Author: Douglas Shuit

Ideally, student-athletes play sports for a free education and the love of the game.

    But somehow that doesn’t jibe with billion-dollar network contracts, celebrity coaches paid $1 million to $2 million and football stadiums packed with fans paying Broadway-show ticket prices.

    The big money is in the National Collegiate Athletic Association’s Division I-A men’s football and basketball programs. Those sports make enough money to keep athletic departments solvent and university building projects going. Driving these programs are exceptionally athletic young men, many of them African Americans dreaming of becoming professional athletes.

    Allen Sanderson, an economist with the University of Chicago who researches sports, calls the way money is shuffled from high-revenue sports to money-losing sports like tennis and cross-country running a “reverse Robin Hood effect.” He notes that athletes in the low-revenue sports are whites from middle- or upper-income families, in contrast to black athletes from more modest backgrounds.

    Sanderson calls college athletes “the most exploited workers in the U.S. economy,” and argues that just about everyone in the system benefits more than the players. He believes they should be paid.

    Scoffing at the romantic notion of the student-athlete, Sanderson argues that athletes have a job, and it is to produce heroics on the football field or basketball court.

    “The colleges don’t want them in the library,” he says. “The kids don’t want to be in the library. What they are there for is to play what amounts to minor-league football and basketball that they hope to turn into professional careers.”

    That argument strikes at the heart of what some say may be the most valuable lesson that workforce managers can learn from athletics, which is that it shouldn’t be about the money.

    While investments in athletics are huge in dollar terms, the relationships between coaches and players are built on core values like trust and leadership. Management consultant Roger Herman, who writes about this subject in his book How to Become an Employer of Choice, says all companies should try to instill these core values in their workforces if they want to attract and keep top talent.

    “Today’s employees are not there for the money,” Herman says. “They want meaningful work, they want to make a difference, and they want to feel like they belong.”

    Without those values, he says, coveted employees might walk out the door muttering, “You can’t pay me enough to work here.”

    Herman says athletes represent the college community. Once they get paid, they would lose that role and become hired help.

Much of the debate hinges on graduation rates. The NCAA’s report card on these rates in 2004 for Division I-A schools, the larger universities that generate the biggest crowds and television ratings, shows that students in general graduate at higher rates than student-athletes, 64 percent to 62 percent.

But in men’s Division I basketball, 44 percent of the players graduate. Football has a below-average 57 percent graduation rate, and for black athletes, the rates are much lower than they are for white athletes in both football and basketball.

    Such statistics only bolster Sanderson’s argument. He’d like changes, but he’s not holding his breath. “These kids have no bargaining power whatsoever,” he says.

Workforce Management, August 2005, p. 35 —Subscribe Now!

PeopleSoft is one of those Silicon Valley stories that just won’t die. Even though the company is rapidly being absorbed by Oracle, former PeopleSoft executives seem to be popping up all over, keeping its legacy alive.

    PeopleSoft’s founder, Dave Duffield, is leading the charge. The former CEO is putting together a company that is developing new software technology based on ease of use, adaptability and cost reduction, which sounds a lot like his early strategy at PeopleSoft.

    Elsewhere, PeopleSoft alums have moved into CEO positions at different software manufacturers or have been appointed to boards of a variety of startups and developing companies. Their experience at PeopleSoft is a huge asset for startup technology companies that have plans for growth or want to go public.

    “Everyone wants to be the next PeopleSoft in terms of rapid growth, in terms of seizing on a large market opportunity,” says Jason Corsello, senior analyst with the Yankee Group.

    Companies that own PeopleSoft software are being courted as aggressively as the company’s former executives are. Oracle wants to hold on to longtime PeopleSoft customers, rival SAP would like to steal them, and numerous niche software vendors see opportunities to get cut in on the business.

    If Oracle has its hands full with competitive pressures, it’s because PeopleSoft was much more than just a technology firm with good marketing. It was a company built in large measure on customer service, hitting the market at the right time and utilizing the risk-taking entrepreneurial spirit of Duffield and people he brought into the company.

    A somewhat goofy incarnation of that spirit was the Raving Daves, a band named after Duffield and formed by musically inclined employees who pulled out their guitars when they needed breaks during long days.

    As the company caught on, so did the Raving Daves, who went from impromptu hallway jam sessions to playing before as many as 12,000 people at the Superdome in New Orleans.

    “I’d often look out at the big crowds and ask myself, ‘How did this happen?’” says Baer Tierkel, the early leader of the band and self-described geek who spent 10 years as a PeopleSoft executive.

    PeopleSoft’s credibility, of course, had more to do with its deep appreciation of its customers and their needs than its employees’ musical chops. It was “a great company; HR people loved it,” says Phil Fersht, research director for EquaTerra.

    Competition for the company’s goodwill is fierce. German software company SAP may have the most to gain. Oracle, Fersht says, “is under serious threat from SAP” in the fight to convert PeopleSoft customers.

    “SAP is very smartly using the human resources outsourcing channel to win over PeopleSoft customers,” Fersht says. “Oracle needs to better understand the HR BPO market. SAP has definitely taken a jump on Oracle.”

    Paul Salsgiver, a former president of one of PeopleSoft’s divisions, says Oracle is going to have a hard time bottling the formula that made the erstwhile software company great.

    “We are people who like to create things,” Salsgiver says. “We are not bashful about taking an idea and creating a product out of it.”

    These days Salsgiver is CEO of Aspectrics, a company built around a unique technology that can instantly get readings on the chemical properties of liquids, solids and gases. Salsgiver is borrowing heavily from his experience at PeopleSoft. Just as he once sought feedback from colleges and universities to help develop PeopleSoft applications for higher education, Salsgiver is going straight to his customers for feedback in developing products for Aspectrics.

Market innovator
    For 16 fast-paced years, PeopleSoft was one of the darlings of the Silicon Valley, a technology growth machine whose stock doubled four times during the 1990s boom. It showed the business world that advanced, sophisticated and cutting-edge software could be applied as strategically to workforce management as it could to finance, payroll and manufacturing.

    The innovation PeopleSoft brought to the market was client/server software that allowed human resource managers to move away from bulky mainframe computers and work with data and workforce management tools at their desktops.

    Early customers who took a chance on the new technology were Monsanto, Eastman Kodak, the Tennessee Valley Authority and the state of New York.

    By the time Oracle targeted the company for the takeover, PeopleSoft had grown from a handful of people to a global workforce of 12,000, with annual revenue approaching $3 billion after its acquisition of JD Edwards and Co.

    Jeff Carr, now executive vice president of global sales and marketing for Taleo, was one of PeopleSoft’s first 50 employees. He was in sales before the company went public in 1992 and rose to the presidency of a PeopleSoft division.

“When we began rolling out our products, HR was a very underserved market… We captured the hearts and minds of that market.” –Early PeopleSoft employee Jeff Carr, now executive vice president of global sales and marketing for Taleo

    “Dave Duffield was a visionary who could look around corners and see trends before anyone else,” Carr says. “He bet the company on client/server and Windows at a time when others still saw it as risky technology.”

Because it was a new technology, customer service became Duffield’s mantra.

    “When we began rolling out our products, HR was a very underserved market,” Carr says. “Human resources reported up to the CFO. Payroll and financial applications ruled, and employees were seen more as an expense rather than value added. Our early focus was talent and human capital management. We captured the hearts and minds of that market.”

Focus on service
    These days, the products Carr sells belong to Taleo, formerly known as Recruitsoft. Carr and several other executives from PeopleSoft, including Taleo CEO Michael Gregoire, are using what they learned at their former employer to help Taleo grow. The private company is gearing up to go public, just as PeopleSoft once did, and is developing a suite of workforce management products.

    Another former PeopleSoft executive, Jason Averbook, co-founded the consulting firm Knowledge Infusion with Heidi Spirgi, also a PeopleSoft alum. Knowledge Infusion has jumped from three employees to 75 in a matter of months following the Oracle takeover, Averbook says.

    Averbook’s company helps PeopleSoft customers develop their software to get more strategic use from it.

    “The hope is that we can help HR departments not take five steps back because of the acquisition of PeopleSoft, but take five steps forward to drive strategic value,” he says.

    SAP, the German software giant, picked up two former PeopleSoft vice presidents, Mark Lange and John Zepecki.

    Phil Wilmington, a co-president at PeopleSoft at the time of the takeover, landed as CEO of Outlooksoft. Kevin Parker, the other co-president and CFO of PeopleSoft, is now CEO of Deltek Systems, which hopes to compete against both Oracle and SAP for a share of what once was the PeopleSoft market.

Ronald Codd, a former PeopleSoft vice president and CFO, today sits on the boards of six technology companies. When he was with PeopleSoft, he helped steer the company from $15 million in annualized revenue in 1991 to $1.5 billion when he left at the end of 1998. During that span, the number of employees rocketed from 75 to 7,000.

    Codd captures much of the spirit of early PeopleSoft executives and what makes them so valuable to developing technology companies: They’re not afraid of risk, and many like small companies.

    Codd says he made that clear when Duffield offered him a job.

    “I said, ‘Gee, Dave, I really think I can do this job, but I want to be honest with you: When we get to $300 million or thereabouts, I am not sure I want to continue,’ ” Codd says.

    “Dave got a good laugh. He had told people he didn’t want the company to be more than 50 people. He was very worried about losing that vibrant entrepreneurial energy that a team can have together.”

    Today, Codd is passing on what he learned during PeopleSoft’s growth years to companies whose boards he sits on. It gets back to listening to the customer.

    “Customer focus is absolutely critical to about 99 percent of the companies out there,” he says. “We were always on the cutting edge with technology. People were betting their careers when they came with us, and we wanted to do right by them.”

    Former PeopleSoft workers have formed a thriving Web-based alumni association organized by Steve Tennant, who worked at the company during the boom years.

    Tennant figured that after the Oracle takeover it would be fun to get together with other PeopleSoft alumni and have a few beers occasionally. He put out feelers and had 1,300 members in no time at all, Tennant says. His Web site, www.psftalumni.net, is particularly popular with recruiters. It now has 700 recruiters registered, Tennant says, and they have posted 3,000 jobs.

    “It just took off,” he says. “It was beyond my wildest expectations.”

Payroll, open enrollment and benefits administration can be a nightmare for a company like Dallas-based Atrium Cos., a window and door manufacturer. Over the past eight years, Atrium has gone from 900 employees to 6,700, creating enough payroll and workforce management issues to outgrow two software systems.

    Nancy Hartmann, corporate human resources director for Atrium, says she thinks the third system, from Employease Inc., will have more staying power. After shopping around, she signed up Employease in 2003 and just renewed for another two years. But she is keeping her options open.

    “You never know where you will be tomorrow,” she says.

    Small and midsize employers like Atrium, while they have the same administrative requirements as much larger companies, often don’t have the budget for a full enterprise-wide HRMS application or the desire to dramatically boost their IT and human resources departments to handle the extra work.

    Enter Employease, one of a number of growing software service providers that fill the gap between blue-chip HRMS applications with all the bells and whistles and outdated legacy systems that date back to the dawn of software.

    Employease, which has won awards for its Web technology, has 1,000 small to midsize clients. It markets its technology, which offers nearly all the traditional HRMS services with the exception of payroll, for its ease of use.

    “People don’t want scary, very hard to do, something you approach with trepidation,” says Jeff Beinke, Employease’s vice president of product strategy. “Every application must be easy to use, easy to implement and easy to learn. If a feature doesn’t conform to that, we send it back to the drawing board.”

    Employease offers a variety of services, such as benefits administration, self-service for both managers and employees and performance management. Clients are allowed to pick and choose the services they want rather than having to sign up for a complete suite.

    What makes it go are more than 3,000 connections with medical, dental, life insurance and 401(k) providers outside the company, as well as agreements with enterprise-level software providers like PeopleSoft, Lawson Software and SAP, Beinke says. As for not providing payroll, Beinke says Employease finds it easier to outsource to one of the major players, like Ceridian, ADP or Millenium.

    Employease can implement its system in four to eight weeks, in contrast to months and sometimes years for larger systems. Charges range from $4 to $8 per employee per month.

    Atrium outsources its payroll to ADP. It uses Employease for benefit communications, open enrollment and as the connection between the company and its leading health care provider, Cigna.

    Employease does the health insurance billing and reconciliation of monthly premiums. If employees have a problem, they call Employease directly, rather than someone at Atrium.

    “The whole process saves us a lot of time and fixes a lot of mistakes,” Hartmann says. She doesn’t like to think what it would take to do it in-house. “You get past the additional people, and then there are issues like adding cubicles and filing systems and computers. The list of things is never ending.”

Workforce Management, June 2005, pp. 60-62 —Subscribe Now!

Industry-leading HRMS companies use aggressive sales and marketing campaigns and big trade shows attended by hundreds of clients to help sell their software. Then there is PDS, a full-service HRMS company based in Blue Bell, Pennsylvania.

    PDS, which generates $5 million to $10 million in revenue serving midmarket companies, gets a lot of business by word-of-mouth. The 31-year-old company offers a full suite of HRMS products, such as payroll, tax management, recruitment and staffing, regulatory compliance and employee and manager self-service software. Still, when it comes to marketing, it bears little resemblance to larger vendors like SAP, Oracle and Lawson Software.

    “Most of our marketing has been designed to work in reverse,” says vice president of sales George Brady. “People seek us out.”

    For PDS, the combination of good technology, low cost and service is working.

    “We like to say we bring our projects in on time and under budget,” Brady says. “We have always been the smallest vendor in our market space, but I can name a lot of companies much bigger than us who are no longer in business.”

    One of the clients who sought PDS out is Anne Vekaryasz, the corporate payroll supervisor for Tendercare, Michigan’s largest chain of long-term care facilities. Tendercare was paying a substantial amount to a large Web-based HRMS payroll specialist but was still plagued by time cards, spreadsheet problems and communicating with the company’s 4,200 employees stretched out over 37 facilities.

    “We found we needed more control,” Vekaryasz says. “We wanted to become completely self-sufficient.”

    Getting software salespeople to trek up to her base in Rogers City, a small town in northeast Michigan, proved difficult. One leading HRMS vendor didn’t even return her call, Vekaryasz says. But PDS did, and a contract was signed.

    “We found they were the best fit for us for the right money,” she says.

    A much bigger client is Teleflex, an international engineering products company that has dozens of subsidiaries, 19,000 employees and $2 billion in annual revenue and is growing by leaps and bounds.

    Now near the end of a five-year implementation project with PDS, Teleflex needed a single system to tie together the 100-plus companies that it has acquired. The companies were being served by a variety of payroll and HRMS vendors.

    Cory Wetterau, the Teleflex human resources information system project manager working with PDS, says his company has saved nearly $500,000 so far by consolidating various systems. One of the big benefits is that Teleflex licensed and bought the PDS Vista system. That allows the company to save on things like float, the value of interest on tax withholding and payroll money banked by the firms that previously provided payroll on a contract basis.

    It also helps that Teleflex is located in Limerick, Pennsylvania–close enough to Blue Bell to get hands-on service.

    “PDS is a small local firm we can lean on and get a lot of support from,” Wetterau says.

    Offering ownership of their HRMS system is part of the value proposition Brady says his company can provide.

    “When people rent, they move on to what they perceive is the next latest greatest thing,” Brady says. “If they buy it, they will stay with you. We’ve had customers who have been with us for eight, 10, 20 years.”

Workforce Management, June 2005, p. 62 —Subscribe Now!

A funny thing happened on the way to a paperless society: The Internet, with its online auctions and e-retail shopping, has created a worldwide demand for shipping that is driving a nice international business for package delivery services.

    Four shippers alone–UPS, FedEx, DHL International and the U.S. Postal Service–divide more than $100 billion in revenue among them.

    These entities are putting so many uniformed employees on the ground, aircraft in the sky and trucks on the road that an international trade war over delivery services seems to have taken on the appearance of true battle.

    Competition among the major parcel handlers, who employ some of the largest workforces in the world, is frenzied. The big package delivery companies are swallowing up smaller companies and expanding into an array of logistical, supply-chain and other services.

    UPS not only moves cars but also sets up warehouses stocked with car parts to make overnight delivery to dealers easier. Instead of transporting lobsters from the Maine coast, UPS set up a lobster farm at its Louisville, Kentucky, hub for faster delivery to restaurants.

    With the exception of the government-run postal service, the delivery companies seem to be mimicking one another. It goes like this: When UPS buys Mail Boxes Etc., FedEx follows up and purchases Kinko’s. Needing an air force to counter its bigger competitors, DHL acquires Airborne Inc., then gets Danzas Air and Ocean from its German parent Deutsche Post World Net.

    Here is a breakdown of the four key players:

    UPS–Revenue in 2004: $36.6 billion. The Atlanta-based giant has 384,000 employees. It owns 268 jet aircraft and charters an additional 301 planes. Operates in more than 200 countries and dominates business in the U.S. Handles 14.1 million packages and documents a day, delivering to 7.9 million daily customers. Owns 88,000 cars, vans, tractor-trailers and motorcycles. Fighting to hold on to market share in the U.S. while it expands operations internationally.

    DHL International–Revenue in 2004: $32 billion. The one-time San Francisco-based company is now owned by Deutsche Post, which has a monopoly on Germany’s mail delivery. Most of its revenue is generated outside the U.S., but it is rapidly expanding and building up its name in the U.S., with a $1.2 billion investment plan. Has 170,000 employees worldwide. Operates a fleet of 420 aircraft. Deutsche Post says its U.S. operations are losing money but could break even by 2006.

    FedEx–Revenue in 2004: $24.7 billion. The Memphis, Tennessee-based company has 250,000 employees and contractors. Operates in more than 220 countries and territories. Has 671 aircraft and more than 71,000 motorized vehicles. Handles 6 million parcels daily. Has a big contract with the U.S. Postal Service. Is putting up a strong challenge to UPS in ground transportation.

    U.S. Postal Service–Revenue in 2004: $69 billion. Employs 707,000 career employees and 101,000 substitute, relief and replacement workers. Owns 212,000 motor vehicles but contracts with commercial air carriers. Most of its revenue derives from a monopoly on mail delivery in the U.S. Counting only priority and overnight mail and package delivery, the services that most frequently throw it into competition with private firms, USPS takes in $7.4 billion a year.

Workforce Management, May 2005, p. 43 — Subscribe Now!

One of Lea Soupata’s favorite photographs captures Jim Casey, the founder of United Parcel Service, standing in one of the company’s offices in Massachusetts staring wistfully off into the distance.

    Reflecting on his image, the company’s senior vice president of people programs says, “He is just standing there, probably thinking, ‘Gee, it’s a long way from Seattle,’ ” where he founded the company in 1907.

    After rising to the top of the world’s fourth-largest employer, Soupata might just as well look at her roots in a working-class neighborhood of New York and say of herself, “Gee, it’s a long way from Queens.”

    Separating her from UPS is almost impossible. She’s been at the company for 36 years in jobs ranging from truck driver to member of the board of directors of a firm whose time-tested organizational style dates back nearly a century to the days of foot and bicycle messengers.

    Workforce management is what UPS is all about, from its liberal employee benefits program to its highly structured, almost militaristic system of internal mobility. As its 384,000-member workforce holds on to its distinction as the largest delivery and transportation company in the world, those traditions are being tested as never before.

    Today it is being chased by archrival FedEx as well as two government-assisted mail delivery monopolies, the U.S. Postal Service and Germany’s Deutsche Post World Net, the German postal service that owns the delivery company DHL. Among the key players helping UPS stay the course in the face of such stiff competition is Soupata, the daughter of a working-class Greek immigrant family.

    Her hard-earned rise through the ranks of UPS is reflection of the company’s old-school corporate values. She joined UPS when she was 19, splitting her time as a receptionist and administrative assistant in human resources at an office in Queens.

    Today she is one of the highest-paid female human resources executives in the nation, as well as one of the wealthiest, amassing company shares over the years that were worth $17 million in early April.

    She has the rare distinction among human resources executives of holding seats on her company’s executive committee as well as its board of directors. She has met and worked with Presidents Clinton and George W. Bush on one of her favorite projects, a Welfare to Work program that has allowed 60,000 people to get off public assistance and into training and jobs at UPS.

    Despite her stature and influence, those who work closely with her say she’s never forgotten where she came from. “She’s a tough cookie,” says Don Cohen, who researched UPS for his book In Good Company. “You have to be tough to do what she did.”

    Until the 1960s, when Soupata joined the company, UPS was mostly a monolithic, male institution. “A lot of white guys worked there, a lot with military backgrounds, a lot of Irish Catholics,” Cohen says. “It still has kind of a feel of a military club, but it is much more diverse.”

    CEO Mike Eskew, whose office is across the hall from Soupata’s, credits her with improving the company’s diversity numbers.

    “Lea has never forgotten what it’s like to walk in the shoes of the people on the job,” he says. “She always puts us back in the drivers’ perspective, the sorters’ perspective. Lea has helped us know that diversity is not only the right thing to do but that it has made us a better company.”

Not the fast track
    Soupata, Eskew and other members of the company’s executive team came up through the ranks, and they expect others to do the same. Many company executives at one time wore the ubiquitous brown UPS uniform. Rather than promise glamorous jobs or interesting assignments, the organization makes it clear that new hires might be put into jobs they don’t want to do.

    UPS also offers better-than-average salaries and benefits, provides health care and stock buy-ins for part-time workers, and has many opportunities for promotion. Family members of founders, executives, employees and retirees own 90 percent of the company’s stock and control 99 percent of its voting shares.

    That’s how Soupata was able to accumulate 242,000 shares of stock.

    “You are going to be working nights, be hot, get dirty. That is the way it is,” Soupata says matter-of-factly, describing the UPS culture. “There are times when you have to take a deep breath and say, ‘Don’t give up.’ That is something we live by.”

    Many executives share middle-class backgrounds and state school educations. As a no-frills exec, Soupata flies coach, doesn’t have her own personal secretary, eats in the company cafeteria and wears a company ID card around her neck like an entry-level clerk.

    She says people who want a fast career track may not make it at UPS. Although today’s corporate demands mean that the company is hiring more midcareer professionals expert in fields like technology and finance, UPS still clings to the traditional approach of starting new hires in jobs they may not like. It doesn’t recruit at Ivy League schools. And UPS continues to be famous for exacting training standards that leave nothing to chance–down to an edict to drivers about which fingers they should hold a key ring on, a time-saving technique, to an insistence on first-name folksiness.

“Lea has never forgotten what it’s like to walk in the shoes of the people on the job. She always puts us back in the drivers’ perspective, the sorters’ perspective. Lea has helped us know that diversity is not only the right thing to do but that it has made us a better company. –Mike Eskew, UPS CEO“

    “We pride ourselves in trying to take care of our people,” Eskew says. “We think our people return that to us in a lot of ways.”

    The chief executive says the company’s focus on its workforce makes Soupata and her 1,400-employee human resources division key to the company’s strategic vision.

    Marc Gunther, a senior writer at Fortune magazine, researched UPS for his book Faith and Fortune. He says UPS is in the vanguard of companies that he believes are creating “a values-driven approach” to business by treating their employees, customers and shareholders well.

    The company has “a very strong sense of togetherness and community and loyalty up and down the ranks,” he says. He likes the way people work their way up the system at UPS. “You are considered a newcomer until you are there 10 or 15 years. That is unusual in today’s world.”

    The company finished 2004 on an up note, generating $36.6 billion in revenue, a 9 percent increase, while net income rose 15 percent to $3.33 billion. The company is sitting on $5 billion in cash, a portion of which is earmarked for expansion that has taken the delivery business into banking, warehousing and retailing.

    Despite a drop-off in expected earnings during the last quarter of 2004, the firm expects earnings in 2005 to increase 13 percent to 17 percent, polishing its already stellar AAA credit rating.

    But the weaker earnings in the last quarter of 2004, accompanied by a loss of market share, led analysts at investment firm UBS to predict below-market growth beyond this year. Analysts at UBS cited intense competition from FedEx.

    The verdict is not unanimous, though. Analysts at Morningstar and Smith Barney both view the soft fourth quarter as a hiccup and say they expect UPS to continue growing, fueled by markets opening up around the world, particularly in Asia.

Brown’s blues
    With a workforce of 384,000 employees moving 14.1 million packages a day–about 2 percent of the world’s gross domestic product every 24 hours–there are many bumps in the road.

    A poor safety record caused the company to revamp its safety and training procedures, leading to a significant drop in reportable injuries and time lost because of injury. More than half of the company’s employees are in unions, primarily the Teamsters, meaning labor issues are always on the front burner.

    UPS is negotiating with the union representing its pilots, who have already taken a strike vote. Teamsters walked off the job in 1997 in a strike that was one of the company’s most painful episodes. As part of the settlement, the company agreed to make more part-time workers full time.

    The company also has defended itself against lawsuits claiming discrimination. In recent years the company has settled a suit filed by black hourly part-time employees alleging discriminatory practices in initial job assignments and other problems.

    In October, UPS lost a suit in U.S. District Court in San Francisco that was filed by deaf and hard-of-hearing workers who challenged the company’s policy excluding them from driving delivery trucks. UPS is appealing the decision.

    Part-time workers, who sometimes figure in labor and legal issues, are key to the success of UPS. The company likes to bring in new hires as part-time workers, often while they are still attending school, and groom them for bigger jobs. The part-timers and students, who receive tuition reimbursement as well as health benefits, work the hard-to-fill night shifts, when the company hubs are often busiest.

    The system is deeply ingrained in each UPS employee. Araceli Ramirez, 25, has been a part-timer at UPS for six years in a Los Angeles County office, working at different jobs while attending community college and then Cal State Los Angeles.

    Now, with a degree in hand, she is awaiting a full-time job on a management track. There are jobs available, but she is waiting for the right one. Meanwhile, she pays the bills by working as a dispatcher. “I want to wait for the perfect job opening,” she says.

    Amy Whitley, the company’s vice president of organizational development and a 21-year veteran of UPS, concentrated on human resources in getting her bachelor’s degree at Pace University in New York.

    “I knew HR was what I wanted to do,” she says. “They said, ‘That’s nice, but everyone starts at the bottom.’ I started as a driver.”

    Soupata calls experiences like those of Ramirez and Whitley getting a “UPS degree.”

Circuitous route
    These days, Soupata seems to be a long way from her start in a low-level administrative job in the human resources department and the browns she wore as a driver. She worked for UPS in New York, New Jersey, Maryland and Pennsylvania before landing at the corporate headquarters in Atlanta in 1994. Along the way she worked in sales, engineering and central sorting.

    As chief of human resources, Soupata is responsible for health and safety programs, employee relations, organizational development, workforce planning, compensation and benefits, and the UPS Foundation. She joined the company’s management committee in 1995, the same year she became chief of human resources, and became a member of the board of directors in 1998.

    Despite living in Atlanta the past 11 years, she still speaks with an accent that reveals her Queens upbringing. Her father, a florist, emigrated from Greece. Her mother, born in the U.S., was a hotel telephone reservations clerk. Soupata recalls her mother bringing her to work with her when she was 5. “To me, it was the neatest thing,” she says.

    Her husband, Sotirios “Terry” Zervoulias, is also a Greek immigrant. The couple met in 1984 through family introductions when she was 35 and he was 42. She says one of her favorite things to do is to roll back the rug and dance. “We are talking ’60s Motown,” she says.

    She attended Long Island University, a private university with campuses in the New York area, and worked at UPS to help support her family. She says she always liked work better than school.

    Soupata first met Casey, the company’s beloved founder, in New York when she was 24. She was a corporate human resources manager for a much smaller UPS. At the time, there were 400 executives in management at the company. Today there are 2,000.

    She remembers seeing Casey waiting for a bus outside the company’s New York headquarters. “I thought if I had that kind of money I would have a limousine waiting for me,” she says. She eventually realized that his personal values–such as humility, prudent spending and equality–were the foundation of his corporate philosophy.

    Soupata is less than a year away from the company’s retirement age of 55 for executives, and is not disclosing her plans. There is speculation that she may stay until the company celebrates its 100th anniversary in 2007.

    Meanwhile, the company continues to grow and break into new markets. Soupata says she loves the ride. For many years, the growth of UPS was slow. The company had to spread through the U.S. literally state by state, bound by federal regulations requiring the transportation company to get individual state approval to conduct business. Now, of course, its reach is global.

    Soupata recently visited employees in Japan. She watched a group of Japanese drivers in their trademark UPS brown uniforms line up next to what appeared to be freshly polished trucks. The workers went through a ritual recitation of safety practices familiar to every driver in the U.S., first in Japanese and then in English.

    “It was just amazing,” she says. “When our people are wearing browns, you don’t know what country you are in.”

    There was one problem, though: the first-name thing.

    “People are so respectful in Japan that using the first name is just not proper. I say, call me Lea, and they are really not sure if they are supposed to do that.”

    She assures them it’s not only OK, it goes with wearing a brown uniform.

Workforce Management, May 2005, pp. 38-44 — Subscribe Now!

Eight years ago, pizza and fried chicken powerhouse Yum Brands Inc. broke off from Pepsico and its celebrated people management programs. In the wake of that split, many of the soft drink company’s executives joined the new business and made a fundamental management decision that is paying huge dividends for Yum and its shareholders. The former Pepsico executives scrapped the parent company’s hard-charging workforce management approach and build a people-friendly style all their own.

    Somewhat surprisingly, one of the tools the new company decided to use to forge its new “customer maniac” workforce identity was the 360-degree assessment tool, an old standby that had lost some of its luster. The campaign is designed to promote customer-oriented values like speed, cleanliness and hospitality among its employees while promoting intangibles like creativity and enthusiasm. The 360s, traditionally paper-based and unwieldy, hardly seemed like an assessment that could help drive a dramatic transformation of workplace values for the 850,000 workers involved in running Yum’s Pizza Hut, Taco Bell, KFC, A&W and Long John Silver’s franchises.

    It turns out that the 360s, after a Web-based technology makeover and a high-profile campaign that reached 8,000 Yum managers down to the store level, became a great tool for reinforcing the customer maniac values. They also fit nicely with the company’s international expansion, helping establish a common set of values that are as readily assimilated by employees in a Beijing KFC restaurant as they are in a Taco Bell in Los Angeles.

    “Being a customer maniac is a big part of being successful at Yum,” says Tim Galbraith, Yum’s vice president of people development and a longtime Pepsico executive. “We call that delivering our passion, which is to put a yum, or smile, on customers’ faces. We want to do that on every transaction.”

    The shift in the people management philosophy has helped Yum achieve a remarkable record of growth. With 33,000 restaurants dishing out fried chicken, deep-dish pizzas and other goodies to 22 million customers daily around the world, Yum is on a pace to open 1,000 restaurants a year, with a strong focus on international expansion. The company has found particularly fertile ground for growth in China, where its 350 restaurants make it the No. 1 restaurant chain.

    Yum earnings are contributing to record prices for its stock, with shares rising 32 percent in 2004, and generating enough income to eliminate more than half the $4.5 billion in long-term debt it inherited from Pepsico. Standard & Poor’s projects that earnings per share will jump from $2.36 in 2004 to $2.63 this year and will grow at an annual rate 10 percent a year over the next few years.

Customer-focused
    At the time of the spinoff from Pepsico in 1997, leaders of the new company knew they had to get much more people-friendly to prosper as a stand-alone in the restaurant business. Pepsico’s focus is marketing and driving sales to big clients like supermarket chains. Yum’s customers care about getting their food hot and fresh, and with any luck, they’ll be served by an attentive counter person. A friendly separation from Pepsico’s hard-charging, show-me-the-numbers business style was inevitable.

    “Pepsico is a very strong, high-talent organization,” says Galbraith, who has a doctorate in industrial and organizational psychology. “What was missing were things more to do with values, the ability to deal well with people and be a great coach. So when the spinoff came, we swung all the way to the other side.”

    John Slocum, a professor of organizational behavior at Southern Methodist University’s Cox School of Business who has studied the two companies, says Yum made huge leap away from the Pepsico management style. The 360s and slogans like “walk the talk” went a long way in establishing an independent culture at the new company.

    “For Yum, the performance criteria are soft: teamwork, communication, leadership. You answer to a mentor or coach, not a boss,” he says. “Pepsi is hard-charging, results-oriented, do it now. They want you to bring your numbers to performance review sessions.”

    He credits the Yum executives with recognizing the differences and setting up a workforce philosophy much more in tune with operating restaurants.

    Under the system developed at Yum, managers officially became coaches. The goal was to turn people into the required customer maniacs.

    Yum turned to Kenexa, a firm that has translated human resources programs into 50 languages, to develop a new version of Yum’s outdated, paper-based 360 system. Just like the old 360, the new Web-based system pulls feedback on an individual’s job performance from a worker’s peers, managers, subordinates and customers.

    Paper-based 360s proved difficult to track in a timely way. They were prone to questions of reliability because the results were hand-tabulated. Without uniformity, 360s are highly suspect because they can vary from workplace to workplace and manager to manager. The paper-and-pencil process meant that the 360s could only be given to management-level executives to keep from getting too unwieldy.

“A lot of companies have historically viewed 360s as executive leadership or corporate management tools. Yum has taken it out to the field.”

    With Kenexa driving the process, 360s can be completed in a compressed three-week cycle. The new system is efficient enough to drop down from senior executives to store-level managers.

How it works
    The process begins with e-mails asking employees who are subjects of the 360s to submit a list of employees who could serve as raters, using a step-by-step process to come up with a list. Supervisors review each list. Once an acceptable list of a dozen or more co-workers is developed, questionnaires are sent out. They include plenty of room for written comment.

    The feedback is collected and put into a report. Then the employee sits down with a supervisor to go over the results. Galbraith says the feedback covers a spectrum of topics. The company wants to know how well its managers know their customers and how well they go about exceeding their customers’ expectations. Yum managers are also held accountable for driving business results by building and aligning teams. Yum managers and executives are also graded on their coaching ability.

    “In the area of building and aligning teams, we will ask, ‘What do you appreciate about this person and how can they be more effective?’ ” Galbraith says.

    To avoid traditional problems with these multi-rater surveys, the evaluations are not tied to compensation. Pay issues are a separate process and are spaced months apart from the 360-degree assessments.

    Given Yum’s global sweep and international expansion plans, Kenexa created a more uniform process and was able to provide language translations of the survey tied to each person’s local region.

    Yum also insists that employees at manager level or above undergo a 360 assessment every year. There is a cumulative effect, enabling the company to get a snapshot of its managers every year and giving it much more control over workforce strategy.

    “This solution helps us paint a picture of where we are as a company in terms of our capability and bench strength,” Galbraith says. “It helps us understand what capabilities we have, what we are missing and where we need to put organizational development efforts.

The right fit
    Jim Holincheck, research director for consulting firm Gartner, says he isn’t surprised by Yum’s success. Companies with global workforces and the kind of similar job and customer relationships found in a fast-food restaurant are a nice fit. “It works well if the activities and skills required to do the activities are similar,” he says.

    Companies made big investments in 360s during the 1990s. Then they fell out of favor because of the paperwork involved, he says. “Today it is a lot easier and less expensive to deploy technology to do the job.”

    Troy Kanter, president of Kenexa’s human capital management division, says Yum helps drive business results by taking the surveys down to the restaurant-manager level.

    “A lot of companies have historically viewed 360s as executive leadership or corporate management tools,” he says. “Yum has taken it out to the field. The feedback may be much richer because it is dealing with immediate customer issues.”

    Galbraith says Yum’s 360s are still evolving. The shift away from the Pepsico management style has begun to swing back to a sharper business focus.

    “We don’t want to create just a great place to work; we also want to be a growth company,” he says.

    One of the new ideas injected into the process has been boiled down to another slogan, the “beat year ago” mentality. “We expect our people to grow and develop each year,” Galbraith says.

    Yum CEO David Novak is a big supporter of the assessments–so much so that he decided to ask a wide swath of company people for feedback on a recent appraisal of the job he was doing. Galbraith says 120 employees responded to the assessment.

    “It ran 65 pages,” he says.

Workforce Management, April 2005, pp. 59-60— Subscribe Now!

International relief agencies say employee contributions matched by corporate donations are helping to drive an unprecedented outpouring of money and support to help the victims of the tsunami disaster in South Asia.

    “We have never seen anything like this,” Susan Schroeter, managing director of corporate partnerships and alliances for UNICEF, says of the size of contributions from employees and corporations. UNICEF received $45.5 million in cash and pledges in just over two weeks after the Dec. 26 disaster. Corporations contributed $14 million of that, she says. The previous high for corporate contributions to the agency was $2 million, which it received after a devastating earthquake in Gujarat, India, in 2001, Schroeter says.

    Both UNICEF and CARE USA report receiving contributions from many companies that had never contributed to international relief campaigns before. Marshall Burke, vice president of private support for CARE USA, says his relief agency had raised $21 million by mid-January—$5.4 million of that from corporate sources. By contrast, CARE took in $8.2 million over six months in 1999 in the aftermath of the genocide in Kosovo, he says. The agency hopes to raise $50 million for tsunami relief.

    “A lot of that is being driven by the corporate matching campaigns,” Burke says. “There are literally dozens of corporations, large and small, doing matching campaigns.”

    Overall, more than $400 million had been raised by relief organizations by mid-January, an amount that exceeded the $350 million pledged by the U.S. government up to that point, according to The Chronicle of Philanthropy. The American Red Cross raised $173 million of the total amount going to relief organizations, and that is the largest amount received by an individual agency. The Chronicle said that while the overall pace of donations to tsunami victims was extraordinary, it trailed the more than $550 million raised to help victims of the September 11, 2001, terrorist attacks during the two weeks after that tragedy.

    Companies are mostly matching their employees’ contributions dollar for dollar. But some, like the Gap, are doing better than that, handing over $2 for every $1 contributed by employees. Some companies are setting limits on matches. Home Depot is matching gifts up to $1,000 per employee. JPMorgan Chase will match employee contributions up to $100,000 per gift. Crain Communications Inc., which publishes Workforce Management, is matching employee gifts on a dollar-for-dollar basis.

    Matt Hirschland, director of research and communications for Business for Social Responsibility, which promotes corporate ethical values, says it is pushing its 300 member companies to contribute. “Our counsel to our members is to please give,” Hirschland says. “There is a need.”

    Those involved in the money-raising drives cite many reasons for the outpouring of support by corporate donors. With globalization, many businesses have manufacturing plants and outlets in the devastated areas. Nike, which has factories in several of the stricken countries, made an early $1 million contribution to four aid groups and set up an employee matching program.

    “There is a deep emotional response to the sheer scale of this tragedy,” Burke says. “So many people are bereft, whole communities are gone, people are gone, schools are gone. For anyone who has lived on a coast or near a coast, there is a sense that there but by the grace of God go I.”

Workforce Management, February 2005, p. 18 — Subscribe Now!

President Bush’s inauguration at the U.S. Capitol on January 20 should come with this warning for anyone involved in workforce issues: Buckle up, because his second term could be quite a ride. If the president gets what he wants, companies will find themselves scrambling to keep up with an array of administration initiatives, including the partial privatization of Social Security and the expansion of consumer-driven health care plans. Executives should also expect political solutions for imperiled private pension guarantees, as well as medical malpractice insurance reform and stepped-up enforcement efforts by the Labor Department’s wage-discrimination cops.

    Fresh off his hard-fought victory over John Kerry and reinforced by stronger Republican majorities in the House and Senate, Bush is expected to move swiftly to push forward his “ownership society” legislative agenda.

    At a time when companies are struggling to find answers to rising health care costs, troublesome pension regulations and sometimes cynical younger workers who wonder if the Social Security system will be drained dry by the time they retire, Bush’s legislative agenda offers potential solutions.

    Issues that employers found problematic with Kerry, such as the Massachusetts senator’s support for tax increases, a promised rollback of Medicare prescription drug benefits and a cool posture toward malpractice limits, are no longer on the table.

    Bush’s central theme of an ownership society would establish a new set of core relationships among the government, employers and workers. That could be good news for employers if, as promised, it brings health care costs under control and eases the stress on the Social Security system.

    But big problems remain. With federal budget deficits already weighing down the government, Bush still must find ways to pay for his programs. Last month, during a White House meeting with Social Security trustees, Bush reiterated that he would not raise payroll taxes to finance his Social Security proposals. Both Social Security and Medicare face huge increases in costs as baby boomers get closer to retirement.

“There is going to be a need for Bush to use these Republican majorities, but it has to be done on a bipartisan basis. You can’t browbeat the minority.”

    PricewaterhouseCoopers Health Research Institute says that retiring baby boomers, increases in national health expenditures and sizable federal budget deficits “will challenge the stability of the Medicare program and could prevent enhancements to other programs unless Congress curbs spending, raises taxes, or both.”

    Jim O’Connell, vice president of government relations and human resources policy at Ceridian, says Bush is clearly in a position of strength and that should help in passing issues defeated in the past by slim margins.

    “During the last four years, the margins on a lot of the issues were very close, often decided by a few votes,” he says. “There are a lot of issues that need to be addressed but were bottled up for one reason or the other.”

    Bush should reach out to Democrats to pass big-ticket items, says James Klein, president of the American Benefits Council. “There is going to be a need for Bush to use these Republican majorities, but it has to be done on a bipartisan basis,” he says. “You can’t browbeat the minority.”

    Working in the president’s favor is a widely shared view that health care and retirement issues related to the aging population will only get worse if there is a political standoff and nothing gets done. Social Security is approaching the day when contributions won’t be enough to cover benefits.

    Health care is increasingly unaffordable for both employers and individuals, as evidenced by the 45 million Americans without insurance. Government-backed private pension guarantees are shaky, with the agency responsible for them running out of money.

    “We expect 2005 to be a very active year,” says Frank McArdle, manager of the Washington, D.C., office of Hewitt Associates.

    Here are the domestic issues that are at the top of the president’s agenda and what to expect as they wend their way through Congress:

Social Security
    This is a cornerstone issue for Bush’s ownership society. The president has not presented a specific plan, but what he and others have been discussing is allowing 2 percent to 4 percent of workers’ contributions to be deposited into private savings accounts. Individuals would control the investments.

    Supporters of the partial privatization plan say that individuals are better able to invest and grow their retirement dollars than the government. Opponents say that the inherent risks of the stock market and other investments mean that some workers could ultimately end up losing money.

    Those issues aside, estimates are that it will take $1 trillion to $2 trillion over 10 years to keep the system afloat during the transition. “It’s not at all clear how the problem of paying transitional costs will be solved,” says Stan Panis, a consultant with Deloitte & Touche. “It does nothing to fix the overall solvency of the system.”

    As it stands, Social Security estimates that tax revenues will fall below payouts by 2018 and that trust funds will be exhausted by 2047, requiring a reduction in benefits.

    The privatization plan does not address the longer-term funding problems of the system.

“Consumers’ unwillingness to hold themselves accountable for health care costs is a stumbling block for proponents of health care savings accounts and the new breed of high-deductible consumer-directed health plans,” says Brad Holmes, a vice president and research director for Forrester. “Until consumers accept their share of responsibility, even the financial incentives inherent in HSAs and CDHPs will be a tough sell.”

    One straightforward fix would be to raise payroll taxes on workers and employers. Bush has vetoed that, and Ceridian’s O’Connell doesn’t see that changing. “There is no sentiment for higher taxes,” he says.

    Given the problems, not everyone expects Bush to be successful. “It surprised me that he made Social Security a signature issue,” says Gretchen Young, vice president of government affairs for Aon Corp. Given the estimated transition costs, Young adds, “I don’t understand how he can get that through.”

    Among the early opponents is the AARP, the lobbying group for older Americans.

Health care
    Health insurance is getting prohibitively expensive for individuals and represents a growing, unwelcome cost for employers. It is often cited as one of the leading contributors to the increasing number of Americans without insurance–45 million at last count.

    “Affordability is probably the No. 1 health policy issue for 2005,” O’Connell says.

    Without action, the problem of Americans being priced out of the health insurance market will only get worse, according to the Lewin Group, a nonpartisan health care and human services research and consulting firm. The Lewin Group estimates that 49.5 million Americans will be without health insurance by 2006 unless there is some kind of intervention.

    Based on the proposals Bush presented during the campaign, his plan would cover 8.2 million new people by 2006, dropping the number of uninsured down to 41.3 million, the Lewin Group’s research indicates.

    Bush attacks the problem from a variety of directions. He is proposing to bring large numbers of low-income children into the Medicaid system. He believes high-deductible, low-premium insurance designed to cover major medical expenses would help provide an alternative for individuals priced out of the current market.

    He supports legislation to create association health plans that would allow employers to join insurance pools in order to negotiate less expensive insurance plans. The president also believes that limits on malpractice awards will help bring down costs. One issue that Bush so far has not embraced–opening the door to the reimportation of lower-cost medicines from Canada–may also be part of the mix.

    Bush believes that granting tax credits and other tax benefits will encourage the use of enhancements such as health savings accounts and high-deductible plans. He would give low-income families a $1,000 direct contribution to help them purchase HSAs. He also proposes allowing income tax deductions to defray the cost of premiums paid for major medical policies and has talked about giving a refundable $3,000 tax credit to individuals to buy standard medical coverage instead.

“The president’s victory and the larger Republican majority in the Senate and House means that the overtime rules are here to stay. In general, the new Congress will be even less sympathetic to mandates on employers than the previous one.”

    Consumer-driven health care, so much a part of the Bush plan, is still struggling to find acceptance. Changing the health care spending habits of Americans is a must.

    “Consumers’ unwillingness to hold themselves accountable for health care costs is a stumbling block for proponents of health care savings accounts and the new breed of high-deductible consumer-directed health plans,” says Brad Holmes, a vice president and research director for Forrester. “Until consumers accept their share of responsibility, even the financial incentives inherent in HSAs and CDHPs will be a tough sell.”

    Bush is expected to once again put his muscle behind medical malpractice insurance legislation that would cap pain-and-suffering damages at $250,000. He contends this would reduce the number of frivolous lawsuits that he says are driving up the costs of health care.

    “The most likely thing to pass is tort reform–putting limits on damages because of medical malpractice,” Aon’s Young says.

    The malpractice proposal was passed by the House last year, only to be blocked in the Senate by Democrats. A pre-election survey of workforce managers shows that they believe Bush was the candidate best able to control health care costs. In the survey of U.S.-based human resource and benefit managers, Aon found that 48 percent of the respondents felt that Bush would be more effective than Kerry in controlling company health plan costs.

Private pensions
    Private pension funding shortfalls are another problem that will land on Bush’s desk during his second term. The Pension Benefit Guaranty Corp., the federal agency that insures pension plans for 35 million Americans, announced in November that it lost $12.1 billion during the 2004 budget year, doubling its deficit to $23.3 billion in just 12 months. The announcement came with a warning from Bradley Belt, the agency’s executive director, that Congress must “act expeditiously so that the problem doesn’t spiral out of control.”

    Contributing to the problem is the fact that Americans are living longer. But terminations of pension plans by troubled companies that are sinking into bankruptcy and defaulting on their pension obligations present a much bigger problem.

    Since September, the agency has assumed pension obligations for more than 12,000 employees of Lumbermans Mutual Casualty Co., a property-casualty insurer and parent of Kemper Insurance Corp.; 3,700 former employees of Fruehauf Trailer Corp.; and 9,600 hourly employees covered by the Kaiser Aluminum Pension Plan.

    Potential pension plan terminations by United Airlines and US Airways loom on the horizon. The PBGC has promised to guarantee the basic pension benefits of the airline workers. Should United terminate its pension plan, it would add an estimated $6.4 billion to the agency’s deficit.

    Such things as premium increases paid by employers or changes in interest rate assumptions could make it more costly and cumbersome for companies–even those with well-funded plans–to continue to sponsor fixed-benefit pensions. If that happens, then the American Benefits Council’s Klein fears that the dramatic termination of fixed-benefit pension plans will intensify. From 1999 to 2003, 25 percent of the nation’s pension plans were terminated.

    Klein says Congress must adopt new rules clarifying and updating accounting standards and liability measurements that employers can live with well into the future.

Labor department
    Just weeks after the election, the Office of Federal Contract Compliance Programs unveiled new guidelines that put employers on notice that they could face more aggressive enforcement of anti-discrimination laws.

    The new guidelines come on the heels of a mid-November announcement by the OFCCP that there was a 31 percent increase in financial recoveries for workers victimized by unlawful workplace discrimination during the 2004 budget year. Nearly 11,000 workers split $34.5 million in back-pay settlements.

    “The administration has been very forceful in going after workplace discrimination,” says attorney Matthew Halpern of the Jackson Lewis law firm. “This is a decidedly business-friendly administration, but it is also a very tough law-and-order administration. Even though you think they will cut business a break, that is not the case when it comes to civil rights enforcement agencies.”

    A hot issue during the campaign was enforcement of the Fair Labor Standards Act and overtime rules interpretations by the Bush Administration, which have been criticized for reducing the number of workers eligible for overtime pay. Kerry vowed to overturn the rules.

    “The president’s victory and the larger Republican majority in the Senate and House means that the overtime rules are here to stay,” McArdle says. “In general, the new Congress will be even less sympathetic to mandates on employers than the previous one.” But he says Bush can be counted on to put teeth into such regulations as anti-discrimination statutes.

    In the end, the success of Bush’s second-term workforce management initiatives could hinge not on how well he pushes his proposals through Congress, but how well he sells his ideas to Democrats.

    “People are hoping that a new spirit of cooperation takes hold,” Aon’s Young says. “If not, it could get real ugly in Congress.”

Workforce Management, January 2005, pp. 35-39 — Subscribe Now!

As the search for a successor to chief executive Michael Eisner gets under way at the Walt Disney Co., the board of directors won’t have far to look for top executives with a Magic Kingdom history. The company has been a launching pad for top executive talent. But one of the issues being raised in the aftermath of Eisner’s retirement announcement last month is that the high number of company defections may have left only one clear successor, Robert Iger, Disney’s current president. That may have been Eisner’s plan all along, but critics say that Iger failed in his promise to turn the company’s ABC Network division around and is not a slam-dunk to take over the top job.

    The question is how many credible successful executives remain on the Disney bench, and whether any of them have the talent to lead the company and properties, which include theme parks, motion pictures, television and cable networks, retail outlets and cruise ships.

    Eisner’s history of running off potential successors, such as Jeffrey Katzenberg, who left to form DreamWorks SKG, and Michael Ovitz, the Hollywood power broker brought in as president during the mid-1990s, is well documented. Among those who jumped ship is Paul Pressler, president and CEO at Gap Inc., who gave up his job as chairman of Walt Disney Parks and Resorts two years ago to take the top job at the $16 billion retailer. Comcast Corp. CEO Stephen Burke, whose company made an unsolicited and unsuccessful bid to buy Disney for $54 billion earlier this year, spent 12 years at the entertainment company after stepping down as president of ABC Broadcasting. Meg Whitman, president and CEO at eBay, who was ranked by Fortune magazine in 2002 as the third most powerful woman in business, launched her career as a top marketing executive at Disney.

    “There is a tremendous need for new leadership at that company,” says Bill Simon, chief of the headhunting firm Korn/Ferry’s global media and entertainment practice. He says it’s a fair criticism of Eisner’s management style that so many top executives have left. “They need someone who can move in there and build a management team.”

    Simon and others watching the Disney drama unfold also point out that Eisner has given himself and the board two years to find and groom a successor. It probably won’t take that long. The board says it would like to complete its search by June. Citing the company’s strong recent performance, it says Iger is the only inside candidate it would consider. The board is promising an open process and says that external candidates would receive “full consideration.”

    Outsiders say speeding up the process is smart. Until there is an end to uncertainty at the top, advancement within the company could be frozen, and executives would be looking over their shoulders. There could be a stampede for the door. The relatively few outside executives who are qualified to run the company might not be willing to wait two years or more to move into the top job and work beside Eisner.

    Whoever is hired will likely have to deal with the same dissident shareholder group, led by Roy Disney, nephew of the company’s founder, and Stanley Gold, a former company director, who have been directing withering criticism at Eisner and demanding he resign.

    Considering the criticism, Brad Marks, a longtime entertainment industry executive headhunter, says Eisner must play a background role. “Otherwise, he will have his handprint all over it.”

    Chuck Pappalardo, managing director of the executive search firm Trilogy Venture Search, blames the uncertainty on the Disney board and its lack of a clear succession. “This is a board issue; this is not a Michael Eisner issue,” he says.

    In the meantime, with so much uncertainty swirling around the company, recruiters will be out in force, Marks says. “Disney makes a great target for people who do what I do.”

Workforce Management, October 2004, p. 25 — Subscribe Now!