My wife recently got a new puppy. I guess technically we both got one, but if you came to our house you'd quickly realize it's hers. We're in that stage of teaching the little guy what behaviors are OK and what behaviors are not going to be tolerated.
It's amazing how quickly he has learned behaviors that can be reinforced by rewards. I taught him to sit in just a few minutes. As part of his housebreaking training, we reward him with a treat when he's outside, and we reward him with a treat when we go back inside and he sits on command. Now, every time he crosses a threshold, he sits and looks up for his treat. All-in-all, teaching him positive behaviors through positive reinforcement has been pretty easy.
On the other hand, getting him NOT to do what we don't want him to do has been more challenging. We can't give a treat for not chewing a shoe, for example, and expect the reward to be understood. Correcting shoe chewing, jumping and other violations must be addressed through corrective action. And behavior modification by corrective action just doesn't "take" as quickly nor as solidly as those reinforced by rewards do.
Humans are more like puppies than we care to admit. Give us a treat for something and we'll do it again! Tell us not to do something and we might or might not. Have you ever said, How many times have I told them not to...
When managers learn that behaviors that can be reinforced through rewards should be reinforced through rewards, they discover that rewarded behavior is repeated and repeated and repeated. Carrots beat sticks every time.
The other thing that's frequently misunderstood about carrots is the belief that the reward must be tangible, like cash or a gift card or a lapel pin (or a doggie treat). But recognition and feedback can be motivating without any tangible reward attached at all. For example, if you can incorporate a graphical representation of the performance that's desired and a graphical representation of employees' actual performance that they can compare to, this simple feedback will be motivating even if there is no financial incentive attached to the goal. Achieving the goal is carrot-enough oftentimes.
Unfortunately, too many managers are much more comfortable with the stick than with the carrot. The stick is easy - an employee messes up and I reprimand them. Coming up with appropriate carrots that don't seem hokey or manipulative is harder.
But carrots work...and work better! Organizations that make the investments to develop the proper carrots and managers who recognize how to use carrots will ultimately develop more productive teams. So try to increase your use of carrots by 50% and decrease your use of sticks by 50% and see if you don't get improved results.
Wednesday, December 2, 2015
DOL Delays Important Ruling
We HR folks have been waiting on a ruling that was expected to come late this year or early 2016. The issue is the salary test for most Fair Labor Standards Act exemptions. The Department of Labor proposed some important changes to overtime laws in June and closed its comment period on those proposed changes in September. The new rules were expected to become law in the first quarter of 2016, but fortunately for small and mid-sized employers, the DOL has delayed announcing the final rule until late 2016.
The DOL received approximately 270,000 comments on the topic, giving them pause to consider the impacts of their proposal a little more thoroughly. There is likely an election-year political component to the delay as well.
The DOL is primarily targeting employers who "promote" people into jobs with management titles, but still require them spend the majority of their time performing non-exempt duties. Picture a cook who's making $10/hour working 40 hours per week at a restaurant. He gets "promoted" to assistant manager and gets what he thinks is a nice raise to a salary of $500 per week. But now he finds himself working 60 hours per week, and spends most of them cooking, just like he did before. The employee thinks he got a raise, but his effective hourly rate dropped to $8.33. These are the abuses that the DOL is trying to curb.
Unfortunately, their proposal also affects millions of small company office managers, department managers, and non-profit agency employees who currently earn a salary between $24,000 and $50,000 and work extra hours occasionally because they are engaged employees who are committed to their organizations. The DOL proposal as it stands today will force them into punching a clock rather than allowing them to work a flexible schedule as they are used to now.
It's a shame that the DOL still operates as though our economy is dominated by manufacturing jobs. The current rules work pretty well for people who show up at a plant and are either clearly on the clock or clearly off. But they simply don't work very well for many organizations in a service economy with constant connectivity. Unfortunately, bad employers who abuse employees to improve productivity have created the need for reform. Many HR professionals wish the DOL would revise the entire FLSA to make it work better for service providers, but they've chosen to continue to put band aids on 1930s legislation.
I'm still advising my clients to have a plan in place for the new rules, even though it will be late next year before they are released. The only thing likely to change is the final salary test number.
The DOL received approximately 270,000 comments on the topic, giving them pause to consider the impacts of their proposal a little more thoroughly. There is likely an election-year political component to the delay as well.
The DOL is primarily targeting employers who "promote" people into jobs with management titles, but still require them spend the majority of their time performing non-exempt duties. Picture a cook who's making $10/hour working 40 hours per week at a restaurant. He gets "promoted" to assistant manager and gets what he thinks is a nice raise to a salary of $500 per week. But now he finds himself working 60 hours per week, and spends most of them cooking, just like he did before. The employee thinks he got a raise, but his effective hourly rate dropped to $8.33. These are the abuses that the DOL is trying to curb.
Unfortunately, their proposal also affects millions of small company office managers, department managers, and non-profit agency employees who currently earn a salary between $24,000 and $50,000 and work extra hours occasionally because they are engaged employees who are committed to their organizations. The DOL proposal as it stands today will force them into punching a clock rather than allowing them to work a flexible schedule as they are used to now.
It's a shame that the DOL still operates as though our economy is dominated by manufacturing jobs. The current rules work pretty well for people who show up at a plant and are either clearly on the clock or clearly off. But they simply don't work very well for many organizations in a service economy with constant connectivity. Unfortunately, bad employers who abuse employees to improve productivity have created the need for reform. Many HR professionals wish the DOL would revise the entire FLSA to make it work better for service providers, but they've chosen to continue to put band aids on 1930s legislation.
I'm still advising my clients to have a plan in place for the new rules, even though it will be late next year before they are released. The only thing likely to change is the final salary test number.
Monday, November 2, 2015
Improving Your Good Hire Percentage
A construction company would never use a building material that has proven to be structurally sound only 40% of the time. A pest management firm would never choose a pesticide that kills its target pest only 20% of the time. No company would lease a copier that produces clear copies only 30% of the time. Yet organizations make their biggest investments, choosing whom they will invite to join their workforce, using a process that is only marginally more effective than simply choosing people at random.
Validity means a thing measures what it's supposed to measure. Scientists calibrate scales to measure standard ounces or grams so their weights are valid. Chefs calibrate their thermometers so they can measure the temperature of food with validity. But dozens of academic studies that date back to the mid-1960's have demonstrated that unstructured interviews have very low validity when it comes to employee selection. But it's still the number one method organizations use to choose between candidates.
How can companies calibrate their employee selection process the way scientists and chefs calibrate their tools?
First, they can convert to a more structured interview process. Those same studies have demonstrated that using structured, predetermined questions specifically targeted at the critical knowledge, skills and abilities necessary to be successful in the vacant job will increase the validity of the selection.
Second, they can add a benchmarked assessment to the selection process. A behavioral or personality assessment like DISC can certainly help avoid poor hiring choices. Adding additional benchmarked assessments such as a cognitive abilities assessment (if appropriate) and/or a motivating forces assessment will increase the validity of the selection process even more.
Without a structured interview process supplemented by valid assessments, you're likely to be just as well off skipping the interview process completely and selecting your new employee randomly from a stack of resumes from candidates who have at least the minimum qualifications on paper.
To quote Golf Channel instructor Martin Hall, if you keep doing what you're doing, you're going to keep getting what you're getting.
Validity means a thing measures what it's supposed to measure. Scientists calibrate scales to measure standard ounces or grams so their weights are valid. Chefs calibrate their thermometers so they can measure the temperature of food with validity. But dozens of academic studies that date back to the mid-1960's have demonstrated that unstructured interviews have very low validity when it comes to employee selection. But it's still the number one method organizations use to choose between candidates.
How can companies calibrate their employee selection process the way scientists and chefs calibrate their tools?
First, they can convert to a more structured interview process. Those same studies have demonstrated that using structured, predetermined questions specifically targeted at the critical knowledge, skills and abilities necessary to be successful in the vacant job will increase the validity of the selection.
Second, they can add a benchmarked assessment to the selection process. A behavioral or personality assessment like DISC can certainly help avoid poor hiring choices. Adding additional benchmarked assessments such as a cognitive abilities assessment (if appropriate) and/or a motivating forces assessment will increase the validity of the selection process even more.
Without a structured interview process supplemented by valid assessments, you're likely to be just as well off skipping the interview process completely and selecting your new employee randomly from a stack of resumes from candidates who have at least the minimum qualifications on paper.
To quote Golf Channel instructor Martin Hall, if you keep doing what you're doing, you're going to keep getting what you're getting.
Recruiters are stealing my best people!
I hear that statement a lot. And I hear the excuses:
- My competitors are desperate and are throwing money at my employees
- Recruiters are unfairly targeting my company
The first statement is generally less true than many owners think. Of course an employee is going to say they're leaving for more money. Sometimes it's true, but often they just don't want to tell you the truth - they can't wait to get away from the management and the culture at your company.
The amount of money it takes to lure an employee away from your company is directly proportional to the level of engagement they feel toward the mission and the management of your organization. If they like their boss, believe in the product or service, enjoy their current role, believe they have a future in the company, and believe they are being treated fairly, it'll take a pretty big number to lure them away. A number that your competitors are unlikely to offer if you're compensating your people somewhere close to market rates.
But if your company culture is unhealthy, the bosses treat people poorly, expectations are unreasonable, extrinsic and intrinsic rewards are insufficient, and positive feedback is nonexistent, then you better be paying people much higher than market rates. That's going to be your only defense against those recruiters.
Speaking of recruiters, the second statement probably is true. I know quite a few industry-specific recruiters. And they know which companies are ripe for the picking. If they are leaving voicemails for your A players, they know there is a reasonable chance they'll get a return call. They don't bother to call prospects at companies with great reputations as employers. The fact that they are aggressively targeting your company is a clear symptom that your employment brand is weak. And a weak employment brand not only affects retention, it affects recruiting as well. You'll have trouble landing A players because they know what you may be unwilling to admit.
Unfortunately, some owners are hesitant to make real investments in improving management and leadership skills and other engagement initiatives. They think a cookout at the 4th of July and a holiday party in December should be enough to buy employee engagement. But studies are clear - people join companies but quit bosses. Invest in improving how your organization manages people and who you're promoting into supervisor and management roles, and those A players will be more likely to delete that voicemail from the recruiter.
But if your company culture is unhealthy, the bosses treat people poorly, expectations are unreasonable, extrinsic and intrinsic rewards are insufficient, and positive feedback is nonexistent, then you better be paying people much higher than market rates. That's going to be your only defense against those recruiters.
Speaking of recruiters, the second statement probably is true. I know quite a few industry-specific recruiters. And they know which companies are ripe for the picking. If they are leaving voicemails for your A players, they know there is a reasonable chance they'll get a return call. They don't bother to call prospects at companies with great reputations as employers. The fact that they are aggressively targeting your company is a clear symptom that your employment brand is weak. And a weak employment brand not only affects retention, it affects recruiting as well. You'll have trouble landing A players because they know what you may be unwilling to admit.
Unfortunately, some owners are hesitant to make real investments in improving management and leadership skills and other engagement initiatives. They think a cookout at the 4th of July and a holiday party in December should be enough to buy employee engagement. But studies are clear - people join companies but quit bosses. Invest in improving how your organization manages people and who you're promoting into supervisor and management roles, and those A players will be more likely to delete that voicemail from the recruiter.
Sunday, October 4, 2015
How to Hire Team Players
Do your employees work in teams?
Just because you use the word team to describe a group of people who perform similar jobs, like our service team, our sales team or our customer service team, doesn't mean your workers really work in teams. I'm referring to situations where workers collaborate. Where they work together to solve problems or deliver service to customers.
The nature of work is changing. And it's incorporating team work cultures more than it ever has. When I was in college, I was only required to participate in 3 or 4 team projects during my entire degree program. Now, students are assigned 3 or 4 team projects each semester. Does this mean young people are better at it than we were? Well, they've had more practice, but it doesn't necessarily mean they're better. Some people of all ages are more naturally individualistic while others more naturally gravitate to teams.
America has historically been a land of individualists - meaning most of us think people should be self-sufficient. We tend to put loyalty to ourselves before that of others, including our team and our company. But it's not all or nothing. Even the most individualistic of us will commit to a team if we perceive it to be in our best interest. Likewise, individuals who don't see any benefit to contributing to the team will physically or emotionally disengage from that team.
Some of the greatest success stories in team sports are linked to coaches or team leaders who convince superstar athletes to sacrifice individual goals for team goals. Hey, star, would you rather score 36 points and lose or score 18 points and win? We've also witnessed the team member who contributes very little, but expects to benefit from team rewards - like the character, Wally, in the Dilbert cartoon.
How can we know before we hire someone whether they naturally tend to be individualistic or to be more team-oriented? Fortunately, one assessment instrument offered by The Davidson Group does measure the degree to which someone's individualism is a motivator for their behavior. The more naturally team-oriented a candidate is, the less they'll have to adapt or modify their behavior to support team goals.
This assessment can be extremely helpful as a pre-employment tool. Let's say I'm hiring a hunter salesperson. I would probably prefer someone with a high degree of individualism. But if I'm hiring a customer service representative who's going to be part of a team that services customers collectively, I might prefer someone with lower levels of individualism. If I'm investing in either of these important roles, I'd want to know as much about what behaviors I'm likely to observe from my top candidates and what motivates their behaviors as I can before I extend a job offer.
Just because you use the word team to describe a group of people who perform similar jobs, like our service team, our sales team or our customer service team, doesn't mean your workers really work in teams. I'm referring to situations where workers collaborate. Where they work together to solve problems or deliver service to customers.
The nature of work is changing. And it's incorporating team work cultures more than it ever has. When I was in college, I was only required to participate in 3 or 4 team projects during my entire degree program. Now, students are assigned 3 or 4 team projects each semester. Does this mean young people are better at it than we were? Well, they've had more practice, but it doesn't necessarily mean they're better. Some people of all ages are more naturally individualistic while others more naturally gravitate to teams.
America has historically been a land of individualists - meaning most of us think people should be self-sufficient. We tend to put loyalty to ourselves before that of others, including our team and our company. But it's not all or nothing. Even the most individualistic of us will commit to a team if we perceive it to be in our best interest. Likewise, individuals who don't see any benefit to contributing to the team will physically or emotionally disengage from that team.
Some of the greatest success stories in team sports are linked to coaches or team leaders who convince superstar athletes to sacrifice individual goals for team goals. Hey, star, would you rather score 36 points and lose or score 18 points and win? We've also witnessed the team member who contributes very little, but expects to benefit from team rewards - like the character, Wally, in the Dilbert cartoon.
How can we know before we hire someone whether they naturally tend to be individualistic or to be more team-oriented? Fortunately, one assessment instrument offered by The Davidson Group does measure the degree to which someone's individualism is a motivator for their behavior. The more naturally team-oriented a candidate is, the less they'll have to adapt or modify their behavior to support team goals.
This assessment can be extremely helpful as a pre-employment tool. Let's say I'm hiring a hunter salesperson. I would probably prefer someone with a high degree of individualism. But if I'm hiring a customer service representative who's going to be part of a team that services customers collectively, I might prefer someone with lower levels of individualism. If I'm investing in either of these important roles, I'd want to know as much about what behaviors I'm likely to observe from my top candidates and what motivates their behaviors as I can before I extend a job offer.
Top Two HR Compliance Risks
If I owned a small business that employs people, I'd make sure that I am getting the following two things right. The risks associated with mistakes in these areas are greater than the benefits derived from being non-compliant.
1. I'd make sure that each employee is properly classified per the Fair Labor Standards Act and I am paying overtime to whom I am supposed to be paying overtime.
Even if you had this right in 2014, you may not have it right in 2016. The Department of Labor proposed some important changes to overtime laws last summer and closed its comment period on those proposed changes in September. The new rules are expected to become law in the first quarter of 2016. The most significant change is increasing the salary test for exempt workers from just under $24,000 per year to potentially over $50,000 per year. That means any manager or supervisor in your company that makes between $24 and $50k is likely to no longer be exempt from overtime pay if they work more than 40 hours in a work week, no matter what their duties are.
Now is a great time to conduct a wage and hour audit to see if you have any potential risks, and to conduct contingency workforce planning to determine how you are going to handle those positions that may no longer be exempt. The penalties if the Department of Labor finds the problems before you do include payment of back wages and liquidated damages to any affected employees as well as fines.
2. I'd make sure that any relationships I have where I am paying a worker by 1099 are legitimate subcontractor relationships and properly documented as such.
Utilizing 1099 workers to supplement your core workforce can be a legitimate and legal strategy. The key is to look at it the way the Department of Labor and the Department of Revenue look at it, not the way many small business owners look at it.
Both the IRS and the DOL consider the use of 1099 a highly abused practice. So the DOL published a guidance in July 2015 to clarify the rules. Before, you might have been able to make a reasonable case that your 1099 workers could work for your competitors if they wanted to - it's not your fault they choose not to. Now, they're looking at the economics - are your 1099 workers performing similar work for other companies besides yours? If the answer is no, and they are working for your company pretty much exclusively, then the IRS and the DOL are going to conclude that those workers should be classified as employees and you should be deducting and submitting payroll taxes, even if you have a signed subcontractor agreement in place. And that's what they want - employers to be withholding and submitting taxes every payday.
The consequences of being ruled against can be quite severe, ranging from payment of back taxes they feel should have been withheld all the way to jail time in extreme cases. As a part of my risk management plan I would look at each relationship in my company and determine, not whether I think it's legitimate, but whether the DOL is likely to consider it to be legitimate. I'd make sure I have an executed contractor agreement with the legitimate ones and I'd go ahead and hire the questionable ones.
An attorney or an HR business partner can help you decide if you're not sure.
1. I'd make sure that each employee is properly classified per the Fair Labor Standards Act and I am paying overtime to whom I am supposed to be paying overtime.
Even if you had this right in 2014, you may not have it right in 2016. The Department of Labor proposed some important changes to overtime laws last summer and closed its comment period on those proposed changes in September. The new rules are expected to become law in the first quarter of 2016. The most significant change is increasing the salary test for exempt workers from just under $24,000 per year to potentially over $50,000 per year. That means any manager or supervisor in your company that makes between $24 and $50k is likely to no longer be exempt from overtime pay if they work more than 40 hours in a work week, no matter what their duties are.
Now is a great time to conduct a wage and hour audit to see if you have any potential risks, and to conduct contingency workforce planning to determine how you are going to handle those positions that may no longer be exempt. The penalties if the Department of Labor finds the problems before you do include payment of back wages and liquidated damages to any affected employees as well as fines.
2. I'd make sure that any relationships I have where I am paying a worker by 1099 are legitimate subcontractor relationships and properly documented as such.
Utilizing 1099 workers to supplement your core workforce can be a legitimate and legal strategy. The key is to look at it the way the Department of Labor and the Department of Revenue look at it, not the way many small business owners look at it.
Both the IRS and the DOL consider the use of 1099 a highly abused practice. So the DOL published a guidance in July 2015 to clarify the rules. Before, you might have been able to make a reasonable case that your 1099 workers could work for your competitors if they wanted to - it's not your fault they choose not to. Now, they're looking at the economics - are your 1099 workers performing similar work for other companies besides yours? If the answer is no, and they are working for your company pretty much exclusively, then the IRS and the DOL are going to conclude that those workers should be classified as employees and you should be deducting and submitting payroll taxes, even if you have a signed subcontractor agreement in place. And that's what they want - employers to be withholding and submitting taxes every payday.
The consequences of being ruled against can be quite severe, ranging from payment of back taxes they feel should have been withheld all the way to jail time in extreme cases. As a part of my risk management plan I would look at each relationship in my company and determine, not whether I think it's legitimate, but whether the DOL is likely to consider it to be legitimate. I'd make sure I have an executed contractor agreement with the legitimate ones and I'd go ahead and hire the questionable ones.
An attorney or an HR business partner can help you decide if you're not sure.
Tuesday, September 8, 2015
Why Performance Management Matters
Ed Cornelius, one of my favorite grad school professors, told the story of being hired by the Navy to develop a new performance review form. After meeting one-on-one with multiple naval officers to better understand the challenge, Dr. Cornelius went back to the admiral who had engaged him and said, You don't need a new form, you need a new process. The admiral responded, Dr. Cornelius, I hired you to develop a new form. Are you going to develop a new form or shall I engage someone else?
Many organizations are committed to the traditional performance review process. And to be fair, this approach can provide effective performance feedback when upper management commitment is strong and managers are well-trained in how to conduct them. But like the Navy, when these organizations observe it's not working as well as it should, they think the problem is the form.
Meanwhile, many other organizations have concluded that the annual or semi-annual review is largely a waste of time for their cultures. Managers in these organizations hate traditional reviews because they tend to create conflict. Employees hate them because the feedback isn't timely - it might occur months after the actual performance took place - and they sense its primary purpose is to justify smaller than expected pay increases.
Whether or not we should have annual performance reviews is the wrong question. The right question is, How do we provide timely performance feedback that is meaningful to our workers and improves performance?
If an organization lacks a system for generating timely, neutral feedback, I guarantee the only time employees receive feedback is when they do something wrong. My article on Bad Referees covers this natural, human phenomenon in more detail.
Attempting to train supervisors and managers on how to give more positive feedback has mixed results. They typically end up using the feedback sandwich technique. The feedback sandwich wraps two positives around a negative. Such as:
You met our $10,000 monthly goal last month, well done. Too bad you had 7 emergency call-backs - you need to improve the quality of your service in order to cut down on those. But I'm glad to see you're achieving our volume targets.
This widely used technique also has its share of critics. My perspective is that, like the annual review, the feedback sandwich is better than giving no feedback or only negative feedback. But there are better ways.
Take sports, for example. After each game, coaches review key statistics with the players. The quarterback reviews metrics like how many passes he attempted and completed. Defensive players review how many tackles they made and how many plays they found themselves out of position, etc. The coaches even grade the players on their performance based solely on those metrics. Pro golfers track how many fairways they hit and how many putts they stroked during the round to see if they need to spend more time hitting drives or stroking putts during their next practice session.
Today, even small organizations have access to performance data much more quickly than they ever have before. Some systems are able to provide real-time reporting on critical performance metrics. Smart companies are harnessing that data into meaningful feedback that's easy for the employee to understand and is perceived to be fair and neutral. That's why dashboards and report cards are more motivating than annual reviews or the feedback sandwich.
A true HR Business Partner can help your organization develop feedback tools that motivate. Not a new form, but a new process that provides timely, neutral and fair feedback relative to individual, group or company goals.
Many organizations are committed to the traditional performance review process. And to be fair, this approach can provide effective performance feedback when upper management commitment is strong and managers are well-trained in how to conduct them. But like the Navy, when these organizations observe it's not working as well as it should, they think the problem is the form.
Meanwhile, many other organizations have concluded that the annual or semi-annual review is largely a waste of time for their cultures. Managers in these organizations hate traditional reviews because they tend to create conflict. Employees hate them because the feedback isn't timely - it might occur months after the actual performance took place - and they sense its primary purpose is to justify smaller than expected pay increases.
Whether or not we should have annual performance reviews is the wrong question. The right question is, How do we provide timely performance feedback that is meaningful to our workers and improves performance?
If an organization lacks a system for generating timely, neutral feedback, I guarantee the only time employees receive feedback is when they do something wrong. My article on Bad Referees covers this natural, human phenomenon in more detail.
Attempting to train supervisors and managers on how to give more positive feedback has mixed results. They typically end up using the feedback sandwich technique. The feedback sandwich wraps two positives around a negative. Such as:
You met our $10,000 monthly goal last month, well done. Too bad you had 7 emergency call-backs - you need to improve the quality of your service in order to cut down on those. But I'm glad to see you're achieving our volume targets.
This widely used technique also has its share of critics. My perspective is that, like the annual review, the feedback sandwich is better than giving no feedback or only negative feedback. But there are better ways.
Take sports, for example. After each game, coaches review key statistics with the players. The quarterback reviews metrics like how many passes he attempted and completed. Defensive players review how many tackles they made and how many plays they found themselves out of position, etc. The coaches even grade the players on their performance based solely on those metrics. Pro golfers track how many fairways they hit and how many putts they stroked during the round to see if they need to spend more time hitting drives or stroking putts during their next practice session.
Today, even small organizations have access to performance data much more quickly than they ever have before. Some systems are able to provide real-time reporting on critical performance metrics. Smart companies are harnessing that data into meaningful feedback that's easy for the employee to understand and is perceived to be fair and neutral. That's why dashboards and report cards are more motivating than annual reviews or the feedback sandwich.
A true HR Business Partner can help your organization develop feedback tools that motivate. Not a new form, but a new process that provides timely, neutral and fair feedback relative to individual, group or company goals.
This New Hire is Not Working Out
We take a wait and see approach with new hires.
If we need 3, we hire 5 and hope only two wash out.
We place a mirror under their nose. If the mirror fogs up, we hire them.
We don't buy uniforms for new hires until after their 90 day probation is over.
I'm not overly critical of these approaches. After all, I recruited that way myself for the first ten years I was in operations management roles. I figured a vacancy was inconvenient for me, so it was best to hire fast to get the open slot filled, then monitor the new hire closely once they're in place. Any signs of trouble and I would cut my losses.
But eventually I ran some numbers and concluded I was going about it all wrong. There were at least three problems with my own wait and see strategy. First, it's expensive. Payroll is typically a company's largest single expense. Doubling up on it is a costly hedge. Second, it is a self-fulfilling prophecy which becomes embedded in our organizational culture. If we expect a high percentage of new hires to quit, a high percentage of new hires actually do quit. Third, thinking that an employee is going to fully commit and be engaged while we sit back and play wait and see is foolish. Employee engagement doesn't happen that way.
I got tired of this roller coaster and committed to learn more about employee selection, on-boarding and engagement. As a result I began to put more effort into choosing the right person to start with. That meant becoming a better interviewer and asking questions that were better predictors of performance. It also meant incorporating at least one pre-employment assessment. I used to believe paying for a DISC profile on two or three candidates I might not offer jobs to was a waste of money. But I soon discovered that the return on investment of that simple tool was huge. After adopting it my good hire percentage went up significantly. It helped me make wiser hiring decisions, and perhaps more importantly, helped me avoid bad ones.
I also began to put more emphasis on on-boarding. Employees get buyers remorse just like employers do. I made it a mission to make sure that no new hire in my department would regret taking themselves (even temporarily) off the open job market to join our team.
Want a new hire to question their decision? Hand them a stack of faded, used uniforms with stains and holes or rips. Assign them a truck or a workspace that's dirty and cluttered from the last person who occupied it. Don't have a plan - just throw them in the work and hope they're productive. Don't take them to lunch the first day or spend time with them during their first few weeks. Don't help them visualize what success looks like in their new job.
Want them to commit from the outset? Do these two things: put more emphasis on selecting and less on hiring, and demonstrate a sincere commitment to their success by committing resources, including your time, to them from day one. Do that and you'll find that your bottom line is much better off than it was with the conventional wait and see approach.
If we need 3, we hire 5 and hope only two wash out.
We place a mirror under their nose. If the mirror fogs up, we hire them.
We don't buy uniforms for new hires until after their 90 day probation is over.
I'm not overly critical of these approaches. After all, I recruited that way myself for the first ten years I was in operations management roles. I figured a vacancy was inconvenient for me, so it was best to hire fast to get the open slot filled, then monitor the new hire closely once they're in place. Any signs of trouble and I would cut my losses.
But eventually I ran some numbers and concluded I was going about it all wrong. There were at least three problems with my own wait and see strategy. First, it's expensive. Payroll is typically a company's largest single expense. Doubling up on it is a costly hedge. Second, it is a self-fulfilling prophecy which becomes embedded in our organizational culture. If we expect a high percentage of new hires to quit, a high percentage of new hires actually do quit. Third, thinking that an employee is going to fully commit and be engaged while we sit back and play wait and see is foolish. Employee engagement doesn't happen that way.
I got tired of this roller coaster and committed to learn more about employee selection, on-boarding and engagement. As a result I began to put more effort into choosing the right person to start with. That meant becoming a better interviewer and asking questions that were better predictors of performance. It also meant incorporating at least one pre-employment assessment. I used to believe paying for a DISC profile on two or three candidates I might not offer jobs to was a waste of money. But I soon discovered that the return on investment of that simple tool was huge. After adopting it my good hire percentage went up significantly. It helped me make wiser hiring decisions, and perhaps more importantly, helped me avoid bad ones.
I also began to put more emphasis on on-boarding. Employees get buyers remorse just like employers do. I made it a mission to make sure that no new hire in my department would regret taking themselves (even temporarily) off the open job market to join our team.
Want a new hire to question their decision? Hand them a stack of faded, used uniforms with stains and holes or rips. Assign them a truck or a workspace that's dirty and cluttered from the last person who occupied it. Don't have a plan - just throw them in the work and hope they're productive. Don't take them to lunch the first day or spend time with them during their first few weeks. Don't help them visualize what success looks like in their new job.
Want them to commit from the outset? Do these two things: put more emphasis on selecting and less on hiring, and demonstrate a sincere commitment to their success by committing resources, including your time, to them from day one. Do that and you'll find that your bottom line is much better off than it was with the conventional wait and see approach.
Monday, August 3, 2015
The 50 Employee Dilemma
In the past few years I've spoken with hundreds of small business owners. A common theme I hear from a certain group is the desire to stay below 50 employees. That seems to be the magic number for many who have either been there before and shrunk back or are approaching that number for the first time like a medieval knight galloping toward the dark forest.
What is it about the number 50 that makes it so significant? For some it is fear of having to comply with certain legislation, namely the Affordable Care Act and the Family Medical Leave Act. It was after the passage of the ACA back in 2010 when I started noticing the I'm never going to have 50 employees (again) talk. For others it is linked to the realization that there are added complexities related to managing an organization once it gets above 50 employees, and they may not possess the skills or the desire to run an organization that large.
This second group is certainly understandable. James Fischer points out in Navigating the Growth Curve that organizational complexity and management priorities typically change at the 10, 20, 35, 57 and 95 employee marks. This means entrepreneurs that have grown their businesses through each of the first three organizational transitions and are now approaching 50 employees recognize that they will soon be facing another plateau. Busting through this ceiling will require investment and organizational realignment before another growth phase can begin. They may be happy with the results the organization is getting in that 35-57 employee phase and comfortable with their ability to manage an organization that size. They may strategically opt to remain in that space.
It's the first group that may be missing an opportunity. If fear of the ACA is the only thing holding them back, then they should consider this: If they do not offer health insurance, employees who weren't able to get it through a spouse or parent probably opted to remain uninsured. But the ACA includes an individual mandate, which means those employees must have health insurance now or face tax penalties.
Let's take the case of Bob, a single guy age 30 who works for a company with 35 employees that doesn't offer health insurance. Bob is uninsured, but being healthy, he never thought much about the risk. The owner has said he'll never grow to 50 employees because of the ACA. Bob files his 2015 taxes and gets popped with a big fine he wasn't expecting. He finds out the fine will be even larger in 2016. He goes to healthcare.gov and buys insurance to avoid the fine next year. He finds he earns too much to qualify for the cheap, government-subsidized insurance, so he has to pay the entire premium out of pocket. Bob loves working at his company, but he knows that a larger competitor in the area offers health insurance that is partially subsidized by the company. 30 days later, Bob turns-in his two week notice.
Of all the options available to Bob's company to defend against this type of turnover, the best financial alternative might simply be to provide a qualified plan to its employees. Many small companies are going to find that not having a plan is more of a deterrent to recruiting and retention than it used to be and there is basically no competitive advantage to be gained by not offering insurance. So that magic number, 50, is really a windmill not a dragon.
If avoiding this legislation has created an artificial barrier to growth, a company that would otherwise be happy to continue growing should partner with a knowledgable HR professional, commercial insurance agent and finance professional. With their help, it can position itself to bust through the 57 employee plateau and charge ahead toward the next plateau, which won't occur until approximately the 95 employee mark.
What is it about the number 50 that makes it so significant? For some it is fear of having to comply with certain legislation, namely the Affordable Care Act and the Family Medical Leave Act. It was after the passage of the ACA back in 2010 when I started noticing the I'm never going to have 50 employees (again) talk. For others it is linked to the realization that there are added complexities related to managing an organization once it gets above 50 employees, and they may not possess the skills or the desire to run an organization that large.
This second group is certainly understandable. James Fischer points out in Navigating the Growth Curve that organizational complexity and management priorities typically change at the 10, 20, 35, 57 and 95 employee marks. This means entrepreneurs that have grown their businesses through each of the first three organizational transitions and are now approaching 50 employees recognize that they will soon be facing another plateau. Busting through this ceiling will require investment and organizational realignment before another growth phase can begin. They may be happy with the results the organization is getting in that 35-57 employee phase and comfortable with their ability to manage an organization that size. They may strategically opt to remain in that space.
It's the first group that may be missing an opportunity. If fear of the ACA is the only thing holding them back, then they should consider this: If they do not offer health insurance, employees who weren't able to get it through a spouse or parent probably opted to remain uninsured. But the ACA includes an individual mandate, which means those employees must have health insurance now or face tax penalties.
Let's take the case of Bob, a single guy age 30 who works for a company with 35 employees that doesn't offer health insurance. Bob is uninsured, but being healthy, he never thought much about the risk. The owner has said he'll never grow to 50 employees because of the ACA. Bob files his 2015 taxes and gets popped with a big fine he wasn't expecting. He finds out the fine will be even larger in 2016. He goes to healthcare.gov and buys insurance to avoid the fine next year. He finds he earns too much to qualify for the cheap, government-subsidized insurance, so he has to pay the entire premium out of pocket. Bob loves working at his company, but he knows that a larger competitor in the area offers health insurance that is partially subsidized by the company. 30 days later, Bob turns-in his two week notice.
Of all the options available to Bob's company to defend against this type of turnover, the best financial alternative might simply be to provide a qualified plan to its employees. Many small companies are going to find that not having a plan is more of a deterrent to recruiting and retention than it used to be and there is basically no competitive advantage to be gained by not offering insurance. So that magic number, 50, is really a windmill not a dragon.
If avoiding this legislation has created an artificial barrier to growth, a company that would otherwise be happy to continue growing should partner with a knowledgable HR professional, commercial insurance agent and finance professional. With their help, it can position itself to bust through the 57 employee plateau and charge ahead toward the next plateau, which won't occur until approximately the 95 employee mark.
Time to rethink that 1099 strategy?
I had seen their trucks all over town. How many employees do you have?, I asked.
Six employees, he answered, plus 20 service techs that we 1099.
Using 1099 as a way to avoid workers comp risk, unemployment risk, and even payroll tax withholding headaches has been a strategy used by many employers for years. Some owners see this as little more than driving 62 in a 55 zone. Yes, technically I'm speeding, but I doubt I'll get caught. Besides, the rules are pretty vague and I'm confident I can justify it if I'm forced to.
On July 15 the Department of Labor released a guidance that defines independent contractor more narrowly than ever before, making those rules a little less vague. And it signaled its intent to prioritize the enforcement of what it considers to be abuses of this practice. This action also emboldens the IRS and the state enforcement agencies to go after employers who utilize a 1099 workforce strategy.
So, what's the risk if I can't convince them that my 1099s are legit? The penalties start at 1.5% of wages, plus interest, plus 100% of the FICA tax the employer should have paid, plus at least 20% of the FICA tax the employee should have paid, going back three years (no matter whether the contractor paid his/her taxes or not). That's if you properly filed the 1099s. If you messed that up, the fines are even more substantial. If the IRS determines you knew the rules but you intentionally violated them to avoid taxes, they can even file felony charges. If convicted, you could potentially spend a year in prison and pay fines of up to $100,000.
That's no speeding ticket, what should I do? Consult with an HR professional or labor attorney to help you determine which of your 1099 relationships are likely to be considered legitimate by the DOL and/or IRS. They can help you ensure that you have the right documentation in place to demonstrate that the 1099 relationship is appropriate in those cases. They can also help you evaluate alternative workforce strategies for those that will likely be considered illegitimate. If the best alternative is to bring them onboard as employees, they can assist with that migration and any policy implications that result - such as regulations that now may apply to your organization, like FMLA or ACA.
Why do they care? It's all about tax dollars. When you pay an employee on Friday, you withhold taxes and send it in immediately. When you pay a 1099, the government has to wait until that individual files his or her taxes (presumably quarterly) to get its money. A lot of them don't file until the end of the year (if at all). In addition the state and federal unemployment coffers are still strapped as a result of the great recession. 1099 workers often don't pay into the unemployment system like employers do. All levels of government prefer the steady stream of cash that comes from regular payroll withholdings.
It's so much easier simply writing one check and being done with it? Being a small business owner is hard work. The best surround themselves with smart people to help them navigate through these types of changes and manage their risk so they can focus on their customers and their business. Regulatory changes are never going to stop. In this case, you might as well develop an alternative workforce strategy, because a 1099 strategy is rife with unacceptable risk and it's time to rethink its use.
Six employees, he answered, plus 20 service techs that we 1099.
Using 1099 as a way to avoid workers comp risk, unemployment risk, and even payroll tax withholding headaches has been a strategy used by many employers for years. Some owners see this as little more than driving 62 in a 55 zone. Yes, technically I'm speeding, but I doubt I'll get caught. Besides, the rules are pretty vague and I'm confident I can justify it if I'm forced to.
On July 15 the Department of Labor released a guidance that defines independent contractor more narrowly than ever before, making those rules a little less vague. And it signaled its intent to prioritize the enforcement of what it considers to be abuses of this practice. This action also emboldens the IRS and the state enforcement agencies to go after employers who utilize a 1099 workforce strategy.
So, what's the risk if I can't convince them that my 1099s are legit? The penalties start at 1.5% of wages, plus interest, plus 100% of the FICA tax the employer should have paid, plus at least 20% of the FICA tax the employee should have paid, going back three years (no matter whether the contractor paid his/her taxes or not). That's if you properly filed the 1099s. If you messed that up, the fines are even more substantial. If the IRS determines you knew the rules but you intentionally violated them to avoid taxes, they can even file felony charges. If convicted, you could potentially spend a year in prison and pay fines of up to $100,000.
That's no speeding ticket, what should I do? Consult with an HR professional or labor attorney to help you determine which of your 1099 relationships are likely to be considered legitimate by the DOL and/or IRS. They can help you ensure that you have the right documentation in place to demonstrate that the 1099 relationship is appropriate in those cases. They can also help you evaluate alternative workforce strategies for those that will likely be considered illegitimate. If the best alternative is to bring them onboard as employees, they can assist with that migration and any policy implications that result - such as regulations that now may apply to your organization, like FMLA or ACA.
Why do they care? It's all about tax dollars. When you pay an employee on Friday, you withhold taxes and send it in immediately. When you pay a 1099, the government has to wait until that individual files his or her taxes (presumably quarterly) to get its money. A lot of them don't file until the end of the year (if at all). In addition the state and federal unemployment coffers are still strapped as a result of the great recession. 1099 workers often don't pay into the unemployment system like employers do. All levels of government prefer the steady stream of cash that comes from regular payroll withholdings.
It's so much easier simply writing one check and being done with it? Being a small business owner is hard work. The best surround themselves with smart people to help them navigate through these types of changes and manage their risk so they can focus on their customers and their business. Regulatory changes are never going to stop. In this case, you might as well develop an alternative workforce strategy, because a 1099 strategy is rife with unacceptable risk and it's time to rethink its use.
Monday, July 13, 2015
Protecting Owners from Themselves
The CEO was standing in my office steaming mad. I had just sent him a summary of our most recent employee engagement survey results. He wasn't angry at the results. They were excellent - demonstrating that the investments we were making to build a solid employment brand were working. He was upset about one particular comment made by a single employee. He demanded to know who the employee was.
Even though I would have had a difficult time determining who might have made the comment even if I wanted to, I simply said "no." He was a little taken aback, but he continued with his argument, "We can't have someone who feels that way working here, they'll poison their co-workers. We must get rid of them." I said "You're right, but if they truly feel this way, they'll make themselves known through their performance or through other behaviors. If we tell our employees that the survey is anonymous and they begin to suspect it isn't, we will no longer get honest feedback. We can't sacrifice the trust we've built to simply flesh out one disgruntled employee." When he calmed down, he agreed that I was right.
When I think back over my years as an HR leader, protecting business owners and division managers from themselves was one of my more valuable contributions to those organizations. Owners and managers have a lot of pressure on them. They must make difficult decisions, often quickly and without all the data they would prefer to have. When those decisions will impact the workforce, consulting an HR leader who understands the big picture can help the owner frame business challenges and potential solutions in ways that achieve the buiness objectives with the least negative impact on employee engagement and performance. For example:
Company X needed to reduce its workforce due to the loss of a key client. The CEO considered across the board pay cuts and temporarily eliminating the 401k match as ways to protect cash flow and spread the pain evenly. His HR leader pointed out that the big winners with that strategy are the poorest performing employees and the biggest losers are his "A" players. On the HR leader's advice they opted instead to keep the benefits structure in place and lay off 20% of the workforce, carefully chosen to have the least impact on productivity and avoid discriminating against any protected class.
The CEO of Company Z wanted to fire an employee immediately as a result of a mistake. The HR leader saw the potential impacts of that snap decision, including establishing the precedent that a mistake results in immediate termination, the impact the termination might have on the rest of the team, and costs associated with losing the unemployment hearing. The HR leader asked, "Would you fire our top sales rep if they did the same thing?" The CEO admitted it would be difficult. The HR leader suggested the CEO allow him to document the mistake and develop a performance improvement plan for the employee instead.
When Jack Welch was CEO at GE, he had that type of relationship with Bill Conaty, GE's head of HR. Jack often took Bill with him to visit plants around the world to help him think through people and leadership issues. Of course if you happen to be CEO of a Fortune 500 firm, it's easy to drag your trusted advisors along. But what about the CEO of the small and mid-sized organization?
Unfortunately, many small business owners find themselves on an island making decisions such as these without the counsel that the large company CEO enjoys. But the smart ones surround themselves with trusted outside advisors, including a part-time HR leader, who possesses the confidence to help protect them from themselves.
Even though I would have had a difficult time determining who might have made the comment even if I wanted to, I simply said "no." He was a little taken aback, but he continued with his argument, "We can't have someone who feels that way working here, they'll poison their co-workers. We must get rid of them." I said "You're right, but if they truly feel this way, they'll make themselves known through their performance or through other behaviors. If we tell our employees that the survey is anonymous and they begin to suspect it isn't, we will no longer get honest feedback. We can't sacrifice the trust we've built to simply flesh out one disgruntled employee." When he calmed down, he agreed that I was right.
When I think back over my years as an HR leader, protecting business owners and division managers from themselves was one of my more valuable contributions to those organizations. Owners and managers have a lot of pressure on them. They must make difficult decisions, often quickly and without all the data they would prefer to have. When those decisions will impact the workforce, consulting an HR leader who understands the big picture can help the owner frame business challenges and potential solutions in ways that achieve the buiness objectives with the least negative impact on employee engagement and performance. For example:
Company X needed to reduce its workforce due to the loss of a key client. The CEO considered across the board pay cuts and temporarily eliminating the 401k match as ways to protect cash flow and spread the pain evenly. His HR leader pointed out that the big winners with that strategy are the poorest performing employees and the biggest losers are his "A" players. On the HR leader's advice they opted instead to keep the benefits structure in place and lay off 20% of the workforce, carefully chosen to have the least impact on productivity and avoid discriminating against any protected class.
The CEO of Company Z wanted to fire an employee immediately as a result of a mistake. The HR leader saw the potential impacts of that snap decision, including establishing the precedent that a mistake results in immediate termination, the impact the termination might have on the rest of the team, and costs associated with losing the unemployment hearing. The HR leader asked, "Would you fire our top sales rep if they did the same thing?" The CEO admitted it would be difficult. The HR leader suggested the CEO allow him to document the mistake and develop a performance improvement plan for the employee instead.
When Jack Welch was CEO at GE, he had that type of relationship with Bill Conaty, GE's head of HR. Jack often took Bill with him to visit plants around the world to help him think through people and leadership issues. Of course if you happen to be CEO of a Fortune 500 firm, it's easy to drag your trusted advisors along. But what about the CEO of the small and mid-sized organization?
Unfortunately, many small business owners find themselves on an island making decisions such as these without the counsel that the large company CEO enjoys. But the smart ones surround themselves with trusted outside advisors, including a part-time HR leader, who possesses the confidence to help protect them from themselves.
Incentive Pay for Non-Sales Workers
Sales professionals should be and expect to be compensated based on their results. In fact the more confident the sales professional is, the more they'll push for less guaranteed money (base salary) and a higher commission percentage.
But what about the manager, the route technician, the construction superintendent, the factory floor worker or the administrative employee? Do variable pay plans work for them, too? The answer is, sometimes.
I was once a program manager for a large company, assigned to a fixed-fee account in the Florida panhandle that was bleeding money and had high levels of customer dissatisfaction. My task was to cut costs dramatically and improve customer satisfaction simultaneously. Sound like fun?
With the promotion, I became eligible for an incentive bonus. But since no one communicated it to me, I had no idea the bonus plan existed until my regional manager attempted to explain why I wasn't getting it. In six brutal months our team was able to implement significant process improvements, erase the losses, and improve customer satisfaction ratings. But the complex formula that our company used to calculate bonuses couldn't account for the improvement from massive losses to break-even, so I was given a thank-you instead. In this case not only was the bonus plan not motivating (I didn't know about it), but it became significantly demotivating once I found out about it.
A similar situation frequently exists in the construction industry when job bonuses are calculated on the job's financial performance. The contractor assigns his "A" superintendent to a very difficult job with a very slim margin (and little margin for error) and assigns his "B" superintendent to a relatively straightforward job with a healthy margin. Since the bonus is calculated the same way for each, the "B" superintendent gets the larger bonus. When this gets repeated job after job, the company is, in effect, rewarding mediocrity and punishing excellence.
In order for financial incentives to be effective as a motivator of performance, employees must understand the goals of the incentives, must believe they can impact the outcomes, and they must trust management to do what they say they're going to do. Here's a list of mistakes companies make when developing incentive bonus plans for non-sales people:
But what about the manager, the route technician, the construction superintendent, the factory floor worker or the administrative employee? Do variable pay plans work for them, too? The answer is, sometimes.
I was once a program manager for a large company, assigned to a fixed-fee account in the Florida panhandle that was bleeding money and had high levels of customer dissatisfaction. My task was to cut costs dramatically and improve customer satisfaction simultaneously. Sound like fun?
With the promotion, I became eligible for an incentive bonus. But since no one communicated it to me, I had no idea the bonus plan existed until my regional manager attempted to explain why I wasn't getting it. In six brutal months our team was able to implement significant process improvements, erase the losses, and improve customer satisfaction ratings. But the complex formula that our company used to calculate bonuses couldn't account for the improvement from massive losses to break-even, so I was given a thank-you instead. In this case not only was the bonus plan not motivating (I didn't know about it), but it became significantly demotivating once I found out about it.
A similar situation frequently exists in the construction industry when job bonuses are calculated on the job's financial performance. The contractor assigns his "A" superintendent to a very difficult job with a very slim margin (and little margin for error) and assigns his "B" superintendent to a relatively straightforward job with a healthy margin. Since the bonus is calculated the same way for each, the "B" superintendent gets the larger bonus. When this gets repeated job after job, the company is, in effect, rewarding mediocrity and punishing excellence.
In order for financial incentives to be effective as a motivator of performance, employees must understand the goals of the incentives, must believe they can impact the outcomes, and they must trust management to do what they say they're going to do. Here's a list of mistakes companies make when developing incentive bonus plans for non-sales people:
- They don't consider the unintended consequences. For example, over-incentivizing volume of work can easily result in a drop in quality; and an over-emphasis on individual contributions can easily discourage teamwork and collaboration.
- They assume all people are motivated by money. Some people are more motivated by other things, like work-life balance, than they are achieving that bonus. If you want financial incentives to drive higher levels of productivity, you better hire people who are motivated by financial incentives. Utilize a pre-employment assessment that will tell you how important money and achievement are to a candidate.
- They create entitlements not motivators. Safety bonuses or attendance bonuses, for example, can easily morph into another line on the paycheck that the employee doesn't really think about. It may not really be motivating them to work safely or to show up for work.
- There is no feedback. Want to get more bang for your bonus check's buck? Spend a few minutes reviewing with the employee what they did to earn it and how they could get an even bigger bonus next time. Feedback can be just as motivating as a bonus. Owners often overvalue the check and undervalue the feedback.
- They unintentionally create a compliance issue. If your company pays bonuses or commissions to non-exempt employees for being on-call or for achieving a production goal, there's a good chance you are calculating their overtime pay incorrectly. Your incentive bonus plan might be working, but you might be creating a costly liability if faced with a wage and hour audit.
A well-designed, self-financing incentive bonus or commission plan can indeed provide powerful motivators for your non-sales personnel. Just make sure the incentives are simple to understand, easily calculated, the employee can control the outcome, it's accompanied by feedback and it's compliant.
Thursday, May 28, 2015
Quits at a 7-year high. Is it time for an Employee Survey?
Organizations seemed to survey their employees regularly during the 1990s and early 2000s. The war for talent was in full force and they felt it was important to keep their finger on the pulse of their workforce. Then the recession hit. And with it came difficult management decisions - cost-cutting, restructuring and layoffs.
Management in many organizations understandably shifted from a collaborative, participative style prior to the crisis, to a command-and-control style during it. And in many cases the employee survey disappeared with this shift.
Unfortunately, many organizations re-discovered that there is nothing more efficient than a dictatorship, so they have been hesitant or slow to move back to more collaborative cultures. But this statistic might change their minds: 2.8 million Americans voluntarily quit their jobs in March 2015. According to the Bureau of Labor Statistics, this number has been rising since September 2014, but March marks the first month quits have reached that level since April 2008.
This means the war for talent is heating up again. Employees feel they have more options than they've had in recent years and many are looking for a healthier, more pleasant work environment. So it may be time to initiate planned organizational changes to make sure your organization is a ship people want to board rather than one from which they can't wait to disembark.
A great way to gauge whether employees may be actively looking for new opportunities, passively open to new opportunities, or happy, engaged and entrenched is to dust off the old employee survey and simply ask them.
Administering a survey can be easy using an instrument like SurveyMonkey or Zoomerang. However, if you suspect the trust gap between workers and management in your organization has grown from a crack to a gorge over the past few years, you might benefit from engaging an outside organization to conduct the survey for you. Employees are much more likely to provide honest feedback if they trust that their responses are truly confidential. The return-on-investment could be huge, especially if some of those 2.8 million employees who voluntarily quit their jobs were yours.
The hard part comes after you collect the results - demonstrating to your employee base that you are actually listening. This is the phase where you communicate the results along with action plans designed to address their concerns.
Of course you're always going to have the vocal disgruntled minority who gripe about virtually everything. The challenge is recognizing when it's more than that - especially when it's feedback you don't really want to hear. A reputable consulting firm can assist not only in the design and the administration of the survey, but in the interpretation of the results, the communication, and the implementation of strategies that evolve from the analysis.
Management in many organizations understandably shifted from a collaborative, participative style prior to the crisis, to a command-and-control style during it. And in many cases the employee survey disappeared with this shift.
Unfortunately, many organizations re-discovered that there is nothing more efficient than a dictatorship, so they have been hesitant or slow to move back to more collaborative cultures. But this statistic might change their minds: 2.8 million Americans voluntarily quit their jobs in March 2015. According to the Bureau of Labor Statistics, this number has been rising since September 2014, but March marks the first month quits have reached that level since April 2008.
This means the war for talent is heating up again. Employees feel they have more options than they've had in recent years and many are looking for a healthier, more pleasant work environment. So it may be time to initiate planned organizational changes to make sure your organization is a ship people want to board rather than one from which they can't wait to disembark.
A great way to gauge whether employees may be actively looking for new opportunities, passively open to new opportunities, or happy, engaged and entrenched is to dust off the old employee survey and simply ask them.
Administering a survey can be easy using an instrument like SurveyMonkey or Zoomerang. However, if you suspect the trust gap between workers and management in your organization has grown from a crack to a gorge over the past few years, you might benefit from engaging an outside organization to conduct the survey for you. Employees are much more likely to provide honest feedback if they trust that their responses are truly confidential. The return-on-investment could be huge, especially if some of those 2.8 million employees who voluntarily quit their jobs were yours.
The hard part comes after you collect the results - demonstrating to your employee base that you are actually listening. This is the phase where you communicate the results along with action plans designed to address their concerns.
Of course you're always going to have the vocal disgruntled minority who gripe about virtually everything. The challenge is recognizing when it's more than that - especially when it's feedback you don't really want to hear. A reputable consulting firm can assist not only in the design and the administration of the survey, but in the interpretation of the results, the communication, and the implementation of strategies that evolve from the analysis.
Wednesday, May 27, 2015
Indispensable Employees and The Lottery Principle
Employers generally make one of two mistakes when firing someone - they either do it too quickly or too slowly. Too quickly happens when they terminate an employee who might have been salvageable with a little time and good management practices. Instead of spending a little money to rehabilitate, they often decide to spend a lot of money to simply start over.
On the flip side, too slowly sometimes happens when an owner or manager has the illusion that a problem employee is indispensable. This may be rooted in one of three issues:
On the flip side, too slowly sometimes happens when an owner or manager has the illusion that a problem employee is indispensable. This may be rooted in one of three issues:
- The owner/manager knows that he/she will be inconvenienced by addressing the problem and is willing to tolerate a lot more than they should in order to avoid any conflict.
- The owner/manager is worried about the problem employee's relationship with a key client.
- The owner/manager overvalues the problem employee's individual production, but undervalues how the trouble-maker limits the productivity of the rest of the team.
I worked with a CEO who needed to make a personnel change in a critical, non-executive role. He requested that I run blind ads, network confidentially, or anything else I could think of to find a replacement before taking action against the poor performing employee. Since I'm not a fan of blind ads in any circumstance, I reminded him of The Lottery Principle.
The Powerball prize reached an unusually high number one week, which generated some buzz around the office. I asked one of our top sales people if he would be coming into work tomorrow if his numbers were picked. He said, "Yes, but I'll be wearing flip flops!"
The Lottery Principle teaches us that if an employee wins the lottery tonight and flies to Key West tomorrow, the organization will find a way to work through the unplanned loss, no matter what role the employee filled. If that's true then why do so many organizations feel powerless to act on poor performance, even when they know they need to?
I found myself in similar situation to that CEO a few years back. I had a poor performer who happened to be loved by my largest client. The frustrating part was that he didn't even do a very good job for the client, but was revered by the client nonetheless. In both my case and in the case of the CEO, above, the problem employee eventually did something that forced our hands. And in both cases we realized that the sky didn't fall and we wish we had acted sooner. In fact, that's the comment you'll most frequently hear from other employees in those cases, "What took you so long?"
So, how do you know when it's time? It's time when you can clearly define what the performance deficiencies are, you have communicated your expectations to the employee such that they know what success looks like, and you've determined that the employee is either unable or unwilling to meet those expectations. At that point it is time severe the relationship and deal with the ramifications, just as you would if the employee won the lottery and disappeared to a Caribbean island.
The Powerball prize reached an unusually high number one week, which generated some buzz around the office. I asked one of our top sales people if he would be coming into work tomorrow if his numbers were picked. He said, "Yes, but I'll be wearing flip flops!"
The Lottery Principle teaches us that if an employee wins the lottery tonight and flies to Key West tomorrow, the organization will find a way to work through the unplanned loss, no matter what role the employee filled. If that's true then why do so many organizations feel powerless to act on poor performance, even when they know they need to?
I found myself in similar situation to that CEO a few years back. I had a poor performer who happened to be loved by my largest client. The frustrating part was that he didn't even do a very good job for the client, but was revered by the client nonetheless. In both my case and in the case of the CEO, above, the problem employee eventually did something that forced our hands. And in both cases we realized that the sky didn't fall and we wish we had acted sooner. In fact, that's the comment you'll most frequently hear from other employees in those cases, "What took you so long?"
So, how do you know when it's time? It's time when you can clearly define what the performance deficiencies are, you have communicated your expectations to the employee such that they know what success looks like, and you've determined that the employee is either unable or unwilling to meet those expectations. At that point it is time severe the relationship and deal with the ramifications, just as you would if the employee won the lottery and disappeared to a Caribbean island.
Wednesday, April 15, 2015
Fast Growing Organizations Need an HR Business Partner
You've made strategic investments in your sales and marketing capabilities. They are working and now you're rockin' it! Only problem is, you're putting tremendous pressure on your operations and administrative teams.
This is when you need an HR business partner. Not a compliance guru. Not the "Chicken Little" who tells you you can't do that or you'll get sued. Not someone with an HR title, but whose skillset is administrative not strategic. This is when you need someone affiliated with your organization who understands the dynamics of organizational change.
When you're growing quickly you have the option of hiring experienced people away from competitors. They may bring those competitors' cultures with them. And certain aspects of those cultures may clash with the culture you are trying to build. This may not be that big of a problem when you're growing slowly, but when you add several of these folks at one time, it can impact your culture and frustrate your long-time employees.
Perhaps you have an unwritten policy about not hiring people from certain competitors for that very reason. This can be unwise, too, as there may be some potentially good people working at those companies who dislike those competitors' cultures and work practices as much as you do. An HR business partner can help you assess each candidate on his or her own merits, not on a stereotype that might be attached to them due to where they worked previously. And they can help you design on-boarding processes that increase the likelihood that they'll become accepted into the organization and engaged in their new role.
When you're growing quickly, you're tempted to promote people into supervisory roles who may not be well-suited for those roles. The best individual contributor is not always the best supervisor. Often they're not. This decision made hastily can cause all kinds of problems down the road. How can you know if that individual contributor has what it takes to become a supervisor or manager? How do you determine which skills matter at that next level? That's what HR business partners do - help you assess what you have in the organization and what you need.
When you're growing quickly your basic workflows may become strained. This includes how workers report their hours, their in-process and completed work, request time-off, etc. Those processes may have worked just fine when you were 30% smaller, but now the bottlenecks are starting to appear and details are getting missed. HR business partners who have strong business acumen can help design and roll-out systems that make the entire organization more efficient.
That's just the beginning. An experienced HR business partner can also:
- design performance feedback instruments so that new hires and long-term employees receive timely and relevant feedback, not just design a new form.
- manage employee communication programs so that employees are receiving relevant information about organizational changes in a timely manner.
- give employees the opportunity to be heard either informally or through employee surveys. And they have the courage to say, "we need to fix this" when employees have a legitimate complaint.
If your organization is not large enough to support a full-time, dedicated HR professional with the business acumen to be a legitimate business partner, consider a fractional solution. You can get all the expertise your bigger competitors have, just when you need it and at a level you can afford.
Wednesday, February 18, 2015
Did Your Candidate Salt Before Tasting?
A famous executive reportedly used to take prospective new hires out to lunch. If the candidate salted his food before tasting it, the exective wouldn't hire him.
This story has been attributed to Henry Ford, Thomas Edison, Howard Hughes and J.C. Penny among others. It's really an urban legend, but there's an interesting parallel between this story and what I've actually observed from hiring managers.
Some think they have found a similarly clever shortcut. "I won't hire anyone who ever worked for Company X" or "I won't hire anyone who wears loafers to an interview" or "I won't hire someone who won't look me in the eye when answering my questions..."
These witticisms sound clever, especially coming from a person who's confident and believes this method works. But they lack both reliability and validity. Does the type of shoes a person wears to an interview accurately predict how they might perform in the job? I seriously doubt that any scientist would be able to prove a cause-and-effect relationship. And I'm sure, under scrutiny, we'd find that the clever manager isn't as effective at hiring people as he or she thinks.
If I get on my scales each morning and they read 150 pounds (+/-), then the scales are said to be reliable. They provide consistent results. But if I go to my doctor, who has properly calibrated scales which tell me that I weigh 200 pounds, I've discovered that while my scales are reliable, they are not valid. I thought my scales were weighing me in pounds, but they're not. Since I don't know what unit of measure my scales are using (150 what?), they are pretty useless in helping me monitor and control my weight.
Interviews might also be reliable - we consistently hire people who have strong interviewing skills. But they can also lack validity - good interviewing skills may not be a valid predictor of success in the roles we're hiring for.
Interviews might also be reliable - we consistently hire people who have strong interviewing skills. But they can also lack validity - good interviewing skills may not be a valid predictor of success in the roles we're hiring for.
Organizations that consistently make good hiring decisions try to increase the validity and reliability of the inputs in their decision making. Here's what they do:
1. They ask well-designed, open-ended interview questions that offer a peak at how the prospect will behave when faced with challenges similar to what they'll face in this job.
2. They utilize assessments that have been benchmarked to the job in advance, so they are not using intuition after-the-fact to interpret the assessment results.
3. They look at the candidate's previous work history based on the skills that those jobs required, not on their impression of the organization that they worked for.
Good employees from Company X will likely make good employees for your company, even if you don't respect Company X. Bad employees from the world's most respected companies will likely be bad employees at your place, too.
Certain personality types tend to look up, down or to the side when they are thinking, rather than directly ahead. "Looking someone in the eye" may be a valid criteria when hiring an outside sales person or someone for a role that regularly interacts with the public. The behavioral profile for people who are successful in those roles tends to favor people who naturally behave that way, anyway. But is it a valid input for hiring a call center customer service rep, an accountant or a IT systems analyst? Doubtful.
So, don't look for clever witticisms like, "did the candidate salt his lunch before tasting it?" to improve your good hire percentage. Build a system that gives you the best chance of hiring a winner based on reliable and valid inputs.
So, don't look for clever witticisms like, "did the candidate salt his lunch before tasting it?" to improve your good hire percentage. Build a system that gives you the best chance of hiring a winner based on reliable and valid inputs.
Monday, January 19, 2015
These Kids Today...Managing Millennials
I was recently asked to lead a presentation on the topic of multiple generations in the workplace. I've heard several speakers present on this topic and the punchline is generally something like this:
- kids today are selfish and lazy
- baby boomers must adapt their behavior to accommodate them
I have a slighly different take on the subject. Here are some thoughts:
1. Prevailing beliefs about the differences in the generations are mostly bunk.
No one would ever lead a seminar called, How to Get the Most out of Your ___ Workforce (insert Hispanic, African-American, Asian, Gay, Female or the subgroup of your choice). Most of us recognize that each of those groups is made up of individual human beings and that everyone in a given group doesn't behave the same way nor is motivated by the same things. Yet, many consultants are perfectly happy lumping all millennials or Gen Xers into the same bucket, employing stereotypes based on age that are no more universally true than racial or gender stereotypes are. I'm convinced that they do this simply because stereotyping millennials plays well to audiences of full of boomers. We love to hear, these kids today...." (reinforcing to us that we were so much better...)
2. Kids today are as individually diverse as ever.
I teach at the university level. I have bright students who study hard and give the discretionary effort necessary to achieve academic excellence as well as students who do the minimum necessary to pass my course. I have extroverts and I have loners. I have mature 19 year-olds and I have immature 23 year-olds. My classmates in the 1980s were very much the same. As were my parents' classmates in the 1950s and my grandparents' in the 1930s.
3. The "Technology" thing is overblown.
Younger people in the 1920s embraced the automobile and the radio at a faster rate than their parents and grandparents, many of whom preferred to stick with the horse and carriage and were hesitant to bring electricity into their homes. I was the family "tech genius" in 1987 because I could program a VCR when my dad couldn't seem to get the hang of it. 30 years from now articles will be written that the younger generation is better with emerging technology than the aging millennials who prefer to stick with what they know. Always has been true, always will be. That doesn't mean there aren't plenty of older workers who are early adopters and technologically adept. Assuming a 22 year-old candidate will be a whiz at technology is no different than assuming an Asian candidate will be better at math. It's a stereotype.
4. Experiences differ but motivators don't.
Yes, some millennials may have experienced a different type of parenting than many of us did. We love to talk about helicopter moms, bicycle helmets and how everyone gets a trophy. But when millennials join your organization, they are really looking for the same things that previous generations were looking for. They want interesting, challenging work in an environment that is safe, positive and rewarding. The six primary categories of motivators that determine whether a job is "interesting" to an individual haven't changed and these motivators can be measured in job candidates to ensure a good fit for your organization. Those motivators are:
- Utilitarian - is this individual motivated by money?
- Individualistic - is this individual motivated by the pursuit of power and influence?
- Theoretical - is this individual motivated by a natural pursuit of knowledge?
- Traditional - is this individual motivated by the desire to maintain unity, order and tradition?
- Aesthetic - is this individual motivated by the pursuit of form, harmony and symmetry?
- Social/Altruistic - is this individual motivated by an inherent love of people and helping others?
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