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July 2007

Guess the Turnover Rate for TSA Baggage Screeners!

Looking for a high number on this one?  So was I...

You were thinking 50%?  75%?  To my surprise, it wasn't that high... Airport_screeners

Stephen Barr of the Washington Post reported last week that the high attrition rate for passenger and baggage screeners at the STA (17.6 percent in 2005 and 14.6 percent last year) has caused concern in Washington.  Does that number seem high to you?  It did in Washington, where the average annual turnover rate across all Federal agencies was 4%.  That's right, 4%....

I don't know whether to cheer or cry....

First up, let's take a look at the turnover rates for passenger and baggage screeners.  Low turnover is always good, especially when you are trying to prevent another 9-11.   However, a turnover rate in the teens for a position with unskilled labor doing a repetitive task tells me a couple of things:

1.  The workers are more than likely well-comped at above market rates for their skills, so much so that the workers in the roles have no other options for work at their current comp and benefit levels; and

2.  Performance probably isn't actively measured in these roles.  If it was, the turnover would probably be to levels I would expect for this type of position - somewhere between 20-50%, depending on a variety of other factors. 

It's the perfect storm from a retention standpoint.  Artificially high wages (for the labor pool being acquired) and no performance management to speak of.

Can you imagine if Call Center people were in charge of baggage screeners?  The would have 5-7 metrics designed to evaluate the overall productivity of the screeners (bodies moved through the gate per hour, complaints per 1000 bodies screened, pat-down quality scores following a pat-down checklist).  To the Call Center professionals credit, they could implement the productivity packet at the same hourly rate and turnover would remain manageable, if unavoidably higher.

On the plus side, the TSA is better than when security was outsourced.  I'll leave the evaluation of whether 4% turnover across all Federal Agencies is a good thing or not to you...

When Should Candidates Talk Money With An Employer?

Rowan Manahan has started a new writing project called the Definitive Guide to Clearing Job-Hunt Hurdles.  Cool use of the technology.  I'm glad to be a part of it, and I'll post links to what's going on with the project moving forward...

I talk a lot about compensation from the employer's perspective.  This is, after all, a site for HR Pros. 

Of course, candidates have needs as well.   Especially HR Candidates...

There's a lot of information warning candidates about compensation related issues (and the dangers of being the first one to bring it up), how to answer questions from interviewers related to your expected salary when asked, yet you persist - you want to be proactive and ask the interviewer about compensation for the position (before they ask you)....

Is asking about compensation before an interviewer brings it up ever a good idea?  Usually not.  Most of the interviewers you run into will note this as unusual and you run the risk of being identified as driven by money.  Not a great way to start off the interview process.  Remember, when it comes to your knowledge of the target comp for a position you are pursuing, there are 3 different states you can be in as a candidate:

1.  You won't take a job below a specific minimum salary.  Period...

2.  You are unsure about what salary you can command in the marketplace, and with this in mind, don't want to establish a minimum that would eliminate you.

3.  You have a pretty good understanding of what the position might pay, which is acceptable to you.

Among these three situations, only one (#1), really presents a compelling argument for you to be bold and bring up the comp the position might yield.  After all (you say) why waste everyone's time if it is not a $$ fit for you, right?  Maybe.  The worst possible outcome is that the $$ are a fit after you ask, but the interviewer/recruiter is so turned off by the question that you will no longer be considered, whether they disclose that or not.

Here's the golden rule -  If you pro-actively ask an employer about money, ask early and very late in the process, never in the middle.  If you have to engage the employer and ask about compensation for a position, do it on the first call you get, or late in the process when the next step is a likely offer.   Most companies you would want to work for will run you through a multi-faceted interview process, so don't put off the "influencers" or the "approvers" in the process by asking about money.  Often times these folks are in the process to ensure they can simply work with you, to see if the dialog is comfortable, etc.  Ask the money question and most of them will frame you as driven by money or worse yet, selfish.

Suggested talking points - "Since we are very early in the process and attempting to determine overall fit on both ends, can you tell me what the targeted compensation range for the position is?"  Use phrases like this on the first call you get, and the odds of a misstep related to comp are minimal....

As a part of Rowan's project, I'm tagging Deb at 8 Hours, Ann at Compensation Force, Michael at Career Revolution, Andrew at Life at Work and Ask A Manager to line up a job hunt related post and tag it according to the specs of Rowan's project....


Should You Care About the Minimum Wage as a HR Pro?

Should you care about the minimum wage as a HR Pro?

The current law raises the minimum wage from $5.15 to $7.25 per hour in 2009 (it's currently at $5.85).  For mostPoulty_plant of us, the move upward in the minimum wage doesn't impact the businesses we support.  However, if you are in a tough environment like a poultry processing plant paying minimum wage, the move hurts your margins.  If you employ 200 employees at the minimum, the move to $7.25 adds over $800,000 in expenses you didn't have in 2006.

As the "Capitalist" title might indicate, I'm a big believer in less regulation and free markets, but it's always been tough for me to get my Irish up about a move in the minimum wage.  Lots of people in the know argue that any move upward in the minimum wage actually hurts the economy by forcing costs on entrepreneurs.  Still, it's been hard for me to get too worked up about.

Then, I see the move already formulating to move the minimum wage to $9.50 per hour on the heels of recent changes.  Now that same poultry processing plant has 1.6M in additional expense per the proposed revision.

That's where they lose me.  Doesn't anyone get that $9.50 in rural Georgia vs. California are two very different things?  Sounds like a perfect time to let the markets figure out what the wage needs to be (which it has done pretty well to date), or in the worst case, let the states figure it out on their own. 

If an IBM guy can't dress up his corporate Avatar like Tina Turner, what's the world coming to?

Did you really think we wouldn't get here?

The place where we even define rules for ALL workplace activity, including how you dress your onlineAvatar Avatar you use in Second Life on the company dime?

Oh, my poor, naive, trusting friend.  OF COURSE we were going to get here.  I mean, we can't have you getting your groove on by adding lace, leather or whatever you do on the weekends to your corporate Avatar.  That would be wrong.  And I know just the company to break the ice for the rest of us.  We'll use....  IBM!!

Increasingly, online zones like "Second Life" are becoming places where commerce is happening. Big companies such as IBM Corp. and Intel Corp. use these graphics-rich sites to conduct meetings among far-flung employees and to show customers graphical representations of ideas and products.

Now, in hopes of capturing the power of this new platform while avoiding potentially embarrassing incidents, IBM is taking the unusual step of establishing official guidelines for its more than 5,000 employees who inhabit "Second Life" and other online universes.

Step #1 - Leave your freaky side at home.  From the AP article on the guidelines:

"IBM's rules — which apply to "Second Life," "Entropia Universe," "Forterra," There.com and other worlds — are logical extensions of the real world: Don't discuss intellectual property with unauthorized people. Don't discriminate or harass.

Other rules are unique to the metaverse, which requires users to create animated avatars with distinct appearances, personalities and gestures. "Second Life," owned by San Francisco-based Linden Lab, has more than 8 million avatars; most look human, but many take the form of chipmunks, zombies or fantastic beasts.

IBM guidelines suggest being "especially sensitive to the appropriateness of your avatar or persona's appearance when you are meeting with IBM clients or conducting IBM business."  Rules caution workers who have multiple avatars or frequently change their avatar's appearance. It's common to have numerous avatars — similar to having multiple e-mail addresses for work and personal use.

"Building a reputation of trust within a virtual world represents a commitment to be truthful and accountable with fellow digital citizens," IBM states. "Dramatically altering, splitting or abandoning your digital persona may be a violation of that trust. ... In the case of a digital persona used for IBM business purposes, it may violate your obligations to IBM."

Translation - guys shouldn't dress up like Tina Turner or anyone else from Mad Max.  Unless you want to see the HR people pop onto your screen dressed like the Two Bobs from Office Space.

Is Google Smarter Than Your Company With Talent?

I may have to turn comments off on this one - such an obvious question for most people that I expect the caveman, ALL CAPS responses like "H#@! YEAH!!"... Thanks in advance, Nostradamus....

In news you might have seen a week or so ago, Google announced it was missing its quarterly earnings targets, in part because it overhired.  From the wire report:

“We overspent against our own plan in the area of headcount, and some of it was ...Google_2  because we hired a little faster than we had planned,” CEO Eric Schmidt told analysts during Thursday's conference call (Google hired 1,548 people during the quarter, “the majority in sales, marketing and engineering positions.  In looking at it we thought, was this a mistake or not? We decided it was not a mistake, that in fact, the kind of people we brought in are so good that we’re happy we did this. As I said earlier, we will continue to watch this very carefully in the future.”

So here's the deal.  Google has the ability based on their business position to hire more people than their budget called for, and has so much market power right now they don't even have to worry about the quarterly earnings call.  You and your company?  Four levels of approval for any new hire, whether it is a budgeted new hire or a backfill.

Does that make Google smarter than your company since they are willing and able to invest in talent?  Here's the take from a couple of people I like to read.  First up, Google thoughts from John Hollon at Workforce:

"It’s easy to dismiss Google’s decision to over-hire as a luxury that can be indulged when your company has a stock price over $500 and a market cap in excess of $162 billion. That’s certainly one way to look at it. Of course, you can also view this—as I do—as just par for the course with Google, another one of the smart business and workforce decisions that helped to build a mega company with a mega stock price and gigantic market cap. Yes, the rich get richer, but sometimes, they get richer because they are smarter. So it goes with Google."

To attempt to find a counterpoint, I turn to Former Netscape wonderboy Marc Andreessen, who recently issued caution in viewing Google's talent approach as too special (Note, he's talking about the talent approaches of both Microsoft and Google):

"Now, on the one hand, you can't question the level of success of either company.  Maybe they're right.

But maybe, just maybe, their success had a lot to do with other factors -- say, huge markets, extreme aggressiveness, right time/right place, key distribution deals, and at least in one case, great products."

My take?  I agree with John that you can't dismiss the current Google approach as simply the actions of a company flush with cash.  After all, they built the thing to where it is today.  Plus, they're profitable, so the over hiring can only be coded as strategic in my eyes. 

I just wish there was some way to plug the Google team into a struggling company, and someone like Andreessen into Google, etc.  Or better yet, folks like you and I into the Google team!  Then you could evaluate the whole nature/nurture argument that Andreessen brings up related to Google being special.  I think we would find a mix - there are certainly elements to what has been built that are truly special, but given the opportunity, people like you and I could likely thrive in the environment as well.

Of course, for the HR side of the experiment I would pick you as the VP of HR.  You're up for doing away with the four levels of approval and hiring super talent above the plan, right?   Having a spread of food for the employees at no cost ever day, right?   I thought so.....

Now back to work!!  Keep your eye on the street issues like how to keep the $$$ managable in your offer process, etc....

Why Companies Keep Jerks Around...

Saw the following article on the "no Ass#%e rule" as a formal policy at an American company - and it got me thinking - why do companies keep problematic, abrupt, explosive, jerk employees around?  I thought back to my own experiences - those employees I have known who remained with companies even though they fit the definition.

The answer I came up with was pretty simple - the company, or managers representing the company,Knight thought they needed them.

They are the Chemical Weapons of corporate America.

Remember chemical weapons in the cold war?  When stockpiles of conventional weapons/nuclear arms/etc., weren't enough, even civilized countries like the U.S. developed weapons using chemical agents like Sarin Gas.  We're now disposing of these in places like Anniston, AL (Side note - I once hired a PR guy who's prior gig was to do PR to the local community regarding the benefits of having a chemical weapons incinerator in Anniston.  Needless to say, doing PR for a cable company didn't sound so bad compared to that).

Why did countries like the U.S. develop these weapons?  The same reason that corporate America tolerates problematic employees who fit the definition.  Corporate America thinks they need these employees "just in case".

Like chemical weapons, corporate America keeps problematic employees (or in simpler terms, jerks/ass$#$es) for a very specific reason.  The employee usually has a very specific skill set that the management team in question values.  For this reason, all the negative behavior and impact is tolerated.

Many times, the jerk employee isn't even contributing day to day.  But if you need the skills in question?  Nice to know they are there.  Just like the stockpiles of Sarin Gas during the cold war, but the toxic effects happen daily instead of when delivered in a weapon payload.

The "no Ass#%e rule" is a great idea, but won't spread virally because it is hard to quantify.  It's hard to quantify what constitutes a jerk, and much harder to quantify the bottom effect of removing jerks from the workforce.

Keep working on the "value of removing jerks" metric.  If legit, you could make a lot of money in the HR space.

Tony Soprano, HR Manager - Negotiating Offers With Candidates

Lots of strong professionals are looking for help when it comes to the art of negotiating offers with candidates....

My advice?  Be proactive and make them an offer they can't refuse.  Tony Soprano would be proud.Tony_soprano

Here's the reality behind that comment.  In the vast majority of hiring situations, both sides (candidate and employer) are looking to minimize the conversations regarding compensation.   Why?  It's uncomfortable and not something we deal with every day.  Additionally, the employer side is often the one who is the most uncomfortable.  After all, in negotiating an offer, we are making value statements about the human being on the other side of the table, whereas we are dealing with OPM (other people's money) on our side unless we are running our own business.  With that in mind, we're aware that it's much more personal for the candidate, and that tends to make us more uncomfortable as employer-side representatives.

But we still have to fill the spot for what we can afford and what the talent is worth...

My advice to those that hate negotiations as part of the offer stage?  Stop the negotiating before it begins.  Here's how:

1.  Never ask the candidate "What's it going to take?" - Don't do it.  You'll be sorry and will effectively be transferring the balance of power in the negotiation to the candidate.

2. Always have your careers site set up to capture current and expected compensation for the position the candidate applied for -  To figure out where you need to be in the offer process, you need data.  Don't get your initial data by asking the candidate - that's riddled with issues - get it via technology when they apply for the position.  Drive all candidates through the online process, regardless of the source they originated from.  Ask them as part of that process what they currently make and what they think they need to make with your company.  You'll need the data and be shocked by the accuracy of the info you receive.  (See www.taleo.com for $100/month solutions if you don't have one).

3.  Tell the candidate what you can spend and seek their commitment - This is the key.  Once you have data on what the candidate makes in their current position and what they want to make with your company, figure out what you want to spend.  Once you have determined that, end your initial phone screen/interview with the candidate by telling them the general offer specs you will make to the successful candidate, including a salary number.  Once that's done, directly ask the candidate if they will accept that offer if provided to them at the end of the process.

4.  Hold firm on the specs of the projected offer in the conversation that follows - One of a couple of things will happen when you pro-actively tell them what the offer will look like at the end of the process.  The candidate will say A) "That Sounds Great" (which happens more than you would think), or B) the candidate will want to probe your flexibility on those compensation specs.  Your job in this stage is to remain firm, providing reasons that offer has to the one you use, which can include budget, internal equity or market rate considerations.  You're the expert in all those, so use your expert power to your advantage.

5.  Close by seeking a commitment - If the candidate wanted to discuss your flexibility on the projected offer specs you outlined, you have to come back and seek commitment.  Use a phrase like, "Having walked through the reasons for what we can provide for this position, if you are the selected candidate at the end of the process, will you accept that offer?" 

Follow these steps and you'll be able to hold most offers to the range you can afford, and you won't lose many candidates in the process.  Following this process doesn't make you cheap, it makes you an effective offer negotiator. 

Like Tony would say, it's all about setting expectations up front.    You just have to screen out the Paulie Walnuts of the applicant pool....   

HR Economics - Even HR Tech Companies Have "Burn Rates"

Definition of a Burn Rate - a synonymous term for negative cash flow. It is a measure for how fast a company will use up its shareholder capital. If the shareholder capital is exhausted, the company will either have to find additional funding or close down.

Illustration of a Big Burn Rate - SuccessFactors, the cool Performance Management on demand companyPetscom_sock_puppett  I have always liked. 

Late last week, SuccessFactors filed their S-1, announcing their formal intent to raise up to $125M (that's million, Dr. Evil) via an IPO.   Jason Corsello of the Human Capitalist did the best job of anyone covering it, so I'll plug his observations of the filing in here, primarily surrounding the BIG burn rate that's going on at the company:

"1.  The company is losing a staggering amount of money. The company incurred net losses of $32m in 2006 and is on track to loss $50m this year

2.  2006 revenues were only $32.5m, significantly lower than I had previously estimated in some market forecasts. They are currently on pace to achieve approximately $65m in revenue this year. As a SaaS vendor, deferred revenue is important. SuccessFactors deferred revenue is currently $56.8m.

3.  Sales and marketing expense is nearly 100% of revenue. The company is spending a lot of money with most of it going towards a blue-chip direct sales force. In comparison, Netsuite, another SaaS vendor who also recently filed their S-1, is operating at about 65% of revenue."

What's it all mean?  Who knows?  I'm not an investment banker, but 50M in losses on 65M in revenue makes me a little jumpy.   I'd also want to know over what time horizon the deferred revenue will come in, as recurring revenue makes the on-demand model sing.

Jason makes a cold war reference in his post, and I have to say it's relevant.  Reagan brought the whole thing down with his approach, and now there's one superpower, which was a pretty nifty trick.  The last time I saw a market share plan like this other than Reagan's cold war approach?  How about the sock puppet of pets.com?

SuccessFactors has a cool product and I hope they continue to make it happen.  But at least the pets.com reference let me throw up a jpeg of the sock puppet with an IPO reference....

UPDATE - Tom O'Brien fired back up his HRMS blog to talk about the SuccessFactors IPO, and he's not neutral....

UPDATE #2 - I've been contacted by two people I trust, who gave me a timeline to illustrate that reputation that remains of pets.com isn't necessarily fair.  While we think of the sock puppet and 1.2M 30 second Superbowl spots, the company was founded in fall of 1998 and folded in fall of 2000, actually returning money to shareholders rather than move forward after it became apparent that capital had dried up in the post dot com crash world.  See the Wikipedia summary for the best detail you can find on-line...

Money Never Sleeps - Why Mutual Funds May Be Hurting Your Employee 401k Returns...

Think all funds in 401k's are created equal?  Think again.  Under the premise that HR people are a lot like the general population, I've been meaning to get out a post to encourage all my HR peers who have anything to do with a 401k to push for more Index Funds and less Actively Managed funds.  You don't have to be Gordon Gecko to have a firm grasp of the impact.  First up, let's get a definition of what these types of mutual funds are:

Index Fund - A passively managed mutual fund that tries to mirror the performance of a specificGecko index, such as the S&P 500. Since portfolio decisions are automatic and transactions are infrequent, expenses tend to be lower than those of actively managed funds.

Actively Managed Fund -Most mutual funds are "actively managed," meaning the mutual fund shareholders, through a yearly fee, pay a mutual fund manager to actively buy and sell stocks or bonds within the fund. Though you would think that mutual funds provide benefits to shareholders by hiring alleged "expert" stock pickers, the sad truth of the matter is that the vast majority of mutual funds under perform the average return of the stock market. Over time, because of their costs, approximately 80% of mutual funds will under perform the stock market's returns. Currently, most mutual funds do not make their fees very easy for shareholders to understand.

Expense Ratio - A mutual fund's total annual operating expenses (including management fees, distribution fees, and other expenses) revealed as a percentage of the fund's average net assets. High expense ratios decrease investors' returns. An example would be two funds that both earned an 10% return before fees. If the first fund has an expense ratio that is 2 percent higher than second fund, you lose an extra 20 percent of your expected returns each year when your money is in the first fund. High expense ratios doesn't mean better results.

So, with those definitions in mind, if your mutual fund selection doesn't include multiple index funds with expense ratios of .50% and below, you can likely do better for your employees.  The average expense ratio for mutual funds in company 401K is said to be in the 1.50% range.

How's that hurt employees?  Over time and with the magic of compounding, that seemingly small difference in expense ratios can end up hurting overall returns.  Here's a calculation I ran at Moneychip.com:

Scenario - Investing $100,000 for 20 years, Expected Annual Rate of Return - 10%

Fund A - Expense Ratio of .4%, Transaction Costs of .1
Fund B - Expense Ratio of 1.5%, Transaction Costs of .8


Cost-Adjusted Return Rate - Fund A, 9.0%.  Fund B, 6.2%
Final Balance - Fund A - $560,441.  Fund B - $333,035
Difference - Index Fund outperforms Actively Managed Fund by $227,406 over 20 years...

All the more reason to rethink your 401k.  If you don't have at least 4 index funds in your 401K, you aren't providing all the tools available to enable employees to maximize their returns.

Like Gecko says - Money Never Sleeps.....

Legal Considerations - Before you start swapping funds in your plan, make sure you get full disclosure on expenses associated with employees moving money out of a fund with a high expense ratio.  Sales fees associated with funds with high expense ratios are common and a type of poison pill designed to discourage change...