Column: Risk — the good, the bad and the downright ugly

Douglas Pepin
Douglas Pepin

BY DOUGLAS PEPIN
GAZETTE COLUMNIST

To advance an organization and stay competitive it’s important to be innovative, try new things and take risks in developing new products (R&D).

I can’t imagine the number of failures (unsuccessful successes) it takes to perfect the next generation widget. The Post-it note was first conceived by Art Fry (in the choir loft I sing from in North St. Paul) when a paper bookmark fell out of his hymnal. He took the risk of communicating his idea to others and then to management. Management took the risk of developing something beyond the original scope of a sticky bookmark. Needless to say, it resulted in a great and profitable invention.

This type of “good” risk is both healthy and encouraged. However, let’s not fool ourselves, because too much of a good thing can also be bad. R&D is expensive and can bring about cash flow and other financial issues, resulting in failure if not managed properly.

There is another type of risk — the risk of non-compliance with employment law, or bad risk. There is a saying floating around, “If you think compliance is expensive, try non-compliance.”

What is nice about this type of risk is that it can be greatly reduced by simply knowing the rules, then implementing and following, in most cases, cost-effective administrative procedures such as: writing, communicating and enforcing well-established policies and procedures. Training employees, supervisors and management on harassment and discrimination. Making sure those responsible for compensation, benefits and payroll know the rules and regulations associated with their discipline. Training supervisors and managers on legal interviewing. Training staff on properly completing paperwork and required reporting regulations. Yes, there are a great number of regulations, but most, if not all, are fairly simple to comply with.

To put this in perspective, on Jan. 18 the Equal Employment Opportunity Commission posted a press release on its website that provided the Fiscal Year 2016 Enforcement Litigation Data. Keep in mind that these staggering numbers are from just one government entity.

In 2016 there were more than 91,500 charges of workplace discrimination, an increase from 2015. Overall, they resolved 97,443 charges, some carrying over from previous years, and secured more than $482 million for the victims. The press release also states that the agency reduced pending charges to 73,508. I estimate about $400 million pending charges will eventually be awarded to victims.

The agency received 585,000 complaints by phone and 160,000 inquiries in field offices. Putting these numbers together brings the totals to about 745,000 complaints, resulting in 91,500 charges and $482 million in payout to the victims, not counting the pending charges. Note: this does not include the cost of HR and legal counsel investigating and submitting information defending against the allegations in an attempt to have them diminished and/or dismissed.

The numbers of violations and costs are just as staggering when reviewing the Department of Labor (DOL), Department of Homeland Security (DHS) and the Occupational Safety and Health Association (OSHA) data. By averting just one major fine, organizations could pay for an entire HR team.

I would highly suggest ensuring that HR, supervisors and management knows all the exposure risks for their type of organization, and that they have “tools” in place to reduce those risks. We do not yet know what President Trump will do, but he did campaign on protecting the middle class (DOL) and controlling illegal immigration (DHS), which are two key areas of business compliance.

Can an employer keep an employee from filing a complaint? No. Can an employer greatly reduce the risk by having policies, procedures and required training, in addition to providing a safe, fair and pleasant work environment? Yes.

It has also been proven that when doing so, productivity increases and complaints decrease. When it comes to compliance, the best defense is a well-documented offense.

I encourage employers to take the needed risks to stay competitive by developing the next “smart something,” but also take the necessary steps to reduce all risks of non-compliance. Who knows, maybe the next major multi-million dollar sale will be clinched by being the proven low-risk supplier.

Douglas R. Pepin is a business consultant and owner of Advise-HR LLC in Stillwater. He has more than 25 years managing business human resources departments. Learn more at advise-hr.com or 651-888-1113.