Thursday 13 February 2014

FWA rule - you can't fire someone who publicly called the MD a 'wa....!'



Recently, FWA ruled that Home Choice had unfairly dismissed an employee who had emailed the entire company calling his MD a name (rhyming with banker!) and stating that one of his hobbies was masturbation. Pretty extreme I would say, so why couldn't they fire him and what can we learn from this case?

Culture - it might be alleged that the company has a culture that allows the sharing of images, bad language and verbal abuse among employees, with senior management, at worst actively involved and, at best, complicit. One of the issues with this type of culture is that employees tend to assimilate and follow the patterns of behaviour - or leave, so the culture gets stronger and stronger. I know of someone in the building game that was working within a similar culture and survived by towing the line. This was until he realised that he was coming home and speaking to his wife the same way. He promptly left!

Precedence - given that this type of behaviour was active across the business and at all levels you cannot single out one incident with different treatment. But had there been active management of this behaviour and strict control, this incident would have been far less likely to be ruled unfair

Policy - there were no policies in place to guide and manage employees' behaviour. If employees are not told that this type of behaviour is not appropriate you can't manage this retrospectively

So what was the ruling? - Well, the employee did not want to be reinstated although this was an option. He was initially awarded $30,000 compensation reduced to $20,000 because of his role in the situation.

This company has a major cultural change to undergo which will be painful and will need to be led from the top. They will experience high attrition levels but the irony is that a positive culture built around respect for the individual will ultimately increase their employee engagement and motivation levels and improve the customer experience leading to better financial results.


Exit Stage Right


You may or may not have ever thought about the end - the time when for a number of reasons you would like to sell your business. The frightening thing is, is that you are not alone - the majority of business owners haven't either - but if you would like to get 4 times your EBIT for the sale you need to be thinking about this now...

I met a guy who had run a very successful business for 30 years turning over approx. $30m p.a. and with a profit of $2m pa. His wife had worked in the business with him but she was keen to spend more time travelling now that they were hitting their sixties. So in theory, the sales price should be close to $8m - the problem was everything was in his head, there were limited detailed processes or employee records. His business was significantly devalued as a result and he is likely to walk away from it and not recover the pot of gold at the end of the rainbow. So what can you do to prepare for the end?

1. Systemisation - every process, procedure and practice - so that someone else can pick it up and run with it and the business is not totally dependent on key personnel. This activity will also protect against attrition

2. HR - have detailed personnel files and contracts, job descriptions and annual reviews. Your employees are often part of the transaction and the potential buyer will want to understand their skills, annual leave and long service leave liability plus the performance records that they will inherit

3. Practice run - know that your business can run without you for extended periods of time - take some lengthy breaks, try and switch off and then come back and learn from the experience - what were the issues and how can you protect against those issues in the future?

4. Plan & prepare early - look to maximise your profits in the three years leading up to your sale but, more importantly, start an exit strategy document now to think through issues such as prospective buyers, financial and legal advisors and, importantly, your life post the sale. Any prospective buyer is likely to complete a thorough due diligence review too

It is really important that you start your business with the end in mind - sounds counter intuitive I know but it will also help with the everyday business decisions if you are always linking decisions, strategy and operations to the day of exit.