Speaking the Language of Business for Strategic HR Professionals

AdobeStock_101865782This week I’m returning to discussing strategic HR and am going to define some important business terminology Strategic HR Professionals must know in order to be taken seriously by their organization’s leadership.

This is not a comprehensive list but simply some basic business terms that relate to developing an effective HR strategic plan.

The first term is Business Strategy.  Business strategy as defined by Michael Watkins of the Harvard Business Review is the following:

A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. A strategy is therefore about how people throughout the organization should make decisions and allocate resources in order accomplish key objectives. A good strategy provides a clear roadmap, consisting of a set of guiding principles or rules, that defines the actions people in the business should take (and not take) and the things they should prioritize (and not prioritize) to achieve desired goals.

The definition implies that a business strategy can be looked at from the perspective of creating shareholder value, competitive market position, and creating a strategic advantage within the constantly changing business environment.  

This constantly changing business environment is influenced by things such as national and local politics, regulatory agencies, the economy, customers, suppliers, competitors, technology, economic trends and current and potential markets.

The second term is Strategic Intent. The business strategy, described above, is built upon the strategic intent and is defined by the website Simply Strategic Planning as the following:

Strategic intent is a statement of the course that the management of an organization plans to take the enterprise in the future. As many people as possible should understand these intentions. Then everyone can work consistently to achieve the corporate purpose.

Statements of intent aim to be more explicit than the usual directional statements. Most mission and vision statements point the way forward only in general terms. Sharp statements of intent can provide more clarity about what to do in the near future to achieve the vision and/or mission. Such statements convey the flavor of the strategic decisions taken through the planning process

In order to determine an organization’s strategic intent, the following questions must be answered: who we are and what we are trying to accomplish, what business are we in, what is our mission, what is our vision, what are our core values, how do we compete, and how do we add value to the marketplace.

The third term is Strategic Focus. A good description of strategic focus comes from Ann Latham at Forbes where she writes the following:

A good strategic framework provides focus by limiting the number of directions the organization runs. You’d be foolish to try to extend all your products while simultaneously expanding all your markets while also ramping up capacity or shifting your business model to include new types of production, sourcing, sales, delivery, and partnerships. This isn’t just an issue of capacity. It is also an issue of risk, learning, complexity, and credibility.

A great way to identify an organization’s strategic focus is to take a close look to the classic Generic Strategies by Michael Porter where he identified three strategies that address the question of how value is added by an organization.

These three approaches are cost leadership, differentiation, and focus as described in this article by the Institute for Manufacturing:

Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.

Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser’s target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments

In order for an organization to be successful and grow, it must have a business strategy that excels in all three of these strategies, not just one or two.  All of the organization’s operating and management systems, which include HR, must support all three of these approaches.

Bottom line, for an HR pro to be seen as an effective business partner, they must fully understand such important basic business elements such as the operations of the organization, its sales/revenue LY and YTD, its profit margin, how those margins compare with competitors and industry, its cash flow, its growth rate, the metrics leadership tracks, and the top initiatives of each of the members of the leadership team.

The FLSA Executive Exemption

Image courtesy of stockimages at FreeDigitalPhotos.net

Image courtesy of stockimages at FreeDigitalPhotos.net

In the second installment of the FLSA Overtime Exemption I’m going to discuss the executive exemption.

As you recall there are two test that must be applied in order to be considered exempt from overtime pay. First, the salary basis test which is the same for all the exemptions (except for the computer exemption). As a reminder, the salary basis test is where employees who are paid less than $455 per week ($26,600 per year) are automatically considered nonexempt. If the employee is paid more than $455 per week, however, they then must also meet the duties test in order to be considered exempt.

The duties test for the executive exemption are fairly straightforward and all three of these requirements must be met in order to be exempt:

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department of subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent;
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.

Although the duties tests are fairly straightforward, they do require further explanation.

Let’s start with the primary duty of managing the enterprise.

So what, exactly, does primary duty mean? According to the FLSA, primary duty means “the principal, main, major, or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.”

The relative importance of the exempt duties compared to other duties must be considered when determining the the primary duties. These include the amount of time spent performing exempt work, the employee’s freedom from direct supervision, and the relationship between the employee’s salary and the wages paid to other employees for doing nonexempt work performed by the particular employee.

The amount of time spent performing exempt duties is also addressed in the regulations. If the employee spends more than 50% of their time performing exempt duties they will usually satisfy the primary duty requirement. If, however, an employee spends less than 50% of their time doing exempt duties they may meet the exempt duty requirement if other factors support it.

Next, let’s discuss the primary duty of customarily and regularly direct the work of two or more full time employees. This duty is the most straightforward of the three. An employee must regularly direct the work of two or more full time, or full time equivalent, employees. For example, an employee who supervises four half time employees will meet the requirement.

Third, let’s discuss the requirement of an employee having the authority to hire or fire other employees or their suggestions to do so carry a particular weight. It’s interesting to note that this requirement is to hire or fire, not necessarily both.

This duties test gets complicated where an employee who may not necessarily have the authority to hire or fire other employees, but may have significant influence over hiring or firing. The employee’s suggestions carry a particular weight with the employer concerning hiring or firing decision. In order for the influence to be considered, the DOL requires three key factors:

1. Making such recommendations is actually a part of the employee’s job duties;
2. The frequency with which the employee makes the recommendations and the frequency with which the
employer requests the recommendations;
3. The frequency with which the employer actually adopts the employee’s recommendations.

So, if the employee’s recommendations are not requested and/or followed, the employee will not meet this executive exemption requirement. However, the employee will meet this requirement if their recommendations have particular weight and are followed even though they don’t have the official authority to do so.

Again, all three of the above duties must be satisfied along with the salary basis test in order for an employee to to classified as exempt under the executive exemption.

On a final note, what do we do when an employee has both exempt and nonexempt duties? The DOL covers this situation in what they call Concurrent Duties. Basically, to be considered exempt, the employee must perform their executive duty responsibilities on a regular basis and decide when and for how long to perform their nonexempt tasks. The employee cannot be directed by a supervisor to perform exempt work.

Working supervisors who’s primary responsibility is performing nonexempt duties but who have some responsibility of supervising other nonexempt employees are not considered exempt.

Well, that concludes the summary of the FLSA executive exemption. Next week, I will cover the professional exemption.

The Fight to Survive – Competition is Good in the HR Certification Space

It seems that almost every certified HR leader has an opinion about SHRM’s abandoning their support of HRCI’s certifications and rolling out their own.  The vast majority of what I’ve read or heard is critical of SHRM and supportive of HRCI.

Frankly, I think SHRM’s entry into the space is a good thing.  A very good thing.  I am a believer in free market competition and I think having two HR certification competitors battle it out will only make it better for the profession in the end.

Case in point, HRCI has already responded by increasing their marketing.  I see them advertising everywhere in all the prominent HR magazines and websites.  Maybe they advertised this heavily before, but I doubt it.  Monopolies don’t need to advertise and market.

I received a letter from HRCI on August 1 reminding me of the value of their certificates and promised that I will be hearing back from them soon about how they are “shaping the future of HR certification and providing me with new opportunities to connect with other HR professionals within our community.”  I was impressed.  The letter sends the signal that they are clearly working hard to maintain their status as the Certificate of Choice!

I even received a tweet from Rebecca Hastings, the HRCI HR Content Manager, asking me if I had read this article at the HRCI website.  She was responding to my post here where I said I was OK with two certifications.

This is all very good.  They are being very smart by getting out there when they are still the only game in town to aggressively promote and market their products.

Let’s be honest about the value of our certification.  Its really only important to those of us in HR.   The executives in our companies don’t really know anything about HRCI and their certifications.  For example, my boss was very supportive when I told him I earned my SPHR but he didn’t really know or understand what it meant.  I had to give him a print out from their website describing the SPHR certification to help explain it to him and “prove” that it was a significant accomplishment.

The other executives in my organization also don’t really know and understand what it is.  In fact, I get the impression they think it’s “cute” that HR has a certification.  But, in their minds, it doesn’t rise to the level of a CPA (Certified Public Accountant), PE (Professional Engineer), or a PG (Professional Geologist).

With the two organizations fighting for prominence, I’m hoping there is a lot of press outside of the HR media platforms.  If so, our company executives will see this and take notice and realize that there are important professional certifications in the HR profession.  Rather than think the competition is hurting our profession, I think most of our executives will understand and appreciate it.

Here are the four reasons I think it’s a good thing to have competing certifications.

  1. Improved quality.  As the two are competing for prominence, the quality of their products – the certificates – will improve out of necessity.  Maybe HRCI will finally provide a decent website!
  2. Greater visibility.  Both organizations will aggressively advertise and promote their products.  A lot more will be written about both.  This will hopefully leak out into the main stream media and be noticed by the non HR executives in our organizations.
  3. Increased transparency.  Both organizations will need to build or retain the confidence of their stakeholders.  In order to emerge as the prominent certificate provider, both organizations will need to become more transparent in how they conduct their activities to build and retain their brand presence.  SHRM will need to make an extra effort with their transparency in light of how they rolled out their announcement.
  4. Improved credibility.  When this all shakes out in the next several years, one certification will emerge as the winner.  It will have fought the battle, taken on the criticisms, and made the changes and adjustments needed to win.  It will have advanced the certification and profession along far more than it would have had their not been the battle.

I’m going to watch this all with a great deal of interest.  I am not taking sides.  I love my SPHR.  I worked hard for it and am proud to sport those letters whenever I can.  On the other hand, I also love the fact that SHRM is going to shake things up and challenge the status quo.

I will maintain my SPHR and I will go through the process of earning my SHRM–SCP early in 2015.  I will also proudly sport both sets of initials after my name.  I will fully support both because I think both are important and that the upcoming battle between the two organizations will ultimately benefit the HR profession.

How my Presentation Helped me Narrow the Focus of Hard Hat HR

Last week I delivered a presentation to a group of HR executives at Innovative Career Consulting and told them the story of  how I created my online brand presence.  Turns out, a couple executives at ICC were impressed with how I was branding myself and HHHR so they contacted me and asked me to speak to their group about how I am doing it.

The request was completely unexpected and on very short notice – I only had two and a half days to prepare something completely from scratch!

Remember, I only re-launched Hard Hat HR a couple weeks ago and am in the beginning stages of building it.  Delivering presentations is certainly one of the activities I intend to do but I was completely caught off guard by their request and certainly not ready.

But my attitude is and always has been to take whatever opportunity given and make the best of it.  I would have to make myself ready.  Who knows when the next opportunity will come or where this opportunity will lead?

So I went into deep dive mode and, in following two mornings and evenings, I built the presentation with enough time to rehearse it a half dozen times.  Whew!  Of course I was nervous when it was time to deliver the presentation but once I got going, my enthusiasm and passion took over and was able to comfortably deliver some real value to the group at ICC.

The group was fantastic and engaged throughout  and asked some great questions – many of which have given me several ideas for new material for HHHR!   One question in particular really made me think.  A gentleman asked what was the main focus or specialty for HHHR.  I didn’t have a good answer for him except to say “HR Strategy and Tactics”.   I’m actually OK (but not really excited) with that answer but the question still made me think a little harder about what direction I want to take HHHR.

That thinking led to the conclusion that the group consisted of HR leaders who were looking to me for advice and seemed interested in what I was delivering.  So why not concentrate my efforts on delivering advice and content to HR leaders and those who aspire to be HR leaders?  Boom.  That’s it.  And that is what I will do.

As of today, my new title/focus/brand is “Hard Hat HR – Human Resource Leadership Strategy & Tactics.”

In closing, I want to sincerely thank the good people at Innovative Career Consulting for giving me the opportunity to speak to their group last week.  Not only did it give me the opportunity to help a fantastic group of HR leaders, it gave me some great new ideas for the future direction of HHHR!

DOL Targets Extractive Industry – Where is HR?

Recently, the Department of Labor (DOL) has been targeting the extractive industry in its enforcement of the Fair Labor Standards Act (FLSA).  The result, large settlements.

Here is a list of some of the latest settlements:

Hutco – paid nearly $2 million in overtime back wages to 2,267 employees for mis-characterizing certain wages as per-diem payments and excluding these wages in their overtime calculations.

HongHua America – paid over $680,000 in overtime back wages to 133 roughnecks and crane operators who were improperly classified as independent contractors instead of employees.  Company paid them straight time for the hours they worked is excess of 40 in a week rather than time and a half they should have been paid.

Justiss Oil Co. – paid $619,830 in back wages to 270 employees for violating FLSA overtime and record keeping provisions by not paying workers for time spent at mandatory staff meetings at the beginning of the day and failing to record the time spent at the meetings.

Morco Geological – paid more than $595,000 in back wages to technicians for improperly classifying nonexempt employees as exempt and paid them a fixed daily rate regardless of how many actual hours they worked.

Savard Marine Services – paid $60,000 in overtime back wages to 107 employees for mis-characterizing certain wages as per-diem payments and excluded these wages in their overtime calculations.

Rigid Oilfield Services – paid $51,839 in overtime back wages to 28 employees who they improperly classified as independent contractors instead of employees.

The DOL’s initiative has resulted in $6.7 million in back wages being paid to 4,004 employees in the last fiscal year – Oct 1, 2012 through Sept. 30, 2013.

When I look through this list and the reasons for the settlements, I shake my head because its all HR 101 and could have easily been avoided.  Where are their HR Departments?  Do they even have one?  If so, where are they? Are they incompetent or are they just being ignored?  Regardless, these settlements should serve as confirmation that these companies should have an executive level HR position.  An HR professional at the executive level would have known that these practices are in violation of the FLSA and would have prevented them from happening.