Author: Eilene Zimmerman

Americans’ attitude toward debt has changed dramatically in the past two decades, from embarrassment to acceptance. Many people now see debt as simply part of modern life.

   Two results of this change of heart are the lowest personal savings rate since the Great Depression—in January 2006 it dropped to minus 0.7 percent—and a penchant for using credit cards. More than half of workers surveyed by the Employment Benefit Research Institute for its “2005 Retirement Confidence Survey” say they carry credit card debt month-to-month.

   Despite its social acceptability, debt problems cause stress and anxiety that sap workers’ productivity, cause health problems and increase the likelihood they will leave a job in search of better pay.

   “They are absent more frequently and waste time at work dealing with financial matters—on the telephone with creditors, trying to get a loan from their 401(k),” says E. Thomas Garman, author of more than 30 books on personal finance, a professor emeritus at Virginia Tech and former executive director of the university’s National Institute for Personal Finance Employee Education.

   Personal debt may be a personal problem, but many employers now recognize the potential drag on their bottom line. Increasingly, companies are including basic financial education courses as part of their employee assistance programs.

   The timing is right: Garman’s March 2005 research showed that 30 percent of U.S. employees feel overwhelming distress over their finances. At the end of 2005, Chicago-based EAP provider ComPsych asked employees that it serves to describe their financial situation. Twenty-eight percent said they were not only worse off than last year, but are also just one major setback away from financial disaster.

   Kathy Stoughton, a financial specialist with ComPsych, says the company has seen a rise in demand from clients for basic money management, budget strategizing and debt management courses. Its most requested workshop is “How to Get Beyond Living From Paycheck to Paycheck.”

   Last year, 45 percent of calls to a financial hotline run by Financial Finesse, a financial education provider in Manhattan Beach, California, were about debt, up from 39 percent in 2004. Two of the most commonly asked questions were “How do I put together a budget?” and “How do I deal with my creditors?”

   Liz Davidson, CEO of Financial Finesse, says her company used to conduct workshops for clients related to events like layoffs or mergers to help employees figure out what to do about their benefits. Now Davidson says almost all of her company’s clients are asking for financial education courses.

   Aflac, an international insurance company headquartered in Columbus, Georgia, began offering financial lunch-and-learn sessions for employees seven years ago. The focus largely was retirement planning, investment strategies, college savings plans and home buying. But in the past year and a half the company has added several basic money management courses that teach employees how to create a budget so that what is spent doesn’t exceed what’s coming in.

   “These are all very well attended. In fact, because we limit the number in each session to control costs, most of our sessions have wait lists,” says Chad Melvin, manager of corporate training and development.

   Still, that cost is minimal–just lunch–since most of the presenters do not charge a fee and Aflac provides the classroom space. Many presenters are local nonprofits that provide financial education or investment advice, but if the presenter is a vendor that might gain financially from the program—such as Merrill Lynch or Wachovia—that vendor pays for lunch.

   Although Melvin doesn’t know how many employees have changed their habits as a result of these sessions, he does know that morale and retention are better because of them.

   “I see that employees really feel the company has their best interests at heart,” he says. And Aflac’s retention rate is 87.3 percent, a few points higher than the industry average.

   Another benefit employers hope to realize as a result of these courses is an increase in 401(k) plan participation—it’s the primary reason a majority of Financial Finesse clients say they offer financial education.

   “The challenge for these companies is that about 30 percent of their employees aren’t participating in retirement plans because they just can’t afford to do so,” Financial Finesse’s Davidson says.

   In fact, next to the desire to increase retirement plan participation, Davidson says employers’ biggest concern is reducing the number of 401(k) loans employees are taking.

   But it’s a Catch-22. Jinhee Kim, an assistant professor of family studies and personal finance at the University of Maryland, studies how financial education changes workers’ attitudes and behaviors. Kim says that although many employers continue to offer traditional retirement planning seminars, they are useless if employees don’t have cash to invest in the first place.

   For many employees, rising health insurance premiums exacerbate debt problems.

   Professor and author Garman says he recently consulted with an employer that had 300 employees, and although he gave those employees a raise each year, it wound up being less than the increase in their health care insurance premiums. “He urges them to put money into their 401(k) plans and they look at him like he’s crazy,” Garman says.

   Another complication for employees is the recent changes in bankruptcy laws that have made it much harder to qualify.

   “We get lots of calls about bankruptcy. A lot of folks who want to know if they are still eligible for it and the pros and cons,” says Jonathan Hefner, manager of legal and financial services for Ceridian, a human resources outsourcing company in Minneapolis whose EAP serves about 1.2 million employees nationwide. Many of those in serious financial straits that now can’t file for bankruptcy are looking for help in formulating another plan.

   Basic financial management courses can help with those plans, and although they aren’t a panacea for a workforce mired in debt, research shows education can change bad spending and saving habits. A study conducted by professors Kim and Garman in 2003 and published in the Journal of Compensation and Benefits, showed that 80 percent of respondents who had received a combination of workplace financial education and individual financial counseling felt they had a more adequate knowledge of personal finances. More than 44 percent said they had developed a plan for their financial future and about 37 percent reduced some of their personal debt.

    Businesses also benefit by having a less preoccupied workforce. Financially distressed workers make lots of poor financial decisions for themselves and their employers, Garman says.

   ComPsych’s Stoughton agrees.

   “This is a decision-making skill employers are teaching,” she says. “If an employee learns how to make good decisions–financial and otherwise—for themselves, chances are they will make good decisions on behalf of the company.”

The phenomenon of boomerang recruitment–luring back high-value employees who voluntarily leave their jobs–is becoming increasingly important as a way to stop a drain of female talent: women who leave careers to raise children or care for an aging parent.

    A recent study by Sylvia Anne Hewlett, founder of the nonprofit Center for Work-Life Policy and Carolyn Buck Luce, a global managing partner at Ernst & Young, showed that 37 percent of women have opted out of their careers at some point; 43 percent for women with children. Only 5 percent of highly qualified women are looking for ways to rejoin the companies they left. The study was discussed by the authors in an article in the March 2005 Harvard Business Review. “If ever there was a danger signal for corporations, this is it,” write Hewlett and Luce.

    Anne Berkowitch, co-founder and CEO of SelectMinds, a New York consulting firm that creates and manages corporate alumni networks, says more and more companies are trying to devise work arrangements attractive enough to make these valuable women come back. Alumni networks, Berkowitch says, are the next evolution of women’s networks, which were originally designed to mimic “old boys” networks and help women further their careers.

    “Now women can access other women who left the company in similar situations and find solutions that will work for them, be that a job share or coming back as a consultant.” she says. “And being part of an alumni network is a great way to keep these women connected to the company.”

No matter how tough the labor market or prevailing the talent wars, until recently few companies looked at their ex-employees as potential job candidates. But with the recovery slowly in motion, companies are beginning to see the value in their former rising stars. They hope to turn these people into “boomerangs”–employees who come back home.

    Actively seeking out ex-employees, who are cheaper to hire and often more productive than those recruited from scratch, is now a hiring strategy for many forward-thinking companies, particularly in such professional services as accounting and consulting.

    Five years ago, when Anne Berkowitch began talking about ex-employees as a recruitment channel, people were taken back. “People didn’t really understand what we were suggesting,” says Berkowitch, founder and CEO of SelectMinds, an alumni relations management company in New York. They do now. Since SelectMinds’ founding as one of the only firms of its kind, it has grown between 50 percent and 100 percent annually.

    John Challenger, CEO of outplacement firm Challenger, Gray and Christmas, says that especially in the past three years corporate America has seen a rise in boomerangs as well as an increase in formalized programs to support the phenomenon: the corporate alumni network. These social networks for former employees are modeled on university alumni programs and allow human resources to keep track of former employees.

    Networks generally consist of a Web site with a directory of members, a job board and information about networking events and continuing education programs. Challenger says that because people are so often terminated not because they’re not capable, but because of layoffs and business cutbacks, “it makes enormous sense to tap into these ex-employees.”

    Berkowitch estimates the cost of boomerang recruitment in 2005 to be between a third to two-thirds of the cost of bringing in a new recruit. Berkowitch and colleague Cem Sertoglu published a paper on the topic in the Harvard Business Review in 2002, when the trend was nascent. She found then that hiring an ex-employee cost about half as much as a new hire. She also found that rehires were 40 percent more productive at work and tended to stay on the job longer.

    Joyce Gioia, president of the Herman Group in Greensboro, North Carolina, a human resources consulting firm that focuses on workforce trends, says that since the middle of 2004, she has seen an upswing in companies wanting a more formal approach to tracking ex-employees. “Not only top performers, but all those who left favorably,” Gioia says. “People who leave often discover the grass isn’t so green on the other side are very inclined to come back.”

    Katie Peterson, now regional resource manager for consulting firm Deloitte & Touche’s Pacific Southwest region, is a boomerang herself. Peterson started out as an auditor at the firm and left after two and a half years to get her MBA. She went to work in finance, then changed tacks and began working as an executive recruiter.

    Peterson kept up with Deloitte-related news and stayed in touch with former colleagues; she was also a registered member of the alumni network. In January 2004, after eight years away, she returned to Deloitte. “I wasn’t even looking for a job, but a recruiter at Deloitte who had been networking with others was directed to me,” Peterson says. “I had always held an affinity for Deloitte and missed it, so the opportunity was perfect.”

    Deloitte’s alumni network, Alumnet, was established four years ago and now tracks 75,000 ex-Deloitte employees nationwide. In February, the network will be opened up to current employees. The company has seven alumni relations regions, each of which operates autonomously. Karen Palvisak, coordinator for those regions, says most offer continuing education programs and networking receptions. The alumni Web site contains Deloitte job postings by region and office and a place where alumni can post their resumes.

    Deloitte’s internal recruiters use the alumni network to identify job candidates. Peter DeMartin, recruiting director for Deloitte’s Southeast region–which includes 22 offices from Washington, D.C., to Miami–says he is provided annually with a list of people who left offices in his region over the previous two or three years.

    “We go through the list with our human resources managers and partners in various offices to identify those we might be interested in having return,” DeMartin says. Anyone working for a client is ruled out, but the others are assigned to someone at the manager level or above who knew them. “We have found it is better to get someone who knew the former employee to call them. It’s more successful,” he says.

    Boomerang hires have worked out so well for the firm that raising their numbers has become a Deloitte recruiting goal. Palvisak, the regional coordinator, says those coming back require less training. And there’s another bonus: “Our numbers show they also stay with the company longer when they come back the second time, because now they know what else is out there,” she says. Rehires just in the Southeast region account for 10 percent of all hires. Of the past year’s 350 experienced hires–those who were not brought in through college recruitment efforts–about 30 were ex-employees.

    In 2003, Deloitte conducted a study to determine the cost savings associated with hiring ex-employees. At that point, 140 had been rehired nationwide, the vast majority coming through alumni relations and not search firms. “It came out to saving about $3.8 million in search fees,” DeMartin says.

    BearingPoint, the global management consulting firm that was formerly KPMG, launched its alumni network in October 2002, on the same day the company rebranded itself. By the end of that first month, 1,453 alumni had registered on the site. Sarah Martin, vice president of global corporate communications and one of two people who coordinate the alumni network, says nearly everyone who leaves is invited to join, even if the person was asked to leave because of a performance issue.

    “Sometimes someone doesn’t fit in with where they were assigned at that time in their career,” Martin says. “And we may be able to find a job for them in the future that’s a better fit.”

    BearingPoint alumni are offered many of the same benefits as employees, such as discounts on home loans through IndyMac Bank and Bank of America, education savings programs and even discounted Apple products.

    Network members are also kept abreast of the firm’s events and financial news. “We want them in the marketplace buzzing about our performance,” Martin says. “When we announced our new CEO (Harry L. You) in March, we made sure he reached out to the alumni network, because it’s not only a recruitment channel, it’s a communication channel.” It’s also a business development channel.

    In November, BearingPoint opened the alumni network to current employees. “There is tremendous value in allowing alumni access to both former employees and current employees,” Martin says. At consulting firms like Deloitte and BearingPoint, top employees often leave to work for clients or would-be clients, making contact with them not only important for recruitment, but for new business as well.

    If a BearingPoint alumnus has a business problem, he can reach out to former colleagues for advice or help and potentially become a client. Martin says the cost of creating and maintaining the Web site compared with what the company gains in new business leads and new hires is so small that “it’s not even worth discussing.”

    As for current employees who use the alumni network to find jobs with BearingPoint clients, the firm’s position is that its people are smart–if they want to find another job, they will do it with or without the network.

    “If we can place a BearingPoint employee with a client, that’s more leverage for our company. We facilitated them getting there and will have the goodwill that comes from that,” Martin says.

    The alumni network’s Web portal includes a job site where alumni (and current employees) can create a personal profile and post a resume. This year 100 candidates were hired from the alumni site, and alumni have referred a total of 153 candidates to BearingPoint recruiters. Sourcing someone cold, says Martin, costs the firm several thousand dollars; sourcing from the alumni network costs next to nothing. “And they have already been trained, so we reap the benefit of that; it enables them to hit the ground running and they are generating revenue sooner.”

    Management consulting firm Accenture also uses its alumni network for hiring and business development, but also to keep retired employees connected to the company. About 5 percent of those who retire come back as employees, and many more are hired as contractors, says Jill Smart, managing director of human resources.

    Although most corporate alumni networks and outreach programs exist at professional services firms–management consulting, investment banking, law, public relations–it is spreading into sectors where competition for talent is fierce. Allan Schweyer, executive director of the Human Capital Institute in Washington, D.C., which conducts research and holds events focused on talent management, says he has had recent discussions about alumni networks with those in the federal government and in health care.

    It’s also spreading within the technology industry. The Microsoft Alumni Network (MSA), established in 1995, hired Kathi Jones two years ago to help it expand. This year it has more than 6,000 members, up from 1,800 when Jones began work. She has overseen the launch of its first international section. Her goal at the end of the fiscal year, June 30, 2006, is 8,000 members.

    MSA charges a fee because it operates independently of Microsoft, although it is closely aligned with the company. U.S. alumni pay an annual $130 fee, while international members pay $80. Both have access to other Microsoft alumni, network-related special events, cultural performances and lectures and the Microsoft Company Store. They can partake of specially priced health, dental and life insurance and peruse the job directory, where recruiters post jobs but have no access to resumes. A special section on the alumni Web site is open to those seeking positions within Microsoft, and gives ex-employees access to a special group of Microsoft recruiters.

    “Alumni submit their resume to this specific group of recruiters, who will work with them,” Jones explains. “It’s not like being moved to the front of the line; it’s more like being in first class, rather than coach.”

    About 5 percent of Microsoft’s hires last year were rehires, Jones says. For the fiscal year that began July 1, 2005, rehires already account for 5 percent of all hires. But no matter whether they come back or not, Jones says corporate alumni represent an opportunity.

    “These are people that helped shape your company, and no matter where they go they are an important resource. When someone walks out the door, a unique collection of information walks out too,” Jones says. “And that’s something companies don’t want to lose.”

Companies that specialize in exit interviewing ask a plethora of questions, some as general as “Why did you leave?” and others as specific as “Can you give us names of those you believe are involved in criminal behavior?”

    The trick to effective questioning is to focus on areas where you feel you can improve the organization, says Scott Erker, a senior vice president in DDI’s Selection Solutions group. “Don’t ask questions if you aren’t going to use the information,” says Erker. “We see a lot of companies going through the motions of just asking the usual questions, rather than being strategic about it.”

    David Scarborough, chief scientist at HR consulting firm Unicru in Portland, Oregon, advises clients to interview the manager as well as the departing employee. “We ask managers ‘What was the impact of this person’s departure on your department?’ We are looking for patterns that relate to job performance, so that they can hire better qualified and better suited candidates,” he says.

    Here are some typical interview questions being included on exit surveys, according to several vendors (depending on the answers, most surveys include follow-up questions that hone in on specifics):

• Did you find your new job or did it find you?

  
  

• Were you satisfied with your compensation and benefits?

  
  

• How did you feel about your supervisor?

  
  

• How did you feel about the working relationships you had with members of your team?

  
  

• Did you work give you a sense of accomplishment?

  
  

• Are there things we could have done to make your job more fulfilling?

  
  

• Did you feel you had opportunities to expand your knowledge and learning?

  
  

• What are some things you would address that are problems in the workplace?

  
  

• What competencies do you feel were required to do your job and did you have them?

  
  

• What did you like about your job? What did you dislike about your job?

  
  

• If there were an opportunity to return, would you do that?

  
  

The HR metric of the moment may be employee engagement, but many companies have also placed a new emphasis on employee disengagement by reinventing the exit interview and acknowledging there’s much to be learned from a departing employee. The development and implementation of these surveys is increasingly being outsourced, and the data compared with other workforce surveys.

    Vendors that provide these services say demand is rising because outsourced exit interviews are often more comprehensive and strategic than internally devised surveys, which can be incomplete or haphazard. Beth Carvin is CEO of Nobscot, a Web-based software provider whose products include WebExit, which was introduced in 2001. She has seen growth in both the number of her business’s clients as well as her revenue of between 20 to 50 percent a year since then. “Exit interviews are the one process that companies haven’t really figured out how to do well,” says Carvin.

    Like Carvin, Diane Irvin has seen demand for her firm’s exit interview services grow rapidly in the last few years. Irvin, senior vice president for the HR research and consulting firm Strategic Programs, says the Denver-based company has been growing more than 70 percent a year for the past three years, largely due to its exit interview work. “Right now it’s trendy to do employee engagement surveys, but to engage employees you have to understand them. Comparing your exit data to your engagement data helps you do that.” Irvin and others in the exit interview business find employees are both more likely to participate and to be more honest when someone unconnected to their employer asks the questions.

    Nobscot, Strategic Programs and most other vendors provide clients with detailed reports that correlate responses from departing employees and analyze data, breaking it down by age, seniority, gender and other demographics. The number of questions ranges from about 35 to 70. For larger organizations, the questions are generally quantitative rather than qualitative, although most surveys contain a section for open-ended comment.

    Since January, Black & Veatch has been comparing data from its newly designed exit interviews with its workforce engagement surveys in order to accurately gauge how employees feel about their jobs. The engineering consulting firm hopes the information gleaned from its surveys will help senior management find ways to increase employee productivity and, ultimately, profits. The company may discover, for example, that supervisors need a specific kind of training or development to better manage their teams.

    Michael Harris, a professor of human resources at the University of Missouri-St. Louis’ College of Business, says that’s a smart move. “Think of your employee as your customer,” he says. “Most companies want to measure customer satisfaction, but it’s important to also find out why your customers are leaving.”

    Black & Veatch changed its old set of exit interview questions–which B.J. Holdnak, vice president of organization effectiveness describes as “kind of hit or miss”–to a standardized survey that identifies high performers and categorizes the reasons they leave. Black & Veatch’s exit survey also tracks demographics. “Are younger people leaving us more often than those with a longer tenure? If so, why? Is it compensation? Their team? The environment? The culture? We are looking for patterns,” says Holdnak.

    Some of the same questions asked in Black & Veatch’s exit interviews are also asked in their engagement survey, so that the responses of those currently in the workforce can be compared to those who are leaving.

    Richard Wellins, a senior vice president at human resources consulting firm DDI, says asking exit interview questions before people actually exit–in engagement surveys–can help a company prevent people from leaving. “The idea is that the questions you ask for a current employee are very similar to what you ask a person who is leaving. For example, on an engagement survey you might ask, ‘Do you feel you have opportunities to expand your knowledge and learning? Are we meeting your needs for learning and growth?’ and on the exit survey it’s the same questions, only past tense,” says Wellins.

    Richard Harding, director of research at Kenexa, says this kind of comparison across surveys is relatively new for businesses. “You’re looking not just at why people are leaving, but why they are staying,” says Harding. “Then you give your managers actions they can take to keep their people. Just doing exit interviews after someone leaves is like shutting the door after the horse has left the barn.”

Expansion plans
    Black & Veatch has an aggressive expansion plan in place, a response to dramatic growth in worldwide energy and water markets that began about three years ago. Its work is concentrated in those industries, says Holdnak, and the firm wants to capitalize on the opportunity for growth by hiring people that are a good fit and will stay put.

    “We are going to have to increase the number of people we hire and retention is also going to be an issue. If [energy and water] markets are better, people are more likely to jump ship,” says Holdnak.

    Black & Veatch hasn’t been collecting data long enough to know how it will use the information to make changes, but as the firm grows, a big concern is fostering a globally inclusive corporate culture.

    Between 30 and 35 percent of Black & Veatch’s 7,000 employees work outside of the U.S. “Having policies and processes that resonate with employees in different countries across a variety of cultures is a challenge for us and we’re hoping the data we get from these surveys will help us achieve that,” says Holdnak.

Increasing participation
    Sutter Health, a healthcare network based in Sacramento that serves northern California and Hawaii, overhauled its exit interview process when it developed a nursing retention and recruitment plan four years ago. The data is being used to help stem the turnover of newly hired nurses, which is very high compared to Sutter’s general nursing population, says Diane Lahola, director of workforce planning and retention at the company. Turnover of new nursing school graduates is high throughout the healthcare industry, says Lahola, and Sutter wants to find out “what it will take to create a more satisfactory work environment for nurses, because the cost of turnover is very high and they are difficult to recruit.”

    Sutter’s affiliates–the members of its network–have been allowed to either internally redesign their exit interviews or contract with third-party vendor Strategic Programs. “It made sense to use a third party because you tend to get better participation rates and more [candid] data,” says Lahola. The first year, between 40 and 50 percent of affiliates outsourced exit interviews; this past year 75 percent did. Lahola says for affiliates who conduct the interviews themselves, participation among departing employees is between 0 and 12 percent. With a third party, average participation is about 70 percent.

    The new exit surveys give Lahola more accurate information than she had previously. “A lot of times someone will say they are leaving because they are getting more money across town, when the real reason is that you can’t pay them enough to work for their manager,” says Lahola.

    In an effort to get at the true reasons employees leave, Lahola compares exit data to the data she gets on annual employee opinion surveys. She was surprised to learn this fall, after the most recent opinion survey, that the orientation and assimilation period was a sore spot for new nurses. It wasn’t the structure of the orientation program itself. It was other things, such as current employees not being prepared for a new employee’s first day on the job. “Although it wasn’t happening at all our affiliates, I didn’t realize the degree to which this was a problem,” says Lahola. “New nurses and other employees would show up for their first day and staff may not have been prepared to orient and assimilate them.”

    Also surprising was the issue of competitive pay. Employees currently with the organization are actually less satisfied with their pay than those who leave. “That tells me people aren’t leaving because of money,” she says. “And I can drill down by affiliates to see where the problem is most acute.”

    Sutter Health’s affiliates are just starting to make changes based on the exit data. New nurses are now surveyed about their work experience at the 30, 60 and 90-day mark and several affiliates have begun mentor or buddy programs. Another reason nurses were leaving, says Lahola, was a perceived lack of career opportunities, despite the fact that Sutter offers a variety of programs that allow employees to move from one affiliate to another or attend management and leadership programs. “We need to connect the dots better to show employees these opportunities exist,” says Lahola. “Now we focus on that in all of our communications.”

Hiring alumnae
    Jeppesen, an Englewood, Colorado company that provides aviation data such as maps and flight plans, redesigned its exit interviews in 2000 with the help of an outside vendor. Information from the exit surveys spurred the company to offer more training for managers and change the way management jobs are posted. “There was a perception here that people got jobs through who they knew rather than what they knew,” says Alice DiFraia, the company’s director of human resources and organizational development.

    The changes had a profound effect: by 2003, turnover was down to six percent, which was DiFraia’s goal, and the company stopped performing exit interviews. This year, however, turnover began rising again–it’s 12 percent now–and the company has reinstituted the interviews.

    Data from exit interviews is also used in less obvious ways. United Risk Partners, for example, a firm that doesbackground checks, is finding that about 40 percent of companies also use it to conduct exit interviews. Craig Lawrence and Marco Confuorto, partners in the suburban Chicago firm, are both trained investigators and use the interviews to gain information about a company that management can’t find on its own. “From a risk management standpoint, you can find out things about sexual harassment, drug and alcohol abuse, intimate relationships and criminal activity,” says Lawrence. “To investigate a criminal allegation you would have to hire an investigator to go under cover for a 90- or 120-day investigation. Exit interviews are a way to obtain inside intelligence about operations without having to make those significant investments.”

    Boomeranging–getting highly valued employees who leave voluntarily to return–can also be facilitated via exit interviews. Exit questions for those employees focus on what it would take to get them to stay. Beth Carvin of Nobscot recalls an insurance company client that was able to do just that. “They called an employee who had left to say, ‘All the great things you liked about working here are still here, and the things you didn’t like? They are gone.’ They hired this guy back within two weeks,” she says.

    Richard Harding of Kenexa says because employees sometimes find the grass isn’t necessarily greener at another company, doing exit interviews a few weeks or even months after valued employees leave can help a company find out what it will take to bring them back. Harding says Kenexa asks departing employees if they’d consider returning to the company, and under what conditions. About two-thirds say they would consider returning if the circumstances changed. Often, employees don’t say they want more money–they just don’t want to work for the same manger.

Academics have long struggled to come up with a satisfactory explanation as to why some recruiting practices work better than others, but Cornell’s Christopher Collins has his own theory.

    Collins’ gut instinct years ago when he began studying the recruitment of people early on in their careers was that job seekers made decisions based on preconceived notions about a company they had from being a customer and from consumer advertising campaigns. His recent research into college recruitment bears that out. (Two other academics, Dan Cable at the University of North Carolina, Chapel Hill, and Daniel Turban at the University of Missouri, are currently conducting similar research.)

    “Students aren’t really blank slates,” says Collins, an assistant professor in the school of industrial and labor relations and a former staffing consultant. “If they have ever used a Dell computer, bought Nike shoes or used a Sony MP3 player, they already know something about those companies, and to some degree it has influenced how they feel about working for that company. If they’ve seen ads for Intel or a consulting company or an investment firm on television, they have started to form an idea about what it would be like to work there. And that idea isn’t always accurate.”

    Part of the problem, Collins says, is that students go straight through college, sometimes through to their master’s degree, without actually working in their field. “They don’t have enough work experience to really know what work is and they develop these highly idealistic notions of what it’s like to work at a particular company.”

    Collins cites Intel an example. He says that Intel over the years has had creative, hip television advertisements, and because of that has also had a relatively easy time attracting talent. “People perceive it as a fun, exciting place to work, but if you work in fabrication, in a clean room, it can be very boring and monotonous work. And misperceptions like that can cause high turnover. Sure, you want to attract a lot of people. But you also want to attract the right sort of person with the right expectations,” he says.

    Collins talks about his recent research and gives advice to companies trying to get the attention of job candidates.

    Workforce Management: You examined the campus recruitment marketing tactics of big and small companies. What worked best to influence students?

    Collins: We surveyed students at three different engineering schools on the East Coast, because engineering is a very high-demand labor market, to find out the extent to which they had been exposed to five companies. We first asked about general beliefs, positive or negative feelings the student had about the company and what that they thought the company would be like as an employer.

    Then we looked at general publicity: How much publicity is there on a college campus about various companies recruiting there? We also looked at buzz marketing tactics–the relationship companies build with faculty and career services that provide good word-of-mouth. The hope is that faculty will use your company as a positive business example in class, and that career services will talk about the company as a good one to work for.

    We found that the most effective method was the social networking, the word-of-mouth. If you see a brochure in the college office you know it’s biased; if you read something in the newspaper, you don’t know if it’s true. But if your professor says this is a good company to work for, that carries an awful lot of weight.

    Most companies don’t spend a lot of time building those relationships. It requires a commitment of some resources, taking people out for lunch and dinner, spending time on campus, meeting with faculty in their offices. But it’s better than just showing up at a recruitment fair; faculty members and career services counselors are a direct link to students.

    One surprising thing we found was that sponsorship activities–like sponsoring tailgate parties at football games or concerts on campus–didn’t seem to have a very positive effect on a student’s feelings about the company. At the time of this particular study, in 2002, it was considered a novel way to get a student’s attention and use it for recruitment, but it wasn’t effective. What we found worked best was companies using more than one strategy. Combining different approaches, one might be ads on campus or postings in career centers, even the sponsorship stuff, as long as you do networking too. The more approaches, the more positive the student’s impression.

    WM: Your most recent study looks at how a company’s consumer advertising affects college students’ beliefs about what that company would be like as an employer. On what do students base their decisions to apply for a job?

    Collins: Students see companies with strong corporate brands or reputations as more attractive; students believe the jobs and the company are better. And this is where we see that students know things about the company based on information other than recruitment information.

    In one study I did with a faculty member at the University of Maryland, we showed students the names of companies, and if they didn’t know anything about the company or had never been exposed to it they assumed the worst about it–unless there was something about their name or industry that seemed intriguing. Software companies, for example, they tended to have positive feelings about, because they thought a software company would be cool to work for. It was that simple.

    My personal belief is that a good percentage of students don’t follow up to see if their assumptions are true. That’s why we see a remarkable number of companies with high turnover in that first year after hire.

    WM: How would you advise a well-known company like Apple or Intel–companies with very specific images in the marketplace–to handle recruitment?

    Collins: The first thing Apple should do is figure out who their target markets are, because they have multiple groups to go after. Marketing, research and development–those are probably the more exciting jobs. But they are also going after highly trained people for manufacturing and quality improvement, less exciting and less dynamic jobs.

    We found the quality of the applicant went up when well-known companies provided detailed information about requirements, responsibilities and necessary attributes for a job. You have to understand what your different markets are looking for in a job and what they think of Apple. Let’s say you find out that R&D job seekers like working independently and your R&D employees have that autonomy and really like it. You use that in your R&D recruitment pitch, but it might not be important in quality engineers, so you don’t use it for them. For quality engineers, it might be they want new line manufacturing technology or job stability.

    The idea is to give a realistic view of what it’s like to work at this company, because you don’t want to hire people that, three months later, want to leave. People who say, “If I had just known X, I wouldn’t have taken the job.” Nike could be another example. Nike could put out information on campus about actual jobs at the company and what the real work environment is–for instance, information about a day in the life of a marketing person–so that when the company goes to interview on campus, 17 of the 20 interviewees (won’t be) guys who just want to play sports all day.

    WM: What about a startup with virtually no name recognition?

    Collins: We found that if you are unknown, you will be more successful if you use what’s known as low-involvement tactics. These are posters on campus or full-page ads in the student newspaper that contain general positive images of the company but don’t have any real information. Just the company’s brand name and photos of students or young employees having fun at work. For companies with no real strength of name based on advertising and reputation, these low-involvement strategies have a really positive effect on students. The companies that did this on campus got significantly more candidates, although they didn’t get a huge bump in quality of candidates.

    If your company has a low budget, volunteer to teach a class at the business school or help develop a case (study) around your company as a way to expose the company to students. Sponsor a club or sponsor a competition, like a marketing or advertising competition. You provide the idea, the judges and some sort of prize, maybe $500. You can get an enormous amount of positive exposure that way. Marketing the company this way might cost anywhere from nothing to $1,000.

    I remember a small company who came here to Cornell two years ago during a recruitment fair and had three people on their interview schedule for two or three internship openings. It was their first time on campus and no one had heard of them (even after the fair).

    WM: Did they do anything as a result of the poor turnout? Anything to make students aware of them?

    Collins: Yes. That spring they had no luck, but the following fall they sponsored three research fellowships, giving each student a $5,000 stipend for the year. The students wrote a paper and presented it. The company also got involved in classroom activities, did a guest lecture in a large lecture class and a lecture at an undergraduate-student SHRM club. Those things led to a huge change in the company’s visibility on campus: The next year it had 17 people on its interview schedule.

Today, only a minority of companies nationwide are able to make investment decisions about staffing and recruitment based on hard data, rather than anecdotal evidence.

    Those that keep track of their hires and measure the success of recruitment channels have slashed budgets and saved valuable time. Here is a look at some of these forward thinkers, starting with Valero Energy Corp.

    Two years ago, the San Antonio-based company hired Dan Hilbert as employment manager to transform a staffing group for a company with a couple of hundred people into a human resources department for a Fortune 25 company.

    Valero had acquired Ultramar Diamond Shamrock Corp., making it one of the top three U.S. refiners of petroleum products, a $55 billion company with 15 refineries and 4,700 stores. Hilbert believes strongly that what you can’t measure, you can’t improve.

    A year ago, the company began using HR Smart’s Smart Reporter product, which allows it to keep track of the effectiveness of recruitment advertising and gives Hilbert a weekly snapshot of which sources produce the most hires. His metrics show how well each advertising channel is delivering.

    Valero then created a tool that integrates employment data pulled from the company’s HR information system, budgetary data and performance data from employee reviews and uses it to predict which channels will be most effective at filling a position and producing a quality employee. “It has been a monstrous undertaking,” Hilbert says.

    Hilbert has saved the company money. February’s data, for example, showed that of the 30 recruitment channels Valero uses, it got better candidates by advertising on niche industry sites than on major job boards or through other channels. Hilbert said the average cost-to-hire for candidates from niche boards is about $1,100; from major job boards it’s about $1,600; and outside recruiters cost the company nearly $22,000 per hire. “We’ve reduced our cost-to-hire 60 percent over the last two years and rely on outside recruiters now for less than 10 percent of our hires,” he says.

    With results like that, tracking and measuring exactly where new hires come from would seem to be a no-brainer. It’s not.Nick Burkholder, founder of Staffing.org, an organization that helps members use human capital measurements to make hiring decisions, says one reason more companies aren’t measuring recruiting performance is that workforce management executives are obsessed with strategies rather than numbers. “Real leaders are obsessed with objectives, not strategy. You can’t measure strategy,” Burkholder says. “The No. 1 reason HR execs lose their jobs is because they can’t document what they do for the organization.”

    Mark Mehler and Gerry Crispin, co-founders of CareerXroads, a recruiting consulting firm in Kendall Park, New Jersey, released the results of their annual Sources of Hire survey in March. Of the 150-plus Fortune 500 companies contacted, only 40 were able to participate, a sign that many don’t track source of hire. “If you are hiring thousands and tens of thousands of people, that’s a lot of data to manage,” Mehler says. “A recruiter is trying to source candidates, set up interviews. They have 50 jobs on their plates, and then you’re asking them to do more administrative work? It’s not high on their list of priorities.”

Convincing engineers
    Drew Farren, staffing manager for North America, the Middle East, Europe and Africa at Corning Inc. in Corning, New York, says the company has been tracking hiring data since 1999. Corning is ahead of the curve, Farren says, because numbers are at the heart of the engineering company’s culture. “Everyone we have to convince when we want to make changes are engineers, and we need numbers to convince them,” he says.

    Although Corning outsources all its recruiting to outside vendors, Farren says the company decides how recruiters spend their money and gives them specific objectives in terms of hires needed, when they’re needed and what qualifications are required.

    Farren gets monthly reports from Corning’s recruiting partner (an outside vendor that Farren declined to disclose) showing the number of applicants versus hires from each source, including all major and niche job boards. That data allows Farren to dictate to recruiters what percentage of their budget is spent on each sourcing channel. Thirty percent of Corning’s open positions are filled internally, and 40 percent come from employee referrals.

    “We would probably spend 50 percent more on recruiting if we didn’t track this information and look at it,” Farren says. “We would be throwing money away on the wrong sources. Especially with online job boards, they can’t tell you the true ROI numbers. They tell you they have X amount of resumes for a position you’ve posted, but do those resumes match your industry?”

    Based on its hiring data, Corning has decreased its visibility at career fairs and spends more now on networking for employee referrals and lists of people that either could be candidates or who may know others that would make suitable candidates for jobs at Corning. Two years ago, it spent no money on such lists.

Getting better rates
    Plantronics, a leading manufacturer of lightweight communication headsets, uses metrics to back up every decision made, says Layne Buckley. The human resources manager at the Santa Cruz, California, company uses tools from Hire.com to track applicants and hires. Buckley looks at the results at least monthly, usually more often. The cost to track hires is minimal, he says, because the technology to do it exists in the automated services the company gets from Hire.com anyway.

    Buckley also uses the data to gauge the effectiveness of a direct-mail campaign he conducts every month, where a targeted marketing mailer is e-mailed to a specific group of potential candidates. Buckley determines who gets the mailer–sent to 10,000-35,000 people a month—by mining his database for those who have not been hired but who have a particular skill set. “We keep track of how many open the e-mail, click through to apply for positions and how many get hired,” he says.

    Plantronics uses tracking data from job boards to improve the terms of its contracts. “One major job board we were using went from constituting about 40 percent of our applicant traffic to less than 5 percent, and we were able to show (the job board) we weren’t as heavily dependant on them as we once were,” Buckley says. “We wound up securing greater services from them without increasing our investment.”

Most productive, most effective
    Federated Department Stores–owner of Macy’s, Bloomingdale’s and, after a February merger with May Department Stores Co., 15 other brands–has been tracking its hires since 2001 using WetFeet Recruiter, which supports all of the company’s online recruiting efforts.

    Federated’s No 1. priority is its own recruitment Web sites, such as Bloomingdalesjobs.com and Macysjobs.com, because of the tremendous overlap between job seeker and consumer. Susan Burns, director of employment initiatives at Federated, says her data shows that both employee referrals and company sites are key sources of good hires. “Not only are our own corporate recruiting sites the most productive–in terms of hires and conversion rate from applicant to hire–but they are the most cost-effective,” she says.

    Burns looks at how successful a source is in driving traffic that results in a completed application and a hire. Last year, Federated noticed that a major job board had changed its list of affiliated job sites–the smaller sites to which larger ones like Monster sometimes funnel jobs. “For us it was a pretty significant thing, very positive. And based on our hiring data, we made a decision to aggressively reallocate funds,” Burns says. “A year later we looked at the numbers and saw it was the right move.”

    Sarah George, senior vice president and director of recruiting business, strategy and operations atWachovia, used hiring information to change the company’s Internet recruiting strategy. Three years ago, Wachovia decided to look more closely at its data and found that although Internet job boards were the cheapest way to get hires, the volume of applicants was overwhelming. “It was costing us money to deal with it,” she says. “You get a lot of spam. Abundance is what the Internet is good at, but in this labor market we don’t need abundance, we need quality,” George says.

    Peter Weddle, who publishes an annual guide to employment Web sites, says volume is a problem for many companies. He estimates that there are about 40,000 commercial job sites on the Internet at any one time. “That’s a good reason to use niche sites–at least everyone is an engineer or a software designer. We are in the third generation of job postings online, and we need to be more savvy buyers than we were as early adopters,” he says.

    Wachovia’s George used sources-of-hire tracking data to see where the company’s investment in Internet advertising was paying off. “We began looking at sites in terms of quality of hire, rather than number of hires,” she says. Her analysis led to more limited posting of jobs through job boards and for shorter periods of time.

    Technology from Kenexa, a human capital management company in Wayne, Pennsylvania, allows George to track her hires at minimal cost, following them from application through employment and also giving information about where potential hires drop out of the process. Her goal is to get more qualified candidates faster. Today Wachovia’s recruiters deal with hundreds of candidates as they try to fill open positions; George says that a year from now she hopes each recruiter will have 10 well-qualified people in the palm of their hand.

The economy was just beginning to sour in 2000 when Synygy Inc. saw the writing on the wall. The suburban Philadelphia company was used to explosive growth–80 percent on average annually since its founding in 1991. But Synygy’s clients were cutting back, and management realized it had better prepare for slower growth.

    Sure enough, demand for Synygy’s performance-management software and services dropped off, and growth slowed to 50 percent, then 30 percent. Ed Steinberg, vice president of human resources for the company, says the solution was pretty straightforward: either increase revenue or decrease expenses. The company decided to ask its employees for help in cutting expenses.

    “There is a good way to cut costs and a not-so-good way,” says Steinberg. “The benefit that comes with listening to their ideas is that the process becomes a partnership. They could see the situation. We were sharing all our information with them.”

    Synygy, like many other companies negatively affected by the economy, knows that to thrive and grow in the good times, it must preserve its human capital in the bad times. If cost-cutting and containment is handled in a way that doesn’t disenfranchise employees, doesn’t leave them feeling unappreciated and resentful, it can be used to help with retention and recruiting in the upturn. Goodwill and loyalty aren’t easy to quantify, but their existence in a workforce can change an employer’s image in the eyes of both employees and customers from cold-hearted to compassionate.

    Michael Harris is a professor of management in the college of business administration at the University of Missouri-St. Louis. He says being candid with employees the way Synygy has is vital to a company’s success because when the promised upturn arrives, the last thing managers want is to see embittered employees jumping ship or to have trouble recruiting new talent.

    “Public relations and communication internally is more important now than it ever was,” Harris says. “The tendency for managers in tough times is to hide information, but now I see them communicating with employees instead.”

    Fred Crandall is co-author of The Headcount Solution: How to Cut Compensation Costs and Keep Your Best People. “During this downturn,” he says, “the best companies took a look at their future focus. They didn’t just lay people off, but asked, ‘How can we get through this and keep the people we need to build the company in the future?’ ”

   Studies conducted in 2001 and 2002 by WorldatWork show that U.S. companies are increasingly looking to cut or contain costs in ways other than layoffs. In the 2002 survey, 58 percent of respondents had reduced or suspended annual pay increases or were considering doing so; 46 percent were considering reducing or suspending bonuses or incentive pay or had already done so. Other cost-cutting measures included voluntary severance and early-retirement packages. In the 2002 survey, the use of alternatives to layoffs, such as hiring freezes, job sharing and contracting arrangements, had increased from the 2001 survey.

Tapes worth thousands
    Layoffs weren’t necessary at Synygy, which launched its cost-savings idea competition at a quarterly company meeting and then reinforced it through the intranet. Steinberg says that Synygy’s employees, who tend to be entrepreneurial anyway, were energized by the opportunity, and that the response was “outstanding.” Management got about 200 suggestions, and the person whose idea had the biggest financial impact received a cash reward of $500. Steinberg also tied the submission of ideas into the company’s existing rewards program, normally used for employee referrals. Employees earned points for their ideas, which could then be used to purchase items in the Synygy store.

    Other than having to increase inventory in the store, the program cost virtually nothing, except for the time expended by employees to think of ideas. The winning idea suggested that Synygy recycle the tapes it uses to store information. Each day the company backs up its server and stores the information on tapes, thousands of them, which are kept for years. Now it saves only three months’ worth of backup and reuses the rest of the tapes. “It saved us literally thousands of dollars,” says Steinberg. Another suggestion the company implemented was to combine multiple daily FedExes to other office locations into a once-daily or once-weekly mailing. That saved hundreds of dollars, he says.

    Although annual growth at Synygy is at 25 to 30 percent, down significantly from what it was three years ago, it’s still impressive. And employees, who know they had a hand in keeping a lid on things, have said in anonymous quarterly surveys that they are pleased to be part of the process.

Six months of pain
    The downturn also took its toll on Healthwise, a Boise, Idaho-based nonprofit organization that publishes consumer health information. The company’s 110 employees are motivated by a common mission: helping people care for themselves and their families. The atmosphere at Healthwise is collegial and relaxed; every office has a window, and the culture is one of openness. So when the company realized it would have to lay off about 10 percent of its workforce after the triple terrorist attacks on the United States, it was honest with its employees. “Still, our employee-satisfaction survey results immediately following the layoffs took a big hit,” says Donald Kemper, chairman and CEO.

    The day after layoffs were announced, Kemper held a staff meeting and told employees that pay cuts would also be needed. Hourlies received no pay cut; exempt employees took a 5 to 10 percent cut and executives a 10 to 20 percent cut. The salary reductions saved the company about $250,000 and the layoffs another $537,000 per year, about 7.5 percent of total revenue.

    After six months, it was clear that Healthwise had fared far better than expected, and Kemper pushed to have employees’ pay restored to pre-reduction levels. It also paid back the money it had held back during those six months. “It was a tough sell to the board,” he says, “but I really felt it was the right thing to do. It was immensely well received, and brought us an enormous amount of goodwill and loyalty. I think it has created a sense of trust that we will do the right thing by employees, and that is how we want to be known.”

$50,000 well spent
    Rising health-care costs was the major problem for Flight Options, which sells aircraft on a fractional basis, giving companies access to a fleet of jets on four hours’ notice. In the midst of the downturn in 2002, the Cleveland company merged with a division of Raytheon Travel Air. This made Flight Options the second-largest fractional jet provider in the industry and doubled its size overnight.

    After the merger, Raytheon’s employees went from having a health-benefits plan powered by the buying clout of 33,000 employees to one that would have to meet the needs of a company with 1,400 employees. Bob Sullivan, Flight Options’ director of human resources, says the price of benefits was simply better with 33,000 than it was with 1,400, so the company could not afford the package Raytheon had in place. Sullivan was concerned that Raytheon’s employees would become resentful of the changes and that when economic conditions improved, they’d quit.

    Sullivan conducted an anonymous opinion survey, giving employees a hypothetical open checkbook and asking them to design any benefits package they wanted. He learned that they wanted affordable health insurance, as well as dental insurance and additional vacation benefits. The big message, however, was a desire for work/life balance.

    Flight Options began offering flextime for tenured employees, on-site dry cleaning, tuition reimbursement, a preferred new-car purchase rate at Ford, gift certificates for expectant mothers and on-site banking. During peak travel times, when employees routinely work 10-hour days, they receive free gourmet meals, snacks throughout the day and chair massages. Employees loved the perks. “Feedback was phenomenal,” says Sullivan.

    On average, the investment for the new benefits, as well as a monthly picnic to welcome new employees, was about $50,000 annually. “It’s a very small investment compared to our revenue,” says Sullivan, who declined to give specifics but said Flight Options had record sales in 2003. Net sales for Raytheon in the third quarter of 2003 were $4.4 billion, up from $4.1 billion in third-quarter 2002. Third-quarter results include $141 million in sales from Flight Options.

    The company managed to establish a benefits package for far less than it had anticipated–spending $900,000 less than budgeted–and used the difference to significantly reduce the amount each employee has to pay for benefits. That $900,000 could have been put back in the company’s coffers rather than being used to help employees. Flight Options has now rebranded itself as “the preferred employer,” largely because of its benefits. “We want to be the employer of choice in this industry,” says Sullivan. “By rewarding our employees this way, we hope to attract and retain the best people.”

Re-recruiting at Accenture
    Sabbaticals were the elixir for Accenture. In 2001, it faced a decrease in client demand and had more employees than it needed. To keep layoffs minimal, the consulting company created FlexLeave, a voluntary sabbatical program of 6 to 12 months. Employees were paid 20 percent of their salaries and kept all their health benefits, as well as their laptops and e-mail. They were still employees of Accenture, but were able to do whatever they wanted.

    Keith Hicks is Accenture’s director of human resources for the United States. “It wound up being a fantastic thing for Accenture’s business and our people,” he says. “It has had an enormous positive impact on our community and the global community. We had people teaching at schools for underprivileged kids, teaching English to students in China, doing all kinds of volunteer work.”

    Two thousand employees in the United States took advantage of the program, which ran for about 18 months, until the end of 2002. Hicks, who is based in Atlanta, says that even those who didn’t participate in FlexLeave wrote to him and said they were proud of the company for creating it. For those who did take part, the outpouring of loyalty and gratitude toward Accenture was, he says, unbelievable. “The loyalty factor increased exponentially; they couldn’t believe that their employer would give them such an opportunity. I spoke to many who went out on FlexLeave, came back and said they felt re-energized, as if they had been re-recruited.”

    Accenture saved 80 percent of the payroll costs for the 2,000 employees who took the sabbaticals, but did eventually do layoffs. The company wouldn’t provide many details on the layoffs, but it was reported in August 2001 that Accenture had laid off 600 support staff. In 2003, the company, which has 25,000 U.S. employees, created the Accenture At Home program, which gives certain segments of its workforce the option of working from home three or more days a week. It’s just been rolled out in Atlanta, but will soon hit all other U.S. cities where Accenture operates.

    Branding itself as an employer that recognizes the need for work/life balance and gives employees flexibility has helped the company retain the highly skilled talent it relies on–and that isn’t easy to find. “Everyone feared when things started to improve that we’d have a mass exodus, but we’re not seeing that,” says Hicks. “Business is picking up in our industry, but we’re not seeing the exodus, and I think the loyalty we gained is paying off.”

Flexibility “will keep them here”
    Sun Microsystems has frozen raises and hasn’t given bonuses in two years, but it’s banking on a program called iWork to give employees some much-sought-after flexibility. With iWork, employees can access Sun’s server from anywhere using a device called a Sun Ray, a laptop computer that costs about $400 and has no hard drive. Right now, about 65 iWork employees have a Sun Ray at home, part of Sun’s pilot SunRay@Home program, and the company plans to expand that to between 300 and 400 users by the end of March 2004. However, 27,000 of these computers have also been deployed at Sun’s campuses globally, including iWork flex offices, iWork drop-in centers, iWork Cafés and iWork kiosks. Employees use a Java card encoded with their identification information to connect to the company server via the Sun Ray computer.

    iWorkers at home without a Sun Ray can plug into the company remotely via their traditional laptop or a PDA device and access most of their files, although it’s not as secure as using the Java card and Sun Ray. Either way, the office comes to the employee. “It’s about being remote, about being mobile. It’s a cost-containment strategy,” says Ann Bamesberger, director of the iWork Solutions Group. “We don’t have to pay for that 1950s office you aren’t working in anymore because you’re in transit, at meetings with customers or at home.”

    Of Sun’s 35,000 employees, 14,000 take advantage of iWork. Rather than rebranding itself, Sun is enhancing its brand. Flexibility is one thing it offers customers, Bamesberger says, and an important part of doing that is offering iWork to employees.

    “All of us in this industry are facing the same freezes, and people in other companies are biding their time until they can leave,” she says. “We think the benefits of iWork, giving employees the life balance they don’t have in a traditional work environment, will keep them here.” Employee surveys done over the last two years show satisfaction rates at between 75 and 80 percent. Sun’s total cost avoidance in 2003, the money it didn’t spend building traditional offices or investing in real estate, was $65 million. Electricity savings alone–Sun Rays require just 11 watts of power to run, whereas most lightbulbs are between 60 and 100 watts–is over $2 million.

    Those savings are needed. Sun lost $125 million in the second quarter of fiscal year 2004. Net revenue is down $6.8 million from what it was in 2001. Although the company’s stock has rallied since the start of 2004–largely on the strength of its partnership with chip maker Advanced Micro Devices–Sun faces an uphill battle as it tries to grow revenue and reach profitability.

    Linda Crowe, group manager of the enterprise systems product group, is an iWork employee. She’s been at Sun for eight years and has been working remotely for 18 months, which she has found liberating. “I have to say, if I were to be offered a position that required an hour commuting a day, that would be hard to consider,” she says. “I’m used to this flexibility.”

In 1995, Monical Pizza Corp. took a hard look at the future and saw a looming recession and an overbuilt, highly competitive fast-food industry. Management at the Bradley, Illinois, chain knew that, with 37 company-owned stores and 18 franchises, it would need a creative strategy to compete with large, well-financed companies during the coming economic downturn.     It began to reorganize big-time. In 1997, the company instituted a process called the “service-profit chain model,” which links employee satisfaction with profitability and growth. And the firm has been enjoying swift and steady success ever since. Turnover in the restaurant industry is notoriously high. In 2003 it ranged from 45 to 80 percent, with higher rates in fast food and lower rates in pricier establishments, according to the the National Restaurant Association. Monical’s turnover still exceeds those numbers, but it reduced its rate from 138 in 2001 to 88 percent today. There has been no turnover among managers within the past 18 months. Guest-satisfaction scores are an enviable 60 percent, and revenue is up almost $6 million since 1998–from $22.8 million to $28.8 million. For proactively changing its operating model to meet the challenges of a slowing economy and an ultra-competitive industry, Monical is the winner of this year’s Optimas Award for Vision.     The transformation began with an article in the Harvard Business Review, “Putting the Service-Profit Chain to Work.” Monical’s team leader for special projects, Max Brigham, made the electrifying discovery. “It made so much sense to us that we began our initiative centered on employee satisfaction as the primary driver of this chain.” It was a two-year process in which the company reviewed every contact point employees had with both the company and customers. Brigham says that the self-examination resulted in “a near total overhaul” of the company’s structure and mission. “We involved everyone in the process–general managers, assistant managers, field supervisors, people from the office–and asked them how things should be structured and changed. We took almost all their recommendations.” Everything did change: job titles and descriptions, the incentive plan and the company’s mind-set. Management and employees were organized into teams, and hierarchical structure was eliminated. And the company is also working with Harvard Business School as part of an experimental online learning program.     For the fiscal year that ended April 30, 2003, revenue per store was up about $60,000 from 1998; 60 percent of guests gave Monical a 5 (on a scale of 1 to 5) when asked about their experience, jumping from 55.2 percent in the first quarter of 2000. Revenue climbed to $58.5 million since the company instituted the service-profit chain model. Workforce Management, March 2004, p. 52 — Subscribe Now!