Your Employee Matters

Companies nationwide are struggling to survive. One of the greatest mistakes they make while in this mode is to stop working “on”� their business and think that the only answer is to work harder “in”� it. This is a classic entrepreneurial error. Just ask Michael Gerber, author of “The eMyth.”� The competition is intense today and if you don’t distinguish yourself from your competition, how can you expect to recruit clients and customers from them? To succeed, we have to work not only on improving our sales and marketing acumen, but our workforce management acumen as well. The greatest “variance”� at any company involves sales and marketing. If one salesperson outsells another salesperson two-to-one, that’s a 100% variance. What many companies fail to realize is that the second largest variance has to do with how well they manage their workforce. As the HR That Works Cost Calculator shows, it’s usually 10% or more of payroll. For example, if you have a $1 million payroll, a variance will cost at least $100,000 the revenue equivalent of more than $400,000.

Here’s the point: This is no time to give up on improving HR practices. Doing so is a huge mistake! This doesn’t mean that you need to make an overhaul overnight it means that you should engage in constant and never-ending improvement, taking at least one proactive step a month. In today’s economy, I’d recommend working on improving productivity, motivation, making proper termination decisions, and stepping up your compliance effort. Given the doubled rate of unemployment, workers are filing more wrongful termination, sexual harassment, ADA, FMLA, and similar claims than ever. The average employee win-rate is the highest on record, as is the average verdict. Failing to get your compliance act together literally can put you out of business.

We’ve been advising HR That Works Members to get their independent contractor act together. This is an exploding risk exposure driven in large part by the need of federal and state agencies to make sure that they collect all their taxes. The IRS estimates that the 1099 misclassification problem, due primarily to poor controls, has led to more than $8 billion in unpaid taxes.

As we advise members, “If it walks like a duck and talks like a duck it’s a duck, no matter what you call it�. If you have any independent contractors and you’re an HR That Works Member, look at the new Independent Contractor Training Module, which includes a video, IC agreement, analysis worksheet, and a guide to many state and federal resources in this area.

Don’t take this lightly! In November of 2009, the IRS launched an audit of 6,000 companies, essentially to prove the value of hiring more auditors to collect more money. I can tell you what their conclusion will be: That they should hire more auditors because there will be a greater return on investment given the amount of unpaid taxes out there. This exposure is significant, not just from a taxation perspective, but as a liability and risk management issue. Bottom line: It’s far better to pay the additional taxes, workers comp premiums, and medical expenses than to run afoul of the misclassification analysis.

For more information, click here, and visit the Independent Contractor Training Module on HR That Works.

Much of what I share with HR That Works Members comes from my study of marketing. Take any marketing book, replace the words “client� or customer,”� with “employee”� and you’ll learn a lot about improving the HR function. Consider the time-tested marketing formula: Cost, ease, and impact (which you’ll find in the Form of the Month spreadsheet) and ask yourself, “What’s the cost of this item, how easy is it to implement, and what’s the bottom line impact?”

For example, a hand-written thank-you note provides a low-cost, easy to implement, high impact motivational tool. In Harvey Mackey’s “Swim with the Sharks,”� he shares how he built his business from thank-you notes. This raises two questions: (1) How many thank-you notes to your employees have you written lately? and (2) Have you mailed these notes to their homes which shows the employees’ families that you acknowledge the contributions they make at work?

The Retention Program Possibilities (Form of the Month) document offers dozens of ways to show your employees that you care. How you do this is secondary. A final bit of advice: The greatest benefit is the one that’s least remembered. It’s usually the frequency of showing you care that matters the most.

During my recent workshops, a number of employers have asked me, “How do I keep my folks motivated?”

What they really mean is “How do I keep them focused on growing the bottom line?”

I remind them of two things: (1) Maslow’s Hierarchy of Needs and (2) the formula for using our motivational dollars effectively. I mentioned Maslow last month. This column will have more to say about Maslow. Another article in this newsletter will discuss the retention formula to consider.

In 1954, Maslow wrote a paper entitled “The Hierarchy of Needs.”� As I like to kid: Peter Drucker referred to it, Peter Senge refers to it, and everyone else named Peter refers to it. The reason: There’s no room for improvement Maslow nailed it! The paper laid out five levels of need, as shown below. Let’s review each in turn.

1. Survival

This is the greatest need of many employees and many companies given today’s economic stress. This stress is largely self-induced, due to poor financial acumen and practices. Having said this, the most important question becomes “What money am I earning today?” That’s what it means for an individual or company to be in survival mode.

Smart companies such as In and Out Hamburger (an incredible California-based private business) and Costco realized the value of paying entry-level employees at a rate above their competition. Consider how paying a few dollars above your competition will affect who you attract, how hard they work for you, and how long you retain them.

2. Security

Unfortunately, many folks still believe that the only form of job security is a union. Just ask the people at United, Delta, American, GM, Chrysler, and Ford. In fact, there’s only one form of job security: Doing a positive job, in a positive manner, where there’s a positive cash flow. Our responsibility, as leaders, is to make sure that our employees understand this by opening up the books and sharing the numbers. I encourage you to watch the Webinar we did with one of Jack Stack’s trainers on the Great Game of Business.

3. Belonging

You might as well substitute the words “company culture”� here. Are you trying to maintain a positive attitude in tough times? Are you trying to make the work fun? Are you taking the time to brand your company to your employees? One low-cost way to do this is through company uniforms — whether work clothes, sports teams, or recreational clothing. If I walked into your company today, would I be able to define your company culture just by walking around? If not, why not?

4. Ego Gratification

The biggest mistake I see employers making here is ignoring the ego need, especially those of their superstar employees. Here’s an example: “Bob brings $200,000 to the bottom line every year and causes me no drama. I am so glad I don’t have to worry about him.� What an incredible mistake! Unfortunately, most organizations spend 80% of their time on the 20% of employees who don’t bring it every day and ignore the breadwinners; when in fact they should be doing just the opposite. The ego needs stroking. Give these folks awards, get them in the Business Journal or other industry publications, highlight them on your Web site, upgrade their titles, and so on.

5. Self-Actualization

Although I realize that it’s hard to worry about being self-actualized when you’re in a survival or security mode, this need still remains. I believe that self-actualization has to do with knowing that “you make a difference.” Do this by engaging your clients or customers in the conversation. How do you make or break their day? How does it affect them when they receive good or bad service? Have you brought some of your clients and customers and perhaps even prospects in for a focus group with your employees? Do your employees understand the “precessional”� impact of their daily work?

For example, when I finally realized the precessional impact of my litigation career, I had no choice but to quit. Now I know that the work I do makes a positive difference.

This is what it takes to motivate employees. This probably won’t be the last time I mention Maslow. Within each of these categories, we have to be careful about how we spend our money. The next article will address this issue.

Independent Contractor Agreement
(PDF)

If you’re sure you have a proper 1099 arrangement, use this agreement to get it in cement. HR That Works Members can also access this document in Word format by logging on to the site.

The FTC has issued helpful guidelines to help employers avoid the pitfalls of false degrees.

Click here for more information

Enjoy this fun and informative quiz on labor history, created by the Alabama Department of Labor.

Worklaw Network Member Firm Franczek Radelet’s has provided us with a great summary of recent U.S. Supreme Court cases. Labor and employment-related cases figured prominently in the U.S. Supreme Court’s recently concluded 2008-2009 term. The Court’s conservative Justices continued to play a dominant role, with Justice Kennedy often casting the deciding vote. This trend will probably continue at least through the next term, despite the replacement of Justice Souter by Justice Sotomayor.

During the 2008-2009 term, the Court took these actions:

• Considered whether an employer’s well-intentioned decision to disregard promotional test results and avoid claims of disparate impact discrimination violated Title VII.
• Held that “mixed motive”� jury instructions applicable to cases arising under Title VII may not be given in discrimination cases pursued under the Age Discrimination in Employment Act (ADEA).
• Found that a pension plan qualified as a bona fide seniority system and did not violate the Pregnancy Discrimination Act by giving less credit for maternity leave taken before that law took effect than for other medical leave in calculating pension benefits.
• Determined that Title VII prohibits retaliation against employees who participate in an employer’s harassment investigation.
• Held that a collective bargaining agreement can waive employee rights under the ADEA.
• Found that a local union’s charge of litigation fees to nonmember employees was constitutional.
• Addressed the constitutionality of a state law that prohibited the use of union dues deducted from public employees’ paychecks for political purposes.
• Adhered to the plan documents� rule under ERISA requiring that plan administrators follow the express language of plan documents in all but a very few, narrowly defined circumstances.

Read the entire report here.

The recent Internet Labor Outlook Survey by the Society for Human Resource Management (SHRM) included a question about the most important aspects of employee job satisfaction. The results, in order, were:

• Job security (63%)
• Benefits (60%)
• Compensation/pay (57%)
• Opportunities to use skills and abilities (55%)
• Feeling safe in the environment (54%)
• Relationship with immediate supervisor (52%)
• Management recognition of employee job performance (52%)
• Communication between employees and senior management (51%)
• The work itself (50%)
• Autonomy and performance (47%)

At the bottom of the list came items such as being in a green workplace,networking opportunities, career development, social responsibility, and so on.

These results show that when we hit tough times, our needs move down the Maslow Hierarchy.

In today’s economy, it’s very difficult to self-actualize when you’ve just been laid off from a job. Survival, security, and belonging are what employees need right now. Their egos are in check and trying to save the world might have to wait until another day. This is one reason why I continue to support the notion of open-book management. It’s about having an authentic and honest conversation about money (an item in great demand today). Show your employees the black and white of their futures and understand how they can shape it to the benefit of all.

IMPCO Technologies found itself in a no-win situation. Just after having moved over to a new time-clock program, two employees approached their manager, Manuel Barbosa, claiming that they were not paid overtime for a couple of hours. Since their manager was also paid on an hourly rate, he realized that if they hadn’t been paid, neither had he so he submitted a claim for overtime to human resources. An investigation determined that the employees did not work overtime. When confronted with this finding, the manager maintained his good faith belief that he was entitled to overtime. The company, which, in fact, had paid the overtime, dismissed the manager for intending to defraud the company. He promptly sued for wrongful termination.

When the case made its way to trial, the court ruled that the company had terminated the employee for his dishonesty, not for making a claim for overtime. On appeal, the court ruled that if an employee brings forth a wage and hour complaint in good faith,� they are thereafter protected from termination even if, in fact, they prove to be wrong. The case was reinstated, with instructions to determine if the manager had acted in good faith.

Lesson to employers: Think twice about firing any employee who complains about anything. If such a situation arises, contact the HR That Works hotline or your attorney before making a decision. Remember that, in general, if the matter complained about affects public policy (health, safety, labor laws, tax laws, etc.) the employee is generally protected from a retaliatory discharge.

To read the case (Barbosa v. IMPCO Technologies), click here.