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Paying the Price
Events at Rent-A-Center Prove That When Employers Don't Respect HR Today, They'll Pay Tomorrow.
Robin Yeubanks, manager of a rent-to-own store in Coffeyville, Kan., had just bought an expensive new pickup truck when her district manager stopped by.
Yeubanks, a high school graduate, married with two adult kids, began working an entry-level job at the store in 1993. Promoted to manager after three years, she had been thriving. But now her employer, Thorn Americas, had been acquired by Renters Choice. The newly combined company, renamed Rent-A-Center, was under new management. The rules had changed, performance expectations heightened.
The problem was, Yeubanks—the only female manager in the 12-store market area—was out of the loop. “My district manager was going to the other stores and telling the men what changes needed to be made, but he wasn’t telling me,” she says. “Then he’d come down and write me up for not effecting the changes that I didn’t know about.”
Yeubanks also claims that on this day in February 1998, the district manager gave her a choice: accept a demotion to assistant manager or lose her job entirely. With monthly payments looming on her new truck, Yeubanks says she swallowed her pride and traded her $36,000 a year manager’s salary for the less lucrative assistant manager slot. To make matters worse, a former employee whom Yeubanks had fired three years earlier was hired to replace her as store manager. “Instead of assigning me to the assistant manager’s office, he put me in a corner of his office with a TV tray for a desk,” she says.
The district manager, Kevin Nowatka, who no longer works for the company, denies that he withheld information from Yeubanks and declined to comment further.
HR Magazine was unable to reach the store manager, who also no longer works for the company, for comment.
Convinced that her direct supervisor was retaliating against her and that the district manager would be unsympathetic, where could Yeubanks turn for help? HR, of course. “HR was always there to talk to if you had a problem; you could go to them and explain the situation,” she says.
But alas, though Rent-A-Center had more than 2,300 stores and 13,000 employees, CEO J. Ernest Talley had fired the top HR professional and eliminated many HR functions (payroll and benefits were retained) within 30 days of taking charge of the newly formed company. “Now I didn’t have anyone to talk to,” says Yeubanks. “I couldn’t go to the person who demoted me or to my manager who was mistreating me. I had no one to turn to, so I had to quit.”
Looking back, Talley’s decision to wipe out Rent-A-Center’s HR operation reflects a fateful misunderstanding of HR’s critical role. It contributed to the departure of thousands of able female workers and the blackballing of thousands more potential new hires. It became a public relations disaster and is costing the company, headquartered in Plano, Texas, a whopping $47 million to settle sex discrimination lawsuits.
Rent-A-Center’s problems began shortly after Renters Choice acquired Thorn Americas in August 1998. Initially, analysts were pleased that Talley, a pioneer in the rent-to-own industry and part of the Renters Choice group, was named CEO. Industry leaders hoped he would help cultivate a more positive image of the industry. But it wasn’t to be.
From the get-go, the merger proved problematic. The companies had vastly different business philosophies and structures—and views of HR.
Thorn, a subsidiary of Thorn EMI, a London-based multinational, featured an active HR department that was influential in supporting managers in the field. HR played an integral part in training, advising and administering company policies.
Talley, a tough-talking entrepreneur, had a different view of HR. “He thought the HR people at Thorn had too much power; he felt they were running the company,” observes Ann Davids, Rent-A-Center’s vice president of marketing and advertising, who has worked for Rent-A-Center (and previously with Renters Choice) in various capacities since 1995. “He was much more of a bottom-up guy who believed the company should be run from the field.”
Talley wasted no time eliminating HR. The effects were palpable, even for those who successfully made the transition to the new company.
One such person was Janet Caskey, store manager at the Rent-A-Center in Jacksonville, Ill. Caskey earned a promotion from assistant to store manager, but she missed the advantages of HR under Thorn.
“If there was a mix-up or you didn’t know which way to turn, you could call them; they would talk to you and support you,” she says. “When HR was eliminated, we didn’t have anyone to turn to if we had a problem with our store manager or when things came up that we didn’t want to discuss with the people we usually talk to every day.”
Another fundamental difference between Thorn and Rent-A-Center involved staffing issues.
Thorn had built specialized clerical positions into their business model, enabling some staff to avoid lifting, deliveries and collections. Talley viewed—and Rent-A-Center still views—this specialization as a drain on the bottom line.
Talley understood how to make the rent-to-own business profitable, says Marty Roustio, who has worked at the company since 1990 and was named director, co-worker relations, in 2000. “He knew it’s essentially a mom-and-pop enterprise—with four or five people responsible for each store. With long hours, days off, sickness and leave time, it meant that some days two or three people would be shouldering all the work. Therefore, Ernie believed—and most experts agree—it’s essential that everyone be able to do all aspects of the work. Everyone had to be capable of delivering furniture, collecting money, interacting with customers and so forth.”
Talley’s solution, however, was flawed. To ensure that employees could handle the physical aspects of the job, he implemented a 75-pound lifting requirement for all employees. The company had difficulty justifying the burdensome requirement, which disproportionately disqualified women from consideration.
To be fair, Talley also made some positive changes. Out of the gate, the average store manager got a raise of $4,500. Salaries for managers in each of the company’s market areas jumped $15,000.
Trade-offs for the increases included expanding the workweek from five to five-and-a-half days and demanding higher productivity. The weekly quota for permissible delinquent accounts in a typical store was halved from 10 percent to 5 percent.
The pressure was palpable. But it was applied unfairly, believed many female employees, who left the company in droves. Two years after Talley’s team (Renters Choice) acquired Thorn, the number of women working at the combined company had been cut in half.
Diana Albrecht, a former store manager in Las Vegas, is one of those women who found it unbearable to stay at Rent-A-Center. “I know how to run a store,” says Albrecht. “Before Talley came in, I was in the Silver Medal Club—manager of a store that was performing in the top 4 percent of the company. All of a sudden they began to come down on me. My store didn’t look good enough; I wasn’t training or doing my inventory well enough.”
The working environment was unwelcoming to women in other ways also, says Albrecht. In 1999, she met fellow managers at a company meeting in Las Vegas. She found the change in climate disheartening. “Thorn always put on a professional, uplifting meeting, respectful of everyone. But this was horrible. It was good old boys, let’s get drunk. They even had go-go dancers on stage for entertainment. It was very unprofessional, and the women in attendance were in an uproar, unhappy at the lack of respect.”
Albrecht left the company rather than subject herself to the humiliation. She became a named plaintiff in one of three lawsuits contending that Talley initiated a series of discriminatory actions and policies that resulted in a mass exodus of female employees and made it virtually impossible for women to be hired.
The lawsuits alleged discrimination in hiring, pay, promotion, job assignments and treatment of female Rent-A-Center employees and job applicants. Named plaintiffs sued on behalf of 5,300 women from stores, service centers and corporate offices, as well as an estimated 10,000 rejected job applicants. Plaintiffs were represented by private attorneys and the Equal Employment Opportunity Commission (EEOC).
Mary Anne Sedey, partner at Sedey & Ray in St. Louis and plaintiff’s lawyer in one of the cases, requested human resource documents during the pre-trial disclosure. She was astounded by the results. “They sent us a loose-leaf notebook in August 1999 with a tab that said ‘personnel,’ but there was nothing, not one sheet of paper, behind the tab,” she recalls. “At first, I thought they were kidding.”
Sedey says it became obvious that Talley’s disregard for HR was a major cause of his undoing. “People were told that ‘Every manager is an HR manager, go up the line if you have a problem.’ Talk to the same people who were told by the boss to get rid of you. It was like asking the fox to guard the chicken coop.”
The plaintiffs, through documents and oral testimony, introduced evidence to substantiate their claims of discrimination. Ultimately, on Dec. 27, 2001, U.S. District Judge David R. Herndon of the Southern District of Illinois granted class-action status to plaintiffs in the case of Wilfong et al. and EEOC v. Rent-A-Center.
Quoting from depositions of more than 300 company officials and employees in 47 states, Herndon noted that witnesses repeatedly cited statements made not only by Talley, but by other company executives and store managers as well, that articulated Rent-A-Center’s “anti-female policy.” Attributed to Talley:
Statements attributed to company officers, vice presidents, regional directors, marketing managers and store managers included the following:
Observes Donna Harper, supervisory trial attorney for the EEOC’s St. Louis office, “I’ve never seen a case in which so many women and men tell the same kind of stories all across the country. It’s remarkable.”
Sedey says the allegations against Rent-A-Center were “extraordinary,” the worst she’s seen in 26 years of practice. “This was systematic, intentional discrimination against women in every aspect of the company’s operations mandated by the top officers of the corporations.”
Faced with an onslaught of outrageous allegations that were indefensible if true, Rent-A-Center tried to fight back, claiming correctly that no actual findings of fact had been made as to the validity of any of the statements. But it was too late. No one was listening.
In October, Talley retired and passed the reins of the company to CEO Mark Speese and President Mitch Fadel. The new team quickly entered negotiations and agreed to settle the cases for $12.25 million. After challenges by the EEOC, plaintiffs in the Wilfong case and the National Organization for Women Foundation, the judge rejected the deal as being too paltry. The company went back to the table, this time agreeing in March to a payout of $47 million.
The settlement is one of the most expensive ever for a company the size of Rent-A-Center, which has $1.8 billion in annual revenues. The money will be paid to plaintiffs under a formula to be determined, and all of the women who lost employment will be given the option to return to work except for the 54 named plaintiffs, who will receive cash only.
Under the terms of the agreement, Rent-A-Center also agrees to:
Progressive Leadership Steps In
In all her years at the EEOC, Harper says she’s never had a company agree to do what Rent-A-Center promised: To “really undo the things we claimed were going on.” The credit goes to the current leadership spearheaded by the emergence of Fadel, who withdrew the 75-pound lifting requirement and will have ultimate responsibility for the new HR operations. Though Fadel was on board during Talley’s heyday, he says—and industry observers agree—he had little influence on his willful boss. Now, he says he would have handled the HR aspects of the acquisition differently.
“I would have brought the HR pros into the room and listened to their advice. I would have discussed our business strategy, which required eliminating specialized positions and requiring all staff to handle all aspects of the business. I would have explained the business rationale for getting where we wanted to be, and asked them how we could achieve our goals without appearing to discriminate against any minority. The HR people would have told us how to go about it, how it might take six months to get there and how to back up our actions with proper documentation. You have to have documentation to prove your action was a business decision and not a discriminatory one.”
“HR needed more depth when Ernie was here,” says Davids, the marketing VP. “We had people doing HR functions, but not under one HR leader. We were lacking someone who could advise the company about things in the HR world that we needed to be doing to be proactive.”
Getting on Track
Fadel started implementing the terms of the settlement agreement even before the court signed off. A new anti-discrimination policy has been issued and training sessions begun for all managers. And a new VP of HR was hired in June.
“These were things we were going to do anyway, so why not move ahead?” says Fadel. The new vice president will be at his side and will participate fully as a member of his strategic management team, he says.
“You need an HR department and you must have their support,” Fadel says. “HR can help operations make the decisions; they can help train and be part of making the right decisions. It’s a team effort and when it comes to personnel they have to be on board.”
Those who work with Fadel, as well as those who negotiated with him, are convinced he means what he says. “He seems genuinely concerned that gender discrimination was going on and is committed to helping women go forward and have their contributions recognized,” Sedey says. “He’s a breath of fresh air.”
Good Place for Women?
The settlement requires Rent-A-Center to offer 10 percent of job vacancies during the first 15 months to women who had been fired or rejected for jobs because of their sex. Will they want to return? Approximately 30 percent of the workers in the rent-to-own industry are women. In September, Rent-A-Center’s percentage was 9.1 percent. It’s often tough, physical work, leading some HR experts to predict there will always be fewer women than men interested.
“The notion that women don’t want these jobs is based on stereotypes of what women can and will do,” she says. “Most women need to make a living and they will do what it takes to do the job. At the end of this, when the company has done everything it needs to do to get the message out that it’s hard work but women will be given a fair shot, you’ll see women working in this company in hugely greater numbers than in the past.”
Adds Harper: “I have spoken to hundreds who loved that job. They saw it as a chance to succeed on their own merits. The pay and benefits are good, and without a college degree you can pull down $60,000 to $70,000. It’s a terrific option for certain women.”
Indications are Harper is right. The money is too good and growth opportunities too attractive for women not to want back in what promises to be a gender-neutral environment. Even plaintiffs in the lawsuits like Robin Yeubanks and Diana Albrecht, prohibited from returning by the agreement, say they would welcome the chance.
Meanwhile, some women currently working at Rent-A-Center, like Ramona Jeffries, speak with pride of Fadel and the company’s responsiveness. “I’m too new to know what the prior events were,” says Jeffries, who joined the company in June 2001 and has since been promoted to store manager in Defiance, Ohio. “It’s unfortunate if there were problems in the company in the past, but Rent-A-Center is trying to take care of it. The company should be commended for dealing with things quickly.”
Keith Carrico, PHR, formerly HR head at rent-to-own chain Rent One and now an industry HR consultant in St. Louis, says though signs are positive and Fadel is sincere, it remains to be seen if he can turn his rhetoric into reality. “They’re saying, ‘It’s our intention to change; we really didn’t understand the importance of HR, and now we’re going to show we do.’ We’ll have to wait to see if the new HR VP really is given a respected position at the table. Are they getting rid of store managers who don’t want women? Are they changing the way they hire and supervise? If they take a positive attitude and follow through, they’ll be successful. If they’re saying one thing and doing another, we’re going to hear from them again.
“Right now, everyone in the industry is waiting to see how it flushes out.”
Robert J. Grossman, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.
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