The Astron Road Show

Headed to upstate New York? Don’t forget to visit Astron’s National Director, Michael Maciekowich, at the New York Bankers Association 2009 Senior Management Conference in Cooperstown, NY on June 10-12. Michael will be part of a panel discussion on compensation.

Please contact us for information on any of these presentations.

Fact or Fiction?

Fact!

Even though academia is still challenging the veracity of the theory, in 1996 Dilbert creator & cartoonist Scott Adams published a book exploring a theory that management promotes those that are least competent in order to limit the damage they may cause. While this theory does conflict against human resource traditional techniques, some management and business programs require the book for their courses.

Whether the economy is strong or weak, leaders must constantly look for competitive advantages to ensure success for their organizations. Maximizing the performance of people has typically been an elusive factor in organizational success. It is not easy to show the ROI of people investments and to demonstrate a cause-and-effect connection between people data and organizational outcomes. Leaders of all stripes often use the phrase “our people are our most important asset” but rarely, if ever, back up that statement with any data or analysis.

Connecting employee data (e.g., skills, behaviors, attitudes, competencies, demographics) to tangible outcomes is not so difficult that it should preclude leaders from attempting to focus on it. It does take advanced statistical knowledge, but this should not be a strong enough barrier to keep leaders from taking on the challenge/opportunity. We at Strategic Management Decisions have put together a six-step process for discovering people-drivers in your organization. This process does incorporate advanced statistical analytics. However, it is comprised of many organizational development/change methodologies with which most leaders are familiar.

Below we have provided a basic overview for each of the six steps that you can implement.

Step 1: Determine Critical Outcomes

An organization must first determine the top two to three most critical outcomes or priorities that it anticipates will be accomplished through its employees. For example, outcomes such as sales, productivity, turnover, error reduction, or customer satisfaction are commonly desired outcomes. These outcomes can be gleaned by reviewing strategic documents and plans. Key stakeholder interviews of board members, CEO, CFO, or other leaders (e.g., the head of sales) are also very useful in the process. Once this information has been collected and summarized, the outcomes must then be prioritized into two to three outcomes that will be included in the analysis.

Step 2: Create Cross-Functional Data Team

Once the owners of the critical organizational metrics have been identified, a cross-functional data team needs to be organized. This team should consist of the appropriate statistical/measurement experts, key line-of-business leaders or metric owners, and HR leaders that own the people data. The measurement experts are needed in order to determine the data requirements to empirically link the necessary datasets and conduct the necessary statistical analyses. This cross-functional team should also facilitate and sponsor the analytics initiative. Therefore, it is important to include company leaders with influence and decision-makers in this process.

Step 3: Assess Measures of Critical Outcomes

Once the cross-functional data team has been convened and you have the two to three critical outcomes identified, the next step is to understand how data are currently captured in the organization. For example, most organizations measure customer satisfaction in some manner (e.g., monthly, quarterly, annually). Several measurement characteristics of each outcome measure must be assessed that include: level of measurement (e.g., by work unit, by line-of-business, at the organization level) and frequency of measurement (e.g., monthly, quarterly, annually)

Step 4: Objective Analysis of Key Data

The advanced statistical knowledge plays a key role in the step of the process. Many large organizations currently employ statisticians or social scientists with a statistical background. Hiring a consultant or full-time statistician for this step is necessary if this type of internal resource does not currently exist in your organization. Step 4 is where the various data sets are empirically linked via advanced statistical methodologies. Structural equations modeling is the preferred solution for these types of data linkage analyses as causality can be inferred and it accounts for measurement error. Using structural equations modeling allows leaders to be able to state, for example, that employee attitudes about work-life balance are a causal driver of increased customer satisfaction. When leaders make people-related investments, they want a similar level of certainty as when they make capital investments.

The statistical component of this step sounds complicated, but it is really just a tool for accomplishing three things: 1) Understanding the relationship and impact between and meaningful outcomes and employee data, 2) Prioritizing specific types of interventions that will impact meaningful outcomes, and 3) estimating return-on-investment (ROI) to determine the levels of investments to be made and the expected returns. The final result generated from these data analyses step will be the priorities, taken from the employee data that will drive the desired outcomes.

Step 5: Build the Program and Execute

Once the critical drivers of meaningful outcomes have been identified, the next step is to implement the types of interventions that will have the desired effect. This stage of action-planning stage can be focused at the systemic (organization-wide) level, line-of-business level, and/or work-unit level. Even without analytics, this step encompasses the largest amount of work for leaders and investment. The main difference now is that the investments that are being made are focused on those employee demographics/processes/attitudes etc, that have a proven, empirical impact on the organization’s desired outcomes.

Organizational leaders that focus on people as a priority have likely developed a strong process for action-planning at all levels. The key for implementing this approach is to leverage any existing, useful processes and, at the same time, enhance them. It is very often the case that leaders will push results of people analyses to individual managers who then own the action-planning process for their department. Solid action-planning for leaders requires both work unit level and systemic level action planning. Using analytics to prove the worth of people initiatives will produce buy-in from senior leaders to make those initiatives worthy of being implemented ‘system-wide’.

Step 6: Measure and Adjust/Re-prioritize

Organizational leaders understand the importance of measurement and setting goals. They also understand the importance of creating a culture of accountability. For example, measuring employee attitudes through an employee survey every three years does not create a sense of accountability for leaders around this issue. A culture of accountability is the primary reason customer satisfaction is measured nearly continuously in organizations. An organization’s financials are not reported only on an annual basis, with good reason. Leaders do not need to conduct organization-wide employee surveys every month, but measuring attitudes annually is reasonable to create accountability. Learning management systems (LMS) provide employee training data at a high frequency of measurement, usually in real-time. In those cases where high-frequency measurement is available, a leader’s ability to drive accountability and monitor progress is improved.

As with any organizational initiatives, leaders must be able (and willing) to make adjustments that are also based on the results analytics and measurement. Leaders understand that change is frequent in any environment or economy and the level of impact of people on important outcomes can shift as improvements and/or situations change.

Setting a People Strategy

Many strategy and budgeting meetings around people have the potential to be effective at plotting a course for the coming year that will drive outcomes. Unfortunately, if HR is still only viewed as a cost function, then cost-cutting will be the only topic that leaders discuss at these meetings. Leaders that utilize this process to unveil the critical levers that can be pulled to impact their organizational outcomes will allow them to use the HR function as a key piece of their strategies that incorporates investments that are based on analytics and ROI. In serious economic situations, cost cuts will be necessary. However, this process of prioritizing investments in people will show leaders where to cut and where to invest.

Leadership is about using information to drive action. People investments should be a part of this protocol. The six-step process outlined will assist leaders in prioritizing their people-related initiatives based on analytics and ROI—which may be a broad shift in the typical approach to people investments, but a necessary one to gain competitive advantage.

Scott Mondore, PhD is the co-author of Investing in What Matters: Linking Employees to Business Outcomes, published by SHRM—available June 2009. He is the managing partner of Strategic Management Decisions, LLC. Scott can be reached at smondore@smdhr.com, 404-808-4730.

Shane Douthitt, PhD is the co-author of Investing in What Matters: Linking Employees to Business Outcomes, published by SHRM—available June 2009. He is the managing partner of Strategic Management Decisions, LLC. Shane can be reached at sdouthitt@smdhr.com, 704-975-6820.

Overtime Issues

“White Collar Exemptions”

Many organizations are aware that salaried, exempt employees are excused from overtime pay and other wage and labor laws. However, the confusion often lies in determining which employees meet the criteria of exempt or non-exempt. Michael clearly states: “Often employees are classified as exempt based solely upon job title, job classification, bargaining unit membership, or salary. These factors provide a good place to start the FLSA ‘duties’ test analysis; they are not legally sufficient in and of themselves, however. An examination of the employee's actual job duties is also required.” Well, then, we may ask ourselves….what else do we need to know? A November 2008 article from BLR’s HR Daily Advisor breaks it down: “To be exempt under the administrative, professional, or executive exemptions, employees must pass three tests.” These tests are as follows:

Salary Level Test: An employee has to make at least $455 per week.
Salary Basis Test: The employee must be paid on a salary or fee basis.
Duties Test: The employee’s work falls within the falling types of duties:
• Administration
• Executive
• Professional
• Outside sales

While BLR gives a brief explanation as to what the determining factors are for each of the above mentioned duties, it is best to consult the Department of Labor’s website for official documentation. It may also be wise to consult a labor lawyer. A small fee for prevention can save an organization a lot of time and money in the future.

“Alternative Work Schedule and Overtime”

Another tricky subject involving the FLSA human resource professionals everywhere should be aware of is dealing with overtime for employees under a compressed work schedule (CWS) or a flexible work schedule (FWS). The U.S. Office of Personnel Management (OPM) explains: “For a full-time employee under a CWS program who is exempt from the FLSA, overtime hours are all officially ordered and approved hours of work in excess of the compressed work schedule. For a full-time employee who is covered by the FLSA (non-exempt), overtime hours also include any hours worked outside the compressed work schedule that are ‘suffered or permitted.’ For a part-time employee, overtime hours are hours in excess of the compressed work schedule for a day (but must be more than 8 hours) or for a week (but must be more than 40 hours).”

For an employee under a flexible work schedule other circumstances must be considered. For starters, hours worked over 8 in a day, or 40 in a week, is considered overtime for FWS workers. However, if this additional time were “suffered or permitted” hours, the employee cannot take overtime compensation. Be sure to inquire with a labor lawyer for full details in regards to determining whether a FWS employee has acquired overtime.

“Compensation Time Off (CTO)”

Another hurdle many human resource professionals tend to trip over is the discussion between Compensation Time Off (CTO) and Overtime Pay (OP). Compensation Time off, as the OPM describes, is, “Time off with pay in lieu of overtime pay for irregular or occasional overtime work.” Mix-ups begin when employers decide to give employees CTO without understanding who qualifies for it. For starters, some are not aware that the “FLSA mandates that non-exempt employees must be paid in dollars for their overtime and cannot receive compensatory time instead.”

US Legal, Inc further states: “In 1978, Congress passed the Federal Employees Flexible and Compressed Work Schedules Act which enabled the Federal Government to pay its employees comp time instead of overtime pay. In 1985, this provision was extended to state and local employees as well at the employee's option.” Regardless, FLSA still requires that overtime compensation to be made monetarily to private sector hourly workers.

For public sector employers further confusion can occur when human resource representatives do not distribute the CTO time properly. If an employee were to work over 5 hours overtime, in compensation time the employee receives 7 ½ hours off. Just as with overtime, employees who receive CTO should expect the time back in 1.5 times the amount worked. They should also expect to take those hours off the same week they accrue them. Many employers do not keep these points in mind and compensate their workers with exact hour time off or allow them to accrue the hours for weeks and months at a time.

Innocent Errors

“Forgetting to Keep a Paper Trail”

Michael mentions in his presentation, “The biggest mistake employers of all sizes make is to over-rely on time cards or time sheets to record hours for their non-exempt employees. More commonly, employers get tripped up because they lack a system for recording ‘borderline’ work time spent by non-exempt employees. The errors need not be intentional to violate FLSA.” For many employers it is very difficult to keep track of every single minute of time worked by their non-exempt employees. Not all companies can afford an electronic sign in/sign out device to accurately keep track of time. However, all companies can afford to document hours via record sheets that are transferred onto a database. Investing into a simple database program such as Microsoft Access could help any organization to accurately keep track of all time worked.

“Outdated Job Descriptions”

Due to understaffing, some employees may take on tasks usually left to other employees in another job title. While circumstances may permit this, HR representatives should recognize that due to the extra work these employees undertake their exemption status may be affected. Also keep in mind that not all salaried employees are exempt. HR representatives must determine if 20% or more of the employee’s day is spent on non-exempt tasks, and whether at least 50% of the day is still spent on primary job duties. If adjustments are needed, so be it. First, start with a thorough audit of the organization’s job descriptions. After receiving an accurate understanding of what employees should be doing, physically take the time to find out what they are actually doing. Employees may appreciate that you are taking the time to find out whether they are being overworked or not. After gathering this data compare and contrast. If you notice that employees should have been paid overtime, or have compensatory time off, take care of it immediately. It is more than likely cheaper than a lawsuit. Also, do not forget to also check with state laws. Although the FLSA is a federal law, if your state has a law more favorable to employees, then that law applies more than the FLSA does.

“What To Do? OH! What To Do?!”

With all this talk on the FLSA and how easy it is to make a mistake in applying it, many have become frustrated. Even though it is understood that the FLSA was not put into place to make the topic of compensation more difficult than it already is, many organizations still find themselves between a rock and a hard place. While consulting a labor lawyer is always the best way for clarification, organizations don’t always have the funds or the time to consult for every questionable issue. Many human resource consulting firms, like Astron Solutions, offer FLSA compliance audits separate from or part of consulting engagements. In addition we at Astron Solutions are happy to give Astronology readers a peek into an upcoming product. Astron Solutions is currently in the works of creating a training module that will help educate managers on the ins and outs of the FLSA law. To find out more, just check Astron Solutions’ website for information at a later date. It is also not a bad idea to confer with the Department of Labor website and the Office of Personnel Management website for more information. In addition, the DOL provides a free Power Point review of FLSA basics. Taking the time to be informed from both these sources will be beneficial. In addition, with assistance through training modules and trained professionals, all can avoid the common pitfalls and mistakes in complying with the FLSA.

Looking for a top-notch presenter for your human resource organization's meeting? Both Jennifer Loftus and Michael Maciekowich present highly-rated sessions on a variety of compensation and employee retention issues. For more information, send an e-mail to info@astronsolutions.com.

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Copyright 2009, Astron Solutions, LLC

ISSN Number 1549-0467