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The preservation of institutional knowledge can mean the difference between a finding of discrimination and a finding of no violation in an OFCCP audit. Institutional knowledge can tell you how and why a particular situation exists. For example, suppose Jennifer, a widget designer, is among the last hires in a down market 2010. The entire widget designer staff is shortly thereafter subject to a pay freeze and the company institutes a hiring freeze. This results in Jennifer’s pay staying at the original $30 an hour rate, the market rate at her time of hire. The hiring freeze is lifted in 2012 before the pay freeze is lifted. John is hired as one of the first new widget designer hires in 2012. The market rate when John is hired is $35 an hour. The compensation snapshot (the compensation situation on a given day) for the OFCCP audit shows the less experienced John making more money than the longer tenured and more experienced Jennifer.
Institutional knowledge would be all the information about the pay freeze, the hiring freeze, the market rates, and how others similar to Jennifer were paid when they came on board in 2010, etc. If there is no institutional knowledge, none of this information is available at the time of the audit. In the absence of institutional knowledge, all we see is John being paid more than the more experienced, more tenured Jennifer and no ability to provide a non-discriminatory reason for why this has happened. If institutional knowledge is preserved, the company can show that the males hired with Jennifer were paid the same market rate as she, and the same disparities exist between their pay and the newly hired John. Thus, the pay freeze is a legitimate, non-discriminatory explanation for the disparity in pay between Jennifer and John. This institutional knowledge makes the difference between a finding of discrimination and a finding of no violation.
The Passage of Time
In the example above, the events that set Jennifer’s pay occurred close in time to the events that set John’s pay. The greater the passage of time between the legitimate non-discriminatory reason for Jennifer’s pay and the observed disparity with John’s pay, the more difficult it becomes to explain the disparity. Preserving institutional memory helps overcome the challenges posed by the passage of time. Some pieces of information that needed to be preserved in the example above include the policy for how pay was set in 2010, the 2010 market rates, the names of all widget designers hired during the period when the 2010 market rate was applicable, the 2012 pay policy and market rates, and the 2012 widget designers hired under the same rate as John. If this information is stored on an information system that the company can access at the time of the audit, the audit should conclude that there was no pay discrimination. The information in the system is likely to be more accurate if it was recorded at the time the pay decisions were made. The market rates and pay formulas could be recorded in the system when they are made. It is also possible that the system could be programmed so that certain information fed into the system at the time of hire automatically runs a market rate formula and sets the pay. In either case, the system can supply the institutional knowledge that might otherwise be lost.
The departure of critical personnel can also pose a threat to the preservation of institutional memory. For example, your EEO/Affirmative Action Program has been ably run by Leslie for over 45 years. You never needed to worry about an audit because Leslie understood utilization, impact ratio analyses, compensation analyses, diverse candidate slates, and all of those compliance topics that no one else really had time to master. Leslie knew and had good relationships with the OFCCP compliance staff. If your managers had a question, they simply called Leslie. Leslie had a system for tracking everything. Leslie developed and used codes over the years and understood them at a glance. One day the unthinkable happened, and Leslie was gone. With Leslie went any clue about the system that worked so well for all those years. No one knew where anything was and there was no key to the coding system. Decisions were being made, and there was no Leslie to call. Things were quickly getting completely out of hand and of course an OFCCP scheduling letter hit before you could get your act together and sort out Leslie’s system.
You never know how much advanced notice you are going to get of the imminent departure of personnel with critical, institutional knowledge. While this situation is hypothetical, actual companies have been found out of compliance and sometimes to have discriminated because the one person who could have provided the legitimate, non-discriminatory reason for the employment action was no longer available, and no one else could access the information because they could not make heads or tails of the documents the recently departed had left behind.
The company needs to have a key to any coded system that contains critical information. There needs to be a bench of people who can step in if a critical person becomes suddenly unavailable. The processes used to ensure compliance should be documented so that someone coming in new to the position can clearly understand how the system works, where important information can be found, and what advice has been provided to the managers over time. More than one of your compliance staff needs to establish a positive working relationship with OFCCP. These are things you need to think about before it is too late.
While I have mentioned only a few things, the useful institutional knowledge of your compliance staff may be deeper and wider than this example shows. For instance, Leslie may know how to approach certain managers to get them to provide timely and accurate information or to make feedback on the need to change some practice more readily received. Leslie may know who in your information staff can most quickly put their hands on useful information or who knows how to program necessary new reports. These kinds of “softer” pieces of information can be extremely useful, though perhaps harder to get and to preserve. It is worth thinking now about how this time saving information can best be preserved long after your faithful “Leslies” have left the building for good.
Inadequate Data Retention
Critical institutional knowledge can be lost because it was never recorded in the first place. For example, Mark, who works for you, asks you for permission to use an empty office because he has a condition that makes it hard for him to concentrate. You know and like Mark and you have seen that he struggles with focusing when he works in his cubicle. The office is not currently being used so you say yes. You do not use the reasonable accommodation process or document any of this. The following summer, long after you have moved on to greener pastures, a new supervisor, Angela, comes in and sees Mark using this office and Mark’s female counterpart working in a cubicle. Angela looks for but finds no documentation explaining why this is the case. The staff in charge of accommodations has no record of Mark having a disability or requesting an accommodation. Angela orders Mark to move back to his cubicle.
Angela looked for but was unable to find the institutional knowledge explaining why Mark is in an office and his female comparator is not. To Angela, this situation may have looked like gender inequality. It was the fact that Mark’s accommodation was never documented in the first place that created this confusion. Preservation of institutional knowledge not only can help you defend your company when an audit occurs, it can, as in this example, help you avoid an EEO problem in the first place. Had Angela been able to access information showing that the office was part of a reasonable accommodation, she would not have perceived it as possible gender discrimination.
Inadequate data retention can also occur when the systems designed to capture the institutional knowledge are not being properly used. For example, the disposition codes devised by the company are intended to keep track of the reasons certain individuals were not selected for a job. If the users of the system use defaults instead of the actual reasons for non-selection, the institutional knowledge that may supply the legitimate non-discriminatory reasons for the non-selection are lost. In addition, it may compromise even the accurate entries into the system because OFCCP may ignore all of the disposition codes if a significant portion of the disposition codes prove unreliable.
Lack of Access to Legacy Information Systems
Institutional knowledge can also be lost when a company changes from an old information system to a new one. In a compliance evaluation where there are indicators of possible discrimination, OFCCP can look at data going back two years from the date of the scheduling letter. Sometimes these reviews fall during a period when the company was transitioning from one human resources information system to another. I have been involved in audits where either the old system information is lost or where the cost of retrieving information from the old system was excessive. If this information cannot be accessed, the company may be deprived of institutional knowledge that resides on the prior legacy system.
It is important in any transition to new technology that the information required for compliance remains accessible in the event of an audit. It would be helpful to document the steps that are going to be taken to make sure that this occurs. This documentation can be helpful both in avoiding any loss of critical information and in showing that the loss, if it occurs, was not deliberate and that every reasonable step had been taken to preserve the data.
The cost of accessing legacy data should be known up front so that you can minimize expenditures if retrieval becomes necessary due to an audit. The expense of retrieval is not likely to be treated by the agency as an acceptable reason for failing to provide information.
Lack of Information Sharing
Institutional knowledge can be lost if the person who is being asked for or who needs to know the information is unaware that someone else in the company has the needed information or even that the requested information exists. For example, suppose that the diversity staff has knowledge that the affirmative action/EEO staff needs for an audit, but the affirmative action/EEO staff does not know that the diversity staff has it. Further, suppose that the diversity staff does not know that the audit staff needs the information that diversity has. The institutional knowledge is effectively lost because the left hand does not know what the right hand is doing.
To minimize the likelihood of this happening, there needs to be effective communication between the two staffs. Diversity needs to understand the role of the affirmative action/EEO staff and the kinds of information that are critical to its role of assuring compliance such as the hiring and placement goals. The affirmative action/EEO staff needs to know what kinds of programs and goals have been established by the diversity staff and what information the diversity staff collects, uses, and/or needs.
Silos (internal barriers between divisions) within institutions occur for many reasons. For example, the legal department may think that the hiring managers should be ignorant of the affirmative action goals, and the affirmative action/EEO staff may think that the hiring managers are the ones who most need to know the goals. Depending on who wins this tug of war, the hiring managers may or may not be given access to this institutional knowledge.
As a company, it is important to make a deliberate and considered decision about who should have access to what institutional knowledge. In making these determinations, you should take into account the possible impact on compliance.
Changing Codes, Definitions, Position Descriptions
Often when examining pay discrimination, OFCCP wants to compare the time in position of employees who are demonstrating pay disparities in the snapshot data. In order to be sure that the time in position is properly calculated, the company needs to be able to understand the relationship between the current job code and any previous job codes that may have fed into the current job code. Being able to follow the trail back through old definitions and codes can be extremely difficult if the institutional knowledge about prior job duties and job code changes is lost. Similarly if the same words or codes now have radically new definitions and meanings, there can be misunderstandings that may affect the outcome of an audit.
With the baby boomers reaching retirement age and the increase in job mobility of the current workforce, the loss of institutional knowledge is a real and present danger that may significantly affect your compliance posture during an OFCCP audit. Institutional knowledge preservation will not happen by chance but only by careful preparation and planning. Regular reviews of your current systems for preserving institutional knowledge will minimize the likelihood of significant gaps occurring because of underuse or misuse of your tracking systems. You need to capture not only the decisions that were made but the rationale for those decisions. Taking time now to review your strategy for preserving institutional knowledge will likely pay significant dividends in the future.