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    Entries in compensation (16)

    Wednesday
    Aug302017

    What should an employer do when the state reduces the minimum wage?

    While confessing to not knowing any of the back story or local details behind this, I read with interest this piece in the Atlantic about the state of Missouri rollback of the city of St. Louis minimum wage from $10/hour back down to $7.70/hour. The Atlantic piece is solid, if a little long, so if you don't have time to dig in to it the essentials are as follows:

    1. The city passed an ordinance which was designed to gradually increase the minimum wage in St. Louis from $7.70 to $11. The wage had hit $10 just three months ago, in May.

    2. The state of Missouri, whose governor and state legislature were not in favor of this increase, passed a so-called 'preemption' law, effectively barring cities and other local jurisdictions from setting local minimum wages at a level greater than the state level minimum wage.

    3. The preemption law went into effect on this past Monday, reducing or re-aligning the minimum wage in St. Louis back down to the state level of $7.70.

    Got all that?

    Why this was interesting to me was not because of the politics of it, the local control vs. state level authority issues, or even the economic benefits and/or constraints that minimum wages place on labor markets.

    What is interesting is the dynamics at individual employers who just three months ago were forced/compelled to raise wages to $10/hour for anyone earning less than that, and who know are allowed, by virtue of the preemption law going into effect, to cut wages back, as far back as $7.70.

    These numbers might seem small, but a cut from $10 to $7.70 is almost a 25% reduction in pay. I don't care what you are earning, if the boss cuts you by a quarter, you are going to feel some pain.

    So back to the interesting, (to me) stuff. Employers in St. Louis have three (maybe more, but they would be variations of these), options with respect to the wages of any folks they had to give increases to back in May,

    1. Cut everyone who was bumped up to $10 back to their wage level as of May. 

    2. Keep everyone at $10 who was given the bump in May.

    3. Pick and choose who gets to stay at $10, (the better performers, more essential folks), and bump others back to their May hourly rate, or some other rate less than $10 that better reflects their performance, value, and position relative to their peers.

    Options 1 and 2 are the easiest to implement, and for different reasons, the easiest to justify back to the employees. Which is why I would expect that the vast majority of employers will opt for one of these approaches,

    Option 3 is harder to effect, requires better understanding of employee performance and value, needs managers that know what is going on and can communicate clearly why decisions are being made the way they are, and could possibly drive better overall performance, as better workers feel more rewarded, and the others see a way to work towards the wages they desire.

    Yep, Option 3 is definitely much harder to pull off. Which for some cynical reason seems to me the one that the fewest employers will pursue.

    Have a great day!

    Monday
    Oct242016

    The Geometry of the Deal

    So do you want to know what I did this past Saturday night? 

    Scratch that, I assure you that you do not, as you would likely become distracted having to navigate the simultaneous emotions of boredom, pity, and incredulity.

    So let's pretend for both of our sakes that I didn't spend a good portion of Saturday night re-watching (thank you Amazon Prime), the 1996 HBO movie The Late Shift, a 'based on real events' telling of the late-night TV wars of the 1990s following the retirement of TV legend Johnny Carson, long time host of NBC's The Tonight Show.

    (Ok, just between us, this is what I did on Saturday night, don't judge, and roll with me on this)

    Quick recap of the movie's key elements: 

    1. Johnny announces his plans to retire from TV in May of 1992, giving NBC effectively a full years notice and time to select his successor

    2. NBC has to decide who will be the next host of The Tonight Show, an extremely important decisions because (at least in 1992), The Tonight Show was still very popular, and extremely profitable. This was a big deal for NBC, (and their corporate owner at the time, GE).

    3. There are only two candidates. One, Jay Leno, who was well-liked, funny, (he was), and had become Johnny's regular guest host in the last few years of Johnny's run. And two, David Letterman, who had been hosting the Late Night Show on NBC, (the 12:30AM show that ran right after Johnny) for the past 10 years, and who was also popular, if slightly more edgy and hip than Leno.

    4. The rest of the movie, (I won't spoil it for you, as if I need to worry about dropping a spoiler for a 20 year-old movie), runs through what happens in the run-up to NBC's eventual decision, and the chaos and corporate drama which almost immediately ensues.

    I decided to watch this movie again for one specific reason, and that was not because I could not remember who did get The Tonight Show.

    No, it was because I recently was in a discussion with a friend regarding a real-life contract negotiation, and during that discussion I wanted to advise my friend to essentially 'think bigger', to not necessarily get bogged down in trying to 'win' on the small items, but rather to try and garner support for something more expansive, something more wide and far-reaching, frankly for a pretty significant re-interpretation and definition of the business relationship altogether.

    And then the phrase I was wrestling with trying to articulate finally popped into my head - I wanted him to change 'the geometry of the deal'.

    And then, I remembered where I first, (and I am pretty sure the only) time I heard that phrase - the movie The Late Shift.

    About a third of the way through the movie, Letterman comes to realize that NBC intends on awarding The Tonight Show host job to Leno, and is frustrated and confused and doesn't really know how to move forward. His ally (and Carson's producer), Peter Lassaly advises Dave to meet with a Hollywood agent, something Dave has in the past had no interest in doing. Lassally does convince Dave to meet with one of the most powerful agents in Hollywood, Mike Ovitz, and the 'geometry' line comes from Ovitz, when he sits down to meet with Letterman and Lassally.

    (Note: I can't find a clip of just the Ovitz meeting, below is a YouTube embed of the full movie, fast forward to 35:12 for the meeting, which is only a little over 2 minutes long). Email and RSS subscribers, click through.

    Here's the text of the Ovitz speech as well, in case you can't be bothered to mess around with the clip:

    Michael Ovitz: Peter, I know Dave's circumstances, and so I know why you're here. Dave is a star of such compelling stature that frankly it makes me personally angry he finds himself this abused. We pride ourselves here at CAA in developing a career plan for our clients that protects them as much as it enriches them. David has set such an incredibly high professional standard and yet he is going disturbingly unrewarded. That just doesn't make any sense; it's simply bad business practice. Obviously, we have an interest in establishing a business relationship with you Dave, and you Peter. Frankly, we have worked out a career plan for David, and it includes securing everything for Dave that he wants. EVERYTHING. Of course that means an 11:30 television show. Dave will be offered an 11:30 show, and he will be offered it by every network. The geometry of the deal will be far larger, the studios will be in, the syndicators, the full range of the entertainment industry. We shall frame a deal that will make you one of the giants. And if you give us the privilege of working with you, CAA will take care of everything your talents deserve, and his spirit desires.

    Awesome, right?

    And if you did watch the clip in the movie when Ovitz makes the speech you will catch his confidence, his preparedness, ("Peter, I know Dave's circumstances"), and his all-around dominance of the proceedings. Dave leaves the meeting much more confident himself, which is how all the best coaches, agents, teachers, leaders, or bosses make the people they work with feel.

    But most of all, and why this is so cool is that phrase - 'The Geometry of the Deal'. It's been in my head for 20 years, and now, hopefully, it's in your head too.

    Go kick some a$$ this week.

    I will try to as well.

    Thursday
    Oct202016

    Taking care of customers by taking care of employees, Part 2

    A few months ago I shared on the blog some details about fast-food giant McDonald's recent improvements in both same store sales, customer satisfaction, and customer service, (think shorter wait times in the drive thru), that were largely attributed by McDonald's CEO to a series of comprehensive hourly wage increases for thousands of front-line staff.

    For a quick refresher on that story, here is part of what I wrote back in March:

    What if there was another, simpler way to improve customer service that didn't involve 'engagement' at all, but did impact those employees that are on the front-line working with and helping customers every day? You'd be interested in something like that, wouldn't you? What if it was as simple as cutting a check? Well, make that several thousand checks.

    Check this excerpt from a recent Fortune piece - McDonald's Says its Wage Hikes Are Improving Service:

    The hamburger chain in April announced it would raise the average hourly rate for workers at the U.S. restaurants it owns to $9.90 from $9.01 starting July 2015, with average wages climbing above $10 per hour by the end of 2016. The company also said it would allow those employees to earn up to five days of paid vacation every year following one year of employment.

    McDonald’s CEO Steve Easterbrook, who took the helm in 2015, has since moved swiftly, closing hundreds of weak stores, bringing back all-day breakfast, and simplifying the chain’s menu, reducing bottlenecks in serving customers quickly.But improving the customer experience hinges on workers being on board with all these changes, hence the raises.

    “It has done what we expected it to—90 day turnover rates are down, our survey scores are up—we have more staff in restaurants,” McDonald’s U.S. president Mike Andres told analysts at a UBS conference on Wednesday. “So far we’re pleased with it—it was a significant investment obviously but it’s working well.”

    In October, McDonald’s reported its first quarter of comparable sales gains in two years. The company built on that growth with a huge 5.7% increase in the following quarter.

    Wow, is it that simple? A general 10% across the board wage increase and sales and customer service both rise enough to offset the costs of the increased wages? That's it? Man, what took them so long to sort that out?

    That was McDonald's story back in March, and if you read the entirety of the piece, you will see that I acknowledge that there were probably some other, and possibly significant factors at play that likely also contributed to the uptick in sales and improvement in customer metrics. But there can be little doubt that the wage increase had an effect as well, and I would argue, the most pronounced effect. 

    Let's fast forward to earlier this week where Business Insider shared some details of another massive retailer taking a page from the McDonald's (as well as the Costco) playbook of increasing wages and improving training, and perhaps most importantly, concentrating on employee scheduling, (and not just to 'optimize' staffing levels) - none other than Walmart. What have been some of the effects of wage increases and overall heightened investments in people at America's largest retailer?

    From the Business Insider piece

    Walmart is becoming a better place to shop because it started paying employees more.

    For many years, the company was plagued by widespread complaints about poor customer service at its stores.

    That was until last year when Walmart, under pressure from investors following several quarters of same-store sales declines, decided to invest billions of dollars in wage increases and training for workers.

    Specifically, Walmart committed to investing $2.7 billion over two years in higher wages, scheduling improvements, and employee training, following in the footsteps of companies like Costco.

    Walmart's efforts so far have translated into a pay raise of about 16% to $13.69 per hour for non-managerial full-time employees, The New York Times reports.

    In the meantime, widespread issues in Walmart stores such as empty shelves and cleanliness have significantly improved.Three out of four Walmart stores now meet the company's own customer service standards, according to the Times. A couple years ago, just 16% of its stores met those goals.

    It turns out that paying people more may have made them better employees.

    The piece goes on to mention, (like in the McDonald's situation), some possible other reasons for the improved results, and some alternative motivations for Walmart to make these investments in their workforce, but as in the McDonald's case, Walmart's leaders see a clear line between taking better care of employees and taking better care of customers, (and driving better top and bottom line results).

    I think after these two cases, you get the idea of where I am going with this. I will end this piece with the same couple of thoughts I used to end the March piece on McDonald's:

    Sometimes, maybe most of the time, we tend to over think what it takes to keep people (reasonably) happy, and give them a situation where they feel good about the work they are doing, and the customers that they are serving. 

    You might not be able (nor necessarily should you), give everyone on the staff a 10% bump. But there probably is some other, simple, reachable change you can make that would serve the same purpose. It's out there. You can find it.

    Just don't call it "employee engagement" and you will be fine.  

    Have a great day, and if you hit up a McDonald's or a Walmart today, let me know how it goes.

    Tuesday
    Mar152016

    Taking care of customers by taking care of employees, (give them all a raise edition)

    ETERNAL TRUTH: Better engaged employees are happier, more productive, are retained at higher rates than less-engaged folks, and provide higher levels of customer service, all things being equal.

    So if you want/need/desire improved customer service, all you have to do is find a way to improve employee engagement levels of the folks meant to be providing the customer service. 

    Easy, right?

    Except when it's not. I have written plenty here, (and so have lots of other folks), about how despite tossing money and effort at improving engagement for at least 20 years, that in aggregate engagement levels are about what they have always been since it became a member of the 'something we measure' club.

    But what if there was another, simpler way to improve customer service that didn't involve 'engagement' at all, but did impact those employees that are on the front-line working with and helping customers every day? You'd be interested in something like that, wouldn't you? What if it was as simple as cutting a check? Well, make that several thousand checks.

    Check this excerpt from a recent Fortune piece - McDonald's Says its Wage Hikes Are Improving Service:

    The hamburger chain in April announced it would raise the average hourly rate for workers at the U.S. restaurants it owns to $9.90 from $9.01 starting July 2015, with average wages climbing above $10 per hour by the end of 2016. The company also said it would allow those employees to earn up to five days of paid vacation every year following one year of employment.

    McDonald’s CEO Steve Easterbrook, who took the helm in 2015, has since moved swiftly, closing hundreds of weak stores, bringing back all-day breakfast, and simplifying the chain’s menu, reducing bottlenecks in serving customers quickly. But improving the customer experience hinges on workers being on board with all these changes, hence the raises.

    “It has done what we expected it to—90 day turnover rates are down, our survey scores are up—we have more staff in restaurants,” McDonald’s U.S. president Mike Andres told analysts at a UBS conference on Wednesday. “So far we’re pleased with it—it was a significant investment obviously but it’s working well.”

    The move reportedly created friction with franchisees, who hire and pay their own workers, as they felt pressure to match the wage hikes. Still, there are early signs it is paying off: In October, McDonald’s reported its first quarter of comparable sales gains in two years. The company built on that growth with a huge 5.7% increase in the following quarter.

    Wow, is it that simple? A general 10% across the board wage increase and sales and customer service both rise enough to offset the costs of the increased wages? That's it? Man, what took them so long to sort that out?

    In truth, there are a few things to tease out of this experiment, and it could be that some of the non-wage increase changes have been at least somewhat responsible for this recent turnaround in McDonald's fortunes. But as CEO Easterbrook rightly observes, in order for these operational and strategic changes to really work, the employees had to be on board, and raising wages was the simplest, (and possibly best) way to accomplish that.

    There are probably a few special circumstances that make this strategy more effective than it would be in other places, even small reductions in turnover are likely to have a big impact on service levels in the fast food business, and even with a high number of employees, giving blanket increases of 10% does not represent massive spending. So get turnover down just a little, keep a few more longer-tenured staff on each shift, and boom - the drive thru lines move a little bit faster and the customers are happy.

    Sometimes, maybe most of the time, we tend to over think what it takes to keep people (reasonably) happy, and give them a situation where they feel good about the work they are doing, and the customers that they are serving. 

    You might not be able (nor necessarily should you), give everyone on the staff a 10% bump. But there probably is some other, simple, reachable change you can make that would serve the same purpose. It's out there. You can find it.

    Just don't call it "employee engagement" and you will be fine.  

    Thursday
    Feb252016

    Yelp and a missing piece of HR Tech

    By now I am pretty sure you've heard the story of the call center rep at Yelp who was summarily fired after posting an 'open letter' to the CEO claiming (among other things), that the company's failure to pay a living wage was placing her and her colleagues under tremendous financial pressure. Here's a quick two paragraphs from coverage of the letter and the firing from the Washington Post:

    The Yelp employee who said she was fired after she blogged about the financial pressures she felt while working for the multibillion-dollar business said Monday that her breaking point came one night when she went to sleep — and woke up "starving" two hours later.

    Talia Ben-Ora posted an open letter Friday afternoon to Yelp chief executive Jeremy Stoppelman, saying she wasn't earning a living wage while working in customer support at Eat24, Yelp's San Francisco-based food delivery arm.

    She was out of work hours later, she said.

    Yesterday at the HR Capitalist, KD had some great takes on the entire Yelp employee hullaballo, but it was this one, KD's point #3 that I found the most interesting and wanted to expand upon a little bit here:

    "The company has some responsibility here as well.  It's San Francisco, people. Maybe 20K annualized jobs don't belong in the Bay Area.  It's called workforce planning - put a call center in Detroit and do some civic good. "

    KD is quite correct of course, it doesn't make a tremendous amount of sense to attempt to locate, staff, retain, and motivate the team for a call-center or similar kind of low-wage filled business operation in one the most expensive cost of living places in the world.

    Heck, there have been reports that teachers, police officers, nurses and many other professionals can't afford to live in San Francisco or the nearby cities and towns that the tech boom in Silicon Valley have made incredibly expensive compared to most of the rest of the country. Super expensive places to live and work are always going to be extremely challenging for workers on the lower end of the wage scale, as made clear by the ex-Yelp employee's post.

    So let's get back to KD's point - Yelp shouldn't realistically try to locate a call/service center, staffed by what the market would force to be low-paid workers, in a place like San Francisco. The reason this point resonated with me is that for a long time I have thought that one of the big gaps in the HR technology landscape was a solution or platform for helping organizations make these kinds of decisions - the 'Where should we locate the call center?' ones that the Yelp story reminds us are so important.

    In fact last year when I was setting up the first-ever HR tech hackathon at the HR Technology Conference, I toyed for a time with making the 'challenge' for the hackers would have to tackle be that very thing - to build a tool that would help HR and organizational leaders answer the 'Where should we locate the call center?' question.

    So what kinds of considerations and inputs would such an HR technology that could help answer that question have to encompass?

    Here's a quick, incomplete list...

    1. Inventory of the needed talent/skills to staff the call center, (I am going to keep using the call center example, but the technology would naturally have to be flexible enough for all kinds of workforce planning decisions).

    2. Assessment and comparison of the available talent/skills to the needed set of talent/skills from Step 1. This would have to factor in the existing employee base, the candidate/prospect database and funnel, the alumni database, public networks like LinkedIn, 'on-demand' portals like Elance, and perhaps other external candidate repositories or resources like local staffing companies. Somehow you would need a decent idea of the addressable talent/skills that could be applied to the needs developed above.

    3. Capability to cost and analyze a range of options with different talent mixes from the potential sources above. In other words what difference does it make if we staff using 80% temps/contractors and 20% FTEs? How much longer and more costly would it be to push the FTE level to 40%? What are the chances we could even find enough readily available talent in the local market to choose that mix?

    4. Ability to incorporate site specific factors like land/building acquisition costs, infrastructure costs, tax implications, cost of compliance with any local regulations, and the 101 other things that go into building or leasing, (and then maintaining), company facilities. 

    5. And finally, incorporate, or at least make folks aware of other factors that could influence the decision like an evaluation of how average commuting time/cost might be impacted by the choice of location of the new call center, the likelihood of delays in facility construction or with acquiring needed permits, or any location specific elements like local climate or even political landscape.

    There are probably lots of other factors that any major business decision like 'Where should we locate the call center?' would need to be taken into account, but I think at least I touched on the obvious ones. And the fact that these kinds of decisions are so complex, involve data from so many disparate sources, and have to be incredibly flexible in order to adapt to meet the requirements of highly complex scenarios is probably the reason why a technology for this use case does not seem to exist.

    So to circle this back to the Yelp story it is for sure an accurate observation that trying to run a call center operation in a high-cost place like San Francisco is likely a terrible, no good idea.

    But where should the call center be located? 

    That's a simple question that is hard to answer. I hope that we will see some movement in the HR tech space in the coming years that will help to make answering that question a little easier, and will help lessen the kinds of situations like the one about the starving Yelp employee.