If I Were Starting A Union, Here's What I'd Do...

I'm spent a lot of time over the last week thinking about the challenges of the budgeted merit increases - you know the drill - 4% across the board, and you need to get "pay for performance" out of that.  Which got me thinking about this ...

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If I Were Starting A Union, Here's What I'd Do...I'd rip a page from the player's unions in the major sports leagues and focus my bargaining on the establishment of a salary cap.

Once the cap was established as a percentage of company revenue, the deal would be pretty simple from an economic perspective - members of the union would get more cash as revenue grew, and they'd be at risk if revenue didn't grow or decreased (I'd have to figure out how new headcount impacts that - there would have to be some way to protect a certain % of growth for the incumbents).

Of course, membership drives for my union would be challenged - mainly because the majority of workers in America have no interest in that kind of risk, or at least see little value in the upside. They'd rather take their 3% annually.

Which means I'd have to attempt to unionize high performers and Linchpins only.  Of course, that's problematic since this group really doesn't need representation and can increase their compensation on their own, both within the same company and via the free market.

Crap.  Back to the drawing board...


ECONOMIC MOBLITY CHART: The Older I Get, The Less I Judge People...

As tax time approaches, I find myself searching for a little balance.  Why do I have to pay so much in taxes?  I'm sure a lot of Americans feel like that up and down the tax bracket.  

The alternative, of course, is to not earn enough to pay high taxes. We all know that the global economy, the advent of technology eliminating jobs and more has conspired to make the gap separating the haves vs have nots larger.

A secondary question to that reality is economic mobility.  Can people born into poverty actually bootstrap their way to the American Dream?  The answer is yes, but it doesn't happen as much as we'd like it to.  Check out this great chart (enable images or click through if reading via email) based on a study from the Federal Reserve Bank of St. Louis:

Economic mobility

 Here's a run down from Business Insider:

"The notion of an American Dream can be boiled down to a simple concept: a meritocracy in which place of origin and social status do not preclude success for hard workers.

Talk of that dream fading has been present since the Great Recession sucked 9 million jobs out of the economy and knocked down already-depressed wages for millions.

Now, a study published by the Federal Reserve Bank of St. Louis has found a way to measure that decay. It does so by coming up with a simple, mathematical definition of the American Dream as represented by social mobility defined as "the probability that a child born to parents in the bottom fifth of the income distribution makes the leap all the way to the top fifth of the income distribution."

In the US, children born to parents in the bottom fifth of the income distribution have a 7.5% chance of reaching the top fifth, according to Stanford's Raj Chetty, the paper's author.

Hmm. It's one thing to say that 7.5% chance of starting from the bottom and arriving at the top is low.  But when you think about it, that's almost 10% - probably the hardest working, smartest and most gifted 7.5% for sure.  That kind of follows the bell curve and seems reasonable.

But - and there is a but - the older I get, the less I judge people for being different than me related to language, behavior, values and more.  That's especially true for children and young adults.  The stats related to presence of 2-parent families, education and more are scary when you look at the bottom fifth of this same distribution.  If you didn't have the same level of access to resources, education and yes - parents being unyielding in what they value, provide and expect - you can't be expected to have the tools to bootstrap yourself to the top fifth.

That means that kids with the raw gifts to make the leap get left behind through no fault of their own.  That sucks.

A more important measurement might be the probability the same citizens in the bottom firth can bootstrap themselves to the median of income distribution.  That's another version of the American Dream that might look pretty good to someone starting in the bottom fifth of income slotting.

I can't solve any of the red in the chart above.  But I've long since stopped judging most of the people who start in the lower fifth.  The next step for people like you and me is to try and impact a couple of kids who start there and make sure they have what they need to arrive at the top fifth - or even the middle fifth - based on their own merits rather than where they started.


Amazon's Getting Ready to Crush Another Industry Near You (aka Call Center Services Killer)

When you think about how the business world is changing and how those changes affect the workforce and talent issues, a good place to look first is Amazon.

First, the great marketplace in the sky made shopping online easy.  Then, it made shopping online preferable for many to shopping locally in a store through it's bundle of value called Amazon Prime. Amazon_one1

In the background, it's a been a hub of innovation through it's rollout of corporate services (look up Amazon Web Services to see how it's crushing cloud competitors) and consumer products alike (Kindle, Alexa).  It's so into investing for the future and innovation that it basically keeps it's profitability at zero by reinvesting all earnings into forward-looking ventures (click that link to see the chart).

Sometimes we forget that the advances cause big shifts in the workforce.  The giant sucking sound you hear is the slow implosion of the retail sector, with a lot of jobs going with it.

Next up after retail?  How about Amazon rolling up the call center industry?  More from GeekWire:

"Amazon Web Services is developing a suite of cloud-based tools to sell to enterprises that would help them manage their call centers, based on technology the online commerce giant developed for its own retail call centers, according to a report from The Information. 

According to the report, citing a person briefed on the plans, the programs will incorporate Amazon’s digital assistant Alexa to answer some questions on the phone as well as via text message. The report claims the service will also employ Lex, a chatbot building service that uses the same deep-learning technology as Alexa, and text-to-speech program Polly. All these aspects together paint the picture of a suite of tools that allows customers to build their own customer service programs using bots and voice control with the ability to learn and adapt to specific industries.

The Information reports that the new products could be announced as soon as mid-March and could jolt the call center software industry. It’s a market that features many players such as Seattle-based Spoken, as well as other companies like Cisco Systems, Avaya and Genesys.

Amazon Web Services has been in the news a lot lately for new products that it has announced and others it is considering. Amazon’s cloud service arm is reportedly considering bundling its email, file storage, and video conferencing apps into a productivity suite that would compete with Google G Suite and Microsoft Office 365."

If there's any good news in this for current call center outsourcers, it's that Amazon seems intent on owning the technology part of the call center business model rather than owning actual call centers.  Of course, at one time it didn't have any interest in the shipping business either, and it's now getting ready to ramp up it's own fleet of planes and hub.  

Thanks for the memories, Fed Ex and UPS.  I'm sure Amazon will name a conference room after you to commemorate what you meant to each other at one time.

The good news for HR?  Amazon doesn't seem to have any interest in rolling up the HR industry.

#yet

 


Jobs in the USA - Coal Miner/Trump Edition...

One of the things that's fascinating about the Trump presidency is some of the promises - direct and implied - he's made that the jobs environment is going to improve for the blue collar American worker.  The Trump jobs platform is a cocktail of trade policy, economic policy, protectionism and more.  

To be fair, there's no such thing as an easy solution to any of this, but one of the dirty little secrets is that a lot of the jobs are never - and I mean never - coming back.  Whether it's automation, robots, Solar_worker global trade or societal changes, a lot of jobs are gone for good.

Which means the unspoken truth for a lot of blue collar workers is that their prospects won't improve with retraining and possible relocation.  Consider this coal/solar/wind energy jobs rundown from Fortune:

"According to a recent report from the Energy Department, the coal electric generation sector employed just 86,035 people—57,325 of them miners—in 2016. That’s far fewer than the number who now work in solar: 370,000, up 25% from 2015. The wind-energy workforce, meanwhile, ballooned 32%, to 101,738, and the Bureau of Labor Statistics pronounced “wind turbine service technician” the nation’s fastest-growing occupation, projecting 108% growth between 2014 and 2024.

Compare that with the fate of coal miners, whose number dwindled by 24% last year. There are lots of reasons for that—the shale gas boom, declining demand, Obama-era regulations, and automation. Even for those in the industry, it’s hard to imagine all those coal jobs coming back. Luke Popovich of the National Mining Association has upgraded the industry outlook from “not great” to “improving,” in light of Trump’s early days in the White House."

My dad was a telephone line guy for years, and looking back, I'm proud of the adjustments he made when the business he was in become less POTS and more data and video.  He embraced that OK, but didn't have to change companies to get retrained - and certainly didn't have to relocate for the job.

West Virginia coal miners can't get a job in solar or wind without retraining, looking for a different company to work for, and yes, moving somewhere else.  And they're really going to hate the arid climates over Morgantown.

Many of the jobs aren't coming back.  Retraining is key, but as the economy shifts, relocation is another dirty little detail.  

God help us all when semi-trailers become automated and take out millions of jobs that blue collar Americans migrated to over the last 30 years.


The Real Workplace/Economic Issue at the Core of the Trump Presidency...

Lots of polarizing stuff going on across both sides of the political aisle right now.  As always, I'm drawn to views that ponder the center - and to the ones that are all about the workforce we have in the United States.

With that in mind, I offer up the following from Joe Klein of Time (who conservatives view as a dangerous liberal and liberals don't seem to fully own - which makes him someone I'd like to listen more to).  In the February 6, 2017 issue, Klein painted Trump economic policy as a test to long held free market ideas in the following way:

"In addition to a loaded slogan--"America First"--and a questionable demeanor, it is now apparent that President Donald J. Trump actually has a governing ideology. His Inaugural Address, the strongest and most coherent speech he's ever delivered, was a clear statement of that Wal mart
philosophy. It may change the shape of domestic politics. It may overturn the international order that has existed for 70 years. It certainly deserves more than the "divisive" dismissal it received from liberals--and more than the puerile crowd-size diversion that its perpetrator stumbled into during the days after he delivered it.

The traditional argument against free trade is myopic and simple: American jobs are going to Mexico and China. The traditional counterargument is more abstract: the price of children's clothing at Walmart is much lower now that shirts are made in south China instead of South Carolina. Free trade, it is convincingly argued, has been a financial net plus for the U.S. But there has been a spiritual cost in a demoralized middle class, which leads to an existential question: Is the self-esteem inherent in manufacturing jobs long considered obsolete--think of those grand old steel mills--more important than the lower prices that the global market provides? Have we tilted too far toward market efficiency and too far away from social cohesion? Is there a middle ground? Trump's insistence on changing the equation brings a long-neglected issue to the center of our political debate. He may be wrong, but the alienation that seems like a by-product of globalization needs to be addressed. A happier people may be worth the cost of higher prices."

When you really start to think about it, having goods made in America - and they higher costs that would be passed along to consumers - is really just another tax.  With that in mind, I've written before that I'd love to see America's willingness to pay more for good made here tested in the marketplace.  Of course, I wrote that at a time before we had a president that seemed hell-bent of penalizing and tariffing goods made elsewhere.

As Stein asks, is the self-esteem inherent in manufacturing jobs long considered obsolete--think of those grand old steel mills--more important than the lower prices that the global market provides?  To me, that's a crazy interesting question that I don't know the answer to.  To hear a liberal ask it and note that the time has probably come to at least test whether the ultra free-trade is the best path probably gives a lot of conservatives pause.

Hmm.

And yes, Alice, I'm aware that robots are replacing people in factories all around the world. But accounting, engineering and countless other professions are increasingly being shipped to talent bases willing to work at fraction of the cost.

I have to agree with the liberal Klein.  We really don't know the answer related to free-trade vs higher cost American goods, and it sure seems like Trump is hell bent on providing the environment to test those ideas for the first time in 70 years. 

As Klein states at the end of his column: "These are crucial questions, without clear answers. It is good that Trump has raised them. It is unfortunate, however, that he is such a defective messenger."

Truer words were never spoken.


KNOW YOUR HR STUFF: The Difference Between U3/U5/U6 Unemployment Rates

The economy is hot and the 2008/2009 recession feels distant, right?

That means now is a pretty good time to review the types of unemployment rates that are available out there for consumption. As it turns out, the one we usually hear about is an incomplete picture.  Here's a primer on unemployment rates that are available from the government and a chart that shows where we've been since 1995:

U3 is the official unemployment rate.

U5 adds on discouraged workers and all other marginally attached workers. These people are still unemployed, but not in the market for a variety of reasons.

U6 adds on those workers who are part-time purely for economic reasons.  

The U6 unemployment rate counts not only people without work seeking full-time employment (the more familiar U-3 rate), but also counts "marginally attached workers and those working part-time for economic reasons." Note that some of these part-time workers counted as employed by U-3 could be working as little as an hour a week, but they prefer full-time employment but haven't landed it yet. And the "marginally attached workers" include those who have gotten discouraged and stopped looking, but still want to work. The age considered for this calculation is 16 years and over

The current U6 unemployment rate as of December 2016 is 9.20, almost double from what's normally reported as the official U3 rate.  See historical chart below:

Unemployment rates

If you consider U6 "real" unemployment, it reached almost 18% post recession in 2009-10.  Damn.

I'd expect the gap between what's reported (U3) and the U6 rate to grow in the future, as the gig economy forces people to become part-time in an increasing variety of ways.

 


TODAY'S JOB MARKET: Peak Economic Cycle Edition

If the chart below were an investment chart, you'd be looking to start scaling back tech stocks in your portfolio right now.

Take a look and let's talk about this visual after the jump (email subscribers click through for image):

PeakEconomicCycle

What this chart tells us is that over 50% of businesses are reporting they have few or no qualified applicants for job openings today.  Look at the chart closely, and you'll also see that percentage is higher than at any point between the 01 and 08 recessions (gulp). You'll also see that the latest spike has us reaching recruiting difficulty at its highest level in 20+ years.

That seems like a picture that tells us we are at what I like to call "peak economic cycle" right now.  Here's what that means for your recruiting/people/talent function:

--It's going to be harder to find people. You'll need to spend more on recruiting than you traditionally have to acquire talent in 2017.

--At times, you're going to have to buy candidates with expensive offers to get the talent you need in key positions.

--If you have compensation issues, now's the time to be aggressive to do equity increases in key roles that are under-comped vs the market.  Make those adjustments and you can buy yourself another year.  Refuse to do it in key roles, and there's a great chance you'll lose experience AND pay more for the talent you ultimately recruit to replace the great people who leave.

Peak economic cycle = Turd Sandwich for the companies who don't like to spend much on recruiting and have a "trail" strategy related to compensation in key roles.

That's right - "turd sandwich".  You won't see that in the reports from economists, but that's what it is for a lot of you.

Take this chart to your CEO/Ops lead and get some more money.  You're going to need a bigger boat until this thing cools off.

 


Uber: The Right HR Leader Depends On Your Company's Maturity...

This post previously appeared at my other site - Fistful of Talent.  I thought it was important enough to share here as well.

If there's one thing that's true in HR, it's that today's HR leader right for a company may not be right for the same company 3 years from now.  Things change. New leaders come in, new strategies are developed and deployed. And if you're really lucky, your company experiences exponential growth that causes you to need a different type of HR leader. Uber fits that example, and they just had a trade out - an early CHRO has left, and a new one - dramatically different - has entered.  Here's the rundown of the changeout I ran across on the web:

Uber is bringing in Liane Hornsey, a longtime VP at Google and current operating partner at SoftBank, to be its new Chief HR Officer.

The move gives Uber a seasoned executive with public company experience to help manage the $66 billion ride-hailing service's rapidly swelling ranks and to guide it through the various challenges facing startups as they evolve into giant businesses.

Travis Kalanick announced the hiring in an email to Uber employees on Friday, calling her "one of the most sought-after 'people people' in the world," according to a source inside the ride-hailing company.

Uber confirmed Hornsey's hire to Business Insider, but declined further comment. SoftBank and Hornsey didn't immediately respond to a request for comment.

The opening at Uber, one of the fastest-growing companies in tech, became available in July when its former head of HR Renee Atwood left to join Twitter. Atwood had been at the company from when it was 605 employees to more than 5,000. 

Hornsey's LinkedIn shows she had spent nine years at Google as its Vice President of Global People Operations before she moved to being a VP on the sales side, reporting to Nikesh Arora. 

She followed Arora to SoftBank International in September 2015 to be its Chief Administrative Officer and operating partner, helping other startups with their HR needs. Arora left his position in June 2016, and now Hornsey's departure follows nearly six months after. Hornsey will start at Uber in January.

Couple of things come to mind here from an HR leadership perspective:

  1. If you go look at the profile of Renee Atwood (former CHRO at Uber, now at Twitter), you'll see a pretty good background.  Now go look at the background of Liane Hornsey.  They're different.  Neither one is right or wrong - they are just different. One's growth and the other one is more mature from a career perspective, focused on things that a 5,000 person company focuses on.
  2. Atwood joined Uber when it had 500 employees and left at the time it had grown to 5,000 (both FTE numbers do not count driving contractors).  Anyone in HR would tell you that those are two dramatically different companies as evidenced by the size and the fact that it's Uber only adds an exponential factor to that difference.
  3. Uber's a unicorn and increased market cap from $13B to $70B during Atwood's tenure.  Atwood chose to leave for a cool company in Twitter, albeit one that doesn't have a clear path moving forward.

I think Atwood's background is very strong.  Former client group leader at Citi and Google, got a great opportunity at Uber - I really like that progression. But Uber's issues today are dramatically different today than they were in 2014.  The fact they changed out the CHRO - a seemingly voluntary move by Atwood - is evidence pointing to the fact that the HR pro you have today may not be right for you tomorrow.

If you're a CEO out there, looking at your HR leader (and determining whether you still have a fit as you grow) should be as important as looking at your CFO fit for the stage your company is in.


The Netflix Approach to Movies: Notes for HR

Do you watch Netflix?  Have you ever been frustrated that the movie selection, for a lack of a better word to describe it - sucks?

Of course you have. If you're a business focused individual, you might think this fact is a canary in the coal mine - meaning it's a signal that Netflix won't be in a dominant position 2-5 years from now.  That would be a reasonable assumption - after all, if the product's not right, decreased viewership and profitability is sure to follow, right?

Wrong. As it turns out, Netflix has figured out that its customers don't really care much about what's available on the movie side of the business. I think there are some HR parallels you can learn from with this.  First the notes on Netflix from Business Insider, then we'll talk after the jump about the similarities with HR:

"No matter what movies Netflix has on its service, subscribers spend about a third of their time watching films on Netflix, according to the Best-movies-on-netflix
company's content boss Ted Sarandos.

On Monday at the UBS Global Media and Communications conference in New York, Sarandos was asked about the perceived sparseness of Netflix's movie offerings. "No matter what, we end up with about 1/3 of our watching being movies," he responded.

Sarandos cited two contrasting examples: the US and Canada. In Canada, Netflix has five major movie studio output deals, while in the US, it basically has none, with the exception of the just-starting Disney one. And yet in both places, Netflix sees about 1/3 of its viewing being movies.

Research earlier this year showed that Netflix's selection of IMDb's 200 highest-rated movies had gone down in the past two years by a substantial amount, as had its total catalog of movies. And given what Sarandos revealed Monday about the viewing habits of Netflix subscribers, that decision makes total sense. Why would you pay a bunch of money for blockbuster movie deals if it's not going to make people watch more Netflix?"

When I think about how my generation treats Netflix (as well as my teenage son), we're much more likely to binge watch a series that we are select a movie from the streaming service. There's just something about binge watching a series together that is good for relationships.  Also, if you're watching alone, binge watching provides a chance to become emotional connected with the characters, etc.

But just as importantly, I think there are some similarities to how movies are treated by consumers of Netflix with our HR practices.  

Employees act in a certain way within our companies.  There are several employee/candidate behaviors that aren't going to change much year to year, and with that in mind, there's no reason to spend more on these behaviors than you have to.  Examples include the following:

  1. Job Boards - You've got a spend. You get candidate flow and hires out of that spend, but at some point there's a diminishing point of return on additional investment in job boards.  You need to find the optimum spend, then never go over that - instead pushing additional spend to new sources that are rapidly gaining candidate attention.
  2. Employee Referrals - You've likely got a program, right? You may or may not monetize it, but spending more on referrals is not a guarantee that you'll get more flow.  At some point, you're paying more for the same number of hires, and you've just experienced what I'll call the "netflix movie effect".
  3. Employee Development - Complex one here. There's a lot of spend you can make to try and make your employees more than they are, but a lot of your employee base just wants to do some work, go smoke and leave at 4:58pm. You can spend to try and make them more, but they're not going to give you more performance given your additional spend on them. 

Netflix has learned that additional spend on movies doesn't equate to better results/profits.  We can learn a lot in HR from that Netflix lesson.

You've got a limited budget in HR.  Never feel guilty about not spending money (or more money) on things that don't produce results.


HEY HR FOODIES: Stop Dreaming About Opening a Restaurant - Here's Why...

A bottle of white, a bottle of red
Perhaps a bottle of rose instead
We'll get a table near the street
In our old familiar place...
 
You and I, face to face
A bottle of red, a bottle of white
It all depends upon your appetite
I'll meet you any time you want
In our Italian Restaurant...

--Billy Joel

If there's one false positive in the business world, it's that a person should start a business simply because they love something.

Why doesn't that work?  Two reasons:

  1. You love something but have horrific business instincts and management skills.
  2. You love something and have good instincts and management skills, but the economics of the business SUCK.

A lot of you who read this blog are foodies. That means you've dreamed of starting a restaurant.  You might have heard that it's hard, but you still dream. You think you're the snowflake who can make it. Bill joel

You're probably not. And if you are, recent studies show that your success or failure is probably cemented before you even open the doors. More from the New York Times:

The New York City restaurateur’s perennial lament — that staying afloat is tougher here than anywhere else in the country — grows louder each time another restaurant closes. Rents are astronomical, the complaint goes; wages are rising, regulations are byzantine, and don’t even talk about the price of fresh produce.

One thing we do know: There is a rigid formula for survival. Whether a restaurant opens in hyper-competitive Manhattan or in California’s gold-rush dining scene, it has to make the same equation work: The costs of real estate, labor and food should add up to about 75 percent of its projected sales, leaving a profit margin of roughly 10 percent once smaller expenses are figured in.

Did you catch that? Let's say you're kicking ass and grossing and average of 3K a night with your idea for a different type of bistro (I like your idea by the way). The numbers tell us that you'll only keep $300 of that a night - if you're performing at a high level.  Depressing, isn't it?

A large restaurant group or chain may be able to skate below 10 percent because its volume is so high, but a chef who opens a starter full-service restaurant can end up in trouble if profits dip below that threshold.

To further break down the formula, a healthy restaurant aims to spend about 10 percent of its sales revenue on rent, utilities and other occupancy costs; 30 to 40 percent on labor (your specialty if you're readying this blog) including payroll taxes and benefits; and 30 percent on food and beverages.

This is a HR/Talent blog, so it stands to reason we should take a look at labor costs first.  More from the NYT:

The federal Bureau of Labor Statistics reports that annual mean restaurant wages in New York City in 2015 were about $49,000 for a head chef, $28,580 for a cook and $29,290 for a server. In San Francisco’s much smaller labor force, pay was about the same for a head chef, $31,120 for a cook and $32,040 for a server. Wages were lower in Los Angeles: $40,740 for a head chef, $25,300 for a cook and $27,570 for a server.

In all three cities, restaurants pay more than the federally mandated minimum hourly wage of $7.25, and each city plans an increase to $15 over the next few years. New York businesses with more than 10 employees will reach $15 in December 2018, up from the current $9; smaller businesses, a year later. San Francisco will increase its minimum wage from the current $13 in July 2018, but Los Angeles will not reach $15 an hour until 2020 or 2021, depending on staff size.

New York State allows employers to pay a lower minimum wage for tipped front-of-house employees, while California is one of seven states that have abandoned the so-called tipped minimum wage — so a New York restaurateur pays those staff members less than a California owner does.

You might be thinking of opening your bistro in a smaller metro than the three cited - doesn't really matter, since your prices will be lower and the 10% profit target will still hold true - if you're performing at a high level.

But we can't end this missive on the danger of opening your own bistro without telling you that your success or failure is likely locked up before you even open the door.  How well you find and negotiate your rent probably matters more than anything else:

CoStar, the nation’s largest source of commercial real estate data, tracks more than 980,000 listings. Though they are not broken down by use, Joseph Sollazzo, an economist with the firm, created a rough category of “restaurant friendly” spaces for us: listings from 2,000 to 5,000 square feet, a popular range for independent full-service restaurants, that met criteria like “available for all uses” and “ventilation.”

Some San Francisco landlords offer promising but unproven tenants a bit of help known as a percentage deal. If a restaurant performs below an agreed-upon level of sales, the tenant pays only the base rent. If it takes in more than the stipulated amount, the landlord collects an additional percentage, which can double the monthly rent.

 Some New York tenants paying as much as 13 percent for occupancy costs, which he considers a danger zone. “You get past 15 percent and you get into trouble,” he said.

What's that all add up to? Your dream of opening a restaurant is undoubtedly cool.  But it's a bad deal as a business proposition. Do great things related to negotiating your lease, have a great idea and drive traffic and you could be the recipient of a 10% profit margin.

Find another idea, HR and Talent foodies...

Miss on any of those items? You could lose your retirement.

Better to play a song like Scenes from an Italian Resturuant and dream.