Facing Rejection With Class

Given the exceedingly tough job market over the past few years, I thought it would be helpful to give a few tips to job seekers on how to handle being turned down for a job. As a matter of law, an employer does not have to contact a rejected candidate to inform them that they were not selected. If you haven't heard back after following up with the prospective employer or recruiter, they have probably elected to move in another direction. However, losing out on a job could be turned into a future opportunity.

* Remember that recruiters or staffing agencies work with multiple accounts and may have other openings that would fit you better than the one you didn't get, so keeping good relations with them is imperative.

If you do happen to receive a call about the bad news, here are a few things that you might try to set up a future opportunity:

1. Always let them know that you appreciate their time and consideration, especially in that they've performed the courtesy of contacting you to tell you that you weren't selected.
2. Ask for feedback! Let them know you are always looking to improve yourself and their input can help you be a better candidate in the future.
3. Express a desire to keep in touch regarding future opportunities. Adding them to your LinkedIn network might be a good idea.

Vendor Discrimination?

I recently had an opportunity to work on a case where a company received a letter from an independent contractor that had been bidding to provide its services who claimed to have been discriminated against because he was not selected in the end. The employer was naturally concerned about the exposure to liability and sought assistance in replying to the allegations. As a rule of thumb, employment law only governs conduct between employers and employees. In this case, a vendor of services or independent contractor is, by nature, not an employee and is not covered by Title VII. However, this doesn't mean that you are immune from liability from every independent contractor on your roster. If you recall in my article about the misclassification of 1099 workers, the determination of who is and is not an employee will be based on their actual job duties with a company. Not only is it always important to carefully review the circumstances surrounding each allegation of labor law violation, but to proactively review the classification of your employees and independent contractors to make sure they are appropriate so there aren't any surprises if you should ever find yourself the recipient of a similar letter.

How much does health insurance cost?

Now that you've organized your business, this may be a good opportunity to flex that employer muscle to set up some benefits for yourself and your employees. This may even be an indispensable tool for helping you attract and retain quality employees, especially as healthcare has become an increasingly hot button topic for many.

Interestingly, the first question employers ask tends to be the least relevant. How much does it cost? Well, that depends on what you're looking to get and what kind of group your company is. Much like buying auto insurance, which is determined based on the type of vehicle, driver risk and policy provisions (deductibles, maximums, etc.), the cost of benefits are going to depend on multiple factors. Ultimately, there's no such thing as employee benefits that are "on sale" or discounted to create more value. Because the premise of insurance is the protection against risk, the results for premiums are very tightly controlled according to well defined mathematical formulas. As a result, you'll pretty much get what you pay for, so it's better to ask a different question and decide whether its in your budget.

The question everyone should actually start with is, "What kind of employee benefit platform is right for me?" This focuses the conversation on the needs of your business and employees rather than just cost. The answer will depend on a variety of factors:

  1. Group Size - There are essentially two markets, small group (2-50 employees) and large group (50+ employees). Small group policies have age banded rates, so the premiums will not only vary based on the plan features, but also the age and location of each employee. This makes it more difficult to budget for growth in your company since your costs can't be scaled predictably. Large group policies have composite rates that don't change based on the demographics of the employee. If you're currently under 50 employees, but would like to have access to the large group rate structure, consider joining a multiple employer plan through a PEO or fix your contributions to a specific dollar amount and leave it to the employee to absorb the variance due to their demographics.
  2. Industry Standard - A well trained HR professional should evaluate how common health insurance benefits are for each position in your company based on a compensation analysis using data from similar companies. You may not be able to avoid paying for health insurance if the new Systems Engineer you're looking to hire is offered these benefits everywhere else. This ought to be considered part of the overall compensation and budgeted for accordingly. Remember that benefits are a way to make your offers more competitive and attractive to potential candidates!
  3. Employee Demographics - As insurance companies have developed more focused programs, like HealthNet's Salud, it's becoming increasingly more relevant to make sure that the plan you're considering and it's network is appropriate for your employees. After all, it does you no good to offer a plan that doesn't have any coverage in the region your employees reside, even though it might be inexpensive.
In the end, your consultant should prepare a short list of options, focusing on high fit solutions and discuss a multi-year program of development for your benefits platform. Only then can you make an informed decision about whether your organization is ready to make the commitment to providing benefits!

Hidden Cost of COBRA

In the aftermath of the economic meltdown and resultant increase in unemployment, millions of American workers lost access to affordable healthcare through their employers. Normally, this would leave a former employee with a tough pill to swallow in paying 102% of the full insurance premium compared to what is normally a much lower cost since the employer's contribution is no longer applicable. In the past that meant that the only people likely to pay that increased amount were those who were most likely to cost the insurance more than they would be out of pocket otherwise. Statistically, it had been measured that a typical COBRA participant had a utilization of 150%, which means that for every dollar they paid in premium, they cost the insurance company $1.50 in claims. It's no surprise that the number of COBRA participants attached to a company's policy will significantly affect the overall premium for the group. After all, the insurance company must charge enough to cover their expenses and leave a profit on top. When the American Recovery and Relief Act (ARRA) was passed, it provided a subsidy to the COBRA premium of 65%, and it was expected this would draw in healthier COBRA participants and reduce the high utilization of that population. Oddly enough, although COBRA enrollment numbers climbed significantly due to the lower cost barrier resulting from the ARRA subsidy, the utilization remained at 150%. The high rate increases the last few years are a direct response to factors like this where the insurance company is attempting to balance out its losses by raising the costs to the healthier groups.

So what should an employer do? Since COBRA rights are fixed in the law and those participants will not be present in the work environment, the employer must focus their energy on the health of the active employees that are enrolled in the group plan in order to offset the claims of their COBRA population. Incentivizing healthy activities and eating habits are a great way to mitigate insurance increases. That kind of atmosphere also creates a more productive workforce with higher morale, so it's a win-win. A well trained HR professional can help craft, implement and maintain this kind of initiative with a minimal budget. The most valuable asset they'll need though, is executive support and buy in to help motivate the rest of the staff to follow suit.

Reputation vs. Regulation

In the world of employment practices, we are sometimes so wrapped up in determining whether a regulation prohibits us from doing a thing that we forget to ask whether we should do it at all. For example, because California is an at-will state, a company can generally withdraw an offer of employment at any time. However, presenting a candidate with an offer and a start date will probably lead that person to cease looking for other opportunities. If that offer is revoked, you can imagine the frustration the candidate is going to feel when they have to play catch up in the job hunt, especially if they declined other offers because they had already accepted yours. That frustration may even cause the candidate to look into legal remedies on the basis of discrimination, if they belong to a protected class. At the very least, a negative experience usually leads someone to express their dissatisfaction to 26 others. That number is more likely to be higher when the experience directly affects someones livelihood though. Eventually, this bad mojo affects the company reputation so much that it becomes difficult to recruit top talent who are then more likely to work at the competition. Because websites like Glassdoor and social networking forums like LinkedIn have accelerated and amplified the effects of negative employee experiences, it's extremely important to carefully consider how your policies can impact your reputation even if they are lawful.

Unpaid Interns

With the downturn in the economy over the past few years, we've seen an increasing number of unpaid intern positions pop up, which capitalize on the eagerness of people to work in any capacity on the chance that they may get a permanent job. This has prompted the Department of Labor to begin scrutinizing these positions to ensure that employers are in compliance with the wage and hour rules under the Fair Labor Standards Act (FLSA). There are six factors that need to be met in order for an intern to be unpaid:

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;  
  2. The training is for the benefit of the trainees;  
  3. The trainees do not displace regular employees, but work under their close observation;  
  4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded; 
  5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and  
  6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. 

According to Advisory Letter 12-09, "If the workers are engaged in the primary operations of the employer and are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits is unlikely to make them trainees given the benefits received by the employer." In other words, if you are using interns as a form of free labor, you're probably out of compliance and could be the target of a potential wage and hour claim. As I've mentioned previously, the penalties piled on top of the owed wages can make this an extremely costly mistake, especially if unpaid interns have been a longstanding practice at your company.

The Right (Sales) Stuff

Most startup companies are born out of a clever idea and gobs of sweat equity in turning that concept into a product or service. The biggest decision you face at that point is how to market your product, draw in investors and reach your exit strategy. Unfortunately, product development skills don't always translate into sales savvy, so many founders must look to bring in leaders to grow their sales orgs.

Traditionally, the path to fast money and showing the "hockey stick" growth curve to boards has led companies to gravitate towards sales executives with backgrounds transactional sales models where quantity is the key driving metric. Initially, this method produces "revenue" numbers that prompts investors to throw tons of cash into the expansion of the company, which increases the operational overhead. However, when the incentive for the department is aligned with speed and quantity, shortcuts are usually taken, which manifests itself in escalating churn and more resistance to repeat purchases.

The boiler room environment is best suited for very simple transactions that focus primarily on a fixed, predictable cost to result relationship. For example, "X number of dollars buys you Y number of leads, which results in a Z increase in sales... how many leads would you like to buy?" However, if your product requires a better understanding of the client before the pricing can be prepared, like a media campaign or consulting services, the transactional sales org is most likely going to try and find a way to convert that into their model. This usually produces something along the lines of, "Our service will cost you less and produce X results for your business, so you should buy from us." The expectation set is that of a fixed result. The customer may believe this the first time, but if the results don't match the expectations, they will probably cancel and be unlikely to renew. That churn not only takes projected revenues off the table, but will also make it harder to course correct down the road due to the negative experiences accumulating in the market space about your company. Meanwhile, the accelerated growth will have left you with a tremendous overhead and with the inevitable sagging sales figures, your burn rate will go through the roof.

An alternative method known as the complex or consultative approach is based on the notion that the customer's needs must be understood in order to make their experience with the product or service more successful. This usually results in a longer ramp time and sales cycle, but provides solid revenues by minimizing churn and building a reliable book of business. The sales leaders that are most appropriate for this kind of role will come from a space where sales and account management are somewhat blurred. For example, consultative salespeople are often in regular contact with their clients, managing their expectations and reinforcing the value statement. This type of sales org is evaluated on metrics like activity, quality and retention. Opting to go this route may not generate as much of a funding frenzy, but will probably result in a much lower burn rate since the infrastructure will never get ahead of the pipeline. That means you'll be operating in the black and less affected by fluctuations in the mood of the funding community. It also creates real value in your company, whether your exit strategy is to sell or to IPO.