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23
Sep

Sustainable Businesses Embrace Family Leave Solutions for Employees

The face of the American workforce has undergone a dramatic transformation since the early 1950s, when about one-third of American women were worked as opposed to almost 90% of the men. In 2016 57% of women were working while the percentage of men in the workplace had slipped significantly to a little under 70%. This shift has transformed the American workplace and allowed women to come forward to launch new companies, invent new products and services and become more economically self-sufficient. Life in American homes has also changed radically with the roles of both women and men changed forever. However, many problems remain unresolved: women are still under-represented among senior executives and entrepreneurs; the median female wage is just 80% of that of men, a percentage that is lower than the average among OECD countries; and, in general, American companies are still not required to provide paid family leave to parents when a child is born, a shortcoming that stands in stark contrast to the OECD average of 54 paid weeks off—in fact, the United States is the only OECD country that does not guarantee some form of paid maternity leave.

Interestingly, considering how little they agree, both major candidates for President in 2016 have expressed support for some type of paid leave for parents following the birth of a child: Clinton proposed 12 weeks of paid leave and universal preschool and Trump became the first Republican nominee to propose paid family leave (six weeks) and help for child care. While these initiatives are not extensive as some would like, and would probably face fierce opposition from a Congress in which Republication control at least one of the chambers, they do represent an important step in addressing labor market troubles that have persisted due to a continuing failure to deal with changes in family structures. It should be noted that the federal government, and many states, have required employers to allow some employees, both women and men, to take up to 12 weeks’ unpaid leave for the birth or adoption of children, or to care for a sick family member, with assurance that they would not lose their job; however, for many families it is impractical to go that long without some form of payment, even if it’s only a portion of the wages they would have otherwise received.

While economists have certainly been involved in convincing lawmakers about the merits of paid family leave, they are turning more and more to talking directly to businesses about why it makes sense for them to implement leave policies voluntarily and collaborate with both employees and local governments to come up with share solutions that make sense for all involved stakeholders and not unreasonably compromise the economic performance of the organization.  Researchers have found evidence that family-friendly policies boost labor supply through higher participation of women in the labor force, increase wage rates, improve the lives of struggling families, boost workers’ productivity, reduce absenteeism, and reduce the costs that companies would otherwise have to incur to replace workers—estimated to be between 15% to 20% of annual pay–who must leave the company altogether if no leave policy is in place. Family leave contributes to the development of sustainable human capital for companies by facilitating reentry of valued and experienced workers back into the organization, thus reducing the loss of institutional knowledge that is difficult to replicate. While workers generally return to their jobs at their old salaries, some studies have found that wages often increased quite quickly for mothers who have returned to their jobs after taking a leave. Other research suggests that more flexible work rules reduce absenteeism and increase productivity. In fact, when Google increased its paid maternity leave from 12 to 18 weeks in 2007, the rate at which new mothers left the company fell by half.

The minimum obligation of companies to their employees is to abide by applicable legal standards in key areas and activities including, when they have been implemented, laws and regulations pertaining to family and medical leaves.  However, sustainable entrepreneurship and socially responsible human resource management is based on the proposition that employers have an obligation to exceed legal standards when forging relationships with their employees and take steps to ensure that employees are treated with dignity and value and that their contributions and hard work brings both financial and non-financial rewards. Socially responsible employers assist employees who need to balance work with their obligations to take care of their children and elderly parents (e.g., by providing on-site day care, referral services for elder care and adopting flexible policies regarding working remotely and required arrival and departure times).

The issues surrounding “family leave” need to be addressed in a manner that acknowledges that the traditional principles of company performance, which focused primarily on what is best from an economic perspective for the owners of the company, are inadequate and unfair. Simply put, human capital is not a commodity and relationships between companies and their employees and families should not be not be governed by the same market forces that apply to commodities.

One of the core subjects of ISO 26000, the guidance on social responsibility for businesses issued by the International Organization for Standards, is “labor practices” and within that topic ISO 26000 calls on employers to respect human development in a number of ways including respecting the familial responsibilities of workers and providing policies and programs, such as parental leave, that can help workers achieve work-life balance. Also instructive is the obligation on employers to engage in social dialogue with respect to their labor practices including negotiations, consultations and information sharing between employers and employees (and their representatives).

Google’s paid leave policy mentioned above was not implemented because any government told it to do so, and large companies such as Google are certainly better positioned to absorb the costs of a leave program. However, smaller businesses, including startups, do need to think twice about the short-term financial impact of a leave policy and implement their policies intelligently. How can it be done? Here are some thoughts for sustainable entrepreneurs looking to develop family leave solutions for their employees and their businesses:

  • Analyze the demographics of the current team and projected hires, taking care not to make too many assumptions about age, gender or other factors that might expose the company to discrimination claims, to estimate the impact of a family leave policy over a reasonable planning period.
  • When setting the leave period, take into consideration any applicable legal requirements and “industry standards” set by larger companies engaged in similar businesses.
  • Consider establishing an “insurance program” that will help fund the anticipated costs of the leave program before the time comes for payouts to employees on leave.
  • Engage early and often with investors to make sure they understand how the policy will work, the justifications for the policy and the projected impact of the policy on all relevant measures of performance (not just economic performance).
  • Establish continuous dialogue with employees regarding the leave policies and establish mutual expectations include commitments from employees to remain engaged with the company during their leaves and continue to develop their skills while away.
  • When hiring and promoting, consider the skills that will be needed in order to fill in for employees who are on leave.
  • Establish a program for “re-boarding” employees who are returning from leaves and making sure that they are able to make an easy transition back to full-time employment, including assistance with child care etc.
  • Engage with employee representative and local government to implement social insurance policies that can ease the burden of leave programs on companies (e.g., small businesses pay into a fund that employees can draw from when they take their leaves).
  • Involve employees in decisions above the structure of the leave program, particularly when problems arise in implementing the program.
  • Make leave programs part of a broader discussion regarding other work-life balance policies such as job splitting, flex-time and support for daycare for children or elderly dependents.
  • Senior executives needs to set the proper “tone at the top” regarding their enthusiasm for, and encourage of, employees taking advantage of leave opportunities so that employees do not feel they will be penalized for taking a leave.
  • Monitor the impact of the leave policies, including reduced costs of replacing employees, and report the results regularly to relevant stakeholders.
  • Celebrate successful leave experiences to help transform organizational culture and position the company as a “family-friendly” employer in the eyes of prospective employees.

Sources: All in the family: America does little to help people’s work-life balance. Enter Heather Boushey, The Economist (September 10, 2016); Trump Unveils Plan to Expand Aid to Parents, The New York Times (September 14, 2016), A1; R. Perez-Pena, Comparing Trump’s and Clinton’s Child Care Plan, and Those in Other Countries, The New York Times (September 15, 2016), A16; K. Doerer, “How much does it cost to leave the workforce to card for a child? A lot more than you think” (June 11, 2016); S. Pathe, How Paid Parental Leave Helps You, Your Newborn and the Job Market (January 3, 2014); P. Hohnen (Author) and J. Potts (Editor), Corporate Social Responsibility: An Implementation Guide for Business (Winnipeg CAN: International Institute for Sustainable Development, 2007), 30-31; Handbook for Implementation of ISO 26000, 29-30.

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Dr. Alan S. Gutterman is the Founding Director of the GSE Project (“Growth-Oriented Sustainable Entrepreneurship”) (gseproject.org) and the Business Counselor Institute (businesscounselorinstitute.org). Further information about Alan is available at his LinkedIn Profile and more materials relating to the subject matter of the post can be found here.

14
Sep

What Entrepreneurs Can Learn from Wells Fargo’s Fraudulent Sales Scheme

 

According to a settlement with regulators announced on September 8, 2016, Wells Fargo Bank fired about 5,300 employees over several years leading up to the settlement for opening more than two million checking, savings, credit or debit card accounts without customers’ knowledge or consent. The bank agreed to pay $185 million in fines (the bank’s quarterly earnings were averaging around five billion dollars at the time of the settlement), refund fees paid by customers on accounts they had not authorized (average refunds ran around $25 per customer according to the bank), and hire an independent consultant to review its sales practices.  E-mails from John Stumpf, the bank’s CEO, arrived in customers’ inboxes promising that the bank was “making it right” and the bank took out ads in nearly a dozen newspapers saying that it took “full responsibility” for the actions of its employees; however, the settlement did not include any official admission of misconduct.

Wells Fargo Bank is a large and complex global financial institution and the financial impact of the penalties for this event on the bank will be de minimis.  Time will tell whether the bank or its chief executive officer will suffer any substantial reputational damage.  There are, however, some important lessons for growth-oriented sustainable entrepreneurs as to what they should be thinking about as they lead their companies with launching their first product or service and seeking the favor of potential investors:

  • Critics of the bank have argued that either the people at the top knew about the fraud and did nothing or they should have known about it but didn’t because the bank has become too large to manage. At the startup stage, no detail of the sales process is too small for the CEO not to know, even if there is a separate senior executive responsible for sales.  The CEO should be participating in sales meetings with prospective customers, proactively coaching the sales team on how to make presentations and closely monitoring the progress of events with customers in the sales pipeline.
  • The situation with the bank reinforces the truism that customers should not have to pay for products and services they don’t want or value. In addition, customers were unhappy about having to spend extra time and effort to get the transactions undone.  While startups need to close sales deals to establish credibility in the market and with prospective investors, in the long run what they need more is a base of satisfied customers who have had good experiences with the company on both of use of the products and services and resolving problems.  Any issues raised by a customer need to be brought to the attention of the CEO and resolve quickly and fairly, with a bias toward “the customer is always right”.  Reporting upward must be encouraged from the very beginning.
  • News reports on the bank situation mentioned that aggressive sales quotas had been set for bank employees and that the bank had a history of employing aggressive sales tactics, including cross-selling. Again, sales are important for every startup and there is a natural desire to build up revenues quickly.  However, sales goals need to be set at reasonable levels and incentives for members of the sales team need to be based on balanced performance metrics that include customer satisfaction and retention.
  • Pundits from the capital markets suggested that the bank might need to do some work to convince investors that the fraudulent sales transactions and the aggressive sales targets were not an indication that the bank had run out of legitimate ways to grow its business. While the leadership of a large bank is probably in a good position to assuage investor concerns—the bank’s CEO had been widely praised before the event for his performance—the startup CEO has one chance to make a good impression and needs to realize that savvy investors will always look behind sales numbers to evaluate the sales process and assess customer satisfaction.  If investors lose confidence in the numbers they are receiving from the company, they’ll soon run out of patience with the leadership of the company.
  • Experienced early stage investors will interview customers to get a sense of how the company approaches the sales process and interacts with customers. Needless to say, while Wells Fargo Bank can and will survive this particular event, a similar story for a startup will be a “curtain closer” regardless of the glitter and dazzle of the company’s product or service.  CEO Stumpf was famously quoted a year before the event as saying “I don’t want anyone ever offering a product to someone when they don’t know what the benefit is, or the customer doesn’t understand it, or doesn’t want it, or doesn’t need it.”  An amazing comment in hindsight, particularly if he was aware of what his employees were doing, but actually a sound standard for the startup CEO to impose on his or her sales team and a good metric to use when assessing the quality of customer engagement.

As part of the post-mortem on the Wells Fargo situation, commentators took to lecturing customers on what they should have been doing in order to uncover the problems before the fees began to mount.  This is all good advice; however, sustainable entrepreneurs do not put their customers in a situation where they feel compelled to monitor the actions of the company.  Customers need to be able to trust the companies from which they purchase their goods and services and growth-oriented entrepreneurs need to begin building that trust from the first day that they open the doors.

Sources: To learn more, see A. Sorkin, “The Brazen Sham No One Noticed”, The New York Times (September 13, 2016), B1; K. Pender, “Why isn’t Wells’ CEO on the hook?”, San Francisco Chronicle (September 10, 2016); and M. Corkery, “Wells Fargo Offers Regrets, but Doesn’t Admit Misconduct”, The New York Times (September 9, 2016).

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Dr. Alan S. Gutterman is the Founding Director of the GSE Project (“Growth-Oriented Sustainable Entrepreneurship”) (gseproject.org) and the Business Counselor Institute (businesscounselorinstitute.org). Further information about Alan is available at https://www.linkedin.com/in/alangutterman and more materials relating to the subject matter of the post can be found here.

9
Sep

The Most Important Work Skills for 2020

In a research paper issued in 2011, the Institute for the Future argued that identifying what are likely to be the most important work skills as of 2020 begins with recognizing and acknowledging six key drivers of disruptive change: extreme longevity (i.e., “people are living longer”); the rise of smart machines and systems that can augment and extend human capabilities and automate workplace tasks leading to elimination of repetitive jobs; the expansion of the “computational world”; new media ecology based on development of new communications tools that require media literacy beyond text; “superstructed” organizations that leverage social technologies and tools to drive new forms of production and value creation and work at extreme scales; and emergence of a “globally connected world” in which job creation, innovation and political power is no longer horded Western countries.  These drivers of change suggest that workers invest their time and effort in developing the following work skills in order to be successful in 2020 and beyond:

  • Sense making—the ability to determine the deeper meaning or significance of what is being expressed in order to cope with the rise of smart machines and systems
  • Social intelligence—the ability to connect to others in a deep and direct way, to sense and stimulate reactions and desired interactions in order to cope with the rise of smart machines and system and manage effectively in a globally connected world
  • Novel and adaptive thinking–proficiency at thinking and coming up with solutions and responses beyond that which is rote or rule-based in order to cope with the rise of smart machines and systems
  • Cross cultural competency—the ability to operate in different cultural settings in order to operate effectively in a globally connected world and inside superstructed organizations
  • Computational thinking—the ability to translate vast amounts of data into abstract concepts and to understand data based reasoning in order to survive in the new media ecology and the computational world
  • New media literacy—the ability to critically assess and develop content that uses new media forms, and to leverage these media for persuasive communications in order to cope with extreme longevity, new media ecology and superstructed organizations
  • Transdisciplinary skills–literacy in and ability to understand concepts across multiple disciplines in order to cope with extreme longevity and the computational world
  • Design mindset—the ability to represent and develop tasks and work processes for desired outcomes in order to prosper in superstructed organizations and a computational world
  • Cognitive load management—the ability to discriminate and filter information for importance, and to understand how to maximize cognitive functions in order to cope with superstructed organizations, a computational world and new media ecology
  • Virtual collaboration—the ability to work productively, drive engagement, and demonstrate presence as a member of a virtual team in order to survive and prosper in a globally connected world and in superstructed organizations

Sources: A. Davies, D. Fidler, M. Gorbis, Future Work Skills 2020 (Palo Alto CA: Institute for the Future for the University of Phoenix Research Institute, 2011) (as cited and described in “The 10 Most Important Work Skills in 2020, Top 10 Online Colleges).