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1994 Vision Optimas Award Profile Coors Brewing Co.

For nearly half of a century, a union supported the hourly workers at Golden, Colorado-based Coors Brewing Co. But in 1978, a failed strike turned bitter union officials against the company. Spreading false allegations and organizing a boycott, the union tried to put the beer manufacturer out of business. Its plan backfired, however, and instead the employees put it out of business. The workers held an election and voted to decertify the union.

Although this seemed to be the wisest, if not only, choice at the time, it was a bold move. Without the union representing them, employees ran the risk of losing their voice. Even with the union in place, a typical “us vs. them” barrier threatened the relationship between management and their workers and weakened communication lines. With the employees no longer functioning as a collective unit, what would prevent management from authorizing complete control over them? Employees feared that they no longer would have recourse for actions against them, specifically unfair discipline. They communicated this to human resources.

Coors’ HR department didn’t have to look further than one of the company’s own subsidiaries for a solution. Coors’ Container Co. (which today has been integrated into the company) had undergone several unsuccessful organizing attempts throughout the years. To ward off the attempts, the subsidiary had adhered to the adage, “If you don’t want a union, act like you’ve already got one,” and instituted a peer review system in 1974. The process enabled employees to appeal disciplinary actions against them by taking their cases in front of a review board, made up largely of co-workers. The subsidiary at the time was heavily involved in participation management, asking for employees’ judgment on decisions that affected their jobs. HR at the brewery recognized that having such an employee-involvement system in place, along with an open-door policy enabling employees to file all complaints other than discipline, could prove beneficial to both the company and its workers.

Everyone didn’t agree, however. The Coors family and other members of upper management expressed concern that every disciplinary action would be overturned. Supervisors feared that their authority would be undermined as employees gained the right to scrutinize their decisions. Even employees lacked confidence in the fairness of the process, believing that it somehow would be skewed to benefit management.

HR stuck to its guns, despite the fact that employee involvement initiatives were in their infancy and considered a risk. They convinced Bill Coors, company president at the time, and the senior staff, to let them set up a peer review system at the brewery to replace the former union system of dispute resolution. “We told them, ‘Look, our employees are frightened because they’ve had this union here that was taking care of their needs and making sure that discipline was meted out fairly. Now they don’t have that and we’ve got to either find a way to provide it or ultimately the employees will bring in another union,'” says Richard L. Kellogg, who is Coors’ human resources director and was involved in the system’s implementation. “That was a persuasive argument, having gone through the strike and the boycott and having our employees tell us that they didn’t want a union.”

Although senior management agreed to putting the system in place, it would take time before supervisors and employees would be convinced of the system’s worth. The peer review process would have to prove itself.

Peer review process evolves.
Employees’ and managers’ fears were legitimate, and human resources took them into account when modifying the Container Co.’s appeal system to fit the brewery’s needs. For example, to eliminate the employees’ skepticism, HR planned for the appeal board—which hears the supervisor’s and the appellant’s cases in a disputed disciplinary action and makes the final decision—to contain more of the appellant’s peers than managerial personnel. However, in response to management’s fears of a loss of control, human resources also decided to limit the employees’ powers.

The system’s designers thus created the appeal board to consist of five members—three workers and two managers. The original board selection process allowed appellants to choose two people from their work group to serve on their behalf. They couldn’t pick family members, but choosing friends was allowed. The vice president from the appellant’s work area and an employee-relations manager served as the managerial members. The employee-relations manager also chaired the review-board hearing. On the day of the hearing, the four previously chosen board members randomly chose another person from the appellant’s work group to serve as an unbiased juror.

In 1989, a routine employee survey revealed that they believed the appeal board was losing its objectivity. “Because the appellants could choose two people out of their own work group, there were individuals who were serving constantly on appeal boards,” says Mary Drummond, an employee-relations manager in Colorado. “Employees would pick the same two peers who [they knew] would go in without having an open mind, who would defend the employees’ positions whether they were right or not.”

As a result, the company revised the selection process. Today, an employee-relations manager draws up five lists of names—three lists of personnel from the appellant’s work category and two lists of managers from anywhere within the company—randomly selected by the human resources information system. Both the appellant and his or her supervisor have the opportunity to delete one name on each list. The first name not crossed out on each of the lists becomes a board member. “If either party feels there’s any individual who may be biased, they have the right to delete that person’s name,” says Drummond.

The new selection process has reinstated the system’s credibility. Board members randomly selected are more apt to come into the situation with open minds. Also, the new process removes the employee-relations representative from the board as a voting member and replaces that position with another manager in the company. The employee-relations manager now strictly chairs the appeal board meetings instead. “It was difficult, if not totally awkward, to run the appeal board objectively and yet cast a vote,” says Kellogg.

Another change implemented at the same time for credibility purposes was a rule that a person serving on the board couldn’t have a financial relationship with the appellant. Because friends of the appellants are allowed to serve on the board, roommates or unmarried partners of the appellants wouldn’t uphold terminations because it put them in financial risk.

To appease upper management’s fears that the peer review board would overturn every disciplinary action, HR intended to use the system only for debates over terminations. “We found out early on, however, that some employees get very upset about a first written warning,” says Kellogg. As a result, the company broadened the system to include all forms of discipline, such as first warnings, final written warnings and suspensions without pay, as well as terminations.

Managers also feared that if employee-dominated review boards were allowed to modify disciplinary decisions, they automatically would lower every discipline one step down. To deter this, HR only gave the boards power to either uphold the supervisors’ actions or overturn them. However, the early boards saw many cases that warranted middle ground, and they struggled with their decisions because of their limited options. So, HR made another change in the procedure, allowing boards to modify discipline as they see fit. For example, a board may determine that an employee should be disciplined but that termination is too harsh. They now can lower that action to suspension without pay or a similar disciplinary action.

Successful system dispels fears.
Even with the modifications that have been made to the system, management’s fears haven’t been realized. For the past ten years, an average of only 9% of management’s decisions have been overturned by review boards. In 1993, for example, appeal boards reversed only three of 62 decisions appealed and modified only nine. “It’s amazing how employees view other employees,” says Ed Cruth, an employee-relations manager in Colorado. He adds that managers, seeing that all of their decisions aren’t overturned, have more confidence in the system.

In addition, statistics show them that only 14% to 16% of disciplined employees appeal the action against them each year. According to Drummond, this is because the disciplinary action process in and of itself has improved tremendously as a result of the peer review system. Supervisors know their decisions will be scrutinized and that they can’t arbitrarily discipline people. They must ensure that any action they take is warranted and that there’s justification for taking that action. And, employees know that because management takes the time to review their decisions—probably discussing them with employee-relations before finalizing them—there’s a good chance that an appeal board will uphold them.

Nonetheless, employees who feel that they have been wrongly disciplined trust the peer review process. This trust has grown through increased use (see “Coors Appeals Per Year). According to Drummond, word-of-mouth testimonies more than any formal communications are the cause. Both appellants and board members have the opportunity to observe the fairness of the system. Even those workers who might not themselves ever receive discipline or haven’t served on the board have friends and co-workers who can attest to the system’s fairness.

The system’s credibility stands up despite the occasional controversial outcome. For example, Drummond once chaired both review sessions of two em-ployees who were terminated for fighting at work. One appeal board ruled to overturn the appellant’s termination while the other appeal board decided to let the discharge stand. Obviously, there was confusion and some negative reaction among employees, who only knew of the original action and the final outcome. Because the information that’s discussed in review board deliberations is confidential, Drummond says that the employee population usually isn’t aware of similar cases’ specifics. She admits that, “even though it may benefit the company for people to know and understand what differentiates those cases,” the company values the appeal board’s confidential nature more.

Another factor that contributes to a greater extent to the maintenance of the system’s credibility is upper management’s commitment to not make any exceptions as to what can be appealed. Managers have the same right to appeal as hourly employees. And workers who receive immediate termination for offenses such as theft, insubordination, gross misconduct and drug abuse have the same opportunity as everyone else to appeal, despite the chance that they may be reinstated. Cruth once chaired an appeal hearing for an employee who had been terminated for being intoxicated on the job. The board ruled to reinstate the worker with the provision that the person go through counseling. “There are going to be times when controversial decisions that go against management or against the company will be made,” says Cruth. “But if we start picking and choosing when a person can appeal, then we destroy the credibility of the program.”

The company’s commitment to accept the review boards’ decisions as final and binding further strengthens the system’s credibility. Some employees, disappointed in the results of their hearings, have sought a reprieve from the Coors family. They never receive one. “If the president or CEO overrules just one decision, then we might as well forget the whole thing,” says Cruth. “You have to either commit to this, allowing the process to work without manipulating it and trusting the results of it, or you don’t do it at all because it will be viewed as a farce.”

That doesn’t mean that the company doesn’t periodically question the process. “We’ve been under pressure from time to time from members of the Coors family to either change or abort the system when an onerous decision comes down from the appeal board,” says Kellogg. “But [by not doing so] we’ve been able to protect its integrity.” He says that the process is so ingrained in Coors’ culture now that he doesn’t think the company could get rid of it even if it wanted to.

Benefits outweigh problems.
Few in the company want to eliminate the peer review process. Use of it has kept the brewery from turning back to unionization. And, relations between management and employees have steadily improved throughout the years, measured by the increasing number of employees who communicate with their supervisors via the open-door procedure (from 1983 to 1992, the number of employees using this process increased from 25 to 88). In addition, the peer review system has generated unexpected advantages.

The human resources department at Coors has discovered that appeal board rulings are a good gauge for measuring whether its policies are meeting employees’ needs. Recently, for example, HR changed the required discipline for sleeping on the job as a result of several appeal board rulings. Coors’ former policy on this issue, carried over from the old union contract, dictated immediate termination. In almost every appeal of cases in which employees were discharged for sleeping on the job, however, appeal boards modified the discipline. “They weren’t buying the idea that sleeping on the job was deserving of immediate termination,” says Kellogg. “It was deserving of discipline because the boards would almost always reduce the discipline to suspension without pay or a final warning, but they weren’t quite willing to terminate an employee the first time around.”

As a result, the policy now states that this offense warrants progressive discipline. In all cases that have gone to an appeal board since the policy’s modification, appeal boards have upheld supervisors’ discipline decisions.

An even greater benefit derived from having the peer review system in place is its legal implications. Cruth says that when employees are terminated, and their employee-relations representatives sense that they disagree with the decision, the HR person will encourage them to request an appeal through the peer review system. “We want to have the first shot at making a determination in the circumstances surrounding the termination before that individual files charges with the EEOC or goes and talks with an attorney,” says Cruth. “If we can’t substantiate or uphold a termination internally with an appeal board, we can almost guarantee it wouldn’t be upheld in front of a jury. And the opposite also is true. If [an appeal] is upheld internally, then we feel comfortable that it’s going to be upheld in front of a jury.”

Indeed, according to Kellogg, Coors has never lost a wrongful termination case in court. Not that it even has very many cases brought against it. Most employees who have gone through the internal appeal process don’t pursue further action. Occasionally, however, employees not satisfied with the decision of the appeal board do take their battles to court.

In these cases, the company usually brings the members of the employees’ appeal board with it to court. The company’s attorneys have interviewed juries after trials and a majority of the jury members expressed that they were impressed with the company’s appeal process, and especially with the testimony of appeal board members. In Churchy v. Coors Brewing Co., for example, a jury, convinced of the effectiveness of Coors’ appeal process, upheld the board’s decision in favor of the company.

Courts, too, put credence on Coors’ internal process. The Jefferson County Court, for example, threw out the case of Curtis v. Coors, giving the company’s peer review system equal standing with outside binding arbitration.

In the nearly two decades since Coors began its internal appeal system, numerous companies have instituted similar processes. And as this increasing number of companies use these systems for the filing of all types of grievances, court cases and state laws are justifying their existence. Not only have several courts upheld management’s right to request employees to use an internal grievance system before seeking legal action, some have gone as far as permitting companies to require internal appeals as their first step in the legal process. In the 1991 Fregara v. Jet Aviation case, for example, a terminated employee argued that provisions in the company’s employee handbook made it an implied contract. The judge at the U.S. District Court in New Jersey discovered that the company handbook provided opportunity for internal grievance proceedings. The judge ruled that if an employee treats the handbook as an implied contract, he or she must accept his or her obligations as well as rights.

In addition, the 1991 Civil Rights Act specifically provides for and encourages the use of alternative dispute resolutions. Some states have followed suit and passed their own laws requiring courts to uphold the decisions of internal appeal systems, providing they’re conducted fairly. Texas, for example, passed a law that states: “The use of alternative means of dispute resolution… is encouraged to resolve disputes arising under [the Civil Rights Act] or provisions of state law amended by this act. The settlement of disputed claims under this act that results in the use of traditional or alternative means of dispute resolution is binding on the parties to the claim.”

Did the human resources staff at Coors know back in 1974 that their proposed plan would be so beneficial? “We were pretty naive,” says Kellogg. “We weren’t sure what we were getting into. We just felt it was the right thing to do.”

Apparently it was for Coors. Drummond and Cruth are quick to point out that their system may not work for every company, however. Any process of this type needs to be structured to fit with an organization’s specific culture and needs, they say. “Whatever system a company sets up has to be perceived by the employees as being fair ,” says Cruth. “Management has to be willing to allow employees to participate in decision making, and if they’re not willing to do that, then it won’t work.”

It has worked for Coors, and the employee-relations managers are glad that, in a time when employee involvement was in its infancy, their company was willing to take the risk.

Dawn Anfuso is the assistant editor at Personnel Journal.

Personnel Journal , February 1994, Vol.73, No. 2, pp.68 – 76.