Building the Matrix: Who’s Responsible for Your Company’s Decisions?

Sometimes simply following the law isn't enough to ensure decisions impacting your company go smoothly and that your reputation is protected. Learn how a matrix of authority can help.

It is difficult to keep a company on the path of legal compliance and to maintain its reputation especially since following the law does not necessarily protect an organization’s reputation. 

Recently, AT&T and Novartis experienced the pain a bad decision can have on reputation and financial value. The CEO’s for both Novartis and AT&T gave mea culpas for hiring Michael Cohen, Donald J. Trump’s former lawyer.   

Novartis’ chief executive explained that it was a bad decision for his company to pay Michael Cohen $1.2 million dollars to consult on how the Trump administration would approach policy decisions related to the Affordable Care Act.   

Likewise, AT&T’s CEO said that “Hiring Michael Cohen as a political consultant was a big mistake." Cohen was going to advise AT&T on the key players in the Trump administration; on those key players’ priorities; and on “how they think,” including the administration’s approach on AT&T’s proposed merger with Time-Warner.

To be clear, according to both companies, their decisions to hire Cohen were legal since hiring someone to provide a corporation with insight into an administration in itself is not a crime.

In fact, Cohen is not the first person to sell his knowledge or experience with a particular administration. Many who have held government positions or who have unique access and knowledge about the government are hired as “consultants” or “lobbyists.” And, this is not just a U.S. thing. Most businesses that work internationally know that retaining a former government official, in almost any country, to consult on how the government operates and to make introductions facilitates developing business.

But, with this benefit comes risk. Consultant and lobbyists—whether in the U.S. or outside of the U.S—who have access to government officials or former government officials, or who otherwise have “inside” government information, although capable of providing valuable political strategy to a company, may also, intentionally or unintentionally, expose a company and its employees to reputational damage and to criminal behavior such as bribery, conflicts of interest, and a whole host of other crimes. 

As a result, when an organization decides to hire a consultant is connected, like Cohen is, the organization should proceed with caution. First, conducting due diligence on the consult is a must so you can know who their family members and business partners are, where they are invested, what they did in the past, what they will do with the money you pay them, etc. 

Second, an organization needs to make sure that leadership, including its lawyers, know a consultant with ties to the government is going to be hired, this includes the fees to be paid to the consultant, and the scope of the work. 

The CEO’s for both AT&T and Novartis admit their mistake in hiring Cohen was a result of “moving too fast” and a lack of due diligence. More precisely, Novartis’ CEO said he really did not even know who Cohen was and, very soon after signing the agreement with Cohen to provide policy advice, it became clear to Novartis that Cohen had oversold his ability to advise on health policy. 

As for AT&T, apparently AT&T’s government affairs group hired Cohen; and according to AT&T’s CEO, Cohen was not adequately vetted. In the wake of this matter, the leader of AT&T’s government affairs group will retire; and, going forward, AT&T’s government affairs team will report to AT&T’s lawyers.

AT&T’s decision to place the responsibility and authority to hire political consultants in the hands of its lawyers is one way of mitigating the risk of the reputational damage it and Novartis suffered. But not the only way, because at Novartis, the lawyers were involved, yet Cohen was still hired. Novartis’ general counsel resigned over the matter.

The facts that are known about how AT&T and Novartis decided to hire Cohen demonstrate why it is vital to define who within an organization has responsibility and authority to make decisions that have the legal and reputational implications that hiring Cohen had. 

An effective way to clearly define responsibility and authority, essentially who owns a decision, in an organization is through a well-configured “matrix of authority.”

A matrix of authority broadly identifies the decisions a company regularly makes, for example retaining political consultants, leasing factory or office space, merging or acquiring another company. Once the decisions are listed, each decision should then map to the role/function/title within the organization that has authority and responsibility to make the decision. The role/function/title listed as the “decider” should have the necessary clout, experience and knowledge depending on the type of decision. For example, a decision to re-brand the company would sit with the CEO but also an organization’s marketing leader. Or, a decision to re-finance debt, depending on how much debt, may rest with the CFO or the CFO’s designee.

The AT&T and Novartis situations further demonstrate how a matrix of authority should be designed and how it may blunt legal and reputational damage.

As a result of the Cohen hire, going forward AT&T lawyers now own the decision on whether to retain political consultants. Theoretically, the lawyers should know the legal requirements that apply to working with political consultants who have government ties – for example lobbying, ethics and corruption laws. With this knowledge, the lawyers should be able to assess the legal and reputational risks of the decision; advise leaders on these risks; and advise on steps to manage these risks.

However, for political consultants with Cohen’s connections and profile, the lawyers should not have the final say. Rather, the matrix of authority should assign final authority and responsibility to the AT&T CEO and possibly its board, informed by the lawyers. 

If, for example, the Novartis CEO had been clearly identified as the individual with the final authority and responsibility to retain political consultants like Cohen, then the CEO would know it was his obligation to make sure he is satisfied that the hiring decision complies with the law and is in the best interest of the company. Rather, than having to explain his company’s decision after the “writ” has already hit the fan.

The matrix of authority also relieves leaders of having to review every decision. For example, if a company wants to hire a political consultant to advise on a state’s approach on public-private partnerships and the consultant is a professor focusing on public-private partnerships with no government relationships, the final authority and responsibility may rest with more junior lawyers and managers. Thus, leaders are not burdened with these less risky decisions. For, I can assure you, many an organization develops procedures and policies to blunt some risk, only to find it has gridlocked itself with some onerous review and approval process which ties up leadership with decisions they don't need to make.  This ends up making everyone in the decision chain frustrated; and, slows business decisions without necessarily mitigating risk.

Without defining who has responsibility for decisions, organizations risk exposing themselves to decisions being made without adequate facts; without adequate subject matter advice; and without the judgment and knowledge of leadership. A matrix of authority provides clear definition to both employees and leaders on who owns decisions; and, as a result fosters more thoughtful decisions. Because, for most of us, when we know we have the responsibility, we act with more diligence and thought.  So, had the AT&T and Novartis CEOs knew of their organizations’ decisions to hire Cohen, they may have thought through the implications and may not have found themselves having to explain their mistakes.

"It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong." Thomas Sowell

Margaret Cassidy is principal at Cassidy Law. Learn more about the firm’s capabilities by clicking here.


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  • Next up: Who’s the Employer Here? Understanding What Constitutes ‘Joint Employer’ Status Under the NLRB
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  • Who’s the Employer Here? Understanding What Constitutes ‘Joint Employer’ Status Under the NLRB

    What does the reversal of the joint-employer standard mean for your business?

    Recently, the National Labor Relations Board (NLRB) reversed the joint-employer standard. That decision is likely to impact a number of industries and businesses across Northeast Ohio.

    First, some background. On Dec. 14 last year, the NLRB found two or more entities are joint employers only when it can be shown that one has control over the essential employment terms of another company’s employees. This standard also requires that the control be direct and immediate instead of indirect or limited.

    The recent ruling reversed the Browning-Ferris standard, which had held that a company, its contractors and franchisees could all be considered a “joint employer” for purposes of the National Labor Relations Act.

    The prior standard applied even if the company did not have control over the terms and conditions of a contractor’s or franchisee’s workers. Under Browning-Ferris, the NLRB could find that separate organizations could be joint employers if the primary company had just “indirect control” or an ability to have indirect control over related companies.

    The Browning-Ferris standard had far-reaching impact because the alleged wrongs of one company could be imputed to other companies if it was determined that even “indirect control” might have been exerted. Thus, joint liability could be imposed on all of the entities as part of a “joint employer” web.

    What does this mean?

    This latest reversal is prompting labor and employment attorneys to closely watch how future decisions are impacted. Perhaps the most notable of these cases involves fast food giant McDonald’s and the extent to which it controls its many franchises. This new standard is likely to impact not just the McDonald’s case, but many more just like it. Stay tuned, and we’ll update this issue with further developments as they arise.

    Max Rieker is an attorney at Walter | Haverfield who focuses his practice on labor and employment law. He can be reached at mrieker@walterhav.com or at 216-928-2972.

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  • Next up: National Eye Exam Month: Why Eye Exams Are Important For You And Your Employees
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  • National Eye Exam Month: Why Eye Exams Are Important For You And Your Employees

    The month of August is National Eye Exam Month, the perfect reminder for you and your employees to schedule an annual eye exam. Courtesy of our partners at VSP® Vision Care, here’s a few reasons why devoting time to your vision’s health and getting a routine exam is so important.

    While you and your employees are enjoying the last peppery days of summer, eye exams are the last thing you have time to work into your busy schedule, right? But before calendars completely fill up, this month is a great reminder to add a visit to the eye doctor on your to-do list. Even if you don’t have a vision need right now, getting regular eye exams every year is the best way to ensure that you’ll catch problems early. Below are just a few good reasons why scheduling routine eye exams are so important.  

    Detects vision health and your overall health  

    Did you know that getting an annual comprehensive eye exam can reveal a lot about the health of your eyes and provide your eye doctor a view into your overall health and well-being? Not only will the exam help your eye doctor diagnose issues affecting your ability to see – like nearsightedness, farsightedness, glaucoma or cataracts – but The Vision Council reports that optometrists can spot many health problems at the earliest stage, when they’re most treatable. Conditions your eye doctor can detect include diabetes, high cholesterol, thyroid diseases, and hypertension.

    Ensures your prescription is up to date 

    As we age our eyes change and you may not be seeing things as clearly as you should. Wearing the wrong glasses or contact lenses causes the eyes to work harder and can lead to unnecessary eye strain. Even a slight change in prescription can cause eye discomfort, headaches and other associated problems. An annual comprehensive eye exam can determine if your prescription is up to date.

    Improves workplace productivity 

    In today’s working world, we are looking at computers and phones on a consistent basis. Studies have shown that screen time can negatively impact your eyes. As many as 2 in 3 American adults experience digital eye strain symptoms from using a digital device¹. Discussing the amount of time, you spend on a computer, can help your eye doctor advise you on which lenses you could benefit from, like blue-light protection. Plus, getting a regular eye exam can help minimize vision problems that affect you and your employees’ work performance.

    Since eye exams are relatively brief and non-invasive, now is the perfect time to schedule a comprehensive eye exam with your VSP network doctor. By going in-network, you’ll save more on your eye exam, frames, contacts, Lasik, and lens enhancements. Plus you can get additional member savings and bonus offers when you visit a doctor who participates in the VSP Premier Program.

    1. 2017 Digital Eye Strain Report, The Vision Council

    This August make vision health a priority, starting with scheduling a comprehensive eye exam. If you haven’t already, take advantage of your COSE member benefit and opt-in to VSP vision insurance. Contact your COSE sales representative or broker for more info.

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  • Next up: Why I Mentor: The Lessons I Learned
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  • Why I Mentor: The Lessons I Learned

    When I volunteered for the True2U youth mentoring program I was told, “You’ll get as much out of this as the kids.”  I nodded agreeably, but was unprepared for how profound the experience would be. There were many moments that will never be forgotten: poems written; artwork created; vulnerabilities exposed; clever thoughts shared; curiosities explored; challenges met; and frustrations and mental blocks overcome all while self-awareness awareness dawned. However, two large lessons stand out. First, the overarching themes of True2U are as valid for adults as they are for teens. Second, what it takes to be a good mentor is what it takes to be a good human. 

    When I volunteered for the True2U youth mentoring program I was told, “You’ll get as much out of this as the kids.”  I nodded agreeably, but was unprepared for how profound the experience would be.

    There were many moments that will never be forgotten: poems written; artwork created; vulnerabilities exposed; clever thoughts shared; curiosities explored; challenges met; and frustrations and mental blocks overcome all while self-awareness awareness dawned. However, two large lessons stand out. First, the overarching themes of True2U are as valid for adults as they are for teens. Second, what it takes to be a good mentor is what it takes to be a good human.  

    In my opinion the point of True2U was guiding students to know and respect their strengths, deeply acknowledge their distinctive interests, combine those strengths and interests into an understanding of their unique selves and encourage taking action to explore where that will take them. (First priority being a commitment to choose, attend and graduate from high school.) Any person doing this work will find their purpose, their job, their career, their company, their tribe, their way to make a living, their further education and their destiny. We find and expand ourselves, but we cannot do it alone. It takes interaction and support. The genius behind True2U’s effectiveness is the two-layers of high expectations, high structure and high support provided to the students (through the program) and to the mentors (as the program). There is no better way to deepen and broaden your understanding of a subject than to teach it. I found this to be true and profoundly impactful.

    I had a confident, but naïve notion that the will and skill used to help develop my career would help me to be an effective mentor. That was partially true, but largely false. Some will and skill were required, but honest, patient, curious, caring presence is what allowed the most meaningful moments. I learned this on my first day. As I and my fellow mentors launched into the first exercise, I was seated at a table with four young women. They were chatting and laughing and doing what 8th graders do.  “OK, we’re going to…”, I started and stopped.  “This exercise is all about…”, I said stopping again. Nothing was capturing their attention. As a 26-year sales and marketing veteran, I’m KNOWN for starting conversations and I was stuck.

    So the internal dialogue starts: “What ARE you doing here?” Long pause. “I just want to be of some help to these students”.  “Well, that’s a nice intention. Why don’t you just sit patiently with that and see what happens?” So I did. Uncomfortably. It felt like a half hour, but was probably 3 minutes. I noticed one of the student’s hands were bright red. I asked why and learned that she liked to style hair and was coloring last night without gloves. We related that to the exercise which and that sparked the whole table’s engagement. Being patiently present with selfless intention was That established my way to connect to with each of the students.  and  I recognized this it as a deficiency in all of my relationships most of the time. Ouch. Big lesson. Fortunately, True2U supplied me with three 8-hour sessions to practice in.  Three times eight equals 24 hours in a day. Just one day. Seldom easy, but always valuable.

    In the end, Aimee, my wife, summed it up best. “Think of how much better you’ll do next year.” That “day” of mentoring felt like a lot more and what I learned in that “day” is well beyond what I have learned in most of the 24 hours periods in my lifetime… and I will be better next year.

    Learn more about how True2U impacts both sides of the mentoring partnership.

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  • Next up: Why Is it so Hard to Get People on Your Bus? Part Two: Controllers/CFOs, Quality Managers and Operations Managers
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  • Why Is it so Hard to Get People on Your Bus? Part Two: Controllers/CFOs, Quality Managers and Operations Managers

    If you read my prior blog relating to the same subject, but directed at Sales positions, you will no doubt recognize that a fair amount of what was said about getting the right sales people on your bus also applies to other positions.  The sad fact is that most small business owners don't do a very good search job in looking for people, and that starts a process which often leads to unsatisfactory results.

    If you read my prior blog relating to the same subject, but directed at Sales positions, you will no doubt recognize that a fair amount of what was said about getting the right sales people on your bus also applies to other positions.  The sad fact is that most small business owners don't do a very good search job in looking for people, and that starts a process which often leads to unsatisfactory results. 

    Controllers/Chief Financial Officers

    One firm I have advised over the years searched a full year for a Controller, interviewing sixteen (!) applicants before finding one who appeared to fit the organization's needs.   He was promised a review and raise after 90 days.  The owner quickly became unhappy with his work ethic.  The saying around the office was "don't stand by the door at 5 PM; he'll knock you over as he bolts for the parking lot."  One of the several things that most disturbed the CEO was the fact that he never quite completed tasks on schedule.  He was almost always late, sometimes by an hour, and sometimes by days.  She not only gave him the promised raise at 90 days in spite of her dissatisfaction, she didn't even fire him.  She suffered through almost two years of his behavior before he finally resigned to become someone else's problem. Why did it take so long?  The CEO admitted the search had taken so long and she was so uncomfortable with the financial/accounting side of the business, that she was willing to keep the "known devil", feeling her next choices would also result in sub-optimal behavior.  Interestingly, the salary she had been paying him would have easily attracted an experienced CPA!

    Another firm I have worked with wanted to hire a CFO.  The owner found a candidate.  He brought the candidate's resume to a Board of Directors' meeting.  One of the outside Directors noticed that the applicant had three years experience working for an out of state CPA firm.  That Director happened to know the Managing Partner of the CPA firm.  He called him.  The Managing Partner gave the candidate a less than glowing report.  The CEO/owner hired the candidate anyway against the advice of the Board.  [Side note: while this group was legally a Board of Directors, and therefore could have blocked the hire of a senior executive, in practice the Board functioned as a Board of Advisors because the CEO was the majority owner of the company and could override his Board's recommendations any time he wanted - as he frequently did.]  It took over two years for the CEO to finally fire the CFO, much to everyones' relief.

    Quality Managers

    The emphasis on quality is increasing important in today's business environment.  I recently reviewed the experience of an ISO certified firm that was faced with a significant problem with the scheduled review of its quality processes after the sudden resignation of its most skilled QC Manager.  The firm hired, through a respected search firm, a new hire to take his place.  By all background checks and interviews, this person was expected to be a solid replacement.  In his first week, it was quickly determined that he had a substance abuse problem.  Confronted, he promised to clean up his act.  And he did, for almost two weeks.  Luckily, he was sober enough to guide the quality audit.  Shortly thereafter he arrived at work too drunk to walk a straight line.  Rather than cut the losses, the firm chose to send him to rehab.  A month later, the man again relapsed.  He was terminated.  And so a new search began.  Another candidate, selected from a pool provided by another respected search firm, seemed to be the real deal. However, within three days of his hiring, he informed the CEO that he had lung cancer and needed some time off to deal with the medical problem.  A week later he returned to work, only to ask for a half day off for "personal business".  The half-day off was reluctantly granted.  Two more days passed when he again asked for another half-day off for more "personal business".  Again the request was granted.  A week later he was AWOL for four days.  He didn't inform his employer during that period that he would be absent.  On Friday of that AWOL week he arrived at the firm's headquarters dressed in a t-shirt and shorts.  He said he had been in another city doing personal things.  The story got even better when he told his supervisor that his first half-day off was spent buying his wife a Mercedes Benz car, and the second half-day was devoted to purchasing her some expensive jewelry. This man was hired in the mid-30K range. The man had been on the payroll for seven weeks and was absent for eight of the thirty-five work days.  He was finally terminated.  The search firm agreed to return the deposit on his hiring and credited the company with the other 50% of the fee towards another hire.  The ultimate irony: this man recently filed for unemployment compensation. As incredible as this story seems, I did not have to make it up!:   The company is still looking.

    Operations Managers

    One firm had a revolving door for Operations Managers.  Over a ten year period there were at least seven of them.  None satisfied the owner.  Desperate for a solution, the owner finally brought the problem to his newly created Board of Advisors.  They asked him some very pointed questions: (l) Do you have a job/position description of what you want your Operations Manager to do?  (2) Have you recruited and screened potential candidates against Gino Wickman's Traction process of " Gets It, Wants It, and has the Capacity to Do it"?  (3) Have you defined the Core Values of your firm to look at "fit" of the candidate for the job? 

    The answers to those questions were mostly "no".  He had done some systematic recruiting, but he mostly relied on word of mouth, friend referrals, and admitted he was batting well under 300 for a decade.  He wondered how he would ever make it to the Big Leagues. The Board recommended he change his process.  He took the rest of his management team through the Traction Core Values exercise, developed a cohesive set of standards to measure candidate fit, first by resume, next by background check, then personal interviews with key members of his management team, and finally a provisional offer of potential employment to the four candidates that got through a much more systematic and rigorous screening process than had ever been done before in his company. 

    Each of the four candidates were invited to become paid two day consultants to the firm.  Those two days were disguised as "outside consultants" to do what consultants do - walk the floor, ask questions, observe, evaluate and write a report to top management with recommendations on what they felt were areas of Strengths and Weaknesses and potential actions to ameliorate weaknesses and enhance strengths.  Compensation of $1500 was offered for the two days + the report.  Three of the four accepted the offer.   What happened?  One candidate was superior in his observations and recommendations.  However, in the two days, his behavior clashed significantly with the company's desired culture.  Candidates two and three were virtually tied in their performance on this assignment, with one appearing to fit much better than the other one.  The better fit man got the job.  The company got some great recommendations on changes that needed to be made.  Luckily, the new hire worked out well.  In part due to implementation of the series of recommendations suggested by the first candidate, cost of materials and labor as a percentage of sales decreased 7% over the first two years of his employment,  on-time delivery to customers rose from 91% to 97.5%, and rework/returns decreased by 50%. 

    It's nice to win once in a while!

    Some Analysis

    Employee selection is not an exact science.  The human factors all too frequently override common sense.  We hire people we like. We limit the scope of the search because we have found what looks like a good candidate rather than search for the best candidate.  Settling for the good hire is counter to best practices.  In the case above in hiring the Controller, the CEO was clearly out of her comfort zone.  The whole three year fiasco (remember, it took a year to hire him and two more years of being unhappy with him) could have been avoided or at least minimized by following some simple rules, detailed below.  In the Controller situation, the problem could have been minimized had she sought help from others with more experience and comfort in hiring for the position. 

    Entrepreneurs can often be their own worst enemies.  I frequently conduct SWOT (Strengths, Weaknesses, Opportunities & Threats) analyses with company management teams.  It is not unusual to see the CEO listed as a major Strength and as a major Weakness of the  firm.  The CFO example happens all too frequently when the CEO is also the major shareholder and believes he doesn't have to answer to anyone. 

    The Quality position problems noted above are probably exceptions to the norm, but these stories are real. 

    The happy ending of the Operations Manager story is heartwarming but also disturbing.  The owner had to wander in his personal desert for a decade before he sought the help that made the company experience real progress.

    Takeaways

    l. Effective hiring is a process, not an event. 

    2.You must define your company's Core Values before you begin any significant hiring effort.  This will shape and guide assessment of candidates for "fit" with your firm.

    3. Once you have defined the Core Values, any position you need to fill must have a definite job/position description against which you can measure candidates' talents and capabilities.

    4. If you do your homework properly, you will screen first on the resume, next on validation of the claims on the resume, and then by an appropriate background check.  While we all know that people are unlikely to list references who will say bad things about them, there's a lot to be gained in seeking out contacts who know the candidate.

    5. Candidates who pass the resume and background checks get moved into the interview stage.   A future blog in this series will examine some of the more egregious errors people make in interviewing, but for now, focus the interview on lots of listening, structuring the interview so that what the candidate "Can Do, Will Do, and has the Capacity to Do" can come through.  There's a lot to be said for having more than one interviewer in the room with the candidate. 

    6. Hire people provisionally with specific, measurable goals to be accomplished by specified dates clearly enumerated and documented. And, review progress towards those goals.  Keep score.

    7. Even with all of those guidelines, you are still going to make hiring mistakes.  Everybody makes hiring mistakes.  The key is to admit the mistake sooner rather than later.  Don't "put up" with someone who clearly isn't working out just because you are afraid you won't do better next time.  

    8. Hire Slowly, Fire Quickly. 

    These are the kinds of issues we routinely discuss and dialog about in the COSE Strategic Planning Course.  If you would like to learn more about the course, consider attending one of our information sessions (the next one is August 16, 2016) and/or look int the material about the course in this same website.

    Jeffrey C. Susbauer, Ph.D. is Associate Professor Emeritus at the Monte Ahuja College of Business, Cleveland State University where he has taught strategic management and entrepreneurship courses since 1970. A long-time consultant to scores of businesses, a member of the boards of advisors to over 60 companies, he co-founded and serves as the principal instructor for the COSE Strategic Planning/CEO Development Course for the past 36 years. The course is concerned with providing entrepreneurs with education to guide their vision, strategic thinking and execution in their businesses.

    Learn more about the Strategic Planning/CEO Development course or contact Jeff via email

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