4 questions of compensation philosophy to ponder

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In the simplest of worlds, an employee effectively performs a set of tasks on an agreed-upon schedule and you pay him or her a fair wage. End of story. But, in the real world, employers need to craft a compensation philosophy: a formal statement outlining their belief system and approach to all the different ways they compensate employees. Here are four compensation philosophy questions to ponder:

1. Do small annual raises for everyone really make sense? Many employers have dropped the practice of spreading around modest (for example, 2% or 3%) raises broadly, because it limits funds available to give substantial pay raises to top performers. Often these raises are referred to as “cost of living adjustments,” but the value of a job doesn’t necessarily move in lockstep with inflation (even when inflation is low).

2. Are you using the right benchmarks? Although salary surveys can tell you average pay levels for jobs in your labor market, they can be misleading. This is because, in your own organization, an employee whose job pays, for instance, $50,000 on average in your community might be worth much more — or less — to you because of factors distinctive to your organization. An employee who understands his or her value to you — particularly when it’s high — probably won’t be content with pay that simply matches a market average.

3. What employee behaviors are you rewarding? It’s important to establish a clear link between the activities you’re rewarding and your strategic goals. For example, if your goal is to raise employee skill levels to equip them to assume greater responsibility, are they rewarded for acquiring those skills, or simply for performing well at their existing jobs?

4. Is your incentive system overly complicated? It may be tempting to devise a bonus system that touches on every possible metric of employee performance. But employees aren’t finely tuned machines that can calibrate their efforts precisely in response to a multitude of incentives. If they feel as though they’re being pulled in too many directions, or don’t really understand the formula, the bonus will lose potency.

After you’ve created, or perhaps revised, your compensation philosophy, communicating it to employees is critical. Craft a carefully written description in your employee handbook. But don’t stop there — train your managers to explain your philosophy clearly while onboarding new hires and when discussing compensation during performance reviews. For more information, please contact us.

© 2019

What does “at-will employment” really mean anyway?

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Many, if not most, employers today use some form of an “at-will” employment contract when hiring. The arrangement is theoretically simple: The employer can terminate the employee at any time, for any cause — with or without notice. But is that what at-will employment really means? Not necessarily.

Common exceptions

For every rule, there are exceptions. Those applicable to at-will employment include:

  • Unlawful discrimination (that is, statutory considerations established under Title VII of the Civil Rights Act of 1964, including age, race, sex or sexual orientation discrimination, as well as other applicable laws),
  • Public policy infringements (such as retaliation for having filed a workers’ compensation claim), and
  • Violation of implied covenants of good faith and fair dealing (such as terminating long-term employees just before they’re due to receive an anticipated financial benefit).

When considering whether to terminate an employee signed to an at-will contract, it’s important to review these exceptions and other mitigating factors with your employment attorney before acting.

Progressive discipline

Even when an employer doesn’t view a termination as being subject to an at-will exception, that doesn’t mean the terminated employee won’t view it as discriminatory, retaliatory or otherwise unlawful and file a wrongful termination claim. So, documented progressive discipline is essential to improving the likelihood of prevailing in court should a lawsuit arise. Typically, progressive discipline follows three steps:

1. Verbal warning
2. Written warning
3. Employment termination

In some situations, there may be an additional step between a written warning and termination —suspension (with or without pay). Of course, there can be problems serious enough to justify immediate suspension or termination — without going through the first two steps. But, along with building a good defense against lawsuits, progressive discipline can often correct employee performance issues early on, benefiting everyone involved.

Probationary periods

A probationary period upon hiring — usually the first 60 to 90 days of employment — may prevent terminated employees from coming back and suing the employer for wrongful termination. But it depends on the worker’s employment status.

If a union’s collective bargaining agreement covers the employer, the employer may be able to terminate the employee during the probationary period risk-free without going through progressive discipline. Most union contracts allow management the right to terminate during this period without fear of a lawsuit.

On the other hand, if employees are hired at will, no similar “contractual right” exists. Consequently, the employer does have the right to terminate without cause or notice — but the ex-employee also has the right to sue. Therefore, you may want to issue at least one written warning before terminating even probationary employees.

Risky business

Hiring can be risky business, so it’s understandable why at-will employment has become so commonplace. But it’s not without its exceptions and complexities.

© 2019

Want to motivate employees? Get back to basics!

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Motivation. It’s a relatively simple word, but encouraging it among your employees can be a challenge. Maybe that’s because, fundamentally, enthusiasm must come from within. It’s not something you can implant in someone externally. For this reason, employers sometimes need to get back to the basics of employee motivation to identify the right ways to inspire their workforces.

Maslow’s hierarchy

Every employee has needs. Some just want to do a good job and go home happy. Others want to earn as much money as possible. Determining what will drive each person may boil down to figuring out what makes him or her tick as a human being.

Psychologist Abraham Maslow developed a “hierarchy of needs” for humanity. Those needs, as they apply to the workplace, are:

  1. Physiological: Being able to earn enough to acquire food, shelter, clothing and other survival necessities is usually an employee’s most basic need.
  2. Safety: Having a secure and non-threatening work environment, safe equipment and job security is the next most basic need.
  3. Social: Once physiological and safety needs are met, employees typically are looking to fulfill higher-level needs. The first of these is generally positive relationships with managers and coworkers and feeling like part of a team.
  4. Ego: Being recognized and rewarded for good performance is considered the next level of need.
  5. Self-actualization: At the top of the hierarchy of needs, when it comes to the workplace, is realizing dreams by using one’s talents and potential.

By figuring out where your employees are on the hierarchy of needs, you can determine the best ways to motivate them.

Team behavior

Let’s assume that your organization is meeting at least the two most basic levels of employee needs. That means it’s time to focus on the socialization level — making sure your employees feel a sense of belonging. First, use strategic communication (such as conferences and meetings) to share goals and performance information. Provide employees with feedback to make them feel they’re contributing to these goals and the organization’s success.

Team behavior should extend throughout the organization. Remind managers that excessive competition between employees defeats teamwork and may even damage customer service. Motivating employees to take initiative and challenge themselves achieves better results.

Let employees know they’re important team members. Something as simple as greeting people by name can make all the difference in the world. Also, be sure to thank individuals and departments for their hard work and reward their contributions.

Of course, employees need more than “hello’s” and “thank you’s.” Build on the positive work environment you’ve created through effective HR strategies, positive discipline, fair treatment and clearly defined policies. Augment these efforts with training and reward programs, fair appraisals, competitive pay, attractive benefits, and occasional team-building activities.

Consistent effort

It’s hard to pinpoint what will motivate every employee. But, by and large, employees want to take pride in their work, feel like they’re part of a team and receive positive recognition from management. For other ideas and information, please contact us.

© 2018

Help Employees Take Flight with a Performance Management Pilot Program

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Many years ago, “performance management” was a supervisor giving orders to an employee and the employee trying to follow them. But as the workplace has evolved and employers have sought to get a greater return on investment in human resources, the concept of performance management has become much more complex.

Today, performance management is a formal and multifaceted system for setting goals, soliciting feedback, generating documentation and ensuring accountability for productivity outcomes. As you might imagine, anything so intricate has a high risk of malfunction or even outright failure.

One way to guard against such disappointment — whether your organization is launching its initial performance management system or relaunching it after major renovations — is to conduct a pilot program.

People and time

Because employee trust and confidence help generate cooperation, the pilot program should start with employees and managers who believe in the benefits of change. This group can pinpoint problems and help improve the system. In short, they’re its champions. The performance management system, amended through their feedback, will be more likely to disarm the skeptical or those clinging to old performance-management styles.

Another critical aspect of a pilot program is time. Organizations often spend a substantial amount of it researching performance management, consulting with outside experts and designing the program. But then they rush to launch and the entire initiative ends up a confusing, disappointing struggle.

That’s why you should set aside a period of months, maybe even an entire year, to test the system with committed participants, analyzing their feedback and making adjustments.

Just one example

What sorts of problems might an organization discover during a pilot program? Let’s say fictitious Company X launches a performance management pilot program and almost immediately learns of a critical snag.

Namely, it realizes that its objective-setting form will likely be a major source of frustration for employees and their managers. The form is a means of documenting information such as annual objectives, individual development plans, and supervisors’ assessments. In other words, it’s intended to ensure employees are following the performance management system’s essential components.

Although some pilot-program members are comfortable with the form, others describe it as taking on a life of its own. The detractors say it’s too long, much of its wording is vague or confusing, and the design makes it hard to read.

On the bright side, the pilot program’s participants overwhelmingly embrace the new system’s fundamental principles. So, before rolling out the performance management program to everyone, Company X acts on these results by shortening, revising and redesigning the objective-setting form.

Their best work

Launching a performance management pilot program can truly help your employees take flight and do their best work. In addition to identifying minor design flaws, it can help the design team learn the underlying organizational barriers to performance management and continuous improvement. To discuss further, please contact us.

© 2018

3 Critical HR Metrics for Employers

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Many employers routinely watch key financial metrics, such as current ratio and gross profit. But these aren’t the only measures you should consider monitoring. Recent years have seen the emergence of vital human resource (HR) metrics. These measures can help your organization make better-informed decisions about human capital, operations, and overall strategy. Here are three examples of critical HR metrics:

1. Turnover

The turnover percentage is calculated by dividing the number of terminations (voluntary and involuntary) for a specified period by the average headcount and multiplying that number by 100. Turnover is a good indicator of your company’s culture and health overall, but you also can apply it on a more granular demographic level.

Looking at turnover for your high performers or Millennials, for example, can give you valuable insight on how well you’re managing these employees. High turnover among new hires could suggest problems with your recruiting or onboarding processes.

2. Average time to fill

This metric is useful in assessing the efficiency of your recruiting process. It’s calculated by dividing the amount of time it’s taken to fill all roles (that is, the total days all positions were open) by the total number of openings filled.

Higher numbers might signal that the application or interviewing process is too long or that the candidate qualifications are subpar. They also could reflect the need to improve your employer brand.

3. Average time to productivity

It’s one thing to get the right people in the right jobs; it’s another to get them contributing to the company. Time to productivity tells you the average number of days it takes for a new hire to meet a satisfactory productivity level.

The measure is determined by totaling the number of days from start to the minimum desired level of productivity and dividing that figure by the number of positions filled. Time to productivity provides not only a window on your recruiting and onboarding, but also useful planning information regarding, for instance, how quickly you can ramp up production of a new product, service or project.

The appropriate HR metrics for an employer to track will depend on its individual circumstances and goals. Once you identify the most relevant ones, you can move forward on a proactive, real-time basis — as today’s fast-moving, data-driven world demands. We can help you identify and accurately calculate the optimal HR and financial measures for your organization.

© 2018

Which Employees are Truly your MVPs?

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Every year, when baseball season finally ends, a most valuable player (MVP) is named in each league. Not everyone agrees on the choice; in fact, it’s something fans love to argue about. But eventually the two players receive their awards and their names go into the record books.

Can you name your organization’s MVPs? (You probably have far more than one or two.) A common assumption is that the highest-paid person in each department is the most valuable. But this isn’t always the case. Identifying your true MVPs can help you make optimal employment decisions ranging from hiring to retention to compensation.

Identifying the highly skilled

One insightful framework for taking a fresh look at your workforce is the Lepak & Snell model. It’s a four-quadrant, skills-based paradigm dividing employees by value of skills particular to your organization and the skills’ uniqueness in the labor market. Each employee’s skills will fall into one of four quadrants:

• High value, high uniqueness

• High value, low uniqueness

• Low value, high uniqueness

• Low value, low uniqueness.

Assess where your employees’ skills fall on the value spectrum based on criteria most pertinent to your mission, such as the ability to:

• Lower costs

• Increase revenue

• Strengthen customer relationships

• Foster team collaboration

• Offer creative ideas

• Solve problems

The uniqueness spectrum depicts the degree to which employees’ skills are narrowly applicable to your organization, and, thus, harder to find in the labor market. Let’s say you produce a distinctive, expensive and complex product. It takes years for employees involved in the production to develop the necessary talent. Those employees will be rated highly on the uniqueness spectrum. The same principle is applicable to specialized services.

Looking at organizational structure

The purpose of the framework isn’t solely to categorize your current employees. It’s also helpful in organizing your workforce structure by job function. You can create a generic organizational chart by department or by division and assign job titles and functions to the four quadrants.

For example, a sales manager position might require an employee who qualifies as a critical employee. But you’ll likely need employees representing all four quadrants in most if not all departments.

After you’ve applied the Lepak & Snell model to your organizational chart, look for inconsistencies. Are some departments understaffed in terms of skill? Overstaffed? If so, why? Is any action warranted, either in the short or long term?

Above all, identify your criticals. Putting these employees at the top of your retention priority list makes sense, as does looking to hire — or train — more highly skilled workers like them. They are your MVPs.

Analyzing and quantifying

The Lepak & Snell model may not be the “be all, end all” to understanding your workforce. But it, if nothing else, can provide a fresh view of it. Our firm can provide more information on ways to analyze and quantify the value of your employees.

© 2018

4 Tips for Creating an Apprenticeship Program

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A shortage of skilled workers is a real concern in some of the nation’s largest industries. If you fear your business could find itself struggling to fill positions, one way to lay the groundwork for a solution is to create an apprenticeship program.

Apprenticeships are paid positions that focus on gradual, step-by-step training aimed at creating fully realized, often certified workers. By creating such a program, you can “stock the waters” with quality employees who are not only proficient in their professions but also invested in their industries. Here are four tips for getting started:

1. Think it through. Discuss your apprenticeship strategy with both your business’s leadership and your rank-and-file employees. Address questions such as:

• What are our biggest hiring challenges for technical jobs that don’t require a college degree?

• Do we already have employees who could participate in an apprenticeship program?

• How will our business change in the future and which skill sets will we most likely lack?
Ideally, your program will focus on the specific types of skilled workers who will be in shortest supply in the years to come.

2. Look for partners. Successful apprenticeship programs often involve collaboration among various partners. These may include:

• Other similar businesses or organizations

• Industry or professional associations

• Labor organizations

• Educational institutions (for example, community colleges)

• Public agencies (such as police and fire departments)
The partner organizations can help you design the apprenticeship, provide some of the educational resources and assist in finding the apprentices themselves.

3. Build the engine. An apprenticeship program is like an engine — it will have many moving parts. To build your engine, start by identifying who will fill the leadership roles within your existing staff. Every program needs a champion (or several). Also, pinpoint who will provide the on-the-job training to each apprentice — these may be people different from those who are leading the program.

From there, anticipate where participants will receive “related instruction.” Most apprenticeship programs involve learning that takes place outside of the job itself, including classroom-based training. In addition, look into how you’ll allocate funds to compensate and reward apprentices as they achieve key milestones.

Last, but not least, target the end game. That is, define the point at which the apprenticeship will be completed and what type of certification might accompany it.

4. Consider registering the program. You can register your apprenticeship program with the U.S. Department of Labor. Doing so will place it within a network of registered apprenticeships that offers access to additional expertise and support. Your graduates will receive a national, industry-recognized credential, while your business may qualify for tax breaks at the state and/or federal level.

The challenge to obtaining federal registration — as well as to creating any effective apprenticeship program — is establishing and adhering to high-quality standards for training, education, and administration. We can help you assess the concept and determine whether it’s financially feasible for your business.

© 2018

2018 Q4 Tax Calendar: Key Deadlines for Businesses and Other Employers

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Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

October 15 

  • If a calendar-year C corporation that filed an automatic six-month extension:
    • File a 2017 income tax return (Form 1120) and pay any tax, interest, and penalties due.
    • Make contributions for 2017 to certain employer-sponsored retirement plans.

October 31

  • Report income tax withholding and FICA taxes for third quarter 2018 (Form 941) and pay any tax due. (See exception below under “November 13.”)

November 13

  • Report income tax withholding and FICA taxes for third quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due.

December 17 

  • If a calendar-year C corporation, pay the fourth installment of 2018 estimated income taxes.

© 2018

Supervisors Promoted From Within Call for Special Care

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When a supervisory position opens up, your immediate reaction as an employer may be to post a job opening to the general public. But don’t underestimate the value, efficiency and cost savings of an internal hire from your non-manager ranks.

Although promoting from within isn’t always feasible, when it is, you’ll likely be boosting that employee’s loyalty, eliminating (or greatly shortening) the onboarding process, and saving dollars on hiring costs. But, if you take this step, be prepared. These new supervisors typically need special care to avoid rocky transitions.

Cover the basics

Don’t make the mistake of promoting an employee to supervisor and then immediately moving on to other priorities. Most newly minted supervisors, no matter how strongly they performed in previous positions, will need some training and mentoring to grow into their new roles.

What specifically might they need? First, reflect upon your own experience for some ideas. If you had a smooth transition to a supervisory role, what made that possible? If it was a bumpy road, what would have made it smoother? Basic subjects that should be part of a supervisor boot camp include:

• Employee goal-setting

• Performance assessment

• Performance management

• Conflict resolution
Also, leadership training will be needed to supplement the nuts-and-bolts topics.

Assign a mentor

In devising a training program, you can’t anticipate every stumbling block a new supervisor will face. So, it’s important to give that person a mentor who, ideally, has made the same transition.

Putting some structure around the mentoring program at first — such as a scheduled weekly check-in session — can give rise to important discussions that might not otherwise take place. These check-ins don’t need to go on forever; three to six months may be all it takes.

Prepare for the worst

Unless the new supervisor will be moving to another department, prepare him or her for the challenges associated with becoming the boss of former co-workers. Just to name a few:

• Resentment from employees who believe they should have gotten the promotion instead of the person you chose,• Efforts by former co-workers to exploit friendship with their new boss by asking for or expecting special treatment, and• Difficulties the new supervisor may have in delivering honest but critical performance appraisals to former co-workers.
It will be tempting for new supervisors to downplay their authority over former co-workers. But they need to understand going in that there’s no getting around the fundamental change in the relationship. That change will probably require a cutback in purely social interaction with their former co-workers.

Give it a shot

The good news is that, if you have chosen wisely, a new supervisor will be able to surmount these hurdles. And the potential benefits can be striking. Our firm can provide more information and other budget-smart hiring ideas.

© 2018

Behavioral Job Interviews Offer a Glimpse of What Could Be

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Once an employer identifies a prospect for an open position and sets up an interview, another great challenge arises: How do you effectively use the interview to determine whether this person is right for your organization?

One way is behavioral interviewing — a technique in which you frame your questions to candidates to elicit real-world stories from previous work experience. The answers your interviewees give can offer a glimpse of what could be.

Examples to consider

It’s important to structure your questions so that the candidate can’t reply with only a “yes” or “no” answer. In some cases, your “questions” might not literally be questions.

For example, if you’re looking for a customer service rep, you could say, “Tell me about a time you’ve had to handle a dissatisfied customer.” Look for detailed responses that appear honest and heartfelt.

Or let’s say the open position is for a manager or executive. You might ask something along the lines of, “Talk about a situation in which you were asked to do something or tackle a strategic objective that tested your personal values. How did you react? What was the ultimate result?” Listen for how the candidate describes his or her value system and what steps he or she took to resolve the situation.

Best practices

When coming up with behavioral interview questions, begin with the job description. (If it hasn’t been updated in a while, you may want to do that first.) Be sure the queries you come up with are relevant to the duties and skills listed in the description, as well as the challenges the candidate will face if hired and the culture of your organization. To keep the interview from going too long, devise, say, three to five questions that will offer the most insight.

Instruct your managers to use identical language and present the questions in the same order to interviewees. Consistency is key when trying to weigh applicants’ responses against one another.

More revealing

Behavioral interviews may take a little more preparation than a more ad hoc, impromptu approach. But many employers believe these types of questions reveal much more about how an employee will perform when on the job. Our firm can provide more information and ideas.

© 2018