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  • 1. AberdeenGroup Managing the Hourly Workforce: The Benchmark Study Hiring, Retention, and Performance Management June 2004 Sponsored by
  • 2. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Executive Summary M anaging an hourly workforce is fraught with well-known problems: the work- force is transient, is generally unskilled, often does not have a high school education, earns low wages, and has an apparent propensity for theft. How- ever, this 59.6% of the labor force that is hourly forms the basis of the econ- omy — providing farm and field labor, workers for manufacturing lines, health-care sup- port, the lifeblood of retail and grocery, and labor for the hospitality industries. Yet in the recent past, technologies focused on workforce management looked at the 30% to 40% of the market that consisted of professional workers. The business processes behind the sourcing, screening, hiring, training, managing, and retaining of an hourly work staff re- ceived little attention and changed little over the past half century. Now, however, the application of technology to the hourly workforce is growing, providing a clear competi- tive difference in the companies that apply it. This Aberdeen report benchmarks the strategies, processes, and supporting technologies used in corporations that depend on a productive hourly staff for their success. This re- search quantifies the current status of the use of technology in managing an hourly work- force and examines the profit opportunity presented to companies with an hourly work- force that decide to automate their hiring processes. It also identifies strategies — or the lack thereof — currently employed for maximizing performance of hourly employees. Data was gleaned from online survey research and a series of interviews with companies with large hourly workforces. Key Business Value Findings Today, close to 60% of the U.S. workforce is made up of hourly workers. Thus, their impact on business is huge. Plagued with high turnover and little employee loyalty, busi- nesses that depend on an hourly workforce face challenges in screening, hiring, training, managing, and retaining hourly employees. As the need for hourly workers increases, employers require new strategies for attracting a pool of candidates from which to draw and for addressing technology in pre-employment assessment and screening to determine better applicants. Aberdeen’s research yielded the following key findings: • Hourly hiring is often emergency-driven by current need, not by a strategic plan. • Increasingly, businesses are using the Internet and e-recruiting applications to source, recruit, and hire hourly workers. The majority of use is with online “career sites” to enable candidates to apply for positions. • Retention strategies are fragmented — increased application of rewards and bonuses exist, but many companies still see the company outing as a reten- tion device. • Performance evaluation is still tied to paper-based methodologies, the annual review, and the reactive response to the problem employee. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • i
  • 3. Managing the Hourly Workforce: Hiring, Retention, and Performance Management • Businesses cite better communication with their workforces, both through improved vehicles for communication, such as newsletters, and employee self-service portals. • Companies employing technology saw benefits in their hiring management of hourly employees — namely, better quality candidates and shorter and less expensive hiring cycles. Implications and Analysis Hourly employees are most often hired, evaluated, and managed throughout their careers in decentralized environments, usually by the immediate hiring manager, such as the store manager or the manufacturing line manager. As a result, centralized procedures regarding employee qualifications, EEO compliance, and consistency in hiring and managerial processes are lacking or at least poorly enforced. Interviews with companies with large hourly staff revealed common themes related to hiring practices: applications were piled on desks or in boxes, sometimes were never reviewed, and were improperly stored, leaving issues of applicant privacy and identify theft very real. The use of automation in performance management is in the nascent stages; many hourly workers are governed by union rules, yet the rest are haphazardly evaluated, trained, and managed for professional growth at best. Issues here included the return of investment question — will the automation of hourly worker performance management prove worth the cost in a particular environment. Retaining hourly workers is the major management problem. The ongoing cost of churn affects store productivity, managerial effectiveness, and customer satisfaction. Of companies that do not use automation to hire their hourly workforce, 30% plan on moving to a technology-based solution within the next six months; 28% plan on moving to technology in six to 12 months; 19%, in 13 to 24 months; and 22%, in more than 24 months. Of companies that do not use automation to manage their hourly workforce members’ performance, 38% plan on moving to a technology-based solution within the next six months and 24% plan on moving to technology in either six to 12 months or 13 to 24 months. Recommendations for Action Aberdeen recommends the following actions for managing an hourly workforce: • Look at managing an hourly workforce strategically rather than tactically — implement policies for hiring, performance management, reward, retention, and ongoing supervision that allow qualified individuals to grow in their po- sitions while quickly weeding out unqualified or unmotivated workers. • Evaluate policies for employee retention, such as timing of rewards and types of special recognition • Implement pre-hiring assessment tied to success in the position for which you are hiring • Leverage online hiring management technology for sourcing and screening hourly candidates All print and electronic rights are the property of Aberdeen Group © 2004. ii • AberdeenGroup
  • 4. Managing the Hourly Workforce: Hiring, Retention, and Performance Management • Look closely at training policies and procedures as measures to improve workforce efficiency and performance levels; loyalty to the company; skill sets; and overall safety. Also look at certification practices and ongoing training policies, as education can foster retention and is itself a reward to the employee. • The life cycle of hourly employees is a business process to be managed; hourly employee management technology should replace the current reac- tive, sporadic, decentralized, and inconsistent policies and procedures that are in place today. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • iii
  • 5. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Table of Contents Executive Summary .............................................................................................. i Key Business Value Findings.......................................................................... i Implications and Analysis................................................................................ii Recommendations for Action..........................................................................ii Chapter One: Issues at Hand...............................................................................1 Chapter Two: Key Business Value Findings .........................................................3 Aberdeen Methodology.................................................................................. 4 External Drivers: Increase Profit Margins, Prevent Brand Erosion in Face of Demanding Customers .............................................................................. 5 Internal Drivers: Managerial Time Lost on Costly Turnovers; Cost of Shrinkage .......................................................................................... 5 Strategies Focus on Quality, Quantity, Not Cost ............................................ 6 Improved Communication with Candidates and Employees Deemed Key to Better Retention ................................................................... 6 Assessment Is a Growing Part of Practices for Hiring Hourly Employees ..... 6 Retention Programs for Hourly Workers Vary ................................................ 7 Chapter Three: Implications and Analysis ............................................................8 Turnover of Hourly Employees ...................................................................... 9 Company Size Shapes Views on Automated Hiring..................................... 10 Managing Hourly Workers Still Paper Based, Reactive ............................... 10 Challenges in Managing an Hourly Workforce............................................. 12 Solutions to Challenges in Managing an Hourly Workforce ......................... 13 Chapter Four: Recommendations for Action ...................................................... 15 Benchmarking Current Status in Hourly Employee Management ................ 15 Recommendations for Action....................................................................... 16 Featured Sponsors............................................................................................. 18 Sponsor Directory .............................................................................................. 20 Author Profile ..................................................................................................... 21 About Aberdeen Group ...................................................................................... 22 Appendix A: Research Methodology .................................................................. 23 All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup
  • 6. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Table of Contents Appendix B: Related Aberdeen Research and Tools.......................................... 25 All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup
  • 7. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Figures Figure 1: Keeping Workers in the Hive: How Companies Address Retention Issues ..................................................................................................7 Figure 2: Concentration of Hourly Workers at Respondents’ Work Sites (%).......9 Figure 3: Turnover Rates of Hourly Workers by Company Size (Annual Revenue) .............................................................................................. 10 Figure 4: Looming Challenges in Managing an Hourly Workforce...................... 13 Figure 5: Solutions to Challenges in Managing an Hourly Workforce................. 14 Tables Table 1: Prioritized PACE .....................................................................................4 Table 2: Reasons for Not Implementing Hiring Management Systems.................9 Table 3: Reasons for Not Automating Performance Systems for Hourly Workers11 Table 4: Perception of the Impact of Technology on Management of an Hourly Workforce........................................................................................................... 15 Table 5: Comparative Stance in Approaches to Managing an Hourly Workforce 16 All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup
  • 8. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Chapter One: Issues at Hand Key Takeaways • The inability to hire qualified hourly workers is an ongoing issue for corporations today. • Difficulty in retaining top hourly employees presents an even bigger issue. • Turnover among hourly employees is a significant cost. M anaging an hourly workforce is fraught with well-known problems: a work- force that is transient, is generally unskilled, often does not have high school education, earns low wages and has an apparent propensity for theft. However, the 59.6% of the labor force that is hourly forms the basis of the economy — providing farm and field labor, workers for manufacturing lines, health-care support, the lifeblood of retail and grocery, and labor for the hospitality industries. Yet in the recent past, technologies focused on workforce management looked at the 30% to 40% of the market that consisted of professional workers. The business processes behind the sourc- ing, screening, hiring, training, managing, and retaining of an hourly work staff received little attention and changed little over the past half century. Now, however, the applica- tion of technology to the hourly workforce is growing, and making a clear competitive difference in the companies that use it. Likewise, performance management, a growing concern in all areas of management today, has not been optimal for the hourly workforce. Yet 89% of respondents indicated that they Over 2003, some 72.9 believe that improved employee management has the poten- million American workers tial to achieve strategic competitive advantage for their enter- were paid at hourly rates, prises. (See also Aberdeen’s report titled Business at Risk: Is representing 59.6% of all Employee Performance Management the Antidote? [March wage and salary workers. 2004]) The High Cost of Turnover Among the companies surveyed, turnover of the hourly workforce ranged between 0%– 5% and 50%–100%. By company size, turnover varied — as it did by industry. The costs of turnover are threefold — the cost of the vacancy to the company, the cost to hire, and the cost of training the new employee. Because turnover is a direct bottom-line expense (see Hourly Hiring Management Sys- tems: Improving the Bottom Line for Hourly Worker-Centric Enterprises [June 2002]), it is imperative that companies can quantify both turnover itself and the cost to the com- pany of such churn (note that turnover generally includes employees who voluntarily quit, retire, become disabled, or die — as opposed to those who are laid off and generally All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 1
  • 9. Managing the Hourly Workforce: Hiring, Retention, and Performance Management are not replaced.)1 The Employment Policy Foundation reports that for all employees in every industry, quitting is the predominant cause of turnover, accounting for an average of 87.5% of total churn.2 Most respondents saw benefit through improvement, improvement that can be derived through both application of technologies and better policies for hiring and managing their hourly employees: • Ninety-one percent of respondents said that they think that improved man- agement of employee performance can improve customer satisfaction. • Seventy-eight percent of respondents said that they believe that improved hiring management for hourly workers has the potential to achieve strategic competitive advantage for their enterprises. As the economy improves, current and potential employees are empowered with more choices and, with the increase in use of the Internet, more information on alternatives. As a result, businesses will need to differentiate themselves as the employer of choice to the hourly worker. 1 U.S. Bureau of Labor Statistics figures show that 27% of private sector employees quit, died, retired, or became disabled, thereby prompting the need to hire (August 2002 statistics). (This includes all employees, not just hourly workers.) 2 Employee Turnover — A Critical Human Resource Benchmark (Washington, DC: Employment Policy Foundation, December 3, 2002) All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 2
  • 10. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Chapter Two: Key Business Value Findings • Ninety-one percent of respondents believe that improved management of employee per- Key Takeaways formance can improve customer satisfaction. • The high cost of turnover (68%), increasing profit margins (67%), and demanding end- customers (66%) were the top drivers in the success of hourly labor management goals, according to survey respondents. • Eighty-eight percent of respondents disagree with the statement: “Little can be done to hire a better hourly workforce.” A utomated hiring management systems — ASP-driven or in-house applications — are used by 36% of the survey respondents. These respondents cited different perceived results than users whom Aberdeen interviewed to supplement survey results. The survey respondents reported no impact on turnover (49%), no im- pact on shrinkage as a percent of revenue (71%), no impact on customer satisfaction based on contact with hourly employees (53%), and no impact on ability to maximize tax credits through easier reporting (76%). On the other hand, interviewed respondents re- ported that automated hiring management solutions create major advantages in multiple business areas. Key points gleaned through interviews included: • Easier ranking of candidates through knockout questions • Better cultural fit through improved screening (for example, screening on views of theft and whether the candidate would report theft) • Improved corporatewide consistency in hiring policies and procedures, including EEO compliance • Increased ability to collect welfare-to-work tax credits • Better retention through hiring of better quality applicants • Creation of a pool of applicants to alleviate “any-warm-body-will-do” emer- gency hiring • The perception that improved screening will lead to better workers who will in turn alleviate shrinkage Aberdeen hypothesizes that the difference between results cited by survey respondents and interviewees is in the increased use of technology to source and accept candidates (job boards and corporate career centers), but not necessarily the consistent application of screening tools or pre-hiring assessment as part of the application process. In addition, many applications today do not have the ability to automatically process tax credit infor- mation. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 3
  • 11. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Aberdeen Methodology Aberdeen applies a methodology to benchmark research that evaluates the business pres- sures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in spe- cific business processes. These terms are defined as follows: • Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regula- tory, technology, changing customer preferences, competitive) • Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage in- dustry opportunities, such as product/service strategy, target markets, finan- cial strategy, go-to-market, and sales strategy) • Capabilities — the business process competencies required to execute corpo- rate strategy (e.g., skilled people, brand, market positioning, viable prod- ucts/services, ecosystem partners, financing) • Enablers — the key functionality of technology solutions required to sup- port the organization’s enabling business practices (e.g., development plat- form, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management) The results of this evaluation are shown by priority in Table 1. Table 1: Prioritized PACE Priorities 1 2 3 4 5 6 7 Pressures Increasing High cost of Better use of Demanding High cost of Eroded brand Shrinkage profit margins turnover managerial end- hires loyalty time customers Actions Hiring more Hiring work- Creating a Being fully Hiring to re- qualified ers who stay greater pool staffed at all duce shrink- workers in their posi- from which to times age tions longer draw candi- dates when needed Capabilities Improved Improved Employee Hiring goals Managerial Workflow electronic communica- self-service match per- self-service links between communica- tion with em- portal formance portal HR and pre- tion with em- ployees (e.g., criteria for hire assess- ployees (por- paper-based individual ment, train- tals, em- newsletters) employees ing, testing, ployee self- or perform- service, e- ance evalua- mail) tion solutions All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 4
  • 12. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Priorities 1 2 3 4 5 6 7 Enablers Increased Automated Online guid- Kiosk- or Workflow that Automated Automated Internet ac- time and at- ance for in- computer- links applica- methods that workforce cess for can- tendance terviewing based appli- tion manage- further com- workforce didate infor- tracking candidates or cation proc- ment with pliance with scheduling mation or job conducting ess background state and applications performance checking, federal rules evaluations of drug testing, employees and shrink databases Source: Aberdeen Group, June 2004 Key points from the PACE chart are summarized below. External Pressures: Increase Profit Margins; Prevent Brand Erosion in Face of Demanding Customers The link between profit margin and good workers may seem obvious — but in reality it is impacted in various ways, including the following: • A major retailer with more than 1,200 stores globally believes that if each employee can be motivated to save $1.00 per day, the company will reduce costs by $75 million in 12 months — the equivalent of having to earn more than $2 billion in revenue at today’s margins. • A major Big Four consulting company believes that there is a direct correla- tion between employee turnover and customer dissatisfaction ─ a correlation with a direct hit to the bottom line. Internal Pressures: Managerial Time Lost on Costly Turnovers; Cost of Shrinkage Only 25% of the respondents to Aberdeen’s survey saw hiring to reduce shrinkage as very important, unlike the comments from retail and grocery in the population also inter- viewed as part of this study (76% of retailers and 100% of financial service respondents saw shrinkage as an important driver). An employee is 15 times more likely to steal from his or her employer than a customer is3. No other form of larceny costs the American public more than employee theft.4 3 The 2002 National Retail Security Survey published by the University of Florida in Gainesville, cites that 48% of inventory shrinkage, totaling $31.3 billion annually in the U.S. alone, is caused by employee theft. Inventory lost to theft averages 1.7% of a company’s annual total sales. An- nual employee theft, up from the previous high by 2.1%, is $15 billion. 4 The 2002 National Retail Security Survey (Gainesvillle, FL: University of Florida). All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 5
  • 13. Managing the Hourly Workforce: Hiring, Retention, and Performance Management A chain of Midwestern grocery and drug stores implemented an automated hiring man- agement system. For a particular employee applying to be a cashier, all the new system’s warning lights went on — bad hire, high risk. After the hiring manager insisted on hiring her, HR ran a credit check that demonstrated fiscal irresponsibility. The hiring manager really wanted the individual (she had been a cashier for 13 years at a competitor that had just folded; perhaps, he reasoned, her customers would follow her to the competing gro- cery). HR let the manager hire her as long as she had no access to cash registers, so she worked in the deli. Within a few weeks she was caught stealing food. She admitted steal- ing $400 worth; HR directors report that stealing is generally three to five times the ad- mitted amount. The hiring manager became a convert to the screening capability of the automated hiring management system. Seventy-one percent of respondents to Aberdeen’s survey also indicated that the use of technology in managing their hourly workforce had no impact on shrinkage as a percent of revenue, whereas 18% of respondents believed that using automated hourly employee management had a slight impact on shrinkage as a percent of revenue in their companies. Strategies Focus on Quality, Quantity, Not Cost Nearly three-quarters of survey respondents rated hiring more qualified workers (74%), hiring workers who would remain in their positions longer (73%), and creating a greater pool of job candidates from which to draw when needed (72%) as their most important strategies. Additionally, being fully staffed at all times was seen as strategic by 68% of respondents. An interviewee at an international hotel chain told Aberdeen that the use of e-recruiting systems increased the “reach” of the hotel’s recruiting efforts for its 30,000 hourly work- ers, providing a broader pool of applicants from which to draw when necessary. It reports a faster application process, as well as both time-to-hire and cost-to-hire benefits. Ac- cording to the interviewee, the company is now attracting a better caliber candidate than previously. Improved Communication with Candidates and Employees Deemed Key to Better Retention Respondents saw the ability to better communicate with their employee base as critical, whether that communication was online or via more traditional paper newsletters. Forty- two percent had employed means of electronic communication — through portals, em- ployee self-service, or even e-mail. Another 45% stated that they had improved commu- nication with their employees, albeit not necessarily electronically. Assessment Is a Growing Part of Practices for Hiring Hourly Em- ployees Although 43% of respondents said that they do not use testing or any assessment of their hourly candidates, 53% currently use pre-hiring assessment to assess skills or compe- tency levels. More than one-quarter of respondents (27%) use testing to assess compre- hension skills. Other areas of assessment, including ascertaining cultural fit in the organi- zation, determining traits such as honesty, and assessing likelihood of retention, are cur- rently being used by 10% of respondents. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 6
  • 14. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Retention Programs for Hourly Workers Vary Figure 1 shows the various methods of addressing retention issues that respondents said that they currently use. Figure 1: Keeping Workers in the Hive: How Companies Address Retention Issues Source: Aberdeen Group, June 2004 All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 7
  • 15. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Chapter Three: Implications and Analysis • More than one-third of survey respondents (36%) indicated that they use automated hir- Key Takeaways ing management systems today, another 35% plan to use such a system in the future, and 29% have no intention of automating the hiring of their hourly workforce. • More than one-third of respondents (35%) use technology in managing hourly employ- ees’ performance; 36% do not use technology for performance management today, but expect to in the future; and 29% do apply technology to the performance management of their hourly workforce now and do not plan to do so in the future. • The majority of respondents rely on paper-based processes for hourly employee per- formance evaluation. T he Aberdeen-Human Capital Institute study demonstrated the extent to which technology is used in the hiring of hourly Forty-two percent of respondents workers today: 36% of survey respon- said that they did not consider dents currently use an automated hiring man- automating hiring management for agement system for hiring hourly workers; 35% hourly staff, and 35% do not con- are currently not using automation for hiring sider automating performance their hourly workers, but will in the future; and management for hourly staff as 29% do not use automation for hiring their hourly workers now and have no plans to do so strategic. in the future. Concentration of Hourly Workers within the Respondent Base Figure 2 shows the concentration of hourly workers at the work sites of the 223 respon- dents to Aberdeen’s survey. Sixteen percent of survey respondents indicated that hourly workers constituted 81% to 100% of their workforce. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 8
  • 16. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Figure 2: Concentration of Hourly Workers at Respondents’ Work Sites (%) Aberdeen Group, June 2004 Turnover of Hourly Employees Of the 36% of respondents who indicated that they currently were using an automated hiring management system to hire hourly workers, 31% experienced turnover among that workforce of 25% to 50% annually; 23% experienced turnover rates of 16% to 25%. Eleven percent of the users of technology in hiring their hourly workforce experienced turnover rates from 50% to more than 200%. Of those respondents who indicated that they are not currently using technology for their hourly hiring, but plan on doing so in the future, 87% had turnover rates of less than 50% of the hourly workforce annually, 11% experienced turnover exceeding 50% of the work- force, and 2% had turnover rates of 100%. Of those respondents with no intention to use technology for hourly hiring, 82% had turnover rates of less than 25%, and 61% had turnover rates of less than 15%. Low turn- over rates of hourly workers may militate against the rapid adoption of e-recruiting sys- tems, as fewer new hires are required to fill open positions. Further research may demon- strate that companies with little urgency for rapid refilling of positions or little concern for cost of hires are also hesitant to adopt automated hiring systems. The reasons cited by those who do not intend to purchase or use hiring management solu- tions are listed in Table 2. Table 2: Reasons for Not Implementing Hiring Management Systems Technology-driven hiring management for hourly workers is not economically feasible for a com- 44% pany of our size. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 9
  • 17. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Implementing a hiring management system is not 42% considered a strategic or top priority. No compelling business value proposition has 27% been developed. Computer-driven recruiting and hiring make sense 16% for professional staff, but not for hourly workers. There is insufficient awareness of the value of automated hiring management to merit pursuing 16% the implementation of a system. Source: Aberdeen Group, June 2004 Company Size Shapes Views on Automated Hiring More than one-third (38%) of the respondents from small companies with less than $250 million a year in annual revenue thought that applying technology to hiring was finan- cially out of reach for them; in companies that have between $1 billion and $5 billion in annual revenue, the most common answer was “not considered a strategic or top prior- ity.” In all, 83% of respondents either did not know the value of computer-based hiring management or did not see the value as compelling or strategic to their business, creating a window for education on the part of the e-recruiting suppliers. Figure 3 shows the turn- over rates of hourly workers by company size based on annual revenue. Figure 3: Turnover Rates of Hourly Workers by Company Size (Annual Revenue) More than $1 billion 0-5% $250 million to $1 5-15% Revenue billion 16-25% $51 million to $249 25-50% million > 50% Less than $50 million 0% 20% 40% 60% 80% 100% Aberdeen Group, June 2004 Managing Hourly Workers Still Paper Based, Reactive More than half of the population surveyed used paper-based evaluations for their hourly workers, with 55% using an annual review for performance evaluation. Fourteen percent had a six-month review, after which the employee was evaluated annually. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 10
  • 18. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Much of performance management is reactive, rather than planned (a full 14% did not have any formal review process whatsoever). Almost half of the survey respondents (48%) indicated that they see the review process as tied to an event or problem employee and to compliance or poor performance issues. Yet 87% of respondents said that em- ployee evaluation was of value to their businesses. Today’s corporations attempt to align employees’ work objectives with overall corporate goals, or so they say. In this research, 39% selected “slightly agree” with the idea that their hourly workforce could articulate how their jobs related to corporate goals, but 28% thought they could not — with 20% unsure whether employees knew how their jobs re- lated to corporate success. Slightly less than one-third (30%) of the respondents said that they use no technology in the management of employee performance for their hourly workforce, and 4% use kiosk- or computer-based evaluation processes. Although 20% of respondents indicated that their hiring goals match the performance goals for individual employees, only 15% re- tained any metrics to determine overall success. Respondents who said that they do not use technology to manage performance of their hourly workers cited several reasons for their decision (Table 3). Table 3: Reasons for Not Automating Performance Systems for Hourly Workers We use paper-based evaluations and processes. 56% Automating performance management systems for hourly workers is not con- 34% sidered a strategic or top priority. Technology-driven employee performance management is not economically 27% feasible for a company of our size. The required business process change is not warranted by the expected bene- 17% fits. No compelling business value proposition has been able to be developed. 16% There is insufficient awareness of the value of computer-driven employee per- 14% formance management to merit pursuing the implementation of such a system. Internally, we are not ready for employee-related performance management 9% technology — whether in-house, hosted, or outsourced. We do not evaluate our employees. 9% Source: Aberdeen Group, June 2004 All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 11
  • 19. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Today, the majority of hourly employee performance evaluation is conducted for raises, promotions, and job continuation (67%). Nine percent of the population surveyed saw no value in employee evaluation for their businesses. The idea of improving employee man- agement, however, clearly resonates with most of those companies with an hourly work- force: 91% of respondents indicated that they saw improved employee performance man- agement as improving customer satisfaction — and 89% saw better employee manage- ment as a potential strategic competitive advantage for their companies. Challenges in Managing an Hourly Workforce Getting and keeping good workers are key management issues for companies employing hourly workers. For example, holiday periods are difficult for almost all retail businesses, as they all compete for the same worker. This also demonstrates the failure of planned hiring over time and the lack of policies that are executable to ensure that workers are ready to work when needed. Figure 4 shows various issues related to managing hourly employees and the percentage of respondents who deemed these issues as challenges. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 12
  • 20. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Figure 4: Looming Challenges in Managing an Hourly Workforce The inability to hire qualified hourly workers Difficulty retaining top hourly employees The inability to keep fully staffed at critical periods as among the top three challenges Loss of candidate or hires to competitive employers Insufficient time devoted to training new hires Inability to adequately maintain customer satisfaction due to output of hourly employees Inability to adequately maintain customer satisfaction due to interaction with hourly employees Inability to prevent shrinkage 0% 10% 20% 30% 40% 50% Survey respondents were asked to indicate their top three challenges in managing an hourly workforce. Aberdeen Group, June 2004 Solutions to Challenges in Managing an Hourly Workforce The concepts of a talent pool from which to draw hourly employees when needed and improved recognition of top hourly performers were the points that most respondents saw as key for addressing the issues of locating and keeping talent (Figure 5). The talent pool would address the sporadic, panic-mode hiring that prevails today. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 13
  • 21. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Figure 5: Solutions to Challenges in Managing an Hourly Workforce Improve identification and rewards for top performers Create an ongoing pool of potential job candidates Find more creative ways to attract applications for open positions Develop better training for all hourly employees over the life cycle iwthin the organization Develop better training for new hires Create the ability to act on applications faster 0% 10% 20% 30% 40% 50% 60% Survey respondents were asked to indicate their top three solutions to challenges in managing an hourly workforce. Aberdeen Group, June 2004 The motto “hire better, faster, cheaper,” the vendor-perceived motivator for use of auto- mated hiring management systems, is slightly contradicted in this study in its application to the hourly workforce — the goal of managers of an hourly workforce focuses more on hiring better employees and retaining them longer. Yet users of automated hiring man- agement to hire hourly workers cite exactly these three benefits — they find better candi- dates, the search for workers is completed quickly, and the candidates are hired at a lower cost than those hired via traditional methods. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 14
  • 22. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Chapter Four: Recommendations for Action Key Takeaways • Companies need to develop an overall business process of ongoing proactive employee management — from hiring through the employee’s life cycle at the company. • Companies should evaluate hiring management technology in their management of hourly employees. C ompanies that employ technology in managing their hourly workforce end up with better quality hourly candidates who are hired faster and at lower cost than previously (Table 4). Table 4: Perception of the Impact of Technology on Management of an Hourly Workforce Perception of Impact (% of Respondents) Area of Impact Negative None Positive Decrease in hourly turnover 6% 49% 44% Decrease in time to hire 6% 32% 62% Improved quality of hires 2% 37% 62% Decrease in cost to hire 7% 37% 57% Shrinkage as a percentage of revenue 7% 71% 22% Customer satisfaction based on contact with 2% 53% 44% hourly employees Ability to collect tax credits for welfare-to-work 9% 76% 15% employees Source: Aberdeen Group, June 2004 Benchmarking Current Status in Hourly Employee Management Synthesizing the data from this study, Aberdeen concluded that companies fell into three categories: best in class, the industry average, and laggards. Table 5 is included so that the readers of this report can measure their approaches to managing an hourly workforce against the approaches that participants in this study decided made a difference in their companies. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 15
  • 23. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Table 5: Comparative Stance in Approaches to Managing an Hourly Workforce Laggards Industry Average Best in Class Process No plans to implement Use or will use tech- Use hourly hiring sys- hiring automation; do nology for hiring hourly tems to source, screen, not manage perform- workers, but perform- and hire; planning to ance of hourly workers. ance management may apply technology to remain paper based employee performance near term. management. Organizational Limited or little system- Communication with Electronic communica- communication atic corporate commu- the workforce, but likely tion methods beyond nication with the hourly paper based. Increas- ESS; increased reli- workforce. ing reliance on portals ance on managerial and employee self- self-service systems for service systems. management. Hiring knowl- Do not use pre- Assessment may be Test to determine com- edge assessment testing as limited to background prehension, skills, or part of the hiring proc- checks. competencies before ess. hiring; psychological assessment of likely behavior on the job. Technology Paper-based hiring and Limited automation in Automate the hiring management of hourly hiring hourly workers. process; integrated hir- workforce. May have different sys- ing mechanism for tem to automate hiring hourly and professional of professional work- hires; workflow links to ers. HRIS systems. Source: Aberdeen Group, June 2004 Recommendations for Action This study discerned the following success factors that are common to enterprises achiev- ing the greatest benefits from their management strategies for their hourly staff: • Leverage online hiring management technology for sourcing and screening of hourly candidates. • Implement assessment tied to success in the position for which you are hir- ing. • Evaluate policies for employee retention, such as timing of rewards. • Put a formal mechanism for ongoing employee communication in place — via an online newsletter, a corporate portal, or as part of the ESS options. • Look closely at training policies and procedures as measures to improve workforce efficiency and performance levels; loyalty to the company; skill sets; and overall safety. Also look at certification practices and ongoing training policies, as education can foster retention and is itself a reward to the employee. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 16
  • 24. Managing the Hourly Workforce: Hiring, Retention, and Performance Management • Look at managing the hourly workforce strategically rather than tactically — implement policies of hiring, performance management, reward, retention, and ongoing supervision that allow qualified individuals to grow in their po- sitions while quickly weeding out unqualified or unmotivated workers. • The life cycle of hourly employees is a business process to be managed; hourly employment management technology should replace the current reac- tive, sporadic, decentralized, and inconsistent policies and procedures that are in place today. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 17
  • 25. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Featured Sponsors Deploy Solutions Deploy Solutions delivers talent optimization software to maximize staffing performance. Uniquely providing world-class solutions for the hourly workforce, combined with lead- ing solutions for the professional workforce, Deploy offers the deepest capability in both areas, without compromise. Deploy drives results for customers like Sprint, FedEx, Southwest Airlines, Bristol- Myers Squibb, Harley-Davidson, Sunoco, ChevronTexaco, Six Flags, and others. For more information, call 877-GO-DEPLOY (877-463-3756) or visit Deploy's Knowledge Center (http://www.deploy.com/kc/library.cfm) to download white papers, articles, and reports written by real industry experts on topics like best-practice recruiting, hiring, and retention of hourly and professional workers; HR metrics; employment branding; diver- sity; compliance; and talent optimization. Recruitmax Recruitmax (www.recruitmax.com) is all about the people. An award-winning global provider of workforce management solutions, Recruitmax provides software and ser- vices, which allow companies to attract, hire, retain and manage their workforces more efficiently. Recruitmax provides solutions which manage all types of workers, including nonexempt, exempt, and contingent. With its U.S. headquarters in Ponte Vedra Beach, FL, and European headquarters in Chiswick, U.K., Recruitmax provides solutions that are used at more than 500 organizations, ranging from small recruiting firms to multina- tional Fortune 100 companies. Webhire Webhire, ranked No. 1 on ERE’s 2003 Customer Satisfaction survey, is a leader in talent acquisition and management solutions. By helping clients attract, hire, and retain the best employees, we help you reduce expenses and achieve the fastest return-on-value. Hun- dreds of companies rely on Webhire today for reliable, easy-to-use browser access to powerful recruiting and hiring solutions for all employee types: hourly, contingent, and professional. Webhire offers solutions specific to the needs of large enterprises, divi- All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 18
  • 26. Managing the Hourly Workforce: Hiring, Retention, and Performance Management sional and/or midsize companies, and the health-care industry. Webhire’s customers in- clude The Sharper Image, Heinz North America, and Lee Memorial Health System. For more information, visit www.webhire.com. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 19
  • 27. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Sponsor Directory Deploy Solutions Deploy Solutions 100 Lowder Brook Drive Westwood, MA 02090 Direct: (781) 461-9024 x218 Fax: (781) 461-9034 www.deploy.com Recruitmax Recruitmax Software 240 Ponte Vedra Park Dr. FL 2 Ponte Vedra Beach, FL 32082 Phone: (877) 394-5644 Fax: (904) 567-2148 www.recruitmax.com Webhire 91 Hartwell Ave. Lexington, MA 02421-3125 (781) 869-5052 (direct) www.webhire.com All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 20
  • 28. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Author Profile Dr. Katherine Jones, Research Director Human Capital Management Research Aberdeen Group, Inc. Katherine Jones is responsible for human capital management research for Aberdeen Group, Inc., a Boston-based market research and positioning services firm. In this role, she provides analysis and assessment of software and services that automate and stream- line the sourcing, life-cycle performance management, and succession of a productive workforce at all levels. Jones focuses on the fundamental processes of business operations and strategy, as well as the effects of technological change and innovation on these processes within the global organization. In addition to traditional enterprise environments, such as business, indus- try, and manufacturing, Jones addresses the application of enterprise solutions in educa- tion, the public sector, and the federal government. She continually consults with early implementers of these applications to identify world-class supply management strategies and to determine the strengths and weaknesses of technology solutions and services that are competing in this market. Her current research efforts include ROI of electronic-driven recruiting, and upcoming research focuses on HRO (human resource outsourcing) in the middle market; perform- ance management for an aligned, performance-driven workforce; and planning for work- force mobility as changing demographics, an aging workforce, global sourcing for new workforce members and a potentially improved hiring climate affects the current working environment. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 21
  • 29. Managing the Hourly Workforce: Hiring, Retention, and Performance Management About Aberdeen Group Aberdeen Group’s Empowering-the-Enterprise Research Practice Aberdeen’s Enterprise Strategy research focuses on how Global 5000 firms can utilize technology to implement highly tuned value-based strategies that optimize and protect a company's internal resources while still reducing operating costs. Aberdeen focuses on the strategies, operations, and resources that drive business success to help companies overcome such challenges as: • Building and managing a flexible team • Securing the business • Maximizing assets • Turning IT into tangible value As enterprises strive to increase revenue, they must simultaneously attempt to reduce op- erational costs in order to be successful. Aberdeen believes that winning companies must be open to new strategies and technologies that maximize the efficiency of their opera- tions in order to keep the value chain working at peak efficiency. An enterprise's success hinges upon its ability to build a strategic and technological plan that enables it to manage performance across the entire value chain. This cohesive ap- proach helps businesses leverage their resources toward a distinct competitive advantage Aberdeen’s History of Integrity: Aberdeen was founded in 1988 to conduct fact-based, unbiased research that delivers tangible value to executives trying to advance their businesses with technology-enabled solutions. Aberdeen’s integrity has always been and always will be beyond reproach. Aberdeen provides independent research and analysis of the dynamics underlying specific technol- ogy-enabled business strategies, market trends, and technology solutions. Although some reports or portions of reports may be underwritten by corporate sponsors, Aberdeen’s research findings are never influenced by any of these sponsors. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 22
  • 30. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Appendix A: Research Methodology I N May 2004, Aberdeen Group and the Human Capital Institute, a Washington, DC- based provider of educational programs for human capital practitioners, talent man- agers, and executives who recognize the critical importance of human capital, exam- ined the hiring, retention, and performance practices of 223 enterprises that hire hourly workers. Responding HCM executives completed an online survey that included questions de- signed to determine the following: • The degree to which hiring of an hourly workforce is perceived as a business problem today • The degree to which electronic hiring management is used in those compa- nies that rely on an hourly workforce • How respondents’ use of automated hiring systems compares against that of their industry peers • How respondents’ employee performance management, strategies, and im- provement plans compare against those of their industry peers • Emerging practices in hiring and employee management that are separating the market leaders from the rest of the pack Aberdeen supplemented this online survey with telephone interviews with select survey respondents. Aberdeen gathered additional information on their management of their hourly employees. The study aimed to identify emerging best practices for the hiring and ongoing manage- ment of an hourly workforce and provide a framework by which readers could assess their own capabilities. Responding enterprises included the following: • Job title/function — The research sample consisted of respondents with the following job titles: Cxx senior management (11%); executive management (5%); human resource management (39%); corporate recruiters (21%); hiring managers (3%); department heads and directors (5%), and others. More than one-third (34%) were concerned directly with human capital; 33%, with re- cruiting; and 13%, with operations. • Industry — The research sample included respondents from a wide variety of industries — from aerospace to a zoo. Ten percent represented health- care-related services and industries; 16%, high-technology companies (soft- ware); 2%, computer hardware manufacturers; 6%, retail or wholesale; 2%, travel/hospitality/restaurant; and 5%, telecommunications industries. Re- spondents also represented automotive and aerospace and defense distribu- tion, education, finance/banking/accounting, publishing, public sector, and All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 23
  • 31. Managing the Hourly Workforce: Hiring, Retention, and Performance Management utilities, medical equipment, construction/engineering, and retail and distri- bution companies were also respondents. • Geography — Nearly all study respondents were from North America, in- cluding 95% from the U.S. alone. Remaining respondents were from the United Kingdom, Germany, Singapore, and India. . • Company size — About 20% of respondents were from large enterprises (annual revenues above US$1 billion); 28% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 48% of respon- dents were from small businesses (annual revenues of $50 million or less). Solution providers recognized as sponsors of this report were solicited after the fact and had no influence on the direction of the research or its results. Their sponsorship has made it possible for Aberdeen Group and the Human Capital Institute to make these find- ings available to readers at no charge. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 24
  • 32. Managing the Hourly Workforce: Hiring, Retention, and Performance Management Appendix B: Related Aberdeen Research and Tools Related Aberdeen research that forms a companion or reference to this report includes: • Business at Risk: Is Performance Management the Antidote? (March 2004) • Workscape’s Acquisition of Performaworks Reflects Software Consolidation Trend in HCM Market. (March 2004) • Managing Employee Performance — Why Is This a Hot Topic Now? (Janu- ary 2004) • The Growth of an Industry: Enterprise Talent Management 2003 (September 2003) • Enterprise Incentive Compensation 2003: Buyers’ Guide for Variable and Total Compensation (November 2003) • Hourly Hiring Management Systems: Improving the Bottom Line for Hourly Worker-Centric Enterprises (June 2002) Information on these and any other Aberdeen publications can be found at www.aberdeen.com. All print and electronic rights are the property of Aberdeen Group © 2004. AberdeenGroup • 25
  • 33. Aberdeen Group, Inc. This research study is the result of research performed by Aberdeen Group. Founded in 1988, Aberdeen Group is the trusted advisor to the Global 5000 for value chain strate- gies and technology advice. Through its continued benchmarking and analysis of value chain prac- tices, Aberdeen offers a unique mix of research, tools, and services to help G5000 executives assess their value chain performance, develop improvement strategies, and select value chain solution partners. Aberdeen delivers unbiased primary research that helps enterprises derive tangible business value from technology-enabled solutions. Through continuous benchmarking and analysis of value chain practices, Aberdeen offers a unique mix of research, tools, and services to help G5000 executives accomplish the following: • Improve the financial and competitive position of their businesses now • Prioritize operational improvement areas to drive immediate tangible value to their businesses • Leverage information technology for tangible business value • Aberdeen also offers selected solution providers fact-based tools and services to em- power and equip them to accomplish the following: • Create demand by reaching the right level of executives in companies where their so- lutions can deliver differentiated results • Accelerate sales by accessing executive decision-makers who need a solution and arm- ing the sales team with fact-based differentiation around business impact • Expand customers by fortifying their value proposition with independent fact-based research and demonstrating installed base proof points To provide us with your feedback on this research, please go to www.aberdeen.com/feedback. The information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not guaranteed by Aberdeen. Aberdeen publications reflect the analyst’s judgment at the time and are subject to change without notice. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their re- spective holders. Warning: This publication is protected by United States copyright law and international treaties. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior written consent. Unauthorized reproduction or distribution of this publication, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of the publisher. © 2004 Aberdeen Group, Inc., Boston, Massachusetts
  • 34. THIS DOCUMENT IS FOR ELECTRONIC DELIVERY ONLY The following acts are strictly prohibited: • Reproduction for Sale • Posting on a Web Site • Transmittal via the Internet Copyright © 2004 Aberdeen Group, Inc. Boston, Massachusetts Terms and Conditions Upon receipt of this electronic report, it is understood that the user will and must fully comply with the terms of purchase as stipulated in the Purchase Agreement signed by the user or by an authorized representative of the user’s organization. This publication is protected by United States copyright laws and international treaties. Unless otherwise noted in the Purchase Agreement, the entire contents of this publication are copyrighted by Aberdeen Group, Inc., and may not be reproduced, stored in another retrieval system, posted on a Web site, or transmitted in any form or by any means without prior written consent of the publisher. Unauthorized reproduction or distribution of this publication, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of the publisher. The trademarks and registered trademarks of the corporations mentioned in this publication are the property of their respective holders. All information contained in this report is current as of publication date. Information contained in this publication has been obtained from sources Aberdeen believes to be reliable, but is not warranted by the publisher. Opinions reflect judgment at the time of publication and are subject to change without notice. Usage Tips Report viewing in this PDF format offers several benefits: • Table of Contents: A dynamic Table of Contents (TOC) helps you navigate through the report. Simply select "Show Bookmarks" from the "Windows" menu, or click on the bookmark icon (fourth icon from the left on the standard toolbar) to access this feature. The TOC is both expandable and collapsible; simply click on the plus sign to the left of the chapter titles listed in the TOC. This feature enables you to change your view of the TOC, depending on whether you would rather see an overview of the report or focus on any given chapter in greater depth. • Scroll Bar: Another online navigation feature can be accessed from the scroll bar to the right of your document window. By dragging the scroll bar, you can easily navigate through the entire document page by page. If you continue to press the mouse button while dragging the scroll bar, Acrobat Reader will list each page number as you scroll. This feature is helpful if you are searching for a specific page reference. • Text-Based Searching: The PDF format also offers online text-based searching capabilities. This can be a great asset if you are searching for references to a specific type of technology or any other elements within the report. • Reader Guide: To further explore the benefits of the PDF file format, please consult the Reader Guide available from the Help menu.

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