A Strategy to Win the Talent War

Terry Pile

REA Career ConsultantWhen Don Fisch told his wife Susan of an opportunity with a large technology company in the United Kingdom, her response was a mixture of joy and concern. Don and Susan spent a couple of years overseas in the 1980s. It was a terrific experience, and one they hoped to repeat.

Fast-forward twenty years. The Fisch’s now had two pre-teens comfortably ensconced in the public school system. Susan was almost finished with a hard-earned graduate degree in Library and Information Services, and she was eager to apply her new skills. An overseas move undoubtedly meant postponing her career; a sacrifice she was unwilling to make.

The Fisch’s dilemma is a common one. According to the Employee Relocation Council, nearly one million Americans relocate for jobs each year. Over 75 percent of those are married and dual career families. (Over 20 percent of the accompanying partners are male and that number is growing.) Of the employees who are reluctant to move, 63 percent site partner/family resistance. With assignments overseas, the rate is even higher, and with good reason.

For most accompanying spouses/partners who are relocating abroad, finding work isn’t easy. Immigration laws for employment are complex and applications can take years to process. Careers get pushed aside as other pressing issues take over, such as finding housing and schools for the children, dealing with transportation and acclimating to a new culture and language. Once relocated, it is generally expected that the accompanying spouse/partner will continue to be responsible for keeping family life running smoothly. Careers can be put on hold for years and in some cases damaged beyond repair.

What does this mean for employers trying to do business in a global marketplace where the war for talent is heating up? According to a study by McKinsey & Company which involved 77 companies, the most important corporate resource over the next 20 years will be talent; smart, sophisticated businesspeople that are technologically literate and globally astute. However, in 15 years, there will be 15% fewer Americans in the 35 to 45-year-old range than there are now. Although the demand will increase for talent in this age bracket, the supply will diminish. Finding talent to relocate overseas will be increasingly difficult as the accompanying spouses/partners become entrenched in their careers.

The more aggressive and visionary companies are taking a non-traditional approach to recruiting and retaining talent for overseas assignments. They are aware that the success of relocating an employee abroad depends largely on the happiness of the accompanying spouse/partner. Increasingly, these companies are hiring international relocation assistance services to help with the special needs of expatriates and their families. In addition to assisting with housing, childcare and language, relocation assistance programs often help the accompanying spouse/partner explore alternatives to employment or options to enhance or advance a career. The result is a significant reduction in relocation resistance and failure rates among overseas candidates.

In the book, A Career in your Suitcase 2, REA consultant, entrepreneur and author Jo Parfitt discusses the range of challenges the accompanying spouse/partner experiences when trying to find employment in a foreign country. Career consultants who specialize in working with expatriates can help negotiate the rough waters of obtaining work permits, understanding cultural differences and determining education/certification compatibility, to name just a few of the obstacles.

Parfitt offers “Fifty Brilliant Ideas” for individuals who want to continue working while living overseas. Some of these options include self-employment, internships, additional education, telecommuting and volunteering. She points out that with the benefit of an international career consultant, the aid of technology and a bit of ingenuity, “the accompanying spouse/partner can maintain a career identity while finding adventure, vocational growth and exciting opportunities in a global economy.”

Fortunately for Don Fisch and his employer, Susan was one of the 14% of accompanying spouses/partners who did find employment overseas. During a preliminary trip to England to check out housing and schools, Susan discovered that one of the schools she was considering for her daughter had a librarian position open. She applied in May, finished her degree in June and started her new job abroad in August. “My job was miracle,” said Susan. “From my observations of other expatriate parents, it is unusual for a (accompanying) spouse to find work.”

With a shrinking workforce and the predominance of dual career families, forward thinking companies are seeing spouse/partner career assistance as an important investment to their international growth strategy. Whether it is hiring a career consultant, subsidizing educational pursuits or providing legal aid to negotiate immigration issues and work permits, the employer who is sensitive to the career needs of the accompanying spouse/partner, has the edge in the fight for recruiting the best talent available.

Terry Pile is a career consultant for Ricklin-Echikson Associates (REA), a global human resources consulting firm specializing in partner assistance services for relocating families. She also is president of Career Advisors, providing career transition and outplacement services to individuals and small businesses. www.careeradvisorsonline.com.

THE AGING WORKFORCE

Challenges, Issues and Operational Impact

In October, 2007, when the first of the baby boomers walked into a Social Security office and applied for those benefits, one era passed and another began. In keeping with what they’ve been doing since birth, this generation is becoming the catalyst for yet another series of profound changes in the marketplace, the workplace, and arguably the world in general.

Over the past two years, Ernst & Young has surveyed a number of Fortune 1000 companies and talked with many C-suite and Human Resource (HR) executives to track what changes may be occurring as the baby boom generation nears retirement. With 43% of the workplace eligible to retire between 2004 and 2012, we wanted to see whether planning activities were being anticipated or implemented. How were companies preparing for the upcoming wisdom withdrawal? What changes were they making in their compensation packages or benefits? Where did they think they would lose the most talent and what were they doing about replacements? Did they have strategic plans or were they reacting to one-off occurrences? Had the fact and scope of potential “wholesale retirement” registered with them at all?

We’ve continued to track the impact of the baby boomers—from a high-level perspective in our 2006 survey to a more focused look at the operational impact in 2007—sharing our knowledge via a series of whitepapers, articles and a recent web cast, held October 24, 2007. While we haven’t seen a groundswell of actions and programs, we have seen a significant increased awareness of this impending business risk and its impact on the organization. In 2006, just under 40% of our survey respondents said that retaining key employees and maintaining intellectual capital was their number one concern. By 2007, nearly 70% had such human capital issues at the top of their lists. Whether they called it the talent gap, brain drain or wisdom withdrawal, just over three in ten said that was their concern in 2006; seven out of ten did in 2007.

Despite being more focused on what’s happening with their aging workforce, however, companies still seem to be operating from a more reactive point of view. We’ve found very little affirmative strategic planning to address the mounting issues and meet the challenges that are arising with growing frequency.

That said, the impact of the aging workforce is beginning to be recognized as a critical business risk, not just an HR concern, with strategic, financial, compliance, and operational ramifications. It’s a complex set of issues requiring long-term solutions and a broad level of accountability from boards of directors, C-suite leaders, and HR executives. Each company will want to look at its own “retirement population profile” in a holistic manner—understanding employee demographics, their interests and needs, the overall HR strategy and how it aligns with the business strategy—and factoring them all in to determine their implications for the organization’s financial statements. No quick fix. Not a passing trend.

KEY FINDINGS
The Ernst & Young 2007 survey and its comparison to the 2006 survey responses resulted in key findings that provide insight into the corporate landscape and how the aging workforce is changing it. These findings fall into the general categories of talent and succession planning, retirement, health care, executive compensation, and HR risk and compliance.

TALENT AND SUCCESSION PLANNING
This is the issue that may be considered the most strategic, as it deals with how organizations today recruit, retain and develop talent for the future. More than 40% of the survey respondents said they have a high turnover in key positions. Middle level retention was the concern for 41% of respondents, while 75% of those with succession plans said they focus on the senior management level. Since 52% said they go outside their organizations to hire for key positions, it’s clear that companies will feel the impact of increasing costs in training and development, as well as in health care and retirement. With retention such a critical issue, it’s important for companies to start focusing on programs for retaining and developing middle management to promote strategic growth.

Organizations that do a good job of succession planning and talent development will be ahead of the graying curve and on the way to higher retention rates, higher productivity and higher employee satisfaction, creating significant future financial and non-financial returns.

As employers are paying more attention to the literal transfer of business wisdom from their baby boomers to the next generation, one of the practices having significant success is mentoring. In the past, the role of the mentor has been a relatively informal one. With this newly defined need, however, companies are formalizing the practice. Older workers are formally assigned to younger workers who have potential in a specific area of expertise, with the goal of developing these individuals along career paths that make sense and leveraging the mentoring relationship to transfer business wisdom, which goes beyond know-how to know-why.

Indeed, some employers are tasking their older employees with such specific mentoring and wisdom transfer goals that these are becoming part of their performance review criteria. Others are implementing job sharing,where a junior person shares a job with someone senior and more experienced and knowledge transfer becomes a measurable part of this arrangement. Yet another approach is actually to bring retirees back to the organization in a consultancy role. This allows an individual to retire when he or she chooses, yet extends the time for transferring knowledge and wisdom to other staff. Whether a company takes a more or less aggressive approach, de facto informal arrangements are no longer enough and some formal knowledge management/knowledge transfer plans may represent the only way a company can capture wisdom and keep it in the organization.

RETIREMENT
Retirement today is often a protracted process rather than a single momentous event. What’s more, people are working longer. Some employees retire, take their pension and then return to work elsewhere. Some are looking for a bridge from fulltime employment to something less than fulltime.

Employers are shifting more retirement responsibility (from financial planning to health care programs) onto their employees; they do not appear to have developed an accurate assessment of employee interests or to have implemented programs for win-win transitions. Phased retirement is one example of an available, yet underused, option for retaining talent and managing the wisdom withdrawal, from both cost and resource perspectives. Nearly 90% of organizations do not allow phased retirement and fewer than 30% are considering it.

Our survey also looked at issues relating to regulatory and legislative changes, but it wasn’t clear if employers have assessed how these changes could affect an aging workforce. More than half (60%) of those surveyed said their C-suite executives and boards of directors were concerned with the Pension Protection Act of 2006 or with FAS 158, the Financial Accounting Standards Board statement on employers’ accounting for defined benefit pension and other postretirement plans. About 20% were not concerned at all.

Wherever their focus lies now, employers need to assess what their employee population may need to look like in the future. Only then will they be able to determine what their needs and issues are when it comes to retirement programs. Although programs like phased retirement may be challenging to implement, they do provide options and flexibility that allow employers to hold on to their key talent. In addition, more dialogue between C-suite and HR executives is necessary so that organizations can better address these issues.

HEALTH PLANS AND HEALTH CARE ISSUES
Survey respondents ranked health care as the top program influencing a person’s decision to stay or retire. Even so, less than half said they had changed their benefits programs to respond to the financial needs of an aging workforce. Most of those said the action they’d taken was to increase employee and/or retiree cost-sharing in the medical plans. These responses are another indication that the majority of employers have little or no clear strategy. Although they have a strong idea of what influences employee’s to stay, they haven’t leveraged this information to drive decisions about their health care programs.

Employers without a retiree medical program may find that employees are staying longer than they normally would—a dilemma we call “health care handcuffs.” Ironically, this may be a welcome result if the employer doesn’t want to lose key talent to retirement, even if the decision to eliminate or not offer retiree medical benefits was most likely a cost-based one rather than a tactic for talent retention. This raises the question whether the lack of a retiree medical plan is keeping the right talent; those with the financial means to afford their own medical benefits after retirement may leave regardless of whether there’s an employee-responsive medical plan for retirees. Bluntly put, employers may find themselves in a situation where, rather than retaining the talent necessary to survive the brain drain, they’re simply keeping retirees on the active payroll. Alternatively, employees with an extensive retirement medical plan may find that they’re no longer handcuffed and retire at will.

Therefore, whether or not they have a retiree medical program, extensive or not, it’s imperative for employers to develop a long-term strategy to address the issue that 68% of respondents called top of mind—retaining key talent and intellectual capital.

All of this suggests that the demographic make-up of the workforce will significantly change over the next few years, prompting variances in health care costs. This may stem from the geographical dispersion of employees and retirees covered under a medical plan (active employees moving from cold weather climates to warmer geographies when they retire) or general changes in the demographic make-up of those currently covered under the health plans. Variances in health care costs can be directly influenced by geographical and demographical changes.

Health care costs are rising—at a fairly consistent rate of 7-10% and across the spectrum of employers. As suggested, though, the results of Dartmouth’s renowned studies over the years have shown significant variances based on where one lives. For example, lumbar fusions are performed 4.6 times more often for residents of Idaho Falls than for those of Bangor, Maine. In other words, claims change based on where a workforce resides.

There are also differences in cost of utilization when we look at other demographics of particular employee populations. For example, the health care costs for a 64-year old can be two to three times that of a 40-year old, and the cost for a retired individual can be more than that for a person of similar age who is active. Whether this disparity is due to the individual’s decision to retire because of health reasons or because the retired person has more time to address health care issues is really irrelevant. In either case, employers need to understand what drives the costs of health care plans for their employees, as well as their retirees. The absence of a strategic plan or a detailed analysis of health care programs and claims information can have a considerable impact on long-term costs, even causing an organization to miss opportunities for realizing economies of scale.

EXECUTIVE COMPENSATION
Although loss of key talent certainly isn’t limited to senior management and executives, the Ernst & Young survey did indicate that 75% of employers responding are most concerned with individuals at this level, where retention has long been a key driver for compensation packages. Our findings also indicate that many companies want certain senior management to stay beyond normal retirement, yet 60% said their compensation programs were neutral in terms of encouraging or discouraging retirement. That begs the question, “Can a company better use its pay programs to help address the wisdom withdrawal/knowledge retention issue?”

Only 17% of survey respondents indicated that long-term incentive programs were the top consideration influencing an employee’s decision to retire. Even fewer respondents (11%) said they believe that variable compensation will be a key retention factor, but 20% plan to increase compensation to address these concerns. Indeed, compensation is one area that lends itself to customization, because it can be determined on a selective basis, making it a more attractive vehicle for addressing aging workforce issues than broad-based retirement or health and welfare plans whose changes have to be more universal.

But if long-term incentives aren’t enough on their own to assuage the aging workforce issues, what other programs and features are likely candidates for consideration? Those deserving of a look include supplemental retirement plans, non-qualified deferred compensation plans, restricted stock and restricted stock units, even deferred bonuses with premiums driven by employment after normal retirement age. Any of these might contribute additional incentive for talent retention, yet none of them should be implemented in a vacuum. Also important are the broader business implications for the organizations’ pay philosophy and compensation strategy, cash flow, financial statement impact, tax impact, and more. While these considerations may not outweigh the prospect of losing talent, they must be assessed.

Our survey also revealed a paradox: some key employee pay programs work almost at odds with the mounting concern about retiree brain drain. For example, some programs reward individuals when they reach retirement age with automatic vesting or more liberal stock option exercise provisions. These are well-established compensation features, to be sure, and would have been particularly appealing to baby boomers when they were young, up-and-coming executives. But as more employees draw closer to the end of their careers, companies will need to address this possible reverse, adverse effect.

Though compensation program designs in and of themselves will not be the ultimate solution for avoiding the brain drain and loss of key talent, this is one category that can be a positive factor in a strong strategic solution.

HR RISK AND COMPLIANCE
Members of the aging workforce are increasingly opting for continued flexible employment, and Ernst & Young’s survey shows that 25% of respondents are trying to adjust benefits accordingly. While adopting policies and plan changes designed to benefit and retain experienced workforce members may seem the right move, such changes may not be compliant with pension and benefits requirements. What started with an employer’s good intentions may result in a negative impact on the tax-qualified status of a retirement plan or exposure to plan fiduciaries.

As Congress and regulatory agencies react to the graying trend as well, the playbook for retirement will be an iterative document, with the terms of compliance shifting with new legislation. An overwhelming majority of survey respondents (77%) say that responsibility for keeping up with these changes and their accompanying financial risks, then modifying the company’s plans accordingly, falls squarely on the HR executive. With 70% of respondents saying that compliance issues are top of mind in the C-suite, HR’s role will become both more demanding and more visible. Statistics notwithstanding, the optimal approach to ownership of these issues will be a collective effort—HR is the sponsor, with an understanding of, and input from, the organization overall with respect to issues, interests, needs and demographics.

In light of the newest requirements of the Pension Protection Act and FAS 158, companies are even more focused on being technically compliant. The ingredient that may be missing is an understanding of what that means through the lens of an aging workforce. The result is an apparent disconnect between what’s being done to address compliance, on one hand, and what management and stakeholders want, on the other. In contrast to this strategy gap, however, compliance with labor and discrimination laws has received more attention, with 69% of respondents having analyzed their plans to make sure they’re compliant.

Change in social policy relative to the aging workforce began to occur in about 2002. An employer now has the option to allow participants who are 50 or older to make 401(k) plan catch-up contributions, currently up to $5,000 and likely to increase. Additionally, defined benefit plans are allowed to pay retirement benefits as either a pension or a lump sum prior to the date a participant would reach the plan’s normal retirement age. As much momentum as there is behind the reality of social change driven by an aging workforce, pension and benefit laws have some catching up to do. When laws are passed that introduce change, it will be important to make sure that eligible employees understand such changes and know how to use them.

READING BETWEEN THE LINES
Complex and multi-dimensional though any discussion on the aging workforce must be, there are a few key themes that emerge from the statistics.

Employers are grappling with internal issues, particularly roles and responsibilities for solutions to the challenges posed by an aging workforce. Leading practices suggest that the best approach puts HR as the sponsor, with C-suite, boards of directors, and HR executives working together to develop a comprehensive strategic plan that dovetails with overall business strategy.

  • Solutions are as unique as the businesses themselves and should be developed based upon an in-depth understanding of employee demographics, business issues, competitive pressures, program cost drivers, and financial and business risks.
  • For retirement plans, issues will become more obvious as the workforce ages. A reactive posture won’t be sufficient; projecting change and continually monitoring the workforce will be key to identifying and recognizing the issues and meeting the needs in a timely and responsive manner.
  • In the push to retain key talent, companies should reassess the components of their compensation strategy, along with workforce demographics and particular areas of vulnerability, then use compensation adjustments as part of a comprehensive solution.
  • Succession planning and knowledge transfer require a specific strategy, with executive by-in and a collective effort enterprise-wide.
  • Solutions to the challenges will come from the “four R’s”: recruitment, retention, retirement and redeployment.

    The Ernst & Young 2007 Aging US Workforce Survey: Challenges and Responses an Ongoing Review was written by the following authors:

    William J. Arnone, Principal, Employee Financial Services, Ernst & Young LLP. He can be reached at William.arnone@ey.com

    William B. Leisy, Americas Markets and Services Leader, Performance & Rewards Practice, Ernst & Young LLP. William authored the white paper on Talent and Succession Planning and can be reached at William.leisy@ey.com

    Arthur L. Conat, Executive Director, Resource Actuary, Performance & Rewards Practice, Ernst & Young LLP. Arthur authored the white paper on Retirement Plans and can be reached at art.conat@ey.com

    David G. Johnson, National Service Line Leader – Executive Compensation Strategy & Design, Performance & Rewards Practice, Ernst & Young LLP. David authored the white paper on Executive Compensation and can be reached at david.johnson2@ey.com

    Edward Pudlowski, ASA, MAAA, Principal, Performance & Rewards Practice, Ernst & Young LLP. Edward authored the white paper on Health Care and can be reached at Edward.pudlowski@ey.com

    Christopher Lipski, Principal, HR Risk Service Line Leader, Performance & Rewards Practice, Ernst & Young LLP. Christopher authored the white paper on HR Risk and Compliance and can be reached at chris.lipski@ey.com

    The views expressed herein are those of the authors and do not necessarily reflect the views of Ernst & Young LLP.

CFOs & HR

Largest investment, financial execs frustrated in measuring ROI

Companies spend an estimated 36% of their revenues on human capital — pay, benefits, training, and other expenses related to their workforces — yet only 16% of the financial executives who participated in a recent study say they significantly understand the return they are getting on this huge investment.

The study, “Human capital management: The CFO’s Perspective”, was conducted by CFO Research Services in collaboration with Mercer Human Resource Consulting to examine the changing role of the finance function in managing human capital. It is based on a survey of 180 senior financial executives at large US and multinational corporations, as well as select in-depth interviews.

“CFOs are in a difficult situation,” says Rick Guzzo, PhD, a human capital strategy consultant with Mercer.

“Most see the importance of human capital to business success, yet they are unable to apply ordinary financial discipline to managing what is often their company’s largest investment. Their predicament is getting tougher. Financial executives are feeling increasing pressure from boards, investors, and analysts to show how human capital is being managed in their companies.”

According to the study, half of the financial executives surveyed (49%) report that investors are beginning to ask about human capital issues to at least a moderate extent. About a quarter (23%) say their boards currently are involved in human capital issues to a considerable or great extent, and 36% predict that their boards will be involved at this level in two years.

Relationship with HR function
The changing role of the CFO in managing human capital demands a corresponding change in the relationship between the corporate finance and human resource (HR) functions.

“Historically, there’s been little love lost between finance and HR in most companies,” Dr. Guzzo says.

“However, the changing business landscape makes it necessary for these two areas to come together in new, more collaborative ways. The financial executives surveyed acknowledge both a need and a willingness to work in partnership with HR to better manage the human capital of their enterprises.”

According to the study:

* Financial executives want to be more involved in human capital decisions — not just in setting and allocating HR budgets, which has been their traditional role. Of those surveyed, 62% say they should have an “important” or “leadership” role in human capital decisions, but only 38% say they currently play such a role.

* Financial executives today see human capital as a key value driver, not merely an expense as they once did. Among those surveyed, 92% say human capital has a great effect on the company’s ability to achieve customer satisfaction. Eighty-two percent believe this is so for profitability, 72% for innovation/new product development, 71% for success in integrating acquisitions, and 64% for growth.

* Financial executives believe both finance and HR should report directly to the CEO and work together collaboratively. “The relationship between HR and finance has changed because managing human capital is no longer just the province of the HR function,” Dr. Guzzo says. “It is a responsibility increasingly shared by senior leadership across the organization.”

The value of HR technology
As part of the study, respondents were asked to comment on the investments their companies have made in HR technology. Their assessment: It’s been a disappointment. The financial executives report that the HR technology provides some value in tracking employee turnover, but is much less valuable for systematic workforce planning, measuring employee skill levels, or measuring leadership capabilities.

Just 8% of the respondents say they are “largely” or “highly” satisfied with their HR technology’s usefulness in quantifying the company’s return on human capital investments.

“The problem may not be the technology,” Dr. Guzzo points out. “More likely, the problem is what the company does with data captured by its systems. Traditional approaches to data analysis won’t give CFOs the answers they are seeking, but new, more powerful human capital measurement techniques can provide these answers.”

“In all likelihood, the right data already is accessible and can be used to help both finance and HR leaders answer questions about what’s working, what’s not working, and what kind of return the company is getting on its human capital investments,” Dr. Guzzo adds. www.cfo-research.com.

About the study
A complimentary copy of the study report, “Human capital management:” The CFO’s perspective, is available at www.mercerHR.com/CFOstudy and www.cfo-research.com.

Mercer Human Resource Consulting, one of the world’s leading consulting organizations, helps organizations create measurable business results through their people. With more than 13,000 employees serving clients from 142 cities in 40 countries worldwide, the company is part of Mercer Inc., a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (NYSE: MMC) on the New York, Chicago, Pacific, and London stock exchanges.

CFO Research Services, based in Boston, Mass., is the sponsored publishing unit of CFO Publishing Corporation, which publishes CFO magazine, the leading business magazine written and edited specifically for senior executives with financial responsibility. CFO Publishing Corporation is an Economist Group business. At CFO Research Services, a dedicated team of business research professionals dissects emerging trends in corporate financial management using mailed surveys and personal interviews with respected financial executives.

Avoiding Liability

MIAMI, FL — Attorney Richard D. Tuschman, a member of the litigation department in the Miami office of Baker & McKenzie, the leading international law firm, is offering tips for avoiding liability in the hiring process. Tuschman, who specializes in employment law matters, says there are two principle federal laws restricting an employer’s inquiries during the hiring process — the Americans with Disabilities Act (ADA) and the Fair Credit Reporting Act (FCRA).

“These laws protect employees’ privacy concerns and are very specific in their requirements. Failure to comply may subject an employer to an expensive, time-consuming lawsuit,” Tuschman says.

Under the ADA, employers are forbidden from asking about the existence, nature, or severity of a disability and may not require a medical examination until a conditional offer of employment has been made. The following are some examples of topics employers should not ask during interview or reference checks:

  • Don’t ask about current or past disabilities, or about any conditions or diseases for which they have been treated, including back problems or mental illness
  • Don’t ask whether an applicant has ever requested or needed assistance in performing past jobs
  • Don’t ask whether the applicant has any disabilities or impairments that may affect performance in the position
  • Don’t ask about past drug or alcohol use

Tuschman also suggests staying away from questions about past on-the-job injuries or whether the individual has ever received workers’ compensation benefits. Also, employers should not ask about previous hospitalizations or the use of prescribed medications.

Employers can ask about the applicant’s ability to perform essential job functions and about current use of illegal drugs or alcohol use. Also allowed are questions about qualifications required for the position — education, experience, licenses, and basic reading, writing, and mathematical skills.

FCRA, the second federal law, governs companies’ use of credit reports. Employers can request an applicant’s credit and driving records as well as their criminal history. However, the employer is required to obtain the authorization of the job applicant or employee before requesting any information, and there are very specific requirements regarding the use of such reports.

“FCRA applies to all employers who use outside agencies to obtain `consumer reports,’ which include any written, oral, or other form of communication where the reporting agency gives background on the person’s character, reputation, and credit capacity. It also refers to any other details used to establish the applicant’s eligibility for employment purposes,” Tuschman goes on to say.

In conclusion, Tuschman summarizes the guidelines for FRCA compliance:

  • Obtain applicant’s consent before ordering any background checks.
  • Notify the applicant of negative report before taking action.
  • If the applicant does not respond to notification within a reasonable time period, proceed with decision.
  • Notify applicant of adverse action.

Tuschman is available to elaborate on the ADA and FRCA federal laws and to offer additional tips for employers for avoiding liability. Baker & McKenzie opened its first office in 1949 in Chicago, and today has 64 offices in 35 countries. It established a global presence more than 25 years ago, with an office in each of the world’s major money centers. The Firm currently has 612 partners, 3,169 lawyers, and a total of almost 4,200 legal professionals. The chairman of the international firm is Christine Lagarde. For more information, visit http://www.bakernet.com. Baker & McKenzie posted record financial results for FY01, with a global fee income figure of US $1 billion.

Recruitment Outsourcing Strengthens Overall Value of HR

Ron LeVan, Director of Client Services

Advantage Human Resourcingrlevan@advhr.com

While today’s weakened economy has increased the number of active jobseekers, recruiting is no less challenging now than in times of full employment. On the contrary, recession places additional demands on the Human Resources Department. The inundation of resumes from unqualified applicants only complicates and lengthens the hiring process, putting you in jeopardy of losing first-rate candidates. More importantly, your department’s expenses may be under the very watchful eye of upper management.

But believe it or not, there is a bright side: Tough times such as these present the opportunity to further enhance HR’s reputation as a strategic business partner.

Outsourcing your staffing function can resolve the challenge of time- and cost-effectively pinpointing top performers – both temporary and permanent – while also freeing you up to participate in high-level corporate priorities. Recruitment outsourcing is becoming increasingly popular for a number of reasons, each of which is compelling in any economic environment.

1. Specialization
Your organization’s core competency is developing and/or delivering the products and services that it offers, just as recruitment is a staffing provider’s core competency. Leading vendors actively capitalize on this expertise, resulting in:
– Up-to-date mastery of sophisticated Internet search techniques, as well as traditional and “grass roots” sourcing methods;
– Insights into industry developments and salary trends;
– Streamlined internal processes; and
– Robust resume collection, sorting, tracking, and search capabilities.

This powerful combination of factors results in the identification of stellar candidates – even those that are seemingly elusive (or “passive”) – swiftly and efficiently.

A high-quality staffing firm will also use their in-depth knowledge in a proactive, consultative manner. In addition to sourcing and qualifying applicants and handling the related administrative details, some may help establish quality and productivity benchmarks, evaluate candidates in relation to organizational “fit” factors (as well as skills and motivation), continually refine procedures to reflect best practices and lessons learned, and measure and report both hard and soft dollar savings. It is these services that transform the vendor-client relationship into a true partnership.

2. Cost savings
Outsourcing to a staffing firm eliminates the fixed expense of a recruitment infrastructure, a benefit that is particularly appealing if your personnel requirements, like those of most employers, are variable. It is no longer necessary to train and compensate in-house recruiters and support staff and, more importantly, to deploy and maintain the requisite technology. The latter is especially advantageous when you consider how quickly systems and software become obsolete.

Candidate cycle time and cost-per-hire are also reduced by virtue of the vendor’s deep understanding of what works and what doesn’t. While perhaps less dramatic than the expenses cited above, these costs also have a significant impact on an organization’s bottom line.

3. Redirected HR focus
Finding the “right” employees, while critical, is only one small item on the sizable HR “to do” list. As your firm’s success hinges upon its ability to hold onto these stars and help them flourish, you cannot afford to push retention and development activities to the back burner. Outsourcing recruitment will enable you to dedicate ample time to the planning, implementation, and support of these and other high-level pursuits.

It is important to note that recruitment outsourcing is not necessarily an “all or nothing” venture. While a skilled full-service provider can certainly administer your entire staffing function – from performing departmental needs assessments to orienting new hires and temporary workers to the organization – there are a variety of other options available, including:

  • Keeping your direct-hire process in-house while turning “ownership” of your contingent workforce over to a staffing partner;
  • Submitting temporary, temporary-to-hire, and direct hire requests to the vendor only on an “as needed” basis (i.e., when internal staff is overloaded or their efforts have been unsuccessful); and/or
  • Utilizing a staffing firm to expand, support, or completely manage outreach programs such as college recruiting, job fairs, etc.

The importance of the staffing function cannot be overstated. A company’s performance, after all, can only be as strong as that of the people who work for it. Equally vital, however, are performance management, leadership development, succession planning, and a host of other strategic HR initiatives.

The operational nature of recruitment lends itself very well to an outsourcing situation. Partnering with a staffing firm allows you to capitalize on the vendor’s technology and expertise, reduce costs, meet fluctuating personnel demands while maintaining a steady headcount, and – last but certainly not least – leverage existing resources in a way that makes a very direct and meaningful contribution to organizational effectiveness.


Services provided by recruitment outsourcing vendors Strategic consultation:

  • Working closely with the employer to define present metrics and set future goals
  • Developing a customized recruitment strategy
  • Facilitating the transition from an in-house recruitment staff (or existing vendor)

Ongoing administration:

  • Determining job specifications/candidate requirements
  • Sourcing candidates
  • Tracking, managing, and reporting on candidate activity
  • Screening candidates via telephone and face-to-face interviews
  • Scheduling and coordinating the logistics of employer interviews
  • Conducting reference/background checks, arranging drug screenings, etc.
  • Extending/negotiating job offers
  • Preparing necessary “new hire” paperwork
  • Handling candidate correspondence (e.g., offer letters/welcome packages, declination letters, etc.)
  • Generating compliance reports

Benefits of recruitment outsourcing
Vendor Specialization

  • Traditional and high-tech sourcing expertise
  • Efficient candidate management capabilities

Cost savings

  • Office space, technology, equipment, supplies
  • Staff compensation and training
  • Decreased cost-per-hire and candidate cycle times

Redirected HR focus

  • Performance management, career development, and retention activities
  • Ability to accommodate high growth needs and special projects without adding to headcount

Seizing the WoW Advantage: The Next HR Challenge

What should a smart HR leader do in these tough economic times? A targeted rather than ‘slash and burn’ approach to cost cutting, of course, but also development of a strategy for better leveraging talent. In a global, knowledge-based economy, survival and future prosperity depend heavily on our ability to mine the imaginations and expertise of men and women often working thousands of miles from each other. As part of the strategy, a smart HR leader will embrace new information and communication technologies and create work environments in which distributed talent can connect and collaborate – in planned and spontaneous ways.

Often the new ‘workplace’ is not a ‘place’ at all, but a virtual workspace. In a world seeking cost savings and higher value-added from employees, we will see the increasing use of virtual work environments, or what I call WorkWebs (WoWs). New user-driven Web 2.0 tools like wikis, blogs, and social networking technologies are converging with audio, video and web conferencing to make possible global WoWs. These collaborative spaces offer enormous potential for juxtaposing and mashing up individual knowledge, skills, and experiences to create new competitive advantage.

A WoW can be broad or narrow depending on the distribution of talent, and focused or unfocused depending on how sharply the purpose of those inside the WoW has been defined. Typically, a global project team is a broad and focused WoW, while social networking groups in business can be broad or narrow/ focused or unfocused depending on the intent and wishes of members. They can also have defined leadership or not.

While available technologies are powerful enablers of cost-effective global collaboration, the real challenge is people enablement – developing individuals and groups who can be effective in a virtual workspace – Millennials, Boomers, and those in-between. Many hours spent by Millennials playing video games doesn’t guarantee competence in a WoW role, and Boomer mindsets and skills don’t always adjust easily.

What can we do to enable people to be high performers in WoWs?
First, we need to understand the primary challenges people face collaborating virtually. In my experience, the challenges are threefold: isolation, fragmentation, and confusion. Physically and psychologically separated by virtual distance, individuals can easily become alienated from others, and paranoia, resentment, and false assumptions will try to fill the space. Distance and reduced communication also magnify the chances a collaborative group will fragment. Even small differences in understanding of team purpose direction, and priorities, etc., can open up large gaps in a team’s sense of itself and easily diffuse its efforts. Working across geographic, time zone, and cultural borders also increases the chances of confusion and misunderstandings. Many of the clues we use to understand others, e.g., facial expressions, eye movements, gestures, and knowledge of the other person’s context are often restricted or absent. Quick adjustments to communication signals can be made in face-to-face settings, but not so easily in a WoW.

The second thing we need to do in developing high performing WoWers, is to turn the challenges on their heads so that we understand the conditions to make collaboration across distances successful. Isolation will be countered by fostering high levels of engagement, fragmentation by cohesion, and confusion by clarity. These desired outcomes are dependent on performing well in what I call The Six Cs of Global Collaboration:

  • Cooperation: Ability to develop trusting relationships across geographies, time zones and cultures
  • Convergence: Ability to maintain shared purpose, direction, priorities, and performance measures across distances.
  • Coordination: Ability to align distributed work through clearly defined roles and responsibilities, tools, and processes.
  • Capability: Ability to leverage the knowledge, skills, and experiences of team members across all locations.
  • Communication: Ability to establish shared verbal and written understandings across distances via technology.
  • Cultural Intelligence: Ability to maintain a virtual workspace inclusive of value and style differences.

When people connect via technology they are consciously or unconsciously creating a virtual space in which they interact and work together. A virtual territory like Second Life is an extreme example of such a space complete with personal avatars, real estate, shops, classrooms, and so on. But even when we make a phone call, instant message someone, create a wiki document, or send an e-mail, we are creating a virtual interaction space. Our experience of that space is influenced by our choice of technologies – some technologies provide for greater communication and contextual richness than others. The technology shapes the virtual environment to a degree, but so do the mindsets and behaviors of the individuals interacting via the technology.

To realize the potential collaborative advantage of WoWs, we need to develop individuals who take personal – as well as mutual – accountability for performance in each of the Six Cs. Every member of a WoW should receive feedback on their active, value-added contribution to each C. What are the contributions we should be encouraging and rewarding?

Cooperation – Partnering
Key question: Am I contributing actively to creating a WoW in which everyone feels a desire to share and fully participate?

It is well known that trust is a key factor in the success of virtual teams. It is important to develop trust early on, and shared leadership is needed in creating the environmental conditions for developing trust. How? By modeling the attitudes and behaviors that promote cooperation and partnering from the very beginning – these include openness, support, honesty, predictability, caring, reliability, and inclusion. When a cooperative climate is created at the outset, distance loses much of its potentially negative power.

Convergence – Navigating
Key question: Am I contributing actively to creating and maintaining clear navigational markers in the WoW to help overcome potential fragmentation of the team?

Virtual space is a void and only has the navigational markers and coordinates we set up. Virtual workspaces need clear signposts such as a well-defined purpose and strategic direction, clear goals and objectives, shared principles for working together virtually, agreed upon priorities, and common performance measures. Shared leadership in developing and maintaining these markers builds ownership and commitment across distances, helping to prevent focus drift by individuals and sub-groups.

Coordination – Facilitating
Key question: Am I contributing actively to enabling the efficient and effective synchronization of team effort to achieve goals?

WoWs are made possible by a dazzling array of asynchronous and synchronous information and communication technologies (ICTs). The opportunities made possible by these technologies, however, will only be realized if participants apply them appropriately and consistently to facilitate the type of coordination and collaboration needed at a point in time. Each technology has strengths and limitations, but too often a small number of tools are used as all-purpose vehicles, e.g., e-mail. All members of a WoW need to take a vested interest in how well the different tools support the task and relationship needs for accomplishing their independent, interdependent, routine and non-routine work.

Capability – Developing
Key question: Am I contributing actively to identifying and leveraging the ranges of capabilities and resources available to the WoW?

Distance tends to hide resources and capabilities. Team members are brought into a virtual space to play a role, and the ‘wholeness’ of individuals – character, background, and range of knowledge, skills, and experiences – is often underutilized as a source of value. A key role for everyone in a WoW is to communicate who they are, what they can do, and what they want to learn from the WoW experience. This can be done formally through the exchange of CVs or more informally through creative activities and exchanges between participants. Everyone needs to work at uncovering the talents on a team, and unblock or create channels and processes in which personalities, cultures, knowledge and skills can flow and combine together to develop new possibilities.

Communication – Sensemaking
Key question: Am I contributing actively to identifying, resolving, and preventing confusion and misunderstandings in the WoW?

Misunderstandings cause chaos in virtual workspaces. Silence often hides confusion and panic rather than agreement and alignment. Interpretations can differ radically across national, organizational, and professional cultures. As well as modeling clear and precise communication, everyone must be on alert for the potential misperceptions and misunderstandings; too often they are not corrected fast enough in the virtual environment and a small communication disconnect can become a major issue.

Cultural Intelligence – Integrator
Key question: Am I contributing actively to helping everyone in the WoW feel that they are able to participate fully and make a difference?

Members of global virtual teams contribute diverse values, perspectives, approaches, and styles. These differences are so necessary for creativity and robust problem solving on the team. While that is certainly true, participants must support the development of a WoW culture that provides some shared operating agreements, e.g., how will we make decisions, share information, communicate, give feedback, and handle conflict.

During this economic downturn, HR departments should seize the opportunity to strengthen cost-effective global virtual collaboration in their organizations. Strategic collaborative advantage can be developed now to increase competitive advantage in the recovery.

This is a post about Global Talent Management

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