Performance Management Systems

Ideally your performance management system should support an already robust relationship between your managers and their subordinates, not create or replace it. It should help to focus your efforts on actually improving performance and managing the development of your employees. Well chosen, a system will support what you are trying to build in your organization and will be viewed as a part of a seamless approach to creating a valued workforce, as well as allowing your organization to streamline the performance review process online.

Organizations today are very interested in measuring and improving their workforce and their performance and productivity, or their ability to create value at speed.

Customer Service

Do your research.  Call the customer service center at all times of the day. Night weekend.  Many companies today are using Call Centers in India and, need I have to say this, that can lead to a very frustrating experience for the user.  Do they understand HR or only their system?  What kind of training is done for the employees in the service center?

Administrator level of Difficulty

Unless you are fortunate enough to have a systems admin who is solely dedicated to bringing up your Performance Management System, you will want to fully understand what is involved in setting up the back end.  Some performance management systems do much of the work for you, others, Like Cornerstone, expect that you will architect and set up the entire back end.

UX

To borrow a term from the development world, UX, cannot and should not be underrated.   The user experience should be pleasant, not frustrating and the flow of the process should be intuitive.  If your managers have to hunt for buttons or try and figure it out, it’s not designed well.

On- the-Go

Is it accessible on the go.  Does it utilize responsive design, that allows the systems to perform the same on a mobile device as it would on a laptop?  Much of our world is mobile now and your workforce will expect that they should not have to be tied to a desk in order to work with your Performance Management system

Demo it

Allow your managers to demo the top 2-3 selections and choose the one that they feel best meets their needs.  You will have immediate buy in and advocates throughout the organization.  

In summary, spend the time up front to truly evaluate the systems that will best meet your organization’s needs.  You will likely live with the approach for quite some time, so make sure it is one that will actually create efficiencies and not additional work for you and your team.

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!

Why Internal Bid Programs Yield the Best Candidates

pexels-photo-70292 (1)Internal bid programs have long been considered to be one of the best sources for hires and promotions.   In fact, some sources indicate that existing employees make up over half of all successful candidates that filled positions in 2016 in some of America’s larger companies.

Even though the average posting may only attract 4-5 internal candidates versus an average of over 200+ external applicants, (or 1000’s if your ads are not written correctly) those internal candidates are far more likely to be successful as the final candidates.

So, doesn’t it makes sense to have a formal internal bid or internal mobility plan in place?  Well, yes it does, although one poll found that only 28% of Fortune 500 CHRO’s actually had a well-defined plan.  

Well defined would include:

    • Well thought out- put some real time into what type of plan will work best for your organization
    • Documented- get it down on paper, so to speak.  Make sure the steps make sense and that you have the technology to support it
    • Communicated- plan different communication mechanism- an employee newsletter, published posts on your intranet form employees who have bid and been accepted, announcements at your monthly stand ups
    • Adhered to- nothing is worse than putting a plan together, communicating it and then not following your own plan.  This means that EVERY position must be posted.  Nothing will derail your success faster than publishing some but all your positions
    • Promoted- find fun ways to promote the internal bid process- highlight the employees who have been successful.  Tie balloons to the cubes, hand out congratulations cupcakes.  Anything to bring attention to your program!
    • Tracked- ensure that you are tracking your metrics from the start and that you can report on your success.  Tracking your metrics will also tell you if certain teams are accepting more internal bids than others and allow you to focus your continued efforts in the right places

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The number one reason job seekers reported looking for new opportunities in one 2016 poll? Lack of advancement and promotional opportunities. Stated another way, what you don’t retain, you replace.

Recruiting is an expensive proposition no matter how you cut it.  In fact, almost 20% the dollars spent by an employer every year go toward the costs of recruiting and onboarding backfills.

So, well run internal bid programs not only make sense from an employee morale standout, but from a very real dollars and cents standpoint as well.

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.

Stereotypical Startup Culture Can Be Detrimental – Part 1

startup culture

This is the era of the startup. Between the simultaneous unemployment crisis America has been experiencing in for the past few years, and the technological boom that is seemingly unstoppable, startups (primarily in the tech sector) have been popping up left and right. With this influx of startups came an entirely new culture: one of relaxed schedules, no dress codes, huge personal freedoms, and a never ending supply of snacks. The stereotypical startup is full of young, charismatic go-getters who thrive in a “fun” and “casual” workplace.

While this new culture and mindset have been hugely beneficial for some companies (see: Google and Facebook), it may not be the right move for all startups. There are a few ways that “startup culture” can actually do more harm than good for certain startup businesses.

 

Too Much Money is Being Spent

This is actually one of the biggest problems that many startups are facing. Everyone wants to emulate the Google culture, with the free food,  the games, and the chic & fun office space. But, the reality is that most startups cannot afford those overhead costs. Many companies will use a lot of the money from their investors to foster this fun space. While this will absolutely make a great impression on both employees and clients alike, it’s important to make sure that your company is saving money and focusing funds on creating a viable product/service.

 

The Lines Between Boss & Subordinate May Be Blurred

The beautiful part of startup culture is that it’s generally an environment of openness and personal connections. For a lot of companies, “culture fit” is important and people are hired based on how well they will get along with the existing employees. This creates a comfortable place of work and creativity, which is fantastic for productivity.

However, this wholly democratic environment may may lead to issues when hard decisions or conversations need to take place. If the bosses aren’t seen as leaders, and are instead seen as friends & peers, it makes it difficult to reign in a rowdy team, or to provide disciplinary action when an employee is out of line.


 

Be sure to check out the blog next month to learn more about the potential downfalls of the stereotypical startup culture.