Patrick Smith, COO of Alarm One Inc., isn’t apologetic about how he handled the shocking people management crisis involving "team-building" spankings at his now disgraced home security firm.

The behavior was wrong, and he stopped it. Speaking by phone this week from his office in Anaheim, California, the beleaguered executive said that in hindsight, he’d communicate a few things more specifically about "do’s and don’ts" to employees, but he wouldn’t change much else.

"Swatting is not camaraderie building," he noted. "You have to understand the sales mentality. Sales guys are just that way."

The real problems involving the sales team took place more than two years ago, he said. That’s when he heard a complaint from an employee about a woman on the sales team who was hit with a paddle. With the help of the HR director, he personally launched an investigation into employee reports of humiliation--by telephone and e-mail.

That inquiry, and the cultural values that supported it--including "camaraderie building" practices where sales team members were encouraged to compete and the losers were forced to eat baby food, wear diapers and endure public spankings with a rival alarm company’s yard signs--has cost the company dearly in dollars.

And its reputation is in the diaper pail.

On April 28, a jury in Fresno, where Alarm One has a facility, awarded former employee Janet Orlando $1.7 million. The jury found that she was subjected to sexual harassment and sexual battery at meetings where sales teams competed.

Katherine Hart, a Fresno attorney who represented the defendants, said during a phone interview on the day of the verdict that employee conduct at the security company was "reprehensible, but the intent was not to be malicious or sadistic.

"It was young people acting juvenile and engaging in juvenile behavior," Hart noted. "They didn’t have much supervision and the company promoted salespeople without enough training. One woman (a plaintiff in an earlier case against Alarm One) was bruised (with a metal paddle). It was meant playfully--slaps on the butt. Then catcalls. It escalated."

Before dismissing Smith and other company executives at the firm as smarmy or stupid or both, look straight into the mirror, leading human resources professionals say. Some version of the extreme spanking case could be happening at your company.

There are lessons you can and must take away from the case no matter how extreme it is, says Atlanta attorney Stephen Paskoff, who spoke about the consequences of allowing bad employee behavior and what to do about it in a keynote speech at a Society for Human Resource Management conference last month.

"People say, ‘Oh, that could never happen at our company,’ " Paskoff says. "I ask, ‘What makes them think this couldn’t happen?’ "

It’s a question Mark Keppler, professor of human resources management at California State University, Fresno, understands. He served as an expert witness in the civil suit, and estimates that he has spent at least 30 hours studying transcripts and other case documents.

"Alarm One was out of control--and they never got it," Keppler says. "It was only after a woman was hospitalized for being hit with a metal sign that the spankings stopped.

"Everything they did was wrong," he continues. "They had inconsistent policies. Their employees were relatively young--most were 18 to 22--and the company had insufficient policies and insufficient training. The human resources department declined to take a complaint from an employee seriously."

Alarm One’s human resources director at the time has since left the company and is now working for a financial firm in Southern California. She hasn’t returned several phone messages.

Keppler says the investigation conducted by Alarm One was woefully inadequate, involving phone calls and e-mails when the situation required a far more personal, hands-on, comprehensive investigation.

"Lesson 1: If you have a problem in a remote location, you must go there," he says.

The Fresno professor likens the atmosphere at Alarm One to a strip club: Language included comments such as "Bend over, baby" and "You’ve been a bad girl." He says a very bad situation was seriously compounded by very bad policies--such as "specifying that employees could go to only a few upper-level managers with problems.

"Lesson 2: The company needed a policy to allow people to come forward," Keppler continues. "Lesson 3: Do a serious investigation, or the plaintiff’s attorney will do it for you. Lesson 4: If you have a problem, you better make sure your answer will sound good on 60 Minutes."

Though Alarm One didn’t deny that the spankings and other humiliating tactics took place, Smith says he doesn’t agree with the verdict and calls the victim "an opportunist" because she has a past history of workplace problems and has been arrested for shoplifting.

"If I’d do anything differently, I’d go into more detail with employees and more do’s and don’ts," Smith says. "We were lacking in specific examples like why you shouldn’t do things like throw water bottles (in team-building exercises). You don’t do it because you don’t have their permission to do it."

No, Paskoff says flatly. "You don’t do it because it is wrong. Companies must have a few core values that people recognize and just know ‘We don’t do that here.’ "

And that’s a key problem, Paskoff notes, because a company’s essential commitment to good behavior must go far beyond sending a memo, or trotting out an ethics code or mission statement, or allowing different rules of behavior for different subgroups in an organization.

"It’s not bringing in an expert on behavior and being done with it," Paskoff says. "Leaders have to be able to talk about behavior, and to say, ‘We do this because this is who we are.’ HR focuses on law and regulations, and not on culture--though they say they do. The emphasis must be on corporate citizenship, not Title VII or tort laws."

Paskoff, president and founder of Employment Learning Innovations Inc. in Atlanta, says that human resources leaders must communicate to all employees that sexual and racial jokes and banter are unacceptable--not for the rank and file, not for leaders, not in sales meetings, corner offices or golf courses.

"You say, ‘If a workplace issue doesn’t look or feel right to you (any employee), tell us. If something isn’t right, don’t cover it up and lie.’

"Someone at Alarm One should have known they were expected to speak up."

At a recent corporate ethics event, Paskoff says he heard a comment--as well as other similar concerns--that exemplifies the reason no one in human resources should pass the spanking case off as completely bizarre or incomprehensible.

Like others at the event, an HR executive said, " ‘We have all of the systems, but I’m still scared to death,’ " Paskoff recalls. "The trouble is, they have all the processes in place and those processes are not attached to daily behavior."

Despite headlines and the magnitude of the company’s mess, Smith says "everyone" at the company is happy and the work environment is very good. Alarm One--which had 400 employees at its peak in 2002--now has only 50 employees because of changes in the industry, Smith says. It is currently developing a new strategic plan for building the company.

"We still do accounts, but we just don’t do them with salespeople anymore," he says.

Though Alarm One is a private firm that won’t reveal specific financial information, the embattled COO does admit that "business isn’t growing."

"Yes, that is correct," he says. "Business is good, but it could be better since the Janet Orlando case."

Defense attorney Hart says the case is "an example of what happens when top management isn’t in touch at the grass-roots level. "The managers must have been out of touch. If they’d acted more like the CEO at Costco (Jim Sinegal), who personally visits every store, this never would have happened."

Orlando’s attorney, Nicholas "Butch" Wagner, sums it up this way: "They (the defense) used three common tactics: 1. Blame the victim. 2. Circle the management wagons. 3. Deny, deny, deny.

"It cost the company $3 million," the Fresno lawyer estimates. "Alarm One exhibited very poor post-harassment behavior. The people who made the decisions for the company are worse than the (sales) people who made the conduct."

-- Janet Wiscombe