Area Economy

Improving economy puts HR functions in a different perspective

July 4, 2014
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Have we turned a corner? It seems like the focus has been on unemployment for so long that we’ve almost forgotten what the other side of the situation looks like.

In fact, I was surprised recently when I was at a meeting of business owners in West Michigan who all seemed to chime in when one said he was having trouble finding qualified candidates. Economists have been warning of this condition for years, but in their next breath, they chat up the fact that the economy is only going to grow at 2 percent, or whatever number they see as underperforming. It seems they are more like politicians who will say whatever grabs headlines.

There are statistics to prove whatever position we want to support. I don’t want to pull out the old song about how “figures never lie, but liars always figure,” but what can you rely on to manage your business?

Perhaps it is as simple as taking a look at some of the information that used to be of importance, before we got so sophisticated. This is not to say don’t use the new techniques; it just means to focus on those things that make intuitive sense, then supplement it with other information.

One of those simple tools is internal employment statistics. You need to know how many employees you have in each major category of your workforce: management, professionals, production or operations staff, and administrative employees. 

Next, take a look at what positions your leadership team says they need to have. Examine why they need them. Are they replacement, are they for expansion in existing positions, or are they new positions for new work or to do old work differently? Getting a handle on the answers may give substantial insight as to what you ought to be doing about aligning your workforce with organizational demand.

One of the other important aspects of this employment analysis is to examine terminations. Not only do you want to know how many are happening each month or each year, you want to know the real reason for them. 

This analysis requires a bit of detail. You can’t use major category codes such as voluntary or involuntary. Furthermore, even within the voluntary group, you can’t ask ‘why are you leaving?’ and expect to get great insight. The likely answer is more money, better position, closer to home; it will always be a positive answer that places your organization in a more negative perspective. It has to be, or why would they leave? 

The important question is: Why did you start looking for a new situation? This answer is much more revealing — if they will tell you — and it is what you have to look into to better manage your workforce.

One other aspect of this analysis of terminations is to look at the true voluntary terminations and see what kind of performers they are. A trend we haven’t seen in a few years is the movement of high performers — people who make good contributions to the organization. It seems with today’s more positive economic perspective, these better performers are now looking for a better situation. If they feel they were shortchanged during the downturn, they are looking to get back on track. They may not be waiting for you to do something, or they may even feel resentment. Making a few pre-emptive moves on behalf of your better performers may be your best shot to retain them.

You should also watch the trends with the less effective people. Even these people feel like things might be picking up and that they, too, can find other opportunities. What you might find with this group is more signs of “bad behavior.” They feel confident and aren’t concerned if they lose their job. You might say good riddance, but these terminations take time that might be better directed at productive activities. Any involuntary termination has risk of legal implications and costs. There are big hidden expenses adding a new hire: lost administrative time by line management in replacement interviews; human resources time sourcing, screening, new hire set-up, maybe recruitment fees, and orientation to the job; bringing staff up to speed; lost operational knowledge. Each organization is different and it depends on the job, but you might find it cheaper and with increased results to invest in these employees. Be creative; it doesn’t have to be more pay or better benefits. It might just involve the management team paying attention to these people — bringing them into the tent instead of shutting them out where they find unproductive actions to fill their time.

You can do all sorts of simple analysis to stay ahead of the turnover issue. An example is the involuntary termination due to disability. Look to see how it might have been prevented. This is often a big drain on the organization in direct pay or replacement costs or increased insurance premiums. Almost every category can be managed in some fashion to reduce the numbers. Remember that the new replacement may not work out and you’ll have to do the process again. Be sure you make every effort to hire the right person.

If you do the comprehensive analysis and address the various contributing factors to turnover, replacements may still be necessary, but the best response is to be able to say, ‘We are hiring because we have new or expanded business and we want people who can grow with us.’ 

Ardon L. Schambers is president and principal of P3HR Consulting & Services in Grand Rapids.

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