What Preliminary Steps Should a Company Take When Developing a Recruiting Strategy? (video)

What Preliminary Steps Should a Company Take When Developing a Recruiting Strategy?

5 Hiring Mistakes to Avoid

It's always a pleasuring getting quoted - and accurately at that!  Here's a Q&A I did recently with the National Federation of Independent Businesses...

5 Hiring Mistakes to Avoid | NFIB

Photos of C-Level Offices

This is the first in a series of posts of C-level offices of selected clients of mine.  I'm always interested in offices - what it says about the occupant, what it looks like, what needs are met by its design, etc.

Museum CEO - Pasadena, CA

What Are the Basic HR Issues to Be Addressed by an International Business? (Video)

What Are the Basic HR Issues to Be Addressed by an International Business?

Managing a Multigenerational Workforce

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My latest article for the Western Independent Bankers is "Managing a Multigeneratonal Workforce".

Checklist for Global HR (Video)

Checklist for Global HR

9 Ways I Know Your HR Department Is Obsolete (infographic)

After a career working in management, leadership and as a consultant with hundreds of companies of all sizes, I’ve found a vast difference between those with cutting edge, next-generation human resources departments and those trapped in the past.

Do you know what differentiates highly successful companies like Zappos, Google and TraderJoe’s from their competitors?  They not only have great employees, but they know how to get them, keep them, and engage them.  That’s the differentiator.  The first thing Marissa Mayer did upon becoming CEO of Yahoo was get a new HR Director. She knew the biggest difference between Yahoo! and Google (her previous employer) was the quality of people, and great people begin with human resources.

Whether your company has 5,000 people or 25, I’ve observed 9 easy ways to know if you’re HR Department is obsolete. Here they are:

1.       The head of human resources reports to the CFO. Where do I begin? If human capital viewed has truly crucial to the success of a business, then the head of human capital needs to report to the CEO and not the CFO.  CFOs usually have no experience in human resources and have a tendency to judge success solely by metrics such as ROI. If the CFO does not see standard return on investment, they tend to dismiss, or even worse dissuade innovative human resources functions from taking place in the organization. Forty years ago, HR reported to the CFO.  Not today. 

2.       Your employee handbook is titled, “Personnel & Policy Manual”.  The term ‘personnel’ was dated in the 1980s when I entered the workforce, and now it's really, really dated. My company reviews and writes approximately 75 to 100 employee handbooks yearly, and when we see an handbook that’s called  personnel or policy manual, we know it either hasn't been revised in decades, or more likely the culture of the company treats employees not as talent but as widgets; it presents a management style and corporate culture rooted in the 1950s.

3.       Your employee handbook is longer than the United States Tax Code.  In the few years, we've seen employee handbooks as long as 175 pages long. If you need five pages to describe all of the items an employee can’t wear according to your dress code, you're probably doing it wrong, and you're definitely obsolete. I once had a CEO ask me to put a policy in his handbook prohibiting all former employees from ever re-applying for a job at his company. When I asked him why, he mentioned a former, fairly incompetent employee who wanted to come back. The CEO wanted to make sure there was a policy prohibiting that from happening. You don't need a policy for that, you need courageous management. What would happen if a terrific employee is forced to leave your company, due, for example, to a relocation of their spouse? Then after two years, the employee wanted to come back?  Now you have a policy prohibiting that great employee from ever coming back. Be courageous.  Make decisions.  Understand you can’t have a policy for every conceivable circumstance; that’s what managers and leaders are for.

4.       HR spends more than 50% of their time on compliance and benefits management. In many small and medium-size companies we work with, the “director of human resources” is little more than an administrator making sure that benefits paperwork is completed and that nobody breaks rules.  Not only is your HR department obsolete, you’re not getting enough ROI.  I can find you a terrific HR Management System that can perform most of the benefits management stuff that person does at a quarter of the cost.  Then, the focus needs to be on doing things you ought to do, in terms of talent development and management.  For if you do things you ought to, you’ll spend far less time doing things you have to do. If employees feel they’re treated well, fairly compensated, and that management has their back, they are far less likely to file grievances or lawsuits. And they are far more likely to stay with your company and perform at a highly engaged level, which is usually the differentiator between an average performance company and a great performance company. Ask yourself: does your HR department spend over half their time doing things they have to do?  And do they know the things they ought to do?

5.       None of your executives have heard of the term “talent management". Talent management, or workforce development, or a variation of the above is now the preferred sobriquet for human resources, a term which replaced personnel years ago. These new terms demonstrate a desire by CEOs and executives who visibly appreciate and support great employees, from acquiring, developing, mentoring to promoting and retaining that talent.  Human resources is no longer the “bad guy”, they're the force that can drive the company to greatness. Take a look at job postings online. I recently saw a job title for a hospital called “Director of Compliance and Personnel”.   Who would want to work for a company like that? More and more companies are going to terms like “Vice President of Talent Management” or “Director of People & Culture”.  It may be only a title, but they reflect a desire to create a workplace culture that values their biggest expense – employees .

6.       “That's the way we've always done it.” When my consultants or I go into a business for the first time and make observations or recommendations, we often hear a CEO or the HR person say, “Well, that's the way we've always done it”.  We then know the HR department is obsolete.  You can either embrace change or die resisting change.  There will be 1 billion people entering the global workforce in the next 7 years.   You can bet none of them want to hear “that’s the way we’ve always done it” from their executives.   Do you think highly successful companies get to where they are by saying that's the way we've always done it? In an era where businesses either reinvent themselves or not, “that's the way we've always done it” is a ticket to obsolescence or worse, extinction.

7.       HR is considered a cost center and not an asset. This often goes hand-in-hand with #1.  Today’s savvy CEOs know that cutting-edge human resources techniques save companies money and create higher productivity and not the opposite.  Millenials, for example insist upon training and development in a potential employer.  If they get that development, they stay with the company.  The staggering cost of employee turnover(which will become more problematic as the economy improves and more jobs are created) is one of the most obvious ways human resources can save the company money by recommending and implementing techniques to improve talent selection, retention and development. 

8.       It's been over three years since your executives taken leadership training. I promise, if you have a manager who is been their position for over 10 years, then the techniques and style they use to lead people are completely obsolete. The nature of leadership and management of people has undergone a sea change in the past decade and will continue to evolve as we become more even diverse and more global. We now have four generations in the workplace for the first time in our history. Do you really think that somebody who was leading people 15 years ago has the skill set today to take you to the next level tomorrow?

9.       Employees feel no one is listening to them. In every employee survey I've ever conducted or reviewed, the number one complaint of employees is “I don't get enough feedback from my boss” and “I don't have an opportunity to voice my concerns candidly”. We have a client who still uses suggestion boxes. The concept of the suggestion box is okay, but today’s leaders, managers, line supervisors, and even the CEO should be a Walking Talking Suggestion Box.  Corporate cultures that are cutting-edge understand leaders are proactively soliciting candid feedback, and that the days of a lonely suggestion box are over. When employees feel that their opinions are valued, that their voices are heard, and that their jobs have meaning, they become engaged, happy and successful.

In every business, the way of leadership has changed. Businesses will have to re-invent themselves over and over again to keep up with the speed of change.  Unfortunately, HR seems to be the group to be involved with that change. Whether it’s because executives feel that HR is a nuisance and not an asset or because of “that’s the way we've always done it”, it is essential that HR have a seat at the table – that they are valued at a level of the CFO, CTO, or COO.  

The next generation of human resources requires a relentless focus on talent development in a global workforce; the ability to identify, develop and promote next-generation leaders.  And, most importantly, it means doing what you ought to do, not what you have to do.

27 Things I Hope You Learned In Leadership Training

(originally published in the Western Independent Bankers HR & Training Newsletter)

We’ve seen a rapid decline in leadership over the past few years. Whether it’s finding time to lead in the current workplace environment, or having fewer skilled and trained managers or simply the failure of people to step up and lead, the abdication of leadership in business today is both real and impactful.

In October, I had the opportunity to conduct a Leadership Master Class for 14 high-potential supervisors. Here are the lessons I’ve learned in 25 years of management that I hope they – and you – will remember.

1. Never forget the best boss you ever had, and never forgot the reason why s/he’s the best boss you ever had.
2. What you allow, you encourage.
3. You are always on stage. People are watching you.
4. No matter how good a communicator you think you are, your employees think you’re not communicating enough.
5. The best way to improve your communication skills is by learning how to listen better.
6. Your effectiveness as a manager and leader is determined by not by your IQ (Intelligence Quotient) but by your EQ (Emotional Intelligence Quotient)
7. Have a plan to win. No one succeeds without a plan.
8. The “One Size Fits All” theory of leadership went away 10 years ago. Focus on “One Size Fits One” strategy in dealing with people. They’ll appreciate and respect you for it.
9. Treat everyone with respect, whether they deserve it or not.
10. Be accountable and always give your best.
11. The people who managed you in the past were probably using styles and techniques that are completely outdated in today’s workplace. It’s now about coaching, mentoring and inspiring.
12. Employees look for leaders who have their backs and understand we’re all in it together. Are you that boss?
13. If you’re doing performance reviews once or twice per year, that’s about 50 times too few. Talk to employees weekly about their positives and negatives.
14. The toughest thing about being a leader is giving tough feedback. You can never change a culture unless you’re honest and direct. But compassionate and fair.
15. Deal with problems – and problem employees – immediately. These things do not get better with age.
16. Never forget where you came from. And be gracious with your title and authority.
17. Spend 5 times as much time recruiting, interviewing and hiring as you currently do. And reduce by 5 times the amount of time it takes to get rid of a bad employee.
18. There are lots of employers who regret keeping someone too long. There are very few who regret removing them too quickly.
19. Our world has significantly, and structurally, changed due to technology. This isn’t a trend, it’s a permanent change that demands continual innovation. Darwin said, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.”
20. “You can’t do today’s job with yesterday’s methods and be in business tomorrow”. –Michael Josephson.
21. Are your employees happy and engaged? How do you know? People tend to tell you what they think you want to hear.
22. Personally congratulate an employee who does a good job.
23. Fifty percent of the reason an employee fails is because of their manager: letting things go on too long; not setting expectations; not providing immediate feedback; and failure to lead.
24. When an employee quits, let them go. Gracefully. What goes around, comes around. This is the best time to be the best leader you can be. Remember, departing employees talk to staying employees.
25. Resist every urge to communicate by text, email or instant message in favor of face-to-face communication. The decline of soft skills – especially the ability to write effectively – is the cause for more angst and potential lawsuits than any other reason.
26. Do things because you should do them, not because you have to do them.
27. The Golden Rule. Treat others as you would like to be treated. Remember, the person working for you today may be your boss tomorrow.

Podcast: What Is Next Generation Talent Management?

It only took several years, but we're finally podcasting!

Here's the first episode -

The Death of Human Resources opens the door to Next Generation Talent Management. Instead of the "Compliance Police," great companies are unlocking the huge potential of their human capital.

Here's the link - and please let me know what you think!

http://ericswenson.podomatic.com/entry/2012-08-19T13_21_28-07_00

On Business, Leadership & The Stanley Cup

To know me is to know I'm a hockey fan. I went to my first game at the age of 8, in 1970.   I've been a fan of Los Angeles Kings, a team that had an unsurpassed history of futility since their  founding in 1967.  To be a Kings fan is to live with a lifetime of frustration, a lot of hope, and not much else.

This spring, however, something unusual happened.  The Kings not only made it to the playoffs, they won the Holy Grail of hockey: The Stanley Cup.  A team that was nowhere in December made an epic move through the last third of the season, culminating in an unprecedented run through the playoffs to win hockey’s Championship.

To know me is to also know I’m a fan of great leadership and management; it’s my career.  Since June 11 (the night the Kings won the Cup at Staples Center), I've been thinking about what the Kings did to transform their entire organization from a history of "almosts" and ‘could haves’ into a Stanley Cup champion.  And I realized that what the Kings did can apply to any manager, CEO, or business. 

So, in no particular order, here are the reasons the Kings won the Stanley Cup and how you can apply those lessons to your own business.

#1: Switch in coaches

On December 12, 2011, the Kings fired their coach about one-third into the season.

Sometimes a coach or manager can only take a team to a certain level. And then, you need someone else to take the team to next level. Prior to the season, the Kings were favored to be a contender for the Stanley Cup.  But three months into the year, they were mired in 12th place in the Western Conference and last in the entire league in goals scored.  After losing four games in a row, General Manager Dean Lombardi fired Terry Murray.

During his four year tenure, Murray did a marvelous job teaching fundamental defense to the players. And his calm, professorial demeanor stabilized a young team during their developing years.  By all accounts, Murray was and is a fine person and a good hockey mind.  But by December, it was clear the Kings were struck on offense and lacked passion. Murray had taken the team as far as he was capable of.

Darryl Sutter, Murray’s replacement, came in and immediately changed the dynamic of the team. By demanding more accountability from his players (star defenseman Drew Doughty was the subject of a Sutter-esque rant when the former was caught watching television between periods of a game), Sutter set a tone: no exceptions, no excuses.  Sutter also installed a more aggressive style, including a consistent and frequent forecheck and more strategic attitude. The Kings took a several days to adjust to the change, and then started winning.  A team that was just one game over .500 when Murray was fired went 25-13-11 under Sutter, and then 16-4 in the playoffs.

What’s the lesson?

The first lesson is - Just because a manager was good at one time doesn’t mean they’re the right person today.   Time and circumstances change – we’ve seen fundamental and structural change in business in the past four years.  It’s likely your business is substantially different today than it was 4 years ago.  Have your managers adapted as well?  Adapting to change is critical for management and leadership success.

A second lesson is in management style.  Some managers are capable of starting and developing a team from scratch, and others are better suited for taking an existing team to the next level.

The most success I ever had as a manager came when I took over an existing team of sales people in 1996. The team was good but not great. I was able to take the team to the next level, and they became the top sales team in the company. It’s a lesson I’ve seen through my career.

When was the last time you identified your current needs and criteria for your company that’s aligned with a serious business strategy?  And then when did you ensure those needs were in sync with the capabilities of  your management team?

By the way, one of the best stories I’ve heard was seriously underreported by the press.  After the Kings won the cup, team owner Philip Anschutz personally called Terry Murray to inform him he was going to receive a Stanley Cup ring.  A class move that shows the Kings understood and appreciated the value Murray brought to the team.

#2:  The Trade for Jeff Carter

By February 23, the Kings were playing better but still not scoring goals.  General Manager Lombardi then traded one of his young star defensemen, Jack Johnson, to Columbus for winger Jeff Carter.

This was a gamble.  Carter had been essentially run out of Philadelphia due to differences with management.  And he was desperately unhappy in the hockey outpost that’s known as Columbus.  But he’d also scored 30 or more goals in his previous four seasons, including 46 in 2008-09.  His best friend, Mike Richards, had been traded to the Kings at the beginning of the season.  It was a gamble, but there was reason for hope.

Carter didn’t add much scoring during the regular season – just 6 goals and 3 assists in 16 games.  But he changed the dynamic of the team by allowing players to move into a more natural position.  For example, rookie Dwight King, who had been playing on the second line, moved down to the third line to accommodate Carter.  Other players moved into a position that was a better fit for their skills.

By the time the playoffs came, the Kings were ready.  Carter scored 8 goals and 5 assists in the 20 playoff games, including the overtime winner in game #2 of the finals.  King scored five goals in the playoffs and was a decisive physical presence on the third line.

What’s the lesson?

Do you have the right people in the right positions? 

Aligning talent with need is one of the most fundamental yet underused techniques that human resource professionals’ or executives have at their disposal.

In businesses I work with, we first take a look at the overall business strategy, and then I have each manager rank employees based on employee skill set as it pertains to the needs of the job.  Smaller businesses today need nimble, agile employees who are capable of multi-tasking and enjoy performing diverse tasks.  Larger companies need employees who are skilled at individual positions. 

But every company must constantly re-assess their business strategy and needs with the employees who are doing those jobs.  And then, executives can’t be afraid to make the moves necessary to strengthen the team and better align skills and needs.

#3:  The Kings Went Without Significant Injury Throughout the Playoffs

You might think these sounds like a reason that could only apply to a sports team and not a business. 

You’d be wrong.

Larry Robinson is a winner.  A hall-of-famer player and former NHL head coach, Robinson was named the 24th greatest player in NHL history by The Hockey News.  He won the Stanley Cup six times as a defenseman with the Montreal Canadiens; as a Coach, he won the Stanley Cup as both as Assistant Coach and then Head Coach of the New Jersey Devils.

When he was the Head Coach for the Kings in the late 1990’s, I asked him what the most critical component necessary to win the Stanley Cup.  His surprising response was, “keeping the team healthy for the entire season and playoffs”.

During the 2012 playoff run, the Kings only suffered one injury, when fourth-line winger Kyle Clifford suffered a concussion in the opening series against Vancouver.  Other than that, no player missed any significant playing time due to injury.  In fact, the Kings played the same six defensemen in every game of the playoffs – a feat that hadn’t been done for 30 years.

What’s the lesson?

I’d never thought of the importance of a healthy team to business success until Robinson mentioned it.  But think about it – if you’re constantly replacing employees, you’ll never achieve the momentum and consistency needed for sustainable success in business.  Turnover – especially involuntary turnover – is a killer for any business.  Many businesses have the mentality that “we can always get better employees if someone doesn’t work out”.  That may be true – and there are always people who are willing and in some cases, able, to step up.  But the never ending process of recruiting, interviewing, hiring, and onboarding takes executive focus away from the success of the business; not to mention the significant costs involved.

There is a real need for business today to focus on engagement. That means understanding why you’re hiring, who you’re hiring, and then developing and nourishing a culture where talented individuals can thrive and contribute – and stay long enough to make the impact necessary for everyone’s success.  Don’t get your employees injured – get good people and keep them healthy!

#4: Your Best Players Have To Be Your Best Players

Every sportscaster beat this line to death during the playoffs.  But it happens to be true.  In business, think of it as the old 80/20 rule: 80% of your success is attributable to 20% of your talent.

The Kings’ biggest goals were scored by their best players – Anze Kopitar and Dustin Brown.  That’s not to denigrate huge contributions by others.  And every Kings player points to one reason the Kings won the Stanley Cup – goaltender Jonathan Quick.  Quick, who carried the team on his 26-year-old shoulders during the regular season, was ridiculously good during the playoffs, with 1.41 goals against average and a .946 save percentage.  Quick was named the Conn Smythe winner for the most outstanding player in the playoffs.

So the Kings best players were their best players.

What’s The Lesson?

What about your players?  Who are your best players, and who are your high potential players for the future?  Do each of your managers know who they are, and what – strategically – are you doing to develop them for the future?

The challenge in today’s business environment is that your best employees can always find a job elsewhere.  The last thing you want is to have them (or your high potentials) get up and leave.  These are your leaders.  Good companies develop special programs to train, develop, and ensure their success.  They frequently conduct ‘stay interviews’ to see what makes those employees engaged and satisfied.  You rely on your best players.  Don’t just hope they stay – make sure they stay.

#5: Adversity Breeds Success

One of my favorite maxims in business is that adversity breeds success.  If your managers and executives know it, they can use it to their advantage.

The Kings certainly have known adversity throughout their history.  One of many people who have had to deal with that over the years is Luc Robitaille.  Now the President of Business Operations for the Kings, Robitaille was a star player for the organization from 1986 to 1994, then from 1997-2001, and finally from 2003 until his retirement in 2006.

Robitaille had his share of adversity. In addition to playing – and never winning – during his Kings career, he was never supposed to be an NHL player.  Due to a (perceived) lack of skating ability, he was selected all the way down in the 9th round of the 1984 entry level draft – the 171st player taken.  Robitaille proved everyone wrong – he was the 1986 Calder Trophy winner as rookie-of-the-year.  No player at at his position (left wing) - in the history of the sport - has scored more goals than Luc.  He was selected to the Hockey Hall of Fame in 2009.

I had a brief chat with Luc during Game #3 of the finals.  He was slightly preoccupied but told me that the years of losing would make the Stanley Cup even sweeter, more desirable and intense for Kings’ fans.  (During one of his stints away from the Kings, he won the Stanley Cup with the Detroit Red Wings.)  His point was that Los Angeles fans could truly appreciate winning the cup after 45 years of adversity.  He was right.  And the players fed off the hunger of the fans.  Veteran sports journalists repeatedly said they had never heard a Los Angeles sports venue louder than during the playoff run. 

Barry Melrose, the former Kings’ coach and now ESPN commentator, made a number of insightful points about the Kings during the playoffs.  At one point he was asked if it would help by having three players in their lineup who had previously won the Stanley Cup.  Melrose was emphatic.  “No,” he said.  “It’s more important that the Kings have five players who made it to the finals and lost.  They know what it’s like, having been so close and not winning.  Those will be the leaders.”

What’s The Lesson?

Adversity doesn’t breed contempt; if managed properly, it can breed more success than you thought possible.  Great leaders don’t avoid or fear trouble; they embrace it.  In sports, championship teams often become more closely bound during a losing streak (such as the Kings).  Many great coaches know this and use it to their advantage.

The path to greatness almost always must go through some adversity.  Once a team – whether it be your team or the Los Angeles Kings – hits a snag in the road, it’s up to the leader to direct them out and towards success.  Dean Lombardi and Daryl Sutter did just that, along with players who had character and attitude and the core values instilled in them by Terry Murray.

I was at Staples Center during the decisive Game 6 of the finals.  There was nothing close about the game; the Kings were ahead 3-0 after the first period and cruised to a 6-1 win.  During the third period, I kept looking around in disbelief.  I first got my season seats in 1987.  After 25 years of season seats and spending 40 of my 50 years expecting the Kings to lose, it was a surreal scene.  One fan said he kept trying to see where Rod Serling was.  A team with a history of losing and with no expectation of success had won the Stanley Cup.

The leadership decisions the Kings made changed their culture and won a championship.    Culture doesn’t just happen; it must be intentional.  These are the decisions that transformed the Kings - and that also can transform your business.

Brinker Announced - Major Employer Victory

After 3 years of waiting, the California Supreme Court has today handed employers a victory.  In the anticpated Brinker Restaurant Corp v. Superior Court decision, the court said that employers don't have to ensure workers take scheduled breaks - they just need to provide the time to do so.

This means employers are no longer/not liable if an employee decides to work instead of resting during their breaks.

More from:
Los Angeles Times
Fox News 
San Jose Mercury News
Hospitality Labor & Employment Blog






And we'll be adding comments and postings throughout the next few days...

UPDATE #1

For clients of RSJ/Swenson: we are currently reviewing employee handbooks to ensure the appropriate language reflects these changes.  Please call or e-mail us if you'd like us to modify your handbook.

Brinker Announcement Tomorrow 10am PST

After 3 years, the highly anticipated Brinker decision will be announced tomorrow.

http://calchamber.typepad.com/hrwatchdog/2012/04/brinker-is-coming-brinker-is-coming.html

5 Ways to Retain Your Great Employees

5 Ways to Retain Your Great Employees

I wrote this article for Western Independent Bankers.  I truly believe that retention of great employees is the key to business success in the next two years.

Hope you enjoy it!

The Importance of Your First Job

The first job a person gets is, in many ways, the most important job you'll ever have.  If - that is - you look upon it as what is should properly be - a learning experience.

Never, ever look down on any work you do thinking it is beneath you or will have no value you to you in life.  Every task and opportunity can be a learning experience if you make sure to look at it that way.

Take a look at me, for example.  During my last year in college (and for a couple of years after), I worked at a restaurant.  I started out busing tables, then waiting on tables and bartending and eventually participating in buying wine for the restaurant.  This was a moderately upscale seafood restaurant.  Twenty five years later, I can tell you it was the greatest learning experience I’ve ever had, with better “real life” training for my career than any college course or seminar I took.

One day, I’ll write an article that will be called, “Everything I Know About Sales I Learned From Waiting Tables.”  Think that’s not true?  I learned about multi-tasking, and customer service, and that different people need to be treated different, with varying levels of urgency.  I learned how to upsell, and look for signs that a patron was looking for something better than the house white wine.  That meant learning about my products and understanding what they mean to people.  The restaurant offered an incentive for additional wine sales, and that was my first experience with commissions.

Working with different types of people in different positions, and treating them the way they prefer to be treated.  Not just clients, but the restaurant management and ownership; chefs and busboys and cocktail waitresses and hostesses.  One of the first great leaders I saw was the owner of the restaurant, who saw something in me and encouraged my development.

It’s only a crappy job if you view it as a crappy job.  Everything is an opportunity to learn.  And in life, learning ultimately is everything.

Forbes List Fail

Recently, Forbes unveiled its newest list – "America's Best Small Companies 2010",which led me to wonder: What criteria did the magazine use to determine the “best small companies”? 

Instead of taking a thoughtful, comprehensive approach to this process, Forbes chickened out, took the lazy way out, and insulted all small business owners and those of us who work with them.  And, in the process, Forbes embarassed themselves.  Their list should have been called “America’s Best Publicly Traded Small Companies Based on the Best Earnings Growth and ROE in 2010,” because that’s what the list really is.  What it decidedly is not is a list of Americas Best Small Companies.

Someday, Forbes will realize there’s more to a successful – or “best” – company than a stock price.  But that’s probably too much to hope for.

First, Forbes excluded millions of small businesses by requiring that candidates: “…for our list had to be publicly traded for at least a year, pull in annual revenue between $5 million and $1 billion, and boast a stock price no lower than $5 a share.”  That eliminates a lot of companies – there are about 27.5 million businesses in the United States, but only about 6,500 are publicly traded.  There are also thousands of successful small businesses that earn less than $5 million in revenue, but are profitable nonetheless.  (In any event, the $5 million threshold was an illusion; the company on the list with the lowest revenue was Nevada Energy, with $29 million in sales).

But, we’ll cut Forbes a break here.  They probably didn’t want to research millions of companies, and it’s a lot easier to measure publicly traded companies, since their financial reports are naturally made available to the public.

But that’s where the breaks stop.  For Forbes imperically decided the only attributes that comprise a “Best Small Business” are:

• earnings growth;
• sales growth;
• return on equity in the past 12 months and over five years; and
• stock performance compared with that of its peers.

Say what?

Long-term, sustainable success in business – especially small business – is based not only on financial terms, but the quality of a company when it comes to such crucial areas such as:

• employee satisfaction and productivity;
• customer satisfaction and loyalty;
• how well a company benefits its community and strategic partners as well as its vendors. 

Satisfied employees are always more productive; becoming an employer of choice takes a combination of corporate values, compensation, challenging work, a good environment and the opportunity for personal and professional growth.  Businesses measure this all the time through Employee Satisfaction Surveys, or 3600 Surveys.

Customer satisfaction and loyalty – also easy to measure and benchmark - were not included as criteria by Forbes.  Why?  Because this list was clearly intended not to be the “Best Small Companies in America” – but actually a tip sheet for short-term investors and traders. 

I’m not suggesting that financial measurments be eliminated when determining a best small company – it should just not be the only measurement.

Values play a significant role in successful business.  How an owner’s values permeate throughout the workforce is essential to long-term success.  Having and implementing long-term values such as quality of product and service; commitment to clients and customers; appreciation and understanding of the workforce creates a culture where the “best” truly comes out. 

It’s ironic, then, that Forbes on one hand says, “we dropped companies that are thinly traded and those with fuzzy accounting or major legal troubles,” and on the other hand names Medifast as the #1 Best Small Business in America.  Medifast, as you might know, is in the middle of a major lawsuit in which Fraud Discovery Institute accused the company of “ ... pyramid-style selling - is unsustainable and will lead to a revenue trajectory similar to other multi-level marketing companies: dizzying initial expansion followed by lackluster revenue or worse.....”

Whether these accusations are true or not – they are illuminative.  If Medifast is indeed one of “America’s Best Small Companies,” won’t they still be there in 2011 when the lawsuit is behind them?  Why rush?

If you’re a day trader looking to make a quick buck – the Forbes list might be just right for you.  If you’re looking companies to emulate or model as a Best Business – Forbes is out of answers, and this list is one epic fail.

Follow Eric Swenson on Twitter: www.twitter.com/managingpeople.

Employees First

Dave Berkus is an accomplished speaker, author and angel investor.  He provides common sense advice to all businesses through his blog, Berkonomics.

His recent post deals with the frustrations of business owners who perceive that government regulations always favor employees.  His advice?  Recognize the realities of the times.

He's right!

Workplace Litigation Trends Report

This is the 7th year that Fulbright & Jaworski has surveyed senior corporate counsel regarding litigation.  I'm focusing on the responses that affect businesses - and selecting those answers.  The results are illuminating!

In which area is there the most litigation pending in the U.S.?

Contacts: 53%
Labor & Employment: 49%
Personal Injury: 27%
(participants could pick more than one type)

In which area has there been the greatest increase in multi-plaintiff cases whether they be class, collective action, or significant multiple plaintiff action?
Wage & Hour: 46%
Labor Union: 13%
Age: 11%
ERISA: 10%


[What types of cases] will see the greatest increase in 2011?
Discrimination: 39%
Wage & Hour:35%
Labor Union: 17%

ERISA: 5%

FMLA Could Become More Complicated

The Department of Labor will be conducting a comprehensive survey on how employees in the United States use their Family and Medical Leaves.  The Obama administration has made a committment to improving work-life and work-family balance, and the results of this survey are likely to influence changes in FMLA.

For now, nothing to take action on - but keep your eyes/ears open.

Here's an article from the Chicago law firm of Franczek and Radelet.

Quarterly Newsletter and a Sage Cartoonist

I hope you'll checkout our HR & Management Newsletter by clicking here.

Also, I note with interest David Horsey's editorial cartoon from July 21.  Mr. Horsey is a talented cartoonist who's published through the Hearst Newspaper chain.  (You can see all his stuff here).  After I've been writing and speaking so much on this topic - that businesses are finding ways of doing more with fewer employers - a client saw this in the San Francisco Chronicle and gave it to me:

David Horsey - Hearst Newspapers

Ten Truths for the Boss

Anyone who's read this blog over the years, or who knows me personally, is aware that one of my heroes is Michael Josephson.  Mr. Josephson has commented for years on the relationships between ethics and successful, sustainable business models.  One of his greatest radio commentaries discusses "10 Truths for the Boss", which I've put here:

Why is it that most employees think their bosses are at least a little out of touch? Probably because they are. Even those who worked their way to the top lose some credibility and effectiveness because they don't recognize what I call Ten Truths for the Boss:

1. The more certain you are that "it can't happen here," the more likely it is that it will. Be careful about overconfidence and complacency.
2. There are lots of things you don't know, and lots of people who hope you don't find out. Hardly anybody tells you the whole truth anymore. Information is filtered through the fears and career aspirations of subordinates, and many employees believe you will "kill the messenger" if they deliver bad news so they tell you what they think you want to hear.
3. To those who want to please you, your whisper is a yell and your comments are commands. Be careful, people may do foolish things to please you.
4. What you allow, you encourage.
5. There's never just one bad employee; there's the employee and the manager who keeps him.
6. At least someone who works for you is "gaming" the system so they appear to reach their business objectives with smoke and mirrors rather than real achievement.
7. According to the law of big numbers, if you have lots of employees, you probably have a few crooks and psychopaths working for you.
8. Few people think as highly of your ethics as you do.
9. No matter how many good things you do, you will be judged by your last worst act.
10. No matter what your job description says, what matters most is how you manage relationships and people.

The Josephson Institute of Ethics website is here.

To follow Mr. Josephson on Facebook, click here.

To follow Mr. Josephson on Twitter, click here.