Human Capital Magazine by Key Media

human capital

HC issue 7.6

PROFILE:

teambuilder:

Hewlett-Packard

RBC Dexia Investor Services

The global workforce Expert advice: *International hiring *Relocation *Remuneration

L&D: Don’t fear budget cuts – learn on the job

editor’s letter issue 7.6

EDITORIAL Strength from within

aul Keating was once attacked for presenting the early 1990s economic slump as ‘the recession we had to have’. While nobody has been as forthright this time round – and everyone seems reluctant to use the dreaded ‘R’ word – business leaders currently face unique challenges. Is this slump a necessary evil – a chance to trim some of the fat? Although many employers have had it easy these last couple of years, HR professionals in mining and resources or healthcare might beg to differ as they’ve struggled to fill roles with skilled workers. The recession is certainly a chance to rethink strategies and perhaps remove deadwood. Clearly, it is time to get smarter with human resources and the budgets that attach to these resources. Without sounding like a Zen believer, there can be unexpected strength to be found within. This month’s feature on L&D reveals that only 10% of learning comes from formal courses. The rest comes from on the job experiences and the people we work with. In short, getting smart about learning experiences can save money. The same logic applies to succession planning. Research shows that internal CEO hires generate on average a 21% shareholder return compared to 17% for ‘outsiders’. As each organisation today is aiming to retain their most talented workers to weather the economic storm, it pays to provide both insightful L&D and clear career paths.

In the first person… “When people talk about cutting the L&D budget they often feel this means they can no longer send people on courses. However, they should be looking at ways to make the work itself a source of development” – Lenorë Lambert, director, Exit Info, on costeffective L&D (page 32)

“Due to the economic downturn, the government is seeking additional information around the benefit to Australia but also information around recruitment, retrenchment, and hours of work for employees” – Teresa Liu, partner, Fragomen, on new criteria for gaining sponsorship status (page 14)

“Currently, we see a majority of HR leaders with less professionalism holding high level HR positions and sitting at the board table. This is something different from the West” –

managing director chief operating officer editor journalist production editor contributors marketing manager marketing coordinator traffic manager design manager designer photographer senior web developers it/is manager

Mike Shipley George Walmsley Iain Hopkins Daniela Aroche Tim Stewart MatthewsFolbigg Merryck & Co Onetest The Next Step Chandler Mcleod Group Danielle Tan Jessica Lee Stacey Rudd Jacqui Alexander Ben Ng Thilo Pulch Kevin Kim Storm Kulhan Colin Chan

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Francis Tam, HR director, Ibis Hotels China on the unique HR challenges in China (page 30)

“The goal is to ensure that the aspired behaviour of teamwork is encouraged not only within departments but across global teams” – Eva Wright, head of human resources at RBC Dexia Investor Services, on embedding teamwork into every day activities (page 54) www.hcamag.com

this issue

inside

HUMAN CAPITAL

HC ISSUE 7.6

PROFILE:

TEAMBUILDER:

HEWLETT-PACKARD

RBC DEXIA INVESTOR SERVICES

14 Cover story:

International exposure

Although 456 visa applications are down to their lowest level in four years, employers in certain sectors are still scrambling for international talent. Iain Hopkins explores the options

The global workforce Expert advice: *International hiring *Relocation *Remuneration

L&D: Don’t fear budget cuts – learn on the job OFC_concepts.indd 2

25/06/2009 4:38:15 PM

30 International HR:

China challenges

Paul Howell investigates how HR departments are coping in the People’s Republic of China as the country experiences a severe reduction in economic growth

contents features Next in line 38 32

The impact of careful succession management stretches far beyond a smooth handover of responsibility. Human Capital looks at what is involved in the current environment

Earn your stripes

HR professionals face special challenges when it comes to L&D in a recession. Not only must they ensure the learning needs of all employees are considered, they must also look after themselves. Human Capital explores some cost-effective upskilling options

regulars 4 In Step 6 Legal 8M entoring 9C orporate Culture 10 Training and development

Letters to the editor Do you have a burning HR or people management issue you would like to share with others? Would you like to share your thoughts on the challenges youâ&#x20AC;&#x2122;ve faced and how youâ&#x20AC;&#x2122;ve overcome them? Want to kick off some debate about your industry? If so, Human Capital would like to hear from you. Send through your comments to editor@hcamag.com.

Correction

Human Capital magazine would like to make a formal apology to culture and leadership consultancy, Human Synergistics International, for a significant error made in the cover story Aftermath: The cultural toll of redundancies, which featured in issue 7.5 (June/July) of the magazine. In this story about the cultural and business implications of redundancies for an organisation, Human Synergistics provided Human Capital with a graphic of their trademarked culture and leadership measurement tool - the Human Synergistics circumplex. Human Capital incorrectly adapted this model without approval or correct acknowledgement. In this edition of Human Capital we have included a comprehensive explanation of the Human Synergistics circumplex, along with the correct graphic, and would like to encourage all our readers to take a look at the story on page 46, which takes you through the characteristics of the highly credible measurement tool.

instep InStep

HR Career Experts

Page 04

HR decisions in ’09

uring the boom economy there was much discussion within the HR community about the pros and cons of different corporate structures and their impacts on HR careers. In this month’s Instep column, we look at some of the implications of these structures for HR practitioners as we move forward in the post-GFC environment, focusing on key issues of autonomy and decision making.

Ownership structures and the impacts for HR practitioners

Some of the different structures offering HR opportunities include: Australian subsidiaries of global multinationals, large ASX-listed national companies, privately owned companies, partnerships, the public sector and the not-for-profit sector. These structures extend over all industries and can offer a really wide range of alternatives for HR practitioners. What suits one HR practitioner may not suit another, so it’s important to understand the advantages and disadvantages of each structure and how they fit with the career and personal objectives of the individual. The decision-making process and its lifecycle are key elements of HR roles in most companies. There is no doubt that the GFC has affected the types of decisions made by HR professionals, and that quite fundamental implications arise from the question of who decides how much autonomy is available to local HR practitioners.

Global multinationals have tightened their grip

In an environment characterised by a far greater emphasis on cost containment, regulation and compliance, it’s not surprising that a stronger level of control is being exerted by parent companies overseas. In their recent report, “HR Responses to the GFC: How Australian Subsidiaries are tackling the Challenges”, the International HR Directors Forum concluded that the autonomy of local HR teams had decreased in 38% of companies. The report was based on surveys and interviews with leading HR Directors. One of the main questions tackled by the report was: “How is the GFC impacting on the HR function itself , in areas such as the relationship with the parent, the level of resources now available to the local HR function, and perhaps most importantly, the very nature of the HR challenge faced by subsidiary HR Directors”. While anecdotal evidence has indicated that the level of control has increased from overseas parents, the International HR Directors

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Forum report would certainly seem to confirm that this has been the experience of a wide range of local HR directors (HRDs). The question then presented is whether this reduction in local autonomy will adversely impact or influence the quality and range of HR roles within these companies.

Local organisations: local decisions

Evidence suggests that HRDs within locally-based organisations, whether they be in the public, private, government or NFP sectors, are being asked to produce substantial detail and a focused rationale for any business decisions. Having said that, local HR teams are able to drive decisions based on conditions in their immediate region. It was said in the boom years that Australian subsidiaries of global companies offered the opportunity to work in time frames that were longer than the short-term thinking that pervaded ASX-listed companies. Within the challenging conditions presented post-GFC there is evidence that this situation may be changing. The Australian economy has faired better than most, and locallybased professional partnerships and private companies are, in many respects, better placed to be able to make the long-term decisions that are investments in the future. The major accounting and legal firms, for example, are doing everything possible to not lay off high-calibre professional staff and maintain their investment in longer-term focused learning programs to secure their long-term competitive advantage. As always with these articles, generalising heavily means that there are many examples of companies that will fall outside of broad observations. However, most would agree that corporate structures across the board have been reviewed in response to the GFC. This has resulted in the major restructure of some organisations. Others have focused on redefining roles including the level of autonomy and the process of decision making. HR shares this change with many other professions. The post-GFC challenge will be when and how such changes are realigned from an HR perspective.

Craig Mason is the founding director of The Next Step, a specialist consulting practice in the human resources market. For information call +61 2 8256 2500 or email cmason@thenextstep.com.au web www.thenextstep.com.au

Recent HR Market Moves supplied by The Next Step

Integral Energy has appointed Liz Schenke as Group General Manager Corporate Services. Liz brings to the role experience gained in organisations such as Asciano Australia, Citigroup Australia and Toll Holdings.

Tabcorp have appointed Melanie Forbes as Human Resources Business Partner, Corporate Services. Melanie has previously held senior HR roles with BT Financial Group, Qantas Holidays and Deutsche Bank in London.

Orica Limited has appointed Trisha McEwan as General Manager Human Resources. Prior to this she headed the HR function for Telecom New Zealand as well as Shell and Fletcher Challenge.

& Development Specialist. Jacqueline was most recently in the role of National Learning & Development Manager with Integrated Group.

Peter Styles has commenced as General Manager Human

Resources with United Group Limited. Peter was previously with Qantas where he held a number of senior HR positions. Boehringer Ingelheim has appointed Elaine Wilson as Human Resources Director Australia & New Zealand. Previously Elaine was with CB Richard Ellis as Regional Director Human Resources â&#x20AC;&#x201C; Australia & New Zealand.

Amy Goodall has joined FuturePlus as Human Resources

Manager. Amy was previously with Barclays Wealth in London as Performance Development Manager.

Suzanne Peddington has joined McMillan Shakespeare

Australia as General Manager Human Resources. Previously Suzanne was with Suncorp where she held senior HR positions.

Jacqueline Evans has joined Schweppes Australia as Learning

Bridie Bell has accepted the role of HR Consultant with Ferrier Hodgson. Prior to this Bridie was with GMK Centric Chartered Accountants as the Senior Consultant Human Resources.

Pei-Lin Kao has commenced as an HR Business Partner

with ANZ. Pei-Lin has a wealth of experience gained within organisations such as Ceva (Previously TNT) Logistics Malaysia and Intel Malaysia.

Natalie Hanrahan is now with GE Money as the

Organisational Staffing Specialist. She was previously with Alexander Mann Solutions in the role of HR Project Consultant.

Christine Heyting has joined Slater & Gordon as the General

Manager of People & Culture. She has an impressive background in the Professional Services sector, having spent seven years in senior HR roles with Ernst & Young, both in Europe in Australia.

By supplying Market Moves, The Next Step is not implying placement involvement in any way.

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issue 5.10

news

Page Legal Experts

Twittering towards dismissal?

n a digital age where employees are regularly engaging in online communication via social networking sites such as Facebook and Twitter, employment laws and company policies are under increasing pressure to manage employee conduct in the changing workplace. Facebook alone has over 200 million users worldwide and each user has an average of 120 friends. The potential for damage from misuse of such powerful communication tools is extraordinary and is creating another dimension for employers to consider in managing employee conduct.

Facebook Posts and Twittering: A sackable offence?

Whether disciplinary action is appropriate is a question of fact and degree based on each case but circumstances where online use of social media may result in disciplinary action include: yy use of the sites to bully, harass, discriminate against or vilify work colleagues; yy use of the sites as a forum to publicise workplace disputes; yy posting of defamatory content on such sites; yy disclosure of confidential information or intellectual property on the sites; or yy lack of productivity due to excessive use of the sites during work hours. Whether the posts were made by the employee from a work computer or during work hours is not critical to whether an employee can be disciplined for inappropriate conduct. Even before the internet age, there were circumstances where employee conduct outside of work could be scrutinised by employers. Social networking sites simply broaden the range of communications employees can participate in and be disciplined for if they step over the line. But what is the line? How far can employers go to discipline employees for posts they make in their private time? This depends largely on the relevant contract of employment as well as policies and procedures the employer has in place. If the employee’s posts reveal confidential information about the

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employer or make discriminatory comments which are referable back to the employer or workplace, existing contractual provisions, policies or procedures may anticipate disciplinary action for this type of conduct. However employers are encouraged for their own protection to go further and create specific policies relating to social media so the “line” which must not be crossed is clearly outlined for employees. This will mean any termination of employment flowing from a breach of these specific policies is less likely to be considered to be harsh, unjust or unreasonable if challenged.

What should employers do?

Develop Social Media Policy As a matter of best practice, it is recommended employers implement specific provisions and policies which explicitly state what conduct or social media posts are prohibited. Specifically, such policies should: 1. Be clear about what posts are prohibited, for example: yy posts mentioning the employer’s name, affairs or confidential information yy posts which are defamatory yy posts which may otherwise be construed as discriminatory or “bullying” 2. Make it clear employees can only speak on behalf of the organisation if they have the authority to do so. 3. Contain specific provisions on confidential information and intellectual property such as trade secrets. 4. Explicitly state employees who engage in breach of policies even outside the workplace, may be liable to face disciplinary action. 5. Clearly explain failure to comply with the policy may result in disciplinary action being taken against employees up to and including termination of employment. Employees should also be made aware that in a court scenario, production of such material posted may be requested under a subpoena and has been used in Australian Courts. A recent example was in the Australian Industrial Relations Commission case of Lukazewski v Capone’s Pizzeria Kyneton (which is yet to be finally determined) where the employee indicated he was “p****d off” on Facebook after being called in to work when two other staff members had called in sick. Distribute and consistently enforce policy The Social Media Policy must be distributed to all employees and consistently enforced when breaches occur. Since the conduct the policies are dealing with is so public, evidence of inconsistent enforcement will be easily accessible and may be used as the basis of unfair dismissal proceedings by disgruntled employees whose employment is terminated for breach of the policy. Fay Calderone is a Senior Associate with MatthewsFolbigg Lawyers. For more information call: (02) 9806 7412 or e-mail: fayc@matthewsfolbigg.com.au

issue 5.10

international

Mentoring

Page 8

Establishing a mentoring culture

mentor is someone who has ‘been there and done that’. They have walked the path, learned the lessons, and can provide the wisdom that comes from experience. Learning from a mentor can fast track development of people at every level in an organisation, and help avoid costly mistakes. I vividly remember the very first task on my first day at work after leaving school. I had joined the Merchant Navy and was posted to a ship in Japan. “Have a look in the portside chain locker in the forecastle head and check that we have a Kentor joining shackle,” said the Chief Officer, my new boss. He may as well have been speaking a foreign language for all the sense it made to me. My confused look gave him much delight as it provided an opportunity to demonstrate his superiority and my ignorance. The bosun, who overheard our exchange, took me aside and quietly explained what I needed to do, and then offered to show me. In the ensuing years this man was a marvellous mentor as he helped me learn from his experiences, while the Chief Officer continued to teach me how not to treat people. We all have mentors – people who show us the way and help us tread a wiser path. We require different types of mentors at different times in our lives and careers. When we first join an organisation there is great value in having someone who has worked at the firm for some time taking us under their wing. Internal mentors know and understand the corporate culture and wisdom. They know who the ‘go-to people’ are in order to get things done. They can help sponsor the career of rising stars. They can help us avoid common pitfalls and mistakes. As we progress to greater and more complex challenges the type of mentor we require changes. Not only do they need to have walked a similar path, they also need to possess the key qualities required in a mentor – humility, curiosity, generosity, listening skills, and so forth. But at all times the key thing about mentoring is that it is tailored to the needs of each person. As people join the firm they usually undertake initial training and induction in groups. Assigning mentors can personalise this for each participant. As people rise in the organisation, mentors can continue to support their specific growth and development. Senior leaders may still attend Executive MBA programs for example, but this would not replace the value of a mentor helping them with the very real

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challenges they face each day. At the very top of organisations, an external mentor to the CEO takes on a crucial role, as there is no longer the prospect for internal mentors, and many of the matters to be discussed require an agenda free confidant who understands what it is like to be a CEO. They also usually bring a completely different perspective, often from another industry, which can add great value to the leader’s thinking. Recognising the different types of mentors at different stages of a career enables a firm to build an approach to mentoring that complements and builds on the impact of existing learning and development programs. The key issue is to identify who can be a mentor. This is not a case of calling on volunteers, but rather of agreeing the criteria, and seeking out people who have raw mentoring capability. Ask questions like: Who do people enjoy working with? Who do people seem to naturally seek out for advice and comment? Who seems always willing to help others without seeking recognition for themselves? Who has a good track record of developing people that work for them? Having found a group of potential mentors, the next task is to train them. The main thing new mentors need to understand is that this is about their ‘client’, not about them. They need to listen, help people learn, and avoid a natural inclination to want to solve problems. They need to regularly check that the client’s expectations are being met, against a set of measures established early in the relationship. Mentoring can be formalised, such as when you use a firm like Merryck & Co., or informal such as when you seek out a friend for wise counsel. The point is that having a mentor with whom you can test your thinking, and from whose experience and insight you can learn, will accelerate your success and help create significance in all that you do.

Anthony Howard, Chief Executive Officer +(612) 9231 8670 anthony.howard@merryck.com www.merryck.com

Corporate Culture Column Evolving your Workforce

Page 09

When accountability is present it becomes the glue that holds a top-performing organisation together at the top of its game.

hose seeking high performance should first look for accountability. Consistent values – and above all those of accountability – are the glue that bind repeated performance. In highperformance teams, we see repeatedly that mutual, internal accountability prevails in force. Such teams are characterised by self evaluation, and their sense of internal accountability is far greater than anything imposed by a boss or outsider. They demonstrate clearly that accountability is a behaviour, not an action. This is deeply cultural. Yet it is the nature of the modern world that the culture of even the healthiest organisations is under persistent challenge. Rates of technological change create the suggestion that there is always a newer, better, faster way of doing things. So, as the ground shifts repeatedly, requiring regular workplace reconfiguration, we see that there is a risk to every successful culture. In restructure, whatever its cause – acquisition, realignment, divestment lies the possibility of fracture, and of values unattended working themselves adrift. Yet cultures take time to build and time to manage, and consistent values – and above all those of accountability – are the glue that bind repeated performance. When accountability drifts, typically, we see avoidance behaviours begin to creep in. When what is sought are processes and frameworks that can uphold an achieving culture, an investigation of the organisation’s practices of accountability should be a first port of call. We’ve all been victims of poor service. We see it in our retailers, in our banks and in anonymous and faceless telecommunication providers. Many see it daily in the workplace: people are busy but nobody is responsible anymore. Even those who might wish to help us are unable to do so because the appropriate structures are not in place. The culture of failure, of passing the problems back to the customer, has become so ingrained that they are powerless to change it without fear of recrimination from above. And those unexposed to the angry customer are unlikely to jump in and help.

But if a lack of accountability is costing the customer, just imagine what it is costing the organisation that repeatedly delivers such poor performance. Is it any wonder that the best workers will be among those heading for the exit? In hiring circles, word has a way of getting around. So what are the implications in your own battle for talent if the culture can’t fix such obvious problems? And, when management really seeks increased confidence in its groups’ ability to deliver on its plans, when things go wrong in your business, who gets obsessed with the blame game? Cultures in which strategy isn’t playing out have a knack of telling us that something is afoot within. It has proven too easy for many to betray their legal and moral responsibilities, and recent years have delivered a string of high-profile failures of corporate accountability – among them Enron, HIH, Worldcom, ABC Learning, Opes Prime, Allco and AWB. The shared behaviours, language and standards of accountability to which most societies must subscribe were not found in these organisations’ senior managerial ranks. Each manifestly had a culture of accountability which rewarded behaviours at odds with the wellbeing of other stakeholders. Yet we see it persist in the sub-prime mortgage crisis, which began in the United States, and from whose unravelling the world may yet take many years to recover. Yet who was accountable? Who can we blame? It’s easy simply to blame the accountants, auditors, or traders when a culture of ‘anything goes’ or ‘whatever it takes’ becomes an organisation’s norm. But organisational culture manifests through its myriad symbols, often invisible to the unfocused eye. But those for whom the strategy isn’t playing out as it was meant to have a knack of showing us that something is afoot. Exposed in the headlights of the media, those who should have been accountable suddenly – inexplicably – aren’t. They were of course only acting on the information they were given. It can be argued that senior management thought it was no longer answerable to investors. Executive rewards were out of alignment with real progress and business growth. Short-term share price was considered more important than profitability as by realising its targets, managers were able to release their performance bonuses. Yet it is those beneath who were forced to shoulder the burden of the reduced salaries required to achieve it, and the fewer people available to do more work. Yet no one seems surprised when the next incidence of failed governance appears on the media’s radar. So what could happen if accountability for its culture doesn’t take hold in your organisation? And what are you going to do about it? Where accountability is insufficiently woven into the plan of execution, or there is possibility for misinterpretation of what is expected, it is the belief, behaviours and the careers of the willing that are most fallible. www.hcamag.com

Training & Development

Page 10 Professional Development Experts

SURVIVAL TIPS FOR YOUR ORGANISATION

ith the global financial crisis biting hard, management executives are beginning to realise that while their share prices and balance sheets are showing them where they are falling behind, it is the skill and commitment of their people that will take them where they want to go in the future.

Talking about your generation

Australia has enjoyed unparalleled prosperity over the last decade. Unemployment reached its lowest levels and the national standard of living reached its highest levels. Older workers focused on improving their superannuation via the soaring stock market; while younger workers asked what their employers could do for them, rather than how they could contribute to the organisation. In good times of low unemployment, organisations are so keen to attract and retain employees that their people management becomes process-driven and less strategic. Many organisations today have wage rates and conditions of employment that were created with the sole purpose of satisfying employee demands – but these are not sustainable in the current situation.

Do you have an EVP?

Organisations with a good people management strategy have a brand or EVP (Employee Value Proposition) that attracts and retains good employees irrespective of the employment market or economic times. Employees want to work for employers who have a clear vision and a corporate strategy that will prevail regardless of changes or challenges to the labour market. Employees understand that poor leadership or bad management practices are a threat to the survival of the organisation, and they will leave as soon as they have other employment options.

1. Invest in your people by sending them on training programs, running management workshops and spending considerable time developing long-term strategies. 2. Balance the needs of old and new workers. Older workers have been caught short by the economic downturn – their superannuation and retirement planning is particularly affected. New workers, however, are at risk of becoming disillusioned and disaffected with a work environment that has shifted focus. Gone are they days when the needs of individual workers were paramount. 3. Make organisational survival your new focus, and make quality people management a priority. A common theme here is strengthening the organisation. This may seem incongruous when most organisations are focused on how they will survive the next quarter or financial year and have shelved their improvement programs. In broader organisational lifecycle terms (and even in product lifecycle terms, in some cases) the current economic downturn will be a short, albeit painful, experience. Recovering markets will provide a range of unique opportunities. Organisations need to be ready for these opportunities as they arise. Gaining a ‘first mover’ advantage in some of these areas will be critical for maximising benefit. As strategic level organisational change can take several years to implement, now is the time for organisations with a competitive agenda to start making the changes necessary to take advantage of recovering markets. Contributed by John Taya and Stuart Orr John Taya is Unit Chair for Contemporary People Management and Stuart Orr is a member of the Chifley Academic Committee for Chifley postgraduate programs.

Steps to take

Unfortunately, the poor performers stay as they do not have the same ability to walk into other jobs. As a result, the organisation slips further behind in its productivity and competitiveness. Consider the following steps to improve your organisation’s health.

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Phone 1300 CHIFLEY | 1300 244 353 Visit www.chifley.edu.au

news issue 7.6

NEWS Executive pay reforms slug ordinary managers P

roposed Federal Government legislation threatens the termination payments of middle managers, warned representatives from governance, risk and compliance advisors Chartered Secretaries Australia (CSA). Under the legislation, termination payments would be capped and could even be voted down by shareholders. According to CSA, the objective of the proposed legislation was, justifiably, to target ‘golden handshakes’ paid to poorlyperforming senior executives. However, in its rush to act, the government has delivered a heavy-handed framework that also captures genuine payments

made to middle managers on resignation, retirement or redundancy. “The definition of a termination payment is currently so broad that legitimate entitlements like accrued annual leave, long-service leave, bona fide redundancy payments and salarysacrificed superannuation contributions are also caught,” said Tim Sheehy, CSA’s chief executive. “Imagine a long-serving worker being made redundant. He or she may be simply a line manager, but it’s more than likely that once all their entitlements are combined with their superannuation savings, the total termination payment

Leaders the key to powerful employer branding

he most effective and critical activity in an employer-branding program has nothing to do with marketing, and more to do with developing capable managers, according to a wide-ranging new survey from the Employer Brand Institute. The Employer Branding Global Research Study surveyed more than 2,000 organisations worldwide. Some 15% of respondents said they believed the most effective branding activity a company could undertake was “building a leadership development program to equip leaders with the capabilities to better manage the employment experience”. Next were 14% who cited defining an employee value proposition as a key branding activity, and

13% who mentioned an effective careers website. Employer Brand Institute Chairman and CEO Brett Minchington said the research underscored how important it was for an employer Brett Minchington brand to reflect the employee experience. “Leadership behaviours and actions are the key to building a strong employer brand,” he said. There is also a further trickle-down effect to managers, who generally underestimate

would exceed the Bill’s cap of one year’s salary. “Not only would this hapless employee’s payout have to be approved by shareholders at the next annual general meeting, which could be up to 12 months down the track, but there’s no guarantee the votes will go his or her way.,” added Sheehy. CSA has also called into question the fact that the Bill will extend beyond key executives of the listed parent company, to management personnel of its subsidiary companies. According to CSA, this would make the legislation impractical and unworkable, with no public benefit to shareholders since many large listed companies have hundreds of unlisted subsidiaries in Australia. In its submission, CSA recommended that companies be permitted to submit to shareholders a general termination policy for approval, and only require specific shareholder approval for payments outside the approved policy. “Under our proposal, shareholders would vote in support of a formula for determining an executive’s termination benefits rather than for each specific termination payment. We believe that the formula would be supported in meetings with worked examples based on the top executives’ salaries, so that shareholders can assess the merits of the policy in a fully informed way,” said Sheehy. the impact their daily interactions can have on an employee’s employment experience. “This is not their fault,” added David Kent, managing director of The Right Group. “Buy-in of the employer brand concept at senior leadership level first is most critical if middle/line managers are going to affect brand equity.” The survey also showed that companies were relying on a range of metrics to measure the success of their employer branding projects, with 42% tracking retention rates. Some 35% of respondents were tracking quality of hire, 30% recorded the number of applicants and 29% measure the cost per hire. “The biggest hurdle is moving employer branding out of the ‘recruitment tool’ space and getting it across the whole organisation. More manager accountability is needed,” said Kent. www.hcamag.com

issue 7.6

ask the experts

Need advice? Ask the experts! We would all like to have experts on hand when we need information. This month, Ari Kopoulos from EmployeeConnect explores HRIS project implementation

I’am trying to evaluate the preferred implementation strategy for a HRIS project. What are the criteria for assessing whether we take a ‘big bang’, or ‘phased’ approach?

This is a very common question, usually asked of a vendor during the evaluation phase of the purchase. Do you we get it done quickly, in a big bang approach, or do we slowly phase in the new functionality and technology? The reality is, it depends on your business requirements and the amount of planning and resources you’re prepared to put into the project. Both approaches work under the right conditions and have the same project risks. It’s just that the probabilities of those risks are generally higher under one, uber-phase than with multiple phases. The lure of the big bang is that it offers an organisation with a sizeable budget an efficient, speedy yet intense implementation option. This often helps in situations where resources are limited. On the down side, the shorter time frame condenses the challenges and difficulty, magnifying the pain and demanding more effort in issue management. If you are prepared to dedicate budget and the required resources to change management, then the big bang has the advantage of a relatively speedy implementation, with all your users on the one system , allowing you to move on to managing the process. The track record of the big bang implementations is that the projects are often rushed, details and testing are

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overlooked, and the proposed solution may not be aligned to the existing business. Project success is compromised, resulting in a less satisfied end user. And, as mentioned above, the pain is often more severe due to the shorter timeframe. The other alternative is to follow a planned, phased approach. The phases can be mapped to system functionality, business process, or location. The appeal here is that is allows project teams to take their time in planning, enhancing, and testing of the system whilst tending to their existing workload. The downside is that these types of phased projects often lack the urgency and focus, risking drawn out implementations. The constant change can also be draining to users and employees. Also with longer implementations comes the risk of losing the project champion, resulting in a shelved project. So, which approach is the best? Both approaches have clear pros and cons. To help you select any implementation approach you need to consider the size of your organisation, budget, scale and complexity of your requirements and solution, alignment to existing workflow processes, end user functionality and training, data migration, existing business workload, testing and support, and change management. I would generally argue that phased is the preferred, less risky option in HRIS implementations. Most systems these days offer modular functionality which easily lends itself to phased implementation. The

prospect of spreading costs across more than one budgetary year is also appealing. Furthermore if you are migrating from a manual to an online workflow process, then phased is the way to go. If the system you have purchased is large, non modular, or is a payroll system bundled with HR, then it probably needs to follow a big bang approach. Also, if you are replacing existing automated systems, possibly mission critical processes, then big bang eliminates the need to maintain dual business processes. What’s clear is that today’s business landscape is in a state of flux, and any software that supports a business process needs to be deployed rapidly and deliver the benefits. However, detailed project planning anticipates and addresses any issues arising out of the implementation strategy irrespective of the approach. Naturally, selecting the right partner with a proven track record would take away the pain associated with any type of implementation. HC

About the author Ari Kopoulos is national sales and marketing director for EmployeeConnect. For more information on EmployeeConnect, visit www.employeeconnect.com

issue 7.6

ask the experts

16-17 JULY 2009

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Ask the experts! We would all like to have experts on hand when we need information. This month, Ari Kopoulos from EmployeeConnect explores HRIS project implementation

Q Increase performance and I’am trying to evaluate the preferred implementation strategy for a HRIS project. What are the criteria for assessing whether we take a ‘big bang’, or ‘phased’ approach?

overlooked, and the proposed solution may prospect of spreading costs across more not be aligned to the existing business. than one budgetary year is also appealing. Project success is compromised, resulting Furthermore if you are migrating from in a less satisfied end user. And, as a manual to an online workflow process, mentioned above, the pain is often more then phased is the way to go. severe due to the shorter timeframe. If the system you have purchased is The other alternative is to follow a large, non modular, or is a payroll system planned, phased approach. The phases bundled with HR, then it probably needs can be mapped to system functionality, to follow a big bang approach. Also, if you business process, or location. The appeal are replacing existing automated systems, here is that is allows project teams to take possibly mission critical processes, then big their time in planning, enhancing, and bang eliminates the need to maintain dual testing of the system whilst tending to business processes. their existing workload. What’s clear is that today’s business The downside is that these types of» Maintain landscape is in morale a state ofinflux, any employee the and downturn phased projects often lack the urgency and software that supports a business process » Manage redundancies andrapidly terminations focus, risking drawn out implementations. needs to be deployed and deliver The constant change can also be draining benefits. corporate However, detailed » Createthe a resilient culture project to to users and employees. Also with longertake you planning anticipates and addresses any through the recession implementations comes the risk of losing issues arising out of the implementation » Protect and develop your talent base the project champion, resulting in a shelved strategy irrespective of the approach. » EnsureNaturally, your HR selecting metrics are project. the still rightrelevant partner So, which approach is the best? Both with a proven track record would » Prepare your workforce for economictake recovery approaches have clear pros and cons. away the pain associated with any type of To help you select any implementation implementation. HC approach you need to consider the size of your organisation, budget, scale and complexity of your requirements and About the author solution, alignment to existing workflow processes, end user functionality and Sudzina AriStephanie Kopoulos is – conference producer stephanie.sudzina@keymedia.com.au training, data migration, existing business national sales (02) 8437 4727 workload, testing and support, and change and marketing director for management. Official Sponsors Strategic sponsors EmployeeConnect. I would generally argue that phased is publication For more the preferred, less risky option in HRIS information on implementations. Most systems these days Bronze sponsors EmployeeConnect, Organised by offer modular functionality which easily organisation visitSupporting www.employeeconnect.com lends itself to phased implementation. The

productivity in a challenging business environment

This is a very common question, usually asked of a vendor during the evaluation phase of the purchase. Do you we get it done quickly, in a big bang approach, or do we slowly phase in the new functionality and technology? The reality is, it depends on your business requirements and the amount of planning and resources you’re prepared to put into the project. Both approaches work under the right conditions and have the same project risks. It’s just that the probabilities of those risks are generally higher under one, uber-phase than with multiple phases. The lure of the big bang is that it offers an organisation with a sizeable budget an efficient, speedy yet intense implementation option. This often helps in situations where resources are limited. On the down side, the shorter time frame condenses the challenges CHANCE and difficulty, magnifying ST pain LAthe TERdemanding more effort in GISand REmanagement. TOissue If you are prepared to dedicate budget and the required resources to change management, then the big bang has the advantage of a relatively speedy implementation, with all your users on the Event partner one system , allowing you to move on to managing the process. The track record of the big bang implementations is that the projects are often rushed, details and testing are

Case studies from recognised brands: Boost Juice, Collingwood FC, AXA, Mars Foods, Hewlett-Packard, Melbourne Business School, La Trobe University

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issue 7.6

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issue 7.6

International

exposure Although 457 visa applications are down to their lowest level in four years, employers in certain sectors are still scrambling for international talent. Iain Hopkins explores the options

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issue 7.6

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Current state of play Randstad 2009 Employment Trends Report – International Recruitment »» The Randstad 2009 Employment Trends Report indicates recruitment beyond borders shows no sign of slowing. At a time when many organisations are reigning in the expansion of their workforce, 13% expect an increased level of interest from international talent and more than half (54%) expect this level to remain steady. »» The slowing of the global economy has resulted in significant and increasing unemployment levels in the UK, Europe and USA. It may be the case that jobseekers are looking toward Australia, New Zealand and Singapore, where unemployment levels have not hit the heights experienced in other regions. »» 64% of organisations in the Asia-Pacific region are sourcing international talent from the UK, Australia (49%) and New Zealand (41%). »» 32% of talent is from South Africa, South East Asia/Singapore (32%); India (32%), China (19%) and the US (19%). »» 24% of organisations in the Asia-Pacific region operating in the professional services sector expect an increase in interest from international talent, with 47% expecting it to remain steady over the next 12 months. »» 20% of respondents in the resources, mining and construction industries expect an increase, and 24% expect interest to remain steady. »» Organisations in the education and childcare sector only expect a 4% increase in interest, with 66% expecting a steady level and 31% predicting a decline.

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t is ten months on from Human Capital ’s last in-depth look at international hiring, and in that time the world has changed. Back in August 2008 employers were desperate to attract international candidates with skills that were hard to find locally. Now, with recruitment budgets slashed and unemployment rising, the urgent call out to overseas talent has relaxed. This is reflected in both the 30% reduction in 457 visa applications over the past 12 months, and the May Federal Budget, which saw a 20% reduction in numbers for the skilled migration program from last year (this includes general skilled migration, employer nomination scheme, business migration and distinguished talent). It now sits at around 108,000 places. However, certain industries remain desperate for skilled workers. Employers in health, engineering, infrastructure, and IT continue to look overseas for talent – a fact highlighted by the government’s critical skills list, which is used to determine the priority for independently lodged permanent applications. That list, which is regularly updated, retains jobs in the health, engineering, and IT sectors. There are other elements at play that indicate there is still demand for overseas workers: large scale and smaller projects are ongoing or in early stages; multinationals have regional HQs in Australia; and expatriates are looking to return to the comfort of home. “While we need to be cautious, the workforce is global,” says Karen Waller, executive director, migration, middle market advisory at KPMG. “It hasn’t come about just because Gen Y demands this international work experience – we’ve been heading there for a long time. In the UK, many Aussies are not necessarily returning home. They might be going to the Middle East or Asia with the same company. Locally, there’s a huge skills shortage in engineering, and although the resources area has been hit hard we know that China and India will continue to expand and jobs will be needed to be filled

in those areas. There is an increasing global demand for talent, particularly within developed countries, and it’s matched by the demographic reality of people leaving the workforce.”

Employing overseas workers

There are well-established avenues for organisations looking to hire talent from overseas. Internally, these could include encouraging staff to inquire about overseas transfers with their direct managers, via global intranet sites, company noticeboards or social networking. Externally, it could involve broadening hiring programs to tap into international media, keeping up-to-speed with visa requirements and changes to programs, thinking outside obvious sourcing locations such as the US and the UK, as well as collaborating with government-funded programs. Employers typically recruit candidates themselves through international advertising in specific trade journals, targeted recruitment drives and visibility at employment and trade expos. Organisations with a greater and more immediate need for talent tend to turn to international recruitment agencies with global offices and affiliations. Before a decision is taken to hire internationally, there are important factors to consider. It costs more to bring in an overseas hire rather than find someone locally. This tends to be because of the particular skills base they have and the relocation and add-on costs. For example, the new employee might bring their spouse and kids. “It depends on the policies a particular company has – will they agree to take the whole family, will they help with accommodation costs for a few weeks, and so on. So yes, it can be extremely expensive, but it depends on what you’re willing to offer. Sometimes it’s easier to provide the offer of permanent residence, because many people want it and don’t care if they don’t get the add-on benefits. Years ago expatriates would get quite extravagant packages. Now it can be more

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localised and it helps with Gen Y – they want to do it, they want to experience something else, and it becomes part of their career path,” says Waller. However, Teresa Liu, partner and registered migration agent with Fragomen, advises caution and careful talent management. “In the vast majority of cases employers are only using the [457] program when they feel there is a significant benefit to bring someone in from overseas. That might be because that skillset is just not here or it may be that that person is particularly key in a global organisation and will be crucial in terms of growing the business in Australia,” she says. Megan Warrin, Randstad’s international hiring expert and GM of the health and community care division, Australia and New Zealand, does not believe international recruitment should be taken lightly. “If you don’t understand the process, the benefits, the legislation and the long-term commitment you need to research them until you do. Utilise government information services and immigration groups to verify you are following the correct processes. Find a recruitment partner that specialises in international recruitment with a strong overseas network, and has the capability at hand to assist in the process. Understand that international hiring is a long-term, ongoing strategy requiring the correct infrastructure and commitment in place to ensure ongoing success,” she says.

Getting started

In many ways, international hiring requires the same considerations as local hiring, but there is added complexity to factor in. As always, background verification is important. Randstad’s International Recruitment Process, for example, checks everything about a candidate, including graduate and post graduate studies, International English Language Testing System (IELTS) scores, association memberships and referee credentials.

“The recruitment consultant will perform the reference check themselves, but the international office will confirm the referee is the appropriate person to be a candidate’s referee to avoid any fraudulent candidate information being used. Police checks and the like are part of the applicant’s visa application, so no stone is left unturned,” says Warrin. Cultural fit is also crucial. Warrin urges employers to spend as much time as possible explaining the job role and the culture of the organisation to international candidates. Employers should attempt to interview candidates via webcam so that both the candidate and client can get the look and feel for one another. “Prepare marketing material like DVDs that really tell a story about where you are going, and what the experience of working for your organisation is like. Candidates who signed with a client in our last recruitment drive held in London said that ‘the information supplied about the organisation made me feel more confident about the decision’. Be as honest with the candidate as you can – you don’t want them to arrive only to have a completely different experience than they expected. Ask them to talk about what their ideal job role and work environment is. Don’t be afraid to ask hard questions – you both want the fit to be right,” she says. When the candidate arrives, Warrin suggests employers create a support network for them to tap into. “It can be lonely on the other side of the world, without family and friends. Helping them adapt to the local society will strengthen their commitment to your organisation and the region,” she notes.

issue 7.6

Teresa Liu

“Due to the economic downturn the government is asking more questions about a sponsor’s recruitment strategies, its retrenchment of Australians and the benefit to Australia that sponsored employees will bring” – Teresa Liu

Visas

The government’s skilled migration program includes four streams: general skilled migration; the employer nomination scheme (ENS); business skills migration; and distinguished talent migration. The 457 visa program is considered a separate entity, with demand dictating use. www.hcamag.com

issue 7.6

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More than a job ad Megan Warrin of Randstad provides some tips on luring international candidates: »» “An outline of the position is important when advertising any role. However, if a candidate is moving from overseas, you need to include more than just job role details.” »» “To obtain the candidate’s interest, and consequently their buy-in from the very beginning, you need to demonstrate that your offer is distinct from the competition. The candidate wants to know what the benefits of working for your organisation are, and why they should make the move overseas. You have to capture their imagination from the very beginning. They want to know who you are, how big you are and what your company has to offer.” »» “Location and work/life enticements are very attractive to people reading you ad.” »» “Given that one in 10 employees across the Asia-Pacific region move overseas or interstate, some organisations are now deliberately repositioning their attraction message as a ‘come back home’ proposition to entice workers to return to the local employment market. This is particularly evident in the face of the current global economic situation. As it worsens, people want to be around familiar things and this includes family and friends. A familiar environment can be a very important factor when choosing their next job role, compared to the gloomy atmosphere of some cities they are currently living in overseas.” »» “Don’t over promise, but make sure you can identify what your organisation’s deal breaker is going to be.”

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Liu believes permanent employersponsored programs and 457 visa programs will continue to be the dominant vehicles by which employers bring in skilled staff. However, over the past six months, she says that the government appears to be favouring the permanent categories over the temporary (four year) 457 visa category. “When you bring in a foreign worker, it appears that the government’s preference is that they move towards permanent residency sooner rather than later. That’s reflected in government direction around the order of priority in processing of various permanent visa categories, and the processing times of applications for the ENS stream, which have been falling over the past 12 months,” she says. There are obvious benefits to both employers and employees under the ENS. Once an individual becomes a permanent resident, whether under the ENS or any other visa, they are no longer linked from an Immigration standpoint to the employer (although they may still have contractual obligations). “This means the employer sits outside Immigration’s audit and monitoring of the company for that permanent employee. Effectively, all the sponsorship obligations that attach to an employer when they bring someone in on a 457 visa cease once they become a permanent resident,” Liu explains. An application for a permanent visa under the ENS can be made while the applicant is overseas. So, for an assignee who is effectively coming to Australia for a permanent full-time role, an employer may consider making an application for the permanent visa more immediately offshore – particularly given the good processing times. The employee enters on the permanent visa, which means they enter as a permanent resident and there are no obligations or sponsorship links with immigration. Despite the rise in use of the permanent-employer-sponsored programs, the 457 program remains popular. “As

one example, there remains a number of global companies that would favour the 457 program because the people they are bringing in are true global employees. These people move around the world from project to project, and as a result the permanent visa would be inappropriate,” says Liu.

Obtaining sponsor status

There are different criteria for organisations seeking to obtain business sponsor status for ENS or 457. The ENS is slightly more onerous in that employers must apply to nominate an employee and effectively be approved as a ‘nominating employer’ for every occasion they wish to sponsor. The employer will have someone in mind that they wish to sponsor or nominate for permanent residency, then they make a nomination for the occupation, and then a decision is made. The visa application for permanent residence then follows. For the 457 program the company needs to be an approved business sponsor, which is valid for two years and covers a number of positions over that two year period. Workers are brought in after the position is approved and the visa of the candidate is approved. “To get sponsorship status to begin with, organisations need to show that they are a good employer, they have the financial capacity to support any 457 visa holder that is in Australia, that they have a commitment to local employment and training and are also using the program to benefit Australia,” says Liu. The term ‘using the program to benefit Australia’ is crucial. Sponsorship for a 457 visa will require the employer to demonstrate that the employment of 457 visa holders will contribute to one of the following: »» the creation or maintenance of employment for Australian citizens or Australian permanent residents »» the expansion of Australian trade in goods and services

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»» competitiveness within sectors of the Australian economy »» the improvement of Australian business links with international markets “Due to the economic downturn the government is asking more questions about a sponsor’s recruitment strategies, its retrenchment of Australians and the benefit to Australia that sponsored employees will bring. They are also asking questions around the market salary that people will be receiving. The government wants to be assured that people coming in will be paid fairly and comparably with Australian employees,” Liu says. Sponsors will be continuously monitored, with special attention paid to organisations that have retrenched staff.

Problems

Most problems arise when employers are not aware of their obligations, such

as ensuring individuals have appropriate health insurance or providing employees relocation back to their home country. The biggest problem tends to be around salary packaging. Under the legislation, there is a minimum salary level that must be met and cannot include items like a substantial living away from home allowance and a number of other benefits as specified by Government Gazette. “That’s the problematic area for employers who are trying to provide as much cash in hand and benefits/allowances for their assignee but package it to such an extent that the defined ‘salary’ component inadvertently moves under the minimum salary level. Breaches of the minimum salary level remains the number one reason that Immigration will provide a notice to an employer if they are considering a bar on the employer’s use of the program, or are considering cancelling their

issue 7.6

Karen Waller

www.hcamag.com

issue 7.6

cover story

Immigration checklist Sponsorship for the business: does the business have current sponsorship status? expiry date? number of remaining positions available under that sponsorship? keep records showing recruitment of Australian staff keep records showing training policies/delivery to Australian staff keep records tallying compliance with minimum salary requirements keep DIAC or your migration agent advised of changes in the business that may affect your ability to continue to meet sponsorship criterion – eg, retrenchments, business restructuring Position to be filled: ensure position to be filled is in a sufficiently skilled occupation ensure base pay (excluding non-allowable items in packaging under immigration law) meets or exceeds minimum salary level (MSL) amounts permitted by law. Check period of time needed for the assignment is covered ensure that the position is full-time and based in Australia Visa applicant: confirm necessary skills and experience for the position ensure minimum English language requirements are met ensure health and character issues are satisfactory check that the partner (if any) qualifies to be sponsored ie are they married, in a de facto or same-sex relationship confirm that children and other dependants satisfy dependency rules Management of 457 visa holders: regularly review and adjust 457 visa holders’ salary against current and new MSL imposed by law regularly review and adjust 457 visa holders’ total salary package against local market rates (on the basis that market rates are likely to be used in the new construct of MSL in September 2009) regularly review and consult with your Migration Agent of any changes to the 457 visa holders’ approved occupation hold records of employment contracts and immigration sponsorship obligations towards 457 visa holders ensure all relevant staff are aware of upcoming changes in law and policy, and review company policies to ensure new or revised obligations can and will be met Audits officials audit most businesses from time to time and records demonstrating compliance with sponsorship and visa requirements must be kept. This will include payment of assignee staff, MSL, appropriate use of leave, etc Source: Teresa Liu, Fragomen

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sponsorship,” says Liu. It should also be noted that from 1 July the minimum salary level for all visa holders will increase by 4.1% and will likely move to a market rates system by September. Employers with visa holders sitting close to the threshold will need to review their remuneration strategy. Employers also need to be wary of the processing times for visas. For both 457 sponsored and employer nominated employees, organisations should typically allow a three-month lead time. “With the economic downturn the government is making revisions to migration budget and in particular they have been changing policy, which can impact on the time frame in which skilled migrants can enter the country,” says Liu. Within the 12 May Federal Budget, the government announced a tightening of English proficiency regulations for the non-sponsored independent skilled pathway for trades occupations. The changes do not affect the 457 visa category or the ENS category, but there have been minor tweaks to these as well over the last 12 months. Liu suggests that employers seek professional advice from a registered migration agent to ensure candidates meet all English proficiency requirements. “The government wishes to ensure that, at a minimum, employees are able to understand OH&S requirements, their employment contracts, and can work effectively with Australian-based staff,” she says. HC

employee relocation

issue 7.6

on the move I The signature on the contract is just the start of international hiring. Here are some tips to ensure the hire is a complete success

n today’s world, relocation support is crucial. The covering of simple costs such as airfares and the first few weeks of accommodation are well received by candidates. Megan Warrin is Randstad’s international hiring expert and GM of the health and community care division in Australia and New Zealand. She notes that by offering basic support, an organisation can show that it is not only committed to a new employee, but also understands the ‘out of pocket expenses’ that would generally not apply had it been a local job offering. “A candidate’s contract signature is really only the beginning of the journey,” she says. “The employer and their recruitment partner need to be vigilant in monitoring the candidate’s enthusiasm.

After signing with a candidate, the process of working out how to move them and which concierge services they will need upon arrival, especially if they are travelling with family, begins. There are many conversations and a lot of waiting. Moving overseas is a big commitment and a complicated process.” According to the Brookfield Global Relocation Services 2009 Global Relocation Trends Survey, family concerns remain the most overwhelming reason (92%) for assignment refusal or failure. family concerns were the top reason for early returns from assignments (27%). The most critical challenges facing families were adjustment (15%); partner resistance (15%); children’s education (13%); cultural adjustment (12%), and location difficulties (11%).

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issue 7.6

advertorial - Corporate Keys

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employee relocation

When it comes to preparing employees for their new assignment, cross-cultural training was made available 81% of the time. However, only 56% offered it to the entire family, and only 22% mandated the training.

Key points

Toll Transitions provides the following essential points to consider for any hiring manager relocating executives and employees. These points are typically overlooked by companies, and doing so may lead to an unsuccessful relocation. »» Ensure that everything is ordered for the visa. This is often overlooked. »» Complete a detailed needs analysis. Your relocation company can do this on your behalf either by email questionnaire or by telephone. »» Accurately assess the cost of living and allow a reasonable budget for accommodation . »» Inform employees of their accommodation budget. Failure to do this can lead to an enormous amount of lost time while the transferee views properties that are not appropriate for their budget (when writing your letter of offer to the transferee, make sure that you stipulate the monetary amount after tax). »» Arrange Medical Cover for the transferee and anyone accompanying them. »» Ensure that the company relocation policy meets the needs of the employee and their family..

“A candidate’s contract signature is really only the beginning of the journey. The employer and their recruitment partner need to be vigilant in monitoring the candidate’s enthusiasm” – Megin Warrin

»» Involve the whole family. Your company now has a duty of care for these people. They will have an enormous influence on how your transferee feels about the move. »» Decide on payment methods for rental properties before the transferee starts searching for a home. If the company will be paying, it may be a good idea to arrange for one month’s holding deposit to secure a potential property. This will allow the company time to arrange all other monies. »» Arrange for the transferee to be in contact with relocation company as soon as possible. It is best to do this before they arrive in order to avoid any disappointment.

issue 7.6

Things to consider when writing assignment policies

»» Relocation allowance – the lump sum paid to the assignee to cover miscellaneous expenses. »» Payroll – local or off-shore, depending on availability and where appropriate. »» Medical insurance and exam – the company must remember their duty of care, particularly in countries with high security risks. Health care is a basic requirement, which will need to be prepared before departure. »» Tax equalisation – this is a complex issue and a major cause for confusion and concern. It may require tax consultation and preparation including home and host tax returns as appropriate.

Building English language skills RMIT has the answers Who needs Professional and Business English training? Non-native English-speaking employees can greatly benefit from a customised course that polishes their professional language skills. Employers often report that skilled migrants provide superior technical skills but, once in the job, are let down by poor pronunciation or fluency constraints that lead to difficulties delivering presentations or negotiating with clients. Poor English skills effectively act as a glass ceiling, stopping further promotion to management levels. We have found that both management and staff have a vested interest in training and development. Carefully designed courses can ensure employees are able to achieve better results for themselves and their employer. Which industries benefit from language training? Our English language training is tailored to suit all types of businesses. We have clients from a range of industries including medical, engineering, banking and finance, accounting, IT, mining, aviation, government, insurance and legal sectors. Some of our past clients include: Deloittes, KPMG, Amcor, Worley Parsons, Rio Tinto, Suncorp Metway, Scania, Toyota, MIGA, The Department of Human Services, Austin Hospital, Barwon Health, Clariant, and Air Services Australia. What are the benefits of customised training? Our customised training is underpinned by two core principles: firstly, no two people are alike; and secondly, employees have limited time for study and need to achieve results quickly. By carefully designing our courses so they meet the specific needs of the employee, we create training content that is relevant to their real-life work environment. One-on-one training also provides the focus and flexibility needed to ensure no time is wasted on unnecessary information and places the participant in control of the timing and pace of their lessons. Further information RMIT English Worldwide Ph: 03 9657 5810 Email: business.english@rmit.edu.au

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issue 7.6

employee relocation

»» Cost-of-living allowance – compensate between home and host country living costs. »» Orientation visit – flight costs and temporary accommodation for all members of the family. »» Sale or purchase of home – instead of property management, would normally include sales costs, agents fees etc. Property management – third party to manage principal residence. Including inspection of property, expense management and repairs. »» Lease protection – there may be a shortfall between rental income and rental expenses in the departure country. »» Lease cancelation – there may be a gap of up to approximately three months in a break lease situation. »» Language instruction and cross cultural briefings – for all members of the family. »» Shipping (or furniture allowance). »» Storage of goods – for items remaining in the home country

»» Temporary accommodation and living expenses – approximately six weeks. May be reduced to approximately two weeks if you use a Homesearch service. »» Home finding services – home finding and settling in assistance. Family support, real estate advice and introduction to the community. »» Housing allowance – housing costs, including rent, management fees, bond, government rates/taxes and utilities. »» Settling-in/relocation support – recent surveys report that this is the area of most dissatisfaction. Companies often forget after three months that the assignees are still adapting to major changes and require ongoing support. »» Education assistance – education program designed to provide schooling options and meet each individual family’s needs. »» Dependent children – payment of school fees or allowance equal to difference between home and host-country.

»» Government fees. New school uniforms, books, etc may need to be considered in a miscellaneous allowance. »» Annual trip home – flight costs and temporary accommodation for all members of the family. »» Repatriation – career guidance and family support on return. While the tasks associated with employee relocations appears daunting, Warrin urges employers to view international candidate sourcing as a longterm investment. “Helping candidates and their families successfully relocate requires ongoing support, great care, sensitivity, ongoing contact and a great deal of communication via phone, email and video. This might include assisting with working visas, a relocation allowance, guidance on living and working in the office location, travel tips and any additional training. The aim is to make the transition mutually beneficial for both parties,” she says. HC

The accommodation alternative saving companies up to 40% on corporate travel Human Capital interviews Kathy Childs, Managing Director of Corporate Keys Australia, a leading provider of Corporate Accommodation. Human Capital: Corporate Keys provides corporate accommodation for business people, project teams and relocating employees. Can you describe corporate accommodation? Kathy Childs: The corporate accommodation industry provides an alternative to hotel and serviced apartments for business people. Corporate accommodation has been in the USA for over 25 years and is a multi-billion dollar industry, but is still a relative newcomer in Australia. Corporate accommodation companies provide residential apartments – the same apartments inhabited by well-to-do city dwellers – as short-term rentals. Companies like Corporate Keys in Australia and

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Oakwood in the USA have become a real alternative to hotels or serviced apartments for stays longer than a few weeks. The residential apartments are typically 50% larger and up to 40% cheaper than serviced apartments and hotels and are furnished to a high standard. HC: How do corporate travellers decide when to stay in corporate accommodation rather than the traditional alternatives? KC: Hotels are an ideal solution for a short stay, and serviced apartments are an excellent fit for the one to two week stay when checking out the next day is a requirement. Corporate apartments are perfect for longer stays – for a home away from home rather than a brief business trip. Corporate accommodation is available for a minimum of 28 nights, however the average is three to six months, and shorter stays of two weeks are occasionally available.

HC: What are the benefits of using corporate accommodation from Corporate Keys compared with traditional hotels or serviced apartments? KC: The cost of corporate accommodation is substantially lower than hotels or serviced apartments. There are many benefits: from improved living conditions, to ensuring employees are up and running as soon as they arrive. Apartments have full kitchen facilities, eliminating the expense of restaurant dining and washing and drying facilities, saving on dry cleaning costs. HC: How does corporate accommodation compare with corporate travellers leasing apartments directly from realestate agents? KC: While the cost of corporate accommodation is substantially lower than hotels or serviced apartments, it is higher than comparable residential

employee relocation

Corporate apartments are typically 40% cheaper than serviced apartments and hotels

rentals. Residential rentals, however, are difficult for international or interstate travellers. Finding a property for short-term lease, viewing it in person to meet legislative requirements, connecting utilities and waiting for telephone technicians, hiring furniture; all of these logistics mean that the residential market is not always practical for businesses. Corporate apartments include utilities, local phone access and cable TV on arrival. Properties can be booked after seeing a comprehensive property profile, and bookings can be made for as little as 28 nights. HC: We hear that some hotels and serviced apartments are reporting lower than usual occupancies due to the current economic climate. Is the corporate accommodation sector experiencing the same issues? KC: The corporate accommodation sector continues to grow as travelling consultants, assignees and relocating employees become more particular about their accommodation. Relocation consultants have jumped at the opportunity to provide spacious home-style living for their clients. With companies controlling

staffing costs more tightly, Corporate Keys is seeing an increase in occupancy as the lower weekly rental becomes as much a factor as the larger living space. Corporate accommodation is a winner for both companies and employees. We offer sub-penthouse apartments for senior executives to twin-share two-bedroom apartments for project teams. Accommodation costs are reduced while maintaining a very high degree of comfort.

issue 7.6

KC: We have a very broad range of clients. Corporate Keys is particularly popular with the IT industry and large consulting and accounting firms who move their employees around the world to meet the workload demands of various projects. We also work with private and public companies to accommodate whole project teams; and with small to medium-sized companies who require one or two executives for periods from one month to one year. Often interstate travellers will reside in a Corporate Keys apartment from Monday to Friday and head home for the weekend. Having a local base ensures they are not unpacking every week in a different hotel room, and is still more cost effective. So describing our typical client isnâ&#x20AC;&#x2122;t easy â&#x20AC;&#x201C; we are structured to meet the needs of many types of clients. We approach each new request with a fresh mind and work to find the best solution for each particular client.

Kathy Childs, Director of Corporate Keys Australia, a leading provider of Corporate Accommodation. Corporate Keys Australia t: +61 3 9279 7200 f: +61 3 9646 0474 www.corporatekeys.com.au

HC: You mentioned that Corporate Keys is very popular with the Relocations industry. Which other industries use Corporate Keys apartments? Can you describe your typical clients?

*prices are based on average 2009 published rates

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issue 7.6

migration

Don’t forget the due diligence M&As present special challenges to organisations with significant foreign workforces. A professional visa audit as part of the due diligence process may be the answer, writes Jane Goddard and Dr David Crawford

nformed and well-resourced companies are using the present economic environment to invest in new opportunities – some of which include acquiring existing businesses. Sensible business people will ensure that in these cases some form of due diligence process is conducted before the purchase so that liabilities and risks are identified and considered as part of negotiations. Compliance with immigration requirements is sometimes overlooked in these situations, with potentially serious implications for the new business owner. When a business is purchased, decisions are taken about whether the legal entity will continue to trade in its own right or if its operations will be merged within a separate legal entity. If the former, it may be that the brand name will change at some point while other features of the business will remain largely unchanged. A problem can arise when people are sponsored to Australia holding subclass 457 visas, since they are only permitted to work for the entity that sponsored their visa. If the visa holder is employed by a new entity without appropriate steps being taken through the Department of Immigration & Citizenship, significant breaches of immigration law could take place. This could potentially involve criminal offences. A change in ownership of a business does not affect the existing sponsorship

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approval, and sponsored 457 employees are able to continue to be employed by that sponsor – provided that they remain in the same roles. It is prudent (and after September 2009, following significant changes to the legislative regime that will affect all existing sponsors, compulsory) to notify the Department of Immigration and Citizenship (DIAC) about a change in ownership of a sponsoring entity. A significant change to the job roles, or a reduction in salary as a consequence of the transition, may trigger the making of a fresh visa application and should be discussed with an immigration advisor. A change in ownership will not necessarily mean that any fresh paperwork needs to be lodged with immigration authorities. But it can mean that the new owners are exposed to liabilities that arose under the previous owners’ sponsorship undertakings. For example, Company A (which includes a substantial population of 457 visa holders) is purchased by Company B, and A continues to trade as a whollyowned subsidiary of Company B. Following the purchase, Company A is monitored by DIAC (as it has power to do) and it is discovered that while trading under the previous owners, its 457 visa population was paid substantially below the minimum salary level prescribed by legislation. The new owners would be required to make restitution to the underpaid employees (which could

amount to a significant sum) and could face administrative sanctions that could remove its right to sponsor future 457 visa holders or employees under the employer nomination scheme. It is also important to check whether the visa holders are actually working in the positions for which they were nominated. If they are working in lesser-skilled roles this could result in an administrative sanction and/or an inability to re-sponsor that person. These sorts of problems can be avoided if a professional visa audit is conducted as part of the pre-purchase due diligence process, thus alerting both the seller and the purchaser of any immigration compliance issues that need to be addressed in the terms of sale. In principle, this is no different to checking for any tax or employment law problems that could arise. In the event that the business is purchased but the legal entity is not, then immigration legislation requires fresh paperwork. Although workplace law may regard such an arrangement as a continuation of employment with the associated preservation of rights and entitlements accumulated under the old employer, DIAC regards such a transaction as a change in employer. As this is not permitted under the work limitation imposed on the 457 visa the new employer must seek sponsorship status, approval for each position and the each 457 visa holder must apply for a fresh 457 visa. Significant problems can arise if the fresh visa application is not initiated in a timely way. The visa holder will be inadvertently in breach of the work limitation imposed on their visa and the sponsor may be committing a criminal office by recklessly employing

migration

a person without the correct permission. While it is difficult to have the grant of the new 457 visa coincide with the purchase of the business (particularly so if negotiations have been conducted under a veil of secrecy) DIAC is generally accommodating to the needs of business in these circumstances. As the liability under the sponsorship obligations remains with the old sponsoring entity, the purchaser does not need to be concerned with whether or not these obligations were met. However, if the old sponsoring entity is wound up then this means that the visa holders would not have the ability to recover any underpayments of other financial obligations that arose with respect to their previous employment. A change in the employing entity can also cause problems for a 457 visa holder who wishes to obtain permanent residence on the basis of the employer nomination scheme. Although there are three possible pathways to this visa, the most common is for the employee to have worked for at least two years in Australia as the holder of a 457 visa. As there is a new employer,

the visa holder must then be employed for at least 12 months before qualifying on this ground. Although the majority of problems arise with respect to 457 visa holders, it is worth noting that DIAC adopts a different approach to the case of working holiday-makers who are restricted to working with any one employer for six months. According to the policy on this particular visa condition, if the technical employer changes, but the work place or tasks do not then this is regarded as the same employer and a breach will occur if the work continues beyond six months. The working holiday-makers constitute a growing source of labour in our economy and they are being supplemented by other visa holders with the right to work. Over the last four years the number of student visa holders, working holiday makers and other temporary residents has swelled to well over 500,000. Unlike 457 visa holders there are no sponsorship obligations for employers but there may be conditions attached to

issue 7.5

their visas that would limit the length of time they can remain with one employer, or the number of hours they may be able to work each week. Employment of a temporary resident in breach of a work limitation imposed on their visa can expose the business to criminal penalties. It is important to keep adequate records of the total foreign workforce, not just the 457 population. If a business is purchased it is highly likely that many new employers do not consider the visa status of their employees and examine their right to work. Immigration compliance is another regulatory challenge facing businesspeople looking to make the most of a new opportunity. Failure to identify and deal with that challenge is becoming riskier business. HC

About the authors Jane Goddard is special counsel and Dr David Crawford is a partner at Fragomen

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issue 7.6

remuneration

Beware

the taxman

Effective salary packaging is a key consideration for returning expats, yet many organisations ignore tax and regulatory requirements. John Williams provides some tips on how to do it better

he beer may be cold and the summer hot but, there is more to be wary of than mossie bites and sunburn for expatriates. Salary packaging, superannuation, retirement benefits and tax rulings of Australian assets are the taxation traps for the influx of unwary executives relocating to Australia this year. By keeping up-to-date with regulatory changes and myriad tax structures, expatriates can achieve large tax savings This should be taken into consideration when employers try to absorb talent from abroad, according to John Williams, managing director of outsourced accounting firm Lumina. “Having to unravel tax regulations for temporary residents is a considerable barrier to employers considering employing overseas talent,” Williams says. “Salaries must be packaged correctly before a contract is signed; otherwise it can be too late for expats to receive concessional treatment and exemption of benefits under fringe benefits tax [FBT] legislation.” As a guide, temporary Australian residents can achieve tax savings of $18,700 on an annual salary of $100,000 if it is correctly packaged upfront. A sample from Lumina’s outsourced accountancy clients illustrates the considerable net after tax difference of $46,500 on a salary of $400,000 and a whopping

$152,446 saving on a salary package of one million dollars (see Table 1). “Many employers still do a salary packaging component in arrears, thinking that relocation expenses and relocation consultant fees come up after the deal is done. Employers often just say it is too complex and ignore it. However, this results in higher taxation for employees,” Williams explains. The worst-case scenario for many employers is unwanted regulatory attention, such as the Phillip Smiles ‘Nannygate’ case, which saw the former Liberal MP frontbencher fined $30,000 for claiming his children’s nannies as tax deductions. He was later acquitted on appeal. Even Kevin Rudd is confused when it comes to nannies, and had to reimburse taxpayers for many hours staff at The Lodge spent looking after his teenage son in early 2008. “In Singapore, South Africa and India, it is common for nannies to be included as part of a salary package – so when people move to Australia it’s not uncommon for them to be caught out by differences in tax regulations,” Williams says. We have seen cases of employees immigrating to Australia and missing out on legitimate benefits as they have not considered these benefits until after the ink is dry. Expatriates arriving in, or leaving Australia, confront many issues regarding what constitutes a taxable Australian asset. The government applies tough foreign investment fund rules to tax Australian residents holding non-controlling interests in foreign companies or foreign trusts. These rules mean income tax can be applied to the increase in value of these holdings. Australia’s tax laws can play a crucial role in determining how long an expatriate remains in the country. A foreigner a becomes resident in Australia for tax purposes if they remain in the country for more than 183 days of any tax year, or is domiciled here. One of the most complicated areas that start-up businesses must grapple with in taking on expatriates is the living-awayfrom-home allowance. “Every start-up business finds this one difficult to deal with,” says Williams. “This can be perplexing and expensive, particularly if the business gets it wrong.” Employers could be charged tax and penalties for a payment made to an employee for relocation and living expenses. However, despite the confusing nature of Australia’s tax regime for expatriates, the benefits to businesses and the economy in general of bringing skilled people in from overseas

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Table 1 One member of a couple on $100,000 salary relocating temporarily to Australia, with one trip home/overseas during the year: Adults Children Salary Benefits Provided Relocation Flights Removals Other Rent Reasonable food component Food allowance

2 100,000

4,500 3,000 600 per week 4,368 17,576

Education Kids Cost

Travel Number of people Cost

2 2,500 per person

Salary

Packaged 100,000

Adjustments for Salary Packaging Relocation Rent Food Fringe Benefits Tax on food Travel

(7,500) (31,200) (17,546) (3,797) (5,000)

Pre Tax Salary Tax Net Salary

34,927 (5,002) 29,925

Post tax expenses Relocation Rent Food Travel Income Remaining after expenses Saving attributable to packaging

Not Packaged 100,000

100,000 (27,500) 72,500 (7,500) (31,200) (17,576) (5,000)

29,925

11,224 18,701

are overwhelming. According to Access Economics, an expected intake of 203,000 migrants in 2008/09 is expected to deliver a net fiscal benefit of $829m in the first year, rising to $1.8bn in the twentieth year. The government is eager to market Australia as a safe haven for capital in a period of global turmoil, with measures to encourage foreign investors being heavily promoted. However, the country has a long way to go before its tax regime for expatriates matches the relative simplicity of nations such as Singapore.

Lumina’s big three watch-points for executives coming to Australia:

1. Ensure you fully understand the tax concessions available to you before structuring and executing contracts. 2. Consider local tax consequences on global assets, particularly the capital gains tax impact on foreign residences and the Foreign Investment Fund (FIF) provisions. Executives coming to Australia with significant global assets will likely be caught by the Australian tax net. 3. For more advantageous tax outcomes, take into account Australian tax consequences of employee share acquisitions schemes including considering elections that may be required to be made to the ATO. HC Lumina provides a specialist outsourced accountancy and finance department for accounts payable, document management and payroll through to effective taxation structuring and complex international consolidations, financial statement preparation and audit management. For more information visit: www.luminabpo.com.au www.hcamag.com

issue 7.6

international HR – China

Still burning bright?

HR challenges in China Take more than one billion people. Add a centralised government with strict rules on employment and retrenchment. Stir in a severe reduction in economic growth and you have the People’s Republic of China in 2009. Paul Howell investigates just how HR departments are coping

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alk to anyone living in any of China’s growing cities and you will hear a common theme. The pace and breadth of change is unlike anything that outsiders have ever seen. Buildings can rise or fall in a matter of weeks – businesses too. Even as the worldwide downturn takes hold, China is still growing at what any other country would consider an enviable pace. But that doesn’t mean everything is perfect. There are still many significant challenges being faced by businesses in the People’s Republic. And with a total labour force of 807 million, it’s not surprising that many of those challenges are peoplerelated. HR departments are charged with finding quality staff, managing expectations and maintaining loyalty in a shaky, if still expanding, economy.

An evolving profession

Of all the fast-paced change taking place in China, it is easy to miss the continuing evolution within the HR profession itself. But the fact is HR is a markedly different profession today than it was just five years ago. Having gone from a completely administrative function, many organisations now boast high-level strategic HR departments, with HR leaders making up an important of senior decision-making teams. Still, there are remnants of the old order still in place. Benedicte Hersen, vice president of HR, Airbus China, says that while situation is improving, much of the HR profession is still stuck in its way. That makes hiring good quality HR staff a sometimes challenging process.

international HR – China “HR seems to be the hardest function to hire for,” she says. “The kind of HR people we find on the market are more administrative.” She says Airbus, in China for the last three years, has been able to find very good director-level staff. These are most often local Chinese staff who have built careers in multinational companies with significant exposure to international business practices. But lower level staff, including first-tier HR managers, are much harder to find. “We look for customer-oriented; value added staff,” she says. “[But] the HR community is to a large extent very administration driven.” Danielle Monaghan, HR director for Microsoft’s R&D unit in China, agrees that the HR profession is still evolving there, just as it is in more developed economies. “It’s an emerging profession,” she tells Human Capital. “It’s now where HR in the US was 15 years ago.” For many years, it was a “very clinical” function. “It’s only now really beginning to understand that HR can pull levers to really change a company’s bottom line. The notion of talent management, for example, is a brand new concept in China.” Francis Tam, HR director for Ibis Hotels in China, says there is still a long way to go – and poorly-skilled HR professionals even occupy some of the highest posts. “Currently, we see a majority of HR leaders with less professionalism holding high level HR positions and sitting at the board table,” Tam says. “This is something different from the West.”

Fast facts »» labour force: 807.7 million (the largest in the world) »» occupations: agriculture: 43% »» industry: 25% »» services: 32% »» unemployment (urban areas): up to 9% »» unemployment (rural areas): “substantially higher” »» gross domestic product per capita: US$6,000 (ranked 132 in the world) Source: CIA World Factbook

Recruitment blues

Finding good-quality HR staff is tough, but it is a common problem across many functions. Even as the downturn takes hold, the war for real talent in the Chinese economy continues unabated. While there is increasing unemployment at the lower end of the market, most HR experts at multinational firms say this is restricted to migrant workers and unskilled labour. Manufacturing workers have been hit hard by the faltering world economy – as China’s export trade thins out. Jonathon Taylor, HR director for Coca Cola China, says finding good professional level talents is tough, particularly as his company continues to grow through the economic slump. “The war for talent is consistent across all industries,” he says. “We look for five to ten years’ international experience [for senior positions] – that’s the biggest derailleur.” Multinationals looking for staff with multinational experience have had to resort to creative hiring and training options. “We take chances on local talent and that’s not necessarily a bad thing,” Taylor says. “Coca Cola has always had a philosophy of taking chances on talent – but it has to be done in a consistent manner.” Monaghan says differentiating employment offers is one answer – but it’s a very foreign concept in China. “Understanding top or potential top performers is new,” she says. “Pay for performance is new as well.” She says Microsoft works to build, buy, and even borrow, high-end technology talents. “You can’t just hire from the market for architecture, software development or leadership experience,” she says. As well as hiring aggressively in international markets, Microsoft makes use of its talents in other parts of the globe. Its ‘Marco Polo’ scheme allows for six-month secondments to the China campus, creating opportunities for knowledge sharing, cultural exchange and direct training.

China looks forward

The global downturn has pared China’s rapid growth back to a mere expected 8% or 9% this year. There are still signs of a slowdown but, as Tam explains, they are different to the

issue 7.6

indicators shaking up many developed economies right now. “The impact right now is comparatively less than other developed countries, especially in the financial and banking system,” he says. “Companies are facing retrenchment, freezing headcounts and closing down regional offices.” “HR has to strategically align to these business changes.” This has created a greater divide between employees and employers, which has resulted in threats of strikes or even riots at the lower end of the market. Multinationals, however, say business is as close to usual as can be expected – at least as far as staff relations go. “There has been a need for employers to undertake a more deliberate effort on communication,” Taylor says. “Over the last 10 years [many local staff] have only experienced significant merit increases year-on-year.” That is clearly unsustainable in the current environment, so it has been up to HR to dampen expectations and introduce staff to a new reality.

Industrial relations

Trade unions and even the governing party play an important part in how employers interact with their staff. Unions are common, and even small businesses often have a formal employees’ representative or group. Employers are legally obliged to consult with unions whenever largescale changes are being considered. The formulation and amendment of certain policies, retrenchments, and changes to standard working hours all require unionlevel talks. While strikes are technically illegal, industrial disputes do take place, particularly when those talks fail to progress. These can be resolved through mediation – a compulsory first step – arbitration through a government body, or in the worst case scenario, litigation through the courts. Taylor says that’s all part and parcel of dealing with HR in a rapidly changing and developing economy. While it is certainly a challenging place to practice the profession, he says he wouldn’t have it any other way. “That’s the modus operandi here since Day One,” he says. “It’s what gets us out of bed in the morning!” HC www.hcamag.com

issue 7.6

learning & development

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learning & development

issue 7.6

Earn your stripes HR professionals face unique challenges when it comes to L&D in a recession. Not only must they ensure the learning needs of all employees are considered, they must also look after themselves. Human Capital explores some cost-effective upskilling options

ccording to The Australian Institute of Managementâ&#x20AC;&#x2122;s National Salary Survey 2009, there are mixed signs with regard to expected training spend over the next 12 months. A notably lower proportion (33.7%) of organisations expect to increase training budgets (as compared to 45.7% in the 2008 survey), while the majority (52.5%) of organisations expect their training budgets will remain the same (up slightly from 48.4% in the 2008 survey). HR and L&D professionals may be slightly perturbed by this news, as it is difficult to build skills capabilities on a limited budget. Or is it? When considering L&D it is useful to divide it into two sections: one is the formalised L&D programs, seminars and courses; the other is on-the-job development. The results of research conducted by The Centre for Creative Leadership on what has the most developmental power, www.hcamag.com

issue 7.6

learning & development

specifically relating to leadership development, might challenge pre-conceived notions. According to the survey, only 10% of what people learn in terms of how to lead teams effectively comes from formalised L&D. The other 90% comes from two main sources: on the job challenges, the actual job assignments themselves and hardships at work; and other people – in other words, role models, coaches, mentors. “When people talk about cutting the L&D budget they often feel this means they can no longer send people on courses. However, they should be looking at ways to make the work itself a source of development,” says Lenorë Lambert, director, Exit Info. “Is it dangerous to slash L&D budgets? Only if it gets in the way of people feeling like they are developing their skills and careers. I would argue that L&D resources spent wisely with a small budget could potentially still provide some powerful learning experiences for people internally. If a large percentage of learning comes from hardships, I don’t think we’d have to look too far in businesses at the moment to find some difficult situations to get people working on.”

Why people leave

The belief that on-the-job L&D is perhaps more effective and highly valued by employees is reinforced by exit interview research conducted by Exit Info. This data indicates that lack of support for formal L&D is rarely featured in the top five reasons for leaving a job. However, lack of interest or lack of enjoyment in the work itself features heavily in the top five. “Lack of challenge or stretch in the job and lack of appropriate opportunities for career development is frequently cited. This is entirely consistent with the fact that it’s work itself which is a developmental experience,” says Lambert. Lambert argues that the most effective organisations develop learning cultures where learning is ingrained into all aspects of corporate life. This is easier said than done. Lambert notes that of the 67 competencies that leaders need at some point to be effective, the one at which they are least proficient is developing their direct reports. “The focus for L&D should really be showing people leaders how to develop the people who are working with them,” she says.

Learning agility

Research shows that there will be a small portion of people who have such a strong desire for growth and have high learning agility – which is one of the strongest predictors of leadership performance and promotion potential – so if they are thrown into the deep end they will learn in their own way. Indeed, a personal desire for growth has a significant impact on how effective L&D experiences are. This is where the competence of learning agility comes in. “Learning agility is about your willingness and ability to learn new competencies in order to perform. It’s about learning new things to deal with new

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situations. This should be a key part of a retention strategy for those people who have that strong desire for learning. If they don’t get that learning experience, they will look for it elsewhere. For those who don’t have such a high desire for growth, then it’s about making sure they are proficient enough to do their job well,” says Lambert. This willingness to learn is easy to spot. A manager who takes an interest in their staff will be aware of how they respond to new things, how they respond when they make mistakes, and the extent to which they ask for feedback.

Cost effective learning

On-the-job training, coaching and mentoring are ideal avenues for developing people-related skills like influencing, negotiating, conflict resolution, inspiring others through direction, encouragement and empowerment. These elements count greatly towards business effectiveness once technical skills are nailed. Lambert provides a prime example of using work itself as a learning experience for employees. She cites a client in the professional services sector that has deliberately avoided retrenchment as a strategy during the downturn. Unsurprisingly, they also have a headcount freeze. As part of dealing with this, the company has started to increase the mobility of professional staff within the firm. In order to meet client demands, they are moving staff across geographical groups and fields of practice. “While it’s early days, the feedback from staff so far has been very positive. From their point of view the broader exposure to different parts of the business and different types of work is good developmentally and it keeps them stimulated and challenged – which builds their kitbag of competence. From the firm’s point of view it allows the company to service client demand without taking on more staff and helps keep turnover low as a result. Then there are the fringe benefits of relationship building across groups and a greater ability to deploy skills responsively where they are needed in the future,” she says.

Formal learning

However, there will always be a need for formal learning – indeed some professions demand it. Professional services firms – lawyers and accountants for example – must tread carefully if budget cuts to formal programs are in the pipeline. “Many of these larger firms take on quite large groups of graduates as their future skill base. In law firms, continuing legal education [CLE] forms almost a psychological contract with these grads: when you come and work for us we’ll teach you how to be a lawyer. Cutting that would potentially be dangerous, because it’s the way lawyers develop the technical skills they need to be competent in their profession,” says Lambert. HR professionals also need to be wary. They are often so engrossed with the upskilling of the wider workforce that they forget about their own skills.

learning & development

“You would hope that HR and L&D professionals would value learning enough that during the good times they’ve taken care of their own. I would say HR people who haven’t upskilled themselves in coaching, negotiating, and influencing are probably behind the eight ball. In most cases they can get resourceful and find internal people to mentor them through these challenges. Most organisations have someone who’s good at it and it doesn’t have to be someone senior. A mentor really should be someone who has the skillset that you want to develop, and it doesn’t matter where they are as long as they have it and are willing to share it,” says Lambert.

HR’s special requirements

However, the skills required in this recession perhaps run deeper than a good mentor can provide. It is vital that HR professionals understand their organisation’s business issues, key competitive challenges, industry trends and market sensitivities so that they can adapt their HR responses accordingly – for example, by reviewing total reward systems to share the sacrifices. Helen Ormond, MBS Mt Eliza program manager, believes HR professionals must also become genuine strategic partners of

issue 7.6

“When people talk about cutting the L&D budget they often feel this means they can no longer send people on courses. However, they should be looking at ways to make the work itself a source of development” – Lenorë Lambert

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issue 7.6

learning & development

managers, ‘trusted advisors’ or, as David Ulrich suggests, “credible activists” on people and business issues. “They also need to master cultural change and employee engagement, to help their organisation to create the culture and supporting processes that will drive the business strategy, and then navigate change intelligently. Workforce engagement is a key issue in a recession; indeed a global survey conducted this year by the Corporate Leadership Council* found that the number of highly disengaged employees has jumped from 1 in 10 to 1 in 5 since the first half of 2007, and that lifting engagement was deemed the highest priority for HR managers in the global sample. “The survey also found that intent to stay remained at the same level for three years while the number of employees expending discretionary effort dropped by half. Therefore, and to use an economic term, ‘deflation’ becomes a key risk. Employee deflation can affect operational performance and customer service, just as economic deflation leads to stagnation,” Ormond explains. HR professionals face a daunting list of challenges, some of which can be met head on by on-the-job experiences, and also from formalised learning. In some cases, both are required. Change management is a good example. For many HR managers, this is their first experience of managing in a financial crisis. The late 1980s and early 1990s were periods of significant turbulence that changed organisations, the employer/employee relationship and working habits. The present downturn is set to do the same, dismantling structures and prevailing practices in ways that are difficult to foresee. “HR professionals can enhance their role by becoming a trusted advisor to their business on people issues as long as they have a deep understanding of market conditions and the range of impacts on their organisation,” says Ormond.

Why HR needs to upskill There are many new issues facing the HR profession: »» new skill sets like the green skills and green jobs »» technology is changing the nature of work and occupations »» the demographic tsunami of the ageing workforce »» intergenerational workforces »» increasing rates of international mobility »» global talent management »» critical skill shortages especially in trade and engineering and the health and allied professions “Workforce planning becomes paramount and the need for this to be strongly aligned to the strategic vision and plan of the organisation is vital. HR metrics or workforce analytics are essential for the HR professional no matter what the economic climate,” says Dr Roslyn Cameron of Southern Cross University.

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“HR professionals can enhance their role by becoming a trusted advisor to their business on people issues” – Helen Ormond They can also add more value to their business by applying practical strategies to address business issues, including building compelling cases for change and communicating these with impact. “The academics of the world have pushed forward our knowledge of what good change management is over the last couple of decades, and there is a certain amount of technical knowledge that is worth having if you have some serious change to manage. Having said that, there’s the knowing/doing gap – it’s fine to have completed the course and know you must have your quick wins and champions of change and everything else, but to then be able to put it into practice is another thing,” says Lambert. Lambert believes this is where a learning culture is important. Alongside a good basic technical understanding of which elements are needed in order to make a successful change, it’s also important to have a team of people undertaking it who have established norms and processes for effective learning. “By it’s very nature, change management occurs in a very dynamic situation – change is happening all the time. The important practical skill is to be able to have very fast and effective feedback loops from when we go out and do something – is it working; are we taking notice of the right channels of feedback to find out whether what we’ve done has worked; if we’ve done something and it hasn’t worked, how do we correct it? It’s learning agility skills on a team level,” she says.

Partnering with L&D providers

Dr Roslyn Cameron, HRM academic and consultant within the Faculty of Business & Law at Southern Cross University, believes the key to effective formal learning is a good relationship with education providers – whether they are in the vocational sector or the higher education sector. “Begin conversations about how you might partner with them for L&D activities. These may involve components of accredited training but could also involve customised and tailored L&D activities that could form pathways into more formal qualifications,” she says. “Invest in relatively low resources and activities to encourage innovation and creativity within the workplace where staff are able to interact in ‘creativity spaces’ to brainstorm both minor and major improvements or changes to products or services,” Cameron adds. In many cases, the educational institutions themselves are moving with the times. Mt Eliza, for example, provides a specific

learning & development

program for HR managers, ‘Leading HR in Turbulent Times’. This focuses on financial management in a downturn and includes a ‘bootcamp’ on macroeconomics and organisational financial management to help HR managers understand how the GFC impacts their organisations and regions, as well as how their own company measures and reports performance. “It is now more important than ever for HR managers to understand the business issues facing their organisations, so that they can provide credible advice and influence organisational change. The program is focused on the current challenges and on enabling HR professionals to become genuine strategic members of their management teams,” says Ormond. Southern Cross University offers an array of qualifications targeting HR professions, including The MBA, Masters in Human Resources and Organisational Development (MHROD) and the Graduate Certificate in Recruitment, Placement & Career Development (online delivery completed in one year). “As course coordinator of the Graduate Certificate, I’ve seen growing interest in the course from those professionals who may be working in broader HR roles or related HR roles. They want to gain and upgrade their skills in HR, and to also have their 10

issue 7.6

to 15 years of experience in the industry recognised through the graduate certificate and its links to professional standards. The graduate certificate offers four units, one of which is strategic HRM. This unit provides the capstone to the other three units, including Recruitment & Performance Management; Career Development Studies and; and Contemporary Issues in Labour Market Behaviour,” explains Cameron.

Armed up

HR professionals, like all managers, have greater accountability for performance in an economic downturn. Armed with the right skills, they can enable managers to change their organisations and respond to current challenges. To achieve this, HR professionals must build technical mastery while earning the trust to become trusted advisors or credible activists to managers in their organisations. “This is an active role, an influential role, an externally focused role. It is not about talking the language of business with colleagues, but about partnering with managers to mobilise workforces to change,” Ormond concludes. HC *Improving Employee Engagement and Performance in the Economic Downturn, 2009

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succession planning

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succession planning

issue 7.6

Next in line

The impact of careful succession management stretches far beyond a smooth handover of responsibility. Human Capital looks at whatâ&#x20AC;&#x2122;s involved in the current environment

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issue 7.6

succession planning

nyone who doubts the importance of succession planning need only cast a look at the political arena. Dominating headlines in 2005 was the ongoing succession tension between Prime Minister John Howard and Treasurer Peter Costello. Would Howard retire? Who would replace him? Had Costello been promised the top job? Since losing the 2007 election, the Liberal Party has struggled to find a suitable leader. The debate continues as to whether this was the fallout from a long period in power or – perhaps more feasibly – was due to poor succession planning. In the corporate world, recent resignations of the chief executives of Telstra and Suncorp-Metway, as well as Rupert Murdoch’s right-hand man at News Corporation, have been met with much hand wringing from company boards as to who the permanent replacements will be. It begs the question: just how seriously are company boards taking succession planning?

Talent management

A 2006 study conducted by management consultants Booz Allen Hamilton found average CEO tenure in Australia remains lower (5.9 years) than the global average (7.2 years), while the trend for Boards to appoint replacement CEOs from inside the company is increasing. In 2006, 57% of new CEO appointments in Australia were hired internally. Furthermore, internal hires generated on average a 21% shareholder return compared to 17% for ‘outsiders’. The benefits of best practice succession planning for executive roles has never been clearer. However, Jane Adams, operations director at Randstad, notes that ideally a succession plan should operate business wide if the organisational structure allows for it. “To retain talent in today’s sophisticated and increasingly global market, people want access to a wide variety of career opportunities and the scope to be inspired by a wide variety of roles,” she says. Succession planning is an important tool for a business, both in good times and in bad. It is viewed as a vital component in talent management as it helps to develop employees from within, it identifies potential areas of risk, and is also an effective retention tool. Simon Moylan, the general manager of talent management at Hudson, notes that the two factors consistently quoted in the retention of top talent are career development and relationship with direct manager. “On career development, it’s not necessarily about moving laterally into the next role in the business; it’s about feeling that your career has momentum. This is achieved through on-thejob development, learning new skills and taking on special projects, all of which are valuable pursuits in the current market,” he explains. Top organisations are developing leadership capability for two reasons. The first is to show a commitment to and investment

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in the individual. So, while there may not be an immediate promotional opportunity, they at least know that they have been identified as having potential. The second is to decrease the organisation’s risk, by preparing the future leaders for their next role, rather than waiting until they are in it to develop them.

Moving with the times

The economic downturn presents new challenges for succession planning. David Reynolds, executive general manager, Chandler Macleod Group Consulting, says that success now relies on being smarter and thinking laterally about the skillsets and competencies that organisations should be focusing on. “In an environment where the world has changed so significantly, some skillsets that weren’t so prevalent or needed before are ones that are needed now,” he says. Reynolds highlights resilience and coaching skills as essential. “Typically, looking at these skills and traits was not a succession planning issue; but it’s looking at future leaders and planning for the future so these are the sorts of qualities you would want to embed and accentuate in terms of employee development,” he explains. In addition, the recent delayering of organisations has increased the complexity of leadership roles, and at the same time has increased the ‘distance’ between roles in organisations. Moylan notes that this has resulted in a difficult situation for succession plans, where the gap between identified successors and the roles they are expected to fill are greater than they ever have been. “This places a huge reliance on talent management strategies to bridge a wider development gap between successors’ current capabilities and where they need to be,” he says. Another element to be wary of is the fact that employees are hanging onto their roles for longer, either for fear of jumping ship in this environment, or in the case of many Baby Boomers, because they are delaying retirement due to superannuation concerns. This presents challenges for succession planning, particularly when the pipeline becomes ‘clogged’ with too many

Succession planning is an important tool for a business both in good times and in bad. It is a vital component in talent management as it helps to develop employees from within, it identifies potential areas of risk, and is also an effective retention tool

editor’s letter issue 7.6

EDITORIAL

AUSTRALIA’S NUMBER 1 MAGAZINE FOR LEADING HR PROFESSIONALS managing director chief operating officer editor journalist production editor contributors marketing manager marketing coordinator traffic manager design manager designer photographer senior web developers it/is manager

Strength from within

PSubscribe Today aul Keating was once attacked for presenting the early 1990s economic slump as ‘the recession we had to have’. While nobody has been as forthright this time round – and everyone seems reluctant to use the dreaded ‘R’ word – business leaders currently face unique challenges. Is this slump a necessary evil – a chance to trim some of the fat? Although many employers have had it easy these last couple of years, HR professionals in mining and resources or healthcare might beg to differ as they’ve struggled to fill roles with skilled workers. The recession is certainly a chance to rethink strategies and perhaps remove deadwood. Clearly, it is time to get smarter with human resources and the budgets that attach to these resources. Without sounding like a Zen believer, there can be unexpected strength to be found within. This month’s feature on L&D reveals that only 10% of learning comes from formal courses. The rest comes from on the job experiences and the people we work with. In short, getting smart about learning experiences can save money. The same logic applies to succession planning. Research shows that internal CEO hires generate on average a 21% shareholder return compared to 17% for ‘outsiders’. As each organisation today is aiming to retain their most talented workers to weather the economic storm, it pays to provide both insightful L&D and clear career paths.

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issue 7.6

succession planning

successors and not enough roles. Reynolds does not view this as a major problem. “At the end of the day it will come down to the basic rules you put in place about who qualifies for future leadership roles and who doesn’t. If it clogs up the pipeline it just means you need to be more definitive and objective about who gets developed and who’s put in line for future roles across the organisation,” he says. It is also important to consider that succession planning is not necessarily about climbing a corporate ladder, but rather about filling gaps for critical roles and providing employees with the opportunity to gain exposure to other areas of the business. Secondments and stretch assignments can be used, while project work might relate directly to the current environment – for example, if organisations are looking to take advantage of growing market share it might be something around cost efficiencies, or it could be a project to realign certain business units to move them closer to the customer. “This current crisis has forced us to look at what’s important and what’s not important. There is a silver lining if you can see beyond the clouds,” says Reynolds.

Role or person?

This internal analysis makes succession planning a valuable risk mitigation tool, and in that regard it should focus not just on leaders but also on pivotal roles. This is problematic if the organisation has taken a blunt approach to redundancies. “Business continuity is a huge risk that some organisations overlook in downsizing. They haven’t looked at what the pivotal areas or roles are, where they can and can’t cut, and where they can actually borrow from other parts of the organisation to back-fill. You’ve got to look at it from the organisational perspective and not a siloed perspective. There could be key skillsets in other areas that you could transfer to fill the gaps,” says Reynolds. To that end, business leaders should be asking how well placed a role is in terms of the direct reports. Do they have the knowledge, confidence and ability to take over? “That’s part and parcel of good organisational design, to make sure the roles of the direct reports to some degree overlap,” Reynolds adds. Taking into account the changing demands made on future leaders, it is no longer possible or appropriate to groom people for specific roles. Organisations have to equip successors with the necessary experience, knowledge and techniques to assume a certain future ‘role’. However, just as it is important to identify critical positions in the organisation, it is also vital to identify crucial employees with the potential to lead in the future. This is a key point, as Moylan explains: “Where succession planning is concerned with mapping of critical roles and potential candidates for them, succession management is focused on managing the readiness of a successor to take on his or her next role,” he says. Succession management is concerned with guaranteeing continuity of the organisation in the long term. Initially, this continuity was seen merely in terms or replacement planning with specific people being identified who could assume specific posts when senior managers retired. The principal reason for the implementation of these systems was to mitigate the risk of losing someone, and is of a reactive rather than proactive nature.

Internal movement Simon Moylan of Hudson outlines some key benefits for internal development and succession: »» provides staff with aspirational benchmarks to strive toward, accelerating their development and career plan »» re-enforces a culture of support and development of staff »» rewards existing staff for their contribution and commitment »» the talented individual can be an effective change agent »» promotes longer tenure and retention of IP

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succession planning

issue 7.6

“Succession management as HR practice has meant a further step forward. In addition to mapping critical positions and possible successors, progressive organisations have put in place distinct development programs which enable successors to grow toward their future roles,” Moylan says.

Beyond a replacement tool

It has been suggested that a succession plan should no longer be seen as a replacement tool but rather a development and leadership capability tool, a sentiment that Adams agrees with. “I believe that people who view a succession plan as purely a way to protect the business and have a seamless handover are very short sighted. The effects of good succession planning can have far more wide reaching and profitable benefits. It’s all about retaining high potential employees and achieving greater productivity from them while they are on their development journey. “In my experience, an employee who believes their organisation is investing in their future and showing an active interest in their career is more engaged, becomes motivated to higher achievement, works harder and becomes a positive cultural role model. All of this translates to greater productivity from the

“People who view a succession plan as purely a way to protect the business and have a seamless handover are very short sighted. The effects of good succession planning can have far more wide reaching and profitable benefits” – Jane Adams

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succession planning

No movement? While retention will continue to be a key focus for organisations in 2009 – just as it was during the skills shortage of 2008 – this in itself presents some problems with succession planning. If people are not moving on or are delaying retirement, what options does this leave for organisations wanting to hold onto employees but also give them career development and career pathways? “Strategies to assist with retention in the absence of promotion need to be creative and personalised to the individual,” says Jane Adams of Randstad. “They need to offer incentives as well as professional development.” Adams provides the following retention examples: »» personal interest, travel and recreation allowances »» relevant training and development programs – particularly for the current economic climate »» inclusion in stretch programs and special projects which engage and challenge employees »» secondments both internally and externally to the organisation »» allocation of ‘free leave’ days per annum »» mentoring, coaching and management programs »» subsidised childcare, gym memberships, health/life/ income insurance »» reward and recognition culture »» flexible working arrangements »» contribution to sponsorship of employee-endorsed charity groups »» university and further study support programs

individual and the teams they work in. Imagine what could be achieved if every organisation had pools of high-performing talent working for them,” she says. High-performing individuals need to see a career path ahead of them and organisations need to ensure they are helping these employees develop further in order to be successful in their new role. It is a joint task to identify skills gaps, risks, on-boarding and any other requirements. Succession planning needs to involve sourcing, assessing, developing, retaining and deploying the right talent. “Senior management should regularly look at their leadership pipeline and recognise individuals three to four levels down in the organisation, and then focus on their succession plans. It’s about looking at your human capital as talent pools,” says Adams.

Traits to look for

Personal motivation is the key to choosing who to develop as a successor as there is little point in investing in someone if they

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have no desire to take on more responsibility. Reynolds adds that the person must also have the intellectual horsepower and resilience to move up. “That’s why you need to assess the potential more than past performance”, he says. However, past performance can provide a guide. Adams looks for proven success in the roles the individual has held within the organisation and elsewhere. “To be viewed as a high potential, quality successor they must have the credibility and the ability to be inspirational to those working their way up. I’m a firm believer this can only come from a visual track record of high achievement. I also look for demonstrated passion, self belief and work ethic,” she says. Organisations also need to set out the competencies and traits required for the role and by the individual in order to succeed. These competencies are based on three key areas: the job itself (ie, specific capabilities to take on this role), the team they would be leading and cultural competencies (ie, how well does this individual fit in to the organisational culture?).

HR’s role

Reynolds believes the CEO should be driving succession planning, and the HR director should be enabling and providing the framework for: the selection of successors; the process for communication; the manner in which people are developed and monitored; and ensuring the feedback loops are directed back into development needs, training and coaching. “HR must contribute but more in an advisory role, working with the CEO and executive team,” he says. It is also fair to suggest that one of the first tasks for an incoming CEO should be to assess successors, not just for his or her own role but for other critical roles in the organisation. “If I were coming into an organisation at that level I’d want to assess my direct reports and look at their capabilities and understand what the risks would be if they left. One would hope they’ve done their due diligence prior to coming in, and if they are an

High-performing individuals need to see a career path ahead of them and organisations need to ensure they are helping these employees develop further in order to be successful in their new role. It is a joint task to identify skills gaps, risks, on-boarding and any other requirements

succession planning

issue 7.6

internal candidate they would probably know that already,” says Reynolds.

Getting it wrong

Succession planning is a long-term investment. It requires ongoing consultation within the business by the HR department and senior management and it needs to be communicated effectively to avoid promising the world and then not delivering. “It’s about managing the communication and the expectations right from the word go and having a very transparent process to identify those you want to develop. The danger is you alienate people if it’s not handled appropriately. There’s additional risk if you make this huge investment in development and you don’t get any return on it,” says Reynolds. Another key risk is the derailment of successors. Generally, with each transition of an employee with potential to a new role or job level, the chance of derailment is real. “The challenge of learning a new role, combined with the pressure of maintaining high performance, can often lead to derailment if insufficient support, guidance and mentoring is provided,” says Moylan. HC

“It’s about managing the communication and the expectations right from the word go and having a very transparent process to identify those you want to develop” – David Reynolds

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issue 7.6

corporate culture

The Australian culture story What is the story?

Over the past year, Australians, along with the rest of the world, have experienced some significant changes in the way they do business. From credit lines drying up to mass employee redundancies, the shift from a thriving economy to one in a state of so-called ‘peril’ has left many organisations high and dry. However, this is not the first time – nor will it be the last – that Australian businesses will be forced to confront such grim realities. “For quite a few years, companies in this country have had it easy. Credit was flowing and businesses would take risks that were perhaps not properly thought out. The problem lies in the fact that these same companies think short term rather than long term, and are therefore not prepared for the ebbs and flows,” explains Quentin Jones, managing director of culture and leadership consultancy, Human Synergistics International. The most interesting part of this economic rollercoaster is that

the majority of Australian organisations, in their current approach to business, will be seriously impacted when the carriage takes a nosedive. Human Synergistics has used their Organisational Culture Inventory (OCI) tool to measure the culture of 1,700 Australian and New Zealand organisations, both as they are (the Actual culture) and as the leaders of these organisations believe, or would like, the culture to be (the Preferred culture) – and the discrepancy is frightening. The OCI makes tangible the otherwise abstract aspects of culture using the Human Synergistics circumplex to graphically describe the culture of an organisation (see graph bottom left). “Despite all the talk about managing staff well and culture being on the agenda in most boardrooms, we are still seeing a trend where the majority of organisations do not live their values,” explains Jones. “Through our research, we continually see leaders that do not practice what they preach, which results in the cultural disconnect. The actual culture is characterised by defensive behaviours rather than the constructive behaviours that our research tell us that workers want,” he says. The culture that the Australian and New Zealand workforce want to see is largely made up of constructive behaviours such as: Constructive (Blue) Styles Achievement

Staff are encouraged to establish challenging but realistic goals, develop plans to reach these goals and pursue them with enthusiasm.

Self-Actualising Staff are encouraged to maintain their personal integrity, enjoy their work, think in unique and independent ways and take on new and interesting activities. HumanisticEncouraging

Staff are encouraged to be supportive, resolve conflicts constructively and be open to influence.

Affiliative

Staff are expected to deal with each other in a friendly, pleasant way and be sensitive to the satisfaction of their work group.

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corporate culture

Conversely, the styles being experienced are aggressive/ defensive and passive/defensive: Aggressive/Defensive (Red) Styles Oppositional

Staff are encouraged to gain status and influence by being critical, opposing the ideas of others and making safe decisions.

Competitive

Staff are expected to operate in a win-lose framework and believe they must work against team members, rather than with them to be noticed.

Perfectionistic

Staff are expected to avoid all mistakes, keep track of everything and work hours to attain narrowly defined objectives.

So how do you create a happy, Constructive ending to the story? Bridging the gap between what the organisation and its leaders say, and what employees experience, is a matter of bringing into line the language and the actions. “Just like any other part of a business, the most effective way to get things on track culturally, is to know where you are, and then set the goals for where you want to go – this is the key to transforming the culture of your organisation,” says Jones. Strategies to make your workplace more Constructive Structures

Passive/Defensive (Green) Styles Conventional

Staff are expected to conform, follow the rules and make a good impression

Avoidance

Staff are expected to shift responsibilities to others and avoid any possibility of being blamed for problems or errors.

The Australian situation, outlined above, has some very real impacts for an organisation. This is in relation to employee performance and, ultimately, the financial bottom line. “Often, leaders in an organisation will pin the company mission statement up on the wall, follow it up with a list of values that they sit on the desks of all their staff, and then go on to make decisions, implement systems and act in a manner completely contradictory to these promises,” explains Jones. “This then results in staff who are disenfranchised, unproductive and less likely to stay with the company for the long haul.” Overall, Jones says that without constructive leaders who align the Mission, Vision and Values of the organisation with what they are doing – the systems, technologies, structures and skills – the culture will ultimately be impacted and hence, performance. The interesting impact of this situation, according to Jones, is the fact that when life is good, businesses can still function (although not to their full potential) under these cultural circumstances. Then, as soon as something goes wrong internally or the market goes into disarray, these same organisations have inappropriate structures in place to adapt to the new environment, and will ultimately suffer.

establish clearly defined goals for business units that reflect the corporate goals, so there is no confusion managers need to ensure that there are opportunities for all staff to feel as though their involvement matters the culture must encourage feedback upwards, as well as downwards activities and language should emphasise collaboration, rather than competition

So what does this mean for the bottom line?

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Systems and ensure that performance management Technologies systems are based on outcomes that the individual CAN influence and not based on external factors people are recruited for the emotional skills they can bring to the team, technical skills can be learned job descriptions are signed in ways that motivate. For example encourage autonomy, variety and individuality Leadership

champion the mission and vision of the company focus on where peoples’ effort can make a difference value learning and continuous improvement trust and empower people through delegation give constructive and truthful feedback

For more information on how to measure the culture of your organisation, go to www.human-synergistics.com.au or email info@human-synergistics.com.au www.hcamag.com

issue 7.6

remuneration

Budget fallout A pause in employee share schemes should fast forward critical review of long-term incentive schemes, writes Ken Gilbert of Mercer

t has been a frenzied few weeks for many companies in Australia. In its controversial Federal Budget, the government announced its measure to abolish the option for employees to defer the tax on employee share discounts. Upon hearing the news, many companies quickly moved to freeze or review their employee share schemes. The government has now decided to review its decision and businesses and industry groups have put forward a list of considerations and suggestions as part of the formal consultation process in an attempt to soften the impact of the changes. At the time of going to print, the government announced that employees earning less than $150,000 will be able to defer tax for the first $1,000 of shares granted, raising this threshold

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from $60,000 annual salary. The revised plan also allows deferral of tax on share schemes if there is ‘a real risk of forfeiture’. Until the draft legislation is finalised, there will continue to be uncertainty surrounding employee share schemes. While there is no doubt that a quick resolution is desirable, particularly for the many companies and their employees left in limbo, this is one situation where the old adage ‘more speed, less haste’ rings true. Yes, the changes to employee share schemes have been unwelcome and inconvenient, but businesses and their HR leaders may benefit from keeping their finger on the pause button for the time being - especially given that the treatment of employee share schemes are likely to undergo further change. Now is a good time for businesses to step back and take a critical look at the use of long-term

incentives and employee share schemes in their organisations and assess whether or not they are delivering what they have been designed to achieve. In essence, employee share schemes have become an effective and legitimate tool for companies that want to link employee reward to the future performance of the company – as well as align staff and shareholder interests. Additionally, as the response to the proposed changes has highlighted, another great advantage is their ability to allow employees to share in the ownership of the company and build wealth as well as contribute to its performance. But as employee share schemes are more widely used, there is a risk that companies are taking a blanket approach and not using the schemes as an effective performance incentive vehicle.

remuneration

Furthermore, employee share scheme structures in Australia are more complex than those used overseas – thus indicating that there are actually good reasons to review employee share schemes at both a company and a policy level.

Company level: a critical tool in broader reward strategy

At a company level, the current upheaval provides a catalyst for companies to assess their employee share schemes and their continuing effectiveness as a long-term incentive vehicle. With the government and regulators maintaining a close interest in the use of long-term incentive vehicles and executive pay, we can expect that companies are going to have to, at some point, review their current practices and possibly adopt new remuneration structures for executives. Employee share schemes will be a key component of this. One of the interesting points of the current debate is the use of employee share schemes across an organisation. Today, employee share schemes are more than a vehicle to reward just the most senior executives – they are increasingly used as a retention tool across an organisation. While this has many benefits, including encouraging greater loyalty and aligning performance goals with shareholder experience throughout the organisation, we’ve observed that as the barrier to entry for a shareholder scheme is lowered, so too has the communication and clarity around what employee share schemes are used for. In many cases this has resulted in decreased take-up rates. Companies need to take stock and understand the driver for offering an employee share scheme. How should it be applied to different segments of the workforce? Can a mix of performance metrics (growth, profitability, returns and shareholder experience) as well as time horizons (short is one year, intermediate is two to four years and long term is over five years) be applied? And finally, how should this all be communicated to employees?

The critical point here is balance: a balanced program helps to mitigate the biases in any single compensation plan or measurement approach and just as performance metrics should be varied, it might be time to consider a different mix of cash, equity and other benefits. It is also a good time to look at whether you are receiving the best return on your investment. Broad-based employee share plans are time-consuming and expensive to administer. If participation rates are low or employees do not value the grant of shares, is this time and money well-spent? Are there better ways of communicating the benefits of the plan in order to increase participation and engagement? Or would other benefits such as training and education be more highly valued? An internal review of participation rates and retention outcomes as well as employee engagement surveys may assist in understanding whether you have the right balance.

Policy level: a framework to keep Australia competitive

Australia has been at the forefront globally when it comes to the design of performance-based equity structures for senior executives. It is important that our remuneration packages continue to be internationally competitive – particularly for companies competing for talent globally or trying to attract expatriates considering returning to Australia. At a policy level our system is unwieldy when compared with other geographies. The tax treatment of people ceasing employment is one case in point. Unlike other OECD countries, the Australian tax regime treats the cessation of employment as a taxing time for employee equity plans regardless of whether shares have vested and disregarding forfeiture or disposal restrictions. Not only does this mean the person in question must pay the tax due on those incentives, regardless of whether or not they can sell the shares to fund the tax bill, this also hampers the ability

issue 7.6

to performance test – or reward good performance – using unvested equity incentives beyond cessation of employment. This strikes right at the heart of current debate surrounding executive pay, which has highlighted a need to find ways to better align pay with superior long-term performance as well as discourage excessive risk taking. This is one area that we expect will be addressed in the Productivity Commission’s review of Australia’s executive remuneration framework. As the Productivity Commission’s review of executive pay is expected to also include consideration of effectively linking pay to performance and shareholder return over the long term, the initial changes to employee share schemes appeared to be at odds with the context of the overall review. Furthermore, the new guidelines on executive pay released by the Australian Prudential Regulation Authority (APRA) encourage banks and other financial institutions to switch some portion of executive pay into long-term incentives. APRA’s recommendation is based on the principle that long-term incentives would discourage practices that contributed to the global financial crisis, such as irresponsible lending. How employee share schemes are utilised in Australia in the future will depend somewhat on the outcomes of the review of the current policy, but it is clear that they have an important role to play in rewarding good performance over the long term. It is important though, that in this time of flux, they are assessed in the context of the broader reward strategy for each company. HC

About the author Ken Gilbert is the business leader for Mercer’s human capital consulting business in Australia and New Zealand

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issue 7.6

profile

Global player Hewlett-Packard may be the number one PC supplier in the world and a true global giant, but its HR focus remains on personal development and creating a world of opportunities for employees

ichael Vavakis, HewlettPackard’s Asia-Pacific HR vice president, has been with the company for over 18 years but he says it does not feel like a long stretch. In fact, he has operated in a number of roles during that time frame and it is the variety that keeps his enthusiasm high. “In HP I’ve primarily undertaken HR roles, but I’ve had a couple of stints outside of HR in a PR/communications capacity and also a time when I was involved in sales operations,” he says. “I’ve also held jobs here in Australia, Hong Kong, Singapore, and 13 years in the US.

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Every two or three years I’ve moved into a different job or function and that variety has led me to stay with HP.” Global mobility is ingrained in the HP culture. The massive worldwide workforce of 321,000 has the ability and opportunity to move around the world into different business functions and different roles. It was the company’s graduate program that set Vavakis on his career trajectory. After he graduated from university with an accounting and economics degree, he worked as a financial analyst for several years. He opted to join HP via its graduate program. The aim of that program is to expose graduates to as much of the business as possible – even if there is no direct correlation with their qualifications. “For example, you might be an engineering grad but you spend time in HR or marketing,” Vavakis explains. “It’s a great way to ground their experience over the first few years. That happened to me – I came into an HR and a communications role in the first three years, and after three years I got to move to the US and stayed there for 13 years. That’s the DNA of the company, giving people exposure and experience to different environments.”

Broad responsibilities

In his current role Vavakis has a range of high-end responsibilities, but possibly

the key area is to help drive the business strategy across each of HP’s three different businesses. These business units are not like product lines but rather distinct businesses. These include: the imaging and printing group; the personal systems group (everything from handheld devices to PCs); and a technology solutions group, which is the traditional HP offering and revolves around IT solutions and consulting. The recent acquisition of EDS also forms a significant outsourcing arm for the technology solutions group. “Each of these units is very different. How you sell a PC, the markets you go to and what sort of resellers you use is very different to what you do in the tech services group, where you’re selling to larger business customers. The HR implications are also very different. In the PC business you would be driving high volume people that are selling out in the different geographies in Asia. In China, for example, we’ve got a strategy that takes us away from selling in Beijing and Shanghai and into places in the middle of China that most people don’t know about but may have populations of 30 million people,” Vavakis says. Vavakis’ next level of responsibility encompasses all the HR-specific elements – making sure the company has a quality staffing engine, ensuring

Photo: Thilo Pulch, www.pulchphotography.com

profile issue 7.6

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issue 7.6

profile

the reward & recognition programs are based on the company philosophy (pay for performance), and then there are the major issues of people development, talent management and employee engagement. “To get specific on talent management we drive a lot of rigour around moving people into different roles and providing them different experiences. We carefully manage the top talent in the organisation and make sure we’ve got the right strategy to keep those people. We also aim to create a strong performance culture. If the people at the lower end are not performing we move them out of the company or into different jobs,” he says.

Cross-cultural management

Vavakis notes that although the HP culture is strong enough to carry through to all business units, the more interesting challenge is the sheer scope of having such a geographically dispersed workforce. HP’s Asia-Pacific market alone covers 20 countries, from Japan to New Zealand, from Pakistan to the Philippines – and this presents unique cultural awareness issues. “The way you implement things from one country to the next can be slightly different. For example, how you do things in Japan will be slightly different to how you do things in Australia. You must respect the culture and ensure you

In his own words… What has been the biggest challenge you have faced in your career? Integrations are always tough. We’ve been through several but two recent experiences have been challenging – the integration with EDS and a few years ago the merger with Compaq. There’s so much work that comes out of doing the technical aspects of integration – the tax, legal, and HR implications – but there’s a softer side that is sometimes forgotten and that’s the cultural assimilation of two entities. It’s easy for people to fall into the ‘us’ and ‘them’ mentality and that’s not good for business. The challenges have been really getting people beyond that and getting the leadership teams to understand the cultural aspect is just as important as the technical side. It can be basic stuff – it can go down to how people prefer to communicate, is it email or voicemail? Such a simple thing that you wouldn’t think about in normal environments but it can create a huge disconnect. Also, the immense growth in HP over the last four years is an ongoing challenge. Each business unit needs to get the best people in the shortest time frame possible. The balance of getting these people in with the quality we need is tough – but you don’t want it to be a trade-off. What do you consider to be your biggest career achievement so far? There was a time when I stepped out of HR and into a sales operational role. In that role we were forming a new organisation for the top corporate accounts in HP – the top 100 customers. We were almost starting from scratch: we had to hire the people who would be account managers; determine how to measure and reward them; and decide on how we needed to operate in terms of our go-to market strategy. Building the structure and processes around it was probably one of my biggest accomplishments. The second one is the growth of the region in terms of the employee base and the fact we’ve been able to engage people well and have good business results despite the economic climate. We’ve seen a downturn but not to the extent we’ve seen in some of our competitors. Where do you see HR as a profession heading? I see moving administrative work out as being important. At HP, HR is expected to not just deliver HR priorities but also be part of the business decision-making process. Sometimes people in HR say they need to understand the business – I don’t think that’s good enough. They need to be confident enough to understand P&L and how HR decisions and implications can impact P&L. Then they need to be able to participate in business planning and decisions, and then of course deliver all the HR programs.

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understand cultural nuances. It doesn’t mean you move away from what the objective is; it just means the way you get to that objective may be slightly different,” he says. “It’s about listening and understanding but also not necessarily taking your finger off the accountability button. Sometimes culture will be a barrier to getting things done, and you have to understand enough to still make people accountable so they execute and do everything they need to. However, you also need to do it in a respectful way.”

HR at the top

HP has made huge investments in the Asia-Pacific region over the last four years – the workforce has almost doubled in that time – and this growth has only been possible with HR operating at the most strategic level. Hence, Vavakis and his team have put in place rigorous processes to view the workforce from a strategic standpoint. “We plan what the workforce will look like over three-year time frames. We don’t just say ‘we need to hire X many people’; we look at what’s the right location for our workers, what’s the mix of contractor verses permanent, and what sort of skills are needed. That has been a way for HR to get away from just executing HR programs, and really work with the business as they do their business planning,” he says. “Ultimately this means HR is very involved in what happens in business decision-making, as well as the process and the execution that comes from the planning. That’s a key accomplishment for us. We’ve built into our financials internally a measure to assess the cost of the workforce we put in place as a result of those plans. It puts rigour into not just the planning exercise but also demonstrates the impact on our financials as well.”

Leadership development

Another key focus for Vavakis and his team is leadership development. The premise that HP works toward is that the most effective way to train new leaders is to have existing leaders teaching future leaders. A 2008 program called Leading

profile for Results involved all of the management team, starting with the executive counsel at global level, cascading down through the company and communicating what the business strategy is, as well as what the company wanted to do in terms of treating, rewarding and managing its people. It outlined what was expected around the performance culture, and how leaders personally could best manage and drive people forward through change. “We deliberately used a cascading approach so that leaders teach other leaders and it goes all the way down the organisation,” he says. “We also have key talent programs, which are run every year across the region. These look at the top talent and the emerging talent that we think comprises the next generation of leaders. We couple them up with senior leaders, and then we give them actual projects to work on. It’s good to give them the theory about leadership but in reality if we get them working on true business problems, and have them working with senior leaders, it’s

the best way to improve their leadership skills,” Vavakis adds.

HR priorities

Like all global organisations operating in uncertain economic times, Hewlett Packard is ensuring it has the right cost structure in place and is keeping a close eye on economic trends. The integration with EDS also continues, and HR will continue to play a crucial role in ensuring the two organisations are aligned for future success. “There are many aspects of the EDS integration. One aspect is the technical side – how do we harmonise benefits, how do we bring people onboard, how do we make sure all the legal and tax aspects of merging the two companies together work. Then there’s the culture component. We have two distinct cultures coming together and we’re highlighting what the differences are and taking the best elements out of both. There’s an element of organisational effectiveness and transparency that comes into play as well,” Vavakis explains.

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Outside of the integration there is plenty to keep the HR team busy. This ranges from driving the focus on talent management and leadership development, to moving the transactional aspects of HR into automated formats or to BPO arrangements. With expansion into new markets and workforce growth expected to continue, the HP HR will need to keep track of a rapidly changing organisation. “This expansion naturally brings with it a whole lot of HR implications including making sure we’ve got the right staffing processes, the right onboarding processes, and keeping that talent and driving that talent to grow with the business and keep HP the number one IT company in the world,” Vavakis concludes. HC

See Michael Vavakis talk at HR Summit Melbourne, 16–17 July www.hrsummit.com.au

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issue 7.6

teambuilder

Leader of the pack This month’s teambuilder has won plaudits from the EOWA and is a passionate advocate of the HR profession as a key business partner

va Wright, head of human resources at RBC Dexia Investor Services, has turned an early interest in psychology into a successful career in HR that has seen her develop an award-winning team and some innovative HR initiatives. The core of her passion for HR remains an interest in human behaviour, which was initially sparked while studying psychology. Her practical experience came with employment in the HR field across a variety of industries within Australia and the UK. She first entered the insurance and financial services sector as HR manager at Promina, where she managed the HR team and all aspects of HR for Australia and New Zealand.

Current challenges

Wright’s current role at RBC Dexia Investor Services – an organisation that offers a range of investor services to institutions worldwide – is as challenging as it is diverse. With 5,500 professionals in 16 markets worldwide, the company is equally-owned by RBC and Dexia, and ranks among the world’s top 10 global custodians with US$1.9tn in client assets under administration. Wright reports to the MD in Australia and is a member of the senior leadership team. She holds responsibility for all areas

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of HRM, and manages a team of HR professionals that supports 400 employees based in Sydney and Melbourne. Wright and her team have worked hard to proactively position the HR function as a key contributor and value add to the business as a whole. She says that this is something the company has been committed to, and is possible thanks to a strategy that drives business performance. “In terms of specific HR initiatives, there are two in particular that stand out and which have made a positive impact on the business. The first is a tiered leadership program we developed in cooperation with the Australian Graduate School of Management. This program targets all people managers, including the senior leadership team through to team leaders and has proven invaluable in enhancing the way our managers lead,” she says. “The second is our in-house mentoring program, which was developed to help foster communication and share knowledge across the organisation. The mentoring program is open to all employees and has resulted in increased skills and knowledge across the business.” This concentration on knowledge sharing is an integral element within the organisation’s approach to teamwork. Wright notes that effective teamwork is crucial, as “every task performed feeds up

the business value chain”. To that end, teamwork is one of the organisation’s core values and is directly linked to the global reward and recognition program.

Employer of choice

Earlier this year that culture and the commitment shown by RBC Dexia Investor Services to provide equal employment outcomes for all Australians was rewarded with a citation from the Federal Government’s EOWA as an employer of choice for women. To meet the stringent criteria for this citation, the company was able to demonstrate a progressive and comprehensive approach to equal opportunities as part of a workplace culture that values diversity. Wright explains that the citation came about as a result of a desire to drive the business forward and help meet the needs of its employees. The HR team and business leaders focused on a number of key drivers to help support diversity and increase transparency across the organisation. RBC Dexia Investor Services embarked upon a program that consisted of a best practice remuneration framework, leadership development, best practice recruitment, secondment opportunities and employee benefits, such as a 12 month career break, 16 weeks paid parental leave

teambuilder

issue 7.6

for the primary care giver, coaching, flexible work practices, wellbeing program and volunteer leave. “This is an area that RBC Dexia is certainly committed to. For example, the number of women on the company’s senior leadership team continues to rise – currently it sits at more than 30%. There is a persistent commitment to building a skilled and diversified workforce,” Wright says. RBC Dexia’s flexible work practices have helped to open the door to new opportunities and talented individuals – regardless of gender, age or background. “We’ve also recruited employees who, due to a disability or family commitments, might not have traditionally viewed the financial services sector as a flexible work environment,” says Wright. “This is due to our managers and recruitment practices.” “Our focus is to ensure that our workforce is engaged and that we have the appropriate talent to meet our clients’ current and future requirements. As part of a cost-effective approach – given the realities of the current economic environment – we’ve launched programs that can be run in house, such as our mentoring program and lunch and learn programs, to help reduce the impact to the bottom line and utilise the great talent that RBC Dexia possesses,” Wright says. For Wright, the HR profession remains “truly exciting” and will continue to evolve. “Given the current legislative changes and economic climate, it’s safe to say that the profession will call for even more creativity and stronger relationships in the future, both internal and external to the organisations we work for. As key leaders within the HR community, we need to operate not just within our field of expertise, but aim to be recognised as key leaders within the businesses we represent. This means challenging ourselves to continue to develop creative, cost-effective solutions that will help ensure the future success of our respective organisations,” she concludes. HC

Photo: Thilo Pulch, www.pulchphotography.com

The road ahead