Wayne F Cascio, Distinguished University Professor at the University of Colorado Denver has authored and edited more than 27 books on human resource management and holds the Robert H Reynolds Chair in Global Leadership at the University. Cascio was recently in Delhi for the third annual conference of the Society of Human Resource Management (SHRM). Excerpts from an interview:
Does the war for talent still continue?
There is no such situation as a war for talent. It's just not true. Everybody is trying to make believe that all organisations are trying to hire the top 10 per cent. But the unfortunate mathematical fact is 90 per cent of the firms are not hiring the top 10 per cent. The real challenge is how do you take ordinary people and allow them to do extraordinary things and that's where management systems in HR processes come into play.
You hear about employee engagement a lot. Everybody thinks they know what it means (chuckles) ; it really means three things. First is vigour, i.e. when your employees are beaming with high energy and really can't wait to go to work. Second is dedication — your employees have to be dedicated to the mission or vision of your organisation. The third part is absorption — have you ever been so absorbed in something that you lost track of time? You can have a workforce like that. The sad part is most people are not. So, the role of HR is to engage such people.
As helpful and pleasant the HR function sounds in theory, things are the other way around in practice. HR is not the same everywhere. In some organisations it's bureaucratic. It's focused on compliance, while the same function in others is strategic. They have been into the business before and know about the kind of issues managers face. So, they really support managers and help them do a better job.
Do you think HR, as it is known today, will cease to exist in the future, with organisations adopting HR as a core business function?
Not so much, I guess. Some organisations think about their core competencies and outsource the rest. They could outsource the entire HR function. The problem is people who are handling your HR don't understand the culture of the organisation. Other is, the HR department doesn't really exist until the company reaches at least 100 people. But as you start to get big, you have problems associated with growing and you need systems such as pay and benefits for employees. Eventually, your managers will start asking for help in performance review and you will need systems for that too. You can't just outsource all this, a lot of it would take place in-house.
What is the single largest expense of human resource management?
People tend to think HR is a cost. The first things to go are people in difficult times. They don't remain an asset anymore, they become a cost.
It is easy from an accounting point of view to say, look, how much people cost. The real question is: what is the value they create? If they create more value than their cost, then it's worth having people. If not, might as well get rid of them. If you think about downsizing, the economic logic is very strong. There are only two ways to make money in a business — you either grow your revenues or you cut costs. And future costs are much easier to predict than future revenues, especially in case of labour-intense companies.
So, the managers think, let's cut on people to reduce cost and boost earnings. Problem with this logic is things are never equal.
When the lay-offs happen, and there is a lot of empirical evidence to prove this; the next year some of the best employees leave. The employee turnover goes up by 50 per cent i.e. if it was 10 per cent last year, it will be 15 per cent this year. And that's called unanticipated turnover. The company may not think of that at the time of a lay-off. When the things get better and you want to hire people, top candidates may not come to you. It is the cost of mismanaging people.
If at all, you have to lay off people, how do you do it?
First of all take steps that make lay-offs unnecessary. For instance, cut back on training, entertainment, or travel expenses. During the global financial crisis, instead of laying-off hundreds of people, the Du Pont CEO asked every manager to get 2-3 suggestions from his/her team on how to cut costs. Du Pont saved $50 million in costs savings and avoided lay-offs. Not just that, they got $118 millon worth of cost saving suggestions. People become very creative when they know their own job is at stake. Du Pont became more efficient as an organisation.
What is the role of analytics in HR?
It has helped develop systems and practices. In Caesar’s Palace casino, dealers have 16 shifts a day. HR found out they had a 25 per cent employee turnover among dealers. The question was how they (HR) could bring down the turnover. By using HR analytics, they found that the majority of dealers who were leaving were paid below the mid-point of the compensation grade they were in. If they brought these dealers to the mid-point, the turnover would reduce to just 9 per cent. It's a huge drop. But if they were brought 10-20 per cent above the mid-point or even more, there was no change in turnover. So, HR analytics could be extremely valuable.
How much would a single turnover cost a company usually?
It is roughly one-and-a-half times, or twice, the salary paid to an employee. It's much cheaper to invest in activities that will retain top people then to hire new ones.
Any leadership trends in the making?
There is something called HERO within; here, H stands for hope. The E stands for efficacy. Efficacy means belief that you can do it. R stands for resilience, somebody who could bounce back from setback s. And the O is for optimism. It was Mandela and other political prisoners’ approach in the Robben Island prison. It changed the behaviour of the guards. Think about what could be achieved if you had a work-force motivated like this.