Risk management and workplace culture: back to basicsDecember 30, 2015
The way in which an organisation’s values and expectations are expressed in framework documents is important both for legal risk management and workplace culture. FCB Workplace Law Partner, Rod Marshall, examines how and why.
Increasingly, people managers are turning to interpersonal trust and accountability – not rights and entitlements – as the critical drivers of positive workplace relationships. However, as workplace laws become more complex, many businesses still generate masses of complex, legalistic documentation to ‘clarify’ worker rights and responsibilities in an attempt to mitigate against legal risk. Far from being clear or reassuring, this type of documentation frequently proves counterproductive, triggering unintended mistrust, confusion and frustration for staff and managers alike.
Unfortunately, the answer is not as simple as tossing out the paperwork entirely, or simply adding in a bunch of flowery ‘motherhood’ statements covering conduct and expectations, but the solution does not need to be hard or overwhelming either. In many cases, simple but strategic adjustments to workforce contracts, policies and procedures can help ensure your management practices are aligned with the positive human relationships you are trying to foster and with the legal framework you need to support you. Ultimately, legally robust but ‘plain language’ framework documents will not just reduce your legal risk, they will also build a strong foundational platform to support business leaders and guide effective corporate behaviours.
Why drive trust and accountability?
Legal purists might tell you that employee trust is not a necessary feature of employment relationships. True, in 2014 the High Court decided that Australian employment contracts don’t include a general duty of ‘trust and confidence’, with the Court saying it is not necessary for the relationship to operate.1 But that decision reflects a narrow interpretation of specific legal principles, not a pragmatic statement of reality. Indeed, our research indicates at least 90% of respondents believe:
- for an employment relationship to ‘work’, both parties must be able to trust each other
- when two parties sign an employment contract, they both intend to trust and be trusted by the other
- it would be inconsistent with their organisation’s values to ‘opt out’ of an obligation of trust and confidence towards employees.2
Furthermore, many businesses now recognise that the most successful organisations in the future are likely to be values-driven and that developing brand reputation (including a reputation for integrity) is crucial to recruiting and retaining the people you need to survive and compete.3 In part, this is because staff in the modern labour market increasingly have the independence and appetite to walk away if they do not feel respected or valued, or if they do not trust or respect the organisation they are working for. Of course, it cuts the other way too. Organisations also need to be able to trust their workforce, particularly if their workers:
- Deal directly with customers or stakeholders (meaning your brand depends on their conduct).
- Work remotely (meaning you have less practical ability to supervise them).
- Are entrusted with your property, or that of your clients (eg. access to funds, personal belongings or even intellectual property).
- Importantly, if they are in a position to expose the organisation to liability if they do not behave in a transparent and accountable manner (eg. creating deemed organisational responsibility for a manager’s poor decisions, or for one employee harassing another).
With all that in mind, it is difficult to see how any organisation can function effectively if its framework documents do not set realistic, practical expectations around the conduct and values the organisation requires (and in a way that also allows appropriate action to be taken when those standards are not met).
Don’t throw away the rule book
Unfortunately, a common misconception is that, in order to foster trust and personal accountability, an organisation does not need rules and instead needs to take a ‘softly, softly’ approach. Here are a couple of hypothetical examples that demonstrate how clear expectation-setting can support organisational values, whereas simply trying to be ‘nice’ may in fact undermine them.
A tourist operator runs a small hotel on a remote island. Apart from the site manager (a local), the other staff are generally young backpackers who ‘live in’ over the peak summer months. The operator is realistic about the potential for some staff to ‘hook up’ romantically, and he does not want to prevent that. But at the same time, he is concerned about the risk of sexual harassment occurring at work and the perception of cliques forming within the workforce.
Instead of trying to ban personal relationships entirely (which he knows is unrealistic and probably unreasonable) the operator has a clear policy prohibiting physical contact between staff while on duty or within the hotel grounds. He also has a blanket rule that no employee is allowed to enter another staff member’s bedroom. This helps manage the risk of misunderstandings or discomfort developing among other staff or when relationships sour.
The operator explains the policy to staff transparently during their recruitment and on-boarding processes, and their offer letter states that breaches of the policy are likely to result in immediate dismissal. The site manager also is consistent about enforcing the rules and no-one has ever tried to argue that they didn’t understand them. In fact, on the one or two occasions where he has had to counsel staff for non-compliance, he has received positive feedback from other staff, expressing respect for the way the incidents were handled (and gratitude that he was looking out for their personal privacy and comfort)!
The ‘motherhood’ approach
The owner of a club receives multiple complaints about the night supervisor. Patrons say he is often rude to them around closing time but, because the club operates in a small town, none of them are prepared to go ‘on record’.
The club owner decides that the solution is to sack the supervisor, even though he does not have solid evidence of misconduct. However, the employee’s contract says “our policies and procedures support the friendly culture of our club” and, in turn, the policies say “in the event of misconduct allegations, we’ll conduct an appropriate investigation before determining the best response”. The owner seeks legal advice and is told that, because of the wording in the contract, if the club sacks the supervisor, it will probably be exposed to an unfair dismissal claim and have to pay ‘go away’ money or worse – reinstate the employee!
This leaves the club owner in a quandary. On the one hand, he cannot afford to defend a legal claim and does not want to be seen as an unfair employer. On the other hand, he knows that if the allegations are true, the club’s reputation with patrons will suffer if he does not take decisive action (and other staff may also feel the supervisor’s behaviour is condoned). No matter which option he chooses, someone is going to feel betrayed.
Looking at these examples, we see that both business owners genuinely tried to use their documents to support friendly and comfortable cultures, while also attempting to account for legal risk. Although the ‘motherhood’ approach may have appeared ‘friendlier’ on paper, in the end it was the ‘firm but fair’ approach that achieved the intended outcomes. Accordingly, when drafting framework documents, employers (and their workers) are usually best served when they take a clear, consistent and realistic approach to setting the ground rules.
So what should I do?
Businesses that do not use framework documents to communicate clearly, effectively and persuasively risk:
- Undermining the confidence of staff, discouraging them from being loyal and accountable.
- Being unable to follow through on disciplinary processes in relation to behavioural expectations because they lack the necessary legal foundation.
- Internal frustration from managers who feel unsupported.
- Confusion, lost focus and lost productivity at all levels as staff and managers grapple with incomplete or mixed messages.
Undertaking a review of your documents and taking a pragmatic approach to the way they are drafted will help ensure your management practices are aligned with your values, as well as improving your prospects of legal compliance. In particular, the following steps may provide a useful starting point:
- Assess whether your documentation can be re-crafted in a more holistic manner that suits and balances your different business risks and objectives.
- Re-cut them in simpler, clearer language that is appropriate to your audiences.
- Factor in changes in the legal, commercial and labour market environment since you last reviewed them – and get advice if you are not sure about any of these things.
- Distribute them to staff in a way that promotes understanding and acceptance (eg. information sessions with employees to explain the changes and the organisation’s expectations).
- Do not be afraid to wipe the slate clean and ask for help if you are getting lost in the complexity!
1 Commonwealth Bank of Australia v Barker  HCA 32
2 We surveyed predominantly senior HR directors and managers, or C-suite executives across a range of industries and sectors – predominantly private sector employers with more than 100 employees. The whole survey represented businesses estimated to employ cumulatively 25,000+ employees.
3 FCB Group, Smarter solutions for the future (White Paper published October 2014)