Millennial Employees in the Workplace

Friday, December 14, 2012

In 2011 PricewaterhouseCoopers (PwC) reported on its survey of 4,364 university graduates in 75 countries releasing a study on Millennial employees at work in its analysis titled “Millennials at work: Reshaping the workplace 2011”. PwC perceives that Millennials are expected to be an influential cohort of employees. It is believed that Millennials who process the correct talents and skills will be in extraordinary demand for those talent and skill sets. Millennials are expected to command both significant remuneration and direct how, where, and when they will work. Lastly, PwC envisions Millennials may very well be a challenge to manage for many of their employers.

According to Pew Research, Millennial employees are those born between 1977 and 1992 and are now entering the workplace. So what is significant about this generation? For one thing, they have grown up in a digital domain online real-time world encompassing an explosion of PC’s, Internet, WiFi, Cell and Smart Phones, laptops, tablets, and a propensity for 24-7 connectivity.

Pew Research notes, the Millennial generation is:

     • The most ethnically/racially diverse group in the nation's history.

     • The most politically progressive group in modern history.

     • The first cohort to regard digital behaviors as commonplace.

     • The least religiously observant cohort.

     • They are inclined toward trust in institutions.

Why are Millennial employees important to employers? They are the second largest segment of the population after Baby Boomers, 30% vs. 34% respectively. Generation X comes in a distant third at 19%. So as Boomers reach age 65 at a rate of 10,000 per day, many vacated jobs will be filled with Millennial cohorts. And since we know that many Boomers are planning to work beyond their normal retirement age, this could be a source of conflict in the workplace employers will have to address.

Michael A. Olguin, writing for Inc 5000 on April 13, 2012, identified five motivational characteristics of the Millennial worker:

“1. Reinforce the positives

Millennials need constant affirmation and positive reinforcement in order to feel like they are doing a good job.

2. Recognize that each person is different ...

Like any group, not all millennials are the same. Therefore, it's important to not implement a "one size fits all" approach to managing them.

3. Be flexible

Millennials by nature don't really like rules. They grew up in an environment where parents asked their opinions, allowed them to make decisions, and rarely pushed something on them that they didn't like.

4. Allow as much ownership as possible

The best way to handle a Millennial's feelings of entitlement is to provide them with a lot of responsibility.

5. Don't be vague

Millennials are not good at interpreting what you meant and rarely succeed when put into a situation to "wing it" themselves. Though they want responsibility and authority, they are uncomfortable without having some sort of framework for the task at hand. “

Managing Multigenerational Workforces

Friday, December 07, 2012

Writing for the Tampa Bay Times on November 21, 2011, Marie Stempinski noted several attributes identified with Baby Boomers, Generation X, and Generation X (Millennial) which have a direct impact upon workforce dynamics. In her Times article, Stempinski focuses on the uniqueness of each generation as well as their interplay.

• Baby Boomers (1946 - 1964), many are remaining in the
   workforce due to financial reasons, because want to work,
   and they actually like what they are doing. Many may
   continue to work into their 70’s and possible beyond.
   Boomers are frequently the most loyal and knowledgeable
   employees in an organization’s labor force.

• Generation X, (1965 - 1976), they are often middle managers,
   hard workers, unique, want to learn new technology. Sometimes
   they can be distrustful and skeptical about the future. They are
   seeking a work-life balance.

• Generation Y (Millennials) (1977 - 1992), they challenge the
   status quo, they are team orientated, they want their input
   and their technology abilities to be recognized and compensated.
   They often distrust large organizations. They expect to make
   numerous job changes in their life in an effort to find a work-life
   balance.

The challenge for organizations is to integrate these three generations into a functioning, yet diverse labor force, making the optimum use of each groups’ skill sets.

In a 2007 publication by AARP, “Leading a Multigenerational Workforce”, prepared by Susan A. Murphy, PhD, of Claire Raines Associates, the author explores the impact of the developing multigenerational workforce. Murphy notes in the opening pages of the study that it is possible for 20 year olds to be working next to 70 year olds. Throughout her analysis, the differences, commonalities, assets, liabilities, myths, and realities of four generations are explored. The study identifies six guiding principles for managing a multigenerational workforce successfully:

1. Open a dialog around generational issues with the workforce.

2. Ask workers about their requirements and preferences.

3. Propose options, alternatives, and offer suggestions.

4. As a manager, style should be tailored to individual workers.

5. Build on the interplay of the strengths of each generation.

6. Practice a diverse set of viewpoints.

Why the concern ourselves with managing a multigenerational workforce? The simple answer is the ongoing demand for talent. Most organizations have a huge investment in its labor force. That investment is comprised of knowledge, skills, and abilities. Regardless of which generational segment is discussed, the demand and competition for top talent is not going to let up. While the workplace has seen astronomical advancements in technology, someone has to conceive, design, build, deploy, and maintain that technology. The current workforce has increasingly moved from an analog world into a digital domain and along the way acquired the talent to make today’s work environment the most productive in history. Attracting, retaining, and motivating an organization’s multigenerational talent may well make the difference between the success or failure of an establishment.

Why Are Many Workers Missing Out on Their Employer’s Defined Contribution Matching Monies?

Friday, November 30, 2012

PLANSPONSOR's annual 2012 Defined Contribution Survey, “Looking to the Stars” reports that upwards of 27% of eligible employees do not participate in their employer’s defined contribution plan and a third do not receive the full employer matching monies available to them.  As part of an organization’s total reward system, defined contribution plans such as 401(k), 403(b), and 457 constitute a significant financial and organizational commitment by an employer to its workforce.  For over a quarter of eligible employees to fail to take full advantage of such benefits certainly has a personal financial impact on the employee’s future retirement plans.  However, let’s not lose sight of why employers have implemented such plans, competition to attract, retain, and motivate the talent which drives their enterprise.

I have stood up in front of large and small groups of employees in an effort to communicate the value of defined contribution plans.  I have emphasized the dual concepts of employee self-control and direction.  I have used phases like, “It’s Free Money”, referring to the employer’s match.  I have used examples of starting out with small contribution percentages and upping that contribution rate over time.  I have displayed the charts and graphs which tells the story of how money grows over time.  I have explained how Social Security was never meant to be a stand-alone retirement system.  I have discussed the roles of public and employer sponsored plans, and private savings.  Yet contribution and participation rates generally remain low.

Low contribution and participation rates are concerns for employers, governments, regulatory agencies, and employee advocacy groups.  Governments and regulatory agencies have responded with automatic enrollment safe harbors, employers have responded by taking up those features, and advocacy groups have lobbied for more communications and disclosures.  The Profit Sharing/401(k) Council of America  is now reporting that as many as 54% of employers have adopted automatic enrollment.

Brigitte C. Madrian, Aetna Professor of Public Policy at the Harvard John F. Kennedy School of Government, argued in a July 2012 paper that a defined contribution plan’s matching threshold was a greater contributor to participation and contribution percentages than a higher matching rate.  Madrian also maintains that non-financial features such as “automatic enrollment, simplification, planning aids, reminders, and commitment features” produce higher rates of participation and contribution than financial incentives, and at lower costs.

At least when comes to defined contribution plan participation and contribution, Economic Man turns out to be his own worst enemy in his efforts to save for retirement.  So, if increased financial rewards will not persuade a quarter of eligible employees to take full advantage of their defined contribution plan, how do we proceed?  Targeted communications focused on segments of the workforce and product branding.  As we would segment and target any consumer market in an effort to promote a “brand” product, consider the same approach for workers.  As with most things today, one size does not fit all.  The same is true for marketing and branding employee benefits, including defined contribution savings plans.  Thus, the old adage holds true: communicate, Communicate, COMMUNICATE!

Why Are An Increasing Number of Employers Moving to Market-Based Salary Structures?

Friday, November 23, 2012

An October 2012 joint report by WorldatWork and Deloitte Consulting LLP identified that market based pay systems now make up to 64% of all salary structure practices worldwide. Compared to other systems such as traditional and broadband, the prevalence of market-based salary structures is now 3 and 5 times greater than traditional and broadband systems respectively.

I cut my compensation teeth on writing job descriptions, conducting salary surveys, evaluating jobs, and building merit matrixes and pay structures. As a cornerstone for an organization’s total-rewards strategy and philosophy, employee compensation is an essential component in attracting, retaining, and motivating a talented, effective, and efficient workforce. So, why are more employers moving from traditional job pricing methods to market based salary structures?

• Organizations must react with a sense of haste in response to changes in

  competitor practices and market segment pressures if they wish to avoid

  market share erosion.
• Employers need a system which is scalable, tunable, adaptable, responsive,

  and aligns the organization to local, regional, national, and global talent demands.

• Companies want a system which directly relates job knowledge, skills,

  abilities, and performance to their current and immediate needs.

• Entrepreneurial enterprises want to reward value added results to the 
  organization, and not just check off another step increase within a pay range.
• Market based salary structures are creditable with employees as opposed

  to a point-factor and other systems which may often be perceived as rigid and

  out-of-date.

• Organizations want a process which relates ever changing “project” based

  jobs to the market place.

• Employers want a practice which provides for external and internal equity that
  moves towards gender neutrality.
• Market based salary structures addresses the four P's of marketing:

     o Price the job according its external market value to the organization,

     o Promotion of the employer brand in attracting, retaining, and motivating talent,

     o Place the job relative to its internal organizational value,

     And

     o Product, define the “job” as a commodity in the delivery of goods and services.

It should not go without saying, market based salary structures do require human and informational technology resources. Certainly in these times of minimum HR staffs, many organizations rely on an alphabet of small to large consulting firms to perform job pricing tasks. Most enterprise and cloud based HR payroll and information systems are capable of supporting both employee and job level market based pay data.

The selection of job evaluation and pricing practice methods is a function of the organization’s overall business nature, needs, strategy, and philosophy. Small local employers may already be practicing market based pay; they just do not call it that. Large international organizations may have little choice but to move to market based pay practices, if they have not already done so. It clearly says something, with over 60% of employers worldwide having moved to market based salary structures.

Employees Remain Worried About Employer Sponsored Benefits

Friday, November 16, 2012

Results from Gallup’s 2012 annual Work and Education poll indicate that employees remain worried about the continued availability of their employer sponsored benefits.  The annual poll, based on a random telephone sample of 1,012 employed adults in all 50 states and the District of Columbia was conducted between August 9th and 12th and posed several questions on how worried respondents were concerning their compensation, benefits, and continued employment. When the surveyor asked if they were worried their benefits would be reduced, 40% said, “yes”. What is revealing about this statistic is that in the same poll taken in 1997, the “yes” response rate was 34%, a difference of only 6 percentage points. Considering the reported total sample margin of error is ±4 percentage points at the 95% confidence level, employees’ level of “worry” today is not that much higher than it was in 1997.

              Source: Gallup’s 2012 annual Work and Education poll

Employer sponsored benefits are expensive, the U.S. Bureau of Labor Statistics estimates that total private employer provided benefits represents over 29% of an employee’s total compensation. The largest component of this at 8% is “Legally Required” benefits which include: Social Security, Medicare, unemployment insurance, and workers’ compensation. The second largest component, as if we did not know, is “Health Benefits” at 7%. It is fairly easy to understand how employees have concerns over benefit reductions since benefits represent such a large proportion of the employer’s costs.

While the last several years have focused center stage on a national debate on health care, many employers have struggled with funding their retirement and savings plans, both defined benefit (DB) and defined contribution (DC) plans. During the recession, as investment returns declined and remained low, employers and employees alike saw the performance of their DB and DC plans suffer. Since employers are mandated to maintain a certain funding level for their DB plans they had little choice but to deposit additional monies into those plans. However, many employees, faced with a declining 401(k) balance and reduced hours, furloughing of employer match or outright job loss, lacked the ability to invest more to offset low returns.

Over the last three decades, defined benefit (DB) plans have been largely replaced by defined contribution (DC) plans and hybrid plans, placing the majority of retirement responsibility on the employee. Witnessing the continued erosion of DB plans must be a contributing factor to employees’ angst related to the potential loss of benefits. The trend from DB pension plans is also mirrored in the movement of employers to “consumer driven”, i.e., high deductible health care plans. In both cases, shifting from DB to DC pension and health care plans places an increased burden of risks on the individual employee. While this may seem unfair, it is the employee who has the most to win, and yes lose in a defined contribution scenario. Key to the employee winning is the power of financial management knowledge, gained either on their own or with the help of the employer.

Employee Performance is Suffering Due to Prolonged Stress in the Workplace

Friday, November 09, 2012

The results of an employee workplace StressPulse survey conducted and reported by the ComPsych Corp., on October 29, 2012 found:

     • Stress Levels - 63% Have high levels of stress

     • Work Priorities - 59% See basic responsibilities most important

     • Causes of Stress - 39% Cite workload

     • Impact Upon Productivity - 41% Lose 15 – 30 min/day

     • Impact Upon Attendance - 55% Miss 1 to 2 days/year

     • Impact Upon Effectiveness - 46% Come to work 1 to 4 days/year too stressed to be effective

     • Common Reasons for Absences - 46% Cite stress and personal relationship issues

     • Coping Strategies - 53% Take frequent “stress breaks”

The StressPulse survey was conducted from Sept. 3 to Oct. 1, 2012, receiving responses from 1,880 employees nationwide.

It is important to note that results from this survey are based on “employee” responses. And it is also important to note similar surveys have been conducted by ComPsych in the past decade, 2011, 2010, … ect. I will not attempt to test and verify the survey’s longitudinal reliability and validity or its construction design based on employee responses. I will leave it to the reader to judge the survey’s veracity.

Workplace stress, like the Perfect Storm, is a combination of several experiences coming together over time which in turn magnifies each event beyond its normal parameters. While we may think of stress as a psychological response, it has its foundation in our fight-or-flight reaction of early humans to threats. Continual elevation of  stress levels result in increased heart rate, elevation of blood pressure, and a boosting of energy supplies. Over time, repeated and prolonged exposure to stressful situations has the potential do real damage to our psychological and physiological systems.

While a certain degree of stress may focus an employee’s attention on meeting a looming deadline, prolonged work-related stress may act to undermine an employee’s overall performance. Such that an employer’s best workers may become their least productive. Employees faced with increased workload, staff reductions, low or nonexistent pay increases, cut-backs in benefits, little or no promotional opportunities, and a constant demand to do more with less frequently will result in employee burn out.

Employers have attempted to deal with workplace stress and its productivity impact for many years. Organizations have added Employee Assistance Programs, redesigned workstations to reduce ergonomic factors, introduced health and safety programs, rolled out wellness plans, management training programs, onsite fitness centers, and work-life balance programs. Global organizations have come recognize the importance of managing workplace stress to the extent that Buck Consultants and Wolf Kirsten International Health Consulting presented support of the grow in stress at the WorldatWork 2010 Total Rewards Conference and Exhibition in Dallas. The published results are downloadable at: Stress in the Workplace, 2010 WorldatWork Conference Survey.

Organizations may not be able to eliminate all stress from an employee’s workplace. Competitive and economic pressures will continue to drive business decisions as organizations struggle to react to market forces. The workplace is but one of several sources of stress and as such employers have limited abilities to address stress outside the employment setting. However, both employers and employees have a great deal to lose if stress goes unmanaged in financial, competitive, and economic terms.

Increased Pay vs. the Increased Value of Benefits

Friday, November 02, 2012

Many years ago, employee benefits were often referred to as “fringe” benefits, this moniker was attributed to the relative minor role of benefits compared to direct pay. Until the last several decades, employee benefits played a relatively small, although important role in the human resource management scheme of employers. The overwhelming focus was on employee cash compensation. Until the 1970’s, expansive and inclusive benefit programs were generally relegated to very large private and public organizations as well as unionized employers.

However, as a new generation of workers began to enter the workforce, they demanded and employers responded with expanded programs including dental and vision care, EAP’s, savings programs, additional time off, … etc. Employees wanted flexibility, employers saw tools to attract, retain, and motivate workers. Employers saw benefit programs as a relatively inexpensive way to differentiate themselves from other organizations. Nevertheless, economic and competitive forces being what they are; many companies’ benefit programs began to look very similar to each other.

In an October 19, 2012 article in USA TODAY, Dennis Cauchon quoted analysis from the Bureau of Economic Analysis', reporting that 2011 workers’ total compensation rose 19.7% on the basis of employer-paid benefits. This increase is in direct opposition to direct pay which reportedly rose 1.4% in 2011. Workers have become accustomed to annual pay increases in the 1%-3% range during the most recent recession.

The concepts of total rewards, total compensation, and total remuneration emerged out of an effort by employers to help employees appreciate the complete value associated with employment with a given organization. It certainly includes both direct pay and traditional benefits such as health care and retirement as well as non-monetary accolades. But, it also includes the value connected with working for well respected employers; employment with organizations which the employee perceives adds value to society, career development and advancement opportunities, and the employee’s ability to achieve a work-life balance with an organization.

Cauchon points out that the BEA analysis identifies: health insurance, retirement benefits and employer Social Security and Medicare contributions as the three largest expenditures for organizations. This is hardly a surprise to anyone, since we are in the midst of a national debate over health care, retirement benefits, entitlement system funding for an aging population. Nor is this debate unique to this nation; virtually every industrialized nation has or is dealing with the same issues of how to provide for their public and private social welfare systems.

Whether an employee perceives enriched benefit programs have more or less value than direct cash compensation is relative to the employee’s personal situation. That is why many benefit programs provide greater value based on an employee’s marital status, years of service, and number of covered dependents. A retirement program which projects a post-employment income replacement of 70% may have very little value to a 21 year old as opposed to an employee 5 years away from retirement. Furthermore, employers with rigid total reward may find it difficult to attract and retain the desired talent if for no other reason than competitors provide a higher degree of flexibility.