Hiring Freezes Create a Cycle of Failure

March 18th, 2008 by hragitator | Posted in Management | No Comments »

Anyone who has worked in the corporate world for even a few years has probably experienced a hiring freeze. As you might guess from the name, this is where companies stop (freeze) all hiring. Personally, I could never see the logic in this action, even though I understand the causes.Why do companies institute a hiring freeze? There are a variety of reasons, but the most prevalent by far is that the revenue forecast is looking poor and management wants to contain costs. Given that, it seems to make perfect sense to freeze hiring. No new employees coming on, no major increases in expenses. What could go wrong?

photo credit: ollografik

Keep in mind that the reason revenue forecasts are low to begin with probably comes from two sources:

• The economy is turning down, or
• You’re losing to your competitors.

A hiring freeze will not alleviate either of these pressures. If the economy is in a downturn, then a hiring freeze is only delaying the inevitable. You certainly aren’t making things better by refusing to employ people. If anything you’re contributing to the downturn.

If you’re losing to your competitors, it will be very difficult to catch up to them by freezing hiring. If you freeze hiring, you delay or halt projects by constricting their resources. However, no CEO wants to tell the market or customers they’ve delayed or canceled a project, so they freeze hiring because they don’t know what else to do. In fact, when you’re losing to your competitors, that’s when you need to redouble your efforts. Hiring freezes are non-action. They’re a slow steady death. Your competitors aren’t freezing hiring and delaying their projects, so you’re just getting further and further behind.

As you can see, the cycle goes something like this: get behind, freeze hiring in hopes that reducing expense will magically make up for lost revenue, magic doesn’t happen, projects are delayed, customers cancel orders, market responds by lowering stock price, get further behind, continue hiring freeze, etc., etc.

I’m not saying that companies shouldn’t control hiring. They definitely should, but it should be a normal business process not a panicky reaction. Also, consider freezing bonuses, first class travel, expensive dining, holiday parties, company newsletters, etc. before you resort to freezing hiring. Employees may not like this, but they won’t stop working.

If things do get really bad, then don’t freeze hiring (indecision). Be a leader and realize what needs to be done. Cancel projects, lay off employees, and re-structure the business to either work in the current economy or challenge the competitor effectively.

I know it’s not always that clear cut, but a hiring freeze is a disease on your business and often one of the first signs of an imminent demise.

Five Reasons HR Should NOT Report to Line Management

March 17th, 2008 by hragitator | Posted in General HR | No Comments »

For the past decade or more, there has been a significant push in both academic and professional circles to transform the Human Resources function from an administrative unit into something more strategic. HR needs a "seat at the table" is the battle cry. HR needs to become a strategic partner. Some even took it to what seemed to be the next most logical step - have HR report directly out to line management. What better way to become strategic, then to align yourself directly with the business?

While I wholeheartedly support this metamorphosis for HR, I have to disagree with the last step that so many companies have taken. In fact, I strongly disagree with the idea of HR reporting out to line management. So, here are my top five reasons why this should never happen:

1. Line managers don’t know enough about Human Resources. Most managers I’ve worked with don’t know much about HR at all. Some think they do, but those usually think they know everything. The simple truth is that most managers were engineers, salespeople, marketeers, or in some other function before they came into management. It just doesn’t make sense. Why put a person in charge of something they know nothing about? Not just that, but many line managers have grown to dislike HR due to prior experiences.
2. It creates a conflict of interest. Let’s face it, whether HR ever becomes strategic or not, they will still have to be the enforcers and policy police. Someone has to do the dirty work, and it will always be HR. If HR is supposed to be protecting the business from illegal activity and lawsuits, why would you put the most likely offenders in charge of HR? A person is almost always going to do what their boss says first, whether they’re in HR or not. Don’t be surprised when the HR person helps the boss cover something up when they should have been exposing it. Not reporting to the line gives a much needed buffer.
3. It divides the HR function against itself. You now have two kinds of HR people: line HR and "back office" HR. Since they don’t report into the same person any longer, they’re effectively at odds with one another. Line HR wants to pay over the market value to get the best candidate while back office HR wants to maintain a responsible salary structure. Line HR wants to create a job titling system specific to their function while back office HR wants a global standard titling system. I could go on, but I think you get the point. Where they used to work together, they’re now butting heads. Why? Because of the conflict of interest I mentioned above. HR didn’t become strategic, it simply gave the line a formal complaint system. Instead of providing strategic guidance, HR became the lackey.
4. It creates fiefdoms within HR. Once you open this floodgate, it’s hard to turn it off. When you allow the line to take full control of HR, they do what the line does best…expand and bloat. When line HR can’t get it’s way with back office HR, what do you think they do? Compromise? No way! They just create their own back office. That’s right, when compensation doesn’t give you the salary data you want, you simply propose that you need your own compensation person during the next budget. Then, you need your own recruiter when the back office doesn’t send resumes soon enough. Then, you need a training specialist who can focus on your groups specific needs. Before you know it, you have redundancies and bureaucracy galore.
5. It actually weakens HR’s position at the most senior levels. In reality, this approach gives HR a smaller seat at the table at upper levels in the organization. Because there are now multiple fiefdoms of various sizes throughout the organization and each line function has their own HR team, it becomes increasingly difficult to leverage your resources for change or gain agreement on the appropriate action. Why would the line agree to assist in a corporate HR initiative that they disagree with? They have their own HR department that they can do what they want with. It opens up the opportunity for undermining and sabotage.

The thing that frustrates me the most about this approach is that it’s simply not necessary. A good line HR person should be able to do all the things they’re doing when they report to the line without actually reporting to the line. All the change in reporting does is create the problems I’ve described above.

My recommendations for creating a more strategic HR are the following in no particular order:

• Rotate your HR employees into line positions to help them gain experience, so they can really know how to be a strategic partner.
• Rotate your line employees into HR positions so they can better learn and understand what HR is trying to accomplish and why.
• Maintain a strong reporting structure within HR and simply assign employees to work with the line.
• Be more assertive in making recommendations on strategy. Don’t assume that what the line wants is what’s best for them.
• Start slow and build credibility with consecutive wins until you’re sought after. You should earn your seat at the table, not have it given to you.

Its easy to get caught up in trends and consulting advice, but sometimes these things get carried away. In this case, what started as a call to arms ended up as a Pyrrhic victory.

Most Important Interview Technique Revealed

March 14th, 2008 by hragitator | Posted in Recruiting | 1 Comment »

There are many sources of good advice on interviewing for a job, so I’m not going to re-hash them.  However, there is one critical technique that is almost always ignored.  One technique that has personally made a huge difference in my own interviewing abilities.  One device so devastatingly powerful that I caution to even mention it here…but I will anyways.  The key to nailing almost any job interview is this - listen.

photo credit: abbyladybug

That’s right, shut up and listen.  Here’s an axiom that will help you to remember this all important skill:

You can talk your way out of a job, but you can’t listen your way out.

But, you might say, they brought me here to talk to them.  They want to hear me speak.  They’re asking me questions for goodness sakes!  This is all very true, and I’m not suggesting that you can get out of the interview without answering some questions.  However, given the first opportunity to turn it around and start asking some questions, you should.

At the very beginning of the interview, you’re often asked, “Do you have any questions before we begin?”  Most people say no to this, thinking the interviewer is just being nice and many times they are.  I wouldn’t lose this opportunity, though.  You have a perfect chance to control the pace and flow of the interview and dictate where it goes.  Why wait for them to ask you a question?  You have no idea what’s coming.

A better approach is to be prepared with questions on subjects you’re confident in discussing.  Once you ask them a question, they’ll want to answer it thoroughly and completely.  This will then give you time to think of follow up questions while they’re talking.  You want to make them feel almost like they’re being interviewed.  Like you have the upper hand in deciding whether YOU want work for THEM.  Most people feel the company has control in an interview, but only if you let them.

True story, at a very young age I went into an interview with a CVP.  I could have and should have been easily intimidated - the guy made five times my salary!  However, when he said, “Do you have any questions before we start?”, I said, “Yes, perhaps you could tell me a little about yourself and your own career.”

Remember, people love to talk about themselves, and executives are often very boastful.  It’s like an excuse to brag.  Also, it’s a reasonable request.  I just wanted to know a little more about the person I was talking with.  He may have even been a little embarrassed that he didn’t tell me more to begin with.

To cut the story short, 45 minutes into an hour long interview, we were still discussing (i.e., having a conversation) about his career.  What mistakes had he made?  What were his successes?  What would he do differently?  And so forth.  He actually said, “Gosh, we only have a few more minutes, I guess I should ask you a few questions.”  In the end, he saw me more as a peer than a person in need of a job.  I wasn’t desperate, I wasn’t being interrogated, I was almost a colleague.  Yes, I got a job there.

To sum things up, don’t be afraid to use every opportunity to get the interviewer talking.  The more they talk, the better you sound!

How Much Parental Leave Is Appropriate?

March 13th, 2008 by hragitator | Posted in Employee Relations | No Comments »

To start with, this post is geared towards the United States, since the US has a fairly low (12 weeks) legally required leave period. I should also say we need to admit that there should be a balance in parental leave policies between being fair to the parent and fair to the company. It’s easy to look at the company as the million dollar money making machine that’s cold and heartless to it’s employees, but let’s remember that the purpose of a business is to make money, and you can’t make money if you don’t have employees. So, let’s establish that both parties have conflicting but legitimate standpoints.

photo credit: TravelSeminar

That being said, I’d like to make a case for why companies should be willing to allow employees to take reasonable (let’s say 6-12 months) of leave on the birth or adoption of a child.

First and foremost, having a short leave period has a few inherent negative aspects:

• Employees don’t like it and don’t think its fair - unhappy employees are never good for business.
• Companies have two methods, both poor, for covering an employee’s absence - they hire a temp who takes 12 weeks just to be trained or they ask another employee to fill in thus overworking and stressing them.
• Female employees may feel they’ve left their child too soon - why shouldn’t they feel this way? I’ve seen this situation, and I’ve seen an employee be very vocal about about their feelings. This does not improve moral in the department or engender loyalty to the company.
• It just feels icky - the only reason for bringing someone back from a pregnancy quickly is to put them back to work. In other words, it’s a strictly business decision with no regard for human rights.

Now, why should a company have a 6 to 12 month leave period?

• It’s employee friendly - not only does an employee get to spend time with their new born, but they essentially get a sabbatical from work and return fresh.
• It allows the company to hire and fully train a new employee - in most cases, after 6-12 months due to attrition and growth there will be a position available for that employee. Consider it an opportunity to build the pipeline and save on additional recruiting and training costs.
• If you don’t want to hire someone, it serves as a nice excuse to do some job rotations. Sometimes 6-12 months in a new job is a perfect way to jump start a stagnating employees.
• For female employees, they are less likely to quit the company at the end of the leave period. Yes, some companies will try to push a pregnant women out the door or find creative ways to make her unwelcome, but women will sometimes swear they are returning just to keep their benefits, then resign prior to their return date. This door swings both ways. Given a reasonable leave period and humane treatment, of course they will be more likely to return. Why lose an employee if you don’t have too.
• It feels good - shouldn’t you be able to go home at the end of the day and feel good about your job and the company you work for.

I know what you’re saying, “who’s going to pay for this?”. Well, usually short term disability plans will pay for the first 6-8 weeks and employees can often use their remaining paid time off to cover a few weeks. In short, employees can often make it to the 12 week FMLA alottment without taking much unpaid leave. So, why should the company pay the other 3-9 months? Let’s be frank here, companies spend lots of mony on relatively frivolous things like office parties and community sponsorships. I’m not saying companies shouldn’t do these things, but if you asked the average employee whether they’d want a holiday party or extra paid parental leave, I know which they’d choose. Also, you could ethically reduce the employees pay to 66% or 75%, thus making it more palatable from a business standpoint.

In summation, I think it’s time that companies start to weigh their spending decisions against humane ethical policies and practices. Even if the company can’t afford to allow a 6-12 month leave policy, they should ask themselves which is more important, allowing employees to fly first class or giving an extra month’s leave to new parents.

Should Pay Be Linked to Performance?

March 12th, 2008 by hragitator | Posted in Compensation & Benefits, Performance Management | 3 Comments »

One of the most commonly accepted and rarely questioned axioms in all the whole canon of Human Resources knowledge is that pay and performance should be linked. But is this really the best approach?

The logic is simple and that’s why this methodology is so widely ascribed to. It goes like this:

1. Employees are motivated by money.
2. Employees should focus on certain activities.
3. Paying employees for good performance in those activities will drive their behavior.

Let’s face it, this is the carrot and stick argument. Logically, it should work, and it does for very simple tasks that are rewarded immediately. However, most white collar workers have complex jobs and long spans between when they perform an activity and when they get rewarded. For this reason, most bonus programs really only reward or punish what was or wasn’t done, as opposed to driving performance.

Here are some other essentially unavoidable reasons that linking pay and performance usually fails:

• Objectives change mid-year so the employee is stuck with a useless goal
• Something outside of the employee’s control keeps them from reaching their objective
• Objectives are attained without the employee contributing correctly
• Objectives are set at such a distant line of sight that the employee can’t see how they make a difference
• Too many objectives are set, rendering each one individually insignificant
• A few good years creates an entitlement that serves as a punisher during downturns
• A few bad years creates cynicism when employees aren’t paid no matter how hard they work

Aside from all of the issues I’ve outlined above, the most important reason to avoid pay for performance programs is that it robs the employee of the intrinsic joy of doing their work. In fact, it directly interferes with the true intention of performance management. If an employee knows that their bonus is directly affected by their rating, they are much more likely to argue over criticisms and squabble over ratings.

When trying to give constructive feedback to an employee, it is almost impossible to get a person to accept that they need to improve when admitting to such also means admitting they should be paid less. Virtually no employee feels they should be paid less! If an employee’s financial well being is at stake, any manager will have a difficult time convincing them change is needed.

Now, you might say that the loss of income is a motivating factor to do better next time. I disagree. All you have done is de-motivated, depressed, frustrated, and angered that employee. How can you expect that person to bear down and try harder? Sure, there are a few that will, but the majority will spiral downward until they are managed out of the company.

Look at the perfect PM appraisal I proposed. No pay for performance, no ratings, just regular and consistent constructive feedback that the employee has no compelling reason to reject. Focus on increasing productivity!

The Perfect PM Appraisal…One Page

March 11th, 2008 by hragitator | Posted in Performance Management | No Comments »

As software has revolutionized the way company’s do business by streamlining processes and eliminating paperwork, it has also made performance management much more complicated.

It’s easy to get excited about creating fully featured PM processes and documents that cover every possible HR facet. However, this only pushes us farther and farther from the true original intention of PM, which is to increase the productivity of our employees through constructive feedback in order to create a competitive advantage.

Employees and managers get easily overwhelmed by today’s PM software applications. Keep in mind that they didn’t go to school for HR, they don’t go to SHRM conferences, they don’t spend all day working in and discussing HR issues. In fact, most employees and managers cringe when they hear HR or see performance management.

With that in mind, HR departments should take one step back in order to take two steps forward. Start with the appraisal/evaluation document. This should be one page long. It should be hand written. It should be completed quarterly. It should have three sections:

1. What do we expect from you this quarter? (completed by the manager and discussed with the employee at the beginning of the quarter)
2. What did you do this quarter? (completed by the manager and discussed with the employee at the end of the quarter)
3. What should you continue to do and what should you develop upon for next quarter? (completed by the manager and discussed with the employee at the end of the quarter)

Rinse and repeat. No ratings, no bonus calculations, no complicated objective weighting schemes, no confusing software, no time spent on the phone with the helpdesk and away from your job.

This would be universally accepted and understood by employees and managers. It would be extremely easy to administer for HR departments. It would win back some credibility with the line. And, most importantly, it would place the focus on constructive feedback and productivity increases.

Is a Productive Employee a Happy Employee?

March 10th, 2008 by hragitator | Posted in Employee Relations | 1 Comment »

Yesterday, I explored the definition of Human Resources and HR’s role within the company. As a result of that, I concluded that HR should focus it’s time on creating a productive workforce. However, I also hinted that an over-zealous approach to maximizing productivity and minimizing cost can produce some questionable ethical situations. Let’s save most of those for another day, but today, let’s assume that your effectively increasing productivity at your company. Is a productive employee a happy employee?

To hit at the very core of this question, let’s ask a simpler question first. Why does an employee work? Ostensibly, they trade their skills for compensation, which they use to support themselves and their families. This, of course, applies to all workers regardless of the type of work they are doing.

Now, there’s an assumption of a minimal amount of work (productivity) that must be done in order to maintain a job. So, minimally, workers will be as productive as is required to keep their job. However, this doesn’t answer the question about whether a productive employee is a happy employee. All employees should produce something, but that doesn’t guarantee their happiness. I know plenty of unhappy employees.

Let’s now take a closer look at the word productive. In technical terms, labor productivity means “the ratio of a volume measure of output to a volume measure of input”. While excellent for economics analysis, this is virtually useless when assessing the day-to-day activities of the average white-collar employee, since they may be very distant from the actual production of a good. I once had a friend who worked as a contractor testing sales ordering software for a pharmaceutical company. He never saw the sales people, he never saw a lab, he never saw a production facility.

I would suggest this definition of productivity: the extent to which an employee’s activities directly and positively effect the creation or sale of a good or service. Notice I don’t suggest this is directly measurable. Take my contractor friend I just mentioned. If you wanted to quantify the value of his work, you’d have to identify each bug in the software he identified and estimate the value of potential order errors that was deviated by catching the bug. This would be almost impossible and certainly not worthwhile, as it’s not a productive activity in either definition.

What’s your point here, you might ask? Essentially, I’m saying that you have to take a leap of faith that an employee working effectively in the tasks given will be productive. Assuming this, you now need to ask whether or not the tasks given are productive according to the definition I’ve outlined. Much like I suggested yesterday, I don’t think this question is ever asked in business. Corporations have gotten so complex, that the true intention of our being there can be lost. However, if you take the leap of faith and the assumption that the employee is engaged in productive work, then it stands to reason that HR and management should ensure that employees are as efficient and effective as possible in their given activities.

What of happiness, though? A full and complete discussion of happiness is out of the scope of this discussion, but let’s assume for our purposes that a happy employee has the following characteristics:

• They enjoy the work they do
• They enjoy their co-workers presence
• They enjoy working for their boss
• Their environment is safe and fitting to the work they do
• They can see a path for developmental opportunities
• Their needs are adequately met by the pay and benefits given

I think it’s safe to say that if an employee has all of these attributes, they should be happy. I guess that means you are saying that productivity and happiness are not related then, you might say. Well, not quite. The factors above can have a negative effect on the employee (e.g., I hate my boss), but once they’re met, they’re met. None of them will make your employees more than simply happy or content or satisfied.

This means that productivity is a special modifier. In other words, assuming all the basics are met to reach a plateau of happiness, then increased productivity can make the person happier. I would call this the different between job satisfaction and job ecstasy. Most white-collared workers have spent a large portion of their lives training to have the knowledge to do their jobs (college, grad school, professional certifications, etc.), and they want to see the effects of their hard work. Keep in mind they also probably chose their respective field because they like to do it to begin with. So the productivity happiness modifier is “how much am I able to do what I’ve trained to do and enjoy doing.” Just keep in mind it can go the other way as well.

If you wanted to find the true happiness of your employees, you would ask them to rate themselves on a scale from -3 to +3 for the six categories I listed above with -3 being “I hate it” and +3 being “I’m completely satisfied.” Then ask them how productive they are on a scale from 1 to 5 with 1 being “I meet the requirements of the job with ease” and 5 being “I’m doing as much work as I possibly can.” Now add up the scores of the six categories and multiply by the productivity modifier. What you’ll find is that the most unhappy employees are those that have negative scores across the six categories and a high modifier (i.e., I’m unhappy and the work is making it worse) while those with positive scores from the six categories and a high modifier will be your most happy (i.e., I’m happy to have a lot of work, because I like being here to begin with).

I did a quick analysis in Excel here to illustrate my point. Also, please don’t actually ask your employee’s these questions. Not a good idea. I didn’t list an ineffective company, because they go out of business…

The Purpose of Human Resources

March 9th, 2008 by hragitator | Posted in General HR | No Comments »

I can imagine no better place to begin this blog then to attempt to re-define, or at least clarify, the true purpose of the Human Resources function of a business. If you were to ask Joe Employee what HR does, I would guess he’d say something like this:

• “Well, they hire people and fire people and, um, stuff like that.”
• “Uhh, HR gives really boring presentations that wastes my time.”
• “HR screws up my bonus check every year; that’s all I know.”
• “Why would you ask me that? Did I do something wrong? Are you in HR? I have to go!”

As you can see, none of these are very accurate, and what I didn’t tell you is that Joe Employee is the CEO! The simple truth is that HR should (notice I didn’t say does) maximize the productivity of the workforce in a manner that justifies the cost of said workforce. Let’s analyze this a bit further.

If you are an HR person or a manager, ask yourself when you last discussed the productivity level of an employee, department, division, or the company in general. I’ll bet you can’t remember. Let’s get this straight right now: employees produce what the company sells. There’s no other way to look at it. You hire people, so they will produce something (ideas, products, services, etc.) that you can sell for more than what it cost to create. That is the essence of business - sell something for more than it cost to create it.

So, there should really only be four types of employees:

• Creators - Engineers, production workers, etc.
• Sellers - Sales, marketing, etc.
• Support - Employees that help the creators create or the sellers sell; supply chain, accounting, HR, etc.
• Managers - The people who decide who, what, when, where, how, and why we do things, and then see that it gets done

That’s it! All employees fall into those four categories. Duh, you might be saying. How is this relevant. Well, remember productivity? HR people should be asking the following questions all the time. In staff meetings, in ad hoc hallway conversations, on the golf course, behind closed doors.

• What are we creating, and how many people will it take to create it? Why?
• Where and how are we selling it, and how many people with it take to sell it? Why?
• What does it take to deliver the creation, and how many people does it take to deliver it? Why?
• Who is best capable of deciding these things, who is best capable of ensuring they get done (these are very different traits), and how many of each do we need? Why?

If you can answer all of these questions then you will be able to maximize the productivity of your workforce. However, while all of these things are asked separately and distinctly from one another currently (how else would anything get done?), they are not asked by Human Resources; even though HR is ostensibly responsible for their performance and well being.

Now let’s look at the second part of the definition - “in a manner that justifies the cost”. I intentionally didn’t say “while minimizing the cost”. You might argue that they are two ways of saying the same thing, and I might agree…or not, but the reason I delineated this is because of the robotic and sometimes inhumane way in which some people administer the “minimize” mentality.

Let’s look at an example of this. Let’s say engineer one is asking for $80k, while engineer two is asking for $60k. The market calls for $70k. All other things being equal, engineer two looks like a better deal. However, things are never equal. If engineer one was 50% more productive than engineer two, then the extra $20k is more than re-gained in productivity.

This is a silly example, and there are many things illogical about it (there’s very little correlation between pay and productivity), but my only point is to illustrate that “minimize” usually connotes spending less. This over focus on “less is more” is a plague in business in general, not just HR. The main reason I point it out in HR is because “minimize” usually means less money for an employee, which has broad ranging effects, including some ethical ones such as a company’s effect on it’s employee’s families, which are usually not considered.

OK, deep breath. To cap this initial post off, I want to suggest that for one week all HR persons reading should ask themselves this simple question at the end of every work day: did I make the workforce more productive today? If you can’t clearly draw a line between your activities and a more productive workforce, you should re-evaluate your efforts closely.