Legal

An important collaboration: CHROs and legal confront crisis management

By Preston Pugh

Mar. 17, 2020

There has been exponential growth in the field of crisis management over the last several years. Crises are understood to have the long-term potential to change the way an organization operates, sometimes threatening its survival or fundamentally changing its stakeholder relationships.

Also read: How Business Leaders Should Respond During Crises

Crisis management, accordingly, helps organizations survive these events. Gone are the days when crises were limited to emergencies and disasters that left a physical impact on an organization. Now included are so-called “soft crises” that may not result in physical damage but nonetheless have a lasting impact on a company’s brand, reputation and employee morale. Here are ways that the chief human resources officer and legal counsel work together to see crises to successful ends.

Crises are typically unplanned, are hard to manage and unpredictable. Experienced leaders, including CHROs, know they will happen, but the who, what, where, why and when are normally unknown. Consider how your organization would deal with these events (all based on real crises):

1. Your chief executive officer, who has overseen a period of marked profitability, is caught in a consensual relationship with an employee that reports to her. Your company has a policy that prohibits such relationships.

2. In the wake of a New York Times story about your company paying millions of dollars in exit packages to male executives accused of sexual harassment, thousands of your employees around the world walk off the job in protest.

3. Two of your employees who are responsible for preparing fast food upload a video on social media showing one of them doing vile things to the food in one of your kitchens. 

employment law
Legal counsel is a vital crisis management partner for HR.

Events like these pressure-test an employer’s crisis management readiness. They pose serious risks, such as loss of consumer, retailer and investor confidence; government fines and sanctions; recalls, litigation and claims; loss of employee morale and focus; and in some cases, high turnover. The value of crisis management is to minimize these and other negative outcomes. The end goal is business sustainability. 

Also read: A Leader’s Guide to Effective Communication Under Pressure

Managed effectively, crises require leadership teams to do several things carefully and with deliberate speed:

1. Detect that the incident has reached crisis status, determine its severity, and communicate quickly and transparently with stakeholders, both external and internal.

2. Investigate the matter thoroughly to understand the cause, disclosure obligations, and other responsibilities the organization may have.

3. Take steps to contain the damage from the crisis and prevent its immediate recurrence;

4. Start the process of business recovery.

5. Learn how to prevent the next crisis of this type — stakeholders may forgive the company’s first crisis but they rarely forgive the second of a similar nature.

So, what roles should CHROs play in this process? During the detection and initial response phase, if a crisis is by nature an HR issue, CHROs should work closely with the company’s counsel. Together, they will understand how a problem impacts internal stakeholders, know the policies that are intended to address the problem and be the most familiar with how those policies have been enforced enterprise-wide. Hopefully, they will have helped establish and refine the HR component of the company’s crisis management plan, including identifying triggers that turn an incident into a real crisis, giving the company a helpful head-start when the crisis hits. 

Also read: Repairing the Downed Lines of Workplace Communications

Even if the issue is not an HR problem, CHROs are needed to provide an initial response to employees, as they will know the most effective ways to reach hundreds or thousands of employees at or near the same time.  

For crises that are triggered by events like a government subpoena or pre-dawn raid, preparation is key. Working with company counsel, CHROs will know what can and cannot be ethically communicated to employees in the initial response phase. 

For example, while companies can never tell employees to refrain from speaking with the government, they should always inform employees about their rights if the government approaches them for a voluntary interview.  Understanding the difference between the two is important.      

During the investigation phase, if the crisis is primarily an HR issue, the CHRO should work with the company’s crisis management team leader (often the CEO or COO) and its counsel to quickly understand the problem — how it happened, who is responsible, and whether any company protocols or controls were bypassed. If the problem is the result of the actions of one employee or a small group of employees, the CHRO and legal team must assess supervisor and managerial responsibility — did they know about the employee’s actions, did they profit from them, and, if they didn’t know about them, should they have known?

In the containment and damage control phase, CHROs will play a pivotal role in deciding employee corrective actions and working on extended internal communications with employees.  When the crisis is especially severe, CHROs are also central in retaining talent and helping employees who are facing hardships because their jobs are impacted. This phase may require CHROs to work with the company’s legal team to manage employee litigation and respond to regulator scrutiny.  

During business recovery, many employees may experience a range of emotions, including fear, shock, panic, anger, hopelessness and trauma. They will need help getting back on their feet and CHROs have an important role in helping them get there. CHROs can facilitate internal discussions addressing employee sentiment, creating safe spaces where employees can openly express their feelings and still go back to remaining productive employees. In this phase, CHROs will also serve as stewards over needed cultural improvements.   

Lastly, in the learning phase, CHROs should play a leading role in determining how to prevent similar HR crises in the future. Here, a deeper root cause analysis is important. How did the problem happen, did the controls work as the company intended, and if not, why not?

Even if the crisis was not an HR problem, CHROs should still lead the assessment of how to mitigate the effects of future crises on the company’s employees.

 

Preston Pugh is a Member in the Litigation Department at Miller & Chevalier in Washington, D.C. Recognized for his work in risk avoidance and mitigation investigations, and trained as a labor and employment lawyer, he works with boards of directors and C-suite leaders in multiple stages of crisis management.

About Workforce.com

blog workforce

We build robust scheduling & attendance software for businesses with 500+ frontline workers. With custom BI reporting and demand-driven scheduling, we help our customers reduce labor spend and increase profitability across their business. It's as simple as that.

Book a call
See the software

Related Articles

workforce blog

Compliance

Minimum Wage by State in 2022 – All You Need to Know

Summary The federal minimum wage rate is $7.25, but the rate is higher in 30 states, along with Washing...

federal law, minimum wage, pay rates, state law, wage law compliance

workforce blog

Legal

California’s push for a 32-hour workweek explained, and how to prepare

Summary: California is considering a 32-hour workweek bill for businesses with over 500 staff 4 day wee...

32 hour workweek, 4 day workweek, california, legislature, overtime

workforce blog

Legal

A business owner’s guide to restaurant tipping law

Business owners in the restaurant industry are in a unique position when it comes to employee tips. As ...

restaurants, tip laws, tipping