CASE 10

The Wells Fargo Scandal

In 2016, retail banking giant Wells Fargo fired some 5,300 employees and was forced to pay a record $185 million in fines by the Consumer Financial Protection Bureau for opening upwards of 2 million fraudulent accounts for unwitting customers. This lead to CEO John Stumpf testifying before the CFPB ( and very publicly dressed down by senator & liberal fire-brand Elizabeth Warren) and eventually stepping down from his position. These fraudulent activities stem from a banking environment stricken with low-interest rates and slim profit margins creating a culture of unreasonably aggressive sales quotas—up to 20 new accounts a day—and quick dismissals for employees who couldn’t perform. Some former employees allege that they were tasked by management to perform unethically and in some cases illegal practices under threat of termination, and when these employees reported the dubious activities to Wells Fargo HR or the bank's ethics hotline they were dismissed anyhow. Although Wells Fargo vehemently denies these allegations, employees say that management would begin scrutinizing employees, looking for any fire-able offense, such as being 3 minutes late. Head of Berkshire Hathaway and Wells Fargo shareholder Warren Buffett once said in defense of embattled JP Morgan Chase CEO Jamie Dimon, “ If a cop follows you for 500 miles, you're going to get a ticket…”; the same sentiment rings true for a bank investigating employees for small, but “fireable” infractions. Click here to hear Buffett’s thoughts on the scandal.

The HR policies in place here not only failed but actively worked against the some of the most vulnerable people within the organization and certainly some of the most. These were not high paid executives, these were single parents, recent graduates, and average Americans. Recruiting and company review site Glassdoor.com pegs the average annual salary of a personal banker at $37,500 a year or about $18 an hour. These were not people with large savings to fall back on or people who would be offered “golden parachutes” if implicated in misconduct. This is why it is so disheartening that Wells Fargo’s HR policies failed them. Even if there was no coercion by management to commit fraud, this would still be a pressure cooker environment that would result in wrongdoing.

The fraud and extreme quotas were not the only sins Wells Fargo committed. Within the banking industry, there is a document known as the “U-5”. This universal bio document for anyone licensed to handle investments designed to keep fraudulent bankers out of the industry. In the case of Wells Fargo, managers would leverage their ability to alter this document and functionally blackball the employee from the entire industry. Former employees allege that the “U-5” was used as a retaliatory weapon against those that attempted to blow the whistle on the above mentioned fraudulent activities. To learn more about the “U-5” and the way it was used to against ex-employees, check out the Planet Money Podcast embedded below.

 There were HR policies in place to avoid these ethical dilemmas and they were avoided or disregarded entirely. HR departments are a powerful tool for employers to manage their workforces to achieve financial success, but they should also function to assist organizations to root out corrupt business practices and protect those that bring them that success. The record-breaking fine of $185 million may be a mere pittance in the banking industry, but the damage done to their brand through mismanaging their HR processes is enormous.  

Sources:

BBC News. (2016). Wells Fargo boss urged to resign over accounts scandal - BBC News. [online] Available at: http://www.bbc.com/news/business-37419968 [Accessed 4 May 2017].

BBC News. (2016). Wells Fargo boss John Stumpf steps down - BBC News. [online] Available at: http://www.bbc.com/news/business-37639648 [Accessed 4 May 2017].

Egan, M. (2016). Workers tell Wells Fargo horror stories. [online] CNNMoney. Available at: http://money.cnn.com/2016/09/09/investing/wells-fargo-phony-accounts-culture/index.html [Accessed 4 May 2017].

Egan, M. (2016). Wells Fargo workers: I called the ethics line and was fired. [online] CNNMoney. Available at: http://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html [Accessed 4 May 2017].

Egan, M. (2016). 'Wells Fargo isn't the only one': Other bank workers describe intense sales tactics . [online] CNNMoney. Available at: http://money.cnn.com/2016/09/22/investing/wells-fargo-fake-accounts-banks/index.html [Accessed 4 May 2017].

Glassdoor. (2017). Salary: Personal Banker in United States . [online] Available at: https://www.glassdoor.com/Salaries/us-personal-banker-salary-SRCH_IL.0,2_IN1_KO3,18.htm [Accessed 4 May 2017].

Los Angeles Times. (2016). What is the Wells Fargo scandal?. [online] Available at: https://www.youtube.com/watch?v=QXbD6YggCYQ [Accessed 4 May 2017].

NPR.org. (2016). Planet Money Episode 732: Bad Form, Wells Fargo. [online] Available at: http://www.npr.org/sections/money/2016/10/28/499805238/episode-732-bad-form-wells-fargo [Accessed 4 May 2017].

CASE 9

An Ethical Dilemma

How can an organization’s HR department cope with the challenges of a changing, globalized world? How can a business remain ethical while reaping the obvious benefits that come from globalization? Although I doubt we’ll be able to solve these issues completely, these will be the issues we will be exploring this week.

Our first case involves the exploitation of Syrian refugees by the fashion industry in Turkey. The BBC’s investigative unit “Panorama” went undercover into a garment factory in Istanbul to expose manufactures of famous brands employing Syrian refugees and children as young as ten, all of whom do not possess a work permit and are paid as little as £1 per hour, far below the Turkish minimum wage. Included among the brands involved with the violating factory was iconic British brand Marks & Spencer, who maintain that they’re inspections have found no exploitation present in their current factories and claim the exposed producer to be an illegitimate manufacturer. They have also offered those that have been affected and are of working age permanent legal work.


The Panorama report from the BBC

 As the West moves further and further away from a production economy, this will continue to be an issue faced by all but the most dedicated and diligent. Nike, Walmart, Apple, Victoria’s Secret and Nestle have all been implicated in poor, exploitative labor practices, just to name a few. Companies must extend their HR policies beyond their own boundaries. Not only should companies insist that their suppliers to fall in line with their practices, but it is also the duty of an HR department to promote ethical policies and support a culture of ethics throughout the organization. These policies should be proactive and are informed by the nature of the business activities performed. Although all companies should strive to be ethical on all fronts, the form of these policies will differ greatly depending on the mission, vision, structure, key activities and general business strategy. Let's take a moment and talk about some of the different business strategies and their accompanying HR strategies.

In 1978 Miles and Snow published “Organizational Strategy, Structure & Process”, wherein two distinct strategic segments were introduced. These identified strategic categories are defenders and prospectors. Defenders are the tried and true brands of old, unlikely to attempt to extend beyond their already comfortable market segment. This focus on stability equals an HR strategy that seeks to maintain control with a formalized management structure and equally formalized hierarchy and promotion structure. On the other hand, “prospector” organizations seek new and innovative offerings and the segments that come with them. With a focus on innovation, flexibility and an unconventional structure are the name of the game.

Michael Porter offers a slightly different perspective, identifying 3 businesses categories: overall cost leadership strategy, differentiation strategy, and focus strategy. The allure of exploitative labor practices affiliated with outsourcing may be more alluring to a business practicing a cost leadership strategy, as the goal is to keep pricing as low as possible. HR strategy must reflect the challenges faced by this positioning, while also being cost efficient. These lean HR practices should take the form of strict adherence to practical policy that maintains a rigid structure to avoid errors that create expensive setbacks. When dealing with companies that practice differentiation strategy, the role of HR leans toward a more flexible, creative strategy to entice skilled, creative employees, not to mention these companies (if successful) have the capital to experiment more in their HR strategy. A focus strategy may take the best of both worlds and usually seeks a narrower audience and as expected, HR strategy will usually end up as a blend of the two previous models listed above.

Another option to best implement an effective HR strategy is to find outside help. While many businesses are choosing to outsource their HR services with mixed results, it may be more effective to hire an HR consulting firm to help streamline your policies and bring them in line with your business’s strategy. Advisory HQ has assembled list of the top consulting firms operating in the HR realm. Aon Hewitt, Deloitte Consulting, Hay Group, Mercer, and Oliver Wyman all made the cut. Each excelling at a different aspect of the HR realm. For example, Aon brings structure in a more tailored, localized fashion with its “Globalized Business Units” strategy, effectively promoting a consistent culture across geographically diverse locations while offering strategies that are individual to the local branch.

I feel like I end all of these posts by saying that your strategy is individual to your specific business, and today is no different. Business is rapidly changing, and businesses competing in the same fields may implement vastly different strategies, the only constant is the need for ethical and humane policy. The rest is up to you.
         

Sources

AdvisoryHQ. (2016). Top 5 Best HR Consulting Firms | 2017 Ranking | Best HR Consultants & HR Consultancy Services. [online] Available at: http://www.advisoryhq.com/articles/hr-consulting-firms/ [Accessed 27 Apr. 2017].

BBC. (2016). Undercover: The Refugees Who Make Our Clothes (Panorama) - BBC News. [online] Available at: https://www.youtube.com/watch?v=3tf6qc51Kbw [Accessed 27 Apr. 2017].

BBC News. (2016). Child refugees in Turkey making clothes for UK shops - BBC News. [online] Available at: http://www.bbc.com/news/business-37716463 [Accessed 27 Apr. 2017].

Gomez-Mejia, L., Balkin, D. and Cardy, R. (2016). Managing Human Resources. 8th ed. Essex: Pearson Education Limited, pp.21-79.

CASE 8

Separation Anxiety

After a weeklong break, we’re back in business. This week we’ll be looking at the past trials and tribulations of the once great Nokia. Studying in Finland, I knew we would get here eventually. Many of my younger classmates probably see Nokia as a scrappy underdog, nipping at Apple and Google’s heels, knowing only a sense of tarnished patriotic pride associated with the brand. While I (as a relative old-fart) was once a proud owner of a gloriously garish, indestructible, gold brick of a phone known as the 3310. I remember Nokia as a colossus, unrivaled in its market. As an American living in Finland, I do not seek to belabor the point that Nokia’s fall came hard and fast, as I can see older faces sour when the name is mentioned and understand that Nokia was much more than a company here, but symbolized an entire thriving economy. Compounding the cultural significance of their descent was a world wide economic crisis to add real injury to insult.

For more information about the history of Nokia check out the video series below.

All credit to the videos original creators. Check out their channel here

In 2008, with little notice Nokia pulled up stakes in its German factory, laying off 2,300 manufacturing jobs in the process. In an effort to reduce costs, the phone manufacturer planned to relocate to the far cheaper, newly inducted EU member state of Romania, much to the chagrin of German officials. Threatening to brand them as a “subsidy locust”, officials insinuated that Nokia was abusing German subsidies to then turn around and move to a country which receives financial assistance from the EU. Little did Nokia know that a looming financial crisis was about to break and their Romanian factory would shutter 3 years later, slashing another 3500 jobs. German officials in 2008 demanded an update to the EU directive on the European Works Councils (EWCs) to prevent companies from these kind of abrupt layoffs. A revised directive was passed in June of 2009, addressing many of these concerns.

While Nokia managed to avoid EU sanction, they certainly walked away with a tarnished reputation in these markets and in the minds of the thousands of people laid off. Let’s take a look at what could have been and some methods that could have been utilized.

Downsizing vs Rightsizing

Downsizing is the the effort to diminish the scale of an organization for a leaner, more effective operation. Whereas rightsizing is a restructuring of an organization for the sake of efficiency. Rightsizing will more than likely produce redundancies or shed light on inefficiencies that will result in employee separations. In Nokia’s case it could be argued that moving the factory to a more financially agreeable country can be seen as reorganizing for efficiency and thus be considered “rightsizing”. It may have been in Nokia’s best interest to attempt purely to downsize its operation in Germany, while opening a more modest operation in Romania. It may not a have averted disaster, but it may have saved some of its reputation.

Layoffs

Living in the new economy, this is a concept in which we are all at least tangentially familiar. This is an involuntary employee separation brought on by an organization's financial situation or strategic positioning rather than due to employee misconduct and should be view as a last resort. Layoffs can be a powerful signal to investors and can sometimes be misconstrued as poor financial performance when it was a strategic maneuver instead. Although generous severance packages may soften the inevitable PR blowback, mass layoffs are never trumpeted as a measure of success.

Laying off the layoffs

There are quite a few alternatives to layoffs that organizations can implement instead. First is early retirement programs. To best manage an early retirement program, a the scope should be limited to a select number of carefully selected employees and managed with a soft touch to avoid the perception of forced or coerced retirement. Other options include: hiring freezes, part-time hires rather than full-time, reduction in pay or hours, job sharing, or handing out profit sharing incentives rather than traditional raises. Training programs can be utilized to encourage more efficiency from existing workers or to replace departing/retiring employees. There are more options than those implemented in the Nokia case.

And life goes on…

If layoffs are inevitable, it is wise to strategize a measured and thoughtful outplacement procedure. Outplacement is the process that seeks to minimize the turmoil felt by departing employees. These programs may be handled in-house by HR or by a third party consulting firm and serve to avoid negative press, avoid union issues, and allow employees to leave with a sense of security and dignity. These outplacement services often manifest as counseling services or employment search assistance or a measure of the two. By allowing employees the tools to make it through a difficult time an organization can avoid the ill will and possible toxic PR situation that can arise from layoffs, all while doing the right thing by those that have served them loyally. A company need not always pit what’s right against what’s best.

Nokia suffered greatly during the the mid to late aughts. Although many of their employees were well compensated after their respective departures, a more conscientious approach may have allowed the once mighty colossus to show the public a more strategic, graceful shift in strategy, while doing right by those that helped them ascend to their once vaunted position.     

Sources:

Cold Fusion (2017). Nokia | The Rise And Fall [Parts 1, 2, 3]. [online] Available at: https://www.youtube.com/watch?v=yyRb_4-cquc [Accessed 20 Apr. 2017].

Communicating Labour Rights. (2008). Nokia closes plant in Germany and relocates in Romania. [online] Available at: https://communicatinglabourrights.wordpress.com/2008/01/17/nokia-closes-plant-in-germany-and-relocates-in-romania/ [Accessed 20 Apr. 2017].

Gomez-Mejia, L., Balkin, D. and Cardy, R. (2016). Managing Human Resources. 8th ed. Essex: Pearson Education Limited, pp.209-230.

Yle (2011). Nokia cuts 3500 jobs "to ensure profitability". [online] Yle Uutiset. Available at: http://yle.fi/uutiset/osasto/news/nokia_cuts_3500_jobs_to_ensure_profitability/5431070 [Accessed 20 Apr. 2017].

Yle (2012). Hundreds of Nokia's outsourced Symbian developers leaving Accenture. [online] Yle Uutiset. Available at: http://yle.fi/uutiset/osasto/news/hundreds_of_nokias_outsourced_symbian_developers_leaving_accenture/5252177 [Accessed 20 Apr. 2017].

CASE 7

In this week's blog post will be looking at employee engagement. Defining employee engagement can be difficult due to the needs of the individual and the multifaceted nature of the concept itself.  Issues related to engagement can include, but are not limited to: motivation, success, loyalty, recognition, flexibility, culture, individuality, professional growth and so on. Employee engagement may be the decisive factor in employee retention, differentiation, and company wide success. Therefore, managing and fostering engagement is one of the most important tasks in a manager’s or HR professional’s career.

Employee data consultants, the Hay Group, have identified six mega-trends influencing the future of employee engagement. Found here, the white paper defines these trends as: globalization 2.0, environment crisis, demographic change, individualism, digitization, and technological convergence. We will not explore every trend listed, as I believe many are interdependent, but instead we’ll try to explore a few of the issues involved.

The economic centers of the world are shifting. No longer can a company rely solely on the needs and wants of a purely western workforce, nor can they graft the same engagement template onto different cultures or regions. Customs and socio-economic factors shape all of our desires. We strive to achieve the goals that our culture deems worthy, or buck the trend and derive satisfaction from defying our culture’s goals. Every generation has a little bit of iconoclast in them, so understanding the generational composition of your workforce along with their culture is critical as well. This rise of a global society also makes for a more diverse and vibrant workforce that may not all share the same sensibilities. Therefore a multifaceted approach is necessary in the development of an effective employee engagement plan. The core of any successful engagement plan is the employee survey. By surveying your employees, not only do you gain insight on your employee’s needs, but give the employee a sense of agency and the feeling of being heard; a powerful tool indeed.

We touched earlier on the concept of age in the previous paragraph, but let’s talk a little about how the demographics of the workforce is changing. With the baby boomer reaching retirement age, a younger workforce is taking over the reigns of the workforce. During this transition we are looking at the most age-diverse workforce that the world has ever seen. To make matters worse, after the global financial crisis, many retirement age workers have found it impossible to retire. These coming years are uncharted waters and must be navigated carefully. The methods of engaging a 66 year old who saw his 401K disintegrate and is now just burning the clock are vastly different than a 25 year old, eager to begin his new career and professional development. A younger workforce may be frustrated by the lack of modern technology in the workplace, while the older generation may feel threatened or frustrated by the encroachment new unfamiliar tech. These two issues need not be tackled individually, by allowing the younger employees assist the older workers in adapting to the new environment, while fostering a relationship that allows the older workers to help mentor the the newer employees. By understanding the the needs of your individual employees, you may find that one group's issues may be solved by another’s, and vice versa.

Engagement may not only be affected by the organization interacting with the employee alone, but may also be affected by the organization’s interactions with the society at large. Along with the rise of social media and a more connected world employees have more and more opportunities to see of a company’s successes and also its misdeeds. An organization must be honest and enthusiastic in its sustainability efforts. They will find out, and an organization will be taken to task, not just by the general public but by its own employees. If a company is enthusiastic about its environmental initiatives not only will you have more satisfied employees, but they will be your greatest evangelists. Social media can be fraught with peril for any company that doesn’t manage their image well or pushes employee engagement were the will doesn’t exist. At the same time it can be a powerful tool to collect and gage solicited employee feedback and foster stronger positive relationships with one another. Internal social media sites, intranets or message boards can be a source of collaboration and can encourage engagement, when not presented as just another task or a chore with no reward.

Employee engagement impacts all elements of an organization’s performance and should be at the forefront of an business’s HR strategy. By tailoring you strategy to your business’s culture and specifically to the individual, you can create a workplace that encourages hard work and loyalty rather than a workforce that works for a check and 5 o’clock.


To find out how different people find engagement in their work, check out the Best Part of My Job podcast below.

CASE 6

Health and Wellness

This week we will be looking at a case involving health and safety in the workplace. First up is a young man in London suffering a fatal seizure after working three days straight until 6 a.m. as an intern at Merrill Lynch in order to secure employment at the banking giant. In 2013, 21 year old Mortiz Erhart, a German national interning at Bank of America Merrill Lynch was found dead from complications stemming from an epileptic seizure in the shower at the student facility he was staying at. Mr. Erhart had been reportedly working long hours and maintaining an inhuman sleep schedule in the hopes of outshining his fellow interns and claiming a coveted spot at the mega bank. Mr. Erhart had suffered from 1-2 seizures a year since 2010, a fact that he did not disclose to his co-worker, nor on the medical paperwork he filled out before starting with the firm. Although from all accounts he had been happy, healthy, and managing his condition with medication, his parent contest that the probable source of his fatal seizure was exhaustion brought on by overwork.

Although, Merrill Lynch was not found at fault for the young man’s death, his passing did spark criticism about the banking industry’s culture of competition and the firm’s management of its employee’s workload. Could a health and wellness program have possibly avoided this tragic outcome? Can a culture of safety avoid people from overworking themselves?

OSHA, while not the governing body in this case, give some advise on these matters, stating: “Managers and supervisors should learn to recognize signs and symptoms of the potential health effects associated with extended and unusual work shifts. Workers who are being asked to work extended or irregular shifts should be diligently monitored for the signs and symptoms of fatigue. Any employee showing such signs should be evaluated and possibly directed to leave the active area and seek rest.” The aforementioned monitoring suggested above was not in place to for Mr. Erhart, nor for anyone else at the Merrill as they have no “punch clock” or any other system designed to monitor their employees’ working hours.

Joshi Herrmann at The Independent ran a story in August of 2014 titled “A year on from intern Moritz Erhardt's death, has banking industry changed its ways?” exploring the changes that Merrill has implemented to avoid another tragedy. The banking juggernaut now hires 40% more interns as a measure to promote work/life balance among its young up-and-comers. Other initiatives designed to dissuade interns from burning the candle at both ends include a no working on the weekends policy, accrual of 4 vacation days during the internship period, and managers designated to monitor intern workload. A number of other measures have been adopted throughout the industry in response to Mr. Erhart’s death, such as gym memberships and wellness programs. These measures may be unrealistic in the high stakes world of investment banking. One anonymous source interviewed in the article says that when he asked for the membership form for the gym, he was told by a his manager that he should go for a run before early in the morning before he is needed and more or less forget about the gym.

While the investment banking industry may not be the poster-child for successful health and wellness programs, there have success stories. American medical and beauty supply heavy Johnson & Johnson claim that their wellness program have saved them a whopping quarter billion dollars in medical payouts over the last decade. Big-box hardware store Lowes has seen a sharp decline in employee smoking rates by offering up to $100 a month toward employee insurance premiums. For other successful wellness programs—as well as some additional info on Johnson & Johnson—check out the video from the Institute for Health and Productivity Studies below.

Promotion of health and wellness may be beneficial for many companies, safety is a chief concern for all organizations. In 2014, there were upwards of 3,700 workplace deaths in the EU alone. Another 4,500 occupational fatalities occur in the United States every year. In 2013, workers compensation payouts totaled $63.6 billion in the US. While compliance with regulation is paramount, prevention and training is the best way for businesses to curtail rising worker’s comp insurance premiums and maintain a productive workforce. OSHA, a US regulatory body underneath the Deptartment of Labor governing worker safety requires companies to log every instance of workplace accident. This practice may now be in danger. Check out the embedded NPR broadcast below to learn more.


As stated in the absolutely brutal PSA’s embedded below, “There are no accidents”.

Sources:

Ec.europa.eu. (2017). Accidents at work statistics - Statistics Explained. [online] Available at: http://ec.europa.eu/eurostat/statistics-explained/index.php/Accidents_at_work_statistics [Accessed 30 Mar. 2017].

Greenfieldboyce, N (2017). Congress May Undo Rule That Pushes Firms To Keep Good Safety Records. [online] Available at: http://www.npr.org/sections/health-shots/2017/03/20/520589621/congress-may-undo-rule-that-pushes-firms-to-keep-good-safety-records [Accessed 30 Mar. 2017].

Herrmann, J. (2014). A year on from intern Moritz Erhardt's death, has banking industry. [online] The Independent. Available at: http://www.independent.co.uk/news/business/analysis-and-features/a-year-on-from-intern-moritz-erhardts-death-has-banking-industry-changed-its-ways-9652559.html [Accessed 30 Mar. 2017].

Institute for Health and Productivity Studies. (2017). Extraordinary Workplace Wellness Programs. [online] Available at: https://www.youtube.com/watch?v=s-QbV_OstxQ [Accessed 30 Mar. 2017].

Kennedy, M. (2013). Bank intern Moritz Erhardt died from epileptic seizure, inquest told. [online] the Guardian. Available at: https://www.theguardian.com/business/2013/nov/22/moritz-erhardt-merrill-lynch-intern-dead-inquest [Accessed 30 Mar. 2017].

Lebowitz Rossi, H, (2017). 5 hallmarks of great corporate wellness programs. [online] Available at: http://fortune.com/2015/04/13/corporate-wellness/ [Accessed 30 Mar. 2017].

Morgaine, B. (2015). Do Corporate Wellness Programs Really Work? | LivePlan Blog. [online] LivePlan Blog. Available at: https://www.liveplan.com/blog/2015/10/does-corporate-wellness-work-the-surprising-truth-about-employee-wellness-programs/ [Accessed 30 Mar. 2017].

Moshinsky, B (2013). Bank of America Intern’s 5 A.M. E-Mail Before Death Worried Mom. [online] Available at: https://www.bloomberg.com/news/articles/2013-11-22/bank-of-america-staff-quizzed-as-coroner-probes-intern-s-death [Accessed 30 Mar. 2017].

Mylowesbenefits.com. (2017). Tobacco-Free Discount Increased in 2016 | Lowes Benefits. [online] Available at: http://mylowesbenefits.com/drawer/tobacco-free-discount-increased-in-2016/ [Accessed 30 Mar. 2017].

Osha.gov. (2017). Extended Unusual Work Shifts. [online] Available at: https://www.osha.gov/OshDoc/data_Hurricane_Facts/faq_longhours.html [Accessed 30 Mar. 2017].

Osha.gov. (2017). Worker Fatalities Reported to Federal and State OSHA | Occupational Safety and Health Administration. [online] Available at: https://www.osha.gov/dep/fatcat/dep_fatcat.html [Accessed 30 Mar. 2017].

Social Security Administration  Research, Statistics, & Policy Analysis  (2015). Annual Statistical Supplement, 2015 - Workers' Compensation Program Description and Legislative History. [online] Ssa.gov. Available at: https://www.ssa.gov/policy/docs/statcomps/supplement/2015/workerscomp.html [Accessed 30 Mar. 2017].

Thomas, E. (2013). 'Exhausted' Merrill Lynch intern died from epileptic fit in shower. [online] Available at: http://www.dailymail.co.uk/news/article-2511911/Moritz-Erhardt-exhausted-Merrill-Lynch-intern-died-epileptic-fit.html#ixzz4RTj2xoP1 [Accessed 30 Mar. 2017].

YouTube. (2017). Workplace Accidents - Prevent-it. [online] Available at: https://www.youtube.com/watch?v=3jLGkmOVtnI [Accessed 30 Mar. 2017].

CASE 5

To the victor go the spoils?

This week we’ll be looking at a TED talk where author, Al Gore speechwriter, and business guru Dan Pink rolls out an opposing viewpoint to the traditional method of incentivizing modern employees with monetary benefits. But first let’s take a look at some of the current strategies in place to build a compensation and reward structure within an organization.

Weighing internal equity vs. external equity

When deciding on the pay scale of an individual position, an organization must decide how much weight should be given to the needs for the position within the company compared to their core activities versus what the market rate for the job presently is. When researching the market for an appropriate pay scale, one can find a huge range being offered to a given position—largely due to the aforementioned “internal equity” determined by various companies in the market.

Fixed vs. variable pay

Means what it says on the tin. Deciding on whether or not an employee should be paid a fixed, expected salary or if the salary should fluctuate depending on the employee’s or the overall business’s performance.

Performance or membership

Similar to the fixed versus variable debate, but tying compensation to an individual’s performance, the team’s, or the organization’s overall performance.

Job vs. Individual

Will an organization pay a different rate for a superstar employee compared to a mediocre performer in the same position or decide to pay all employees within the same pay scale for the position?

Below-market vs. above-market

This one is also pretty self explanatory. This decision revolves around the question of value of the position within the company. The decision to pay below-market rate may not only come from lack of value placed in a particular position but could also stem from a sense of prestige or positive resumé fodder for young promising talent. This may come at the cost of them “graduating” from the position to seek greener, more lucrative pastures.

Monetary vs non-monetary rewards

This will be the crux of the case we will be discussing shortly. Monetary rewards are exactly what they sound like, but may not be the best motivator. Non-monetary rewards can be paid time off, in-house child care, employee recognition awards, free lunches, free time to develop passion projects (like Google’s since abandoned "20% Time") or a endless number of other benefits.

Open vs. secret pay

Some organizations will dissuade employees from divulging their salaries to other workers to avoid conflict. While on the other side of the spectrum, some organizations publish their payroll within the company or even to the general public .

Centralization vs. decentralization

The question of whether or not to have all salary decisions made from a centralized segment of the organization or made individually by managers and departments.

Like all things in business, there is no silver bullet solution. Most of the above mentioned compensation methods exist as a spectrum rather than in a binary state. The best fit for an individual organization depends on the goals and culture of the business and its industry.

Compensation tools

Job based compensation plans

This is the predominant method of compensating workers in the United States. Striving to create a balance between internal, external, and individual equity. This method creates a hierarchical structure of jobs within in the organization, compares them with their market value, and assesses the individual based on experience, seniority or performance.  This method has it’s drawbacks as it forces an organization to strictly and subjectively categorize its different positions and doesn’t always take into account the difficulty of the tasks required and the rapid changes that may be taking place within the positions. This method may also plays directly against organizational efforts to avoid disenfranchising women and minorities and may institutionalize wage gaps.

Skill based compensation plans

This method starts all employees at a similar rate and rewards its employees based on development and/or performance. This method can bolster cross training initiatives and can give you a more manageable, well rounded staff. This method may come with a high price tag. If employees take advantage of all the training and development programs available, payroll costs can increase without the needed increases in revenue to support it. Thus, this method requires thoughtful implementation and careful oversight.

Paying for performance

When incentivizing employees most organizations directly link performance with pay increases; this ideology, when viewed too myopically, may have some significant disadvantages.

Author Dan Pink, believes that just strictly offering a monetary reward for performance may actually stifle creativity and lateral thinking in modern day workers. His claims—backed by a study (which has its detractors) from the London School of Economics—state that when offered a large incentive to solve a problem, all but the most mechanical parts of our brain effectively stop functioning. His theory posits that what really drives critical thinking and creativity is a three pronged approach consisting of: autonomy, mastery, and purpose. Rather than holding a sword of Damocles over an employee’s head or offering a payout large enough to cloud judgment, one should be challenged to master a skill that they deem important, to work toward something greater than themselves, and to have enough autonomy to create and work without inhibiting factors.

This philosophy is not inherently anti collaborative. Nor is it in opposition to common goals between employer and employee. While basing incentives on pure performance may work in very specific fields or business models, they can be disastrous in others. This focus on performance may lead team members to hold back valuable information from one another or attempt to sabotage each other to achieve greater personal success. It can also present opportunities for reckless and dangerous behavior, as seen in Lehman Brothers executives making incredibly risky financial bets in the name of personal bonuses, thus leading to the tanking of the US housing market and the global financial crisis of 2008.     

Performance based incentives may not be based on an individual's performance alone. Although performance and skills should be taken into account to avoid disenfranchisement, employees can be incentivized on a macro scale as well. Other approaches can include equally distributed profit sharing programs, team/organization-wide bonuses, or any other large scale incentives.

Balancing rewards it a challenging for any organization, regardless of size or practice. When building an appropriate compensation system one must carefully weigh the company’s needs and goals against those of their employees and strive to create value for all involved. There are no easy solutions.   



Sources:

Gomez-Mejia, L., Balkin, D. and Cardy, R. (2016). Managing Human Resources. 8th ed. Essex: Pearson Education Limited, pp.315-387.

Pink, D. (2017). The puzzle of motivation. [online] Ted.com. Available at: https://www.ted.com/talks/dan_pink_on_motivation?language=en [Accessed 16 Mar. 2017].

CASE 4

Learning and Development

In this week's post we will be looking at learning and development through the lens of two separate cases. Unlike previous posts, these cases are not problems that require solutions but cases which illustrate exemplary training programs and their benefits.

First, will be looking at restaurant chain, Nando’s, and its holistic approach to training and team building. By training all levels of employees, Nando’s have grown to over 1,000 locations in 30 countries, while maintaining high standards of customer service and more than quadrupling their sales. Nado’s selects two employees from each location to their buddy program, where they are taught to design compelling and targeted training exercises for their staff. All levels of management get whisked away from their comfort zones and live communally (bunk beds and all) and participate in team building exercises. By maintaining a culture of training, Nando’s has ensured that it can withstand any growing pains while maintaining a ‘family feel”.

In our second case, McDonald’s is using a strategy of gamification and emergent technology to better train its managers and staff to deliver a better product and create and capture value. In 2012, McDonald’s began using a game featured on the company’s intranet, designed to simulate serving an increasing number of customers on the fast-food chain’s new registers. The training simulation masquerading as a game quickly became a smashing success, with upwards of 50,000 users in the weeks after launch. Thus, saving McDonald’s an estimated $1.5-2.5 million in training. This was no mere flirtation with gaming, as now McDonald’s is implementing a virtual reality program to train managers tasked with implementing its new made-to-order preparation in its UK stores. The program, developed with tech-trainer Kallidus, tasks managers to run a shift in the new concept stores with their “JiT” model, allowing them to make learn and mistakes without the risk of losing revenue or jeopardizing customer relationships.

The proliferation of VR technologies mean that simulation training isn’t just for dangerous or expensive work anymore. Primarily used by militaries, surgeons, police forces, and the air travel industry, VR simulation training has been shown to greatly reduce the stress of an unknown environment by giving the trainee a taste of what's to come and developing a skillset to deal the challenges of the new setting or system. Although VR and gamification may be the new hotness when it comes to employee training and development, let us not forget the other flavors that can be used to teach and motivate staff.

On the Job - includes apprenticeships, internships, and job rotation. A classic and most used method for training. While allowing an employee to experience the real thing, it also opens you up for productivity loss and presenting a less polished, less professional image to your customers.

Presentation Methods - While most people are trained predominantly on the job, many companies utilize a number of other methods for training. These methods may be supplementary to OJT, be required before work begins, be presented throughout an employee’s career, or all of the above. They can include, presentation of audio/video, slides, webinars, workshops, role-play, collaborative exercises, courses from external educational institutions, simulations, board games, mentorships, and the list goes on and on.

Although the training methods can vary widely, the goals can usually be boiled down to a few distinct types: skills training, retraining, cross-functional, team, creativity, diversity and ethics.  

The methodology of an organization’s training program—like most things in business—relies heavily on the particular business’s needs and goals. While formulating the program, one must consider not only the organization’s needs but that of the employee as well. Once the individual needs are assessed and the type, location, and presentation are decided, it is time to implement. During implementation, feedback is key. Employees should be asked for feedback on their engagement and learning, while quantifiable metrics should be put in place after to measure the program’s success. Once metrics and feedback are collected, they can be used to calculate ROI and strengthen or augment the training program.

The Training Process as defined by Gomez-Meija, et al (2016).

Development vs training

While training is designed to correct a behavior or acclimate an employee to a new task or environment, development exists as an attempt to futureproof the employee to the benefit of both the organization and the individual. Employees may seek greener pastures if they are not challenged and offered opportunities to grow within the organization. Many companies offer tuition reimburstments or lay out defined career paths to enable growth beyond mere productivity increases. In the current workforce it is no longer the norm to spend one’s entire career at one company. Therefore, companies must offer an incentive to encourage a valued employee to stay beyond regular incremental pay increases. This can improve employee retention, increase your pool of internal hire candidates, and decrease spending on the costly new hire process.

Sources:

Gomez-Mejia, L., Balkin, D. and Cardy, R. (2016). Managing Human Resources. 8th ed. Essex: Pearson Education Limited, pp.263-313.

Howlett, D., Bruce, S., Bruce, S. and boulton, c. (2016). Super-sized gamification for training - McDonald's is lovin' it. [online] diginomica. Available at: http://diginomica.com/2016/06/08/super-sized-gamification-for-training-mcdonalds-is-lovin-it/ [Accessed 9 Mar. 2017].

Pollitt, D, (2006)  "Nando's tastes success through training: Expanding restaurant firm retains a family feel", Human Resource Management International Digest, Vol. 14 Iss: 2, pp.19 - 21