How The Laws of Wealth Can Improve Your Management Game

I was looking for some summer reading.  Something that would challenge me, inspire me, and help me continue on my path to being a better leader.  Mission accomplished!

3d-bookWhether you’ve been a long-time reader, know me personally, or are just finding this blog, you’ll find that I am someone who likes to look to industries outside of the traditional HR arena when it comes to learning how to be a better leader.  For example, I’ve gravitated to science and design as places to look for inspiration on creating better leadership practices or people-relations experiences.  Additionally, as someone who has held high level HR positions that tied closely to the CFO and finance teams in organizations, the role of understanding the impact of finance on the people practices is equally important.

With that in mind, I found a new resource from the finance world for leaders and managers to use in their day-to-day people management.  To be clear and upfront, this is in no way a paid endorsement and I did not receive anything “free” in order to make this recommendation.  The source I’m sharing today is a new book by author Dr. Daniel Crosby.  If you’re not familiar with him yet, you should be.  Dr. Crosby’s book The Laws of Wealth is not only helpful as an individual striving to have better understanding of your personal finances and approach.  It’s a source that has components that can be used in managing people.

Dr. Crosby shares chapters dedicated to specific steps the reader can take to have a better approach to financial self-management.  These same steps can be applied to your role as a leader or manager trying to manage yourself and your team.   Let me share a few examples from Dr. Crosby:

  • You control what matters most- Over the last 20 years, the market has returned an average of 8.25% per annum, but the average investor has gotten just over 4% of that. The highs and lows of the market may be out of your hands, but how you choose to behave is within your power, and is just as important a driver of returns.
  • You cannot do this alone- Most people understandably assume that the greatest value offered by a financial advisor is, well, financial advice. Not so. Vanguard’s “Advisor’s Alpha” study shows that working with an advisor provides around 300 basis points of outperformance and that fully half of that value comes from behavioral coaching. Morningstar, Aon Hewitt, and Envestnet all have similar studies showing that hand holding trumps stock-picking when it comes to optimizing returns.
  • Trouble is opportunity- We are all familiar with the Oracle of Omaha’s admonition to be “greedy when others are fearful and fearful when others are greedy,” yet so few of us manage to successfully view a downturn as the opportunity it truly is. There is true joy (and riches) to be had in financial schadenfreude, so commit yourself to continue investing and even upping your savings when times are bad.
  • You are not special- Robert Shiller is fond of saying that “This time it’s different” is the most dangerous phrase in investing. While mania can carry a market for a time, the truth about what works long-term on Wall Street is pretty boring (think paying a fair price for a profitable company) and is unlikely to fundamentally change.
  • Forecasting is for weathermen- Famed contrarian David Dreman found that from 1973 to 1993, of the 78,695 estimates he looked at, there was a 1 in 170 chance that analyst projections would fall within plus or minus 5% of the actual number. The smartest people in the world don’t bother with the crystal ball. Said JP Morgan of the market’s future trajectory, “It will fluctuate.”

His themes of how we are not always in control as leaders, how we have to rely on others to be successful and have optimal results, how trouble is inevitable and the importance of managing well in a downturn, that we are not special and thus learn from each other, and that looking constantly into a crystal ball instead of real life is not the best way are all themes that hit home for me.

If those examples ring true for you, pick up The Laws of Wealth today.  Who knew that a finance-focused book could become the best summer reading you’ve had?  For more information, you can follow Dr. Crosby on Twitter @danielcrosby or find resources on his site Nocturne Capital.

HR Happy Hour #231: Employee Financial Wellness

HR Happy Hour 231 – Employee Financial Wellness

Hosts: Steve BoeseTrish McFarlane

Guest: Steve Wilbourne, CEO, Questis

Listen HERE

This week, join Steve Boese and me as we discuss the increasingly important topic of employee financial wellness and well-being with guest Steve Wilbourne, CEO of Questis, a software and services provider of employee financial wellness technology and resources.

We talked with Steve W. about the issues many employees are facing with financial planning, financial readiness,  unforeseen expenses or challenges, and the benefits to organizations and to employees in providing more modern, personalized, and affordable tools for employees to help manage their finances.

In addition, Steve (the host Steve), made a semi-serious pitch for the return of employee pensions, I shared a preview for the widely anticipated HR Happy Hour Oscars show coming soon, and Steve shamelessly appealed for some big-time corporate sponsors to come on board, (are you listening Delta and Dr. Pepper?).

You can listen to the show on the show page HERE, or by using the widget player below (Emaill and RSS subscribers will need to click through)

This was an interesting and informative show about employee financial wellness, many thanks to Steve Wilbourne from Questis for joining us. To learn more about Questis, please go towww.myquestis.com.

Thanks for listening and remember to add the HR Happy Hour Show to your podcast subscriptions in iTunes, Stitcher Radio, or any of the major podcast apps. Just search for ‘HR Happy Hour’ to subscribe.

4 Ways HR Can Operate More Like a Profit Center

*Sharing one from the dusty archives that is still relevant today…

**Disclaimer** I am not an accountant and don’t even play one on tv.  That said, I am not implying that ideas in my post meet the generally accepted accounting principles.  You’d have to talk to your accountant for that kind of advice.  The post is intended to explore ways HR can communicate the value of services in a way that is understood by the leadership team in terms of ROI by considering ways to operate more like a profit center and less like a cost center.

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How much would you pay for a real competitive advantage when it comes to the people knowledge of your company? 

That is a question we should be asking the business leaders in the departments we support both as HR generalists and recruiters. Honestly, I am tired of hearing that the human resources department is just a cost center.  Why?  Because we add value, we support our internal clients, we are often proactive on business strategies to help the “real” profit centers succeed, we make sure you get paid, get your benefits, are able to relocate, provide your training, and more. Why aren’t we treated like the internal consultants that we are?

Now let me tell you that I talked to an accountant about this and had an hour long debate (ok, borderline argument) on why companies are not able to treat the HR department as a profit center.  In layman’s terms, it’s because a company cannot generate revenue from itself, however, it can offset expenses or offsetting revenue.  I realize that for those who are familiar with accounting this is greatly oversimplified, but it gets the point across.  Revenue and profit can come from external sources.  So, being internal, HR does not turn a profit.

Got it.

I’m not saying we throw all the accepted accounting principles and practices out the window.  My idea revolves around the way we “sell” HR and recruiting services internally.  Even though it technically does not turn a profit, why can’t we set up the way the profit centers use HR in a way that “charges” (ie. distributes the share of the expense for the HR department) out to the profit center based on the type of HR usage they have?

What if HR departments set up a fee schedule for all the ways that HR departments and recruiting teams add value to the company, then “charge” our internal clients by tracking our time spent on projects like external consultants would.  Maybe then they would place more value on the services they receive.  Here are some ways I think the department could operate more like a profit center:

1.  Charge back other departments for their use on:

  • Training courses offered
  • Recruiting and sourcing
  • Succession planning for their team
  • Conflict resolution
  • Coaching services
  • Compensation analysis
  • Employee surveys

2. Focus on expense reduction. Since HR cannot actually make revenue, the biggest impact they can have is to creatively reduce expenses.

3.  Review how vendor procurement is handled. This is an area where the HR department can take steps to being more involved.  It is usually handled by the finance department, so why not help in those business decisions if you are a recruiter or HR generalist?

4.  Use social media to aid in reducing external recruiting costs. Bring the knowledge and leadership of the sourcing process internal.

So, tell me what you think.  Should we take steps to operate more like a profit center and less like a cost center?  Share your views in the comments.

HR: The Importance Of Understanding Finance

This morning, I’m excited to be contributing over at Creative Chaos Consultant’s blog.  He is putting together a great series about what HR pros really need to know in order to be successful.  His posts will explore each area in depth.  First up, finance.

Finance should not be the dreaded topic for those of us in human resources. Understanding it is the way to have the ability to contribute more in your HR role.

So, head over to check out his post ‘HR 101- Finance‘, Part One.

Money- Should You Ask For A Raise?

Money, get away.
Get a good job with good pay and you’re okay.
Money, its a gas.
Grab that cash with both hands and make a stash.
New car, caviar, four star daydream,
Think Ill buy me a football team.

‘Money’ by Pink Floyd- The Dark Side of the Moon (1973)

Money is always on an employee’s mind.  And, I’ve been getting questions lately about raises.  They want to know:

  • When is it ok to ask for a raise?
  • Can you ask for a raise during a recession?
  • Do you have to wait for a performance review to ask for a raise?
  • How do you know how much to ask for?
  • If another company is trying to recruit me, should I ask for a raise in my current job?

While there are no right or wrong answers here, I’ll give my 2 cents.  I personally do not believe in asking the boss for a raise. I do advocate for making sure your boss knows what you’ve been doing, when you’re going the extra mile, when you’ve landed a big account, completed an exceptionally challenging project, etc.  In most organizations, if your boss understands that you’re doing great things, an increase will come naturally.

If you still feel compelled to ask for a raise, there are a few things you can do to help ensure that you will have a positive result.

Organize the facts- Be prepared to discuss the accomplishments you’ve had that go above and beyond what is expected.  Especially today, when many organizations are having a hard time maintaining the revenue flow they once enjoyed, you will have to have concrete reasons how you have made a difference to the bottom line.  Have you completed a new degree?  Have you obtained a certification?  Have you taken on a great degree of added responsibilities in your current role?  All these things can factor into the decision of whether or not to give a raise, whether during the annual performance review or off-cycle.

Understand your market value- This is the part that can get tricky.  I’ve had many conversations with employees over the years who run to sites like www.Salary.com as the one source to tell them how much they should be making.  I’m not knocking Salary.com at all.  It is a source.  One source.  But, in order to uncover how much you are worth in the market, you need more.

You need to have multiple sources that can help you see how you really fit in the market.  If you know someone in the HR or recruiting industry, this is a good person to check with to get an idea of where you are in your industry from a compensation standpoint.  You can check with sources like Manpower’s “My Path” career center, www.TheLadders.com, or other industry job boards to determine what companies are paying for similar positions in your area.

What to avoid–  One tactic I’ve seen used during my career is the employee will say, “Well, John in my department says he makes $XXX so I need to get a raise.”  This does not work.  When HR or the recruiter work with a hiring manager to make an offer to a candidate, there are so many factors that contribute to that final offer decision.  You can be certain that if someone else is making a vastly different rate, they had different circumstances, skills, and experiences that led to that rate.  I’ve also heard of employees who tell other people an overly-inflated rate just to stir up trouble.  So, if a colleague is telling you exactly how much they make, be leery.

Also, knowing how well your company is doing financially is important.  Don’t ask for a raise if the organization is in trouble, in the midst of layoffs in other departments, or freezing increases for everyone.  You will be setting yourself up for failure.

What do you think?  Do you favor asking for raises?  Have you done it successfully?  Have people asked you for a raise and been successful?  Tell me in the comments if you agree or disagree with me, what works, and what doesn’t.