More than one in four (26%) privately held companies has faced litigation by an employee or former employee in the past few years, according to a nationwide survey sponsored by the Chubb Group of Insurance Companies.

The Chubb 2004 Private Company Risk Survey found that executives at 44% of the firms surveyed say it's likely that an employee will sue them, their board members, and/or their company this year. One in two respondents (50%) expect their company to face a discrimination complaint lodged with federal or state authorities.

More than half the respondents estimated that it would cost more than $100,000 to settle an employment discrimination or harassment lawsuit; ten percent said it would cost at least $1 million. "Executives at many private companies realize that they're vulnerable to lawsuits from employees and former employees," says Lisa McGee, Chubb & Son Private Company Customer Group manager. "They are concerned, and rightly so, about the cost to defend against these lawsuits and the potential losses."

According to the survey, private companies are also concerned about lawsuits from retired employees. Nearly one in four respondents believe that a retiree will sue the company, its directors and officers, and/or its benefits plan administrators, and fiduciaries this year. The Employee Retirement Income Security Act of 1974 (ERISA) makes fiduciaries personally liable for losses to benefit plans incurred as a result of their breach of duties. The most frequent charges against fiduciaries include denial or change of benefits, administrative error, incorrect benefit calculation, improper advice or counsel, misleading representation, and wrongful termination of a plan.

The study found that many private companies are taking steps to lower their risks and reduce potential losses. Forty percent of the companies surveyed bought Employment Practices Liability insurance (EPLI), while 24% purchased Fiduciary Liability insurance. In addition, 72% of companies surveyed have written policies banning employment discrimination and sexual harassment, and 52% offer employment discrimination and/or sexual harassment training.

Impulse Research Corp (Los Angeles) conducted the survey, interviewing the CEO, CFO, and other top managers of 300 privately held companies. To learn more, go to www.chubb/news/pr20040525.html.

 

The success of any executive is directly proportional to their ability to work in their highest and best use. The delegation of all other activities is a must. Here's an approach to take:

• Begin by defining exactly what it is that you're doing and, just as important, how you do it . Reduce the "what and how" to writing. This is your personal SOP;
• Define which of your tasks are your value-added/highest and best use activities. Eliminate wasteful activities from your plate and delegate or outsource administrative tasks;
• Don't expect employees to do the job as well as you. As Ken Blanchard states: A strategic objective done 80% well by a subordinate is better than one not done at all by you! Expect the person who gets the new duties to make mistakes. After all, that's how you learned. Reduce the propensity to error through training, standard operating procedures, and incentives. It's understandable if employees make a mistake the first time. It's not understandable if they keep making it;
• Take small steps. Divide the delegated assignments and don't expect people to master them all at once. Using this approach will help employees build their confidence, and they'll be increasingly willing to take on new projects;
• Realize that for the employee to take on new work, they, too, have to delegate some of their work . Have them determine which of their activities add value, which are purely administrative, and which are wasteful and to whom they can delegate the latter two types of tasks;
• Don't allow "gotta minutes?" to eat up your time. If you're delegating a matter, encourage the employee to figure out any challenges themselves before coming to you. Limit their inquiries during the day to emergency issues only. Have them ask all other questions at regularly scheduled meetings
• Give feedback on their performance. In the beginning, focus on rewarding their effort, not their results. Once they gain experience and their confidence has grown, you can critique results.

KEEP YOUR BALANCE RIGHT

The Balance Scorecard, introduced by Kaplan and Norton in 1992, provides a management tool that measures four perspectives of organizational performance: Financial, Customer, Internal Business Processes, and Learning and Growth. You can apply the scorecard to overall company performance and to individuals and teams.

• Financial . What's your average revenue per employee? As Dr. Deming would say, the goal of any organization is the optimization of its resources. For any employee to be worth more, they must be able to do more with less. This doesn't necessarily mean that they work harder or longer hours — but that they work to their highest and best use (see the article, "The Less You Control …"). For example, how much time is your $100 an hour employee spending on $25 an hour work? How much time are your $25 an hour employees spending doing $10 an hour work? And so on.
• Customers. How well are you servicing clients and customers? For some employees, that customer might be an internal one. Are you and your employees clear about understanding customer needs and meeting them more effectively? We'd recommend this approach: Have your workers ask a number of customers what they think is going right about the service they're receiving, what can go better about customer service, and what else they would like to share.
• Internal Business Processes. Whether you call it workflow or standard operating procedures, make sure that every employee understands the company workflow. See to it that everyone who is affected by these practices has input into them. Encourage improvements, and capture your "best practices" in writing. Remember, whether you call it an SOP, process, or system, it doesn't exist and can't be systematically improved unless you have it in writing.
• Learning and Growth. To grow your organization, focus your learning on finances, customers, and procedures. Education is the greatest form of leverage in any organization; it's almost impossible to grow without it. When it comes to managing this growth, stick within your competencies without shutting off your cash flow in the process.

 

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The material presented here is general in nature. Due to local and state laws and ordinances, an individual article might not apply in every jurisdiction.

Copyright Employer Advisors Network, Inc. 2004