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Being open about employee salaries can be a remedy for inequality, or a prescription for disaster.

Pay transparency. Two words that evoke very different responses. For some organisations it’s key to their diversity strategy and employer brand. But for many companies, pay transparency is a nightmare policy with the potential to alienate staff.

Yet it’s often forgotten that pay transparency is something of a fact of life in the public sector. So why do so many private sector businesses insist on keeping salaries confidential?

Although many companies claim they are concerned about putting employees off side, Dr John Molineux, a senior lecturer at Deakin Business School, believes the rationale is more about keeping a lid on salaries than sparing the feelings of employees.

“With pay transparency, people can compare themselves to the market. If they receive a better offer, they can come to the organisation and ask what it will do about it,” he says.

Regardless of motivations, many Australian companies may soon lose at least some of their pay secrecy. Under the Labor Party’s new pay transparency plan (which is aimed at reducing Australia’s stubborn 15 per cent gender pay gap), companies with more than 1000 employees will be forced to disclose their gender pay gap.

Prime minister Scott Morrison is not ruling out the idea. In September last year, he told a press conference that he was “open-minded” about pay transparency.

Different approaches

It’s not just Australia; the push for transparency is global. Norway publicly discloses total income and tax paid for every taxpayer, though most countries don’t go that far. The UK, for example, only requires companies with at least 250 employees to publish gender pay gap data.

Gender equity is driving much of the push. Research by INSEAD and US and Danish universities examined 2006 legislation that required companies in Denmark to report on gender pay gaps. It found that transparency reduced the pay gap by seven per cent.

“Given the fact that only a limited number of firms in Denmark are governed by this legislation, the effect is significant,” says professor of economics Morten Bennedsen, from INSEAD. “We can even prove the effect among firms that were not required to provide gender-segregated pay statistics.”

The Danish law shows how pay transparency can mean different things. Sometimes it refers to complete transparency, where everyone knows what their colleagues earn. In other cases it refers to an audit system where individual salaries are kept confidential, but organisational pay equity is evaluated.

The audit approach has proved controversial, and its ability to close the gender pay gap has been questioned. For example, some US firms in the financial sector have been accused of playing fast and loose with data by not listing their pay gap (the difference of pay between genders), and instead listing an adjusted pay gap (which looks at gender pay equity between similar roles).

Public differences

Compared to an audit and tidy data comparison, many businesses find the idea of full pay transparency a lot scarier, although it’s the norm in Australia’s public service.

“In the public sector, everyone is on a pay scale and you receive annual increments until you get to the top of that band. Pay is often not mentioned at all in the public service, as everyone knows everyone else’s banding,” says Molineux, who spent over a decade as HR director with the ATO’s Compliance Division.

Which isn’t to say it can’t be everyday life for private sector businesses. Digital consultancy Cogent has a completely open salary model coupled with full financial transparency. Cogent sees the approach as a reflection of its core values of transparency, creativity, learning, personal wellbeing, diversity and usefulness.

Over its 11-year history, Cogent has always had pay transparency, with the system slowly being refined as its workforce grew to the current 60 people.

“In the early days, the company was a community of people working together who were friends and peers. From that it was a natural flow-on to pay transparency,” says James Ferne, the ‘People Guy’ at Cogent.

Matt Connell, AHRI Victorian state councillor and executive workplace consultant at Workplace Conflict Resolution, has seen both sides of the pay transparency fence and argues that an open model makes it easier to talk to staff about their pay.

“This means you can explain it to people and easily justify where they sit within their band. It leads to less difficult conversations,” he says. “When it’s not transparent, you leave open to debate whether you are doing it fairly.”

Transparency can also help in the battle to attract and retain talent. Cogent promotes pay transparency in its recruiting and believes it gives the organisation an advantage over employers with more opaque systems.

“People self-select. Those who are not interested in our values, or who value money above all else and tend to jump from job to job, don’t tend to apply,” says Ferne. “Pay transparency attracts and retains people. Being a values-driven business and hiring based on value alignment means people tend to stay around longer.”

Connell believes organisations with opaque pay models are making life difficult for themselves.

“When you define a pay structure, it takes the mystery out of it. We find in workplace conflict situations, if there is not a structure, it’s hard to justify pay to employees.”

Peer pressure

Broadcasting pay levels can be a double-edged sword, according to critics. They argue that most people have an exaggerated view of their own performance and hence believe their current pay is well below what they deserve. “Everyone’s general impression is always that other people are doing better than them when it comes to pay,” says Connell.

Staff who discover they are ‘underpaid’ in a transparent system can become dissatisfied and more likely to leave. McKinsey recently reported on a Canadian engineering firm that introduced a transparent annual bonus system, only to find employees’ perceptions of the fairness of the reward relative to their on-the-job effort was significantly worse (-8 per cent), while trust in their employer declined (-7 per cent) compared with a previously arbitrary approach to bonuses.

Staff interviews found transparency made people critically evaluate what had previously been seen as an unexpected gift. It also highlighted those who received larger bonuses, inviting envy by those with lower bonuses.

The natural human tendency towards social comparison often compels staff in a transparent system to ponder questions of fairness.

“Pay is often not mentioned at all in the public service, as everyone knows everyone else’s banding.”

Molineux has seen this occur in the public sector when everyone is paid the same, but some are working harder than others. “This can lead to a perception of inequity. Then the question for those people is what they do about it. Do they continue working at the same high level?”

When employees find out about their peers’ higher pay, dissatisfaction can lead to demands for change, which can be tough to handle. “With transparency, you see a lot of discussions around equity start, which can be uncomfortable or destructive,” says Molineux.

David Bates, executive counsel at Harmers Workplace Lawyers, believes an opaque system helps avoid this problem. “Where a number of people are at the equivalent level, the employer may not want to pay them all the same amount. Confidentiality avoids the unpleasantness of staff knowing not everyone is on the same rate.”

Privacy can also be a problem with open systems. A US survey by Bankrate found only 24 per cent of employees had shared their salary information with a co-worker. Millennials were more likely (33 per cent) to do so, compared with only 18 per cent of baby boomers.

Molineux is unsurprised by this finding. “There will always be some people who just don’t want others to know their salary.”

Transparency is definitely not for everyone, Connell admits. “When it’s introduced, it can be quite confronting.”

“The natural human tendency towards social comparison often compels staff in a transparent system to ponder questions of fairness.”

Pay transparency can also be a recipe for losing top staff, says Bates. Opaque pay models allow employers to keep control. “It prevents sending signals to the market, which may avoid poaching of key employees.”

Connell agrees this can be a problem. “When you have pay transparency, it can be quite rigid, so you can’t reward your high performers – especially if you want the system to be consistent.”

To avoid this, even supposedly transparent public sector schemes are sometimes boosted. During his stint at the ATO, Molineux helped introduce a bonus scheme for senior staff. “Within the ATO the bonus system was secret and no-one knew who got what. In terms of general salary, everyone knew what people earned, except for people who got the bonus.”

Although pay transparency sounds easy, it can also be a very exacting process.

“As the business grew, we brought in a ‘salary table’ of competences. It’s similar to salary banding, but we cover the skills, responsibilities and business impact for each particular discipline within the organisation,” says Ferne.

With 30 levels, Cogent’s salary table is updated annually in a rigorous, but time-consuming process, says Ferne. “It takes a lot of work, especially as it is a collaborative process, not a closed door management process. Naturally everyone is quite invested in it and they closely monitor it.”

Transparent hypocrisy

Although sticking with an opaque pay model may avoid difficult discussions with employees, increasingly it is opening up organisations to questions about their values. Molineux says pay transparency creates trust in management.

“If you are honest in this area, you are more likely to be honest in others. If you want to build a culture of honesty in an organisation, secrecy is the worst thing you can do.”

Supporters of pay transparency also believe an opaque system can’t be squared with public commitments to gender equity and diversity.

“Pay transparency makes you front up to those values. If you don’t have transparent salaries, then you need to ask if equality is just something written up on the wall. Can you really hold yourself with integrity?” says Ferne. “We believe open salaries is the way of the future, and the push for equity and information accessibility is helping drive that.”

Connell agrees that organisations risk looking hypocritical if they don’t have transparent pay systems. “Talking about pay levels is a big taboo in the private sector. And yet 90 per cent of organisations have values of collaboration, communication and trust, but not in this area.

We talk about accountability, but if the organisation is not telling you why you are getting paid what you’re being paid, then how can it claim to be accountable?”

This is an edited version of an article that appeared in the February 2019 edition of HRM magazine.

Talking about money at work can be uncomfortable. AHRI’s short course ‘Having difficult conversations’ can help you understand how to get the most out of all workplace communications.

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This case shows why you should hire professionals who have a local understanding of employment law.

The Fair Work Commission (FWC) has ruled a Sydney-based Canadian worker (O’Farrell) an ‘employee’ of technology company GuestTek, despite the company claiming him to be a contractor, and awarded him US$17,704.29 in compensation for unfair dismissal.

Employee not a contractor

O’Farrell originally worked as a project manager for the Canadian company in 2009. In 2012 he was sent to Australia under a contractual arrangement that referred to O’Farrell as ‘an independent contractor at all times’.

However, commissioner Bernie Riordan found that O’Farrell was in fact an employee, not a contractor.

“It is obvious that [O’Farrell] was not performing the work of an entrepreneur who owns and operates the business,” Riordan says in the decision.

Some of the factors considered were the fact that O’Farrell was paid 12 equal instalments “irrespective of the number of work days in that calendar month”.  Also, aside from his wage, O’Farrell only charged GuestTek for his mobile phone. No other charges were made.

“There was no GST charged, no on-costs, no overheads and no profit,” Riordan says.

Australian law stipulates that an employee cannot subcontract or delegate work nor can they pay someone else to do the work, whereas a contractor can (though the Foodora case from late last year showed there is some room for interpretation here). But when O’Farrell went on annual leave, GuestTek decided to cover him internally.

A major similarity between Canadian and Australian law is that contractors aren’t entitled to leave.

According to the FWO a contractor “is not entitled to paid leave” and according to Canadian labour laws a contractor isn’t entitled to vacation pay.

“From my 30 years’ experience in industrial relations, I have never heard of a contractor accruing annual leave, taking the leave after approval had been provided by the client and then the client paying for the contractor’s replacement,” Riordan says.

It’s a duck

The jurisprudence section of the case report references a Full Bench decision which highlights the issue of distinguishing between an employee and contractor. It says that parties cannot alter the true nature of their relationship by putting a different label on it.

“In the same way that if a bird looks like a duck, walks like a duck and quacks like a duck, then it is a duck, [O’Farrell] in this case is an employee,” Riordan says.

GuestTek’s global HR manager presented the fact that the contracted said “it is expressly understood and agreed that [the] contractor is not an employee, agent, joint venture or partner of GuestTek” and that he would not “assert a claim of employment against GuestTek”.

Riordan did not accept this as evidence against O’Farrell’s unfair dismissal claim.

“For an overseas company, such a provision may result in the belief that the outcome of this matter is guaranteed,” Riordan says. “However, the Australian law does not support such an outcome.”

Interestingly, it doesn’t seem as though Canadian law supports such an outcome either. The University of British Colombia says of this same issue that “it is a misconception that contractual language is determinative in itself. It is not.”

Redundancy

In 2014 and 2017 O’Farrell signed upgraded contracts. In 2018 he was told that his position was being made redundant due to an organisational restructure.

An India-based worker took over O’Farrell’s role and three months after his dismissal the company advertised for O’Farrell’s position, an APAC project manager. Subsequently O’Farrell filed for unfair dismissal.

“It is not in dispute that [O’Farrell] was not offered this position,” says Riordan.

Riordan also says that the award O’Farrell was under (Telecommunications Services Award 2010) states that he was entitled to a consultation regarding major workplace changes.

“If [GuestTek] wanted to make [O’Farrell] redundant and transfer [his] role to Asia, then such a transfer should have been discussed with [O’Farrell].

“Alternatively, [O’Farrell] may have been able to prove that, with today’s electronic capacity, he may have been able to service [GuestTek’s] customers and market from Sydney…The lack of consultation by [GuestTek] makes [O’Farrell’s] termination harsh.”

It seems clear that GuestTek was either unaware of Australian employment law, or thought they weren’t subject to it. Ironically if they had done the exact same thing in Canada, the outcome could have been the same.

This highlights the fact that knowledge of local employment law is crucial. Had GuestTek had a qualified Australian lawyer or HR professional review the employment relationship at the beginning, or even before they dismissed O’Farrell, they could have avoided this ruling and upcoming legal complications.

“I note that the Applicant does not appear to have been paid any superannuation in accordance with the Superannuation Guarantee Levy Act or any pro rata Long Service Leave in accordance with the NSW Long Service Leave Act,” says Riordan in the decision. “The Applicant may wish to consider an application to the Fair Work Ombudsman in relation to these issues.”

Managing legal issues across the employment can be tricky. To stay up to date, take this short course.

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From employees pocketing the odd pen or stack of Post-It notes, to those creating their own slush funds. Workplace theft is becoming a huge financial issue.

“When I quit my job at Subway, I stole the bread scoring knife because I found it was perfect to open mail with,” one employee confessed to Whisper.

Stealing office supplies is a seemingly harmless act. In fact, sometimes it’s so harmless and strange you wonder why they bothered – employees have admitted to some odd thefts, from pocketing toilet paper and light bulbs, to sneaking the office Windex out by making it look like a bottle of water.

What’s the point? Perhaps it’s the thrill of the act, or an urgent need for cheap items? Then there are those who find themselves stealing things on the wilder end of the scale, like a baby pig on death row.

While stealing a pen (or an innocent baby pig) mightn’t seem like the biggest deal, this behaviour is costing Australian businesses up to $1.5 billion each year, according to Australian Federal Police statistics.

In 2018, retailers lost around $3 billion due to retail shrinkage and it’s thought that around $750 million of that figure was taken by employees.

The Association of Certified Fraud Examiners in America reported that “non-cash” property in the workplace jumped from 10.6 per cent of corporate-theft in 2002 to 21 per cent in 2018.

What’s causing the increase?

One report from The Atlantic suggests the increasing amount of employees working from home could be to blame.

It makes sense. With the 2016 census showing that 3.5 million Australians regularly work from home (and we can assume that number has only grown with more organisations implementing flexible work policies) they need to take some essential work items with them. And some of those items are never returned. If it’s a notepad, it might not seem like such a big deal, but your average Apple laptop sets you back around $1,300.

The Atlantic article also suggests there are specific times of year where an employee is more likely to give in to their thieving tendencies.

“The burn rate on tape spikes when holiday gifts need wrapping, and parents ransack the supply closet to avoid the back-to-school rush at Target. After a new Apple gadget is released, some workers report that their company-issued iPhone is broken — knowing that IT will furnish a replacement, no questions asked.”

An article from The Conversation suggests an even simpler reason; employees are after sweet, sweet revenge. The article’s author, assistant professor of Industrial and Organisational Psychology Yannick Griep of the University of Calgary, says that when an employer breaks a psychological contract with their employee – say they go back on their word regarding requested leave, or a salary bump – employees can be overcome with a sense to take what’s rightfully theirs.

“Employees who experience broken promises tend to experience a series of very intense negative emotions such as anger, frustration and outrage, which in turn will lead to a higher desire to dominate, retaliate and get even with the employer,” says Griep.

Interestingly, Griep says that it can be an employer’s best performing workers who are most likely to fall into this behaviour pattern, because those who are considered excellent at their job are more likely to expect to be treated fairly.

The snowball effect

In a paper titled ‘The Slippery Slope: How Small Ethical Transgressions Pave The Way For Larger Future Transgressions’, a team of researchers found when minor unethical acts at work are left unchecked they can easily snowball into much larger crimes.

“People rationalize their behavior to justify it,” says Lisa Ordóñez, one of the study’s authors. “They might think ‘No one got hurt,’ or ‘Everyone does it.’ The next time, they feel fine about doing something a little bit worse and then commit more severe unethical actions.”

The researchers tested this theory by giving subjects 25c for committing a minor unethical act. Later, the same subjects were given $2.50 for taking on a not-so-minor misdemeanour.

Subjects who done the minor act for 25c were less likely to involve themselves in the $2.50 wrongdoing, which supports the researchers theory that this behaviour builds upon itself.

Take the woman from Western Australia who was recently sentenced to six years in jail for stealing money from two small businesses.

She had carried out 389 fraudulent transactions over seven and a half years, amassing $1.2 million in total, to pay for bills and “to go out shopping, have coffee with friends and have nice things”. It’s possible when she stole the first sum of money, just one month into the job, that she didn’t foresee herself wracking up millions. However, once she realised she was able to get away with it and got a taste of the new life she could afford to live, she fell victim to the snowball effect.

What’s the fix?

Returning to Griep’s theory, with 55 per cent of employees reporting a broken promise from management within their first two years on the job, the lesson for employers is to remain trustworthy if you want to keep all of your pens.

While organisations should keep their eye on those high-performing employees, as per Griep’s article, they should also take special note of those who’ve been with the organisation for some time.

“Often, the person caught stealing from a retail business is one of the most trusted employees. This is where the high emotional cost kicks in. It is not uncommon for them to be a long-term employee who has the trust and respect of the business owners. Often, it has been a relative of the owner or at least someone treated as a relative or a member of the family,” says a spokesperson for Tower Blog.

So, what should employers be doing? Ordóñez and her team suggest the following:

  • Ensure that ethical misconduct is clearly defined.
  • Make ethical behaviour part of your organisation’s identity
  • Be vigilant about small ethical lapses and address them quickly. Employees who see coworkers called out for minor offenses might be less likely to rationalise their own potentially deviant behaviors.

But if you’re very lucky, you don’t need to do anything to punish workplace theft – it becomes its own punishment. As one anonymous employee told Whisper, “I stole some industrial glue from work to fix my glasses [and I] ended up gluing my fingers together”. That, my friend, is what they call karma.

Learn how to set clear expectations and improve employee performance with the Ignition Training course ‘Managing performance’.

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The Closing the Gap 2019 report has been released and the state of employment for Aboriginal and Torres Strait Islanders does not look good. With the future of employment evolving, what can be done to help?

The Indigenous employment gap still has a long way to go, according to the recently released 2019 report.

Closing the Gap was first established in 2008 with the hopes to reduce disadvantage among Aboriginal and Torres Strait Islander in all aspects of life, including employment. The 2008 report aimed to halve the gap in employment outcomes between Indigenous and non-Indigenous Australians by 2018. It failed and is continuing to fail.

(As was true of previous reports, the latest data is from two years prior to the report being published, so 2016.)

The report says the closing the gap target has been affected by the discontinuation of the Community Development Employment Projects (CDEP) program.

“While the Indigenous employment rate declined by 1.3 percentage points to 46.6 per cent in 2016, the non-Indigenous rate remained stable at around 72 per cent. After adjusting for the impact of the CDEP, the Indigenous non-CDEP Indigenous employment rate increased from 42.4 per cent in 2006 to 46.6 per cent in 2016,” the report says.

Image sourced from Closing the Gap Report 2019. Investments and incentives

All Australian states and territories are focusing on investing in closing the gap, but have acknowledged that the following areas need improvement:

  • Delivering effective and culturally competent employment services through mainstream programs.
  • Ensuring Indigenous-specific programs complement mainstream programs where necessary.
  • Tailoring the Community Development Program (CDP) based on the needs of remote communities and job seekers.
  • Ensuring Aboriginal and Torres Strait Islander Australians have access to quality employment opportunities, including in growth industries.
  • Better understanding the employment opportunities of the future and link relevant educational offerings to ensure Indigenous Australians are job ready.

As of January 1 2018 the Federal government has also been providing businesses with Indigenous employees a wage subsidy of $10,000 (GST inclusive).

But why should there be a need for financial incentives to hire Indigenous Australians, and why is the gap not closing?

There are a range of reasons, but the report says having a society that values Aboriginal and Torres Strait Islander cultures and people provides a supportive environment for employment.

This is a complex issue, and there is  a long history of cultural and social barriers that will take years of work to dismantle. But to respectfully simplify things (despite how problematic it feels to do so), businesses are reluctant to hire Indigenous Australians.

According to a report from Hays, only 30 per cent of employees say their organisation has a workforce that includes Aboriginal and Torres Strait Islanders, and a low 41 per cent have said they are committed to recruiting Indigenous Australians.

CEO of Arillia and Djiribul woman Shelley Reys says there is a reluctance in hiring Indigenous Australians due to a knowledge gap many people have.

Reys told SBS that “when you put the term ‘Aboriginal’, ‘Indigenous’, ‘First Nations’ or ‘reconciliation’ – any of those words, on top of something – good-natured [non-Indigenous] Australians start to get a bit nervous.

“They’re afraid of saying the wrong thing, doing the wrong thing, making a mistake or sounding racist, they just start to walk on eggshells.”

Chairperson of Babana Aboriginal Mark Spinks agrees with Reys and pointed out avenues that will help close the knowledge gap.

“I don’t believe that opinion will change in my lifetime,” Spinks says.

“I’ve placed several Indigenous men in positions with NRMA with the pledge that I would mentor them through their initial placement as well as continued support whenever I’m needed. I’m more then happy with the results and this process is very appealing for the employer and negates and nervousness they might have.”

Even if Spinks doesn’t think perceptions of Indigenous Australians will shift in his lifetime, if the gap is to close then they will have to.

Currently 56 per cent of Indigenous Australians are under 25 years old, compared to 33 per cent in the rest of the population, meaning young Indigenous Australians entering the workforce.

Worrying trend

Conventional barriers to Indigenous employment are not the only challenge if Australis is to close the gap. Unfortunately the data says that jobs that are Indigenous Australians are more likely to have are also among those likely to be automated.

Image sourced from Closing the Gap report 2019.

This data is reflective of a number of factors, including the automation of many routine jobs and what jobs have been most attainable for Indigenous Australians.

“Over recent decades, employment growth has come from non-routine cognitive jobs such as managers and professionals, and more recently, from non-routine manual jobs such as community and personal service workers,” the report says.

With this growth in management and professional roles, there has been a much slower growth rate in manual roles such as technicians, trade workers, labourers and machine operators.

The report says industries with historically large workforces, such as retail and construction, will become susceptible to automation over the next few decades.

The way forward

As the future of employment changes there will need to be more support for job seekers to adapt.“My belief is that more mentoring services and programs need to be introduced as this assists with both job placements and job retention,” Spinks says.

Reys’ approach is a ‘good for business’ perspective. In a KPMG media release she says the following are key to culturally competent companies:

  • Demystifying Indigenous matters by dispelling the myths and understanding the facts
  • Understanding how it makes good business sense by showing that Indigenous employment enhances outcomes, social impact and brand reputation
  • Decreasing unconscious bias while increasing capacity to engage, and
  • Managing risk by encouraging better work practices.

It’s clear that there needs to be more done to halve this gap and the government is aware of it too.

“As we move into this next phase, Closing the Gap will be embraced as a whole of government agenda with all governments sharing accountability for progress and extending this shared accountability to include Aboriginal and Torres Strait Islander people,” says Prime Minister Scott Morrison in the report.

“We should not let our failure to meet targets overshadow the successful, thriving lives of many Aboriginal and Torres Strait Australians and the great work that many in our communities have been doing to improve outcomes for Aboriginal and Torres Strait Islander Australians.”

Going forward, the government has outlined their support for employment services to help close the gap, like:

    • Mainstream employment programs, like jobactive and Youth Jobs PaTH.
    • Funding of Indigenous-specific employment programs.
    • Strategies to build and diversify the Indigenous allied health workforce which will benefit participants in the NDIS.
    • The implementation of reforms to the Community Development Program (CDP) which aims to help remote job seekers transition from welfare to the workforce.
    • Employing more Aboriginal and Torres Strait Islander people in Commonwealth-funded services.

The competitive labour landscape means that employee retention will become a critical challenge for employers now and in the future. Learn how you can attract and retain talent with this short course.

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Should employers be able to dictate what you eat your lunch from or where you hang your coat? This company’s employer branding is on steroids.

If you’ve ever walked into an Aesop store, you’ll be familiar with the calming, multi-sensory customer experience. The air is lightly misted with the scent of a mysterious citrus fruit, the fresh-faced staff approach you with the kindness of a distant relative, and it’s likely your hand will be washed, towel dried and lightly massaged at some point.

If so, you might not be surprised to find out that this considered, aesthetic-focused approach is carried on behind the scenes of Aesop HQ. Employees from all departments within the skincare franchise are asked to follow quite a unique set of policies all in the name of cultivating a strong culture.

Going through those policies with an HR lens, you have to ask, how far is too far?

Aesthetics to encourage culture

Everything about Aesop is highly curated, even down to their choice of toilet paper.

A day in the life of an Aesopian (an employee for those not familiar with the lingo) is intended to be smooth, calm and aesthetically pleasing. Staff are asked to pour their coffee into Aesop-approved cups, and are told eating from a Tupperware container is a no go – that’s what the Aesop-supplied bowls and plates are for. You also mustn’t eat at your desk and “junk food” is discouraged.

In their retail stores, microwaves are banned from the back rooms, to avoid employees heating up food that could waft a nasty smell into the store that would disturb the scent of that mysterious citrus fruit.

Notes are to be recorded exclusively in Moleskine diaries and Post-it notes should not decorate the edges of your computer, but rather remain inside said Moleskine. Employees are asked to utilise the coat rack instead of hanging things from the back of an office chair, and it’s important you choose the ‘right’ colours if you’re giving a Powerpoint presentation, according to the former chief marketing officer Lisa D’Amico.

“The colours used on PowerPoint presentations are really, really important, particularly to the board. If you’re not OK with that you just won’t enjoy it here. We take cultural alignment to the nth degree. If the fit is not good for you, then it’s not good for us. It’s a sensibility. Execution matters,” D’Amico told the AFR.

Another head office employee told Mamamia: “This is not a personal space, it’s a work space, and we’re trying to promote a beautiful idea that flows through every aspect of the business – from the product packaging to the stores themselves, up to the way in which we work each day. It’s about aesthetic and thoughtfulness, and it really works.”

“We take cultural alignment to the nth degree. If the fit is not good for you, then it’s not good for us. It’s a sensibility. Execution matters.”

Customer-facing employees aren’t allowed to have colourful dyed/bleached hair (that’s in their contract) and if you want to wear lipstick the only acceptable colour is red.

A former Aesop employee told HRM, “Some of the organisational policies made the physical work environment feel clean, calming and organised. This often brought about a similar state of mind during work hours.”

This is all well and good in theory. Working in a beautiful environment is nice, and being forced to eat away from your desk can help with wellbeing. But while such stringent policies could warm the cockles of one employee’s heart, it could leave another feeling alienated.

When you’re not “Aesop enough”

On Glassdoor, a site where employees review employers, Aesop’s profile reveals that not everyone feels this approach works. It seems that when some employees feel they have to “fit the mould” in order to belong.

One person says it’s an organisation that “relies on perfection” and says the culture can be somewhat toxic. “There’s a feeling of inadequacy if you’re not Aesop enough.”

Another former employee says: “They expect each staff member to fit into their cookie cutter mould of the ‘perfect Aesopian’ and look down on anyone who is a little different.”

HRM spoke with two former Aesop employees who both had positive experiences working for the store. “I know it probably sounds like I’ve drunk the Aesop Kool-Aid, but I just honestly had an incredibly positive experience working there,” one of them says. They were, however, able to acknowledge that it was somewhat of a strange place to work at times.

When asked if she thought the company attracted the same type of person Rachel* says, “I think some of the ‘guidelines’ mean the company very clearly attracts like-minded people and confuses or repels others.

“I worked with men and women, students and parents, with lots of different personalities, styles and backgrounds. The only precondition was to be polite, authentic, clean and tidy. I think some of the lines that get pulled out of the staff guidelines are sensationalised; they served as good examples to understand the brand, not sticks to beat down individualism.”

Lisa* admits that even as an ex-employee she can feel slightly irritated by the ‘cookie-cutter’ type employee so common in Aesop stores.

“Everyone speaks in the same way, that Aesop elitist manner where only topics of art and architecture are appreciated.”

There were definitely moments where Lisa felt she didn’t fit the mould.

“I often felt that way, coming from a science degree and having a bit of country (bogan) twang to my accent. However, I was fortunate to have worked in a really great team where we didn’t necessarily all share the same interests. Everyone respected and valued each other’s different quirks.”

Aesthetic labour

While dress code policies and uniforms have their place, dictating the colour of an employee’s lipstick seems excessive. Social scientists refer to the practice of screening and managing employees on the basis of their physical appearance as “aesthetic labour”.

In a world focused on image, through the proliferation of social media, it seems this approach to hiring is here to stay. According to the authors of ‘Aesthetic Labour and the Policy-Making Agenda: Time for a Reappraisal of Skills’, some employers rely on functions such as call-centre scripts to dictate employees mood, appearance and demeanour, while other employers attempt to train employees to achieve the same ends.

“Alternatively, companies can employ only those people who already have the right attitudes. This approach is linked to competency-based recruitment and selection. The aim is to have ‘oven ready’ employees, able to be popped straight onto the shop floor to work with minimal preparation,” the authors say.

But if employers are looking for the ‘perfect employee’ (just add water) they could unintentionally land themselves with a homogenous workforce. Even if you’ve got cultural and gender diversity sorted, different personality types bring about diversity of thought, and that’s important.

HRM recently looked into the unconscious favouritism shown to employees deemed to be more attractive than others, and the underlying biases around appearance present in the hiring process are widely known. What Aesop are doing seems to be different. True, they appear to be hiring a certain ‘look’, but perhaps that’s just an offshoot of hiring for a specific ‘feel’.

The preferred personality type at Aesop is enviable. Who wouldn’t want to feel as if they’re floating through the day with a clear mind and gentle demeanour? But this does not come naturally to everyone. What if a new hire was able to mimic the behaviour of ‘the perfect Aesop employee’ long enough to get their foot in the door, but from there felt they were putting it on?

Psychologist Andrea Linder says there can be detrimental effects when people feel they have to put on a certain persona in the workplace.

“Changing your personality too much can cause you to become stressed and feel disconnected, or even depressed. This is especially true if your work persona is at odds with your true personality,” Linder says in a Fast Company article.

She goes on to say that this feeling of having to harbor a dual personality is heavily influenced by the people you work with and the environment you work in. So while it’s easy to notice the benefits of working within a highly curated space with like-minded individuals, it’s also important to acknowledge that it could be a highly anxious experience for someone who constantly fears they’ll step out of line.

Of course, Aesop is just one example of a company that zeros in on its cultural practices in a very specific way. You’d only have to look into the offices of fashion magazines or other luxury brands to find similar practices.

Employers and hiring managers should make sure to look beyond the short-term benefits of an ‘oven-ready’ employee and consider how their presence will impact the long term environment of the company.

*Names have been changed.

Want to avoid building a homogenous workforce? AHRI’s short course ‘Building and developing talent’. explore competency based training, understanding learning styles and much more.

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Automating roles in your organisation is sometimes a necessary decision. But you don’t have to alienate staff, or even fire them, when doing it.

A lot of people are scared automation will make their job redundant. One study even found evidence that fear of automation is making workers so anxious it makes them physically ill.

Research from McKinsey looked forward to 2030 and found that while less than five per cent of occupations are fully automatable (predominantly those with a lot of repetitive physical activities, or data processing or entry) 60 per cent of jobs can have 30 per cent of their activities automated.

While this suggests a future where very few of us won’t be affected by automation and just a small number should be truly ‘scared’, it needs to be unpacked.

Organisations treat different roles differently. In some organisations that 30 per cent of activities might be the most valuable contribution you make. Optimistically, removing almost a third of your activities would free you up for other tasks. In reality many companies will simply make a third of the people in your role redundant.

How HR manages staff in this situation will become an evermore important skill. Because while redundancies are never easy, imagine how much more difficult it must be when the  staff who are leaving know they won’t find another role elsewhere.

If done right, redundancies can run so smoothly that the staff leaving actually appreciate the company for how they handled it, and even help with the transition. If done incorrectly, redundancies can hurt the engagement of the remaining workforce. This might be especially true of those who actually conduct the automation.

It’s not just those being automated

A less told side of the automation narrative is the distress felt by those who are tasked with automating the jobs of their colleagues.

This experience is captured in an article from MIT Technology Review titled ‘Confessions of an accidental job destroyer’. It’s the intimate tale of a woman streamlining a company’s mould making process with 3D printing during a summer internship. She quickly discovers that to complete her task a man she calls ‘Gary’ is crucial, as he has over 30 years’ experience in making moulds. She also discovers that when she’s finished Gary will be redundant.

Gary goes along even after she makes him aware of this, though he does complain about the company. After she’s done Gary is moved to another job, but he doesn’t like it (or the company itself anymore) and so he quits.

An article on Gizmodo refers to more employees who have to automate their colleagues’ jobs, and their responses to the situation. Some understand the stakes immediately, others only realise the full implications of what they’re doing later on. One even quits when he realises.

So, given the potential harms, what’s the right way to automate staff out of a job?

Be upfront

In the article on MIT, the writer says they reconnected with Gary. He was happy to talk to her. He says the company took “a very aggressive stance with [him] and some other employees in similar positions… I assumed, wrongly, that I would have an opportunity to follow along with the evolution of the process.

“The ‘official position’ of the company was that there was no attempt to change anything about how things were being done.”

If that’s true, it’s no wonder Gary didn’t stick around. The company lost a long-time worker and made the person who helped them with automation feel so nervous she felt compelled to write about it years later.

The lesson is obvious, if staff are going to have their jobs either partially or fully automated there is no benefit to pretending otherwise. In fact, you give them their best chance to help themselves, and your organisation to succeed, if you tell them immediately. They can have the opportunity to think about retraining, you can plan more openly for the automated future, and you can retain the right staff if the automation process goes awry.

Get them to self-identify

The most intriguing option for an organisation that knows automation is in their future is to follow the example of UK insurance company Aviva. In 2017 it asked 16,000 employees if their job could be automated and offered to train them for alternative jobs if they said ‘yes’. Doing this has multiple benefits.

  1. It establishes your organisation’s openness.
  2. It makes the conversation around automation less toxic, and staff feel less afraid.
  3. It gives your company valuable data to help direct automation funding and fine-tune a workforce strategy.
  4. It’s a positive story that plays well to current staff and potential job seekers.
Retrain or reposition them

Everyone in the future will need technology-based skills, but not everybody today has them. At the 2018 ReimagineHR conference in Sydney, a presentation from Gartner looked at the digitalisation of organisations. It quoted the head of talent management at an insurance company saying, “Just because we don’t have the right skills, doesn’t mean we don’t have the right people.”

This is an important point because hiring is quite costly, and for some roles it’s very difficult. As HRM wrote in late 2017, the workforce who can handle AI related roles is very small (Canada has a similar population, but double our talent pool).

If you want someone who has expertise in a specific role with strong technology skills, it might end up being a smaller investment trying to retrain rather than firing and hiring someone else. After all, a world economic forum report found that 51 per cent of Australian workers will need upskilling or retraining before 2022. This will create a shorter supply in the talent market.

A different piece of research by McKinsey looked into the five strategies employers can take when faced with automation of job tasks; retrain, redeploy, hire, contract and release. Not surprisingly, the importance of strategies is decided by the disruption each industry faces.

Source: McKinsey Global Institute

Retraining and redeployment were rated as relatively important to every industry. Of a release strategy, the report says, “the risk is that knowledge of the company, culture, and operations is lost. Layoffs can also diminish employee productivity and satisfaction, and can be difficult and costly to carry out.”

Still, redundancies are sometimes a business imperative. But there is a right way to do it, and that’s being upfront.

Recent surveys have shown that those projects that use formal change management processes have a much higher return on investment than projects that do not. Sign up for AHRI’s ‘change management’ short course to get ahead on your next strategy.

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Our culture moves forward because pioneers – whether they be individuals or organisations – are willing to take the first step in promoting diversity.

Madeline Stuart is one of the fashion world’s rising stars. The 22-year-old Brisbane model has appeared in the pages of Vogue, walked the catwalk at New York, London and Paris fashion weeks, and accrued more than 190,000 followers on Instagram.

She is also the world’s first professional model with Down Syndrome.

Madeline, who will appear with her mother, Rosanne, and journalist Sara James at the AHRI International Women’s Day breakfasts, decided she wanted to be a model after she attended a fashion show with her mother in 2014. Her first modelling shots went viral and made her an international star.

Madeline’s success as a model is challenging traditional notions of beauty in an industry not known for its diversity.

Trailblazing individuals

In 2017, Forbes declared Madeline a game changer in the fashion world for normalising Down syndrome.

“She is showing other individuals with Down syndrome that it is OK to have your own hopes and aspirations,” Sara Hart Weir, president of the National Down syndrome Society in the US, told Reuters.

Trailblazers – individuals and organisations that overturn the status quo – are critical to driving social change, says Lisa Annese, CEO of the Diversity Council Australia.

Change, she believes, requires a plunge into the unknown. “It’s really important to have leaders who are out there being brave, making bold decisions and taking risks – knowing that not all risks will pay off.”

These trailblazers can be individuals, like Madeline, or pioneers in other fields, like Enid Lyons, Australia’s first woman to be elected to the federal lower house; Michael Kirby, the first openly gay man to become a Justice of the High Court of Australia; or Shemara Wikramanayake, Macquarie Group’s first female CEO and fifth on the list of Fortune’s Most Powerful Women in business outside the US in 2018.

Trailblazing organisations drive innovation too.

Annese points to Telstra, which introduced a groundbreaking All Roles Flex policy in 2014 after a successful pilot the year before.

“They were the first organisation in Australia to go out on a limb and do something bold,” she says.

All Roles Flex made flexibility mainstream, permitting Telstra employees to work part-time, outside normal nine-to-five business hours or from different locations depending on their roles.

The company didn’t stop there. In 2017, CEO Andrew Penn announced that all recruitment and interview shortlists should include at least 50 per cent female representation, which saw the number of women on interview lists rise from 35.5 per cent before implementation to 50 per cent in January 2018. It’s this type of innovation that led LinkedIn to include Telstra in the top 20 of its 2018 Top Australian Companies.

A new normal

Flexibility is now the norm at the country’s top employers, from PwC Australia to Woolworths.

“Someone has to start, someone has to be the brave person – or an organisation needs to be the brave organisation – that does something for the first time,” says Annese.

“Once that happens, others will follow, either because the competitive nature of the economy demands them to or because they think it’s the right thing to do.”

Social change can also come from above via policy and legislation, such as the Sex Discrimination Act 1984 or the establishment of the Workplace Gender Equality Agency in 2012.

It is also driven by grassroots movements, such as the decade-long push to legalise same-sex marriage that was finally successful in 2017 after 61.6 per cent of the population voted in favour of the change in the Australian Marriage Law Postal Survey.

In Australia today, business is leading the way in diversity, says Annese. Business owners have “seen the value in having workplaces that are progressive, supporting strategies to improve equitable representation of women in leadership, strategies to reduce the gender gap, to minimise harassment and discrimination”.

Good for business

Statistics support the business case for diversity.

According to the DCA-Suncorp Inclusion@Work Index, inclusive teams are 10 times more likely to be highly effective than workers in non-inclusive teams, nine times more likely to innovate, and five times more likely to provide excellent customer or client service.

Inclusivity is also good for staff retention. Workers in inclusive teams are 19 times more likely to be very satisfied with their job than workers in non-inclusive teams, four times
more likely to stay with their employer, and twice as likely to receive regular career development opportunities.

Today, diversity is widely accepted, says Annese.

“There’s been a public reckoning around women and minority groups and the role they play in society – and in power, politics and business.”

However, there are two groups that remain on the margins.

The Inclusion@Work Index shows Australians with disability and Aboriginal and Torres Strait Islander Australians are among the most discriminated-against in the workplace.

They haven’t benefited from the overall movement of diversity in the same way others have, says Annese.

“There’s still a long way to go before we see genuine inclusion in the workplace for those two groups.”

Leading the way on this front are trailblazers who, like Madeline Stuart, are brave and determined enough to tear down some of society’s most entrenched biases, clearing the path for others to follow.

Join Madeline Stuart, her mother/manager, Rosanne, and journalist Sara James in conversation at the AHRI International Women’s Day breakfasts in Brisbane, Sydney, Canberra and Melbourne from 5 to 8 March.

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This company thought it wasn’t required to pay redundancy entitlements when its catering contract ended, but the Fair Work Commission ruled otherwise.

With the foundations of ‘casual employment’ being undermined by recent decisions (see previous article on the Workpac v Skene decision, and more recently Hall and Wilcox’s update on amendments to the Fair Work Regulations affecting casual employees), employers are more unsure about their obligations than ever before.

While the recent decision in Fair Work Ombudsman v Spotless Services (Spotless) has departed from the controversial decision in United Voice v Berkley Challenge (Berkley), the application of the ordinary and customary turnover of labour (OCTL) exemption to redundancy pay remains hazy and dependent on the questions of fact in each case.

History of OCTL exemption

Prior to the Fair Work Act 2009 (Cth), industrial tribunals have long required compensation be paid where an employee’s employment was terminated due to redundancy, while generally excluding terminations that occurred due to the ordinary and customary turnover of labour. The OCTL exemption is now embedded in section 119(1)(a) of the Fair Work Act.

Over time, the OCTL exemption was recognised to apply in circumstances where employees did not have a reasonable expectation of ongoing employment due to the intermittent nature inherent in their employment. This is often the case in short-term contract work such as cleaning or catering, and in the building and construction industry.

Whether the OCTL exemption applies is a question of fact, based on various factors including:

  • whether it was a normal feature of the employment that work is intermittent;
  • whether the parties understood the intermittent nature would result in a lack of continuity in work;
  • whether the employee has been paid a loading or allowance to compensate for the intermittent nature of work;
  • whether there could have been a settled expectation of ongoing employment based on the length of employment or otherwise; and
  • whether it was customary to dismiss employees once there was no more work, regardless of their service history with the employer.

However, in the Berkley case last year the court moved away from the well-founded understanding above and determined that the OCTL exemption would apply “in circumstances where the redundancy component of that decision is for that employer, with respect to its labour turnover, both common or usual and a matter of long-continued practice.”

Justice Reeves held that the question of whether it was ‘ordinary and customary’ was with respect to the employer’s practices, as opposed to the custom of all jobs of that type, and any expectations the affected employees held about those matters are irrelevant”.

While the Berkley decision may have expanded the scope of the OCTL exemption, the shift from the widely-understood application of the OCTL exemption created uncertainty for employers.

The Spotless decision

Spotless followed the termination of over 30 employees (including a manager who had been employed for over 34 years) after Spotless’ contract to provide catering and hospitality services at Perth Airport ended. Spotless sought to rely on the OCTL exemption. The employer contended it was not required to pay redundancy entitlements to the employees who were terminated as a result of the company losing its contract with the airport, claiming it was part of the company’s long-standing policy not to do so.

The Spotless decision has departed from the decision in Berkley in a finding that examines and critiques the history and evolution of the OTCL exemption.

While earlier decisions have focused on the requirement that the nature of the work be inherently intermittent, Justice Colvin concluded that termination will be part of the OCTL where ‘“termination is so inherent in the nature of the job for a particular employee that it cannot be described as ongoing or indefinite employment”.

In coming to his decision that termination was not inherent in the nature of the work and that the OCTL exemption did not apply in the circumstances, Justice Colvin noted:

  • the Spotless Group provided services in a number of different sectors, however the services provided in each sector often overlapped. So employees who worked under one contract may be expected to undertake similar work in the provision of services under another contract, including in a different sector;
  • Spotless did not produce any evidence that its policies were known to employees or that it was actually common or usual for their employees to be terminated when a contract came to an end;
  • it was established that Spotless had a practice of trying to redeploy its employees following the end of a client contract; and
  • the contracts between Spotless and its employees did not indicate when the contracts would come to an end.

Therefore, informed by the context of the earlier decisions, Justice Colvin’s decision has refined the interpretation of the OCTL exemption, with the inherent intermittency of work still being a relevant consideration in determining whether a settled expectation of ongoing employment might exist.

Lessons for employers

This case provides guidance for employers within the business of contracting their employees to complete work for clients on a project basis.

As the OCTL exemption will be applied on a case-by-case basis, and based on a range of factors, critical to its application is whether the termination is so inherent in the nature of the job that there could be no settled expectation that employment would be ongoing.  

To increase the prospects of successfully relying on the OCTL exemption, employers should consider including a carefully drafted clause in their agreements with employees to support the position that the employees could not have had a ‘settled’ expectation of ongoing employment beyond a specified contract or assignment, which should also be identified in the agreement. In addition, the employment contract should specifically state that any allowance or loading paid is in compensation for the intermittent nature of the work.

However, like almost all things in employment law, there is no guarantee such clauses will provide a complete protection. Employers must be wary that in circumstances where an employee’s employment continues without any new terms being agreed – when customer contracts are renewed or the employee is reallocated to another contract – an expectation of ongoing work may be reasonably founded and an employer will be hard pressed to argue that termination is inherent in the nature of the work.

As always, the specific set of facts in each case remains vital and well-drafted provisions and legal advice on a case-by-case basis should be sought at the time of termination.  

This content is general commentary and opinion of the writer provided for information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied upon as legal advice. Readers should obtain specific advice relating to their particular circumstances.

Fay Calderone is a partner at Hall & Willcox and Jessica Luker is a graduate lawyer.

Need to brush up on how to dismiss an employee fairly, respectfully and legally? AHRI’s ‘Recruitment and workplace relations’ short course takes you through important legislation at all stages of the employment cycle.

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  • Effective employee and stakeholder engagement is critical.
  • Responsible for leading and managing payroll teams in a dynamic and fast-paced team.
  • This is a temporary position available for 12 months with the possibility of extension and/or permanency.
  • Send a two-page pitch outlining your experience against the Selection Criteria and capabilities, including your most notable achievements, along with your current resume to jobs@act.gov.au. Applications close at midnight 21 February 2019.

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While advocates of flat organisations emphasise how they encourage innovation and autonomy, their lack of structure can alienate employees.

The flatter an organisation, the fewer bosses it has and the more it expects staff to self-manage. So the appeal of flattening your organisation is giving each employee the power to be more productive and innovative – you make their work less bureaucratic.

It has become a popular approach to organising a business, one that has been adopted by big companies like Google, Nike and Patagonia.

Flat organisations don’t all look the same, some have formal structures or defined boundaries as to what counts as self-management. Some, such as Nike, assign groups to different products. Others allow for employees to completely self-govern and self-assess their roles.

While there are obvious good reasons for more collaborative, innovative and autonomous employees, without any form of structure, elitism can breed within an organisation. A consensus seems to be forming – going flat can be effective, but removing too much structure is dangerous.

Feminist predictions

As noted by Klint Finley in his Wired article, one of the more famous criticisms of ‘structureless organisations’ was articulated by Jo Freeman, a feminist activist, in her essay ‘The Tyranny of Structurelessness’.

Responding to a flat, structureless philosophy of group organisation popular with the women’s liberation movement in the sixties and seventies, Freeman argued there was no such thing as a structureless organisation, as every group of humans will naturally form a hierarchy.

“The structure may be flexible; it may vary over time; it may evenly or unevenly distribute tasks, power and resources over the members of the group. But it will be formed regardless of the abilities, personalities, or intentions of the people involved,” says Freeman.

“We cannot decide whether to have a structured or structureless group, only whether or not to have a formally structured one.”

Freeman says that if you refuse to define power structures, informal ones will emerge. And, while she thinks that an informal structure can work in a few circumstances, she believes that for larger groups and more significant ventures they tend to cause more harm than good.

“Unstructured groups may be very effective in getting women to talk about their lives; they aren’t very good for getting things done. It is when people get tired of ‘just talking’ and want to do something more that the groups flounder, unless they change the nature of their operation.

“As long as the structure of the group is informal, the rules of how decisions are made are known only to a few and awareness of power is limited to those who know the rules.”

Welcome to flatland

Valve, the company behind gaming-platform Steam, has a structureless approach. True to Freeman’s theory, its critics say an informal structure formed in a very hierarchical way.

In its employee handbook, under the subheading ‘Welcome to Flatland’, Valve claims hierarchy is great for predictability and repeatability. It states that without management, ‘nobody reports to anybody else’ and innovation ‘steers’ the company to success. The only management like figure in the company is the founder/president but as the handbook says “even he isn’t your manager”.

An ex-employee spoke to Wired about how Valve’s ‘pseudo-flat structure’ hid a layer of powerful, structured management.

It made Valve feel “a lot like high school,” the ex-employee says.

Considering its flat structure, it’s a little surprising Valve also had a system of ‘stack-ranking’ (see our article for what this is, and why it’s problematic).

The handbook states “stack ranking is done in order to gain insight into who’s providing the most value at the company and to thereby adjust each person’s compensation to be commensurate with his or her actual value.”

Most notably, the ranking is formed by project team members and no employee is allowed to rank themselves. While eliminating self-promoting, it does allow for popularity tests.

Image sourced from Valve’s ‘Handbook For New Employees’

Another ex-employee wrote anonymously on Glassdoor that “to succeed at Valve, you need to belong to the group that has more decisional power, and even when you succeed temporarily, be certain that you have an expiration date. No matter how hard you work, no matter how original and productive you are, if your bosses and the people who count don’t like you, you will be fired soon.”

This ex-employee could have expressed the same sentiment by quoting Freeman when she said that structurelessness can become “a smokescreen for the strong or the lucky to establish unquestioned hegemony over others.”

Flat but structured

Melbourne based company, Inventium adopted the flat organisation style but did so with pretty rigorously defined structures adapted from Brian J. Robertson’s method, ‘Holacracy’.

Holacracy is a way of structuring roles within an organisation wherein power is distributed into teams called ‘circles’. A holacracy gets rid of job descriptions, in an effort to allow for more flexibility in what a person’s responsibilities and tasks look like.

This creates a self-organised hierarchy. Each circle is given clear responsibilities and are trusted to carry out their own work. To create some accountability to the larger organisation, there are two roles within each circle called ‘lead link’ and ‘rep link’. They sit in a circle’s meetings to ensure the teams are working within the organisation’s mission and strategy.

Each circle creates its own governance process that is made up of input from all employees. The idea is to ensure there is agreed upon decision-making for changes in governance and amending or objecting to proposals.

Holacracy gives authority for employees to take any action needed to perform their work, unless it is prohibited by policy.

“One of the criticisms of [holacracy] is that it replaces one bureaucratic, rule-driven system with another,” Inventium founder Amantha Imber says.

“After reviewing it all, we took what we liked, and created some new systems of our own. For example, people constantly work in different team combinations. So rather than having ‘circles’, we hire people who are self-motivated and self-driven and are comfortable working both on their own and with a variety of different team combinations.”

Imber didn’t fire her managers but instead took away their management duties to allow them to “focus their efforts on actually doing the work they were originally hired to do rather than spend countless hours managing people,” she explains on the Inventium website.

Without management, Imber felt there was no fair way to evaluate her team members’ performance, so she decided to implement a questionnaire that would require quarterly self-reflection.

Example questions include:

  • What are the key things you have done this last quarter which have made you proud?
  • What have been your most significant learnings this quarter? How has this led to self-improvement?
  • What are you most looking forward to achieving next quarter?

“I’ve regularly sought the team’s reflections on how the new system has been working and what needs tweaking. This has led us to deviating from the traditional holacracy model,” Imber says.

Imber admits that not everyone has adapted well to this model. “People either love it and thrive, or it makes them feel extremely uncomfortable and they inevitably leave.”

With or without management, having a cohesive team is essential for any organisation. Sign up for this Ignition training course on building effective teams.

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