Author: Gillian Flynn

You and your employees have a 50% chance of running into a situation this year that a lawyer can be helpful in solving, according to the American Bar Association, based in Chicago. Life—the simple act of living—has always required its fair share of legal dalliance. Marriage, births, adoptions, deaths all bring with them their portion of attorney paperwork.

Recent years have only increased the chances of winding up in court. Does the phrase “litigious society” mean anything to you? Filing lawsuits seems to rival baseball as America’s favorite pastime: You’re three times more likely to go to court this year than to the hospital. Yet, while employers tinker endlessly with hefty medical plans, it’s a relatively rare company that offers legal-services plans.

This situation is, however, beginning to change. According to a 600-company survey conducted late last year by Lincolnshire, Illinois-based Hewitt Associates LLC, only 4% of employers offered prepaid legal plans—but 10% planned to add them in the next three years. And why not? As employers snip and clip so many other areas of employee assistance, here’s one that seems an HR dream: a low-cost, high-value benefit that employees will rave over. With a little bit of background information, a little bit of data-gathering and a few words of caution, you can install this benefit at your company. You’ll gain a goodwill advantage and a bottom-line boost with limited investment on your part.

How they work.
You know how an HMO works? Then you’re very close to understanding how prepaid legal services work. In these plans, employees pay a flat fee—generally $10 to $20 a month depending on the extent of coverage—in return for access to a network of lawyers that will handle a variety of legal issues. Enrollment can be voluntary, for which employees must sign up themselves—often as part of a flexible benefits program—with the premium deducted from their paychecks. However, enrollment also can be automatic, whereby a company covers all its employees, or refers them to legal services as part of an Employee Assistance Program (EAP) component.

Not surprisingly, the vast majority of employers go the voluntary route—their only cost is the time setting up the system and the small administrative expense of payroll deduction. The average cost to employees is $120 per year, according to Chicago-based American Prepaid Legal Services Institute (APLSI).

You know how an employee covered by group medical insurance receives better price-per-service than a patient off the street? So too do employees under prepaid legal services get a break because they’re part of a group. In fact, many major legal-service providers won’t even consider taking on firms with less than 500 eligible employees. If, for instance, a client firm had only 10 employees enroll, one or two costly legal actions would wipe out any profit the legal-services company was expecting.

Just as insurance firms offer different levels of coverage, so do legal-services companies. To begin with, the most basic of group plans isn’t a true prepaid plan at all (prepaid meaning the service is funded in advance). At this level, a referral-and-discount plan points employees to an attorney who will provide free or inexpensive consulting according to a certain fee schedule.

On the next level, an access plan is prepaid and provides members with unlimited legal consultation over the phone in addition to reviewing papers and preparing simple legal documents, such as wills or cease-and-desist letters. More complex situations are handed over to an attorney who provides these extra services at a discount. The member generally pays for these expenses in addition to the monthly premium payment.

Finally, comprehensive plans provide all the services of an access plan in addition to in-office and trial work. This level is designed to cover 80% to 90% of an average person’s legal needs in a given year. Most group prepaid plans fall under this category.

Once a company enrolls in a plan, its members gain access to a group of attorneys—a panel. Where do the panel lawyers come from? “Most are privately licensed, general practitioners,” says Alec Schwartz, executive director of American Prepaid Legal Services Institute. “Many times the plans will have certain criteria with regard to experience, office location, telephone [accessibility] and malpractice insurance before a lawyer can be accepted as being a participating provider.”

There are three types of panels. The most restrictive but easiest to administrate are closed panels, according to Brookfield, Wisconsin-based International Foundation of Employee Benefit Plans. Closed panels require the employee to choose from preselected attorneys. On the other end of the spectrum—in an open panel—an employee may choose any licensed attorney, and the plan then reimburses the employee or pays the attorney. Most employers try for a happy medium with a modified panel, in which employees are guided toward prepaid panel attorneys who provide most services at no cost. However, employees are also free to use their own attorneys, after which they’re reimbursed partially or fully according to the type of work performed.

Why they’re growing in popularity.
Prepaid legal services first gained Corporate America’s attention in the late ’70s, because of the favorable tax treatment they provided. In 1992 these tax benefits were axed, but by then the idea had caught on. (There are, in fact, several proposals in both houses of Congress to reinstate a tax break.) In 1995, 18.5 million Americans were enrolled in prepaid legal plans, according to the American Bar Association. The number includes spouses and children—common to most plans.

So why is this benefit booming now, after its tax incentive has been removed? For one thing, the workplace atmosphere is ripe. Thanks to HMOs and flexible benefits, employees are now accustomed to paying for services on their own under company-chaperoned plans. That’s exactly how Sharon Bohlman, vice president benefits and employee services at McLean, Virginia-based PRC Inc., came across the idea for prepaid legal. PRC’s flex-benefits program serves as an umbrella for myriad employee offerings, including prepaid legal from Cleveland-based Hyatt Legal Plans Inc. “We work very hard to offer our employees work/ family benefits and try to take care of their needs,” she says. “Legal is one of those.” It was well-received. Typical enrollment in an employee-paid plan hovers at 10%. The first year for the legal program at PRC saw a 21% enrollment, and continues to grow.

Colleen Carr-Blaxill, supervisor of employee benefits for New York City-based Salomon Brothers Inc., began offering employees legal services from Des Moines, Iowa-based Midwest Legal Services for much the same reason. “Our whole approach to benefits is to offer employees a multitude of plans to help them with different phases of their lives,” she says. “We heard about legal services and thought that was an inexpensive plan to offer; and for employees going through certain phases in their lives, it can be really beneficial.”

As odd as it may sound at first, legal benefits can find a nice niche under the work/life rubric. Consider, for instance, the employee who is having landlord woes. What if, instead of worrying about it on the job, she could pick up a phone and have her answer? If she were a Sears, Roebuck and Co. employee she could. Since 1995, 5,000 of the firm’s employees have solved their legal problems through the company’s alliance with Prudential LegalCare, a Louisville, Kentucky-based service that has seen a 75% growth rate since 1993. Both full-time and 1,000-hour part-timers are eligible, making a potential enrollment of 160,000 employees. “These are the kinds of issues that our associates would be standing around on the sales floor talking about, worrying about, making phone calls to handle,” says Renee Tehi, manager of benefits planning and administration (Tehi has since left the company). “We think we offer them a way to deal with those issues so they don’t have to worry about them all day on the job.”

It’s true that most employees, particularly those in the middle to lower levels, have had little experience with the legal system and are intimidated by it. If they think they can handle a problem themselves, they will. By the time they figure out what they’re up against, their procrastination may have allowed a small legal nuisance to swell into a big legal nightmare. According to a Hyatt survey, more than 60% of Americans have legal needs that go ignored because they’re wary or unsure of how to access the legal system. “There’s still somewhat of a reluctance for people to consult a lawyer,” admits Schwartz of APLSI. “I mean, you only consult lawyers if you’re a weak person, an evil person or not able to take care of your own stuff. But having the employer sponsor [a service], and having legal advice accessible by the phone—that goes a long way to help people get over the idea that they don’t use lawyers except in dire circumstances.”

In fact, the majority of problems are simple ones that truly can be handled by phone. In a survey by APLSI, for 80% of respondents a phone call alone solved the problem. Just as important, for 78% the consultation “reduced stress that otherwise might have affected performance or resulted in time off work.”

Bohlman also emphasizes the helpfulness of unlimited phone advice. “Every time you have what might look like a legal situation, you can pick up the phone and be assured that it either will or won’t be,” she says. “If it will, you can rest that much easier by talking to a lawyer, which typically you wouldn’t do for two reasons. One: It’s very costly. Two: Most of us can’t pick up the phone and call an attorney because we don’t know an attorney.” Bohlman used the service herself last year when a person she sold a car to wanted to return it, claiming the state had a three-day “buyers’ remorse” right to return. Bohlman didn’t know if that was true, but a quick call to a lawyer assured her it wasn’t. He offered to explain the situation in writing to the mistaken buyer. “It was just so nice not to have to worry about it,” she says.

Aside from employees focused on work instead of legal conundrums, employers gain a lot of simple goodwill for very little expense. Most employees are more than happy to fork over their $120 to $200 a year just for the peace of mind. But if, for instance, they access the service even twice in a year, they’ve generally saved money on the deal. “If you’re in a legal plan that covers the advice for the purchase or sale of your home, and then you [write] a will later that year, you’d get a few years of your annual enrollment right there,” says Joel Hyatt, president and CEO of Hyatt Legal Plans, whose business is growing annually by 20%.

Bohlman tells the story of one PRC employee, a single mother who’d been struggling for years to buy her own house. While pulling together the last of her resources, she got socked with a lawyer’s estimate of $750 to help with the legalities of real-estate purchasing. Fortunately, she’d enrolled in the legal plan, and Bohlman promptly referred her to the program. Under PRC’s coverage, the real-estate service was free. “To her it was just the icing on the cake,” says Bohlman. “She was so thrilled. It was like a gift—it made her house even better. We’ve actually had a number of really dear stories like that, and a lot of wonderful experiences.”

Is a prepaid legal service for your company?
Before you start comparison shopping for prepaid legal services, a few words of caution. To begin with, again, there’s company size. If your company is a smaller one, consider this statistic before deciding. According to APLSI’s Schwartz, anywhere from 5% to 25% of employees will enroll in a prepaid legal plan. If you’re a company of 100 with 15 employees who sign up, do the math for your return on investment after setting up the service and administrating it. It may not be worth the expense. (Check into this before giving up, though. Some plans’ major selling points are that they handle all the administration themselves.)

Next, you should know that some critics of prepaid legal services claim that plan-sponsored lawyers may not be the best-qualified—or may even try to steer naive employees into costly legal work not covered by the plan. Hyatt called the idea “uninformed criticism. I’d say the proof is in the pudding. You couldn’t keep an account unless employees were being very well-served and very well-satisfied. You couldn’t build this concept unless you were really delivering on it.” The companies Personnel Journal spoke with also scoffed at the idea. They basically had nothing but praise for their plans—and boasted approving employee surveys to back that up.

Finally, an HR professional considering legal plans may worry the service will come back to haunt the company. Will the employer be liable for legal advice gone astray? Will employees generate more lawsuits against their employer if they have round-the-clock access to free legal advice? Unlikely, on both counts. That’s because every good plan contains a hold-harmless agreement, in which employers are completely removed from liability. Plans should also have a condition barring any action against employers. But, warns Schwartz, the actual advice and consulting aspect can’t be regulated. An employee can ask any employment-related question and receive any kind of legal advice. Again, however, the companies Personnel Journal spoke with had neither any problems nor worries on this front.

So, if you’re still interested, where should you go from there?

Find a plan that fits your company.
When beginning the hunt for a service, the first thing to decide is how big the network of lawyers in the plan needs to be. If your company is nationwide, you’ll need a network of attorneys across the nation. “We have associates in 2,000 units across the country,” says Tehi of Sears, based in Hoffman Estates, Illinois. “We have associates in every zip code. So for us it was real important how many attorneys [a service] had.” That’s one of the reasons Sears went with Prudential LegalCare—it has legal offices in each state, with an attorney’s office in individual states contracted to handle all phone advice.

Once you’ve found a service that’s the right size for your company, the next most crucial issue is accessibility and user-friendliness. The plan should be very customer-service oriented. Again, we’re dealing with employees who are a little jittery about the legal system, so if the service is convoluted, confusing or difficult to navigate, it will be of no use.

Tehi demanded unlimited phone advice with easy employee access. So before committing to any service, she phoned up all finalists’ toll-free numbers. “I wanted to see how each feels,” she says. “Do I really get through to an attorney or do I get a customer-service person who gives me the run around? If [my situation] is something that can be handled over the phone, do I immediately get connected to an attorney’s office? If I need an office visit, am I sent a list of attorneys and a claim form?” Tehi says one service she nixed early on had a panel of attorneys, but the toll-free number was managed by a completely different organization. “I knew right away that wasn’t going to look seamless to our associates,” she says.

In this vein, Hyatt suggests checking the usage rate of each service: “You want to look at usage rates very carefully, because they’re a good indicator as to how easy the program is to use.” Most old-hands also recommend ensuring that a firm gives constant feedback on the user rate of your own employee population.

Finally, you must decide how extensive a service you want, because they come in all cost ranges. Sears employees pay $8 a month singly, $11.75 for the family. PRC’s program is $10 a month, single or family. Salomon Brothers’ plan costs approximately $15.50 a month for an employee, $19.50 to include the family. The question to consider is how much disposable income your employees have. If your company has a lot of employees who are in lower-paid categories, then you don’t want to develop a plan that costs $16 a month, because the people you really want in the program, and who would benefit the most, essentially can’t afford it.

Remember, it’s your plan. So your final screening should be to ensure the legal service is willing to take its plan out of the cookie cutter and work with you to mold it to your company. “Can the provider come in and include services and exclude services based on our need?” says Tehi. “We had a vendor who just said, ‘Here’s the benefit, take it or leave it.’ That wouldn’t work for Sears.”

Consider coverage options.
Before you decide what you want to cover in your plan, you should probably decide what you absolutely don’t want covered. Besides the universal exclusion of actions against the employer, there are several areas you may want to consider. For instance, most companies opt to exclude criminal cases. First of all, they’re extremely expensive; secondly, they carry a definite stigma. Sears took a bit of a twist on this one: Although the company won’t cover criminal cases for its employees, it will cover criminal charges against juveniles. “With a juvenile, it generally can be handled more expeditiously, not as expensively,” says Tehi. “And it helps the parent who’s going to worry about it on the job. The parent didn’t commit the crime, but he or she is the one who has to deal with it.”

Another controversial area is divorce. Again, like, criminal cases, it can be very expensive. Only 2% of employees undergo divorce proceedings each year, but they may add as much as 50% to the plan’s cost. Also, for some companies, they can carry a stigma. Says PRC’s Bohlman: “We don’t cover divorce, DUI, anything we thought had a little bit of morality attached to it. We didn’t want to issue a program that supported things we didn’t think encompassed family values.”

Sears, on the other hand, chose to include divorce up to certain dollar amounts, as well as post-divorce issues such as custody negotiations or harassment. This reflects Sears’ own company values—it has a large single-employee and single-parent population. However, like PRC, Sears maintains an exclusion that supports its philosophy: Because Sears is deeply involved in the credit business, its plan refuses coverage for credit problems. The final word from all companies: It’s your plan, so design it to fit your company—in size, cost, construction and values.

So now you know what you need to know. Legal services are less expensive than medical benefits and many other employment staples—yet they’re just as likely to be used. And they’ll be all the more appreciated because they’re not your average-Joe benefit. “I really just would encourage everyone to not be afraid of it,” says Bohlman. “It’s just a really easy benefit, and one that’s so well-received by the employees.” When you and your employees have a 50/50 chance of needing legal assistance this year, legal services sound like a pretty good investment.

Personnel Journal, October 1996, Vol. 75, No. 10, pp. 48-56.

Today’s workers: poor, tired, huddled masses. They work on the production lines for long, exhausting shifts, murmuring amongst their own in a flutter of foreign languages. Many are first-generation Italians, Germans, Greeks. The rest have migrated to the cities only recently, leaving their farm work behind for more trying, less rewarding labor. These employees just want to punch in, do their time and leave. Luckily the government is watching out to make sure they can do just that. Workers must be protected from their employers —corporate sharks constantly searching for a chance to exploit these innocents.

Oh, wait, this isn’t the 1930s anymore, is it? It’s the 1990s, and workers’ education levels have risen threefold. Fewer work on the factory floor. More work in positions that were scarce or nonexistent in the past 60 years: customer-service reps, account execs, computer engineers. They’re eager to learn, anxious to get involved. Workers of the ’30s kept their hands busy because their jobs depended on the number of widgets they produced. Workers of the ’90s keep their heads busy because they’re judged on the ideas they produce.

At least that’s the U.S. government’s message. To be competitive in a global economy, we need employees who can think and do for themselves, who thrive on teamwork, who have a satisfying work/life balance. You hear the message from the floors of Congress to the podium of President Bill Clinton’s State of the Union address.

And yet, doesn’t it seem that the new employee-employer relationship is shackled by an old, outdated group of labor laws? Every time HR tries to get creative, it runs smack into a wall of legislation. The problem stems from the fact that, although government has changed its mindset about what the successful workplace looks like, it hasn’t changed its mind that employees are simpletons in need of protection from evil employers. “Most of our labor laws were written in the ’30s and ’40s and are based on the assumption that employers and employees always have divergent interests, that they can’t really cooperatively make decisions,” says Sandy Boyd, co-chair of the Flexible Employment, Compensation and Scheduling Coalition (FLECS) in Washington, D.C. “That’s why you have these laws that don’t allow employees to make choices. There’s the assumption that if you’re the employee, you check your brain at the door. We’ve passed that period. [Government] is urging us to pass that period: Be more flexible, be more family-friendly. Well, we can’t really do that.”

It’s frustrating, both for employers and employees. But things will have to change. If we’re going to evolve into businesses of the 21st century, we’re going to have to be governed by laws of the 21st century.

FLSA: Restricting flexibility.
In the 1930s, when most jobs were on the factory floor, flexibility in workplace and hours wasn’t possible. It’s different today. You want to offer more of your employees telecommuting options. Problem is, you’re not totally sure who is and who isn’t exempt, and you can’t very well let nonexempt employees head home where you can’t tally their hours.

You want to start a program that places top managers side-by-side with line managers for a substantial period of time. But you’re not sure if that would eliminate the top managers’ exempt status. And, you want to initiate compressed workweeks. However, your nonexempt employees wouldn’t be able to participate in a nine-day/80-hour schedule, because that means one week they’d work more than 40 hours and you’d have to pay them overtime. The law doesn’t allow them to just waive the pay, even if they’ll be getting a day off the next week.

You want to offer more flexibility in general, but the Fair Labor Standards Act (FLSA), created in 1938, won’t let you. The FLSA, as it currently stands, has several deficiencies that can wreak havoc in progressive workplaces. One problem area, as described in the scenarios above, is the exempt/nonexempt classification and the inability for nonexempt employees to waive overtime in exchange for more flexibility. For one thing, the classifications are outdated. The salary requirements for exempts in the private sector haven’t been revised since 1975, which leaves HR professionals with meaningless guidelines that allow exempt status to be triggered at $250 a week—that’s an annual salary hovering at the poverty level. Some guidelines for computer positions were tacked on several years ago, but with that booming industry, these also seem stale.

“It’s difficult to sit down with those regulations and look at your workforce and figure out who’s entitled to overtime and who’s not,” says FLECS’ Boyd. “It’s probably the No. 1 problem in the wage/ hour division. That’s an area we would like to see updated, but there hasn’t been any legislation on that yet.”

We’ve all been slotting employees into exempt or nonexempt positions without such updating, so what does it matter? A lot, says Boyd. “It ends up [damaging] flexibility programs,” she says. “If you knew for sure which employees were exempt, you might be more inclined to offer telecommuting to certain employees because you wouldn’t have to worry about keeping track of hours worked and where. But if you’re not sure, and you think there might be an overtime liability, you might not offer the program at all. The same goes with flexible schedules like 9/80 compressed workweeks. If you’re concerned about the effect on employee morale by offering it to your exempts and not your non-exempts, you might not offer it at all.”

And if you do offer flexibility, you do so with little ease. Newark, New Jersey-based Prudential wants to allow employees whose jobs are compatible with flexible work arrangements to take advantage of such arrangements—from compressed workweeks to alternative work schedules. But, says John Teehan, personnel policies consultant, the recordkeeping requirements are egregious: “We’re trying to be flexible and meet employees’ needs, but then we’ve got the government saying, ‘You’ve got to know exactly when they’re in and not in, when they take breaks, when they have lunch.’”

On top of all that, having the legislation sends the wrong message. “There’s really a lack of flexibility on how creative you can be with your nonexempt employees,” says Boyd. “It sets up an unfortunate and unnecessary caste system, in effect.”

Laura Janusik, recruitment manager for Digital Directory Assistance Inc. in Bethesda, Maryland, believes the lack of flexibility is ironic this election year. “I think we’re getting back to a generation that’s putting much more emphasis on free time and family life. With that type of philosophy, it’s easier to accommodate an employee with flexible scheduling. But that’s not really permissible with the FLSA. Family values are such a big election-year issue, but unless government redoes the regulations, it’s denying employers the opportunity to jump on that bandwagon and support it.”

This may change if the comp-time bill, which passed the House in August and at press time was pending in the Senate, becomes law. The bill would allow nonexempt employees to bank overtime at time-and-a-half in a comp-time bank for future use. Boyd supports the idea not only because it allows employers more room to work with employees on flexible scheduling, but also because it announces a shift in attitude. It concedes that employees, for the first time under the FLSA, are able to choose how they’d like to be compensated for overtime, and acknowledges that employers and employees may work cooperatively to find a plan that best fits them.

Employees seem to like the idea, according to a survey conducted by New York City- and Washington, D.C-based Penn + Schoen Associates Inc. Seventy-five percent of more than 800 respondents said they favored the proposal of allowing them to choose; 57% said they’d take the time off.

Still, says Teehan, it’s far from perfect. Nonexempt employees still must receive comp time at time-and-a-half, no maneuvering allowed there. “You’re trying to have management provide flexibility to employees, but then they get hammered if they do,” he says. “They have to run a business, so while they’re trying to provide flexibility, they have to look at the bottom line.” A look at the bottom line will remind most that flexibility comes with a time-and-a-half price tag.

What should happen in the long run? Janusik echoes the desire of other forward-thinking HR professionals: She’d like government to extend its credo of innocent until proven guilty to employers. “The assumption when the FLSA was written was that the employer is bad. I’d like to see that reversed. I’m not Pollyanna enough to think every employer out there is fair, so I understand the need for regulations. But I think it ties the hands of fair employers. There needs to be a mechanism that would allow employers more flexibility if they can demonstrate a willingness of employees and a benefit for both the employees and employers.”

The TEAM Act: Employee involvement gets vetoed.
Back in the 1930s, some employers kept their workforces from unionization by forming bogus company unions. The Big Boss would pick a group of employees, call them a union, and then “bargain” with that phony union. The result: Management maintains the status quo. The Wagner Act, passed in 1935, put an end to this by creating a broad prohibition against employers working with groups of nonunion employees if the employees discuss terms and conditions of employment. As many legal professionals read it, even two employees count as an illegal, employer-dominated group if they discuss workplace problems with management in an effort to resolve the issue. Section 8(a)(2) of the National Labor Relations Act (NLRA) prohibits such discussion in a nonunion setting.

The law is taxing, to say the least, in today’s business setting in which 75% of all employers and 96% of large employers have incorporated employee involvement (EI) into their workplaces. At least a dozen companies, from Polaroid to DuPont, have been forced by the National Labor Relations Board (NLRB) to cease-and-desist their employee-involvement projects (the NLRB can’t levy fines). The legality of EI practices has been doubtful since 1993, when the NLRB ruled that employee committees at Electromation Inc. were actually employer- dominated labor organizations and therefore illegal. Since then, employers have felt they’re on shaky ground as companies continued to fall under NLRB rulings.

The bipartisan TEAM Act (Teamwork for Employees And Managers) was businesses’ bright hope that this would all change. The Act, passed by the House in September 1995 and the Senate in July 1996, would have amended the NLRA, making it legal for an employer to “establish, assist, maintain or participate in any organization in which employees participate to address matters of mutual interest.” Basically, it would allow companies to let their employees truly make a difference.

Clinton vetoed the TEAM Act in August, and with Congress lacking the votes to over-ride the veto, the TEAM Act goes to rest until next year. What does that mean to HR? “It’s confusing to HR folks in terms of whether their employee involvement and use of teams is in fact legal,” says Chuck Nielson, vice president of HR at Texas Instruments (TI) in Dallas. “[At TI], we’ve emphasized for our whole history that we don’t obey just the letter of the law but the spirit of the law. My employees naturally are asking me whether what we’re doing is legal.”

It’s truly a tough call. In Clinton’s explanation of his veto, he writes: “Current law provides for a wide variety of cooperative workplace efforts. It permits employers to work with employees in quality circles to improve quality, efficiency and productivity. Current law also allows employers to delegate significant managerial responsibilities to employee work teams, sponsor brainstorming sessions and solicit employee suggestions and criticisms.”

Veto leaves employers in a quandary.
To avoid violation of the law, the AFL-CIO has suggested that companies using EI should allow committee members to be elected by coworkers, rather than selected by management. But some labor lawyers disagree that employee-participation programs are illegal at all. Basically, no one really is sure. Clinton himself has conceded that “recent NLRB decisions have created uncertainty as to the scope of permissible cooperation. ” And there’s the rub: It’s a bit difficult to promote full-throttle teamwork when you’re not sure where the legal boundaries are.

Further frustrating pro-TEAMers is what they believe is the Clinton Administration’s slap in the face to business: Congress approved the bill. More than 600 CEOs across America wrote to Clinton in support of the bill. The TEAMwork for America Initiative, a coalition of more than 250 businesses and professional associations, has supported the TEAM Act. Both Clinton and Vice President Al Gore have proliferated pro-team rhetoric in speeches ranging from their 1992 campaign manifesto to the 1996 State of the Union address.

So why a veto? “Because of total union pressure,” says Jeff McGuiness, president of Washington, D.C.-based Labor Policy Association, an organization of more than 230 HR officers interested in federal employment-policy issues. “It’s pure, absolute politics. Here you have a Secretary of Labor [Robert Reich] who for four years [encouraged] employee cooperation and then recommended a veto. I think in his case it’s just totally dishonest intellectually.”

Talk to anti-TEAM people and you’ll of course, hear another story. They believe the current law gives enough leeway for employee involvement and that the TEAM Act peels away employees’ protections. Employers that have horrible working conditions will avoid unionization by setting up mock employee teams—a repeat of the ’30s situation. Unlikely, counters McGuiness. “The law is very clear that company unions are illegal under current law, and they’d still be illegal under the TEAM Act. It was a bogus argument they used to defeat it. The unions are terrified that workers would start speaking for themselves and not through a union. But the way the workplace is going and education levels have risen, that’s going to happen [anyway].”

The worst thing about the veto, many TEAM proponents say, is the tone it sets toward the vast majority of U.S. employees who aren’t in unions: That they must be protected. “What I’m afraid the message going out to 85% of the U.S. workforce is that the Administration doesn’t have enough respect for them to believe they’re capable of making decisions,” says Nielson. “I think that’s too bad.”

This is particularly unfortunate in view of current employee attitudes: A national survey sponsored by the federal Dunlop Commission found that workers prefer employee involvement over unions by a three-to-one margin. Nielson recalls a TI employee’s testimony to Congress on what her job was like before and after teaming: “She said, ‘The difference is that I used to make things and now I make decisions. Even better, the people I work with have enough respect for me to think I’m capable of making decisions.’ That’s pretty powerful stuff.”

So what now? Most companies are forging—albeit cautiously—ahead. At nonunion Suburban Water Systems, a workforce of 100 in Covina, California, employee involvement has influenced everything from performance reviews to company operations. Last year, Suburban won the Management Innovation Award from the National Association of Water Companies for “building a common vision through employee involvement.” Says Rick Hagar, HR manager: “Employee involvement has become a fairly integral part of our HR strategy. It’s sort of spooky that the president is gun-shy.” Yet, worker involvement will continue at Suburban, as it will at Texas Instruments, a company celebrated for its employee work teams. Nielson will be part of the 1997 effort to push the TEAM Act back through Congress and to the president—whomever he may be. “I think in 1934, when you talked about teams, they were something you took time out from your job to do and then went back to work,” he says. “Teams are the way we do work now. They’re integrated into every single thing we do at every level of the company. Teaming is here and we’re going to do it,”—law or no law.

That sounds suspiciously like an acknowledgment of cooperation between employees and employers to better the workplace—a very 1990s sentiment. Let’s hope somebody’s listening.

Personnel Journal, October 1996, Vol. 75, No. 10, pp. 66-74.

The number of never-married adults nearly doubled between 1970 and 1994—from 21.4 million to 44.2 million—according to the Census Bureau. Couples who do marry now more than ever are choosing to remain childless. Has your company culture shifted its attitude to treat these people as equals, not anomalies? Ask yourself these questions to determine how fair your policies are to single and childless employees:

• Are employees without children expected to stay later than those with children?
• Are more exceptions to rules governing time schedules and work arrangements applied to those with children?
• Does an equitable amount of childless employees take advantage of flexible-work arrangements?
• Do single and childless employees take more of the traveling assignments?
• Do married employees or those with children seem to receive first dibs on vacation and holiday time off?
• Are your benefits skewed toward dependent-care issues?
• When you have company parties, do you invite all employees’ children and allow singles to bring only one guest?
• Do you have paid-time-off banks, which allow all employees equal days off—or do you divide leave into sick and vacation, which allows more employees with children to take sick days to care for kids?
• Do you regularly survey all groups of employees on their needs?
• Do you offer more benefits coverage for employees who are married with children than those who are single?
• Do you have or are you considering flexible benefits, which allow all employees to create a package that best meets their needs?
• Do you have or are you considering domestic-partner benefits, which prevent employees in committed relationships from being penalized for not being married?
• Is the title of your program work/family or work/life?

Personnel Journal, September 1996, Vol. 75, No. 9, p. 68.

Earlier this year, executives at Eli Lilly and Company headquarters hosted a recognition ceremony for a handful of high-performing employees. These employees had been selected from around the world, so Steve Fry, manager of HR strategy and development, took his Sunday off to meet three of them at the Indianapolis airport. As 200-plus passengers spilled out of the jumbo jet, Fry scanned them over. “I immediately could tell the ones who were Lilly employees,” he remembers. “There was something there, and I could just tell.”

Pedro Granadillo, vice president of human resources, agrees: “One of the things I find amazing is that if you go into any of our places around the world, other than the language [being] different, the feeling is very much the same as it is in corporate headquarters.” Hard to imagine for a pharmaceutical goliath of more than 27,700 employees — 12,700 overseas — 68 affiliate companies and employees in approximately 90 countries.

Even harder to believe when you consider the challenges Lilly lined up for itself the past few years. About three years ago, the company introduced a new goal: To remain competitive, Lilly would have to aggressively promote its global presence — to expand established markets and to establish emerging markets, such as Russia, Chile and China. In just the past three years, Lilly has added more than 2,200 positions overseas. This goal, obviously, requires some serious HR support.

Luckily, HR at Eli Lilly and Company has been up to the challenge — or, challenges. Headed by Granadillo, a Cuba expatriate himself, the HR function has been reengineering itself to think more globally, and has been assisting the company in its thrust toward worldwide dominance. The company takes its HR seriously — head over to the corporate cafeteria and you often see Granadillo lunching with Chairman and CEO Randall L. Tobias and other top executives, chewing over new strategies.

And it’s a good thing the function is taken seriously, because HR has a huge say in what happens at Lilly. In just the past three years, it has introduced a global stock-option program, a global employee survey, a global management conference and global job leveling. For the next few years, it’s rolling out global staffing development, global succession planning and a juggernaut of new affiliates globally. Do you catch the key word here?

From U.S.-centric to a worldwide mindset.
Once, Lilly was a company firmly rooted in the United States. Sure, it dabbled outside its friendly shores — Lilly’s first expat sales rep sailed off back in 1924 — but the company still identified itself as a U.S. firm. As Tobias himself has said, “We used to be a U.S. company that happened to have business outside the U.S. Now we’re a global company that happens to be headquartered in Indianapolis.”

You see, a few years ago, top executives realized the company simply couldn’t support a U.S.-centric attitude anymore. For instance, although the United States makes up only one-third of the pharmaceutical industry’s market worldwide, Lilly had approximately 70% of its sales coming from the United States. Lilly needed to set up new affiliates, push open new markets, develop new geographical stomping grounds.

To say that the HR implications are massive is an understatement. First there’s the actual start-up operations to worry over. But HR also must ensure the workforces at established overseas affiliates remain tied to the company. Each affiliate’s needs are different, yet each affiliate needs to retain the Lilly mindset. It can be like trying to hold a pile of marbles.

Fortunately, Lilly’s HR philosophy for start-ups is relatively simple. Says Fred Winters, director of HR for Japan, Latin America, Pacific Rim and global staffs — with responsibility for most of Lilly’s emerging-market areas: “We basically define our business the same in Indonesia as we would in France or the U.K. or the U.S., in terms of what’s important to us, what elements of the pharmaceutical market and health-care business we want to be in. So there’s little doubt about who we want to be and what we want to be.” With this clear mission, HR professionals like Winters can begin with a strong base. The company believes in sending expatriates to get things rolling — but working overseas for a short term only, while HR rounds up the best local recruits it can find. Communications, training and administrative development follow.

While the strategy remains the same, how the company gets there may vary wildly from country to country. Take, for instance, Japan. When the company started recruiting there, it hit a wall quickly: Very few top-notch Japanese execs wanted to work for Lilly. Young Japanese had spent decades in furious educational preparation to work for a Sony or a Mitsubishi. Signing on with a U.S. affiliate would be considered a disgrace. This required a clever recruiting twist, targeting primarily women. In Japan’s paternal corporate culture, women are often first-round hiring rejects. Japan’s loss, Lilly’s gain: The company gathered a woman-dominated workforce of some of the brightest minds in the country.

Or consider Communist China, which the industry predicts will generate an $18 billion pharmaceutical market in the next two years. Lilly has no option but to hire through a third-party state organization. That means a body of workers who, though fascinated by the possibilities of capitalism, have always been dependent on the state. What do you mean, eight-hour days? In addition, as U.S. companies flood China, the best employees, particularly those who speak English or have Western experience, are flooded with offers. Because they basically never have to leave their employer — the state — the slightest unhappiness or increase in compensation (through perks and expense allowances — actual salary is mandated by the state) can have them running back to their agency to request a switch.

The investment in training and developing these employees is too big to see them skipping over to a competitor 12 months down the road. Lilly isn’t immune to this kind of turnover, but it is fighting back. To promote Lilly as a viable long-term employer, HR plays on employees’ interest in capitalism. It spells out the development employees will receive over the years, thus making them more desirable than shallowly trained job hoppers. HR also sells its American management style, which most Chinese find preferable. The effort keeps Lilly’s turnover in China hovering around 15%, while other multinationals have seen theirs soar in excess of 40%.

Lilly respects local culture, yet stays true to corporate culture.
The tough part about these employment gymnastics is that Lilly must switch its HR angles to adapt to a country’s culture while maintaining the company’s corporate culture. So far, Lilly has handled it well. “From an HR point of view, we used to be reluctant and maybe even avoided entry into emerging markets, because we liked to do business in a Western way,” says Winters. “As part of our globalization, we’re trying to be much more sensitive to local differences, much more creative about finding ways to do business in these countries, while adhering to our basic values as a corporation.”

Business ethics always comes into play. Some countries do things differently than Americans, and HR must draw the line between adjusting practices to fit a country and violating Lilly standards. This can be hard in some countries, such as Korea, where “payoffs” start on a child’s first day of school, when parents toss the teacher a little extra to give Junior a good seat. This attitude, in turn, extends to Korean business and the pharmaceutical industry, in which it’s common for drug companies to pay doctors a fee every time physicians prescribe their product. Lilly refuses. “You have to decide what you stand for and how you’re willing to run your business and be firm about it,” says Winters. “And then find a sensitive way to deal with it.” In the short term, some of Lilly’s ethical decisions confuse employees in developing countries. Many have to be let go because they can’t — or won’t — adopt a certain business standard. Often it becomes difficult to hire people, to buy land or to build factories. Always, HR is there, reminding employees of the codes of behavior Lilly demands. Lilly executives believe the effort will pay off, as these emerging countries evolve toward values more consistent with Western beliefs.

Today, approximately 45% of Lilly’s sales come from overseas, up 15% from just a few years ago. Winters believes the key to continued growth is to keep on pushing. It’s not enough to just set up shop in Chile or China. These fledgling affiliates must be nurtured into full-blown, self-sufficient businesses. “In these emerging markets, [it’s tempting] to measure success just by surviving,” he says. “You get off the airplane, there’s no office, no staff, no nothing. We have no business there at all. I’ll visit [later] and I’m impressed with the little bit of business we have and the few people we’ve hired. But we have to make the transition early on, to get away from start-up mode to market penetration. It’s a tough change.”

Winters would like to see this change take place in 18 months rather than two or three years, as it generally is. The key: Keeping an eye on employees, an ear out for what they want, a taste for what they need and a feel for the company globally. It’s a job that keeps Granadillo fat in frequent flyer miles: In 1996, he’ll visit about a dozen countries to offer HR support and guidance.

Employees worldwide have a voice, an equality and a piece of the pie.
Sometimes when Granadillo heads overseas, he drops in on regional HR meetings in which all the key HR players in Europe, for instance, get together and exchange ideas — the theory being that a truly global company must build relationships among each of its country affiliates. In these meetings, participants often tell Granadillo which of headquarter’s ideas are working for them and which aren’t.

This type of exchange would never have been possible a few years back. But HR has worked hard to offer a road map detailing where affiliates needed to be heading, to offer a set of principles that must be honored and a group of tools that may be used — and to let each individual country decide its plan from there. “We have some countries we’ve been in 50 or 60 years, and a lot of countries we’ve been in 12 to 18 months,” says Granadillo. “Their needs are different. You can take an issue like performance management and go to the U.K. and find a sophisticated rollout. You may go to [an emerging country] and they have simple back-of-the-envelope performance management — but it still has the same principles, and they’re going through the same desired behavior.”

This acceptance of individual country processes may have been partially produced by a global initiative called “Voice of the Employee” (VOE). VOE is a survey designed to elicit feedback from Lilly employees worldwide. It asks such questions as:

• Do you understand the corporate strategy? Has it been communicated well?
• How do you feel about career development at Lilly? Do you feel you own your career?
• How do you feel about your compensation? Do you understand the company’s pay philosophy and what it does and doesn’t reward?
• Do you understand Lilly’s values? Do you feel the company behaves in accordance with these values?

Employees worldwide completed the survey in early 1995. Each affiliate saw its own results and developed areas of intervention — action plans to improve employee feedback.

Lilly as a whole also could see its results globally. Its three biggest deficiencies in employees’ minds? Career development, diversity and communication. These issues likely were spawned by Lilly’s once U.S.-centric viewpoint: The most important jobs were in the United States, usually held by Americans and the communication was centered in the United States. Employees at corporate headquarters were more likely to be developed for high-level jobs. Lilly has been working hard to be more inclusive ever since. At the end of 1996, the North American affiliate will move out of Lilly’s headquarters building, just to underscore the fact that North America shouldn’t be favored. HR believes the next VOE — scheduled for third quarter 1997 — will unveil improved ratings.

As part of its promotion of equity, Lilly has undertaken a global job-leveling process: evening out all management jobs around the world. “I think most people felt there was a bias toward jobs here in the United States,” says Sharon Sullivan, director of compensation. “This exercise was saying, we are a global company, a global team, and we’ve got some very important jobs outside of here.” HR recently completed the criteria for each level of job: complexity, how difficult or complicated the job is; responsibility and decision making, how much the job can affect Lilly; strategic content, how much long-term strategy is involved in the job; and customer focus, how much the job affects its customers — internal or external. Once the jobs were leveled, Lilly could see who the real players were and who just had the impressive titles — and compensate accordingly.

Finally, to dismiss any remaining feelings of U.S. bias, Lilly rolled out a worldwide stock-option program in 1993 called GlobalShares, designed to reinforce employees making decisions as owners. The program allows all nonmanagement employees — management has their own program — to purchase 100 shares of Lilly stock when the grant does. (Basically, employees received a voucher allowing them to buy stock at the April 1993 price, $47.06, in 1996, when stock value was more than $100.00.) Shares are offered to all employees — the only exceptions are employees in countries where it’s illegal or the tax ramifications would nullify the profit. Ultimately — after communications through brochures and videos, a lot of patient explanations from HR around the world and countless translations — the company launched GlobalShares in more than 55 countries, with more than 22,000 employees taking up options.

The feedback has been tremendous. Employees around the world — from factory workers in Mexico to line employees in Malaysia — understand that what they do affects the company, and in turn, their shares. Affiliates around the world post homemade charts of the stock value through GlobalShares. Fry remembers on a summer site visit to Ireland that the joke was the affiliate now had 305 stock analysts working there. Sullivan notices the new attentiveness too. “When our stock prices go down, our stockholders wonder, but boy, our employees sure start questioning,” she laughs. Sullivan says that when the stock shifted noticeably earlier this year, an employee sent in a question to Lilly’s worldwide newsletter asking investor relations to explain why: “I think that would’ve been unheard of a year ago.”

HR fixes future staffing gaps.
With the structures in place, HR now has two major thrusts for the next five years. The first is global training and development (see, “Spreading Best Practices Worldwide,” page 54). The second is leadership development. To begin with, says Granadillo, HR must improve its staffing practices. “Do we have the individuals with the skills and capabilities to fight the next war, not the previous war?” he asks. In some cases, the answer has been no, and Lilly — with a violent aversion to stray from its promotion-from-within commitment — has had to hire outside to get the needed competencies. Lilly’s CFO, for instance, recently hired on from General Motors.

Still, the preferred method is promotion from within, which means some serious internal pipelines. Which brings us to Bob Parks, director of succession planning. His job was created in March 1995, when HR decided it needed to look globally at Lilly’s employee base to assure the company didn’t have talent gaps, that it was developing key people. “Succession planning talks about lists of people to replace people,” says Parks. “Succession management in our view is pools of talent that can be developed for future managerial responsibilities.”

Lilly’s process works like this: The operations committee — which includes Granadillo, the CFO and COO among others — reviews talent corporately from both a regional and functional view. Say a sales-and-marketing person in the Brazilian affiliate is targeted by her manager as a possible future vice president. The manager then passes this person’s name onto the Latin America management group, which, if it approves, will submit the employee to the operations group. That’s the regional approach. Functionally, say a financial employee in Singapore looks like a high-potential. His name would be flagged to the Asia financial function, which would then submit individuals to the CFO.

Once employees are approved by the operations group, they are set along a developmental path. Maybe a scientist has all the technical skills the company could ask for, but lacks managerial capabilities. A managerial stint would be in the works. “We begin to plan experiences for people,” says Parks. “A person can learn and grow through exposures to different parts of the business. Exposures can mean [placement] outside their home country. They can mean different functions. They can mean associating with different parts of the business.”

Working outside one’s country has become a priority at Lilly — 55% of the top 40 to 50 executives have been expats at one time or another — so if an employee is targeted for development, an experience outside his or her home is definitely in the picture. The development assignments generally range from 12 to 18 months, and they don’t come cheap. Lilly has spent approximately $70 million per year on getting people the experience they need. Fry says that occasionally for the highest talent, HR may create a series of nontraditional positions — individuals can move through five or six jobs rapid-fire to get the specific experiences they need. Lilly ensures supervisory responsiveness by including succession management on each supervisor’s performance review.

What does all this mean? The right people in the right positions at the right times. “You’re going to see better development because people know why they’re moving into the position they’re moving into,” says Parks. You’re going to see less cost because you’re not moving people indiscriminately. You’re going to see more retention because people are going to know where [they’re] going in the company.”

A conference links global leaders — present and future.
In 1994, Lilly offered its first Global Management Conference. The eventual audience is the 2,200 members of management worldwide, but to keep the week-long conference meaningful, attendance is restricted to 120 at a time. Eleven were held last year, all at headquarters, though this will likely change in the future. The idea is to have every management professional attend the conference every other year.

The conference has four objectives — for participants to:

1. Fully understand the Lilly business strategy
2. Understand what it takes to implement the strategy
3. Get people from all different parts of the company to interact; break down natural barriers between functions, levels and geographies
4. Provide feedback to members of senior management about the strategy — how well it’s being perceived, implemented and embraced.

Although each conference is a bit different due to nips and tucks made from suggestions by previous attendees, the structure generally remains the same. And it’s a packed week. As Lisa Cheraskin, executive development advisor, says: “This is not a fancy, posh kind of conference. Things get done. It’s a working conference.” Attendees learn about external forces that drive strategy from a market perspective, such as the political changes affecting health-care reform. They hear lectures on scientific forces affecting Lilly. They examine Lilly values and its mission. Top leaders within the company offer presentations on Lilly’s three main business thrusts: critical capabilities, global presence and targeted disease categories.

Each day begins with a recap of the previous day’s topic. Tuesday, Wednesday and Thursday feature discussion groups on each of the three business thrusts, requiring attendees to have pored over background reading material just to keep up. These study materials and the discussion groups keep attendees on their toes. “You really want them to analyze and interpret what they’ve heard,” says Cheraskin. “We don’t want them to sit there and be passive listeners. We also want them to give feedback to presenters on their strategies.” It’s so important for the senior executives that attend to “get it” that either the CEO or COO spends more than an hour on Thursday just answering questions and eliciting reactions.

[pulquote]”Employee comments also help senior management. Some feedback has actually caused changes in strategy.”