Paying the price: events at Rent-A-Center prove that when employers don't respect HR today, they'll pay tomorrow - Cover Story - includes related article on learning from mistakes - Statistical Data Included

HR Magazine, August, 2002 by Robert J. Grossman

Robin Yeubanks, manager of a rent-to own store in Coffeyville, Kan., had just bought an expensive new pickup truck when her district manager stopped by.

Yeubanks, a high school graduate, married with two adult kids, began working an entry-level job at the store in 1993. Promoted to manager after three years, she had been thriving. But now her employer, Thorn Americas, had been acquired by Renters Choice. The newly combined company, renamed Rent-A-Center, was under new management. The rules had changed, performance expectations, heightened.

The problem was, Yeubanks--the only female manager in the 12-store market area--was out of the loop. "My district manager was going to the other stores and telling the men what changes needed to be made, but he wasn't telling me," she says. "Then he'd come down and write me up for not effecting the changes that I didn't know about."

Yeubanks also claims that on this day in February 1998, the district manager gave her a choice: accept a demotion to assistant manager or lose her job entirely. With monthly payments looming on her new truck, Yeubanks says she swallowed her pride and traded her $36,000 a year manager's salary for the less lucrative assistant manager slot. To make matters worse, a former employee whom Yeubanks had fired three years earlier was hired to replace her as store manager. "Instead of assigning me to the assistant manager's office, he put me in a corner of his office with a TV tray for a desk," she says.

The district manager, Kevin Nowatka, who no longer works for the company, denies that he withheld information from Yeubanks and declined to comment further. HR Magazine was unable to reach the store manager, who also no longer works for the company, for comment.

Convinced that her direct supervisor was retaliating against her and that the district manager would be unsympathetic, where could Yeubanks turn for help? HR, of course. "HR was always there to talk to if you had a problem; you could go to them and explain the situation," she says.

But alas, though Rent-A-Center had more than 2,300 stores and 13,000 employees, CEO J. Ernest Talley had fired the top HR professional and eliminated many HR functions (payroll and benefits were retained) within 30 days of taking charge of the newly formed company. "Now I didn't have anyone to talk to," says Yeubanks. "I couldn't go to the person who demoted me or to my manager who was mistreating me. I had no one to turn to, so I had to quit."

Looking back, Talley's decision to wipe out Rent-A-Center's HR operation reflects a fateful misunderstanding of HR's critical role. It contributed to the departure of thousands of able female workers and the blackballing of thousands more potential new hires. It became a public relations disaster and is costing the company, headquartered in Plano, Texas, a whopping $47 million to settle sex discrimination lawsuits.

Merger Mismatch

Rent-A-Center's problems began shortly after Renters Choice acquired Thorn Americas in August 1998. Initially, analysts were pleased that Talley, a pioneer in the rent-to-own industry and part of the Renters Choice group, was named CEO. Industry leaders hoped he would help cultivate a more positive image of the industry. But it wasn't to be.

From the get-go, the merger proved problematic. The companies had vastly different business philosophies and structures--and views of HR.

Thorn, a subsidiary of Thorn EMI, a London-based multinational, featured an active HR department that was influential in supporting managers in the field. HR played an integral part in training, advising and administering company policies.

Talley, a tough-talking entrepreneur, had a different view of HR. "He thought the HR people at Thorn had too much power; he felt they were running the company, observes Ann Davids, Rent-A-Center's vice president of marketing and advertising, who has worked for Rent-A-Center (and previously with Renters Choice) in various capacities since 1995. "He was much more of a bottom-up guy who believed the company should be run from the field."

Talley wasted no time eliminating HR. The effects were palpable, even for those who successfully made the transition to the new company.

One such person was Janet Caskey, store manager at the Rent-A-Center in Jacksonville, Ill. Caskey earned a promotion from assistant to store manager, but she missed the advantages of HR under Thorn.

"If there was a mix-up or you didn't know which way to turn, you could call them; they would talk to you and support you," she says. "When HR was eliminated, we didn't have anyone to turn to if we had a problem with our store manager or when things came up that we didn't want to discuss with the people we usually talk to every day."

Jacks-of-All-Trades Needed

Another fundamental difference between Thorn and Rent-A-Center involved staffing issues.

Thorn had built specialized clerical positions into their business model, enabling some staff to avoid lifting, deliveries and collections. Talley viewed--and Rent-A-Center still views--this specialization as a drain on the bottom line.