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California Fair Pay Act

California’s Fair Pay Act continues to be under-recognized as an important law by employers, creating the risk of EECO complaints or lawsuits. The fundamental target of the law is unfair or discriminatory pay practices, with an expansion this year that bars asking candidates for salary history. Employers need to perform a compensation review that includes a comparison of salaries by gender and “substantially similar” positions, and resolution of identified disparities. And employment applications must be modified to remove commonly asked salary history questions.

Building the Business Through Ownership Expansion

EW Business Partners has extensive experience and expertise in developing Equity Strategies that align with your business plan and goals.  Here is an interesting perspective by San Francisco Bay Area attorney Rick Randel regarding using ownership expansion as a vehicle for business growth.  If you are thinking of implementing or updating an existing equity plan, be sure to involve qualified HR, legal, and tax advisors.

 

Fall Legal Alert 2014

Rick Randel, Randel Law Office

Source: rick@randellaw.com.

This legal alert is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter.  You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.

EW in the News

EW Business Partners CEO Sandra Dickerson authored this article for the November issue of the Western Independent Banker’s HR & Training Digest:

 

Expanding your View of Succession Planning

Succession planning is an essential board function and one regulators and stakeholders consider a priority. The financial industry has been challenged in recent years by a seemingly endless number of crises that have diverted time and attention away from this critically important area.  Institutions face many risks when succession planning is either ignored or given only perfunctory attention including financial losses, critical talent exodus or takeover vulnerability.

As the industry emerges from relentless crisis mode to a more settled, albeit still challenging environment, it is an opportune moment to move succession planning to its appropriate place in the Board’s oversight agenda.  The banking environment has been forever changed by recent events so it may also be the perfect opportunity to move away from the traditional succession management process to a more comprehensive and innovative talent development model.

Traditional succession planning focuses primarily if not exclusively on the CEO.  Often the current CEO drives the process or anoints an heir apparent with little or no Board input other than a perfunctory approval. In that scenario the Board may lose the opportunity to determine the kinds of future innovative and organizational needs the organization may have in order for the new CEO to forge a new direction.  The other common scenario in traditional succession models is a Board that fails to fully assess internal organizational talent, assuming the only qualified candidates must come from outside.  The outsider only approach can be expensive and may result in a more difficult transition. Assessing skills and prior success is fairly simple, but assessing cultural fit can be a tricky endeavor.

Succession planning is too critical a Board responsibility and the consequences of a poor selection too risky to rely on anything less than a comprehensive succession model that encompasses the broadest possible range of options and opportunities.

The talent development model of succession planning considers the whole organization and takes a broader view of succession planning beyond just the CEO replacement.  This model builds, maintains and continuously evaluates an internal and external talent pipeline and creates a transition strategy that will address either emergency or normal course of business successions.

So how does a board begin implementing a talent development model for succession planning?  The first and most essential step is a commitment by the board and the current CEO and recognition that they will be engaging in a process that involves emotions, egos, politics and “peeling the onion” …a process that will also require resources (both time and money).  Success can only be achieved if they align the business strategy with the “best fit” opportunity for future leadership.  The process requires defining the current and future needs of the organization and determining the skills, aptitudes and personality traits essential to filling the key leadership positions within the organization.

Once the Board defines and understands the current and future needs of the organization, they begin the next step which forms the foundation of this process:  that of assessing the organization’s current talent.  Small banks may have an easily identifiable group of leadership candidates.   Larger institutions should look not only at the obvious top tier but also reach deeper into the organization.   Existing talent should be fully assessed for training and development needs. The Board and CEO can utilize this information as the basis for creating and implementing a talent development program. Effective talent development programs require resources of time and money.

One component of these should be properly administered assessment tools.  These will help identify those employees most likely to succeed, and training can be customized by employee.  Training and assessment budgets are often first on the budget chopping block but such a shortsighted approach will leave the organization without essential talent at critical moments.

Identifying outside talent is more challenging but can be accomplished through creating and maintaining networking channels.  The CEO and Board members all play a role in the process and outside talent should be incorporated into the succession strategy.

Using a talent development model will provide a stronger candidate pool and improve overall organizational health and morale.  A reputation for providing strong career development is an outstanding recruiting tool to attract the best possible candidates.  Employees who are encouraged in their career development path and provided the tools and resources they need to grow are far less likely to seek opportunities with your competitors. The implementation of a talent development approach to succession planning takes much of the uncertainty and guesswork out of the succession process but it has the added benefit of building a stronger organization from which to choose the next leadership team or to attract the right outsider if that is determined to be the best course of action.

Comprehensive Compensation Review & Analysis vs. Simple Compensation Comparison

How Much Information Do You Want or Need?

You want to determine the appropriate compensation for a specific position or evaluate whether your company-wide compensation plan is competitive.    Determining the best way to obtain this information really depends on how thorough you want or need to be.

EW provides two core options to meet this need of our clients, in addition to providing the California Labor Statistics information.  First, we have a relationship with PayScale, to provide quick, position specific data.  However, where more refined data is needed, or to evaluate company-wide total compensation (and board of directors),  we provide much deeper compensation analysis services.

What’s the difference?   A good way to describe this is to distinguish between technical knowledge and practical knowledge. As a prominent columnist recently noted, technical knowledge is the sort of information that can be put in a recipe in a cookbook.   Practical knowledge is the rest of what the master chef actually knows: the habits, skills, intuitions and traditions of the craft. Practical knowledge exists only in use; it can be imparted but not taught.

Services like PayScale rely on information provided by individuals who input their position and compensation details, with no independent validation – the technical knowledge described above.   The accuracy of the report will depend on the depth of individuals who have participated, and the geographic range the software reaches to obtain responsive data.   For some areas, that can mean higher compensation regions are included in the report, skewing the data received.   However, these services are extremely cost effective so can be a reasonable approach for some companies who want more general  feedback.

A more thorough method is provided by EW through our Compensation Services, where our decades of practical knowledge are utilized.   There are substantial differences in the scope of these services, including:

  • We take a more holistic view, analyzing groups of positions (e.g. the executive team) or the whole company together so the client has a cohesive picture of their entire situation.
  • We use relevant published compensation survey data that is carefully scrubbed by the organization performing the survey to ensure appropriate job matches; some surveys also indicate whether the match is less than, equal to or greater than the survey job so that more analysis can be performed.
  • For executive compensation studies in the financial services industry and other industries with published data, we supplement survey data with proxy data based on a peer group of companies using company size and scope, as well as geographic parameters.  Data can be collected for the CEO and CFO positions and, depending on the available information, for other executives as well.  This data provides not only compensation data but also details on executive compensation plans and benefit plans (e.g. SERPS, Change in Control, Severance, etc.) if our client is interested in that analysis.
  • We incorporate our decades of human resource/compensation experience to analyze the data we obtain to ensure that it makes sense, and then provide the client with a detailed comparison of base salary, incentives, and total cash compensation, in addition to other information for executives, such as equity and perquisites/executive benefits.
  • The data is used to not only inform the client of where their compensation stands in relation to the market, but we also provide recommendations for salary actions/planning based on factors that are relevant to the client.
  • For company-wide compensation studies, we utilize the market data to build salary structures, identify vulnerabilities within the company, develop compensation guidelines and assist in communicating the pay program.
  • We also analyze positions as to their FLSA status (exempt/non-exempt).
  • Board of Directors can also be evaluated for compensation, board responsibilities, and practices.

For more information about EW’s compensation services, either through PayScale or customized solutions, please contact us.

The Role of Enterprise Social Collaboration in Employee Engagement

Many organizations, even small to mid-sized ones, have employees separated by more than just multiple branch locations – different work experiences, expectations and generational differences create unique cultural issues and challenges in the workforce. When implemented and managed successfully, enterprise social collaboration (ESC) can enhance the “emotional connection” between employees, the organization and the customer. HR professionals can harness the power of ESC as a tool to address a multitude of internal and external institutional challenges including recruitment, on boarding, training, productivity, retention, marketing and customer service.

Communication and Collaboration – High Touch Using High Tech Tools
Irrespective of the size or configuration of an organization, effective internal and external collaboration is an essential business function. Gone are the days when companies consisted of a single location where coworkers and managers shared face-to-face contact on a daily basis and customers conducted their business in person.

Meaningful connections between management, coworkers and customers are arguably the linchpin of every successful organization, but face-to-face interactions have been replaced with increasingly remote interactions. Even coworkers sitting a few feet apart find themselves isolated from each other and the pulse of the organization as they are inundated with an endless barrage of email and tasks that offer limited opportunity to connect and collaborate.

The challenges are exponentially greater when employees are separated by miles or even continents. Generational gaps add another layer to the complexity. The resulting disconnect is lost opportunities for the organization to benefit from the creativity, problem solving capacity, institutional knowledge and employee engagement that meaningful collaboration can contribute to organizational health and ultimately the bottom line.

Enterprise social collaboration can provide the high tech solution to maintaining a high touch organization in an electronic world. Facebook, Twitter, SnapChat, LinkedIn and similar applications have tapped into our basic need to be “in touch”.  Adaptations of these tools to the work environment offer the opportunity to maintain many benefits of the “office water cooler” workplace using technology as a collaborative bridge.

The industry has been forced to adapt social media tools to many aspects of the customer experience due to customer expectations and competition, but the integration of social media platforms to enhance employee communication and collaboration has lagged. Concerns about regulatory compliance, risk management, cost, ROI and an industry already forced to adapt to fundamental changes simultaneously on multiple fronts may all contribute to the slow transition to ESC.

Worth the Effort – Tangible and Intangible Benefits
Integrating ESC offers internal and external benefits to help address some of the challenges facing companies large and small. Solutions range from simple off-the-shelf applications to fully scalable solutions specifically designed to meet the needs of large organizations. ESC tools must be viewed as essential business tools not optional extras.

Potential and current employees have embraced technology in their personal lives. If companies want to attract and retain the next generation of industry leaders, creating and maintaining a collaborative work environment is imperative. A generation that spends their personal time plugged in and engaged is unlikely to find career satisfaction in an industry unwilling to offer equally powerful collaborative tools in the workplace.

ESC also offers an unprecedented opportunity to transfer institutional knowledge and provide immediate access to essential in-house training, coaching or answers to employee questions that empower the employee to learn and grow their career on-the-job and in real time. Organizations with employees in multiple locations will find the barriers to communication and collaboration fall as ESC becomes fully integrated into the daily office routine. As a result, the challenges of knowledge silos will dissipate as employees have greater access to information.

Productivity enhancement is another benefit that offers real ROI in addition to greater employee satisfaction. In their report The Social Economy: Unlocking Value and Productivity Through Social Technologies, McKinsey Global Institute estimates between $900 billion and $1.3 trillion in annual business value can be unlocked through the use of social networking tools and technologies in four commercial sectors alone: consumer packaged goods, retail financial services, advanced manufacturing and professional services.

A study by the Aberdeen Group stated the “year-over-year business impact of social collaboration on business performance was remarkable.” Companies with an ESC in place saw operational efficiencies increase by 131 percent.

Successful Implementation and Integration – Stay the Course
Successful implementation is multifaceted. It includes management buy-in, IT cooperation, regulatory compliance, cultural readiness, best-fit tools and ongoing adaptation as employee, customer and organizational needs evolve.

The need for a top-down commitment cannot be overemphasized. Even if the ROI is not instantly apparent, the benefits will manifest over time and the risks of not incorporating ESC tools into the organization will far outweigh the challenges of implementation.