Last week of the blog our mandatory reading is only articles. It is about case that happened in American bank Wells Fargo with some illegal and unethical activities. I will first go through the articles one by one and then end with reflection of my on trying to process this case.
I wanted first to get some background information, so the fist article I chose was the first one on the list. ''Workers tell Wells Fargo horror stories'' written by Matt Egan in CNN Money. It's very well described on behalf of the workers, that the company had unrealistic selling goals and targets for customers. They were even forced to create fake accounts in order to meet the very aggressive demand of their managers. Managers did not care if they crossed lines, ethically or even legally. They opened accounts for customers unauthorized, meaning they had never agreed to open an account like that with the bank. When customer contacted, they just apologized for the mistake and let it be. This all ended up for Wells Fargo firing 5300 employees and got fined by $185 million (Egan, M. 2016).
Next up, as probably someone would have guessed, was the managers on the line. According to BBC- article written eleven days after (20.9.16) the CNN one Wells Fargo boss was fired due to the scandal. Banks had opened more than two million credit and debit card accounts without customers' agreement. The chief executive John Stump kept apologizing, but he was accused by the senator for squeezing the workers into a situation where is no other choice (CNN, 2016).
When there is a scandal going on, it's easier to bring up other issues as well. The CNN article handles a case tied to the account scandal, where Wells Fargo made workers to work extra ''call nights'' where they would call customers trying to sell them extra credit cards or other additional products. With no extra pay, these extra hours were usually happened if the target sales had not been met. Wells Fargo sort of pushed the problem back to the workers saying, that it's employees responsibility to report all the hours. Employees replied that they were not allowed to report hours after 5:30pm, which is very problematic. It caused major issues for workers who have families. They could not leave their job and later on when they got fired, they faced major financial issues for someone else's mistakes (Egan, M. 2016).
The fourth article comes back well to the second one, where the Wells Fargo CEO John Stumpf were wanted down from his position. Ten days later from the article, 30th of September 2016 it was announced that he has been released from his duties. He claims that he has been working for the best of the company, but still decided to step down. It's a bit questionable, most likely was not his own choice (BBC, 2016).
The series written by Matt Egan for CNN continues, when he wrote an article about a letter from an employee that warned Wells Fargo already in 2007. He was warned for illegal and unethical activities, but later on the board told press that he never saw them. All in all this proves that the whole scandal and its practices were going on a long time before 2011- when it was brought public (Egan, M. 2016)
All this was very new to me. I haven't heard of this scandal before while more than 5 000 people were laid off and it had impacted so many lives. I can only think of the situations the workers were in, also some managers were most likely pushed to the situations with no options. It must have been major crisis at Wells Fargo HR department as well, when so many people are suddenly leaving the company, none of them probably with a large exit package as the CEO John Stumpf, $130 million (Egan, M. 2016). I am sure their HR department had hands full of work for unhappy workers due to the fact that thousands of people without a choice, friends of the employees left in the company, have been laid off and are struggling with their lives. Now this man responsible for all of it walks out with more than enough money for the rest of his life. Even the senator wanted him to return the money he earned during this scam (Egan, M. 2016).
Wells Fargo seemed also to have an HR policy to just fire everyone possible. If an employee should have started working 8:30, but showed up 8:32, they were gone. Even former HR official from the company confirms this information (Egan, M. 2016). And from all the problems these kind of situation could lead, it's probably no surprise that the talent out there are not wanting to join Wells Fargo (Allocca, S. Welsch, A. 2018).
Allocca, S. Welsch, A. 2018. FinancialPlanning OWC. Latest Wells Fargo scandal threatens recruiting efforts https://onwallstreet.financial-planning.com/news/latest-wells-fargo-scandal-threatens-recruiting-efforts accessed on 15.4.2019
BBC. 2016. Wells Fargo boss John Stumpf steps down. https://www.bbc.com/news/business-37639648 accessed on 15.4.2019
BBC. 2016 Wells Fargo boss urged to resign over accounts scandal. https://www.bbc.com/news/business-37419968 accessed on 15.4.2019
Egan, M. 2016. CNN. I called the ethics line and was fired https://money.cnn.com/2016/09/21/investing/wells-fargo-fired-workers-retaliation-fake-accounts/index.html?iid=EL accessed on 15.4.2019
Egan, M. 2016 CNN. Letter warned Wells Fargo of 'widespread' fraud in 2007 - exclusive https://money.cnn.com/2016/10/18/investing/wells-fargo-warned-fake-accounts-2007/index.html accessed on 15.4.2019
Egan, M. 2016 CNN. Wells Fargo made me work overtime - without extra pay. https://money.cnn.com/2016/09/30/investing/wells-fargo-workers-wage-theft-overtime/index.html accessed on 15.4.2019
Egan, M. 2016. CNN. Wells Fargo CEO walks with $130 million. https://money.cnn.com/2016/10/13/investing/wells-fargo-ceo-resigns-compensation/index.html?iid=EL accessed on 15.4.2019
Egan, M. 2016. CNN. Workers tell Wells Fargo horror stories. https://money.cnn.com/2016/09/09/investing/wells-fargo-phony-accounts-culture/index.html accessed on 15.4.2019
For next week we are studying ethics and outsourcing HRM. Outsourcing is usually deployed due to difficult situations managers face. The problems can be divided into three major categories.
There is also lots of of organizational challenges. It could be downsizing, advantages in technology, increasing number of small businesses, and the rise of outsourcing. These all are challenges that an organization itself may face in HRM.
Individual challenges are also as it describes itself, individual person's challenges. They can be something like treating employees ethically, increasing individuals productivity, and dealing with issues with job insecurity.
If done correctly, planning HR can provide multiple benefits, direct and indirect for a company such as:
It can be challenging to create a HR strategy. The strategy needs to be creating and maintaining a competitive advantage of the company, avoiding day-to-day problems, developing strategies suited to unique organizational features, and accommodating change. Companies must make choices in many HR areas, for example work flows, staffing, employee separations, appraisals, training and development, compensation, employee rights and so on. If done correctly, it's possible the strategy is very helpful and let's HR managers work efficiently.
HR managers need to be working fluently with all the other managers in order to have a nice working environment. Partnership throughout all in managing positions help employees also to feel familiar with company and its policies. The past years the trend has been, that the number of HR professionals is increasing even though the size of companies HR departments are decreasing. This is due to outsourcing HR to some external consultants. Some companies even outsource their whole Human Resources department.
Our mandatory link from BBC handles an ethical problem about child refugees in Turkey making clothes for shops in the UK. This is very difficult situation for a company in multiple different ways. It's awkward having to explain these kind of situations for customers buying their products, since it is not acceptable in any way. It is bad for the children working, because well of course they should not be working, but also they get a terrible salary plus their working conditions are inhuman. Dangerous chemicals and awful working hours may effect their lives negatively for a long time (BBC, 2016). It's also tough for company's managers to try to keep their employees happy when there is news about some of them products made in bad conditions. It may affect to employees mindset and productivity. While these kind of news are unacceptable, it would also to be crucial for the companies to do the best this will not happen again and improve the conditions.
Our other link from AdvisoryHQ handles the other topic, outsourcing. There is listed the 7 best HR consulting firms, with the information of how they have been chosen. The best HR consulting companies focus on:
AdvisoryHQ, 2018. Top 7 Best firms for HR consulting and ranking https://www.advisoryhq.com/articles/hr-consulting-firms/ accessed on 8.4.2019
BBC, 2016. Child Refugees in Turkey making clothes for UK shops https://www.bbc.com/news/business-37716463 accessed on 8.4.2019
Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London. ISBN-10: 1292097248 accessed on 8.4.2019
Marjomaa-Mäkinen, M. 2014. Azets Finland. Miten HR on ulkoistettu suomalaisissa pk- yrityksissä? https://www.azets.fi/blogi/miten-hr-ulkoistettu-suomalaisissa-pk-yrityksissa/ accessed on 8.4.2019
Quantum Workplace, 2019. https://www.quantumworkplace.com/ accessed on 8.4.2019.
For the next week we are focusing on exit management, when employee is leaving the company. The compulsory sources are chapter 6 from the course book and a few articles I will go through later on this post.
Employee separations occur whenever an employee is leaving the company they are working for. The exit of an employee should be well managed with thought policies. Employee separations have costs and benefits.
There is different types of employee separations, meaning different ways and reasons for workers to leave the company. They may leave voluntarily or involuntarily. Voluntary separations include quits and retirements where as involuntary separations include discharges and layoffs. When employee is leaving involuntarily, there is a lot more paperwork and documentations needed to show that the manager's decision to lay off the employee was fair.
When organization is growing negatively, or downsizing, managers might need to lay off people and negotiate with employees if there would be any possible voluntary early retirees. The programs on early retirement must be managed so well, that the employee does not feel like being forced doing it. They must feel doing it voluntary.
The final stage of cutting expenses and after everything else has been made, should be layoffs. When there is no other options. There are important considerations in policies whenever laying off employees:
If possible, some companies help their laid-off employees with getting a new place to work for or help them on educating themselves for the new career. Using outplacing services helps employees cope with their emotions and minimize the time they are unemployed.
These mandatory links were all about Nokia and its difficulties and layoffs. The first one I read was from Communicating Labor Rights handled the Nokia case where they moved their factory from Bochum, Germany to Romania. It caused massive layoffs for Nokia's German employees and at the same time it was a big movement for Romania getting a large factory. From Nokia's point of view they saved lots of money from salaries when Bochum factory was not beneficial (Communicating Labor Rights, 2008).
Nokia's layoffs and troubles continued throughout the years and in April 2012 Accenture's Symbian developers were let go. Nokia had transferred 1200 developers to Accenture earlier, trying to lower costs from their employees. Employees kept working the same way, just getting their salaries from a different company. Now at 2012 they offered a deal where the workers could get up to 15 months salary in order to re-educate themselves or time for finding a new work place. 40% of the developers took the deal and moved on in their careers (YLE, 2012). This was a great use of outplacing.
Two months later from that, June 2012 Nokia announced they will cut 3500 employees, again, to lower labor costs. Now this time they closed the new factory in Romania opened a few years back. Also 300 people in Finland were let go. It's also mentioned that 1400 workers from Finland are supposed to let go by the end of 2012.
Even though Nokia laid off thousands and thousands of people one after another, according to HRM partners 80% of the previous workers were generally happy on 2016. Nokia offered support for those who left the company aiming to establish their own, financially and through training. Those who started as an entrepreneurs 64% reported themselves doing well, or good (HRM Partners). This supports the image I had from the news I have read over time, that even though Nokia's falling was a big tragedy for many people, they still managed to make it reasonable for the most. They didn't just let people fall into nothing, but wanted to help them to keep working and offered packages, training, and financial aid for those in need.
Communicating Labor Rights. 2008. Nokia Closes Plant in Germany and Recolates in Romania. https://communicatinglabourrights.wordpress.com/2008/01/17/nokia-closes-plant-in-germany-and-relocates-in-romania/ accessed on 1.4.2019
Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London. ISBN-10: 1292097248 accessed on 1.4.2019
Palmroth-Leino, E. 2016. HRM Partners. Employees who have left Nokia are generally satisfied with their situation. https://www.hrmpartners.fi/en/2016/04/employees-who-have-left-nokia-are-generally-satisfied-with-their-situation/ accessed on 1.4.2019
Yle, 2012. Hundereds of Nokia's outsourced Symbian developers leaving Accenture. https://yle.fi/uutiset/osasto/news/hundreds_of_nokias_outsourced_symbian_developers_leaving_accenture/5252177 accessed on 1.4.2019
Yle, 2012. Nokia cuts 3500 jobs to ensure ''profitability''. https://yle.fi/uutiset/osasto/news/nokia_cuts_3500_jobs_to_ensure_profitability/5431070 accessed on 1.4.2019
For some reasons, after remodeling this site the platform removed the previous blog posts. I will try to work with support in order to get those back.
But this week I read chapters 10 and 11 from the book and the mandatory articles. Starting from the chapter 10 - Managing Compensations. There is three different kinds of compensations: Base compensations, pay incentives, and benefits or indirect compensations. Base compensations is a fixed pay on a regular basis. Pay incentives are programs that have been designed to reward good performances and benefits could be like health insurance, vacations, or having a car from the company.
It's important for the company to design a compensation plan that is effective and at the same time if fits to the company's culture. There are lots of things managers need to consider when creating a compensation plan, for example:
The two categories for compensation tools are job-based approaches and skill-based approaches. Job-based compensation has three major components. To achieve internal equity, companies use job evaluation to assess the value of jobs in the company. To achieve external equity, they use data of salaries on benchmark or set a pay policy by browsing key job market surveys. The third component is to achieve equity for individuals. Using the combination of experience, skills, seniority, and performance to create worker's position within the pay range for their job.
In the U.S. There is major federal laws governing major compensation practices. They are called the Fair Labor Standards Act (It has covered minimum wage, overtime payments and guidelines for classifying employees as exempt or nonexempt), Equal pay act, and the Internal Revenue Code. Some countries and municipalities have comparable legislation, which stands for comparable pay for jobs that require skills, effort, and responsibilities and have comparable working conditions, even if the contend of job is different.
The first mandatory article I read, was written by Kevin Krouse to the Forbes Magazine, about employee engagement. He started well describing what it is not: such as employee happiness or employee satisfaction. Employee engagement means employee's emotional commitment to organization and its goals (Krouse, K. 2012). In that case, the software developer works overtime when needed without being asked. Workers clean up together their environment for example keeping the floors clean even if the boss is not there watching (Krouse, K. 2012).
According to the article, companies with engaged workers have 6% higher net profit margins and these companies have five times higher shareholder returns over five years. Engaged Employees lead to:
An article from entrepreneur.com describes well also about rewarding employees the factor that not necessarily is money. They want to feel acknowledged and appreciated by the managers, which was also included in the second Forbes mandatory article.
Second mandatory article was written by Mike Kappel in 2018 to Forbes Magazine as well. He writes about how to build and establish an employee management culture into a company. He introduces the 5 ways to encourage employee engagement.
On the chapter 11 from our book the concept of Pay-for-Performance is clarified and studied well. The major challenges come when the workers won't feel like doing the intangible things they don't directly get paid for. Individual performance is difficult to measure and the payment strategy should be carefully considered. There is different types of salary combinations. Some of them are just provision, some have lower base salary with some provision, and then higher salary with smaller additions to it. They fit well in different situations, that should be every time thought well through before implementing them.
Entrepreneur. The Best Ways to Reward Employees. https://www.entrepreneur.com/article/75340 accessed on 30.3.2019
Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London. ISBN-10: 1292097248 accessed on 30.3.2019
Kappel, M. 2018 Forbes. How to Establish a Culture of Employee Engagement. https://www.forbes.com/sites/mikekappel/2018/01/04/how-to-establish-a-culture-of-employee-engagement/#64fd84b78dc4
Kruse, K. 2012. Forbes. What Is Employee Engagement. https://www.forbes.com/sites/kevinkruse/2012/06/22/employee-engagement-what-and-why/#5a9b5aa27f37 accessed on 30.3.2019