HumanMarkets

I have taken my time on this one.  This is the “don’t trust HR” article.  My first reaction was that the good folks at Human Capitalist had nailed the right reaction.  Don’t whine; do.  HR doesn’t have a reputation that matters – only you do.  Bang. Done. 

I have decided to whine anyway.  Professor Beatty is wrong on this one.  Not because he believes that you shouldn’t trust HR or because he thinks that we don’t focus on the right things.  He is wrong because his point of view lacks sophistication.   His work here just isn’t very good.

I don’t take that lightly.  Professor Beatty’s CV on the Rutgers School of Management web site is very impressive and filled with achievements that I would love to have – but don’t.  Prof. Beatty appears to be substantive as a thinker, consultant and doer within the profession.  I hope to meet this guy one day – I bet I will learn something if I do.

Prof. Beatty lacks sophistication in his criticism here however, because he fails to account for the range of business models and profiles across organizations.  Organizations have different human capital needs because they economic and market profiles.  Some are labor intensive; others are not so much.  Some organizations really do rely on a few people at the top and the rest of the organization is, sad to say, low-value-added.  Other organizations however have massive people needs and quantity is inextricably linked as a driver of value with quality.  The real truth, the A+ essay, might be that some organizations are hetrogenius and actually have more than one set of characteristics.  In other words – for some organizations the focus on broad-based employee satisfaction might be just right.  For others, a focus on fewer high achievers might be right. 

The better question is how well do you understand the economic model and risk of the organization relative to people.  HumanMarkets did a post last March on this point relative to benchmarking, “Benchmarking isn’t wrong, it’s sometimes just dumb”  The point is that saying a myopic focus on top performers is a cliched and narrow as “employee satisfaction is always good.”

Here’s an example – if your business is about availability and volume – 24/7/365 maybe having a large number of competent people is exactly what you want.  It’s the toll collector model.  They can’t make change much better than the other guy.  The  difference in accuracy rates from the best to the median, is, I am guessing fairly narrow.  (Customer spots it right away too.)  Friendly and service oriented – ehh, not so important – certainly not compared to smooth pavement.  The point is that the road, the physical asset is where the value is.  Even maintenance workers only have a small degree of variation in what they do to make the road valuable.  A few engineers and planners do the value planning around the physical asset but even then, it is the fact that there is an army spread out of a couple hundred miles of concrete that matters more.

Better work on this point for Professor Beatty might be to start with an excellent piece by McKinsey.  Their argument is that best metric to understand the quality of most businesses is “profit per employee“.  They make a great case for this metric and for the fact that some businesses are modeled on the competitive proposition that higher profits are their KPI while for others (they cite Walmart) having a boat load of employees at an acceptable albeit low level of profitability works.  The article is premised on research about the incredible increase in the portion of market capitalization that is made up of intangibles rather than hard capital assets.  Intangibles are largely what people bring to the business table.

I would have been OK with the Professor and CFO.com if they had said something like, HR can’t be trusted because they should be the principle drivers of identifying, measuring and enhancing return on talent as measured through profits per employee and they aren’t.  HR doesn’t think in terms of a return measure or on about financial and outcomes measures relative to the contribution of the workforce.  HR is too concerned about subjective indications of a productive workforce and not enough about quantifying objective measures of productivity and therefore can’t be trusted. 

The fact is that the article and the work misses the opportunity to really focus HR issues on driving value for the organization.  They miss the need for more quantification – especially when trying to make a bridge to finance.  The article misses that HR manages risk and is a market player.  Instead, the article basically says that you should not trust HR because they focus on the wrong soft, subjective measure.  Professor – that is not the solution to the problem, that is just substituting one for the other.

There is a market for professionals who can figure out the methods, resources and management of building intangible value as measured by profit by employee.  It’s the market for great HR people.

2 Comments | In: How to do HR | tags: Finance, HR, markets, risk management. | #

By now you know about EFCA,  or you should know about it.  (N.B. the headline is only funny, or for that matter comprehensible if you pronouce “EFCA” as “F – KA”),

If you don’t here are a couple of good places to learn.

• One of my favorite blogs: The Human Capitalist has been doing great stuff on EFCA for a while. Get a great overview useful links there.
• For a nice overview about some of the personal  impact of the issues and great counself on communication regarding EFCA, of course, you want KnowHR
• An for someone extremely passionate about the subject, try Fist Full of Talent and what Jessica Lee is fdoing over there.

I am not going to pile on about corporate democracy, competitiveness, politics, etc…  the sources above are really good.  Here is a different angle. Why is EFCA wrong from a legal perspective?

Unions want people (workers, the public, government, etc…) to think of  “the labor movement”.  They want to cast the legal context for unions, organizing and collective bargaining as essentially a civil rights issue. It isn’t. Labor law is market law; labor law is market regulation. The difference is important.

EFCA would transform labor law from market regulation – which is a good context,  to rights -which is a bad context. The reason it is bad, is because workers don’t unionize. Unions unionize. Unions are businesses – just like someone selling soap. Unions sell representation to a worker’s manager and employer, so the worker doesn’t have to do it herself. And that is absolutely fine, unless you mistake what they do, as some altruisitic “fighting the suits”, “fight the man”, David and Goliath social cause.  Government action has taken many, although far from all of the “rights fight” out of the hands of unions.  The romance of the little guy being stood up for is a romantic branding by unions of their product.

Bottom line – unions are market players, not civil rights advocates – just like employers.

Labor relations law is organized very similarly to other market regulation.  Labor law sets up rules for communication, transparency, timing, counting, eligibility. It explicitly recognizes roles – employers, workers and unions.  A key concept is that by properly understanding labor law as market regulation it makes clearer the three key roles involved – unions are sellers – they sell representation and sometimes benefits; employers are sellers – the sell represenation and rewards. Employees are buyers. They “buy” represenation of themselves from one of these two sellers.  (I get that workers “sell” their labor to employers – but that is a different market than the one we are talking about today.)

To do its job the best, labor law should be indifferent between the two market players.  Its goal should be to reduce transaction costs for the buyer.  Increase information and transparency to the buyer, by forcing the sellers to provide it in an honest, accurate, and structured manner.  Labor law should reduce everyone’s transaction cost by setting procedure and process in place ex ante so that it is reliable, can be invested to and planned to.  Other market regulation does this and does it well.  Securities law, in warm cooperation with exchanges rules (themselves regulated) make the flow of capital through securities efficient and effective because it sets the rules for communciation, process, and roles in the securities markets.  (For an excellent overview of the concept of how market regulation reduces transaction costs, try The Economic Analysis of Labor Law by Richard Posner.)

The problem with EFCA is that it moves labor law from being a neutral regulator of a market for employee representation to the notion that the right to join a union needs special protection.  Creating the ability for a union to market its product in secret, leaves the individual in the dark about the other side of the market.  The best protection of the truth, and of workers’ free choice among transparent choices for representation is the campaign and secret election process. 

EFCA is a market bias that will result in bad outcomes that people would not have chosen on their own.  When that happens, companies no longer compete to have HR and management programs that are competitive to represent employees back to the company well.  The bias will hurt workers, hurt employment and hurt our economic society and benefit a market player – unions.  And that… is a sub-optimal outcome as the economist would say.

There is a market for the representation of employees.   Let’s keep it fair and open and efficient for the benefit of all who work; all who employ them; good unions who serve them; and all of the rest of us too.

7 Comments | In: How to do HR, Labor | tags: EFCA, HR, Labor. | #

There is a market for attention and passion among people. The capacity of a person to think about stuff is limited – that capacity is a scarce resource. The person gives that scarce resource in exchange for information that he or she feels is valuable to them.  It is valuable because it is informative, entertaining, stimulating, etc… This basic dynamic – scarity traded for scarcity is the definition of a market.

Take everything you just read, but apply it to a person’s passion or engagement and it works, but probably even more sharply because most of us have less capacity for passion than we do for attention.

These are critical lesssons to learn when communicating to employees.  To be good at it, you must realize that you are competing with other messages in the work place.  Messages from other managers, from co-workers, from customers, from family and friends during the work day, from third-parties (unions, government, etc…) abound. In addition, you are competing with those that want to get to your employee for their own self-interested reasons – they are selling soap to your employee, they are selling loyalty to a sports team, they are selling movies or music or services, or blogs.

If you want to effectively communicate with your employees, you need to recognize that you are engaged in competitive, market activity.

One way to compete better is to have a feel for the mood around the market. What is the context that the market is operating in. Just like the mood on Wall Street can impact the valuation of stocks, the mood around the market for employee engagement impacts it.

Here is why this thought jumped out to me today.

I am affiliated with a non-profit that is holding an auction – pretty typical stuff. One of the items however is a shopping spree at Neiman Marcus.  To a person, other people affiliated with the organization has commented on how that just doesn’t “feel right” based on the economy, unemployment, and general current events. People are finding it “odd” that we would be auctioning off a night at one o f the most elite department stores in the world at this time.

In fact, the other items for auction, the normal buzz of people anticipating the auction, and the importance of the auction to the organization, have all been impacted negatively because of the attention on Neiman Marcus.  The organization is losing in the market for attention and passion because their competitor, “idle gossip” is winning.

2 Comments | In: HR Strategy, Multiple Markets | tags: HR, markets. | #

Our friends and mentors over at KnowHR.com recently did a spot on, call to action regarding EFCA. I have nothing to add to their analysis and recommend it whole-heartedly. Look over the next couple of days for the HumanMarkets analysis of EFCA which will approach it from a very different angle.

Today’s thought however is about something that I think will be bigger than EFCA – Lilly Leadbetter Fair Pay Restoration Act. 

For an nice overview see theMiddleClass.org 

Even for things that are right to do, having no rules on how to enforce them can create chaos. No matter how you feel about this, the market for HR litigation just got a stimulus package.  Expect challenges to pay equity to be a major part of your job for the next couple of years.  It would be a great time to get up to speed on the type of analysis that plaintiff’s counsel might be doing.  Check out a nice overview from Mercer through the WAW web site.

1 Comment | In: Compensation, Employee Relations, How to do HR | tags: Employee Relations, HR, markets, risk management. | #

I had a conversation the other day with a pretty sophisticated CFO of a big non-profit (about half a billion dollars in assets under management). The conversation was about what to say to people about investing in the 401(k). In so many words, is the market so bad that people should stop contributing to their account.

My advice was that while, it may not be the time to twist arms to get new participants or higher deferral rates, it was not the time to tell people to put their money in their matteress either.  Here’s a quick list of some things to consider when you are asked by executives or line employees about whether or not the 401(k) is still a good idea:

1. This is an ethical question, then a human capital one, then a legal one, then a “I want to be able to go into the cafeteria without being pelted with food one.”
2. The ethical issues for you to consider is that these are peoples’ lives and security you are talking about. You need to be fully competent to discuss this. If you need help – get it. It is immoral for you to take opinions that are made up on the fly. If you don’t know what you are taling about – be quiet.
3. There are legal issues. You need to protect yourself and your employer. If the plan does not give investment advise, and it probably doesn’t and shouldn’t, then don’t start now. It is not a great time to initiate that policy. 
4. Consider the impact of your employer match. First if you still have one that is a happy thing. Second do the math. If you even have a modest match of say 50% of the first 6% of compensation deferred, you are doing well. The employee defers $1000.  The match is half of that or $500. If the $1,500 in total drops by 30%, or $450, the employee is still ahead at $1,050 on principle alone. If there is a better match the math is really compelling.
5. If your employee is paying some income taxes, the math improves.
6. If you have not done a professional review of your investment alternatives, that is a bad thing. Get on that now.
7. President Barack Obama said falling share prices may mean bargains for investors with a “long-term perspective.” (Bloomberg.com 3 March 2009).  Before you tell people to not invest, you should be pretty sure that you know that they will in fact not make money – money they will need to retire.
8. Does your play offer some type of professional investment advice – maybe your administrator, maybe a third party like Ayco? If you are in a position of offering the professional services of a Fidelity or Vanguard, a bank or an insurance company that is running the plan – market the hell out of it. They will have the best advice for you and your participants – better than mine.

What did I miss? What is on your list? What are you telling people? The retirement investment market is among the murkiest of all. We should all be thinking about this.

2 Comments | In: benefits | tags: benefits, HR, markets, risk management. | #

If you have any responsibility for benefits or for HR generally – your answer should be only “I know what that is.”

This insurance concept has been in the news recently and has created problems for very sophisticated employers. Companies are being absolutely brutalized by the press over this very common plan provision.

Quickly – third party subrogation is the provision of an insurance policy that says if some other party (the third party) pays a participant for the same claims as your plan – the plan will get their money back from the participant.

Easiest example: My employee is hit by a bus; he goes to the hospital. Our medical benefit plan pays his medical expenses. The employee then sues the bus company and receives damages in the law suit that cover, among other things, those same medical expenses. (At this moment the employee is “double dipping” he has been paid twice for the same claim.) The employer’s medical plan will then seek to be reimbursed by the employee for the dollars the plan used to originally pay the benefits. (No more double dipping.) (Before you start clicking over to EvilHRLady or HRMinion in response to the sheer boredom of insurance theory, please hang on one more moment.)

Third party subrogation has recently hit the news when a large national employer exercised it’s rights under it’s plan. In short form, a woman had a tragic accident. She will suffer from life altering injuries and handicaps. As you would expect she sued the party responsible for the accident and won $700,000 in money damages. The very sad part is that the amount of damages were not very much relatively speaking.

After paying off her lawyers for handling the case, she was left with about $417,000. Problem was, the past health care claims had already run up to about $470,000. Now her employer wanted to make a suborgation claim in that amount. The family fought the company in a very public manner including law suits. Eventually the case was presented to the Supreme Court of the United States (yeah – that Supreme Court). The company “won” there in that the Court declined to hear the case of the family on appeal. The interesting part was that the media has indicated that after winning at the highest legal level in the country the company gave in any way and walked away from the claim.

• A couple of thoughts – I have not mentioned the name of the company. The point is not who they are and their identity really shouldn’t matter. I will not bash them – I think that they were in a tough spot. I don’t know that I would have handled it any better a priori.
• This plan design is similar to just about every company health care plan that I am aware of. It probably is the way yours is set up as well. If you don’t know if yours is set up this way – I would find out if I were you.
• There is also a legal problem the other way. When the plan is set up in a given way, the plan administrators typically have a legal obligation – a fiduciary duty – to operate the plan in accordance with its provisions.  Not doing so can come up on an audit by the government, or if you want to sell your organization and you have to warrant or represent that you are operating the plan in accordance with its provisions. You can evaluate for yourself if that is a risk worth taking or not. The point is that you should know.

Biggest risk however – how about being the Benefits Manager that gets your company dragged through the mud by Keith Olbermann AND the Wall Street Journal. HR is about risk management. Sometimes the risk you manage is the reputational risk of the company. (The Wall Street Journal Health Blog nicely tells the end game story.)

More in a day or so about why this plan provision may be useful to you. In other words, why you might want to keep just the very plan provision that triggered this human and public relations disaster. Until then – what do you think – run the plan or run the gauntlet. Which would you have done?

4 Comments | In: How to do HR, Uncategorized, benefits | tags: benefits, HR, risk management. | #

I think that the answer to HR being better liked, is that we need to be better respected. The key to being better respected is that we have to work on developing a better more integrated character. By extension – we should focus less on talking about ourselves as professionals; stop looking for seats at tables and even less on strategic business partnering. We should work on improved character. I would like to recommend a book on precisely this point – it is one of the 3 or 4 most influencial books that I have read – certainly regarding “how to do HR” and “how to succeed in business”.

The book is integrity by Dr. Henry Cloud. The sub-title says a lot – “the courage to meet the demands of reality”, “How Six Essential Qualities Determine your Success In Business”.

Cloud defines “character” as “the ability to meet the challenges of reality”. Cloud’s “six essential qualities of character are:

1. The ability to connect authentically (which leads to trust)
2. The ability to be oriented toward the truth (which leads to finding and operating in reality
3. The ability to work in a way that gets results and finishes well (which leads to reaching goals, profits, or the mission
4. The ability to embrace, engage, and deal with the negative (which leads to ending problems, resulving them, or transforming them)
5. The ability to be oriented to growth (which leads to increase)
6. The ability to be transcendent (which leads to enlargement of the bigger pricture and oneself)

The namesake of the book, “integrity” is the notion rooted in the need for wholeness around these characteristics. As Cloud says, “Another way of saying this is that while you don’t need all the gifts that exist in the world, you do need all the aspects of character while you are putting your gifts to work.”

I think that the key for HR is that without a more powerful character in this or another similar model, HR looks functionary; lacks credibility with both managers and employees and loses its abiltiy to be a powerful market actor. People who are successful in markets, have to face reality. They never really indulge themselves with “but it should be this way” – it is always about what is.

Want to be that HR person who the business people like – start by having the firmest grip in the room on facing the reality of the situation; then bring your technical ability and HR instincts to bear on that reality. That’s the killer app for HR. Knowing reality – the full reality which includes the market behavior of people inside and outside the organization better than anyone else.

Want to learn how to do it. Read the book: http://www.amazon.com/Integrity-Courage-Meet-Demands-Reality/dp/0060849681/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1210608715&sr=8-1

CAVEAT: Attached is a link to Henry Cloud’s web site. I don’t specifically endorse it even though I am in love with the book “integrity”. The web site is much more oriented to his general counselling business and a religous aspect to his work. Not that it’s not good; it’s just not a topic for HumanMarkets and not anything that I have explored all that deeply. http://www.cloudtownsend.com/

2 Comments | In: HR Strategy, How to do HR, Professional Development, Uncategorized | tags: character, HR, Integrity, professionalism. | #

I am going to do three separate posts completing a thought. This is 1 of 3.

I am pretty sure people hate HR. People here includes workers, CEOs, line managers and cartoonists. Take a look at this video and tell me it is not a statement of distain for HR. CAUTION – This has some mild nudity. Don’t click if you shouldn’t have this on your computer.

3 Comments | In: HR Strategy | tags: HR, Integrity, The Countdown. | #

Neil does HR      Reuters is reporting that a company in Japan is offering a paid leave of absence for people who have been dumped by their boy or girl friends. Wow. FMLA doesn’t sound quite so bad any more.

 TOKYO (Reuters) – Lovelorn staff at a Japanese marketing company can take paid time off after a bad break-up with a partner, with more “heartache leave” on offer as they get older.

Tokyo-based Hime & Company, which also gives staff paid time off to hit the shops during sales season, says heartache leave allows staff to cry themselves out and return to work refreshed. “Not everyone needs to take maternity leave but with heartbreak, everyone needs time off, just like when you get sick,” CEO Miki Hiradate, whose company of six women markets cosmetics and other goods targeted for women, told Reuters by telephone.

Staff aged 24 years or younger can take one day off per year, while those between 25 and 29 can take two days off and those older can take three days off, the company said.

“Women in their 20s can find their next love quickly, but it’s tougher for women in their 30s, and their break-ups tend to be more serious,” Hiradate said.

 You can’t make this stuff up. Read more at this link: http://www.reuters.com/article/lifestyleMolt/idUST8913820080128

3 Comments | In: HR Strategy, Just for fun | tags: benefits, fun, HR, international, japan. | #

When I was young and new in HR I worked for a large department store. I was on my second assignment in a proscribed career path and working in a suburb of Baltimore, M.D. It was about 6 p.m. on a Friday and I was the only HR person in the building. The phone rang it was Security – they had “caught someone stealing and wanted him fired immediately!”

This is not uncommon in retail – many retailers experience half of their theft at the hands of their own employees. The internal security measures and the need for swift, effective disciplinary action is important for the orderly running of the company. Perversely, it’s one of the reasons that retail is a great place to start an HR career – you hire, fire, counsel and interscede – a lot.

Back to this call… I asked what happened. They tell me that an employee was working on the sales floor and took a camera from stock and moved it back into the storeroom but to a place that cameras are not normally stored. In fact he seemed to hide it in the back of the store room. A “stash” if you will where he would be able to put the camera in a backpack.

So here’s my problem… Security picks the guy up for questioning before he puts the camera into any personal bag. It really is not so clear that the camera was in fact hidden, it was put on a shelf and the employee says he was holding it for a customer (the camera was on sale), he meant to write it up as a hold but got busy and hadn’t gotten back to it. Security is adament that HR needs to support policy and that this is stealing because this is not proper procedure. What to do?

I call Corporate HR and thankfully get the top Employee Relations guy in the company – John Witherington (one of the great HR guys of all time). I tell him my story and ask what to do. He gave me the best HR advice I have received – even up to this day.

He waited until I was done telling him my story and he paused. For a long time he paused (I was sure that I had presented him a difficult decision, even for the great John Witherington.) He said, “Bill, this is not black and white – it’s gray. If it was black and white Security could look it up in a book. That’s what you are there for. Make a God Damn decision.” Then he hung up.

It’s been over 20 years since I made a decision that night. Some have been better than others – most importantly however, I have only a very few times, avoided making some decision.

6 Comments | In: Employee Relations, How to do HR | tags: Decisions, Employee Relations, HR. | #