If not accounted for properly, significant penalties may be assessed.
— Purchase order control: To ensure firm control over the use of independent contractors and consultants, it is best to use a purchase order that clearly spells out the terms and conditions of the assignment including the commencement date, due date, deliverables, rate of com-
pensation, and the maximum amount of money authorized under the
agreement. The topic of recruiting is covered in depth in Chapter 11.
Performance Evaluations
One of the most important managerial tools used in the professional services firm is the performance evaluation process. Legal review and approval of forms used in the process can significantly improve the firm’s position in a legal action, but only if the forms are used on a regularly scheduled basis. In general, it is the HR department’s responsibility to distribute such forms and follow up with managers/supervisors to ensure the form is completed in a timely manner and reviewed for content before being discussed with the employee. That review should ensure that all statements made, particularly those that may not be well received, are supportable and written in such a manner that would not create a potential legal liability.
Employee performance should be evaluated formally at least once a year, with at least one or two feedback points made during the year. Some firms stagger their evaluation process to coincide with the employee’s anniversary while others conduct them in batches once or twice per year. Either way may be used based on management’s personal preference; however, the critical factor is to ensure that at least one written evaluation is given to every
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employee at least once per year, with a signed copy placed in the employee’s personnel file. Done properly, this is one of the simplest ways to improve performance and morale. Employee appraisals and career tracks are covered in depth in Chapter 9.
Layoffs/Reduction in Force
The decision to lay off a significant number of workers is always a difficult task. Invariably, such decisions become muddled with personal conf licts, performance issues, and, simply, who likes whom. Life-altering decisions made by managers who are under a tremendous amount of stress subject the firm to increased risk of liability. Before “the list” of names of employees to be terminated is assembled, the firm should fully evaluate its revenue and expense forecasts and ensure that it has identified not only its most likely projection, but also its best and worst cases. Layoff plans should be developed around all three of these scenarios so that management can build as much of a holistic plan as possible. It is important that staff remaining after the action is taken be confident that the worst is over, and are enthusiastic about pulling together and moving forward.
Key points in the layoff process include:
• Keep the list confidential. Only those who absolutely need to know should be involved, and great care should be taken to shield irrelevant information (e.g., a manager may see only a layoff list of people he or she selected within his or her team/department). The only people who
should see the entire list are the CEO, COO, CFO, and HR director.
Department heads should be concerned with only their own lists. For
every person who has a copy of the list, there is an exponential increase in the probability that a leak will occur. Often these lists evolve over time and change right up until the last minute before an employee is notified that his or her position is being eliminated. If people found out that they were supposed to be laid off but ended up being taken off the list, their attitude toward the firm and management may be forever
tainted. Key points to safeguard the list’s security include:
—Never label it with titles or headings that may suggest its true meaning.
—Never let someone else copy it.
—Never let it leave your possession.
—Never allow more than the absolute minimum number of trusted
staff members in finance and HR to have access to it.
—Never print it out on a network printer—memory problems are not
uncommon, and it is possible that the report could print out long
after anyone responsible for it leaves the printer unattended, leaving it available for the first set of curious eyes.
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The Back Office: Efficient Firm Operations
Unplanned Communication
The administrative assistant to the CFO of a professional services firm was assisting in the late night preparation for a major presentation of the local office’s plan to reduce staff in light of a wave of significant client losses over a short period of time. The multipage presentation was prepared in a very short amount of time and required that several charts be printed out in color. The only color printer was located in another part of the building, far removed from the assistant’s desk. For some reason, initial network print commands failed to work, so the assistant printed the pages a second time. That night the presentation was completed; however, the next morning, a single copy of the page that failed to print the night before was found sitting on top of the printer by another employee.
Within minutes, copies of management’s layoff plans were photocopied and posted throughout the building. Needless to say, morale plummeted over the following days and weeks leading up to the layoff action as a result of this very innocent error in the printer system network.
• Set financial targets for each department to achieve rather than target a specific number of people to lay off. Let the department head prioritize his or her needs and then challenge that team’s ability to perform its function in the post-layoff environment. Don’t nitpick or micromanage the decisions of the department head.
• Have a legal review of the list. Include searches for discrimination based on age, sex, and other protected classes. Further, counsel should review documentation supporting the action being taken and the specific reason(s) each person was selected to be included in the RIF.
• Do it only once whenever possible. Often, employees are aware that the firm is facing financial difficulties before a layoff action. Their anticipation of the date can be distracting and lead to morale problems and productivity declines. If all cuts are made at once, management is in a much better position to make an affirmative statement to the remaining staff that acknowledges the action taken and assures them that
“there is no other shoe to drop, so let’s get back to business as soon as possible.” Without such a statement, nagging concerns can continue to drag down the firm and become a self-fulfilling prophecy. In many situations, it is not possible to complete all layoffs at once and actions must be taken in stages; but minimizing the time that elapses between those stages is very important.
• Reorganize workf lows and improve processes before taking action. Simply cutting the number of personnel is an exercise almost anyone can execute. However, great managers will anticipate potential business
downturns and prepare for that day by working to constantly improve
internal processes. By developing process improvements before a layoff,
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staff remaining after the action will be prepared and equipped to complete all required work without undue burden. Unless the firm has allowed nonproductive employees to remain on the payroll, simply
cutting the number of workers without a plan in place to achieve each department’s workload objectives will result in chaos and confusion, and key work may not be completed properly, if at all.
Recognizing Job Function
Management of a large professional services organization ordered that accounting operations personnel be reduced by an arbitrary amount because of consolidation with another division. Almost immediately, a third of the combined staff was laid off under the belief that the team would be more productive even though new procedures had not been developed and the workload remained the same as before the consolidation. Once the staff left, their work was attended to by remaining staff on a “when they could get to it” basis. One of the tasks performed by the departing staff was the reconciliation of the travel advance account, including airline tickets.
Over the next two years, the firm lost more than a half million dollars in airline ticket fares because unused tickets were not reconciled with the airlines in a timely manner, a function that had been performed for less than $30,000 per year by staff that had been laid off without the benefit of improved procedures.
Records Management
The HR department is responsible for maintaining all government required forms and other prudent information on each employee. Depending on local legal requirements and firm policy, this information should be maintained in separate files for each employee with current data on a regular basis (e.g., daily, weekly, or monthly). Rules as to specific data requirements vary from state to state, but, in general, these records should be maintained in separate file folders: (1) personnel file, which is available for the employee’s inspection, (2) employee’s benefits file, (3) medical or disability files, and (4) an