Human resources, when faced with issues like mistakes, bad hires or findings on a compliance audit, we are often asked why and how did this happen? Why do these issues continue to happen and how do we manage the risk better in light of the fact that many of these mistakes come with a financial penalty? According to Workforce.com, an employer can expect to spend, on average, between $175,000 –$250,000 to defend an employment lawsuit. In October 2019, the Equal Employment Opportunity Commission (EEOC) announced that a Texas-based contractor and two related companies were required to pay $200,000 and provide sexual harassment training to all employees as a part of a legal settlement to an employee over a harassment claim. According to Immigration and Customs Enforcement, a small cleaning service was fined $44,315 for failing to complete section 2 of the Form I-9 for 25 of its employees. Department of Labor statistics indicated the cost of a bad hire can be up to 30% of the employee’s first-year earnings and as high as $240,000 in expenses related to hiring, compensation and retention (remember a bad hire can also mean other employees leave). Failing to terminate insurance coverage on a single terminated employee can result in $10,000 in only 90 days.
While this article could focus on the myriad federal, state and local regulations that must be followed (e.g., changes to rules, laws and forms; the required recordkeeping and reporting; deadlines for employee notifications and the vast list of obligations that most human resources departments are responsible for), ultimately, these issues come down to resource constraints—a lack of people, processes and technology.
Despite the fact that we’ve now entered the second decade of the 21st century, a lack of human capital management (HCM) technology continues to plague the construction industry. It is not for a lack of solutions, but often a lack of investment—the financial investment in the purchase of the system, the training of employees and the time investment. However, issues like timely and correct processing of I-9s could be significantly reduced by using an applicant tracking and onboarding system. In addition to supporting a paperless, on-demand process for securing complete new hire information, these systems allow the activities to be deployed directly to a new hire and supported by someone who doesn’t necessarily have to be part of human resources. For example, a new hire who reports directly to the job site can work with the superintendent, who’s had minimal training but has the correct permissions in the HCM system, to view and complete their electronic I-9 form. The system-provided prompts will ensure they upload document copies used to verify the employee’s identity and eligibility. These timekeeping systems will not allow an employee to clock in beyond the third day of work until the system records a completed I-9 form, which provides added motivation for the employee to complete their paperwork.
The success of employee self-service for employee data changes, benefits enrollments and qualifying events is often a topic of debate among construction HR professionals. At the core of this debate is an employee’s access to technology and their ability to use the technology. In March 2018, New Media Institute reported that 95% of Americans own a cellphone of some kind, and 77% own a smartphone. Individuals between the ages of 18 and 49 report smartphone ownership at rates of no less than 92%; indicating that the majority of employees, regardless of their position, have the ability to “self-serve” on a mobile device, significantly reducing the time to transact changes and placing the responsibility for the accuracy of changes completely in the employee’s hands.
When the benefits capability within an HCM is subsequently integrated with carriers, changes such as employee terminations become real-time, reducing the risk of continuing an employee’s benefits for months beyond termination because it was missed due to “one more system to log in to” or “another form to fill out.”
Oftentimes, HR departments have well-defined processes around handling employee complaints and conducting investigations, evaluating the appropriate classification of employees under the Fair Labor Standards Act, and a systematic process for orientation of new hires that include introductions to company cultures from leaders, and commitments to how employees will be treated with respect and given opportunities to advance. These processes frequently fail for a number of reasons, including:
- HR is underresourced in time, money and people.
- Processes are not deployed beyond HR.
- Initiatives may be rolled-out, but the training and education that support these processes aren’t driven down to every level in which an employee’s opinion influences another (yes, that means potentially every employee).
- Training, reinforcement and support are not sustained activities.
For example, an employee complains to his foreman about inappropriate racial slurs and while the foreman vaguely remembers something about anti-harassment training from three years ago and tells the accused to stop, he does not advance the complaint to HR. The complaint never reaches HR until it is delivered by EEOC. Or a young new hire, who decided to forgo college to learn a skilled trade, is told in orientation how valued she is and how much she will learn from her team. Yet she finds she receives no mentorship or guidance once she is assigned to her superintendent, and she subsequently resigns when she is reprimanded for a time entry error she made, but her supervisor never trained her on. Finally, as what continues to be the leading reason employees leave year after year, the manager is a poor communicator or poorly behaved. It is a well-discussed topic among employees; but despite the company’s values of respect and communication, the leaders of the company do nothing about the manager’s behavior, calling into question how the leaders live out the company values.
Failing to build an HR team with individuals who are open to technology or who struggle to fully execute and deploy processes is the first mistake. However, failures ultimately result from the lack of understanding of how to adequately staff the HR function, the talent required for your organization’s HR function and executive leadership’s support, in both practice and investment, to achieve optimum results.
Various HR professional resources estimate that HR staffing ratios are 1.4-1.5 HR staff per 100 employees. As this ratio is not industry specific, construction companies may argue that their need may be greater due to the competitiveness of talent acquisition, the need for a dedicated recruiter, and whether or not payroll reports to the HR team. Additionally, the technology leveraged also affects staffing ratios. A lack of digital strategies and the subsequent paper transactions of HR activities require a different staffing model, potentially exhausting resources on a low-value exercise.
Failing to clearly define what the HR roles are within a company also creates challenges. Is the HR leader a director or an administrator? Do you see the role as tactical or strategic? While there is a strong argument for strategic HR leadership, some organizations are simply not at the point in their corporate development to invest and support the strategic role. Is your company’s focus on talent development and does anyone on your HR team have the knowledge, skills and experience to develop and deploy talent development programs that provide value?
Whether in HR, finance or any other department within your organization, the people, process and technology, if effective, can put money to your bottom line.