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.

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.

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.

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.

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.


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.



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.