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A Sugar Tax or Social Responsibility on the Balance Sheet

Is there a company out there that doesn’t promote itself as a socially responsible company.  These companies also work hard on increasing their market capitalisation (value), so where does sugar fit in?

 The gap between the book value and market capitalisation is largely unquantified but in reality it is made up of the employee value, often called HR asset value, intellectual capital and the socio-economic contribution.

There are tools to value the HR assets so this is possible, the accountants say they can value the intellectual property (although those innovative inventions are thin on the ground these days) which leaves valuing the socio-economic contribution of the organisation.  This is where the “rubber hits the road” and with some companies the socio-economic value may be neutral or even negative for example tobacco companies, heavy polluters, some alcohol promotions and maybe foods that contain ingredients that the medical profession tells us is “damaging” like excess added sugar etc.  We have been down the path of putting a value on the carbon footprint including pollution, carbon “miles” but did we transfer this to the balance sheet as a socio-economic value?

 I am not an accountant but we are all governed by accounting standards for reporting through standards like GAAP, IASB (IFRSs) and FASB which appear to prevents us from putting these values on the official book value (but they will allow goodwill which can now be impaired to make up for losses elsewhere).  However this should not prevent us from advocating for it, nor does it prevent us putting these values in as a balance sheet notes.  This has been done for [...]

Is Australia’s Economy of Scale Adequate for the Future?

Turnbull team cartoon low

Australia has an increasing imbalance between the economic contribution from its “residents” and the cost of providing social services and government administration.   Are there lessons we can learn from the past and how do we move forward?

In the mid 1990’s Australia lost most of its manufacturing base.  Not only were jobs lost, but the need for highly specialised skills, together with the problem solving expertise to create unique innovative solutions in these industries evaporated.  The car industry limped on under the “Button Car Plan” with government incentives to share components such as body pressings.  Entities like Kellogg, with raw materials on its door step, changed structures and redefined traditional “jobs” to outcome based contributing elements (positions), empowering their employees.  Whilst Kellogg’s workforce nearly halved at the time, some manufacturing was retained and survived a further 20 years.

Government reviews at the time considered what options could be adopted to retain some of the exiting manufacturers as competitive businesses.  The findings in each sector were similar; firstly the need for investment in new technology including robotic processing, and, secondly the production and processing scales for efficiency were many times the Australian domestic demand at that time. 

I remember being at a presentation for new piece of equipment for a communication company.  When a slide showing the optimum output for the smallest model was displayed the CEO thought there was a misprint on the capacity as the minimum recommended output was 10 times what they required and they thought they were [...]

When the only certainty is uncertainty

Human Resource Professionals can contribute to the socio-economic change in Australia.

The overwhelming availability of media, both social and formal, make it is easy to get distracted by the political “ping pong” and perceived waffle we are constantly bombarded with.  However, now organisations need to deal with the uncertainties of a budget delivery in the next few weeks and a protracted looming federal election.

We live in a time of political optimism with a current PM who sees the issues facing Australia as opportunities.  We clearly have deep-seated issues like an ageing population, high costs of doing business and providing services, relatively few value-adding sectors like manufacturing, a slow economic growth and an imbalance between revenue and expenditure levels.  Governments must rely on their own planning and service delivery departments while considering the impact on the private and not for profit sector.  We all have a role to play in maintaining our standard of living and assisting in closing the gap between the haves and have nots leading to a more sustainable society. 

As HR professionals we need to make that transition from narrow HR focus to a broader and more methodologically driven approach to organisational issues – often referred to as human capital management (HCM).  This approach commences with the development of a dynamic strategic plan that addresses the historical trends, where we are today as well as projecting forward with a dynamic quantifiable rolling strategic plan that defines the corporate accountability.  Other than the corporate statements that we are all familiar with the strategic plan must define how we intend to measure the success of the plan as well what capability will we need to [...]

Board Corporate Governance

Corporate Governance can sometimes be likened to a mad hatters’ tea party.

Good governance models are relatively straight forward so why is it often poorly applied? The shareholders/owners elect the Board which provides the corporate directives to the CEO/Management. The performance framework and corporate risk analysis provide the foundation for reporting back. What could be difficult about this and why do organisations have difficulty in applying such a simple but absolutely crucial model?

While we find a number of commercial organisations, including listed entities, have challenges applying and maintaining good corporate governance principles, spare a thought for the member-based organisations, cooperatives, smaller family based companies as well as the not-for-profit support and research organisations, all where the Board members have to wear multiple hats and making decisions in extremely difficult situations that can have direct impact on themselves or other associates.

When you are working with these co-operatives or not-for-profit organisations you quickly realise the complexities of these organisations and the critical need for good governance procedures as the responsibilities can be enormous. Whether you are a commercial cooperative like fruit packing or dairy product manufacture, a not for profit providing services to specialised groups using government funding or a member organisation providing services to a range of member interests good governance is as important in these organisations as it is in any large commercial entity.

Take for example, a Supplier Board Member in a co-operative; they are an owner/shareholder receiving a dividend, a supplier receiving payments and a part of the Board ensuring commercial sustainability of the cooperative. During any Board meeting they might be involved in decisions involving shareholder dividend payments, supply rates and decisions involving the sustainability of the co-operative organisation, like capital expenditure that in the [...]

Infrastructure and Asset Maintenance is failing us – who is to blame and does HR have a role.

Professionals Australia provided a link (as part of their Better Infrastructure campaign) to a very humorous YouTube clip from the US Last Week Tonight with late night talk show host John Oliver: Infrastructure (HBO) Mar 2 2015.

This topic would be funny if it was not so serious but what has it to do with human resources? The clip raises the question, who is John Oliver really making fun of, is it just those maintenances engineers or is he criticizing the organisation’s broader “good governance”.

The John Oliver clip is brilliant at getting across the message of the importance of infrastructure maintenances from a retention of the value and safety aspects. While it is probably not difficult to find a measure like Return on Assets (RoA) or something like this in most organisations, it is not as easy to find measures on how well we are looking after those assets. In a Human Capital Management approach to organisational management it is critical to have a balance between all the measures. While the John Oliver clip highlights the obvious importance of looking after the infrastructure, it is the practical setting of the level of this maintenance and monitoring that we find is essential, but unfortunately often missing. In organisations Maxumise often find two (2) gaping holes when it comes to asset management. The first hole is the human asset value – why isn’t this included as a real and significant assets in all organisations? Secondly there are rarely any maintenance measures for the assets including infrastructure, plant, equipment and yes the human assets who also need to be maintained.

Professionals Australia describes John Oliver clip as “an informative and humorous insight [...]

Is your Succession Planning driving the status quo or driving business change?

Succession planning is still critical in organisations; however it has evolved over the past 10 years where today succession planning is more about planning for the future and ensuring “Organisational Readiness”. Research at the Australian Graduate School of Leadership has identified the importance of organisations developing transitional and future structures. This is supported by the Maxumise strategic planning process that often identifies transitional structures that have quite different contributing elements (positions) to those that currently exits.

In modern Human Capital Management, succession planning is about “organisational readiness” and involves:

a) Managing the structure and knowing what the future and transitional capability needs are and what this will translate to in structure design (Strategic Planning);

b) Specifying the role/position descriptions which define the current and future contributing elements in the structure and

c) Determine the competency match between the current employees and the respective positions in the transitional structures.

Traditionally, succession planning is about employees being ready to fill, or at least apply for, positions that are, or may soon become, vacant in the current structure. Using this traditional approach, organisations find themselves focussing on maintaining the status quo rather than using succession planning as a key driver of business growth. These business growth drivers consist of firstly, the generic drivers that maintain the organisation on a steady state of growth whether from a competitive pricing, legislative change, product or service offering etc. Secondly, the deliberate growth or what is often referred to as interventional growth.  This interventional growth is identified largely through a structured strategic planning process that incorporates generic growth as well as the interventional growth over the next 3 to 5 years.

Two (2) key outcomes of the strategic planning process are, firstly the performance framework and secondly the capability [...]

Performance Management Systems

Is this the way to manage employees out or manage employees up?

At a business meeting this week, an HR professional suggested that, in his mind, performance management was linked to how to “manage an employee out of the organisation”.

This mindset is, no doubt not an uncommon one, perpetuated by poor and unwieldy performance management or “performance appraisal” systems and the need to provide evidence to “manage an employee out”.

From Maxumise perspective, what is lacking is an understanding of the power of a good performance management system which is used as a tool to empower and develop staff.  We have seen these work miracles.

How you ask?

To begin with measuring and reporting on anything regularly creates change, just ask Jenny Craig!  Set some achievable and meaningful goals, measure and report on these regularly, support and motivate the people, and miracles can occur.

The same process can be applied to any organisation.

Look at the strategic goals for your organisation and set some performance measures in place to achieve these.

Make the measures realistic and achievable, with a little stretch added. Using some well sourced benchmarks can assist to set good measures, ensuring achievable targets.  Good measures are ones that are well defined and unambiguous in terms of how they will be measured.  They will also state the scope of the measure e.g. the team, department, individual etc.  They will be easy to obtain; a measure that takes more time to collect the information than it is worth is not a good measure.

Make sure that the people are in control of the outcome of the performance measure.  It is no good setting a measure which a person cannot directly influence the outcome.  For example: the receptionist has no influence over [...]

Yes there is a replacement for the old “Job Evaluation”?

New age role sizing and position evaluation has been around since the first competency modelling developed around the early 1990’s. The preciseness of these systems have improved over the years and we can now confidently pay the right base salary, differentiate between position and incumbent and even place the HR asset value on the balance sheet (note).

 

The old “job” evaluation and the psychometric basis for sizing “jobs” has really been dead for a number of years. The point-factor job evaluation and processes like starting employees off at 85% and progressing to 115% of an imprecise number to start with would raise a few challenges – yet we still see remnants of this approach. The Productivity Commission study into executive remuneration questioned the processes used to determine the salaries that executives were paid and obviously market forces create the creep resulting in the salary levels we see today. What is critical is the not so much the package paid to specific appointments (this is a P&L expense), rather it is the value of the contribution of the position to the organisation. This is the value of the HR asset that should go on the balance sheet.

In modern human capital management the base salary is calculated precisely for the position. With an ideal position design then the applicant, incumbent or promotion candidate (s) can be assessed against this position and also valued. The new quantitative position evaluation uses competencies (outcome based competency vs behavioural) and this sets the position value and also used as the valuation on the individuals.

Competencies designed appropriately will have dimension such as a starting and finishing complexity as well as a significance to the position to deliver the critical outcomes. With over [...]

Can we trust our workers to perform?

Not only do we need to set up a system where the employee knows what is expected of them, we need them to understand and provide feedback on the results. They need to be empowered.

Progressive organizations are embedding the performance measures into the position descriptions using an outcome-based approach. The quantitative performance measures empower employees to manage their own performance and report back to the manager/supervisor- obviously with the necessary checks and balances. It applies from the CEO or even Board right down through the organization e.g. delivery driver which can be by shift or 6 weeks whatever.

This human capital management approach provides the definition of expectations in a quantitative way, empowers the employee, encourages motivation & innovation and rewards the employee for effort above and beyond the normal expectations (position target performance measures). The organization also knows they are getting a positive return on the performance pay – this is a win win situation.

With the performance envelopes in place the employees can interpret the data as quickly as the supervisor. As an example, in 1990’s this was introduced at Kellogg Australia and, just taking the Cooking Team, they could not only tell you whether the cook was in specification, they could also tell the supervisor why it was in spec. or tending towards the “out” and what needed doing to fix it. The supervisors moved to another site where they receiving feedback but more importantly spent time focusing on their own performance measures (which included an accumulation of the teams at the plant).

This empowerment was a new concept in the 1990’s but today it must be the approach we adopt if we are to become a progressive organization. We have to utilize and [...]

Making 2015 a year for moving forward in a structured way

The world is and will continue to be an ever changing place bringing with it the uncertainties and risk which can cause us to bunker down and remain in our normal comfort zone. This cautious and sometimes defeatist approach is reflected in a number of the electronic discussions that featured in 2014 and focussed largely on dealing with the negatives in a largely reactive way.

Maxumise believes that we are missing opportunities and that in 2015 we should be taking a more proactive and progressive approach. While the uncertainties will not go away, at least we will be taking more control of our organisations destiny.

The proactive approach will need to be strategically driven with a clear and common understanding of where we want to be in say 3 to 5 years as an organisation and identify the corporate risks that need to be monitored. In the current global climate of “what’s going to happen next” and governments struggling to take control and drive their countries forward it is easy for an organisation to lose focus and start to pull in different directions. We had the opportunity to ask 6 Directors and a CEO to write down what they saw as the organisations one “core business”. We ended up with 7 different answers and while 2 were similar the answers were largely quite different. This meant that every time a decision was to be made around the Board table each member’s decision was based on a different “business” – no wonder decisions could not be reached or took a long time to be reached. Each Board member was “rowing” in a different direction. It was not surprising that this confusion was also reflected the operations and [...]