Author: Ed Frauenheim

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Research Backs Benefits of Flex Work for Workers – and Companies

It doesn’t always filter into conversations about flexible work in the business world, but there’s a raft of academic research about flexible work arrangements. It generally supports those arrangements for workers and companies—with some intriguing twists such as the 15-hours-per-week telecommuting sweet spot.

The scholarly research on flexibility deserves attention these days, given that alternative work arrangements were curtailed this year at prominent companies Yahoo Inc. and Best Buy Inc. Those moves have triggered scrutiny of workplace flexibility throughout the business world. Some consultants have argued that flexibility programs aren’t always well-designed or effectively put into place, while companies by and large say they remain committed to some flavor of flexibility. But the public conversation around flexibility and work-life balance in recent months has taken place largely without consideration of academic investigations on the subject.

In fact, scholars of work-life balance issues have bemoaned the way their research findings tend to remain cooped up in the “ivory tower” of academia—meaning in academic journals rarely read by business practitioners. “Although work-family research has mushroomed over the past several decades, an implementation gap persists in putting work-family research into practice,” scholars Ellen Ernst Kossek, Boris Baltes and Russell Matthews wrote in a 2011 paper. “Because of this, work-family researchers have not made a significant impact in improving the lives of employees relative to the amount of research that has been conducted.”

That research as a whole speaks in favor of flexibility. A study several years ago by Ravi Gajendran and David Harrison of Pennsylvania State University, for example, concluded that telecommuting reduced work-family conflict and improved job satisfaction and performance. Those findings were echoed in an article earlier this year in the Journal of Occupational Health Psychology. The study, conducted by University of Minnesota researchers Phyllis Moen, Erin Kelly and Jack Lam, examined the impact of an alternative work arrangement known as “Results-Only Work Environment,” or ROWE, on employees’ health. Under ROWE, employees have significant power to set their work schedules and locations.

The study found that ROWE helped employees gain a sense of “time adequacy”—that is, workers’ sense of having enough time for themselves, for being with their families and for participating in their communities. Greater time adequacy, in turn, was associated with higher levels of energy and lower levels of emotional exhaustion and psychological distress.

ROWE was born at Best Buy. A pair of the retail giant’s employees conceived of the approach about a decade ago and first implemented the practice at Best Buy’s Minneapolis-area headquarters before spreading the work philosophy to other organizations. That’s why Best Buy’s decision to kill the program was so striking.

The company’s financial results have slipped in the past year—it posted a loss of $81 million for the quarter ended May 4—and CEO Hubert Joly ended ROWE amid a broader turnaround effort. Joly said the alternative work approach erred by delegating too much authority to employees. “Anyone who has led a team knows that delegation is not always the most effective leadership style,” Joly wrote in an opinion piece in the Minneapolis StarTribune newspaper. A similar story unfolded at Yahoo. Under pressure to rekindle Yahoo’s earlier success, new CEO Marissa Mayer turned heads by reversing work-at-home arrangements at the Internet pioneer. Published reports suggested telecommuting workers at Yahoo were slacking off. And Mayer later argued face-to-face encounters are important for collaboration and innovation.

Academic research supports the idea that flexibility can go awry. An intriguing study in 2005 by scholars Timothy Golden and John Veiga suggested that the ideal number of hours a week to telecommute is 15. Job satisfaction increased as workers approached this figure but began to decrease as workers spent more time each week telecommuting. “The limited interactivity of the electronic media coupled with increased social isolation may take a toll on the benefits of telecommuting,” they wrote.

It also seems that flexibility regarding work hours is more effective than flexibility around workplace when it comes to reducing the stress work can cause on family life. Researchers Kristen Shockley and Tammy Allen found as much in a 2007 paper, noting that telecommuting workers with children at home may experience “role conflict.”

Scholarly research also helps clarify the degree to which flexible work arrangements are offered to workers. A 2011 study by Stephen Sweet, Elyssa Besen and Marcie Pitt-Catsouphes suggests that such programs are often hyped by companies, which in practice offer only limited options. Their research found that 78 percent of companies offer reduced workload flexibility to at least 1 percent of employees, but just 16 percent offer reduced workload flexibility to at least 51 percent of employees. “The types of flexibility that workers need most—cutting back on hours or going on leave—are least likely to be within their reach,” Sweet wrote in a blog post last year.

As companies wrestle with flexible work options, they may also want to consider the findings of a recent academic paper on the connection between virtual work and “social loafing”—when individuals on a team slack off. Much depends on the family demands of individual workers and whether they are on teams of similar workers, researchers Sara Jansen Perry, Natalia Lorinkova, Emily Hunter, Abigail Hubbard and J. Timothy McMahon found. For example, if a team is made up entirely of “busy” people with many family responsibilities, their individual performances suffer. It appears those workers may feel committed to their jobs but excuse each other out of sympathy. But teams composed of all “carefree” people with few family obligations generally work hard in virtual teams. And teams with a mix of “busy” and “carefree” individuals generally avoid loafing, perhaps because the “carefree” workers help show the “busy” how to be more efficient and refuse to excuse any slacking.

“Employees who have many family responsibilities may actually work best with dissimilar co-workers (in terms of family responsibilities) when virtuality is high,” the scholars write. “Perhaps this is a function of learning from co-workers’ working styles or maintaining accountabil­ity within the team.”

Ed Frauenheim is associate editorial director of Human Capital Media, the parent organization of Workforce. Comment below or email him at efrauenheim@workforce.com. Follow Frauenheim on Twitter at @edfrauenheim.

 

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Survey Shows Lack of Innovation Motivation

Despite the fact that company executives call innovation one of their highest priorities, cultivating innovation is not a top goal when it comes to managing the workforce, a recent survey reveals.

What’s more, 4 in 10 organizations see themselves as ineffective at fostering innovation, and there’s a mismatch between what companies are doing to promote inventiveness and what they say is effective.

These are among the findings of the 2012 Workforce Innovation Survey. The survey, which solicited information from human resources officials, HR executives and other company leaders, suggests many organizations have a ways to go when it comes to cooking up creativity.

Many observers call innovation a crucial ingredient for the 21st century economy. As product cycles spin faster, customer expectations rise and global competition ramps up. Indeed, 9 out of 10 survey respondents expect that fostering innovation will increase in importance over the next five years. But many workforce leaders in our survey are frustrated by the state of their firm’s innovation efforts. One respondent suggested a bunker mentality persists at that person’s organization in the wake of the Great Recession. “During an economic downturn, survival is 100% everyone’s focus,” the respondent wrote. “No funds or tolerance from investors or senior management to innovate and try new things even if they will ultimately generate positive revenue to the bottom line.”

Three of the other top-ranking workforce goals do contribute indirectly to innovation: leadership development, recruitment and retention. Still, the middle-of-the-road showing of promoting innovation as an explicit goal contrasts with the priorities voiced by company leaders in the CEO Challenge 2012 report published by research firm The Conference Board. In that study of global leaders, innovation ranked as the top challenge.

The U.S.-specific findings in the report also show a greater concern for innovation than is reflected in the Workforce survey, in which the majority of respondents were from U.S-based organizations. The Conference Board discovered that U.S. executives ranked innovation as the third most important challenge after government regulation and global political and economic risk.

Nearly 60 percent of respondents to our survey said their organizations were effective at fostering innovation among employees. The remaining 40 percent felt the opposite, judging their organizations’ innovation-cultivation efforts to be ineffective.

Those findings dovetail with a disconnect we discovered between what companies are doing on the innovation front and what they say works. When asked about which strategy to encourage innovation among employees is most effective, respondents ranked these approaches as the top three:

  • Facilitating more collaboration among employees.
  • Giving employees freedom to spend time developing ideas and projects.
  • Building expertise in our own domain.

But when asked about which strategies they are actually using, giving employees autonomy to pursue ideas ranked just fourth.

Why aren’t more companies applying the lessons of Google Inc. and other companies that provide employees with freedom to tinker with their own projects? One possible explanation is that workforces are stretched thin these days. “Budget constraints and downsizing have increased individual workloads, meaning that innovation is not at the forefront of priorities for most staff,” a survey respondent said. “The conundrum is that if more innovation could be implemented, staff could work smarter, not harder, but with current workloads few staff have the time to ponder or develop new ways of doing things.”

Another potential reason companies are not carving out time for independent projects is that managers may not trust that employees will use free time wisely. One survey respondent suggested that workers need guidance on the path to inventiveness. “Helping employees ‘learn’ to learn and think outside the box is a big transition for most,” the respondent wrote. “Long-term employees in particular have to have support to get to the point of being able to participate in innovation, particularly when they have not seen it in their prior years of employment.”

Perhaps another factor behind companies making less-than-ideal decisions about how to cultivate creativity is that innovation initiatives often are not measured. Just 16 percent of respondents said they have a way of quantifying the level of innovation at their organization.

Overall, the survey offers a portrait of discombobulated innovation efforts. “It’s not really structured and organized,” one respondent wrote, “So it’s more a matter of luck whether innovation takes place.”

Ed Frauenheim is Workforce’s senior editor. Comment below or email editors@workforce.com.

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Private Equity Firms Can Improve People Management

Charles Jones doesn’t fit the stereotype of a private equity mogul, or how such moneymen change company cultures.

Jones is founder and managing partner of Bedford Funding, a private equity firm that has bought a number of human resources software companies in the past few years. But while some private equity groups borrow heavily to acquire companies—leading to big debt service payments that can undermine businesses—Bedford Funding has done its deals without debt. And amid tales of selfish financiers sending American jobs overseas to cut costs, Jones did nearly the opposite recently.

When White Plains, New York-based Bedford Funding acquired software firms including Authoria and Peopleclick, it inherited an offshore workforce of a few dozen computer programmers in India. Under Jones’ leadership, the company decided to move those developers to the United States to improve collaboration and ultimately serve customers better. Most of the employees agreed to come over on work permits.

“As opposed to exporting jobs, we’ve imported these longtime employees,” Jones says.

Jones’ tale helps paint a more complete picture of private equity and its effect on companies and people management. Partly because of presidential candidate Mitt Romney’s background at Bain Capital, the private equity industry has come under intense scrutiny in the past year. President Barack Obama and other critics assailed Bain and other private equity firms for laying off workers and bankrupting companies. And overall, coverage of the industry has tended toward the extremes—either blasting the field for cutting jobs and killing workplace cultures or defending it as vital to turning around ailing firms and boosting the economy.

The truth lies somewhere in between.

While horror stories exist, in some cases private equity takeovers can lead to healthy updates of management methods and practices. These can include improved alignment between business strategies and employee rewards, greater focus on key talent issues such as retention and even a willingness to invest in hiring and higher pay.

“Private equity tackles business issues, including HR management, head-on,” says Bob Braddick, a senior partner at consulting firm Mercer who guides its global strategy for private equity. “They are thoughtful and decisive.”

Private equity firms generally take the shape of partnerships in which a group of managers raises money from sources, including pension plans and individuals, to invest.

The firms typically acquire companies and seek to increase their value over the course of several years in the hopes of realizing a profit by selling them or through a public stock offering. Private equity already touches many companies in the U.S. economy, and is poised to expand its reach.

According to the Private Equity Growth Capital Council trade group, there are 2,670 private equity firms headquartered in the United States as well as 15,680 private equity-backed companies based in the country that employ 8.1 million people. What’s more, the global private equity industry has “dry powder”—the trade group’s term for money available for investments—totaling some $900 billion.

The potential for more private equity deals irks industry critics. And they can point to cases that give the industry a black eye. For example, a private equity investment in holiday fruit basket seller Harry & David Holdings Inc. resulted in the company going bankrupt in 2011 even though investors made off with millions in profits, according to a Bloomberg report.

But such disturbing tales aren’t the entire story when it comes to private equity.

Sandy Ogg, operating partner at private equity giant Blackstone, says the field has moved past the days of slashing research-and-development budgets and skimping on customer service at acquired firms. “The industry learned long ago the lessons of ‘Strip it and flip it,’ ” he says.

Before coming to Blackstone two years ago, Ogg held executive HR positions at Unilever and Motorola Inc. Blackstone hired him as part of its efforts to handle effectively the people side of acquired businesses.

Along those lines, this year Ogg spearheaded the creation of a leadership committee designed to work alongside the investment committee that makes key decisions about what firms to buy and at what price. The goal of the new group is to assess the managerial talent needed to carry out the business plan at the acquired company.

Ogg chairs the committee, and it includes the CEOs of acquired companies as well as other operations experts. One sign of the new group’s importance: Blackstone’s legendary CEO also attends the meetings. “Steve Schwarzman is in every one,” Ogg says.

It’s important to recognize distinctions within the industry, says Chas Burkhart, founder of boutique private equity firm Rosemont Investment Partners. Rosemont, which is based outside of Philadelphia and has raised a total of $250 million since its inception in 2000, specializes in ownership transition deals within the asset management wing of the financial services industry. As such, Rosemont may help a group of managers buy out an asset-management business from aging founders or break out from a parent bank.

Burkhart says his firm tends not to take on debt in its acquisitions. And it tends to leave people management matters in the hands of executives that it works with in the acquired company. Rosemont officials have had seats on 23 company boards over the past 12 years but have never exercised a vote.

“We have a very light touch,” Burkhart says.

On the other end of the spectrum in terms of size is private equity firm Hellman & Friedman, which has raised more than $25 billion since 1987 and invested in more than 75 companies. Among its portfolio companies is HR software firm Kronos Inc. Kronos was a publicly traded company in 2007 when investors including Hellman & Friedman took it private in a deal valued at roughly $1.8 billion.

For Kronos employee Dave Ragusa, being owned by a private equity firm hasn’t hurt Kronos’ culture and may have helped it. Ragusa, a Houston-based project manager who implements Kronos software at retail clients, is glad the company doesn’t have to worry about the burdens of the Sarbanes-Oxley regulations facing publicly traded companies. Those federal rules had affected his job in ways including a more complicated, more time-consuming process for making changes to customer work.

He’s also grateful that longtime CEO Aron Ain remains at the helm, where he has shown sensitivity to military reservists like Ragusa.

Ain has a policy to make up the difference between Kronos’ annual pay and the pay employees get during military service when they are called up. That has remained in place under Hellman & Friedman ownership.

And in 2010, Kronos allowed Ragusa to spend a year away from work at the US Army War College, where he’d been offered a training opportunity given to just 2 percent of his reservist peers. While some employees of organizations taken over by private equity firms have bemoaned their new owners, Ragusa has no complaints about the arrival of Hellman & Friedman and no plans to go elsewhere.

“Someone would have to really knock my socks off for me to leave Kronos,” Ragusa says.

Ragusa apparently isn’t alone. Employee-satisfaction scores are higher at the company now than before it was bought by Hellman & Friedman, Ain says. The shift to private equity ownership meant the loss of just one job, Ain says. It was the company’s investor relations specialist, who was offered other positions at Kronos but decided to leave.

At the same time, Kronos gained management expertise from Hellman & Friedman, Ain says. “They’re really smart,” he says. “They’re always giving me ideas.”

For example, Hellman & Friedman prompted Ain to take a look at his sales force turnover rate in 2008. With that turnover running north of 30 percent the previous year, Kronos received the approval of Hellman & Friedman to invest $2 million in having management consultants come in to study the situation.

Their advice was to boost sales-force compensation by some $6 million. Again, Hellman & Friedman gave Ain the green light, and Kronos spent the additional money.

“They said do it,” he recalls, noting this was a decision taken in the midst of the recession.

Sales force turnover retreated into the “low teens” by 2009 and remains there today. To Ain, the investments have paid off. Kronos’ annual revenue has jumped from about $600 million at the time of the Hellman & Friedman acquisition to close to $900 million.

The kind of people-related investments Hellman & Friedman approved at Kronos are not uncommon, says Mercer’s Braddick. He says private equity firms have a certain urgency stemming from their goal to increase the value of the acquired company within a particular time period, which may be three to five years.

“There is a defined window to execute the business strategy,” he says. “If there’s a strong business case, they will invest in the business, and they will do it quickly.”

In addition, Braddick says private equity firms have beefed up their capabilities to help portfolio companies handle talent matters in the past decade or so. This includes turning to consulting firms such as Mercer, which offers private equity firms assistance with issues such as benefit programs, employee engagement and employee communications.

Braddick says private equity groups also have hired ex-HR executives—think Sandy Ogg—who can then counsel acquired firms.

That’s not to say everything always goes smoothly these days with private equity deals. Jones and Bedford Funding, for example, experienced a rocky leadership patch at the HR software firm they assembled.

In April 2010, Jones brought in an outside manager to oversee Peopleclick Authoria. But a number of former Peopleclick and Authoria employees grew dissatisfied with CEO Joe Licata’s management style and quit or announced plans to leave. In November of that year, Licata left and Jones stepped back in as CEO. He rehired at least 13 ex-staffers and issued stock options to each of the company’s 500 employees.

Licata, who currently serves as a director of electronics manufacturing company Sanmina-SCI, couldn’t be reached for comment.

Jones declines to talk about the details of that tumultuous period. But he says getting leadership right is tricky when stitching together companies. Melding multiple firms into one is what he has done at his HR software business, which was rebranded Peoplefluent in 2011.

Executives capable of overseeing a company with $5 million in revenue may not have the skills to lead a firm with $100 million in revenue, Jones says. In addition, if you are seeking to turn a collection of several software companies into a unified business with one head of finance and one head of development, there is going to be a shake-up among the executives of the previously independent firms.

At this point, though, Jones says Peoplefluent is on the right track. One sign of this is strong results for the quarter ended in September, when Peoplefluent reported a 28 percent increase in annual recurring revenue year over year. Employees, Jones says, are generally happy with president and CEO Gerard Murphy, who took the reins of the private equity-owned company in June.

“There’s a period of time of intense change,” Jones says. “People overall are more enthusiastic than they were three years ago.”

Ed Frauenheim is Workforce’s senior editor. Comment below or email editors@workforce.com.

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Future Workforce Predictions: Teams, Brain Scans and Externships at Work

The year was 1968, and a futuristic film, 2001: A Space Odyssey, pitted man vs. machine in a battle for domination.

Today, the massive HAL 9000 might be the size of a tablet computer, but fears of technology taking over are nothing new. Many pundits and prognosticators have imagined a machine-run society where superpowerful robots either enslave humans or give us lives of leisure.

Research in artificial intelligence, according to a feature on Discovery Channel’s website, could one day lead to robots performing unassisted surgeries, preparing meals at restaurants or even teaching our children’s classes. Let’s just hope HAL’s homicidal tendencies will be left out of the equation.

To wit, technology is advancing at a breakneck pace—consider, for instance, how much mobile phones have changed in just five years—but the future workplace isn’t all about technology taking over either. Companies are looking for ways to bring the future to the present using teamwork. Human teamwork.

Medical device company Hospira Inc., for one, has a futuristic training program.

Called “Ignite,” the program allows groups of employees to apply collectively for company grants to learn new skills. Ignite supplements a traditional tuition-reimbursement program for individuals at Hospira. Checks for up to $5,000 have gone to such initiatives as a proposal by the company’s women’s networking group to work with a consultant to increase global awareness and reach.

Lake Forest, Illinois-based Hospira launched Ignite in 2010. But it captures what many experts expect to be a crucial feature of the workforce a decade hence: increased attention to teams rather than individuals. Author Jeanne Meister, for example, predicts organizations will increasingly hire and train entire teams to tap the effectiveness of coherent work units.

Meister, who co-wrote The 2020 Workplace: How Innovative Companies Attract, Develop, and Keep Tomorrow’s Employees Today and is a founding partner of consulting firm Future Workplace, says Ignite smartly fosters collaboration skills because colleagues have to join forces to apply for the funds. And she calls Hospira’s program a good example of the more collective work styles on the horizon. “Because of the complexity of the businesses we operate in, nobody can really do the job without being part of a high-performing team,” she says.

A greater focus on work groups is one feature of the likely workplace of the future. People management practitioners, researchers and consultants Workforce interviewed predict that over the next 10 years organizations also will likely turn more to nontraditional sources of labor, tap “crowdsourcing” for performance management and involve networks of organizations for employee career development.

Prognostication about the future of management is a well-trod field. In 1998 and again in 2008, Workforce took stabs at foretelling what human resources would look like 10 years out. We didn’t always hit the mark. For example, consider this wishful-thinking item from 1998 about how HR would change by 2008: HR will “report directly to the CEO in most companies.” But our 1998 crystal-ball gazing did include a forecast that “collaborative cultures” would become the workplace model. That’s largely panned out. In 2008 we made a similar projection, saying “there will be an increased focus on infrastructures—such as social networks and wikis—to support building strong relationships and collaboration.” With growing business interest in social media tools, this prediction seems to be coming true as well.

The importance of teamwork continues to be compelling to experts and executives as they guess at what’s ahead. .

Hospira’s Ignite program fits into this context. The initiative has roots in a quest to use employee-development dollars more efficiently, says Ken Meyers, senior vice president of organizational transformation and people development at Hospira. Officials reasoned that if one person needed training in a particular area, it probably applied to others as well at the 15,000-employee company. Since 2010, the company has given out close to 120 Ignite awards affecting 3,850 employees on topics including statistical analysis, customer service and infection prevention.

Even as Hospira promotes team development, Meyers expects individual initiatives to remain crucial to organizations in the years ahead. In particular, he says employee engagement will be less about companies trying to motivate workers and more of a shared responsibility. “It’s not about how we engage employees,” he says. “It’s a choice employees make to be engaged.”

Individual choice in another form could make up another striking feature of the future workforce: more people contributing to companies in nontraditional ways. One of these ways—working on a contingent basis—has been on the rise in recent years. And it will continue to become a popular option, says Jennifer Christie, chief diversity officer and vice president of executive recruitment at financial services company American Express Co.

“In the next five, 10 years, the employment relationship may evolve in such a way that organizations may not ‘own’ their talent, but there may be times where they ‘borrow’ it for a defined period of time,” Christie says. “We see there being a mix of longer-term career employees and finding talent to fill short-term assignments.”

Another alternative form of labor is enlisting volunteers, says John Boudreau, a management professor at the University of Southern California. Already, organizations are starting to take steps in this direction by arranging contests designed to help solve problems. Consider Foldit, an online game created by University of Washington researchers that aims to let the public tackle puzzles related to the way proteins are configured. In one case, gamers provided key insights for solving the structure of an enzyme vital to the reproduction of the HIV virus. The accomplishment could lead to new drugs to treat AIDS.

Boudreau says he can envision more such examples in the years ahead. “There may actually be some creative solutions that involve tapping into this voluntary talent pool,” he says.

What Boudreau is talking about also goes by the name of “crowdsourcing.” And the same principle could apply increasingly to employee reviews and performance management. Software tools such as Saleforce.com Inc.’s Work.com have emerged in recent years to make it easy for people to give one another praise. And this trend can morph into a smarter overall approach to people management, says Eric Mosley, CEO of recognition software and services provider Globoforce.

In an e-book titled The Crowdsourced Performance Review, Mosley foresees a future in which the performance-review process includes the feedback of a range of an employee’s peers. Not only does this approach produce richer information than traditional top-down reviews, but also it inspires better behavior on the part of workers, Mosley says. “Because they have the power to reward others, they help to weave a stronger social fabric in the company,” he writes. “As they nominate others for awards, they will become more conscious of company goals, values and teamwork. And they won’t take these things for granted. They’ll be active builders of culture.”

Tom Vines, IBM’s vice president of technical and business leadership, takes the social-performance management prediction a few steps further. Vines, who is responsible for the computing giant’s leadership development and succession planning globally, thinks comments and endorsements will evolve to the point where employees will select their managers based on very visible feedback given to those supervisors. What’s more, Vines expects companies to publish this information as a recruiting tool. Call it talent acquisition via radical transparency. “It will be both inside and outside” the company, Vines says. “Companies will want to expose their managers’ ratings to attract talent.”

Boudreau offers another prediction that fits in with the notion of a decentralized, more permeable organization. It is that companies will allow for and encourage their employees to take positions in other organizations for extended periods of time to increase their skills and develop their careers. These individuals may return to the organization, even as the firm accepts such long-term, temporary workers from other companies.

For an early adopter example of this, Boudreau points to Malaysia and a government agency called Khazanah Nasional Berhad. Khazanah has a mission to improve the country’s economy through investments in strategically important industries such as telecommunications, transportation and utilities. One of its methods is to strengthen leadership development in Malaysia. To do so, it has created a cross-organization leadership exchange, where high-potential middle managers take assignments in another company for up to two years. The role is designed to be a challenging one that fosters growth, and the “home” company pays the employee’s salary. If such “externships” take off, they would mark a new chapter in the relationship between organizations and employees.

“It’s an example of this employment deal really being boundaryless,” Boudreau says.

Speaking of new boundaries, companies will become much more sophisticated about the optimal function of workers’ brains in the future, says Wayne Hochwarter, a management professor at Florida State University. He says this will include considering the role of stress on brain performance. And it could lead to a daily mind diagnostic. “I can see a future where an employee gets a brain scan every morning and is then assigned tasks based on what the test shows,” Hochwarter says.

By way of example, he says that if a worker shows high activation in the frontal lobe of the brain on a particular day, that person may get the assignment of a key review of a 50-page financial report. That’s because the frontal lobe controls functions including attention, problem-solving and judgment, Hochwarter says, which are important for a detailed scouring of a document.

Hochwarter argues organizations have just begun to appreciate the importance of brain health and its effect on productivity and organizational success. “You’ll have a staff of people whose function is to chart and develop the mental capacities of workers, in terms of how stress is evaluated and reacted to,” he says. “Much of this will come from the evolution of mind-enhancing diet and supplementing.”

Would workers object to once-a-day brain diagnostics as invasive? Couldn’t it raise fears of companies—if not supersmart, sinister machines like HAL—knowing too much? Hochwarter doubts it. To him, the future use of such technology will be commonplace. To his point, employees have come to accept surveillance cameras and software that records their every keystroke and Internet site visits while at work.

The scan “will be as simple as walking through a doorway,” Hochwarter says. Workers “won’t even know it’s happening after a few times.”

What about work way into the future? What can we expect to see closer to 2050 or 2060? Will human beings be mere batteries for machine masters, as The Matrix grimly suggested, or could people and computers become adversaries as we saw in 2001? On the other end of the spectrum, will computer advances lead to a work-free utopia for mankind?

IBM’s Vines envisions something in between: people remain at the helm of ever-more powerful technology and organizations continue to need the services of flesh-and-blood workers. The age of “Big Data” is emerging, Vines says, and computers can sift through mounds of information. But he says companies require people with industry and analytic expertise to help them make sense of facts and figures. As paradoxcal as this sounds, humans are becoming as indispensable to companies as technology, he says.

A future where people still have to put their shoulder or brainpower to the grindstone may be the most realistic. But can’t we dream about a day when work is a thing of the past? “Boy, I would like to live in that kind of world,” Vines says with a laugh.

Whatever’s coming down the pike, one thing’s for certain: It will be an odyssey. And if there are any mistakes along the way? As HAL said, “It can only be attributed to human error.” Indeed.

Ed Frauenheim is senior editor at Workforce. Comment below or email efrauenheim@workforce.com.

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The ‘Employee Value Proposition’ Over the Years: The Search for a Middle Ground

In her 20 years in the human resources field, Maureen Paradine has seen the “employment deal” take on new terms.

Paradine, who is senior vice president of HR at gift firm 1-800Flowers.com Inc., says companies used to focus on maximizing the performance of workers. Now, it’s more of a two-way street, where employees—especially younger ones—expect guidance and recognition in exchange for their efforts. Paradine, for example, gives her five direct reports coaching on a weekly basis, and the company is trying to offer the same combination of supervision and support to its overall workforce of about 2,000 employees.

“We want to be performance-driven,” she says. “And feedback-driven.”

The “social contract” surrounding work—sometimes called the “employment deal” or the “employee value proposition”—continues to change. The era of lifetime employment for loyalty prevalent in the ’50s, ’60s and ’70s gave way to a less paternalistic, more profit-focused corporate mind-set and reduced worker allegiance in the ’80s, ’90s and ’00s. But now signs point to a possible middle ground.

Organizations and workers see the benefits of longer-term connections. These may not always be in the form of traditional employment, as many workers and companies gravitate toward contingent labor arrangements. And the “deal” these days increasingly has become a personalized one, with workers of different generations and life circumstances prioritizing different kinds of rewards and benefits.

In many cases, a disconnect exists between what companies believe employees are after and what those workers want. And amid high unemployment, many companies are pressing their advantage. But experts say we’ve entered an era defined more by reciprocity.

“There is less of a sense of employees as disposable,” says Sarah Johnson, a practice leader at consulting firm the Corporate Executive Board Co. But at the same time, she says companies are “being realistic that: ‘We can only be together if we’re both being successful.’ ”

The “employment deal” refers to the generally agreed-upon rules for the bargain struck between workers and organizations. During the Industrial Revolution and the post-Civil War period, that deal was often turbulent, marked by hazardous working conditions, strikes and sometimes violent clashes. Scores of workers died in New York’s Triangle Shirtwaist Factory fire in 1911, and unsafe working conditions contributed to the tragedy. In 1920, the so-called “Battle of Matewan” took place when West Virginia miners sought union membership, which ultimately led to a deadly gunfight between private detectives and the workers. Ten people were killed including Matewan’s mayor.

However, it wasn’t all labor conflict in the first part of the 20th century. In 1914, Henry Ford famously more-than-doubled the pay of autoworkers to $5 a day under the theory that a wealthier working class would be able to buy the cars he was making.

After World War II, still greater harmony reigned as labor reforms provided basic protections around workplace safety and unemployment benefits and a kind of unspoken pact emerged. In return for enduring allegiance, organizations offered a near-guarantee of job security. “Company men” at IBM Corp.—think loyal employees in blue suits—and union contracts at Detroit’s automakers captured the spirit of the times.

But this paternalistic approach, with its emphasis on “employee satisfaction,” was flawed, says Kevin Sheridan, senior vice president at consulting firm Avatar HR Solutions and author of the book Building a Magnetic Culture. “Shiny, happy people holding hands” do not necessarily get the job done well, he says. Attention to quality and productivity sometimes suffered in organizations, symbolized by clunker cars made in the United States like the AMC Pacer and Chevy Chevette.

Partly because of quality problems and pressure from international competition, such as Japanese automotive and electronics firms, U.S. companies in the 1970s began moving away from their worker-satisfaction focus. In fact, employers took things to the other end of the spectrum. Companies in recent decades have treated employees to a greater degree as costs to be minimized. This shift also had to do with the rise of what might be called “shareholder capitalism” and a concentration on short-term results. Layoffs became widespread not only as a response to dire financial straits but also as an ongoing management strategy.

But this focus on business performance also had shortcomings. Wayne Cascio, a management professor at the University of Colorado at Denver, has shown that firms that downsize are not more profitable than those that don’t, and often end up hurting themselves in the long run. And evidence indicates that strong bonds with employees pay off in the form of long-term success. Companies that are better to workers outperform their peers in the stock market.

Meanwhile, corporate social responsibility and sustainability have become increasingly important to consumers and investors. And the public defines a good company in large part by how it treats its employees. For example, research shows consumers increasingly want to do business with companies that show “kindness” in their operations.

Many employees share this concern for corporate responsibility. And in the wake of the deep recession and continued tepid economy, they have been seeking job security.

As companies update the employment deal for the 21st century, they are not promising lifelong employment as in decades past. Few observers expect them to in a global, competitive economy. But many organizations are offering an alternative route to employment stability: a strong commitment to training and career development.

In a job market where marketable skills can change quickly, employer willingness to invest in career development is vital to attracting and retaining talent, says Rusty Rueff, a member of the board of directors at employee feedback site Glassdoor. “That is the new security blanket,” he says.

The notion that employees want employers to help them advance professionally is borne out in a study from last year by consulting firm Deloitte that surveyed 356 workers at large global companies. It found that “lack of career progress” was the top reason employees would leave their organization. Similarly, the survey showed that “promotion/job advancement” was the top incentive employers could offer to retain employees.

One company that has seen the light on employee career development is solar-power service provider Sunrun Inc. The 200-person, San Francisco-based company is investing in training for front-line managers. Sunrun holds monthly discussions with a cadre of about 27 managers, says Beth Steinberg, Sunrun’s vice president of talent and organizational development. The supervisors are reading management books such as Daniel Pink’s Drive and hearing from guest speakers such as Hilary Krane, vice president and general counsel for Nike Inc.

Sunrun also is working to identify employees who could take on leadership roles in the future. The focus on management development prepares the company to grow, but it also is part of a company ethos of preparing employees for the future, Steinberg says.

“We’re really trying to arm people whether, frankly, they stay at Sunrun or go elsewhere,” she says. “That’s really part of our responsibility.”

Such corporate responsibility may be of growing importance to all employers, but the employment deal can come in many flavors. For one thing, the pact around work may not take the form of a traditional employer-employee relationship.

Many workers today are choosing to be independent contractors and temporary workers, though they still tend to want some sort of ongoing bond with the companies for whom they work. And for “regular” employees, a one-size-fits-all approach can backfire. The Deloitte study, for example, found that although “promotion/job advancement” was the top retention tactic among all age groups, it was more important for Generation X workers than for baby boomers or millennials. What’s more, while younger workers tended to list additional compensation, bonuses or financial incentives as next most important, baby boomer employees ranked “support and recognition from supervisors or managers” as second-most effective.

The sexes are divided, too. Deloitte found that men appeared to focus on financial incentives in terms of retention initiatives, while women were more likely to seek recognition.

Many companies are working to address such varied desires. 1-800Flowers.com, for example, has concentrated on feedback in part to meet the needs of millennials, Paradine says. To facilitate frequent conversations about performance, the company has tapped technology. It uses software from Work.com (formerly Rypple and now part of Salesforce.com Inc.) to allow managers and peers to recognize a job well-done, to provide coaching tips and track progress on goals. Work.com and other collaboration and talent management software products even have the look and feel of the social media applications that younger workers have grown up using. “It’s designed very much like a Facebook tool,” Paradine says.

Still, harmonious relationships between employers and employees aren’t the rule everywhere. Deloitte’s study, for example, found key differences between what workers want and what executives—polled separately—think workers want. Executives in the study thought “additional benefits” would be the best retention strategy for baby boomers—and it didn’t rank among the top three for workers in that age cohort. Similarly, leaders figured company culture would be the top retention factor for millennials while those younger employers didn’t rank it in the top three.

In addition, some companies are taking advantage of today’s slack job market to, in effect, bargain harder with employees. They are skimping on training spending and loading workers up with additional duties without a corresponding bump in compensation. But that’s a risky deal to offer. Disengagement is commonplace in the workplace—and with it reduced employee effort and passion. Some 63 percent of U.S. workers are not fully engaged in their work and are struggling to cope with work situations that don’t provide sufficient support, according to a July global study of 32,000 workers by New York-based consultancy Towers Watson & Co.

Many employees also are itching to leave their jobs. Deloitte found that just 35 percent of employees surveyed in March 2011 expected to remain with their current employers, compared with 45 percent who were committed to their employers during the recession in 2009. A major factor is the sense that companies aren’t doing enough for employees’ long-term prospects: nearly 60 percent of those employees who plan to leave their current employers say their companies do just a “fair” or “poor” job of creating career paths and challenging job opportunities. The pent-up desire to leave bodes poorly for companies at a time they say they’re having trouble finding specialized talent.

So yes, the relationship between employers and employees remains a work in progress. Still, times have changed. Compared with the employment-for-life days decades ago and the recent past where organizations were quick to give out pink slips and workers felt little remorse about leaving for a competitor, today’s employment deal is more mutual. Sunrun’s Steinberg says the pendulum swing to a middle ground is just about right.

“There’s really more of a reciprocal relationship between employees and employers. ‘We want to do good by you. You want to do good by us,’ ” she says. “It really should be a mutually beneficial relationship.”

Ed Frauenheim is Workforce’s senior editor. Comment below or email efrauenheim@workforce.com.

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Contingent Workers: Why Companies Must Make Them Feel Valued and Engaged

Sharron Wood felt left out.

A freelance writer and editor based in San Francisco, Wood had worked hard for roughly two months for a client on a book. But she didn’t get invited to a launch party for the book last September—she only learned about the bash by reading a blog post about the event. The exclusion stung both personally and professionally.

“I wrote a quarter of it,” she recalls. “It just makes you feel like they don’t value your contributions.”

In years past, companies might have shrugged off this sort of complaint from a contractor as a minor matter or annoying whining. These days, they would do so at their peril.

armslengthembraceOrganizations face a growing need to engage workers such as Wood just as they do their full-time employees to attract the best of contingents, get the best out of them, and preserve a long-term relationship with them. Why? A confluence of reasons. Companies rely more and more on contract and outsourced workers to deliver both their customer experience and strategic initiatives. Increasing amounts of work are going to higher-skilled contingent workers—to professionals such as engineers, graphic artists and nurses—whose talents can be pivotal for organizations. And many of today’s temps and contractors are millennials, an age cohort famous for needing more attention than older generations.

For the past few decades, the corporate agenda regarding temporary workers, contractors and independent consultants has been largely about cost-cutting and legal compliance. But amid greater interest in labor flexibility and a tight market for specialized skills, companies are starting to see contingent quality as key. This concern surfaced in a recent Workforce Management survey of almost 1,200 readers. Asked for their biggest concerns about using contingents, nearly 43 percent of respondents cited “quality of work”—making it the top response.

If companies are going to connect with the best of today’s contingents and elicit their best efforts, a new deal or relationship is in order. That relationship might be called the “arm’s-length embrace.” In it, companies respect contingents’ independence yet nonetheless show them more love—in the form of invitations to social gatherings, improved communication, greater recognition and the like. It also means a partnership approach to pay that includes a fair wage rate rather than a nickel-and-diming approach to free agents.

To be sure, there are categories of contractors and temps where a transactional, cost-conscious, impersonal exchange makes more sense. And attention to contingents cannot eclipse efforts to maximize the engagement and output of the regular workforce. But experts say the smartest companies are paying greater attention to contingent labor as they set overall workforce strategy, and that tighter ties with contingents are increasingly crucial.

So far, companies are giving scant attention to their bonds with contingents. The Workforce survey found that fewer than 30 percent of companies either have a plan to become a client of choice for contingents or are working on one. But wise firms will take relationships with contingent workers more seriously if they want to improve organizational agility, customer service and productivity, argues Brian Kropp, analyst with research firm the Corporate Executive Board.

“Organizations need to rethink their approach,” he says. “If you treat them as ‘hired help,’ then they will behave as ‘hired help.’ ”

Definitions of contingent work vary. But most observers agree the term at the very least encompasses temporary agency workers and independent contractors. The contingent workforce also can include individuals pitching themselves as business consultants. And some analysts argue companies should add in the employees of larger professional services firms who are engaged in project work.

About a decade ago, pundits including author Daniel Pink proclaimed the United States was morphing rapidly into a “free agent nation.” The transformation has proven to be slower than expected. But today free agency and other forms of contingent work are coming to fruition in dramatic fashion. Research firm Aberdeen Group estimates that nearly 26 percent of the average organization’s total workforce is contingent or contract-based. And the irregular workforce is growing quickly. Aberdeen says use of contingent labor has jumped over the past year alone by more than 12 percent.

Fueling the era of impermanent labor are factors including companies’ desire for greater flexibility amid economic uncertainty, the need to access scarce skills and the fact that some high-end professionals are choosing to work independently. That last trend could intensify thanks to the recently upheld federal Patient Protection and Affordable Care Act, which aims to make it easier for individuals to get coverage on their own.

To the extent that they have focused on contingents, companies have concentrated largely on labor costs and legal compliance. Organizations are keen to avoid calling people “temporary workers” or “independent contractors” when they actually qualify as employees. Microsoft Corp.’s landmark $97 million settlement with its “permatemps” in 2000 put the “co-employment” issue on employers’ agendas, and recently the Obama administration has made worker misclassification enforcement a priority.

Saving on labor costs has long been a rationale for using contingent workers, who typically don’t get health or retirement benefits and allow firms to avoid paying employment taxes. Still, a concern for many organizations is that departments and managers hire temps on their own, avoiding oversight and missing opportunities to save money through preferred vendor arrangements.

In part to save costs, industrial-packaging-maker Greif is working to standardize its use of contingent workers. But higher quality also is on the radar screen for Greif, which is based in Delaware, Ohio, and employs some 16,000 people worldwide. Steve Youll, human resources strategic planning analyst for Greif, foresees a future when individuals and small bands of highly skilled people will engage with companies on projects in information technology and other areas. Attracting them, vetting the effectiveness of their work and wooing the good ones back time and again will be crucial, Youll says.

“The HR trend is to look at contingent workers in the same way you look at your regular employees,” Youll says.

As it stands, though, companies tend to look at the two sets of workers quite differently. A key case in point is performance assessment. While most firms track their staffers’ performance in a formal process, contingent quality control is much less consistent, according to the recent Workforce survey. Not surprisingly, the quality of contingents often isn’t great, as indicated by the Workforce survey.

Mediocre or low quality poses a threat to organizations as they turn more and more work over to contingents. And much of that work touches customers directly or indirectly. The Workforce survey found that contingents affect customers’ experience to a moderate or significant extent at 31 percent of organizations. Nonregular employees shaping customer service levels is a growing concern, says the Corporate Executive Board’s Kropp. That is, companies increasingly are relying on their extended workforce to deliver a great experience—whether that’s a security guard, a call center worker or a nurse. “From a customer’s viewpoint, all these people are actually your people,” Kropp says.

Organizations ought to make contingent labor more central to their strategic workforce planning, says Barry Asin, president of Staffing Industry Analysts, a sister organization to Workforce Management. As Asin sees it, firms should “stop setting the contingent part of their workforce to the side.”

To help get their contingent houses in order, companies have purchased software tools called vendor management systems—though these have tended to focus on efficient use of temporary workers rather than quality (see “Tech Talk” below). Organizations also have turned to third-party managed-service providers, or MSPs, which promise to oversee contingent labor operations.

Among such MSP vendors is Kelly Services Inc. John Healy, vice president and talent-supply-chain strategist at Kelly, says MSPs have a responsibility to help clients figure out when to focus on efficiency with contingents and when to be more flexible for the sake of better talent. For example, he says, it may make sense to treat contingent assembly-line workers in a transactional way, because supply of this labor may exceed demand. But workers in more creative or critical roles may require a responsive, high-touch relationship, Healy says. “You have different models,” he adds.

The high-touch model may be especially effective with the legions of young people now in the workforce. Millennials—the roughly 80 million people born from the early 1980s to 2000—tend to want a great deal of guidance on the job. Call it the product of coddling parents or a healthy desire for self-improvement, this hunger for feedback makes it all the more vital for companies to connect with their contingents.

Mary Ann Davids has seen the payoff of a little TLC to young temps. Davids is a performance support specialist at a call center run by a large insurance company. A 16-year veteran at the company with a background in training, Davids took her current job about two years ago when the firm saw quality and attrition problems with its stable of temporary workers—who help handle calls and serve as a pool of candidates for permanent positions.

Before Davids came into the picture, temp-population attrition at the center was running about 95 percent annually. And the service quality of calls handled by temp workers was judged by officials to fall short of the company’s standard. The temps, from a major national staffing firm, have an on-site manager from the agency. But the insurance company put in Davids to beef up the coaching given to the temps. This comes in the form of weekly evaluations and live monitoring of calls.

So far the extra strokes to the youthful temps are paying off. Davids says temp call-service quality now exceeds the company standard, and attrition has plunged to about 25 percent. Davids says her young charges can’t get enough of her comments. “They’re so used to getting some sort of acknowledgement. They crave feedback,” she says. “Some of them will ask me every day, ‘How am I doing?’ ”

Another reason to reach out to temps and free agents is that many of them aren’t there voluntarily. The ranks of contingent workers are made up in part by people who would prefer the steadier work of regular employment. As game as they may be to do a good job, these folks may suffer from an inherent engagement deficit. Offering feedback and appropriate kudos can help fire up their performance.

Even voluntary independents are thirsty for signs that clients recognize their worth and potential. Take Jan Grose. Since 1999, Grose has had a consulting business helping companies with organizational development and HR projects, and she prefers life as an independent contractor.

Still, Grose chafes at the way clients penny pinch rather than value the insight she can bring from many years of experience in the field. For example, she once persuaded a client to consolidate its payroll systems worldwide through regional providers. The suggestion was outside the scope of her work, but she estimates her advice easily saved the client the equivalent of her fee.

“Companies should not be focused on just the rate,” Grose says. But “that’s the first thing they think about.”

Travis Coleman, a technology contractor based in the Seattle area, notes another problem that hurts both companies and contingents: a failure to give contract workers the “big picture” surrounding their assignments. When firms spell out a discrete set of tasks without a sense of the larger purposes of the work or the project’s timeframe, it makes it more likely that contractors will do the bare minimum for the client, Coleman says.

Coleman, who has been working for about a decade as a contractor on computer-support projects for companies including Bank of America Corp., Brio Realty and Microsoft Corp., says he does his best to combat the image of the disengaged contractor by going above and beyond client expectations.

But even he finds it frustrating when organizations do not share information about how a project is proceeding. For example, Coleman hates when, at the end of a week he thought was going well, the client supervisor suddenly reports the project is way behind schedule.

“There’s nothing worse,” he says.

Besides passing key information to contractors, there’s also gathering information from them. If companies want to optimize use of their contingents, they will want to learn about the skills, experience and passions of those impermanent workers. Organizations have begun to develop sophisticated databases about their in-house talent in order to best match assignments with employees. They aren’t as far along with that sort of talent tracking with their armies of contingents.

Consider Wood, the freelance writer. She says her publishing house clients typically don’t know her areas of expertise.

“They don’t do a very good job of finding out what my particular strengths and interests are,” Wood says. That disconnect not only has frustrated her over the years, but also, she believes, has kept clients from getting the most from her talents. Wood says she would never provide less-than-professional services. Still, projects on musicology and food in particular get her juices flowing, which leads to even better results. “I’m going to get much more excited about something that’s up my alley,” Wood says.

Overall, though, Wood says she has it good as a free agent. She treasures the flexibility, the lack of office politics and the diversity of assignments that come with working independently.

And sometimes clients do include her in fun, professionally helpful events. The same client that didn’t invite her to the party last year made up for it more recently. The organization flew her and other freelancers to New York, put them up in a hotel, talked about future strategy and took them out to a fancy dinner. “This client generally does the right things,” Wood says. The “right things” like involving key free agents in occasional strategy discussions and taking them out to dinner once in a while are likely to pay off for companies too—in the form of fresh ideas, increased loyalty and extra effort.

What Wood and many other contingent workers want is to remain independent yet grow closer to clients. To feel a sense of inclusion, even if at a distance. The arms-length embrace. It promises to warm the hearts of contingents and business executives alike.

Workforce Management, August 2012, pgs. 34-39 — Subscribe Now!

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Worker ‘Gas Tanks’ Close to Empty

One way to think about workplace performance is in terms of a person’s gas tank.

The idea is that employees have a reservoir of physical and psychological resources for fueling their work contributions. Things like vacations, support from others and job autonomy can add to the reservoir, while difficult bosses, financial anxiety, job insecurity and heavy workloads can drain it.

“When fuel levels reach unhealthy levels, additional pressures are often debilitating, with impaired performance as one of the first consequences,” says Wayne Hochwarter, a management professor at Florida State University in Tallahassee.

Hochwarter points to research he did about job stress and employee effort in the wake of hurricanes. Hurricane-related work stress—such as demands to work extra hours to make up for absent colleagues—had a negative effect on employees whose resources prior to the storms already had been taxed by pressures such as the inability to get help at work. Those employees, whose gas tanks effectively had been running low, said hurricane-related stress led to a decline in their work efforts, Hochwarter says. On the other hand, employees with “adequate resource levels” leading up to the hurricanes were more engaged at work when storm-related demands were high.

Workplace scholar Dave Ulrich makes a similar point. “With increased demands—workload—employees need increased resources to stay in ‘balance’ or equilibrium,” says Ulrich, who is a professor at the Ross School of Business at the University of Michigan. “When employees have more resources—control of their time, opportunities to learn and grow, etcetera—they can cope with increased demands. Stress occurs when demands exceed resources.”

A number of observers see worker tanks nearing the empty line.

Among them are management professor John Boudreau and former Northrop Grumman Corp. chief human resources officer Ian Ziskin. “Employees are, to put it simply, just plain exhausted—physically, emotionally and psychologically,” Boudreau and Ziskin write in a recent issue of the journal Organizational Dynamics. They also argue that spent employees are a real risk for businesses in the long run: “Burnt out, fatigued employees are unable to build sustainable performance.”

Hochwarter’s research during the past year shows that employees in a demanding work environment said their job performance had risen. But their anxiety levels at work and home also rose while their job satisfaction fell. That’s a troubling sign, according to Hochwarter’s research.

He says spikes in productivity sparked by new or increased demands are not sustainable unless employee tanks are filled with new resources. “Without doing so, you are going to see half-tanks turn into tanks with only fumes,” he says.

To read more about the ‘work-more economy,’ click here.

Ed Frauenheim is Workforce Management’s senior editor. To comment, email editors@workforce.com.

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Democracy at Work: 5 Questions With Traci Fenton, Founder and CEO of WorldBlu

Many people like to keep politics out of the workplace. But to Traci Fenton, what workplaces badly need is the infusion of a political idea: democracy. Fenton is founder and CEO of WorldBlu, a 14-year-old organization devoted to making companies more participatory. Allowing workers a stronger voice on the job is not only a lofty ideal, she argues, but also a recipe for revved-up employees and better business results. The proof, she says, can be found at firms on WorldBlu’s annual list of the Most Democratic Workplaces. Fenton spoke recently with Workforce Management senior editor Ed Frauenheim.

Workforce Management: Why did you start WorldBlu?

Traci Fenton: Because of a series of life-changing events. My senior year in college, I was director of a student-run public affairs conference. My peers wanted to do the conference on democracy. I said, ‘That’s the worst idea I’ve ever heard. Democracy means government and politics and I’m not interested in either!’ But I started to research the concept. I realized democracy creates an environment that unlocks our full potential. … It really spoke to my heart. Then I spent time in Indonesia, when the dictator Suharto was being overthrown. I saw what it was like to not live in a free and democratic environment. When I returned to the United States, I took a job at a Fortune 500 firm. I came home from my first day of work demoralized. I realized I was not going to have a voice there. So I left. And I started WorldBlu.

WM: Isn’t workplace democracy a recipe for sluggish decision-making?

Fenton: Decentralized decision-making can take more time on the front end as you gather more input from employees. But organizational democracy doesn’t mean you have to vote on everything. And even if decisions require more time, you make up that time in the execution. People who have had a say in a decision are more willing to follow through on it.

WM: Is organizational democracy good for everyone?

Fenton: It’s not right for all employees. Not everyone has a strong sense of their own self-worth. This may sound hippy-dippy, but it’s a requirement for effective participation in a democratic organization.

WM: You say organizational democracy is inevitable. Why?

Fenton: We don’t live in the Industrial Age anymore; we live in the ‘Democratic Age.’ And the command and control system that worked before simply doesn’t work in this new age.

WM: Is organizational democracy good for all businesses?

Fenton: Yes. Organizational democracy is good for all companies, but what matters is the timing as to when it is introduced. The mindset of the CEO and top leaders must be prepared for it first before a democratic framework and leadership style can be introduced.

Workforce Management, December 2011, p. 13

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DaVita Optimas Award Winner for Competitive Advantage

Dialysis provider DaVita was hurting several years ago because of problems with a key corporate function: recruiting. The Denver-based company’s recruiting department was understaffed, inconsistent and lacking in feedback to recruiters. Nearly 10 percent of budgeted nursing positions were open in 2005, and the time to fill jobs averaged almost 65 days. In early 2006, DaVita managers ranked recruiting as one of the bottom-five departments out of 70 corporate functions.


“Recruiting was labeled as ‘broken,’ ” says Tony Blake, DaVita’s director of recruiting.


What’s more, demands on recruiting jumped when the company effectively doubled in size with the acquisition of Gambro Healthcare in 2005. The 33,600-employee firm now operates more than 1,500 outpatient dialysis facilities and acute units in more than 700 hospitals in 43 states and the District of Columbia.


In response to the hiring challenges, the firm brought in industry veteran Blake in late 2006 and launched an “extreme recruiting makeover.” DaVita implemented new hiring software from Taleo and relaunched its career site. It reorganized the recruiting function with separate teams targeting corporate positions, managers at clinics and clinical staff including nurses. And it began collecting more data on time to hire, cost of hire and quality of hire. It also began force-ranking recruiters. Not everyone fit the new initiative. About 30 percent of the firm’s 50 recruiters have left voluntarily or have been “managed out” in the past few years.


Getting a monthly scorecard with the recruiter rankings was difficult at first, says Sherida Gard, a DaVita clinical recruiter based in Texas. But she eventually came to appreciate the approach and says the firm has managed to increase both individual accountability and a sense of teamwork among recruiters.


DaVita’s reputation faced a challenge last year because of trouble at a company facility in Lufkin, Texas, which experienced an increase in patient deaths. A former employee of the dialysis center has been charged with injecting patients with bleach. The site also shut down for about three months in the wake of a federal probe that found a number of deficiencies.


Negative publicity around the Lufkin center hasn’t damaged DaVita’s recruiting in Texas or nationwide, company spokesman Craig Handzlik says. Indeed, data indicate DaVita’s recruiting function has grown stronger in the past few years. The firm has trimmed its time to fill nursing posts by 26 days, or 41 percent.


Faster hiring allowed DaVita to save $12.1 million in potential overtime and contract nursing costs during the past two years. The registered-nurse vacancy rate fell by nearly 20 percent last year and now stands at about 4 percent. Early this year, DaVita managers ranked recruiting as one of the top 10 corporate departments for the first time.


Dennis Skrajewski, vice president for DaVita’s division serving New Jersey, Delaware and part of Pennsylvania, says recruiting was “very thin” when it came to finding managers in 2006. That has improved over time, he says.


The recruiting staff has played an important role in finding key management talent for his division, Skrajewski says. “They have helped me turn around a division that was struggling 2½ to three years ago,” he says.


For curing an ailing recruiting function and making it a healthy foundation for business success, DaVita earns the 2009 Optimas Award for Competitive Advantage.   


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HCL Optimas Award Winner for Innovation

N oida, India-based HCL Technologies made employee happiness a central strategy three years ago. And that move has helped catapult the company from peripheral player to center stage in the hard-fought, fast-growing information technology services industry.

    The company says a series of reforms dubbed Employee First, including better communication with CEO Vineet Nayar and a pay scheme giving more income security to workers, has curtailed attrition and fueled fast revenue growth. HCL’s revenue jumped 146 percent in the past three years, to $1.9 billion for the year ended in June.

    In fact, customers have been seeking to learn from HCL’s people management philosophy in addition to tapping its IT services, says Shami Khorana, president of HCL America, a unit of the company in Sunnyvale, California. The customer interest has been a pleasant surprise to Khorana, who initially worried about the impact of the initiative.

    “My first thought was, ‘How will the customers react when they hear employee first, customer second?’ ” he says. “In the end, it’s very easy for them to understand and even appreciate.”

    Eugene Kublanov, CEO of outsourcing advisory firm NeoIT, says HCL now routinely is one of the top two or three vendors that make it through NeoIT’s vetting process for clients. Kublanov says that’s an improvement for HCL in just the past few years, adding that HCL’s customer service stands out.

    “When they do win deals, we are definitely seeing a high level of client satisfaction,” he says.

    HCL may be proving the maxim that delighted employees make for happy customers. But this wasn’t always the case. HCL was a late entry in the IT services market, which refers to services such as custom software development and technology consulting. As a result, earlier this decade it struggled to compete for talent with India-based rivals such as Infosys Technologies and Tata Consultancy Services. The company concedes it suffered from above-average attrition of 30 percent in 2004.

    HCL’s leadership also determined that the firm needed to pursue more complex, higher-value contracts, competing against global players such as IBM and Accenture.

    To juice up the firm, HCL in 2005 decided to focus on employees. Goals of the Employee First reforms included creating a unique employee experience, inverting the organizational structure and increasing transparency.

    A signature piece of the overhaul is what the company calls trust pay. In contrast to an industry practice of making 30 percent of engineers’ pay variable, HCL decided to pay higher fixed salaries that included all of what would have been the variable component—essentially trusting that employees would deliver. The policy, put in place for 85 percent of employees, was intended to increase trust and trim the number of decisions HCL had to make about compensation.

    Another initiative encouraged HCL employees to communicate with CEO Nayar. Through an online forum called U&I, he answered 100 questions from workers each week. “I threw open the door and invited criticism,” Nayar says. “We were becoming honest, and that was the sign of a healthy company.”

    Employee First hasn’t just helped goose HCL’s growth, it has also made the firm more of a talent magnet. Attrition dropped below 15 percent for the year ended in June.

    For turning employees into a strategic asset with a novel philosophy and programs, HCL Technologies earns the 2008 Optimas Award for Innovation.
 

Based in Nodia, India, HCL Technologies is a publicly traded firm that employs 49,800 people in 18 countries. Its HCL America unit employs more than 3,000 people in 15 states. For the year ended June 30, HCL reported net income of $280 million on revenue of $1.9 billion.


HCL Technologies sells a variety of information technology services, such as custom software development, application maintenance and technology consulting. HCL is part of the burgeoning Indian outsourcing industry and also offers business process outsourcing in areas including finance and accounting.


Workforce Management, October, 2008, p. 25 —Subscribe Now!