Category Archives: Workplace

Purchasing a Risk Management Information System

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It’s bound to happen. At some point, nearly every risk manager is faced with the need to purchase or replace a risk management information system (RMIS).

The decision may be driven by the obsolescence of an existing RMIS, a need for different or more robust capabilities, organizational changes and general systems upgrades that facilitate wider application of data analytics.

The good news is that RMIS long ago transcended their traditional roles in claims tracking, analytics and benchmarking, and they continue to evolve. Today RMIS offer an array of sophisticated capabilities, including applications to support enterprise risk management and global strategic risk management initiatives.

To get the RMIS that best meets your current and emerging needs, thoughtful consideration is called for. In light of exciting RMIS developments, here are a few ideas that might help.

Rethink your RFP. A rigid RFP process with a defined set of parameters and limited detail might leave you with insufficient information and result in a choice that is less than optimal. With many risk managers now required to address more complex exposures, provide sophisticated analytics, and drive down costs, contemporary RMIS platforms offer the versatility to support a spectrum of risk management needs. So starting out with a broader conversation about needs analysis versus capabilities can equip RMIS buyers to make better decisions.

Remember, people are key. Sure, new technology is exciting. However, as highlighted in the 2014 Advisen/Bickmore RMIS Review, client service is a top reason for organizations to switch RMIS providers. Do the people on the other end of the phone have the experience to understand your complex business and needs? Can they advise or make the changes within your system? Do they have authority to do so without submitting tickets or routing your problem to another department?

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While it is reasonable to assume any RMIS vendor will need to get up-to-speed on the specific needs and priorities of your organization and department, you don’t want to be training a less experienced RMIS vendor or employees at your expense.

Usability: How quickly can your team get up to speed? Unlike a decade earlier–or even just a few years ago–virtually all RMIS users are quite familiar with general website navigation based on their Internet use. Ideally, the RMIS you select will have a simple user experience with navigation that’s fairly intuitive and functions and unique features that are for the most part self-explanatory. Historically, RMIS systems were “siloed” in terms of how their capabilities were developed, so information had to be searched for and located. Today, the workflow of a RMIS should coincide with the user’s organic thought process–and not the other way around.

Scalability: What happens as needs evolve? Today, virtually every RMIS provider claims its system is scalable to handle growing organizations. While that may be true, the question for the buyer to ask is: “At what expense?” When interviewing potential RMIS providers, be sure to ask plenty of “what if” questions so you come away with a clear understanding of what might be involved in scaling, changing, or even reconfiguring a RMIS system.

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Does each and every change come with a price tag, or is the system’s architecture built to accommodate on-the-fly configuration changes?

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There is no doubt these are challenging times for risk professionals and their organizations. In this environment, choosing the RMIS that is right for you can go a long way toward making your job a lot easier and your team more successful. Happy shopping!

EEOC Oversight: Congress Considers Accountability Proposal

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The Equal Employment Opportunity Commission (EEOC) has encountered a series of set-backs over the last several years in terms of big losses and fee sanction awards. Our past blog posts have reported on these court rulings and defeats (here, here, here, and here.) As a result, criticism has mounted, stakeholders have complained, and now some members of Congress want to do something about it.

Most recently, on June 10, the House Committee on Education and the Workforce, Subcommittee on Workforce Protections held a hearing titled “The Regulatory and Enforcement Priorities of the EEOC: Examining the Concerns of Stakeholders.” Representatives of various stake-holders testified, including the U.S. Chamber of Commerce.

Referencing complaints raised at EEOC meetings in 2012 and 2013, the Chamber pointed to a rare consensus between plaintiff and defense bars—that EEOC investigations “[are] too long, inconsistent and of questionable quality.” The Chamber noted that the EEOC has so far failed to address those complaints by providing investigators with timeliness standards or a definition of a “quality, limited investigation.” In addition, the Chamber highlighted the agency’s propensity for litigation at the expense of sound investigation and good-faith conciliation. As a key example, the Chamber cited the EEOC’s “stonewalling” in EEOC v. CRST Van Expedited, Inc., where EEOC’s failure to exhaust administrative remedies and to properly investigate before resorting to litigation led to $4.7 million in sanctions. The Chamber’s testimony can be downloaded here. Concurrent with the hearing, the Chamber released a white paper titled “Review of Enforcement and Litigation Strategy during the Obama Administration—A Misuse of Authority.”

Against this backdrop, on June 25, Rep. Richard Hudson (R-N.C.) a member of the House Committee on Education & the Workforce, introduced the Equal Employment Opportunity Commission (EEOC) Transparency and Accountability Act (H.R. 4959). A Fact Sheet on the proposed bill is here.

Summary of H.R. 4959

The proposed legislation would require the EEOC to post on its website and in its annual report an array of information to promote transparency.

In a press release announcing the bill, Congressman Hudson said: “The EEOC is tasked with a noble mission to protect American workers and job-seekers from discrimination in the workplace and hiring practices. Recently, however, the EEOC overstepped its bounds by litigating numerous cases found to be frivolous, groundless, and baseless, that have caused undue burdens on numerous businesses and industries. It is critical that Congress provides meaningful oversight to certify that the EEOC stays focused on carrying out its core mission. This legislation will increase transparency and accountability at the EEOC to help ensure that the agency fulfills its duty and adequately balances the interests of both employers and workers.”

Among other things, the proposed legislation would require the EEOC to post on its website and in its annual report an array of information to promote transparency, including any case in which EEOC was required to pay fees or costs, or where a sanction was imposed against it by a court; the total number of charges filed by an EEOC member or as a result of a directed investigation; and each systemic discrimination lawsuit brought by the EEOC.

It also would require the EEOC to conduct conciliation endeavors in good faith and such endeavors would be subject to judicial review.

Further, the bill would require the EEOC’s Inspector General (IG) to notify Congress within 14 days when a court has ordered sanctions against EEOC. The IG must also conduct a thorough investigation of why the agency brought the case, and submit a report to Congress within 90 days of the court’s decision explaining why sanctions were imposed. In addition, the bill would require the EEOC to submit a report to Congress within 60 days of the court’s decision detailing steps EEOC is taking to reduce instances in which it is subject to court-ordered sanctions; further, the EEOC would have to post this report to its website within 30 days of submitting to Congress.

Implications for Employers

The proposed bill is one measure of the degree of frustration that stakeholders have with the job the EEOC is doing. While no one questions the importance of the Commission’s mission to root out and eradicate employment discrimination, many question the manner in which the EEOC has wielded its power. Employers should stay tuned, as future chapters in this debate are sure to be written in the coming months.

This blog previously appeared on the Seyfarth Shaw website.

Chicago Board of Ed Wins Battle with Teachers Union

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On May 27, 2014, the U.S. District Court for the Northern District of Illinois handed a major win to the Chicago Board of Education in its battle with the Chicago Teachers Union over the selection of 10 schools for turnaround in 2012, which affected the jobs of more than 200 African-American teachers and para-professionals. The decision – Chicago Teachers Union v. Board of Education of Chicago—is reflective of a growing trend that raises the Rule 23 class certification bar in employment discrimination class actions.

In an important lesson for all employers, the Court held that the Board’s rigorous, individualized assessment of the schools considered for turnaround meant that the case was unsuitable for class treatment of plaintiffs’ discrimination claims.

Background

Under the Illinois School Code, schools may be subject to a “turnaround” if they had been on probation for at least one year and have failed to make adequate progress in correcting deficiencies. In a turnaround, the Board of Education takes control of the school and removes all staff. Affected teachers and para-professionals are either placed in a reassignment pool or a substitution pool with different rights to salary and other benefits depending on their tenure status and job position.

In 2011, the Board began considering which school should be turned around in 2012. The process started with an initial list of 226 schools. That list was reduced to 74 schools based on composite standardized test scores and graduation rates. Subsequently, a qualitative “in-depth investigation process” began for the remaining 74 schools. This involved school visits, additional data collection, and meetings with a variety of school representatives and community members. No written policy applied to the turnaround decision and no one set of factors was applied to determine whether a turnaround was appropriate for a particular school. Some of the factors considered were: the academic culture of the school, whether quality instruction was being provided, the quality of the leadership, and the academic trends of the school.

After reviewing the information, the Board ultimately voted to turnaround 10 schools. The schools were located exclusively on the south and west sides of Chicago where African-Americans made up 40.9% of tenured teachers. The total percentage of African-American tenured teachers at the 10 schools selected for turnaround was approximately 51%, while the total percentage of African-American tenured teachers in the entire Chicago public school system was only 25%.

The Chicago Teachers Union and three African-American tenured teachers brought suit against the Chicago Board of Education alleging that the board’s decision to turn around 10 Chicago public schools was racially discriminatory. Plaintiff sought to certify a class consisting of all African-American teachers or para-professionals in any school subjected to the 2012 turnarounds.

The Certification Decision

The Court held that the individualized, qualitative nature of the Board’s selection process made the case unsuitable for class certification. Relying on Wal-Mart v. Dukes, the Court held that it could not resolve “in one stroke” the question of whether the Board’s turnaround policy was discriminatory as applied to all class members because that would require an examination of the rationale behind the decisions to turnaround each of the 10 schools selected for turnaround in comparison with the decisions concerning the remaining 63 schools that had not been selected. The Court noted that its decision may have been different if schools had been selected based solely on objectively measurable criteria applied across the board, which would have eliminated the need for further review into how the criteria were applied to individual schools.

Although the commonality question drove its decision, the Court went on to analyze the other class certification requirements. In particular, the Court found that plaintiffs had failed to establish that they met the requirements of Rule 23(b)(2) or the predominance requirement of Rule 23(b)(3).

The Court held that plaintiffs’ claims for relief were not amenable to certification under Rule 23(b)(2) because the injunctive and declaratory relief sought by plaintiffs would merely initiate a process through which highly individualized determinations of liability and remedy would have to be made. The relief would be class-wide in name only, and could not be final without further individualized inquiries involving, for example, placement of individual class members in specific jobs based on their qualifications or providing them with back pay and front pay if no positions were available.

With respect to Rule 23(b)(3), the Court held that the case was unsuitable for class treatment because individualized questions of liability and damages would predominate over common questions. Because the selection process involved a qualitative review, claims would have to be resolved on a school-by-school basis, eliminating any efficiencies gained by certifying the matter as a class action. The Court went on to note, however, that the mere fact that damages may be individualized would not preclude certification. Distinguishing the Supreme Court’s decision in Comcast v. Behrend, 133 S. Ct. 1426 (2013), the Court held that it was enough for class certification purposes that all putative class members attributed their damages to the turnaround decisions. Although the extent to which individual class members were able to mitigate their damages would involve individualized inquiries, those were not enough to merit departure from the prevailing rule that individualized damage issues will not preclude class certification.

Implications for Employers

This case is another interesting decision in the line of cases interpreting Wal-Mart Stores, Inc. v. Dukes. The Court applied the reasoning of Wal-Mart to hold that a policy of selecting schools for turnaround that relied on the individualized application of common criteria was not enough of a common policy such that the claims of all class members could be resolved in one stroke. In other words, because each school got a separate, fact-intensive and individualized review, there was no one common question that could provide a common answer on an essential question of liability for the entire class.

This has important implications for all employers considering any kind of mass lay-offs. Common, across-the-board numerical or objective criteria that are applied to select individuals for termination are going to make the company’s actions more easily challenged on a class-wide basis. To the extent that an employer utilizes and can document a more searching, qualitative selection process, this decision supports that approach as a process that may be better immunized from attack on a class-wide basis.

This blog was previously posted on the Seyfarth Shaw website.

RIMS Risk Maturity Model: Root Cause Discipline

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After the last article, which discussed the first two attributes of the RIMS Risk Maturity Model (RMM), ERM Based Approach and ERM Process Management; our focus here is on the third attribute, Root Cause Discipline.

Root Cause Approach

In Washington, D.C., officials tried, but were nearly helpless in stopping the deterioration of the Lincoln Memorial. Rather than address the damage with costly repairs, they instead traced the concern back to a root cause. Deterioration was caused by the high powered hoses needed to clean the building—which were necessary because the building was an attractive home for birds.

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Birds were drawn to a very dense population of insects, which were attracted to the bright lights of the memorial.

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So how do you stop the Lincoln Memorial from deteriorating? You dim the lights.

The root cause methodology provides clarity by identifying and evaluating the origin of the risk rather than the symptoms. Unveiling the triggers behind high level risk and loss events point to the foundation of where an organization is vulnerable.
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Uncovering, identifying and linking risk back to the root causes from which they stem allows organizations to gather meaningful feedback, and move forward with accurate, targeted mitigation plans.

To illustrate an example in a business environment, consider the risk of inadequate training. Within an organization, there may be multiple departments experiencing risk regarding their training policies, procedures and documentation, yet each area is likely to be recording and recognizing this risk in its own way. The result is an extensive amount of information recorded in spreadsheets that requires time and energy to sort and sift through. By identifying the root cause, a risk manager can expose the underlying commonality between departments and their concerns, allowing more effective identification and mitigation of systemic risk.

Applying root cause to your current approach

To integrate this type of approach to an enterprise risk management (ERM) program, you must first identify the root cause foundation of your organization. The RMM is built on five root cause categories which cover all enterprise risks:

  • External – risk caused by third-party, outside entities or people that cannot be controlled by the organization
  • People – risks involving employees, executives, board members and all those who work for the organization
  • Process – risks that stem from the organizations business operations including transactions, policies and procedures
  • Relationships – risks caused by the organization’s connections and interactions with customers, vendors, stakeholders, regulators  or third parties
  • Systems – risks due to theft, piracy, failure, breakdown, or other disruption in technology, plant, equipment, facility, data or information assets

Understanding which core area of the organization a risk stems from provides the ability to effectively understand and mitigate the risk. For instance, theft from an external third party is very different than theft from an internal employee, and will thus have a very different response and mitigation strategy.

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One strategy would require an investment in IT or infrastructure, while the latter would need an HR policy change or new ethics program.

Looking for an example of root cause? Download our complimentary Risk Assessment Template.