Category: HR Administration

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Labor Department Stiffens Incentive Pay for Flex Workweek Employees

Starting May 5 employers who pay workers overtime under a fluctuating workweek system may find themselves facing penalties for providing bonuses and other types of incentive pay to its non-exempt salaried employees—something that was allowable until the U.S. Department of Labor issued new regulations April 5 forbidding the practice.


The system, which is used in a variety of industries from retail to technology to the service sector, allows employers to pay workers a fixed salary regardless of the number of hours actually worked. The new regulations, which amend the Fair Labor Standards Act of 1938, will likely lead employers using this method to eliminate all incentive rewards such as commissions, bonuses or prizes, says Lee Schreter, a shareholder with Littler Mendelson, a labor and employment law firm based in San Francisco.


“Employers will no longer be able to reward employees for doing a good job if they use the fluctuating workweek method and I think that’s unfortunate,” she says.


Schreter says that many employers are unaware of these changes because the Labor Department “has not done a good job” of publicizing them and has provided little guidance on the matter “other than publishing the 100-plus pages of the final rule, which are not user-friendly,” she says. And the department has given employers only 30 days to comply. After that they would be subject to investigation and enforcement, she says.


“The department has done a sleight of hand and employers must make a very quick change if they are using the fluctuating workweek and paying incentives to come into compliance,” she says. Small businesses that may lack a large human resources staff will most likely be caught unaware, according to Schreter.


“They aren’t likely to read the DOL website and unless they belong to a trade association they may not know these rules are going to take effect.”


In addition to changes in the fluctuating workweek, employers with tip-earning workers must now inform the employee if they plan to claim an employer tip credit, which allows employers to use part of a workers tip to pay their minimum wage salary. The new regulations also provide that the maximum tip credit an employer may claim is $5.12 an hour and that the tip credit cannot be larger than the tips the employee actually receives, among other provisions.


While the tip credit notification doesn’t have to be in writing, Schreter says she is telling her clients to put it on paper.


“The penalty for not giving notice is paying the difference between the tip credit claimed and the hourly salary of the employee,” she says. “That kind of liability can put a small business out of business. Employers will want to report the tip credit on their pay stub, which means they have less than 30 days to reformat their pay stub.”  


—Rita Pyrillis

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Demand for H-1B Visas Off to Slower Start

Demand is off to a slower start this year than previous years for H-1B visas that are used to bring in employees with college degrees and special skills such as technology workers.


U.S. Citizenship and Immigration Services began accepting H-1B visa petitions for fiscal 2012 on April 1. However, only 5,900 petitions had been filed by April 8 under the general H-1B visa cap of 65,000, and only 4,500 petitions had been filed under a 20,000-visa cap for those with master’s degrees or higher.


In comparison, the Immigration Department had received 13,500 petitions under the 65,000 cap in fiscal 2011 and 5,600 petitions under the 20,000 cap in the same time period—between April 1, 2010, and April 8, 2010.


Demand had been stronger in previous years. The caps were reached in one day for fiscal 2008.


Staffing firms, including those that provide information technology workers, have been among those using H-1B visas.   


Filed by Staffing Industry Analysts, a sister company of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Focusing on the Core

New players are shaking things up in the human resources management software world by challenging traditional “core HR” powerhouses with systems that some say add functionality and, in many cases, cost less.


The new technologies and an ever-widening selection of vendor offerings are providing more and more choices—and more confusion about what to choose. What should a company look for in a core HR system, the software that holds basic but important employee data?


“What has been traditionally known as ‘core HR’ is evolving quickly,” says Doug Dennerline, president of San Mateo, California-based SuccessFactors Inc., one of the talent management software vendors disrupting the market.


Core HR systems, sometimes called human resources management systems or human resources information systems, track fundamental worker information such as name, location, job title and supervisor.


For much of the past decade, core HR products have represented a large but relatively sleepy corner of the HR applications market. Over the past few years, though, the core HR market has heated up. For one thing, firms have sought a stable “system of record” that can help them comply with rules such as training requirements and nondiscrimination laws. In addition, companies have put more attention on their human resources management systems as they seek to analyze their workforce data more rigorously for business insights.


One key distinction in the increasingly crowded market is how core HR tools are delivered. On the one hand, there are the traditional “on-premise” systems sold by vendors including software giants Oracle and SAP. With on-premise software, companies typically buy a permanent license to the product, install it on their own computers and pay an annual “maintenance” fee to vendors for software upgrades and patches to fix “bugs.”


Then there are newer core HR applications delivered as a service over the Internet by vendors including Lawson Software, SilkRoad Technology Inc., SuccessFactors Inc., Ultimate Software and Workday Inc. Under the software-as-a-service model—sometimes called the “on-demand” approach—organizations usually sign a contract to access the applications for a set amount of time, such as three years.


Some vendors straddle the fence. Oracle, for example, designed its new Fusion applications to be delivered both through the on-premise method and as a service over the Web. Lawson also will deliver core HR software either way.


Paul Hamerman, vice president of enterprise applications at Forrester Research, says the software-as-a-service approach promises fewer technology hassles because vendors manage upgrades and patches.


“The SaaS model that Workday and Ultimate have is attractive because it really takes the upgrading and the patching out of play, and it makes the cost of ownership very simple and transparent,” he says.


A study by research firm Aberdeen Group last year found that companies were split on whether to purchase an on-premise system or an on-demand product and overwhelmingly chose whichever system would be most cost-effective. “It came down to cost,” said Aberdeen analyst Jayson Saba. “If it is too expensive for a company to replace its on-premise SAP, they aren’t going to dump it for an on-demand Ultimate Software system.”


Another 2010 Aberdeen study of more than 300 organizations found that, in the face of the economic downturn, companies were investing in core HR systems that help manage costs, ensure compliance and allow HR personnel to be more strategic. The companies surveyed believed that integrating human resources management systems with payroll and other applications had benefits including a lower cost of administering HR functions.


That finding plays to the strengths of the traditional big guns of core HR systems, Oracle and SAP. Both vendors have payroll systems. And they portray their core HR products as crucial hubs to a wide range of related HR software and other business management tools.


“Our customers tend to review Oracle’s products and say, ‘This is our system of record and not just for our HR processes,’ ” says Gretchen Alarcon, vice president of human capital management strategy at Oracle. “They are using that one system as a core centerpiece that everything else integrates with.”


Although software as a service has grown in popularity in recent years, it raises questions about long-term costs. SaaS providers defend the approach—which is sometimes referred to as “cloud” computing.


“Independent sources like McKinsey have confirmed that the pure cloud model gives customers the best value not only in terms of total cost of ownership over time, but also in terms of immediate value from a superfast implementation, no worries about infrastructure and maintenance, and continual product innovation,” says Tom Fisher, chief information officer of SuccessFactors.


For small to midsize companies, Hamerman agrees: “The long-term costs of ownership tend to favor SaaS, except where very large enterprises can achieve significant economies of scale via licensed, on-premise ownership for transactional HR and payroll processes.”


Vendors with newer products also claim they are bringing new capabilities to the table. Workday, for example, says its core HR system has been built from the ground up to be able to adapt to frequently changing corporate structures and newer management models, such as “matrixes” where employees report to multiple managers. The software also can run on the latest devices used by today’s employees, such as iPads.


“We had the opportunity to start from scratch,” says Leighanne Levensaler, Workday’s vice president of human capital management product strategy. “That gave Workday the chance to build a modern system that really meets the needs of today’s business climate.”


In addition, Workday has a payroll product that can be paired with its core HR application. Ultimate and Lawson also have payroll applications.


That’s not the case at SuccessFactors or SilkRoad, which started out as talent management software vendors. But these firms say their core HR products can tie up with other payroll applications or services. And they tout additional functionality, such as social networking tools that foster collaboration.


SuccessFactors, for example, says that its product allows users to easily update their own employee profiles with such information as their skills and experience, as well as tap the system to find and collaborate with colleagues across the organization.


SilkRoad’s software also allows for individual employees to enter their own information, reducing the need for the type of back-end work that is required by other systems, says company co-founder and chief operating officer Brian Platz.


Aberdeen’s Saba says the core HR field isn’t done changing. “There is a lot of activity on the provider side,” he says. “The market is moving and it is going to continue” to do so.


Workforce Management Online, April 2011 — Register Now!

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Should We Worry That a Manager Pals Around With HR Staff?

Dear Worrywart:

Your question is a good one—right at the heart of human resources and what the various constituencies look to your team for.

Among other things, managers have a right to expect that their HR staff provides them with timely, well-reasoned, unbiased counsel. On a daily basis, your staff is called upon to be umpires who call balls and strikes exactly how they see them, not how they might like them to be. Managers also count on your staff to reliably help them keep a finger on the pulse of their organization, a task that requires the confidence of the workforce. In a similar vein, the general employee population looks to your team as honest brokers of policy and employment matters, and people who will keep confidences.

HR’s ability to effectively perform those roles is materially impaired by either the real existence or appearance of a relationship that is compromised by partiality.

Does that mean that HR professionals can’t be friends with employees (management or otherwise) within their sphere of influence? No, of course not. It does mean, though, that HR professionals should be ever mindful to avoid both the existence and the appearance of compromising behavior, and know where the boundaries are. As the title implies, it also means that they really must be a “professional.” In particular, they must take pains to ensure that their dealings with friends, and for that matter, those with whom they have a much cooler relationship, are consistently aboveboard and evenhanded.

Were I in your shoes, I would neither attempt to chill the relationship nor ask either of the parties to put it in the closet. And I wouldn’t worry unduly about it, absent any signs of compromised behavior. I would, however have a chat with either the involved HR rep, or perhaps my entire staff to remind them of the need to be, like Caesar’s wife, above suspicion at all times. If they need more specific direction than that, they might be on the wrong bus.

SOURCE: Bill Catlette, Contented Cows, Memphis, Tennessee

LEARN MORE: Exit interviews can help keep corporate secrets secret.

Workforce Management Online, April 2011 — Register Now!

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Labor Department Weighs New Definition of Fiduciary

When you try to change a regulation that has been virtually untouched for 35 years, there’s bound to be a lot of feedback.


That is what officials at the Labor Department discovered at a two-day hearing in March on a proposed regulation that would dramatically expand a 1976 rule defining when a person providing investment advice becomes a fiduciary to a retirement plan.


“I’ve been at the Labor Department for more than 20 years, and I’ve never seen something like the lobbying effort I’ve seen here,” says Tim Hauser, the department’s associate solicitor in the plan benefits security division.


While the department is taking a careful look at the more than 200 comments by individuals and organizations as well as reviewing the testimony from 38 people who attended the hearings, it expects the final regulation will be out by the end of the year, Hauser says.


Right now, people who provide advice for a fee must pass a five-part test to be labeled a fiduciary. Their advice must be provided on a regular basis and it must be mutually agreed (between adviser and recipient) that it is the primary information used in making investment decisions.


Under the 1974 Employee Retirement Income Security Act, a fiduciary must act in the best interest of the plan and its participants.


The proposed rule, first published in the Federal Register in October 2010, abolishes the five-part test and says people who meet any one of the five elements can be labeled fiduciaries. The department specifically noted that even one-time advisers would be considered fiduciaries under the proposed rule, as would advisers who give recommendations on how to manage securities and those who provide advice directly to retirement plan participants. The new rule would apply to broker-dealer firms and other providers of advice for individual retirement accounts.


The department’s main complaint is that the current regulation is outdated and doesn’t work, considering the significant changes in the financial industry and the massive shift to defined contribution plans.


“In today’s world, a lot of a plan’s success depends upon investment advice,” says Norman Stein, professor of law at Drexel University, who testified on behalf of the Pension Rights Center. “If people are doing something wrong, they shouldn’t be able to hide behind this ancient regulation.”


But many critics have a wide array of concerns, mainly charging that the change would cast too wide a net and would wind up raising costs for plan sponsors, force providers to exit the business and ultimately not benefit participants.


“Any casual conversation had about investments will make you a fiduciary,” says Kent Mason, partner at Washington-based law firm Davis & Harman. “Advice has to play a significant role in decision-making.”


Mason, who testified on behalf of the American Benefits Council, said there are too many circumstances where accepted practices, like record keepers helping plan sponsors whittle down thousands of investment choices based on the plan sponsor’s investment criteria that would trigger fiduciary status unintentionally. Knocking out this kind of assistance may discourage employers from offering retirement plans, he says.


But the Labor Department’s Hauser says the proposed rule will help plan sponsors, especially small and midsize companies, because the financial experts will be held liable for their advice, not the business owner or their managers who made decisions based on that information.


“Right now employers are right in the bull’s eye,” Hauser says. The proposal allows “other fiduciaries to be held liable and more appropriately held liable.”


But some plan sponsors, like Bob Steen, fiduciary to his company’s ESOP, say the proposal would be “a game changer,” driving up costs and limiting what the plan could pay out to retirees.


“There are people who don’t understand their fiduciary duty, and we have plenty of laws to deal with those folks,” says Steen, CEO at Bridge Community Bank in Mount Vernon, Iowa.


Stock valuation firms would become fiduciaries under the rule. Steen estimates the cost for an appraisal will more than double because these firms will need to buy fiduciary insurance and will pass that cost onto ESOPs.


“It matters that the stock value is as reasonable as it can be because we pay out people based on it,” Steen says, adding the rule shouldn’t apply to ESOPs. “We give our employees recourse if they question any aspect of the stock value.”


Hauser says the labor department is set with its position on valuation firms, but it understands the need for clarity and concern about costs in other areas, and hopes to address many issues brought up in the comments and hearings in the final regulation. He added that if providers who question their fiduciary status can show that their practice is sound, the department has “expansive authority to grant exemptions” to the rule.


“It’s critical we get this right and figure out who should be considered a fiduciary,” he says.


Workforce Management Online, March 2011 — Register Now!

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Winners Gather in Chicago for 20th Annual Workforce Management Optimas Awards

Workforce Management held its 20th annual Optimas Awards presentation recognizing initiatives that created positive business results from managing an organization’s workforce in 2010.

This year’s event, held in Chicago on March 24 at the Mid-America Club located in the Aon Center, took on a global perspective, as Mumbai, India-based Tata Consultancy Services won General Excellence honors. It was the first time a non-North American-based company won for General Excellence. Bangalore, India-based Infosys Technologies also was honored in the Competitive Advantage category.

“This is the most prestigious award you can win in the field of human resources,” says Workforce Management publisher Todd Johnson. “The awards aren’t just for great programs—companies have to clearly demonstrate the bottom-line impact of a program to the organization.”

Before the awards ceremonies, representatives from the winning organizations participated in round-table discussions on topics affecting the management of today’s workforce. The sessions, which touched on employee engagement, use of social media, talent recruitment and leadership development, were moderated by Workforce Management staff members.

The winners were named in December 2010 and earned the distinction because of their ability to tackle challenges with flexibility and ingenuity. There are two overarching themes among the winners in this volatile global economy: how to do more with less and how to find, develop and retain talent.

The winners were:

• General Excellence, Tata Consultancy Services

• Competitive Advantage, Infosys Technologies

• Corporate Citizenship, Microsoft Corp.

• Financial Impact, Ultimate Software

• Global Outlook, IBM Corp.

• Innovation, GameStop Corp.

• Managing Change, OppenheimerFunds Inc.

• Parnership, Protective Life Corp.

• Service, U.S. Navy

• Vision, Planned Cos.

The application deadline for the 2011 Optimas Awards is Aug. 31. Winners are scheduled to be announced in the December 2011 issue of Workforce Management.

Workforce Management Online, March 2011 — Register Now!

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The Last Word: Pride vs. Prejudice

Little League Baseball obeys a court ruling and admits girls for the first time. The first black model graces the cover of Vogue. Amid much controversy, the first women are ordained as Episcopal priests. And the first bill to protect gay individuals from employment discrimination is introduced in Congress.

That was America in 1974—a time when barriers to equal opportunity were falling fast. Unfortunately, one of them didn’t fall—and still hasn’t. More than 35 years later, gays cannot count on federal protection from discriminatory employment practices. Indeed, gays who were just beginning their careers back in 1974 are still vulnerable to workplace homophobia—even as they now near retirement age.

This month’s lead Outfront article explores how, once again, gay advocacy groups plan to push for passage of the Employment Non-Discrimination Act, or ENDA. Given the more conservative makeup of the current Congress, this still might not be ENDA’s year. But gay employees can take some comfort in the fact that corporate America has proven to be more enlightened and progressive than many lawmakers.

The vast majority of Fortune 500 corporations have added sexual orientation to their nondiscrimination policies, and a growing number are including gender identity, as well. What’s more, roughly 80 major employers have publicly pledged their support for ENDA. Aside from the basic issues of equality and fairness, many companies realize that a diverse workforce is critical to success both in attracting talent and marketing their products.

As Rick Moran, executive sponsor of Cisco Systems’ gay and transgender employee network, told Workforce Management: “We know that when we’re going out recruiting, a lot of employees, especially our younger employees, are looking for what our policies are on inclusion and diversity. So, we are pretty forward with that. We also know that a lot of our customers have very strong diversity practices, as well. They often come to us and ask what our inclusion and diversity policy is, so it’s very important from a business perspective.”

Some companies specifically target potential gay recruits. A few years ago, I attended the annual Reaching Out MBA conference at Columbia University, where representatives of such blue-chip companies as Citigroup, Ford, IBM, and McKinsey networked with gay students from across the country. S.C. Johnson & Son, the household products-maker, even invited students to interview for brand management jobs during the conference.

More companies also aim advertising at the gay community, but it isn’t enough simply to create a rainbow campaign featuring same-sex couples. Savvy marketers realize many gay consumers check out corporate workplace ratings before buying. The Human Rights Campaign, for example, compiles Corporate Equality Index scores and lists them in its Buying for Workplace Equality guide. The scores are largely based on employment practices, including nondiscrimination policies, partner benefits and diversity training. Deloitte, Subaru, DuPont and other companies issue news releases when they rate a perfect 100 in the equality index; a few big brand names, including Starbucks and Coors, have even touted their diversity policies in advertising targeted to gay consumers.

Gay-inclusive employment policies can influence not only consumers, but also business customers. In a recent survey of 1,400 gay business managers by the research firm Community Marketing, 70 percent said they would likely give preference to gay-owned or gay-friendly vendors when making purchasing decisions. It isn’t surprising then that companies sometimes enlist members of their gay employee resource groups to help with their business-to-business marketing.

To be sure, some companies remain skittish about being too visible in their outreach efforts. There’s always the risk of a boycott. I once wrote an article about Subaru’s gay-themed ad campaign. The same day the story was published, a right-wing group threatened to boycott the automaker, but the protest never gained any steam. Just last year, the American Family Association announced a boycott of Home Depot because of its support of gay pride festivals. The conservative organization took to calling the retailer “The Homosexual Depot,” but the company didn’t cave to the cheap shots.

Regardless of ENDA’s fate, it’s the corporate trailblazers who will continue to have the greatest impact in making gays feel welcome and safe at work and in expanding their career opportunities. Employers can’t necessarily change people’s deep-seated prejudices, but senior executives can make it clear that there is zero tolerance for bias and bullying within their workplaces. Meanwhile, let’s hope that ENDA becomes law before yet another generation of gays retires from the workforce.

Workforce Management, March 2011, p. 42 — Subscribe Now!

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Numbers Game: Companies Utilize Data to Predict Workforce Needs

Employers are beginning to turn their gaze from the rearview mirror as they develop and analyze workforce metrics.

For the past decade, large employers have tried to get a better handle on basic data, including head count and turnover. Some have taken those initiatives a step or two further by calculating such metrics as the attrition rate of high-performers or the amount of revenue and profit per employee. But generally, workforce metrics have tended to focus on past activity, with limited attempts to peer into the future. Now, that’s slowly starting to change. With the help of software tools and expert statisticians, organizations are beginning to project their labor needs and challenges with greater precision. Already, predictive workforce analysis is standard operating procedure at some companies, such as weapons-maker Alliant Techsystems Inc., better known as ATK.

The company began a metrics push in 2008, aiming to improve the recruiting function of one division. Gradually, the effort morphed into a broader workforce planning project. The company, which makes aerospace, defense and commercial ammunition products, continues to work to more accurately anticipate its labor supply and demand.

Based on an analysis of past departures, ATK officials created a “flight-risk model” that calculates the probability of attrition for each employee. Last year, for example, ATK correctly projected unusually high turnover in a vital plant maintenance group. 

ATK will likely have more company soon. Jac Fitz-enz, head of the consulting firm Human Capital Source and a pioneer in workforce metrics, expects more organizations to take advantage of their human resources data to forecast what’s ahead. With better predictions of expected attrition among key performers, for example, firms can take action to try to prevent or prepare for the losses. For instance, employers can develop targeted recognition programs to try to retain flight risks or they can prepare for departures through better succession planning, training and recruiting campaigns. “Those who are into predictive metrics have a competitive advantage in the war for talent,” Fitz-enz says. “They know more about hiring and developing people for business opportunities, as well as how to contain attrition of high-potential talent.”

To be sure, the number of firms jumping into predictive workforce analytics remains small. In fact, only 20 to 25 percent of companies have a workforce metrics system of substance, Fitz-enz estimates.

A variety of obstacles have slowed the adoption of workforce data analysis. For one thing, companies have tended to prioritize data related to sales and production, which can more easily be tied to the bottom line, says Lois Melbourne, CEO of Aquire Inc., a software firm in Irving, Texas, that sells tools for workforce analysis and planning. Another hurdle is the plethora of HR systems many companies use, each with its own set of data. Multiple systems can complicate big-picture analysis because they can be difficult to integrate and may contain contradictory data. What’s more, Melbourne says, many people drawn to the HR field tend to be uncomfortable with number crunching. Still, the tide might be about to turn. Melbourne sees companies studying their workforce information more carefully and notices growing interest in prediction. Employers “know they need to get there,” she says.

Employers want to take a longer view of their labor needs now partly because of the shortsighted way many managed their manpower during the recent recession, says Jason Averbook, CEO of the consulting firm Knowledge Infusion in Minneapolis. Averbook estimates that 30 to 40 percent of the employees laid off by firms during the downturn were the wrong choices. “Organizations for the most part did a slash-and-burn of talent,” Averbook says. “Most HR leaders never want to do that again.”

Hunger for more data-based decision-making prompted a workforce metrics project at Nationwide Mutual Insurance Co. Launched in 2009, the effort has resulted in monthly “score cards” for managers that contain a number of metrics, such as head count, turnover of high performers and span of control—which shows the average number of direct reports per manager. The score cards also display organizational goals for each of the measurements and managers’ performance relative to those goals.

The reports generally amount to rearview-mirror workforce metrics. But the Columbus, Ohio-based insurer is shifting its gaze forward, as well. The company began its metrics with Excel spreadsheets but is upgrading to an analytics tool from software provider Oracle Corp., which will speed up creation of the score cards. “That frees us up to focus on that next step,” says Scott Nemeth, senior consultant for human capital analytics at Nationwide. “We will use historical data together with market intelligence and benchmarking data to provide better workforce forecasting.”

Software is crucial to a cornerstone of predictive analytics: mining the valuable data and insights that can be buried in a mound of information. Computers act as the drilling equipment to discover nuggets difficult to find by hand.

That computer gear, in turn, requires skilled operators who are well-versed in data analysis. ATK, for example, hired a statistician as part of its initiative, and Nationwide brought on Nemeth to beef up its analytical and planning expertise. Before arriving at Nationwide, Nemeth spent five years in General Motors Corp.’s corporate strategy and planning department and another five in GM’s global workforce planning unit.

But powerful software and data analysts alone won’t result in effective forecasting and planning. Companies need to set goals and ask the right questions. A cutting-edge computer system for analyzing data is no more than a metal detector, Averbook says. Companies must know where to sweep to find useful insights. “You are walking around on a golf course with a metal detector looking for needles,” he says. “In every business, there are different needles.”

Some HR experts worry that companies could focus too much on hard numbers and neglect the softer side of talent management. University of Michigan management professor Dave Ulrich says companies shouldn’t obsess over measurement to the exclusion of inspiring employees and helping them feel part of a team. “Turning work into a series of numbers and analytics may take away the emotion that brings meaning to our lives,” he says. “When people find meaning at work, they are more productive, which leads to companies being more profitable.”

Fitz-enz and other analytics advocates say organizations usually err in the other direction, making less-than-optimal decisions about talent because of a lack of concrete evidence. In any event, Fitz-enz says fears of overemphasizing metrics are overblown. HR professionals, he says, tend to blend hard calculations with a soft heart.

Workforce Management, March 2011, pgs. 20-21 — Subscribe Now!

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A Strategic Suggestion for Effective Organizations Get Rid of Job Descriptions

Job descriptions are a cornerstone feature of traditional bureaucratic organizations.


They facilitate selection and placement by providing clear skill requirements; enabling equitable pay systems by allowing organizations to compare their jobs with those in other companies and determining a market value; providing a basis for measuring individual performance and making pay increase decisions; and telling individuals what they are supposed to do so that managers can perform more value-added tasks.


Despite their widespread uses, job descriptions frequently are more dysfunctional than helpful, even in traditional bureaucratic organizations. They are costly to develop and keep current. In an attempt to be clear about telling individuals what they need to do, they can be faulted for implying what they don’t need to do and providing a convenient excuse for not doing things.


When baggage handlers and flight attendants won’t help the cleaning crew clean a late arriving plane so that it can leave on schedule because it’s “not their job,” that’s a real cost.


In addition, job descriptions slow change and make it more difficult. This is not a serious problem in stable businesses because change simply doesn’t occur very often. But, in today’s dynamic world, change is a constant.


As a result, more and more organizations face situations where job descriptions become quickly outdated and need to be regularly updated; this takes time, energy, delays change and can be quite expensive. The alternative is to simply abandon them. They are an obsolete management practice that no longer fits today’s rapidly changing human capital centric world of work.


Of course, it’s not quite that simple. Given all their uses, organizations cannot just abandon job descriptions; they need to fill the void left by their absence. Let’s start with the most basic use: letting people know what work to do.


Job descriptions tell people what to do and can be used as a basis for motivating them to do it. The evidence is clear however; a combination of effective leadership and an effective goal-setting process is much more effective at motivating and guiding behavior.


When managers are aware of their organization’s strategic agenda, skilled in collaborative goal setting, able to give feedback to employees, and ensure their employees have the right skills, they can create a much more effective and adaptable organization.


Organizations, such as W.L. Gore & Associates, a technology-driven global company; sportswear and equipment supplier giant Nike Inc.; and DaVita Inc., a Fortune 500 health care services company, have adopted a goal-setting approach and altered their performance appraisal system.


Often, this means a quarterly or semiannual performance management process in which individuals and their supervisors develop goals and identify projects that will support strategic objectives. In many cases, this process needs to be done with teams of employees.


Often, work, particularly knowledge work, requires multiple contributors and as a result is best managed by having team goals rather than individual goals.


Without job descriptions, how can the organizations set pay rates? The answer is simple, straightforward and logical; it is to pay individuals based on the skills and competencies they have (and the organization needs) and to let them share in the value they create.


Compensating somebody based on a job description is a misleading way to determine pay. An individual’s skills and competencies have market value, not jobs.


Therefore, a better way to determine what an individual is worth is to focus on skills and to use them as a basis for developing the market value of individuals. This is already done in a number of professions and with recent graduates who are clearly hired for their skills rather than for the jobs they are taking.


Focusing on an individual’s skills and competencies enables an organization to abandon pay based on job descriptions. It also enables the organization to improve its selection and placement processes.


Organizations need to know what work needs to get done and the skills and knowledge necessary to do it. Just as the organization’s strategy informs the goal-setting process for the present and the future, it also establishes the competencies, capabilities, and skills required to reach the goals and get the work done.


This in turn should form the basis for establishing the skills and competencies used to select who works in a particular area and, as mentioned earlier, what the individuals should be paid.


Abandoning job descriptions may sound like a radical approach to many but it is in fact the way many professional service firms and knowledge work firms have been managed for decades.


It is also the way an increasingly large number of global technology organizations from Google to Netflix are managed. Simply stated, it fits a management approach that highlights agility by emphasizing adaptability and focusing on human capital as a source of competitive advantage.


For organizations, it is a step toward achieving sustainable effectiveness.
 


Workforce Management Online, March 2011 — Register Now!

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Apple Wont Say Who Will Eventually Take Jobs Job

While more stringent Securities and Exchange Commission guidelines calling for greater corporate transparency have many companies assessing their succession plans and other areas of corporate governance, Apple Inc. shareholders rejected a proposal Feb. 23 to disclose their plan for finding a replacement for CEO Steve Jobs, who announced last month that he is taking his third medical leave.


The proposal, which was filed in August by the Central Laborers’ Pension Fund in Jacksonville, Illinois, asked the maker of the iPhone and iPad to amend its corporate governance guidelines to publicly outline a written CEO succession plan and provide shareholders with yearly written reports.


But Cupertino, California-based Apple’s board of directors urged shareholders to reject the proposal, arguing that publicizing its succession plans and forcing the company to identify candidates would give competitors an unfair advantage and “undermine the company’s efforts to recruit and retain executives,” according to its proxy statement for the 2011 annual shareholders meeting.


“Apple misconstrued its intent,” says Jennifer O’Dell, assistant director of corporate affairs for the Laborers’ International Union of North America, many of whose members contribute to the Central Laborers’ fund, which owns about 11,000 shares of Apple stock.


“They suggested we wanted to know the names, but that couldn’t be further from the truth,” she says. “We agree 100 percent that they shouldn’t give out information that names a successor or gives away a business strategy. Instead, we want to know that they are thinking about this issue and putting time and energy into it. None of that gives away any kind of competitive advantage.”


David Larcker, director of the Corporate Governance Research Program at Stanford University’s Graduate School of Business, says it’s important for shareholders to know that a succession plan is in place, but he doesn’t see the need for companies to expose “the gory details.”


“I find putting this on the agenda for a vote to be a little over the top,” Larcker says. “In Apple’s case, clearly the board has thought about this. What I want to know if I’m a shareholder is that if something happens that you have a plan in place. I don’t need to know specifics. You want to be careful about releasing proprietary information.”


Indeed, Apple’s board stressed in its proxy statement that a succession plan is in place, which would make adoption of the proposal unnecessary.


But in the wake of SEC guidelines issued in the fall of 2009, Larcker and other experts say that shareholders are becoming more vocal about matters of corporate governance. The regulations provide support for shareholders demanding more transparency around CEO succession planning by eliminating the “ordinary business exclusion” defense used by companies reluctant to disclose their plans


“Shareholders, like Apple’s, can now make a proposal to companies that they disclose their succession plans,” says Bruce Newsome, a lawyer who is a partner in the corporate/securities practice in the law firm Haynes and Boone. “This used to be considered company business but now that’s excluded. Shareholders now have an avenue to put it to a shareholder vote and more will take advantage of it.”


O’Dell says that the union has filed similar proposals with more than 30 corporations since 2009 and most, including Allstate Corp., Comcast Corp., Hewlett-Packard Co., Verizon Communications Inc., and Whole Foods Market Inc., adopted them without fanfare.

“Most companies say, ‘Oh, this is an easy one; we already do all of this. It’s a part of our culture,” O’Dell says.


She says the union plans to refile their proposal with Apple in 2011.


“If they continue to ignore us, we will hold the directors accountable and withhold our vote for re-election. This is definitely not over.”


—Rita Pyrillis