After many years in several businesses I have come to a conclusion.
If you are very big, government regulators will probably leave you alone realizing that you have a staff or can purchase one to defend you from their investigations.
If you are very small, you don’t have to worry about government intrusion because there’s no headline potential for them to try to make themselves look good and no one really cares if they uncover something.
It’s those companies in the middle (which is most of small American business) which are the prime targets for regulators. They are too small to be able to defend themselves, and generally cave in whether they are guilty or not of an infraction because it is less expensive, yet the regulators can come back to their bosses and say, “Look what we’ve done. We got ‘em.”
Of course, every business starts out small – perhaps the owner and a spouse or one or two partners. The goal is to become the next Google. But in order to get to there from here, it will spend most of its time in the middle ground and is the prime target for government regulators.
I’m sure that I’m not the only person who understands this reality and I believe, at least in part, this is one of the reasons that the economy is not recovering as in past recessions. Who wants to take the risk of starting a business with the gloom and doom of excessive and uninformed government regulation hanging over your head?
I believe that even the most strident supporters of regulatory government will agree that the current American climate promotes the concept of letting “government save us from ourselves”. Those who ascribe to that concept have probably never owned their own company. Rather than deal with theory, allow me to offer you an encounter I had with government regulators and how it all turned out.
Our temporary help office in Phoenix discovered that there was very little call for clerical help – the specialty of our home office in Chicago – but learned that there was a niche for temporary workers in the area. These were people who worked in banquet service.
After getting off to a difficult start we began making a name for ourselves and ultimately were being asked to provide employees at the convention center and at various of the resorts and hotels in the area. We were on our way. We were the premiere provider of these workers in Phoenix. We were now big enough to be “noticed”.
A typical assignment might include as few as three or four servers, bartenders, bus personnel to as many as fifty for the larger events. We interviewed extensively, advertising regularly and relying on word-of-mouth referrals. We also accepted applications from people who walked into our office from the street.
Half my staff spent the day interviewing new applicants – and the other half spent the day finding people whom we had hired to fill our assignments. We developed a rudimentary computer program in which each applicant’s skill-set was input.
Because of the transient nature of the employees with whom we were working, we soon realized that trying to track down people to assign to new openings was very inefficient (phones not answered or disconnected), so we instructed all our candidates and temporary employees that they needed either to call or stop in every day to let us know that they were available for work.
This was clearly noted on an instruction sheet which each applicant was given after their interview. Because of the large concentration of Hispanics in the Phoenix area, it was written both in English and Spanish.
Our computer program was setup so that when an applicant called in, he or she went to the top of the list of the group who had that skill-set. Then, when we received a new assignment, my staff merely pulled up the list of people with that particular skill and beginning at the top started calling until we had a sufficient number of people to meet the client’s requirements.
One day I received a call from the manager of the Phoenix office. She had received a letter from the Equal Employment Opportunity Commission which contained a complaint from one of the people whom we had interviewed who alleged that he was being discriminated against. Despite his having made an application with us for temporary employment, we had never sent him out on an assignment. That part of the allegation was true – we had never put him out on a job.
I asked my manager why we had never sent this man (a college student at a community college) out on an assignment. I thought it might be that he didn’t have the skills necessary for our assignments. She replied, “Despite the fact that we instruct everyone to call in every day, we never heard back from him after the initial interview. In fact, after I got the letter, I called the number on his application and found that it was disconnected.” (This was well before the advent of cell phones). And because he never called, he never made it to the list of available candidates.
Fortunately, one of the features that was part of the program was documentation of each and every time a person called – so we did have a record of this to present to the four EEOC investigators who were going to look into this allegation. Feeling confident that we had ample evidence of our “innocence”, we arranged a time to meet and I flew to Phoenix.
At our meeting we presented our computer printout of this and five other people’s records. They had all applied for work at approximately the same time. The complainant’s record was brief – containing only his name and contact information. The other applicants who had been on many assignments had records that went on for ten or more pages. They had followed our instructions – he had not. I was confident that this would put the matter to rest – until the team leader asked me the following question.
“Can you prove that this individual didn’t call in – or that you merely didn’t record his calls in your computer system?” My stomach suddenly started churning – violently. It is almost impossible to prove a negative.
I responded, “Why would we want to do that?”
She replied with the lascivious grin of those with little authority who plans to push it beyond reasonable bounds, “That’s why we’re here.” And they were there – on and off for two and one half years.
Of course, the EEOC did offer me an option after our first meeting. Rather than go through an investigation I could merely pay a fine of $7,500 for the privilege of being innocent of wrongdoing and they would go away. (I believe in the non-governmental world that is called “extortion”). I politely declined the EEOC’s generosity.
So the investigation went on and on and on – sometimes with regularly scheduled visits and sometimes with surprise ones. They sat in our office and saw how we worked. They went through our original paper applications and reviewed our computer program. And they came to a conclusion. We were INNOCENT.
Between hiring employment attorneys to defend us during this process and the loss of productivity on the part of my staff when they pulled and photocopied records for the EEOC and entertained them during their visits, I figured that this episode cost my small business in the neighborhood of $50,000 during this period.
Yes, we were in the temporary help business. I just never thought that I would be employing four government workers part time for thirty months – and at my own expense.
There is a great deal of talk about the decline of the middle class by members of OWS and others and some of these allegations are true. Without a doubt, small businesses have been more responsible for allowing people to enter this group than anything else in the history of this country.
If government makes being in a small business so difficult and expensive, few will choose this as a path to financial success and all of us will be the worse off because of that.
I have offered one example of how life and business and government regulation really work. Many others could be cited.