* * *
When Ben Alexander, founder of Oregon's Scintilla Systems, asked salesperson William Budd to submit weekly reports, Budd refused. When Alexander wanted to know which accounts Budd was calling on, Budd wouldn't say. Alexander warned him to shape up or risk dismissal, and Budd retorted, "You're not the kind of manager people respond to. Salesmen need to be able to go off and do their own thing." "Jeez," Alexander realized, "I don't have any of this stuff documented, so I can't just fire him." Instead, Alexander again urged Budd to improve his performance.
Budd did -- on paper. He ran up his dollar volume by writing deals at below cost. "Not only didn't your performance improve," Alexander announced, "it got more insolent. It's reckless, and it endangers the company, so I'm letting you go." "Screw you," Budd shot back. "I'll drive you into the mud. I'll dog you out of town." With that, the former employee invited Alexander into the parking lot for a parting "discussion." Alexander declined, but offered severance of three weeks' pay for each year served, a formula generously calculated to encourage Budd to go away.
He did -- but not far enough. He sent Alexander a letter demanding $25,000 as an award for wrongful termination, alleging a dozen iniquities perpetrated against him and threatening to take further action unless the sum was forthcoming. "It doesn't seem like much," Alexander says, "but for a small company, 25 grand is not a check you blink an eye at." Neither is 100 grand -- what it cost to stare Budd down in court. "Writing the check would have saved time and aggravation, in addition to $75,000," Alexander says, "but people who own businesses don't view this kind of thing as business; they see it as principle."
* * *
Whistle-blowing as harassment, once the bête noire only of big companies, also has trickled down to small businesses. Lickety Split, a chain of ice-cream stores around Chicago, dismissed one of its managers. Unless he got better severance pay, the man threatened, he'd turn Lickety Split in to the health department. "For what?" its fastidious owner challenged, and rejected the threat. Sure enough, the health department came to inspect all 20 stores.
"It's a terrible expense," declares one similarly harried small-company founder. "Usually it's a nonperformer who, when you try to lay him off, will call up a hot line -- OSHA, the EPA, the IRS -- and soon you've got some 'badge' in there checking everything out. The government can always find something wrong, and you spend tens of thousands of dollars dealing with it, or if it thinks it's really onto something, you spend hundreds of thousands."
For the employee, it's a win/possible-win maneuver. Faced with feds who "have a bigger budget than we do and more time to spend it," as one cynical CEO notes, employers would rather surrender than fight; and if they don't, the employee still stands to share a substantial percentage of whatever penalties the government agency collects. "Some of these guys have hit several companies," the CEO mentioned above contends. "They work at one and turn it in, and then they work at another. They make a living off it." The quandary for a wronged employer is that responding to charges keeps unsavory issues alive in public, creating a courtroom forum for employees who enjoy the limelight. "Some of these people like to go to court," Ortego finds. "For once in their lives they get to torture their employer."
In a similar if less remunerative vein, a worker who resented being laid off by a small manufacturer in Tennessee launched a campaign of phoning each of the company's 2,000-plus retailers, claiming alternately that the products were of inferior material, that the owner was immoral, that the customer was being billed more than its competitors were for the same goods, or that the customer should "watch your invoices." The company sought an injunction to get the employee to shut up, but since the employee had no assets, he was judgment-proof and kept dialing. In desperation the owner sent a letter to the customers, dismissing the onslaught as the unfounded ravings of a fanatic. The customers identified with the owner: "The same thing could happen to us. We could let someone go and have no protection, either."
In another instance, a rep for a medical-equipment maker near Houston was told he was dismissed. "It'll cost you $25,000," the salesman snapped. "Why?" the employer asked. "You haven't earned us that in two years." "Because there are things the FDA should know if you don't," the salesman said. The employer granted the parting package. Explains the CEO, "You do everything you're supposed to, but you can't dot every i. Then an agency does a full audit, and even if it doesn't cost you money, it costs you a significant amount of time."
* * *
One problem a small business faces in paying off a troublesome employee is that everyone then knows the market value of stirring things up. When you terminate the next employee, that employee views the 20 weeks' pay his predecessor got as a vested right. So should the business consider keeping that employee on, merely to avoid the danger of firing him? Bite the bullet, Ortego counsels. "You can't run a business out of fear of being sued. Once that employee realizes the employer won't take action, he appropriates more -- shorter work hours, longer absences -- and the others see it, and the employer loses their respect."
The solution for EdVidCo, a 12-employee producer of instructional videotapes in North Dakota, was that the best offense is a good defense. Paying for a bad employee's good riddance is a cost of doing business, believes founder Joel Nardo, who hired a woman as national sales manager on the basis that she was "a self-starter and energetic." Once she was on the job, the other employees defined those attributes as "combativeness and pushiness." Explains Nardo, "She didn't grasp that we were a flat organization. No one was below her -- they were support people for her." Morale dropped, productivity plummeted, and employees threatened to quit. "I had to let her go," Nardo says.
