for unemployment compensation. You are not required to pay these claims if you can show that the employee was fired for a valid, business-related cause. You will need to have complete, written documentation of their performance problems or policy violations and your communication with them about these problems. Protecting your rights in these situations can save you literally thousands of dollars a year in payroll taxes.

John Towler is a Psychologist and the founder of Creative Organizational Design. Please send comments about this article to jtowler@creativeorgdesign.com. For more information, please contact us.

Re-printable with permission.