As the new year dawns, most economists predict better times on the way. This is great news for employers eager to get back on the road to prosperity. But for HR professionals, the turnaround will be tempered with daunting challenges.
HR departments have “been decimated by staffing cuts and deductions,” says Peter Cappelli, a professor of management at the University of Pennsylvania’s Wharton School. “There will be a growing demand for HR services, but there are not enough people in place to handle the job. HR will struggle to find creative ways to accomplish its mission.”
This means making tough choices about worthwhile projects, programs and activities. It means finding ways to accomplish essential tasks. What follows are 11 suggestions for 2011 gleaned from HR leaders and experts that you may want to consider as you plan your agenda for the year ahead.
1. Look at succession planning and talent acquisition.
Although unemployment stubbornly hovers around 10 percent, employees—especially high-potential employees—are growing impatient. Yearning for higher salaries, better benefits and greater challenges, many are thinking about moving on and up. They’re firing out resumes, calling headhunters and listening to hiring pitches. These actions were not in the cards a few months back when employers and talent hunkered down.
Expect a feeding frenzy for talent, says Hal Johnson, chairman, Global HR Practice, at Korn/Ferry International in New York City. Competitors will be on the prowl, wanting to raid your best and brightest. Chief executive officers and board members will be looking for assurances that you have a succession plan to effectively identify and develop talent.
“The No. 1 concern is the pipeline and succession; most CEOs and boards are disappointed with the status of their succession plans. Some don’t have full-fledged plans in operation; others have them, but they lack rigor,” Johnson says. He recommends being two people deep in the top eight positions.
Think about whether you’ll have the talent to thrive when the economy turns. If not, move quickly—like J. Kim Scholes, SPHR, did. The vice president of human resources at Network Communications Inc. in Atlanta initiated an in-depth review of managers at all levels that looks at their past performance, their performance in their current positions and their potential performance in roles with more responsibility. In addition to identifying high-potential talent, the review will allow HR professionals to advertise who the high-potential employees are and to develop, support and invest in them.
Keep a lookout for outside talent that can energize, diversify and fill gaps in your pipeline. Headhunters are an obvious resource, but there are also advantages to involving the management team in identifying prospects. For example, at Thermo Fisher Scientific, a leading provider of life sciences tools such as high-end analytical instruments, equipment, reagents, consumables, software and services, executives keep a list of potential external recruits. “We keep track of where they are and regularly consider annually what positions they might fill,” says Elizabeth Bolgiano, senior vice president of human resources at the 35,400-employee company based in Waltham, Mass.
2. Lift pay freezes and restore 401(k) matches incrementally.
When the economy headed south, many business leaders took steps to limit losses, including implementing layoffs, cutting 401(k) matches, and freezing or reducing pay. Now, many are restoring 401(k) matches and doing away with pay freezes. A March 2010 survey of 293 Fidelity defined contribution plan sponsors that eliminated or reduced their employer contribution in 2009 found that 44 percent have restored the match or intend to do so by this year. And more than three-quarters of organizations that froze pay during the previous 18 months had lifted their pay freezes or planned to do so by the end of 2010, according to a survey released in October by Buck Consultants.
If your company hasn’t already opened the compensation spigot, the pressure is on to do so. But with uncertainty about how rapid the recovery will be, HR leaders advise proceeding cautiously. Margie Harvey, SPHR, vice president of human resources at catalog retailer Miles Kimball Co. in Oshkosh, Wis., recommends an incremental approach linked to benchmarking. “If the majority of employees are already above market average, look first at your 401(k). If employees are below or at market, focus first on merit,” she says.
Furniture maker Hickory Springs Manufacturing Co. in Hickory, N.C., is reverting to its former compensation policies, but gradually, says Jim Packer, SPHR, vice president of HR. “We’ve lifted the wage freeze and are still deciding what to do with the 401(k). We want to be sure the company is where we want to be before we risk restoring a benefit that we might be forced to take back down the road,” he explains. “We need to be very sure about the economy before we commit.”
3. Invest in top managers and critical jobs.
Disproportionately invest dollars and time in top managers and critical jobs. “Everyone should feel they’re important, but focus on those with highest potential,” says Charles Tharp, executive vice president for policy at the Center On Executive Compensation in Washington, D.C. Make sure “you are identifying, paying and investing in the key people and that you are delivering a two-part story that makes them want to stay aboard.
“Ideally, the story is a personal narrative that envisions the [high-potential employee] on an upward path, and a story of the company—its mission, vision and culture.”
Let high-potential employees and top performers know how special they are to your organization and how what they do today is tied to the objective of the overall enterprise. Don’t presume that it should be obvious. If you’ve already told them, do it again clearly, openly, unambiguously.
A recent study from the Center for Creative Leadership, High-Potential Talent, A View from Inside the Leadership Pipeline, reveals that by telling high-potential employees that you value them, the chances they will stick around improve significantly. “Only 14 percent of formally identified high-potentials are seeking other employment,” says Roland Smith, professor of leadership at the Elon University School of Law in Greensboro, N.C. The number more than doubles for employees only identified informally.
At Goodwill Industries of Colorado Springs, high-potential employees know the score. “There are no question marks about whether we want you,” says Brad Holliday, vice president of human resources and development. “You’re seeing performance feedback around set competencies; you’re able to look at your career map and know what knowledge, skills and behaviors you’ll need to advance.”
4. Prepare for legal minefields.
With private employers’ union membership levels the lowest in history, it may seem counterintuitive to suggest that unions pose a problem as the recession unwinds. But they do. The dissatisfaction and frustration that so many workers feel—especially at lower and middle levels—makes them attractive targets for union officials desperately trying to replenish the ranks, says John Raudabaugh, a counsel in the labor & employment practice group at Nixon Peabody LLP in Washington, D.C.
Union officials use the Internet and other technology to spread messages. Don’t be caught off guard, he warns: “Unions are facing a death watch; they know they need to organize to survive.”
Your company isn’t safe just because it’s not unionized, Raudabaugh adds. Nonunionized employers are subject to the National Labor Relations Act, he says, and union officials can seek out overly vague phrasing in employee handbooks, for example, that could open the door for union action.
During the downturn, many HR departments cut back on labor relations training, Raudabaugh says. “What’s being done is so old and outdated it’s virtually useless. Whether you have a union or not, you need to move quickly to update your training to bring supervisors up to speed,” he urges.
Other legal disruptions may involve pay equity and related wage and hour issues. “Regulators will be increasingly aggressive in enforcing compliance,” warns Paul Salvatore, a partner at Proskauer Rose LLP in New York City. “Conduct an audit of your pay practices.”
Also, review noncompete agreements that protect your company in the event that people who have access to customer lists, company secrets and corporate strategies jump ship. “Once hiring picks up, a lot of companies will wish they had their houses in order,” Salvatore says.
5. Resolve to be an effective consigliere.
You are responsible for telling the truth, even when it’s difficult. “It takes courage to artfully, shrewdly, tell the boss when he’s wrong,” says Michael Feiner, a professor of management at Columbia University’s Graduate School of Business. “Typically, HR is sitting on advice that the boss could use to be better. If the boss is viewed as autocratic, not good at listening and not empowering his people, how do you tell the boss that so he will listen?
“Understand the crucial and pivotal role you should play as consigliere,” Feiner says.
The role of an HR leader is complex; speaking up requires finely tuned skills. “With your expertise in compliance and employment law, HR has to strike a balance,” Network Communications’ Scholes advises. “Avoid being perceived as the policeman in the room, always telling people what they can’t or shouldn’t do. Still, you need to be trusted to speak up when necessary. Do that by being really knowledgeable about the business and by being very diplomatic.”
At times, speaking out can backfire. “If you’re the one who always says you shouldn’t do this or that, you stop getting invited into the room,” says Ken Sloan, a professor of HR at Marist College in Poughkeepsie, N.Y.
Despite the inherent difficulties, more HR leaders are filling the consigliere role. Miles Kimball’s Harvey is an example. “On our team, we recognize that we need to have difficult conversations to be effective,” she says.
6. Enhance transparency in support of ethics.
Consider adding a public forum or blog to your intranet. In contrast to your hotline or complaint line, a public forum allows people to raise concerns anonymously but openly so managers, leaders and others will know what’s happening.
If leaders are “aware of what comes out and it’s being misinterpreted, they can respond and clarify,” Sloan says. “If you promote open, confidential discussion in-house, leaders will be less able to say, ‘We didn’t know.’ For example, if conditions are unsafe, people would have posted it on the blog. Leaders could take action, and people would see that leadership is responding.”
7. Rebuild trust and boost morale.
Analyze the impact of the recession on your workers. What was your pre-recession level of engagement, and how does it compare to the present level? If there’s a downward shift, what are the drivers? Ask employees what’s important to them, and consider how effective you are at providing things that employees say they want. Business leaders “acknowledge that cutbacks and layoffs have had an impact on stress and happiness, but what they haven’t looked at sufficiently is the impact on productivity, customer service and profits,” says Laura Sejen, global head of rewards consulting at Towers Watson in New York City. “When you look at it that way, you realize the need to address the concerns.”
Thermo Fisher Scientific conducts an employee engagement survey every 12 to 18 months, which sometimes yields surprising results. “We discovered that we had morale issues at a particular site. With the information in hand, we held focus groups, interviewed a cross section of the population and found there was a challenge with one of our supervisors. As a result, we put in a new supervisor training process. Then we resurveyed to see if the needle moved.”
HR professionals must figure out how to target what drives dissatisfaction, Sejen says. There is no single answer. “It’s bound to vary by industry sector and by company in terms of what the critical-skill job families are. A company heavily dependent on innovation has to keep R&D employees happy. It might be different in a customer service-oriented environment,” she explains.
“About two years ago, a general concern about the quality of our managers emerged,” Bolgiano recalls. “We wouldn’t have picked up on the problem if we hadn’t been actively requesting feedback from our employee population.
“We instituted a ‘role of the leader’ program. It has two components: training when someone first becomes a manager, and after a manager with experience advances.”
8. Look for innovative approaches.
Here are a few creative approaches that HR leaders are implementing:
- While interest groups continue to debate health care costs and the federal health care reform law, employers are reconciled that the only certainty is that they are likely to pay more. To minimize costs and foster a healthier workplace, Hickory Springs established on-site medical clinics, run by a vendor, where workers and their families can receive routine care, including diabetes management. Participating employees are rewarded with lower insurance premiums. “We benchmark the clinics against our costs before we had them, and it’s making a difference,” Packer says.
- Small gestures can make a big difference, especially when they’re not anticipated, says Richard Floersch, executive vice president and chief human resources officer at McDonald’s Corp. in Oakbrook, Ill. The company announced an early closing recently due to what Floersch described as “fantastic” weather. “The response we got was incredible,” he says. The keys: It was spontaneous and unexpected.
- Workforces are increasingly diverse in background, experience and age. Because more projects now require teams, people with different outlooks may need help working effectively together. At Thermo Fisher Scientific, a reverse mentoring program addresses the challenge. “We’ve paired a more junior and more senior person with the goal of having the Millennial guide and coach the senior person on how to use the new social media,” Bolgiano says. “It naturally leads to a two-way mentoring experience that both are finding beneficial.”
- HR professionals can expect to be stretched to the limit as the economy recovers. Consider partnering or consulting arrangements with former employees, look carefully at outsourcing models, and seek ways for other types of employees to perform HR tasks. Miles Kimball’s HR staff has helped train 60 facilitators who provide professional development and instruction to employees on subjects ranging from process improvement to holding effective meetings.
9. Find a mix of nonmonetary rewards.
When queried, people still say they are most motivated by money, but nonmonetary factors are becoming more important to employees. “It reflects a mind shift among workers,” Sejen says. “They’re saying they want good pay and benefits, but they’re also looking for paid time off, vacation, flexible schedules and a secure place to work.” So money is important, but it’s not enough, especially for top performers and high-potential employees.
“A raise is a buzz for a day or so, but if you let someone present to the senior management team about the work they did, have coffee with them, let them know you care, the payoff can be huge,” says the Center On Executive Compensation’s Tharp. “There is no substitute for reaching out and connecting personally to high-potentials. How would you feel if a senior-level guy asked you to have lunch?” Tharp recalls scheduling his CEO for special development sessions with high-potential employees when he was at Bristol-Myers Squibb.
Determine the nonmonetary rewards HR leaders should consider as they devise a retention strategy. Research reveals a disconnect between what employers offer employees and what senior executives say their direct reports actually value. For example, in a 2010 report by the Economist Intelligence Unit, sponsored by the Society for Human Resource Management, 479 senior executives said their workers want opportunities for continued learning, performance-related bonuses, opportunities to work internationally, flexibility to work on different teams and opportunities for career planning. Then the shocker: Most said their own companies were negligent in providing what was valued.
Other potential drivers of attraction and retention include offering flexible work schedules that include telecommuting, giving people special assignments, creating cross-functional teams to help draw people out of their silos, and encouraging managers to participate in community projects and join local boards.
10. Focus on core business.
Make sure your training and performance review systems are linked to customers and the company’s mission. “Spend one day a month with customers so you really understand the business and what you have to deliver,” says Murray Dalziel, director of the Liverpool University Management School in the United Kingdom.
Understand and promote the benefits of aligning your internal culture with your outside image. Build a culture that mirrors customer expectations, advises Dave Ulrich, a professor of business administration at the University of Michigan in Ann Arbor. “Wal-Mart wants to be known for everyday low prices; they encourage leaders who attend aggressively to price and cost. Apple and Google want to be known for innovation and design; they encourage leaders who take risks. Marriott wants to be known for service and shapes leadership around service activities.”
11. Learn from the past, but question assumptions.
Make the most of metrics. Incorporate scenarios and analytics into planning. Follow the lead of marketing and finance, where managers routinely analyze data, Sloan says. “For example, Wal-Mart has something like a 40 percent turnover rate, affecting several hundred thousand people a year. What’s better—letting the rate rise or [spending] money to drop it? What’s the real impact?” he asks. “Unless you can answer that question, you don’t know what action to take.”
Plan for the future, but don’t accept your strategic plan as gospel. Forecasts don’t work; too much stock, time and energy are placed in them, Cappelli says. “Strategic plans are constantly being reviewed because they never prove to be accurate over time,” he explains. “They always have review periods written in, usually a year or less. And given the realities of the marketplace, they never end up where they start.”
Factor in alternative scenarios after the planners have settled on the main premises. Learn from the past, Cappelli advises—and get discussions going.
The author, a contributing editor of HR Magazine, is a lawyer and professor of management at Marist College in Poughkeepsie, N.Y.