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.

Changes in Fair Labor Standards Act (FLSA) Rules – Big Impacts

Friday, March 21, 2014

 

It should come as no surprise to anyone that a change in the Fair Labor Standards Act (FLSA) guidelines would have a significant impact on many organizations.  Just consider the current minimum earnings standard of $455 per week that is used to classify workers as non-exempt vs. exempt.  If that standard were raised to the proposed level of $970 per week or $24.25 per hour, millions of workers could be impacted by being reclassified from exempt to non-exempt.  This would then expose millions of additional primarily while-collar employees to FLSA’s overtime rules.  Such a change could impact workers in job classifications ranging from Animal Care Workers to Meeting and Event Planners.

 

A second proposed change is to the "primary duties" test.  Workers who are currently classified as exempt due to their job duties could be reclassified as non-exempt not because their duties changed rather due to a change in the rules making it difficult for employers classify them as exempt.  Workers are often classified as exempt based on the primary duties of their roles, this includes classifications such as:  Executive, Administrative, Professional, Computer-Related Occupations, and Outside Sales Employees.  The key to classifying these roles as exempt is found within the primary duties rules.

 Executive Employees

Compensated on a salary basis not less than $455 per week

Primary duty must be managing the enterprise, a department
or subdivision

Must regularly direct the work of at least two or more full-time
employees

Must have authority to hire/fire other employees

 

Administrative Employees

Compensated on a salary basis not less than $455 per week

Primary duty must be the performance of office or non-manual work

Primary duty includes exercise of discretion and independent judgment

 

Professional Employees

Learned professional employee

Compensated on a salary basis not less than $455 per week

Primary duty must be work requiring advanced knowledge

Advanced knowledge must be in a field of science or learning

Knowledge must be acquired by prolonged course of instruction

 

Creative professional employee

Compensated on a salary basis not less than $455 per week

Primary duty must require invention, imagination, originality
or talent in artistic/creative endeavor

 

Employees in Computer-Related Occupations

Compensated on a salary basis not less than $455 per week

Compensated hourly, at a rate not less than $27.63 an hour

Employed as computer systems analyst, computer programmer,
software engineer or other similarly skilled worker in the computer
field

Primary duty must consist of:

Application of systems analysis, consulting, determination of
hardware, software or system specifications;

Design, development, documentation, analysis, creation,
testing or modification of computer systems

Design, documentation, testing, creation or modification of
computer programs

Outside Sales Employees

Primary duty must be making sales

Obtaining orders or contracts for services

Use of facilities for which a consideration will be paid

Must be customarily and regularly engaged away from
the employer’s place or places of business.

Is clear, that any change to the earnings threshold and/or the primary duties test could have far reaching impacts for any organization regulated under the Fair Labor Standards Act (FLSA).

Millennial Employees Are Coming, Is Your Organization Ready?

Friday, March 14, 2014

 

Boomers revolutionized the world.  Art, civil rights, consumerism, family, government, music, recreation, society, and work were radically changed by millions of the post-WWII generation, aka, the Baby Boomers.  They represent approximately 77 million or 25% of the current population.  But wait, there is an even larger generation out there, no not the Gen-X’ers, it is the Millennial generation.

 

Millennials are estimated at some 80 million and projected to make up 46% of the US workforce by 2020 and like their Baby Boomer cohorts; they are already reshaping the world and the workforce.  And the tool they are using to reshape the world is digital, from smart phones to tablets to social media, it is all about mobility, instant access to information, and constant connectivity.  For the Millennial, the mobile device is their life line to reality.  The defining characteristic for Millennials is the extent that digital technology is integrated into their very culture.

 

Millennials are expected to have a profound impact on the workforce.  Born after 1980, over half have already entered the workforce.  From the Millennials’ viewpoint, employer loyalty is not that important, personal development and work-life balance are important, financial rewards only go so far for Millennials, and the expectation of rapid advancement is their normative expectation.  One striking finding is that over half of all Millennials perceive that organizational diversity promises have not been kept by their employers.  Millennials prefer their own digital and mobile devices rather than some standard provided by their employer.

 

As daunting as this may sound, there are opportunities out there for the organization that can incorporate the Millennials’ expectations into the company’s business goals and objectives.

 

Personal Development: Provide greater opportunities to learn and grow personally and professional in both formal and informal modes.  Provide mentor programs, in-house training, paid educational leave, and teaching opportunities.

 

Work-Life Balance:  Permit greater flex schedules, work from home, work from remote or satellite locations; provide opportunities to volunteer in schools and the community.

 

Non-Financial Rewards:  Identify high visibility project assignments and leadership roles, provide travel opportunities, temporary assignments, fast-track advancements, paid sabbaticals to do research, study or volunteer.

 

Personal Digital and Mobile Devices:  Accommodate a wide range of employee owned digital and mobile devices in the workplace.

 

While many hi-tech organizations have integrated a high degree of flexibility into their organizations, more traditional legacy employers may find it difficult to accommodate such elasticity in their daily operations.  From a strictly business perspective, employee development works only if there is a direct line between the employee’s skill development and the needs of the organization.  Not every position or employee is suitable for flex schedules or working remotely.  Organizations still must maintain a competitive compensation package, even in the face of any non-financial rewards.  Any attempt to accommodate the current and future assortment of employee owned devices is likely to raise security and supports issues with an organization’s IT management.

PPACA and Worker Mis-Classification as Independent Contractors

Friday, March 07, 2014

 

The Patient Protection and Affordable Care Act require that employers with 100 in 2015 and 50 or more employees in 2016 must provide certain employees with health care or face potential penalties for failure to do so, i.e., “pay or play”.  The recent release by the Internal Revenue Service (IRS) on February 10, 2014 of the final regulations provided further clarification on a number of critical issues including, definition of full-time employees, safe harbors, transition rules, applicable large employer status, and hours of service.  Along with the final regulations, the IRS also released 46 Frequently Asked Questions or FAQ’s and a Fact Sheet to assist employers.  Both the final regulations, FAQ’s, and Fact Sheet seek to clarify who is and is not a “full-time employee”.  This determination as to who is a full-time employee for the purposes of “Shared Responsibility for Employers” is essential to any number of provisions of the PPAA and thus who is offered health care or not as well as when.

 

FAQ # 15 defines a “full-time employee” as, “… an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of [paid] service per week.”  This definition thus begs the question as to who exactly is an “employee”.  The simple answer is any “W2” wage earner is an employee (common-law employee) of the employer and may be broken down into several classifications including, full-time, part-time, seasonal, and variable hour employees.  To complicate matters, employees may move between classifications throughout a calendar year and an employer’s benefit’s Plan Year may not coincide with the calendar year.

 

Individuals who are classified as “independent contractors” are not common-law employees of an employer for purposes of PPACA and are not used in the determination of an employer’s “applicable large employer” status or the calculation of any penalties.  However, this is where the mis-classification of common-law employees as independent contractors becomes an issue.  As with the Fair Labor Standard’s Act, worker mis-classification as an independent contractor may have significant and negative legal and financial outcomes for an employer.  Therefore, it is strongly recommended that employers seek competent and professional legal and tax advice before classifying any workers as independent contractors.

 

The final regulations by the IRS addresses the concern that employers might inappropriately classify otherwise common-law employees as independent contractors.  So strong was the IRS’ concern that the final regulations included, “The Treasury Department and the IRS are concerned that the relief requested would serve to increase the potential for worker misclassification by significantly increasing the benefit of having an employee treated as an independent contractor. Accordingly, the final regulations do not adopt this suggestion.”  XII. Worker Classification and Section, 4980H, page 8567

Performance Evaluations in a Changing World

Friday, February 28, 2014

We are all familiar with the ubiquitous employee performance evaluation.  Virtually every organization has one or more, sometimes associated with the employee’s job classification.  Every human resource vendor has several for sale.  Some are purchased and some are developed in-house.  Furthermore, no one likes them or thinks they are very good at measuring “true performance”.  Thus many question an attempt to measure employee performance with a tool that is perceived as less than accurate, valid or reliable, especially when organizations are changing at light speed?

Organizations need some method of how well an employee, and by proxy, how well mangers and business units are performing in the human resource sphere.  Otherwise, how else is an employer going to support employee and job actions?  Likewise employees want to know how they are performing and employees also want to be rewarded.  This cycle of behavior-reward has been programmed into us from birth.  We are rewarded with parental praise as a child and with recognition and advancement in school.  And lastly, we expect to be rewarded and advanced in the workplace.  Essentially, this paradigm is the foundation of much of human behavior.

At issue is how do we evaluate performance when job expectations are consistently changing?  How do we, as managers, set expectations when neither we nor our organizations may know the next major direction the organization is going to take?  How do we coach and direct an employee on what skills are needed for the next project in the pipeline?

First, none of us may ever be able to foresee the next big change in our organizations.  We need to learn to accept the fact change is going to occur and occur at an ever increasing rate, aka, Moore’s Law.  Dealing positively with change becomes a skill in our toolbox as well as in our employee’s toolbox.  Coaching employees to see change as a challenge and an opportunity for the employee to shine is one approach.

Second, the mental model with we approach change is going to telegraph to everyone around us.  If we are positive, they are more likely to see the change as positive.  Since our success as leaders is closely correlated to the success of those we lead, it really is in our self interest for them to rise to the occasion. 

Lastly, it is important to communicate with everyone.  This means asking those who lead us to explain the business reason(s) behind the change.  Once we understand the driving force of the change we can better communicate to others, such as those we lead.  Our complete understanding of what change is occurring is going to help us positively communicate with your management, peers, and those we lead.

RoseFass, CEO of the consulting company fassforward was quoted in an 11/05/2013 article by Dorie Clark in Fobes as saying,” The best kind of change comes when you envision, initiate and control it. That type of change creates opportunities, transforms companies and ignites growth.”