by D. Kevin Berchelmann | Oct 2, 2010 | Brazen Leader, Human Resources, Kevin Berchelmann, Miscellaneous Business Topics
I get several questions each week, from various people across the country, on topics ranging from benefits administration, to compensation, to “I hate my boss, what should I do?” (Not sure how I get that one…)
Most, I simply respond to the email directly, as they don’t have universal appeal. Some, however, do… hence this entry, of course.
I received an email, subject titled, “QUIT JOB.” The sender asked, “If an employee gives notice they are quitting, can I fire them? If so, must I pay them out for their notice period?”
Now, as I’ve oft-said, I’m not an attorney, nor did I sleep at a Holiday Inn Express last night. However…
Generally, yes.
In most states, a resignation is just that – a resignation. The employee then offers to stick around for a couple of weeks to help the employer transition. The departing employee, however, doesn’t set their resignation “date,” the employer does. The employer can accept their notice, or not.
Having said that, there are two reasons to accept or pay out a resignation notice:
1. Other employees are watching. This particular employee may not be important, but others may now believe that giving any notice is futile, so that when they resign, they may do so without notice. Consider if you are agreeable to NO employees giving notice.
2. You could be liable for unemployment compensation for that notice period, if the employee is otherwise eligible. Not likely for an extended period of unemployment, but possibly for those two weeks, or whatever the notice period given.
So, do you whack ‘em instantly or let them see through their notice? It’s a business decision that requires some thought. If they are truly a substandard performer – such that you would have fired them within 30 days anyway – then by all means, show them the door. If you may later WANT employees to give you adequate notice, and this is a satisfactory employee, then you may want to consider either allowing them to work their notice period, or paying them for the notice period regardless.
Just my considered, un-legal opinion…
by D. Kevin Berchelmann | Jun 14, 2009 | Brazen Leader, Executive Improvement, Human Resources, Miscellaneous Business Topics
Who’s on First??
Abbot & Costello (if you must ask, then ‘never mind’) had this brilliant baseball comedy skit where it was difficult – if not impossible – for Abbot to actually determine which player was at which position.
This should not be a natural lead-in for succession planning today; alas, it’s the perfect entré.
We simply must determine, in advance, “Who’s on first.” We have to know – at a minimum – who is capable of assuming our significant (“Key”) leadership roles. Real people, with names and plans behind them.
The Philadelphia-based Hay Group surveyed their “150 Most Admired Companies,” and discovered that almost 80% of these firms’ Boards have a preference for internal CEO candidates. 80 percent!
These companies (and their Boards) recognize two things:
1. Selecting replacements for key positions is one of the most critical tasks of board or senior leadership, and
2. That when done correctly, companies can better create succession replacements from within, instead of hiring from the outside.
And, unlike a previous blog post that describes settling for “the pick of the litter,” these companies purposefully develop their internal talent to be prepared when “called up.” They don’t simply settle for “best available.”
Want a specific take-away action? Ok, how’s this for a 2-parter:
Part 1:
Identify, via a logical, involved process, those positions (not people) that are or will be essential (“Key”) to the future success of the organization.
Part 2:
Meet, discuss and name — by NAME — the likely successors to those roles at least twice per year.
Even better, determine the skill gaps that still exist and create a plan to make sure your “chosen ones” are headed down the path for preparedness.
Then execute, execute, execute.
by D. Kevin Berchelmann | Apr 20, 2009 | Brazen Leader, Human Resources, Kevin Berchelmann, Organizational Effectiveness
I’ve worked with many organizations, both as the in-house compensation expert as well as an outside consultant, and determining the economic return for incentive plans is clearly a significant effort – and there’s sometimes nothing simple about it.
Incentive plans do not work in a vacuum; even with potentially great compensation plans, outside forces can be such that the results are almost anecdotal. This doesn’t mean we shouldn’t make every effort to measure the results, but it does mean that any specific measurements will have “assumptions” built in to the equation.
Some client examples:
I implemented an extensive gainsharing plan for a $100M division of a $1B manufacturer/smelter of zinc ingot. In less than 18 months, we reduced the average production cost per pound by well over 35%, and split the dollar savings evenly with employees, some of them nearly doubling their typical hourly wage. Now, was it simply the incentive plan? Well, as part of that effort, we conducted extensive training, constant follow-up, intense metric evaluation and trending… in short, we implemented a process “around” that incentive effort.
So, did the gainsharing “cause” the improved performance?
It certainly played a significant part.
With a small, fast-growing bio-tech firm, we implemented significant incentives for management’s leadership in driving research & development and time-to-market. The incentives paid out fairly handsomely, and time-to-market for new products was reduced by almost 15% in less than 12 months.
Was that caused entirely by incentives?
Hard to say; time-to-market had become an incredible focus before implementing the incentives, and was reflected in many management efforts, hiring, etc. Clearly, the incentives played a part, but how much?
Finally, with a $120M industrial services firm, we implemented sales incentives that had the most generous “upside” in the industry. 12 months later, we realized an increase in revenue of almost 15%, with margins equal to or better than before. Yet the company still entered into Chapter 11 bankruptcy, and the strategic buyers immediately discontinued the plan, saying it was too “rich.”
Did it play a part in the company’s slide into Chapter 11, or did it stave off that bankruptcy for several more months? Again, it’s difficult to determine, given the pressures on the entire organization at the time to reduce costs, increase revenues, and bolster margins. It certainly made more in earnings than it cost in incentives, by a factor of almost 13x.
Again, these plans don’t work in a vacuum, and are usually part of an organization’s current strategic focus. As such, measuring ROI aimed squarely and solely at a particular incentive plan will always be difficult.
Can we measure the total impact of the effort, INCLUDING incentive plans? Of course, and that’s likely the most successful way to run a railroad anyway.
by D. Kevin Berchelmann | Jun 28, 2008 | Brazen Leader, Executive Improvement, Human Resources, Kevin Berchelmann, Organizational Effectiveness
Most managers hear “retention plan,” they immediately think “stay bonus.” And to be sure, those bonuses could very well be a real part of most retention plans.
A well-thought retention plan, however, is much more than simply “money.”
Retention plans can be necessary for critical continuity during turbulent, transitional, or heavy-change times. When necessary, and well-thought, retention plans create real, measurable value to an organization when it needs it most. The key, of course, is the “well-thought” part.
During the sorts of times mentioned above – the times that drive the thinking behind retention plans – it’s easy to look to those who have done so much up to now, and convince yourself that a reward is in order. Maybe it is, and maybe it isn’t, but a retention plan isn’t the way to go about it.
A retention plan should never be used to reward prior performance; its sole purpose should be to ensure retention of those employees critical for the future success of the organization, both during and after the retention period.
So, what exactly is a retention plan? Think 3 things:
1. Communications,
2. Employee Development, and
3. Bonus Compensation.
All three of these are necessary for effective retention, and for emerging mostly unscathed after an organization’s transition.
For Communications, think open, relevant, and frequent.
Employee Development is part of the future promise of “things to come,” that will provide future leverage.
Bonus Compensation is just that – a cash “carrot” paid out in such a manner as to be worthwhile to both the employee and the organization.
Retention plans can be critical for future success – but they aren’t simply a promise of payment to a large group of people. Think through carefully what you need, and implement a plan accordingly.
by D. Kevin Berchelmann | May 28, 2008 | Brazen Leader, Human Resources, Kevin Berchelmann, Organizational Effectiveness
For my money, a well-thought, well-implemented gainsharing effort is the holy grail of productivity and efficiency incentives: Paying for performance with money you never would have had anyway, without the improved performance. An incentive plan that funds itself.
For the unenlightened, “Gainsharing” is an incentive plan that, using etsablished, historical threshholds of performance, pays incentives for “gains” based on that thresshold. Usually defined in some fashio of a “split,” such as 50% for the company, 50% for employee incentives.
An example: Company has historically spent $2.00 for every widget it produces. Under a gainsharing plan (oversimplified here for clarity), if the employee effort resulted in making widgets at $1.50 per, then the $0.50 savings, or “Gains,” would be shared equally between the company and employees.
Their are keys to an effective Gainsharing effort:
1. Get it right. Determine the critical lever(s) involved that the gainsharing will apply. These are likely the final productivity measure, e.g., cost per lb., hours per process, waste, rework, etc. Do not use simple payroll dollars. And use a recent trend data point (1 yr, 3 yrs), not some arbitrary “goal.”
2. Keep it simple. If you can’t explain it to the lowest level impacted worker in less than 5 minutes — so they really understand — it’s too complicated.
3. Communicate. You cannot overcommunicate with a gainsharing effort. You must be open and free with sensitive financial data — if you feel you cannot, don’t use gainsharing.
4. Educate. Participants must be able to “connect the dots” between today and “better,” and they need new knowledge tools to do that. Financials, process, etc.
5. Reward. Timely payouts are a must. Monthly for typical blue-collar, perhaps quarterly for more sophisticated workers. You may have to prime the pump at first.
Gainsharing is not a “template” compensation scheme where you can take someone else’s and fill in the blanks. Things like holdback/reconcile, thresholds, buy-downs, etc. all need to be determined, to say nothing of the original pland design.
If done correctly, however, there is nothing better.
But that’s just me…
by D. Kevin Berchelmann | Aug 28, 2007 | Brazen Leader, Human Resources, Kevin Berchelmann
So, I have had several emails asking about executive compensation in smaller companies. Apparently, some can see the detail in larger companies, but believe that the issues are fundamentally different in smaller and mid-market firms.
You probably don’t want to hear this, but base compensation is what it is, and should be close-to-comparable for a given accountability. Regardless, for the most part, of company size. Incentives and perquisites vary, of course, but again, base compensation simply is what it is.
Smaller private companies have long faced these issues regarding competition for executive talent, particularly w/ compensation. Fortunately, many public firms are beginning to curtail their biggest draw — equity options — since FAS 123Rnow requires that they expense them. So, don’t just throw up your hands.
Realize that the way to deal with executive compensation is via a well-thought plan, not simply a “base plus bonus” scheme. What do the investors/owners want from the company? Increased shareholder equity?? Relative stability?? Cash flow?? Net operating income?? Identify this first, since it will be your critical metric. Every plan starts with a purpose.
The key to keeping execs on target is a well-designed executive compensation plan.
On average, about 50% of a private CEO’s compensation is determined by how well his/her company performs within the chosen metric(s). The rest of the senior staff should still be north of 30%.
Consider, in addition to metric-based incentives:
** Modified gainsharing or goalsharing (for management)
** Deferred compensation (unfunded)
** Increased vacation/PTO
** Reimbursements for clubs, exercise facilities, etc.
** Conference attendance, with spouse allowance
There’s a ton more to do. Approach the effort holistically – you can’t get there with just a “base-bonus” philosophy.
Hope that helps some…
