Author: Eilene Zimmerman

You just spent six months and thousands of dollars to hire that new senior vice president. Here it is a few months out, and you’d like to know if you got a truly quality person. 

    On the surface, it might seem impossible to assess something as subjective as quality in another human being. But an increasing number of companies are establishing metrics to help them assess both quantitative and qualitative aspects of a new hire’s performance.

12 questions for managers
    Measuring the quality of a new employee isn’t easy, nor is it universal. The 2003 Benchmark Report, a nationwide survey of companies done by Staffing.org and the Human Capital Metrics Consortium, showed a less than 1 percent increase from last year to this year in the number of companies evaluating new hires for quality. Thirty percent do, but the vast majority of companies still put their faith in the front end–a rigorous selection process–to ensure that they get a “quality” employee.

    Gerry Crispin is a principal in the international staffing firm MMC Group. “I think one of the key problems that most corporations face is defining what quality really means,” he says. “Quality is a measure of ‘did I get what I wanted?’ “

    Among those that are assessing quality, the systems in place vary from gut instinct to research-based questionnaires. Experts agree that either the recruiter or the hiring manager must define quality, establishing some kind of standard against which to judge the employee.

    At Health First, an integrated delivery health-care system in Melbourne, Florida, senior vice president of human resources Robert Suttles uses the Q12, a tool from The Gallup Organization that assesses both new managers and established ones. The Q12–which stems from extensive Gallup research conducted during the 1990s–measures what Gallup calls employee engagement, which is correlated with sales growth, productivity, customer loyalty and other business metrics.

    Larry Emond, chief marketing officer for Gallup, says the company did a ton of bad employee surveys in the 1990s, asking about an employee’s overall satisfaction. But, he says, “that question is not good, not predictive of outcomes. Q12 questions differentiate highly productive work groups from others.” More than 500 corporations worldwide now use the tool as a barometer of quality in their workplaces.

    Q12 information tells Robert Suttles of Health First how well a manager is doing in creating the right work environment for her team. Compensation is partially tied to the results of the survey. “The benefits for us are enormous,” he says. “Where we have high scores, turnover is low, the group under that manager is more productive, more profitable, and we have higher customer satisfaction.”

Bristol-Myers’ six-month plans
    Jim Ellinghausen, vice president and head of worldwide human resources for Bristol-Myers Squibb in Princeton, New Jersey, says the company measures quality in its senior people by how well a person has been integrated into the organization.

    First, however, a structured plan is created, with certain deliverables–which Ellinghausen calls “integration goals”–for the first three to six months of that executive’s tenure. For a new head of research and development, for example, goals might include visiting all his major research sites and meeting with key members of the executive committee within six months. About 90 days into the hire, the executive meets with his direct reports and talks to them about who he is and why he joined the company. Then for the next three or four hours–while he is out of the room–that group works with facilitators to develop questions for the executive.

    Typical questions developed at that meeting ask what the executive looks for in his people, how he operates, what his goals for the job are and where he sees the organization going, Ellinghausen says. “It’s a dialogue that helps the organization say to this newly hired executive: ‘Here are things you will need to be aware of to be successful here.’ “

    A year ago, Bristol-Myers also began to judge the quality of new and existing executives by looking at seven core behaviors that tie into the company’s culture and its pledge to “enhance human life.” Six months into their tenure, new managers are assessed on their previously established integration goals as well as these core behaviors.

The metrics of caring
    At Ritz-Carlton Hotel Co., the quality of a new hire is measured in ways more warm and fuzzy. The international hotelier has about 28,000 employees and looks to its customers for guidance. Ongoing surveys ask customers about their experience in emotional terms: Did they feel cared for? Were greetings warm and sincere? Did they feel as if they were a guest in someone’s home? The answers, while appearing subjective, are actually part of “satisfaction scores” that each department in a Ritz-Carlton hotel receives.

    Sue Stephenson, senior vice president of human resources, says the company uses assessments of customer loyalty to determine the quality of new and existing employees. Results come back to human resources on a monthly basis by hotel and department. A housekeeper’s quality, for example, won’t be judged only on the person’s work ethic or ability to be part of a team. “We also look at things like caring,” says Stephenson.

    Results have been “tremendous,” she says. Year-to-date, Ritz-Carlton has achieved “top box”–the top box on the customer survey, indicating the highest satisfaction level–76.3 percent of the time. “That’s up 4 percent from last year,” Stephenson says. “Most hotels don’t get near that result.” Much of that success is attributed to both the after-hire assessments and a rigorous selection process.

    It’s much more common to use rigorous selectivity in hiring than in after-the-fact assessments. Ritz-Carlton has in place a QSP–“Quality Selection Process”–that lays out explicitly what is expected of new hires, so that when they’re assessed, they know on what criteria they will be judged. “Much of our focus is on the selection process, what talents they bring to the table,” says Stephenson. “For instance, you can’t teach someone to smile.”

    Dante Capitano, a managing director in the Philadelphia office of executive coaching firm RHR International, specializes in executive assessment and integration of new executives. His primary work is done when companies are hiring, at which time RHR develops a “profile of success” for a new candidate. The profile includes everything from behavioral characteristics to leadership style crucial to that person’s success.

    Capitano then advises clients to conduct a 360-degree assessment of senior managers at about the six-month mark. He prefers that the survey be qualitative rather than quantitative. “We interview 10 to 12 stakeholders who have an interest in this person’s success and find out how they perceive this person’s effectiveness,” he says. “It’s not scientific. It’s not a lot of metrics… It’s more measuring up against a set of principles.”

Just the beginning
    Companies like Bristol-Myers Squibb and Ritz-Carlton are at the forefront of a trend. The idea that companies should evaluate the quality of new hires is just beginning to gain a foothold in corporate America’s human resources departments. Human-capital guru Jac Fitz-enz, founder of the Saratoga Institute and author of The ROI of Human Capital, says assessing quality isn’t as objective–or prevalent–as it ought to be. Although he acknowledges that plenty of good tools exist, he says companies are reluctant to use them. “It goes against our national culture to assess people in this way, so we don’t want to do it.”

    In an economy with rising unemployment, where people apply for jobs even if they know they won’t be a good fit, assessing quality is increasingly important, says Peter Weddle, a publisher of guides to online job boards. Weddle agrees with Fitz-enz that most assessments are too subjective. “That’s the rub, isn’t it?” he says.

    Measuring the quality of an employee may prove elusive, Weddle says, but you can certainly measure the impact of a quality employee. “In terms of the work completed and how well it’s done, you can measure that. It shows how well that person fits within an organization,” he says. “And that’s what quality is: a measure of how well someone fits.”

The statistics are dizzying. The vast majority of health costs are generated by a very small number of employees. NCR, for example, reports that 10 percent of its employees drive 75 percent of the firm’s health costs, numbers that are typical of many companies.

    To deal with soaring health costs in new ways, the global technology company recently introduced a health-risk assessment, high-tech tools that help companies improve employee health on the basis of answers to voluntary health questionnaires. In the past three years, industry experts say, the number of employers making use of HRAs has been swiftly rising. Thirty years ago, employers assessed the health of their workers by looking at death rates. In the 1980s, they began asking questions about weight, smoking, nutrition and personal safety. Data was collected, but no one offered a way to change what seemed inevitable, given family histories of chronic deadly diseases and other health problems such as asthma attacks or obesity.

    In the mid-1990s, employees began receiving suggestions for improving their health based on HRAs, and new technology has since transformed the assessments to higher levels. Health surveys are now administered online and are usually handled by a third party to preserve privacy. Results are immediate. Employees identified as being predisposed to chronic diseases are given a concrete plan to head them off.

    Last fall during 2003 open enrollment, NCR began offering an HRA tool, CareSteps, which is owned by American Healthways, Inc., in Nashville. The program is administered and customized by Intracorp, a wholly owned subsidiary of Cigna. NCR, located in Dayton, Ohio, has about 11,000 employees in the United States in four major locations, and about 4,000 retirees still using its health-care coverage. Mike Kriner, director of compensation and benefits, says that annual health-care costs are about $72 million for active employees and another $40 million for retirees.

    CareSteps software is “smart software”–the more HRA questions an employee answers, the more specific subsequent questions become. “It’s decision-tree based,” says Lynne Harsha, senior product manager for health facilitation at Intracorp in Philadelphia. “For example, if I’m a 42-year-old female who smokes, I won’t get questions about my prostate. The software accounts for risk factors and current behavior,” Harsha says. “If I’m extremely fair-skinned, have red hair and light eyes, and answer that I wear 50 sunblock, it would ask me if I wear sunglasses.”

    In the past, HRA results included general statements about health such as “you should stop smoking” and ended there. Now, the HRA outlines a plan. For example, Wellsource, a company in Portland, Oregon, that offers clients a suite of tools for health assessment and management, gathers information from HRAs and prepares personal reports that flag individual health risks and suggest a course of action. Similarly, CareSteps makes recommendations for achieving better health that include specific instructions and hyperlinks.

    “If you’re a smoker, it would say that on your behalf, NCR has provided you with access to this smoking-cessation program. It may give a link to a Web site to enroll or a phone number,” Harsha says. Intracorp’s job is to follow up and make sure employees get to the disease-management programs. It uses more than 2,500 nurses for all aspects of medical management.

    Results at NCR after one year haven’t been overwhelming, but Kriner is still pleased. Ten percent of employees completed the HRA and the program, and 23 people were identified as high-risk and referred to disease-management programs. Thirty-one people referred themselves to company fitness centers. NCR declined to reveal the cost-per-employee for the HRA but says company analysis shows a saving of $2 to $3 in the long run for every dollar it spends on HRAs. Although costs are expected to increase initially because of referrals to disease-management programs, Kriner estimates that the company saved $23,000–about $1,000 per high-risk employee–which more than paid for implementation. “If we help someone avoid a middle-of-the-night asthma attack or a diabetes problem, in the long term we’ll have more productive employees and fewer hospital visits,” he says.

    Participation in HRAs is often accompanied by a financial incentive such as a reduction in an employee’s health-care contribution. Last year NCR held a raffle-type drawing for participants, but this year it may make contributions to a flexible spending account to help boost participation. Kriner predicts it will increase to 40 or 50 percent.

    Cynthia Burghard, a research director at Gartner specializing in medical management, says that incentives are the key to large-scale adoption of HRAs. “We still have a huge population that is obese, that smokes and drinks too much. I think you have to build in a financial incentive to get employees to use the HRAs and stay in disease-management programs,” she says. At Coors Brewing Co. in Golden, Colorado, employees receive $100 when they complete the Checkpoint program, which includes an in-person screening and an online health-risk assessment from the Mayo Clinic Custom e-Health Package. For those who complete wellness programs, such as smoking cessation or weight management, incentives are customized. “Employees pay $50 for the smoking-cessation program, but if they are smoke-free 12 weeks after their quit date, we give them back $100,” says Colleen Reilly Perkins, manager of health and productivity at Coors.

    Information from HRAs is usually aggregated and given to management at regular intervals throughout the year. Harsha says it’s rare that anyone in the industry would ever receive information about an individual employee. At Coors, the majority of participants in its Checkpoint program agreed to release information to the wellness staff for use in customizing intervention programs. “But the information would never be released to Coors management,” Reilly Perkins says. Despite these assurances and prevailing HIPAA regulations, privacy concerns are real.

“People are concerned that personal information could be hacked into. That anxiety is heightened because of a tight economy. Even though it’s against the law to lay someone off because of a health condition, that doesn’t mean it doesn’t happen.”

    Burghard says Gartner’s most recent consumer survey, which asked questions about a variety of technology-related issues, showed high anxiety associated with having health-care information on the Web. “People are concerned that personal information could be hacked into,” she says. “That anxiety is heightened because of a tight economy. Even though it’s against the law to lay someone off because of a health condition, that doesn’t mean it doesn’t happen.”

    Beth Givens, director of the Privacy Rights Clearinghouse, a nonprofit consumer-advocacy organization in San Diego, says the issue is a real one. “Here is information about some employees with conditions that are costing the company a lot of money, and here is this compilation of sensitive data,” Givens says. “It creates a temptation for employers to try to access that data.”

    Thus far, Kriner has gotten few negative comments at NCR about the assessment and seen little concern among employees about privacy. Most seem willing to embrace health-improvement strategies and assessments, he says. Stephanie Pronk, senior consultant in the group health-care practice at Watson Wyatt Worldwide, says that acceptance and the increasing prevalence of HRAs are part of a continuing shift in the consumer mind-set toward taking more responsibility for personal health and health care. “Employers have often exhausted their options–such as trying different plan designs–to reduce health-care costs,” Pronk says. “Their employees know this isn’t a silver bullet, but it’s one strategy. There’s not much else left to do.”

Workforce Management, August 2003, pp. 83-84 — Subscribe Now!

If you’re an employee anywhere in Europe, Patrice Barbedette wants to beyour savior. The 31-year-old Frenchman cares about whether or not employees liketheir boss, their dreams for the future, and how they feel about sharing acubicle. He has created a company that aims to put that information–oftenconsidered impossible to quantify–to use.

    Barbedette is the founder of and driving force behind little-known,European-based Jobpartners, one of several companies competing in an arena whereno one can even agree on a name, though “talent relationship management”often wins out. Young entrepreneurs aren’t exactly unusual, but Barbedette ismore than that, a forward thinker who dreamed up a talent relationshipmanagement company when the industry was barely in existence.

    His ideas have earned the financial backing of Cisco, known for itsprogressive workplace-management philosophy. Jobpartners’ software enablesworkforce-management professionals to follow an employee from the time he fillsout an application to the time he leaves the company.

    The technology also allows clients to maintain a “living profile” of anemployee’s skills, experiences, and career aspirations and can match her toappropriate internal job opportunities. Information about employees gleaned fromsurveys, assessments, and appraisals is processed, assessed, and distributed sothat managers have immediate access to it. And the software can also be used todesign a personal development plan for those destined for executive management,keeping track of their movements up the career ladder.

“It seemed obvious”
    People-relationship management–the term favored byBarbedette–occurred tohim six years ago, when he was a 25-year-old software engineer for SAS inGermany, putting together CRM solutions for banks and other businesses withlarge customer bases. “It seemed obvious to me that you could take some of thebest practices in CRM and use them to manage the relationship between anemployee and a company,” says Barbedette, speaking heavily accented English.

    A year later he joined forces with friends Simon Lynch and Gulian Qulkarni.They spent two years reading books on sociology and workplace psychology andinterviewing VPs and directors of human resources throughout Europe. “Welearned that employees see themselves providing skills for a certain period oftime, for certain projects, and then if there’s something more interesting orbetter-paying in another place, they go.”

    In 1998 and 1999, when Barbedette and his partners were laying the groundworkfor their company, human resources was largely transaction-oriented and hadlittle to do with the individual. Barbedette’s idea was to “crossqualitative information with quantitative information to get a global view ofemployees, to know about their skills, motivation, performance, and what theywant to do in the future.”

    Although he was on the cusp of it, Barbedette wasn’t the only one thinkingthis way. Companies that had been offering ASP-based systems automatingworkforce transactions–like Siebel and PeopleSoft–had begun branching out,starting with recruiting modules. Talent-relationship management was a logicalnext step.

    A few years ago, many leading global companies began looking for systems thatcould track applicants beyond the recruiting process, throughout their lifecycle as employees, says Jane Paradiso, national practice leader, workforceplanning, Watson Wyatt Worldwide in Washington, D.C. “Companies like BrassRing,Peopleclick, PeopleCapital, and Jobpartners are doing this now,” she says.Mike Jurs, spokesman for Massachusetts-based BrassRing, says that his companywas first in the TRM space, having launched in 1997. BrassRing now has largeinternational clients such as Sears, Unisys, and GE.

    Michael Hannum, founder and CEO of PeopleCapital, a San Francisco Bay-areabusiness that bills itself as a “human capital management” company, says thecurrent landscape presents tremendous opportunities for talent relationshipmanagement firms because “what was considered strategic 10 years ago istransactional now, and much of it is being outsourced.” Experts say strategicmanagement of people is the only place for human resources to go.

Dusting off appraisals
    Being strategic requires data, and one of Barbedette’s biggest gripes withhuman resources is the way it wastes information. Employee data–if it’scollected at all–isn’t acted on, he says.

    “I wanted to make sure an appraisal is never to be stuck in a desk drawersomewhere getting dusty. What good is the information if you never use it? Myvision–when I thought about the database of information we would have onemployees–was of a ball in a soccer game. The ball can’t stay in one place;it has to keep moving down the field so it produces something in the end,” hesays. “We take input from employees and managers, analyze the information, andgive managers the results so they can take action.”

    The crucial challenges of the market today, says Barbedette, are to keeptrack of strong performers, manage high-potential people, and handle successionplanning. “I think these issues have been addressed by many companies,” hesays, “but not with the right tools. Very often it is done in a handcraftedway, each company doing their own thing, but they lack a consistent, totalsolution.”

Barbedette felt that the best way to address those challenges was to examineaspects of an employee’s relationship with work. “We wanted to find a way tolearn and quantify how employees feel about their work environment, theirmanagers, their opportunities to develop personally and professionally,” hesays.

    To that end, Jobpartners is, like its competitors, trying with its productsto assist in the development of key people–the “golden nuggets” Barbedettecalls them. “We have large clients with business divisions in many countrieswho want their best people to go through all those divisions, at the endbecoming part of executive management. So we help create a plan for personaldevelopment, then manage and organize the process,” says Barbedette.

    Although Jobpartners boasts some big-name clients–like AOL France, Nike,and Xerox–it serves only European businesses. And that’s a challenge,considering the multitude of individual countries, laws, cultures, andlanguages. “Serving the U.S., its 50 states, they aren’t exactly the same,but they all speak the same language, have the same business mind-set,” hesays. “In Europe, for example, the way Czechs do things is different from howwe do things in France–the structure of the market, the salary levels, thestandard of living. We’ve had these constraints from day one.”

You want people to evolve
    Kevin Wheeler, president of Global Learning Resources, a human capital,recruiting, and workforce development consultancy in Fremont, California, saysEuropean companies differ from U.S. companies in that they take a more systemicview of the workplace than we do. “American companies tend to be much morereactionary, more knee-jerk and focused on today,” he says.

    In a down economy, being reactionary is sometimes the best a company can do.After all, the technology designed for use in recruiting and managing talent isof course now being used to decide who is let go. Wheeler says that’s going toturn around, even if the economy stays sluggish. Between 1998 and 2008, 25million people–most of them baby boomers–are expected to leave theworkforce, which means the U.S. faces a looming talent shortage, especiallyamong executives and those with specialized skills.

    Barbedette is keenly aware of this. “You want your best people to evolveand stay with you,” he says. “I think the only way to keep these people isto help them develop professionally.”

    He admits that for the majority of companies, this kind of personalizedmanagement of employees hasn’t arrived yet. “My feeling is that most HRdepartments agree this is important and want to do it, but they haven’t gotthe tools or resources. How can you manage careers with five HR employeesserving an entire company?” he asks. “You can’t.”

John Fox is a senior technical analyst at Sapphire Technologies, an IT placement firm in Woburn, Massachusetts. He’s the man to call when the server is down, the network fails, or the system crashes. He’s also the guy to call if someone at the company is sending harassing e-mails or viewing porn sites.

Fox is Sapphire’s tech-enabled Big Brother. A year and a half ago, the company installed both e-mail and Internet monitoring systems from Elron Software in Burlington, Massachusetts. The e-mail product, Message Inspector, is set up using triggers — certain words, video files, or attachments — that, when detected, forward the message immediately to Fox for review. The Web component of the monitoring system automatically blocks graphically explicit sites, and if an employee tries to go to a blocked site, Fox is notified. Using parameters given to him by human resources, essentially to block hardcore porn and violence sites, Fox can veto the block, which sometimes occurs automatically because a certain word, say “naked,” appears on a Web page too many times.

“If you find that someone who never works after 6 p.m. is suddenly showing up at the office in the middle of the night and going online, that should raise eyebrows.”

The majority — 57 percent — of U.S. companies now monitor their employees’ e-mail and Internet use, according to IDC, a technology research and analysis firm in Framingham, Massachusetts. And the number is expected to rise substantially in the next couple of years. Large companies are more likely to monitor their employees than small ones: at the end of 2001, 70 percent of firms with 1,000 or more employees had implemented electronic monitoring systems. For companies of any size, the decision on whether or not to read an employee’s e-mail and monitor his or her Internet activity is highly emotional and intensely controversial.

Employers say they monitor to increase productivity and to protect themselves from potentially disastrous computer viruses, harassment lawsuits, and leaks of confidential information to competitors.

An IDC survey conducted in the fall of 2001 reports that 48 percent of the employers who monitor employees say that their intention is to protect against viruses and the loss of information; 21 percent as a way to limit legal liability.

Many employees, privacy rights experts, and workers’ rights advocates, however, are angered and offended by the monitoring trend. They argue that privacy is a guaranteed human right — at home and at work. They say workplace monitoring is an unnecessary infringement on that right. A recent Privacy Foundation study found that 14 million U.S. workers are already subject to continuous monitoring while online. The nonprofit Denver-based organization studies communications, technologies, and services that may pose a threat to privacy.

Lewis Maltby, president of The National Workrights Institute Inc., in Princeton, New Jersey, says the most frequent complaint his organization hears from workers is that employers don’t distinguish between personal and workplace communications. “They look at everything,” he says.

George Baroudi is vigorously opposed to the use of electronic monitoring. He is chief technology officer and an Internet security expert at iLabyrinth, a company that develops network security systems headquartered in Hockessin, Delaware. “The Internet is a tool for learning, not a way to invade privacy,” he says. “Just as the United States Postal Service is permitted to deliver your mail but not open it, e-mail is the property of the recipient, not the message carrier.”

Proponents of monitoring challenge that point of view, and insist that they are only looking at e-mails that signal a problem — such as sexual harassment or a predilection for child porn, and are not endorsing personal snoop squads.

For many corporate decision-makers, a potential violation of privacy rights and the possibility of stunting creativity are minor concerns compared to the advantages of monitoring. That’s why the market for monitoring and filtering software is growing by about 36 percent a year, and revenue in the industry is expected to triple in the next three years, according to IDC.

Although companies have different reasons for monitoring, Fox says Sapphire began the practice as a way of preventing potential legal problems. If one employee makes allegations about another employee’s behavior, for example, checking e-mail correspondences can substantiate the charge.

Fox notes that, despite company warnings, three people at Sapphire have been fired for spending time surfing adult-oriented Web sites. The company reminds its 350 employees that they are being monitored each time they log on to the network. Fox says that no one has quit because of the monitoring, and that he has heard only a few complaints from employees about violations of privacy rights. “Generally, people know that if they aren’t doing anything wrong, they have nothing to worry about.”

Bart Lazar, a partner in the high-tech group at the Seyfarth Shaw law firm in Chicago, says smart employers do monitor e-mail and Internet use in “some way, shape, or form.” Lazar was lead counsel for GeoCities in 1998 in the country’s first Internet privacy suit. The Federal Trade Commission sued GeoCities, arguing that the company took consumer information collected on its Web site and disclosed that information to a direct mail marketing company. (GeoCities eventually settled with the FTC.)

Lazar advises his clients — which include Fortune 1000 companies in the financial services, high- and low-tech manufacturing, media and education industries — to use filtering or monitoring systems. Many do, largely to protect computer systems from viruses and junk e-mails, some of which could be offensive to certain employees, prompting hostile-work-environment lawsuits.

Employers also use monitoring to protect trade secrets and prevent other proprietary information from getting out. “Suppose you’re a loyal employee in a chat room on the Internet and you see someone bashing the company’s profits,” Lazar notes. “The employee sends a message saying, ‘No, you’re wrong. In fact, we’re about to announce our best quarter ever.’ Well-intentioned sure, but what they did is illegal.”

Nancy Flynn, founder of the ePolicy Institute in Columbus, Ohio, and author of The ePolicy Handbook (AMACOM, 2001), says a company can also set up its monitoring system to alert management to suspicious behavior. “If you find that someone who never works after 6 p.m. is suddenly showing up at the office in the middle of the night and going online, that should raise eyebrows. Why is this employee online? Is she downloading proprietary information?”

Even if employees aren’t conversing in chat rooms, leaking trade secrets, or furtively looking at porn, they may be active recreational surfers, day traders, or radio listeners who are wasting a lot of company time and bandwidth.

Judi Epstein, product manager for iPrism, an Internet monitoring and blocking system from St. Bernard Software in San Diego, says her clients typically find that an employee goes online for business purposes and then gets unintentionally sidetracked, sometimes for a few hours. “At other times it is intentional,” Epstein says. “At my last job, I worked with a woman who ran a side business on eBay Inc. while at the office — eight hours a day.”

For all of the pros and cons, knowing what electronic monitoring systems cost and how much money they save is an obvious concern. But is it possible to figure out the ROI of monitoring software?

“All sorts of problems arise if you do monitor. Workplace studies on productivity show a detrimental effect on employee morale and an increase in employee stress”

Vendors such as iPrism say yes. Companies uses gains in productivity to calculate the ROI, Epstein says. iPrism’s software, for example, costs about $20 per employee per year, or about a nickel a day. Websense, a provider of Internet blocking and monitoring software located in San Diego, cites the same cost for its product. Vice president of marketing Andrew Meyer says the firm’s research shows that the average employee spends about three hours a week on personal surfing. If monitoring helps cut that wasted time down to one hour, and the average employee earns about $20 per hour, the investment in Websense is paid back in a week.

Epstein is, of course, an advocate of monitoring. Still, she says the majority of workers who use the Internet are not overtly malicious. Most of iPrism’s clients still allow their employees a lot of latitude in using the Internet, she says.

Even the most vociferous proponents of corporate snooping agree that the rules and morality now governing electronic monitoring are far from clear. Bruce Kasanoff, a former partner at marketing consultancy Peppers and Rogers Group and author of Making It Personal (Perseus, 2001), finds electronic monitoring frightening. His book discusses how technology enables companies to play Big Brother.

He is concerned not only about what companies are doing today, but also about what they will be able to do in the very near future. In the next year or two, states will begin implementing a system called e911, which will require cell phones to send the location of a call to their phone-service carrier. Pinpointing the location of a cell phone user in the event of an emergency could save lives, but the technology could be used for more ominous purposes.

“Today companies read what you write in e-mails, where you go on the Web,” Kasanoff says. “Two years from now they will be able to track, for example, where their salespeople go and what they do. Where will it end?”

Many of these same concerns are receiving a great deal of attention in board-rooms and courtrooms. In May, Federal Appeals Court Judge Alex Kozinski and other judges ordered the shutdown of software that tracked the online activities of all employees in the Ninth Circuit Court of Appeals. In an open letter to federal judges published in the Wall Street Journal on September 4th, Kozinski likened the monitoring of judiciary employees to the treatment that prison inmates receive. “The proposed policy tells our 30,000 dedicated employees that we trust them so little we must monitor all their communications…How did we get to the point of even considering such a draconian policy?”

In September, the Judicial Conference of the United States, which sets policy for the courts, approved a revised version of the monitoring program, allowing only limited tracking of Web surfing and no e-mail monitoring.

Chris Hoofnagle, legislative counsel for the Electronic Privacy Information Center in Washington D.C., hopes that because the judges themselves want privacy, they will be more apt to uphold privacy rights

in worker-versus-employer cases coming before the courts. Regardless of a company’s position on monitoring, he says, it’s still imperative that all businesses have a written Internet-use and e-mail policy and that they notify employees regularly if monitoring occurs.

“Right now the law heavily favors employers’ right to monitor,” he says. “But all sorts of problems arise if you do monitor. Workplace studies on productivity show a detrimental effect on employee morale and an increase in employee stress.”

A Websense random survey of U.S. companies conducted last fall found that one third of those surveyed had fired an employee for Internet misuse; and over 60 percent had disciplined an employee.

Andrew Schulman, chief researcher with the Privacy Foundation, says employers falsely defend the use of electronic monitoring by saying it protects the company against lawsuits. But in all the hostile-work-environment cases he has seen, none began with an offensive e-mail. Instead, they started as sexual-discrimination cases in which female employees were not promoted but male employees were. “And as one piece of evidence used to show gender bias, the women’s lawyer says, ‘Look, this guy thinks it’s funny to trade e-mails with his buddy about why beer is better than women.’ But the lawsuit wasn’t triggered by the e-mail,” he relates.

Attorney Ann Kiernan is a solo practitioner in New Brunswick, New Jersey, who specializes in preventive law for employers and is also one of the principals in Fair Measures Corporation, a group of attorneys who train executives and managers on how to prevent employee lawsuits. She says that monitoring may actually increase a company’s potential liability. Right now, the law states that employers aren’t liable for harassment unless they are made aware that harassment is occurring. Once the company becomes aware of the problem, it must take prompt corrective action. But if a company monitors employees, Kiernan says that business assumes responsibility for everything it sees and everything it monitors on the Internet, whether an employee brings it to the company’s attention or not. “You suddenly have a duty to investigate everything,” she says.

Schulman and other privacy-rights advocates say electronic monitoring may be warranted in specific cases if there is suspected wrongdoing, but that monitoring should always be used as narrowly as possible to prevent abuse and misuse.

A reoccurring problem is that companies often make a snap decision about how they are going to use monitoring software. One story circulated by analysts and researchers tells of a CEO who read a Sunday newspaper article linking lost productivity at work to too much Internet use. Convinced that it was a problem at his own company, the CEO took the article to work on Monday and went straight to IT — rather than HR — and ordered the department to immediately install an electronic-monitoring system.

The story also is a reminder of why HR — and not IT — should be responsible for creating a monitoring policy and carrying it out. “When you have the IT department saying to the CEO, ‘Everyone is doing all this browsing on CNN and we have to put a stop to this,’ you have the cops making the laws, and that’s not good,” says Bill Gassman, research director for Gartner, a business consulting firm specializing in IT infrastructure operations.

It’s also problematic to ask employees to give informed consent to a policy of surveillance when they aren’t able to view the data collected about them. Schulman says if they can’t see the data, they can’t verify that the information is accurate.

One service — FastTracker — puts out reports that resemble a telephone bill and allow employees to see their own usage. FastTracker, a product of Fatline Corporation in Boulder, Colorado, analyzes its clients’ Internet traffic and sends reports back to the company for examination by both management and employees.

When employees have access to their own Web usage statistics — where they’ve been and how long they were there — they become responsible for managing their own time, says Bob Silk, FastTracker’s vice president of sales. “When you block sites, you treat employees like children. You don’t give them any responsibility. Our product makes each employee responsible for his or her actions.”

Ultimately, an employee who wants to break the rules will break the rules, those close to the issue say. Sexual harassment was occurring long before the Internet existed, and confidential information can just as easily leave a company in a face-to-face conversation as it can in an e-mail.

Attorney Ann Kiernan says she thinks employers who e-monitor should ask themselves why they don’t also monitor phone calls, mail, and faxes.

“How much time do you, as an employer, want to spend policing your employees?” she asks. “From a practical point of view, isn’t it better to have someone who is skilled in information technology or human resources doing something productive, rather than playing nanny?”

Workforce, February 2002, pp. 38-45 — Subscribe Now!

 

When Wall Street gets anxious, corporate America gets lean. That’s why nearly a million jobs have been cut nationwide this year, according to outplacement firm Challenger, Gray and Christmas. Even before the terrorist attacks, the numbers were staggering: 32,000 at Motorola, 22,000 at LM Ericsson, 20,000 at Lucent, 6,000 at Cisco, 4,600 at Gateway. Then in September, as airline stocks plunged and flight schedules were slashed, Boeing and major carriers cut more than 100,000 jobs — the majority of the total job cuts by all U.S. employers in recent months.

After a period of near-manic employment, the country is in the midst of major downsizing. The list of companies shedding jobs is long and varied, with manufacturing, technology, and transportation hit hardest. The magnitude of the cuts was unexpected, but the cuts themselves were not. Kenneth Button, a professor of public policy at George Mason University in Fairfax, Virginia, says that even before the tragic events of September 11, most airlines had plans to cut back.

Unlike economic contractions of the past, the current downturn hit fast and hard. Companies have responded with swift cuts to satisfy investors. Research demonstrates, however, that although layoffs please some in the short run, effectiveness is minimal over the long haul.

In the early 1990s, layoff announcements created a very small lift — less than 1 percent — in relative stock-price performance. Companies that laid off 15 percent or more of their workforce during that recession performed significantly below average in the following three years, according to a survey of 288 Fortune 500 companies by Bain & Company, a Boston-based strategic consulting firm. Companies that announced repeated rounds of layoffs did even worse.

In fact, much of the long-term effect of these current cuts will be negative, says Will Gordon, vice president of the management-consulting firm Adventis in San Francisco. Referring to US West (now Qwest, a sibling of Verizon) in the early 1990s, Gordon says the company “moved very swiftly to reduce expenses in their network operations, laying off many hundreds of people — the network operations people, the guys in the vans, the pole climbers, the central office technicians.”

At the same time, many state legislatures lifted earnings caps that then existed, allowing companies such as US West to earn as much as they wanted on the basis of certain performance hurdles. But because it had idled so many workers, US West failed to meet performance measures and was fined tens of thousands of dollars. “The company’s recovery was painful,” Gordon says, because the layoffs caused serious damage to labor relations with the company’s largest unions, resulting in US West’s first major strike a year later, when 34,000 workers walked off their jobs.

In order to shore up performance levels, US West had to hire contractors at “significant expense to fill crucial customer service and technical roles,” Gordon says, adding that service delays and disruptions eroded consumer confidence.

When management commits to sweeping, often strategically misguided layoffs, they frequently look for answers to their financial woes internally, rather than externally. That is a crucial mistake, Gordon adds. “They look to their culture, history, and values as if the marketplace had no bearing on the answer. They whack 10 percent from all departments — fast and furious but fair, they think. It’s unhealthy, because the marketplace doesn’t value all parts of a company equally, nor every product or service. They wind up taking people from key functions.” He says the problem is compounded because the company can’t deliver its most valuable products to its most valuable customers.

Paul Platton, national director of strategic awards for the global HR consulting firm Watson Wyatt in Washington, D.C., says many of the cuts at tech companies this year were made before management had any real understanding of their own core business. “The management group typically isn’t sure who is valuable and who isn’t, and makes layoff decisions based on finances, rather than knowing what functions and processes give a business its competitive advantage,” he says.

The layoffs and furloughs at airlines, however, are different, says Bruce Hicks, president of Darcy Communications in Houston and an airline industry consultant for over 25 years. “Many of the jobs they are cutting go hand in hand with the level of flying. If you are flying 80 percent of your planes, you don’t need 100 percent of your airplane staff.”

Button, who also serves as editor of the Journal of Air Transport Management and is the author of Air Transport Networks (Edward Elgar, 2000), says the airline industry is the least profitable sector of the economy, and that it had a very poor performance last year. “They’ve had the economic downturn and trouble with (striking) pilots to contend with, so they were planning to slim down anyway. But clearly not on this scale.”

Mark Slitt, a spokesman for American Airlines, says the equivalent of 20,000 jobs will be eliminated. The airline had no fixed plans for layoffs before the tragedy, he says, but the current cuts are a part of the airline’s strategy to save money and will be permanent. “When conditions are bad, layoffs are something a company looks at to cut costs. We’re seeing a drastic downturn in passenger volume, and American Airlines had a bad year financially anyway.”

Unless layoffs are leveled across the board, the main targets are usually support staff and human resources. In many tech companies, which moved quickly to hire when the economy was robust, there are redundancies now in business planning, logistics, customer service, and IT support.

In almost every industry facing layoffs, HR areas that are not focused on the bottom line — such as recruiting, employee relations, relocations, and training — are vulnerable. “It’s ironic that training is one of the first things at bat,” says John Miller, senior vice president of sales and marketing for career management consulting firm Drake Beam Morin in New York.

“Most people undervalue training. Yet, preparing people to be leaders is critical. Cutting training represents a short-term view. It’s knee-jerk. Employees feel the organization isn’t committed to their professional development any longer. And in the long run, they’ll have problems moving the right people into the right jobs, trying to align the skills and competencies of the workforce with what needs to be done.”

Another way that companies hurt themselves is with deep cuts into lower and middle management. These are the people who have a substantial amount of organizational memory. They are the managers who have built close relationships with their colleagues and those who work for them.

“Later, when a company starts to redesign its organization in IT, for example, it will need to focus on the strategic decisions of the company. But the managers who handled that were let go, and those who remain are technically skilled but don’t understand the big picture,” says Diane Tunic Morello, vice president and research director of Gartner Group, Inc., in Stamford, Connecticut.

In the push to flatten and prune organizations, Tunic Morello says, the employees who remain wind up with peers as mentors. These relationships become much stronger than the commitment to the organization itself. “If one person leaves, they can easily take the rest of the group with them.”

Experts say this shift in loyalty and the impact on morale is perhaps the most damaging consequence of round after round of cuts. Fred Reichheld, a fellow at Bain & Co., addresses the aftershocks of shattering the bonds of trust between an employee and a company in his books The Loyalty Effect and Loyalty Rules! (Harvard Business School Press, 1996 and 2001).

Reichheld says most businesses don’t foresee that they cannot grow a profitable business without loyal customers, and that they can’t have loyal customers without loyal employees. “If employees think layoffs were done to prop up this quarter’s earnings or stock price, they won’t think the company stands for something worthy of their own commitment,” he says.

And in a business world where downsizings and organizational flattenings are commonplace, workers are more cynical than ever. Bain & Co. surveyed thousands of employees across the country last summer, asking questions related to loyalty. Less than half said their employers were worthy of their loyalty. “Corporate leaders I spoke with can’t explain why loyalty is important, but they know it affects customer retention,” Reichheld says. “It’s a crisis.”

Poorly handled layoffs have an enormous impact on the company’s reputation, not only affecting its ability to recruit in the future, but also making it difficult to retain those who are left. “If the person beside you just got shot, you’re going to do what you have to do to stay alive, but when the economy turns, you’re going to be looking for something else,” says Robert Morgan, president of the Human Capital Consulting Group at Spherion Corporation, an outsourcing and recruitment firm in Ft. Lauderdale.

A handful of companies are beginning to take the loyalty factor seriously. Reichheld cites Cisco as an example. This year, after two months of HR-driven strategy sessions that included finance, facilities, and executive management issues, the company laid off 6,000 regular employees and ended the assignments of 2,500 temporary workers.

Rather than cutting a certain percentage of the workforce, Cisco looked at each department, reviewed the area of business that each department served, and determined where growth would be in the future. Each business group made its own layoff recommendations. Employees who were cut were given two months’ notice and four months of severance — a total of six months of pay — while they searched for other work.

“Then we took our remaining recruitment workforce and directed it toward a full outplacement effort for impacted employees,” says Matt Schuyler, the global head of workforce placement and development for Cisco. The company also created a community fellowship program, which gave affected employees the option of being placed with a charitable organization for a year at one-third of their salary. “Hundreds have taken advantage of that. I think it says that even in tough times, Cisco is good to their people. In this way, we aren’t worried about how we will ramp up when the time comes. We consider ourselves an employer of choice.”

Continental Airlines — one of the few major carriers that were profitable this year — hadn’t intended to furlough a single employee. But in the immediate aftermath of the terrorist attack, the industry saw a 50 percent decline in demand. Continental decided to furlough 12,000 employees.

“It was a tough decision to make, but necessary to preserve the jobs of the 44,000 other people who work here,” says airline spokesman Rahsaan Johnson, “and to make sure there would be a Continental in existence down the road. This is a demand-driven industry, and if demand goes down 21 percent, we aren’t going to need as many pilots, attendants, phone operators, and reservation agents.”

Continental says that if it had reduced service and employment levels to match demand, the staff reductions would have been much deeper than 21 percent. Johnson says the hope is that in short order, laid-off employees will receive preferential treatment when the airline is hiring again. Continental has also sought the help of businesses in its hub cities, setting up job fairs to help furloughed employees find other work.

“Gordon Bethune, our CEO, came to Continental in 1994, and he was the driving force in helping management recognize that it’s the people here who have made Continental what it is today and we owe them a debt,” Johnson says. “We recognize that happy employees make happy customers.”

Cisco and Continental don’t have to be exceptions to the rule, says Robert Morgan of Spherion. “Companies need HR there when planning for those cuts begins.” He cautions HR against focusing on personnel issues. Accept that the layoffs will occur and concentrate on minimizing the damage, he says.
“You can’t go to management and present your case for limiting layoffs by talking only about the people portion of it. You have to show what the company’s turnover rate is, what it costs to replace an employee, and how your company compares with its competitors, and the industry in general,” he says.

In order to present its case, HR must get to the discussion table. Will Gordon of Adventis says the only way to insist that management let HR in on layoff decisions is to show that the department understands what drives the company’s business. In many companies, HR winds up simply taking orders, he says, and then is left to deal with the bloody aftermath.

“A year from now, when they’re told the company needs 2,000 people in 30 days who are trained in a variety of programming languages, HR has to tell management those people don’t exist and that they shouldn’t have cut them six months earlier,” Gordon says.

He suggests that HR managers volunteer to be on steering committees, and seek access to meetings, seminars, and committee activities where major company decisions are made. If you know how your company makes money, he says, you can look at similar businesses and gauge what the marketplace pays for the kinds of employees who are being cut. Then give management estimates of how long it will take to replace each of those people, taking into account the demand for their capabilities.

Even the cost of poor morale can be calculated. DBM’s Miller says if you lose a key employee, don’t look only at the cost of replacement and lost production. You must also consider the impact on other employees. He says that each key employee lost has about a 1.5 impact on those left. If you calculate the average salary of an employee, you can show in dollars how much the company loses if that employee spends an hour a week worrying about the situation.

Most business consultants agree that it is the job of HR to protect the business in the long term, because that will save jobs.

“If you speak about the bottom line,” Gordon says, “everyone will listen.”

Workforce, November 2001, pp. 48-53 — Subscribe Now!

When economic conditions sour and companies have to cut back, personnel is usually the first target. Yet it is possible to make layoffs a last resort rather than a first line of defense. Despite the fact that business has slowed significantly, chip-maker Intel Corporation has managed to avoid layoffs altogether this time around.

In the late 1980s, the company went through painful cuts. With recent financial troubles, Intel spokesperson Gail Dundas says, the company was determined to change the way it reduced its workforce. It did have to close a manufacturing facility in Puerto Rico this past summer and let go 5,000 employees, but it has managed to avoid other layoffs by continually pruning the organization.

Although the company offers a kind of early retirement package to select employees, its workforce is young (largely 25- to 45-year-olds) and often doesn’t want to opt out early. That’s why in 1990, during the last recession, Intel established a redeployment program that allows talented people who might otherwise be laid off to find other jobs, either at Intel or elsewhere. People in the program receive a full salary and benefits for two to four months and decide how best to network and look for other work. Those in the redeployment program often meet with management for advice and referrals, as they search for contacts at other companies. Intel provides career counseling and skills training. Laid-off employees can also take temporary positions within the company or work on a per-project basis.

Because the program is ongoing, it has become a part of Intel’s culture. “It’s not secretive, and no one is embarrassed to say they are in redeployment. Often, business units within Intel change direction or focus, and we have all these bright, highly skilled workers who can be reassigned,” Dundas says.

Intel has taken a strategic approach, she says. “We hire the best, so for us, human capital is as important as our investment in R&D.” The company no longer has to make drastic cuts all at once, since it continually trims its workforce. Dundas says she wonders about companies such as Charles Schwab, which offers a bonus for each rehire, and Cisco, which recently gave laid-off employees the option of working for a year at a charitable organization at one-third of their salary.

The question Dundas poses is this: “What do they do the rest of the time?”

Workforce, November 2001, p. 52 — Subscribe Now!

TMP Worldwide, parent company of Monster.com,works to retain employees and avoid unrest by keeping benefits veryforward-thinking, says Margaretta Cullen, senior vice president of global humanresources. The company is beginning domestic partner benefits this year and hasa broad-based stock option plan for everyone, from upper management to thetelemarketing staff.

“Our culture is definitely one ofempowerment and risk-taking. We’ve grown a lot by acquisition, and we tellthose running the local offices that they are responsible for employee happinessand maintaining budgets. It’s like running their own businesses without thecorporate worries,” says Cullen.

The 500 telemarketers and technical people atMonster.com in Massachusetts work in a building that has won design awards andhas an on-site gym, concierge dry-cleaning service, free breakfast, snacks, anda recreation area.

This is just some of what it takes to keepdiscontent at bay. Research by Unifi Network, a division of PricewaterhouseCoopers, identifies six things employees consider necessary for them to becontent at work:

1. Learning opportunities:Companies should explain how they are going to help their employees develop –and then follow through. Training should never be offered as an afterthought.




2. Compensation:It has to be competitive, but employees also want to understand how it works.For instance, if a sales program has certain incentives, they want to be ableto understand the formulas inherent in the awards. If it’s a promotion they’reafter, what do they have to do to get it?




3. Understanding career potential: Bestraight with employees from the get-go. Not everyone can be the CEO, sotell employees, “We’re going to do our best to create leadership andsupervisory positions, but while we’re establishing these, we’re goingto invest in you and pay you competitively.”




4. Mentors:The management model is changing in the 21st century. Nearly 60 percent ofthose surveyed by Unifi say they would be willing to leave their jobs tofollow their mentors.




5. Reputation:It’s important to your employees that the company have a strong brand orsolid reputation.




6. Benefit mix:A company should offer more than just traditional health and welfare benefits.Nap rooms and upscale cafeterias are not just for the dot-coms.

Workforce,November 2000, Vol. 79, No. 11, p. 40 — Subscribenow!

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Nancy Gilfillan, cofounder and senior vice president of human resources atComputerJobs.com, an IT employment Web site, says she was shocked to learn thatrecruiters were teaching others how to “flip” Web sites. “I thinkthat’s really on the edge of being ethical,” she says. In March, Gilfillanreacted to the situation by removing all personal contact information from her company’s Website and from ComputerJobs’ intranet, which contains information meant only forthose within the company.

    At Bell Labs, which supports Lucent Technologies with research anddevelopment, there’s no talk about changing the way business is done to thwartunderhanded recruiters. It’s the company’s belief that the only way to preventpoaching is to keep employees happy. Recent media reports say the companyexperienced a brain drain in the last year as some of their best people werelured away by recruiters.

    Bill Price, a spokesperson for Lucent who didn’t acknowledge a loss of personnel, says the company isn’ttaking any specific steps to prevent “the poaching you allude to,particularly in reference to removing online information. Bell Labs is and willremain a very open community. It is that community and open exchange thatfosters many of our market-leading innovations.”

    Every company in the industry is using aggressive tactics to recruit talentedpeople, including Lucent, Price says. Bell Labs is taking steps to retain itsbest people through the use of competitive compensation and option packages, andthe recognition and grooming of top talent.

    Brobeck, Phleger & Harrison, an international law firm based in SanFrancisco, keeps professional profiles of each attorney on the company Web site,including contact information. Abe Isenberg, executive director of the law firm,says there are no plans to hide any of that. The firm considers the information aresource for clients and potential clients — not for ambitious recruiters –althoughIsenberg acknowledges that recruiters use it.

    “With the kind of talent we want, and with our compensation at the topof the market, our people are always in demand. The only way we’re going to keepgood people is to be a good place to work.”

Workforce, May 2001, p. 33— Subscribe Now!

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Using the Internet to aid in recruiting isn’t new, but what is new is moresophisticated searching, the kind that allows recruiters to find résumés,employee directories, organizational charts, and personal information on the Web.These searching techniques are controversial.

They allow users access toinformation considered private by its originators, but which is — given the righttraining — accessible to the public. One company that has helped move thesetechniques from the fringe to the mainstream is AIRS — Advanced InternetRecruitment Strategy — which offers seminars to HR professionals and recruitersthat teach them how to find passive candidates hidden on the Web.

Here are some of the terms that are used to describe these power searches.AIRS claims to have coined the first three in 1997. The firm providesdefinitions:

• X-Ray: Enables the user to find employee home pages, staff directories, andbios hidden inside a Web site. The X-Ray command is focused on the server ratherthan on external links to the site. That enables a visitor to see all pagesindexed on the search engine, regardless of where they are linked. So eventhough you don’t have a link to a particular Web page — say the employee directorypage — this technique allows you to view the page anyway.

• Peelback: A technique that reveals additional unknown resources andcandidates. Once you find one candidate, says AIRS spokesperson Laura Whitcomb,you “can find them all.” Peelback is made possible by the structureof a URL and the fact that personal documents are usually contained within alarger folder that holds many people-related documents. By”peeling” — or going back — in the URL from the individual document to thepeople-folder, it’s possible to access lists of passive candidates.

• Flipping: The AIRS name for this technique is FlipSearch™. Flipping isused to find Web pages that are linked to a specific site, allowing a searchwithin those links. This can be used to find people who create links from theirhome pages to their colleges, associations to which they belong, and thecompanies that employ them. Tracey Claybrooke-Friend, vice president of hiringsolutions at Peopleclick, leads seminars in the art of flipping. Herinstructions for flipping a Web site are to simply use the button on your searchengine that reads ‘Identify links to this URL.’ “

• Domain Search: A method of finding virtual “footprints” on theWeb. For example, you can use a domain search to find people who have visitedyour competitors, who currently work for them, or who worked for them in thepast, says Claybrooke-Friend. “If your competitor is Peopleclick, you wouldtype in *@peopleclick.com using an advanced search on a public search engine. What you’re doing isasking the search engine to find everyone from Peopleclick who has left animprint — a name, a virtual business card — anywhere they have traveled on theWeb,” she says.

Workforce, May 2001, p. 32— Subscribe Now!

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When Bank of America signed its 10-year contract with e-HR process managementcompany Exult, they began what some in the industry are calling the “nextlevel” of outsourcing. Although the two companies insist it’s a strategicalliance, outsourcing of many basic HR functions is a key component.”Whether you call it an alliance, partnership, or outsourcing, there’s aninordinately large amount of positioning,” says Richard Bell, an analystwith TowerGroup in Needham, Massachusetts.

Here’s how the deal was structured:

1. Outsourcing. The bank will outsource to Exult all the business processesrelating to human resources, such as payroll, accounts payable, and benefits.Other functions being handled by Exult are information technology, delivery ofHR services, and a call center for human resource and benefits information.

2. Bank of America will handle policy design and strategy and compliance.Personnel managers and executives remaining at the bank will be the point ofcontact for employees with questions or problems. The bank has retained thesemanagers to help employees in person or on the phone.

3. Portal partners. Exult is taking a variety of HR processes and puttingthem on the Web, so that Bank of America employees can handle a number ofadministrative functions online. The portal is also a revenue source for bothcompanies. Anyone logging on to the site will see Bank of America products andservices advertised, from commercial credit cards to consumer loans. And forBank of America clients looking to outsource certain administrative functions,Exult’s services are also advertised.

4. Assets for equity. Bank of America already had a high-performing workforcein Charlotte, North Carolina, when it finalized the deal with Exult. Because ofthat, Exult-a company looking to grow and establish an East Coast base-took overthe Charlotte facility and 675 former Bank of America employees.

5. Equity. In return for the instant infrastructure, Bank of America receivedwarrants for Exult stock valued at about $50 million instead of cash.

Workforce, April 2001, p. 53SubscribeNow!