HR Debt: How it Builds Up and How to Pay it Down

Jacqueline Breslin: So we're here today to talk about HR debt. And I am certain that all of you are familiar with what debt is. You take a risk today to hope it's gonna work out in the future. But HR debt has a ton of risk associated with it. So you're looking at things like a lack of productivity and what that does to the organization.

You're really trying to solve today's problem, hoping that you'll be able to work it out tomorrow. It looks like maybe pushing aside an employee complaint because you need to focus on the day-to-day of what's going on. Or maybe sometimes it's not investing in something like continuing education or more learning because you're hoping it'll be okay, employees will just hang on a little while longer.

So we're going to talk about a number of issues and concerns that lead to HR debt. And we'll go deep and discuss some things you can do to fix that. I'll turn it over to Rob.

Rob Maresca: So some of the causes of HR debt, which can build up from a variety of weaknesses in a business. So today we're going to talk about things like poor HR processes, also lack of HR data analytics and poor communication.

So the first cause, poor and vague HR processes, we're talking about structure. When you don't have structure and HR is ad hoc, we have HR debt. So think of things like, when you have weak processes for hiring. Hiring costs money. When you hire employees and they don't work out, that HR debt is increasing.

Then you have things like performance appraisals. If you don't have proper performance appraisals in process, employees are going to feel undervalued or maybe just not even heard through the process. And then there is also lack of feedback or complaints. If you don't have a process in place for complaints, if employees don't have that channel to properly go through, that could also cause HR debt.

So when you don't have these processes, new employees that come on board, they can feel they're thrown into the fray without having these processes. So it just adds a whole list of work for HR. And if you're HR professionals, you know what I'm talking about. So again, when those processes are poor or vague, that's how HR debt increases.

Also, when there's lack of data or analytics for HR to review, it's really hard to identify issues that could be happening within the workforce or with the employee or with the team. So most things do require data to identify issues. And it could hinder an organization to grow.

It could hinder an organization's workforce and think about things like, if you have good employees without analytics, how can you appropriately figure out a way to reward employees? Who gets the promotions? How do you build your future leadership without that analytic and that data? We struggle. There's also like trends and patterns that can happen in your organization. HR can see all this with analytics and data if we have it. So if there's high absenteeism, why is this happening? Or employee morale is not where it should be. Or maybe it is where it is. What are we doing right?

Without that data, it's hard to assess the situation. And then poor internal communications. I usually see this one as a big one when it comes to employee surveys. Employees will say communication is just not where it should be in this company, and when it comes to internal communications, a lot of companies spend a lot of focus on their external communications, but your internal communication is just as important.

So think about how we communicate with our workforce—through email, quick, efficient, but we all know how quickly it can be cluttered. Our boxes will get cluttered really quickly and we'll miss opportunities for those real important messages. So we should be coming up with ways to better communicate with our workforce and this could be through apps.

So things like, say, G Suite, Slack is another favorite or Asana. Those help those important messages get through. And they won't be lost within the email clutter. So the other thing is when we're thinking about our communications with our employees, how do we want to communicate? What are we communicating? What's the best way to do it? And so, when there's that lack of feedback and the lack of feedback loop make that. So, when communication is not two-way, that can be an issue. And, again, employees will not feel heard and they'll feel undervalued, which again, your HR debt increases.

Jackie, I think you're going to talk about cost of HR debt.

Jacqueline: So, it starts with loss of productivity. So, when you're focused on trying to fix things in a reactive way, it moves your focus. You're not looking at your strategic plan. You're not looking at your mission, your vision, your values. You're focused on trying to get out of the clutter that Rob described. There's also the financial loss due to turnover. I am sure that all of you in this room have had to backfill a position and have been surprised at the cost. I mean, some surveys say that it can be 200% of an employee's annual salary to backfill a position.

And then also the negative impact on employer morale. So if you have employees in the workforce who are disruptive, they're toxic. They're creating problems and challenges. Not managing them can increase the HR debt.

So loss of productivity. Okay so, we know that all of you are trying to be successful with great ideas. You're trying to move the organization forward that you work for. The HR debt is simply a distraction. So when you're trying to rifle through, “What's new? What's happening? What do I need to be focused on?” it completely takes you away from your productivity. If you have complaints in the workplace, those do happen, but they also can be a distraction. So if you're not doing proactive work to try to fix what's happening to prevent the complaints from ever happening, that creates and influences the HR debt.

Rob: And so with negative employee morale, this attributes to a variety of HR debt. When there is negative employee morale in the workforce, we know what happens. Productivity suffers, innovation suffers. So, when employees feel they have limited opportunities for development, what is their career path?

I'm at this organization, how can I grow? When there's that negative morale, they don't feel that they can grow, HR debt increases. Lack of compensation. We all know employees—that is a huge factor when they accept a position or not. Are you paying to market? Are you going to lose them to a competitor?

So it's always a good idea for having the compensation analyzed to make sure you're paying to market. Job security concerns. If an employee doesn't feel that they're secure in their job, they're not going to feel that they're working at their best and that also impacts morale.

And then poorly communicated reorganizations and strategies. Does the workforce know your mission? Do they know what the company goals are? Why are they even coming in? These are really good questions that employees should know the answer to.

And then, when there's no culture for employees to trust HR or leadership, that is a big problem. There should always be some type of communication or channel for employees to communicate their thoughts, their concerns. Maybe they have great ideas and if you don't have that channel, you're not hearing those ideas.

Or even worse, if there's a complaint, as Jackie was talking about before, which at some point will happen and there's not a proper way—say it was a harassment complaint—and there's not a proper procedure in place to handle that, that can lead to legal costs, claims, penalties. So those are things that you definitely need to think about when it comes to negative employee morale. And then of course the costs.

Jacqueline: Okay. So the result of hiring, the turnover cost is, I think, an easy one to think about here. If your talent is walking out the door and they're taking with them, you know, company proprietary information in their minds, they know your organization. So then to fill that back, besides just the pure cost of hiring, which we've already described as it could be 200% of somebody's salary, you're also needing to do additional training.

Those employees also understood your culture. You're having to bring them through the new employees to get up to speed. It can take a long time. The onboarding time for an employee is really a full year. So I think some of us like to think like it can get people up to speed fast, but your company is likely complicated. For somebody to be fully functioning in your organization, it will be a full year before you're really getting everything that you can get through them. And so this goes back to the idea of keeping your current employees satisfied, understanding what's going on with them, working with them, working to retain them becomes an important strategy due to the turnover costs.

Rob: So when it comes to strategies of reducing HR debt, there are a few steps that we can most certainly offer to you now. If your HR debt is high, that may seem like a task that is not something that's attainable, but I can tell you it's so well worth the effort. So, the three steps we're going to go through: improve communication, data driven HR processes and continuous learning.

So starting with improving communication. Again, innovation, it can't exist without it. When leadership and HR are not in communication with each other, that is problematic because HR does hold a lot of the data analytics, if it's there, to help leaders come up with maybe a new compensation plan or maybe to get the best person in recruitment or processes in place. It could also be helping leadership and employees align the company strategy—what the goals are, what the missions are and communicating that to employees. Sometimes it feels like HR is only there to just handle the policies and just tell employees what they need to do because of the policy.

And yes, we are there to enforce policies because that mitigates risk. However, we are also there, where it should be a two-way communication. We should also be listening to employees. So when they come to us, and they come to us with their thoughts and their ideas, or maybe their concerns and complaints, that gives us the path to most certainly mitigate any risk, if there is any there, and also listen to their voices and make them feel heard. It also creates a healthy work culture. Again, if there is no feeling of connection with leadership or HR, employees can be discontent and they can take that discontent in a very negative way that can hurt the organization.

So if there's not a proper channel to speak to HR or to their leadership, or they feel that they can, they can go to social media. And we all know what an HR nightmare that can be. So, well, in any event…

Jacqueline: Story for another day.

Rob: Story for another day, exactly. So, we want to make sure we improve communication ‘cause it does increase engagement. We want to hear what our employees are thinking. Think about those employee surveys again. We want to hear what you're thinking. We want to get the temperature of the room. So, it also improves client relations and public impression. Again, when we have improved relationship between leadership, HR and employees, it's just a win-win and your HR debt starts to chip away.

So some statistics here. Importance of effective workplace communication. 86% of employees and executives cite the lack of effective collaboration and communications as the main cause for workplace failures. And then there's—up to 93% of employee creativity can improve with good communication.

So investing in data driven HR processes. These processes in place, these really help HR when we have that data. So analyzing recruitment channels and resumes. I've said it before. When we have the resumes and the right analytics and we have the job descriptions and we have all that great stuff, we can make better informed decisions to find the right candidates.

It also helps us identify top performers and catch the red flags early. So what does that mean? Let's say you have an employee that's been a stellar performer, but all of a sudden you start to see there's something in their productivity is decreasing. Something is going on. That is a red flag and with analytics we can see the best way to assess that and help the employee get back on track.

And also we can gauge employee sentiment. Once again, your employee survey says it all. When you have employees take an engagement survey, the best thing that a company needs to do next is take action on what they're saying they're gonna do. They need to take that next step, ‘cause then employees will feel heard. And then of course, with analytics, we can look at trends. We could see what's going on. Are there teams that are struggling? Maybe they need another person there. Maybe there are employees leaving and we just don't know why.

So, when it comes to the analytics, we get that view to the 'hire to retirement' of an employee journey. We get to go back and see, okay, what happened in this situation and make those decisions going forward that best fit the company.

And then there is continuous learning. So, the talent development.

Jacqueline: So investing in your employees, this is a great way to do it. And I know that this can be difficult for small companies, growing companies, who don't feel like they have a lot to invest in the continuing path, but I think being here today is a great example. So provide employees with opportunities for seminars, webinars, for conferences like this.

With TriNet, we do an HR 101 program for our clients that's available and diversity, equity and inclusion training where they can attend a multi-client session. And so that's like providing an opportunity. Employees, especially your top performers, they are the ones who are usually very invested in themselves in their own career and your help with continuing education is incredibly important. During exit interviews, when you're talking to employees who've decided to lead the organization, many times they will give the reason, "there wasn't enough growth, including my own education."

And that can be already a challenge. With a smaller size company, there's not lots of positions, maybe it can be a fairly flat organization. So this is a way to invest in employees as a form of retention standpoint. What can you do from the continuing education point of view that maybe you cannot promote them tomorrow, but you can build their skills.

And, we've said it before, but instead of having to seek new talent, investing in your talent that you have is less expensive than going back on that path and recruiting, looking for more, looking at what's out there. And at the end of the day, it creates a more satisfied and engaged workforce and you can frame your training and your continuing education that it builds the worker, but it also can be about the culture in your own workplace. So you can get leadership teams on the same page by giving them specific training and leadership techniques and training management techniques, so it can be, you know, a great way to build your workforce, build some consistency.

Rob: Absolutely.

Jacqueline: Yeah, so we hear it. We see it here. So, 94% of employees say they would stay at a company longer if it simply invested in helping them learn, and then 42% of employees would leave their current job for one that offered better career development opportunities. You know, things also like tuition reimbursement can be another way to go down the road of continuing education or a very specific stipend that somebody can use during, you know, the calendar year can be another way to, you know, have a good incentive for continuing education.

Rob: Absolutely. So reducing HR debt today. All right. And here we start building data driven processes. All right. And when we start to reduce the HR debt again, this now could increase employee morale. It could also increase poor processes, that communication, that lack of data. You want to start to collect that data, so in the event something does arise, that HR and leadership have something to go back on. So let's say there's a disruptive employee. If that employee needs to be dismissed, HR can't simply go to non-existent records and say, "okay, sure, let's move ahead," which would be a very high risk without having any data.

So, when you realize that we can become a reliable ally in HR debt, these are the things that we can actually do with our customers. So, we can help and be that ally by data driven HR processes. So things like workforce analytics, applicant tracking, compensation, benchmarking, reporting, performance management, expense, management, time, and attendance. and out TriNet Mobile app—there are certain tasks that you can do in that—as well as improve communication with your workforce. We have tools and resources to help engage employees, as well as employee engagement surveys. I keep bringing that one up. .

Jacqueline: It's an opportunity.

Rob: It's a great opportunity. Yeah. Organizational assessments, DEI assessments. And then with continuous learning with your workforce, learning management education programs, as well as team accelerator, which helps your teams reach their full potential and also develop your future leaders. So, if you are ready to take on the HR debt, you can simply take out your phone and take our HR debt assessment.

Just simply scan the QC code. I'll get out of everyone's way. But this is a great way to see how much debt you've accumulated. Maybe you have very little, none. Maybe there's a lot that needs to be worked on. But this HR debt assessment is really a great way to start.

Jacqueline: Yeah, it helps you reflect on where you're at in your organization based on the topics that Rob and I have covered today. So reflective on where you're at.

Rob: So thank you.

Jacqueline: Thanks very much. Are there any questions we can answer for you? Yes.

Audience member #1: Suggestions for increasing participation in surveys. So we do send out surveys, but we get very few responses.

Jacqueline: Yeah. Okay. So have you like sometimes, like, trying a contest and motivation? Leaders can be very competitive. And so if they know what their teams have done and percentage wise, that can be a way to incentivize that. I would put the leadership, you know, on that. Get your team rallied up. I mean, surveys are anonymous, but sometimes you could consider offering a small prize for the first team that completes all the surveys, something to get excitement around it. Presenting also really the value of it, that you take this seriously, that your leadership team is going to read every word of it. That can be encouraging also.

Rob: Yeah, I think some of the concerns that I've seen when I have actually been part of the engagement survey with employees, I come from internal HR as well, and one of the concerns that usually comes up is, "Well, how do I know it's really confidential?"

Yeah, "You know, I don't want to put my real thoughts here. I'm going to put a target on my back if I do this," and it's really conveying and communicating to everyone, "This is completely confidential." And what Jackie just said is very important to, that once you get the results, it's so important to share the results with the team because if the employees are just taking it and they don't know what happens after that, they feel like they're just taking it for no reason.

So it's also important to share those results, obviously not every detail, but you can most certainly summarize the high points, the low points, you know, and these are the things that the company is committed to work on.

Jacqueline: And if you've done the survey year-over-year, talking about what you did in the past as a result can also demonstrate that you're taking it seriously. "Look, we did the survey last year and we've implemented, you know, these two things." That could be a good way to move momentum too, but it's great that you're doing the surveys. So, that is awesome.

Rob: Great question.

Audience member#2: Suggestions to control recruitment costs for companies with high turnover.

Jacqueline: Okay. So how about, have you been able to dig into your turnover for the root cause of that? Because that can be a way to control the recruitment cost, is to work on retention. So, I would start there, like digging into, I mean, that can be through exit interviews, but then also stay interviews, which can be a way to have your top performers to understand where they're at. So I would try that, as a starting point. And then for recruiting out there, depends on what you're doing and where the costs are coming from. And so, if you're using an agency, can you add more technology to what you're doing to reduce external recruiting costs?

Technology in the long run might be a way for you to reduce the cost if you're using individual recruiters or maybe it's vice versa. Maybe your technology is expensive and so could work with recruiting firm that could be more advantageous there with talent acquisition?

Rob: Yeah, agreed. Yep.

Jacqueline: Thanks for that question.

Rob: Thank you.

Audience member #3: There was a point said earlier in the presentation about how people can communicate with HR and how email is becoming outdated. I'm interested to hear your thoughts on how there can be a one-stop shop to communicate with employees because sometimes there's so many different tools and resources.

Jacqueline: There are, right?

Rob: Yeah, intranet is a great source. If your company has an intranet, that's a great way to communicate with your workforce.

Jacqueline: Right. I mean it is about choosing a method. So, this is where we're going to go all the time for company updates, company announcements, and maybe it's an intranet. And we only use email for whatever those reasons are. But it is about choosing. It is about making sure managers are aligned with that, so they all know, "this is what we do again." Is it the intranet? Whatever that is, but it is about choosing. To your point, the confusion of where you go for all the information as an employee, I think they just start sort of backing out. Like, "peace out. I'm not gonna look at anything anymore cause I'm too confused as to what to look at." So yeah. Choose a philosophy.

Rob: Agreed. Know your audience, obviously, what works best with your audience.

Jacqueline: That's true too.

Rob: And as far as, I mean, if you're sending employees to like, I don't know, search Slack messages for company updates, that's really probably not the best route to go. But I think in an intranet, a company intranet is really a great way to have all the company updates there and share information where all employees have access to it.

Jacqueline: And also maybe routine. Like on Mondays, we announce company updates. On Wednesdays, we celebrate achievements and get employees expecting that and then stick with it. And then if they miss something, at least they know, let me go back to Monday and Wednesday.

Rob: Like monthly hands-on?

**Jacqueline:**Or monthly. Yeah, we do all staffs, the third Thursday of the month. But I think rigor becomes important, without to consistency. Thanks.

Rob: Any other questions?

Audience member #4: You mentioned accumulating debt from reactive things. But I feel like a lot of things in our organization, we have to execute things that other departments have asked of us. So, "Oh, this hire needs to go through right away. We didn't go through the normal process, but this is like an emergency situation." So I guess I'm curious on your thoughts on how to balance the reactive with getting the day-to-day business.

Rob: I have a question. So my first question is going to be—why is this always an emergency situation? What's going on here? Every time you have a new hire, it's always an emergency situation. Why are we not following our process? And that's where I would start, because then I want to identify who's not following the process that's making this an emergency situation. Why is it always a 911?

Jacqueline: Yeah, we feel your pain like you are seen in the room. I'm sure. It goes back to the concept to, like, I agree with what Rob saying, can we go back to the rigor and the routine? Like, this is our process and there should be very few exceptions and maybe you don't always make the exceptions and that gets employees aligned with what you're trying to do and you only make exceptions where it really, you know, it really makes sense and hoping that the executive leadership team is like, you know, holding that accountable also.

It's difficult. I don't stand up here and think, "Yeah, just say no and then they'll all fall in line," because that's not it. But you have to decide like how you can put that in place. And then maybe ask them too, like, "we have work to do together, this is distracting because I'm running everywhere," and help them be part of the solution with the processes and you get more buy in, you know, with that, especially if you have a chance to do a fresh start. There's always a good time to make a fresh start, but the first of the year is coming.

So, what can you say for 2024? Like, "Let's get certain things in line and process, like now's the time to think about that and get some buy in." So starting in the new year, perhaps you could have less distraction, less debt, HR debt.

Rob: I agree. Even with the buy-in, you know, I would probably identify how this is actually hurting us.

And kind of use that as my buy-in too, you know, like when we have these 911s and we're trying to get an employee say onboarded, what's their experience? We've all been in places where the onboarding was fantastic. I will say TriNet was fantastic. But we've been in other companies where onboarding wasn't really a great experience. And when you don't set that tone from day one, that could really negatively impact the experience.

Jacqueline: Yeah, like, are you happy with the quality of the hires? Are they lasting? Are they resigning soon? There could be a story to tell about why that last minute hiring is not in the long run. That's for the org.

Rob: Right. Great question. Thank you.

Jacqueline: Thank you. Yes.

Audience member #5: What's the best way to document problem children?

Jacqueline: Okay, so I'll repeat the question. What's the best way to document problem children? I mean, oh, gosh, right? Like, not to be snarky, but like, do it. Because that's part of the problem.

Managers are busy. They resent having to document. So how can you make it easy for them, with like forms and templates where they're answering questions, you know, like prompt them. Talk them through what the consequences for not documenting, terminations where there's legal claims or concerns, or they might have to retain a poor performer longer because the documentation hasn't happened. So that becomes a pain.

So I would say, train on how to document, make it as easy as possible and try to make it an expectation and tell some horror stories about what happened when they didn't do it so they maybe try to do it. Hold them accountable.

Rob: Yeah, absolutely.

Jacqueline: Another challenge.

Rob: Because I think also, if you don't have that documentation, it's going to be really hard to defend your decision. And there's your HR debt increasing again. And then also if it ever did reach to the level of termination, the employee should not be surprised. They should not be surprised.

Jacqueline: Oh, that's like the worst feeling when you're terming somebody and they have no idea.

Rob: You know, like they should not be surprised.

Jacqueline: Might not be the worst feeling, but it's bad.

Rob: And there's been conversations, there's been coaching, and it's documented. And then when that termination comes, then they really should not be surprised. They'll be like, "Well, I thought I was a stellar employee." And, "No, you were not." And I would never say that, but my point is, yes, it's the documentation. HR loves documentation. I can't put it any other way. We love documentation. And if you have conversations verbally, send it in an email to the employee. This is what we spoke. Here, I summarized it. Is there anything I missed? Now you have something documented.

All right, I'm on a roll. Who else?

Audience member #6: I was going to mention documentation along with communication to the employee.

Jacqueline: Okay, yeah, did Rob steal your thunder there?

Audience member #6: It's not an ad where the manager will document, meaning, put it on paper, but did that conversation actually happen? Is the employee aware and knows what to work on?

Rob: Yes.

Jacqueline: Right. Great point. Right. Check in with your managers and make sure that the conversation absolutely happened. It's not just a note in there, you know, one note.

Rob: Note to self.

Jacqueline: Yeah.

Rob: That's a great point.

Jacqueline: Very good point. All right. This is going to be our last question.

Rob: Okay.

Audience member #7: Mine is not a question, it's just a piggyback on this statement.

Jacqueline: Great.

Audience member #7: I found that training my managers to remove the emotional part helps a lot with documentation because they know the children, and they know this woman's husband, maybe this and that, so they're afraid to write them up, and you know, eventually leading to termination. Yeah. I train them to look at the performance and not the person.

Jacqueline: Okay, yeah, thanks for that. Yeah, that fact-based documentation. We're not looking for the editorial. Thank you.

Rob: Thank you.

Audience member: So there is a feedback survey, if you were using the app. If you'd give us some feedback on today's session and if you couldn't scan the QR code, I've got it here in my laptop. So swing by and you can scan it off my laptop.

**Rob:**Thank you.

Jacqueline: Thank you. Thank you for attending today.

Rob: Thank you. Enjoy the rest of your day.