Are we losing (the best) half of our workers?

Are we losing (the best) half of our workers?

The job numbers released last week confirmed what we heard for some time. Women are leaving the workforce in record numbers. According to the jobs report, 865,000 women over 20 dropped out of the American workforce compared with 216,000 men in the same age group. Thus, four times the number of women are leaving the labor market compared to men. Women are bearing the brunt of parenting and running a household while also working a job during the pandemic. The consensus is that even though men are doing more than they’ve perhaps done in any other generation, it’s still not half. The Labor Department finds that married mothers do almost double the household chores and parenting as married fathers.

This environment has created a pressure cooker environment in many households, and it has come to a head with the start of the new school year. As many children stay home instead of returning to school, many women are making the difficult decision to drop out of the workforce altogether. The child care crisis is wreaking havoc on women’s employment.

The new school year has brought it to a head with many children staying home instead of returning to their classrooms in person. And it is forcing many women to make a difficult choice and drop out of the workforce altogether. At the end of 2019, women held just over half of all payroll jobs for only the second time in history. Women now account for 49.7% of the workforce.

This departure from the workforce isn’t just an issue for women, it’s an issue for families, the government, and the economy because women employment it drives GDP.

For women. The longer women are out of the workforce, the harder it is to get back in. Every month and year that a woman is out of the labor force leads to a decline in skills, behind on the latest technology, and increasing the wage gap between others who have been in the workforce.

For the economy. Women are critical contributors to household income. According to many, family finances are going to deteriorate in the immediate term.

For the government. If women leave the labor force, there is a risk that the country will take a step back in gender dynamics, both in the workplace and at home. It will reduce the number of women seeking to enter the workforce in the future, and many will leave due to harmful gender dynamics.

The country’s issue is that today more women (72.5%) are graduating from college than men (68.5%). The effect of this is rippling through the economy; more women (50.5%) are graduating from medical school than men (49.4%), and more women (52.4%) are graduating from ABA-approved law schools than men (47.51%). As a result, we are sacrificing our best and brightest.

Not only that, studies show that once women land leadership positions, they excel, often surpassing men, because they have developed soft skills necessary for effective leadership. Females CFO seems to correlate with high income, female CIOs lead to better investment decisions. Traits like empathy, communication, and listening are qualities that serve women well when in management positions.

Getting women back to work requires long-term thinking about the types of jobs where women want to work. However, according to the Harvard Business Review, misogyny is rampant in the restaurant industry, and we have all seen the stories of its extent in the news and technology industries. Providing opportunities for women in STEM fields will help close the gap and provide more stable employment opportunities in the future. However, individual attitudes will have change.

What does this mean for you? I think the challenge for HR and CEOs going forward is to find a way to provide women a way to keep working and reduce the stress they face at home or offer them a path back in the organization and reclaim their position on the corporate ladder. Those companies that can do this effectively will attract great resources and enable them to get ahead.

Looking at the situation reminds me of Bill Gates’ speech in Saudi Arabia. The audience was segregated by gender, with a large panel dividing the fully veiled women from the men. A participant asked whether the country could realistically become “one of the most competitive economies by 2010.” Gates replied, “Well if you’re not fully utilizing half the talent in the country, you’re not going to get too close to the top.” If the U.S. wants to keep to the top, we have to find a better way to utilize the excellent talent pool we have and not throw a lot of it away.

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Now You Need a CHRO!

Now You Need a CHRO!

I have always believed that a great Chief Human Resources Officer (“CHRO”) was essential to a business’s success. Most CEOs know that because businesses don’t create value, and people do, they depend on their company’s human resources to achieve success. However, CEOs are distanced from and often dissatisfied with their chief human resources officers (CHROs) and the HR function in general. According to a study, while CEOs see human capital as a top challenge, they rank HR as only the eighth or ninth most crucial function in a company.

In the 1990s, CHROs were focused on compliance to keep their employers out of court and the press. Following several executive pay scandals in the 2000s, they became more involved in remuneration. In the 2010s, they gained a more significant say in hiring for top jobs, as the failed successions multiplied. Recently, they have had to deal with the often very public “me too” troubles.

As a result, CHROs backgrounds are changing. Once filled with people who had master’s degrees in labor relations, today, many hold business degrees. While most firms recruit CHROs from HR jobs, more are choosing outsiders or unconventional candidates. According to Russell Reynolds Associates, HR heads appointed to Fortune 100 companies between 2016 and 2019 were around 50% likelier than earlier hires to have worked abroad, in general management or finance.

The CHRO’s role is to assist the CEO in building and assigning talent, especially key people, and that will help the organization reach its potential. Human capital management now needs the same priority that managing financial capital was in the 1980s.

To accomplish this role, the CEO has to:

  • elevate HR and to bridge any gaps that prevent the CHRO from becoming a strategic partner;

  • understand the valuable contribution the CHRO could be making and spell out those expectations in clear, specific language; and

  • redefining the work content of the chief human resources officer.

In this new role, the CHRO’s responsibilities will include:

  • traditional HR responsibilities—overseeing employee satisfaction, workforce engagement, benefits and compensation, diversity, etc.;

  • predicting outcomes – crystallizing what a particular job requires and realistically assessing whether the assigned person meets those requirements;

  • diagnosing problems – pinpointing precisely why an organization might not be performing well or achieving its goals; and

  • prescribing actions on the people side that will add value to the business – agile companies need flexibility with their human capital, and CHROs should recommend steps that will unlock or create value.

CHROs are expected to have or quickly acquire business acumen specific to the company they are serving, as well as to work with executive peers to shape and influence business strategy. These three areas of expertise are essential for success in any C-Suite position. Gartner has developed a model for the CHROs role, set out below. The five pillars that sit atop the foundation require the CHRO to step beyond HR functional management to lead the business in the critical areas of talent strategy, enterprise change, and company culture, as well as to serve as a trusted advisor to the CEO and the board.

Copyright Gartner

In this new role, CEOs and CHROs have to ask more of each other.

CEOs: Ask for and expect more from your CHRO

  • Expand Your Thinking. If your expectations for the CHRO role are just the traditional HR function, 90 percent of the opportunity is lost.

  • Critical Skills. What are the essential skills required for your CHRO? Today’s CHRO role requires a wide range of additional strengths, i.e., the ability to use data and analytics to drive strategy and organizational design; a structured way of thinking; and excellent people-assessment skills.

  • Align priorities. Use the model for candid conversations about priorities. Since CEOs don’t have a clear idea of where CHROs spend their time, this will provide a framework for expectations and performance evaluation.

  • Expanded Role. Beyond the traditional HR function, the CHRO needs skills that impact business success, i.e., social media, customer, and employee activism, changing employee expectations of jobs and the work environment, the gig economy, and many more.

  • Interview Better. When interviewing for a CHRO, key considerations: Do you trust them? Are they looking three to five years ahead to determine talent strategy? Do they have a firm grasp on business dynamics within your industry and your company? Are they able to connect the dots between your company’s mission, values, and every other aspect of the business?

CHROs: ask for and expect more from your CEO

  • Role. Since many CEOs don’t understand the purpose, show how the CHRO adds value to the organization and is a crucial player in the C-Suite.

  • Priorities. Ensure HR priorities are aligned with business priorities.

  • Build and maintain a strong team. As traditional HR requirements never go away, ensure the team to keep those functional areas moving smoothly while the CHRO focus aspects that directly drive business success.

  • Know your strengths and weaknesses. The CHROs role will continue to increase, so understand where you already provide value, and where they need to grow.

Many companies have not lifted the CHRO to this new role or seen the benefits that they offer; however, the coronavirus crisis has thrust corporate HR chiefs into the spotlight. A CHRO can make or break a company during a pandemic. Never before have more firms needed a hard-headed HR boss.

During the 2008 financial crisis, there was the mantra, “A good CFO could save a company; a bad one might bury it.” Covid-19 now requires a strategic CHRO that is part of what Harvard Business Review calls the G3 – CEO, CFO, and CHRO. CHROs are critical at this time because they are responsible for keeping employees healthy; maintaining morale; overseeing a rapid move to vast remote-working, and, as firms retrench, consider whether, when, how, and who to lay off. How you treat people during this time will live as part of your reputation and culture long after the pandemic is passed. I heard of a company that laid off 300 employees last week and did it with a prerecorded Zoom message. So much for putting employees first! Unlikely the best and greatest will be knocking their doors down when this is passed.

The pandemic makes such “people analytics” more relevant. Beth Galetti, Senior Vice President of Human Resources at Amazon, is an engineer with no HR experience. She oversees 1,000 developers working exclusively on HR software. Amazon’s pre-outbreak investment in digital induction for fresh hires is paying off. “We onboarded 1,700 new corporate employees on [March 16th] alone,” Ms. Galetti reports. Covid-19 may lead to more HR chiefs to adopt such digital systems to improve HR functionality, which will last long after Covid-19 is gone.

At the moment, many CHROs have a multitude of problems. Mala Singh, chief people officer at EA, represents the C-Suite on the pandemic response team, which occupies 60-70% of her day. Her team has been getting staff desks, computers, even noise-canceling headphones for work from home. A significant concern was balancing work with child care, so Ms. Singh gave the caregivers on EA staff as much time as they needed to adapt without using up paid leave. She is digitally monitoring employee sentiment, particularly anxiety. In all businesses, but especially creative ones like EA’s, “having someone stressed about their family situation does not enable productive work,” she explains.

In many companies outside the knowledge industry, HR leaders must strike a balance between treating staff decently and the bottom line. While the instinct is to cut costs through mass layoffs, the crisis provides strategic CHROs with the opportunity to reconfigure company workflow. What needs to be done by whom, what can be automated, and what requires people to share the same space? Workers who were initially considered redundant may be redeployed or reskilled.

The most strategic CHROs should be looking to the other side of the crisis for what skills they may need and start courting key talent wherever it is. Since everyone is working from home, no one is listening to personal calls. For a savvy CHRO, “it’s the perfect recruiting opportunity.”

For those companies that believe they are too small to have a CHOR, I recommend a part-time CHOR who can provide the essential skills required, and leave many of the traditional HR responsibilities to a Professional Employer Organization, i.e., Insperity. PEOs allow the organization to have a full set of HR services while benefiting from the strategic input of a CHOR.

While budgets are tight and you are letting people go, one of the last people you will consider laying off is your CFO; however, maybe you should be considering adding CHOR to manage your human capital better. After the crisis, there will be fantastic talent available to those that are poised to get it.

Copyright (c) 2020, Marc A. Borrelli

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Want to Improve, Put Women in the C-Suite

Want to Improve, Put Women in the C-Suite

At the end of last year, there was a male-to-female ratio of 19:1 for CEOs and 6.5:1 for CFOs, which exposes a persisting underrepresentation of females in key executive positions. Within my Vistage groups, I am pleased to say that the male-to-female ratio is 11:3 for CEOs. However, that aside, some recent articles have shown the superior performance of companies that have women in C-Suite positions that are typically not reserved for females.

According to a study by S&P Global Market Intelligence, if you are looking for better returns, hire a female CFO! Companies that hired female CFOs saw, on average, a 6% increase in profits and an 8% better stock returns compared with the performance under male predecessors. The 6% increase in profits accounted for an additional $1.8 trillion in additional cumulative profits across 6,000 companies.

Thus, female CEOs drove more value appreciation, improved stock price momentum, better-defended profitability moats, and delivered excess risk-adjusted returns for their firms.

However, a new study by HEC Paris Business School and MVision Private Equity Advisers found that investment committees of private equity fund managers comprising both males and females have experienced comparatively higher returns compared to their male-only peers. Therefore, if PE firms want to outperform their peers, they should appoint more women to their investment committees. The diverse investment committees well outperformed their male-only counterparts! Professor Oliver Gottschalg found that on average, companies in the top quartile for gender diversity on executive teams were 21% more likely to outperform their peers, and 27% more likely to exhibit substantial value creation. Specifically, his research found that gender-diverse investment committees outperformed all-male committees in alpha, TVPI, and IRR by 7%, 0.52%, and 12%, respectively. The level outperformance is due to a broader base of perspectives and the subsequent avoidance of more blind spots!

So what is of interest is that while women’s participation in Investment Committees results in outperformance, Private Equity never received the memo. As can be seen from the chart below, women are very under-represented in the major Private Equity Groups

Not only that, Bloomberg has found that startups with all-male teams raise less money than those with a woman. Therefore, you would think all startups would be looking for female teammates. Unfortunately, many are run by men who “know best.”

Thus, while I am the first to say that correlation does not necessarily mean causality, there undoubtedly enough data to say, “If you want to realize above-average performance, put women in your C-Suite!”

This has to be one of the easiest things to improve your performance and make better decisions. If you say, “We just can’t find them,” you are not looking in the right place.

Copyright (c) 2019, Marc A. Borrelli

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Hiring Results are Bad. Surely, We Can Do Better?

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Most hiring is wrong; businesses have a 54 percent success rate

How successful are we at recruitment? According to the Harvard Business Review, 80 percent of employee turnover stems from bad hiring decisions. A Brandon-Hall research brief found 95 percent of employers surveyed admitted to making hiring mistakes by recruiting the wrong people each year.

According to a 2015 Leadership IQ study, 46 percent of hires are considered failures by the time they reach the 18-month mark. A 54% success rate! Would you accept that from any other area of your business? Not only do we have a 54% success rate, but the costs of a bad hire are huge. Google searches give estimates as follows:

  • The cost of a bad hire can reach up to 30% of the employee’s first-year earnings — US Department of Labor

  • Bad hires cost $240,000 in expenses related to hiring, compensation, and retention — The Undercover Recruiter

  • 74% of companies who admit they’ve hired the wrong person for a position lost an average of $14,900 for each lousy hire — CareerBuilder

 Since all businesses need employees, why are businesses bad at it? Why do they tolerate this inferior performance, as they all have to face the repercussions of poor hires?

Every business leader understands the negative consequences of a bad hire. Hiring a bad fit for your team can disrupt team morale, decreased productivity, and hurt customer service. Also, there are those terrible hires, which are great, but the company puts them off so much they leave.

But the most successful businesses have what it takes to ensure a bad hire doesn’t derail their teams.

 

Disposable Employees

Part of the issue, in my opinion, is that the disposable society has migrated to employees. We tolerate lousy hiring, as we believe we can easily replace them with better employees if they don’t work out. However, this assumption is flawed and is another example of hubris.

Because of this faulty assumption, we don’t bother to put in place processes for recruiting, interviewing, and on-boarding to ensure that we are not undertaking lousy hiring practices.

Many will say, but we have processes, and indeed, you do. However, are they useful? It goes to your culture. If your firm has a culture of continuous improvement, then you be continuously looking at your hiring practices and making changes to improve the results. If you don’t have a Kaizen culture, you should, but, just because you have a process, doesn’t mean it is an efficient process. You need to examine that process and then start measuring the results to see where it can be improved.

 

Direct Costs

  • Hiring Costs

  • Compensation Costs

  • Severance Costs

 

Indirect Costs

  • Support Costs

  • Cost of Poor Performance

  • Loss of Poor Subordinate / Department Morale

  • Value of Bad image in the Workforce

If you want to determine the cost to you from a bad hire, click here for a model that will help you estimate the costs of a bad hire.

The second reason is the damage to morale among the employees that stay. They might think the person was a good hire, and if they left, the remaining employees might question why they are still around.

 

So Hiring is a Process

Like so many things in business, hiring is a process. I have heard that if a company establishes a good process and sticks with it, it can move that hiring success rate from 50% to 80-90%. If we stick to the process and work to improve it, we should get better results. If we “wing it” and don’t track the success, then we have no idea what is working and what isn’t or how we are performing.

To avoid keeping bad hires on your team for long, have a strategy in place to continuously hire–especially for roles you know will open up throughout the year. It’ll help you quickly replace bad hires and build a network of talent to staff up as your team grows.

Keep jobs posted on your career site–even if you don’t have an immediate opening. If a strong candidate comes along, you can offer an informational interview. If the meeting goes well, you might even decide to hire the candidate before you have an immediate need. If not, you’ll have a pool of talent to tap into when you need to make an urgent hire, i.e., when you let go of a bad hire or suddenly experience business growth.

Hiring the right employee is much more important than simply filling a seat.

I have identified the hiring steps to be:

 

The Job Advertisement

From a talk I heard many years ago, I took away that ads, in general, do not attract good people, more like the bottom third. Most job specifications define the minimum standards; basically, we end up with the tallest pigmy. Good people and Millennials want to know what I am going to learn and what is the job going to do for me.

You have to inform candidates of the following:

  • What is the situation or problem?

  • What are the main obstacles the employee will encounter to be successful?

  • What actions need to be taken to accomplish the problem?

  • What are the measurable, quantifiable results required that define success?

Instead, what we state is the following:

  • Such and Such Industry experience

  • XYZ Technical Degree / Certification

  • ABC Skills and knowledge

  • D E & F Behaviors and attitude

  • Minim
    um of T Years of experience

If this hasn’t bored you yet, it should have. No “A” player is excited over this! You haven’t sold them. What we should be saying is:

  • Fast-growing company in fast /new/challenging sector

  • Opportunity to part of a successful team to create a market-leading organization

  • Increase sales by X% and improve margins by y% within T months

  • Build an Indep. Rep. Channel in X within Y days

  • Implement sales forecasting and pipeline management with Z months

  • Revamp all sales collateral within Q months.

 

The Search

Recruiters are expensive, and I hear they are often sending the same people that are responding to ads on Monster and Indeed. Instead, reach out to your network, customers, suppliers, advisers, etc. Provide them a copy of your job description and ask if they know someone who would be interested and who would fit within your culture.

 

The Sorting

A lot of HR departments have turned to technology to help them with recruitment. They are using scanners to look for words and phrases on a resume that meet their job description. However, given that they are using the failed advertisement, it makes matters worse as it excludes those that would be great hires but don’t fit with what the computer is seeking. Remember, all these algorithms are programmed and have biases, but we don’t always know the preference. Unfortunately, reviewing resumes needs a human eye until computers get much better.

I recently heard a story of someone who was looking for Venture Capital funding. They sent an email to a VC firm that had a video of them singing “Call Me Maybe” with revised wording. The effect worked. The VC was intrigued and asked to meet them. Your automated system will not take these people in and could reject some great possible hires.

 

The Interviewing

We have all heard of those interview questions to determine how an employee thinks. However, interviewing is more than a few tricky questions, not to say you should give up on them. Consider the interview an audition rather than an interview.

 

Experience

If you need a welder, get the applicant to do some welding. If you need an Operations manager get them to do a presentation on what they would do to solve the “S” in Soar. If they have to code, make them code something that doesn’t necessarily require the language knowledge but the thinking of how to structure the problem for coding.

Rather than ask them about the experience on their resume, which they have rehearsed, get them to whiteboard the entire project and layout everyone’s role and contribution. If an applicant just had a small part, they will not be able to do it.

 

Cultural Fit

Cultural fit is talked about continuously but still gets little application. Primarily I would put this down to the fact that many employees don’t know what their culture is. A client of mine recently when around their company, which has 50 employees, and offered each one $100 if they could say what the culture was. Only one employee could, and to my client’s chagrin, printed all over the office, is the corporate culture. The message is only in words and not carried into behaviors.

  • At Zappos, an applicant who is not a local gets a free ride from the airport to Zappos’ Las Vegas headquarters. In addition to being a convenience, it is also a subtle part of the application process. During the rides, the van driver is paying attention to how the applicants carry themselves and treat them, regardless of whether their travel was pleasant or not. After a full day that includes a tour and multiple interviews, a recruiter checks in with the driver to get their impression. Hsieh said in an interview with the Wall Street Journal in 2013, “It doesn’t matter how well the day of interviews went, if our shuttle driver wasn’t treated well, then we won’t hire that person.”

  • Elon Musk, initially, interviewed every employee last to check for cultural fit and asked employees to write a letter saying why they wished to work for SpaceX. Former SpaceX talent director Dolly Singh said that Musk told her to find the single best person on the planet for any given job, no matter the role. When SpaceX built a yogurt stand in its headquarters, Musk instructed her, “Go to Pinkberry and find me the employee of the month.” Musk also looks for candidates with a positive attitude. He also considers whether co-workers would like working with them–what he refers to as a strict “no-assholes policy.” Musk asked her, “what makes you the right person to build my company? Why should I trust you?”

Due to the failings of the interview, some people have started to use unorthodox methods to determine a candidate’s potential, i.e.

  • playing table tennis to discern their level of intensity and risk-taking,

  • have candidates drive the interviewer’s car to gauge their multitasking skills, or

  • explaining why people shouldn’t work for the company to prompts more honest conversations

 

The Measurement

What about after the interview, how do you compare the candidates? Most people write down whether they liked them or not, and do think they are a good fit, but this loses the focus. I like using a Decision Matrix to select the best candidate. Click here on how to use a Decision Matrix.

 

What if You Couldn’t Fire

An e-commerce company, Next Jump, promises never to fire anyone. A company that will not fire is forced to hire slowly and very deliberately. Jay Forte says this type of hiring model (whether or not you choose to offer lifetime employment) is something all companies should consider. “When we choose wisely about who we bring into our organizations, we need to be aware we are making a lifetime decision,” he says. “Not everyone fits in the organization. Therefore, initially choosing wisely is critical. Once chosen, it is right to think that employees will spend all of their careers with the organization – this completely changes how we think about our people.”

 

Why Should I Work for You?

Like them or hate them, millennials are the largest share of the workforce, so we better figure out how to interact with them. Because of the way they look at the jobs, unlike the baby boomers, they will not accept, “You should be happy I am giving you a job.”  They saw what happened in the Great Recession and that they are disposable, so their attitude is “I work for you, you offer me something more than money – satisfaction, career advancement, training, etc.”

I have posed the following question to a lot of CEOs, “You have the perfect candidate in front of you interviewing for a job. They have everything you need, skills, experience, cultural fit, and attitude. You are about to make the offer, and they look at you and say, ‘Why should I work for you?’” None of the CEOs have a great answer. I get responses along the lines of:

  • We’re a great company.

  • There are great opportunities for advancement at XYZ.

  • We have a great workforce.

These sound good, but if this person is interviewing with several companies, all the companies are probably saying the same thing. You know none of the other companies are saying:

  • We are an awful company

  • We are offering a dead-end job in a dead-end company

  • The people here are terrible and will never go anywhere because they are so bad.

So how do you distinguish yourself from the pack? You better be able to answer this question well and authentically to get those “A” players.

 

Onboarding vs. Waterboarding

Over 70 percent of employees regret their decision after the first day of a new job! No one I have ever met has started work at a new company, not excited about the opportunity and the change for a fresh start with upside. If by the end of the day, 70 percent think they made a mistake, that should tell you how fantastic most onboarding processes are. I experienced such a great onboarding experience many years ago as follows:

  • I arrived and sent to HR to fill out reams of paperwork (they could have sent them to my house, and I could have come with them completed).

  • Taken to security to get my badge – took an hour

  • Brought to my desk to find out that my boss was away on business for the week. No one knew what I was supposed to do, but there were four binders on the desk full of information on some prior deals that I was supposed to read.

  • As I was during my “probation period,” my computer could not be connected to the network, so all files were transferred on disks.

  • I was not allowed to order business cards until my probation had ended, even though I was heading to Asia for a large conference the following week.

I was one of the seventy percent, which was thinking, “What the hell have I done, why did I move.”

By the time the probation period is over, the marriage is over, and the employee no longer loves the company. They have checked out.

I believe it was Cameron Herold who said that his philosophy was to celebrate the arrival of a new employee on their first day. The new employee would be asked to bring their Bucket List. The company would commit to helping the employee realize one item on their Bucket List during their first year. Helping didn’t mean paying for it, but rather seeing how the company could make it possible. People value experiences over money, and if you did this for your employees, they would appreciate you much more than any bonus you can give them.

Finally, onboarding doesn’t end on the first day, but it continues for more than the first year with regular check-ins. The check-ins are to:

  • reinforce that the employee knows what you expected of them,

  • they have the resources that they need to do the job;

  • they understand the company’s culture and values and are living them.

Good luck recruiting, and may your success rate increase.

 

© 2019 Marc Borrelli All Rights Reserved

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