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My guest for Episode #238 of the My Favorite Mistake podcast is Tom Applegarth, Vice President Human Resources for Preferred CFO, a company that provides Finance, Accounting, HR & Payroll support for small companies. Learn more at PreferredCFO.com.
Tom has over 30 years of experience, including serving at high-profile companies such as Goodyear Tires, Payless ShoeSource, and Amoco, with HR experience across the United States as well as Europe, Asia, and Latin America.
Tom's experience has brought significant, measurable improvements in employee engagement, attrition reduction, recruitment of the best and the brightest employees, and establishment of high-impact HR processes and improvements.
Learning from Career Blunders
In the episode, Tom opens up about a costly slip-up early in his career during a sensitive employee termination process involving a plant manager. Why does Tom think he should have elevated the internal conflict about firing (or not firing) that person to the CEO? What led to the company getting sued, which cost them far more than a fair severance would have cost? What were Tom's lessons learned?
Questions and Topics:
- Would it have been risky to go over their heads to the CEO?
- Do others learn from that story? Yes
- What happened with the new plant manager?
- Is HR’s role more about protecting the company from lawsuits than helping the employees?
- A mistake to not have an HR expert – even for very small companies?
- Firing fast with a paper trail?
- If employees need to report a problem — mistakes? What's your advice?
- “Nobody wants to work anymore” — a mistake to say that?
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- Full transcript
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Episode Summary
Navigating The Tricky Terrain of HR Management in Small Businesses
In the complex world of Human Resources (HR), making an error in judgment can have lasting repercussions for companies. For smaller companies, navigating these challenges will require both experience and a nuanced understanding of the HR landscape. Tom Applegarth, a Vice President of Human Resources at Preferred CFO, shares insights from his more than 30 years in HR with some of the most well-known global brands. His journey demonstrates the importance of managing human resources effectively, especially in smaller organizations.
Understanding the HR Role
The role of HR can sometimes be misunderstood within an organization. While HR ultimately serves the interests of the company, it is also instrumental in creating a healthy and fair working environment for employees. Previous roles in organizations such as Goodyear Tires, Payless Shoe Source, and Amico allowed Tom to develop HR processes that foster higher employee engagement, reduced attrition, and effective recruitment strategies.
Throughout his experience, one crucial lesson was the value of taking a balanced approach to decision making. HR should consider the interests of not just the company and customers, but also employees. Balancing the needs of all three constituencies is what differentiates successful companies.
Learning from Past Mistakes
Tom shares critical lessons from an incident early in his career where he was handling a sensitive termination process. The experience taught him the importance of adhering to corporate policy, reserving a fair chance for employees to improve, and offering decent severance packages, regardless of the pressure from managers focused on immediate PNL impact. This mistake ended up costing the company a million dollars in lawsuit and served as a cautionary tale that has shaped Tom’s HR approach throughout his career.
Smarter HR Management for Small Companies
Unfortunately, many small companies make mistakes in not giving adequate importance to HR management until issues arise. It is often thought that hiring a full-time HR person is too expensive. Alternatively, companies may assign HR tasks to employees that lack the knowledge and experience to effectively navigate the complexities of HR.
Preferred CFO provides an effective solution for such companies. They offer necessary HR support, allowing small companies to ensure compliance, manage employee grievances, and build a community within the organization without hiring a full-time HR professional. Avoiding HR-related mistakes and potential lawsuits can save a significant amount of money in the long run.
Importance of Whistleblowing Channels
Ensuring that employees have the ability to raise ethical or procedural issues in a safe and confidential manner is vital for any organization. A robust protocol should be in place for employees to report issues to supervisors or HR. However, if employees do not feel comfortable reporting directly within the organization, having an external reporting avenue accessible will provide an additional layer of security.
A key element in successful human resource management is the continuous improvement of processes, systems, and people. A balanced approach that considers all stakeholders – employees, customers, and investors ¬¬– lays the foundation for successful business operations. Whether it's dealing with a sensitive firing situation or establishing effective whistleblower channels, the role HR plays in small businesses cannot be underestimated. Equipping your small business with the right HR support can prevent costly missteps and promote a healthy corporate culture.
Encouraging Anonymity in Employee Grievances
Recognizing that not all employees feel comfortable directly reporting ethical or procedural issues to superiors within their organizations, secondary reporting avenues become vital. One method is an anonymous 1800 number, acting as a lifeline for employees enabling them to air their grievances without fear of retribution. This external channel can afford employees some level of anonymity and assurance, especially in situations involving bad managers or problematic HR personnel.
Anonymous Reporting Channels: The Intermediary Role
The utility of an anonymous reporting channel goes beyond offering mere anonymity. Its role can span as an intermediary between the employee and the organization's leadership. It involves relaying detailed accounts of issues raised by the employees to the leadership without revealing the identity of the employee. This level of confidentiality can encourage more employees to be forthcoming with their concerns, which can help preempt potential problems.
Spreading the Word: Promoting the Anonymous Channel
Simply providing an anonymous reporting line is not enough; the organization needs to execute a robust communication strategy ensuring that all employees are aware of this avenue. Regular and constant reminders of its existence could range from including details during team meetings to displaying posters around the workplace. The more visible and accessible it is, the greater its utilization and impact on the organization's health and transparency.
Trustworthiness of Anonymous Channels
Despite the promise of privacy, there's often a level of skepticism among employees regarding the anonymity of their reports, particularly in low trust environments. This doubt can significantly impact the effectiveness of such systems. To counter this, companies could consider having these services administered by external independent entities. This can add a layer of credibility since the external firm has no explicit interest in protecting the company at the expense of the employee.
Adapting to Evolving Job Market
The current job market has changed significantly from years past, with technology offering transparency regarding job opportunities and pay scales. Today's employees have access to a wealth of information about potential employers, making it far easier to seek competitive salaries and appealing work cultures. Consequently, companies must be competitive – not only concerning remuneration but also in fostering positive workplace cultures and exceptional management.
Ensuring Competitive Compensation and Career Satisfaction
To attract and retain top talent, businesses must understand current market pay rates and offer ‘in-the-ballpark' compensation packages. Regularly participating in and purchasing salary surveys can allow businesses to stay competitive. But competitive salaries are part of the equation; retention also hugely depends on the work culture and management quality. Regularly evaluating what each employee wants from their career and making an effort to fulfill those needs, particularly for top performers, can significantly enhance employee satisfaction and retention.
Ultimately, companies today need to adapt to the evolving job market, nurturing trust, ensuring adequate compensation, and promoting a healthy work culture. As Tom Applegarth from Preferred CFO suggested, avoiding these measures can leave businesses ignorant of potential issues, vulnerable to public exposure, and ill-prepared to retain their best people.
Automated Transcript (May Contain Mistakes)
Mark Graban: Welcome back to my favorite mistake. Our guest today is Tom Applegarth. He is vice President of Human Resources at preferred CFO. That's a company that provides finance, accounting, HR and payroll support for small companies. You can learn more preferredcfo.com.
Mark Graban: Well, Tom brings more than 30 years of experience to the conversation. Today he's worked at high profile companies and including Goodyear Tires, Payless, Shoe Source, and Amico. With HR experience across the United States as well as Europe, Asia and Latin America, tom's experience has brought significant and measurable improvements in employee engagement attrition reduction and recruitment of the best and brightest employees and establishing high impact HR processes and improvements. So Tom with that, welcome to the podcast. How are you?
Tom Applegarth: I am doing well. How are you, Mark?
Mark Graban: I'm doing all leave. Did you leave the job at Payless because Pay less still good. Pay less shoe source is just really difficult to say.
Tom Applegarth: Yeah, that's not why I left, but yeah, that's why we just called it Payless.
Mark Graban: Payless Shoes. Yeah, okay, that's easier. And I stumbled through that. The first time I tried was even worse. So I bailed out.
Mark Graban: I decided to hide that mistake because it's worse than what's getting published here. So I'm not going to try saying that company name again. Preferred CFO is less of a mouthful. So we're going to talk about that and some HR questions here with Tom today. But as we always do, Tom going to hit you with the main question, the different things you've done in your career, what would you say is your favorite mistake?
Tom Applegarth: So my favorite mistake was when I was working for a manufacturing company that will remain unnamed, but I was the HR person for one of the divisions, and we had a plant manager who got a new boss. And so I remember the new VP of operations came in and he was there for maybe a month and he called me up and said, we need to fire this plant manager. I was like, oh, all right, let's talk about why. And he went through kind of all the metrics that they were measuring, all the plant managers that reported to him on, and this person was just the absolute bottom. And I said, well, he's been working with us for 30 years, so you becoming his boss after a month.
Tom Applegarth: We probably can't just go firing. So let's sit him down, go through a discussion with him and tell him what metrics that he's not meeting and then give him a month or two and then let's reassess the situation. So he did that and came back two months later and said, it hasn't improved, has not improved at all, and I want to fire him. I said, well, let's now give him a written warning. I mean, he's been working with us for 30 years and you've been his boss now for like three months, so let's give him a written warning.
Tom Applegarth: And spell out again what you did verbally before and kind of outline, this is where you need to get, and if you don't get there, we're going to need to terminate you, and let's give him another couple of months. And so he did that, and then he came back and he said, it hasn't improved at all. I really just need to fire him right now. I said, let's give him one more kind of final written warning. I mean, the guy's been here for 30 years.
Tom Applegarth: Let's give him one more and then give him another couple of months. And if he doesn't do it, then we'll go ahead and terminate him. So he did that, came back. So now it's been like, six or seven months, and he hasn't improved at all. And so I said, all right, I'm okay terminating him, but he's been with us for 30 years, so let's give him pretty significant severance.
Tom Applegarth: I said, let's give him six months of severance. And the VP of Ops said, no, you drugged this out, Tom, for seven months. I just want to terminate him, and I don't want to pay him severance. I don't want to take that hit on my PNL. I just want to do it.
Tom Applegarth: I said, no, he's been here for 30 years.
Mark Graban: At some point, it's already interrupted. At some point, there's, like, corporate policy that would dictate.
Tom Applegarth: Yeah. In this particular company, we had a policy if it was a job elimination, we didn't spell it out. We had a labor attorney who wanted to leave that flexible. I'm like that's. Fine.
Tom Applegarth: But our policy was one week per year of service up to a maximum of 26 weeks for a job elimination. So that's definitely what I was using as a rule of thumb, for sure.
Mark Graban: But the VP would say, this is for cause. This is not a layoff.
Tom Applegarth: Yeah, because firing right, this is for cause. And there were definitely some times, especially if it was a short tenured employee, there were times when we would terminate people for cause and not give them any severance. But in this case, 30 years, new boss, seven months. I'm like, no, this is just a real problem if we don't give them any severance. But the VP was absolutely adamant we not get any severance.
Tom Applegarth: I said, well, let's go talk to your boss, the division president.
Mark Graban: Okay, is this the tiebreaker, then?
Tom Applegarth: Yeah, let's just go talk to him, because if this thing blows up and he goes gets an attorney. And I said, So we went and talked to the division president, and the division president was also like, no, we're not giving him any severance. So at that point, I went and grabbed the corporate labor attorney and said, Come help me, man, because these guys, I think and of course, labor attorneys are always the most conservative person in the room. So he was absolutely on my side and said, yeah, we need to give him six months severance. But the division president said no.
Tom Applegarth: So the mistake was, I should have taken it to his boss, the CEO. I should have elevated it and said, no, we're going to go to the CEO.
Mark Graban: And who did you report to in that situation?
Tom Applegarth: I reported to the corporate VP of HR.
Mark Graban: Okay.
Tom Applegarth: I took it to my boss, but she was not as adamant about it. But in hindsight, we both should have taken it to the CEO. So we didn't. We got sued, and six months severance for this guy would have been high five figures, but it wouldn't have been six figures.
Mark Graban: Right.
Tom Applegarth: We got sued. And even when we got sued, all along the way, I was like, let's settle this thing. And of course, once he got an attorney involved, the guy wanted well into the six figures. Nobody wanted to settle at that point. Everybody was asking me, well, do you think we should have terminated him?
Tom Applegarth: Everything's correct in kind of all of these written warnings, and I'm like, yes, that's all solid. However, let's just settle this thing. Why do we want to drag this out and roll the dice? And that one cost us a million dollars.
Mark Graban: Wow.
Tom Applegarth: A million dollars. I've learned from that mistake, and that's the story I tell everybody who doesn't want to pay severance or doesn't want to settle. When some lawyer wants 20 or 30 grand or 50 grand. I'm like, Let me tell you my million dollar mistake. And luckily, I haven't had that happen for a long, long time.
Tom Applegarth: I've been sued a few other times when they wanted outrageous money, but that's actually the only one that I've ever lost. We've lost some other lawsuits, and it's like, congratulations, you won, and it only cost you $70,000 in attorneys fees.
Mark Graban: Yeah.
Tom Applegarth: Doesn't feel like much of a win, but happens.
Mark Graban: Well, at least not out of your pocket. I hope you didn't somehow get blamed for this, even though you had said, hey, we should settle.
Tom Applegarth: I did get a visit from the CEO, and he wasn't very happy with me. And actually, my boss, the corporate VP of HR, had left the company at that point by the time the million dollar verdict came. So I definitely got a black eye out of that. But I swore to him, look, I'll come to you. Don't worry.
Tom Applegarth: Message received. I'll come to you anytime. I adamantly disagree with one of your direct reports.
Mark Graban: Was the CEO mad that you didn't come to them?
Tom Applegarth: Right.
Mark Graban: Saying, hey, you should have come to me? That was pretty clear. Yeah.
Tom Applegarth: He said, you should have come to me. You should have brought the attorneys with you. You should have brought the labor attorneys boss, the general counsel with you. I'm like, all right, message received. Now, I don't know if he really means that, because we fire lots of people every day, but he said that at the time when he was writing a million dollar check for sure.
Mark Graban: Do you have a sense of how mad the CEO was at the division president or the departed VP of HR?
Tom Applegarth: Well, I think he was pretty mad at the departed VP of HR. He wasn't really mad at the division president because he was like, well, that's not what I pay that guy for. That's what I pay HR for, and that's what I pay the attorneys for. So the division president kind of got off scot free, but yeah, the rest of us got a black eye for sure.
Mark Graban: But I imagine, to be fair to you here, the politics of the situation, if you going to the CEO, is now not only going over your boss's head, it's going over the head of the division president.
Tom Applegarth: I agree.
Mark Graban: You got to think about your relationships with them. That must have been a consideration though, for sure.
Tom Applegarth: I had a really good relationship with my boss, and I probably could have pushed her into let's just go to the CEO. And now that I have this story, I've actually had this happen several more times and I always use that story and I'm like, no, let's elevate this to the top. The board probably doesn't need to be involved, but a lot of times just the threat of having the meeting with the CEO has helped a division president or two decide to go ahead and pay a five figure severance rather than even having the meeting.
Mark Graban: So that story and that cautionary tale has convinced others to not absolutely not repeat that other company's mistake.
Tom Applegarth: Absolutely, yes. I've probably told that story in my career. I've probably been involved in either me or one of my direct reports firing 1000 people. And that happened in the first half of my career. So I've definitely got a lot of mileage.
Tom Applegarth: I don't think I probably got a million dollars worth of value out of that story, but I've definitely gotten value. Yeah.
Mark Graban: Wow. So one other question. You might not know the answer to this, but I'll bring this up. So I'm trying to think of I started my career in manufacturing, so I can kind of picture, at least generally, some of the circumstances of some people in roles like this. And the question I would ask.
Mark Graban: And if you say, you might just say, look, I don't know. So maybe it's a mistake for me to ask you. Over that six month period, what was the VP of Operations or Manufacturer doing to help support that plant manager? Other than telling him, hey, you need to do better or you're fired? Like there's a certain role to help coach and help that plant manager say, absolutely.
Mark Graban: Okay, big shot, help fix the situation.
Tom Applegarth: Yeah, he actually, I think, did a really good job because both he and I spent a lot of time in that plant. We had some Lean Six Sigma experts that we brought in to help. So I think we did all of that. Right.
Mark Graban: Okay. So not just pressure, but some attempts to help and research.
Tom Applegarth: Absolutely. I think we did a really good job there. This was just a guy who had been running that plant for, like, 20 years, been working for the company for 30 years and was not very coachable. Not very coachable at all. So it was unfortunate.
Mark Graban: Yeah. And I can certainly see that being the case. I've seen in my career the change of a plant manager can make a huge difference in terms of just their leadership style, the way they're going about things, especially in the context of, let's say, lean manufacturing. It's a different way of working with people. It's not trying harder or yelling or pressuring people more effectively or giving rah, raw speeches.
Mark Graban: There's different leadership styles that can be effective. Do you know, then did they find a plant manager that could turn the place around either internally?
Tom Applegarth: Yeah, we did. We actually promoted somebody who was a number two at another plant, brought them in. And a lot of that plant manager's issue when he was getting fired is we were kind of in the implementation of kind of this lean Six Sigma program. And he was just fighting it tooth and nail. It was just foreign to him.
Tom Applegarth: And he was just one of these guys that was not a continuous learner. And he was like, that's ridiculous. Some of the things that everybody was trying to get him to do, which is part of his plant, didn't go downhill. It just went from being an average plant to the worst plant as everybody else was adopting what they needed to adopt.
Mark Graban: Yeah. So it sounds like one of those situations of what used to work or at least what used to get you by no longer did.
Tom Applegarth: Yeah. The bar had moved. I mean, we had turned into a continuous improvement organization. And all the other plants were improving except for him.
Mark Graban: Yeah. Okay. I mean, when I think of my first job out of college as General Motors it's no secret what company I appreciate you keeping the other company name out of it. But General Motors, that first plant manager, when he was replaced new plant manager came in who had some Toyota training and this lean manufacturing experience. Even though he was a lifelong know, he would lay out data that we hadn't really quite seen as such.
Mark Graban: That showed he was taking over a plant that was bottom of the barrel in terms of productivity quality. It was the worst plant, not just in the division, but probably the worst plant, worst performing plant in General Motors worldwide. And that different leadership style really made a big difference and turned that plant around within a couple of years. But in typical GM fashion, that plant manager didn't get fired or pushed into early retirement. He got at least nominally promoted to a job at headquarters.
Mark Graban: So there's your punishment, right?
Tom Applegarth: Yeah. There you go. Yeah.
Mark Graban: But in general, I was going to ask, and you already kind of touched on this in a lot of ways. The role of human resources is to help protect the company from problems and lawsuits. And this could be unfair, so correct me on this, but the role of HR is really more to protect the company than to protect an individual worker.
Tom Applegarth: Well, I think definitely everybody in HR gets a paycheck from the company, and ultimately you need to do what's right for the company. But I do think one of the values that HR brings to an organization is being the group in the room that isn't solely focused on the company and that we do kind of play that role of saying, hey, look, let's take a longer range view of what we're doing. And ultimately, to be successful, you need to make your investors happy. You need to make your customers happy, but you also need to make your employees happy. And so there's a group that's worried about keeping the investors happy in every company.
Tom Applegarth: There's a group that's worried about keeping customers happy in every company. And HR really needs to make sure that people don't forget about the third leg of the stool and only focus on the other two. And really, everybody in the company should be focused on all three and at least places I've worked at and companies that I've consulted with. It's easy to pick two of those constituencies if you only want to make two of them happy. It's pretty not easy, but it's much, much easier.
Tom Applegarth: The real trick is keeping all three of those constituencies happy. And if you do, you are really in the upper quintile of companies.
Mark Graban: Yeah. So I apologize for being a little too hard on HR and the framing of that question. There might be some companies where maybe HR doesn't have that same focus as you described it, and it kind of.
Tom Applegarth: Gives a burst reputation. Well, and it's easy. Like in any profession, there's good HR managers and there's bad HR managers. And I think the bad HR managers don't push back because it is the natural inclination of most people running a business to really they have to worry about the investors because they're there banging on the door every day. And even in a publicly traded company, the CEO is pretty worried about the stockholders.
Tom Applegarth: When the investor is just an owner, whether or not they're engaged in the business, it may even be a little worse. And then it's really intuitive to almost every manager that we need to keep the customers happy. What may not be as intuitive is that in the short term, it may or may not come back to bite you, but absolutely every time in the long term, if you're not worried about keeping the vast majority of the employees happy, you are not going to be as successful as you might otherwise. And so bad, HR people might react to the manager, and the manager says, do this, and they just go do it really good HR people without getting fired, but are good at kind of pushing back, bringing data, helping people understand the long term. This might be the answer for today, but let's think about a month from now, a year from now, two years from now.
Tom Applegarth: And is that really the right answer?
Mark Graban: Yeah. So let's transition a little bit. And thank you for telling that story and the reflections there, Tom. And this, I think, connects to the work that preferred CFO does and what you're doing there. So you're telling a story about a really large public company.
Mark Graban: You had worked for a lot of large global public companies before. Those who are just listening don't know, but I'm wearing a polo shirt from Kinexis, a startup software company that's now after now reached 40 employee threshold and just hired really first full time business operations. HR, dedicated professional. But when a company like that is new, everyone is either writing code, selling the software, or directly supporting customers. When you're 510, 20 employees, because I imagine it's just hard to say we're going to dedicate a full time salary to an HR person at that point.
Mark Graban: Is it a mistake for small companies to not have an HR person? Or is it a mistake to think the only thing is to hire someone full time?
Tom Applegarth: Yeah, I think both of those are mistakes. So for sure, a small company might look at hiring an HR person and maybe it's going to cost them whatever, 70, 80, $90,000 a year. And they're like, I can't afford that. And I think that's really the niche that preferred CFO plays is you don't need to spend that kind of money because if you only have 20 or 30 employees, it's probably not a full time job anyways. But you really want somebody who knows what they're doing because another mistake that a lot of clients make before they become preferred CFO clients is they have somebody wearing that hat that really doesn't know what they're doing.
Tom Applegarth: And our government in the US, and it's even worse when you go outside. The US has passed all kinds of laws that can end up costing you a lot of money if you don't really kind of pay attention to what you should be doing. And then I also think it's really valuable to have somebody who's helping you understand how to recruit the best and the brightest, how to retain the best and the brightest, what you should pay the best and the brightest. And then it's always good to have somebody in the organization who doesn't want to be the CEO. I worked for a smaller company.
Tom Applegarth: There was about 250,000,000 in revenue, about 700 employees reporting to the CEO. And I was the head of HR, and I was literally the only one reporting to him that didn't want his job. And there comes a role you can play when you're in the position you want to be in and you're not really looking for the next promotion. And I could go to him and say things like, hey, I'd like to give you some feedback, and then giving feedback. And it's always good to have somebody embedded in the organization that's talking to everybody from the ground floor up to the direct reports of the CEO and then giving them feedback at all levels in the organization.
Tom Applegarth: I think that's another important role that somebody needs to play. And it's harder to play if you are still trying to position yourself for another promotion than if you're like, no, this is my terminal position, at least in this company, if not in my career.
Mark Graban: Yeah, there's a lot of mistakes a company of any size might make hiring mistakes, promotion decision mistakes, firing mistakes. As you've touched on here, there's a piece of advice that a lot of people give.
Tom Applegarth: It's real pithy. It's four words.
Mark Graban: Somebody throw this at you and see if you think this is good advice or not. Hire slow, fire fast.
Tom Applegarth: Absolutely. I think it's good advice. The only thing I'd add on that is make the severance something that will keep you out of a lawsuit when you're firing fast. For sure.
Mark Graban: Yeah, because that fire fast without and you were trying to help that company. You told the story of building the quote, unquote paper trail. It's a mistake to, just on a whim, fire someone without you're more exposed to a lawsuit.
Tom Applegarth: Well, there's lots of factors, and there's definitely no totally black and white answer. But the longer an employee has been with the company, the more paperwork you need, the shorter somebody's been with the company. So, for example, if a manager hires someone and then a month later is like, wow, that was a big mistake, I need to fire know that's probably okay. You probably don't need to go through a big, long process because everybody knows that in the United States, most states are an at will employer unless the employee can make a case to a jury that no. Well, the reason that they terminated me was an illegal reason, whether it be because of their race, sex, age, they made a whistleblower complaint, whatever.
Tom Applegarth: So there's lots of laws on why it's illegal to hire somebody. But for the most part, if the manager was the one who hired the person, and then a month or a year or even two or three years later, that's the person, the same person wants to fire the person, well, that gives you a level of protection that's a little different. In my million dollar mistake. A new manager coming in, and now managing somebody for the first time that's been there for 30 years, almost on its case. You can say, well, this young whippersnapper became the boss of an older person, and they were really firing them based on age, which is just a much simpler argument for an attorney to make.
Tom Applegarth: That may not be correct, but is the reason why you need to take a little more time firing a 30 year old person who is well over 40 when they're being managed by somebody who's around 40. So there's definitely some things to take into account on your legal risk.
Mark Graban: When you terminate somebody and think back to that situation, it does sound like the VP had data. It wasn't just a matter of personality of coming in and like, I just don't like that plant manager. And you could point to lack of action leading to lack of improvement, for sure. But still there's legal risk because it's still kind of a crapshoot if it goes to trial.
Tom Applegarth: Oh, for sure. There's always legal risk. And in most states they only need nine out of twelve jurors to agree. So it's not a criminal trial where you need all twelve of them to agree. It's a civil trial where you need nine out of twelve to agree.
Tom Applegarth: And so, yeah, anytime it goes all the way to trial, most jurors are going to be a little biased against the company and a little more sympathetic. So you got to kind of think through all of those issues. But that's why I don't think I would have done that differently. I think the guy probably since then we've given severance to almost everybody and it's like 95 plus percent of the people just sign the severance and they're done. So giving people severance and not challenging unemployment when you fire people are kind of the two guardrails that I've established for myself over time.
Tom Applegarth: That it's like, don't do those two things, and you're probably taking on more risk what you pay and severance for somebody that maybe only hired a couple of months ago might only be two weeks of severance, and that's fine. But give them some reason to sign a waiver not to sue you because it's just cheap insurance. You never know what hungry attorney they might be able to find it.
Mark Graban: Yeah. So I want to ask you mentioned earlier of people who maybe get fired because they're a whistleblower on something that's an ethics matter or maybe something that they report to an outside body. What advice do you have either for employees or companies in terms of, you know, making sure that there's kind of a safety valve or a reporting structure. Forget about, like, you know, you don't want to see anyone getting retaliated against but thinking about someone being in a situation where they think they need to become a whistleblower, what are things for that person to keep in mind and what are some things for a company to keep in mind that best manage that situation other than don't retaliate?
Tom Applegarth: Yeah, I think there's three things that I always recommend companies communicate often and broad and that's if any employee has a problem, you should go to your supervisor. If you don't, for some reason, feel comfortable going to your supervisor or you go to your supervisor and you don't get the answer that you think you should, go to HR if you don't feel comfortable going to HR. Or you go to HR and you don't get the answer that you think you should. I think every company should hire some other company that is outside a third party that is a 1800 number or an email that they can go. And then every single call that goes to those companies should go straight to the board of directors or straight to the owner.
Tom Applegarth: It should be right at the top, a lot of these companies, and we're happy to play that function as well. It's a pretty short report. It doesn't go into a ton of detail, but it gives you a little risk assessment. And having those tools in place really almost eliminate your risk of somebody then feeling like they need to go to the government or go to the press or something else because you have an avenue for people to really be able to address those issues.
Mark Graban: Yeah, sure. It seems like ideal go talk to your supervisor and you talk about a situation where somebody does maybe gets brushed off. You're told, this isn't really a problem, don't make waves. It's not what I wanted to hear. But what if somebody from the get go is afraid to have that conversation because they think they'll be punished or they're afraid to go to HR?
Mark Graban: Is it a mistake immediately to take one of those other routes? Or is that more just a function maybe, of the circumstances?
Tom Applegarth: Yeah. No. And I think that's why companies should have that 1800 number so that because you don't want the employee to just not report it and sit there and stew on it and it become a bigger issue. So these 1800 numbers that people can put in place. And when we manage these functions, the 1800 number part of the agreement up front is the company is never going to get the name of the employee out of us.
Tom Applegarth: We're going to tell you what happened. We're going to give you those detail. If you have follow up questions, we're the intermediary. You come to us and we'll go to the employee, but we will never tell you who that employee is. For some employees in some situations.
Tom Applegarth: Maybe the employee is right in taking that tact and not going to their supervisor or not going to HR because they want that level of anonymity. And maybe they're right to do so because maybe they have a bad HR person. Maybe they have a bad managers and managers of managers and that anonymity is important to them. But as the owner or the board of directors of a company, you want that in place because you. Want to make sure you're going to get that level of exposure to what might be a problem.
Tom Applegarth: And ultimately, maybe the employee is still not going to be satisfied with the answer, but at least you see it coming, as opposed to now you have the government knocking on your door or you have the press knocking on your door and it's a surprise to you and you didn't see it coming.
Mark Graban: Yeah. So you'd rather, I think, ideally address the issue before it becomes something public.
Tom Applegarth: Absolutely. Yeah.
Mark Graban: So I imagine companies should probably regularly communicate, whether they call it the ethics hotline or whatever phrases used, communicate that early and often so people don't forget kind of keep it for sure front of mind.
Tom Applegarth: Yeah, I mean, I think communication is one of those things that everybody knows that they should do, but they don't do it frequently enough. And so at a minimum, I think the leader of any organization should be in front of their entire team once a quarter, and it's easy during that presentation to have, like, one slide. Hey, don't forget, if you have any issues, here's the 1800 number. And I definitely think that's one way to communicate it, and then having posters all over the place, wherever you have all the posters that you have, having it there, but absolutely communicate it and communicate it often. Yeah.
Mark Graban: I can imagine there's a challenge if it's a low trust environment in a company to begin with. Do employees trust the statement that, hey, this is anonymous? I mean, I've been in some healthcare situations where this isn't even whistleblower situations, but just around employee surveys, employee engagement and satisfaction surveys, and this is anonymous. But then people talk and they whisper and they doubt. I don't think it's really anonymous.
Mark Graban: I don't know what you do about that, but it's certainly problematic.
Tom Applegarth: Well, yeah, I've had lots of employees say that to me in lots of different situations. And the answer is, and I think this can be, if that is a real concern, and it is in some units, and we've done this before, that's why employee surveys and the ethics hotline or the 1800 number or whatever you want to call it, should always be administered by a separate company. And then that company, I can, with a real straight face, go into any one of our 150 clients and say, hey, look, we're a separate company and your company is one out of 150 clients. I would never, ever put my integrity of preferred CFO at risk by divulging whoever calls the 1800 number because your company is not that important to us. Your CEO gets upset, oh, well, okay, I guess go work, go find somebody else, whatever.
Tom Applegarth: But it's different because in that company, the CEO is the most important person. And for us, it's like, well, it's one out of 150. We've got sales and marketing people who are bringing in new clients all the time. If that's the cost of having that client, we probably don't want them anyway.
Mark Graban: Yeah, that's good to hear when you can hold to a standard like that. So again, our guest today has been Tom Applegarth from Preferredcfo.com or Preferred CFO? Is the company preferredcfo.com the website maybe? One final question for, you know, when it comes to companies across all sorts of different industries, having trouble hiring people in the last couple of years, having trouble retaining people for different reasons. Another expression I hear a lot.
Mark Graban: I don't know if it's always fair or accurate, so I want to get your reaction to it. Nobody wants to work anymore. Is it a mistake to say that?
Tom Applegarth: Yeah, I don't agree with that statement. I do think because I'll tell you, I've had personal experiences hiring people out of college campus that have been phenomenal and have a great work ethic and are really focused. And so I think that there's a lot of people out there that really do have a tremendous work ethic and want to work. I do think that a lot of things have changed. The job market is much different now than it was when I started my career 30 years ago.
Tom Applegarth: 30 years ago, there was no Internet, there was classified ads. It was much harder to find a job, and then there wasn't salary.com and other places where people kind of knew what they were worth. I think you have to be a much better employer now than you did 30 years ago because people can easily find other positions and understand what other positions pay much easier than they could 30 years ago for that reason. Because the competition is much different than when I started with Amico straight out of college. Almost everybody started with Amico straight out of college, and nobody left them.
Tom Applegarth: And it wasn't necessarily because they were a great, great employer. It was just because it was much harder to find a job. It was much harder to understand whether or not you could make a lot more money somewhere else. And these days I think you have to just be a much better employer to attract and retain the best than you did 30 years ago.
Mark Graban: Yeah, well, that's well said. And it seems like my take on it is instead of blaming workers or the workforce, it seems like it's an opportunity for companies to look at maybe not just compensation, but culture when it comes to employee engagement and just the environment. Right?
Tom Applegarth: Yeah, there's no question. I mean, you have to be in the ballpark from a compensation perspective. Which is why I think it's really important for companies to participate in salary surveys and buy salary surveys and have a structure in place to understand who's paid below market, who's paid above market, and who's kind of paid at market and then understand how you should use that information. I think that's really important for people to do. But you don't have to pay people way above market to retain them.
Tom Applegarth: You have to be in the ballpark. And then it's having great managers and great culture and really understanding what each and every employee is looking for out of their career. And then you're not always going to be able to satisfy everybody, but you definitely want to satisfy your top performers. You want to make sure that those people are like gold and you want to make sure that you're figuring out and bending over backwards to keep those very top performers.
Mark Graban: Well, Tom, thank you again for the story and a lot of great advice embedded through all of that. Listeners know at some point, hopefully benefit and learn from that million dollar mistake and not repeat that. So, again, we've been joined tom Applegarth from preferred CFO.
Tom Applegarth: This has been fun.
Mark Graban: Thank you. Thank you for being best.
Tom Applegarth: Thank you much, Mark.