October 25, 2010Executive Technology StrategiesETS 10-10-16

HCM Strategies 2010-2020 (Part 4)

This series of articles explains the HCM strategy for small- to mid-sized firms for the years 2010-2020.

It outlines preparedness strategies for staffing and sourcing and the various IT scenarios for dealing with current and trending business needs. It contains projections of/for the hiring marketplace during this period.

Evolution of the Employee-Employer Contract

There is consistently one reference which most everyone makes reference to as a seminal work, the article, “The Psychological Contract: Managing the Joining-up Process” by John Paul Kotter. In it the author refers to an implicit contract between an individual and the organization which specifies what each expect to give and receive from each other in the relationship” This expectation set is illustrated below, and very much explains that matched set of expectations in all four quadrants is necessary to make the relationship work. This is such an important point and it reminds one of “The Anna Karenina Principle” coined by Jared Diamond in the book “Guns, Germs and Steel” in turn quoting the opening line of Anna Karenina by L. Tolstoy: “Happy families are all alike; every unhappy family is unhappy in its own way.”

By which the author (Tolstoy) means that for a family (or relationship) to work, effort must be made by both parties to keep everything carefully in-line, e.g. all good families work hard and on same principles to keep it that way. But if even one factor goes awry, then it’s very easy to see that relationship gets derailed. The message being that both sides must work towards a mutually acceptable goal.

The Psychological Contract

Noted leadership expert and educator John Paul Kotter explained misaligned expectations in terms of a “psychological contract.” He defined this as “an implicit contract between an individual and the organization which specifies what each expects to give and receive from each other in a relationship.” Matches and mismatches can occur based on the four sets of expectations in this “hidden” contract. When an employee realizes that the employer cannot meet a key expectation in the contract, there is often a feeling of having been betrayed, as if a real contract has been broken in bad faith. This can become the “shock” or turning point that begins the downward cycle toward disengagement and departure. The more clearly an employee understands his or her own expectations, the higher the probability of a match in expectations. Many new employees fresh out of college, however, are only dimly aware of their needs and desires. That problem is compounded when the organization is also not clear about what it expects, which is often the case. The psychological contract changes over time as the expectations of the employee and the organization change. With each change in expectations, open communication serves to keep both parties in alignment, or may lead to a mutual agreement to renegotiate or break the contract. This expectation relationship is show in the following diagram

Figure 1-1 the psychological contract: two parties, four sets of expectations

Matching Mutual Expectations

The following practices have been found to significantly raise the probability of new hire success, satisfaction and longer-term retention:

  • Conduct realistic job previews with every job candidate.With every potential hire, initiate a frank and open discussion of job activities, performance expectations, immediate work team, working conditions, rules, policies, work culture, management style, the organization’s financial stability or other topics where surprises need to be minimized. If you lose candidates by divulging the truth about the job or workplace, you probably would have lost them anyway shortly after hiring them.
  • Hire from a pool of temp-to-hire, adjunct staff, interns and part-time workers. When workers come aboard on a contingency basis, they have a chance to experience the ups and downs of the job firsthand before they and the organization have made the commitment to a full-time relationship.
  • Hire from current employee referrals.Current employees tend to realistically describe the job and workplace to those they are referring. They have a vested interest in maintaining the friendship, and they are generally motivated to minimize surprises.

Create Realistic Job Descriptions

  • Create a realistic job description with a short list of critical competencies. When a company’s list of “ideal candidate” competencies is too long, it unwittingly narrows its pool of candidates. The company also lays the groundwork for another problem later on — that the new hire will not be able to meet its performance expectations.
  • Allow team members to interview candidates. When those who would work with the new hire as teammates are allowed to take part in the interviewing process, the interview often more accurately reflects the needs and competencies of both parties. It also creates greater “buy-in” from team members while sending them the message that their opinions count.

Hire From Within

  • Hire from your pool of current employees.When you hire from within, you take less risk of turnover, because the inside candidate is already well versed in the ways and expectations of the organization.
  • Create a way for candidates to “sample” on-the-job experience. Many companies have begun using CDROMs that simultaneously test the applicant’s aptitude for the position while also providing a glimpse of onthe-job realities.
  • Survey or interview new hires to find out how to minimize new hire surprises in the future.Based on the feedback received from these, you can minimize misunderstandings and head off any potential disillusionment.

1.1Comp plan design

Let’s start by examining comp plan design(s). Below is a typical overview which explains a concept which we’ll all be seeing more of: Pay-for-performance, the following diagram presents it as a conceptual diagram. It also starts to lay out some of the tangible and intangible factors in a pay package.

While it isn’t the intention to examine pay packages in depth, everyone should have this picture in mind for performance reviews. It is expected that executive-like responsibility will filter down and similar factors to be considered for performance reviews, more so than today, a/k/a what has the employee done which merits rewarding.

1.2Comp plan tangibles

Undoubtedly everyone focus on Base (salary) to the point of solely preparing for a job offer on that basis alone. The reasons are that it is the most easily quantifiable and the one that pays the bills. For most high-tech employees it comprises 50-100% of their compensation.

Compensation and Benefits are the tangible rewards that are thought about and are taking the biggest “hit” right now. For the most part, employees understand the need for the changes but as key attraction tools, these programs are still important to market and communicate as part of the Total Rewards offering.

While most employees know what incentive measures they are compensated for, not all employees understand how their base pay is determined. Developing a communication strategy around your job evaluation system, such as how ranges are developed, how you benchmark against your competition, where levels and titles fit in and why and how employee’s progress through the ranges makes everything transparent and fully supports a performance driven culture.

Although Benefits is a smaller component of the overall cost than compensation, it is growing exponentially in relation to compensation and not typically sustainable in the long run.

Employers have taken this opportunity to critically review their benefit plans, cut and restructure.

Communicating what you have in your plan, various plan options, how to access it and how it can support ongoing health is imperative for ongoing sustainability. People want to be good consumers in all aspects of their lives, so providing the knowledge and clear understanding of all aspects of the benefit programs and the cost drivers in the plan is a critical part of the HR function. This marketing effort takes the focus away from potential cutbacks and gives employees the feeling of contribution.

Given the ongoing stressors in the working world with compounding personal pressures and government downloading, Benefits will continue to have sustainability issues...but it’s truly a golden opportunity to review true costs driving your plan and take a long term, proactive and transparent approach to change and ensure positive reactions and outcomes that translate into better returns for the company and employees.

1.3Comp plan intangibles

There are the traditional, intangible benefits are, e.g. things like

  1. Time-off – Holiday and Vacation
  2. Health Plan
  3. ESOPs
  4. Education
  5. Retirement plan benefits
  6. Perks

However there are less-know ones that can have great impact, are cost effective, sustainable and fulfill our needs are:

  • Career Development
  • Recognition
  • Coaching
  • Wellness-Work/Life
  • Communication

On this topic the concept of “Total Rewards” crops up repeatedly. In the future employers will be expected to provide intangible rewards along with traditional compensation and benefit programs. This means supporting employees need for appreciation, respect and demonstrates the company’s commitment to them and their wellbeing. A proactive rewards strategy will have a positive influence on performance and behavior, which influences, retention, company costs, leadership, training and customer satisfaction which ultimately influences profit and shareholder value. Whether you are looking to enhance your company culture or shift what you have now, initiating and /or marketing the intangible factors of “Total Rewards” make good business sense, especially in these times of economic uncertainty employees will need more time, to feel respected & valued.

1.4What the employee expects to provide

Certainly it depends on the role and the level. Based on experience the three employee phases can be reviewed.

For example junior employees have only their education, and little to no experience or maturity; they expect their education to be relevant and have prepared them well.

Mid-career personnel know they are expected to bring experience and executive personnel know they need to provide guidance and independence of thought to the organization.

Senior career and executive personnel know and expect to be on the line for responsibility and independence of thought.

What changes is the degree to which careers will accelerate. In turn this means more (responsibility and independence of thought, action) are expected sooner and in greater degree. There is less time for learning and gaining experience, the best employees should expect to “hit the ground running”, the best employees will be prepared for it; they’ll be rewarded sooner.

1.5What the employer expects the employee to provide

Employees know they’re responsible for education, relevant experience and competency of work. A discussion on eHow

nicely discusses these as -

  1. Timeliness
  2. Maturity
  3. Professionalism
  4. Flexibility
  5. Responsibility
  6. Honesty and integrity

Some employers, such as Allstate Insurance Co., have created formal statements outlining what

Employee and employer can expect from each other. They believe employee loyalty improves when the company and employees clearly know what is expected.

More employers are expected to formalize this/these “employment contract” intangibles. For example here’s one from a large insurance provider to their employees; you can expect more of this all the way down the chain of companies.

From Allstate to the employee:

  • Offer work that is meaningful and challenging.
  • Promote an environment that encourages open and constructive dialogue.
  • Advise the employee of performance through regular feedback.
  • Create learning opportunities through education and job assignments.

From the employee to Allstate:

  • Perform at levels that significantly increase the company’s ability to outperform the competition.
  • Take on assignments critical to meeting business objectives.
  • Willingly listen to and act upon feedback.
  • Take personal responsibility for each transaction with customers and for fostering their trust.

1.6Career and Career Path Considerations

I’ve extracted from these articles

Employees are more transient, even at later stages of their career. Nonetheless it benefits both sides by having the employer assist employees - either proactively or reactively. Several measures should be considered, all considered against their ROI

Train employees for their next job. This stands to reason by offering challenges and experience people feel fulfilled. Giving an employee relevant skills and world-class experience definitely goes into the “win” column for keeping them.

Here is a recent (and public) report entitled: “Gartner Says the World of Work Will Witness 10 Changes During the Next 10 Years” (Press Release, August 4, 2010)

“Work will become less routine, characterized by increased volatility, hyper-connectedness, 'swarming' and more,” said Tom Austin, vice president and Gartner fellow. By 2015, 40 percent or more of an organization’s work will be ‘non-routine’, up from 25 percent in 2010. “People will swarm more often and work solo less. They’ll work with others with whom they have few links, and teams will include people outside the control of the organization,” he added. “In addition, simulation, visualisation and unification technologies, working across yottabytes of data per second, will demand an emphasis on new perceptual skills.”

1. De-routinization of Work
The core value that people add is not in the processes that can be automated, but in non-routine processes, uniquely human, analytical or interactive contributions that result in words such as discovery, innovation, teaming, leading, selling and learning. Non-routine skills are those that cannot be automated. For example, the process of selling a life insurance policy to a skeptical buyer cannot be automated, but automation tools can be used to augment the selling process.
2. Work Swarms
Swarming is a work style characterized by a flurry of collective activity by anyone and everyone conceivably available and able to add value. Gartner identifies two phenomena within the collective activity; Teaming (instead of solo performances) will be valued and rewarded more and occur more frequently and a new form of teaming, which Gartner calls swarming, to distinguish it from more historical teaming models, is emerging.
3. Weak Links
In swarms, if individuals know each other at all, it may be just barely, via weak links. Weak links are the cues people can pick up from people who know the people they have to work with. They are indirect indicators and rely, in part, on the confidence others have in their knowledge of people. Navigating one's own personal, professional and social networks helps people develop and exploit both strong and weak links and that, in turn, will be crucial to surviving and exploiting swarms for business benefit.
4. Working With the Collective
There are informal groups of people, outside the direct control of the organization, who can impact the success or failure of the organization. These informal groups are bound together by a common interest, a fad or a historical accident, as described by Gartner as “the collective.” Smart business executives discern how to live in a business ecosystem they cannot control; one they can only influence.
5. Work Sketch-Ups
Most non-routine processes will also be highly informal. It is very important that organizations try to capture the criteria used in making decisions but, at least for now, Gartner does not expect most non-routine processes to follow meaningful standard patterns. Over time, it is believed that work patterns for more non-routine work will emerge, justifying a light-handed approach to collecting activity information, but it will take years before a real return on investment for this effort is visible. In the meantime, the process models for most non-routine processes will remain simple "sketch-ups," created on the fly.
6. Spontaneous Work
This property is also implied in Gartner’s description of work swarms. Spontaneity implies more than reactive activity, for example, to the emergence of new patterns. It also contains proactive work such as seeking out new opportunities and creating new designs and models.
7. Simulation and Experimentation
Active engagement with simulated environments (virtual environments), which are similar to technologies depicted in the film Minority Report, will come to replace drilling into cells in spreadsheets. This suggests the use of n-dimensional virtual representations of all different sorts of data. The contents of the simulated environment will be assembled by agent technologies that determine what materials go together based on watching people work with this content. People will interact with the data and actively manipulate various parameters reshaping the world they’re looking at.
8. Pattern Sensitivity
Gartner has published a major line of research on Pattern-Based Strategy. The business world is becoming more volatile, affording people working off of linear models based on past performance far less visibility into the future than ever before. Gartner expects to see a significant growth in the number of organizations that create groups specifically charged with detecting divergent emerging patterns, evaluating those patterns, developing various scenarios for how the disruption might play out and proposing to senior executives new ways of exploiting (or protecting the organization from) the changes to which they are now more sensitive.
9. Hyper-connected
Hyper -connectedness is a property of most organizations, existing within networks of networks, unable to completely control any of them. While key supply chain elements, for example, may be "under contract," there is no guarantee it will perform properly, not even if the supply chain is in-house. Hyper-connectedness will lead to a push for more work to occur in both formal and informal relationships across enterprise boundaries, and that has implications for how people work and how IT supports or augments that work.
10. My Place
The workplace is becoming more and more virtual, with meetings occurring across time zones and organizations and with participants who barely know each other, working on swarms attacking rapidly emerging problems. But the employee will still have a "place" where they work. Many will have neither a company-provided physical office nor a desk, and their work will increasingly happen 24 hours a day, seven days a week. In this work environment, the lines between personal, professional, social and family matters, along with organization subjects, will disappear. Individuals, of course, need to manage the complexity created by overlapping demands, whether from the new world of work or from external (non-work-related) phenomena. Those that cannot manage the underlying "expectation and interrupt overloads" will suffer performance deficits as these overloads force individuals to operate in an over-stimulated (information-overload) state.