I received the following question from an HR Director in the midwest:
Contingency Fees: What’s the value? It seems that the fee percentage in permanent placement ranges from sometimes less than 20% to 30%+ of the candidate’s first years salary.
So, what’s the diff??
Where’s the value change between the 20% firms and the 30% firms?
Though I do not conduct contingency searches today, I spent many years in the Director/VP desk wondering much the same thing… (more…)
I see HR 2.0 as a real phenomenon, but not necessarily an adjunct to Web 2.0; actually, it’s formative predecessor was likely closer to HR 1.0.
If we see HR 1.0 as an Ulrich-like emphasis on “seat at the table,” more business focus, competency-based development of HR talent, less ombudsman-centric, and creating meaningful, relevant HR strategy to match the business, then HR 2.0 must the next iteration or evolution. (more…)
Well, after much ado, gnashing, angst, and so forth…
President Bush signed the legislation increase the federal minimum wage to $7.25 per hour. This will occur in three phases or steps over the next two years or so.
Obviously, this will have some impact on all employers, and some more so than others.
Here’s the time line: The federal minimum wage will increase from $5.15 per hour to:
$5.85 p/h on July 24, 2007,
$6.55 p/h on July 24, 2008, and
$7.25 p/h July 24, 2009
Some states have minimum wages set above the federal level already; I’m not going to try to tell you anything at all in that regard — I know when I’m not an expert on something! (more…)
Well, I had several people ask additional questions about real budgeting for Human Resources. I’ll try to expand a bit on my earlier post…
First, a microscopic finance lesson: Gross Profit is the total revenue or sales, less the cost of generating that revenue (COS or COGS). It tells you how much money a company would make if it didn’t have other costs, such as most salaries, taxes, interest, etc., normally referred to as Operating Expenses and typically including S, G, & A.
Operating Expenses are those incurred by the business that are not directly related to revenue production, such as most utilities, salaries, office supplies, etc. Operating Expenses do not typically change significantly when the organization’s level of production rises or falls — they aren’t usually “variable.” Sometimes referred to as “overhead,” “fixed,” or “indirect” costs.
Here endeth the finance lesson…
Though HR expenses are typically an Operating Expense, direct value-add from Human Resources comes from Gross Margin contribution — increasing revenue or decreasing the direct costs to produce that revenue. Cost-reduction strategies are usually outside of Gross-Profit, and can also have a significant influence on earnings. Assuming a company delivers 10% to the earnings or EBITDA line, it would take $10 of additional revenue to deliver earnings equal to your saving a dollar in Operating Expense, so don’t throw away those last few Post-It Notes.
The real “meat” of strategic Human Resources, however, comes from a significant contribution to the Gross-Profit line through various methods. We’ll discuss those in-depth in later posts.
As you probably know by now, Ken Lay (Enron Founder, Chairman) passed away early this morning. There are many who would cheer in the street. I’d like to offer this small group a counter-perspective…
I knew Ken Lay personally. Not intimately, but I met and sat with him a half-dozen times or so at board meetings (not Enron), and he and Linda were at the same table as Traci and I at a couple of not-for-profit gigs in Houston.
I knew him as a good man. He seemed kind, caring, and thoughtful. Personally brilliant, he managed loosely from the start — an employee autonomy that made Enron successful, and was also his undoing. I won’t opine on his guilt or innocence; he was tried and convicted with evidence I could not see. To give you pause for thought, however, just consider (religious or not, consider the meaning):
There, but for the grace of God, go I.
Just think about it for a minute. Can everything you’ve ever done in business withstand that sort of scrutiny? Not simply “doing the right thing,” but can it withstand harsh, hostile scrutiny from an entity with unlimited resources, hell-bent on destroying you??
What if that entity could coerce — threaten — tens of witnesses to either testify against you or spend many more years in jail? Would all your supporters hold up?
What if, those who weren’t convicted via plea deals, all your purported “business friends,” those who could present fact and testimony that could make a difference, were threatened as well. Called “unindicted co-conspirators,” and threatened with indictments if they testified? Would they still rally to your defense and support, knowing it won’t simply cost them their jobs, but their freedom??
What if “I discussed with my attorney” meant nothing to those attacking you?? How about “our auditors approved it,” or “my board voted on it with full knowledge??” What if NONE OF THOSE could stand as a defense… could your entire business life withstand that level of scrutiny and accountability??
I’m not sure… it sure does give one pause, though, doesn’t it?
It’s easy to say “we should be held to a higher standard.” Frankly, I agree. But to how high a standard do we manage?
Whatever level today, it needs to be higher tomorrow. This degree of scrutiny, oversight, and transparency isn’t simply “going away,” or temporary. It’s here to stay, and we should be prepared to manage accordingly. We must. It’s the right thing, and we have clear marching orders.
So, what does 2007 hold for the human resources community? More of the same (fortunately and unfortunately), and some new things to consider. Using my Kreskin-like powers (age-check…?), my crystal ball, and reading the Earl Grey leaves in the bottom of my Costa Maya coffee cup…
E-Learning will finally take hold. Content is rich, lower lost productivity costs are necessary and reasonable, podcasts and videoblogs make distribution inexpensive.
The war for talent will get worse. Executive talent is in high demand for the fourth consecutive year; companies must continue to add more incentives, including bigger bonuses, to their compensation packages in an effort to lure top talent from competitors and keep key leaders from walking out the door. Developing existing managers, via succession planning and professional growth initiatives, will be crucial.
Increased focus on non-executive staff development. In the face of the growing war for talent all industries, companies are spending more money to develop formalized training programs to ramp up staff more quickly. These programs can also help improve the odds of retaining employees, make companies more attractive to potential recruits, and can help firms get as much productivity as possible from a staff that may not be as large as they would like.
Outsourcing will continue to increase, particulary specific Business Process Outsourcing. Big market, getting bigger. Mid and small markets are underserved (or not served at all) by the big players, yet cost efficiencies are greater there.
Demographic issues will become even more important. Hispanics are our largest minority, immigration non-reform is emotion-laden, boomers are retiring (the workforce is aging), generational issues continue to grow, and work-life balance is becoming more important — all of this in the face of the second prediction above. Medical cost increases will continue at a double-digit clip.
Continued M&A activity will lead to further downsizing/talent shifts, and significant bankruptcies will continue.
Employee productivity must increase. Talent shortages, earnings demands, heavy M&A activity… add to that a growing need for a positive link between pay and performance, a demand for flextime, and idiotic CA laws that potentially mandate additional time off. All point to the need for increasing indiviual employee productivity.
Ethics and social responsibility are replacing “cutthroat” as the official corporate badge of honor. Transparency in dealings, pressure on corporate socialism and philanthropy… ethics are no longer “soft” skills relegated to those who can afford them. They now include CEOs, sales people, and others previously exempt. The world is watching…
HR strategy will become a business unit objective. HR has become too important to be the sole purview of human resources. Strategic-focused HR initiatives — staffing, development, succession, and performance — will become part of general managers’ lexicon. Corporate HR staffs could shrink accordingly, caught between increased strategy ownership in the GM’s office and outsourcing at the transactional levels.
Measurement of all things — including people-focused initiatives — will become a necessity, not simply a differentiator. Someones’ got to explain why we should do this over that, and when I can expect to see a return on my investment of limited capital. Measure or die.
EXCLUSIVE PREVIEW
I interviewed several hundred senior executives — all C-levels, and over 20% were CEOs. In order of significance, their top-5 short-term priorities came in as:
1. Talent management & acquisition.
2. Revenue & earnings enhancement.
3. Performance management, employee productivity.
4. Management/leadership development, performance and motivation.
5. Market pricing, share, and new product/service development.
I don’t offer these things as private or special knowledge of mine; undoubtedly, many of you have arrived at some of these same thinkings. I wanted to put this in writing since that helps me, and maybe offer as help to you as well.
Pay attention to what’s happening around you, your company, the country. It’s not important whether you agree or disagree with my predictions; just arrive at your own thinking by using something other than simple “hope.” As the author said, that’s a lousy business strategy.
Stay alert, focused, and continue to add value.
Happy New Year…!
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