Author: Gretchen Weber

Seven mornings a week, Starbucks CEO-designate Jim Donald makes eight important phone calls.

    As president of Starbucks North America, he contacts five of the 550 Starbucks district managers in North America, each of whom oversees 10 stores, to check in for a minute or two. Then he dials three Starbucks stores at random to say thank you to employees and ask for feedback.

    But as the Seattle-based coffee giant grows globally by more than four stores and 200 employees every day, the surprise phone calls from the top brass are also a calculated strategy for maintaining the small-company atmosphere that Starbucks hopes to retain despite its explosive rate of expansion.

    Donald, who will replace outgoing CEO Orin Smith on March 31, says that keeping the feel of the company small while it mushrooms in size requires a mindset that must start at the highest levels.

    “We (are) going 100 miles an hour,” says Donald, the former head of supermarket giant Pathmark Stores Inc. who joined Starbucks in 2002. “We’re growing at 20 percent a year. We’ve got to be able to reach into this organization and say, ‘How’s it going?’ and ‘Good job!’ If any company doesn’t have the time to talk to people on the front lines, then you might as well close it up, because it’s not going anywhere.”

    Starbucks, of course, is going everywhere. But even if there are enough customers in the world willing to pay as much as $5 for a cup of coffee to fuel Starbucks’ aggressive expansion, questions about its ability to successfully recruit and staff its workforce remain. Can a company so dependent upon the personalities of its employees possibly find enough qualified and desirable candidates to greatly increase its current workforce of 85,000 in the coming years and still maintain its brand? How can it maintain its reputation for high-quality customer service and the unique feel that made it successful in the first place?

    Despite its legions of well-trained, friendly employees and the undeniable popularity of the whole Starbucks coffee experience, there are those who don’t think the company can continue to grow indefinitely. H.D. Brous & Co. analyst Barry Sine says that while Starbucks touts its customer service as exceptional, he doesn’t believe the consumer experience is very different from other high-end retailers.

    Nor does he think it’s enough to carry what he believes is an unsustainable rate of growth as the company continues to expand beyond highly concentrated big-city hubs and into more rural areas where premium prices might not be as well-received. Despite Starbucks’ popular brand and its good employee benefits package, Sine thinks that staffing could become more difficult as unemployment declines and competition for good employees increases.

    “In a recession you can always find people,” Sine says. “But now with the economy booming again, that will make it more difficult to find the right people.”

    Even Donald, who has experienced rapid expansion as a former Wal-Mart executive, says that finding enough good people to fill the swiftly growing number of positions is a genuine concern.

    “My biggest fear isn’t the competition, although I respect it,” he says. “It’s having a robust pipeline of people to open and manage the stores who will also be able to take their next steps with the company.”

    Currently, there are more than 8,900 stores in 35 countries, and in October, the company raised its total eventual worldwide retail target from 25,000 stores to 30,000, which will include 15,000 stores in the United States alone. And its eye-popping growth rate–1,344 new stores in fiscal 2004 and a target of 1,500 new stores for fiscal 2005–is boosting the bottom line.

    Revenues grew 30 percent from $4.1 billion in fiscal 2003 to $5.3 billion for fiscal 2004, which ended in October. When calculated on a comparable 52-week basis for both years, the company reports a 27 percent increase in revenues. While new store openings are certainly the source of much of that increase, even existing-store sales jumped more than 13 percent and 8 percent in November and December, respectively, of fiscal 2005.

Building the Starbucks experience
    Ask Starbucks executive about the company’s recipes for success, and they will tell you unequivocally that it’s the people, or “partners,” as Starbucks calls its employees. They will tell you that Starbucks doesn’t just sell coffee, it sells an experience. And that experience, they will say, is completely dependent upon the attitudes and abilities of the partners on the front lines who greet and serve more than 30 million customers globally every week.

    The most loyal of its regulars return for their lattes and Frappuccinos 18 times a month. By providing consistent, positive customer interactions between partners and customers, Starbucks has become part of a daily routine for millions of customers.

    “It’s definitely a profitable strategy,” says Dave Pace, the company’s executive vice president of partner resources. “When a customer comes in and the person behind the counter says hello and maybe greets you by name, you feel a connection you don’t find with most retailers anymore. It makes you feel welcome, and it makes you want to come back.”

    This strategy of selling an entire Starbucks experience has made the company one of the great growth stories of the last 15 years. In 1990, there were just 84 Starbucks stores. Now there are more than 100 times that number. Since 1992, when the company went public at $17 a share, there have been four stock splits. The stock ended trading in mid-January at $56 a share for a market cap of $22.7 billion.

    Sharon Zackfia, an analyst at William Blair & Co. in Chicago who follows Starbucks, doesn’t think the company will have trouble with staffing even if it continues to grow at its current rate. She says that despite the huge number of employees that must be hired in the coming years to sustain the expansion, the growth rate hasn’t changed much from previous years: 1,339 new stores in 2003, 1,177 new stores in 2002 and 1,208 in 2001.

    “They’ve already passed the risk point,” she says. “It’s always a challenge to find good people, but Starbucks isn’t ramping up any faster than they were, and they’ve always been successful in hiring–because they pay for it.”

    The staffing strategy at Starbucks is simple, says Sheri Southern, vice president of partner resources for Starbucks North America: “To have the right people hiring the right people.” And because Starbucks has garnered a reputation as a good employer–(it was ranked 11th overall on the just-released 2005 list of Fortune’s Best Places to Work and was No. 2 among large companies on the same list), “it’s not hard to recruit at this company,” Southern says. “People want to work here. We’re very fortunate that way.”

    Experienced store managers–typically even at new stores–make initial contact with potential employees through job fairs, in-store advertisements, the company Web site and word-of-mouth. When a store is about to open in a new community, an informal meeting is often held in a town library or similar central location and serves as an opportunity for the new manager to introduce the company and notify locals about job opportunities, Southern says.

    In large markets, the fairs are more organized and held more frequently. Last year, for example, there was a hiring fair every Wednesday afternoon for two hours in a Mill Valley, California, store, and a similar fair on the first Wednesday of every month at a store in San Diego. All job fairs are posted on the company’s Web site.

    Starbucks also supplies interview guidelines to hiring managers to help them ask questions that reveal whether or not candidates have the core skills necessary for the job. The guidelines provide lists of behaviors that outline the ideal employee for each position.

    By using software developed by Taleo, an enterprise staffing management technology company, Starbucks has the ability to maintain a database of hundreds of thousands of candidates who have applied for jobs online and answered a variety of basic informational and skills-based questions, says Diane Pardee, senior vice president of corporate marketing and communications at Taleo.

    With this technology, Starbucks has a swift and systematic way to both screen out candidates and staff up stores quickly. The Starbucks brand is well-known enough for applicants to self-select to some degree, Southern says, but the company encourages this self-selection by stating upfront on its Web site and in its hiring advertisements what kind of employees are wanted: people who are adaptable, dependable, passionate team players.

“When a customer comes in and the person behind the counter says hello and maybe greets you by name, you feel a connection you don’t find with most retailers anymore. It makes you feel welcome, and it makes you want to come back.”

Getting them, keeping them
    Pace says that what draws people to work at Starbucks locations around the world from Portland to Paris–and what keeps them there once they are hired–are the practices and the culture the company has developed as a result of an intentionally strong mission and values statement that emphasizes creating a respectful and positive work environment.

    Pace, who held executive positions at Pepsico Inc., Tricon Global Restaurants and i2 Technologies before joining Starbucks, says that the company is well aware that having satisfied employees translates into greater profits in the long run.

    Starbucks works hard to select the right employees at the outset, to keep lines of communication open throughout the organization, and to reward and retain employees with an above-minimum-wage salary. Its comprehensive health benefits for full and part-time employees and their same-sex or opposite-sex partners includes medical (hypnotherapy and naturopathy are covered), dental and vision coverage, tuition reimbursement, stock options, vacation and a 401(k) plan.

    In 1987, Starbucks became one of the first retail companies to offer part-time employees the same benefits package that full-timers are offered. And while Starbucks does not disclose the cost of various line items, with a workforce that is 64 percent part-time, the cost of this policy is significant.

    In fact, chairman and chief global strategist Howard Schultz told BusinessWeek Online in October that in the next two years, Starbucks will spend more on employee health care costs than it does on coffee.

    Currently, the company covers about 75 percent of the costs of health care coverage for its U.S. employees, and Schultz cites these costs as one of the reasons for the 11-cent price increase on beverages launched in October. Starbucks pays an average of $1.20 for each pound of the 200 million pounds of coffee the company roasted in fiscal 2004. Given this equation, Starbucks will most likely spend well over $200 million in employee health costs in the coming years.

    Starbucks won’t release information about what it pays its employees, but a spokesman for the company says that salaries and hourly wages are above minimum wage and that they vary regionally across markets. Fortune reported in January that Starbucks pays the most common hourly job, “coordinator,” $35,294 a year; the most common salaried position, store manager, receives $44,790 a year.

    A randomly selected partner at a Starbucks in a suburb of Boston says she was recently hired at a rate of $8 per hour, which is $1.75 above that state’s minimum wage, and a partner at a Starbucks store in the Pacific Heights section of San Francisco says the starting salary at his location is $8.62 an hour, which is slightly above the city’s minimum wage of $8.50 per hour.

    But even this company, one that touts its commitment to being an employer of choice and prints its mission statement on the back of business cards, doesn’t spend money on employees out of the goodness of its corporate heart. Offering competitive wages and good benefits, coupled with an intense training program, is a calculated strategy designed to fuel company expansion and generate greater profits in the long run by maximizing the potential of its frontline employees.

    And Pace says that even if the company were to hit hard times, this strategy of above-average investment in training and rewarding employees isn’t going to change.

    “We’re not giving these benefits to our employees because we’re a successful company,” he says. “We’re successful because we’re giving to our people. We believe it’s a fundamental way to run our business. We’re in business and we need to deliver to our shareholders. The difficult decision is, Do I spend money and risk profitability, or do I make cuts? We go with what’s best for the long-term health of the organization.

    “What’s different about us is that we round on the side of the partner.”

    Donald adds that the company’s most important investment is its partner base. “And that investment is returned in stability. In order to sustain growth, you have to have a stable base. There is a direct correlation between the success of Starbucks and the stability and tenure of our employees. Without partner stability, we couldn’t grow so fast.”

    The strategy is working. Donald says the turnover rate for Starbucks store managers is about 20 percent and that the turnover rate for partners is about 80 percent. Analysts put the average turnover rate for employees in the quick-service restaurant business at about 200 percent.

    A 2003 Starbucks Partner View Survey conducted by the company found that of the majority of partners polled, 82 percent stated they were satisfied or very satisfied with Starbucks.

    “Starbucks has always understood that human resources is a fundamental cog in their business, and if they’re going to sell a premium product, they need to offer premium service as well,” analyst Zackfia says. “They’ve invested in their workforce time and time again, and it’s been critical to their success as a company.”

    Starbucks doesn’t release numbers on how much it spends on employee training, but the company does say that it spends more on partner recruitment and development than it does on advertising, which cost the company $68.3 million in fiscal 2004.

    Every new store employee in North America starts work with a 24-hour paid training module called “First Impressions.” This is a standardized curriculum taught primarily by store managers. It focuses on coffee knowledge and how to create a positive customer experience. A team of 32 training specialists constantly updates the curriculum and works with store managers to ensure consistent and effective training throughout North America, Southern says.

    Managers and assistant store managers take a 10-week retail management course. Computer, leadership and coffee knowledge classes, as well as diversity training, also are available to partners. At the corporate level, many new employees start their Starbucks careers with immersion training.

    These programs, which require employees to work in a Starbucks store to learn the business, vary in length depending upon the position, and are designed to give non-frontline partners a true experience making beverages and interacting with customers. One media relations manager at corporate headquarters started his job at Starbucks recently with six weeks of classroom and in-store training, and he says the investment in him by the company was the best thing that could have been done to prepare him for his new job.

    Corporate employees are encouraged, but not required, to work a shift in a store at the holidays to help them stay in touch with the front lines of the business.

    This kind of flow of communication among different segments of the company is just what staying small is all about, Starbucks executives say. And as long as it can retain the consistency of that feel, the sky just may be the limit for the specialty coffee chain.

    John Pearce, professor of strategic management and entrepreneurship at Villanova University, says that it’s the millions of little personal interactions every day that keep the company successful. By rewarding its employees well, with a package that includes health insurance, stock options and a free pound of java a week, Starbucks ensures that each partner has a vested financial interest in the success of the company every day, motivating them to make those little customer interactions all the more positive.

    Can Starbucks triple in size, spread farther around the globe and still retain its identity? The answer may come down to how much human beings continue their love affair with coffee. But with the number of stores, sales and job applicants growing every day, the value the company places on investing in people is not in question.

Workforce Management, February 2005, pp. 28-34 — Subscribe Now!

Twenty years ago, human rights records, environmental policies and levels of community involvement wouldn’t have been on the radar screen for some job seekers when deciding which companies to target in their employment searches.

    Today, the situation is different. In light of recent corporate scandals, as well as growing global awareness, the public’s expectations for corporate responsibility have changed. Along with that, so have the standards for much of today’s top talent. Companies of all shapes and sizes are realizing that not only can a reputation for corporate social responsibility be good for branding, publicity and the bottom line, it can also be a valuable recruiting tool.

Accepting lower pay
    A study released in 2003 revealed that companies perceived as socially responsible often have a competitive edge when it comes to attracting top recruits. Researchers at Stanford University and the University of California, Santa Barbara, surveyed 800 MBA students from 11 leading North American and European business schools and found that 94 percent would accept a lower salary–an average of 14 percent lower–to work for a firm with a reputation for being environmentally friendly, caring about employees and caring about outside stakeholders such as the community.

    Stanford professor David B. Montgomery says that this 2004 study is the first empirical analysis of the influences that factors such as high ethical standards, environmental sustainability and caring about employees have on MBA job choices. The students were asked to rank 14 attributes in order of importance when choosing a job. Intellectual challenge topped the list, with financial package coming in at only 80 percent as important, and a reputation forethics and caring about employees ranked third at 77 percent.

    These results wouldn’t surprise Robert Morgan, president of employment solutions at the staffing firm Spherion. Morgan says that a reputation for social responsibility can often be the determining factor when a candidate is deciding between two or three companies.

    While opportunities forcareer growth andwork/life balance often top the list of what candidates are looking for, Morgan says, a reputation for corporate social responsibility isn’t far behind. At the same time, often the most powerful recruiting benefits from being seen as socially “good” are less direct, he says. “When you’re out doing good in the community, you get lots of PR, which raises brand awareness,” Morgan says. “These companies also have a strong employee brand, and employees are out talking about their company and feeling proud, and as awareness increases, their recruiting brand goes up.”

    This kind ofbranding can be what attracts candidates to a specific company in the first place, Morgan says. Sheri Southern, vice president of partner resources for Starbucks North America, joined the coffee giant six years ago. She says that the Starbucks reputation for strong values was a major reason she targeted the company in her job search. “I really wanted to work at a company that treats its employees with respect and as part of the solution instead of the opposite.”

It’s about recruiting
    Just as the public and job seekers are paying more attention to the ethics and missions of corporations, many companies themselves are shifting to a more values-based model of business.

    Marc Gunther, a senior writer at Fortune magazine, argues in his latest book, Faith and Fortune: The Quiet Revolution to Reform American Business, that bit by bit, a new model of business is replacing the old Industrial Age approach of maximizing short-term profit by charging consumers as much as possible and paying workers and suppliers as little as possible. The new model, he says, is being adopted in various forms not just by small, socially responsible firms, but also by such industry leaders as Ford and DuPont. It’s based on developing a network of long-term relationships that benefit multiple parties. Great companies, he argues, serve their workers, customers, owners and the common good. By contrast, he says, the companies that put their stock prices first end up being the Enrons, theTycos and the WorldComs of recent years.

    This values shift occurring in many companies is not rooted simply in an altruistic desire to do good in the world, although Gunther says the fact that the current generation of CEOs came of age in the 1960s influences their views on issues such as women in the workplace andenvironmentalism. What it comes down to, he says, is that for many companies, this new model is a good business strategy. “The primary driver of corporate social responsibility is the desire of companies to attract better employees and engage the people they already have,” Gunther says. “When I talk to companies and ask why they are investing in the environment or the local community, time and time again they say it’s all about attracting the best people.”

    David Gebler, president and founder of Working Values, a business ethics and training company in Sharon, Massachusetts, says that how a company projects its values and ethics has become a competitive differentiator in terms of recruiting, and he sees more and more companies realizing this. Gebler says his firm developed an ethics training game called the Ethics Challenge for 130,000-employeeLockheed Martin. It uses a board-game format, characters from the cartoon “Dilbert,” and a series of scenarios involving workplace ethical dilemmas to be used as touchstones for discussions. Lockheed Martin recruiters bring the game to colleges to demonstrate to prospective recruits the company’s commitment to ethical responsibility, Gebler says.

    Companies are incorporating their values into recruiting and advertising materials more and more, Gebler says, as a way to both attract the best candidates and to weed out the ones who wouldn’t be a good fit culturally. “They are telling people right upfront, ‘This is what we stand for here,’ ” he says. “People want to work for companies with articulated values. They gravitate toward those companies because they really know what they are getting into.”

“What’s the right answer?”
    Starbucks articulates its values all over the place–its Web site, its recruiting and promotional materials and the backs of employees’ business cards. Through a process called Mission Review, which encourages employees (called “partners”) to voice concerns to company leaders about whether or not company practices are consistent with Starbucks’ mission statement, the company strives to ensure that it never strays too far from its principles.

    Dave Pace, executive vice president for partner resources, recalls last fall when he received a Mission Review comment from a partner questioning why there was no paid-leave benefit for adoptive parents. “We had to think, ‘What’s the right answer for the kind of company we are?’ ” Pace says. Within three weeks, the company had instituted a two-week paid-leave benefit for adoptive parents.

    In addition to having a reputation for treating employees well, Starbucks is also known for its outreach programs into communities both where stores operate and where its coffee is grown. From donations to local, national and international charities to implementing a preferred-supplier program to encourage suppliers to be more socially responsible to its announcement that starting this year it will stock stores with 10 percent recycled paper products, Starbucks has an extensive portfolio of social responsibility initiatives.

    “We do it because it’s the right thing to do,” Pace says. “But from my perspective it’s also a terrific recruiting and retention tool. These days, people want to work for an organization that stands for something beyond profitability. Not just one that’s successful on Wall Street.”

Just too good
    Becoming more socially responsible as a company does have a potential downside, Gunther says. “It is possible to become too good a place to work,” he says. He cites the case of Hewlett Packard in the 1990s.

    The company had always been known as a good place to work, he says, but at that point, just as the technology industry was changing rapidly and innovation became more important than ever, HP’s very employee-friendly policies became a disadvantage.

    “People tell me that at some point people went to work there just because it was family-oriented and because of the camaraderie, and it lost its competitive edge,” Gunther says. “In business, your strength can become your weakness.”

Frank Bednar remembers a time when he might have lost his job had his employer not been so flexible about time off. A senior collector for personal home loan accounts at financial services giant HSBC, Bednar experienced upheaval in his personal life a few years ago because of a divorce and a time-consuming court battle for custody of his son.

    His employer, a Carmel, Indiana-based subsidiary of finance corporation Household International Inc., which was purchased last year by the London-based HSBC Group, offered a flexible paid-time-off program that lumped personal, sick and vacation days into one pool instead of a more traditional vacation and sick leave package. Bednar says that the flexibility of this program saved him his job.

    “I was able to take care of a lot of personal business, which was very, very important, and still maintain my standing in the company,” Bednar says. “It was very handy to be able to do that because a lot of my commitments came up last minute, and I had to do what I had to do.”

    Because of the freedom in his time-off plan, Bednar says that he was not required to make a difficult choice between his family life and the job he had held for more than 10 years. This kind of flexibility, which enables employees to balance their work and personal lives, is a priority in the American workforce, experts say.

    As the end of the year approaches, companies usually see a surge in requests for time off, driven either by the holidays or some states’ use-it-or-lose-it vacation-time provisions. That push is further accentuated by attitudes of baby boomer and post-boomer employees who demand more freedom when it comes to utilizing their time off, according to a recent study by the Society for Human Resource Management. Respondents ages 55 and younger ranked work/life balance as the fifth most important factor affecting their job satisfaction level–just below overall benefits, compensation and feeling safe in the workplace.

    In contrast, employees older than 55 did not place work/life balance in their top five job satisfaction aspects at all and instead cited job security and communication as more important. The study cites cultural factors such as more women in the workforce and increased levels of stress in society as probable reasons for this shift.

    Yet data shows that just when most employees are seeking avenues to achieve more balance in their lives, the American vacation is shrinking. It’s no secret that Americans traditionally get less time off than their counterparts in other industrialized countries. Employees in European Union countries get four weeks of paid leave by law, for example, while many employees in the United States must work a job for more than a year before earning the conventional two weeks of paid leave–a benefit that is not required by law.

    And even with such a relatively small number of days off, studies show that short vacations are becoming even shorter as Americans take fewer days off than ever before. According to a 2004 survey conducted by Harris Interactive for online travel service Expedia.com, at least 30 percent of employed adults give up vacation time they have earned, a situation that resulted this year in a total of 415 million unused vacation days.

    In fact, the average employed American sacrificed three days of vacation this year–up 50 percent from the two days they gave up in 2003, the survey found.

Flexibility counts
    With vacations shrinking, flexible time-off plans are increasingly being regarded by both workers and employers as the best way to ensure that employees actually take days off when they need them. Sixty-three percent of U.S. companies now use some form of flexible paid-leave bank, compared with 21 percent in 2000, according to the CCH 2004 Unscheduled Absence Survey.

    CCH analyst Lori Rosen says the trend away from traditional vacation and sick leave packages is fueled by the fact that flexible plans are advantageous for both sides, and survey data reveals a positive correlation between these programs and employee morale.

    Everyone benefits, Rosen says, because employees get to take time off for any reason, and managers have fewer unscheduled absences to deal with. “When a manager has more notice, he can make decisions so that work continues to run smoothly instead of having to scramble at the last minutes to make sure than workflow is not interrupted,” Rosen says. “It’s a positive for both sides of the equation.

“Even though we may be giving our employees more time off, we’re getting that back in spades.”

    “The employees feel good because their employer understands there are times they need to be away without it being a reflection on their dedication. The employer is getting rid of the situation where employees are calling in at the last minute pretending to be sick when in fact they could have called in ahead of time.”

    Executives at HSBC say that the reduction of unscheduled absences and the recruitment and retention of top employees are exactly the goals of the company’s paid-time-off program. Rolled out in 1996 at Household International, the “TOP” (Time Off Program) is now available to all 45,000 HSBC employees in the United States, and it will be applied to Canadian employees next month.

The plan also grants approximately five more days off each year than the average paid-time-off program, according to recent Society for Human Resource Management surveys. That makes HSBC attractive to potential hires concerned with work/life balance. HSBC estimates the price tag on its paid-time-off program for U.S. employees to be $23 million a year, but executives say the benefits are worth the cost.

    “Even though we may be giving our employees more time off, we’re getting that back in spades,” says Sylvia Alston, director of employee communications for HSBC–North America. “It’s never been a question of costs and benefits because it absolutely washes for us because of the top performances we’re getting from them.”

    Instead of a set number of vacation days and a separate bank of sick time, HSBC–North America employees each get one block of “TOP time,” which are days off to be used for any purpose. They also get six paid company holidays. The number of TOP days granted is based primarily on tenure, says Bridget Schulz, manager of benefit strategy and policy for U.S. populations at HSBC.

    In general, a first-year employee at HSBC is eligible for 18 days of TOP time, while those in their third year get 23 days off. The time off increases every couple of years up to a cap of 33 days for employees with 25 years at the company.

    The plan also allows employees to buy or sell up to four additional days each year, an opportunity that 17 percent of employees utilize for 3.5 of their available days, according to Schulz. “Buying” a day off simply means taking it unpaid. Employees can also roll over up to 10 of their days off each year into the following year, and they may store 15 rollover days at any time.

Not without limitations
    Of course, there are limits to this flexibility. At HSBC, all time off must be approved by a manager, and as a rule, only two employees out of each group of 10 may be out on a given day. This makes the situation a lot less flexible than it sounds, especially for employees without seniority. Half of all time off has to be scheduled by the previous December.

    Managers say that having this control allows them to balance employees’ time off so that it does not adversely affect productivity in their departments. And while Schulz admits that the program does have its abusers–employees who still call in at the last minute instead of planning ahead–the program does create an environment where managers get more notice than under traditional plans.

    But even with the prevalence of flexible time-off plans, American workers are still living up to their workaholic reputation. HSBC does not track what percentage of its employees take all of their vacation, and managers say anecdotally that they encourage their employees to take the time they need. But the odds are that the company’s North American employees are taking significantly less time off than their co-workers in the United Kingdom.

    In London, a new HSBC employee starts out with 26 vacation days plus eight public holidays each year. A U.S. employee would have to be on the job for 10 years at HSBC before getting that kind of time off. Experts say that cultural attitudes about vacations drive the discrepancy.

    At many U.S. companies, a heavy workload and pressures from peers and supervisors keep employees at their desks. A 2003 survey of 730 U.S. executives by Management Recruiters International found that 47 percent wouldn’t use all their vacation time, and 58 percent said that the reason was job pressures. The study also found that 17 percent of U.S. employees said their boss was not supportive of employees taking all of their vacation days, and 35 percent said they had too much work to take a vacation.

Workforce Management, December 2004, pp. 66-67 — Subscribe Now!

Wal-Mart is playing aggressive defense these days in an effort to polish its battered reputation, which has been taking increased fire from all sides in recent months. A rash of negative publicity, which stems from a class-action discrimination suit, a variety of wage disputes and vocal opposition in California to the retail giant’s ambitious expansion plans, has amplified familiar criticisms related primarily to the company’s treatment of its 1.5 million employees.

    The company has taken action on a couple of fronts. Last month, it hired Lawrence Jackson as executive vice president of its People Division. Jackson, 51, was most recently president and chief operating officer of Dollar General Corp., which has been described as a sort of pocket Wal-Mart, operating small stores in rural areas or in poorer neighborhoods of midsize cities.

    Jackson, who grew up in Washington, D.C., is a graduate of both Harvard University and the Harvard Business School. He comes to his new job with a widely praised background in operations and, according to one book, an up-front approach to confronting issues of bias in organizations. In 2002, Jackson was No. 29 on Fortune’s list of the most powerful black executives in America. And, interestingly, there’s no human resources title on his résumé. His hiring could signal potential changes in the employment practices that have served as a lightning rod for Wal-Mart’s critics.

   Meanwhile, in California, Wal-Mart has launched what it calls “an unprecedented effort to communicate the facts.” In an open-letter-style advertisement in 15 newspapers across the state, the company characterizes itself as a “target for negative comments from certain elected officials, competitors and special-interest groups” and calls criticisms of the company “half-truths and misinformation.” Wal-Mart’s California spokeswoman Cynthia Lin says the company decided it was time to strike back. “For years various special-interest groups have engaged in a campaign of misinformation against Wal-Mart, and we simply couldn’t let it go unanswered anymore.”

   Wal-Mart’s ad disputes widespread claims that it pays employees lower wages than comparable retailers and asserts that, contrary to some media reports, health benefits are available to both full- and part-time employees. It highlights the tax revenue that the stores generate for local communities, the business Wal-Mart brings to California suppliers and the corporate donations given to charities.

    Although Wal-Mart has not singled out any particular source, the chain was criticized in a study released in August by researchers at the University of California at Berkeley’s Labor Center. They estimated that California taxpayers provide $86 million a year in public assistance to Wal-Mart employees who cannot make ends meet on company wages.

    “Wal-Mart has had to take an uncharacteristically strong reactive stance recently because the criticisms have gotten that much more serious,” says Michael Belch, a marketing professor at San Diego State University. “They are really feeling the heat all over the place, and from a PR standpoint, you can only ignore things for so long.”

    It’s no coincidence that the company rolled out its new counteroffensive in California. The state has been home to some of Wal-Mart’s most high-profile public relations challenges. During a five-month strike last year, California supermarket chains blamed competition from Wal-Mart for their need to slash wages and health benefits to employees.

    In addition, Wal-Mart’s plans to open 40 Supercenters, which are combination discount stores and supermarkets, have been met with vocal opposition, particularly in Inglewood, a Los Angeles suburb. Residents there rejected a ballot initiative that would have cleared the way for one of the colossal stores, effectively canceling the project. Opponents argued that Wal-Mart stores destroy communities by bankrupting competitors and, in doing so, displacing good positions with low-wage, low-benefit jobs.

Workforce Management, November 2004, p. 22 — Subscribe Now!

L ast fall the largest poultry producer in the western United States found itself in dire need of technical expertise. Foster Farms, a 10,000-employee, privately held company headquartered in the small agricultural town of Livingston, California, had been plagued with technical problems while attempting for four years to convert its supply chain into an integrated $28 million SAP/ERP platform. Specialists contracted to implement the system charged the company $800,000 a month, and as the problems mounted month after month, so did the bills. But instead of hiring a consultant or initiating a search for a technically skilled, permanent CIO, Foster Farms chose a different model. It sought an experienced corporate leader with strong technical expertise and a flair for steering troubled companies back on course, a chief willing to come in-house, but only for as long as it took to get the job done. What Foster Farms wanted was an interim executive.

    In October, the company hired CIO Paul Lemerise, a seasoned executive who had served at the corporate level for more than 20 years at companies such as True Value Hardware and The Stride Rite Corp. before becoming a partner in Tatum Partners, a group of former CFOs and CIOs who hire themselves out as interim executives. Tatum has more than 400 partners nationwide. Lemerise stepped in as full-time interim CIO of the $1.5-billion-per-year poultry company and took charge of the technical team, reporting first to the chief financial officer and then directly to the CEO. By March, the entire supply chain had been converted without the loss of a single order. By May, he was interviewing candidates for his replacement. “The missing ingredients were leadership and direction,” says Lemerise of the situation at the company before he was hired. Once he took the helm, however, and specific objectives were laid out, “it was a huge challenge and a major turnaround, but we accomplished our objectives together,” he says. “It’s quite a success story.”

    While still considered a niche industry, interim-executive staffing is becoming increasingly common for companies seeking new tools to spur change and to achieve rapid results. Top-level interim executives can cost as much as $77,000 a month, but experts say the experience and ability that companies receive for the money not only can save them millions in the long run, but also can sometimes make the difference in a company’s surviving a crisis period intact. Staffing Industry Analysts Inc. reports that the interim-executive market is a $750 million industry, with some placement firms seeing as much as a 50 percent increase in the past year. But analysts do point out that the true market size is difficult to track, given the newness of the industry and the often informal nature of the recruiting.

    Called to duty for a variety of reasons, interim execs are usually hired to fix a critical problem or facilitate a major transition. Most have résumés stuffed with decades of corporate leadership experience and have turned to interim work for both the constant challenge and the more flexible lifestyle. And while their fees may be high–Foster Farms paid Tatum Partners $2,000 a day for Lemerise, and Korn/Ferry’s executive interims charge between $1,800 and $3,600 per day–interims are considered low-risk because they are by definition flexible and temporary. The average assignment is 6 to 18 months, and most interim execs work only one job at a time. Because companies can select people with the exact skills they are seeking for a specific amount of time, these highly experienced professionals are often an ideal, if temporary, solution.

    “More and more companies are beginning to understand what benefits these short-term assignments can bring to an organization,” says Michael Turrell, a former interim CIO in charge of Korn/Ferry International’s interim-executive practice. “They are the instant solution. Companies get very highly qualified and experienced individuals–many at the end of their working lives–who are happy to turn their hand to things they wouldn’t do as a permanent job because in many cases, they are overly qualified.”

The growing demand
    Tighter budgets have slowed hiring over the past few years, and a large number of executives have found themselves out on the street. Once there, many have realized that pounding the pavement isn’t fruitful. According to a survey by human resources consultants Drake Beam Morin, 18 percent of executives were in transition because of downsizing between 2001 and 2003, compared to 6.1 percent from 1997 to 2000. The survey also showed that the length of time needed to fill a new senior-level position had almost doubled in five years, escalating from seven months in 1998 to a year in 2003. From 2001 to 2003, the average length of time that top managers stayed at their jobs fell 30 percent, from 17 years to 12, the survey found, and 31 percent had been employed by their previous company for five years or less. A 2002 Forbes study of 800 top companies found that the average tenure for CEOs is just three years.

“My job satisfaction comes from seeing a job get done and finished and not from running things on a day-to-day basis.”

    “As a culture, we’ve become increasingly impatient about getting results,” says Mark Nevins, president of Nevins Consulting, an executive coaching and consulting firm in New York. In the last generation, a typical executive worked for two or three companies during his career. Now, working for six or eight companies is the norm, and there’s no indication that the number will shrink. In today’s corporate culture, Nevins says, short-term results are valued above all else. And companies are more likely to show their expensive executives the door if those results aren’t achieved fast enough. Advocates of the interim-executive model say it helps companies to remain agile, enabling them to expand and contract their workforce and their expenses with the ebb and flow of the market.

    Phil Nasser, founder and president of Cerius Consulting, a network of interim executives based in Southern California whose clients have included Experian and Wells Fargo Bank, says that during the past four years, companies have been cautious about adding new blood to the payrolls. “It’s a tenuous time,” he says. “I think the down economy, along with all the outsourcing and jobs leaving the United States, has spooked executives. They are not willing to hire in the way they would have a few years ago.” But trimming high-level staff down to bare bones to conserve cash often robs a company of the exact expertise and experience it needs to weather difficult times. So more and more companies–usually when they are caught in a sticky situation–are turning to interim leadership for salvation because these guns for hire can deliver experience and knowledge virtually risk free.

   John Landis, Foster Farms’ corporate comp-troller, says that bringing an experienced person in-house temporarily rather than hiring a consultant was important to the company because it didn’t just want a strategic plan. It needed someone to create the plan and then implement it by managing a team, holding people accountable and ensuring that specific tasks were completed on schedule. “We needed someone whose goals were 100 percent in line with the organization’s,” Landis says. “Someone who was not being paid to consult but was being paid to manage.” An important component of the interim model was that Lemerise was also responsible for hiring his own replacement. After spending nine months at Foster Farms day in and day out, Lemerise had the company knowledge as well as the technical expertise and management experience to be uniquely positioned to select a permanent successor, Landis notes.

    Turrell says the largest demand for interim executives at Korn/Ferry, which has a roster of close to 3,000, is for CIOs, COOs, vice presidents of human resources and, more recently, CFOs. In the wake of Sarbanes-Oxley, companies have become more vigilant about corporate responsibility, and for some, Turrell says, that means employing CFOs from outside the company. Interim executives are valuable because they are tasked with becoming a part of the corporate team and also are independent agents who come in without a personal investment in the company other than a desire to be successful.

Worth the cost?
    Most interim executives are paid well for their services, but compensation can vary widely. Lemerise’s $2,000 daily rate at Foster Farms means an average of more than $40,000 a month. He says that as the placement com-pany, Tatum takes 25 percent of his earnings, leaving him with an income of $32,250 per month plus an incentive bonus arranged with the company. Top-level interim executives from Korn/Ferry can cost a company $3,600 a day. These interims bill client companies up to $77,400 a month, of which 30 percent is a “markup” charged by Korn/Ferry for finding and placing the executive, Turrell says. Staffing Industry Analysts recently reported that compensation for interim executives is determined by the size and complexity of the assignment, balanced with the person’s experience. The typical cost to a company is between $150 and $350 per hour, the report says.

    Despite the high per diem rate, price is seldom a factor in a company’s decision to hire a topflight temp, Turrell says. “These are serious assignments, usually of a crisis-driven nature. The costs are small compared to whatever problem he has to solve. Companies are just glad to get someone who can crack through and fix the problem.” Nevertheless, he says, interim execs can earn in six months what they would have in a year as a full-time employee in the same position. However, because the company is not paying for the interim’s benefits, vacation time, cars or any other perks, the actual cost to the company is not always as large as it might seem, he says.

    Salary.com, an online service that compiles employer-supplied data on compensation, reports that the average chief information officer in Los Angeles costs an employer $318,412 per year when salary, benefits and bonuses are factored in. This translates to $1,350 per actual day of work, assuming three weeks’ vacation and five holidays. It does not include a signing bonus, the possibility of sick leave, or a potential severance package should the employee not work out. At Foster Farms, Lemerise was paid $650 more than the average CIO salary each day, but Landis says the arrangement was well worth the money both in delivery and for peace of mind.

    “Yes, it was a huge expense,” Landis says, “but you never know what situation you would be comparing it with. Maybe we could have found someone with his qualifications [for a permanent position], but it would have taken a lot longer. Maybe we could have brought someone on who was of lower caliber and cheaper, but then how much more delayed would we have been?”

    Landis says that even if the company had attracted someone as qualified as Lemerise for a permanent position, it might have been a challenge to keep the person once the job shifted from fixing an immediate problem to maintaining a whole system. Recruitment group Spherion Corp. reports that the cost of losing and replacing a senior executive can be two to three times her salary. In contrast, Lemerise says that with an interim from Tatum Partners, “you pay nothing to have them walk through the door, and if it doesn’t work out, it doesn’t cost you another penny.”

    Despite the success stories, there can be drawbacks to the interim model. Temporary executives can be forced to spend valuable time at the outset of their appointments trying to gain trust and improve communication within and between departments. A lack of leadership continuity within the company can affect employee morale and productivity, particularly if there have been a lot of layoffs. Michael Harris, a professor of business at the University of Missouri, St. Louis, says that restructuring departments is often a central part of an interim chief’s job. “Usually, interims are brought in when a company needs to make a radical change, particularly when they’re going to be cutting a few heads off,” Harris says. “The [interim executive] is there for a short period, and he has to make some nasty decisions, but he doesn’t have to live too long with those decisions.”

    This difference in tenure can drive a wedge between permanent employees and the interim executive who is spearheading the drastic changes. It can be hard to impart a long-range vision when employees know that the executive will be there for only a short time. Even Landis, who says he is a satisfied customer and would hire an interim executive in the future, notes that the model is less than ideal. What could potentially have been better, he says, would have been to get someone with Lemerise’s skills who would stay at the company permanently.

Up for a challenge
    That could be an unlikely scenario because of the very characteristics that make interim chiefs so successful in the first place. A research report on the personality traits of top interim executives completed this year by Korn/Ferry International and Decision Dynamics, a behavioral research and management assessment firm, finds that most successful interim executives are motivated by a desire for personal growth through learning from successive assignments, whether to broaden their expertise or to increase its depth. They are independent-minded leaders, skilled communicators and natural entrepreneurs who value applying their skills to challenging and new situations.

    After 20 years as a CIO for various companies, Lemerise realized that what he enjoyed most about his career was launching new jobs. “Once everything was up and running and the problems were solved, it just didn’t thrill me in the same way, and I moved on,” he says. “My job satisfaction comes from seeing a job get done and finished and not from running things on a day-to-day basis.” Other interim execs say that in addition to the professional satisfaction derived from the work, the interim lifestyle agrees with them personally. Nasser says that as an interim employee, he has the same income as when he served as a vice president of sales at Atlanta-based Sage Software, but now he is no longer working 60 to 100 hours a week. As an interim executive, he is able to choose assignments and have more control of his time.

    But in addition to the love of a challenge and the requisite expertise for the job, a successful interim executive has to have exceptional interpersonal skills. Temporary execs become chameleonlike, Turrell says. They learn to adapt quickly to new dynamics with every company and corporate culture they enter. “Interims are very sociable individuals–gregarious and very consensus-oriented–because they very quickly have to win over the hearts and minds of the people there,” Turrell notes. “But they come under pressure very quickly, so they can also switch to an autocratic style. It’s this level of social skill, as well as their managerial expertise, that makes them so effective and worth their weight in gold.”

Workforce Management, August 2004, pp. 35-38 — Subscribe Now!

With a cellar that holds more than 1,000 kinds of wine, many rare and priced at over $1,000 a bottle, the Disneyland Resort’s Napa Rose restaurant has a wide enough selection to overwhelm even a savvy wine drinker. Its award-winning wine list features 400 wines at any given time, 60 of them served by the glass, and the menu changes at least twice a week so that all the wines in the cellar can be presented. And the 260-seat establishment is uncorking big profits.

    In fact, wine sales are so high that they consistently account for an impressive 30 percent of total restaurant sales, a figure that general manager Michael Jordan attributes to more than just good product. While Disney won’t provide specific figures, Jordan says that the restaurant seats between 200 and 300 guests each night. Given a Zagat average per-person check of $57, that means the Napa Rose pulls in between $11,400 and $17,100 a night during its operating hours of 5:30 to 10 p.m. At 30 percent of total sales, wine alone could account for more than $1,000 an hour.

    It wasn’t always this way. While Jordan won’t say specifically how much wine sales have improved since the restaurant opened in 2001, he does say that the change has been tremendous. And the key, he thinks, is a well-trained staff, one that not only knows which Chardonnay to recommend with an appetizer of sautéed hand-harvested diver scallops accented with fresh vanilla, but also can recommend several choices, rare and less rare, within a customer’s price range and then explain the choice. This knowledge, and the confidence that comes with it, he says, drives wine sales at each table and also builds rapport with customers, who are then more inclined to come back.

    John Hanson, a Napa Rose headwaiter who has been with the restaurant since it opened, attests that sommelier training has had a dramatic impact on both revenue and customer relations. He says that in the past three years, the average per-person check has increased from $50 to almost $70 and that most of the difference is in wine sales. Some nights wine sales account for over 50 percent of total sales at the restaurant. “Taking the training definitely increases your check average,” Hanson says. “You will make more money if you take it.” Tips are up as well for waiters who know their stuff, he says, because guests are more satisfied.

    Rated by Zagat as Orange County’s best restaurant in 2002, the Napa Rose is located in Disney’s Grand California Hotel in Anaheim, California. In creating it, Disney sought to break the traditional mold of fine-dining wine service, which relegates wine and food pairing to the realm of just one staff wine expert, or sommelier. “Under that method, customers have to wait their turn,” says Jose Barragan, the operations manager for hotel restaurants at the Disneyland Resort. “We felt that was not good enough. We wanted a seamless approach to service, and when you say, ‘Let me go get the sommelier for you,’ that’s not about seamless service. For us, that’s underdelivering.”

    So Jordan, a certified wine instructor, created an intensive training program that ensures that even the busboys know when to suggest the rare Trousseau Gris and what goes best with the oak-roasted shrimp in basil-saffron cream. The results have been overwhelmingly positive for the bottom line. “We’ve had a tremendous increase in wine sales since we began the training,” Jordan says. “In the beginning they were good, but not this good.” In fact, according to Tom Miner, a principal at Chicago food service consulting firm Technomic, wine sales’ percentage of total sales at Napa Rose is four to five times the average for a “sit-down” restaurant, and the training most likely has something to do with it.

    “Wine training for wait staff is extremely valuable,” Miner says. “If guests don’t understand which wine to get, they’ll spend in the low range, but many are willing to spend more if they know what they’re getting. If you give staff training and the ability to speak with authority and make the right selection, sales will go up automatically.”

    Thirty-five of the 80 staff members at Napa Rose have been trained and certified in basic sommelier knowledge, as well as 54 other employees (called “cast members” in the Disney tradition) from throughout the resort. The sommelier training is not new to Disney. The Walt Disney World Resort in Orlando claims more than 300 sommeliers. What is new is the intensive in-house training that Jordan offers in Anaheim, which goes beyond the basics. Jordan’s class meets for two hours once a week for six months and culminates with a two-day level-one class and a test administered by the Napa, California-based American chapter of the Court of Master Sommeliers, the international body that has been certifying restaurant sommeliers since 1969. The court recognizes three levels of sommelier: one, two and master, a level achieved by only 60 Americans. Jordan, who is one of two level-two sommeliers at Napa Rose, plans to take the master’s test this fall.

“It’s fundamental knowledge, but it’s more than most people know. And it breeds enthusiasm and confidence, which then translates to increased profits, higher customer satisfaction and employee retention.”

    The course is so comprehensive that in October, Jordan’s last class achieved a 100 percent pass rate on the test, a feat that the court’s worldwide president, Fred Dame, says almost never occurs. Jordan’s syllabus is a laundry list of technical wine topics ranging from food and wine pairing to wine-making chemistry, history and geography. The course also covers cocktails, beer, bottled water and cigars. “It’s fundamental knowledge,” Dame says, “but it’s more than most people know. And it breeds enthusiasm and confidence, which then translates to increased profits, higher customer satisfaction and employee retention.”

    Disney employees don’t pay for this knowledge. Although the company won’t comment on money spent for training, according to the Court of Master Sommeliers, Disney picks up the tab for the courses and exams it sponsors. At $450 for level one and $895 for level two, the cost to test and certify the 89 employees who have qualified at the Disneyland resort would have been more than $48,000, not counting the six months of free classes offered by Jordan himself. “It’s been a great business decision to educate the team,” Barragan says. “We invest, and we get our money back and more in the quality of service, in customer loyalty and in cast member loyalty.” He says that out of 92 employees who have taken Jordan’s training, only three have left the company in the last three years.

    “A direct result of the course is that the guests trust me more,” says another headwaiter, Mickey Sato. The restaurant attracts wine aficionados, and Hanson says that being able to discuss the wines intelligently with the guests helps to build a clientele, which contributes to increased sales. This expertise also adds to the efficiency of the restaurant as a whole. “The pace can move along faster,” Sato says. “If someone wants a recommendation, I don’t have to go get someone else. I can help you immediately.”

    Wine consultant and Master Sommelier Ronn Wiegand is a former wine columnist for the San Francisco Chronicle and the publisher of Restaurant Wine, a newsletter for wine professionals. He says that while he applauds the dedication and motivation shown by Napa Rose staff in wine training, calling 35 staff members “sommeliers” is misleading. True sommeliers, he says, are dedicated only to the wine program, and their tasks include stocking the wine cellar and creating wine lists in addition to making recommendations and serving. What Napa Rose has, he says, is “a bunch of waiters and busboys who have taken classes and achieved minor expertise.” Wiegand says that any restaurant could train their staff similarly and that many have servers as well trained or more so than Napa Rose. The difference, he says, is that they don’t have the certification to show for it. Yet he admits that Napa Rose’s wine sales are impressive. “It’s an above-average performance,” Wiegand says. “They are doing an excellent job.”

    The success of the training has been so dramatic, as seen through booming wine sales and enthusiastic customer feedback (Jordan says that despite its location in a hotel, 30 percent of Napa Rose’s customers are local), that Disney will continue to expand the program to other areas of the company. Jordan has given his course, complete with the culminating Court of Master Sommeliers class and exam, to 14 Disney Cruise Lines employees, as well as 13 staff members from the Anaheim resort’s Golden Vine Winery. The Golden Vine, which has a restaurant, demonstration vineyard and tasting room, was opened in 2001 in partnership with the Robert Mondavi Winery. (Mondavi eight months later downgraded its role to sponsorship, citing ongoing operational losses due to reduced consumer spending on travel and entertainment. Now Disney operates the venue.) Last month Jordan began a new course with 40 participants, and Barragan says that every table-service restaurant in the resort is represented. Dame says that another Disney cruise-ship training and test are on his schedule for the coming months.

    “Walt Disney puts its money where their faith is,” Jordan says. “They have faith that this is a good, positive thing, and it’s an investment that’s really well made. I think this program will grow and grow. We’ll train 40 people a year until we run out of people. Then maybe we’ll start educating guests.”

Workforce Management, June 2004, pp. 91-94 — Subscribe Now!

Outsider status isn’t always a bad thing for an interim executive charged with taking the helm at a new company. Although gaining the trust of employees and mastering the corporate culture can be challenging for short-term leaders at the outset, consultants say that a new and independent perspective is often exactly what a company needs. Francie Dalton, president of the consulting firm Dalton Alliances in Columbia, Maryland, says that a temporary leader starting out with a clean slate can be more efficient than one with a history at the company as long as the person has the right skills. When a company is in crisis, as most are when they seek aid from interim execs, the person who steps in to lead should be someone from outside, rather than an in-house exec temporarily promoted to fill the slot, she says. Otherwise, jealousy and infighting can thwart any real progress toward meeting company goals. “If a company is in turmoil, it needs that outside objectivity,” Dalton says. “A political agenda cannot be imputed to that person and they can be as directive as they have to be because they have a special role to perform.”

    Another practical reason for bringing in a person from the outside is that often the skills required for a rapid, transformational change simply don’t exist within the organization. Poultry producer Foster Farms felt that it did not have the expertise to navigate a major technological overhaul. When the company hired interim executive Paul Lemerise, a veteran CIO, he brought not only fresh eyes but also the hard technical skills required to complete the task. Lemerise says his corporate and IT background helped him achieve success in the assignment, but so did his position as a change agent with temporary status. “As an outsider, I don’t have any skin in the game,” he says. “I have no agenda. I have an unbiased opinion and all these years of experience. I can be more effective in a shorter period.”

    Dalton says that a third component required for interim-executive success is a clear set of goals laid out at the beginning of the assignment. Without concrete deliverables such as increasing a company’s profit margin by a specific percentage in a set period or acquiring a specific company at a set price, interim execs can find themselves spending valuable time struggling to gain support for their ideas rather than just working to implement them. Lemerise says that at Foster Farms, he had six clear objectives, which included assessing the overall IT situation, implementing SAP for the entire supply chain, stabilizing the once unreliable weighing and pricing system, making a recommendation about outsourcing departments and restructuring the IT department, which eventually involved replacing a previous CIO. Dalton says that by establishing goals “as common enemies,” temporary leaders can “rally the troops around these specific objectives.”

    Still, experts say that even with industry expertise, fresh eyes and clear goals, the early days of an assignment can prove trying. Success is contingent on wielding authority immediately, and interim executives must be perceptive enough to sense potential interpersonal trouble spots and deal with them quickly and smoothly. “You always have to win them over,” Lemerise says. “You’re there as a change agent. In the beginning it can be a little awkward. Communication has to be frequent.”

    Kenneth Cleveland, executive managing director of Los Angeles-based interim-executive arm of consulting firm Ballenger, Cleveland & Issa, has served as an executive temp at eight midsize companies. He says getting management focused can be a challenge initially but that sooner or later, everyone reaches some form of consensus. Whenever an interim executive is brought in to make serious changes, Cleveland says, “people tend to be concerned, and that creates two kinds of people–those who welcome you with open arms because they know management isn’t doing their job and they’re afraid they’re going to lose their jobs, and those who understand the problems and want to work with you.”

Workforce Management, August 2004, p. 37 — Subscribe Now!

As president of Starbucks International, Martin Coles says that making sure that the customer experience translates appropriately across cultural lines is an unqualified must.

    “We’ll expand more slowly than we have to rather than over-expand and compromise the quality of the experience our customers get,” he says.

    Coles won’t reveal what Starbucks spends on employee development in order ensure top customer service around the world, but he will say that the efforts to recruit, train, compensate and retain employees overseas are so huge that together they compose one of the biggest expenditures in the multibillion-dollar company budget.

    Training, for example, typically includes flying new “partners,” as employees are called, to company headquarters in Seattle for intensive training and to other locations for store experience and an additional eight weeks of instruction. Whenever the company enters a new market, Starbucks brings new partners to Seattle for six to 12 weeks of training on topics ranging from business practices to how to produce and roast coffee, Coles says.

    This kind of commitment is, of course, expensive. That’s why some skeptics think that the Starbucks expansion overseas is unsustainable. Barry Sine, an analyst at H.D. Brous & Co., says he doesn’t think staffing will be a problem in overseas markets like China and Europe, but that the company has an uphill battle for customers.

    “Starbucks is an American imitation of a European concept,” Sine says. “To try to sell that back to the Europeans, that’s a real marketing challenge.”

    In Austria, proud capital of coffeehouse culture, the company planned to have 60 stores, beginning with one opening a month last year. But as 2005 begins, the total number in Austria is eight stores, all in and around Vienna. That’s down from 10; two didn’t make it.

    While Starbucks International has struggled for profitability since 1996, when the first 12 overseas stores opened in Japan, fiscal 2004 may have marked a turning point. Total international revenues were up 31 percent, pushing the balance to a slight profit for the first time. For now, the international expansion is going full steam ahead.

    Starbucks opened 413 new international stores in fiscal 2004, bringing the total number of Starbucks outside the United States to 2,437 locations in 33 countries as of October. Two months later, there were nearly 100 more international stores in countries as diverse as Chile, Turkey and Korea. Coles says that the long-term target of 15,000 international stores is attainable and cites China as the next big market and Europe as “an open book.”

Workforce Management, February 2005, p. 32 — Subscribe Now!

Since January, more than 40,000 “survival language kits” have been sent to U.S. soldiers stationed in Iraq. The kits, designed by linguists at the Department of Defense’s Defense Language Institute in Monterey, California, are to help soldiers communicate with Iraqis during operations such as door-to-door weapons searches. They contain written phrases such as “Please step outside” and “Cover your women” and “The Marines are here to help you.” They are necessary because only 1 in 100 soldiers in Iraq can actually speak Arabic, a critical shortage that dramatically affects the ability of U.S. forces to communicate on the ground.

    Capt. Frank Von Heiland, an operations officer for DLI, says that the ability to communicate clearly with locals saves lives and that linguists “have prevented needless shootings of vehicles by being able to tell folks to stop.” The cost of not speaking the language, he says, can be extremely high. Soldiers might not be able to understand an Iraqi soldier, for example, who is standing right in front of them telling a comrade nearby that they are a good target, Von Heiland says.

    The shortage of foreign-language speakers affects more than just the military. The CIA has had to hire retirees and translators to fill critical intelligence roles in both Iraq and Afghanistan. And although the government is working to combat this dearth of critical language skills through recruiting and training, even officials at the DLI, which churns out 500 near-fluent Arabic speakers a year, say that the shortage will be a problem for a long time. (There are 3,800 linguists currently in intensive language training at the DLI; the largest numbers are enrolled in 63-week courses in Arabic, Korean and Chinese, at a cost of $49,329 per student.)

The ability to communicate clearly with locals saves lives and linguists “have prevented needless shootings of vehicles by being able to tell folks to stop.”

    It’s reasonable to think that fast-growing multinational corporations such as Procter & Gamble–which has 98,000 employees in more than 80 countries–that are expanding their operations in overseas markets like China and Japan might be experiencing a similar need and pursuing similar solutions. But many experts say that this is not the case. While many global companies do offer some level of support for foreign-language training for employees who can demonstrate a business need, either by taking an expatriate assignment or working closely with international teams, many multinationals are not making a concerted effort to train their employees in languages other than English. Even so, Procter & Gamble, IBM and Intel are among the companies that offer compensation for employees who opt to learn a foreign language for business-related reasons, often an expatriate assignment. Despite headlines over the past couple of years decrying Americans’ lack of foreign-language skills and hyping the dire need for speakers of critical languages such as Arabic and Korean in the armed forces, multinational corporations aren’t feeling the same urgency.

    In fact, as diverse cultures inch closer through global commerce and technology, training executives and managers to communicate locally is, surprisingly, a very low priority. Unlike military forces in Iraq or Afghanistan, American corporate expatriates have the luxury of communication that comes to them easily. Their native tongue is English, and English, experts say, is the undisputed language of business. Because of this, most multinationals are not finding a major business need to train their employees in any other language, even though U.S.-based companies are entering more and more foreign markets. “English is the language of commerce,” says Chris Van Someren, president of global markets at Korn/Ferry. “There’s very little commercial application for foreign-language skills. Because of that, the need to help expatriates learn local languages is not high on the corporate agenda.”

    But even though English may be the primary avenue of communication across cultures, some say that expatriates unschooled in the local language are at a distinct disadvantage. Nancy Lockwood, a human resources content expert at the Society for Human Resource Management, recently completed interviews with 30 international human resources professionals on the effects of foreign-language ability on the work of expatriates. While there are no hard facts and figures to prove her theory, her research indicates that American professionals positioned in overseas assignments who can communicate in the local tongue are more effective. They can build relationships more easily and earn the respect of their counterparts more quickly, thus paving the way for smoother business dealings. She says that because the benefits of foreign-language ability are hard to quantify and play out in relationship-building rather than in hard numbers, the business advantages of expatriates who can communicate in the local tongue can be undervalued because the repercussions of not knowing the local language are not readily obvious.

“There’s very little commercial application for foreign-language skills. Because of that, the need to help expatriates learn local languages is not high on the corporate agenda.”

    “It’s not black and white,” Lockwood says. “What it comes down to is issues of rapport, respect and trust. If you’re working with someone and you want to really connect with them, it shows respect if you make an effort to speak their language. If you know the language, you can have a better understanding of the culture, and that can lead to trust. Trust can take a long time to establish, and it can take even longer if you only speak English.”

    IBM, which has 319,000 employees in 170 countries across the globe, won’t disclose the amount of money it spends on employee foreign-language training. Procter & Gamble doesn’t even track the amount of money spent on foreign-language training for employees, spokeswoman Vicky Mayer notes. Companies say that in many cases, the benefits of foreign-language knowledge can lie outside the specific realm of business. That’s one reason why the programs are optional. Mayer says that the benefits are more to help each employee adjust to his or her new surroundings and to promote the company’s policy of being a good neighbor and becoming integrated into local communities than to help the executive conduct actual business.

    “As with most companies, English is our language of business,” Mayer says. “However, we want our employees to be as comfortable as possible and to be able to integrate themselves into their new surroundings. Language training is a tool that gives employees a better sense of their new environment. It’s a tool to work with to achieve greater understanding of the host country.” The company will reimburse expatriate employees for language training for their spouses as well.

    At IBM, company-subsidized foreign-language training is provided on a case-by-case basis, says Mia Vanstraelen, director of human resources for learning in Europe, the Middle East and Africa. If employees need foreign-language skills to do their job properly–for example, an expatriate manager who functions as the point person between an overseas operation and headquarters or a sales employee who deals with clients on the ground overseas–the company will provide financial support. In addition, company support is often available for employees seeking business-related skills to further their own careers within the company.

    “In my experience, customers like to have discussions in their local language,” Vanstraelen says. “That’s for sure. But they also understand that if there’s a need for very specific expertise, we won’t always have that in the local language.” She points out that although the value the customer is usually looking for is in knowledge and expertise and not language, some international partners do prefer dealing with an IBM representative who speaks their language. “We have to make a choice,” she says. “Do we send the Italian speaker or do we send the person who is best technically? It’s a business decision we regularly face, and we make it on a case-by-case basis.”

    A less-than-aggressive attitude toward foreign-language acquisition at the corporate level is typical, some experts say, and the reasons range from high cost to a lack of necessity. English, the language of business, the language of technology, the language of Hollywood, is the language to know in global business even for traditionally non-English-speaking countries. Kenneth Lieberthal, a China expert and professor of corporate strategy and international business at the University of Michigan, says that English is so dominant in business that when Koreans go to China, English is the language they use to conduct business. It’s usually a language the two sets of professionals have in common, he says.

“We have to make a choice. Do we send the Italian speaker or do we send the person who is best technically? It’s a business decision we regularly face, and we make it on a case-by-case basis.”

    As countries across the globe continue to require English instruction in schools, this reliance on English as the internationally recognized tongue for business will only increase. Chinese law mandates that English training begin in third grade. In India, more than 50 percent of citizens speak English in addition to at least one other language, according to the Indian embassy in Washington, D.C. English is a target language, notes Susan Steele, provost at DLI. While Americans have to decide which second language might be most useful for their business careers according to their areas of interest, potential business professionals in other countries whose native language is not English have a clear answer to that question. And as more students worldwide learn to conduct business in English, its position as the language of commerce solidifies.

    Even multinationals that are headquartered in other countries are using English as the language of business, Van Someren says. He cites Sony’s Berlin headquarters as an example. In that office, which has about 400 employees, there are 45 different nationalities and almost as many languages, he says. “So the cost and effort associated with trying to teach everyone German when a lot of them will be moving on to other assignments in a matter of months probably doesn’t make a lot of sense,” he says. Language acquisition can be a slow process, and companies that need someone who speaks a foreign language can’t wait years for the right employee to gain the skills. When knowledge of a foreign language is what is specifically required, Van Someren says, that’s the skill set human resources looks for. “Corporations don’t come to me and say, ‘Help me find a great manager and we can teach him Chinese.’ They do say, ‘Help us find a great manager who already speaks Chinese.’ “

    Lieberthal says that in many ways, training high-level employees in a foreign language such as Chinese simply doesn’t make good business sense. “It’s a large investment with high front-end costs.” In a language such as Chinese, which can take three years of study just to be able to converse, the rewards simply aren’t worth the time investment, he says. Top executives could harm their careers by taking time off to study a language, Lieberthal notes. “Business moves quickly. If you don’t move up, you’re out of the game. It would be hard to fit language training into the executive career ladder.”

    In addition, he says, even if an executive were willing to put in the time to learn a language, the training just doesn’t make economic sense. An employer would have to not only cover the cost of language training as well as the executive’s salary, but also absorb whatever financial burden results from lost productivity. An executive sitting in the classroom memorizing vocabulary could be an investment in the future, but it would be a very costly one, Lieberthal says, and one that might not produce great returns.

    Lieberthal says that multinationals operating in a foreign country such as China will try to use employees who already speak Chinese. But there’s always a tension in play because what is most important for an overseas operation of a multinational firm is to have a manager at the helm with the job expertise and the significant clout at headquarters to both run the operation and communicate well with higher-ups at headquarters. Usually, he says, the candidates at this level with these qualifications are not the ones who can speak Chinese. So corporations choose business expertise over language know-how and bridge the communication barrier with translators. It’s not ideal, Lieberthal says, but it’s the better option. “If I had a choice between someone raised in China with good language skills who came through an MBA program and someone within the corporation who had done start-ups in Korea or Brazil but couldn’t speak the local language, I’d take the latter person.”

    Lockwood says that without language skills, valuable cultural understanding is lacking, and it is harder to establish trust. That trust can be built through being able to communicate outside formal meetings, she says, and by making an expatriate more approachable to local employees or customers. The deeper cultural understanding can come from getting to know people on a more personal level–an extremely valuable asset when doing business in a place like Latin America, experts say–and also through specific and subtle language clues that would otherwise be missed. Lockwood asserts that language training does not have to be an all-or-nothing proposition for corporations. The most common form of training, she says, is the less intensive model, which involves two or three hours a week and can fluctuate dramatically in cost.

    Some companies do rely on sending employees to language schools such as Language Exchange International in Boca Raton, Florida, or the Language and Cultural Center at Thunderbird, the Garvin School of Management, in Glendale, Arizona. Standard, non-customized immersion language classes at Thunderbird cost about $750 for 30 hours of instruction. At Language Exchange International, a private intensive class costs about the same–$750 for 32.5 hours of classes. Once the cost of training is added to travel expenses and lost productivity while the employee is away from work, the investment is just too high for some companies. Like Intel, they bring the classes in-house, or like many others, they stick to paying for part-time, after-work classes.

    Despite the reluctance of corporations to foot the bill for more extensive language training, employees with foreign-language skills remain sought after to fill various roles within companies. “Ironically,” Van Someren says, “there’s still a premium associated with people who possess multiple language skills. There’s still a marketplace perception that fluency makes them better thinkers and more sophisticated cross-culturally.” And some data exists to support the assertion that knowledge of the local language does, in fact, improve performance. A survey of MBA graduates from by top international business school Thunderbird, the Garvin School of Management, revealed that 82 percent of participants believe that knowing a foreign language gives them a competitive career edge.

    “In an ideal world, everyone would speak more languages and everyone would have technical expertise,” IBM’s Vanstraelen says.

Workforce Management, May 2004, pp. 47-50 — Subscribe Now!

U nlike other large corporations such as Procter & Gamble and IBM that are sending willing employees to foreign language training programs at outside schools on a one-by-one basis, Intel is testing the waters of developing a more comprehensive course in-house. Despite the popular thinking that foreign-language training for Americans is expensive and unnecessary because English is the language of business, the technology giant is expanding its unique language program.

    At Intel, employees with a business need can take classes in Mandarin, Japanese and Spanish at various offices throughout the United States, free of charge. The courses are not designed for expatriates destined for assignments abroad, but instead target employees who, through technology, are in direct contact with foreign clients or who work on cross-cultural teams within the company. With 78,000 employees in 294 offices in 48 countries, Intel has teams that are regularly made up of employees from different cultures working in different locations. The optional 12-week courses, taught at three levels by contracting companies, are designed to help minimize the culture gaps within these teams. The classes meet for two hours a week and cost the company approximately $300 per person. Employees are allowed to repeat courses.

    Marcos Garciaacosta, a business alliance manager at Intel who is based in Arizona, has been taking Japanese classes since he joined the company seven years ago. He says that the “ease and flexibility of on-site classes” keep him motivated to continue to learn. And while he says he is far from fluent, he is now at a proficiency level that enables him to better communicate with business contacts and customers in Japan.

    The in-house strategy is not new. Company spokeswoman Tracy Koon says that Intel offered its first language programs in Japanese in the 1980s. But despite its 20-year history, the program is still relatively small. Since January 2002, Intel has spent only $54,000 to train 180 employees in these three languages, a tiny fraction of its workforce, and one that does not include expatriates, who are compensated for language training outside these company classes. Without making a huge investment in the concept, Intel is receiving some positive results. Kathy Powell, the foundational development manager for Intel University, the division of the company that manages training, says the demand for foreign-language courses is increasing. Intel plans to expand the language-training program to overseas offices and to train 300 more employees by the end of this year.

    The language classes are part of a larger in-house cultural-training curriculum for Intel employees. The company also offers optional one-day classes with titles such as “Working with Russia” and “Doing Business with the Japanese,” which are designed to give employees basic information that they need to build relationships and do business cross-culturally. Class size is about 15 students, and subjects include culture, history and an overview of various countries and their business practices. Classes about other cultures are also becoming more popular. During the past 27 months, Intel has spent more than $762,000 on the program and has trained 2,495 employees. It plans to offer the classes to 2,300 more employees by the end of this year, at a cost of about $450,000.

    “Our business is very global, and there are a large number of people here working across cultures,” Koon says. “By having these language and cultural tools at your disposal when you work with employees from different countries, you can understand the do’s and don’ts of the cultures. You’re not going to be an effective team if you are constantly offending the other members without knowing it.”

Workforce Management, May 2004, p. 49 — Subscribe Now!