Current Trends in HR

Kim Hester, Ph.D. Professor of Management Arkansas State University

Current Trends
Rising cost of benefits, especially health care

Rising Compensation Costs

Competitive pressure on increasing employee wages

Current Trends
Managing talent

Developing Human Capital

Higher Ethical Standards

Labor Shortages

Current Trends
Use of technology to communicate with employees

Evolution of new technologies

A move toward single software platforms

Harnessing New Technology

Current Trends
Increased diversity in the workforce

Changing work patterns 24/7 availability, etc.

Managing the Changing Workforce

Increased vulnerability of intellectual property

Work-life balance

Rising Compensation Costs

1.

Rising cost of benefits, especially health care

Great News: 2008 Health care costs for most employers is expected to be around 7%, a moderate increase compared to previous years

Employer Responses
Aggressive health care initiatives, such as higher deductibles, co-pays, and employee contribution levels. 88% of employees are required to pay some of the insurance premium out of their own pockets. The employee share rose from 14.0% in 1992 to 22.1% in 2005.
Source: Economic Policy Institute, 2008

Employee Contributions for Health Care

Employer Responses
Changes or elimination of employee health care coverage Statistic: Employer coverage has declined from 61.5% in 1989 to 58.9% in 2000 and down to 55.9% in 2004 (the latest aggregate data available)
Source: Economic Policy Institute, 2008

Employer Responses
Focus on changing employee behaviors
Wellness programs Smoking cessation efforts Education of employees on health care options and associated costs

Employer Responses
Some employers have been holding their health care costs to a 1% increase.
They're doing it by taking a multipronged approach, with programs to prod employees to take more responsibility for their health and to make more informed health care decisions.
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
Successful employers are aggressively pushing consumer directed health plans (CDHPs)
Combines a high deductible insurance policy with a tax advantaged health savings account Firms are setting the premiums at 30% below traditional plans to encourage participation Participation hit 15% this year, up from 10% in 2007 and likely to hit 20% in 2008
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
Saving money by providing free drugs and supplies for chronic diseases (e.g., asthma, diabetes) that are known to lead to costly complications.
Goal is to get patients to stick to their treatment schedules; often tied to classes or coaching Upcoming survey from Hewitt Associates indicates nearly 20% of firms do this now, and 47% are considering doing so in the future
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
Paying the full amount of common preventive services can also help reduce costs
These include annual physicals, mammograms, prostate screenings, flu shots, colonoscopies and prenatal office visits
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
Sending the sickest employees to the best doctors is gaining as a strategy
Dubbed by some as a 20-20 approach - employers and their health plans use data to identify physicians rated in the top 20% for effective treatments and match them with the 20% of employees who most need care. Employers provide financial incentives, (e.g., lower copayments) as incentives to use the top providers. Eventually, firms will try predictive modeling to identify the sickest 20% of employees so steps can be taken today to "get ahead of the curve
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
Increasing financial penalties for employees that poorly manage their health Many companies continue to reward workers who take health risk assessments and participate in health management programs, while punishing those who do not Employers may deny a worker access to higher-benefit plans if worker declines participation in wellness programs
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
On-site medical clinics are growing in popularity Large companies staff clinics with own employees while smaller firms contract out to nearby clinics Help provide primary care to workers at low or no cost On-site clinics lessen time employees spend away from work. On-site clinics expanding to include rehab services, dentistry, X-ray and lab work Forms inviting specialists to come on-site and offer their services. Clinics moving into more active management of workers' health conditions
Source: Watson Wyatt Worldwide and the National Business Group on Health

Employer Responses
Putting health care into employees hands
As health insurance costs continue to rise, employers are adopting a controversial new approach: ending group coverage and giving employees $50 to $200 or so a month to help buy their own health care
Source: USA Today, March 26, 2008

Rising Compensation Costs

2. Competitive pressure on increasing employee wages Linking pay to organizational goals, employee productivity, and labor market norms
Pay-for-Performance Programs Performance Management

Success of Programs
Pay for Performance Works When:
It is measurable and objective There are clear expectations There is commitment to training and support Flexibility for input

Source: workforce.com 5/05

Failure of Programs
Pay for Performance Falls Short When:
It pits employees against each other It pushes one outcome to the detriment of the others It is so subjective it opens the organization and managers to allegations of bias
Source: workforce.com 5/05

Key Drivers of Success

Better communication of performance standards with all levels of the organization Clearly Specify Incentive Measures
Organizational measures: service quality teamwork income growth cost savings Individual measures: based on established performance goals within individual areas of responsibility
Source: JE Rocco. http://danenet.wicip.org/snpo/

Challenges in Implementing Performance-Based Pay

Pervading Attitude of Equality Custom of Cost of Living Approach Challenge of Performance Measurement Discomfort with Judging Performance Weaknesses in Data Collection Inadequacy of Funding Resources

Source: Performance-Based Pay Plans Family Services of Western Pennsylvania; Marc Andrews Kathy Yarzebinski; Catherine Greeno;Christopher Gjesfjeld; 2006

Employee Productivity and Performance Management

Phase 1
Business strategyincluding its mission, vision and objectives, and specific outcomes required to achieve the overall strategyare defined.

Goals and plans for how to measure achievement must be identified. Outputs and measures are defined Data collection and analysis processes and procedures are developed and implemented Most importantlyemployees come to understand their individual roles and responsibilities with respect to performance measurement

Employees are given the fundamental information, resources, competencies, and motivation to ensure their successful execution.

Employee Productivity and Performance Management

Phase 2
Data that informs areas of success and challenge for the organization are collected and analyzed Specific elements and factors that contribute to successes or challenges along with new and/or modified information needs and lessons learned are identified

Employee Productivity and Performance Management Phase 3

Solutions to address identified challenges are developed and implemented, along with mechanisms to ensure the continuation of program or organizational successes Performance measurement systems and processes may be modified as needed to ensure that information collected through the performance measurement process is timely, relevant, and sufficientsteps that cycle back to performance planning According to the U.S. Government Accountability Office (GAO), federal managers reported having more performance measures in 2003 than in 1997, but they also reported that use of performance data for program management activities has essentially remained unchanged

Employee Productivity and Performance Management Phase 4

Several commonly used methodologies for performance measurement
Behavior-Based Approaches - These approaches tend to use specific performance factors to evaluate staff. 1. Quantitative -- use of numbers or frequencies of specific behaviors observed or reported 2. Qualitative -- use of subjective impressions of raters

Behavior-Based Approaches

Behaviorally anchored scales

Broad categories of practice are identified, ideally through collaborations between supervisors and staff. Specific job behaviors are then linked to the categories. Measures of staff member behavior are rated on a scale in relation to specific behavior items, such as "understands department functions."

Behavior-Based Approaches

Behavioral frequency scale

Desired behaviors are described and the staff member is evaluated on how often those behaviors occur

Behavior-Based Approaches
Weighted checklist - method provides a list of performance related statements that are weighted
Staff members are judged on a scale indicating the degree to which the statement accurately describes performance

Behavior-Based Approaches
Forced-choice method - list of performance related statements about job performance are evaluated on how well they discriminate among staff and how important they are to unit or institutional performance

Other Approaches to Measuring Performance

Results-Focused Approaches
Management by Objectives (MBO) and Accountabilities and Measures

Source: Grote, D. (1996). The complete guide to performance appraisal. New York: American Management Association.

Core Elements in MBO

Formation of trusting and open communication throughout the organization Mutual problem solving and negotiations in the establishment of objectives Creation of win-win relationships Organizational rewards and punishments based on job-related performance and achievement Minimal uses of political games, forces, and fear Development of a positive, proactive, and challenging organizational climate Source: Grote, D. (1996). The complete guide to performance appraisal. New York: American Management Association.

Steps in MBO Process

Formulate long-range goals and strategic plans Develop overall organizational objectives Establish derivative objectives for major operating units Set realistic and challenging objectives and standards of performance for members of the organization Formulate action plans for achieving the stated objectives Implement the action plans and take corrective action when required to ensure the attainment of objectives Periodically review performance against established goals and objectives Appraise overall performance, reinforce behavior, and strengthen motivation. Begin the cycle again

Source: Grote, D. (1996). The complete guide to performance appraisal. New York: American Management Association.

Team Performance Measurements

Team appraisal matrix - team members are listed on a vertical dimension, and specific tasks on the horizontal Such an arrangement reflects individual performance, and collectively reflects the overall team performance

Source: Creamer, D.G., & Janosik, S. M. Performance appraisal: Accountability that leads to professional development. In S. M. Janosik, D. G. Creamer, J. B. Hirt, R. B. Winston, Jr., S. Saunders, & D. Cooper (Eds.), Supervising new professionals in student affairs. New York: Brunner-Rutledge.

Success Factors in Performance Management Systems

Success in obtaining meaningful performance data and using this data to manage, and institutionalizing these practices so that they become ingrained in the organization This depends on several factors:
1. Presence of a culture of accountability within the organization 2. Leadership demonstrates commitment to managing for results. 3. Staff engages and invests in the process, which leads to feelings of empowerment and continuity.

Points to Remember
Before implementing a performance measurement or management system, see if other areas of your organization have implemented their own system Anticipate and consider unintended consequences of measuring performance Reinforced behavior will be repeated, so carefully consider what behaviors should be emphasized (e.g., individual achievements versus team achievements)

Communication of performance information among relevant stakeholders crucial to the success of any performance measurement or management system

Current Trends

Developing Human Capital

1. Managing talent recruitment, development, and retention of the best workers
Employers need to find innovative ways to brand themselves, setting them apart from competitors and becoming an employer of choice As talent becomes scarce, development of current employees for promotional opportunities

Developing Human Capital

2. Labor shortage finding the right talent
Statistic: By 2020, gap between available and required skilled workers is projected to be 14 million

Use of e-recruiting and non-traditional labor pools

Establishing selection system geared to retention: better skills assessment, knowledge, and fit for jobs

Source: Kaihla, P. Business 2.0, 4(8), 97-104.

Developing Human Capital

3. Higher ethical standards
Greater focus on trust and integrity at all levels Regulatory compliance issues (i.e., SarbanesOxley Act)

Current Trends

Harnessing New Technology

1. Use of technology to communicate with employees
Company intranets E-Newsletters Company emails

Harnessing New Technology

2. A move toward single software platforms
Integrated HRIS
PeopleSoft SAP Oracle

Harnessing New Technology

Specialized applications
Succession planning
Applicant tracking Job evaluation Employee performance evaluation Grievance handling

Harnessing New Technology

Perhaps most significant development is the use of organizational intranets
An intranet is internal network that makes use of World Wide Web technology (browsers, servers, etc.) to gather and disseminate information within the firm Intranets may be linked to the external Internet, but are secured so that only authorized users can access information on internal components

Harnessing New Technology

3. Evolution of new technologies
Employee Self-Service and Data Exchange Capability to maintain personal data View context-specific information

Initiate benefits transactions

Internet-based tools are quickly becoming the preferred method for employees to execute benefits transactions

Benefits of Automated Benefit Administration

Reducing and eliminating extensive manual efforts formerly needed to:
Distribute, collect, and process forms Test programming required to export/import data Administer the periodic data exchanges Reconcile data Resolve employees problems resulting from the time lag between data collection and processing Source: Benefits Perspectives: Current Issues in Employee Winter 20022003; Milliman USA

Current Trends
Managing the Changing Workforce
1. Increased diversity in the workforce
Creating workplace that respects and includes differences Recognizing unique contributions individuals with differences can make Creating work environment that maximizes potential of all employees

Managing the Changing Workforce

2. Work-life balance
Employees experiencing burnout due to overwork and increased stress in nearly all occupations Rise in workplace violence, increase in levels of absenteeism as well as rising workers compensation claims Causes range from personal ambition and the pressure of family obligations to the accelerating pace of technology
Source: Center for Work Life Policy

Work-Life Balance
According to study by Center for Work-Life Policy, 1.7 million people consider their jobs and work hours excessive 50% of top corporate executives leaving current positions 64% of workers feel work pressures are self-inflicted, and taking a toll In the US, 70%, and globally, 81%, say jobs are affecting their health. Between 46% and 59% of workers feel stress is affecting their interpersonal and sexual relationships. Males feel there is stigma associated with saying I cant do this

Managing the Changing Workforce

3. Structural shift from the manufacturing to the

service sector
Growth in part-time employment Rising prominence of women in the workforce Gradual ageing of labor force with fewer young people entering workforce and participation rates among older workers increasing Growing importance of temporary employment and self employment Adoption of flexible working practices, such as job sharing and the increasing opportunity to work from home.

Conclusions
Exciting time for HR professionals More emphasis on cost containment and control Focus on employee responsibility and involvement at work Greater use of technology in communication with employees More flexible patterns of work