What s On the Minds of HR Directors? Neil Reichenberg Executive Director International Public Management Association for Human Resources

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1 What s On the Minds of HR Directors? Neil Reichenberg Executive Director International Public Management Association for Human Resources The International Public Management Association for Human Resources (IPMA HR) headquartered in the United States is a membership organization for individuals who work in human resource management in the public sector. In 2009, IPMA HR sponsored four meetings for public sector human resource directors. Not surprisingly, the impact of the economy dominated the discussions. This article will summarize the discussions that occurred during these meetings. Economy Most HR directors believe that the recession is long term and its impact will be felt for the foreseeable future. As a result of the economy, many organizations are either considering or have implemented furloughs, layoffs, hiring freezes, early retirement incentives, no salary increases, increased employee contributions for health care, training and travel reductions, reduced use of contractors, delayed capital projects, etc. There was recognition that the current economic crisis can present opportunities for restructuring jobs and positions, increasing the use of technology, and consolidations that might not be considered during good economic times. There is a belief among the HR directors that public safety departments are not sharing the pain of the recession equally with the other departments. Public safety departments in some organizations are insulated from any cuts. In other organizations, public safety employees are expecting to receive raises and benefit increases, such as enhanced pension contributions. It was reported that where public safety departments are being asked to cut their budgets, the reduction may be a smaller percentage than the other departments. The public perceives local government in the United States to be over funded and public safety pensions are often cited as an example. On the positive side, those organizations that are hiring report they are receiving a large number of qualified candidates. Since government employment is considered to be more secure, job seekers are finding government jobs to be more attractive. Turnover and retirements have declined, which may result in key employees remaining with their organizations. Also, the economy can be used to convince departments to do a better job of managing overtime usage. Most organizations were not planning to give increases during this fiscal year. Where multi year collective bargaining agreements are in place with increases included, there needs to be negotiations with and cooperation from the unions. Where increases are given to those in bargaining units, there is pressure to provide similar increases to non represented employees. Hiring freezes and no salary increases may result in a declined emphasis on performance and lower morale. Supervisors and managers may tolerate poor performers where there is a hiring freeze, since if the poor performers are terminated, they will not be replaced. While the morale of some employees may suffer, there are other employees who are happy to still have jobs. There can be unintended

2 consequences for actions such as hiring freezes, which may result in an increase in overtime usage due to vacancies. Elected officials may be reluctant to make cuts and eliminate positions. In one organization, the mayor announced that no employees would lose their jobs and this has limited the options available to the organization in order to address its budget shortfall. Furloughs are believed to be a temporary fix that do not address long term problems. There was caution that furloughs can result in violations of the Fair Labor Standards Act (FLSA) for exempt employees. Due to this concern, some organizations have opted to reduce the salary of exempt employees based on the number of furlough days that will be imposed. Most organizations are not offering early retirement incentives since they can be expensive and it is difficult to predict who will take the incentives. This can result in organizations having critical positions that are vacant. For some organizations, early retirement incentives may be considered a gift of public funds, which is illegal. There was an example cited at one of the meetings of an organization that offered an early retirement package that was accepted by a larger number of employees than was anticipated. While some believe that early retirement programs may not generate any savings another organization implemented an early exit program that resulted in a savings of $6 million over 5 years. In this organization, the program was offered only one time and was targeted to the fire department. Those who opted to participate received 2/3 of one years base pay, provided that the organization could eliminate the position. There was recognition that many defined retirement pensions may not be sustainable. Several organizations have modified their retirement systems for new hires so that they are less generous. Some indicated that they are offering defined contribution plans or hybrid plans to new employees. Other organizations have different tiers of pension plans based on when employees were hired. It was noted that delayed retirements will help the funding of pensions. Some organizations allow retirees to return to work. Where this occurs, there are usually restrictions on either the number of hours they can work annually or the amount of money they can earn. Where retirees are allowed to return to work, some organizations do not guarantee that they will receive the same salary. Other organizations do not allow retirees to return to work, due in part to a public perception of double dipping when retirees are receiving a pension and still working for the organization. Due to the economy, there has been discussion of potential consolidations of governmental units within a geographic area. Other organizations are looking at blending administrative services among cities and counties. There was a report of the establishment of a training consortium for area organizations that is designed to eliminate some duplication and increase savings. The primary benefit is that economies of scale can be realized.

3 Increased communications is one way to address the reduced employee morale resulting from the economy. Several organizations are posting additional information on their websites, offering the opportunity for employees to provide suggestions, and having the city manager conduct quarterly meetings with employees. Morale also can be improved through nonmonetary recognition programs. In one organization, notes are sent on a weekly basis to selected employees thanking them for their performance and they in turn reward other employees. In another organization, the city manager sends letters to employees thanking them for their service. There was recognition that it is important to keep elected officials apprised of the achievements of employees. In one organization, a balanced scorecard has been developed that communicates the accomplishments of the city to the city council and the citizens. It was acknowledged that there is increased stress for HR as a result of the economy. It can be difficult in the current economic climate to keep momentum going for such things as performance based pay. There also may be decreased emphasis on workforce planning and succession planning. The recession will not last forever and organizations need to ensure that they are positioned when the recession ends to address their human capital issues. Succession Planning There was recognition of the need to develop staff. Succession planning may identify skills gaps that exist. Organizations are developing employees at all levels. Competencies that are organization wide and tied to values have been developed and determinations are made as to which ones are relevant for specific positions. Mentoring programs also are being used to assist with succession planning. Leadership development programs and management academies also are being implemented. One organization worked with its information technology department to develop a succession planning program. They looked at skills gaps, competencies, and demographics. They emphasized providing training or advising employees where they could obtain the necessary expertise. One organization has established a public service intern program that is designed to build talent from the ground up. The participants are provided with tuition benefits. Retirements have slowed down and organizations have not yet seen the expected wave of retirements. Where reorganizations and consolidations occur, there may be deputies who had expectations of moving up who will find that these opportunities no longer exist. HR Competencies for Future Demand There was recognition of the need to be more agile, flexible, and focused on outcomes. As work changes, the required competencies also may change and emotional intelligence may become more important. There is a need to understand the business and contribute to the decision making of the organization. While the HR department can express opinions and influence, it doesn t design the delivery of the services provided by the organization. The strategic business partner role was seen as key, while trust and credibility also are important. New Generations in the Workforce There was discussion of the need to restructure work to accommodate the new generations in the workforce. However, government structures may impede

4 these efforts and layoffs can negatively impact the younger generation, especially where the layoffs are based entirely or in part on seniority. Aging Workforce Organizations reported that their workforces are getting older and as a result, they have seen a spike in workers compensation, Americans With Disabilities Act, and Family and Medical Leave Act claims. The need to counsel supervisors to look at performance issues when injuries are occurring was discussed. Importance of HR Leadership HR should help managers build a workforce that will assist in accomplishing the mission of the organization. Transactional work is important and still needs to be done well. HR needs to have the skill set to bring value to organizations. HR needs to become more of an analytical function. There is a role for HR to be responsible for the welfare of the employees. HR has to balance the competing interests of elected/appointed officials who may be transient with the needs of the employees. There is a need to invest in the development of the HR staff. HR needs to get away from doing the HR work of line managers. This can be difficult both because line managers don t want to do the HR work and some HR staff does not want to be removed from its comfort zone. Mentoring and coaching can be an important role for HR. HR faces a challenge to use metrics to connect what HR does with the bottom line of organizations. Civil Service Reform There was agreement that reforming civil service systems can improve governmental efficiency. There was acknowledgment that there needs to be a champion in order to make major changes. Where applicable, unions could assist in making reforms since they have a big stake in how the systems run. Collective Bargaining One key issue when engaging in collective bargaining is how strong elected officials are in support of management. There was recognition that it is tough to get back things that have been negotiated and unions do not want to agree to concessions and rollbacks. For interest based bargaining to succeed, trust between the parties must exist. Management rights are important and need to be recognized. Healthcare Most of the organizations represented at the HR directors meetings were not self insured for health insurance. Concern that the losses may exceed the premiums that are paid was the primary reason for not being self insured. There are some regional health alliances that are designed to improve the quality of health care and also help to control costs. Some organizations have implemented wellness programs and report having high rates of participation. Some provide incentives for wellness program participation. Others report having low participation rate for their wellness programs. Several organizations provide subsidies or reduced fees to employees for the use of fitness centers. Those organizations that have implemented consumer driven healthcare emphasized the need to educate employees. One organization requires employees who choose a consumer driven health insurance option to meet with the benefits staff to ensure that it is a good choice for them. Another organization reported requiring a special training course for any employees who want to participate in a health savings account. Some organizations are charging higher premiums for smokers. Others have implemented health risk assessments, with employees being charged higher premiums if they do not

5 take the risk assessment. There is a need for organizations to educate employees to be consumers of health care. Workers Compensation Organizations have implemented training and awareness programs to reduce the number of workplace injuries. Some provide alternative work duty only for work related injuries. The trend is to handle workers compensation claims internally, although most organizations use a third party administrator for public safety workers compensation claims. Where a third party administrator is used, it is important that the contract be managed effectively. Some organizations have appointed safety committees and have found that they work, but they need time and have to be educated and given responsibilities. Compensation Pay for Performance Without a big pay pool to work with, it is difficult to implement and sustain pay for performance. Key issues to examine when moving from a step pay system to merit pay are: 1) how well the evaluation process works and 2) the training provided to managers. The shift can be a real culture change and one goal is to make managers accountable for the performance of their employees. A phased in approach may be needed, which should be cost neutral, since it would shift the distribution method, but not increase the amount being provided. The potential problem is that over time, merit increases may become automatic. Social Networking Some organizations are using social networking sites for recruitment purposes. Some organizations do not have a policy about the use of social networking sites at work, while others block some sites. There was recognition that if organizations want to attract younger applicants, they need to use social networking sites. Organizations are concerned with the potential of employees posting negative information about the organization or other employees on social networking sites. Hiring Time There is often criticism that it takes public sector organizations too long to hire, which can result in losing quality applicants. Statistics on the number of applicants who were lost due to the time it took to hire could help to make the case for reforming the hiring system. HR may have limited control over the time it takes to hire. In some organizations there are requirements for multiple approvals and this can slow down the hiring process. Decentralization of HR to departments may assist in speeding the hiring time, but where this occurs there is a need for an oversight role for the central HR department. For additional information about the HR directors meetings, please contact Neil Reichenberg, IPMA HR executive director at 703/ or nreichenberg@ipma hr.org. Additional information about IPMA HR is available at hr.org.

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