June 14, 2021

#002: The Biggest Challenge HR Is Facing In 2021 – Hiring

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Having the right talent can be a big boost, which is why developing leadership is a must for many companies. Yet why do many big firms seem to disregard this? Get to know George Randle and Tom Lokar, co-directors for Talent Advisory in The Talent War Group and co-hosts of The Talent War Podcast. Tom and George talk about how they got their start in the world of human capital, and what they think the HR space needs to do to improve in terms of talent acquisition and leadership development. This episode is a must-listen for all HR professionals who are hungry for a much-needed change in the space.

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Hopefully, you got to read episode one and realize why we’re doing this show. The most critical issue going on in any company at any time is the war for talent in that HR ecosystem. We talked about so many people seeing HR as an afterthought or overhead. We started to lay the groundwork for HR being a strategic function and being the critical part of the business ecosystem that drives everything else in your company. We gave you a background about Tom and me. We’re onto episode two. Hopefully, we’ll make it less meandering. I wanted to welcome back Tom Lokar and ask the question. Tom, what do you think is the biggest challenge that HR faces now?

The leadership quotient is the most important thing you could study or pay attention to. Click To Tweet

Thank you, George. Thank you, Talent Warriors, for joining us again. If was to go right into it, the pat answer is finding the right leaders for the right scale of your business, where your business is and its lifecycle, and creating that culture that fits the growth and the ethos of your company. We have to talk real with our audience. The biggest challenge facing HR right now is finding talent at every level and finding people that want to work. This isn’t just coming from my head of HR role with a hospital system through the Southeast that operates in a lot of rural areas.

I was on vacation with my wife and I got talking to some people around the pool. A couple of CEOs were also getting away with their wives on an anniversary and one just getting away. They have manufacturing businesses. The others are in software. Some parts of their business are global, but we were talking domestically about how hard it is to find people and develop a compensation package that attracts people back into the workforce. We went through all of the things that you’re hearing. Maybe not all media but certainly business media that unemployment benefits and stimulus. We don’t think it’s a fear of going back to work because of COVID.

Certainly, if you’re looking for a non-exempt employee, they have the ability to live their life, make their car payments, get food on the table, and keep the roof over their head through those benefits. They’re weighing that check coming in and other things they want to do in their life. In my world, coming to make $12 to $13 an hour in a psych hospital for a twelve-hour shift or working on a manufacturing floor, I was surprised. The one guy was talking about his businesses in rural Kentucky and Tennessee, the Appalachia Corridor, where there have been incredible years of poverty or education, and an explosion of opiate abuse and meth abuse. You would think if you showed up there with a strong hourly wage that everybody would want to come and work, but he has to put what he sees as excessive compensation together to attract people.

This goes to the HR challenge for any company. This is just my observation. I could be wrong. There are probably economists and other smart people that will read this later on and say I didn’t know what I was talking about. The normal distribution of performance and quality labor in the country, let’s take that bell curve and say there’s a midpoint. There’s a 25th percentile and 75th percentile. There’s this range of performance. We’re all trying to select and pay toward the midpoint that we believe we need to make our companies function. For companies that are hiring at the hourly level, the non-exempt level, you’ve got a much wider range of education and socioeconomic sophistication. Frankly, that labor pool’s need to work is different than your traditional salary exempt deploy.

There was a statistic that came out. It was with some of the benefits that there was one state that amounted to $21 an hour not to work. How the hell did we get that so ass-backward?

I don’t know. I just saw on Fox Business that a McDonald’s is giving away iPhones to any new hire who stays past six months.

I thought that’s crazy. I’m glad that you brought this up because when you, I, Mike, Karli or the Talent War Group team were out there searching for top talent, it’s a war for those top leaders, movers, shakers and people that are going to change the financial product and service trajectory of a company. I didn’t go into this show thinking that that would be one of the first things that we’d talked about. I didn’t realize that as we launch this show, we’re having to talk about how HR leaders can navigate finding people that their incentive to work is now disappearing.

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It’s not unimportant work. McDonald’s, Chick-fil-A, Amazon, Oceans, this manufacturing company, we don’t have these hourly jobs because they’re unimportant. They’re core. If you take the pyramid of your organization, you’ve got more people at that level than at the top level. You need good people. You’ve shrunk that labor pool. If you’re in a rural area or a certain part of a city but the city has grown, traffic is terrible and people don’t want to commute, you’re starting to select a narrower swath of your labor pool. Now, you’ve got to figure out, “Am I pulling from the 25th percentile and having to pay 50th percentile wages? Am I somehow luckily tapping in the 75th percentile and maybe I’m paying 60th to 75th, but I know I’m getting good people?” That’s the thing.

I’ll be very honest. It has been a while since I’ve been so close to a business where the hourly wage earner is so important to the delivery of services in our particular company. I’m trying to figure out how I can find that higher end of the talent pool and pay appropriately so we don’t break our business model. Like any company, there’s only so much salary we can afford in our budget. There are only so many patients we can have in our hospital at one time that’s driven by the size of the hospital. We have a ratio of direct care delivery to those filled beds. We have to stay within an envelope to stay profitable. This is not just because we’re doing behavioral health. This is not-for-profit. It’s a for-profit, privately held, PE-held company. To me, in the here and now, that is the biggest challenge.

It has got to be driving people nuts. As an HR leader, that’s one of the things we talked about in the previous episode that people don’t get. The complexity of the leadership dynamic amongst HR professionals that we’ve been swimming around and working with over the years. People don’t get how complex of an environment that is. Who would have thought that we would come out of the pandemic or be rushing out of the pandemic and now you can’t find labor?

What’s even worse is I remembered a long time ago, somebody had made that joke about working at McDonald’s. I can’t remember the person’s name but he told me, “If you look at all the CEOs in the world, one of the things that most of them have in common is they spent time working at McDonald’s or a fast food that it created the work ethic and the drive to rise to the top of the corporate ladder.” McDonald’s is one of many Chick-fil-A. There are all kinds of restaurants like that that lay the groundwork for the discipline, work ethic, integrity and quality that set you up for such success down the road. Now, we’re providing incentives for people not to work there. It’s ridiculous.

The next challenge facing HR is retention. One of the things we’re working on very hard is to flip the script because we’re always focused on turnover, which is adverse to retention. It sets the tone of negativity around your challenge. Instead of the challenge of reducing turnover, let’s increase retention. Let’s come at this from a holistic standpoint of who are we selecting, how are we selecting them, what questions are we asking them to determine whether they’re ready to stand in a hot kitchen or to work on a manufacturing floor or hospital. Try to gauge their level of vocation to the role. Have a fantastic, targeted cultural onboarding and orientation, as well as job-specific orientation, mentoring and pairing them up with an employee who has been there a longer period and can navigate that first shift, those first few hours.

I remember my son who’s now a shift manager at Chick-fil-A at age seventeen. Maybe he’s a future CEO. I’ll have to tell him that. I remember his first week. He had to get used to the customer saying who weren’t getting what they want. He started in the middle of the pandemic. There’s no dining inside. It’s all delivery in the hot Texas sun on a nine-hour shift. They didn’t have the carry-out window set up yet. The stuff that he had to deal with is the same with my son who works at Starbucks. The stuff that they’ve had to deal with and hear from people is abusive.

Helping them navigate through that is part of the retention process because you don’t want to have to go back into this labor pool. The chances that you’ll find someone as good as my sons have been in their jobs is unlikely. That’s the next challenge facing the head of HR. There are more complicated challenges for the bigger companies if you’re a Google or a Facebook and you’re dealing with a current workforce that is starting to polarize and/or push your culture in ways it wants to go versus the way you want to go as a company to support your business. Those are huge challenges if you’re the head of HR at Google and Facebook. For the everyday warrior in the HR trenches, it’s this narrowing labor pool.

I’m going to take that up a little bit of a level. This is one of those complexities when people make the mistake of looking at human resources and turning the cranks on the comp and benefits. We’ve talked about blocking and tackling and how important it is. This is where being a strategic HR leader counts the most. Your CEOs, chief revenue officers, chief product officers, your entire C-Suite, they’re going to be feeling these challenges, but it’s up to that HR leader to solve for these challenges to have to go, “We’re coming out of a pandemic. What issues are going to face us? What are we seeing? How are the incentives to not work affect us? How does the now working remote and people being portable?”

To me, it’s not a pleasant problem to have, but it’s one of those problems that demonstrates very clearly why being a strategic HR leader and getting ahead of your human capital problems is absolutely so crucial. We talked about this very first step and put it in our book. The CHROs are generally paid 1/3 less than their C-Suite counterparts. You’ve brought to the table the issue that can bring companies to a grinding halt. You’re paying the person who’s going to solve those problems or bring solutions to the table, as we say, bring human capital solutions to business problems. You’re paying that person 1/3 less. This is a very tough job for people that are in the trenches and with no easy answers.

If you would ask me this question months ago, I would have said, “Dealing with COVID was the biggest HR challenge and figuring out where your workforce should be and what safety protocols you should put in place.” Looking back, not being a sitting CHRO at that time while I was doing some contract work as a head of HR and working with an executive team on those challenges as well as others. We were dealing with incomplete data and pictures. Some of the things we did probably were unnecessary over-reactions as we’ve learned more and more about how the disease works, how it can be transmitted, and how we can defend against that transmission.

Here we are, almost 50% inoculated or more. Some states are 70%, but the country is coming up to 50%. By Memorial Day, from a pandemic standpoint, COVID isn’t gone but the pandemic is essentially gone. I don’t think heads of HR are now sitting there challenged with, “How do I deal with the pandemic?” They’re trying to figure out, “When can we bring down our mask mandate? When do we start pivoting people back into the office? We believe there’s value in having people face-to-face and having that lunch break discussion or drive-by discussion where work gets done in between the seams of the meetings.”

Those are challenges they’re facing post-pandemic, but they’re not facing the COVID issue. It’s now all going and pivoting back to workforce, culture and labor. That ultimately becomes a leadership challenge. I’m going to rise up with you and say that the biggest challenge facing HR is at the micro-level, if you’re struggling with figuring out where to get the best people to fill your most fundamental jobs, the team that has the best leadership will figure that out faster than the team that doesn’t.

We do not have enough HR practitioners who are students of the business. Click To Tweet

I’m going to put you on the spot. With the pandemic, the issues of working remote and a lot of companies had to cut back because their services weren’t going to be used or needed, do you believe that coming out of the pandemic has in any way elevated the status, importance or criticality of HR being a true strategic leader for a company? Do you think we’re still stuck in the same rut where they’re going to go, “Go figure this shit out?”

A couple of people smarter than me wrote that this particular crisis is the era of the CHRO and 2009 was the era of the CFO.

That’s a good way to put that. I almost want you to repeat it.

Someone smarter than me wrote this. I know I read it in a Korn Ferry article around the August 2020 time frame when we had racial tensions rising due to the George Floyd situation. We had the pandemic going up and down. We thought we were through it. At the end of the summer, it started coming back up in certain states that it hadn’t hit hard yet. Korn Ferry was one of the articles I read and then I read it again somewhere else. The idea is that the 2008-2009 financial crisis launched the era of the CFO. This pandemic, the civil unrest and the political divide that started to happen as a black line chasm between political views through the election have created the era of the CHRO. This is our time to step up and help build the culture, leadership capabilities at the top of the house all the way to future-proof a company for any other major types of hits like this because things are going to happen in the world. We are going to face these types of things. It has built some new muscles for CHROs. You’re going to see an explosion of CHROs on the board. I believe that the CHRO is going to become a regular board member now.

With the exception of you, the people that have contributed to the book, the people that you and I have worked with, and the other CHROs that I’ve been exposed to, we will never name names. It’s always been my general feeling that because of their status, whether it’s compensation or otherwise, that they’ve deferred to the other C-Suite members. Now, we’re in this moment where that situation is now completely reversing, where nobody else can do anything without the consult, wisdom and the advice of the CHRO. To your point about meeting key leaders, is the bulk of the people leading HR, are we ready for that role? Have we been telling the right story? Have we been preparing ourselves? Have we become the leaders that we were supposed to be to meet this moment? Are we going to struggle for a while and we’re now going to start expecting the same leadership qualities in a CHRO that we do in a CEO or COO?

There are so many layers to that question. I would love to hear your thoughts on your own question but let me give you a couple of things that come to mind for me. In my previous role as the Head of HR for Mitel, our CEO used to get me and the CFO together once a month for an hour. He called it the G3. The G3 meeting was bringing the financials and the people together. The beauty is I built a cloud-based HRS capability, which had the single source of truth on workforce planning, succession, performance, retention, attrition, demographics and the shape of our organization in terms of pay grades.

This gets important when you’re a global technology organization. Are you a pyramid with expanding appropriate spans? Are you what we were at one point, a fat diamond, where you got a lot of blockers in the middle? The fat diamond will kill your company. That ability to talk about workforce planning and be the single source of truth about the human capital side to our CFO was invaluable to him. What was invaluable to me was to sit and talk about the drivers of our P&L in our various product lines, various countries, in our regions, and the interplay between the cost of development and sales, and how that trickled down to our ultimate goal, where I could then think about ways that my organization HR could work. We call it simplified programs, process improvement, Kaizen, and ways to pull the waste out of the system. Some of that was a talent move and a process improvement move.

If we saw someone was leading poorly or not driving sales appropriately, it wasn’t a process issue. It was a people issue. We are leading that discussion and having our peers at the C-Suite defer to us. We earned that through the ability to tie the workforce to the business plan, the talent plan to the business plan, the performance measures of learning and development, and the outputs of doing good leadership, learning programs, and what those metrics would be. Secretly, I’m talking about nerdy stuff like Kirkpatrick’s Five Levels of Learning. That worked over the past twenty years and building that into our toolkit, and then connecting that with the CEO and CFO so that the three of us are aligned in terms of driving the business. To me, it has empowered and emboldened the CHRO to be a business leader and in some ways for some of them to be successors on the CEO chart.

If we were to label a call-to-action on this episode, you called it out. That is if you’re a small business or a big business, the CFO, CEO and CHRO should have that huddle meeting and bring the financials and the people issues together. If you’re reading this blog and you want a brilliant idea of something that can make an immediate impact, pulling things together, your CFO, CHRO and CEO in a room once a week. You figure out the time. That’s a great call-out. When I was thinking through the question that I posed to you, I saw too many CHROs deferring or demure to their other C-Suite executives. In my brain, in a company, the only people that can veto things are the CEO, CFO, CHRO or the chief legal officer, “It’s illegal.” The CHRO is, “It would be wrong for the people or unethical.” The CFO is, “We can’t afford to do it.” The CEO is just, “That’s a dumb idea. That’s not in line with our vision.” Those four people or at least the trifecta that you named don’t get together as often as they should.

It has been one of those things that have always frustrated me. The joy of coming to work with you is that I didn’t see you as an HR leader. I saw you as a leader. That call to action, us being strategic and the CHRO position elevating itself involves them telling a different story. I don’t think that the value proposition of the CHRO is being told by very many people from top to bottom, all the way down to an HR business partner. I don’t think we tell the story of the value of HR in the examples we talked about, the declining labor pool and the leadership issues, which we are going to tackle in the next one. If you were to tell C-Suite executives or small business leaders, what would you tell them is the critical reason for having HR be at the table around all the issues that come up?

In some ways, because we’ve only been in so many jobs, our experience of CHROs is probably narrowed to the actual population of CHROs business people who are highly connected to the business, the CEO, the CFO and driving the business forward. I think of Donna Morris, who’s the Chief People Officer at Walmart, but seventeen years at Adobe. Walmart is a whole different animal. I can’t even imagine the pressure. That’s more of a political position. I say that not to disparage her. I interviewed the Head of Management and Development at Walmart. I had interviewed with the previous chief people officer. Her job wasn’t running HR for Walmart. Her job was in Washington DC. You’re an ambassador and a lobbyist. Now, that has changed as their company has changed. Donna is a much more active head of HR in terms of all things talent. At Adobe, she was the Head of Employee and Customer Experience. She was the Head of EX and CX, not EX and then the Marketing Head of CX. She had both.

I saw that while I was at Mitel. I approached our CEO and said, “I sit in these operation reviews. I hear us talk about our channel partners.” These are the people that would sell our products and software to customers because a lot of technology is sold through a channel, not necessarily direct to customers, although we did sell direct. I said, “We have multimillion-dollar channel partners. Each of the members of the C-Suite sponsors an East Coast, West Coast, North and South channel partner except me. What’s going on here? Do you not think I could bring value to helping a channel partner figure out how best to move from the premise to the cloud, best to position our products and solutions into their marketplace, and could also listen to their needs about what we as a company could do to help them maintain market share and drive Mitel to the top of their preferred vendor list?” They could have gone with Polycom or ShoreTel at that time before we bought them. They said, “Absolutely, sure.”

In my last 2 or 3 years at Mitel, I was the executive sponsor for two travel partners. Every quarter, I had a two-hour call with the sales rep that represented us to them and those channel partners talking about their business. Invariably, they asked me about talent, staffing and diversity. They got free leadership development coaching, which I was totally happy to do. It gave me an insight into the outside of where our business lives. The outside of what a lot of people think is outside of HR and it’s actually the beginning of HR. The answer to your question is the people who are ready to position HR as the table has drawn a line from their customer and what the company does to make money, satisfy and delight customers into their people practices and said, “There’s none of this we can do, software, manufacturing, services, outsourcing, pharmaceuticals, consumer goods, fast-casual and retail.”

There isn’t a CHRO in those top companies of those industries, the Nordstroms, the McDonald’s, the Walmarts, the J&Js, my former boss, Peter Fasolo there, who haven’t drawn that line from their customer and then architected their people and talent strategies to deliver against that business model, that very crystal clear customer outcome that the company has produced through its people. Everyone who has done that, they’ve made their jobs easier and yet they’ve made them harder because the metrics are much more clear for HR. My metrics are much more clear. We get measured at my company on patient satisfaction, safety and quality. Three things. If I don’t have great people on the shop floor in those hospitals, those numbers go down. I know I have to deliver talent value from the HR table all the way out to our customers or patient.

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I’m going to continue because I’m having fun throwing hard questions at you because I have a captive audience and my co-host. Do you know the old argument chicken or egg? Following the chicken and egg discussion and following the, “Are leaders made or born?” Those leaders that you talked about in HR, do you think it was because they had the right business mindset that prioritized talent? Do you think it was the force of personality and the intellectual horsepower that those leaders brought to the table that brought that practice of intertwining those things? Was that the company and they got the right leader? Was it the leader that’s changing the company?

To me, great HR leaders, Randy MacDonald, the former Head of HR of IBM, Donna Morris, Peter Fasolo, a former colleague at Bristol Myers who went on to become the Head of HR for Amgen, Stuart Tross, Patty McCord of Netflix, and Tracy Keogh of HP, they had both the intellectual horsepower and the right experiences to be in those jobs. What sets them apart is they’re constantly scanning the horizon and reading the organization, business, market, and pulling that all together and integrating it. They’re learning while they’re delivering services and solutions via the HR function.

They do more to shape the organization than the organization is shaping them. There’s a certain amount of growth that happens because they’re constantly scanning, which means they’re continuous learners for themselves. I know when Tracy Keogh left the consulting firm, not Aon but who is she with, it was owned by Aon, she came to us. She was the Head of HR for a services company embedded in a larger company to become the Head of HR for HP. That’s a step function. That’s a risky move in terms of her experience to then take on this behemoth and then take on Meg Whitman, who was clearly the best leader HP had had in a while.

She told me the story of how she baited Meg into competing for the job. We’ll have to cover that on a show. As part of our interview for the book, she told me the story that she literally strategized on how to bait her into taking the role. We did come full circle in the right way. It’s what I hoped to, which is to talk about what great HR leaders are. If you were to coach and advise business leaders about what they should expect out of their HR leaders, what would you say that they should be looking for to get the right person to propel their company forward?

First and foremost, they have got to be looking for someone who’s curious about the business. The HR pedigree should probably read on the resume and you’re not hiring a first-time HR person. You might be hiring a first-time CHRO. I had my first shot. Someone took a shot on me. The thing that I find matters the most to delivering the right approaches, solutions, services or whatever you want to call them, the right HR strategy with the practical and pragmatic action plans to follow is an HR person who has a curiosity for the business and an absolute thirst to understand, “How does our business model work? Who are our customers? How do we make money? How does the product or service get built and delivered to the customer?” Every element of the P&L can walk backward in 1 to 10,000 pages before they set out their journey for changing the human capital function.

At the same time, they should be looking for a leader that has enough pragmatic sense to pick off the low-hanging fruit. Every company has broken things and problems. I haven’t been in an HR role where I didn’t find some easy things to pick off. Unfortunately, they seemed easy but they kept breaking because it couldn’t get the stability of that process, whether it’s performance. It’s usually staffing. I told my guy, “Your staffing until I tell you your talent acquisition, but right now your staffing.” I think you know what that means, George. I need him to elevate his team before he gets the right to play the higher strategic role and pull all the levers but right now, we got to fill jobs.

A business leader who is hiring a head of HR should look for someone who has got a thirst and desire to understand the business and then can be pragmatic enough in the short-term to deliver solutions. I love that Gartner’s Nine Defining Moments Of A New CHRO. You can even find it online. One of their nine defining moments is quick wins. I found it to be true because we did not have a recruiting function here to start with. I just had a guy overstaffing who was toggling resources in from outside, having it being done in the field but no one with real accountability to be a recruiter.

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What I did in week one was I hired another recruiter. We had one and she was doing part-time. Now, we’ve unleashed those two recruiters on the areas of hospital staffing that we were trying to address in the field. She’s starting to fill jobs. Lo and behold, someone dialing for smiles will get people to show up to the door and fill a job. There are all the other things we have to do, but that’s a quick win that I’m going to have to continue to play with. This isn’t the only fix but you got to look at your situation and say, “I can’t expect gold when I am mining in topsoil. I’ve got to go where the rock is and break some rock before I can expect to make gold.” Did that analogy hold the other?

It holds together pretty well. As we continue to evolve the show, it’s going to be great when we bring on some of these guests that you and I have been talking about to talk about the complexity, leadership and all the things that are necessary to excel. One of the most difficult roles of a lifetime is that lead HR position. I’m not going to say whether one is easier than the CFO or the CEO. We’re not going down that path. You’ve said it right. 2021 is the year of the CHRO. 2021 is the year of HR that’s making a difference, whether it’s finding and filling roles or dealing with escaping the pandemic, “How do we get back to work? What portion stays remote? How do we figure out compensation across?” People that were earning a California wage are now moving to Texas and Florida. Knowing they were earning the California wage and they no longer have to pay state taxes. How is that going to change the financial dynamic?

Wait until they see the property tax in Texas.

For me, what we talked about that started clicking early on is this is a great place for strong leaders, curious leaders and people that are interested in business. If you have that curiosity and interest in business, you should be looking at a career in HR. As a matter of fact, when we talked to Tracy Keogh, she was a business leader first. She was talking about how HR was broken and the CEO said, “You’ve got the job.” She was voluntold that that was her next best role. There’s a lot that we should have expected of our leaders. It keeps us up well because the next episode before we get to guests is we’re going to talk about HR driving a culture of leadership and the criticality of that HR person, the CHRO, VP, SVP, EVP or whatever the title is. First and foremost, it’s about talented leadership and driving that human equation. You’re right. You’re the CHRO.

The era of the CHRO. I’m hoping that I’ll get to run the board and ask you the jeopardy questions this next time around.

Building a team is a subset of leadership. Click To Tweet

I think we might do that. For all you Talent Warriors out there, I hope you enjoyed this episode. This is a great function. It’s got its highs and lows. As I’ve said in previous times if I did a 23 in me and found a strong masochistic gene to make sure that that’s the reason that I was in HR. Tom, any parting thoughts for us before we close out?

Go out there and get that talent.

Talent warriors, talent makes all the difference. It’s the one true competitive advantage that you can hope to achieve and maintain. We appreciate you very much reading the blog. We hope to catch you on episode number three. Thank you and do great.

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