The Goals of My Position
Because I have responsibility for both HR and strategic planning, my goals reflect both areas. Wholesale distribution is a highly people-intensive business, and I believe that, while the two areas are distinct from one another, they are inseparable.
From an HR perspective, our major goals mirror the HR goals of many other companies. First, we’re working to provide a valuable benefits package for our employees without jeopardizing the financial health of the company. With the rising cost of medical benefits and the challenge of funding other benefit programs, this is a major priority for our HR team.
Our second major initiative is succession planning and executive development. We anticipate a workforce shortage going forward, especially in leadership positions. Just as an example, our “average” employee has just under twelve years of experience with the company and is in his or her forties. We know that people tend to work longer than they did in the past, but even so, our number of employees under the age of thirty is far less than the number of employees that are over fifty. In ten or fifteen years, that will leave us with a large gap, unless we take action now. In addition, we’re finding that it’s much more difficult to get people to move into management positions, especially when relocation is a requirement. Employees today want more life and work balance than they had in the past, and we're starting to see the effects of that trend. So, a big challenge for us is to continue developing a “bench” of solid leaders to take the company into the future.
Our third initiative is to move the “ownership” of HR to our managers. Over the years, it seems that people issues were automatically directed to HR. But we’ve learned that it’s more effective when the HR team takes on a support role. We’re here to provide the tools, advice and resources to help managers with this task, but our role is not to take ownership of every “people” issue.
I spend a lot of time reminding managers throughout the company that people are their most valuable asset. We are all working to help the company achieve its business objectives, and we can only reach our goals by having the right people on board and equipping them to succeed. I come from the “business” side, not HR, so I am highly focused on creating value in the organization by helping managers achieve great results through their people.
The Three Most Important Things I Do to Add Value to the Company
In my team, we need to execute the “basics” consistently and effectively. I’m a pretty big stickler when it comes to reviewing what we’re doing, how we’re doing it, and whether we’re adding value. For example, we carefully monitor and manage our relationships with various benefits suppliers, insurance providers, and any other company with which we have outsourcing agreements. This helps to ensure that our audits don’t contain surprises and that the HR needs of our employees and the company are being met.
Another way I add value is by contributing to the design of the company’s medical and pension plans and benefits. In HR, it’s our responsibility to provide recommendations about what we can do to get the biggest “bang for our buck.” Or, in the case of medical costs, for example, our medical claims trend last year as compared to 2003 was approximately a 4.3 percent increase per member per month, which is much lower than average. I believe that’s partially because we’ve been educating our employee owners on how to be smarter “benefits consumers.” That has a direct financial impact on the company, especially in light of skyrocketing medical costs. Our medical and drug expense for active employees was virtually flat last year. I don't think many companies can say that.
Third, HR has a direct financial impact through the effective implementation of training and development. For example, we believe that managers in the organization have a significant influence on, and responsibility for, the success of the business. As a result, we work very hard to equip managers to make smart business decisions. Many of my HR people spend a lot of time discussing business issues with business people, rather than just talking about HR issues. I continually reinforce with them that we're business people first. HR just happens to be our specialty.
Strategies of a Successful HR Leader
I believe a successful HR leader must keep a constant eye on the priorities of the company. The biggest change that people saw when I took over HR is that I brought a lot of my business experience and discipline to the department. I’ve run a number of major initiatives, so I tend to approach things from a results-oriented perspective. My first question to the team was, “What legal, operational, or administrative things do we have to do?” Then, we asked, “What do we need to do to support the company’s goals, both in the short- and long-term?” We found that we were doing some things that really didn’t directly support the company’s objectives or our operational requirements. We decided to stop doing those things and spend our time on other priorities. I believe that in HR our job is not to make people happy, but to add value by helping the business achieve its goals through good people practices.
I also find that balance is the key to being a successful HR executive. You must be very strong and focused, yet not heartless. You have to balance the objectives of the corporation with those of the human side of the business. You have to know the business and work well with your peers so that you have the credibility and the relationships to help make decisions for the company.
The third thing that contributes to the success of an HR executive is the ability to lead. The gentleman who preceded me in my job gave me a really valuable piece of advice. He was an HR professional throughout his career, first with General Electric and then with Graybar. I have great respect for him and his wisdom. One day, he told me, “Remember, Kathy, to lead and not drive. There’s a difference.” Knowing my style and background, he continued, “That’s going to be the biggest adjustment for you, coming out of the real hard-line business side. You need to show more of your leadership side and less of your driven, focused, pushing side.” I remind myself of his advice often and am continually working to develop my leadership skills.
Some of my greatest challenges deal with misconceptions about HR and the people that work in this area. Often, people have an attitude that you’re “just” in HR. Even though I'm on the Board of Directors and on a number of key committees, there are still occasions where people react to my suggestions by indicating (either directly or indirectly), “Well, you’re just in HR.” To me, that is very, very difficult. Knowing what the perception of HR is, I try to add value to the business by providing practical solutions, instead of just giving anecdotal opinions.
The biggest misconception about my position is that I'm a “softie,” that being in HR means that you automatically lead with what’s in the best interest of the person or the employees, versus what’s really in the best interest of the company and the employees. Many people who meet me for the first time tell me, “You’re not what I expected,” because I’m very direct, and I say it like it is.
Another misconception is that HR people don’t understand business issues. I think there are plenty of HR people that don’t understand how business works, but I’ve found that the best HR people have had other experience within the business world, in Finance or Operations, for example. This gives them a better appreciation for the reason why HR exists, to support the business. The people on my HR team have very diverse backgrounds, which help them work more effectively with the business and with each other.
Among the day-to-day challenges I face, personnel issues, especially those with a legal connection, are very difficult. I need to look at the situation from the “people” side but, also, from the angle of business risk. In those situations, I always get advice from our legal experts. Then, I sit down with the business leader, and we decide on the best commercial decision for the company and the best resolution for the employee.
Performance management is always challenging, especially when you’re dealing with long-term employees that were never told by their managers that their work was not meeting expectations. That’s one of the big reasons why I’m really focused on shifting the “ownership” of HR issues to the managers. It’s their responsibility to develop their employees and ensure that their performance meets expectations.
Technology presents a unique challenge for HR, since many routine HR activities can now be automated. This trend also gives companies the option to outsource many of their administrative and operational tasks. As a result, HR people as a whole are trying to redefine their roles. I see a big transition for a lot of HR executives and HR people, even within our own company. What value can they bring to an organization when their core tasks are moved out or done differently? What skills do they need to be a successful HR professional in the future?
My role in HR is to remind people of the key things that differentiate us as an organization. I continually point out that investments in our people bring us financial impact. By having somebody who talks business first, HR really becomes a business discipline, not just a back office function. We should be at the table on any major business decision, because it always impacts our employee base…always.
HR Relationships and Resources
As an HR executive, I am continually working to cultivate strong working relationships with my boss, my peers, my team, and others inside and outside of the organization. First and foremost, I report to the company’s President and CEO. This relationship is critical to ensure that my team’s goals and my own goals support what he needs done on behalf of the corporation. My role with him is to be a sounding board, to reiterate our focus on business objectives and to represent fresh ideas and approaches to ensure that we stay true to our mission.
Probably my second most significant working relationship—other than with financial and legal, which I work with every day—would be with the executive that runs the profit and loss side of the business. He and I need to be in alignment because he is responsible for the vast majority of the employees in the organization. The only way we can accomplish significant HR actions is through his support and involvement. Fortunately, he and I have worked together for many years and have a good relationship. In most cases, he and I sit down and discuss things far in advance of putting out any new policy changes, programs or procedures. While we disagree on occasion, he is very supportive of HR, and I do my best to make HR less of an issue for his people.
As far as working with my own team, every year, we sit down with a planning session and review the previous year. First we talk about the goals for the company. As a team, we agree on what the goals are for each functional area and what we’re going to do cross-functionally within the department. We ensure that these goals will support the business goals and create teams to begin working on the key projects.
We track our goals in a tool called the “Employee Development System.” This allows us to show the linkage between our individual goals and the larger organizational goals. It also helps us monitor our progress. About every 120 days, I sit down with each of my HR managers one-on-one, and we review their own progress. We also review our progress regularly as a team to make sure that we’re staying on the right track and moving forward with our key initiatives.
I continually remind my HR management team to think strategically. They’re all experts in their unique areas, and, unless we continually remind ourselves to step back from the details, it’s very easy to migrate toward the tactical and operational tasks.
Because we’re one of the largest companies in our industry, we are invited to participate in a number of associations and teams. That’s a real advantage, because we learn a lot and can contribute to some important projects at the same time.
We participate in national and local surveys and industry bulletin boards. Our employees also sit on boards and committees. We’re continually networking with other major corporations to find out what they’re doing and to share our knowledge. We also enjoy working with colleges and universities in a variety of ways, whether it involves participating in research or trying new approaches to education. I believe that it’s critical to know what’s going on outside of the company, and I require everyone who works for me to be involved in outside organizations.
On a personal level, I’ve really benefited from participating in some executive education courses. Some of the best I’ve found were at Harvard University and the University of Michigan. These programs allowed me to develop relationships with a lot of other HR executives and discuss important trends and best practices in HR.
Aspects Unique to My Industry
In wholesale distribution, we have a couple of unique issues. The first deals with pay as a motivator. Wholesale distribution operates on extremely low returns, and we strive to hire people that want to work for a company for more than just the money. In many cases, we can’t compete with the pay in other industries, but we can offer a wide variety of challenges and opportunities. Of course, we certainly strive to provide a good compensation package for our employees, but we really try to find people that are more motivated by the challenge than the money.
Also, in our industry, we typically have modest turnover. Wholesale distribution, as a whole, has very low double-digit overall turnover of headcount. Employees of many wholesale distributors tend to stay around a while. We have a lot of outstanding employees; so, in most cases, that’s a very good thing.
Our company is 100 percent employee-owned, which is a very unique attribute, especially for a company of our size. This affects our company’s culture in many ways. Our employees are the shareholders, so I believe that we pay a lot more attention to employee issues and concerns than some other companies may.
Most of the HR budget goes to direct personnel expenses. I should probably clarify that this is “pure” HR budget and does not include the Benefits “Plan” expense budget; the first thing on the fringe benefits report after salary is medical and medically related expenses. We have taken over and centralized our service group, so payroll and benefits are all handled from a single source. That in itself, from a headcount perspective, was a shift in the budget and in the way we approach many of the administrative tasks related to HR.
Our second largest budget item is training. We firmly believe in the value of investing in our people. We know that it makes a difference.
How do we decide what gets spent where? Some of it’s required. When we centralize certain services, we need to be sure that we provide the level of service our employees expect. Training, on the other hand, is driven by a work-force analysis. We compare the business objectives with our work force, from an experience level as well as demographics. Then we try to decide how we’re going to close that gap and where we’re going to put our resources.