The New Total Compensation Picture

Friday, May 16, 2014

 

For some time now the picture of Total Employee Compensation has been changing and evolving.  Few, if any, organizations maintain the concept of cradle-to-grave paternalism which existed prior to and following World War II.  That evolution is best described as a shift in the focus point of those roles and responsibilities of the employer vs. the employee.  This shift is currently best illustrated in the area of retirement as employers have moved from traditional defined benefit pension plans to defined compensation retirement plans, e.g., 401(k), 403(b), and similarly styled arrangements.  However, emerging are the unmistakable signs of a change in the roles and responsibilities of employer sponsored health care benefits.  As with the development of defined compensation retirement plans, the employee has taken on a greater role in selecting and maintaining their health care benefits.  This has and will continue to change the image of Total Employee Compensation.

 

Fundamental to the employer-employee contract is an exchange of value in return for services provided; value may be in the form of direct cash payments, indirect payments for benefits, in-kind values such discounted products and services, and even the value of an organization’s public image.  In the end, the employer-employee relationship is a mutual bond, a co-dependent bond based on a series of reciprocal promises; both parties perceive that such a relationship will benefit each of them respectively.  Total Employee Compensation is that value offered to employees in return for their initial and continued services.

 

The latest influence on the shape of Total Employee Compensation is the on-going role out of national health care reform in the form of the Affordable Care Act.  The opening statement on a Department of Health and Human Services web page reads, in part, “The Affordable Care Act puts consumers back in charge of their health care”.  As a “consumer”, employees have for the last few years begun to move into the environment of Consumer-Directed Health Care Plans.  Such plans remove a significant decision making role from the employer and transfer it to the employee by requiring the employee-consumer to decide when and how to spend their own monies in the form of higher out-of-pocket costs.  As with the growth of defined compensation retirement plans after the 1980’s, Consumer-Directed Health Care Plans are expected to continue their current replacement of more traditional health care plans.

 

Total Employee Compensation is a toolbox employers employ to attract and motivate their talent.  Health care benefits are a major tool through which organizations appeal to and motivate individual to join and support the organization’s mission.  Anything which detracts from an organization’s ability to accomplish that goal may impact the ongoing profitability and viability of an employer.  While most large employers are expected to maintain sponsored health care benefit plans, smaller organizations and those in highly competitive business sectors may find themselves pressured into dropping health care or adopting a strictly defined contribution approach to health care.

Redefining Where Work is Done

Friday, May 09, 2014

 

According to the 2014 National Study of Employers sponsored by the Families and Work Institute, 38% of employers allow some employees to “Work some regular paid hours at home on a regular basis”.  Meghan Biro, writing for Forbes, claims, “Telecommuting Is The Future of Work”.  Despite Yahoo’s Marissa Mayer, The New York Times proclaims, “It’s Unclearly Defined, but Telecommuting Is Fast on the Rise”.  So if everyone is working from home and telecommuting, where are all those drivers headed this morning I saw on my way to the office?

 

With all of the excitement about working from home and telecommuting, a.k.a., “distance employment”, where’s the data security.  If our credit and ATM cards are not safe at major retailers, how can our security be any better around corporate proprietary information and employee data?  It is almost a routine occurrence that an unencrypted laptop is stolen from some unsuspecting employee’s locked car.  The U.S. Department of Health and Human Services’ Office for Civil Rights has oversight authority for data breaches of HIPAA violations associated with protected health information (PHI) and routinely collects hundreds of thousands and even millions of dollars in fines for data breaches.

 

Oh, you’re safe you said because your laptop did not contain PHI.  Increasingly, states are passing personal data breach laws involving other kinds of data.  Florida just passed (awaiting signature) a law covering the unlawful release of Social security numbers, driver’s license numbers, Florida Identification Card numbers, account numbers, credit card numbers, debit card numbers, security codes, access codes, and passwords.  And Florida is not alone, in fact, according to the National Conference of State Legislatures, “Forty-seven states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands …” have some form of personal data breach notification law on their books.

 

So, before your organization sends Bob off to work remotely at his home with a laptop or remote connection, not only must you consider the work rules but you need to have secured any data on that laptop and any Internet connection he may use.  Consider that Bob may decide to work remotely from his local coffee shop and take full advantage of their free Wi-Fi while he polishes that spreadsheet on employee health care claims, or that acquisition or analyzes data on your customer’s credit card transactions.  Unprotected public Wi-Fi networks have the potential; to steal more that your credit card number.

 

As employers struggle to meet the demands for top talent, they struggle to find ways to attach and retain such talent with flexible work arrangements.  Working from home and telecommuting makes for an attractive incentive to entrance that top talent to join the organization.  Being seen as an “employee and family friendly” workplace is important to many employers today.  However, a careless moment can result in a stolen laptop, or a discovered back door into your organization’s otherwise secure network.

Work, It’s Just a Job!

Friday, May 02, 2014

 

It’s Just a Job!  That is how many employees perceive their employment and their relationship with their employers.  Looking around, many see there are few, if any, advancement opportunities available to them and their co-workers.  With no apparent growth prospects it is not hard to understand why such employees become disenchanted with and disengaged from their organizations.  It is also not hard to understand why employers struggle to retain talent and to get and keep their workforces engaged.  Even for workers who are highly talented, motivated, engaged, and making significant contributions, it often seems their employment has little in the way of true opportunities.

 

If a worker perceives there are no advancement opportunities abounding within their employer, the problem is they have not looked hard enough.  The door of opportunities may not be labeled; it may not have a sign post or arrows panted on the floor, pointing the way.  Opportunities must be sought.  Sometimes workers must create their own opportunities by finding a problem and offering up a solution.  By identifying a problem and finding a solution, thus creating their own opportunities, employees begin to think like owners, like entrepreneurs.

 

Organizations may facilitate the pairing of employees and opportunities but they cannot make that relationship solidify.  Matching the right employee with the right opportunity is helpful but it takes more than a set of skills to achieve the appropriate and workable employee-opportunity mix.  Flour + Sugar + Leveling + Eggs + Milk, does not a cake automatically make.  The ingredients must be carefully bended and emulsified, then placed in the correct environment.  Leave out any ingredient, mix improperly, place in the wrong environment and there will be no cake.  Baking, employees, and organizational opportunities are all investments, some are short term, and some are of a longer duration.  The first requires the development of culinary skills, the later requires employee development.

 

Few investors, other than maybe Warren Buffett, have millions to invest in a single project; the same can be said for organizations.  Most are unwilling to turnover a high value, high visibility project to a completely untested employee.  Most employees do not come to an employer fully formed and fully developed with all of the skills desired to shepherd a new system implementation, integration of a new acquisition or rescue a failing business.  Long before we are permitted to take on that break-out project or assignment, most employees must invest their time in acquiring the project, communications, and technical skills needed.  This is the rate-of-return for their investment.

 

It is easy to understand how any employee can be impatient, even frustrated at having to play supporting roles, when in their mind they are ready for the spotlight.  But just like any star, talented employees must be honed through a successive series of assignments for them to develop.  Underprepared employees are not just an issue for the employee.  Failure to develop a talented employee reflects on both their first line manager and the organization as a whole.  Even a diamond has to be polished to bring out its inner brilliance.

How Important are Soft Skills to Employers?

Friday, April 18, 2014

 

According to the results of a WorldatWork survey released on April 14, 2014, soft skills play a significant role in selecting candidates for vacant positions.

 

Typical “soft skills” include: work ethic, dependability, attitude, motivation, team orientation, interpersonal communication, flexibility, and confidence.  What employer would want an employee who lacked these skills?  Image a manager requesting HR recruit employees who had no work ethic, were undependability, had bad attitudes, were not motivated, had no team orientation, lack interpersonal communication skills, had no flexibility, and showed no self-confidence.

 

CarmineGallo, communications coach and a contributor for Forbes recalled a remark by Warren Buffett to a group of business students.  “He said communication skills would increase their value by 50 percent.”  No matter how good an employee’s technical skills are if they are unable to communicate with their superiors, peers, and subordinates, how will they pitch their projects, needs, or results to others?

 

Writing for accountingToday, Danielle Lee relates comments from Tom Hood, CEO of the Maryland Association of CPAs and the Business Learning Institute, in which he states, “… Big Four firms have historically recognized this correlation, valuing soft skills training along with technical learning."  Clearly, if Deloitte, ‎KPMG, ‎PricewaterhouseCoopers, and ‎Ernst & Young value soft skills integrated with hard skills training, other organizations and individuals may want to sit up and take a closer look.  If technical skills are capable of supporting an employee just so far, what does an employer do when those skills have been exhausted?

 

Amanda Alix commented recently on the Motley Fool website that, in spite of being exceptionally knowledgeable, many young U.S. employees must deal with elevated joblessness, in part because many lack "soft skills".  Employers expect new college and technical school grads to be able to perform the entry level basics of their job.  In addition, employers expect new hires to demonstrate even the most simple of soft skills such as showing up for work on time every day, having a positive “can do” attitude, able to work well with others, having flexibility to adapt to changes in the workplace.  Unfortunately, most schools do not offer a class in “Soft Skills 101”.

 

As concern mounts over the lack of soft skills in young workers, some schools are beginning to rethink the role of such skills in their educational compendium.  In February 2014, the Providence Journal reported the Providence school system won a $3-million grant to teach soft skills.  Sonoma County California schools offer a “Career Readiness Course” for the 2013-14 school year to provide a new semester-long class for high school students.  The University of Chicago Law School has introduced, “The Keystone Professionalism and Leadership Program” which is beginning a third year of programming to highlight the significance of soft skills.  The Colorado Technical University now includes soft skill within its General Education curriculum in an effort to fill gaps between a student’s technical skills and the employer’s expectations.

Is a Human Resource Department Necessary for Today’s Businesses to Function?

Friday, April 11, 2014

 

I routinely see articles questioning whether or not Human Resources is any longer required.  My first thought is that HR is no more necessary than finance, accounting, customer service, marketing, sales, engineering, production or shipping.  There is no legal requirement that a function called “human resource” is named in a company’s organizational chart, however, there are numerous legal activities which are performed by HR.  Many organizations state that “people” are their company’s most important resource, that being the case who should manage that resource and how?

 

Organizations are generally built around areas of expertise and specialization.  There is a reason why finance and accounting are staffed with employees with an understanding of financial management, accounting principles, and business management techniques.  Companies employ persons with these expertise because it is a belief this knowledge will lead to an optimal level of operations of the organization.  The same is true for Human Resources; organizations generally seek out individuals who have knowledge of recruitment, employee relations, labor relations, compensation, and benefits.  Most employers hold a belief these expertise will lead to the best possible level of operations of their human resources.

 

Many see HR as a cost rather than a profit center, others see HR as a barrier to what they want to accomplish, and still others see HR as staffed with individuals who have no business acumen or knowledge of how their business operates.  Granted, HR does not build a product or deliver an external service which produces revenue.  There are times when a member of the organization would like to do something that is illegal and HR must raise an objection.  HR staff come from a wide variety of backgrounds and may lack a detailed understanding of every facet of an organization’s end-to-end production cycle.

 

Organizations do not maintain an HR function to generate profits, which the same can be said for finance and accounting.  HR’s charter is to manage the human resources of an employer is the same manner that finance and accounting manages the fiscal and monetary resources of the organization.  Professional and lay publications are full of stories recounting the inappropriate behavior by an employer relative to this or that anti-discrimination, wage and hour, or labor law.  Often that action was taken in spike of the counsel of some HR manager and even against legal recommendations.  Every employee within an organization should have a basic understanding of the products and/or services their employer produces, this includes the HR staff.  And to the greatest extent possible, HR staff should walk in the shoes of store, plant, and mill managers and line supervisors.

 

To a greater or lesser degree, every organizational unit within a business is co-dependent upon other units.  Sales cannot produce revenue without marketing, which cannot function without a product or service to promote; production cannot produce without the aid of engineering, and finance and accounting must rely on sales and marketing to generate income.  And while great strides have been made in the area of industrial robotics, much of the work is still being performed by humans.

Small Businesses Face Numerous HR Challenges

Friday, April 04, 2014

 

Human Resource issues are difficult and challenging for all organizations, large and small.  However, small organizations face these challenges with limited resources, i.e., money, time, and expertise.  While the classification of a business as “small” is determined by Federal regulations and the U.S. Small Business Administration, their challenges are often large.

 

As a small business, most lack the financial wherewithal to spend tens of thousands of dollars on hired consultants and often must rely on insurance brokers, vendors, and agents for advice.  Time is in short supply for small business owners who often play many parts, business owner, marketer, HR manager, customer service leader, production and engineering manager, facility manager, and the list goes on.  Trained in business, marketing or engineering, many small business owners simply lack the knowledge or desire to become HR, compensation, insurance, and benefits experts.

 

As an integral function of the operations of even a small business, Human Resources require the attention of the organization’s managers.  Errors in hiring, firing, the payment of wages, even the mundane activities such as record keeping and reporting can lead to time consuming and expensive repercussions.  It is a common misbelief that as a small business, there are few if any Human Resource issues which require the attention of organization leaders.  The U.S. Small Business Administration points out Human Resource compliance is on par with financial management, marketing, and manufacturing.

 

Talent recruitment and retention is of unique concern for small businesses.  Limited in their ability to compensate, reward, and provide a clear career path, small businesses must compete with larger well established employers.  Since a small business must rely on a small number of very knowledgeable employees, they often suffer from a lack of a deep talent bench.  The loss of even one or two of these key talent members can place significant strain on operations, production, and product delivery.  While customers may be sympathetic, they too face their own schedules and deadlines.  Missed deadlines can quickly lead to lost orders and a reputation for not being able to delivery services and products when needed.

 

Small businesses can make lemonade out of lemons.  One advantage to small businesses is its ability to offer employees a close working relationship with the top management of the organization.  Unlike a large organization where senior managers may rarely be seen and only heard via e-mails, the top managers of small business are often working in close proximity with employees.  Likewise, small business employees deal with customers and clients at a very inmate level allowing them to gain a detailed understanding of their customer’s business needs.  Often this allows a new employee to gain rapid access to decision makers and witness firsthand how the organization operates.  Due to their vary size, small businesses often allow employees to exercise a greater depth and breadth of job responsibilities than would be found in a large business.  Small business permits owners to wittiness firsthand the efforts of their employees which can lead to rapid advancement for the truly talented.  Likewise, employees deal with customers and clients at a very inmate level allowing them to gain an understanding of their customer’s businesses.

Employee Reward and Recognition Plans Require a Glass Slipper

Friday, March 28, 2014

 

The issue with many reward and recognition plans is they often apply the same measurement values and provide the same payoff for different groups of employees.  While it may seem obvious that jobs such as truck drivers and accountants have little in common, some organizations measure, recognize, and reward both groups using the same criteria and formula.  It is little wonder way such programs fail to measure up to the organization’s expectations.  The goal of all employee compensation, benefits, reward, and recognition efforts within an organization is to maintain and/or modify individual or group behavior to meet the business needs of the organization.  While this may seem Machiavellian, the individual cannot succeed unless the organization succeeds.

 

Employee reward and recognition plans work best when designed and implemented with the aide, support, and participation of front line supervisors and managers.  These are the individuals who observe and interact with employees daily and should be the major decision makers as to who is or is not rewarded and recognized.  They are also the very individuals who must sell the plan and its payoffs to the workers.  Front line supervisors and managers stand the most to gain or lose when deadlines are missed, quality standards are not meet or customer satisfaction levels falter.

 

The falsely of many reward and recognition plans is that rewards must be large dollar amounts or recognition must include a 30 day world cruise.  In reality, reward and recognition must be in proportion to the efforts of the individual.  A truck driver that completes one million accident free miles and the new accounts teller who open their one hundredth new account may not receive or value the same reward and recognition.  The truck driver may value a day off to send with the family whereas teller may appreciate a gift card.

 

In an era where many organizations continue to struggle to acquire and retain talented employees, even in the face or a slowly recovering economy, reward and recognition plans can and do play a significant role in the acquisition and retention of talent.  As part of an organization’s efforts to attract and retain workers, reward and recognition stand head and shoulder with competitive pay, benefits, advancement, and development opportunities.  However, as each generation of workers are recruited; reward and recognition plans must be valued by each generational group.  Clearly, this takes an understanding of what motivates each generation with the knowledge that generational cohorts are not cut in a cookie-cutter pattern.

 

As with virtually every other aspect of our lives, social media has a role in employee reward and recognition plans.  Social media can be multiplier of reward and recognition communications by its almost instantaneous dissemination of the accomplishment.  What better way to succinctly tell the story of an employee’s achievement than through a pre-designed network of co-workers.  Such a technique is keenly effective and motivational with selective generations.