Your Employee Matters

In his book Predictably Irrational, Dan Ariely provided two interesting observations related to employee benefits. First, he pointed out that benefits are more of a social contract than an economic one. The distinction between the two is very powerful. For example, if you have a department with 15 employees and someone walks in with a tray of 15 cookies and says that she baked cookies for the department today, under a social contract analysis, most employees would realize quickly that they should take one cookie each. However, if that was now turned into an economic arrangement in which the person stated that those cookies were baked for her child’s fundraiser, there would be no guilt or judgment associated with someone who proceeded to gobble up half the tray. Ariely reminds us that social contracts are much more powerful than economic ones.

Second, Ariely argues that asking employees to chip in for the payment of benefits or providing total compensation statements (something that we’ve recommended for years) diminishes the cohesiveness of the social contract.

These are provocative thoughts — and surveys about employee motivators mirror them to a certain degree. Although book after book after book talks about the “work experience,” in reality, most people go to work to be paid. The other motivational factors kick only after they feel they’re being paid a fair days’ wage. In today’s economy, employees rank benefits over compensation as their top concern. Benefits fulfill a security need more than does straight compensation. In a sense, the workforce is telling us that a dollar spent on benefits (which is a tax-free payment) is worth more than a dollar spent on straight compensation. Consider this if you’re considering a cut in benefits.

The quality of our lives and of our companies depends on the questions we ask and the challenges we set for ourselves. For example, you might ask yourself “Do I dare to be great?” That’s a good question. You can also ask yourself what kind of nonsense would get in the way of believing that you can be great. That’s a good question, too! With this spirit in mind, here are questions that could open you up to higher thoughts.

1. How clear is the vision for your company? Does everyone at the company know what it is? Have you branded it in your employee literature, on your intranet, on your walls, and so on? Would I know it simply by walking into your place or visiting your website?
2. Is your vision for your company a big, hairy, audacious one? It’s better to really go for it and succeed at 50% than to shoot for average — and end up average.
3. Have you played the movie forward to the end? If you got everything you had hoped for, what would it look like? How would it feel? How would your life be different?
4. What personal sacrifices are you willing to make to create a great company or career?
5. What personal sacrifices are you willing to ask others to make to build a great company or career?
6. What effort have you made to guarantee you bring the right people on every seat of the bus?
7. How do you stimulate your workforce to think for itself?
8. How do you create an employee suggestion system that works?
9. What have you done to eliminate the possibility of people making unnecessary mistakes?
10. What “one big thing” could wipe out your business tomorrow?
11. How could your business die from a series of 1,000 cuts?
12. Do you really want to do this anymore? If not, what would you rather be doing instead?
13. How could you stay in your business/career and reinvent how you work in it?

Have fun with the answers!

Business owners love the idea of independent contractors. They afford flexibility, expertise, outside perspective, and of course, reduced insurance, benefit and tax burdens. Unfortunately, for these same owners, the Federal and state authorities are coming down big time on what they claim are independent contractor misclassification schemes. They don’t like the idea of you not collecting payroll taxes and not providing employees with Workers Comp, healthcare, and other benefits they might otherwise enjoy. Here are four of the more common ways employers get into trouble when they misclassify employees:

1. They get hurt on the job — Guess what? Since these people are not considered employees, your Workers Comp policy doesn’t cover them; which means they can sue you directly for negligence, expanding their recovery potential dramatically. What’s more, you might face a fine for not treating them as employees and providing them with Work Comp coverage.
2. They file for unemployment — A number of HR That Works Members have told us that because one person filed for unemployment, the authorities are trying to attack their independent contractor relationship with dozens of people. If a company in this situation comes out on the wrong side of a misclassification judgment, it could go out of business. Part of the thinking involved is that you can somehow “control” employees, but not independent contractors. For example, when I hire an independent contractor to paint my house, I pay them to get the job done and I don’t tell them how to apply the paint.
3. They didn’t pay self-employment taxes — When the IRS comes knocking on an independent contractor’s door and asks them about their tax payments and the work they did, they tend to conclude that they were an employee and you should have been withholding that 14% annually. If they can’t collect this from the independent contractor, they’ll try to collect it from you — not to mention fines and penalties. Some states, such as California, have kicked this up a notch and are making it a criminal offense to engage in intentional misclassification. Unsurprisingly, these bills are introduced into the legislature by the plaintiffs’ bar, which makes sure that the legislation includes handsome attorneys’ fees for enforcement.
4. Finally, the NLRB is getting interested too — Independent contractors don’t have the ability to organize the workplace, only employees do. This means that the National Labor Relations Board, which is very pro-union, doesn’t like it when you classify folks as independent contractors. Recently, because of one or two disgruntled employees, they ruled that independent contractors from a small orchestra were really employees, which will probably end up shutting down that business. I wrote an article about this called “The Day the Music Died.”

The bottom line: This fight is not about common sense or economics. It’s about political power, plain and simple. The pendulum has swung and employers have been pushed up against a wall. The problem is that they’re powerless to do anything about this situation and have to change the way they do business, even when they don’t think it makes sense to do so. That’s the beauty of living in a democracy.

The government has an excellent publication covering everything about I-9s that all employers should know about. Here’s what it covers:

• Obtaining Forms and Updates
• Part One — Why Employers Must Verify Employment Authorization and Identity of New Employees
• Part Two — Completing Form I-9
• Part Three — Photocopying and Retaining Form I-9
• Part Four — Unlawful Discrimination and Penalties for Prohibited Practices
• Part Five — Instructions for Recruiters and Referrers for a Fee
• Part Six — E-Verify: The Web-based Verification Companion to Form I-9
• Part Seven–Some Questions You May Have About Form I-9

Click here to access the handbook.

I’m a big fan of podcast learning. During the past four years, I’ve educated myself on a wide variety of subjects from business to personal growth, financial matters, and spiritual ones.

I would encourage all businesses to make their managers and employees podcast learners. For starters, your HR person should be listening to our monthly podcast. It’s not as fancy as the big guys’ podcast, but the information is there. I would then make sure all my managers listen to the Harvard Business Review podcasts, which provide an MBA-level education. They’re excellent — and they’re free. I would encourage you to consider TED videos and audios, which are outstanding. Pick out a few you think might apply to your business and encourage your team to watch them. They are 15 minutes long. Start one of your business meetings with one of them (maybe even every business meeting).

I also like the Stanford Entrepreneurial School podcasts. The Stanford graduate network has started more entrepreneurial businesses than anywhere else. Tap into this wisdom, even if you have a 50-year-old business. Podcast learning can stimulate thought and innovation at any company.

I’m most familiar with iTunes. Go there and check out all of their free podcasts. You can hire a high school intern to download about 20 podcasts each into a $50 player, so your employees can listen to them in their cars or at the gym. In the end, they will thank you for it.

Here are the links to the podcasts:

• HBR
• TED
• Stanford
• HR That Works

P.S. You can also develop a comprehensive leadership training program by taking advantage of the more than a dozen leadership webinars and podcasts stored on HR That Works. If you haven’t checked these out yet, do yourself a favor.

This poster defines us — what we care about, who we are, what we do. How could you create a fun poster like this for your company?

I’ve coached many executives over the years. One of the questions I ask is whether they spend more time reading about other companies’ stories or creating experiments and stories of their own. More than half of the executives admit that they spend more time focusing on the outside than looking on the inside. To help executives, I encourage them to play social scientist.

• Be a good observer. Step back and take a mile-high view of the environment. Look at the situation with fresh eyes. If you were a social scientist who walked into your company today, what would you observe about it? Simply being “present” in your situation is the best way to be an observer of it.
• Conduct surveys. Social scientists love surveys. You can ask any question you want. Let your imagination be your guide. Consider creating a Survey Question of the Month all employees are required to answer. When this begins producing results, you might bump it up to two a month, or even one a week. Make sure that these surveys solicit ideas, as well as opinions.
• Generate data. The next step is to translate your observations and survey results into data you can use. For example, what do your observations and survey results tell you are the 20% of critical factors that would generate 80% of the desired results? Usually this 20% consists of three things. What’s the data around it?
• Run experiments to verify your data. Now that have some information, play with it. If employees tell you that what they want more than anything else are improved benefits, then dig deeper. Create experiments that compare the perceived value of improved benefits versus other equally attractive options.
• Finally, publish your results. Educate your stakeholders on what you’ve learned and how using this valuable information can improve their career and the company. Of course, when you publish your results, you’ll be open to critical judgment, as well as praise and understanding. That’s what comes with sticking your neck out.

P.S. HR That Works Tools to consider using include a variety of employee surveys, HR department survey, benchmarking report, and tools.

According to a Nielsen poll, here’s how Americans spend their time online:

The chances are that when your employees access the Web at work, this is what they’re doing. The survey doesn’t break down the percentage of time in each of these categories that’s related to personal matters. However, you can assume that — unless you’ve encouraged or allowed your employees to go online for business purposes — most of their use is going to be personal.

As we discuss in the Social Media Training Module, this is a battleground in the workplace. Employees are demanding greater and greater freedom, flexibility, telecommuting, multitasking, etc. It’s how they were raised. Older managers who try to control this new workforce closely find themselves causing dissatisfaction and non-productivity in the process. They also have to consider that dissatisfaction can spread like wildfire through mobile devices and might be protected by the National Labor Relations Act and a variety of other laws.

Here’s the solution: Have a dialogue with your workforce about the use of the Web, social media, mobile devices, etc. Acknowledge that, although the workplace has changed, productivity remains the bottom line. This is another reason why the ability to benchmark performance results is more important than ever. Do you really care if employees spend half their day on their mobile devices, if during the other half of their day they meet or even exceed benchmarks? Although this might rub us the wrong way, is it really something that we should worry us? For example, I use a number of independent contractors through programs such as Elance. I don’t police any of them. I’m simply hiring them to produce results — which is exactly what you’re doing, or should be doing, with your employees. The question is, to what extent is that result clarified? To what degree can inappropriate use of mobile devices undermine activities that enhance your bottom line? Just as important, which employees are using mobile devices in a way that’s helping to grow your business? How can you learn from those employees?

As mentioned, the Social Media Training Module offers a one-hour webinar on this topic, as well as a shorter update video that explains NLRA constraints on social media use by employees. The personnel forms also include sample policies on the use of social media and mobile devices.

Poll after poll describes how dissatisfied today’s workers are. For example, in a recent poll by Staples, 33% of employees said they feel unappreciated at work, while 38% were searching for a new job. Likewise, in the annual Education and Work poll conducted by Gallup, dissatisfaction with healthcare benefits increased 11 points in the past three years, followed by a seven-point increase in dissatisfaction over the potential for promotion at work. According to the poll, job issues causing the most dissatisfaction were: On-the-job stress (34%), Health insurance benefits (30%), compensation (30%), employer retirement plan (28%), chances for promotion (26%), vacation time (20%), recognition for work accomplishments (19%), job security (18%), and amount of work required on the job (17%).

What can we learn from this? Here are my observations:

1. Half of employees are more satisfied at work than the other half. This is the way it always has been and always will be.
2. Stressful financial times cause us to focus on productivity, efficiency, and running lean — which generates a lot of stress. As business owners and managers, we should do everything possible to acknowledge this stress and try to do something about it. For example, do you encourage your employees to take breaks or do you really keep your fingers crossed, hoping they’ll work through them at their desks? If you don’t already have a wellness plan, you should create one because it can help with stress management.
3. Health insurance benefits have greater meaning to employees than straight compensation. In his book, Predictably Irrational, Daniel Ariely explains that health care benefits are a social contract, while compensation is an economic contract. Apparently, a dollar spent on benefits is worth more in total impact than a dollar spent on compensation — something that you should bear in mind when gutting your benefit plans.
4. Years ago, the Gallup organization did the largest poll about employee retention ever conducted. It concluded that there were three main reasons for turnover:
   • The person in the job is a misfit; they don’t have the skills or personality profile to succeed in it. In a sense, both employee and employer are filling a gap that will be short lived.
   • A lack of perceived career growth or opportunity. Here’s where management has to step in with such tools as career ladders, career days, succession planning, and an overall discussion about finding the opportunity at your company.
   • The most important relationship an employee has is the one with his or her immediate boss. Guess what? Half of all bosses are above average and half of them are below average. Which half do you have managing for you? How much training do you offer managers on being better managers? Do yourself a favor and take advantage of the extensive training on HR That Works that will help them be better managers
5. It’s essential for management not to crawl into a cave during stressful times. Rather, they need to stand out front, give honest information, and handle the tough questions. Unfortunately, at too many companies, people are surviving as individuals, rather than as a team.
6. As Steven Covey says, begin with your circle of influence. Start right where you are and focus on those people you work with or manage directly.

The Ninth Circuit, known as the most liberal and employee-friendly federal circuit in the nation, recently overrode an NLRB ruling on employee protections. In this case, an employee complained legitimately about working conditions, but lost his protection when he started berating his manager, calling him plenty of F-word names we cannot repeat here and also telling him that he was stupid, nobody liked him, and that everybody talked about him behind his back. During the employee’s outburst, he stood up, pushed his chair aside, and told the manager that if he fired him the manager would regret it. The manager then fired the employee.

The Court reminded us that in order for an employee to lose NLRA protections, it would consider these factors:

1. The place of the discussion
2. The subject matter of the discussion
3. The nature of the employee’s outburst
4. Whether the outburst was in any way related to a fair labor practice

The Board is required to balance those factors carefully. In the end, the Act permits some leeway for impulsive behavior, which must be balanced against the employer’s right to maintain order and discipline. As the Court reminded us, if an employee is fired for denouncing his supervisor in obscene, personally degrading, and/or insubordinate terms, the employee may lose the protection of the National Labor Relations Act. When the Court looked at the language, the physically aggressive nature of the employee, and his flat-out belligerence, they decided that he had lost his protections.

As mentioned in previous posts, the NLRB has now waded into social media waters with these conversations. So far, its decisions have been very pro-employee, as was the underlying decision in this case.

Click here to read the case.