Author: Eve Tahmincioglu

Two different headquarters. Two different frequent-flier programs. Four different hubs. Hundreds of different destinations and hundreds of different aircraft. Dealing with all these complex issues will be a breeze for the newly merged US Airways and America West compared with dealing with the multitude of union groups now under the merged carrier’s umbrella.

    When US Airways and America West made their merger official in September, their employees were covered by 18 union groups and 18 contracts with different expiration dates and issues. Not to mention the many union presidents, vice presidents, chairmen and others representing the conglomeration of labor groups.

    “The task is challenging for our employees as they have to wait while the various unions work out several items,” says Larry LeSueur, US Airways’ vice president of culture integration. “As a result, there is a level of the unknown, which we wish our employees didn’t have to experience. However, in the near term these issues will get worked out.”

    Since mergers in the airline industry are nothing new, there’s a typical union representation playbook when two companies merge. If a job classification at America West and US Airways was covered by the same national union but had separate locals, contracts and regional governance, the two groups eventually will come under the same contract. At US Airways, the pilots at both companies are all part of the National Airline Pilots Association, the flight attendants come under the Association of Flight Attendants, and the dispatchers are covered by the Transport Workers Union. In these cases, the two groups will typically maintain their local governance but operate as one entity when it comes to contract negotiations.

    For example, the pilots group had 1,888 employees at America West governed by a separate “master executive council” and covered by a contract that was up for renewal this year, and has 2,957 US Airways pilots whose contract expires in 2009. As a result of the merger, says US Airways pilot group spokesman Jack Stephan, the pilot union representatives from both carriers are negotiating with the company together but still maintain separate operations until details regarding worker seniority are hammered out and a new contract is signed with US Airways. Eventually, the two employee groups will be combined, but Stephan won’t speculate on a time frame.

    In the case of employees doing similar jobs at both carriers but being represented by two different national unions, the melding of union representation will be a bit stickier. At the time of the merger, 852 mechanics at America West were represented by the International Brotherhood of Teamsters, while US Airways’ nearly 4,000 mechanics, stock clerks and maintenance training crew were covered by the International Association of Machinists and Aerospace Workers. In cases such as this, the National Mediation Board typically steps in to help mediate any disputes regarding who will represent whom.

    Two unions at the combined company helped make the process easier late last year. The Communications Workers of America and the Teamsters agreed to jointly represent the nearly 9,000 passenger service workers and reservation agents.

    The union quandary could continue for months and even years as union leaders jockey for control. But Bill Adams, a labor consultant with Adams, Nash, Haskell & Sheridan, a firm in Fort Wright, Kentucky, stresses that US Airways managers should keep focused on contract negotiations and make it clear to union officials that the ball is in their court to come up with compromises everyone can accept.

    “Union members know what’s going on in the airline industry and how it’s being decimated, so they should be malleable,” he says. “But employers have to have a good story to tell. They have to be honest. You don’t put two organizations together without some anticipation of cost cutting.”

Workforce Management, January 16, 2006, p. 28 — Subscribe Now!

W hen a lawsuit is filed against a company, the company’s leaders are often so consumed with proving the legal allegations to be false that they ignore the ripple effect of disruption that the mere filing can have on a workforce.

    The problem will spread unless the employer deals with the suit head-on, striking a balance between running business as usual and keeping tabs on potential ticking bombs.

    It will take the shape of retaliation by managers and even workers, poor employee morale, a hostile work environment and branding the employer a discriminator. And all this, labor experts say, can lead to a loss of productivity and ultimately hurt the bottom line.

“Your company discriminates”
    Large companies typically have some sort of litigation or action pending at any given time, but there is nothing more damaging to the company’s internal fiber than a discrimination suit, especially wide-reaching class-action suits or those backed by the credibility of the Equal Employment Opportunity Commission.

    In February, Cincinnati-basedCintas Corp. found out that the EEOC was supporting a suit brought by workers alleging gender and race discrimination at the nation’s largest maker of work uniforms. In the summer, a district court judge gave the go-ahead for a gender discrimination lawsuit against retail giant Wal-Mart Stores Inc. in Bentonville, Arkansas, to obtain class-action status.

    Liz Ryan–a Boulder, Colorado-based workplace consultant and CEO and founder of WorldWIT, a networking group for women in business and technology–says that once the suit is filed, the firm has to realize it will be fighting a PR battle not only outside but inside its walls. Each night, Ryan says, employees are going home and hearing their families and neighbors saying, “Your company discriminates against women, blacks, whatever.”

    And, labor and legal experts warn, workers not part of the action may start thinking they could be victims ofdiscrimination. Others take sides in the case, and morale can plummet.

    Patricia Eyres, a management trainer and author of The Legal Handbook for Trainers, Speakers and Consultants, says that keeping the workplace running smoothly during a legal action is one of the hardest challenges employers can face. It gets even more challenging, she says, when the workers who are plaintiffs in the suit remain employed at the company.

The silent treatment
    While most employers are smart enough to know they shouldn’t retaliate against employees who bring such claims, they tend to get tripped up by not looking at specific acts as retaliatory, says D. Michael Reilly, an employment attorney for companies and author of Handling Employment Liability Claims in Washington.

    Reilly gives the example of an employee who files a lawsuit and has a performance review coming up. The reviewer makes a comment about the plaintiff’s communication skills and how he or she has to improve relationships with others. Making such a criticism when there is no lawsuit could be just fine, but when there’s a suit the wording of aperformance review will be looked at closely. “Someone can make an argument that that was retaliatory,” Reilly points out.

    Michael Lieder of Sprenger & Lang in Washington, D.C., who represents workers in class-action discrimination cases, says he rarely sees blatant forms of retaliation such as firing a plaintiff. It’s typically subtler, he notes, like giving an employee the silent treatment or not considering him or her for a promotion.

    Sometimes a suit can put a deep freeze on day-to-day operations. “Managers begin to feel paralyzed, afraid to give feedback to people who are or might be perceived to be part of the litigation,” Eyres says. “Then you end up with a business problem. Managers have to continue to lead, but lead within legal limits.”

    Reilly offered an example of a legal department for a major financial institution that ended up grinding to a halt following claims of a disparity in pay between men and women.

    A female attorney in the department was the whistle-blower in the case, and her fellow attorneys began avoiding contact with one another and canceling meetings. They didn’t want to become witnesses in the case and were worried if they said something it could be taken out of context. The result: The 15 lawyers in the department were suddenly not talking to one another, no deals were being completed, and the bulk of e-mail exchanges were “more about covering your rear as opposed to getting work done,” Reilly says. 

    The institution had to hire an outside legal firm. Everyone at the company ended up suffering in the form of layoffs and added expenditures, Reilly says.

    Such suits can also create a hostile work environment as workers, line managers and executives all jockey to take sides in the dispute. In one racial discrimination suit, Eyres says, some managers and workers at a company she would not name took pieces of rope in the shape of a noose and hung them on their rear view mirrors. When the black worker who brought the suit walked by they would swing the nooses back and fourth. While the worker did not prevail in the discrimination suit, he did win a retaliation claim, costing the firm more than $1 million.

Keep busy
    Since a lawsuit is often the first inkling the higher-ups have that there is a discrimination problem, legal and labor experts suggest doing an internal investigation immediately. “You want to talk to employees, supervisors, any witnesses whose names come up,” says Ted Meyer, a labor and employment attorney for Jones Day in Houston. “It’s important to try and get to the bottom of what really happened.” Executives in workforce management positions have to make sure the managers working with employees involved in the suit are trained in how to handle the situation.

    Meyer’s most successful clients have involved human resources staff in the general decision-making as it relates to the suit and in the performance evaluation process of all employees. Meyer says a good HR person will verify performance evaluations and any actions that may be taken. Bringing in a third party to mediate the suit early on might also be helpful. “It allows employees to come in and vent with the employer and tell his or her story. On the flip side, it allows the employer to explain why they did what they did.”

    It’s also a good time, he adds, “to do some employee relations work, do some teamwork training. Keep everyone very, very busy. People with too much time tend to focus on things they shouldn’t be focusing on.”

    Ryan, the consultant from Boulder, suggests “small-group meetings to talk about the issue, process employee reactions and decide how to handle it inside the group.”

    Many legal observers point toTexaco, which settled a large class-action discrimination lawsuit in 1996, as a good example of how to deal with a discrimination suit, saying the oil company’s then-CEO, Peter Bijur, was key in mitigating the fallout.

    During the litigation, a tape recording surfaced with senior executives making disparaging racial remarks. A 2000 article in BusinessWeek states that Bijur quickly acknowledged in public that the company had a serious problem and launched an internal investigation. “For 60 straight days after the scandal broke,” the article says, “Bijur put aside the oil business to focus on fixing what he realized was a poisonous workplace culture. Bijur insisted that each one of Texaco’s human resource committees have at least one racial minority and one woman as a member. And he moved swiftly to hire prominent African Americans in Texaco’s senior ranks. Bijur also tied bonuses to achieving diversity.”

    In a more recent high-profile discrimination case,Wal-Mart CEO Lee Scott may be taking a page from Bijur’s book. While Wal-Mart is maintaining its stand that it does not discriminate against women, the retailer established an office of diversity in an effort to boost diversity in employment practices and recruitment. It also tied executive bonuses to diversity targets.

    Having a deliberate strategy and communicating a firm’s objectives in one voice, Eyres says, will help mitigate the negative impact of a discrimination suit. Absolute silence or pat denials with no steps toward improvement “breeds discontent within and out of a company.”

Pepsico inc. executive Ron Parker recalls what it was like to stroll through one of the company’s California bottling plants a decade ago with the senior operations chief and to hear rank-and-file employees holler out the guy’s name with affection and respect.

    “You got a chill hearing that,” Parker says.

The well-liked executive was Lawrence V. Jackson, a corporate star who in 2002 was named one of Fortune’s most influential black executives and was hired in October to be Wal-Mart Stores Inc.’s chief human resource officer. As the leader of the biggest private workforce in the world, at 1.5 million employees, he’s going to need that kind of respect.

    Faced with monumental class-action sex discrimination and wage lawsuits, continued rapid growth and escalating union-organizing activity, Wal-Mart’s new chief people officer will have to be a peacemaker with a tough bottom-line business approach, analysts say.

    In November 2003, the company launched an Office of Diversity. Jackson, who reports directly to CEO Lee Scott and meets with him daily, is now in charge of the company’s diversity effort. As executive vice president of Wal-Mart’s people division, Jackson is also responsible for planning, training, executive development, recruiting, succession planning, human resources technology, culture change and regulatory issues.

    “The biggest problem at Wal-Mart is its extremely tight company culture,” says Brad Seligman, the attorney spearheading the class-action discrimination lawsuit. “I’ve been told by people inside that it’s very hard for an outsider to come into Wal-Mart, and it takes a long time to get assimilated and to assimilate.”

    But several people who’ve worked with Jackson say the 51-year-old Harvard MBA may not have any real experience in human resources, but he just might be the right person for the Herculean job.

    He’s a man who defines himself as a kid from a poor background who learned leadership skills at an exclusive private military high school, an admired manager who is known for an impatient, in-your-face style, a veteran of operations who is a master at schmoozing. It’s a skill he’s put to use at tasks ranging from driving out unions at Pepsico to boosting revenues at Safeway Inc.

    Management consultant Price Cobbs, who has known Jackson for 15 years and included him in a book he co-authored, Cracking the Corporate Code: The Revealing Success Stories of 32 African-American Executives, refers to Jackson’s confrontational style by saying, “Sometimes in meetings the brother (Jackson) would go off.

    “He brings a level of passion to his work that is admirable but at times it needs to be dialed down.”

    On the other hand, Cobbs describes Jackson as an “astute politician” and “master networker” who instills trust in employees, managers and board members. Adds Parker, now senior vice president of human resources for Pepsico’s Frito-Lay division, North America: “(Jackson) sent a message of trust, and if you didn’t embrace that message of values, trust, respect and integrity for everyone, you were not on his team long.”

“The biggest problem at Wal-Mart is its extremely tight company culture. I’ve been told by people inside that it’s very hard for an outsider to come into Wal-Mart, and it takes a long time to get assimilated and to assimilate.”

    For Jackson, being liked is about getting a job done. Parker says that he was instrumental in helping a few Pepsico facilities on the West Coast decertify their unions, a move that doesn’t usually engender affection from workers. This entry on Jackson’s résumé may serve him well as Wal-Mart prepares to battle what could be a $25 million union-organizing effort by the AFL-CIO this year.

    “This guy’s marching orders are to keep Wal-Mart nonunion,” predicts Paul Clark, a professor of labor studies and industrial relations at Penn State University. “If he fails at that he won’t be in the position that long.”

    Meanwhile, because of the gender discrimination suit, “people inside the company are saying there’s a difference in the treatment among men and women, whether they’ve experienced it or not,” says Sheryl Willert, a board member for the Defense Research Institute. “People question the motives of the employer and their actions, and will start to lose trust.”

    Willert says that Jackson’s most pressing responsibility will be building trust.

Early ambition
    Much of what is known about Jackson comes from his long record in corporate America, recollections from former colleagues and schoolmates, analysts who know his work and press accounts. He canceled two interviews with Workforce Management to be held at Wal-Mart headquarters in Bentonville, Arkansas, one on the same day the company embarked on a public relations blitz to counter its bad guy/stingy employer image in the press.

    Jackson did agree to answer questions via e-mail. Despite his reluctance to be interviewed or photographed for this story, a portrait of him emerges from a wide variety of sources.

    In numerous articles, he says he grew up in southeast Washington, D.C., from humble beginnings. “I have been poor most of my life,” Jackson told Newsweek in a 1979 article about budding MBAs.

    He described himself in the story as a one-time teenage militant. “When you’re growing up on the city streets, you know somebody’s going to have the say,” he told the magazine. “I came to realize it might as well be me.”

    In a 2002 article in the Pleasanton, California, East Bay Business Times, he says he was “a disruptive, mischievous kid” who “pulled a few fire alarms and talked too much in class” and wound up getting kicked out of a couple of schools.

    His late father, Vincent, was a postman and a waiter for Marriott, and his mother, Mattie, worked for 35 years as an examiner at the Bureau of Engraving and Printing, putting in many hours of overtime to help pay for his education, he says. In the late 1960s, he attended the all-boys, military St. John’s College High School in Chevy Chase, an exclusive Maryland suburb two hours away from his home.

    While at St. John’s, he began to demonstrate leadership skills. “He was a very responsible, well-respected young man who was respected as a leader,” says Brother Timothy Dean, who was commandant at the school when Jackson attended and is now retired.

    Jackson was a big kid who played football, participated in the French honor society and was a lieutenant colonel, the second-highest-ranked of 1,100 students at St. John’s.

    “Larry was all about relationships with faculty and people that could help him get ahead,” says Dr. Stephen Snow, a former classmate who now lives in Orlando, Florida, and is a gynecologist. “He was a lot tighter with faculty than the rest of us.”

   Despite advice from high school counselors to apply at midrange universities, Jackson set his sights on the Ivy League, and earned a degree in economics from Harvard in 1975. After college, he worked for two years at the Bank of Boston, returned to Harvard, where he earned an MBA in 1979, and spent a couple of years as a consultant for McKinsey & Co. before beginning his 17-year career at Pepsico.

    He held a variety of positions at Pepsico’s bottling division, including plant manager, chief operating officer and senior vice president of worldwide operations for Pepsico Food Systems.

Fostering diversity
    For a young black man with eyes on the highest leadership positions, the job at Pepsico came at a significant time. Robert Stringer Jr., a management consultant who worked closely with Jackson at Pepsi, says that in the 1980s, CEO Roger Enrico was particularly keen on marketing to black consumers.

    “Enrico was extremely interested in getting the upper hand on Coke when it came to the (African-American) market,” Stringer says. “He knew he couldn’t do that unless the company had a robust diversity initiative within its walls. He enlisted people like Lawrence.”

    Stringer says Jackson was fervent about creating equity for black employees at the company and he “was action-oriented, more so than anyone else in the black community at Pepsi. He was constantly pushing, sometimes over-pushing, to do stuff. He was a bit ahead of his time.”

    Jackson says he recruited and mentored many blacks at Pepsi and helped create the first black managers association at the company. InCracking the Corporate Code, he talks about how his own successes emboldened him.

    “As the only black line manager at Pepsi-Cola, and then the only black vice president, I was in a position to protect all the corporate people trying to promote diversity,” he said. “I had the power–the line results, the budget–so nobody could discredit me.”

    His passion for diversifying the workforce was matched by his enthusiasm to drive revenues. Parker recalls a meeting in the early 1990s about the challenge of private labor manufacturers when Jackson was the vice president of manufacturing for the bottling group on the West Coast. The topic was whether to promote 3-liter bottles heavily given that the private-label competitors were doing so.

    Jackson’s perspective was, ” ‘Let’s not play into the hands of the competition,’ ” Parker says. “He was strong on business dynamics. He was so passionate about driving change that that passion sometimes led into challenging in a direct way. He would get animated, use his hands.”

    Parker says he and Jackson developed a code that would be a signal to Jackson when he was getting too in-your-face with other managers. Parker would either say aloud “L.J.” or he would stand up.

    While at Pepsi, Jackson moved from Texas to California before settling in Atlanta. His wife, Kimberly, is a Harvard graduate who was an investment banker before becoming a homemaker. The couple has three children.

    Jackson left Pepsi in 1997 to become senior vice president of supply operations at Safeway, where one of his chief responsibilities was to grow the private-label business. Neil Stern, a senior partner at Chicago-based McMillan-Doolittle, a retail strategy firm, worked with Jackson during his years at Safeway and describes him as a hands-on manager who “very much believes in setting a vision (and) taking that vision through to execution.”

“He was strong on business dynamics. He was so passionate about driving change that that passion sometimes led into challenging in a direct way. He would get animated, use his hands.”

    Coincidentally, the supermarket industry at the time was coming under attack from large discount chains such as Wal-Mart, Stern says. Jackson was part of the team that had to figure out how to change the Safeway model to compete. According to Stern and published reports, Jackson was successful. During fiscal 2001, the East Bay Business Times reported that Jackson was given credit for generating a big portion of the company’s $34 billion in revenues.

    After Safeway he briefly held the highest position yet in his career as COO of Dollar General in 2003, where his efforts were focused on the firm’s theft rate and high employee turnover.

    Stern believes that Jackson will move boldly to make changes at Wal-Mart. “Once he understands the vision he will build and design programs around that vision. He will say, ‘We can no longer stand back and think our superior business model will carry the day. Now we have to be aggressive in marketing why this is a good place to work, why it should remain a nonunion environment.’ ”

    Stern made this prediction to Workforce Management before Wal-Mart embarked in January on its nationwide “unfiltered truth” ad campaign, which featured full-page ads in 100 newspapers across the United States. Wal-Mart CEO Scott said in launching the effort that “it was time for the public to hear the ‘unfiltered truth’ about Wal-Mart, and time for the company to stand up on behalf of a workforce that includes 1.2 million Americans.”

    Was this Jackson’s handiwork? Wal-Mart spokeswoman Clark says Jackson was an “integral part” of the recent campaign but, she adds, the retailer had embarked on a broad public relations effort well before Jackson arrived.

Union rumblings
    At a time when the AFL-CIO is embarking on a large organizing campaign, Jackson has his work cut out for him. When asked if Jackson’s primary function is to keep unions out, Wal-Mart spokeswoman Clark says that “our associates are the ones who decided whether or not they want a union.” (There are no unions at any Wal-Mart stores in the United States. Last month the company closed a store in Canada after its employees voted to form a union, saying that the store was unprofitable.)

    Coleman Peterson, the retail giant’s former human resource head, oversaw a labor team that would swoop down on stores where union activity was percolating. Peterson, who now runs his own human resources consulting firm and says he left Wal-Mart because he had enough of retail after three decades, maintains that the teams were an effort to educate local managers about labor laws.

    But Jill Cashen, a spokeswoman for the United Food and Commercial Workers union in Washington, says the tactic was used to “intimidate workers.”

    Jackson, meanwhile, sees himself as being one with the masses. “My upbringing taught me the importance of respect for individuals, and I tried to build that relationship with frontline workers,” he said by e-mail.

    Steven Katz, author of Lion Taming: Working Successfully With Leaders, Bosses and Other Tough Customers, says Jackson’s task is to be authentic with workers, but at the same time not alienate executive officers. The trick is “not to be viewed by either management or the employees as selling out.”

    As others try to predict what the chief people officer will do, Jackson says of his new job, “Hopefully, others see that I have a drive to get things done and a passion to get everyone going in the same direction.”

    He’ll need all the drive and passion he can muster. Wal-Mart has become the butt of jokes on everything from “South Park” to late-night TV; communities fight to keep the retailer out; the perception of its jobs and wages is at an all-time low; labor-related lawsuits are rampant; and there’s a workforce of 1.5 million and growing.

    Jackson credits his wife with helping him make the decision to accept the job. “She was instrumental in persuading me to come to Wal-Mart and looked into my heart and said, ‘You need to go do this.’ She thought if I didn’t explore this, I would regret it. She made a huge sacrifice to make the move.

    “She thought Wal-Mart’s culture fit me perfectly,” he says.

    Those who know what Jackson is up against say his job will be difficult. He’ll have to run the human resources department almost like a military operation, says Eugene Fram, the J. Warren McClure research professor of marketing at the Rochester Institute of Technology’s College of Business in New York.

    While strict policies are critical, Jackson will have to be responsible to his employees in an “intelligent manner,” Fram says. “He needs to develop a deep understanding of the culture, talk to workers and quickly figure out where the problems lie.”

    He must earn the respect of employees, just as he did at Pepsi. Fram points out that if even 1 percent of Wal-Mart’s workers have problems or create them, that equals 15,000 problems. That means that one of Jackson’s biggest challenges will be this: “He’s got to watch out for ticking time bombs.”

Workforce Management, March 2005, pp. 32-38 — Subscribe Now!

Chubb Group of Insurance Cos. is about to take the next step in helping women navigate their career paths–mentoring. But don’t expect a traditional one-on-one mentor/protégé formula. The firm plans to experiment with so-called group mentoring.

    The Warren, New Jersey, insurance firm has had a networking and education program called Chubb’s Partnership for Women in place since 2001, offering its 500 members opportunities several times a year to connect with higher-level executives and learn from invited speakers about everything from financial matters to career development. Now, company officials want to add a formalized mentoring program.

    While some women within the partnership had traditional mentor-mentee relationships, they were informal and had little structure or focus, says Pat Key, vice president, tax counsel and a founding member of Chubb’s Partnership for Women. When she considered her options, she realized that a typical mentoring program, where someone is responsible for connecting a mentor and mentee, would be time-consuming and too pricey for her limited annual budget of $8,000 for all of the partnership programs. Key decided that the best way to go was mentoring groups, also known as mentoring or coaching circles, where women from varying ranks are thrown together to learn from one another.

Easy to implement
    Chubb plans to start a mentoring group pilot in January involving six to seven individuals per group who are all volunteers. At first, Key plans to limit the total number of groups to seven and to have a woman who has been involved with the partnership to monitor the group’s progress. The meetings will take place once a month and will be held at a conference table or during lunch so that all the members of the circle feel like they’re on equal footing, instead of a manager behind a desk preaching to her mentees. Examples of topics include networking, work/life balance, how to brand yourself, realizing how you look, act and sound to others and creating successful plans, Keys says.

    The cost for the new program: zero, other than the time the participants spend together. “I wanted to make sure this would be inexpensive, uncomplicated and easy to implement,” she says.

    It’s difficult to put a number on how many firms have adopted or are looking to adopt such mentoring soirées, but anecdotal evidence suggests they’re on the rise. “I do see an uptick in group mentoring,” says Elaine Yu, director of advisory services for the nonprofit research firm Catalyst. “The idea of mentoring has been out there for a while. Now I think companies are thinking about different ways to do mentoring, and mentoring circles are one of them. They try different things to fit the needs of employees.”

    For the group setting to work, Yu says there must be a commitment among leadership, clear expectations on the part of mentors and mentees, and clear objectives. Before starting a group mentoring program, she says, everyone must be trained on role-playing and guidelines on behaviors that can be exhibited.

    While some companies want to avert the lengthy matching process, throwing individuals together randomly might not work for all firms. Yu says that in a corporate culture that’s more casual, the random approach might work best; but a more structured, staid environment may benefit from some forethought about the group participants and how they’ll jell together.

Pool was dry
    One firm that has taken group mentoring from a pilot project to reality is Budco, a marketing services and distribution outsourcing company that works with GM and Disney. The firm began holding mentoring groups for its new hires, no matter gender, in 2002. But it wasn’t the cost that turned this Highland Park, Michigan, firm on to the group format; it was the company’s limited mentoring pool. While one-on-one mentoring is a staple for the firm’s career development program for more seasoned staffers, having one mentor for every mentee regardless of tenure would have been impossible. “Our mentoring pool was running low,” says Katrina Belanger, manager of corporate training.

    It’s never too early to concentrate on career development for employees, she explains, adding that the group mentoring program is mandatory.

    Groups at 850-employee Budco typically consist of four mentees and two mentors. They are trained as a group and then meet twice a month for the first three months, and once a month for the second three months. The participants are from totally different parts of the company in order to indoctrinate new hires into the overall Budco culture, not just the subculture in their particular business unit, Belanger says. “Within our company, you have the information-technology department working with the contact center and the warehouse and the distribution area. It’s important to help employees get an understanding of the different roles and departments. The group setting helps with that,” she explains.

    So far, the groups have been successful as far as turnover goes. The cost per employee for the meetings when taking into account 10 hours of meeting time is about $275, says Paula Biskup, Budco’s director of corporate communications. In 2003, Budco began to require that all new hires participate. At that time, the turnover among new hires was at 2.2 percent; so far in 2004, it has been 0.5 percent.

The real objective?
    The Mentoring Co., a firm that developed its own trademarked Mentoring Circles™ process in 1993, has worked with Hewlett-Packard and Coors, among others. The company uses storytelling in its mentoring circles, where participants share their successes and failures. “We believe storytelling offers greater impact than giving advice,” says Mentoring Circles president Julie Manhard. The circles include 14 to 16 participants who meet over a nine-month period. The cost is about $55 an hour per employee. While the group dynamic is gaining acceptance, some workplace management consultants warn there can be pitfalls.

    “I think the objective is good to put a mentoring program in place, but do it the way it should be done–a private one-on-one experience,” says Alan Weiss, president of Summit Consulting Group., a organizational development firm based in East Greenwich, R.I. “You’re missing the real objective here, which is individual development tailored to the individuals.”

    Some reasons Weiss believes group mentoring can falter:

• The groups tend to be dominated by a single personality.

  
  

• Learning is uneven and there is consequent repetition.

  
  

• Oftentimes, there’s no one accountable for making sure the group is successful.

  
  

• Feedback is seldom candid and frank.

  
  

    For others, however, the group concept holds promise. One of the big benefits for Chubb’s Key is that the group setting will take some of the pressure off the mentor and mentee. For example, she says, if a lower-level employee eats with her mouth open, it might be hard for the mentor to point that out directly to her. As a group, a higher-level manager could mention how eating with your mouth open during a business meeting is not appropriate without mentioning a particular individual.

    The bottom line is getting employees to embrace mentoring. “Some people look at it as the big ‘M’ word and aren’t open to formal mentoring arrangements. I think the group format is less threatening, more social and flexible,” she says.

Until three years ago, Diana McGinnis was an ordinary program analyst for Cigna Inc. whose job was more about following orders than initiating projects or managing people. But when she was thrust into the world of management in 2001, the 32-year-old technician suddenly became a decision-maker. Her steep learning curve included figuring out how to deal with the nuances of the worker-boss relationship from the boss’s perspective, how to network to push projects forward and how to interact with high-level executives who handed down daunting deadlines.

    For McGinnis, experiencing Cigna’s leadership testing ground, which is offered in a variety of business specialties, has proved valuable. And for the company, increasing its ranks of women in top jobs has been invaluable, especially in recruiting, grooming and retaining female leaders. The “Information Technology Emerging Leader Development Program,” a project open to Cigna employees in IT, begins with a week of “boot camp” where women like McGinnis are immersed in leadership seminars and discussions and introduced to books such as Seven Habits of Highly Effective People. Over a three-year period, McGinnis’s preparation included quarterly two-day management training meetings run by senior executives and a rotation through a host of supervisory jobs in different business segments for 6- to 18-month stints. She was also assigned a mentor–a vice president who met with her every month and was at her beck and call whenever McGinnis needed to discuss managerial issues. “Without the program, I don’t know if I would have had the confidence to know that management was a possibility I could aspire to,” says McGinnis, who has been with Cigna since 1994 and was chosen for the program not because of her IT prowess but for her leadership and management potential.

    The program, which was launched in 2001 and has cost $200,000 thus far, is one part of Cigna’s larger mission to promote more women to top positions. The company estimates that it now spends $2 million annually on the recruitment and development of executive women. The motivation: women make most of the health-care buying decisions in households. Having them in key positions offers more insight into that consumer base.

    “The fact is, an employee community consisting of talented men and women representing many backgrounds, cultures and social perspectives clearly is best equipped to anticipate and meet the needs and expectations of an increasingly diverse customer base,” Cigna CEO Edward Hanway says. “It’s also the best way to operate strategically and to gain a competitive edge in a tough marketplace. The significant number of women in our employee ranks–especially in high-impact positions at the executive and managerial levels and in the Cigna boardroom–reflects this thinking.”

    And since about 75 percent of Cigna’s overall employee population is female, notes Curtis Mathews, Cigna’s diversity chief, upper management must mirror those numbers so that women have peers to look up to and emulate.

    In 1998, Cigna boosted its efforts to recruit and retain female executives at a time when turnover among women managers was about 15 percent and the representation of women in the upper echelon seemed thin when compared to other industries, Mathews says. Cigna has since seen turnover rates among this group plummet 50 percent. He attributes the firm’s success to the IT program and others like it in finance and health care, and to the company’s decision to push to get women candidates into the pool of executive prospects whenever a job opening arose. That meant managers, internal human resources staff and headhunters had to bring the résumés of qualified women to the table as well as those of men, he says.

    Mathews won’t say how much the firm has saved since 1998, but he maintains that its efforts have paid off. Cigna now has a higher percentage of women at the top than most other Fortune 500 firms, with 24 percent of the company’s executive-level or senior management positions held by women. Thirty percent of its board members are women. (A 2003 study by the nonprofit research firm Catalyst Inc. found that 7.9 percent of senior-level executive titles and 13.6 percent of board-member spots in the Fortune 500 were held by women.) Women now fill about 40 percent of vice-presidential and higher positions, up from 34 percent in 1999. Thirty-eight percent of individuals hired as a senior vice president or higher are women, a jump from 11 percent in 1999. And 44 percent of promotions to senior management positions go to women, up from 12 percent in 1999.

    McGinnis, now a director and applications project manager with 25 direct reports, appears to be heading in that direction. She hopes to be managing several projects in the next year, has a five-year goal of becoming a senior vice president and doesn’t rule out becoming CIO someday.

    For businesses, having women leaders isn’t about being politically correct. It’s about survival, says Joyce Gioia, co-author of How to Become an Employer of Choice and president of The Herman Group Inc., a management-consulting firm in Greensboro, North Carolina. “Women will lead the corporations of the future, and if you don’t have women leaders you might not be in business in the future,” she declares.

    Women also are a boon to business because they “understand aspects of consumerism from a more personal point of view,” Gioia notes. Many management experts agree that women have a different perspective from men, and often bring creativity and innovation to staid corporations. There is also growing evidence that diversity in the executive suite, not just among the rank and file, boosts profits. A recent study by Catalyst shows that companies with the highest representation of women on their top-tier management teams had better financial performance as a group than those with the lowest number of women: 35.1 percent higher return on equity and 34 percent higher total return to shareholders.

    Still, business and society in general have yet to foster an environment where women, who make up more than half the population, are able to take on even close to 50 percent of top jobs. Finding enough qualified women, Mathews says, is getting easier, but it’s still a challenge. “When you look at the population out there, the number of women who have the education, skills and talent to fill the executive-level positions we have is still not 50 percent,” he says.

    In fact, some studies show that women are losing ground when it comes to holding positions at the vice-presidential level and above. Over a decade, women’s share of executive positions, including everything from vice president to CEO, dropped 13.1 percentage points, from 31.9 percent in 1990 to 18.8 percent in 2000, according to the Peopleclick Research Institute, a unit of Peopleclick Inc. in Raleigh, North Carolina, that helps firms comply with federal antidiscrimination regulations. The study, released earlier this year, based its findings on 2000 U.S. Census figures.

the delicate balance: Retention of executives–men and women–continues to be an issue for almost every company in the United States, as both sexes increasingly want to devote time to work and family.

    As companies ramp up their efforts to attract and keep women, they are finding that executive women say they have benefited from flexible schedules, supportive husbands, business opportunities and mentors. Judith Soltz, chief general counsel and executive vice president of Cigna, she has received professional support and recognition for her talent throughout her career. In 1998, she was given responsibility for all corporate legal functions such as mergers/acquisitions and employment law. The appointment was part of a succession-planning process at Cigna that identifies and develops managers to move up the chain of command. She says the plan was designed “to prepare me and test me and to give me exposure to board members.”

    In 2001, general counsel Thomas Wagner began a succession-planning process for his job. Soltz was a candidate. “Tom was very supportive of women. Why? Because we’re good.”

    While women as nurturers may sound like a cliché, management experts say that personality trait often means leaders who are better communicators and more adept at managing teams. The two top women at Cigna, Soltz and Andrea Anania, the firm’s CIO, both talk about their proficiency at rallying teams as a reason for their ascent up the corporate ladder. And both point to their ability to clearly state business concepts–legal matters for Soltz, technological issues for Anania–as a plus when communicating with bosses and staff. “I guess we learned these things from taking care of our dolls,” Anania quips.

    It appears that a significant number of companies are focusing on the female set, but few firms shout their ambitions from the rafters. First, it’s illegal to consider gender when making hiring or promotion decisions. While human resources can ask for a diverse pool of candidates from headhunters, for example, they can’t use testosterone as a reason to toss aside résumés. And many companies are mindful of not alienating men, still the predominant sex in most boardrooms.

    Atlanta-based AGL Resources, a publicly traded natural-gas company with a significant number of women executives, including its CEO and chairman, Paula Rosput, declined to be profiled in this story because of the message it might send. “AGL Resources is unique on a number of fronts. It’s not a sleepy southern utility anymore. It’s been run by a woman since 2000, and other women hold very senior executive positions in the company,” the company reports. ” Yet we certainly don’t want to give the impression to the readers of your magazine that only women are welcome at AGL. We are looking for balance so that when prospective employees look at AGL, they can see the rich diversity of our team.”

    The bottom line is finding the best person for the job, and most women aren’t looking for handouts. “Cigna created the opportunity, but you still have to achieve on a personal level, and there’s an element of luck,” says Soltz, who now earns more than $1 million a year, not including stock options and other compensation, and reports directly to the CEO.

    No discussion about women executives would be complete without a nod to the proverbial glass ceiling. Discrimination and stereotypes do limit opportunities and keep women off the executive track, says Paulette Gerkovich, senior director of research at Catalyst. “There are still pervasive stereotypes that women don’t want the top job, that women don’t want to relocate, that they don’t want to travel.” (Witness the $54 million settlement by Morgan Stanley in July with female employees who claimed they were paid less than their male counterparts and passed over for promotions, and the massive lawsuit against Wal-Mart by 1.5 million current and former women employees.)

Getting–and keeping–top women
    But even if all the weeds of prejudice were rooted out of American companies today, there wouldn’t be a sudden flood of women into the corner offices. Many women who hold top-tier posts today say that episodes of discrimination were merely pebbles on the career path and don’t buy the thinking that such bumps can bar women from the executive suite. “I never perceived there to be a glass ceiling,” says Kathy Hopinkah Hannan, 43, Midwest area managing partner for KPMG tax services and the first woman at the firm to hold the managing partner title. “At KPMG you don’t have to be a gray-haired male to be given opportunity and, more important, to be listened to.”

    Recruiting experts and executive women say that discrimination is often the first thing many people point to as an explanation for a lack of female leaders, but women face other challenges, including their own lack of understanding of business politics, a dearth of female leaders as role models and the never-ending struggle to balance work and family obligations, most notably child-rearing. Of the three highest-ranked women at Cigna, all of whom report directly to the CEO–Soltz, Anania and Karen Rohan, president of Cigna Dental and Vision Care–none has children.

    That doesn’t mean executive women aren’t balancing family and work. Noel Obourn was named senior vice president for Cigna’s national accounts in March. She has a 7-year-old son and a 5-year-old daughter. But her husband is a stay-at-home dad. “I do not understand how anyone at my level can have this type of career and not have a spouse who stays at home,” Obourn says. “It becomes too complicated to juggle both and do it adequately.”

    Kim Bonner Massey, assistant vice president of underwriting and business processes for Cigna, has set her sights on the CFO job. She has two young kids, and she and her husband both work full-time. It works because of one important factor, she says: “I have an excellent husband.” Both Obourn and Massey say their bosses at Cigna have been understanding when they needed to take time off for the family, and that the company provides schedule flexibility and telecommuting opportunities.

    Marty Nemko, a career and education consultant in Oakland, California, says that women are psychologically and verbally more sophisticated and more process-oriented. Despite that, he says, “the benefits of female leadership are insufficient to compensate for the disadvantages of hiring someone who insists on a shorter workweek and refuses to devote serious effort during personal time for professional development.”

    Peter Skalak, senior director of Peopleclick Research, says it’s hard to point to any one reason for the decline in the number of women at the top because the study did not look at causality. He speculates that it could be the glass ceiling, women choosing not to stay in certain jobs, or an issue of not enough work/life options for executives. Katherine Simmons, president and COO of Netshare in Novato, California, has a subscription-based networking service and job site for senior executives making $100,000 and up. She says she’s seeing more women MBAs start their own businesses, opting out of large corporations for entrepreneurial dreams. “They want flexibility and autonomy, and think they can move up faster on their own,” Simmons says.

    While recent figures by Catalyst show a slight rise in the percentage of women corporate officers at Fortune 500 firms, up to 15.7 percent in 2002 from 12.5 percent in 2000, researchers say there’s a long way to go. Despite the anemic numbers, many companies across the country want to recruit and retain women in high-level posts, especially in light of what many say is an impending shortage of talent for executive ranks in the years ahead.

Day care and mentors
    At Cigna, the unique needs of women with very young children are addressed. The company offers a host of programs such as on-site lactation rooms and lactation consultants to help mothers return to work while continuing to nurse. There are also perks such as on-site emergency day care and a cafeteria that offers take-home dinners. In addition to having companies help them address domestic concerns, women executives in a variety of industries say, networking and mentoring opportunities are very effective ways of helping them with the daily grind and assisting them in rising through the ranks.

    In 1998, New York-based Ernst & Young started a program called Women’s Plan, or Partnership, Leadership, Alliance and Networking. It enables the firm to identify the women with the most potential, create opportunities for those women to be mentored by an executive, and offer outside professional coaches. The plan has paid off, says Wendy Hirschberg, Americas Gender Strategy Leader, Center for the New Workforce at Ernst & Young. Today, 4 out of 20 board members at the firm are women, compared to one female director in 1996, and the number of women partners has more than doubled to 12 percent in the same period. In addition, the presence of women at the executive level has increased from zero to 14.5 percent.

    Retention of executives–men and women–continues to be an issue for almost every company in the United States, as both sexes increasingly want to devote time to work and family, says Bert Hensley, chairman and chief executive officer of Morgan Samuels Company, an executive-search firm that focuses on C-level managers. With the reality that women still do the lion’s share of child-rearing, many firms give women the opportunity to take time off. KPMG, which now offers employees a year’s leave of absence, is currently studying the possibility of a five-year leave as a way to retain women executives, says Joe Maiorano, executive director of KPMG human resources.

    Flexibility doesn’t have to mean offering women a chance to run companies or divisions on 20-hour workweeks. While the rank and file may be able to cut back hours, executives have to be there to get the big promotions and run day-to-day operations. Work/life balance at the senior level is not about cutting hours, it’s about flexibility, says Carter Franke, 47, chief marketing officer for Chase Card Services in Wilmington, Delaware, a division of JP Morgan Chase & Co. Franke’s mission is to be home every night at 6:40 to cook dinner for her husband and three teenage stepdaughters. That means she gets to the office by 8 a.m., works after hours and puts in the extra time whenever needed. She says that her boss, Bill Campbell, understands her schedule. “When he has me in a meeting or on the phone he will say, ‘Hang up. I know you need to catch that train.’”

    But even if the corporate environment is perfect, women may have to leave a bit of themselves outside the office door. Rohan, 41, Cigna’s dental and vision care president, recalls an informal mentor she had early in her career. On one occasion, she was in a meeting offering a group of executives a financial review, talking about risks and opportunities. After the meeting, her mentor told her: “You have to be much more deliberate in your delivery. You have to be more straight up and not sugarcoat the bad news.”

    That was her first experience with “direct toughness,” she says. “It’s like a football game. We women can be petty. We hold grudges. But in football, after the game where players are fighting each other, they pat each other on the butt and have beers. My mentor taught me it’s about business. It’s not about me.”

Workforce Management, September 2004, pp. 26-32 — Subscribe Now!

Workforce Management: Do you think American will avert bankruptcy? Why? What’s your strategy, when it comes to labor-management relations, to do that?

Gerard Arpey: We’re certainly not immune to what is happening in the industry, but we are doing all we can to adapt to changing circumstances.

The good news is that we ended the third quarter with more than $3.5 billion in cash, including $500 million in unrestricted (readily available) cash. The bad news is that record-high fuel prices and a revenue environment that is challenging, to say the least, have overshadowed our tremendous pro-gress. We expect to spend $1.2 billion more for fuel in 2004 than we would have with last year’s already relatively high fuel prices.

But we’re working hard on all fronts to drive improved results. The best way to do that is to continue driving Amer-ican to be more competitive by working together, collaboratively with our union and nonunionized em-ployees, and jointly confront the reality that’s before us.

    WM: Do you foresee a time when there will be no consultants at American dealing with labor relations—just labor and management?

Arpey: We collaboratively decided with union officials to hire Overland Resources Group because of their unique expertise in building stronger relationships between managers and employees. Our strategy is to continue working with Overland, having them serve as a neutral third party in our ongoing discussions, until a permanent structure is fully implemented.

But as this process matures and expands across our company, I expect that we’ll eventually be able to decrease our reliance on Overland as a facilitator.

    WM: Are you optimistic about the progress thus far? If so, why? What will be the ultimate (goal)?

Arpey: The success we’ve achieved thus far is a tribute to our employees and a testament to the power of the changes we are making. Our operational improvement is a direct result of our ongoing efforts to restructure our business and the willingness of everyone at American to accept change as an inevitable fact of life in the airline industry.

But even though we are gratified by the progress we have made and the improvement we have achieved in our cost structure, we know we still have a lot of work to do. We have to continue focusing on finding ways to do our jobs more effectively and efficiently.

The ultimate goal is to emerge from this challenging environment a stronger, leaner and more nimble competitor, creating a stable and successful future for all of us.

Coleman peterson, Wal-Mart’s former executive vice president of people, left behind a company facing a human resources public relations nightmare.

    While the 56-year-old human resources veteran says he departed the company voluntarily in April because “there were other things in my life I wanted to do” after 32 years in retailing, some labor experts wonder if he was a fall guy.

    “Wal-Mart’s image as an employer has been really going downhill, and it’s been on this guy’s watch,” notes Paul Clark, professor of labor studies and industrial relations at Penn State University. “You would think he would have to accept responsibility or blame for the rocky road they’ve had in recent years.”

    Peterson, now president and CEO of Hollis Enterprises, an organizational consulting firm he founded in Bentonville, Arkansas, was not on hand to help his replacement, Lawrence V. Jackson, with the transition. He’d left Wal-Mart several months before Jackson began his new job in October. But at the behest of Wal-Mart chairman Lee Scott, Peterson says he entertained Jackson and his wife, Kimberly, before Jackson started the job and that they talked about relocation issues.

    While Jackson has no human resources experience, Peterson says he’s “very excited” that he was hired. “He has operated at the senior operations level, which gives him some good strategic management skills, and that with the fact that he’s surrounded with great HR people with great competency will work well.”

    He predicts that Jackson will have his hands full dealing with immense projects ranging from protecting the Wal-Mart brand to developing workplace technology to be used to hire and promote employees.

    “Wal-Mart has always had a great reputation, but there are constituents out there that are not interested in allowing Wal-Mart to retain that good reputation–labor unions, for example,” Peterson says.

    Some labor experts believe one of Jackson’s main tasks will be keeping unions out, but Peterson calls that “a myopic view.”

    “Our belief is we don’t need unions at Wal-Mart to represent workers,” he says. But he adds that “the principal role of Lawrence Jackson will be to get good people, keep good people and grow good people.”

    As for technology, Peterson says Wal-Mart is in the process of rolling out a new program using technology to promote and hire employees, and that Jackson will play a key role in its implementation. When a potential worker walks into a Wal-Mart store they’ll be able to apply online, and that information will go into a centralized database.

    This system is already being rolled out at the retailer’s stores across the country, he says. And on the horizon, Wal-Mart plans to use technology to marry an employee’s career interests to the jobs available. “No one person is smart enough to know how to do that effectively with an organization of 1.5 million people,” he says. “Technology is.”

    With a large class-action discrimination lawsuit pending against Wal-Mart, such types of systems may end up becoming a requirement for the retail giant in order to ensure that its promotion practices are fair as it continues to grow. In the lawsuit, which was filed in June 2001 by six female Wal-Mart employees and gained class status last year, one of the allegations is that women were denied promotions.

Peterson himself has become embroiled in the discrimination suit. A memo he wrote in February 2001 to Wal-Mart’s executive committee discussing a Catalyst study on female corporate officers and top earners at Fortune 500 firms is now a plaintiffs’ exhibit in the case. “Although Wal-Mart has made improvements over the last five years in this endeavor, we are still behind both the Fortune 500 and general merchandisers in the development of women into corporate officers,” the memo states.

    “What I meant was, we were continually making progress,” Peterson says of the memo. “The question is, is it fast enough, high enough? An organization never improves itself without being critical of itself. It’s a positive process.”

Workforce Management, March 2005, p. 37 — Subscribe Now!

We all know that workers on the front lines are often the ones with the best ideas to help boost productivity and sales. But setting up a reward system for every bit of worker wisdom based on what each idea is worth might spell trouble.

    Alan G. Robinson, co-author of Ideas Are Free, due out this month, teaches at the Isenberg School of Management at the University of Massachusetts. He says his research has found that cash and nonmonetary one-time prizes are not clear indicators of employee motivation and can, in the long run, have negative effects on a company. In fact, he believes that such reward programs can lead to greed and fraud, and could end up costing more than they are worth.

He offers three examples:

• A worker in one of Europe’s largest wireless-communication companies stumbled across an error in the organization’s billing software that was costing some $26 million per year in lost revenues. While he pointed out a simple way to fix it, the company’s CEO worked behind the scenes to block the idea. Why? The sizable reward to which the worker was entitled through the company’s suggestion system would have drawn embarrassing attention to the oversight.

• Two workers at a top U.S. airline came up with an idea that brought in $3 million in additional profits each year. When they were given a paltry $1,000 instead of the 10 percent reward to which they were entitled, they took the airline to court. The case reached the California Supreme Court–twice, no less–and directly involved the airline’s CEO. The company ultimately abolished its suggestion program because of disputes over rewards.

• At a midsize electronics company, a special committee selected the best employee suggestion on a quarterly basis. The worker with the winning idea was rewarded with 10 percent of the total cost-savings from the suggestion. It was later discovered that the committee’s chairperson, a top manager, had actually been gaming the system behind the scenes and, in turn, getting half of the amount awarded to each winner. By the time he was caught, he had ‘stolen’ nearly a quarter of a million dollars.

Workforce Management, April 2004, p. 44 — Subscribe Now!

Scott Testa, chief operating officer of Mindbridge Software, was proud of the employee incentive program he put together 18 months ago to light a fire under his sales force and inspire them to reach new sales heights. The prize: a long weekend at any destination the high-yielding salespeople wanted, with a cap of $3,000 for airfare and lodging.

    “How could this go wrong?” Testa recalls thinking to himself when he announced the reward program to the 15-member sales staff at the Norristown, Pennsylvania, software firm. “We’re a fast-growing company, and we’re always looking for good incentives to keep our people motivated.”

    Unfortunately, the reward plan that couldn’t lose did just the opposite of motivating his employees. It actually ended up demoralizing them. Testa realized he had set the bar for winning the trip too high. Even though the average salesperson brought in $200,000 a month, Testa formulated a reward criterion that was more than double the average take. Salespeople would have to bring in more than $500,000 a month for a whole year to qualify for the lavish trip.

    Testa admits that he came up with the sales figure “by the seat of my pants,” without any input from staff or his managers. “It just became obvious that the goal was not going to be met. I’d hear snide comments under people’s breath in the halls and in meetings, and finally a sales manager confided in me that the sales numbers were way too high,” he says. The program was dismantled within the first quarter of its introduction and eventually became an ongoing joke among the sales staff.

    Employee reward programs have long been touted as a great way to motivate staff, but companies are increasingly finding that they walk a tightrope in creating the right incentive plan. And given a still sluggish economy, it’s more critical than ever that the billions doled out each year for such programs be spent wisely as companies escalate their efforts to reward performance while keeping a lid on salary increases, says Ravin Jesuthasan, co-leader of the rewards and performance-management practice for Towers Perrin.

    “So many reward systems are ill thought out,” says Hellen Davis, president and CEO of Indaba Inc., a management consulting and training firm in Malvern, Pennsylvania. Such failures are not just a nuisance but also could make workers angry and lead to a loss in productivity and sales. She offers the example of a Fortune 500 insurance firm in California that rewarded some of its top salespeople with tickets to a Christmas pageant at a local cathedral. The only problem was that about a third of the firm’s sales force was Jewish.

    “The employees were upset and couldn’t believe they would give them a gift like that,” Davis says. “What was supposed to be a reward became a disaster for the company.” The workers ended up boycotting the firm for six months by bringing in only the minimum amount of sales on the insurance and investment products they sold. They wanted a formal apology from the CEO, but the executive was hoping the matter would just blow over.” Although the CEO finally relented, she says, it cost the firm nearly $750,000 in sales over that period and ultimately reached a loss of $1.5 million because many of the top producers left the firm as a result.

“How could this go wrong? We’re a fast-growing company, and we’re always looking for good incentives to keep our people motivated.”

    For a smaller company with under 100 employees, Davis estimates that the cost of a reward program gone bad could be as much as $200,000, including the cost of retraining workers and a loss in productivity, not to mention the intangible impact on employee morale. (And that’s above and beyond the cost of a typical recognition program, about 2 percent of total payroll for most companies, according to World At Work, a nonprofit human resources and benefits association in Scottsdale, Arizona.)

    Jesuthasan has seen a move away from lavish rewards in recent years. More firms, he says, are eliminating programs such as car giveaways and $1,000 bonuses for the employee of the month, and offering lunch with the CEO instead. Mindbridge Software’s Testa says one of the firm’s most successful motivators is the company-wide half-day outings that occur whenever a milestone revenue target is achieved. “Morale is really good after those events,” he says. “It allows people that wouldn’t associate in the office to talk and get to know each other.”

    There are several factors that pose problems for companies trying to craft award programs. The tight labor market has many workers just biding their time for better economic days and the chance at a new job. Also, a more diverse U.S. workforce presents challenges for company leaders who have to focus on revamping long-standing reward traditions and non-monetary prizes to accommodate different ethnicities and religions. Christmas hams, for example, might not go over well with Muslim and Jewish workers, says Bob Nelson, president of Nelson Motivation Inc., in San Diego.

    And in a time of layoffs and outsourcing, recognition and reward programs in general might not be the best remedies for motivating the rank and file. Management experts say that such programs could look like empty attempts to appease workers and end up backfiring. “We know that people have become disengaged,” says Curt Coffman, global practice leader at the Gallup Organization. “They are psychologically resigning but still staying on the job. I call them road warriors. They’re retired but still on active duty.” A poll he conducted in the fourth quarter of last year found that 55 percent of workers were “not engaged,” basically not committed to their jobs and doing the minimum amount of work. Another 17 percent were “actively disengaged.” Not only were they unhappy with their jobs, but they also were acting out that unhappiness every day. Only 28 percent were deemed “engaged,” and much of the innovation and drive for efficiency was coming from this group, he says.

    How do you get the disengaged to join the ranks of the engaged? Not outsourcing everyone’s job seems to be helping Milliken & Co., a textile firm with 13,000 employees headquartered in Spartanburg, South Carolina. While the economy and outsourcing abroad have hurt the textile industry in recent years, Craig Long, vice president of quality for the firm, says his company is committed to producing domestically sold goods in the United States.

    Management experts often point to Milliken as a prime example of employee motivation even though the company doesn’t focus on monetary rewards.

    In 2003, the firm received an average of 115 ideas per employee, and of those 90 percent were implemented. The workers were not given mugs or trips as an incentive to come up with ways to increase productivity or sales. The reward was that their ideas would be implemented. And one of the keys, Long adds, is that managers promise to let workers know within 72 hours whether their ideas will be used.

    Dean Schroeder, the Herbert and Agnes Scholes Schultz professor at the College of Business Administration at Valparaiso University, has researched Milliken’s idea system. Though Milliken officials don’t disclose company ideas that it has implemented, Schroeder, who is also co-author of Ideas Are Free, says that one example is an idea that came from a dock worker. The employee, who was almost run down by a truck driver backing up a ramp to unload materials, suggested escape ladders be put in loading areas.

“We find that the recognition rewards like salesperson of the year, manager of the year, while they feel good at the time, are not effective. They become a whose-turn-is-it-next program with little clarity. What goes into this award? What is excellence?”

    But even the best employee motivators make mistakes. Milliken offers employees at its 57 plants, mainly in the Southeast, the chance to win a parking space every month if they meet certain productivity or sales goals. On one occasion a lab technician at the company’s headquarters refused to park in the space right outside the main entrance. “We went and talked to the lady,” Long recalls, “and she said, ‘You picked the space where you wanted to park. I work on the other side of the complex and would have to walk a quarter mile to get to my office.’ “

    “It was one of those lessons learned,” Long adds.

    And forget about reward mainstays, Coffman advises. “We find that the recognition rewards like salesperson of the year, manager of the year, while they feel good at the time, are not effective. They become a whose-turn-is-it-next program with little clarity. What goes into this award? What is excellence?” Most incentive plans today, he says, do not clearly answer these questions. Another big problem, Coffman says, is that awards tend to be impersonal and happen far from the actual employee action, sometimes a year after the fact. Basically, he says, the recognition should come about every seven days, whether it’s an “attaboy” or “I noticed how you handled that customer.”

    The best reward occurs in real time between two people, Coffman says. That means companies have to take a hands-on approach when crafting reward plans. It’s not necessary to pay out upwards of half a million dollars a year to an outside employee-recognition firm to figure out what works best internally, he says. It might be easier and less expensive than you think. Coffman admits he’s even learned from his own mistakes. One of his top performers at Gallup was very focused and was often on the phone with his office door closed. Coffman would write notes of appreciation and slide them under his door. But on one occasion, the employee came flying out of his office saying, “Don’t you have the courage to open the door and do it to my face?”

Don’t underestimate the personal touch
    A top producer at an insurance company who was repeatedly named salesperson of the year and received an endless array of trophies and plaques finally stopped coming to the reward ceremony. One wise manager took note of his absence, Coffman says, and asked, “What’s important to this individual?” The manager realized that the man’s wife and three daughters were the focus of his life and the next year gave the salesman a portrait of his family. The worker was overjoyed at the gesture.

    But even the best-thought-out reward plans can fail, for no apparent reason. In 2002, Cheryl Creuzot, managing partner of a Nationwide/Provident agency in Houston, found her branch in the midst of a “horrible” economic downturn. She decided to offer a one-year lease on a BMW to encourage her employees to increase production. “Houston was hit hard, and it was like a virus sort of spread through our office. There was nothing you could do to get our people out of it,” she says. She spent about $1,500 promoting the reward program, giving every worker a metal model of a BMW to display on his or her desk. And she got feedback from her employees on how high to set the annual sales targets, which varied according to experience.

    “Nobody won,” says Creuzot, still surprised at how things transpired. “I don’t know what happened. It could have been that the contest dragged on too long and people lost momentum. Maybe it was because we didn’t have a bell cow that year, a leader in production to pull the rest of them ahead.”

    One big motivator for her staff has been a corporation-wide recognition program that Nationwide/Provident has conducted for many years that combines rewards with education and career development. Every year, the insurer’s staff is eligible for a chance to attend a leadership conference, which is held at a resort, if they hit certain annual sales levels. The prize is tiered, offering higher performers more days and more amenities at the resort. But employees are expected to attend motivational, technical and developmental meetings each day starting at 8 a.m. and socials in the evening where they can network with other Nationwide/Provident sales staff. This past February the event took place at a resort in Cancún.

“Nobody won. I don’t know what happened. It could have been that the contest dragged on too long and people lost momentum.”

    “I think the conference drives my employees,” Creuzot says.

    There might be something to rewarding workers with career-enhancing opportunities, beyond the sun and fun. In a recent Towers Perrin survey called “Rewards & Performance Management Challenges: Linking People and Results,” 60 percent of the highest-performing companies reported that they reward their best workers with training and development opportunities. There’s nothing wrong with rewarding individuals for performance, but beware of creating “stars,” cautions Wendy Greenfield, president and founder of WM Greenfield Associates, a consulting and training firm with a focus on workplace ethics. This works directly against a company’s effort to foster a team mentality, she notes.

    “It’s not going to be the superstar that gets you through the tough times,” says Leslie Fishbein, president of Kacey Fine Furniture, a six-store furniture chain in Denver. Her company focuses on rewarding not just an individual but a group and doesn’t engage in handing out lavish trips or cars. This past February, the company implemented a program in which every department and every category of the company is supposed to come up with ideas to generate sales. The winning team gets a chance to execute the idea within a 90-day period and increase the value of the company. Since the company offers profit sharing, Fishbein says, there is a potential for a monetary reward down the line.

    There are still those firms that find success in more traditional, seemingly outdated reward systems. Mark Metz, chief executive officer of Atlanta-based Optimus Solutions, is more than happy with his Porsche Incentive Program, which gives any salesperson with over $1.1 million in profit margins annually a one-year lease on a Porsche 911. On average, 10 to 15 percent of his 70-member sales team win a lease each year. He estimates that the program costs him about $100,000 each year for a return on investment of $400,000 to $500,000. “It’s been excellent from a sales perspective,” he says, and has helped with retention and recruiting.

    However, he admits that there has been some dissension among other workers at Optimus, a technology solutions provider, which employs 300 workers. The program is open only to sales staff. “We have had some people say that they wanted the opportunity to drive a Porsche,” he says. “But we explained to them that if the salespeople are real successful, the rising tide lifts all boats.”

Workforce Management, April 2004, pp. 43-46 — Subscribe Now!