1. Why your HR managers are spongers and saboteurs
2. HR "testing" and HR "interviews" senseless as you hire
3. Transform your orcs into elves
4. And now a side-note about turnover

1. Why your HR managers are spongers and saboteurs

While classical political economy from Smith to Hayek can be compared to the physics of Newton and Leibnitz, the "man reacts to incentives" thesis is the basis of quantum physics — "behavioral economics".

Which your HR men know in and out. Or purport to.

However.

All the "incentives" that your (and any other) HR men can invent will boil down exclusively to inexpensive morale building and gaslighting your employees. This is the best case. For they usually gaslight top management, too.

Our publication on the composition of the financial incentive system in the IEM Paradigm showed that each and every factor that veritably affects an employee’s behavior must be part of the salary calculation formula.

Everything outside the salary calculation perimeter is milling the wind — until it comes to a threat of being fired, but this is also part of the salary formula in a sense (income = 0).

From here it follows logically that in the ideal case your HR men are harmless parasites.

But in real practice these parasites are quite harmful.

The mechanism of how HR men generate harm is similar to the marketers' one analyzed previously: what should be done by the CEO is usurped by stupid spongers who turn his work of exceptional importance into mockery of it.

Moreover. The only thing for which a CEO is needed if at all is to build such a system of incentives (KPIs in the salary calculation formula) as to keep the financial interest of each employee in the value chain co-directional with the implementation of the company’s overall marketing strategy.

If a sales manager is motivated to get a percentage of sales, he will not care a fig about the sales" profit margin, and sermons like "don’t make old ladies buy those LCD panels they don’t need — and push them into loan bondage" will be a little more than fully ignored.

And if the company’s top management do care about those old ladies, then their sales managers" motivation should largely be based on "70+ customers" satisfaction rate".

A competent CEO’s work with personnel can be compared to the work of a horologist who regularly lubricates and adjusts a sophisticated and delicate mechanism. A competent horologist WILL NOT work himself instead of any springs and wheels.

A good horologist WILL NOT invite sweet-voiced charlatans to mesmerize parts of his clockwork with surprising messages like "Queen Victoria has died", "Learn our mechanism’s corporate anthem", or. "Imagine your wheel has 18 cogs rather than 15 — and change your life!".

And what about "personnel appraisal" and "scoring"?

Get this nonsense out of the system.

A well-tuned financial motivation system will displace inadequate personnel automatically. Obviously, a bad worker will earn little and quit. And if a person earns much and is satisfied, he will work well, too.

Moreover. With the passage of time, your company will become a center of attraction for quality candidates on its own. For two obvious reasons:

1. by virtue of the foregoing, your company is already staffed with normal people; and

2. normal people earn enough in your company.

"Missions". "team-building sessions", "values"? You are gradually becoming immune to this brain shit, aren’t you? Of course, all the true missions and values are those built into motivation. If your sales manager gets his money for sales volume, he needs no words to understand what the company wants. And no "missions" will convince him that the company’s actual goal is happy children in Africa.

And the best — and all-purpose — team building exercise for your staff is to make all employees" financial interests co-directional.

Perhaps your HR men have fun organizing socialist emulation among business units and employees within them? With a good quality financial encouragement system, such competition is spontaneous and arouses far greater enthusiasm. It is enough to keep the current KPIs up-to-date on the company’s internal website.

And the value of a well-tuned financial motivation system is BY NO MEANS limited to providing short and strong strings for manipulating greedy employees. Even in a company staffed by idealistic and unmercenary fans, a well-tuned FMS will be extremely helpful exactly in its role of a compass pointing to the company’s goals and as a means for unobtrusive transformation of a freedom-loving rally of local men of genius into a well-organized team of useful employees.

Plus every unmercenary has a wife, who is perfectly well-versed in the material world.

2. HR "testing" and HR "interviews" senseless as you hire

Also REDUNDANT at least (and deeply harmful in practice) is HR managers" involvement in the process of hiring people. More precisely, moving the business processes of hiring people outside the functional units where the candidates are wanted. Using their tests, your HR men will hire staff for you who are simply good at passing tests.

Using interviews… so you understand. There is NO link between one’s abilities to pass HR tests and to achieve results in real work. So from the multitude of candidates who are eligible to seek a vacancies by formal criteria, your HR men will select totally accidental people.

Whose qualifications will not be much different from those of an average person in a crowd of applicants (simply speaking, you can choose at random, and the result will be the same).

And it can’t be otherwise, as stated by the central limit theorem of the probability theory. That is why all that HR monkey business is sheer nonsense — shamanistic rituals with an HR tambourine designed to impress the bosses. 

Now let’s take a broader look.

Can there exist in principle a formal process for selecting the best candidate from a lot of applicants who are suitable by objective criteria (education, work record, etc.) if the selection is done by HR experts who know nothing about the subject area?

Definitely NO.

There can be no such procedure. For reasons just as fundamental as two times two is four (meaning that the statement can be proved mathematically). And one who offers to provide you with such a procedure (whether in the form of sophisticated psychological tests or miraculous software) is a swindler. Again, in the mathematical sense.

Something unexpected?

Not at all.

The above message is intuitively realized by any manager with successful hiring experience.

Did anybody ever hear of any attempts to select the optimal CEO for e.g. General Motors using sophisticated "tests" and multi-stage interviews at their HR department? From a crowd of some 500 Ivy League graduates?

Nobody did? This is no surprise, because candidates for really important positions are selected otherwise.

How? Just as the IEM Paradigm prescribes how to hire to any positions. Warehouse men should be recruited by the warehouse; shop assistants, by the sales managers, etc.

Besides eliminating the unneeded red tape of "whispering down the lane" (and cybernetically, HR men are a parasitic element that introduces errors into the market signals), this approach acutely stimulates function managers, on the one hand, to use realistic candidate selection criteria and, on the other hand, to take their staff’s working conditions and turnover issue quite seriously.

And to be responsible for the quality of those hired. Instead of complaining as usual that "those silly HR managers have sent me some silly morons again".

And when the candidates are interviewed by the applicant’s future line managers, then interviews are really useful. For the applicant’s future manager is competent in his subject area (unless he/she was recruited by those same HR men).

When the tests have to do with actual work, they make sense. If smartly designed, of course — cf. pilots" flight simulators.

We sum it up in a formula:

If you have a good FMS, you need no HR men. Have no good FMS — no HR men will help.

3. Transform your orcs into elves

The above is by no means to say that HR men are bad people. They are just wrongly placed.

Parasitic HR orcs are turned into EBITDA-bearing elves with a subtle motion of the hand; you just need to need to repurpose them to standardize your company's business processes.

A good HR manager is better prepared for this job than anybody else at your enterprise (well, after he/she reads a couple of books on the topic). Next, the standardized processes are easily IEM automated, and voilà: you have fewer and fewer people, but your profits grow. Your ex spongers now bring in enormous profit.

Dialectically and ironically: like Amazon needs just to give up its own sales to become mega profitable, your HR managers need to switch from (imaginary) management of human resources to eliminating them — to become useful.

Things fall back into place — always for an excellent result.

P.S. And now a side-note about turnover

If you measure it in two-digit percentages per year, we already know how you can multiply your company’s profit.

However, where can you get any net profit at all…

It was repeated many times that the main thing in business is NOT people at all. Still, the performance of your company’s humanoid component is no less important than that of any other equipment. Imagine that a transport company’s trucks consume twice as much diesel fuel as its competitors".

The market prospects of this business are quite clear. Exactly the same applies to personnel. High turnover will inevitably (with rarest exceptions like McDonald’s where it is the basis of their business model) leads to low labor productivity.

For your people are not trained properly. As a result, a company with high personnel turnover will get only a fraction of return on the same payroll that a company with stable personnel gets.

Management tends to overlook this problem, for those same trucks that consume different amounts of fuel are even visually different (like an ancient KamAZ differs from a modern Actros), while an untrained person looks perfectly like a trained one: "looks like a duck, quacks like a duck…".

Fortunately, an IEM style financial motivation system will be a perfect remedy for turnover, too.