Every corporation needs an excellent in-house attorney to fight complex legal battles in their stead—someone to act in the best interests of the company and its future. In addition to the everyday intricacies of business litigation, house counsel may also have to field lawsuits from current or former employees who have a legal objection to something that happened during their tenure at the business. When employee lawsuits become a pervasive issue at a business, not only is the cost in billable hours exponential, but the legal judgements that result from these litigations can be devastating for companies. While litigation in general can be characterized as the cost of doing business, companies with healthy corporate culture experience a much lower rate of employee lawsuits. So, how can healthy corporate culture reduce the chance of a lawsuit?
Corporations across the United States are starting to understand the value of healthy corporate culture. Employee lawsuits aside, unhealthy corporate culture can have detrimental, snowballing effects that occur when employees are unhappy in their capacity and unengaged in their work. This is why corporations must improve their culture from within, so that employee retention and productivity remain high. Corporations also have millennials making up the majority of the workforce in the nation, complete with a set of values that propels them to seek a better work-life balance. This means that millennials are less likely to stay in a job where they are unhappy, and will simply seek a more amendable opportunity that allows them to have the work-life balance they desire.
When employees do not feel heard or valued by their employer, they’re far more likely to file a lawsuit related to their grievance. And unfortunately, no company is safe. In 2010, 99,922 EEOC charges were filed in the state of Florida alone, a datapoint that makes leadership wonder not if they’ll be the target of a lawsuit, but when. Employee lawsuits can drag out over months or even years, exponentially getting more expensive. The average settlement in an employee claim or lawsuit is $40,000. That expense alone can be devastating to a company, but that does not account for the disruption to daily operations, and the fact that litigation costs are on a steady rise. In 10% of cases, settlements result in $1 million or greater, a sum that could be the beginning of the end for many medium to small corporations.
The risk of a lawsuit can be even greater depending on the state in which it is filed. According to the Hiscox Group, a majority of states carry around a 10% change of having an employee lawsuit filed against them. However, in Georgia, the probability is 19%. In states like New Mexico, California, and Nevada, the probability can be as high as 55%. The area with the highest probability of litigation is the District of Columbia, with a terrifying 81% chance. The reason for the wide range in probabilities is two-fold: First, the legal standards in each state regarding discrimination and hostile work environments can vary. Secondly, the states with higher risks have more binding laws regarding litigation that can create extra hurdles for companies at the state level. This is why corporations must stay current on employment legislation, especially if they have locations across multiple states/jurisdictions.
So, how can corporations protect themselves against litigation from current or former employees? In-house counsel fields lawsuits when they are filed, but did you know there was a more proactive method to combatting employee litigation? The answer is simple: healthy corporate culture. When a corporation has a healthy corporate culture, it means that the employees feel valued by their employers in their capacity within the organization. It means that employees who feel valued are engaged, thereby greasing the wheels of internal, daily operations. This increased productivity means progress for the company, and the cycle of healthy corporate culture begins anew with leadership rewarding engaged employees for their hard work.
Research shows that the number one reason behind employee lawsuits is retaliation. In an average scenario, the employee reports an internal issue, usually regarding a form of discrimination. Following the inclusion of the investigation, when the employee cannot track for upward mobility, or a form of unwarranted disciplinary action occurs, they assume the reason is for reporting the previous issue. This can result in that employee filing a lawsuit for receiving unfair treatment on behalf of their employer. When organizations have healthy corporate culture, this is far less likely to occur.
If your company or organization needs a corporate culture overhaul, call Lauth Investigations International today for a free quote on our corporate culture audit program. We can help you improve your business from within and decrease the likelihood of employee lawsuits. When it comes to your business, you should expect facts, not fiction.
The biggest mistake executives make when trying to improve their corporate culture…
The corporate culture within any company, without question, effects their bottom-line day to day. Just to name a few avenues, this occurs through operations, interpersonal relationships between employees, and a level of engagement from leadership that requires consistent enforcement of their established mission and values. Because a corporation’s internal culture often remains hidden from consumer view, it’s not uncommon for leadership to simply restructure operations. Unfortunately, if every aspect of a company’s culture is not examined, this solution is just a band aid.
The Ice Berg Metaphor
When concerning a corporation’s culture, we often use the iceberg metaphor as a means of defining it. Ten percent of a corporation’s values and culture are above the water where the public and consumers can see it, and the other 90% lies below the surface. It’s that 90% that directly affects a company’s employee morale, productivity, and bottom line. A corporation often places its highest priority on how they are perceived by their consumer base, and therefore that 90% of company culture and values are either placed on the back burner, or corporations find themselves at a complete loss of how to get in front of the issues.
Some other band aid fixes for happy employees include things like discounted vending machines in the breakrooms, or regular celebrations of major holidays and birthdays. These lovely notions might improve culture for a day or even a week, but the pervasive internal problems will remain.
Engagement
Happy employees are engaged employees. When a corporation’s culture is healthy, employees feel invested in the success of their companies. The company’s success becomes internalized as their own success, and they are more likely to be plugged in, to take initiative, and to think outside of the box when it comes to problem-solving.
Improved Operations
When employees are leaning into their positions and actively working towards a company’s goals, that leads to smoother daily operations. Engaged employees are constantly finding ways to improve their processes so they can generate higher rates of productivity within their positions
Productivity
When daily operations are streamlined, this yields higher levels of productivity within the company. An employee’s daily duties are no longer a monotonous checklist, but a recipe for success for their company. An engaged employee’s success is the success of everyone in the corporation, and the same is true of productivity. A single employee’s increased productivity is the entire company’s success. Not only does this set an example for all employees, but increased productivity is what helps a company grow, mature, and prosper.
Happy Leadership
This one is a no-brainer. Anyone who has ever been employed knows that a happy boss makes a happy employee. Leadership sees the increase in engagement and productivity and lean into that success. Good leadership will reward that success in tangible ways that will have long-term effects on the company’s culture. They promote or give raises to those employees who are giving 100%, empower those employees through collaboration and development, and are more open to the thoughts and ideas of employees who are contributing to their success.
Morale
When leadership is actively encouraging employees through a pure manifestation of the company’s mission and values, employees feel as if they are making a difference within their organization. This increases the feeling of purpose and desire for cooperative teamwork. These feelings inspire employees to continue their pattern of success through the diligent, genuine practice of a company’s established mission and values. Increased morale means happy employees, and that’s where the cycle begins anew, exponentially influencing a company’s success with each cycle.
Structure is Not Culture
The network of operations within a company will never have a direct effect on company morale. Poor daily operations due to structure are really just a symptom of unhealthy corporate culture—a manifestation of poor culture at work. To diagnose the problem, many corporations turn to independent firms to conduct corporate culture audits in order to identify the problems within a company or organization. These firms measure a company’s daily operations, their quality of communication, and interpersonal relations among employees—just to name a few factors. When a corporate culture audit is comprehensive and curtailed to the organization, the findings can be invaluable to leadership that seeks to grow and mature in tandem with their values.
To Review…
As mentioned above, employees who see a consistent display of established values from leadership, they’re more engaged and productive. It’s one thing to have the company’s mission statement and list of values posted online or on the wall within a workplace. It’s a completely different ballgame when leadership puts their money where their mouth is, and serves as an example for the entire workforce. That example can have a ripple effect creating an interpersonal trust between employees, in which they all feel like they’re on a team, working towards the same goal. It is in the nucleus of that atmosphere where real change and growth begin.
When putting together a team to supervise your money, it helps to know who you’re dealing with…
Nonprofit organizations can do great work in promoting community growth, providing assistance to those in need, and raising money to fund research in the name of bringing solutions to some of the globe’s most comprehensive issues. These organizations must be above reproach, and as such, their board members must be individuals of the highest integrity. That’s why it’s imperative nonprofit organizations establish policy that dictates board members are subjected to a comprehensive background check.
It’s true that there is no requirement for a nonprofit organization to establish a board of directors, but an overwhelming majority of nonprofits do so. This is often a necessity, as many banks will not establish an account for a nonprofit without supervisory leadership. Donors also consider this leadership essential to ensuring their donations are spent wisely and in the best interest of the cause. In addition, organizations that issue grants are more interested in nonprofits in which their monetary awards are also well-managed, due mostly in part to the fact they must answer for how their monies are allocated. Small business journal, Chron, put it best, “The board’s duties are fiduciary. This means the board is trusted to act in the best interests of its organization, regardless of personal interest.”
A board of directors for a nonprofit is designed to promote progression within an organization by virtue of diverse management and comprehensive collaboration. Because an organization’s supervisory leadership can depend on their ability to serve their cause, that board must have impenetrable integrity. Therefore, even nonprofits cannot afford to skimp on background checks for leadership.
When establishing a board of directors, there are often misconceptions on what a comprehensive background check encompasses. The term “background check” is an umbrella term that can refer to one or all of a list of screening processes that both organizations and corporations use to verify the employability of an individual. This can include a report that offers details on a person’s criminal and employment history, and a review of their financial history.
A nonprofit background check is the first step in protecting your organization, but not every executive sees it that way. It’s not uncommon for nonprofits to cherry pick through the wide range of areas that a comprehensive background check includes, either to save time and/or money, or because only one or two areas of such a report are a priority for board leadership. Areas of high priority include criminal history, sex offender registry, or a basic credit report. Even if a nonprofit checked all of these boxes when conducting a background check, that would still not rise to the standard of comprehensive when verifying a potential board member’s history.
A comprehensive background check includes:
Verification of a candidate’s social security number
Work history
Credit check
Driving records
Criminal records
Information on registered vehicles
Relevant court documents
Reference quality
Asset ownership
Military service records
Criminal registry information, such as sex offender registry
This list can sound staggering to the member of staff charged with appropriating an organization’s policy to screen a board candidate’s background. Screening a candidate’s background requires thorough research and a cross-reference of information against multiple open sources, such as public records, human sources, and social media. Even if the cost of obtaining supporting documents were not high, the labor hours to internal employees with day-to-day responsibilities can directly contribute to operational losses within a nonprofit organization.
These comprehensive screenings are crucial to the integrity of a nonprofit. After establishing a board of directors, any previously unknown and unflattering information regarding their history that may come to light cannot only be embarrassing for an organization but can negatively impact the support and assistance those nonprofits receive from donors and grant-awarding bodies. If information regarding a red flag in a board member’s history was publicly available (and not sealed by a court of law, or expunged from their record), and negligence occurs on behalf of the board’s supervisory capacity, there can be legal consequences as well. This is why corporations often run comprehensive background checks on their board of directors, or any other supervisory leadership. If for-profit corporations cannot afford to skimp on their background checks, there is no-doubt that nonprofits have even more at stake, including the opportunity to serve their cause.
Operational losses are why it can be prudent to retain an independent investigator to conduct background checks for a nonprofit organization. Firms like those of private investigators or risk assessment specialists can provide another layer of integrity when considering a candidate for board leadership. An external investigator’s independence and autonomy mean they have no stake in the results of a board candidate’s screening, and therefore only have loyalty to the truth. This is where nonprofits can consider candidates with the reassurance they have performed their due diligence, and have done so with the assistance of an objective third-party. All background screenings must be compliant with the Fair Credit Reporting Act legislation in disclosing the screening to the candidate.
From poor credit to criminal history, no detail is too small when it comes to establishing a board of directors for a nonprofit. Nonprofits may have marketing campaigns, but board diversity and integrity are how they attract monies from grant entities and major donors. That is why a comprehensive background check is an investment for nonprofits that will provide the security of due diligence with the integrity of independent screening.
