Behavioral and Cognitive Assessments

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Following up on last week’s article where we learned that the best predictors of future job performance are cognitive assessments and behavioral interviews, there are multiple tools that have been developed to accomplish both.  One of the best I have personally used is Predictive Index- a Behavioral Assessment tool that has recently added a validated Cognitive Assessment portion.

The Behavioral Assessment

This portion is broken down into four categories, as many of these types of tools are.  They categorize individuals based on their tendencies in the categories of Dominance, Extroversion, Patience and Formality.  The PI is most beneficial when combined with the job profile. Each manager should complete the job profile prior to beginning recruitment for the position.  As each candidate completes the PI, their profile is compared and contrasted with the job profile and a list of behavioral questions are generated for any area where there is not a match.  This is a perfect set of questions to forward and assign to your interviewers.  This serves three purposes.

1) it ensures that each category where there might be a concern is covered by someone

2) it prevents the candidate from being asked all the same basic questions over and over

3) we all have a tendency to want to hire people just like us which may or may not be the best choice for each position

This approach forces us to interview and make decisions based on the merit of the individual candidate.

 

The Cognitive Assessment

This is not your typical IQ test, which, oddly enough, are not particularly well correlated with job success. This is a online survey measuring the many dimensions of human cognitive abilities based on verbal, numerical and visual reasoning. It is a balanced mix of 50 multiple choice question of various types and difficulty levels which are all designed to address the perception and processing skills of the candidate or employee.   Pace of learning is strongly associated with successful on-the-job performance making it an integral part of any recruitment process. Higher scores do not imply higher levels of intelligence simply certain ranges are more suited for certain jobs. Making sure you have the best idea of your candidate’s learning capabilities and their ability to adapt to changes help you to streamline the selection, on-boarding and training of a new employee or manager.

Combined, these are good predictors of success on the job.  The challenge is deciding which of your jobs need what level of cognitive capability.  Not all positions require someone in the top 10% or, to be honest, even the top 30%. Once you have the benchmarks identified, some of the validation is simply collecting the data.  Did you decide that the Accountant needed to be in the top 30%, but a number of the Accountants you have hired are not wildly successful? Perhaps you need to adjust it to look for those in the top 20%.

Combined, these approaches are significantly more effective than the typical “So, tell me about yourself” interview.  

 

The (Dismal) Effectiveness of the Old-Fashioned Interview

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I refer to it as the old-fashioned interview because it is about as useful as were the old fashioned typewriters compared to today’s computers. Never mind the fact that it is a dismal predictor of future success on the job, it is still in use. The good news is that there are alternatives, although they are not yet widely used.

The Worst Predictors

 

Unstructured interviews

In general, unstructured interviews, those in which the interviewer is left to their own accord to ask whatever questions come to mind, can explain only about 14 percent of an employee’s future performance.  Yet, the interviews taking place today could largely be categorized as unstructured interviews.  Rarely is the interviewer prepared in advance for the types of questions they will ask or are the consistent across multiple candidates for the same position.

Reference Checks

Refence checks fair a little worse and can only explain approximately 7% of on the job performance.  Yet, how many of us still conduct reference checks only to be told that they employee was wonderful, never missed a day of work and that they would be re-hired.  Only a few times have I heard a voice on the other end of the line tell me something negative about an applicant. In those cases, I always wonder what that candidates less favorable reviewers would say about them if these are the best they could come up with.

Years of Work Experience

By far, the least predictive of success, coming in at explaining only 3% of performance is our concern with the numbers of years of experience an applicant has.  We somehow make the leap that someone who has been in an occupation for 15 years is better and worth more than someone who has been in the same occupation for only 5 years.  That may be true if the more senior applicant has shown significant career progression, but the inverse may actually be true if both applicants have been in the same job and neither have experienced career progression.

 

The Best Predictors

 

The Work Sample

While not all jobs easily lend themselves to work sample test, these are, not surprisingly, the best predictors of future success coming in at 29%.  While management jobs are notoriously difficult to give a work sample test to, there are many types of positions including finance, accounting, call centers that readily lend themselves to these types of tests.

Cognitive Tests

While there is some reluctance to give what people think of as IQ tests to candidates, these cognitive tests are the second-best predictor of performance coming in at 26%.  They actually don’t measure IQ as much as they measure the thought process that the candidate uses, their ability to solve issues and how quickly they can think and process information.  They are predictive because general cognitive ability includes the capacity to learn and the combination of raw intelligence and learning ability will make most people successful in most jobs.

Structured Interviews

In a tie with the Cognitive tests are structured interviews at 26%.  These structured interviews can be either behavioral where the candidate is asked to describe a past achievement in a certain area or situational where the candidate is given a hypothetical, but related scenario and asked how they would respond.

Given the above data, think about how you might re-structure your interviewing processes to give your company the best chance of hiring candidates that will experience success on the job.

 

Personalization of Employee Health Management

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Employers have long understood that focusing on employee’s health has a multitude of benefits for employees and employers alike.  Health insurance companies touted health and wellness initiatives by offering employee newsletters which didn’t hesitate to point out the distinct correlation between obesity and the greater propensity for all sorts of diseases.  Some offered seminars where employees could ask questions about a particular health issue. Still others went a step farther and held full blown health fairs with vendors across a broad range of areas from clinics to yoga to healthy eating.  Although each initiative may have met with marginal success, they lacked the aspect of real personalization.

In walks wearables.  Wearables, as the name so implies, are devices that are worn by the individuals.  Fitbit is a perfect example.  Having just acquired Twine Health, they are taking aim at helping consumers/employees manage chronic conditions such as diabetes  or hypertension, make lifestyle changes, such as smoking cessation and weight loss and allowing all the parties involved in someone’s health, including providers, coaches and families, to collaborate on care plans.

More employees are expecting their benefits offerings to be personalized to their experience and a wearable could easily set a framework to allow that personalization.

The touted benefits of an employer focus on health and wellness are many:

 

Reduced absenteeism

It seems logical enough.  Healthy employees tend to be unexpectedly absent less than their unhealthy counterparts. The Wellness Council of America estimates that 100 million workdays are lost to workers’ lower back problems each year. A company fitness program that includes weight loss and muscle strengthening can reduce instances of lower back injuries. Fewer doctor visits and fewer sick days make for a more productive employee population.

 

Lower health insurance costs

According to the American Journal of Health Promotion, a study of nearly 950,000 individuals showed  decreased hospitalization costs, length of stay and admissions for those engaged in a comprehensive wellness program.

 

Lower turnover as employees feel cared for by their employer

Sometimes just showing you care is enough to reap the rewards of engagement among your employee population.  Higher engagement yields lower turnover. For example, the APA’s Psychologically Healthy Workplace Award winners report a significantly lower turnover rate than the national rate of 38 percent, as well as a 73 percent employee satisfaction rate. HBR reports that 70% of employee participants reported that their company’s offering is an indicator that their employer cares about them. The real differentiator between successful and failed wellness programs may be whether they deliver on the emotional level as well as the physical.

Wearables offer an opportunity to take employee health and wellness to a new level.  One where programs, advice and reminders are personalized to each individual employee. According to ABI Research, 13 million wearable devices will be integrated into corporate-wellness plans over the next five years. Encouraging employees to use wearable fitness devices, such as Jawbone’s UP 24 activity tracker, Nike’s FuelBands or Fitbits, to track their movement, sleep and eating habits and share their accomplishments with their colleagues can motivate your entire office to lead a healthier life, resulting in less sick days, lower health insurance premiums and higher productivity.

Should we hit the Easy Button?

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It’s a question worth pondering.  Is easy indeed always better? The fast, intuitive response might be a resounding “YES”, but given more thought would you change your mind?  While easy gets the job done, does it leave us with the same level and sense of satisfaction of overcoming a challenge, something that was hard, something that, because it didn’t kill us, made is stronger?  Do we need to feel a sense of accomplishment at overcoming something that was not easy, in order to grow as human beings?

In the words of Margaret Thatcher “Look at a day when you are supremely satisfied at the end. It’s not a day when you lounge around doing nothing; it’s a day you’ve had everything to do and you’ve done it.”  And, I might add, exceedingly well in spite of it being exceedingly hard.

Perhaps that is because the level of accomplishment that leads to success and promotes self-esteem requires that you do estimable things.  Taking the easy way out does not result in these feelings and does nothing to further predict your ability to undertake great endeavors in the future.  This is part of the reason that colleges would rather see a student who takes Calculus and gets a “C” than a student who takes Pottery and gets an “A”. It is because undertaking something that is hard is a better predictor of success than simply achieving something easy.  

A look at accomplished individuals who regularly win awards and medals shows that they are driven by the effort rather than the result. It is the striving rather than the reward that is long-lived.  The striving, the risk taking, the hard won spoils of war are what build self-esteem, not the awards and trophies that are handed out to both teams, win or lose. 

Self-esteem feels good because it calls on the emotion of pride. Pride in turn arises from one’s sense of confidence and capability. Esteem and related emotions instill a sense of success and the confidence that you can accomplish whatever you set out to do.

So, are we cheating ourselves when we take the easy way out?  When we cut corners just to get to the result faster? Are we telling our selves that the result is all that matters?  I think “yes”. I think striving to do our absolute best against formidable odds, even if we take a few missteps along the way, is better than taking the easy way out.  It yields accomplishment rather than simply achievement, it builds self-confidence, and it forms a habit that is a predictor of success for the rest of your life

The Case for Transparent Compensation Practices

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Years ago you could find policies written in Employee Handbooks threatening termination if you were to speak to another employee about your salary or bonus.  The whole process was hush hush and no one really understood how salary increases or job worth was calculated.  Only the select few could afford the salary surveys that were published annually.  Gone are those days.  Salary surveys for your industry, revenue size, employee size and market are now only a click away.  Compensation is finally coming out of the black box and into the light.  So why should you subscribe to this new trend?

 

It’s the Law

Perhaps the most basic reason is that it’s the law.  Employers can no longer prohibit employees from openly discussing their salaries and bonuses or threaten them with termination for doing so. The NLRB specifically ruled “You cannot forbid employees – either verbally or in written policy – from discussing salaries or other job conditions among themselves. Discussing salaries is considered a “protected concerted activity” by the NLRB and it’s protected regardless of whether employees are talking to each other in person or through social media.”

 

Takes it out of the realm of mystery

There are a myriad of other reasons that you shouldn’t prevent employees from understanding their own salaries and others.  One of those, is that it shouldn’t be a mystery. Employees should understand that creating salary structures is a science based on market data.

 

Encourages well thought out salary ranges and structures

Once you know that you aren’t the only one looking at and depending on the salary structures to make hiring decisions, give increases and calculate promotions, it behooves you to take an extra hard look at your structures.  Could you defend them to the outside world?  Are they updated?  Have you properly defined your market?  Does the work force slot in where they should with no one falling below the minimum and only a few over the top?

 

Defocuses people on pay disparities

Employees can spend an alarming amount of time thinking about pay and whether they are compensated fairly to both the market and the person sitting next to them.  Being transparent about you pay practices puts people at ease.  They trust that they are paid fairly because they understand the process and have full access to the data.

 

Better management of promotional opportunities

Employees will frequently bid on jobs without have any concept of whether the job they are bidding on is actually above or below their current job in terms of salary grades.  By allowing employees to have access to the structures, you decrease the number of bids you get for jobs that, once the employee finds out it is a decrease in pay, is no longer interested.  

 

There are many reasons to run a more transparent compensation practice, but perhaps the biggest is trust.  When you are trying to build a culture of trust, it is significantly easier when you are open and willing to answer the questions your employees have.

 

Some of the Best Things are Free

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That statement is never more accurate than when talking about employee satisfaction.  Employers often create employee surveys to discover ways to boost employee satisfaction and retain employees.  They think of programs with hefty price tags including, incentive pay, additional benefits, and perquisites. When reviewing results of such surveys, many employers are concerned they won’t be able to respond to employee needs/asks that surface. However, they may be missing existing internal satisfiers that are already in place but are not being utilized. In some cases, attention to current programs and opportunities can reap great rewards and be real opportunities for employee satisfaction.

Career growth and even professional relationships are often motivators of satisfaction and engagement. One of the reasons employees leave a company is career growth opportunities.  Career growth does not have to be the typical upwardly mobile, vertical track, but can be horizontal growth as well.  Many employees would relish the opportunity to become more involved in a different part the business.  A reason employee stay is the relationships made in the workplace. One survey showed 25 percent of departing employees revealed that they would have stayed in their position with the company if they had a more respectful and connected relationship with their direct manager.  Employees are human beings who want to feel that others care about them and that includes their direct supervisor.

Employees want to learn and experience healthy professional relationships. Management must connect with workers both professionally and personally, and, depending on the work atmosphere and nature of the company, create a fun work environment.  Initiating conversations about things outside of work is one way managers can show an interest in their employees’ lives. Other things managers can do to build employee satisfaction are:

  • Allow employees to use and demonstrate their strengths. Everyone wants to be valued and make a difference. Know where to place each employee for the greatest results. Ask what an employee wants to do in the company and look for opportunities to create the experience.
  • Ensure employees understand the goals of the business and how the work they are doing impacts those goals.  Make sure they understand how they fit into the big picture. Individuals on a team create winning scenarios when everyone knows their role and the rules of the game.
  • Enhance communication. Really listen to your employees. Ask what is and is not working and take action to explore where the company can and cannot implement idea changers. Have managers meet with employees on a regular basis and report on performance, engagement, and employee feedback.
  • Consider stay interviews to understand engagement and exit interviews to understand turnover better. Especially for your HiPo’s, conducting regular stay interviews pays off with better engagement and less risk of them turning elsewhere.
  • Create a learning environment. Foster internal opportunities to learn from one another and expand upon existing skills. Implement programs like “a Day in the Life” where you employees get up to eight (8) hours a year to shadow someone in a job that they would like to know more about.  While this may cause a hiccup on that particular day, future projects led by a well-rounded work teams will create greater quality, be more productive and come up with winning solutions faster.

Don’t fall into the trap of thinking that it costs thousands of dollars to ensure that your employees rank high in satisfaction.  Sometimes all it takes is a little bit of thought and a lot of care.  

Mergers and Acquisitions Terminology

Whether it’s a first car, a first house or a first job, there is always a first.  The same holds true for mergers and acquisitions.  You will likely always remember your first M&A activity regardless of whether your company was the acquirer or the acquiree.  You might, however, remember it more fondly if you were a part of the acquirer as often job losses can occur if you were part of the aquiree company.  You will hear a number of terms tossed around that everyone in the room seems to understand.  Below are a few of the basics that are part of most M&A activities.

Acquisition of Assets– also known as an asset sale- A merger

or consolidation in which an acquirer purchases the selling firm’s assets.  The can purchase all of the assets or only a select few and are not required to accept the liabilities.

Acquisition of stock or a stock sale-A merger or consolidation in which an acquirer purchases the acquiree’s stock.  This means they purchase all of the assets and all of the liabilities

Letter of intent or Agreement in Principle–An outline of the understanding between the two companies, including the price and the major terms.

Deal Structure–The nature of the fee paid by the acquiring entity in a merger transaction. Typical deal structure may include stock, cash or other valuable.

Due Diligence–In the process of an acquisition, the acquiring firm needs to see the target firm’s internal books as well as to audit their systems, processes and salaries. The acquiring firm does an internal audit. Offers are made contingent upon the findings of the due diligence process.  Most due diligence processes go on for at least 90 days, but can last up to 6 months or more in complex situations

EBITDA–Earnings before interest, taxes, depreciation, and amortization.

Restructuring–This can be as simple as selling off an unprofitable or unwanted division or as complex as re-structuring the entire way the new entity does business and is branded.  This is especially important when there is vertical or horizontal integration required.

Synergy–When the two companies are properly integrated and functioning, an output is achieved that is greater than the output obtained when the parts function independently

Human Resources should always play and important role up front in any due diligence process, as well as in the process of the actual merger of the two entities.

HR Financial Due Diligence– assessing HR financial risks, liabilities, and plan structures of compensation, benefits, and pension plans, workforce dynamics.

Human Capital Due Diligence assessing Human Capital aspects including culture, organizational structure, performance management, and workforce development approaches

Time spent up front will ensure that there are less unpleasant or unexpected surprises as the M&A activity draws to a close.

Acquisition Considerations for Human Resources

pexels-photo (6)You have just been told that your Company will be acquiring another Company.  Although your first question could be “How will this impact me?”, your first question should be, “Is this an asset sale or a stock sale?”  There are many implications for Human Resources in any type of an acquisition, but some will depend on which type of acquisition it will be.  You and your team are likely to catch the first wave of questions and work that will follow. 

 

Stock Sale

Let’s talk first about the definition of a stock sale versus an asset sale.    A stock sale is when your Company is acquiring all assets and liabilities of another company.  In a Stock Purchase, all of the outstanding shares of stock of the business are transferred from the seller to the buyer. The buyer in effect steps into the shoes of the seller, and the operation of the business continues in an uninterrupted manner. Unless specifically agreed to, the seller has no continuing interest in, or obligation with respect to, the assets, liabilities or operations of the business.

Asset Sale

On the other hand, in an Asset Sale, the seller retains ownership of the shares of stock of the business. The buyer must either create a new entity or use another existing entity for the transaction. Only assets and liabilities which are specifically identified in the purchase agreement are transferred to the buyer. All of the other assets and liabilities remain with the existing business and thereby the seller.

 

Organizational Structure

In both cases you need to begin to build out your organizational structure of the combined entities as soon as possible.  This will act as your guidelines for interviewing and assessing employees for future roles. The employees who will be, as well as your existing employees, will be anxious to know about any changes in the organization, their positions, location of their work and/or the reporting structure. You also need to have your people, particularly the top-level of the new organization, in place quickly. Frequent and early communication from leadership will reduce anxiety on both sides. 

Policies and Procedures

In both situations you will need to figure out what the company being acquired has in place for their policies and procedures and how they align with those that you have in place.  Frequently there can be a meeting of the minds where you can take the best of both worlds and adopt new P&P’s.  Not only does this give you an advantage but is a nice show of collaboration to the employees being acquired. Especially, understanding the differences in both leave policies and having a transition plan before the close date is critical to reducing employee disruption and managing expectations.

Benefits

In most cases, when it is an asset sale, you will be able to choose which liabilities to exclude from the sale, such as the 401(k) plan provided by the seller.  In a stock sale, you will be required to assume all the benefit plans, at least for a period of time, and may not exclude any up front.  

Other benefit considerations, which we will explore in more detail next time, include how to handle FSA’s, LOA’s, 401(k) account balances and outstanding loans, bonuses and medical deductibles and out of pocket maximums.

Acquisitions bring a lot of uncertainty but also a lot of excitement around the possibility of building a bigger and better entity…….. almost overnight!

Doling Out Dollars

sherriesuski_dollarsIt’s merit increase time again.  “How hard can doling out dollars be?”, you think.  The budget is 3%, just give everyone on your team 3%, right?  Well, maybe, but let’s talk about a better way to evaluate and incentivize your team members.

Compensation is a blend of a science and an art.  Let’s talk about the science part first.  Done correctly, there should be salary ranges for your organization and sometimes multiple sets of salary ranges, depending on the physical locations in which you operate. These salary ranges should have been created by knowing your overall target market percentiles and the value of each job that you are slotting into your ranges in the market. It is often helpful to create a matrix for your managers to use when considering merit increases.  The performance rating should be on one axis and the quartile position in the salary range on the other axis. Keep in mind that the matrix is usually only a guideline.

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As employees move through their salary range, their salary growth should slow.  Someone who is performing at a 4 level, fully competent in their position, and in the 1st quartile, should receive a greater percentage increase than someone who is performing at the same level but is already in the 4th quartile.  Don’t be afraid to be open about this with your subordinates.  Compensation should not be a mystery.  Employees have a right to understand how their merit increase was calculated.  This can also open the door for conversations about career growth and additional responsibilities they could take on to move to the next salary grade.

Aside from merit increases, there are usually two additional types of increases that can happen.  One is a promotion, which is simple enough.  Someone is moving into a different position in a higher salary grade or is moving to a more senior position within their same job family.  The second type of increase is the market adjustment.  Perhaps the most misunderstood type of increase.  A market adjustment is not a way to give your employees more money without going over your merit budget, as many new managers believe.  A market adjustment is specifically used for an employee who is performing competently in their position, but is very low in their range.  Many organizations will restrict market adjustments to employees who are performing at a level 4 or 5 and are in the first quartile of their salary range.  This increase, in addition to the merit increase should bring the employee to the 2nd quartile or as high as the midpoint of the salary range.

The last topic is a merit increase that is called lump sum or one time merit increases.  There are pros and cons of implementing lump sum increases.  

These types of merit increase are reserved for employees performing at a level 4 or 5 and at the very top of their range.  The theory is you are already paying these employees above the 100th percentile of the market and do not want to continue to increase their base salary. You do, however, want to continue to reward and incentivize them.  If you decide to implement lump sums, they are usually given at about ½ the amount of a regular merit increase and paid all at one time at the beginning of the year.

So, now you know, doling out the dollars, can be a little more complicated than just giving everyone 3%, but, done correctly, you can continue to incentivize your best employees!

A Good Culture = Caring about Others

pexels-photo-169915We have talked it the past weeks about how to understand what your company culture is, how to create the change to what you would like it to be, how to incorporate your Purpose Statement and Guiding Principles and how to align your Performance Management system and goals with the culture in order to get the best results.

Especially at this time of year, it is important to remember that creating a great culture, one in which employees will feel inspired to do great things and will give their all, all of the time, comes down to creating an environment of caring.  All of the words and posters, e-mails, employee newsletters and team building sessions don’t really move  you to your end goal unless you truly care about each of your employees as human beings and actively show and encourage that on a daily basis.

Over and over again, studies have shown that employee engagement is a better predictor of both productively and turnover than employee satisfaction is. When employees feel cared for and valued, employee’s engage.  They engage with each other, they engage in their work and they engage with management.  Engaged employees take less sick days, are far more productive, do not file litigation and are generally happier.

Truly caring is not about handing out big bonuses and merit increases or about officially recognizing someone for the best sales performance.  Truly caring starts at a much more basic level.  Truly caring is asking for someone’s opinion and then taking the time to really listen and understand what they have to say.  It means following up with an employee who mentioned they were going house hunting or has a parent ill in the hospital.  It means promptly and courteously responding to each and every request as if it were the most important one.  We all get 100’s of emails each day and it can be tempting to just ignore the never ending onslaught, but take the time to respond if only to say “I am swamped, but can get back to you over the weekend”  It means setting and meeting or beating expectations.  There is nothing worse than committing to deliver something to an employee and then letting it just fall through the cracks.  If you are not truly committed, you are better off, not setting the expectations.  People need to know you care about them as individuals and once that connection has been established you will be amazed how willing they will be to go above and beyond in all aspects of their jobs.

So, as we enter this holiday season, take some time to show those around you that you truly care.  They say if you practice a new skill for 30 days, it becomes a habit.  What an amazing 2017 we would create if caring became a habit.