September 1, 2009

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Human Resources


Human Resources

September 1, 2009

Utah’s human resources and staffing professionals are proving their worth as companies face employment woes during today’s rough economy. Our human resources and staffing experts discussed compliance issues, immigration changes and creative, nonmonetary retention tools. The group also discussed the importance of human resources as a profession and its place in Utah’s business landscape. We’d like to give a special thank you to David Cherrington, professor of organizational leadership at Brigham Young University, for moderating the discussion and Holland and Hart for hosting the event. Participants: Daniela Jex, TEKsystems; Lora Lea Mock, Professional Recruiters; Scott Driggs, Driggs Search International; Von Madsen, ARUP Laboratories; David J. Cherrington, BYU; Neal Summers, Kelly Services; Jeff Herring, State of Utah; Clark Merkley, Employer Solutions Group; Clark Cotterell, Management Recruiters of Salt Lake City; Lois Baar, Holland and Hart; Brad Fagergren, Innovative Staffing; Nina T. Brollier, Workers Compensation Fund; Monica Whalen, The Employers Council; Matthew Yack, OrangeSoda; Leslie Hacket, Express Employment Professionals; Kristine Price, TEKsystems What is the status of human resource management as a profession? How well respected is the profession in today’s corporations? MERKLEY: I’ll give you a perspective on small- and medium-size employers. I think the economic downturn has really brought the fact that many employers don’t think HR is necessary. HR is being cut in a lot of companies, pretty drastically. Many companies are saying, “HR is not core to my business strategy. It’s not core to my production. It’s not a money generator. So we are looking to outsource it.” Those companies then come to HR outsourcing companies in pretty dramatic numbers and, frankly, are looking for a cost-effective solution to HR. Those companies say, “I know I need to stay out of trouble. I know I still need to do some key things with people, but we are cutting out HR.” Unfortunately, the people and companies that are cutting HR don’t recognize the key strategic value of human capital management, meaning the only way you make money as a company and the only way you provide the services you do is through people. So it’s still important to get the right people on the bus and get the right people in the right seats. Those companies tend to be pretty shortsighted when it comes to real financial pressure. Unfortunately, we’ve seen a lot of that due to the economy. DRIGGS: What I have seen recently is you have HR professionals who have been in business a long time and are with companies making a good salary. Now, because of the economy, the company lets them go because they want someone at a lower level. They still want someone in that HR role, but they want someone who’s not quite as expensive—someone who has maybe two to three years of experience. More of a generalist type person who can handle maybe a lot of different things, but at a lower cost. MADSEN: On the other hand, I have heard and read many business experts lately saying, “Your best friend in the corporate world is your HR person.” So I think there’s a balance—there are some executives who say you need to kill the HR department, but there’s also the executives who say you can’t live without them. The executives who realize the importance of HR understand that the only way a company gets anything done, the only strategic value that’s added by a corporation to the marketplace, is through its people. It’s the only real strategic way that a company can differentiate itself from the competitors. HERRING: I think it depends on the organization. If you take a look at HR as a compliance regulatory function and that’s how your other C-level people see it, then you’re not viewed as very important. If you see HR as providing quality services and customer service, then the human capital will sell itself. What won’t sell itself is just the management of the human capital. HR is important, not just because HR executives are people-people or the office cop, but because they can read the financial systems, they can go into the financial data and have that conversation that’s occurring with the other C-level employees about the budget and how human capital plays into it. Overall, it depends on how the other C-level executives are using HR. MERKLEY: We are doing a lot of counseling with companies that are doing layoff analyses. First it starts off with cost reduction and revenue generation analysis. And then the companies say, “We need to do layoffs, because that’s where we can get a lot of bang for our buck early on.” So, they use layoffs as a method to weed out people who aren’t the top performers in the organization. We have them rank employees in the organization based on the values those employees bring. We advise them to take it two ways. The first is to take it from the top down, asking, “Who are the people you absolutely need to make the operation run?” And then take it bottom up, asking, “If you were building this organization from scratch, who are the key people you need.” And no matter how you do it—top down or bottom up—the HR staff tends to fall at the bottom. Not the absolute bottom, but still, at the bottom of the list. I think it is a sad commentary because if you are really good at human capital management and good at getting the best out of people, you are going to have a competitive advantage. But a lot of organizations don’t see it that way when it really gets tight. I think every company has gone through this analysis over the last year. And, unfortunately, HR tends to fall at the bottom. WHALEN: I think that human resource professionals are responsible for their own job security. And to the extent that they have only been a cost center, they are putting their job security at risk, especially in these tough economic times when every company is looking to trim costs and be as efficient as possible. When the HR department was focused on sourcing and recruiting and putting the needed bodies on the line, that was a cost that employers could live with because they saw the value in that. When bad economic times hit, if that’s all the HR professional grew into, then that’s a cost employers don’t need because they are not hiring right now. So the HR professionals themselves, I believe, are partly responsible to make themselves invaluable to the organization. It’s no secret that human resource departments generally are a cost center. So they need to show the value that they bring with the human capital impact that they can have on an organization. I’m also finding that many CFOs are most focused on the return on investment. They think, “What type of human professionals do I need? How many do I need to stay in compliance?” They are still very worried and as new laws are passed and new revisions to laws that we have all been working with are passed, they know they need to stay in compliance. So, they want somebody who can keep them in compliance. But overall I think that they are looking at perhaps an executive level HR person and saying, “I don’t need somebody in the six-figure range. I need a sharp, educated, go-getter who can find the answer and pay them half that price.” On the other hand, I think that what human resource professionals then need to do is make sure that they are demonstrating and tooting their own horn, bringing focus to their own impact that they are having, because I absolutely agree the only way we get things done is through the people. And it is so critically important to understand that people are valuable and that’s the real value that human resources can bring to an organization—not only the recruiting, the hiring and the staffing, but then the retention, the motivation, the engagement and, most importantly, the training and coaching of the managers and the supervisors regarding how to be excellent managers and supervisors. We all know, bottom line, if your talent walks out the door, more often than not they are not quitting their job, they are quitting their supervisor. So human resources can bring tremendous value by making sure that the supervisors and the managers in the company are the very best they can be in relating to their employees, because that’s key to keeping your talent. BROLLIER: I agree with Monica [Whalen] that sometimes human resource professionals have been their own worst enemy over the years in focusing on the turnover and the numbers and just hiring warm bodies and pushing the paper and things like that. In order for human resource professionals to really get at the C-level and meet with senior management, they have to have the initiative to really learn the business and learn the problems that the business faces and how that impacts the people and how the people, depending on their performance, can help make the company successful or not successful. I think what human resource professionals should now be trying to do is to be smarter about the business as a whole, and develop that whole perspective about the challenges and to help the C-level people and the supervisors and managers understand how to bring out the best in people, and teach the managers how to really coach and bring out the best. And then when there are situations where the company is saying, “We have to reduce 10 positions, where are we going to do it?” the human resource professionals, through their work with the managers in performance appraisal and how each department is doing, can help the C-level understand where the cuts will have the best impact. The human resource department can also be the voice of the people. And that goes both ways: sharing what senior management expects and sharing what employees are feeling and thinking. Some of you are employment recruiters. Do you get requests to fill HR positions at high levels? MOCK: Over the last year, we are seeing a lot of HR people who are making $130,000 to $150,000 lose their positions. They are out on the street and companies are now replacing them with HR employees who earn $70,000. I think it’s a function of the economy. I think companies value their human capital more in a stronger economy. It all goes back to supply and demand. When it’s hard to get human capital, companies value the people who bring the human capital to the table. When the economy is weak, companies don’t value that as much. FAGERGREN: I think the reason that HR is kind of perceived as the office cop or being called into the principal’s office is that HR professionals don’t take a strategic approach. I think sometimes we are just focused on compliance, but I think our job goes beyond that. I think HR needs to be strategic and to look for ways to create value and to keep in line with the mission and the goals of the organization. I think as HR looks for ways to work with the managers to provide training and to be flexible with their needs and look for ways to be strategic with the goals of the company, it’s going to get to that point where HR will have a seat at the table with the executive team. You are not going to be perceived as kind of a watchdog or the office cop. It is important that HR professionals really look for those ways that they can provide the company real value. Is there anything unique or different with respect to Utah’s HR industry as opposed to the rest of the nation? COTTERELL: I do a lot of business outside the state, and I think one of the differences I see when comparing the HR role in Utah companies to the HR role in companies outside of the state is that HR here plays a more influential role in companies—mainly because the majority of businesses here are smaller. Where you’ve got larger corporations, there is more bureaucracy, more departments. But as far as really driving and being a part of the solution, as opposed to compliance and some other things that have been talked about here, I think just given the nature of business in Utah, HR tends to be more involved and they really help drive the business. DRIGGS: What I have seen here in the state from a recruiter perspective is that HR is a little more involved in some of the small- to medium-sized businesses. In those companies, HR is looking to make that impact in the company, so there’s more negotiation in our fees, for example, here in Utah than there is elsewhere. It’s easier for me to negotiate a higher fee outside of Utah than it is here in Utah. COTTERELL: All companies are trying to save money right now. What we’re seeing is HR professionals are becoming a little bit more desperate, trying to do anything to be relevant in their company, but sometimes it’s counterproductive. There is a lot of talent on the street right now, but it’s not the impact players that you are finding. It’s those who were laid off for a reason. Sometimes HR thinks, “Well, we can save money by going online and seeing these unemployed people.” In reality, the best people are still those who are employed with your direct competitors. And if companies are paying 15 percent for a fee as opposed to the more traditional fee rates, they are going to get what they pay for. MOCK: Don’t you think, though, that because the Utah unemployment rate is three some-odd points lower than the national unemployment rate right now, that here in Utah we are still seeing HR as more of a key player than perhaps you would in Rust Belt States or other places where there’s very, very high unemployment? The issues in those states are, “How do we cut?” Instead, the issues here in Utah are that we have a lot of companies that are still building here in Utah and have been actually, quite contrary to the national trend, profitable. I think that a lot of that has to do with the fact that we do have a lot of smaller businesses, but our economy has been a much healthier economy. No, we don’t have the high highs, but I don’t think we are seeing the low lows. MERKLEY: I’ve done HR outside the state of Utah, so I noticed the contrast when I came here. And I also noticed the contrast when I went from Salt Lake City to Provo to rural Utah. The cultural homogeneity of Utah, religious or social, makes it very difficult for managers to address HR issues head on. For example, I was recently doing some training on how to deal with difficult employees, an issue that needs to be addressed head on. In the session, I said, “You are managers. I know you are going to see your employees at the grocery store and see them at church. They might be your cousin or your sister’s best friend. But, you still have to address these issues with your employees. Most employees want to be good employees and be productive, and they need feedback in order to do that.” In the session, they came back to me and said, “It’s really hard to manage them when you know them on a personal level. It’s extremely hard to do.” So, with Utah having these pockets of homogeneity, that’s an example of how HR is really different than other areas—it makes it a very difficult HR environment. In other places I have worked, religion, for example, never played into my role. Even in small towns outside of the state of Utah, there were enough differences in the culture that if they had to address an employee issue they could, even though they are going to see that person at the grocery store. So, that’s something that is a little bit different about Utah that I have noticed coming into the state five or six years ago. BROLLIER: I have noticed that, as well. I think Utah employers are very caring and there is a very closed group—what becomes almost like a family group of people working together. This makes it very difficult for managers to address a performance problem or some behavior problem, because they don’t want to hurt the individual’s feelings. And it does make it very difficult for HR to help those managers understand that they are going to help that person be a better employee and better neighbor outside if they do address those issues. JEX: One area where Utah is ahead of the rest of the nation is our work/life balance. Utah employers understand the importance of balancing work and life. WHALEN: I see three hallmarks of the Utah business community. The first one is that we have a very large presence of family-owned businesses. And we are in our second, third, fourth generation in some of these businesses. That does foster more of this communal family and feeling of, “let’s take care of each other.” The second hallmark is that Utah is very fiscally conservative. Utah employers don’t want to spend money unless it’s necessary. And the silver lining is that that way of thinking has led to us to not have the high highs and the low lows; instead, we maintain a position of strength during these economic times. The third hallmark is Utah businesses in general don’t tend to get involved in political action, letting their voice be known on issues that can greatly impact their businesses. Health care is a huge issue, but very few businesses in Utah are banding together to really let their voice be known. It’s been very difficult to get Utah businesses to pay attention to the Employee Free Choice Act which is one of President Obama’s priorities. And that would significantly impact the relationships between management and employees in the state of Utah as well as across the country. So I find in other states, primarily outside of the West, that those businesses are much more likely to flex their muscles and get involved in voicing political agendas. They are a little bit looser with the purse strings, and they tend to not focus as much on we are all one big communal family and taking care of each other. How are you handling today’s rising health care costs? HERRING: Employees are really starting to care about their health benefits more than ever. We did a survey of our 20,000 state employees. One of the questions we asked them was about health benefits. A lot of the answers were very generational biased or staggered in the pension plans versus the defined contribution plans. But health insurance was listed as the top benefit for all generations in our workforce. PRICE: Education is important to the rising health care costs. One of the things that we have done as a company is we have really focused on educating our employees about their health care option. Multiple times during the year, we have an internal survey where we go out and we survey all of our employees. And one of the questions we ask is, “Do you understand your health care plan?” Another thing we do is we invite the spouses into the office and we say, “Do you understand your HSA? Do you understand the difference of taking your child to the emergency room or to an Instacare?” And then we say, “Here are the Instacares in Salt Lake City that you can go to.” So it’s an education process. MERKLEY: I’d like to add that the education part doesn’t really take that long. All employees have to do is see one emergency room visit that they have to pay for a hundred percent of it and they go, “I’m not doing that again.” And it really gives people transparency as to what their true costs are. How is immigration impacting the HR profession? Do you have any ideas or suggestions of things that we should be doing differently regarding immigration? MERKLEY: With the economy down, the issue of employing illegal immigrants has dropped off dramatically, mainly because a lot of people have gone back to their home countries. But, there’s still an immigration issue. BAAR: The new state law is that if you have any state contracts or subcontracts, then you have to e-verify your employee’s legal status. I think it’s not bad legislation, but it’s not good legislation. WHALEN: I think it’s a Band-aid. It doesn’t solve the problem. For employers, there’s sort of two sides of the coin. One problem is finding enough labor willing and able to do the work for the price we can afford to pay it, and labor with the education and the background and the talent we need. Right now there is a huge crisis with H-1B visas—there simply aren’t enough offered. These visas will help people who are trying to come here and work legally, specifically when there is no American worker able to fill a position. So that’s one of the issues—that our economy is driven by a necessary steady stream of available labor at the right price. The other issue for employers is that we are finding that the noose is tightening around our necks on the compliance issue part of it. When we are looking at undocumented workers, we want to comply and not get ourselves in trouble by inadvertently or purposely hiring people who are not authorized to work. And the government focus right now is on worksite enforcement. It’s on holding employers responsible to make sure that there aren’t undocumented workers on their payroll. And so that’s where some of the new legislation that we are hearing, not only Utah’s new immigration law but the federal contractor requirement to use e-verify is focusing on employers needing to be held more responsible to make sure that you are hiring people who are authorized to work here, and then using systems to make sure the workers don’t remain on your payroll once their authorization expires. But I think it is hugely impacting Utah employers. Every day for the last two weeks my phone is ringing from employers who have received letters from the Department of Workforce Services saying, “There’s something wrong with the name of the employee and the Social Security number that you submitted on your quarterly wage report for unemployment tax purposes.” This is not the proverbial “no match” letter from Social Security. This is not a notice from ICE that somebody has complained that you have illegal workers. This is a state agency that is now, through the collection of information on taxes and wages for unemployment insurance benefits, getting information. So, employers are calling every day because these letters are being delivered and being opened and it’s hitting the executives’ desk and the first thing they are thinking is compliance. I agree that there’s less of a concern because we don’t have as many foreign workers in Utah right now with the economy, but it’s still a huge compliance issue that’s keeping HR professionals and business owners up at night now, and really impacting Utah employers. What other employment issues do companies need to be concerned with? BAAR: I think wage-an-hour issues pose the biggest risk for employers right now. MERKLEY: I agree that wage-an-hour issues are growing. All it takes is somebody to drop a dime saying, “I’m a hairdresser, I’m not declaring my tip wages and I should be paid overtime for all the hours I worked.” There’s more money being poured into it from the Federal Government to do enforcement. So overtime, minimum wage issue is a big problem. BAAR: The class actions are the most lucrative work for plaintiff’s lawyers. Even if workers are only working an extra half an hour a day, it adds up. There is a lot of confusion about where the day starts, off-the-clock time or off-the-clock work, exempt classifications, computing overtime and whether a bonus is discretionary or not discretionary and should be included in the computation of overtime. All these family businesses that you were talking about earlier have things that they have been doing over the years that they continue to do. So, if you run a drywall business and you send people out of the state and you give them $100 as a little premium because they are having to go out of state to do the work—well, should that be included in the overtime computation for that week? The answer is yes. So, all of those things really create a lot of risk for employers. And most employers aren’t paying attention. Wage-an-hour issues can cause a lot of trouble and need to be understood. How do you promote a good work/life balance in your business? MERKLEY: Flexible work arrangements are still relevant in today’s economy. The reason is it’s so important to keep hold of the good employees that you have. Many companies are thinking, “Well, we are going to do an across-the-board pay cut and tighten down on all these things we have spent money on.” But you still have to have good people to make your businesses run. The last thing you want to do is be inflexible with the people that provide value and generate value for your company. Even if times are difficult, the only way you are going to get out of the difficulty is with good people. And the only way that you are going to position yourself to be successful in the future is with good people. So you have to take care of the good people who you have and be as creative and flexible as you have ever been. WHALEN: I would agree. The Employers Council has prided ourselves on the flexibility that we afford people in our office. And a lot of times when you first present ideas about work/life balance and flexibility, telecommuting, compressed work weeks, the executives say, “We can’t do that. It’s so crazy—it’s so out of the norm. We couldn’t possibly do that.” And I say, “But you already are doing today things that you never thought you would do years ago. You already are doing things with wages and hours that you never thought this company would ever do. So isn’t it potentially possible that somebody could work from home one afternoon a week? What about having somebody come in at 10:00 a.m. and stay until 6:00 p.m. and other people come in at other hours to avoid the commute crunch?” Employers need to realize that now is not the time to say, “We can’t do that. We have never done that before.” Now is the time to find even more creative ways to help people strike that work/life balance because everybody is stressed out with the state of the economy. It’s not only stressing out your CFOs, it is stressing out your employees, too. And the more support we can give our employees in helping them balance their work and their life, the better we are going to be. SUMMERS: As we’ve discussed, many people are experiencing pay cuts. Some people are not able to work 40 hours now; they are cut back to 36 or 32. Employers are cutting from their employees more than ever. Though these cuts might be out of necessity, employers need to realize that their employees will leave once the economy picks up if employees aren’t treated well. A new employee satisfaction survey said that 48 percent of employees will seek another job when the economy gets better. And in the younger generations, it’s about 57 percent. So I think a challenge that we are going to have in the future, as the economy turns around, is that all of our talent, the people who know what is going on in our businesses, are going to want to leave. So, we have to be really careful now, even while we are managing our money and our pennies and our people, that we are treating our employees right, so that when things turn around, they don’t want to make a mass exodus out. And I think that’s going to be one of the challenges that companies will have as things turn around. So, it needs to be addressed now. MADSEN: In economic tough times for the corporation, flexibility, work/life programs, creating a balance in someone’s life are things you can do for little or no cost and make the employee feel valued and respected. If you treat your employees right, when the dam breaks and the economy goes rushing forward, your employees’ first thoughts aren’t going to be, “I’m going to go find someone who really does respect me.” BROLLIER: My company lost a lot of small employers with the economy, especially in the construction business. So we asked our employees, “Give us some ideas. Give us your input. What can we do?” And the majority of people said, “Let’s don’t do raises this year. Or let’s work one day less a week.” We already have a lot of employees telecommuting and we have always been flexible as a company. Though it was tough having people take reduced hours, I think they appreciated being part of the decision and being asked “What should we do?” SUMMERS: I believe that’s the key. Employees are going to come up with the same things that a company is coming up with, but it’s a different feel when they are coming up with the idea, versus being told, “You are not going to get a pay increase.” YACK: In a personal example, Microsoft is bringing in an office down in Lehi and I found out because they contacted me and said, “Do you want to come staff us? We need at least 100 Web developers.” But I’m married to the company I’m with right now just because of that work/ life balance. And after I made the decision that I’m not going anywhere, I realized that I need to make sure my company doesn’t lose its senior level developers to Microsoft or other companies. So, my thoughts have been about what we can do to make sure that our employees feel married to the company. After conducting a survey, we formed a culture committee just to improve our company culture. It’s been a cost-effective way of improving people’s situation and their satisfaction with the company. And just through the use in building up that culture and making our company a good place to work is definitely one solution of hanging on to those rock stars before they leave when the economy does turn. JEX: Attracting and retaining employees is probably the number one thing that our clients are looking for in a company. And this is a time when HR professionals and C-level executives can get together and communicate to make sure they are doing all they can to retain those employees. MERKLEY: Would you rather do layoffs or across-the-board pay cuts? When thinking about this, I put the question out to my employees, telling them, “We can do across-the-board pay cuts.” But what it does is it penalizes your rock stars, your top performers, if they all have to take a cut. Some people, even my top performers said, “Don’t you think our culture is strong enough to sustain that we are all in this together?” And it will be interesting to see because I elected to do layoffs rather than do across-the-board pay cuts, because I didn’t want to penalize my top performers. HACKETT: I think that model would be harder for a small business where people wore such different hats they couldn’t pick up another job. So there are, I think, businesses where people taking less pay would be more viable for the business. For example, if you have a shop, a retail shop where you’ve got a cashier in the front and somebody is in shipping and receiving and forklift in the back, they are not necessarily going to be able to cut the back office people or the warehouse people to cover for the front office. MERKLEY: That’s true. But that’s if they are really specialized, but a lot of companies are requiring their employees to wear multiple hats. For example, I know people who have never worked in safety before who are now having to learn safety. But, people are willing to do it because they’re happy that they are one of the surviving employees. We have seen a lot of weird things happen in the last several months with the economy. HERRING: I think so much of it is choice and innovation. In the state with the downturn that we had and the budget crunch that we had, we gave a lot of flexibility to the individual agencies rather than mandating across-the-state furloughs or mandatory pay cuts. We have a couple agencies that chose to do furlough days, but we gave that flexibility to the individual agencies. And there were about 1,000 positions that were impacted. Some of the agencies took an approach and did a cost benefit and early retirement incentives, and we got about 250 employees to take those out. I don’t think it has to be a one size fits all approach to whatever you are doing in business.
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