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Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 8AM Pacific – 11AM Eastern, or catch up on full episodes here.

HR Tech Weekly

Episode: 32
Air Date: August 6, 2015


This Week

This week John and Stacey discuss:

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Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 8AM Pacific – 11AM Eastern, or catch up on full episodes here.

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John Sumser:            Good morning and welcome to HR Tech Weekly: One Step Closer with Stacy Harris and John Sumser. I am John Sumser and we’re waiting for Stacy to fly in from Mars, where she has been visiting recently. In the mean time, we’re thinking a little bit about the new SEC regulation requiring companies to disclose the ratio of executive compensation to employee compensation.

Hey Stacy, how are you?

Stacey Harris:            Hey John. Sorry about that, running a little bit late. I had a little bit of technical difficulties, but we’re on now.

John Sumser:            Hey, that’s not problem. I was just starting to launch into talking about CEO compensation, but what are you seeing out there?

Stacey Harris:            I think that’s definitely the first place to start this morning, is to talk about the SEC’s approval of the new rules for CEO pay ratio sharing, but we also have some interesting topics around Netflix and their … The whole conversation today, actually, and the whole this week has been about benefits and pay and what people are doing with them, because Netflix announced that they’re going to be doing year-long paid leave now for all their maternity … For mothers, at least. I’m not sure how that works out with the father side of it. There are some different elements there.

We also have that story the New York Times wrote about what’s happening … Oh, that was the SEC approval one, sorry. Got to pull up all of my files. Actually, it was the Washington Post that wrote a story about the patent office’s issue now with people working at home and what they felt was either a right or a privilege was working at home. Whether it was a benefit or whether it was part of, actually, their overall job rights. Intel also updated their goal on bonuses for more diverse workers references. All those tings have to do with benefits, right, what people are doing with pay, and how organizations are trying to differentiate themselves and bring new people to the organization. So, that’s a good topic this week.

John Sumser:            Sure. We’ll go down and look at each of these things in particular, but do you think that we’re starting to see something like the union movement of ours, or is this all companies reacting to market conditions?

Stacey Harris:            I think that actually differs depending on where you live a little bit, right? I think if you’re in the Silicon Valley, it seems to be very much a reaction to the market issues and what’s happening economically in that market, but I think if you’re living in middle America or in other countries around the globe, there is I think an uptake in expectations around benefits and what my rights are as an employee. Whether or not that’s going to translate into what are traditionally called unions, or whether that translates into more government requirements I think is a real issue and I think that’s the challenge more organizations are struggling with right now.

John Sumser:            Okay. Let’s go through them. What’s your favorite one? Is it Netflix giving employees a year-long maternity leave?

Stacey Harris:            No, I don’t know if it’s my favorite one, but I think it’s one that’s going to set off, from our perspective for HR technology, I think it’s going to set off that and a couple other things are going to set off some real discussions about technology that manages things like absence and leave management. Right now, for the most part, most organizations are looking at if they’re working with a more salary work environment, we’re looking at about six weeks maternity leave. Twelve weeks, usually, if you use up all your vacation. That’s sort of the average, I think, depending on who you’re looking at and knowing what organizations are doing. I think there was a study done by Sherm recently that said that only about 20% of organizations were offering any kind of paid maternity leave. Those are probably more in the professional services areas. Everyone else either has no paid maternity leave, or if they do, it’s being compensated through other things within the organization, but the expectation is that you’re going to get more maternity leave as organizations are rolling these situations out.

I think this is also going to roll not just into maternity leave, but I think as we start to deal with more aging parents in the environment that we’re working in, we’re also going to see this translate into other family medical leave act issues, right? The technology side of this is going to become really challenging, which is “I’m a manager. How do I now make allowances for a workforce that isn’t going to be here, but still has to be accounted for in my documentation, in my skill sets, in my work environment?” Europe has been dealing with this for much longer than we have here in the States, and they figured out a way to do it, but they use a mixture of technology and government regulations, I think, and documentation to do it.

John Sumser:            So, things are changing. It looks like they’re changing in a way that sticks. Do you see any competitive problems associated with these sorts of changes?

Stacey Harris:            Competitive as in terms of the companies themselves?

John Sumser:            Well, if your workers don’t work so much, then at least part of what you’ve got is increased costs. If your workers don’t work so much, then they don’t spend as much time together on the phone or in a meeting room. So, all sorts of things suffer besides price when you reduce the amount of time that people spend working. That’s what this is, right? There’s a new foot here to reduce the amount of time people spend working.

Stacey Harris:            Well, I think actually what’s going to be interesting to see is how many of the high-performing professionals actually take advantage of this. I think that’s a more interesting question here, at least in the State. I think in Europe, and in other nations in some cases, there’s a bit of an expectation and less of a stigma around not being at your company, not being seen on a regular basis. Here in the States, it’s a pretty well-known fact that most people don’t even take all the vacation time that they’re given. I’m not sure if it’s Netflix, but I know there was a couple of organizations that went to unlimited vacation time a couple years back.

John Sumser:            Right.

Stacey Harris:            What that really did is it meant people took less vacation time because they didn’t want to be seen as being out of the office or away from the projects. I think even for new mothers, that’s an issue. I can remember having that challenge when I had my boys. That was ten, fifteen years ago.

John Sumser:            It’s going to be an interesting time. I don’t think anybody has an ideaof what happens if you get people really loosely attached to the organization like this. Certainly not in the States.

Stacey Harris:            Yeah.

John Sumser:            The SEC says companies have to disclose the ratio of the top executives and the bottom workers. The ratio they’re paid. What do you think about that? Is that a good thing?

Stacey Harris:            It’s going to be by 2017. It seems like a simple concept, right? A simple additional item that’s added to public corporations disclosures. They’re already disclosing the CEO executive compensation packages, but now we’re saying “okay, what’s the ratio to your average employee in workforce in the organization?” I think that term “average” is part of what’s going to be interesting, because there’s two things that I think that this could have some unintended out comes for. Which is, if this becomes a major factor that boards and the financial industry as a whole is going to want and monitor, I’m not sure it’s going to reduce CEO’s paychecks. Me and you had that conversation, but I do see them playing the game a little bit to try and figure out how they can get the lowest paid employees actually off the books as employees and more contingent workforce status in that case. That could really change how we think about employees and their classification.

John Sumser:            Yeah. It also seems like this is one of those things that would push compensation into other interesting areas. If you have to declare your compensation in this way, why wouldn’t the provision of maybe an extraordinary work environment on the shore of a lake with guest bedrooms and you know, 7,500 square feet … That’d be what I’d go for, is the new smaller residential office buildings.

Stacey Harris:            You’re quite right. Yeah.

[crosstalk 00:10:39]

John Sumser:            There’s always a way to beat an accounting system like this, so my expectation is that compensation professionals are going to have a very interesting time in their negotiations with CEOs about compensation, because the things that will be really interesting will be hard to talk about. This compensation is going to be made more visible.

Stacey Harris:            Those things are going to have to be tracked and calculated in some way as an expense model, right? That’s going to really … Again, the systems are going to have to adjust on the books compensation versus what the perks and benefits side of the compensation picture, which they already are struggling with in some cases. Don’t get me wrong, I actually don’t think this is a bad idea. I think it’s a move in the right direction to start thinking more broadly about this as an issue, but I think like all things, whenever you start to open things up you’re going to find people who are going to figure out ways around it.

John Sumser:            Yeah. That’s how it works, I think. You think that that’s going to turn into a more aggressive moving of people into contingent worker categories so that it will in fact raise the average by taking the bottom people off of the payroll?

Stacey Harris:            I think it could. I think it could if it’s something that starts getting paid more attention to. A good example of this is that … I don’t know the year. Three or four years back in Europe, they had started actually requiring that engagement scores were shared in annual reports and board documents for public organizations that had anything to do with government funding as well. What you found was … There was a lot of organizations who focus on engagement, and that was good and it was a big topic for a long time, particular in the European organizations, but it also caused some situations where there was inflation of engagement. There was different ways of looking at engagement, right? Engagement is one of those factors that we don’t all define the same way, and I think in some cases, as much as we regulate it, employees aren’t looked at in the same way here in the States definitely, but across the globe as well. I think the differences in how employees are labeled and looked at could allow for some of this to also change.

John Sumser:            That’s interesting. Between the two of us, we have a very cynical view of how organizations will respond to this.

Stacey Harris:            We do. Yes.

John Sumser:            I go directly to embezzlement and you go directly to screw the employees.

Stacey Harris:            Yeah. I’m not sure what that says about us, John. I don’t know.

John Sumser:            I’m thinking it just discovered the liberal bias idea. Oh my goodness. I really didn’t realize that we had become that … It’s a very liberal view. There’s another view. The other view is that compensation shouldn’t be directly related to some sort of performance and these companies make a lot of money.

Stacey Harris:            Yeah.

John Sumser:            So CEO’s who make money … If you compare what they make to employees, you get one kind of picture. If you compare to the value they deliver to their stockholders, you get a different picture.

Stacey Harris:            I actually think that this is a bit, politics aside on this issue, I do think that part of this dialogue isn’t just about workers and middle class and all that conversation. It’s also as much about brand, brand management in your organization, right? At some level, there is a … Do these CEOs warrant, can you make a case at a brand level that these CEOs warrant those outcomes? The differences between those outcomes … Maybe that becomes part of the marketing communications and CEO’s new role, which is “I have to start showing more of my value.” I don’t know if that would come about, but there’s some of that too, that could be in here.

John Sumser:            We should poke at that a little bit. The problem with making executive compensation part of the brand message is that the CEO of the Dollar General store might just do a way better job than the CEO of General Motors and be worth more money as a result of doing a better job. You could never get that through the brand, because the brand is about thriftiness, right? If the brand and the executive compensation are at odds with each other … God help us in a world where CEO compensation is part of a brand. I think you’d find people really resistant, the idea that my Skippy peanut butter tastes worse because the CEO makes more money. It’s interesting to wonder how far this actually can impact the brand. I’m sure there are some cases where it’s an extraordinary impact.

Stacey Harris:            I think we could take a small case study, not exactly so much on the CEO salary, but on the company employee salary. We were talking before the call that this slightly related to what’s going on with the Gravity organization. The CEO last year who announced he was going to raise all of his employees wages up to $70,000. At least his base employees’ wages up to $70,000. It’s a merchant payment processing organization.

If you read through some of the articles that have been out this last week, and some have been saying that he’s not succeeding, some saying that he is succeeding. I think it depends on, again, bias and how you’re looking at it, but there was a hit to his brand and to his client base because some people saw the statement and the work that he was doing and the commentary as both being politically driven, but also feeling that he might damage the ability to keep people’s rate the same. I don’t know if that’s the same thing you’re talking about as brand connected to that, but they lost some clients because of what they had done, because of that from a brand side. They lost some employees, too.

John Sumser:            Really? Really? That lost clients over a compensation policy?

Stacey Harris:            Yeah.

John Sumser:            Can you imagine saying that a year ago? They lost clients over a compensation policy? Really? Stacy, I’ve never heard of that. They lost clients over a compensation policy. I can’t even imagine the world in which that’s true. That’s really interesting.

Stacey Harris:            Why does that shock you so much? It doesn’t shock me. To me it’s a brand and an image conversation, right? Which is everything these days. Why does that throw you for such a loop? Because you don’t think that that’s something that people pay attention to?

John Sumser:            So, you’re in the grocery store and Safeway pays $22 an hour and the local grocery store pays $15. Does that make a difference where I shop? I don’t think so. Does it to you?

Stacey Harris:            I think it does. I think it does. If I see enough stories, I hear enough people talking about what they’re doing and why they’re doing it, and that salary is connected to some agenda, right? Then yeah, I might.

John Sumser:            That’s fine, that’s fine. The story is the Safeway Checkers are unionized and the local grocery store doesn’t have the scale to compete. The local grocery store doesn’t pay as well. It’s kind of a nicer place to shop, like a lot. There’s a pay differential. There’s an absolute pay differential there. Actually, you can find a number of employees who are proud to be working there because of the pay differential, even though that is crazy. I’m proud to be here, I make less. I don’t know. It’s very foreign territory. I don’t think I would choose between Burger King and McDonald’s based on compensation.

Stacey Harris:            It comes down to how much we’re convenience driven in society here in the United States. If something is five miles father down the road, would that make a difference in my decision, right? Versus something that’s two miles closer. It’s very likely that that would, and I hate to admit it but it’s an honest truth, right? I’d say that around the globe, that may not be the case. Around the globe, I hear differently, that here in the States we’re a bit more tied to convenience and price.

John Sumser:            Interesting. Interesting. We’re in a new era. I know some people are going to be uncomfortable as this stuff gets out because it looks bad the first time you look at it.

Stacey Harris:            Yep. Well, if we’re talking about benefits, this is a big question right? How much of your compensation, how much of the work, is based off of pay ,and how much of it is … That you expect, I should say. I should put copy on that. How much of what you expect is based off of what you just generally deserve as a paycheck, and how much is based off of the work environment, the extra perks you get, the things that are valuable to you as an employee? That gets into the last article that I had highlighted here. The last two, actually, which are about perks that employees get. One is from the patent office, which started out as a perk, and then became something that was written into their union law, or union regulations, which was working from home. Which actually had some challenges for the patent office. Then the other one is Intel is now doubling bonuses in their organization to try and acquire references from employees for employees who are either women, who are their diverse protected classes, or who are veterans. Both of those are seen as perks, or bonuses, right?

John Sumser:            Wow. Intel is having troubles with diversity. I think diversity in certain circumstances is getting lots of attention right now. I don’t know how you solve that particular problem. You can’t print more women engineers. You just can’t do it. You can’t print more black engineers. It’s a finite pool and so the people who are going to be more diverse are going to pay people to come and be diverse with them.

Stacey Harris:            Yeah. The CEO of Intel literally said in an interview he doesn’t know what they’re doing is the right way to address this. He is literally unsure of this. There are a lot of experts in this industry that say that there’s a lot of ways that you address this and it’s not just through finances and it definitely has to start at the beginning of the issue, which is at high school and elementary school levels where people are pushed our guided as far as their careers go. That still comes down to the fact of am I willing to pay more to be more diverse? Is that what I need to do or should do?

John Sumser:            I think diversity is powerfully important and I haven’t yet seen data that says diversity always produces a better return, for instance, or diversity produces any kind of return. I haven’t seen data. That’s probably because I have a limited view of the flow of data about things like that. It’s entirely possible that there’s a great body of work proving that diversity falls immediately and directly to the bottom line. I’ve just never seen a shred of that. So paying more for something that doesn’t produce an observable result tells me that the economy is doing really well. This is not the kind of place where people spend money when money’s tight.

Stacey Harris:            When money is tight, or brand is becoming a bigger issue, but I think it’s probably more a factor that the economy is doing well. Brand becomes a bigger issue then underneath that umbrella. I think the other side of what you just talked about is does diversity create a better outcome? That comes back to a technology discussion, because to get to that you literally have to be tracking that, right?

John Sumser:            Really?

Stacey Harris:            You can’t … There’s no there way to track those outcomes and we have a hard enough time tracking if any changes in employees have an outcome that impacts the business, right?

John Sumser:            Yeah. You couldn’t possibly ever under any circumstances do the work it would take to prove that diversity works. You can’t do it. You can’t do it. You can’t set up a test group of non-diverse people and a group of diverse people inside of the company. Are you kidding me?

Stacey Harris:            I know.

John Sumser:            We’re going to have an all white work group over here, and then we’re going to have a blended work group over here. Go, see who’s better. Holy shit.

[crosstalk 00:27:03]

That’s not going to happen.

Stacey Harris:            I know, I know. You would have to look at static data.

John Sumser:            They’d put you in jail for even raising that idea.

Stacey Harris:            On the other hand, it just reminds me of my very first stats professor when I was doing it … We would do statistics on education and he said “who ever wants their kid to be in the control group?” It’d never get done in education. What I do think you could look at … And again, this means that public data would have to be available at this level. You can look at cooperation by corporation or business by business and compare. You’d have to figure out a way to do this. It would be very very difficult analysis.

John Sumser:            No, no. You and I both live in that world. You couldn’t get the data.

Stacey Harris:            Yeah, I know. That’s a challenge, to get data. The real data. Yeah.

John Sumser:            You couldn’t get the data and there’s not enough money to get the data. It’s not get-able data because the peculiarities about every company … a little bit more capital makes all the difference in the world in how you run a company. You have to have a very sophisticated understanding of how capital works and even the great investment bankers don’t really have a grasp of the difference between slightly under-capitalized and slightly over-capitalized. It’s a big, big different in outcomes. Work behavior, what the cultures is, what their ability to tolerate things are, how they make decisions.

Stacey Harris:            That might be worth a conversation the next couple of weeks is to really talk a little bit about how organizations are assessing the value proposition and what they’re doing with diversity. I think it’s worth maybe pulling some data on that and understanding what they’re doing in that space because it is a hot topic right now. It always tends to be a hot topic when you start bringing in issues like engagement and teamwork and collaboration. Like you, I looked at some of the data. I actually had an opportunity to go to a really great conference not too long ago on this topic. I will say most of the data still runs around purely diversity numbers. That’s really where most of them are coming out at. It would be interesting to see people doing some other interesting research in this space.

John Sumser:            Yeah. Let’s think about that. That’s a really good idea. We blasted through another half an hour. What a great conversation. Thank you.

Stacey Harris:            Yeah, definitely.  We  talked about almost all the interesting topics this week.  Next week … I don’t know. Will you be travelling next week? I know I’ll be travelling a bit next week, so we’ll call in from wherever we’re located next week, john.

John Sumser:            Where are you going to be?

Stacey Harris:            I will be, once again, Las Vegas. Everything is in Las Vegas this year. The success factor is a customer event next week to just heard a little bit more about what’s happening there with success factors [inaudible 00:30:34].

John Sumser:            Wow. Have fun. Have fun. Enjoy Las Vegas, because I know there are still probably many things about Las Vegas that you’d like to discover.

Stacey Harris:            I’ve seen more of Las Vegas this year than I really want to see at all, but definitely. We’ll talk to everybody next week and we’ll talk about what’s happening and hopefully some more interesting conversations.

John Sumser:            All right, thanks Stacy. It was good this week. Thanks very much and thanks everybody for tuning in. You’ve been listening to HR Tech Weekly: One Step Closer with Stacy Harris and John Sumser. Have a great weekend.

End transcript


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