From the November 2000 issue of Startups

In the high excitement of starting and running a business, entrepreneurs often overlook the need to create a set of personnel policies and standards. When a problem arises-a sexual harassment suit, for example-the CEO and the management team can quickly find themselves in a courtroom wondering "What happened?" The outcome of such a suit could be financially devastating to the company.

Too often, in fact, young executives aren't even aware there are personnel issues that need to be dealt with upfront-or, when they do, they pass on the job of developing policies to an administrative assistant who is untrained in the law, according to Kari Uman, senior associate at Executive Coaching & Consulting Associates in Washington, DC. "You should put as much energy into developing personnel policies as you would any other part of your business," she warns. "It can't be an afterthought. It's extraordinarily dangerous to not understand the legal ramifications of what goes on in the workplace."

You and your top-level managers need to bone up on what's OK and what's not in terms of personnel practices, then train other supervisory staff. Advises Uman, "Have managers who are informed, not just buddies you dragged in from other jobs."

You can turn to the Society of Human Resource Managers (703-548-3440, www.shrm.org) for guidance, or even hire a consultant who can guide the company through these murky waters, especially in the policy-development stage. But whatever you do, just make sure you address these issues-and quick:

  • Discrimination and sexual harassment. Develop and post a comprehensive policy that prohibits sexual harassment and discrimination based on race, gender, age, physical ability and religion. Court awards are huge in these types of lawsuits-up to $34 million, Uman says.
  • Hiring and firing. Be careful about what you say and do. "Entrepreneurs say things in the heat of the moment to get people to join the company," says Philadelphia attorney Jeffrey L. Braff. "They tell applicants 'You'll have the job for two years if you come to work for me.' [That] can wipe out your ability to let that person go, except [if there was] criminal behavior or extreme incompetence."

When preparing to fire someone, you should document in writing a pattern of poor behavior and opportunities that were given to the employee to improve. Says Braff, "Except in cases where the employee was stealing, the courts don't look favorably on cases where someone was given no warning before they were fired."

  • Non-compete contracts. If you want employees to sign a contract agreeing not to start a competitive business within a given amount of time or in a given location when they leave, have people sign it when they are hired. Some states won't honor non-compete contracts unless they are signed when an employee is hired or given a substantial raise or promotion.

Prevention is the goal in developing personnel policies. Uman suggests you create an office climate that will deter lawsuits by following these tips:

  • Behave as you want others to behave. Modeling behavior is one of the cheapest and most effective ways to make sure that everyone in your organization gets the message about what is acceptable and what isn't. Also, provide behavior guidelines, paying particular attention to activities that involve touching, telling jokes, using e-mail inappropriately or browsing adult Web sites.
  • Establish ways for employees to voice concerns and complaints. If they can't do it inside the office, they often turn to a lawyer.
  • Take swift action when informed of an incident. Investigate the allegations, make a determination based on the facts, and respond appropriately.
  • Provide guidance on office romances. Create a policy that lays out what the organization will or won't condone.
  • Expect everyone to act in a respectful manner.

Contact Sources

Cozen and O'Connor, jbraff@cozen.com.

Executive Coaching & Consulting Associates, (703) 648-1882, kfuman@aol.com.