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Posted on February 15, 2001July 10, 2018

Job Satisfaction May Not Be Everything

Tom Davenport, a principal in the San Francisco office of Towers Perrin, aninternational management-consulting firm, thinks that far too much emphasis isplaced on employee job satisfaction. “Companies spend a lot of time andmoney surveying job satisfaction as if it were a prescient factor in highperformance,” he explains. “Managers tend to think if they get highersatisfaction levels, then employees will perform better. Actually, the exactopposite is true.”


    Davenport claims that satisfaction does not driveproductivity, but that performance drives satisfaction. “Instead ofworrying about boosting satisfaction, companies should be trying to createenvironments where performance is enabled,” he says. Why? Because whenpeople have the tools to perform – e.g., the proper training, coaching andfeedback from the boss, and recognition for good work – they not only do abetter job, but they also feel better about their jobs.


    Davenport, who is also the author of HumanCapital: What It Is and Why People Invest It (Jossey-Bass Publishers, 1999),offers this advice to HR professionals who want to boost employee performance:

  1. Stop talking about job satisfaction and talk more about performance.Instead of worrying about how to make people happy, work to create anenvironment in which people can perform their jobs well. “Your companywill benefit and so will your employees,” he says.

  2. Build the capabilities of supervisors and managers. “When we dosurveys on job performance, employees always tell us, in one way or another,’It’s the manager, stupid!’ ” Davenport says. In other words, there isan enormous correlation between an employee’s job performance and theeffectiveness of his or her manager. “If HR can build the capability ofline managers, they will build performance and satisfaction levels.”

  3. Stop thinking that HR programs are going to make all the difference.According to Davenport, HR professionals tend to work like engineers. Theybelieve that if they build a comprehensive enough program – comp andbenefits, learning and development, whatever – then the program can’t helpbut be successful.

    “Unfortunately, a lot of what happens in theworkplace to build job satisfaction can’t be built programmatically,” hesays. Instead of trying to engineer commitment through a lot of programs, thinkabout how to engage employees by making their jobs easier to do.

Posted on February 14, 2001July 10, 2018

Dear Workforce Who’s Paying Immigration Filing Fees

QDearWorkforce: 


    How are other companiesin the high-tech field and beyond handling the payment of immigration filingfees for current employees with expired H1-Bs or those interested in obtaining aGreen Card?


-Allison K. 


ADear Allison: 


    As a rule, manycompanies are paying for most if not all of the fees associated with theiremployees’ Green Card filings. 


    This is a good faith effortto show the company’s commitment to the employee. In return, the companywill get the employee to sign a document stating that the employee will beresponsible to pay back the costs if the employees terminates employment within(generally) two years of the receipt of the Green Card. 



SOURCE: Mike Sweeny, T. Williams Consulting, Collegeville, PA. 


E-mailyour Dear Workforce questions toOnline Editor Todd Raphael at raphaelt@workforce.com,along with your name, title, organization and location. Unless you stateotherwise, your identifying info may be used on Workforce.com and in Workforcemagazine. We can’t guarantee we’ll be able to answer every question.

Posted on February 11, 2001July 10, 2018

Sample Flextime Proposal

The Flexible Work Arrangement (FWA) proposal is designed toincorporate many of the issues that must be consideredwhen designing a flexible work arrangement and must be completed by all PWCindividuals on an FWA. Please complete the following proposal. Your mentor orothers may assist you. 


  1. Benefits and barriers for the firm. What are the benefits of this flexible work arrangement for the firm? Identify potential barriers that a flexible work arrangement could raise with clients, partners, staff. 

  2. Flexibility and availability. Clarify your availability to travel or meet unexpected work needs on days or at times when you are not in the office or formally scheduled to work. 

  3. Communication. How will you maintain communication with the office? With clients? How will you let others know when you want to change your schedule? 

  4. Efficiency and coverage. How will you ensure that your new schedule won’t be disruptive to work flow? Describe your backup plan when you are unavailable and someone – client, partner, staff – needs something fast.

  5. Flexible Work Arrangement (check one):
    • Reduced Hours
    • Job Sharing
    • Seasonal Employment
    • Compressed Workweek
    • Flextime
    • Telecommuting


  6. Reasons/benefits for yourself. Identify reason for request. What are the perceived benefits for you? Are you meeting your career and personal goals? 

  7. Describe current and proposed work schedules (include hours per week and per day if different from standard office hours). 

  8. Summarize your current workload and client responsibilities/relationships and proposed changes – transitioning clients to other staff, relinquishing main contact relationship, etc.). 

  9. Based on the above, provide the proposed number of hours you anticipate you will spend in each area of your job. 

    Using the completed proposal as aguide, discuss the proposed arrangement with your supervisor, coach, and localHR representative. The agreed upon arrangement should be reviewed, evaluated,and discussed quarterly to ensure it is successful for the individual, theoffice, the clients, and staff.


Workforce, February 2001, Vol80, No 2, p. 41  Subscribe Now!

Posted on February 11, 2001July 10, 2018

Formalized Flextime The Perk That Brings Productivity

Flexible scheduling, long considered agrudgingly given perk for working mothers, is turning out to be a strategicsolution that reduces turnover, improves morale, and draws hard-to-get talent ina painfully tight job market.


    In 1997, more than 25 million workers varied theirhours to some degree, with staggered start times, compressed workweeks, jobsharing, and part-time hours, according to the article “Flexible Schedules andShift Work: Replacing the 9-to-5 Workday?” by Thomas Beers in the June 2000issue of Monthly Labor Review. But, he adds, most flexible workers alter theirschedules on an informal basis. Statistics show that of those 25 millionworkers, less than 6 percent have formal arrangements.


    However, as flextime grows inpopularity, companies are realizing that informal schedule changes can createcommunication problems and hostility among employees. To combat this problem,more organizations are implementing formal policies that require workers topresent solid business cases for going flextime, including how it will benefittheir clients, and how they plan to communicate with team members andsupervisors.


    Companies like Ernst and Young, Hewlett Packard, andPricewaterhouseCoopers have gone so far as to create work/life programs thathelp employees and their coworkers make the transition smoothly and assure thatthe changes benefit everyone involved. Here are their stories and advice. 


Software helps employees planschedules
    “At Ernst and Young, the focus is onresults, not face time,” says Denny Marcel, a member of the company’s NewYork-based Office for Retention. “Employees know that they can choose flexiblework arrangements (FWA) and still be competent. We empower people to decide how,when, and where they get their jobs done.”


    It’s this attitude that has madeE&Y a pioneer in flex schedule options for employees – an initiative thatwas launched formally in the mid-1990s to address the balance of personal andprofessional obligations, especially among female employees. Today 1,600 ofE&Y’s 23,000 employees formally take advantage of the FWA program – 79percent of them women – and an estimated 50 percent occasionally take advantageof options like telecommuting, says Marcel.


    To make sure the initiative wassuccessful, the Office for Retention created two Lotus Notes databases – the FWADatabase and the FWA Road Map – to guide interested employees through flextimeplanning options.


    “There were people interested inflexible work arrangements who didn’t know how to do it,” says Marcel. TheFWA database features profiles and quotes from existing flextimers about theirexperiences. Anyone interested can use it to find people to network with ormentor them through the process.


    “It’s an alternative to approachingyour supervisor,” says Marcel, noting that some employees might not be readyto tell managers that they want to alter their work schedules. The database alsodebunks common myths regarding flextime arrangements, hosts a discussion boardmonitored by FWA experts and users, and has links tothe firm’s administration policies regardingwork/life issues.


    “The database educates all of ourpeople about FWA,” says Marcel. “It’s not just for the people who wantflexible schedules; it’s for their supervisors, their colleagues, and otherworkers.”


    Marcel says that for a flex program tobe successful, it’s critical that team members have access to information onhow to work with and manage flextimers.


    Once they’ve reviewed the FWAdatabase, the FWA Road Map is the next step for potential flextimers. It has aself-assessment tool that helps them evaluate their work/life issues, andwhether they have the skills and personality to succeed on a flexible schedule.It explains their options, and discusses the challenges unique to each type ofschedule.


    Along with information and surveys, theRoad Map walks employees through preparation of the business case. It has a Worddocument template that asks a series of questions about what they want, how itwill affect their team members, and how they will deal with clients.


    “Everyone at E&Y can beconsidered for the FWA program as long as they build a business case for it. TheRoad Map helps them think concretely about the impact that going flextime willhave,” says Marcel.


    Employees can also get help from one of12 FWA specialists to write their business case and negotiate the terms.

    According to survey data gatheredthrough the FWA database, 84 percent of flextimers say the FWA program is theprimary reason they stay at E&Y. And thanks, at least in part, to theprogram, E&Y was named by Working Mother and Fortune as one of “The Best100 Companies to Work For” – one of only 16 companies to make both lists. 


Flextime scheduling reduces stress andovertime costs
   Hewlett Packard has offered employeesflextime options since the 1960s, says Kathy Burke, Global Worklife Programmanager for HP. “It’s part of the fabric and culture of Hewlett Packard.It’s in our DNA.”


    HP leaves flextime scheduling solutionslargely up to employees and their managers, under the assumption that they willdevise plans that best fit their needs. Schedules might include staggered starttimes, or working four 10-hour days or 80 hours in nine days. “Employeesredistribute their 40 hours in their own way. It’s between them and theirmanagers and work groups,” says Burke.


    She believes that giving employees thefreedom and power to create schedules that accommodate their work/life balanceissues makes them more productive. “HP employees face a lot of stress on thejob,” she says. “Giving them flextime options allows them to meet theirpersonal commitments while staying committed.”


    Jill Casner Lotto, vice president ofthe Work in America Institute, a national nonprofit organization based inScarsdale, New York, agrees. She researched Hewlett Packard’s program as partof a flextime policy report she authored, called “Holding a Job, Having aLife: Strategies for Change.”


    “Flextime is not just a company perkor a negotiation for time off,” she says. “It’s a strategic business toolthat improves productivity and quality of life for employees.”


    Casner Lotto cites a group of fieldtechnicians at HP whose own initiative to readjust their team schedule reducedstress and saved money. The technicians were required to meet customer requestswithin a two-hour turnaround time while operating on a 24-hour, seven-day-a-weekschedule, she says. “There were morale problems, people were leaving thedepartment, and overtime costs were breaking the budget.”


    To solve it, the team collaborativelyredesigned the work schedule. Some members volunteered to work 12-hour shiftsFriday through Sunday and a 4-hour shift on Monday, in exchange for reducingtheir workweek to three and a half days. The rest of the team worked five-dayweeks but got their weekends off.


    Overtime costs for that team dropped 36percent, says Casner Lotto, and they were able to accommodate growing customerneeds with the same staff while reducing the stress of a round-the-clock jobscenario. “It gave employees greater flexibility and predictability in theirwork hours, making it easier to arrange child care and transportation. It alsoprovided employees – many of them first-time job holders out of welfare-to-workprograms – with increased pay and training in business and teamdecision-making.” 


PricewaterhouseCoopers’ policy guidesemployees
    “A formal policy for tracking andguidance is essential for a flexible work arrangement,” says Ray Lewis,director of communications at PricewaterhouseCoopers and manager of the PWC AtHome program. “However, the policy has to be flexible, too.”


    PWC has a 28-page document on planningand implementing flexible work arrangements that includes approval guidelines,discussion tools, compensation adjustment information, types of plans,and tips from other flextimers at PWC.


    “It’s written with core successfactors in mind,” says Jennifer Duras, coordinator of flextime arrangements atPWC.


    The policy demands that employees takeresponsibility for their relationships, with both team members and clients, saysLewis. “The focus is on the client, not the individual. As long as all of theclient’s needs are served, we will consider whatever arrangement isappropriate.”


    Flextime options began informally, witharrangements for individual employees left up to department heads and workgroups, he says. When the At Home program was established two years ago, Lewisand others began monitoring flextimers and surveying employees about theirinterest in flex options. “There was an incredible amount of interest,” hesays. “But it became clear that we needed to put a framework around it.”


    A policy team drew input from acrossthe company through interviews and daily communications between flextimers andmanagers. The goal of the policy was to create some commonalties andstandards that were fair across the company to all employees.


    “Without the policy we would beedging toward chaos,” says Duras. “There are so many different points ofview. We needed to focus on the core of the business.”


    Now when employees are interested inflexible scheduling, there is a process to follow. They first read all of theguidelines, then go to their work teams to discuss whether and how it couldwork, says Lewis. Then they go back to the policy and complete a six-pageflex-work proposal that defines their plans to meet their responsibilities.“It helps them think through all of the issues involved so they go into itwith their eyes open,” he says.


    The policy also includes guidelines andquestions from managers and team members to help them determine whether flextimeis a good idea for their group and how to work with a flextimer. “That firstdecision for managers is critical,” says Duras. “Internally, we communicatesuccess stories and make sure everyone reads them. We encourage everyone to tryit.”


    Lewis estimates that 500 of the 45,000employees formally take advantage of the program and that nearly 75 percent takeadvantage informally on an occasional basis.


Workforce, February 2001, Vol80, No 2, pp. 39-42  SubscribeNow!

Posted on February 9, 2001July 10, 2018

Health Plan Nondiscrimination Rules and Wellness Program Guidance

Summary
   The Departments of Labor, Health andHuman Services, and Treasury jointly published two separate regulations on thenondiscrimination provisions of the Health Insurance Portability andAccountability Act (HIPAA) on January 8, 2001. Under HIPAA’s nondiscriminationrules, HMOs and group health plans (both insured and self-insured) may notdiscriminate against individuals by basing eligibility, enrollment, premiums, orcontributions on any “health status-related factors.”


    The interim final rules prohibit grouphealth plans or group insurance issuers from denying an individual eligibility,or charging an individual a higher premium than it charges other similarlysituated individuals, based on a health factor. Health factors include healthstatus, medical condition, claims experience, receipt of health care, medicalhistory, genetic information, disability, and evidence of insurability.


    The proposed rules relate to theapplication of the nondiscrimination requirements to bona fide wellnessprograms. Bona fide wellness programs are permitted exceptions to the HIPAAnondiscrimination requirements. Plans may provide discounts, rebates, andmodifications to copayments or deductibles among similarly situated individualsas incentives for complying with health promotion and disease preventionprograms, which meet certain requirements as a bona fide wellness program.


Status
   The new regulations were generally toapply as of the first day of the first plan year beginning on or after July 1,2001 (January 1, 2002 for calendar year plans), with some provisions beginningMarch 9, 2001. However, the effective date has been delayed by 60 days based ona White House memorandum issued by the Bush Administration. (The ClintonAdministration issued these regulations just before the transition to the BushAdministration).


    The effective date refers to the datethe regulation will have the force of law, although employers may not berequired to actually comply with some of the requirements until a later date.


    The nondiscrimination regulations willbe effective on May 8, 2001 or August 30, 2001, depending on the provision. Itremains to be seen what, if anything, the Bush Administration will do with theseregulations.


Impact
   The nondiscrimination regulationsclarify that group health plans may treat different groups of similarly situatedindividuals differently, but only if the definition or creation of the groups isnot directed at individual participants based on health factors. This means thatit is permissible to limit or exclude benefits for one group of similarlysituated individuals compared with another. However, other employment laws suchas the Americans with Disabilities Act may apply and should be considered.


    The majority of wellness programs willnot have to change in order to comply with the proposed requirements for bonafide wellness programs because most wellness programs do not requireparticipants to attain lower risk levels or health status improvements, butinstead focus on participation and risk reduction. Employers should still reviewtheir wellness programs to ensure that they either comply with the proposedregulation or are excepted from the regulations.


To Learn More

  • View the nondiscrimination regulations
  • View the wellness program regulations
  • Read a DOL pressrelease
  • Link to a DOL Questionand Answer sheet

SOURCE: Hewitt Associates LLC

Posted on February 9, 2001July 10, 2018

Health Claims Procedures

Summary
   The Department of Labor (DOL) publishedfinal regulations on the standards for claims and appeals procedures for ERISAgroup health and disability plans. The final rules set shorter time frames fordecisions on initial health care claims, particularly for urgent medical care.


    The final regulations also set shortertime frames for review decisions of denied claims, give claimants more time tofile appeals, and require plans to provide more information to participants. Thestandards for claims appeals are stricter, such as allowing no more than twolevels of appeal before a claimant can file a federal lawsuit under ERISA forthe denied benefit.


Status
   The final rules became effective onJanuary 20 and will apply to claims filed on or after January 1, 2002. Theeffective date refers to the date the regulation will have the force of law,although employers are not be required to actually comply with the requirementsuntil the later date.


Impact
   The regulations will requireemployer-sponsored health and disability plans to significantly modify theirclaims and appeals procedures under the plan. These regulations will generallynot cause most other types of ERISA plans, such as retirement plans and otherwelfare benefit plans, to substantially change their procedures.


    The regulation will require moreinformation to be provided to participants and beneficiaries, such as includinga description of all claims procedures in the plan’s summary plan description.Certain elements of the new rules will create significant administrativeproblems and systems burdens for plans.


To Learn More

  • DOL pressrelease
  • DOL factsheet
  • Informationfor consumers (published by DOL)

SOURCE: Hewitt Associates LLC

Posted on February 9, 2001July 10, 2018

Think Twice What a $252 Million Contract Means to You

A 25-year-old has just agreed to aquarter-billion-dollar contract (yep, that’s a “B”), but it’s really ahome run for human resources. As we speak, Alex Rodriguez, a shortstop who nowworks for the Texas Rangers baseball franchise, is entering spring training withone of the largest jackpots ever in the hands of a nonexecutive employee.


    Terry Turner,assistant vice president for human resources for the corporation that owns theRangers, told Workforce late last year that the contract was “like buying acompany … or a country.” Turner says the HR department had to buy insurancein case something happened to Rodriguez.


    All these zeroes area good thing for everyone who reads this magazine. They’re a good thingbecause it’s a sign that people are adding up the contribution that employeesmake to the bottom lines of their employers. I mean, if we really believe that(cliché coming) employees are our most valuable asset, then certainly Rodriguezis worth every penny. In his profession, in his position, he’s the bestemployee in the world, and arguably the best ever. If we look at the company’sbusiness results, and put the money where our mouths are, this kind of doughstarts making sense.


    Why should we care?Well, if employees are getting paid solely for their worth to the business’sbottom line – not their experience, not their age, not anything else – itfollows that those who must evaluate these employees (HR) suddenly become very,very important.


    That same importancemust hold for those who:

  • Train that talent
  • Help that talent get along withother talent
  • Try their darnedest to hold on tothat talent
  • Design benefits, salary structures,and relocation incentives
  • Hire and supervise the people whomanage that talent

    Whew.


    The Rodriguezsigning is a signal that when all’s said and done, what really matters to thesuccess of your company are the people on the payroll. It’s a signal that nomatter how nice a stadium you build, no matter how big a computer chip plant orhow great a business plan that promises to sell 5 million widgets by 2020, inthe final analysis it’s your employees that make a difference to the bottomline.


    One might argue thatwe shouldn’t draw too many conclusions here, that since baseball is merely agame played with a stick, it falls in an industry that is somehow unlike therest of American commerce. This sounds like it makes sense, and believing it isa nifty way out of the huge responsibility and opportunity that greaterattention to employee worth could mean for HR. But the radical opposite is true.


    Baseball has been abreeding ground for one workforce trend after another. The concept of “freeagency” started taking root in baseball in 1969, and spread to the rest ofwhat became a job-hopping workforce. Baseball became more diverse more quicklythan many other workplaces, with Hispanics (like Rodriguez) and other minoritiesfrom every walk of life working side-by-side in relative harmony. Long-rangeworkforce planning and succession planning were a way of life in baseball beforethey were in many other industries. Arbitration gained prominence in 1974 as ananswer to baseball’s salary disputes and has spread into other industries andinto other areas of contention. Pay-for-performance was alive and well inbaseball before it was trendy in many corporations.


    The signing of AlexRodriguez may be an indication of yet another trend, one that will place HRprofessionals in an even brighter spotlight.


Workforce, February 2001, Vol80, No 2, p. 112  Subscribe Now!


Other columns by Todd Raphael:

  • OnGore and Bush
  • TheYear HR Became Cool
  • Thoughtsfor the New Leaders of the New Dot-coms
  • LetRocker Talk
  • To:All E-mailers From: Todd
  • Holidays:Some Minor Revisions
  • WeWish You a Merry Winter
Posted on February 9, 2001July 10, 2018

Work-Life Preference Checklist

Place a check next to each item on the following checklist that you feel isimportant to your satisfaction at work. Circle the five items in each categorythat are most important to you.


Work Environment:

Growing/Successful

CaringManagement


Ethical


GivesRecognition


Family-oriented


PhysicallyAttractive


GoodBenefits


Quiet


PaysWell/Fairly


Efficient


Clean/Safe


LargeOrganization


Open/Participative


EqualOpportunity


RewardsRisk/Innovation


TimeFlexibility


Accessto Recreation


FasterPace


 

AdequateParking

SlowerPace


AdvancementOpportunity


PrivateOffice


Entrepreneurial


Stability


StrongLeadership


GivesFeedback


ClearMission


ChildCare


TeamSpirit/Morale


ShowsRespect


TrainingAvailable


Professional


DressCode


Safety/Security


ResourcesAvailable


International


 


The Work Itself:

UtilizesAbilities

MoreManagement Contact


HighVisibility


MoreContact with Peers


HighStructure


Theoretical


LooseStructure


LineJob


Emphasison Thinking


Expertiseon Quality


TaskVariety


Emphasison Quantity


WorkAlone


InvolvesTravel


 

MeaningfulOutcome

Field/PlantJob


Workwith People


GeneralistRole


Workwith Data/Ideas


SpecialistRole


Workwith Physical Things


ReliabilityValued


RegularHours


StaffJob


IrregularHours


HeadquartersJob


NoTravel


Workin Groups


 


Results, Rewards, and Motivation:

Advancement/Promotion

FinancialPayoff


GainControl/Authority


Product/ProcessCreation


Realizea Vision


Buildan Enterprise


MeasurableResults


Havean Impact


MakeSpecific


Tobe a Change Agent


ToCompete and Win

Mastera Craft/Process

Distinction


Recognition


ExploitHidden Talents


ExpertiseOpportunities


Pioneeror Discover


EliteStatus


Respondto a Challenge


OvercomeAdversity


MeetHigh Expectations


Contributeto Society


Lifestyle and Personal Values:

Livean Honest Life

RetireComfortably


LeisureTime


Livein a Beautiful Setting


SpiritualLife


ManyFriends


FinanciallySecure


Bea Good Parent


Careof Family

Healthy

Vacation/Travel


LiveWhere I Want


CommunityInvolvement


LovingRelationship


Respectof Others


MaterialGoods


Balance/Harmony


HelpLess Fortunate


List the 20 items circled from most toleast important:


1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.


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Posted on February 4, 2001July 10, 2018

What Your Employees Are Worth

To paraphrase Jeff Pfeffer (Competitive Advantage Through People), if people are our most important asset, then why are we going to a predominantly contingent workforce?


Management is in a perennial expense-reduction battle. The battle will always start with cutbacks in the employee base so long as management believes that people are an expense. I read and hear the “people are our most important asset” platitudes mouthed by CEOs at human resource conferences days before they launch another “rightsizing.” After ten years and a series of these, one would think they should have gotten it “right” a long time ago. But the inescapable fact is that they will never get it right so long as they believe in their hearts that human capital, unlike other assets, cannot be managed for value.


The irony in this is that while with one hand the executive is signing off on a mega-million capital investment in information technology—which he/she admittedly doesn’t understand – on the unsubstantiated promise of the CIG (Chief Information Geek); with the other hand he/she is signing the death warrant of a couple hundred or thousand more employees. Who the h— does he think is going to make the technology work and who the h— does he think is going to leverage the data that comes out of it?


Okay, I feel better now. So, let’s look at this logically and dispassionately.


No one hires an employee primarily because they want to spend money, right!? They expect that for every dollar they spend on pay and benefits they are getting back more than a dollar in profit. If this does not happen the result is called: BANKRUPTCY. So, since most companies are not bankrupt, it must follow that people are actually returning more than a dollar for each dollar invested in them. That is the only explanation. The bloody buildings, machines and materials don’t make products or serve customers … people do! The biggest-fastest-shiniest computers do not add value until a trained human being applies them to a business task. In fact, the b-f-st computers are nothing more than depreciating assets until the poor schmuck, who is labeled “expense” by management, turns them on and makes them work.


If you are still with me, here is the solution. Learn how to monitor the output of a business unit or process and show that it is adding value as expressed in dollars. The combination of people, facilities and material unite to create something. The unifying force is the person, because those facilities and material ain’t movin’ until the person moves them. The following are a couple of simple formulas that even us math-phobics can use to show human value.


If you don’t have a copy of your corporate annual report, Get One! I’ll wait. Now, flip towards the back to the page called Income Statement. Write down the total sales and service revenue of the company. It’s usually on the top line and labeled Sales or Revenue. Subtract from it all Operating Expense except Interest and Depreciation. Talk to a friend in accounting to get payroll and benefits costs. Subtract that from Operating Expense as well. Now we have a figure representing all non-employee operating expense. When you subtract that from Revenue the resulting number is what we call Adjusted Profit. Now, divide that figure by the number of full time equivalent employees in your company (include contingent workers if you can). This gives you the amount of profit generated per FTE. Below is a picture of it:


BUSINESS SIDE


PEOPLE SIDE


Revenue minus
operating expense only for facilities, machinery, materials and supplies


minus Payroll and benefits cost


equals Adjusted Profit


÷


Number of Employees


Equals Profit leveraged per employee (FTE)


In Saratoga Institute’s 1999 Human Resource Financial Report, the average for 891 companies in 25 industries was $110,429 per person. This varied from under $50,000 to a high of over $500,000. Who says people don’t make a difference?


If you are feeling frisky, you can also divide Adjusted Profit by Payroll and Benefits to get what we call Human Capital Return on Investment. For every dollar spent on pay and benefits you got more than a dollar back (I hope). The average in the 1999 Report was $1.82 for every $1.00 invested.


Economists will tell you that expenditures for machinery are leveraged through production to something more than what the equipment cost. This, they claim, is how companies make money. I agree with them so long as they acknowledge that the bloody machine didn’t do anything until a human being turned it on and used it the way it was supposed to be used. And the better trained he or she was the better the machine performed; that’s human leverage, and that’s where profit comes from.


How do we convince management to spend money to retrain people rather than lay them off? Show return on the training investment. If you teach people to do something you must be able to see them do it when the training is put into play. What can the people do better now than before the training, and what is that worth? Start with clerical and production skills. Make your case there. Then, you can move up to professional and managerial training where there is more judgment and less routine.


You’ve been patient and persevered to this point, so I would like to offer this thought in closing. You might feel that you are so busy you don’t have time to show value added. If that is the case, get your resume ready because soon management will see you as an expense too.

Posted on February 4, 2001February 14, 2022

10 Measures of Human Capital Management

The Saratoga Institute, now a part of Spherion’s Human Capital Consulting Group, has been measuring the value of human capital for 20 years. Among the 250 different metrics used by the institute are revenue factors, profitability, and investment in a company’s workforce. Using a number of formulae, researchers at the institute are able to quantify the value of human capital as well as its overall effectiveness, claims Robert Morgan, president of the Human Capital Consulting Group.

“One of the things we encourage companies to do is to take the top 10 metrics – not necessarily all 250 – and measure themselves. Not every metric is important to a company. Itdepends how labor-intensive they are, if turnover is a problem, if they are in a knowledge industry, things like that.”

Those 10 metrics were developed by Jack Fitz-enz, founder and chairman of the institute. Since there is no set standard of measurement that fits every company, Fitz-enz says, it’s important to decide which of these apply to your company’s situation. What is important to one firm, he says, might have little value to another.

  1. Your Most Important Issues. These are the targets of all lower-level measures. Whether it be one or a few measures, make certain that you are focused on them and that your metrics lead in a direct line to them.
  2. Human Capital Value Added. How do the people in your organization optimize themselves for the good of the company and for themselves? This is the prime measure of a person’s contribution to profitability and shows that you can answer the question: “What are people worth?”
  3. Human Capital ROI. This is the ratio of dollars spent on pay and benefits to an adjusted profit figure.
  4. Separation Cost. It’s important to know how many people are leaving and from which areas, but it’s more important to know what that costs the organization. The average cost of separation for an employee is at least six months’ equivalent of revenue per employee.
  5. Voluntary Separation Rate. Loss of personnel represents potential lost opportunity, lost revenue, and more highly stressed employees who have to fill in the gaps. If you can cut the separation rate, you don’t incur the cost of hiring for these positions or lose quality in your customer service.
  6. Total Labor Cost Revenue Percent. This is total benefit and compensation cost as a percent of organizational revenue: the complete cost of human capital. In other words, this shows how much of what you are taking in through revenue goes to support the company’s total labor cost (including temporary, seasonal, and contract or contingent workers. Thus, it accounts for all your W-2 and 1099 employees.This metric is designed to help you track changes in your workforce. You can do this best by comparing this metric to your revenue factor, your compensation costs, your benefit costs, and your contingent off-payroll Costs. If your Total Labor Cost Revenue Percent is increasing, you need to see if this is because your compensation costs or your benefit costs are increasing or if your revenue is decreasing. This will help you determine what actions to take based on your business objectives. Cutting costs may only help in the short-term if revenue is decreasing.

    Also, by looking at this number in comparison to your contingent off-payroll costs, you can analyze whether or not your contingent workforce is contributing to an increase or decrease in your total labor costs.

  7. Total Compensation Revenue Percent. This is the percent of the organization’s revenues that are allocated to the direct costs of the employees. This differs slightly from Total Labor Cost Percent; it does not include the costs for any off-payroll employees who receive a 1099. It only accounts for any on-payroll employees. Again, it is best to compare this measure to your Revenue Factor, your compensation costs, and your benefit costs to analyze what is happening with workers before creating strategies to address any concerns.
  8. Training Investment Factor. Forces are in conflict within the workplace. There is a continuing invasion and distribution of technology aimed at improving individual productivity and a growing demand for better service. Yet many workers cannot read, write, do simple calculations or talk intelligently with customers. The organization must invest in bringing up basic skills.
  9. Time to Start. With the ongoing shortage of talent, recruitment will be a major challenge. Monitoring the time from approval of a requisition until someone is on the job is a strategic indicator of revenue production.
  10. Revenue Factor. This is the basic measure understood by managers.

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