I had a prospect recently ask me an important question, and indeed the right question. He asked, if I'd invested in an expensive HR leader a few years' ago, how would my organization be better off today? The reason this is the right question is that if investments in HR don't yield a positive return on investment (ROI), should they be made at all? My MBA training says, no, they shouldn't be.
The research shows that, on average, high performing small and mid-sized companies spend more on HR than their lower-performing competitors (i4cp study). So what is HR doing to make those companies more profitable?
The answer falls into several categories:
1. Opportunity Costs - when one small company waits longer than its competitors to invest in a HR resources, it probably doesn't mean the company has no HR function. It likely means the work that is being done is being done by committee. The committee often consists of the owner or operational leader, the administrative leader and the financial leader. If those leaders could be more effective at their jobs if not constrained by HR related tasks and issues, then the company might be better off. Examples might include a business owner investing many hours creating a performance review platform or a controller researching an HR compliance issue when a trained HR professional could do either much faster.
2. Targeted Expertise - another prospect once told me he didn't need HR help because his controller was a CPA. That's like saying I don't need a dentist because I have a doctor. If my tooth is hurting, my doctor may be able to help, but a dentist has more specialized knowledge - and vice versa for a cold or flu. A trained, experienced HR professional can help reduce the time it takes to arrive at a correct organizational diagnosis and develop an appropriate prescription for organizational aches and pains.
3. Priorities - when key HR initiatives are dependent on individuals in the organization whose primary roles are in other functional areas, HR initiatives often go unfinished. Frequently when I speak with companies who don't have a true HR function, they tell me lots of good ideas they've had but haven't had time to implement. A dedicated HR professional can help push those initiatives to the finish line. If they were worth putting on the list to begin with, they are perceived to have value by the leadership team (improved retention, improved engagement, quicker ramp-up in productivity, avoiding bad hires, etc.)
4. Risk Avoidance - this is the most tenuous argument, but it's not illegitimate - how many work comp claims/EEOC claims/unemployment claims, etc. might you have had if not for the programs initiated and managed by your skilled HR leader? Car insurance only has a positive ROI if you wreck your car. For those who have never wrecked, it's easy to feel that buying that insurance was not a good investment. But those who have wrecked know its value.
At the end of the day, if your organization could benefit from having a stronger, more capable, better trained workforce with a more efficient and user-friendly platform for finding, selecting, on-boarding, retaining, managing, evaluating and inspiring those workers, an HR professional can probably help. But feel free to measure that HR professional's performance against those standards.
Wednesday, October 12, 2016
Communicating Overtime Changes
So you have finalized your strategy for being in compliance with the new overtime changes on December 1. You have, haven't you? If not, you better get on with it. While there is some activity in congress that might delay or modify the new rules, it appears the chances of that happening are slim, so you better have a plan.
Assuming you have a plan, how are you going to break the news to those affected? Telling someone they're getting a raise to the new minimum is pretty easy - but it can demotivate those similarly situated who happen to already be over the limit. If Jane has spent 10 years getting to the $48,000 level, she's not going to be thrilled that Ann, 8 years her junior with 8 years less experience, gets automatically bumped from $39,000 to $47,500 in one day. Explaining the change to Ann is easy, but don't forget to have a conversation with Jane.
But how do you tell someone who is currently salaried that they are going back to hourly? Keep in mind that employees may react differently to the news. Some may be thrilled that they are going to be eligible for overtime compensation going forward (assuming that they will be making more money). On a side note: If Bob routinely worked 55 hours a week while he was salaried, calculating a break-even wage rate so that Bob must continue to work 55 hours to retain his total compensation is a sure loser. Before, Bob's 55 hours were discretionary, but now you've made them essentially mandatory. He's likely going to feel differently about those hours now.
However, others may see it as a demotion and a career killer. How do you assure them that neither is true? Here are some tips:
1. Tell them early - your employees watch the news and are likely waiting to hear how they're going to be affected. I understand delaying the conversation a while to see if congress intervenes, but some states require a notice before wages are reduced (7 days in SC, 24 hours in NC, before the hours are worked in VA). So don't let that deadline pass, especially if your plan is a "net zero" plan that accounts for hours-worked as an exempt employee.
2. Be honest - this has nothing to do with their performance and if not for a government mandate you wouldn't be having this conversation. If it's good for them (they're going to earn more), tell them. If you're having to modify (reduce) their hourly rate from a straight salary-to-hourly conversion in order to account for overtime, explain why you're having to do it that way. If they are being reclassified from exempt to non-exempt, they'll need to start keeping a timesheet of some sort. This can also be demotivating, but explain that it's not that the company doesn't trust them, it's required. And also explain how it affects their career ambitions. If their goal is to move up, make sure they understand that this change does not alter their ability to do that (assuming that is true).
3. Don't forget any benefits impacts - some organizations offer different benefits to exempt and non-exempt employees. While the government defines overtime compensation rules, they don't define your vacation policy, so give some thought as to how you're going to handle the things you can control.
4. Train supervisors - if Stan is now non-exempt, he can't work through his lunch anymore or work off the clock (including answering excessive emails or texts after hours). Praise his loyalty, but explain that he's putting the company at risk. Stan may also need training in the company's time-keeping system. Whether it's manual, a time clock, or an electronic system, don't assume he knows how to use it.
5. Tell them who to go to with questions - it may be better to have someone like your HR leader or your finance leader be the pressure valve for these conversations so the workers' supervisors and managers can focus on getting the work done and serving your customers rather than getting mired up in this transition.
Assuming you have a plan, how are you going to break the news to those affected? Telling someone they're getting a raise to the new minimum is pretty easy - but it can demotivate those similarly situated who happen to already be over the limit. If Jane has spent 10 years getting to the $48,000 level, she's not going to be thrilled that Ann, 8 years her junior with 8 years less experience, gets automatically bumped from $39,000 to $47,500 in one day. Explaining the change to Ann is easy, but don't forget to have a conversation with Jane.
But how do you tell someone who is currently salaried that they are going back to hourly? Keep in mind that employees may react differently to the news. Some may be thrilled that they are going to be eligible for overtime compensation going forward (assuming that they will be making more money). On a side note: If Bob routinely worked 55 hours a week while he was salaried, calculating a break-even wage rate so that Bob must continue to work 55 hours to retain his total compensation is a sure loser. Before, Bob's 55 hours were discretionary, but now you've made them essentially mandatory. He's likely going to feel differently about those hours now.
However, others may see it as a demotion and a career killer. How do you assure them that neither is true? Here are some tips:
1. Tell them early - your employees watch the news and are likely waiting to hear how they're going to be affected. I understand delaying the conversation a while to see if congress intervenes, but some states require a notice before wages are reduced (7 days in SC, 24 hours in NC, before the hours are worked in VA). So don't let that deadline pass, especially if your plan is a "net zero" plan that accounts for hours-worked as an exempt employee.
2. Be honest - this has nothing to do with their performance and if not for a government mandate you wouldn't be having this conversation. If it's good for them (they're going to earn more), tell them. If you're having to modify (reduce) their hourly rate from a straight salary-to-hourly conversion in order to account for overtime, explain why you're having to do it that way. If they are being reclassified from exempt to non-exempt, they'll need to start keeping a timesheet of some sort. This can also be demotivating, but explain that it's not that the company doesn't trust them, it's required. And also explain how it affects their career ambitions. If their goal is to move up, make sure they understand that this change does not alter their ability to do that (assuming that is true).
3. Don't forget any benefits impacts - some organizations offer different benefits to exempt and non-exempt employees. While the government defines overtime compensation rules, they don't define your vacation policy, so give some thought as to how you're going to handle the things you can control.
4. Train supervisors - if Stan is now non-exempt, he can't work through his lunch anymore or work off the clock (including answering excessive emails or texts after hours). Praise his loyalty, but explain that he's putting the company at risk. Stan may also need training in the company's time-keeping system. Whether it's manual, a time clock, or an electronic system, don't assume he knows how to use it.
5. Tell them who to go to with questions - it may be better to have someone like your HR leader or your finance leader be the pressure valve for these conversations so the workers' supervisors and managers can focus on getting the work done and serving your customers rather than getting mired up in this transition.
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