Vol. 46, No. 11
What's more important: planning a company's downsizing in confidence or being forthright with a sought-after job candidate?
Click here for the SHRM Code of Ethical and Professional Standards in Human Resource Management.
What would you do?
Tell us your solution.
Janet DePaulo, vice president of human resources at Systemtronics Inc., prided herself on her open-door policy and accessibility to her own staff and other employees. So, she always felt guilty about sneaking off quietly to certain meetings without logging them on her public calendar in the network or giving her administrative assistant a routine, “Bye—I’ll be back in an hour.”
But this had been just such a meeting, so Janet tried to quietly re-enter her office as if she had never been gone.
This meeting—the third in the president’s office during the past two weeks—was especially tense and left her with a piercing headache. Like many high-technology firms, Systemtronics’ sales took a dive during the economic slowdown and the meltdown in the high-tech sector. The CEO had ordered plans for a “reduction in force” (RIF), a euphemism Janet considered particularly blunt and ineffective—especially now that she was involved in planning one.
The meetings with the CEO, chief financial officer and four vice presidents, including herself, had become progressively more painful. The CEO wanted to cut the company’s 278 employees by at least 20 percent. The first meeting began on a somber note as department heads offered their initial sacrifices. But as the executives were sent back to the drawing board for more cuts, subsequent meetings degenerated into heated arguments over company strategy and target markets, along with pointed comments about the employees and activities of other departments. The secrecy to which the executives were sworn intensified the ordeal. Not even the 15 directors who reported to the vice presidents knew about the planned layoffs.
Trying to ease her headache momentarily with some paperwork, Janet leafed through her inter-office mail and opened an envelope marked “Confidential.” But her head throbbed even more when she saw what it contained—a “New Hire” form filled out for her signature by Kevin Sampson, director of Client Applications Support. Kevin had been working with Janet’s recruiter, Shirley Bucknell, for months to find someone for a hard-to-fill position of network engineer. Now, they had found the right person and had extended an offer. Unfortunately, neither Kevin nor Shirley knew—or could be told—that the position might be eliminated in the impending RIF. It was high on the list of possible positions submitted by Trent Seneca, the vice president of technology and Kevin’s boss.
Janet looked at the form—one she had signed countless times in happier days—and stopped at the candidate’s address. He could not have lived any farther away and still been in the continental United States. Janet tried to sound nonchalant as she asked Shirley for the candidate’s file—something she usually didn’t do. “He’s going to be a great hire,” Shirley offered. “He was reluctant to move his wife and two school-age children in the middle of the school year, but I sold him on Systemtronics and convinced him his family would love it here.”
With a sinking feeling, Janet retreated to her office and leafed through the resume, references and other materials in the file. He was an excellent candidate—an MIT graduate in electrical engineering who had received several industry awards, had a steady progression of increasingly responsible jobs and was active in several local civic and community organizations. But to give the go-ahead for a job that might disappear soon after his arrival seemed irresponsible, especially with young children involved. Yet, there were still lots of details to be ironed out before the layoffs could be announced, affected employees informed and helped and important customers reassured. Systemtronics didn’t dare leak word of impending layoffs to an outsider—especially someone currently working for a competitor.
Janet silently fingered the “New Hire” form, as if the right manipulations would make it disappear, and started mentally searching for options.
What should she do?
Tell us your solution.
Candidate Could Claim ‘Misrepresentation’
By Susan Warner
Janet is clearly uncomfortable with her involvement in the plans for the layoff. Nevertheless, Janet has an obligation to and should support the decisions made by Systemtronics Inc. Code: Fairness and Justice—Guidelines "Regardless of personal interests, support decisions made by our organizations that are both ethical and legal."
In determining her course of action, Janet also must remember that she has an obligation to protect her employer and maintain the confidentiality of information she has acquired through her position as vice president of human resources. She must, therefore, ensure that Kevin, the hiring manager and one of 15 directors who is unaware of the impending RIF, does not find out from her prematurely about the planned layoff. Code: Use of Information—Guidelines "Safeguard restricted or confidential information."
At the same time, she has obligations as a professional that extend to the community in general, which would include the candidate who has just been offered the hard-to-fill network engineer job. Code: Professional Responsibility—Core Principle "Accept professional responsibility for our individual decisions and actions"— Intent— "To build respect, credibility and strategic importance for the HR profession with our organizations, the business community, and the communities in which we work"; "To positively influence workplace and recruitment practices"; "To encourage social responsibility."
As Janet attempts to think through the challenges, her analysis is further complicated because she does not know if the position is going to be eliminated. She does know that the position is “high on the list” of possible positions submitted by Trent Seneca, vice president of technology. Janet needs to determine how to bridge these conflicts while maintaining her integrity. Code: Conflicts of Interest Core Principle— "…maintain a high level of trust with our stakeholders*"; protect the interests of her stakeholders*, as well as her professional integrity"— Guideline: Prioritize her obligations to identify conflicts of interest or the appearance thereof; when conflicts arise, disclose them to relevant stakeholders*. Code: Use of Information— Core Principle "…consider and protect the rights of individuals, especially in the acquisition and dissemination of information, while ensuring truthful communications and facilitating informed decision-making."]
Janet also must consider the legal issues that bear upon this dilemma. Two come to mind right away. First, with a workforce of 278 employees being reduced by at least 20 percent, the organization could be subject to the Workers’ Adjustment and Retraining Notification (WARN) Act with respect to the affected 55 or so employees.
Second, in some states there might be a cause of action for a lawsuit based upon deliberate misrepresentation. When deciding an employer’s liability for this type of action, courts have looked at facts such as how far away the individual lived, whether he or she sold a house or left a reasonably stable job to accept the new position and what kinds of enticements were offered to the person. In our scenario, the candidate lives far away, was reluctant to move his wife and two school-age children in the middle of the school year, is active in local civil and community organizations, and has been “sold” on the company by Shirley, who “convinced him” his family would love the new city. Code: Professional Responsibility—Guidelines—"Comply with the law."
Balancing these apparently conflicting values and using the SHRM ethics code as a starting point, Janet has some good options. Because Kevin’s boss is one of the vice presidents who is privy to the RIF plans, and because Janet’s role as an HR professional covers responsibility for the accuracy of information used in employment-related decisions, Janet could certainly check directly with Trent to determine his intent. She also could advise him that the offer already has been made and apprise him of the exposure to liability, should they permit this person to relocate and then be laid off soon after. Code: Use of Information—Guidelines "Investigate the accuracy and source of information before allowing it to be used in employment related decisions"; "Acquire and disseminate information through ethical and responsible means"; and "Ensure only appropriate information is used in decisions affecting the employment relationship."
If Trent is not amenable to correcting the situation—either by ensuring that the offer is withdrawn in a timely way (so that the candidate does not leave his current job or suffer any adverse effects) or by committing to removing the job from the proposed layoff list—Janet should consider going directly to the CEO with the underlying facts and potential for liability. Code: Ethical Leadership—Guidelines "Question pending individual and group actions when necessary to ensure that decisions are ethical and are implemented in an ethical manner"; Code: Fairness and Justice—Guidelines "Develop, administer and advocate policies and procedures that foster fair, consistent and equitable treatment for all."
Janet should guide the CEO with respect to what procedures need to take place to ensure the organization’s compliance with the WARN act. She also will want to review the proposed RIF list to determine if there is any adverse impact on any protected class, such as age, race or sex, in the group earmarked for layoff.
Janet also may want to consider asking the CEO to allow her to arrange for some conflict management with the executive team before they meet again on the company strategy and target markets, in an effort to eliminate the “heated arguments” and to improve the decision-making skills of this group. Code: Ethical Leadership—Guidelines "Through teaching and mentoring, champion the development of others as ethical leaders in the profession and in organizations."
And she may want to guide Systemtronics in the future with respect to achieving its goal of reducing the workforce through less destructive means, such as attrition, hiring freezes, etc. Code: Use of Information—Guidelines—"Acquire and disseminate information through ethical and responsible means."
Susan Warner, J.D., SPHR, is president and general counsel of HR Trouble Shooters Inc. in Philadelphia. She has more than 20 years of HR experience, has practiced employment law and was 2000 president of the Consultants’ Forum, a Professional Emphasis Group of the Society for Human Resource Management.
Involve Others in the Decision
By Donald M. Herrmann Jr.
Janet’s dilemma is not unusual; however, she must separate the issues and address them individually to make the best possible decision concerning a course of action.
What are the facts that Janet must wade through? What facts does she need to know? The known facts are:
- She is under a CEO mandate to reduce the workforce by at least 20 percent.
- She has a packet with a “New Hire” document awaiting her signature.
- This new hire is a highly desirable candidate who will have to relocate a significant distance to join the company.
- An offer already has been extended.
- Janet cannot divulge the pending staff reduction to anyone other than the CEO, CFO and other vice presidents.
What Janet does not know is 1) the specifics of the extended offer, including any conditions attached to it, i.e., not valid until receipt of an offer letter or approval of the “New Hire” packet; and 2) whether the workforce reduction would preclude the hiring of a highly desirable candidate. The answer to unknown No. 2 appears to be in the negative, but Janet does not know for sure.
Janet should not make this decision alone. Nor should she allow the hiring process to continue without discussing this with Trent Seneca, vice president of technology, and the CEO. These would be the minimum conversations necessary to reach an informed decision. Janet’s discussion with Trent would involve the real need for the position, whether or not Trent supported or did not support hiring for the position and, finally, if hiring was desired, if this truly is the best candidate they could hope to hire.
If they agreed that a hiring recommendation should be made, they would both need to approach the CEO with the issue. If they agreed that a hiring decision was not appropriate or if the CEO rejected a hiring recommendation by them, they would need to figure out the best method of withdrawing this offer of employment. For example, they could tell Kevin Sampson that the organization did not want to extend an offer at this time with no further explanation, inform Kevin of the current circumstances along with instructions to withdraw the offer or even continue with the processing of this hire until a public announcement could be made.
Each of those scenarios, as well as other possibilities, is fraught with both legal risk and ethical risks, including claims against the company from the candidate under the premise of “promissory estoppel”; potential allegations of discrimination or unfair practices should it become known that Kevin was the only director who knew of the pending reductions; and the ethics and legal risk of knowingly bringing in a new hire who would potentially be “let go” shortly after arrival.
Janet also should address how Systemtronics could have prevented this from occurring in a proactive manner through simple solutions such as requiring approval of all offers before they are extended, hiring freezes, reviews of open positions and so on. Regardless of how this situation is ultimately resolved, Janet should not take matters into her own hands or make decisions alone. She must remember that her first duty is to the company and that a part of that duty is to be the company’s ethical conscience.
Donald M. Herrmann Jr., SPHR, is director of human resources for LexisNexis in Miamisburg, Ohio.
Retract the Offer Without Explanation
By Deborah Keary
What a terrible dilemma! Janet is caught between two warring concerns, a classic conflict of interest.
On the one hand, she is a member of the management team of her company, and she has a legitimate need to protect the interests of the company.
On the other hand, she has a professional need to conduct recruiting ethically, and she believes she owes this new candidate honest and fair dealing.
Both perspectives are right. And, in fact, Janet may be able to protect the interests of her company and deal fairly with this candidate, but she is in a delicate position.
Janet is feeling a little too uneasy about her “secret” meetings. There is absolutely a legitimate need to hold meetings about downsizing in confidence. It could hurt the company in so many ways if the bad news comes out before company leadership is ready. Employees would probably start to leave, morale would suffer and the company could be adversely affected by the bad publicity. The company might lose market share or could suffer financially in other ways. Janet should feel more comfortable than she does with the requirement of discretion in downsizing and layoff issues. She also should read everything she needs to know whether the WARN Act applies to her company and be prepared to communicate this layoff action appropriately to her employees.
What can Janet do about this candidate? If she tells the candidate, the recruiter or her director that the company cannot hire him and why, she is betraying the confidence of the management team and putting the company in jeopardy. If she doesn’t tell the candidate that the company cannot hire him at this time, she is leaving the company open to legal action for misrepresentation (check with an attorney to be sure; however, this would seem to be the case). And, of course, the candidate would rightly believe that the company had dealt with him dishonestly. Janet doesn’t want to put the company in this position, and she personally doesn’t want to sign the new hire form, which in essence would be lying to a candidate about an opening.
The one item that the scenario does not tell us is the timing: It appears that the layoff, while in the planning stage, is not imminent. This could make a big difference as Janet weighs her options. If the layoff is happening quite soon, Janet could just delay signing the form, prepare a letter to the candidate about the downsizing that in effect rescinds the offer and then send it to him as soon as the layoff is known. It will be obvious to the staff involved that this was necessary.
If the layoff is still months away, Janet’s choices are more difficult. She should indicate to the candidate that the firm is not prepared to hire him at this time after all, apologize and leave it at that. No reasons need to be stated. Dealing with the recruiter and the director who worked so hard to find this candidate will be tougher. They will want an explanation, and she won’t be in a position to supply one, at least not for a while. This is one good reason why it’s important to build up a relationship of trust with your staff. Janet will have to ask her recruiter and her director to trust that she is doing the right thing and will provide details when the time is right.
In the future, the company should not make job offers to candidates until everyone involved has signed off on the paperwork. If the offer depended on Janet’s signature, the offer would not have been extended to the candidate, and this ethical dilemma would never have happened.
Deborah Keary, SPHR, is director of the Information Center at the Society for Human Resource Management headquarters in Alexandria, Va.
This article is the first of an occasional series on ethical issues faced by human resource professionals. The scenario was developed in cooperation with the Ethics Resource Center of Washington, D.C., which helped the Society for Human Resource Management develop its new “ Code of Ethical and Professional Standards in Human Resource Management.” The code can be found at www.shrm.org/ethics.