Five HR terms you might not know (part one)
Whether you’ve worked in HR for a day or a decade, people seem to think you’re a walking glossary of HR terms and definitions. The fact of the matter is though, you’re not.
No matter how good you are at your job, there are bound to be terms that people expect you to understand, which sound completely alien. And that’s why I’ve decided to start a fun series, where we explore some of the lesser-known HR terms and phrases.
1. Forced ranking
What is forced ranking? Forced ranking divides employees based on perceived performance, often focusing on the top 20 percent of workers – with the theory being that these people deliver 80% of the work.
Forced ranking is an interesting, and largely outdated HR term, which has some pretty controversial roots. However, many forms of forced ranking still take place today – even if they’re not branded the same controversial label.
Largely popularised by Jack Welch – the very icon of top-down hierarchy himself – forced ranking is a performance management system which tends to involve large rewards for the top performers, and large penalties for the bottom performers. For example, the top 20% of performers in an organisation may receive a bonus, whereas the bottom 10% may receive their P45.
During his time as CEO at General Electric, Jack Welch notoriously insisted that the bottom 10% of the workforce were removed each year.
Forced ranking systems are not thought to be a very good HR model. They are criticised widely, for many reasons. These include:
- Employee rankings tend to be biased and influenced by favouritism
- The system forces a high turnover rate for the workforce
- Employees don’t tend to thrive well under systems driven by fear and intimidation
It is highly unlikely that you will come across a UK employer admitting to using a “forced ranking” system these days. However, there are many examples of employers who operate in a similar way, albeit under a different name or guise. If you find yourself turning your entire HR system into nothing but a leader board; if you find yourself only ever rewarding the very top percentage of employees; and if you are quick to show the door to under performers… then you may well be playing close to the edge yourself.
2. ATS (Applicant Tracking System)
If you’re already using an HR system as part of your day job, you will have no doubt come across an applicant tracking system before.
What is an applicant tracking system? An ATS is a recruitment and onboarding tool, often found within HR software, which helps HR to advertise vacancies, collect applications, compare applicants, recruit employees, and on-board new hires.
The best applicant tracking systems will let you create score cards for your candidates, and easily compare how well they fit within your company culture and values.
3. Deferred compensation
What is deferred compensation? In a nutshell, it is an arrangement which lets an employee complete work, for which they will get paid at a later date.
According to Investopedia, an employee may opt for deferred compensation for the potential tax benefits it offers. Most of the time, a deferred payment scenario means that income tax is deferred until the actual pay-out – normally when the employee retires.
Deferred compensation can take the form of a retirement plan, a pension plan, and a stock-option plan, amongst other forms.
What is nepotism? It’s when a person in power – such as an employer – has favourites, whom they treat favourably.
Obviously, this HR term is not unique to human resources. Nepotism exists in many forms across many structures – but it is very relevant to the HR industry, as an awful lot of it exists within the workplace.
If you have a member of staff who is giving “undue advantage” to family or friends – e.g. considering people they like for a promotion, instead of considering the people most objectively qualified – then they are guilty of nepotism.
According to CV-Library, nepotism isn’t technically illegal – it doesn’t fall foul of any of the protected characteristics of discrimination.
But it’s not usually good for business. And it’s been shunned for thousands of years – including by the renowned Greek philosopher Aristotle.
5. Abandonment rate
This is another term that isn’t exclusive to HR – but it pays for HR to understand what it is, and how it might apply to them.
What is abandonment rate? In HR or recruitment, you would probably consider it the percentage of candidates who start applying for a job, but quit before they finish the process.
In the world of online retail, abandonment rate is generally taken to mean the level of customers who add items to their shopping carts, but leave the website before checking out. The real world equivalent to this would be customers leaving a full trolley in the middle of the refrigerated meat aisle at Tesco.
For HR, a high abandonment rate can be a big red flag that something is up with your recruitment process. If a high number of candidates are engaging with your vacancy, but leaving before they submit their application, then you should take a look at each step to see what could be wrong.
Is your applicant tracking system running slowly? Are you offering a low salary compared to similar jobs on the market? Do you have a bad reputation on sites like Glassdoor? Is a hyperlink broken?
If you have integrated analytics, you’ll be better able to see where your high abandonment rate is coming from, and hopefully find a way to fix it.
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