Category Archives: Talent

The Best Supply Chains are Flexible in Design and in the Office

A recent article over on Discovery News that headlined that “Employees With Flex Time Put In More Hours” is a must-read. Consider the headline findings:

  • working the usual nine to five may not be the ideal schedule for employees or employers
  • workers with flexible hours are not only more satisfied with their jobs, they also work more intensely
  • the findings also apply to remote workers and employees with reduced office hours

Basically, as those of us who work flex, or who have worked in flex environments know, it’s a boon to your business if you’re in a knowledge industry. And it has nothing to do with the quoted theory that the “intensified work effort given to employers is reciprocity for the relaxed schedule”. It has to do with the fact that not everything about life can be scheduled and, as a result, some days, nine-to-five will not be the best time for your employee to work.

Consider the following:

  • your employee gets a 24-hour virus at 1:00 pm on Wednesday
  • your employee’s toddler is ill and his partner is not available until noon on Thursday
  • an accident Thursday morning shuts down the main highway between your employee’s house and your office and triples commute time

If your employee comes into work Thursday morning, how productive is your employee going to be if he comes in

  • sick,
  • worried, or
  • stressed out from road rage

vs. waiting until Thursday afternoon when he’s well, not worried, and not stressed?

If you’ve hired the right employee, who likes his job and believes in the company as much as the company should believe in him, he wants to do a good job and will happily put in the time it needs to get the job done right, even if it means going (significantly) beyond 40 hours once in a while if it doesn’t (significantly) interfere with his life. Instead of 9-5 on Thursday, he’d probably happily do 1-10, or a few spare hours on the weekend. And if he can do it at home, and not have to waste an hour or two on an office commute, he’ll find it easy to find those hours. Most of what we do is not grunt work, it’s brain work, and that work gets done best when we are at are best and not distracted, plain and simple. And when your employees are allowed to control at least some of their schedules, you’ll find that they’ll organize said schedules so that you get their peak productivity times. So loosen up. You’ll be a better organization for it.

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Yet Another Feather in Private Equity’s Cap

A recent article in CNNMoney.com on “best places to work” (CNN Money, Jan 26, 2010) pointed out that if you look at Fortune’s latest list of the 100 Best Companies to Work For, you’ll note an interesting trend: you can’t buy stock in four of the top five. In fact, 9 of the top 20 best companies are privately held and 40 of the top 100 do not have stock you can buy and sell on the NYSE or Nasdaq. There are also 15 non-profits, 2 partnerships, and 1 cooperative. In all, only 42 companies of the top 100 are public.

What gives? The author’s theory is that without having pesky shareholders to satisfy, these firms can probably worry more about keeping employees happy than satisfying the whims of Wall Street. And, more importantly, these employees can, in turn, worry more about keeping the customers happy, which generally boils down to better products and better services, which they can focus on instead of trying to meet artificial sales numbers or profit estimates. After all, the “over-promise now, make up later” strategy generally only results in under-delivery, which triggers cancelled contracts or bad publicity, which lowers profitability, which in turn demands layoffs, which stresses out the people who are left, who either leave or perform worse, which exacerbates the situation and puts the company into a funk it might not recover from.

So when you’re upgrading that platform or looking for world-class consulting services, remember this: just like bigger is not better, public is not necessarily better either. In fact, this recent survey on “the voice of experience” in the McKinsey Quarterly indicates it might actually be worse!

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Winning the Talent War in China

The McKinsey Quarterly recently published an interview with Emmanuel Hemmerle, a principal with Heidrick & Struggles, on “Winning the Talent War in China”. It had some great information for those multi-nationals who are looking to expand into China or who are having problems finding the top level talent they need.

It had a number of good points that you should not miss. These include:

  • Top Talent is NOT Cheaper in China
    Packages for top talent — with experience, skill sets and responsibility equal to their counterparts in Europe and the US — are often higher.
  • Strong and Weak Performers Have to be Differentiated
    Failure to do so will seem unfair and may lead to resentment.
  • You Will Need to Invest In China
    In some areas, the market economy is quite new, like luxury goods which really started ten years ago. Senior talent just isn’t available. You have to instead look for rising talent and take them the rest of the way yourself.
  • Talent in China Looks for Careers
    They are very sophisticated and, like their American and European counterparts, are looking at the long term impact of any offer on their career.
  • You Need to Localize
    A majority of the management team of the China operation should be mainland Chinese as this supports localization by showing that you see them as your equals, which they are if you have sought out and hired their top talent. (With a population that is more than four times that of the US, they have four times as many geniuses. Remember that.)
  • You Need to Seek Out the Best
    You should not only know who your top competitors are, but who their top people are and try to recruit them. Even if you don’t get your first choices, it shows your commitment to identifying and hiring the best talent.
  • You Need to Embrace the Culture
    You need to provide them with an environment that is attractive to them. This will include the fostering of a relatively non-hierarchical environment with growth opportunities for each individual, opportunities for each individual to get promoted to the top, and socially responsible activities.

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Could Escrow Accounts Return Us To Long Term Thinking?

Besides the fact that you’re probably as fed up as I am at the ridiculous compensation packages that many Executives are getting these days despite the fact that they are on their way out the door having just tanked the company, there’s also the fact that their focus on short term gain is hurting the company and your ability to do your job.

You want to switch to sustainable sources of supply, because you know that the long term savings (as energy, water, and carbon costs are all poised to go through the roof) will dwarf any short term savings you can negotiate, but because there are up-front investment and switching costs, you’re prevented from making the right choice.

You want to license that new strategic sourcing decision optimization platform because you know the 12%+ additional savings you can expect across the board on every event you run through it will give you an ROI of 10X to 20X within a year, but you can’t because an additional overhead cost will decrease EPS for the quarter, which will temporarily decrease the stock price, and, most importantly, impact your CPO’s and CEO’s Christmas bonus. Thus, even though you could probably double EPS and pump up the stock price within a year, you can’t make the right move.

And so on. And to be frank, it just stinks. We’ve made it too damn easy for fat-cats to get big rewards today for results that may or may not materialize tomorrow, and it just shouldn’t be that way. For instance, in Canada, shareholders are only now getting “say for pay” at most public companies — and all that right gives them is the right to tell the Board what they think should happen. The Board, once elected, can still do what it wants. And at many corporations, the shareholders only have two choices when it comes to electing the Board, vote for the nominees put forward, or abstain from the vote. But if even a single person votes for the Board, they Board is elected and, after allowing the shareholders to provide “input”, can still proceed to do whatever they want. Could you imagine if you were told “you can vote for Mr. X for President, or not, but if even one person in the whole United States of America votes for Mr. X, he’s President”. Scary, eh?

Anyway, a new proposal by Alex Edmans, Xavier Gabaix, Tomasz Sadzik, and Yuliy Sannikov (from Wharton, NYU, and U of C) on Dynamic Incentive Accounts could hold the answer to fixing some of these problems. According to the authors, if executive compensation packages were deposited into escrow accounts that vest over a two-to-five year period, with only a certain percentage allowed to be withdrawn each month, it could push executives to focus on the long-term. After all, if an Executive can’t access his Million-Dollar stock bonus for five years, he’ll be highly incented to make longer term decisions that will insure the stock price rises over the long term. And if the company were to grant more stock during a downturn, he’d be double-incented to turn the company around.

The authors also found that an increase in firm value must be accompanied by an increase in pay to keep the Executive motivated (and suggested a 6% pay increase for every 10% increase in firm value), but that’s perfectly acceptable (especially since it too will go into the escrow account). After all, if you increase profits by 20 Million, you should get a good chunk of change as a reward. It’s when you lead the company to a 20 Million loss that you shouldn’t get your bonus, and that’s what the real problem is. Now, the proposal has a bit of a downside in that they authors also found that an Executive’s base compensation would probably need to be increased 20% because of the longer vesting periods, and some of the packages out there are quite generous already, but this would still be okay if a good portion of the package was stock in the escrow account and the executive actually produced continued growth over a five year time frame.

Thoughts? Or am I the only crazy blogger who thinks this proposal makes sense?

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Are You Ready for Your Talent Shortage?

Don’t be fooled by the current economic environment, there’s still a global talent shortage and we’re headed towards an impending crunch because the talent war is going to heat up again along with the recovery. And chances are that you’re going to be on the losing end according to some recent research from TopGrading Solutions. (Tip-of-the-hat to Kevin Cornish.)

According to the research, 67% of currently employed personnel surveyed will be looking for new opportunities once the economy picks up. That’s right, if you’re an average company, when the economy recovers, you can expect that two thirds of your workforce will be looking for work. If you thought you had turnover problems before, you ain’t seen nothing yet. Why? Well, if you’re an average company, you cut your staff by 10% to 20% and pushed those that remained to their limits with pay cuts and unpaid overtime. That’s why over 78% of employees do not feel that they were treated well (enough to stay in their current position).

All I can say is that you better get started on your succession plan. Given that there’s a 4 in 5 chance that you’re going to be hit by an internal talent shortage real soon, I don’t think you can afford to turn a blind eye to the issue any longer. Good luck!

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