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Building the Next Generation of Human Resources

To paraphrase Charles Dickens, “it is the best of times, and it is the worst of times” for human resources. Never in history has there been such a demand for innovative approaches to the management of talent, and yet many argue that the profession has not stepped up to opportunity.

Steve Ashton
IWK Health
Centre Halifax
The HR profession needs to think very carefully about its response to these challenges. But we are not alone in this responsibility. Leaders at every level and discipline in organizations have a key role in ensuring that we are paying more than lip service to talent management and the evolution of the HR function. This spirit of shared responsibility is critical for organizations who wish to attract, retain and engage employees in an era where talent is the most critical element to serving our customers, clients, communities and other stakeholders.

Major Influences on the Current Discussion

‘What interests my boss, fascinates me.’ I learned this axiom from a since-retired Executive several years back, and it rings as true as ever for the HR profession. If we want to know what will earn us the respect of our organization, we need to be well-informed on the things that keep our leaders up at night – and bring them solutions.

Jack Welch: Widely viewed among the greatest business leaders of the 20th Century, he drove General Electric’s unrelenting focus on developing their people. Hiring the best, regularly reviewing the bottom 10%, and investing heavily in leadership development, Welch proved the case that people can be the key strategic and competitive advantage for any company. A whole generation of business leaders has been influenced by Welch’s philosophy and many are looking for their HR departments to help them do the same.

Globalization: Thomas Friedman’s best-selling book, “The World is Flat” is a wake up call for Western societies on the impact of an open, global marketplace. In a world where technology eliminates distance and trade barriers are declining, work can be performed anywhere, anytime, and often at any price. If we want to maintain our lifestyles, Canada must continue to evolve to the higher value-added knowledge economy, and HR has a major role to play in helping businesses define and build a different set of skills, or risk going out of business.

Education: It would be a fatal mistake to look at the rise of China and India as simply a source of cheap labour in manufacturing and technical help desks. They are also outpacing us in their investment in education, especially in the fields that fuel innovation. A recent study showed that only 5% of North American students earn a degree in Science & Technology compared to 43% of students in China. Compared with other OECD Countries, Canada has consistently rated poorly for the number of science, math, computing and engineering grads in the labour force between the ages of 25 and 34. Clearly, if we are to compete in the knowledge and innovation economy, we must invest in our next generation of talent.

Demographics: While it is imperative to invest in our children’s education, our demand for talent is about to outstrip the supply. We are all aware of the impending impact of our aging workforce: by 2026, one in five Canadians will be 65 year of age or older – up from one in twenty in 1921 and one in eight in 2001. You are likely equally aware that Canada is not replacing its population. In 2004, Canada’s birth rate fell to 10.5 live births for every 1,000 population, "the lowest since vital statistics began to be produced nationally in 1921," according to Statistics Canada. The most progressive organizations have realized that we need to re-think concepts like retirement, flexible work arrangements and workforce planning.

Immigration: As a result of our daunting demographic picture, immigration has become the single most important factor in ensuring we have a workforce in the future. Recent immigrants have accounted for 70% of Canada’s net labour force growth over the past decade, and before the middle of the next decade, virtually all net labour force growth will come from immigration. However, this requires us to evolve our workplace cultures and HR practices to attract, retain and optimize this critical pool of talent. In addition, we must get involved in changing public policy and barriers to professional credentialing. Canada may be smug in its international reputation today, but as the economies in China, India, Eastern Europe and others grow, we may see a reverse in the trend – a giant magnet attracting back recent immigrants who have moved to Canada but not found it as welcoming and prosperous as once thought.

Technology and the Nature of Work: It is no surprise that technology continues to change our workplaces and the nature of work. But are we seeing the full picture? While technology can be an enabler, we need to change the way people work, think and interact to generate true productivity and innovation. In a recent interview in the Globe and Mail, author Malcolm Gladwell put it best: “I'm quite prepared for the possibility that the next revolution is not going to come from a machine; it's going to come from creating a more thoughtful work force and giving people the opportunity to be thoughtful.”

The Current State of Human Resources

Consider a recent article on CFO.com: “The HR department is in survival mode. As outsourcing the function becomes a more prevalent option for companies, HR managers know that if they are going to endure, they have to deliver strategic value, and that value has to be measurable.”

A fairly daunting prognosis for our profession. But in reality, HR has advanced its thinking and practices in many meaningful ways, so why the poor reviews? The root cause is equally in the hands of HR and our clients - when we’re battling to meet quarterly results, fight off a new competitor or rushing to launch a new service, it is very hard to invest and focus on issues that don’t have an immediate payback – or worse yet, deal with crises that may occur in a decade. But as we get closer to the real crisis, organizations are paying attention, and this is why the demand for innovative HR is ahead of the investment in it.

In a recent survey by the Corporate Leadership Council, 92% of line managers surveyed felt their HR business partners were either neutral or ineffective in delivering strategic value, yet they viewed this as the most important role for HR to play in their organizations. The daunting challenge, then for HR is this – if we don’t provide it, who will? And we know the answer – this is where consultants or the organizational leaders themselves take over.

In the end, most organizations want their HR departments to be successful. The key is for HR – whether through one influential leader, or the team pulling together as a whole – to create the vision, build credibility through a series of small wins, develop meaningful partnerships with operations, and earn the right to go for the bigger investments that will make a name for not only the department, but the company as a whole.

Before we move on, let’s be clear. There are many examples of successful HR organizations out there for us to put up on a pedestal. But clearly, we’re not doing enough to promote these organizations and their practices. We have a saying on my own team that we need to focus on “PR for HR.” Brag about your successes, share your learning and mentor those who aspire to achieve what you have achieved. HR has traditionally not been good at this, but our success is tied in spreading the knowledge and celebrating our heroes.

Stay tuned for Part 2 in April’s issue of MQ

Steve Ashton is Vice President, People & Organization Development at IWK Health Centre in Halifax. (902) 470-2617

Restructuring a Firm in Financial Difficulty

I was approached recently by the Director of Finance of a manufacturing company with a workforce of 125 employees; 80 unionized and 45 non union. The company is facing financial challenges and the President has asked the Director to reduce the workforce by 30% so the business can survive in today’s economy. The company employs an in-house accountant and a director of HR, but it was recognized early on that special expertise would be required to handle the many complex issues relating to downsizing.

Mark Wentzell
Vice President,
Recovery &
Grant Thornton
Restructuring is the main focus of my practice as a Chartered Insolvency and Restructuring Professional (“CIRP”). I provide advice on all aspects of business restructuring, including refinancing, governance, sale of unprofitable divisions and, yes, managing the delicate task of downsizing the workforce.

With two thirds union employees and one third non union, there are two distinctly different types of employment contracts, each requiring different treatment. The employment terms and legal rights of each category are determined in very different ways.

Union and non union

The terms of employment, financial and legal rights and duties of union employees are determined by contractual arrangements laid out in the collective agreement then in force. Such agreements frequently contain hard fought terms which are entrenched in the fine print of the agreement and which can only be varied by negotiation and subsequent agreement between management, the union and the bargaining unit. Attempts to vary those terms, including early termination of union employees, without regard to seniority and the terms and conditions in the collective agreement will likely be met with a strong legal, even perhaps militant challenge by the employees and union.

Non union employees’ arrangements are normally governed by provincial statute. Every province has enacted statutes which lay out standards relating to employment of non union employees, determining among other things, rights to vacation and other benefits, compensation and notice in the event of early termination of individuals and groups of employees.

Where do we start?

To be of maximum cost effectiveness downsizing should be targeted to those areas of the business where financial and operational benefits can be maximized with the least disruption to normal operations and at the lowest cost. A meeting with top management at an early stage will outline a high level strategy to achieve desired results. In all discussions I will be introduced as the restructuring specialist, not an insolvency or bankruptcy trustee.

We start by reviewing the latest internal departmentalized financial statements. These should disclose, at a minimum, figures for sales, cost of sales and gross margin, as well as details of unit sales by type, employee statistics and estimated return on investment for each department. Many of these statistics will not be readily available. I will work with the in-house accountant to develop the required numbers.

Who should be at the table?

It will then be necessary to have frank, in depth discussions with each of the department heads and managers to develop a viability model for each department under a number of different scenarios. I will lead these meetings. The Director of HR and the accountant will also attend.

Costs, including termination pay, counseling, legal and other costs applicable to each scenario will be matched against the estimated value or revenue enhancements of efficiencies resulting from the changes. The firm is already cash strapped and the costs of downsizing will be significant. It may be necessary to bring the firm’s banker into the discussions to ensure there will be available cash to carry out the downsizing.

As proposed changes will affect the union employees, shop stewards or union representatives should be brought into the discussions early on, preferably in a separate meeting. The Union’s cooperation is critical to the success of the downsizing.

Develop a comprehensive strategy

Other possible downsizing, cost-saving and revenue enhancing initiatives in addition to or in conjunction with the reduction in workforce will likely be highlighted in the assessment process. This is not just a numbers game. Economic and social factors not disclosed in the financial statements, frequently come into play and need to be considered. Process improvement techniques may be needed to streamline the operations.

Discussions with managers and department heads must be hard-nosed and honest as each individual will try to negotiate for continuance of his or her department and position. Those discussions will be of long term benefit to the firm as those departments that survive the downsizing are likely to become more “lean and mean”. Managers will see the exercise as a wake up call for their personal survival as well as the viability and survival of the firm.

How will we implement the plan?

When the strategy is agreed, other specialists will be required to ensure smooth implementation. Downsizing is not in the normal course of business operations and companies do not generally have the required expertise in house. They should not try to invent this expertise, but look to outside experts to help.

Experienced legal counsel is essential. As the legal issues are quite different for each employee group it may be necessary to retain two lawyers; one to advise on the collective agreement and another to advise on the non union group.

External HR consultants should be retained to educate the in-house HR staff on how to handle the dismissal interviews or handle those interviews themselves, depending on the level of expertise in house.

Peoples’ lives will be severely affected by the lay-offs and external counselors should be on hand to deal with individuals requiring counseling. Referral services to outplacement agencies should also be available.

Moving forward…

Good communications are paramount. This means clear and honest messages delivered in a business like, but compassionate manner. If handled carefully and diplomatically the business will survive to prosper.

People are the most valuable assets and 70% of them will be there after the downsizing!

Mark Wentzell, CA, CIRP, Vice President, Recovery & Reorganization, Grant Thornton Limited, LLP, Vancouver Phone: (604) 443-2173 website: www.grantthornton.ca


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