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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: 52
Air Date: January 7, 2016


This Week

This week John and Stacey discuss:

  • Salary, Compensation, Benefits, and HR Technology in 2016
  • IBM Sells Compensation Business To The Original Founding Team Link
  • Compensation and Benefits News in Healthcare, Fair Pay Law, Spotify’s New Parental Leave
  • Malvern firm faces $1.75M bill to pay workers denied bathroom breaks Link
  • SterlingBackcheck Announces Merger with TalentWise Solutions Link

About HR Tech Weekly

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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Begin Transcript

John Sumser:                        Good morning and listening to the dancing leprechaun and you are listening to HR Tech weekly, One step closer with Stacey Harris and John Sumser. This is our 52nd show and we’re happy to have you on board. How are you Stacey?

Stacey Harris:                        I’m doing good this morning. We’re back home in North Carolina. It’s the first of the year, not a ton of news but some interesting news this week. Happy to get a chance to start the year off with a good conversation.

John Sumser:                        I think this show, the abstract for the show is liable to be salary compensation and benefits as HR technology. Hang in there because there’s interesting stuff going on.

Stacey Harris:                        Yeah there is.

John Sumser:                        What’s in the mail bag Stacey?

Stacey Harris:                        What’s in the mail bag? The mail bag this morning … So I went digging and I came up with a couple of interesting things this morning. I don’t think there things that people would have seen because I don’t know that all the news articles have been out about them yet. I came across them both through some conversations and from doing a little bit of investigation myself. One is that IBM sold for anybody who remembers … I don’t know how long that’s been I guess it’s been probably what 3 years now maybe 4?

John Sumser:                        5 [crosstalk 00:01:31].

Stacey Harris:                        Five? Wow has it been that long? Time does fly. IBM had purchased, well actually Kenexa had purchased right before them. They were purchased by IBM and now it looks like IBM has sold and companalyst the technology that went along with it back to their former founders. Who I believe you might know them a little bit John. So that’s one thing that’s well worth having a conversation about today. There’s also some interesting news about the new California Fair Pay law that’s basically being put in starting affective January 1st. There’s some interesting articles about how that impacts diversity and women issues inside the work environment and how that impacts businesses both inside California or who have employees in California.

Then there’s a couple articles today about some organizations who are having to give back money, 1.7 million dollars to workers who they denied bathroom breaks being paid for. Again, that goes along with what are benefits that you’d be paid for, what are benefits should be paid for, how does that come up against labor law. If we get time we can talk about all that and there’s a couple of small articles about SterlingBackCheck and merging with Talentwise and some Gartner information about an internet of things. A lot to talk to about even though it was a small news week.

John Sumser:                        It’s a good time at the first of the year to think about how compensation of benefits are really changing. The net impact of the Affordable care Act is that everybody has health insurance and you don’t lose your health insurance when you go from one company to the next company. What’s happened is that benefits that used to be real differentiators for companies are no longer differentiators. It turns out that benefits are more meaningful in decisions about where to work and whether to stay then people had thought initially. It will be a great conversation about that stuff. [crosstalk 00:03:47] go ahead.

Stacey Harris:                        I was just going to say I think article is exactly part of that conversation because a lot of people don’t think about the compensation as part of the conversation around benefits. It’s a big part of conversation around benefits, it’s the compensation in the benefits package that makes that whole conversation work right?

John Sumser:                        That’s exactly right. What’s interesting, what happened is that IBM sold back to a team led by Kent Plunkett who is the founder. I should say that I was on the board of directors at from it’s earliest days to the sale to Kenexa. What I can tell you about that team is that they are radically entrepreneur. You may not remember this but what did is they began the trend towards salary transparency. By the time they were sold it was starting to be accepted that everybody knew everybody’s salary and that you could look it up. Today it’s a matter of course when you go to look for a job or go in to talk to the boss about a raise that you go to the internet to find out about your salary and what you’re worth. They were disruptive in a way that few company’s, I think glass door may have disruptive. There are very few companies who are actually this disruptive and my sense is that in the hands of this team they’re going to try to find some additional ways to be disruptive. It’ll be cool.

Stacey Harris:                        I think it’s going to be interesting because I very … You know your commentary that they were very disruptive. I worked in Ohio in a retail organization probably right about the time was starting to get off the ground right. I can remember having a conversation with my employee that came to me with their print out saying here’s the salary of all the other people who have my type of role in other organizations. My siting there with that sheet of paper saying “What the hell am I going to do with this?” Who do I take this to? Where do I have the conversation? That was my first [inaudible 00:06:09] into compensation as a manager and I think what’s going to be interesting is that they’re getting this back where we’re also seeing laws and regulations open up about the fact that people can start to talk about their salary.

That was what the new California Fair Pay law was all about. It goes into effect January 1st but it really is supposed to be a tool that helps employees with being able to have open conversations and transparent conversations about their compensation with out being affect or having any sort of impact from the company. The company can’t go after them and say that they’ve done anything if it’s in their policy or their procedures. If they’re a California employee at this point, if they’re openly talking about compensation. Particularly the goal of this open compensation law is to start to get some insight into whether or not women and men are being paid fairly across the board for the same type of work. Now John, you live in California this came about in many cases because of some of the recent hi tech law suits that have been put in place. Do you think that this is going to have an impact at least in California on open compensation conversations?

John Sumser:                        What’s interesting here is that for many years people have thought about doing things like creating a shared Google doc by people who … That’s not on the company servers where everybody in the company can volunteer to enter their salary. So you have the people at work building their own salary database and the places where that’s been tried people have been fired for doing this.

Stacey Harris:                        Exactly.

John Sumser:                        So the law is to reinforce the idea that’s an okay conversation. That it’s okay to know … Now you and I are at the tail end of a generation that’s at the tail end of another generation where talking about this stuff it’s easier and more appropriate to talk about sex then it is to talk about how much money you make.

Stacey Harris:                        I agree yes.

John Sumser:                        It’s far more taboo to talk about how much money you make. Part of what you’re seeing is we’re breaking down that taboo. It’s not a surprise that that happens first in California but I tell you what if I lived some where else I’d be jealous. It means that you can talk about something that’s critical.

Stacey Harris:                        I think it’s going to be interesting to see because the two articles I pulled on this, one was from Fast Company which was talking about how much this was going to impact the hi tech industry and fast growing small organizations who have really not paid much attention to HR as a big part of their growth strategies. This is going to put HR in a very different light for many of them. The other article was from a Kansas newspaper that said this is how it’s going to impact Kansas businesses who have employee’s in California. If someone in California is talking about their salary openly you can’t really do anything about that and you can’t really do anything about that if someone in Kansas is talking to them as well.

So the conversation I think is going to be much broader and much more global than we were probably thinking about. I was actually more intrigued when I was going through all the reading and stuff. When I was listening to some of the commentary from the journalist about the fact that they’re seeing this as an opportunity to not just have open and transparent conversations about compensation but to have organizations actually start to do their own analysis of their diversity compensation issues. I actually just had a conversation with a friend of mine he works over at PeopleFluent who has a couple of technologies do some of this type of analysis if organizations are looking for it as well.

I was quite surprised by, well I shouldn’t say I was surprised, I was not surprised by how many organizations shy away from this currently. That they don’t want to know about their disparity issues, it’s not something they want to have on the books anywhere. Do you think that this is going to actually get more organizations to start doing some of that type of analysis? I’m not sure that I think it is but that’s what she felt it might.

John Sumser:                        It’ll take a couple of news stories where companies get interrupted because there’s disparity and inequity in pay. Now I don’t think that actually happens much right now in [inaudible 00:11:10] backed operations because if you want to see an over managed company you go look at somebody who’s taking [inaudible 00:11:20] financing. They actually do have coherent HR early on and the best of those companies are actually leaders in small company HR practice. The Valley has a ton of small operations that are pre financing in which this is going to start to really matter because the net effect of this kind of transparency is it brings equity and balance into organizations that have not had to have them. I think over the next couple of years this will probably have a big effect in the work place.

Stacey Harris:                        The other thing that I thought was interesting on the articles that they mentioned was that not only did they feel that this was going to push the conversation for compensation disparity analysis. They also felt that it would push the conversation further towards objective performance evaluations. That was where a lot of this was based off was complaints from California based lawsuits that basically said that certain females had not gotten evaluated the same way. There was no performance evaluation process that objectively looked at everyone across the organization. Now we’re in the midst of big shift in other organizations where they’re trying to pull back from performance management evaluations. That was surprising to me that people were sort of saying that this might drive more performance evaluation processes which is part of where we started. When we started talking about performance evaluations that were on curves and ranked and rated. Is that objective tools would allow people to manage the risk of having EEOC complaints those type of things against them for performance management processes. I don’t know, do you think that’s going to push back a little bit on the wave we’ve been seeing of people getting rid of their performance evaluations?

John Sumser:                        There are two related problems here. Problem one is how do we make sure that there’s balance and equity in pay and how do we distribute the merit increase pool when it’s limited and you can’t give everybody the raise that you’d like to give everybody. How do you sort that out? That’s the management problem with compensation. The performance management problem which is are you doing the job that you’re supposed to do and are you doing it well and where are you having problems and how can we make you better. The part of performance management that trends towards development is a separate thing. What we’ve done all these years is married the two. This might just be the way that we separate those two questions into different piles so that we’re not confusing how valuable you are with how much you get paid and how much of a raise you get. [crosstalk 00:14:37]

Stacey Harris:                        Is that going to bring up more conversations about other types of benefits? You’ve been doing a lot of research on benefits John. I think one of the areas that I think I’ve seen other organizations start to really leverage in this is trying to keep the compensation equity more with in their bands and with in ranges that they can defend on a legal front. They’re looking at other benefits as tools and ways to in-cent high performers. Do you think that might be the direction their organizations are heading? I’ve seen a little bit of it not a ton of it but I think enough of it to say that it could be a trend we’re seeing.

John Sumser:                        Money is money and if there’s transparency about cash in your pocket through things like and a number of other places now. Then it becomes a commodity just like health insurance has become a commodity. The fact that you can get health insurance at work doesn’t differentiate until you get to the sorts of organizations that are able to offer health insurance where it doesn’t cost you any money at all. Zero deductible health insurance policies which are things that you can find in huge organizations that you can’t find anywhere else. The competition for compensation related stuff that results in retention is accelerating and that’s really what you see in Silicone Valley with the sort of pet therapy insurance or gold fish protection insurance that you can get. Chef made lunches in the office, that sort of stuff, all of the sorts of benefits are becoming more differentiated because the core things of compensation and health insurance and soon 401 K’s and retirement related stuff are all standardizing.

There’s no difference between one employer and another in those areas and if they want to retain you using benefits they’re going to have to get extremely clever. This week joined, I forget exactly what it is, the International Association of Employment Benefit Counselors or something like that. I’m digging into [inaudible 00:17:03] the benefits so now I am member of this [inaudible 00:17:08] organization. They listed 90 different kinds of possible benefits in their literature. Amazing and it turns out, I’ve been deep in this for about a week now. It turns out that the benefit that people are most interested in is work place flexibility. Which doesn’t deliver in the way that a more compensation oriented benefit does but has great … What you want to do with benefits is build loyalty to the company. The ability to carve out your own schedule and decide when you and don’t have to come to work is something that people really like and really want.

What you start to see is that in the differentiation between companies, benefits are a field in which companies are differentiating their employee value proposition. What they’re doing are extraordinary things that make it so that you can only get this benefit at this company if you’re in this demographic. It turns out that the benefits package that’s interesting to a 60 year old grandmother, single woman are not the same benefits that are interesting to a single 27 year old woman. I talk to some people … Go ahead.

Stacey Harris:                        No, go ahead, I was going to say it fits with our next article but if you’ve got some more insight on it go ahead.

John Sumser:                        I talked to a middle manager at Spotify and Spotify just launched it’s parental leave program. They offer something like 20 weeks of parental leave on the birth of a child to either parent.

Stacey Harris:                        Wow.

John Sumser:                        They hadn’t had that before which Beth, she’s 27, she says “I know I’m going to get married, I know I’m going to have children, I’m pretty sure I’m going to work at Spotify for a long time. So what I have to do is save my PTO to the max so that when it’s time to get married and when it’s time to have a child I’ve got that capacity. When they gave me this additional parental leave benefit I’m not able to take a day off when I’m sick instead of showing up and not using my PTO when I’m sick.” She was grateful, absolutely grateful and in love with her company for doing it. Now the thing that’s going to happen is 5 years from now everybody will be offering that and it won’t differentiate anymore and we’ll be on to what the next differentiation is. There’s a brewing arms race in benefits I think.

Stacey Harris:                        I think this whole conversation about flexibility and time off or flexible benefit models that got to the heart of what people are looking for. Based off of not just demographics and age is also a very regional and cultural conversation too. One of the articles that I picked up was this Philly based organization in Melbourne, Pennsylvania that is basically being required after going through some legal issues with the department of labor in Philadelphia. They have to pay back 1.7 million to workers who they denied payment to for taking bathroom breaks or taking any kind of break during their call center work that they were doing for the organization. Primarily a call center for a magazine subscription business. What was interesting I was reading through all the commentary on this article and the CEO of this 700 person organization, small organization that’s dealing with this but it’s comment was we were trying to give them flexibility that they could go and do and take as long as breaks as they wanted by doing this.

Inadvertently it sounds like in doing that they went into a lot of legal issues that impacted them as a small organization that cause them to possibly close their doors. If they’re not able to manage this appropriately. You also had workers that said no this was really a big challenge for them because they couldn’t leave their desk with out getting paid. Do you think we’re going to see, right now these benefits all are great things as the economic market is doing well. What happens when we go into a down turn in the economic market? Which is when this happened. This was between 2009 and 2012. Between the down turn in economic market particularly for the mid west there. Do you think we’re going to see more of that kind of thinking as well in that flexibility can be turned on it’s head of it?

John Sumser:                        There’s a strong set of dynamics driving towards the ultimate pay for performance and the ultimate pay for performance is peace work. In the contingent labor future that people dreamily talk about it’s a peace work world. Uber is a peace work job and the world of contingent work is all about peace work. I’m an independent contractor a lot of the time and that means that I’ve been working on piece work forever. There’s something to the freedom associated with piece work but as you’re pointing out the underlying anxiety which is if the work drys up what in the world do I do. It used to be that company’s bore that risk and now that risk is being passed directly to employees. I think that there’s a dark side to this side that people don’t notice just yet and it’s still early enough in the process so that managers resent the flexibility and they won’t notice how much better it is when the down turn comes to be manger as a result of it until the down turn comes.

Stacey Harris:                        That’s my concern, I think all of the flexibility is great and I agree. I think people who are given more ownership of their environment and their work day and what they can do with it is a real valuable proposition. I think there is a dark side and as you commented or a riskier side of this for employees but I also think there’s a riskier side of this for the businesses because they don’t know what line they can cross when they’re doing this. I think that again hearkens back to the role HR’s going to have to play for a small and mid market organizations is that in trying to differentiate your level of flexibility you could be crossing lines you’re not even aware you’re crossing in some cases.

John Sumser:                        I think we’re living in a time where the realities of business have out stripped the realities of the legal structure. This is something my wife and I teach a class at the local law school about internet law. What we’ve concluded in that class is that the technology is changing so fast that the law will never catch up with it. That the fundamental institutions of the law in country are broken and are not going to get fixed because technology is moving too fast. Part of that technology move is this rearrangement of the social contract about work and it’s moving so fast that you have to make competitive decisions without regard to the legal implications. The legal structure is designed to facilitate businesses that worked in the 1980’s. It’s not 1980 and so we’re going to see I think a lot … I don’t how intense it will get but there will be social disruption around this because businesses won’t have any choice. They’re going to have to experiment with this stuff and if this case that you’re talking about actually is a failed good intention that puts the company out of business then we’re going to see lots of noise around this. In our current environment lots of noise doesn’t result in good ideas it results in people yelling at each other.

Stacey Harris:                        It results in a lot more risk. I don’t know if that’s the case in this particular situation I was reading through the lines in the article and it’s a short article. I do think that you’re going to see more of that kind of conversation and whether or not it’s good intentions it could be just trying to think through ways to manage cost and flexibility at the same time. There was sort of a way you did it in the 1980’s this is how everybody did. We’re going to have to figure out what is the new norm. What is the way that everybody does it and that’s going to require some level of standardization again or a group of professionals with in the HR space or the legal space who advise you on your decisions on a regular basis and your business. I’m not sure what the answer is to that and I don’t know if we can go back to any kind of standard model because as you said the things that are standard are standard across to everybody now. The compensation, the health care benefits, the retirement packages both here in the states and globally all of that stuff is becoming much more government over sighted in all regions.

Really the big differentiators come down these much more sort of clausey fluid things that are benefits that have a lot more room for interpretation on the legal and HR front. It will be an interesting time I think for anybody. Kind of wrapping up in our last two minutes here, the only other thing that article shows even more of how some of this might be changing is this SterlingBackCheck inquiring TalentWise, I don’t know much about either of them but the big commentary in that article was that they were sort of bringing together the world of background checks. In an onboarding that had never been done before. I thought “Boy I’m not sure how comfortable I feel about all that background check and onboarding being in the same tool.” You said you know TalentWise a little bit John, do you think this is just pulling together company and all their supporting tools to make this easier or is this going to be something different for them that they’re going to be able to offer?

John Sumser:                        I think from an offering perspective this just makes the TalentWise’s business a little bit more seamless. Gives SterlingBackCheck a front end that they can deliver. It makes some sense as alliance. As far as the consolidation of the data being an evil we should be concerned about, my experience has been that when something like this happens it causes five more companies to pop up. Every single purchase of a company results in smart entrepreneurs going “I should build one of those.” The more that the businesses consolidate the more it fractures. I don’t think investors get that what happens when you buy a company is you create it’s competition but that’s in fact what does happen. I expect to see more TalentWise’s.

Stacey Harris:                        More small companies who are doing the onboarding front end that goes along with the background checks. We did just see Greenhouse just picked up their own onboarding tool. I think onboarding is a conversation we’re going to hear a lot more in 2016. It will be well within an ongoing conversation.

John Sumser:                        I agree.

Stacey Harris:                        John we’ve hit the end of our 30 minutes already.

John Sumser:                        Thanks, Stacey. As usual it’s been a blast talking to you. Thanks everybody for checking in and we will see you same time next week. Thanks again Stacey, bye bye.

Stacey Harris:                        Thanks John, thanks everyone, bye.

End Transcript

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