July 17, 2007
I have been traveling a bit lately and, as is apparently inevitable, my most recent flight was delayed. However, the delay gave me the opportunity to speak with a fellow passenger who happened to own a mid-sized business. Once he discovered that I was a Corporations professor at a law school, he at first lamented lawyers and the amount of money he had to pay in legal fees each year. He then said that the fees (and the threat of lawsuits they often represented) were particularly annoying because he was, as he described himself, "one of the most accommodating bosses in the world." When I guess I appeared skeptical, he explained that he made it a point to have a very flexible work schedule for his employees, and if people needed time off or to come in late to "watch their kids or whatever"--his answer was always that they should take the time, their job would be there when they returned. He said the answer was the same if the time off was ten minutes or ten months. When I asked him if he could really run a business with people taking ten months off at a time, he responded that the problem with most people in human resources was that they "forget that resources are things you build up, not something you constantly turn over." I found the quote so interesting, that I knew I would share it. The conversation reminded me that while many corporate scholars may debate the wisdom of whether or to what extent corporations should devote time and resources to employees, at least some business owners do not see it as a debate at all. Thus, while I know that not all employers have the same philosophy as my fellow passenger, I found it refreshing to hear that some not only believe that focusing on employees and their welfare is an integral part of running a business, but also implement that belief through their employment policies. Alas, I considered my flight delay time well spent.
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1. Posted by Jeff Yates on July 18, 2007 @ 7:38 | Permalink
This is an intriguing story and I can empathize with the business owner's lament that he is paying out large amounts while being a very flexible employer. While his sentiments may have been mere rhetoric and not actually reflected his business practices, let's take him at his word. It could be the case that, in relative terms, he is doing quite well on the legal front. Some business owners likely believe that $1 spent on attorneys is $1 too much, but in reality it's part of the business process like any other. It might be advisable for him to consider a baseline level of legal $$ outlay - for instance, how much does a peer company with less beneficent policies spend on legal fees per year? He may be doing really well on this business cost dimension relative to firms with less flexible policies.
There will always be a certain proportion of employees who bring frivolous claims, especially in labor intensive industries. However, businesses can go far in reducing such legal costs through careful hiring processes and sound (and consistently applied) HR policies. Being flexible is only one component of the larger equation.
2. Posted by M. Hodak on July 18, 2007 @ 22:18 | Permalink
The biggest complaint small business owners have is the increasing uncertainty of legal exposure. The changes in rules are only accelerating. Enforcement is spotty, and penalties look increasingly arbitrary. A lawsuit can come from anywhere--being a good person can count against you as much as help you, depending on the circumstance. Etc.
Variability is the bane of small businesses. It's like not knowing if the drive will be 20 minutes or two hours, depending on the traffic. Do you do the conscientious thing and allow for a two hour drive, or realize that's probably going to be a waste of time and leave 90 minutes, or 60 minutes?
I guess I'm saying that an uncertain legal environment is like bad traffic. It's little comfort whether or not your competitors are spending more time in it than you are.
