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Author: Ed Frauenheim

Posted on May 6, 2009June 29, 2023

Co-CEOs Two at the Top

The co-chief executive officers of Aon Consulting do not always huddle about global strategy, economic turmoil and technological change. They also talk about being co-CEO of a family and being a parent.


Kathryn Hayley has two girls, ages 12 and 14. Her co-CEO, Baljit Dail, has two young daughters.


“We talk about our kids all the time,” says Hayley, 51, who is based in Chicago, while Dail, 42, is based in New Jersey. “We always have the kid stories and how we spent the weekend, and how we’re managing the work/life balance, which is a challenge for every professional these days that’s working long hours.”


At first blush, chats on family matters might not seem material to bottom-line results. But close communication and a healthy relationship are among the keys to success when executive power is shared, experts say. Co-CEO arrangements can flop when managed poorly or put in place for the wrong reasons. But observers say two heads together at the top holds out the promise of smarter decision-making, additional inspiration for the troops and a lower risk of CEO burnout.


Just a small fraction of public corporations have co-CEOs at the helm, and the figure has dipped slightly in recent years. But the number of family-owned businesses tapping the co-CEO model has nearly doubled in the past decade to about one in five.


And co-CEO setups will get more attention, given the way the business world is assessing leadership challenges and failures, says George Houston, faculty member at the Center for Creative Leadership. Houston, whose organization offers coaching and training services, sees co-CEOs in keeping with the move to “flat” organizational structures. “It’s an experiment,” he says. “People are going to be testing it.”


A rare arrangement
Co-CEO arrangements involve two or more people splitting the decision-making duties at the helm of an organization. The concept of sharing executive power has been around for decades, if not centuries. Organizations such as Dell have assigned a pair of leaders to manage a division or region. But co-CEOs remain rare among publicly traded companies. Research by consulting firm Mercer found that as of the end of 2008, just 34 of 6,487 public firms, or 0.5 percent, had co-CEOs. That is down from 0.8 percent in 2001. Having co-chairmen is slightly more common: 0.8 percent had them in 2008, compared with 1.1 percent in 2001.


Some well-known companies that utilize co-CEOs include BlackBerry-device maker Research in Motion, restaurant chain P.F. Chang’s China Bistro and business software provider SAP.


Co-CEOs may arise as part of a succession plan, when the eventual successor to the chief executive spot acts as co-CEO for a time with the departing leader. SAP is a case in point. Longtime CEO Henning Kagermann currently shares the role with Leo Apotheker, who was appointed co-CEO in April 2008 as part of the firm’s executive transition plan. Kagermann is slated to step down from his co-CEO post at the end of May.


Corporate mergers also sometimes result in co-CEOs, as happened when Travelers Group merged with Citicorp about a decade ago. Mergers of equals and resulting co-CEOs can generate headlines, but the arrangements “tend to be temporary,” says Mick Thompson, a principal with Mercer. He says most co-CEO situations involve family-owned firms or co-founders of a company.


That’s true at startup firm Ignighter, a Web site for helping groups of friends meet with other groups of friends to make dating less awkward. Co-CEOs Adam Sachs and Dan Osit, both in their 20s, founded the company in late 2007. They haven’t found a compelling reason to name a single head honcho. “We started out as friends, and that kind of led to” the co-CEO arrangement, Osit says.


“We’re not huge on titles here,” adds Sachs, whose firm has a staff of 12 and more than 30,000 users.


A corporate reorganization paved the way for co-CEOs about a year ago at Aon Consulting, which provides human resources consulting and outsourcing. A unit of Chicago-based Aon Corp., which also offers risk management and reinsurance services, Aon Consulting was put together through numerous acquisitions. That led to inefficiencies that the firm began tackling several years ago under the leadership of Andrew Appel, who joined Aon Consulting as CEO in 2005. In the course of integrating the different pieces and paring back the workforce from about 7,000 to 6,300 employees, both Dail, then the unit’s COO, and Hayley, then head of Aon Consulting’s U.S. business, played key roles.


In March 2008, Appel moved to take the role of chairman of Aon Consulting, focusing largely on strategy matters, and to become CEO of Aon’s reinsurance business. Putting Dail and Hayley together as partner CEOs of Aon Consulting made logical sense, Appel says. “This answer just popped itself out,” he says.


The co-CEO answer is very much in evidence at family-owned firms. About 20 percent of family-owned businesses had two or more people serving as co-CEOs in 2007, according to a study by insurance provider MassMutual, the Family Firm Institute think tank and the Cox Family Enterprise Center at Kennesaw State University in Georgia. That figure was up from 11.2 percent in 1997.


In addition, family-owned businesses are bullish about co-CEOs in the future. Just over 42 percent in the 2007 study said they believe more than one family member may serve as co-CEO in the succeeding generation.


Unclear on results
It’s hard to draw clear conclusions about the business results of co-CEO arrangements. Mercer research found that for the two-year period ending September 30, 2001, the average annualized total shareholder return of companies that had co-CEOs for more than two years was a loss of 16.4 percent. This return was below the average S&P 500 return of a loss of 8.8 percent for the same period.


In a recent follow-up report, Mercer found that total shareholder return levels were slightly worse in companies with co-CEOs and co-chairmen. But this study doesn’t account for all the possible factors for poor corporate performance, and Thompson of Mercer is wary of reading too much into the shareholder return data.


“In the end, it comes down to the two individuals,” he says.


Joe Astrachan, executive director at the Cox Family Enterprise Center, says co-CEO relationships in family businesses typically result either in well-oiled machines or gummed-up works.


“They tend to be extreme,” he says. “It can be much easier or it can be much harder.”


Amid the economic collapse in late 2008, Aon Consulting’s Dail and Hayley presided over an 8 percent drop in both revenue and operating income in the fourth quarter, to $342 million and $55 million, respectively. Rival Mercer also saw its revenue dip 8 percent in the fourth quarter, to $807 million.


Aon Consulting declined to comment on its financial performance compared with its peers. It also declined to disclose what Hayley and Dail are paid. Appel, public records show, earned $6.1 million in total compensation in 2008.


As a sign of the leadership strength of Dail and Hayley, the company points to a slew of recent hires. These include former Mercer consultant Barry Greenstein, who joined Aon Consulting in November as senior vice president in a unit focused on mergers, acquisitions, divestitures and restructuring.


Crucial to co-CEO success is executives who have confidence in one another, Dail says. “To make it work, you’ve got to have folks that trust each other, respect each other,” he says.


Aon’s leaders say much of that trust was forged during the intense restructuring period. “There was an hour-to-hour interaction as we changed the wheels of the train while keeping the train moving,” Appel says.


Now, as co-conductors of that train, Hayley says she and Dail complement each other. “He can be very tough, and is very quick on his feet,” Hayley says. “Sometimes I’ll take what may seem to be a slower route on some things. As we balance that out, I think it works quite well.”


Aon also has sought to divide duties between Dail and Hayley in a clear way. He’s responsible for international business, while she focuses on the Americas. He’s in charge of technology and finance; she oversees marketing and HR.


Problem-solving an issue
Distinct responsibilities for each co-CEO can help mitigate one of the potential pitfalls of the arrangements: confusion among subordinates about how to resolve problems.


Co-CEO relationships that stem from mergers face additional challenges. Often, the result is a power struggle rather than power-sharing, Mercer’s Thompson wrote in an essay on the topic earlier this decade. Or, executives may spend a lot of time trying to treat each other as equals while important work is left undone, he wrote.


Other possible stumbling blocks in co-CEO setups are conflicting messages coming from the different leaders, bloated executive compensation and reduced business agility, with verdicts on key issues taking longer.


Then there’s the basic dilemma of decision-making by a pair. “When you have two people who disagree, what do you do?” Thompson asks.


David Cohen, a Boulder, Colorado-based entrepreneur who runs a program that funds and advises new companies, says startup founders should be wary of co-CEO titles.


“It’s quite likely that the founders have some form of internal power struggle, a conflict-avoidance problem, or have not accepted a clear chain of command and/or division of responsibilities,” he says.


Co-CEO situations also can sink if the leaders aren’t committed to near-constant check-ins with each other, Astrachan says. It takes “not just good communication,” he says. “They need to be communicating at the level of they’re reading each other’s thoughts.”


But if co-CEOs can pull this off and avoid the other problems of power-sharing, big benefits are possible, experts say. Co-CEOs with a high level of self-awareness are not only likely to be effective partners, but are also likely to be more understanding of their workers, Astrachan says. “They’re actually going to be better CEOs for employees,” he says. “They have to be better at persuasion.”


Houston, of the Center for Creative Leadership, says co-CEOs create a natural check on unethical behavior, which has remained a concern from the Enron scandal early this decade up to Bernard Madoff’s recent Ponzi scheme.


“You get a broad perspective with co-leaders,” Houston says.


He says sharing authority at the top also may mitigate the problem of “extreme” executive jobs. Amid high stress and long hours, CEOs tend to last in their positions just three to five years, Houston says. “Part of it is the burnout factor,” Houston says.


Collaboration a plus
Despite sharing the CEO role, Dail and Hayley of Aon Consulting each work about 70 hours a week. But both profess to like the arrangement, which involves touching base on various topics every day. “I think it helps to have somebody to really bounce ideas off of, and have real collaboration with,” Hayley says.


In fact, with Appel retaining strategy duties, Aon Consulting has more of a trio at the top than a pair. And while that can sound like too many residents in the executive office, it turns out to be an efficient approach, Appel says.


“One plus one plus a half is definitely more than two and a half,” he says “You can actually go faster, because you’ve got more capacity for decision-making—if there’s trust.”


Still, Mercer’s Thompson says companies should not leap lightly into co-CEO arrangements. “It’s a big deal,” he says. “It should be carefully considered by the board.”


And it should be carefully considered by prospective co-CEOs. Hayley likens the arrangement to a marriage: “If you’re in this with the wrong person, it would be hell.”

Posted on April 29, 2009August 3, 2023

Should Employers Get Behind Full Employment?

A recent essay in the liberal-left magazine The Nation makes a bold proposal: The federal government should create a grand strategy to get nearly every American a job. Does such a full-employment policy deserve the backing of businesses?

This idea merits at least some consideration from the corporate world. After all, one of its authors is a former captain of industry–Leo Hindery Jr., who served as CEO of AT&T Broadband.

Hindery’s co-author is Donald Riegle Jr., a former U.S. senator from Michigan.

(Riegle was one of the Keating Five, faulted for his interference in a probe of failed thrift Lincoln Savings and Loan Association. He has since joined Hindery at the Smart Globalization Initiative, part of the New America Foundation think tank.)

Hindery and Riegle say the nation’s economic priority ought to be creating 24 million jobs so virtually every American interested in working can find employment and the economy can reverse course.

“The right way to earn our way back to long-term prosperity is through stimulus efforts that will help develop, broadly deploy, fairly compensate and, especially, fully employ our human capital, which will always be our greatest source of national wealth,” they write.

Part of their argument is that the official unemployment rate dramatically understates the extent of a job shortage in the U.S. While the official unemployment rate was 8.5 percent in March, a broader Department of Labor measurement of labor “underutilization” indicates the situation is nearly twice as bad. The so-called “U-6” figure adds in people who want full-time work but had to settle for a part-time schedule and “marginally attached workers,” who aren’t working or looking for work but who want and are available for a job and have looked for work in the recent past. The U-6 rate was 15.6 percent in March. 

Pointing to the country’s still-skimpy safety net and Hooverville-like tent cities emerging around the nation, Hindery and Riegle say the billions being funneled into the financial sector bailout and first stimulus package aren’t up to the task of getting Americans back to work.

A second stimulus package should focus on employment, they argue. Among their specific proposals are several that business leaders–especially the leaders of multinational firms–are unlikely to like. These include passing the Employee Free Choice Act designed to make unionization easier and a strong “Buy American” requirement for federal government purchases.

On the other hand, business leaders probably can appreciate the authors’ call for tax incentives for business investments in such things as new laboratories, innovative products and manufacturing equipment. Also appealing to the business crowd should be Hindery and Riegle’s push for more public investment in infrastructure, improved trade adjustment assistance, additional aid to state and local governments and expanded job training for young people in skills such as advanced welding and computerized machine tool operation.

They also say the government ought to help create millions of jobs for American adults, in part through a new program that emulates the best of New Deal initiatives–the Works Progress Administration and Tennessee Valley Authority.

“None of the actions we call for will be easy to accomplish, nor will they come cheap. Yet we need all of them so that American workers can be fully employed in jobs that pay fair wages. We need them to rebuild, and sustain, the great commercial engines that fostered the broad American middle class of the past century and underpinned the global prosperity of the past quarter-century. We need them to bring an end to America’s sorry status as the world’s largest debtor nation. And we need them for our national and economic security.”

Yes, Hindery and Riegle’s “Jobs Solution” runs the risk of bureaucratic waste and higher corporate taxes in the long term. And companies historically have feared full employment for the bargaining clout it gives workers. But businesses rely on healthy consumers, who ultimately are just workers wearing a different hat. Given the dead-end nature of growth fueled by consumer debt, decent jobs for average Americans is the way forward for both workers and firms. A full-employment economy, in other words, may be the best solution out there for employers.

Any more Leo Hinderys in the house?

Posted on April 27, 2009June 27, 2018

Vendor Viability Looming Larger

The economic downturn raises the stakes on the viability of talent management software vendors.


Dozens of firms pitch some variety of talent management software, broadly defined as tools for such key HR tasks as performance management, compensation management, recruiting and employee development.


Sales of the software have been brisk in recent years, in part because firms worried about a looming shortage of talent. But companies are slowing their investments in new talent management technology amid broader belt-tightening. Research firm Bersin & Associates says talent management software sales jumped 16 percent last year to nearly $2 billion, but the rate of growth will slip to about 14 percent for 2009.


Consolidation among vendors in the field likely will continue, and some providers may fail, analysts say. Such disruption can lead to big headaches for customers. A merger can mean a favorite product is no longer improved or kept current with the latest government rules. Taleo acquired Vurv last year and said it will support Vurv recruiting products for large organizations until July 2011.


And if a vendor goes out of business, a customer can be stuck without a crucial business tool.


Jim Holincheck, an analyst with research firm Gartner, says that when organizations buy a “perpetual license” to a software product, it’s wise to keep the source code in escrow. That means a neutral party holds a copy of the code and technical documentation, releasing it to the customer under certain conditions such as the vendor going belly-up. Holincheck also suggests that customers set up contracts to ensure that a buyer of the software firm must honor the terms of existing deals. Another key stipulation is the option to end the contract or get a rebate if there’s a change in control of the vendor.


A basic step organizations should take to protect themselves from vendor disruptions is backing up data, says Naomi Bloom, managing partner at consulting firm Bloom & Wallace. Particularly vulnerable is information stored remotely by providers that deliver their software as a service over the Internet through a Web browser. “If I have an applicant tracking product delivered as software as a service, and they shut down, I need to have my data,” Bloom says.


Experts also counsel organizations to monitor the health of their software vendors. One way is to look at the quarterly financial reports of publicly traded firms. Customers also can ask privately held vendors to disclose such information as their cash reserves, sales and profitability.


Another key area to check is the vendor’s “brain trust,” Bloom says. She recommends using the professional network LinkedIn to track changes in senior management, which can signal possible trouble at a firm.


Current sales are another useful barometer, Bloom says. Organizations can learn about their vendor’s latest sales by being active in user groups and by serving as reference customers.


Holincheck says even big fish in the talent management software pond, such as Kenexa or Taleo, could be acquisition targets. Company share prices have plummeted since September as the stock market overall has dropped.


“It could happen anywhere in the chain,” Holincheck says.


Workforce Management, April 20, 2009, p. 20 — Subscribe Now!

Posted on March 27, 2009June 27, 2018

Midmarket HRO Firms Interested but Cautious

The economic downturn has made midsize companies more hesitant to pull the trigger on HR outsourcing deals. But it hasn’t dampened enthusiasm for farming out human resources tasks.


    If anything, the recession seems to have whetted the midmarket’s appetite for HR outsourcing and the cost savings it can bring, says Gary Bragar, research director at analysis firm NelsonHall.


    “There’s more interest in outsourcing today,” Bragar says.


    Midmarket spending on HR outsourcing should climb from $20.9 billion last year to $22.1 billion this year and $29.6 billion in 2013, according to NelsonHall.


    NelsonHall defines the midmarket as firms having 500 to 15,000 employees, although others in the field use somewhat different parameters. Midmarket companies that outsource payroll alone can expect savings of 15 to 30 percent, according to NelsonHall. Multiprocess HR outsourcing—when more than one task is outsourced—leads to savings of 15 to 40 percent, the research firm says.


    Like the big firms that have led the way with HR outsourcing, smaller businesses are eager to cut costs and take advantage of advanced talent management techniques and tools.


    Media firm E.W. Scripps Co., for example, just began an HR outsourcing relationship with ADP and plans to take advantage of performance management and compensation management tools offered by the vendor, says Lisa Knutson, senior vice president of human resources at Scripps, which has about 6,200 employees.


    For now, ADP is handling duties for Scripps including payroll, benefits administration and recruiting. Knutson says HR outsourcing saves time and money for midsize firms, but requires them to adopt their vendor’s standard approaches to tasks.


    “You as a company have to be willing to be flexible,” she says.


    Companies also need to spend time setting up the outsourcing. In Knutson’s case, a request for proposals went out in January 2007. A contract was signed a year later, and Scripps started going live with ADP last November, with the vendor handling benefits open enrollment.


    But many HR departments don’t have the luxury of time right now, says Stan Lepeak, analyst at research firm EquaTerra. Amid the downturn, HR officials frequently find themselves busy handling job cuts or trimming expenses out of their own departments.


    And even though HR outsourcing can reduce costs eventually, companies in clamp-down mode may not have the money available to straighten out jumbled technology systems in preparation for a handoff. They also may not want to take a charge associated with laying off human resources staff.


    It adds up to pent-up demand for HR outsourcing, Lepeak says.


    “The desire is up, but the ability to execute is down,” he says.


    The Right Thing, a recruitment process outsourcing vendor, launched a service tailored for the midmarket last year. In the fourth quarter of 2008, five of The Right Thing’s 12
new customer implementations were for midmarket clients, says company president Jamie Minier. But recently, midsize firms have been taking longer to ink deals, partly because of the economy, she says.


    “It’s an interesting time,” Minier says.

Posted on March 17, 2009June 27, 2018

Penny-Wise, Pound-Foolish on Unemployment Challenges

Employers have become more aggressive about challenging unemployment claims in a way that threatens to tarnish their appeal to future workers and may be making the current recession worse for workers and companies alike.


About 16 percent of people otherwise eligible for jobless benefits found their claims contested by employers on the grounds of worker misconduct in 2007, roughly double the rate from the early 1980s, according to an analysis of federal data by labor economist Wayne Vroman of the Urban Institute research group. The protest rate is much higher in some states, such as Texas, where employers contested more than a third of otherwise eligible worker claims in 2007 on misconduct grounds, Vroman says.


The increased willingness to fight claims, seen also in data over the past decade on benefit case appeals, has several possible causes. Among these are the use of technology that makes challenges easier, harried corporate HR departments on tight deadlines and the rise of an outsourcing industry that handles unemployment matters for companies.


Growing employer combativeness around benefit claims has likely limited the unemployment insurance taxes paid by businesses and thwarted fraudulent claim attempts. But the challenges to unemployment claims are leaving many former workers embittered in an era when employment horror stories can echo quickly across the Internet.


And although the rate at which employers succeed in their misconduct protests hasn’t changed significantly, the greater aggressiveness is dissuading people from even applying for benefits and ultimately decreasing the share of the unemployed getting weekly checks, Vroman says.


That means more people without much money to spend—a problem that exacerbates downturns and helped spur the creation of the unemployment benefits program in the first place back in the Great Depression.


When fewer out-of-work people get jobless benefits, “it goes against the purpose of unemployment insurance,” Vroman says.


Despite the potential drawbacks to unemployment challenges, observers don’t expect employers to ease off their protests.


Coleman Walsh, chief administrative law judge at the Virginia Employment Commission, says employers in an economic slowdown are more likely to terminate marginal performers. These cases, he says, tend to lead to disputes over whether the “poor performance” amounted to misconduct, which disqualifies a worker from getting unemployment benefits. “During recessionary times, we tend to see more job performance-related cases,” Walsh says.


Incentive for employers
Businesses largely shoulder the burden of the unemployment insurance program, which paid out an estimated $34.9 billion in benefits in the year ended September 30. The effective federal unemployment tax rate generally has been 0.8 percent of the first $7,000 paid in wages to each employee annually—for a maximum federal tax of $56 per employee per year.


A firm’s state unemployment tax, though, can vary based on the amount of unemployment its former workers experience. The so-called “experience rating” system rewards employers with stable employment through lower tax rates, while companies with many layoffs face higher rates.


This year in California, for example, an employer’s state unemployment tax rate can range from 1.5 percent to 6.2 percent of the first $7,000 paid in wages to each employee. For a 10,000-employee firm, that translates to a difference of nearly $3.3 million annually.


Employers, therefore, have an incentive to contest the unemployment claims of their former workers. And they have been doing so with greater zeal in recent years.


Once a worker loses their job and applies for unemployment benefits, the most recent employer is contacted and given a chance to protest the claim. Since the early 1980s, the rate at which state unemployment agencies make “determinations” about whether an otherwise eligible claimant is disqualified from benefits because of job misconduct has nearly doubled, to 16 percent, Vroman found. He says the vast majority of those determinations involve employers contesting the employee’s benefits.


While employers are alleging employee misconduct during initial claims determinations at a greater rate, they still lose on those matters roughly two-thirds of the time, Vroman says.


Increased aggressiveness on the part of employers also can be seen in statistics about appeals of claims decisions over the past decade or so.


The Department of Labor provided a set of data that offers an approximation of the initially approved claims that are appealed by employers each year. This data set considers the number of employer-filed appeals as a percentage of the number of monetarily eligible claimants—that is, the number of people who had adequate work and wages to qualify for benefits. From 1998 to 2002, that percentage was as low as 2.68 percent and never higher than 3.28 percent. From 2003 to 2007, the percentage was never lower than 3.76 percent and as high as 4.6 percent.


Although claimants still account for the majority of appeals, the share of appeals by employers has crept up during the past several decades. It averaged 30.1 percent of appeals from 2003 to 2007, up from 28.7 percent from 1998 to 2002.


The percentage of time that employers win their appeals has edged up, but not by much. The win rate averaged 33.4 percent from 1998 to 2002 and 34 percent from 2003 to 2007.


Reasons behind the push
Industry observers offer various explanations for rising employer challenges of unemployment benefits.


The consolidation of corporate human resources departments over the years, combined with tight deadlines, may contribute to the trend, says Doug Holmes, president of trade group UWC-Strategic Services on Unemployment & Workers’ Compensation. Large organizations may not have time to meet initial state response times—often just 10 calendar days from when the notice of an unemployment claim is mailed—given the way HR-related documents these days are routed to central offices, Holmes says. That could lead to more appeals.


“The short time frame makes it difficult to get a quick, upfront decision in these cases,” says Holmes, whose organization includes employers and aims to be the voice of business on unemployment matters.


The growing use of technology in the system also may be fueling challenges, Holmes says. “It could be because of increased automation of claims,” he says. “If employers can file an appeal online, it’s easier to file an appeal.”


A shift in the courts also may play a role in persuading employers to appeal more often. Court rulings have slowly expanded the definition of employee misconduct, says Rick McHugh, a staff attorney for the National Employment Law Project advocacy group.


“The courts are just not showing as much sympathy for employees who get fired,” he says.


Observers also point to the rise of third-party firms that manage unemployment compensation costs for employers. Monica Halas, a senior attorney at nonprofit group Greater Boston Legal Services, says that in her experience representing lower-wage claimants, outsourcers sometimes act in bad faith during unemployment insurance proceedings.


“This includes providing wrong information to initial claims adjudicators and appealing cases that have no merit and then often not showing up at the hearing,” she says.


Walsh of the Virginia Employment Commission says employers for the most part are not bringing frivolous challenges. But he says most employers that appeal claims these days seem motivated by newfound awareness about the way unemployment claims affect their tax rate. And he chalks up that mentality to the outsourcers.


“My sense is the third-party agencies are educating employers more as to what the real cost of unemployment insurance is to their business,” Walsh says.


Outsourcing the dispute
One of the biggest outsourcers in the field is Talx, a unit of credit-rating firm Equifax. Talx has 7,400 customers of unemployment claims management services. It claims on its Web site to “remove over $6 billion in unemployment claim liability annually and recover $240 million in erroneous charges for our clients.”


But that doesn’t mean the company contests clearly legitimate claims, says Joyce Dear, chief operations officer for tax management services at Talx.


“We take the situation on a case-by-case basis,” Dear says. “It’s really of no benefit to protest something where the facts wouldn’t support it.”


Talx represented Wal-Mart in an unemployment benefits case last year involving former employee Lucia McDermott, who worked in a Semmes, Alabama, Wal-Mart store for about 4½ years and was granted benefits after being terminated May 23, 2008. Wal-Mart appealed the decision, accusing McDermott of misconduct. On April 24, McDermott had come to work at 1 p.m. instead of 11 a.m. as originally scheduled. Although Wal-Mart considered her tardy, McDermott says she had been told to come in later, and that she was fired because of a personality clash with an assistant manager.


An Alabama administrative hearing officer upheld McDermott’s benefits. “It seems unreasonable that the employer would wait a month later to terminate an employee for an incident of tardiness,” the officer wrote. “No reasonable explanation for the delay had been offered.”


Talx declined to comment on McDermott’s case. In a statement, Wal-Mart spokeswoman Michelle Bradford said, “While we’re disappointed, we respect that decision.”


With employers protesting more benefit claims, the number of employees left angry is bound to multiply. And those disgruntled folks are bound to start blasting their former firms on blogs, Facebook pages and other corners of the Internet, says Jennifer Benz, a communications consultant based in San Francisco.


Stories alleging that a company kicks ex-employees when they’re down could damage an employment brand, Benz says.


“An employer who treats current and former employees badly during this recession is going to put itself at a significant disadvantage when the economy perks back up,” Benz says. “Their reputation and employer brand will be damaged and they’ll lose key talent and have a harder time attracting top employees.”


Apart from potentially harming corporate reputations, employer aggressiveness on unemployment claims also threatens to exacerbate the economic downturn, Vroman argues. He says a high level of employer challenges is associated with a lower share of the unemployed receiving benefits.


In 2007, employers protested 34 percent of otherwise eligible claims in Texas on misconduct grounds, Vroman says. That was about twice the national average, he found. In the fourth quarter of 2007, the state’s recipiency rate, which captures the percentage of unemployed people who have qualified for and are claiming benefits, was 20 percent. The national recipiency rate was 36 percent.


A high level of employer protest effectively dissuades workers from applying, Vroman says. If you see your friend’s attempt to claim unemployment fail, he says, “you may not bother to file your claim.”


Gone too far?
No one disputes that employers should contest the claims of workers who don’t qualify for unemployment benefits. Such protests are key to preventing fraudulent claims. And during a recession, low tax rates are good for individual businesses and the overall economy, which benefits from the presence of healthier employers.


Vroman, though, says there’s typically a lag of a year between a claim and any impact on the employer’s tax rate. He adds that unemployment taxes represent a small fraction of employer payroll costs.


The issue boils down to whether employers are going too far with their challenges, risking the common economic good and their own good name.


Benz cautions businesses against benefit-claim protests that are penny-wise but pound-foolish: “Companies need to have a long-term view about their employees and how they’re managing their workforce.”

Update: April 1, 2009
This story has been updated since its original publication.
One source for the story on the level of employer challenges of unemployment benefits, Wayne Vroman, a labor economist with the Urban Institute research group, revised his analysis after the story was edited for publication. Vroman originally provided overall employer protest rates to
Workforce Management. But he later said he was not sure about one component of the overall rate. Vroman initially indicated that the component, the rate of employer protests on the grounds of voluntarily quitting, made up close to 10 percent of the overall rate nationally in 2007. He later said he was not sure what that figure is.

Posted on March 17, 2009June 27, 2018

Court Allows Unemployment Despite Papers Protests

Among the organizations challenging a former worker on unemployment benefits in recent years is Freedom Communications, publisher of The Orange County Register.


The Irvine, California-based media firm protested the benefits of Debbie Zucco, a former editor at the Register who took a voluntary severance package worth $53,500 in late 2006.


Under California law, people leaving employers on a voluntary basis still can qualify for benefits under certain circumstances. Zucco, who worked at the newspaper for nearly 19 years, argued that constantly changing directives at the paper were causing stress-related health problems.


She also figured her job was likely to be cut eventually, because an executive warned on a conference call that “old media” positions were in jeopardy. Zucco worked as a wire editor, selecting and editing stories from wire services, and says the paper has since abolished the job title of wire editor.


California’s Employment Development Department initially denied Zucco’s benefits application. She appealed the initial decision, and an administrative law judge sided with her. The newspaper company then appealed to the California Unemployment Insurance Appeals Board. It also sided with Zucco.


The Register’s owner then took the matter to California Superior Court, arguing that Zucco’s case set a dangerous precedent of employees “double dipping” by collecting both a severance package and unemployment benefits. The court found in Zucco’s favor. She says the court eventually awarded her roughly $16,000 in attorney fees.


Zucco, 56, collected $8,700 in unemployment benefits after being jobless for much of 2007. Now an editor at The (Riverside) Press-Enterprise, she remains bewildered by the Register’s determination to deny her benefits. And she remains angry. “How could you do that to someone that worked for you for 18 years?” she says.


The Register did not return calls seeking comment.

Posted on February 2, 2009June 27, 2018

Many States Running Low on Unemployment Benefits

Just as laid-off Americans are applying for unemployment benefits in droves, the state coffers for cutting those checks are running low.


A December study by the National Association of State Workforce Agencies found that some 30 states could be at risk of having their unemployment trust funds run dry over the next several months. Already some states have taken out loans, according to NASWA, whose members manage state unemployment and other workforce programs.


The financial squeeze amounts to a flaw in the jobless benefits system, which critics also fault for stingy benefits and outdated eligibility rules. There’s widespread agreement that unemployment insurance funding is broken. But how to fix it is subject to debate, with some arguing for higher taxes and others calling for Washington to give states more of the revenue it collects under the Federal Unemployment Tax Act.


The effective federal unemployment tax rate generally has been 0.8 percent of the first $7,000 paid in wages to each employee annually—for a maximum federal tax of $56 per employee per year.


Those taxes go to a federal unemployment trust fund, which pays for state administrative expenses, helps cover the cost of extended unemployment benefits and provides loans to states that run out of money to pay benefits.


Because states are legally obligated to pay unemployment benefits, an empty state account means state officials have to turn to Washington or outside sources for funds. But private-sector loans entail interest payments. And loans from the federal government also can result in interest charges.


A number of observers suggest the funding problem stems from too-low taxes at the state level. Unemployment insurance tax rules and rates vary widely by state. Some states have lowered their employer tax rate—even to zero—during good times, says Randy Eberts, president of the W.E. Upjohn Institute for Employment Research. “Therefore, they have not built up their reserves in times like these when high joblessness puts a huge strain on the system,” Eberts says.


But Larry Temple, executive director of the Texas Workforce Commission, rejects higher taxes as the answer to state funding troubles. Temple, whose agency oversees unemployment insurance in Texas, says the funding dilemma stems from the federal government hording Federal Unemployment Tax Act funds rather than distributing more of those dollars to states. Texas, he says, gets about 32 cents on the dollar returned to it for workforce programs including unemployment insurance.


The National Association of State Workforce Agencies has called for every state to receive at least 50 percent of the federal unemployment taxes paid by its employers. And in October, the group proposed that $6 billion be distributed from the federal unemployment trust fund to state unemployment insurance programs.


As of December 31, the federal unemployment trust fund had more than $31 billion.


“They sit on a huge balance up there,” Temple says.

Posted on December 19, 2008June 27, 2018

Class of ’98 Hits and Misses on HR’s Future

Overly optimistic, but on the right track.


That sums up the quality of predictions made by a group of experts a decade ago, when Workforce Management (or Workforce, as it was called then) asked them to forecast what HR would look like in 2008.


The panel of HR executives and researchers was largely on the mark, for example, in forecasting that “collaborative cultures” would become the workplace model; that many jobs would be “redesigned to be much broader in scope, especially in management positions, resulting in leaner headcounts”; and that the continued emergence of a world marketplace would “require development of an international workforce.”


But the futurists overreached on a number of forecasts. Consider the utopian prediction that “families will return to the center of society; work will serve as a source of cultural connections and peripheral friendships.” And the still-futuristic notion that “Freelance teams of generic problem solvers will market themselves as alternatives to permanent workers or individual temps.” Then there’s this example of wishful thinking: “HR will have a ‘seat at the table’ as part of the top management team and report directly to the CEO in most companies.”


That hasn’t happened, says Jac Fitz-enz, chief executive of consulting firm Human Capital Source and one of the 10 panelists from 1998.


“In certain areas, we had the right direction,” Fitz-enz says. “We just expected things to happen faster than they did.”


Jason Averbook, CEO of consulting firm Knowledge Infusion, has a similar view. He says HR departments have spent more time getting up to speed on such topics as virtual work arrangements, the global nature of work and just-in-time learning than putting the ideas into practice. “The last 10 years have been spent educating HR around those concepts, not HR implementing those concepts,” he says.


For the story a decade ago, Workforce Management asked Fitz-enz and his peers to generate and rank predictions in six categories. Workforce Management has conducted a similar exercise this year, with a largely new set of panelists.


Though not all the 60 predictions from 1998 have materialized, the top-ranked choices from each category reveal good forecasting:


Workplace flexibility: Collaborative cultures will be the workplace model.


Global business: The role of corporate HR will change to that of creator of overall values and direction, and will be implemented by local HR departments in different countries.


Work and society: Family and life interests will play a more prevalent role in people’s lives and a greater factor in people’s choices about work—there will be more of a “work to live” than a “live to work” mentality.


Workforce development: Lifelong learning will be a requirement.


Definition of jobs: Organizations won’t pay for the value of the job but for the value of the person.


Strategic role of HR: Successful HR departments will focus on organizational performance.


Today’s growing interest in corporate social networks, ad hoc teams and in the cooperative style of Millennials shows that collaborative cultures are growing in importance, even if they are not yet the workplace model. And to take another of these top predictions, companies do seem to care more about finding and tapping the value of individual employees, rather than simply paying for a job. Consider all the attention to identifying and grooming high-potential employees in recent years, as well as the push for better succession planning and career development.


On the other hand, there are some major developments in workforce management that the 1998 story largely ignored. It failed to capture the emergence of metrics in HR and increased interest in quantifying the return on “human capital” in the past decade. Nor did the panelists forecast the mushrooming importance of complying with various laws and regulations—a trend that hit HR and other corporate functions in the wake of the Enron and stock-option-backdating scandals.


In other areas, the panel had the right idea in general, but set the bar too high. HR, for example, continues to struggle in its quest to have a seat at the table. Jodi Starkman, executive vice president at consulting firm ORC Worldwide, says HR for the most part hasn’t spearheaded efforts to optimize the performance of organizations.


It could do so, she says, through such means as having visibility into the global talent pool, which would enable it to deploy people better. “My observation is that HR in most organizations is still barely a partner, let alone a leader,” Starkman says. “Ten years later, it continues to play a largely transactional role in most organizations.”


The software systems used by HR officials haven’t helped much, Averbook says. For years, vendors have been touting “strategic” human capital management applications. But the tools have by and large fallen short, Averbook argues, beginning with the employee data typically found in HR systems.


Commercial social networking sites do a better job gathering information about people, he says. “LinkedIn and Facebook know more about the employee than the company does,” Averbook says.


Some of the predictions from this year’s panel are similar to those made a decade ago, underscoring the fact that the field hasn’t changed as fast as many expected. Even so, a number of panelists this year said the pace of change would increase in the coming decade.


Fitz-enz says that breaking down tradition is not a speedy process.


“You’re talking about evolution,” he says. “And evolution takes time.”


Workforce Management, December 22, 2008, p. 23 — Subscribe Now!

Posted on December 19, 2008June 29, 2023

Our Panel of Experts


Kevin Kelly
Americas and Israel
director, people
Ernst & Young
Kelly oversees day-to-day management of strategy and operations for Ernst & Young’s Americas people team. The professional services firm has been on Fortune magazine’s list of the 100 Best Companies to Work For 10 consecutive years.
 

Terry Laudal
Senior vice president of
human resources, Americas, Japan and Asia Pacific SAP
Laudal is responsible for overseeing human resources for SAP. This year, the Germany-based business software company was named by the Great Place to Work Institute Germany as the best large workplace in Germany for the fourth consecutive year.

Virginia Clark
Global head of learning
and talent management
SAP
Clark is responsible for the development of talent across the SAP organization worldwide.

Nandita Gurjar
Vice president and group head, human resources Infosys Technologies
Gurjar handles HR management for more than 94,000 employees. Last year, the India-based technology services firm was named by the Great Place to Work Institute India as one of the 25 best workplaces in India, and earned an Optimas Award from Workforce Management for Global Outlook.
 

Libby Sartain
Former head of HR
Southwest Airlines, Yahoo
During her tenure, both Yahoo and Southwest earned spots on the Fortune 100 Best Companies to Work For list. She is on the board of directors of coffee firm Peet’s Coffee & Tea and is co-author of HR From the Heart and Brand From the Inside.

Dave Ulrich
Professor University of Michigan’s Ross School of Business
Ulrich studies how organizations build capabilities of speed, learning, collaboration, accountability, talent and leadership by using human capital. He has written or co-written several books, and his honors include being ranked top management guru by BusinessWeek.
 

John Boudreau
Professor University of Southern California’s Marshall School of Business
Boudreau has studied the connection between superior human capital and sustainable competitive advantage. His research has received the Academy of Management’s Organizational Behavior New Concept and Human Resource Scholarly Contribution awards.

John Haggerty
Managing director of executive education Cornell University’s Center for Advanced Human Resource Studies
Haggerty’s research interests include HR functional excellence, applications of technology in HR and measures of strength of HR systems. He had a 27-year career as an HR practitioner, including 21 years at General Electric.

Susan Meisinger
Former CEO Society for Human Resource Management
From 2002 until June 2008, Meisinger headed the HR field’s largest professional group, which has nearly 170,000 members. During her tenure, SHRM opened offices in India and China and started a public affairs campaign to highlight the value of the profession.
 

Posted on December 19, 2008June 27, 2018

Top Predictions

Structure of Work
1.
There will be an increased focus on infrastructures—such as social networks and wikis—to support building strong relationships and collaboration.


2. The structure of work will become more adaptive, more informal and less focused on formal structure and static design solutions.


3. (tie) “Agile” organizations will have survived rampant aggregation and consolidation, and all organizations will be developing greater agility.


There will be greater demands on HR professionals to be businesspeople, with competencies in finding and retaining talent and in managing contract and freelance workers.


Organizations will have the ability to personalize the employee value proposition, helping employees find value in the work they do based on how they interact with the company. Some employees will be full time and long term. Others will be short term and part time.


Flexibility will no longer be optional. Employees will expect to utilize both short- and long-term flexibility options to meet their needs.


The most successful organizations will have a performance culture or meritocracy and will demand extraordinary effort from those who wish to achieve leadership positions.


8. Technological progress and the evolution of virtual networks and social vetting—that is, using networks such as LinkedIn to establish trust and research people’s backgrounds—will increase workplace flexibility. The trends will increase the use of emerging work structures that involve engaging professional and social networks through means such as “crowd sourcing”—when an organization invites the public to help solve a problem.


9. Organizations will work across internal and external boundaries, connecting and customizing internal actions to external customers and investors.


10. The talent market will look a lot more like eBay than Monster or Yahoo HotJobs. Candidates will put themselves up for bid for specific work, hours and duration and will name their minimum price, including benefits and perks. Employers will contract with each worker for what will be delivered.


Global Business
     1. Companies will need to balance the need for a unified global culture with local strategic and cultural differences and make core global values locally relevant and easily understandable for all employees.


2. (tie) The business world will continue to be flattened by globalization, changing demographics, the ubiquity of technology and regulatory compliance. Conducting business on this level playing field will require a change in mind-set, strategies and operations.


Operating in a global economy will create even more demand for leaders with global experience. This means it will be more important for key talent to have expatriate experience.


4. (tie) Companies will find their best people anywhere in the world, so successful workers will be willing to work outside their home country.


The concept of offshoring will cease to exist. Talent will exist globally and companies will go where the talent is. The purpose will not be to get the lowest-cost labor, but rather the highest-quality talent. This will be especially true with technical and creative workers.


Global companies will become more adept at managing a global enterprise on a 24/7 basis, with more management and technology systems in place to allow work to be easily passed around the world.


There will be a more progressive use of partnerships and alliances across functions, organizations and customers to build more collaborative and innovative ways to compete and win market share.


8. The hunt for inexpensive labor will continue, but the evolution of economies from low cost to high value will be quicker, and increasingly, a low-cost labor strategy will be more difficult to sustain.


9. Organizations will master the paradox of managing both large global companies and micro units at the local level. They will meet the challenge of being global even as they react to local conditions.


10. Organizations that leverage supply chain efficiencies on a continuous basis globally will flourish. Organizations embedded too deeply in any single geography will be at an increasing disadvantage.


Work and Society
1. Societies throughout the world will focus on work as a more important crucible for social progress and values. The memory of today’s financial crisis will leave a legacy of greater scrutiny and regulation of issues such as fairness, pay differentials and ethics, particularly in traditional Western economies.


2. Millennials will redefine work, doing work at home and taking home to work. This means blurring the boundaries of life and work. More workforce mobility will allow people to work from home and at different hours.


3. There will be more emphasis on collaboration and using technology to support it.


4. As the generation born around 1980 takes its place leading major global organizations, the formative events in those workers’ lives—such as aging parents, the terror attacks of September 11, 2001, and the 2008 financial crisis—will lead to greater C-suite emphasis on corporate social and environmental responsibility.


5. Flexibility will be an expectation of employees.


6. There will be a significant problem of retirement in the West. With people living longer and fewer people in the workforce, retirement will have to be redefined.


7. Balance will still be an issue. Work practices in the most successful firms will have had few changes. Technology, and especially ubiquitous connectivity through wearable devices such as eyeglasses with built-in computer screens, will continue to blur the distinction between working and not working.


8. For nations such as India, where a large number of young employees are entering the workforce, there will need to be a major shift to address their needs and concerns. These are people who may frequently ask, “What’s in it for me?” Organizations need to show that they have the flexibility to adapt to these changes while being able to maintain a strong culture.


9. (tie) Generation Y issues, such as the perception that Gen Y employees will require greater workplace flexibility policies, will have had far less impact on business reality than predicted. Talented people, willing to work very hard, will flourish in most organizational settings.


Corporate responsibility and serving the wider community will be an integral part of an organization’s business strategy.


Recruiting and Workforce Development
1. Recruitment and development will increasingly be seen as part of an integrated workforce-supply optimization process. Both will become virtual, global and just-in-time, but they will also be transformed through an increasing emphasis on optimization, differentiation and return on investment.


2. There will be a continued and increased demand for top talent. The gap between the best and the rest will be greater. There will be more demand for creativity, innovation and thought leadership.


3. Employers will compete as intensively for workers as they do for customers. Branding an organization as a place for workers will be as important as branding for consumers.


4. Firms will become adept at sourcing and engaging transient talent around short-term needs, and will focus considerable energy on the long-term retention of smaller core talent groups.


5. Leadership development will be a critical need. Global leaders must develop strong decision-making, business and people management capability in diverse cultures.


6. With a more flexible workforce, employers will struggle with the funding of workforce development. They will be hesitant to train workers only to see them leave. Training and development may be tied to some contractual time commitment on the part of the worker.


     7. (tie) More focus will be placed on searching for people who match companies, not just people who have the skills that companies need.


The lack of skilled workers will be a global phenomenon, making the war for talent a global war. Successful HR professionals will be much more adept in fighting this war and will develop expertise in work visas, employment and privacy law around the globe.


9. (tie) Workforce development will be seen as a holistic approach that meets the needs of clients, individuals, organizations and surrounding communities.


There will be more development inside and outside of work. People will be encouraged to take a “social sabbatical” as a development experience, for example.


Strategic Role of HR
     1. The strategic role of decisions about talent and how it is organized will increasingly be recognized as pivotal to an organization’s sustainable strategic success. Leaders will be held accountable for the quality of those decisions.


2. HR issues will be measured much more as part of the business plan.


     3. Talent management will become the prime focus of HR.


     4. HR will be heavily involved in helping build organizational strategy, including such decisions as which markets to enter, which countries to choose for expansion and which analytics to inspect.


     5. (tie) A “decision science” approach will be the foundation of human resources. HR will view talent in a supply-chain fashion and help the business understand workforce trends to make sound decisions.


HR will be part of strategy formulation and execution discussion.


HR will play a more significant role in developing leadership for an organization.


HR will go the way of finance and accounting. There will be two career paths. One will be the equivalent to the comptroller in an organization, focused on HR delivery and compliance issues. The other will be equivalent to finance: focused on the business strategy relative to talent needs, workforce development and organizational design.


9. The full-time permanent jobs that remain in HR will require more business acumen and more HR depth than ever imagined, leading to a continued and greater global shortage of the needed talent.


     10. (tie) The role of the “HR department” will vary widely, becoming the repository of expertise and advice on talent in some organizations, but in others, this role may be taken by experts from other disciplines, with HR focusing more on processes, vendor management, etc.


To remain successful in a flat world, predictability, sustainability, profitability and risk management are critical. Hence, HR’s value will also come from helping the organization tackle such areas as people-related challenges, risk and compliance issues, sustained growth and the looming talent shortage.


The ratio of HR staff to firm population will be dramatically smaller.


Compensation and Benefits
1. Companies will need to offer tailored benefits to meet diverse needs and attract talent. As a result, there will be more menu-like choices available for employees relative to their personal lifestyle (e.g., risk-reward incentive designs, benefit options, etc.).


2. (tie) Increasingly, organizations will help their employees understand that benefits have expanded to include an organization’s ability to provide opportunities to build skills and career in an inclusive and flexible work environment through challenging work assignments, career mobility, formal and on-the-job learning, coaching and a feedback-rich culture.


Executive compensation still will be a critical responsibility of HR, and there will be even greater reliance on outside consultants to help design programs. But corporate boards, concerned about consultants being too close to executive management, will seek HR expertise, resulting in many more HR professionals having positions on corporate boards.


There will be more creative ways to tie employee wealth to firm performance, such as performance shares, and not just stock options.


5. There will be more accountability associated with CEO and senior leader pay, with more transparency.


6. (tie) Traditional compensation and benefits will evolve toward a focus on total rewards, with a commensurate emphasis on customization, differentiation and integration across all elements of the employment relationship.


Compensation and benefits will be more tied to financial results and behavior results—that is, demonstrating the right competencies, which will be defined more from the customer point of view.


Organizations will have to work to educate employees on the total value proposition they receive. Compensation is only one component.


9. Benefits will be more globally similar, and portability will increase.


10.There will be an expansion of creative benefit offerings to address different workforce needs, such as elder care, pet care, concierge services and
 

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