Organizations are Dissatisfied with Pay for Performance

Friday, February 21, 2014

 

Pay for Performance, simple, employees are rewarded for their level of job performance.  The better the employee’s job performance the better the employee’s reward.  Those who perform are rewarded, those who do not perform, are not rewarded.  How could any organization be unhappy with such as arrangement?  As reported in Mercer's 2013 Pay for Performance Survey, 45%, of employers reported that Pay for Performance was not performing as expected in their organization and needed to be repaired.

 

According to the survey, there is a disconnection between Pay for Performance as a reward philosophy and measuring the results of that performance and its alignment with organizational needs.  Thus while the majority of employers support and believe in Pay for Performance less than half measure the effectiveness of their programs.  This begs the question, if organizations are not measuring the efficiency of their programs, how do they know they are working?  And the answer is, of course, they do not know if Pay for Performance is driving the desired organizational outcomes.  Bob is a great sales manager and we reward Bob for his performance, we just do not know for a fact that Bob’s efforts are in alignment with the organization’s desired sales goals and objectives.

 

TowersWatson reported in “How to Drive Sustainable Employee Engagement”, on April 3, 2013 that organizations are only limited by those behaviors which they can “observe, measure, and communicate.”  Thus it goes to reason that employers whose objective is to increase sales must observe that behavior which leads to higher sales, measure those sales which are desirable, i.e., profitable, and communicate the desired behaviors to its sales force.  Then, when those behaviors yield the desired results, the organization must reward the employee.

 

In an effort to obtain higher levels of performance, most employers want to engage their employee’s “discretionary effort” level of performance.  Engaging employees to go the extra mile is of no value and may even be counter-productive unless that effort is consistent with the desired direction(s) of the organization.  Increased sales may even be harmful to an organization’s success unless those sales are to the right customers.  Customers, who fail to pay, pay late, have credit issues or return otherwise perfectly good product, may not be the “right” or profitable customers for an organization.  Without some measure or measures of sales, revenue, net income, account balances, account aging, returns, and other measures, employers lack the information to know if their sales force is selling the right products to the right customers at the right price.

 

As organizations continue recover from the Great Recession, greater importance is placed on measuring both organizational and employee performance at all levels.  With employers still reluctant to rehire scores of workers, businesses look for ways to maximum the productivity of existing employees.  Thus measurement of employee performance becomes critical to determine if and when new workers are needed.

Top Ten HR Issues for 2013-2014

Friday, February 14, 2014

 

Bi-annually, the Society for Human Resource Management (SHRM) publishes a “Workplace Forecast” in which a sample of SHRM members voice their concerns and issues for the current and coming year.  The last Workplace Forecast was released as of May 2013.  Prior versions of the “Workplace Forecast” were released in 2011, 2009, 2007, 2005, and 2003.  Since 2005, the # 1 issue and concern for SHRM members has been the cost of employee health care.(Table 1)  And, the # 1 issue and concern for SHRM members looking at 2013 and beyond, is the cost of employee health care.(Table 2)  When questioned about the key factors in recruiting and retaining workers, SHRM members again cited the cost of employee health care as # 1.(Fig. 16 & Fig. 17)

 

Of the myriad issues and concerns facing HR professionals and their businesses what makes the cost of employee health care the # 1 problem for so many organizations?

 

Health care is expensive for both employers and their employees!  As an increasing number of employers move to high deductible plan designs, employees see the cost of health care with every office visit or trip to the pharmacy.

 

The Kaiser Family Foundation reported in its 2013 Employee Health Benefits survey, the cost of a PPO style plan was:
 

                                        Typical PPO Style Plan Costs

                Employee   Percent      Employer   Percent          Total

Single        $1,024         17%         $  5,008        83%         $  6,032

Family       $4,587         28%         $12,084        72%          $16,671

E X H I B I T B

Average Annual Firm and Worker Premium Contributions and Total Premiums for
Covered Workers for Single and Family Coverage, by Plan Type, 2013.

 

Health care is at the center of most employees’ focus!  Unlike benefits such as retirement, health care is something even a healthily person will experience several times a year.  For those employees with chronic illnesses, it could be weekly.

 

It becomes clear that for many candidates, given equal choices, the employer with the less costly and better managed health care plan is likely to win out in the bidding for that talent.  If health care is so important in recruiting and retaining talent, that organization which better manages the cost and delivery of health care will have a comparative advantage in the effort to acquire and retain talent.

 

As noted above, health care is expensive!  Managing that cost is not simple; witness the thousands of pages of laws, rules, and regulations promulgated by the Federal government and its agencies aimed at just that effort.  Educating and informing employees on the costs of health care procedures can go a long way to helping employees understand the value they are getting out of their health care plan.

 

The same approach when used with potential candidates can build an employer’s brand in the eye of job seekers.  Candidates who can appreciate the efforts of an organization to manage health care are more likely to be an engaged employee.  And a talented, skilled, and engaged employee is what most employers seek.

The Return of US Manufacturing

Friday, February 03, 2014

Ask the average citizen on the street about where most manufacturing takes place and you are liable to be told, “not in the US”.  But is that really true?  In the last year, the Washington Post, Bloomberg-Businessweek, Forbes, CNBC, NBC News, CNET, Time, Tampa Bay Times, and others have all reported on the return of manufacturing to the US.  Both domestic and foreign manufacturers are building facilities in the US and employing US workers in them.  This reversal of “off-shoring” or “re-shoring” is occurring as the cost to manufacture in foreign countries is rising while the cost of manufacturing in the US is declining, relative to each other.  In addition to labor cost, transportation and inventory costs are lower for US based manufacturing compared to goods shipped from Europe and China.  However, re-shoring may not bring with it the numbers or types of jobs lost when manufacturing was off-shored years ago.  Increased automation is demanding fewer but higher skilled workers.

One barrier to re-shoring lost manufacturing is the reported lack of skilled workers available to design, build, run, and maintain the highly automated manufacturing equipment used in many of the high tech processes employed in today’s factories.  A. Gary Shilling writing for the Bloomberg View points out that 4% of degrees in the US are in engineering, versus 17% in Asia and 34% in China.  Shilling believes that increased use of robotics and technologies such as 3-D printing and cold spraying will add to the competitive position of US manufacturing by 2020.  But these and other advances in manufacturing technologies require highly trained and talented individuals in engineering, science, math, computer and the biological sciences.

We have heard it before; the US is not producing enough graduates in the Science, Technology, Engineering, and Math fields or the so-called STEM degrees.  Yes, employers are seeking workers with STEM degrees and backgrounds; however, the most talented engineer is of little value if they lack the communication skills to convey their thoughts lucidly via the written or spoken word.  Employers want and need well-rounded workers who know and understand technology and how that technology can be effectively applied to their business to make that business more competitive and produce products and services consumers wants to buy.

While many public and private primary, secondary, and post-secondary schools are developing programs to teach STEM and to train teachers to teach STEM courses, many businesses can not afford to wait for students to move through the educational system.  Many employers, including the US military, are offering apprentice programs in an effort to build a pipeline of current and future STEM candidates.

As with any other talent pool, STEM candidates must be sourced, recruited, and managed.  There has to be a “goodness of fit” match between the organization and the worker to ensure the goals of both are in alignment.  Many of the same motivational factors apply to STEM and non- STEM talent.  Are there opportunities to advance within the organization?  Are there opportunities to learn new technologies?  Are there opportunities for peer recognition within and outside of the organization?

The Long Term Unemployed

Friday, January 31, 2014

 

During the Great Recession a significant number of workers have been unemployed for what is commonly defined as a “long term” of six months or more.  There is a belief the longer a worker is unemployed, the less likely they are to be reemployed.  This lack of employability exposes a number of social and business issues which impact the individual, their family, and their community.  Regardless as to why a worker is unable to find employment, recruiters and hiring managers may perceive the long term unemployed candidate differently those with a shorter duration of unemployment.

 

Released on January 8, 2014, The Conference Board Help Wanted OnLine Data Series for December 2013 stands at 5,297,100 vacancies.  While 5.2 million vacancies may sound like an impressive number of job openings, it is equal to about half the number of unemployed.  The January, 2014 monthly report by the U.S. Bureau of Labor Statistics places the number of unemployed US workers at 10.4 million as of December, 2013.

 

Place yourself in the corporate recruiter’s shoes.  The assignment is to locate a mid-level non-CPA US tax accountant for a corporate location.  The organization is a manufacturer of consumer paper and tissue products with operations in virtually all US states.  The candidate must have 3-5 years of corporate income tax experience in 15-20 states and use of online tax preparation software by at least one of the top accounting firms.  Although this is not a supervisory role, they will be expected to “lead” the work of 2 accounting clerks.  The candidate should have a 4 year degree in Business Management, Accounting or Financial Management; an MBA would be considered a plus.  Any significant skills gap in the candidate’s background would cause you not to consider them.  Your assignment is to deliver 3-5 of the top rated candidates to your customer.

 

Over time many organizations have flattened their management structures so that employees are often expected to know more and do more.  At the same time, those management levels left may become overwhelmed with day to day operations.  Therefore, hiring decisions take on added importance in the light of selecting the “right” person for the job.  Even a top rated candidate whose skills are optimum but lacks the interpersonal communications skills will not be a good pick.

 

It is understandable that an organization who can only afford one tax accountant is going to look for one that is highly employable with an up-to-date skill set.  A tax accountant, who has been unemployed for a significant period time, albeit through no fault of their own, may still demonstrate their employability.  Voluntary work with religious and community groups, supplemental education efforts, temporary and part-time job assignments, and self-publishing blogs are all ways that any unemployed person can maintain their skills and demonstrate their employability.

 

So isn’t the question, not so much about how long a person is unemployed, but rather what did they do while they were unemployed?

Succession Strategy for Family Owned Businesses

Friday, January 17, 2014

As the sole owner of a multi-generational small family business, many owners hope one or more of their children will desire to follow them into the business and take over direction of the company at some point.  Small business owners are often concerned with safeguarding the continued operations of an organization that has possibly taken many decades to establish.  Often such businesses have a small but highly dedicated workforce to whom the owner feels a strong commitment and attachment.  Owners may be concerned with any transfer of ownership that might endanger the ongoing operations of the business and the employment of workers who may have given years or decades of their lives to help make the organization successful.  However, today’s reality is that many children have no desire to follow in the footsteps of a grandparent or parent into the family business.

While there are a number of legal and tax implementations for the transfer of ownership and control of any business entity, family owned businesses are at greater risk than other organizations.  Professional advice for tax, legal, governance, and succession issues and planning should be sought out early and updated as circumstances change.

Unique among organizations, small family businesses often rely on a few key long term employees who have helped build and maintain the operational success of the enterprise.  Such key members of the business’ talent team recognize the risk to the organization and their own self preservation should the organization fail due to the lack of succession and transition planning.  However, one of the greatest risks is the child who succeeds the parent may not have the same passion, desire, motivation, knowledge or skills needed to successfully run the business.  Concerned with their own self preservation, key talent members may look elsewhere taking with them not only their talent but competitive knowledge.

Retention of this cadre of employees is essential to any transition of any business, especially for a small family owned and closely held organizations.  Due to their roles in the organization key talent members may be acutely aware that some transition of leadership or ownership is imminent.  Retention bonuses work well if the goal is to maintain a core of individuals through the initial changeover from the prior to the new ownership team.  However, when that change is from parent to child, the changeover is more about who is at the helm rather than who or what owns the business.

Small family business owners are often reluctant to give up any portion of ownership, a.k.a., control.  Nevertheless, if the goal is to save the organization, distribution of ownership to a select group of non-family members may be the only option.  The “family” can maintain majority ownership while sharing minority control to those key members of the business.  So what was once planned to be “Smith and Sons” may become “Smith, Jones, and Wilson”.

Survival of a small family business hinges on the commonly shared vision of Smith and Jones and Wilson.  Even as minority owners, Jones and Wilson have a strong motivational buy in to its continued and long term success.

Leadership Deconstructed and Reconstructed

Friday, January 10, 2014

 

If you think being a leader is easy, try it when there is someone shooting at you!  The parallels between military and civilian leadership qualities are numerous.  Just because your rank is displayed on your epaulets does not automatically bestow leadership abilities anymore than a CEO’s name plate does.  Rebecca "Becky" Halstead, USA, Brig. Gen., retired, outlines 30 fundamental Leadership Principles based on her 27 years of military service in her recently released book, “24/7: The First Person You Must Lead Is You”.  Throughout “24/7”, Halstead weaves a broadcloth of leadership values based on family and faith, and foremost, integrity.  Halstead holds the distinction of being among the earliest women to graduate from the US Military Academy at West Point and the first women to command a US combat unit.

 

The business literature is peppered with self-help books on management and organizational leadership.  What makes “24/7” different from the host of others?  Halstead asks the reader to hold up a mirror to themselves and look introspectively at how they lead themselves and others.  She makes a convincing case that until you demonstrate to those around you that you process the prerequisites for leadership, you are merely ordering others and not leading.

 

In “24/7” Halstead points out that we own the responsibility and accountability for our successes and failures.  She candidly draws a focus on her own successes and failures, noting that leaders have to be keenly aware of their own strengths and weaknesses.  Along this same line of thinking, leaders have to know when to trust the judgment of others and rely on their expertise.  Halstead makes it clear that as a leader, you set the tone for how you organization operates.  If you lack the moral, ethical, and integrity qualities demanded of a leader, your organization will exhibit those same qualities.  In other words, “You reap what you sow”.

 

In today’s hyper competitive world, it is easy for an organizational leader to take the quick way out of any situation.  Halstead draws the reader’s awareness to the fact at times we as organizational leaders must “chose the harder right over the easier wrong”.  Such actions may at times place us at odds with others to the point of being detrimental to our personal and professional well being.  She reminds us that leadership is a privilege, not a right, we have to earn and maintain that privilege though a continuous demonstration of our value systems.  We may fail at times, but it is precisely at those times that a leader’s true value systems, or the lack thereof, becomes apparent.

 

Hardly a day passes without a public or private person being singled out for mis-conduct.  Halstead reminds us that no one is exempt from leadership failure, even those in which we place the highest degree of trust and faith.  However, she also reminds us that those of us who are in leadership roles have a duty to coach and mentor others towards becoming better leaders.

 

While it may be an over simplification, “24/7”’s leadership style can be summarized as strict, professional, demanding intermixed with lots of common sense, faith, and heart.

2014 Economic Impact on Talent

Friday, January 3, 2014

 

Evidence is mounting, 2014 will be a better year for the economy, businesses, and job hunting employees. CNNMoney, Forbes, and the Society for Human Resource Management (SHRM) are suggesting the US and global economies will see positive growth in 2014.  So with 2013 proving to have been a good year for many businesses, what’s the problem with 2014 being an even better year?  Competition for talent and the cost of that talent is going to heat up in 2014.

 

CNNMoney: Europe is on the re-bound, US housing is recovering, the Fed will back-off on QE2, and unemployment is falling.  Result: Increased competition for goods and services is up, available labor is down, and costs will rise.

 

Forbes: Global economies look significantly brighter in 2014.  US growth will outpace Europe, but lag behind China.  Result: Increased competition for resources, including labor.

 

SHRM: US job creation up over 2012 and 2011, 25% of employers will add jobs, more college graduates to be hired, technology labor cost up by 5%, active and passive jobs seekers on the rise.  Result: Increased competition for labor, labor will cost more, and renewed focus on talent management.

 

Josh Bersin a contributor at Forbes and founder of and principal at Bersin by Deloitte suggests organizations in 2014 will face renewed challenges in the battle over talent.
 

● Talent Acquisition Is a Global Issue

● Continuous Skills Training

● Coaching vs. Over Forced Ranking

● “Holistic Work Environment”

● Career Development Center Stage

● New Skills Needed for HR

● Reinvent/Re-Brand Talent Acquisition

● New and More HR Technology

● Talent Data Moves To Forefront

● HR Becomes “Data Driven”

 

What Bersin is describing is nothing less than revolutionary changes in how employers must embrace their management of human resources, a.k.a., talent.  Yes, many organizations have begun the process of implementing some or even all of these transformations.  So, what is the big deal, it is on my To Do list.  The problem is the world is changing faster than many organizations and those organizations are losing the war on talent and thus on customers, clients, and their ongoing existence.

 

What is the path forward?  Know thy organization!  If you are responsible for managing talent in your organization, know who your customers are and what their needs are today, tomorrow, and next year.  If your organization manufactures or provides services, what, where, and how do they produce products or deliver services.  Who are their customers and when and how do they sell those products or services.  What skills are needed in your organization’s mills, plants, factories, stores or offices?  Where are those facilities located?  What does the demographic, census, and other data (Big Data) look like at these facilities?  Do you have data on who, when, where, and how current and past employees were hired and how well they performed?  Gap analysis; identify the gaps between your customer’s expectations and your ability to delivery.