Author: Fay Hansen

Bill Matson, an American, is now senior vice president of human resources at Lenovo Group, one of China’s largest companies, but he works from an office in the United States. Matson reports directly to the CEO, who is not Chinese but is another American, Steve Ward.

    And Ward’s office is not in Beijing, but in suburban Purchase, New York, where a distinctly American glass-and-steel box houses Lenovo’s global headquarters. Ward’s chairman and CFO are Chinese nationals. His COO, controller and senior vice presidents for sales, marketing and product development are Americans.

    Lenovo created this unique amalgam when it bought IBM’s personal computing division in a $1.75 billion deal announced in December, making it the world’s third-largest seller of PCs.

    It immediately offered employment to the IBM executive team and all 10,000 employees. The transaction closed on May 1. No one was asked to relocate, and virtually all accepted Lenovo’s job offer.

    “The attrition rate that we’ve seen is at or below the levels we’ve historically seen at IBM on a business-as-usual basis,” Matson says.

CHINESE FIRMS’ INVESTMENTS IN FOREIGN COMPANIES AND ASSETS
*2004 total does not include Lenovo’s IBM acquisition
Source: China Ministry of Commerce

Overnight, Lenovo quadrupled its revenue, doubled the size of its workforce and adopted the new model for optimal workforce management: buying up top talent on a global scale. With the IBM acquisition, Lenovo gained not only a powerful brand name, but some of the most seasoned IT executives in America and a worldwide network of highly skilled computer sales and distribution employees who know tax laws and invoicing practices in 66 countries.

    The acquisition signaled that corporations from the developing nations are ready to troll the world for the biggest business opportunities and the best employees along with their advanced-nation counterparts. The top pools of talent for Lenovo’s purposes are in Raleigh, Beijing and a hundred points in between.

    And in the virtual world where top management and knowledge workers now operate, there’s no need for the talent to go to the company. The company will come to them.

    Lenovo’s transformation puts it squarely in the ranks of the global corporations that increasingly operate without borders. Globalization has long been the half-truth of companies from the developed nations investing in the developing countries. Now the flow is moving both ways.

    Powerful corporations are tapping talent wherever they can find it and building a truly integrated global workforce. And forget about culture clash. When billion-dollar investments and market share are at stake, business imperatives trump cultural differences.

    “Many companies operate abroad but are not truly global,” notes Robert Freedman, president and CEO of ORC Worldwide, an international compensation consulting firm in New York. “Global means that you source wherever is affordable, set up manufacturing in the best cost locations, sell in as many markets as possible, sign on talent wherever it is located and develop the top people regardless of where they are from.”

    U.S. media coverage largely missed the significance of the Lenovo-IBM deal. While it may be more titillating to talk about the potential for a culture clash when a Chinese company buys a U.S. firm, the dull truth is that successful global corporations look a lot alike and manage their employees in ways that have far more similarities than differences.

Globalization has long been the half-truth of companies from the developed nations investing in the developing countries. Now the flow is moving both ways.

Smooth transition
    With its IBM acquisition, Lenovo morphed into a powerful international player with worldwide markets, global HR objectives and employees selected to meet the specific needs of the organization at its precise stage of development.

    Lenovo’s board handed the company over to Ward because it knew that he had the right skills for establishing Lenovo as a global company and moving it into new markets. And despite the media’s tendency to linger over the image of American workers now on the payroll of a Chinese organization, IBM’s U.S.-based PC employees recognized the benefits of being part of a global labor market, and embraced the deal.

    At this point in the history of the two companies, they are more valuable to Lenovo than they were to IBM.

    “When the announcement was made to the Raleigh employees, the audience broke into spontaneous sustained applause,” Matson recalls. “These are employees who had worked for IBM for their entire careers, but they see Lenovo as a market leader in China that has grown dramatically over a relatively short history, and recognize that this company is making an enormous investment to create that growth on a global scale. They’ve watched the evolution of IBM’s business, and they know that PCs are no longer part of its core.”

    Less than 24 hours after the two companies announced the acquisition on December 8, the human resources department at IBM’s PC division released a 59-point question-and-answer memo to employees informing them that they would become employees of Lenovo, their compensation and benefits would remain identical or fully comparable to their IBM package, and they would not be asked to relocate.

    The memo covered everything from salaries and bonuses to tuition reimbursement and corporate charge cards, down to the last detail.

    The memo also made it clear that employees could accept employment with Lenovo or leave, with no separation pay. IBM would not consider them for a transfer within IBM or recruit or hire the new Lenovo employees for two years. As Lenovo opened a new door for them to join a high-growth company fully committed to personal computers, IBM–determined to complete its transition to business services–quickly closed it behind them.

    Although the acquisition involved two companies from radically different cultures and employees scattered across six continents, the workforce transition was a nonevent. Matson led the effort to hand all 10,000 IBM employees over to Lenovo and polished off the entire project in a matter of months.

    Of the 2,400 employees based in the U.S., 1,900 work in Raleigh’s research park, where 40 percent of all employees already work for foreign companies. Four thousand are based in China, were IBM has maintained large manufacturing, procurement and distribution facilities for many years, and the remaining 3,600 work in IBM sales and distribution centers around the world.

    Matson uses the same set of principles to guide workforce management in all locations. “It’s easy to overplay the idea that this is a Chinese company purchasing a U.S. company and the whole notion that China will run the world someday,” he notes. “But it’s important to recognize that Lenovo’s headquarters are in New York, and its management is as global as any organization in the world.”

“As an HR executive, you have to be good at unlocking the power of the talent within your global organization. You have to establish the broad principles of how you want to manage your business, but then you have to be very astute about how those principles are applied in each local market so that you remain responsive to the needs of people in different environments.” –Bill Matson

    To smooth the transition, Matson launched an extensive communications program that included biweekly e-mail updates to every employee, a series of town hall meetings, seminars to help employees with financial planning as they moved into the new organization, more seminars on the benefits plans and an ongoing intranet.

    “We’ve delivered on the promise that there will be consistency,” Matson says. “But it’s the promise of additional growth that we’ve brought to them as a vision. Employees are excited because they can see the opportunities that come from growth and the potential in the organization and what that means to them.”

Global integration
    Lenovo left the IBM PC division’s human resources staff in place, with a substantial number of HR professionals in Raleigh, London and Sydney, Australia, as well as a small team in Purchase to focus on strategic issues. “We also have some very good HR people in China, so we are a truly global HR team, consistent with what we had under IBM and with the philosophy and approach used by IBM and by any number of multinational companies,” Matson says.

    “The fundamentals or principles of how we transitioned people to the new organization and the design and structure of our policies and practices were driven at a global level, but we have a strong team of people around the world–both former IBM HR managers and people from Lenovo–who executed the policies and ensured that the transition was properly managed in every country,” he says.

    “As an HR executive, you have to be good at unlocking the power of the talent within your global organization,” Matson adds. “You have to establish the broad principles of how you want to manage your business, but then you have to be very astute about how those principles are applied in each local market so that you remain responsive to the needs of people in different environments.”

    Lenovo and IBM designed their deal to advance the global interests of both companies in prime markets. Lenovo gained immediate access to the U.S.; IBM gained an 18.9 percent share in Lenovo, adding to its already huge holdings in China. The acquisition also designates IBM as the preferred services and customer-financing provider for Lenovo worldwide.

    With Lenovo now well-positioned to hold its spot as the dominant personal computer company in China, IBM will ride its coattails into a larger portion of the lucrative services business there.

    The Lenovo deal is part of IBM’s established pattern of building close ties to the host government and local companies as it expands into new markets. IBM is now Lenovo’s second-largest shareholder, behind the Chinese government, which owns 46 percent of the company.

    IBM has long been a truly global corporation, with clients in 174 countries and 60 percent of its 320,000 employees outside the U.S. Like many U.S.-based corporations, it has known for some time that the engines of growth lie beyond its home market. Last year, its revenue growth slumbered in the U.S. but topped 75 percent in Russia, 45 percent in India and 25 percent in China.

    IBM’s China operations include fully owned subsidiaries, joint ventures and partnerships with hundreds of Chinese vendors. With China’s IT market expected to double from $24 billion in 2004 to $48 billion in 2008 and eventually displace Europe as the second-largest in the world, the Lenovo deal provides IBM with a tighter grip on a rapidly expanding market.

    IBM uses its innovative “on demand” workplace to facilitate global collaboration among its employees through an intranet that carries 3 million instant messages and 1,400 e-meetings every day. The company’s research workers are spread across labs in the U.S., India, Japan, Israel and Beijing, all collaborating through the seamless system that it provides for its talent around the world.

Overseas leadership
    As Lenovo demonstrated when it filled its executive suite with Americans, corporations are increasingly looking abroad to staff the top tiers of their organizations. India’s Tata Group, now a $14 billion global conglomerate, runs four of its companies with U.S. and U.K. executives. Japan’s Sony Corp. broke 60 years of tradition on June 22 when it installed its first non-Japanese chairman and CEO, Howard Stringer, a former CBS president and U.S. citizen born in Wales and educated at Oxford.

    U.S.-based global companies also increasingly draw executive and managerial talent from overseas. A new study of the largest U.S. companies by ORC Worldwide found that on average, 24 percent of the top managers–the highest 100 to 250 people in the company–are from outside the U.S. For European corporations, the average is 40 percent.

    Expatriate managers also have a different look. Companies are using more expatriates, but they are drawing them from all of their locations, not just the home country. Over the past seven years, the average number of employees of all nationalities working abroad for North American companies has risen by 55 percent, according to ORC. At the same time, the portion of these expatriates who are from North America has declined from almost three-quarters to just over half.

    “Ten years ago, American companies sent Americans abroad,” Freedman says. “Now a more global mind-set is in place. U.S. and European companies are more inclined to send their Asian third-country nationals to China. And companies everywhere are more inclined to use Europeans than Americans.”

    This more global approach to recruiting managerial talent and deploying expatriates is still limited, however, by the tangled web of national laws and regulations that inhibit full mobility. “When the laws become more borderless, the corporations will become more borderless,” he says.

    As more companies from the developing nations invest abroad, the mix of talent at the top will become more international. Only a decade ago, foreign direct investment flowing out from the developing countries was negligible. Last year, it reached $40 billion, according to the World Bank.

    Matson notes that the days when companies could focus on a single market are over. “Within the human resources profession, this means that we’ll see a continued focus on people who can operate effectively on a global scale,” he says. “Many organizations have been ‘global’ for many years, but if you look closely, you’ll see that they really operated in many different countries as almost separate franchises, loosely confederated. The future will require a much closer interlock.”

    Lenovo’s IBM acquisition marks the new reality that corporations from both the developed and the developing worlds invest on a global basis, keep costs low by using low-wage labor in the emerging nations, and increasingly recruit managerial talent and knowledge workers on an international scale.

    Managing a workforce that supports global innovation, market share and profitability now fills Matson’s days at Lenovo, just as it did at IBM. Technically, he is a foreign national working for a Chinese company, but he looks much more like a global executive at a new worldwide industry leader.

EMPLOYMENT AT U.S.-BASED GLOBAL COMPANIES
Year	Total	Employed in U.S.	Employed in foreign affiliates
1995	24.5 million	18.6 million	5.9 million
1996	24.9 million	18.8 million	6.1 million
1997	26.4 million	19.9 million	6.5 million
1998	26.6 million	19.8 million	6.8 million
1999	30.8 million	23 million	7.8 million
2000	32.1 million	23.9 million	8.2 million
2001	31.1 million	22.9 million	8.2 million
2002	30.5 million	22.2 million	8.3 million
2003	30.1 million	21.8 million	8.4 million
Source: U.S. Bureau of Economic Analysis

Workforce Management, July 2005, pp. 36-46 —Subscribe Now!

Employers’ wildly successful fight to cut labor costs will continue into 2005. Although inflation may cool from this year’s oil-inspired highs, wages will barely keep pace with prices as 2005 arrives. Impressive productivity gains will keep labor markets soft and unit labor cost increases extremely low.

    Changes in real hourly earnings continued to fall into negative numbers for five of the first seven months of this year, with the rate of decline surpassing even 2003’s dramatic drop. Lower real wages have not generated higher turnover, however. Quit rates remain at record lows of 1 percent to 2 percent across almost all industries.

    Ongoing workforce reductions, lower real wages and rising productivity pushed unit labor costs down 0.4 percent last year. Inflation-adjusted wages continued to sink in the first half of this year, but benefit costs rose, workforce reductions moderated and productivity growth slowed, pushing unit labor cost increases up slightly to a modest annualized rate of 1.1 percent. The wage and salary component of the Employment Cost Index rose 2.5 percent for the 12 months ending June 2004, well below the rate of inflation, but the benefits component grew 7.3 percent.

    Employers will see fairly flat unit labor costs into 2005, but will have to slash benefit costs to wring additional savings out of compensation. Benefit-cost increases have outpaced wage increases since June 2000 and now stand at their highest level in two decades. Virtually all of the increases can be traced to health-care-benefit costs. The health-insurance component of the Employment Cost Index rose 10.2 percent in 2003 and at an annualized rate of 8.7 percent in the first half of 2004. Companies with extremely aggressive health-care-cost controls have been able to hold increases to 7 percent a year, but this is still an unacceptable number in any industry.

Unit Labor Costs		Real Hourly Earnings
Annual percent change
1990	4.1	-2.2
1991	3.3	0.1
1992	1.2	-0.7
1993	1.6	0.1
1994	0.5	-0.1
1995	1.6	0.4
1996	0.7	0.4
1997	1.4	2.6
1998	3.2	2.1
1999	1.8	0.8
2000	4.2	0.9
2001	1.5	2.1
2002	-1.1	0.6
2003	-0.4	0.1
2004*	1.1	-0.4
*first half annualized
SOURCE: Bureau of Labor Statistics

Split-dollar life insurance may have been the last thing on Jeffrey Skilling’s mind when he was led away in handcuffs on February 19, but his split-dollar policy was one of many that spurred regulators to rethink these arrangements in the wake of the Enron disaster. Former Enron CEO Skilling and former chairman Kenneth Lay reportedly used their tax-advantaged split-dollar policies to accumulate massive wealth, avoid taxes and shelter their deferred compensation from the company’s creditors.

    Until recently, companies commonly used split-dollar policies to provide executives with tax-free premium payments for $5 million to $50 million in life insurance. Under these policies, the employer typically buys life insurance for senior executives, with the premium payments and cash-value accumulation treated as a “loan” to the employee, and the employer holds the right to some portion of the cash value and death benefit.

   The first blow to the policies came with the 2002 Sarbanes-Oxley Act, which restricts corporate loans to executives. “Public companies should discontinue payments under split-dollar arrangements for officers and directors until such time as the SEC clarifies the applicability of Sarbanes-Oxley to the plans,” says Margaret Gallagher Thompson, chair of the trusts and estates practice group at Cozen O’Connor in Philadelphia.

    The IRS and the Treasury Department issued the second blow to split-dollar policies in the form of new regulations proposed in 2002 and finalized on September 11, 2003. The new regulations apply to all companies and all employees covered under split-dollar arrangements entered into or “materially modified” after September 17, 2003. “From the perspective of all parties involved, including HR executives, the new regulations clearly make these plans less attractive, and fewer life-insurance professionals will be zealously presenting them,” says Byron Udell, president and CEO of AccuQuote, a life insurance brokerage firm.

Tax bite
    The regulations stipulate that the tax treatment for split-dollar arrangements will now be determined under two different tax regimes, depending on who owns the policy. The new “loan regime” rules cover most collateral-assignment systems, where the employee usually owns the policy and assigns a portion of the cash value and death benefit to the employer in return for the premium payments and cash-value increases “loaned” to the employee. Unless the employee is required to pay the employer market-rate interest on the loan, the employee will be taxed on the difference between the market rate and the actual interest being charged.

    The new “economic benefit” regime rules cover most “endorsement” systems, where the employer owns the policy and its cash value, and the employer’s premium payments are treated as a taxable economic benefit to the employee. The economic benefits to be taxed include the employee’s interest in the policy’s cash value and current life-insurance protection.

    Because the new regulations define split-dollar arrangements in broad terms, Thompson advises workforce-management professionals to take a look at their insurance policies that they may not commonly think of as split-dollar–because they may actually fall under these new rules. This could include any insurance arrangement, other than group term plans, in which the employer pays all or part of the premiums and will recover the premiums from policy proceeds or cash value, and the employee names the beneficiary or has an interest in the policy’s cash value.

    “The effects of the new regulations on split-dollar programs are significant and complex,” says Kristin Barens, managing director, Mullin Consulting. “The final regulations could dramatically increase a participant’s tax under collateral-assignment arrangements. Companies should quantify the additional participant tax to see if it makes sense to terminate or modify these arrangements.” The final regulations have less impact on endorsement arrangements. A quick examination of endorsement arrangements can determine whether modifications would be advantageous.

    Companies should also monitor the plans more closely. “For arrangements operating under the old rules, the HR executive should be certain that the economic benefit is properly paid by the employee, or reported to the IRS for tax purposes,” advises Lynne F. Stebbins, vice president, advanced planning and professional services, The Guardian Life Insurance Company of America. “The economic-benefit split-dollar arrangements will be used more widely for lower-level key employees and managers in an effort to provide life-insurance protection in addition to a basic group life-insurance plan.”

Alternatives
    Employers looking for alternatives to split-dollar policies can choose from a number of viable options. Barens says that if the participating employees value all aspects of their current split-dollar arrangement, a tax increase resulting from the final regulations may not necessitate a change to the existing benefit.

    If they value only certain elements of the policy, such as the death benefit, options include a premium bonus program to cover the costs of buying individual life-insurance coverage or providing additional supplemental individual or group term-insurance coverage. Variations on these options can also be implemented as separate strategies or used in combination to meet both corporate and individual needs.

Jane Paradiso, practice leader for workforce planning at Watson WyattWorldwide, offers this cautionary message: “Before you begin cutting benefits,take a step back. HR executives tend to be reactive and often don’t have themetrics needed to look strategically at what is best for the organization.”

    Cutting benefits without clear objectives and consideration of the impact onemployees can undermine performance. Any changes in benefit plans should be partof workforce planning, which entails analyzing the demographics for employeesand their dependents, identifying the most important positions, and calculatingturnover and replacement costs. “With this information in hand, you can createan ROI model to determine which cuts make sense and what savings can beanticipated,” she says. “This is an unemotional analysis that looks at costsand the level of risk involved.”

    Paradiso advises executives to look at the problem holistically andscientifically, and aim for a package of solutions–a combination of cuttingsome benefits and adding others–that is attuned to the needs of theorganization, particularly in terms of retaining key people. “Otherwise, you’llbe left with a company of lower performers, and any cost savings derived frombenefit cuts will be lost,” she says.

    Effectively communicating the changes to employees is absolutely critical.”Make it honest, and make sure employees understand why the cuts arenecessary.” She advises against asking employees for input on possible benefitcuts. “This approach frequently backfires,” Paradiso says. If you find thatyou cannot act on their recommendations, which is often the case, then you arein difficult situation. It’s best for executives to make the decisions aboutcuts on the basis of business needs and objectives. This is their job and whatthey get paid for.”

Workforce, March 2003, p. 42 — Subscribe Now!

International Game Technology, a supplier of slot machines and other gamingdevices based in Reno, Nevada, has been hit by double-digit health-benefit costincreases for its 4,000 employees. The message was clear, says Randy Kirner,vice president of human resources. “Either we make significant interventionsto manage costs, or suffer cost increases outpacing our corporate revenue andearnings growth. Our dilemma on the employee side was equally compelling. We arean employee-oriented company and felt it was unfair to shift costs to employeesto minimize corporate responsibilities. Cutting benefits was also distasteful.”Cutting salaries or wages was “absolutely not an option,” Kirner says. IGTis a growing company operating in one of the tightest labor markets in thecountry. Unemployment in Reno is a mere 3.2 percent.

    Kirner turned to aggressive vendor management and new plan designs to controlcosts without cuts in wages or benefits or increased cost-sharing. “We engagedour broker, ABD Insurance and Financial Services, and other key stakeholders,”he says. The result was a top-to-bottom re-evaluation of administration anddesign based on a careful analysis of utilization and options. The firmconsolidated two company health plans into one PPO, which enabled it to submitRFPs to third-party administrators. “We determined we wanted to look atvendors offering catastrophic and large-case management, disease management,maternity management, and electronic access for the company, providers, andemployees,” Kirner says. The company chose a vendor on the basis of theseneeds and anticipates saving more than $1 million.

    IGT also moved pharmacy management out of its PPO and into a separatecompany, which resulted in first-year savings of $300,000. In the process, thecompany identified an opportunity to change its delivery of specialty drugs, foradditional savings of $25,000 a year. It also outsourced its COBRA/ HIPAAservices, saving more than $25,000, and self-insured its vision plan. Inconjunction with a new HRMS implementation, IGT tapped a data clearinghouse toimprove benefit-billing accuracy.

    IGT renegotiated its employee assistance program as well as short- andlong-term disability and AD&D contracts for additional savings, and gainednew features such as direct claim services and travel assistance. Finally, thecompany outsourced flexible spending account management, which increased servicelevels for employees while reducing internal costs. Kirner spent a great deal oftime on the vendor and design overhaul. “The process was detailed and involvedmany, many sessions and decision points,” he says, “but the projectedsavings will ease cost pressures.” IGT carefully communicated the changes toemployees. “Overall, employees were prepared for the changes and felt that thecompany had done its homework,” he says.

Workforce, March 2003, p. 40 — Subscribe Now!

The Uniformed Services Employment and Reemployment Rights Act, enacted in1994 and significantly updated in 1996 and 1998, provides protection and rightsof reinstatement for National Guard and Reserve members. USERRA bars any adverseemployment actions by an employer if the action is motivated even in part by theemployee’s military service. Employees must be excused from work for militarytraining or deployment, and must then be re-employed in the same position theywould have had if their employment had not been interrupted. Reservists areentitled to all rights and benefits that they would have attained if they hadbeen continuously employed.

    A 1999 Defense Department study found that a shocking 31 percent of employersare not aware of any laws protecting reservists. In an extensive 2002 U.S.General

    Accounting Office study, most of the reservists contacted reported that theiremployers comply with USERRA provisions, but many had complaints. Some said thattheir supervisors were hostile toward their reserve duty and had activelyencouraged them to leave the reserves. Others alleged employer misconduct that,if confirmed, would be a clear violation of the law, including being deniedmedical benefits upon their return and being forced to use vacation time formilitary duty. In one unit, more than 30 percent of the members surveyed saidthey had problems with their employers when they returned from an extendeddeployment to Bosnia.

    Reserve officials, reservists, and employers all commented to the GAO thateven in companies with good policies, reservists may face front-line supervisorswho do not always comply. One reservist reported that despite working for amajor corporation that has received numerous awards for its policy onreservists, he was placed on probation after returning from a nine-month Bosnia mobilization. HR’sjob does not end with rolling out a USERRA compliance policy; enforcement up anddown the line is necessary.

Workforce, January 2003, p. 35 — Subscribe Now!

Employers should prepare now for what may be the largestreserve deployment in U.S. history. Nearly 900,000 National Guard and U.S. ArmedForces Reserve members are subject to mobilization; a majority are full-timeemployees with civilian jobs. Experts estimate that as many as one out of everythree will be called to active duty if the U.S. goes to war against Iraq.

    With the September 11, 2001, terrorist attacks and the warin Afghanistan, the number of reservists on active duty peaked at 95,000 inMarch 2002, before dropping to the current level of about 58,000. Reservists nowaccount for almost half the national defense strength. Members report for aminimum of one weekend each month plus two weeks each year and for active-dutyassignments commonly lasting from 90 days to one year or longer. Although theDefense Department’s stated goal is to provide at least 30 days’ notice toreservists in a call-up, those deployed in the event of an attack against Iraqare unlikely to receive more than a few days or hours of notice.

    Employers with reservists in the Air National Guard, theAir Force Reserve, and the Coast Guard are most likely to see their employeescalled to active duty. According to the U.S. General Accounting Office, nearlyone-fourth of the Air National Guard reservists were on active duty when thecurrent call-up peaked in March 2002, along with 10 percent of the Air ForceReserve and 15 percent of the Coast Guard. Other reserve units are operatingwith less than 10 percent of their members on active duty.

    “Military action with respect to Iraq will put anadditional strain on the civilian workforce,” says LTC Jess Soto Jr., deputydirector of ombudsman services at the National Committee for Employer Support ofthe Guard and Reserve, in Arlington, Virginia. “Currently, the Guard andReserve are being used for missions that were traditionally filled by theactive-duty force. The unintended consequences of the increased use of theGuard and Reserve have yet to be discussed at the national decision-makinglevel.”

Workforce, January 2003, p. 34 — Subscribe Now!

With health-care costs soaring, something had to be done. So on January 1,2002, Textron Inc. rolled out a consumer-driven health plan for 1,600 of its36,000 U.S. workers. The multi-industry company, which is based in Providence,Rhode Island, extended the offering to 25,000 active and retired employees onJanuary 1, 2003.

    “Our employees and managers understood that it was prohibitively expensiveto continue to absorb double-digit increases in the cost of health care,” saysGeorge Metzger, vice president, human resources and benefits. “The typicalsolutions of decreasing benefits and increasing employee premiums were simplyunacceptable. Our research eventually brought us to consumer-driven health careas the `best-fit’ solution.”

    Textron chose consumer-driven health care because “we believe that apartnership between the company and our employees is the best way to slow risingcosts, while giving employees flexibility, financial incentives, and educationalsupport to help them make better-informed decisions about the type and qualityof the health care they elect,” Metzger says.

    Textron’s consumer-driven plan provides an annual personal account of $1,000for employee-only coverage, $1,500 for the employee plus one dependent, or$2,000 for the employee plus two or more dependents. When the account isexhausted, employees incur a deductible of $600, $900, or $1,200, depending onthe number of dependents covered. Once the annual deductible has been satisfied,insurance kicks in with 100 percent coverage for in-network services and 70percent for out-of-network services. Monthly premiums are $61 for an employee,$114 for an employee plus one dependent, and $160 for an employee plus two ormore dependents. Unused personal account balances roll over to the next year.

    To monitor and evaluate the effectiveness of the plan, “HR uses bothinternal and external resources to provide extensive retrospective dataanalysis, as well as predictive modeling,” Metzger says. “This analysis willenable us to forecast specific cost-drivers so that we can then develop focusedstrategies to address utilization.”

Workforce, February 2003, p. 38 — Subscribe Now!

Why do some employees consistently put in 60-hour workweeks and ignore employer-sponsored programs to enhance work/life balance? “Somepeople simply don’t want balance,” says FutureWork Institute consultantJoseph Gibbons. “We have to stop saying that everyone should have work/lifebalance.”

At Cap Gemini Ernst & Young, Michael Scheidemann, assistant director ofrecruiting, says that “some employees charge forward as fast and furious asthey can, and others have decided that they don’t need to be a partner in thepractice.” Ambitious fast-trackers set their own pace and “know what theyare getting into,” he notes.

At the New York Times, where daily deadlines create enormous pressures formany of the newspaper’s 4,500 employees, “people complain, especially in thenews department, but they love their jobs,” says Dennis L. Stern, vicepresident for human resources. “They came here knowing what the hours wouldbe. There is self-selection.”

Still, there is some indication that employees view long hours as aprerequisite for advancement on the job. In a recent FutureWork Institute surveyof almost 6,000 people, “only 9 percent identifiedthemselves as fast-trackers,” Gibbons says, “but 29percent of senior managers identified themselves as fast-trackers, and thattells the whole story. These people are setting the cultural standard.”

Catalyst studies have identified professionals and managers who would like totake the fast track for a while and then plateau for a period. “Once youplateau, however, you are no longer seen as being on the advancement track,”says Marcia Brumit Kropf, vice president for research and information services.”In many companies, re-entering the fast track is very hard and not acceptablebecause you are written off in certain ways.”

Workforce, December 2002, p. 37 — Subscribe Now!

Maytag Corporation executive vice president and CFO Steven H. Wood toldanalysts in November 2002 that the company had pulled $135 million out of cashflow for pension contributions in 2002 and would pay an additional $160 millionin pension contributions plus higher retiree medical expenses in 2003. TheNewton, Iowa, appliance manufacturer also faced increased health-benefit costsfor its 21,000 employees worldwide. “There are union health plans that wecannot change, but we have reduced the number of plan offerings for salariedemployees,” says Tracy Sears, director of benefits programs. The companyconsolidated offerings in 2002 and estimates savings of $2 million for 2003. “Beforewe consolidated, we had 81 plans across the organization supplied by 50different vendors,” she says. “Now we’re dealing with 12 vendors, so wewill be able to reduce costs through economies of scale. Also, we’re no longeroffering an HMO option, so employees do not have first-dollar coverage.”

    The company is also addressing pension costs. Effective July 1, 2003, newhires will be offered a cash-balance plan and will not be eligible for retireemedical coverage. Current employees will be offered a choice between theircurrent retirement plan and a cash-balance plan, and must meet new eligibilitycriteria for retiree medical coverage. Maytag will shave almost $1 million off2003 benefit costs with a new automated enrollment system from ProActTechnologies that went live in October 2002. Before automation, Maytagadministered enrollment with staff at 12 regional offices. Five regionalbenefits administrators now perform the same functions. “Using an onlinesystem also frees up time for the regional benefits staff to communicate to eachlocation the benefit costs for the site and a comparison to a company norm,”Sears says. “Top management was behind the changes to support the head-countreduction and also felt there was a need to automate.”

Workforce, March 2003, p. 38 — Subscribe Now!