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Thursday, June 26, 2008

The Gun Debate at Work

On my way home last night I listened to a long-form news report on NPR about the Supreme Court's ruling in District of Columbia v. Heller, where the court ruled that law-abiding citizens have the right to own guns for their own protection. The case has been years in the making and involved overreaching gun control laws in the District of Columbia which prohibited lawful handgun ownership. NPR, of course, was predicting the end of civilization as we know it. Curiously enough, it blamed D.C.'s unacceptable violent crime and murder rate not on defenseless citizens, but on gun shows in Maryland. In other words, their answer to the dismal failure of gun control in D.C. was to export it to Maryland.

The high court's ruling came on the heels of yet another workplace shooting, this time at Atlantis Plastics in Henderson, KY fairly near my home town. There Wesley Higdon shot his boss and five coworkers before killing himself. He used a handgun that he kept legally in his vehicle (as even non-permit holders are allowed to do). Looking at shootings like this one and hearing about the loosening of gun ownership restrictions, it would be easy to draw the conclusion that more guns make a society less safe, and banning guns at work or elsewhere will reduce shootings. Well, not so fast.

D.C. has been notorius for gun violence for years. Their solution was to disarm their people and rely completely on police for protection. Kentucky's solution was to develop a system to qualify law abiding people to defend themselves. Part of this difference is geographic, as in a larger rural land area police can't be everywhere. Growing up in rural Western Kentucky, I remember the only time we ever called the county sheriff (because of a break-in one of our barns) they called us three days later to see if we still needed them to come out. D.C. is a more compact and urban land area and more conducive to police response.

But another more important difference is cultural. D.C. has a larger percentage of its population in public housing, on public assistance of one type or another, and is a more urban/community-oriented culture. Kentucky is more rural, and more than slightly ornery. One of the foundations of Kentucky jurisprudence in the area of self defense comes from a 1931 case Gibson v. Commonwealth where the state supreme court established the right to self defense, emphatically, by ruling:

"It is the tradition that a Kentuckian never runs. He does not have to...he is not obligated to retreat, nor to consider whether he can safely retreat, but is entitled to stand his ground and meet any attack made upon him with a deadly weapon"

Based in large part upon this foundational ruling, Kentucky passed one of the best Concealed Deadly Weapons laws in the country in October, 1996 and I obtained my permit within a few months of its passing. To date, literally thousands of permit holders have successfully defended their lives, the lives of others, and their property with deadly force. To date, not a single permit holder has been charged or convicted of misuse of deadly force.

The results of the D.C. and Kentucky approaches are clear. In Kentucky the murder rate was increasing steadily from 1960 when such records started being kept on a statewide basis, until 1996 when the law was passed. In 2006 (last year for which I can find data), the murder rate is at its lowest since 1963. In 2006, Kentucky had 169 murders with a population of 4.2 million while D.C. had 168 murders with a population of 581,000. In 2006 Kentuckians experienced 2.6 violent crimes committed for every 1,000 people; in D.C. that number was 15.1.

D.C's high crime rate is because it is the ultimate soft target, like workplaces and schools. Any place where people are defenseless and can't shoot back is an easy target for someone with bad intentions and a gun. When's the last time you heard of a crazed gunman walking into a police station and opening fire?

The Supreme Court got this one right, and the answer to the horrible phenomenon of workplace shootings is to qualify and register honest people to carry and use deadly weapons, and then allow those in the workplace. The Kentucky law, unlike Tennessee, specifically prohibits businesses from terminating permit holders for carrying a firearm on company property regardless of company policy. However, Kentucky allows employers to restrict that firearm to the personal automobile of the permit holder making the workplace, as in Tennessee, a soft target unless you have armed security. It should be up to each employer to quietly change their policies to allow permit holders to carry in the workplace and save the lives of themselves and their coworkers the next time some crazy with a gun walks into the lobby.

Should we care about this at Christian companies? Absolutely! As my former boss once said, "There are nuts, and there are religious nuts, and those are the ones to fear".

Sunday, June 22, 2008

Realtor's Fees Driving Relocation Costs

The slowing real estate market is bringing to the forefront a long-simmering problem for small-to-medium-sized companies. The majority of corporate relocation expense is now reimbursement for realtor's fees. That just feels wrong in so many ways.

For decades the best practice in relocation management, if your company is too small to buy the houses of the relocating candidates or employees, has been to reimburse realtor's' fees for the selling of their current house and closing costs on the purchase of a replacement in the new city. This is 6% on the selling side and 2% on the buying side, and assuming that the transferee purchases about the same priced home as the one they sold, that's a flat 8%. When this practice became industry-standard, a modest 1500 sq. ft. in a major city was priced around $95 - $125,000 and the expense to the company was usually no more than $10,000. Today, that same house is $325,000 - $400,000 unless you're in a premium neighborhood, in which case it could be as much as $700,000. Now the reimbursable real estate portion of the move is $30 - $40,000. Our relocations usually involve about 15,000 lbs of personal goods, and with all other benefits (house hunting trips, storage, misc. allowances for deposits, etc...) the real estate piece is typically no less than equal to all the other expenses put together, and in some cases its double all other expense.

We got around this for awhile during the recent real estate boom. We gave incentives for people to sell their own home, and sometimes increased the cash allowances as a reward for FSBO. Now that the market has slowed, people need professional help marketing their home and a realtor is a given. However, the slower market hasn't led to significantly lower home prices, as people have 80 - 120% mortgages and not only can't afford to lose equity, but in many cases can't pay off the bank without getting close to full price. The end result is that a 2000/2001 move that would cost us $32,000 now costs $52,000.

So what's the solution? I'm not sure because the issue is bigger than just corporate relocation. Remember, those same Realtors selling those same houses are now getting double the commission they once were due to the rising home values. However, their commissions have not dropped and my friends who are Realtors and see this as profiteering tell me that a realtor who drops their commissions can expect to not have their house shown by other Realtors. Its a closed market; you have to be licensed by state agencies controlled by Realtors, and the 6% commission is regulated informally by other Realtors.

The immediate action required is that managers need to start thinking about what positions are worth relocations. We need about $250,000 in incremental revenue to cover every relocation, so maybe the standard is that the person or position must generate that in order for us to not restrict hiring to the local area or letting the person home-office from their current location. Once a relocation need is established, the managers need to budget $50k for each anticipated full-service relocation (we have a Uhaul-level for some positions).

Finally, if there's a relocation expert out there whose found a solution, let's hear from you!

Thursday, June 19, 2008

Father's Day

There's a line in a song I heard several years ago that says, "All Things Work for Good has become my favorite verse". I thought about this during Father's Day week. After years of being distant my Dad and I have become close again. It started about three years ago as our daughters started attending the same college and our nests emptied simultaneously. It continued on with his urging me to take up guitar again. It solidified this past winter with the passing of his dad.
Suddenly each of us has graduated to a new role. I no longer have kids at home, and he's now the patriarch of the family. He has things he'd like to do but no longer feels up to it alone, and I find myself coming up to Kentucky more often to pick, fish, drop things off or help around his cabin. This past Father's Day week I arranged a guide on Percy Priest so he could fish for rock fish and stripes like he did during the two times he's lived in the Nashville during the 60's and 80's. He drove us all down to the Loveless Cafe for dinner the night before, then we visited until way later than we needed to. We pushed off from Elm Hill Marina at 3:45 a.m. and fished hard until 8:00, grabbed breakfast at the Stewart's Ferry Waffle House, and thoroughly enjoyed each other's company (despite having only two hours sleep!). He caught the most (10 to my 7) and I got the biggest one (15 lbs.). I would not have done this in a million years if he hadn't wanted to, and it was truly one of the best days of my life.
I'm sorry Dad didn't have his dad this year for Father's Day. I'm also sorry that his daughter was away at school for all but a few hours. But selfishly, all things truly have worked for good in that we had this time together. Its summer; if you're lucky enough to still have your dad, take him fishing (or whatever it is he likes to do). What you do isn't really the point anyway.

Saturday, June 14, 2008

A Truly Decent, World-Class Leader

Friday I had lunch with Stephen Harrison, founding partner and current Chairman of Lee Hecht Harrison. LHH was one of the handful of companies who helped invent the professional outplacement industry and Steve, along with Bob Lee and Bob Hecht, were its founders. Steve is the author of "The Manager's Book of Decencies: How Small Gestures Build Great Companies" (McGraw Hill, 2007) which I began reading last night (even though I typically detest business books).

Our company used the Nashville office of LHH for the majority of our professional outplacement during our April staff reductions; their service was spectacular. After meeting their Chairman, I have a better understanding of why their company performs at this level.

Steve was in town to visit the local office, and Mark Marshall, who heads that office, told me in a private moment how Steve spent Thursday and Friday. Thursday was spent in the LHH Nashville office with Steve speaking to people who were in outplacement; hearing their stories, asking their opinions, and finding out what was going on in their lives and the companies that had just separated them. He spent Friday talking to clients; our lunch was at his invitation. During our time together he was interested in how I came to Nelson, what our business issues were, and he had some really good questions about a current area of interest for him; how compliance regulations are or are not driving corporate culure, and an HR leader's role in defining culture for our organizations.

Two things I found most refreshing and impressive about Steve; even though he's a senior executive for a global conglomerate, he is soft spoken, thoughtful, and decent. Mark confirmed with me that he's "easy company" when they travel. The second thing is that, in a difficult economy, Steve was out where leaders should be; on the front lines and out of the office. How many times in my career have I seen, at the first sign of trouble, the senior executives of a company huddle together in multi-day meetings to try and figure out what's going wrong. It makes as much sense as a captain of a battleship, at the first sound of cannon fire, going down below to confer with his officers. A leader's place in time of trouble is on the front lines listening to employees, customers, and end users. They know more about your business than any focus group, survey company, or consultant.

On that note, for those of you are who scheduled to be in the Publishing division's compensation meetings next week, I'm looking forward to spending the day with you, sharing what we've done and are doing, and hearing back from you in what promises to be a day of dialogue and collaboration.

Monday, June 02, 2008

The Hidden Cost of Traditional Offices

The tried and true method of performing communal office work is for people to commute into an office, work for a set number of hours, and commute home. While there's nothing new that I can write about telecommuting that hasn't already been written, I've not seen much written about the cost to the local economy of continuing what is increasingly an arcane work style. Here's food for thought...

I was surprised to learn from our Facilities department that the gold standard calculation for space needed per employee is about 200 ft. Now you may look at your 8 x 8 cube or 10 x 15 office and think, "where's my 200 ft.?" The difference is that Facilities professionals like ours know to allocate hallway, restroom, break room, and lobby space into their needs. So for the sake of calculation, let's go with 200 sq. ft. per person.

With that established, we now have to rent that amount of space. For a typical office outside of the downtown Nashville area, you can expect to pay about $20 per square foot. We negotiate for large spaces and don't pay that much always, but most smaller renters would certainly experience at least this amount. This puts, conservatively, the average annual rent for one employee, before any utilities, maintenance, security, or equipment at $4,000. This means that, for every 100 employees, an employer will spend $400,000 per year just on providing space before any additional costs are incurred. For a company with 500 Nashville employees, like Nelson, that's $2m per year in overhead before a single product is produced. The theory, of course, is that the sum total of the work accomplished more than covers expenses; but what if that work could be done without this expense?

That's on the company side. How about employees? In this era of the super commuter, the typical commuting length is 45 minutes with some lucky souls commuting only 10 or 15 (like I do now) while others commute up to 90 minutes (like I used to do). Assuming an average commuting speed of 30 mph, that's 22 1/2 miles each way, or 45 miles per day, or 225 miles per week. If you're lucky enough to average 20 mpg and have two weeks vacation, you're paying $43.30 per week at $3.85/gallon like I paid today in Nashville, or $2,165 per year just for fuel. Add tires, maintenance, oil changes, and insurance and you're easily around $4,000 per year to drive to work. Consider your time on the road as lost work time, and that number at least doubles. So add $8,000 per employee in commuting expense and lost work time to the $4,000 employers pay for the space in which to perform the work, and the local economy is spending $12,000 per person, or $6,000,000 for every 500 employee workplace such as ours.

As we search for flex schedule solutions and a new way to define the workplace and workday, there will be false starts and bumps and some will say its not worth it. While $6m isn't what shows up on the balance sheets, it does show up in expended energy and the toll on working people as they struggle to balance work, family, and personal time. I will say here and repeatedly as we go forward that the rewards are worth the problems if we can find a way to return value to our authors, vendors, customers, and shareholders from home offices.