Author: Jennifer Koch

Employee sabotage in the workplace is an increasingly complex problem. Dealing with the aftermath can be a nightmare if you aren’t prepared for it. Three experts suggested the following tips for dealing with employee sabotage.

Expert 1:
“A lot of times, the knee-jerk reaction of management is to call an employee on the carpet and say, ‘I know you did it.’ That’s very dangerous to a company,” advises Susan Hubbell Nycum, an international partner with the law firm of Baker & McKenzie and a managing partner of the firm’s Palo Alto, California, office. She’s the chairman for her firm’s practice group on computers and high technology, and has been involved in outlining U.S. computer crime laws since the ’70s when she testified before the U.S. Senate and helped draft laws in this country and others. She has the following tips on dealing with sabotage:

• If you turn the investigation over to an independent investigator or investigation firm, it could be a good idea to do this under the control of your outside legal counsel. The reason: Outside counselors retain the attorney-client privilege and don’t have to disclose sensitive information except in certain situations under court order. “Whereas if you just turn it over to an investigator, he has no privilege,” explains Nycum.


• Don’t instantly call the authorities. “First of all, the police don’t have to investigate everything that’s brought to their attention,” says Nycum. “And if you’ve blown the whistle on someone and brought in the cops, but the cops decide not to take it further, the employee could sue you.” On the other hand, once the police are involved, you can’t stop the process.


• Have policies and procedures in place so employees know what’s right and what’s wrong—what they can and can’t do—in the workplace. Particularly in the cyberspace arena, make sure employees know what’s appropriate behavior.


• Follow your policies. Having policies and not following them is as bad as not having them.

Expert 2:
“Today, you just can’t accuse someone unless you’re absolutely sure it’s accurate,” says Jerry M. Eisen, president of Human Resource Center Inc., a management consulting firm based in Phoenix. Eisen was formerly the vice president of HR at Parsippany, New Jersey-based Ramada Inn and other large organizations over the years. To minimize the risk of sabotage, he suggests that companies take the following precautions:

• When you terminate an employee, change company door locks and computer access codes. “I’ve even had this done while I was terminating the employee in my office,” says Eisen. “This is so that when they go back to their desk to collect their things, they can’t bring up the hard drive and delete it.”


• Make sure you have all your ducks in a row before you confront an employee about sabotage. Interview all employees who might have known about or have seen the sabotage. Get signed statements from those employees about the specifics of their knowledge of the incident. “Then confront the person and try to get him to admit it on his own,” says Eisen. “Ninety-nine percent of the time, they admit it. They say why they did it—usually they were angry—and promise to make restitution.”


• Don’t be afraid to immediately terminate an employee who’s committed an act of sabotage. Even if it was an isolated incident, it could potentially happen again. Don’t take chances.

Expert 3:
“Companies really need to be aware that they’re most vulnerable during issues of separation, reduction in force, layoffs, terminations for cause—and even for no cause,” says Darren Donovan, vice president of the consulting and investigations unit of Pinkerton’s Inc.’s Eastern U.S. region. “These are the times when people feel most agitated and feel like lashing back at the company.” He says companies need to put more safeguards into place. Here are things that might help companies handle sabotage:

• Figure out what your company’s critical areas are and have contingency plans. For example, make an assessment that if an act of sabotage happened in each particular area of the business, what would be the result? Are the company’s assets protected? Are employees protected? Are the company’s information and property protected?


• Do a security survey and vulnerability study. For instance, figure out what you’d do if a product has been tainted or a computer system has been hacked into. Find out where your company is most at risk.


• Figure out your PR plan. Decide ahead of time in which instances your company will speak to the media, who’ll represent the company’s opinion and how to deliver the response.


• Decide how and who will investigate. Have a resource that you can go to quickly, because you can’t wait to act, especially if there’s some external impact or media concern. For example, if it’s an incident like finding a syringe in a Pepsi can, a prompt investigation can quickly help determine if it’s real or a hoax. (In this case, which actually happened, it was a hoax.)


• Do an investigation to understand the underlying cause of the sabotage. Are there a lot of labor issues going on? Is there anyone who’s been disciplined lately? Is anyone having personal problems? Scan the environment to link pieces of relevant information together, and formulate a hypothesis about who might have been involved in the sabotage.


• Contain the sabotage site for evidence. Make sure it stays intact and isn’t contaminated before your investigation team can collect all the information it needs.

Training employees on the topic of emotional intelligence isn’t the same as plopping people down in front of computer screens and teaching them how to use, say, Microsoft Office 2000 . Teaching someone to be emotionally competent can be a long process, taking weeks of time, hours of practice and lots of patience and coaching. It’s an endeavor that invades personal territory while improving professional performance. In short, it’s an adventure into both the heart and the mind. Many organizations that take the plunge experience many positive benefits, for employees and for their organizations.

EI training is an emerging trend.
Emotional intelligence training is just now blipping on the training radar screen. “It’s so small that we’re not really picking it up,” says Laurie Bassi, vice president of research and enterprise solutions at the American Society for Training and Development (ASTD), based in Alexandria, Virginia. So far, training that’s specifically pegged as “emotional intelligence” hasn’t emerged as a category, although aspects of soft-skills training, such as interpersonal communications, have been on the training agenda for years.

Yet Bassi sees it as a growing category. Daniel Goleman, the EI guru and author of Emotional Intelligence: Why It Can Matter More Than IQ (Bantam Books, 1995) and Working with Emotional Intelligence (Bantam Books, 1998), spoke at ASTD’s recent conference in Atlanta, Georgia.

Although there’s growing interest in the topic, corporate trainers, in general, aren’t pouncing on emotional-intelligence training over other skill areas. “What people are saying and what they’re actually doing are two different things,” notes Bassi. “If you ask HR people, they’ll say, ‘These skills are more necessary than ever. We give them high priority.’” Yet, from ASTD’s measurements on what training activities companies are spending the most money on, it’s primarily technical and computer-related skills. “That may be because the demands for computer literacy and skills are even more overwhelming right now,” adds Bassi.

According to The Consortium for Research on Emotional Intelligence in Organizations—which was founded in 1996 in conjunction with Goleman and the Graduate School of Applied and Professional Psychology at Rutgers University in Piscataway, New Jersey—there are thousands of consultants and HR professionals who are engaged in efforts to promote social and emotional competencies in employees.

The mission of the Consortium, whose members are from such organizations as American Express Financial Advisors, Johnson & Johnson and Egon Zehnder International, is to aid the advancement of research and practice related to emotional intelligence in organizations. Its mandate is to study all that is known about EI in the workplace, including identifying ways in which EI may traditionally have been taught as soft skills, but can now be identified under other rubrics, such as management and executive development, stress management and diversity courses.

The Consortium has identified 14 empirically supported models of best practice for developing emotional intelligence in the workplace. The Consortium also has developed a set of practice guidelines for organizations that want to excel in this area. (Find these models and guidelines at the Consortium’s Web site at www.eiconsortium.org.) The guidelines are based on an exhaustive review of the research on training and development in organizations, behavior change, and social and emotional learning.

Different than other types of training.
Although emotional intelligence training comprises the best of any other good training program, there are important differences. This material isn’t touchy-feely, EST-like fluff. Social and emotional learning is different from cognitive and technical learning, and it requires a different approach to training and development. Developing emotional competence requires learners to unlearn old habits of thought, feeling and action that are deeply ingrained and learn new ones. Such a process takes motivation, effort, time, support and sustained practice.

“It’s fundamentally about behavior change,” says Kate Cannon, president of Kate Cannon & Associates, Inc., based in Minneapolis. It’s similar to other kinds of soft-skills training, but it’s very different from technical training.

And in EI training, it’s often good to give learners time during the training for a fair amount of personal time. “This kind of training is often new to them, so it’s important for them to have moments of down time not only when they learn, but when they’re able to reflect on what they’re learning and what the impact is on them,” says Cannon. “Some people may think that’s a waste of time.” But she explains that because it’s important for people to absorb this material and get to points of mastery with it, it can take longer for people to “get it” than other types of training. Even when people may understand the material cognitively, it can take some time for them to be able to internalize it and change their behavior.

Basic elements of good EI training.
According to The Consortium for Research on Emotional Intelligence in Organizations, the optimal process for developing EI in organizations is by following these four steps: 1) preparing for change, 2) training, 3) transfer and maintenance and 4) evaluating change.

A good training program on this topic should have all the elements of a good adult-learning program, such as appealing to different learning styles. A typical program might incorporate visual, sensory, auditory and interactive elements—such as role playing and group discussion.

When Cannon trains a group in EI, she sticks to three basic elements: theory, practice and application. That means she provides the background on what EI is and why it’s important in the workplace, she teaches skills people can use to become more emotionally intelligent, and finally, she helps people apply those tools to their own situations and needs. Training sessions on emotional intelligence can range from a few hours to one day sessions, and up to five days, spread out over several weeks.

Much of emotional-competence training centers around giving people techniques to deal with emotions in the workplace, especially negative ones. “Emotions are quick things,” says Byron Stock, president of Byron Stock and Associates in St. Joseph, Michigan. Stock describes himself as a “recovering engineer” who’s been in the training arena for 15 years, and three years exclusively training people in emotional intelligence. “You have to give people techniques that help people deal with emotions quickly and easily.” For instance, in some of his training sessions, he teaches people a skill called “Freeze Frame” (Freeze Frame is a registered trademark of the Institute of HeartMath). It’s a five-step process that, once mastered, can help people deal with stress and anxiety in a matter of a few seconds. The skill, in a nutshell, goes like this: 1) Recognize the stressful feeling and FREEZE FRAME(R) it! Take a time out. 2) Make a sincere effort to shift your focus away from the racing mind or disturbed emotions to the area around your heart. Pretend you’re breathing through your heart to help focus your energy in this area. Keep your focus there for 10 seconds or more. 3) Recall a positive, fun feeling or positive time you’ve had and attempt to reexperience it. 4) Using your intuition, common sense, and sincerity, ask your heart what would be a more efficient response to the situation, one that will minimize future stress? 5) Listen to what your heart says in answer to your question.

Practicing this skill can help people not only become more focused, it also helps change their physiological responses to stress, such as lowering blood pressure and slowing down heart rate. In the workplace, this type of technique can help people move from being constantly anxious to feeling more in control, more creative and less judgmental of co-workers and bosses. Productivity often goes up in people who’ve taken EI training, and people tend to enjoy themselves and others at work more.

Small-group training works best.
Emotional intelligence training works best in small groups; usually 15 to 25 people is optimal. As with other training that only needs cerebral or intellectual involvement, EI training thrives on group interaction that can only come with a smaller group. Although such training isn’t intended to be team building, that’s often one important outcome. Team building is especially powerful in groups of employees who work together closely, as opposed to groups of people from the same company who don’t know each other. “In my experience, the very best impact is when you have an intact group,” says Cannon, “because when people don’t know each other, you don’t have quite the same level of trust where people really jump in and participate.”

Practice, practice, practice.
It’s important for students to practice what they learn during sessions, between sessions and after the formal training is over.

Assignments between sessions reinforce the training so students continue building their skills. For example, a typical assignment might be for employees to practice the skill of self-disclosure—which is talking about yourself to develop or sustain a relationship, especially a business relationship.

A manager from one of Cannon’s classes practiced this skill during a performance review at which he had to give feedback to a direct report about developing a particular area that the employee was unhappy about. Through self-disclosure, the manager talked about how at one point in his career, he also got feedback he wasn’t happy with, but that he trusted his boss’s judgment and took the advice to heart. Later, he began to develop in the area his boss had suggested, and it was exactly the area he needed to get his career moving. The self-disclosure technique was useful because he wasn’t telling the employee how to think or feel, but through his own story, communicated what the successful outcome was for him.

Between sessions, Stock typically calls his students to check on how they’re doing. People tend to practice what they’ve just learned more if they know someone’s checking up on them. But also, Stock feels that this material hits people at a more personal level than most organizational training, and often requires a higher degree of personal contact to reinforce the training. People often have questions about how to incorporate the material into their work lives. They also typically need someone who cares about their progress. Having an EI coach helps that process along.

“These skills aren’t learned instantly,” says Bassi. “They take time. And they need reinforcement.”

Training with impact.
Emotional intelligence training often has dramatic effects. Stock says that before training one management group at a large telecommunications company, as a group, they rated themselves 45 percent on a “stress” scale. After the training, that rate plummeted to 39 percent. Because the rating was on a normative scale, these results are more like a 20 to 25 percent drop. “People generally feel more peaceful, have less sleeplessness, have fewer headaches and feel more empowered,” says Stock.

Companies that care about their employees often position this type of training as an employee benefit or perk. Many HR staffs realize that their organizations are placing ever-increasing demands on their workers. This is a way for companies to give employees a coping mechanism.

The training also has prompted many employees to make other positive changes in their health, such as eating better and exercising more. Many workers see a positive impact on their careers—especially those who weren’t able to deal well with other people before the training. Employees report feeling more in control on the job dealing with their own emotional reactions to events and people, and say they’re able to handle stress better.

On the company-impact side, organizations can experience lower health-care expenditures and lower turnover. Although EI can be viewed as soft skills, it can translate into some hard results, such as sales people who can create better and more trusting relationships with clients, customer-care representatives who can more effectively handle angry customers, and engineers who can deal not only with the technical aspects of their jobs, but also interact sensibly with co-workers.

Empathy, flexibility and self-confidence might not seem like they’re skills that would help a company improve the bottom line, but many organizations are finding that these are the things that build and sustain competitive advantage.

Advice when looking for EI training.
As with buying the services of any trainer, make sure you exercise the same caution when looking for a trainer to teach emotional intelligence. Does the trainer have the proper credentials? Can he or she demonstrate results? “I don’t think this should be treated any differently than any other purchase of skills,” says Bassi of ASTD. “Except the track record may be harder for a trainer to establish because it’s a hot topic.” Few trainers have a long history of experience in this area.

In addition, make sure that you or the trainer measures the effects of the training. ASTD surveyed 35 highly regarded “benchmark” companies in October 1997, and found that of the 27 companies that said they tried to promote emotional competence through training and development, more than two-thirds made no attempt to evaluate the effect of these efforts. Yet, according to the Consortium, EI training can be, and is being, measured effectively. The Consortium for Research on Emotional Intelligence in Organizations estimates that between $5.6 16.8 million are being wasted each year on programs that don’t follow their established guidelines for implementation. Employers who offer or require EI training should attempt to measure its effectiveness as with any other type of training.

Sabotage. The very word conjures scenes right out of a James Bond movie. Indeed, sabotage is the type of undercover intrigue that international crime dramas are made of. But sabotage, as it turns out, isn t just the stuff of Saturday-night thrillers. It s actually a rarely discussed form of workplace violence that s causing HR nightmares throughout Corporate America. Angry, bitter, envious and resentful employees are taking out their aggressions on their employers for inequities they ve experienced—whether real or perceived.

With increasing frequency, workers are overtly and covertly setting computer bombs, erasing customer databases, tampering with consumer products and impeding co-workers careers—and that s the short list! And it s happening to big-name organizations like Forbes, the City of New York and The Chronicle Publishing Co. of San Francisco, to name just a few.

In the process, employers are losing, time, money, reputations and more, trying to piece their businesses back together. While sabotage by employees generally doesn t happen as often as other workplace crimes, the impact on businesses is greater than ever before. Being aware of your risk potential, and being prepared with proactive human resources practices and policies, are your best defenses.

What is employee sabotage and why does it happen?
According to their book Sabotage: How to Recognize and Manage Employee Defiance, (Mercury Books, 1992), authors Farhad Analoui and Andrew Kakabadse report that employee sabotage can range from deliberate nonperformance to financial fraud. It can be as simple as acts of vandalism or pranks, or as complex as computer revenge. Angry employees have put rodents into food products, put needles into baby food, set companies on fire and wiped out entire company databases.

As far as employee crime in the workplace goes, however, sabotage is unique. Sabotage falls into the broad category of workplace violence, but often falls just short of physical violence, such as workplace homicide. It s usually misconduct tinged with an edge of revenge. “With sabotage, there s definitely an attempt to undermine or disrupt the operation in some way or slander the company,” explains Darren Donovan, vice president of Pinkerton s Inc. s eastern U.S. consulting and investigations division based in New York City. Pinkerton s is a large security company based in Westlake Village, California. “There s a special nature to sabotage because of the overtness of it—and it can be violent.” It s a huge step up from breaking windows or stealing. “Companies can replace windows and equipment, but it s harder to replace their reputation,” adds Donovan. “I think that s what HR execs need to be aware of because it is a crime, but it can be different from stealing or fraud.”

Although there are as many reasons for sabotage as there are employees, it usually falls into two categories: sabotaging people, or sabotaging equipment and operations. “The first kind is done politically, to damage careers, a company s professional image, reputation, credibility and so on,” says Lynne McClure, an expert on workplace violence with McClure Associates Management Consultants Inc. in Mesa, Arizona. “The second type of sabotage is done physically to hurt the company as opposed to hurting specific individuals.”

The motive for sabotaging people is usually to advance one s own career by making others look less qualified, or specifically hurting another person s career to get even for real or perceived mistreatment. “The former seems to occur more often,” says McClure. She says the reasons people feel motivated to sabotage others are intense competition at work, coupled with fewer promotions, perceptions of favoritism, perceptions of unfair or nonexistent performance criteria, and personal conflicts and envy.

Generally, workers destroy equipment because they want to vent anger and frustration usually relating to work situations, such as getting even for a real or perceived injustice or mistreatment at work. It s the only way these workplace criminals have of dealing with their anger. They often don t know how to speak up when they feel mistreated, or they perceive the organization or management is unfair and it s the only way to “be heard.”

In addition to overt sabotage, there s other misconduct that s just as deadly to a company s operations. “In today s workplace, I believe there s a lot of covert, subtle sabotage that s happening daily,” says Nancy Probst, manager and organizational development consultant of management advisory services for Dixon Odom PLLC, a certified public accounting and management advisory firm based in High Point, North Carolina. Examples include intentional reductions in productivity, especially at large organizations in which management has flattened and spans of control have greatly expanded. Then there are managers who agree to whatever is being planned, but have no intention of actually doing it and sabotage those final plans in subtle ways. Employees who actively resist change efforts also could be considered saboteurs.

While the less overt forms of sabotage may not dramatically disrupt business operations in the same way a product contamination incident might, if it s pervasive enough over time, it can cause similar consequences, such as losing your competitive edge or market share.

Sabotage is committed most often by employees who are bored, feel overworked, have unresolved grievances, are attempting to gain unfair competitive advantage or are simply disgruntled. Acts of sabotage usually stem from people who have deeply personal beefs about workplace treatment, and want their employer to feel their pain. “Employees see it as a way to level the playing field, and a way they can gain leverage on their employers,” says Daniel S. Levine, author of Disgruntled: The Darker Side of the World of Work (Berkeley Boulevard Books, 1998) and owner of disgruntled.com, a Web site for workers who want to vent their frustrations.

The downsizing phenomenon has lead to an increase in employee sabotage. Although people have become conditioned to the at-will employment contract, they still can be disheartened and angered by reduction-in-force situations. Says Dick McCormick, senior managing director of Pinkerton s Washington D.C. Business Risks International (BRI) division: “With downsizing, some companies can be fairly brutal in the way it s done—and I think that has a lot to do with it from an HR standpoint. Companies that deal with it in a very humane, moral way don t have these kinds of problems. And maybe that s the crux of the issue: If you treat people shabbily, then human instinct is to get revenge.”

Jeff Zakaryan, president of Global Strategies, an executive coaching firm based in Dana Point, California, says he s seen a dramatic increase in bitterness from people in many types of workplaces over the past decade. He adds: “Sabotage seems to be just one more way for [workers] to kick the big corporation in the shins.”

How often does sabotage happen and what s the cost?
It s difficult to pin down exactly how often workplace sabotage actually occurs, since such misconduct often goes unreported and unpunished to outside law enforcement agencies. Although several organizations keep track of the overall number of violent acts committed in the workplace, none—even the Federal Bureau of Investigations (FBI) and the U.S. Justice Department—keep track of the exact number of instances of employee sabotage.

And security expert opinions vary about whether incidents of sabotage are increasing. “I don t see any dramatic spiking in it,” says Pinkerton s Donovan. “It s not epidemic, but it does happen. And it still happens too much.” However, Dennis Dalton, president of the security company Dalton Affiliates in Fremont, California, recently was quoted in a Los Angeles Times article on work rage, saying that he sees far more employee sabotage now than he did 20 years ago.

Yet there are some areas where sabotage is definitely increasing. For example, computer crimes are increasingly an “inside” job. In its 1997 1998 “Intellectual Property Loss Special Report,” the American Society for Industrial Security based in Alexandria, Virginia, reports that 89 percent of respondents said their biggest concern about system security was retaliation from disgruntled employees. Information-security experts indicate they ve been warning their companies for years that the greatest threat to organizational databases isn t an attack from outside hackers. Rather, it s often disgruntled or simply dishonest employees. In fact, in its fourth annual study of 500 information-security professionals this year, the San Francisco-based Computer Security Institute (CSI) and the FBI s San Francisco Computer Crime Squad reports that corporations, banks and government agencies all face a growing threat from computer crimes committed both inside and outside their organizations.

The costs of sabotage are high. Approximately half of the respondents to the CSI/FBI computer-crime study acknowledged that computer break-ins resulted in financial losses. A third of the respondents (about 163 organizations) could say how much money had been lost—$123 million for them alone. The most serious losses occurred through the theft of proprietary information and financial fraud, the survey said, although it added that other computer crimes ranged from data sabotage to laptop theft.

In a recent case filed by the City of New York, charges are being levied against 29 people, including four former employees with the city s department of finance (which handles tax payments) and 22 landlords. Apparently, the city claims that the employees manipulated a computerized system for recording real-estate tax payments from property owners by wiping out millions of dollars in taxes for landlords who, in turn, paid them bribes. The city will be seeking to recover $13 million in property taxes, plus another $7 million in interest. In the meantime, the city has recently installed a new system which prevents fraud of this type from happening in the future.

Overall, in the United States, the losses from employee fraud and abuse cost more than $400 billion annually, costing organizations 6 percent of their annual revenue. Although high-profile attacks by disgruntled workers garner most media attention, the problem is far more complex. The National Safe Workplace Institute in Monroe, North Carolina, calculates that a single episode of serious workplace violence, which includes employee sabotage, can cost employers $250,000 or more in lost work time and legal expenses.

And according to the Workplace Violence Research Institute based in Palm Springs, California, on-the-job violence costs employers at least $36 billion annually, up 850 percent over the past five years.

And the pressure is rising. Workplace violence was just rated the No. 1 security threat to America s largest corporations according to Fortune 1000 security executives. These results were revealed in Pinkerton s sixth annual “Top Security Threats Facing Corporate America.” The Northwestern National Life Insurance Co., based in Milwaukee, Wisconsin, estimates that approximately 30 percent of violent incidents involve current or former employees, including temps and subcontractors. Clearly, workplace anger that s funneled into nonviolent or violent acts of sabotage is an issue HR managers can t afford to ignore. It can happen when you least expect it.

Expect the unexpected.
Employees are more likely to commit acts of sabotage when they think their employer has done them wrong. For instance, sabotage is common after a termination. Omega Engineering of Bridgeport, Connecticut, has lived this particular nightmare. The company, which does work for NASA and the U.S. Navy, suffered $10 million in actual and productivity losses after someone unleashed a software program known as a “logic bomb” that deleted critical computer files. The incident took place 20 days after the dismissal of the company s former chief computer network program designer, Timothy Lloyd, in 1996. Lloyd has been charged with the crime, and the case is pending.

“I ve experienced sabotage when a merger and acquisition was announced at my former company and it became evident that a major downsizing was in the works,” recalls Linda Konstan, a former HR director who s now president of LMK Associates, an HR consulting firm in Denver, Colorado. “Not only were there suddenly major glitches in computer programs, but items were walking out the door.” She says they arrived one day to find the company s cafeteria refrigerator gone. “I m still trying to figure out how they got it out with a full security system in place. We had to bolt everything down for the remaining nine months of the ongoing downsizing.”

Similarly, an electric company in California resorted to sealing manhole covers during a strike to prevent employees from cutting power wires critical to employee service. At another company, Chronicle Publishing Co., which publishes the San Francisco Chronicle and the San Francisco Examiner, a striking driver electrocuted himself while tampering with a transformer box outside a company office during a strike in 1994. The strike was regarding pay and management plans to reduce the number of delivery truck drivers.

“That s one area where you re more likely to [encounter sabotage] is during a prolonged and ugly strike,” says Pinkerton s McCormick. “If there s enlightened labor relations and no really serious problems on each side, it s less likely to happen. Again, it comes back to what kind of management and HR policies you have.”

Company reactions are mixed.
“Companies aren t taking this lightly,” says one public-relations director at a large firm where an employee sabotaged the company s computer system two years ago, causing more than $100,000 worth of damage. She declined to use her firm s name, but says the company pressed charges against the ex-employee, who has since been prosecuted and jailed. She adds: “The willingness to go after the offender is something to be noted. Companies are making sure that the legal remedies are applied, and policies are being formulated that didn t exist before.”

Employees need to know such behavior won t be tolerated right from the date of hire. “We always suggest our clients put policies in their handbooks that give management the absolute right to inspect lockers, desks, filing cabinets—anything that belongs to the company. And that s a condition of employment,” explains Jerry Eisen, president of Human Resource Center Inc., an HR management consultant based in Phoenix, and former VP of HR for several large organizations. Here s how he usually words his clients policies on the topic:

Most of the time, employees who are found guilty of sabotage or damaging property are subject to paying back the deductible on the company s insurance policy which covers such losses.

Companies are often shy about reporting such crimes. The FBI and other law enforcement agencies are trying to overcome companies reluctance to report computer and other crimes because of the negative publicity involved. Companies fear public scrutiny about what they did to cause an employee to get so angry or feel so desperate.

Human resources managers and even risk managers aren t eager to talk on the record about employee sabotage—especially those who ve experienced it firsthand. Several human resources professionals whose companies were known to have experienced employee sabotage were contacted for this story, but declined comment. However, while it may be a touchy subject, it must be discussed so that fewer incidents occur in the future.

Preventing sabotage requires a kinder, gentler approach.
Perhaps there ll always be those employees who just get ticked off and explode, regardless of environmental, social or workplace stress. You may never be able to do anything to prevent those people from retaliating against your company, but doing thorough prescreening and background checks always helps. And there s a lot you can do to prevent most sabotage.

Most experts say the best prevention is simple: Treat your people right and they ll treat you right. The risk of sabotage seems to be directly proportionate to the way in which a company treats its employees fairly. Often, that s much easier said than done.

In his book, Silent Sabotage: Rescuing Our Careers, Our Companies and Our Lives from the Creeping Paralysis of Anger and Bitterness, (Amacom, 1995) William J. Morin, chairman and CEO of Drake Beam Morin Inc., a large organizational and individual transition consulting firm based in Boston, stresses that organizations need to reengineer both personal and corporate values. “What is silent sabotage? It s a turned-off, disenfranchised society that gives up in silent disapproval. It s a worker who comes in later and goes home earlier than he or she did 10 years ago,” writes Morin in his book. “I believe there s only one way to overcome the effects of silent sabotage—by critically analyzing and reevaluating our own values and our codes of ethics, and then rebuilding or reengineering them entirely.” Companies need to create shared values that we all know, understand and live by.

It s also important to open the lines of communication. That doesn t mean squelching conflict. It means managing it by creating cultures of constructive conflict by making sure that all organizations systems are based on a common set of objectives, says Erik Van Slyke, an expert on organizational conflict and author of Listening to Conflict: Finding Constructive Solutions to Workplace Disputes (Amacom, 1999). These objectives include: a shared perception of reality, results-oriented operating agreements, clarified roles and accountabilities, consensus decision making, and a formalized conflict-resolution process. It also means conducting regular employee communication meetings, collecting feedback through employee surveys and other anonymous channels like hotlines, and third-party reporting systems.

Efforts to treat employees fairly almost always pay off. Consider a 1996 study conducted by the University of Florida s National Retail Loss Survey project and the Winter Park, Florida-based consulting firm Loss Security Prevention Inc. The survey queried 350 companies from all 50 states in 22 types of retailing. The study examined the relationship between the way companies treat their employees and the level of employee theft they experienced. What the study uncovered was the companies that pay their employees better, have low turnover (including low management turnover), promote from within, have profit sharing throughout the company and maintain a high ratio of full-time employees to part-time employees, encounter less theft than retailers that don t rate as well in these human resources areas.

Now more than ever, employees need places to vent their feelings, and employee-assistance programs are still a good HR investment. And an interesting change in EAP services is emerging. “As health care costs continue to rise, employers will see the benefit of pulling together all risk-prevention programs—wellness, EAP and work/life—under one umbrella,” says Ann Vincola, senior partner of Boston-based Corporate Work/Life Consulting, a subsidiary of Knowledge Beginnings in San Rafael, California. Adds Vincola: “Risk-prevention services are increasingly overlapping in requests, and the lines will continue to be blurred. When an employee calls about child care but is anxious over a number of things, stress and marital problems may be at the core.” It s these types of underlying problems that build up and can emerge in inappropriate ways.

Employee sabotage is a complex and complicated issue. The implications are clear: Treat workers right, and they ll reward you with the right stuff. Of course, all things dealing with employees are somewhat uncertain. Your best hope is to keep business as fair as possible. Perhaps you won t predict every employee bomb that might explode, but you need to identify fuses that are lit and burning fast. Look carefully, and listen.

Monday, April 26
Westlake Village, California

Sue Hagen, 37, has what she calls: “A great but somewhat mixed-up job.” Her primary role is that of vice president of HR for Dole Food Co., Inc.’s operating groups, which includes providing support for the business units, including training, staffing and employee relations. The other hat she wears is corporate HR director for the company’s corporate campus based in Westlake Village, California, which houses about 250 people in two buildings—it includes the support group staff, packaged goods staff and the fresh fruit division (primarily the banana business), including salespeople. On this side, she’s responsible for general HR policy, health and welfare programs, plan design, communication (including the HR intranet site) and salaried payroll issues for the firm’s North American operations. She also interacts with divisional HR group and international HR operations. “The corporate philosophy for many years has been to have as small a corporate staff as possible—so there are only about 80 true corporate employees,” she says. “It’s a highly decentralized company.”

The company is set up more from a regional standpoint than from a product line standpoint. The organizational structure includes four divisions:North America, Asia, Latin America and Europe, with regional managers assigned to each. Each division has its own HR organization that supports it. Because her job is so varied, I quickly see it reflected by the many meetings and issues she deals with during her busy day.

5:30 a.m.
Bright and early Monday morning, Sue’s already out the door for an early morning, before-work, 10-mile run. She’s training for an upcoming marathon, and hopes to qualify this year for the Boston Marathon. Then she takes her two dogs, Peanut and Hoover, for a walk before her shower. Then it’s a short, two-mile drive to the office.

7:05 a.m.
Sue arrives at the office a little earlier than usual this morning after taking Friday off for a personal day. She’s a big believer in work/life balance, which spills over into her HR philosophy and the programs she’s helped develop for Dole Foods Co., Inc., where she’s worked for the past 13 years. When I arrive, it’s a short walk from the reception area to the corporate HR department. Sue greets me and ushers me into her large office, which has a view of Lindero Canyon Road and local shops, and rolling hills in the distance. She’s already been catching up on e-mail and voice-mail after her long weekend. “I used to get about 50 calls a day,” says Sue. “As for e-mail, I get 100 e-mails every day.” She seems to take it all in stride, and fires off responses with ease. Many of the questions these days concern the move to the company’s new building being built just down the road, which will be finished later this summer. Most of the other e-mail she gets concerns employee benefits, payroll, policy questions, project work for HR and vendor issues.

8:00 a.m.
We walk down the hall to the company boardroom to meet with the heads of Dole’s packaged foods division. The group is meeting to discuss the division’s results for the last period (there are 13 4-week periods a year) and to discuss forecasts for the next period. With a world map on the wall behind him, Peter M. Nolan, the division president, heads the meeting of seven people. Each executive gives an update for his or her area. They discuss their Thailand operations, pineapple sales, a customer database, the upcoming peach harvest, who their “Broker of the Year” was and a recent promotion. The group agrees the promotion was a great morale booster. Sue asks if they need her group to update org charts with pictures.

While the other execs are giving their updates, Sue munches on a blueberry bagel and sips coffee. When it’s her turn, she begins by discussing a current problem with payroll accruals, then goes on to add that soon Dole employees will be able to access their 401(k) information and make changes directly to their own accounts through their vendor’s new Web site. Sue also talks about pulling some people together to be on a steering committee to coordinate details for the upcoming move. She also wants to pull another committee together to work on parking and security issues. After one other exec’s update, they finish.

9:20 a.m.
Sue meets with the HR administrative assistant, Heidi Hintz, in her office. Heidi’s one of 16 people that Sue manages directly or indirectly. After reviewing Sue’s schedule for the week, they discuss Dole’s wellness program called “Healthy Lifestyles” and their HR-sponsored “Lunch & Learn” seminars. Employees can earn flex-benefit credits for attending these sessions. This week’s luncheon is on self-defense. They talk about other possible topics (such as back health—which they agree would be a good topic because of the upcoming move) and who they might invite to present on these topics at other upcoming events in May and June. Heidi agrees to call a couple of experts and invite them to speak. They move on to discuss Heidi’s performance development goals, and where she needs to adjust the time she spends on certain activities. They agree she needs to spend more time posting information on the company’s intranet so that updates happen once a month.

9:35 a.m.
Sue spends the next 15 minutes checking e-mail and taking phone calls from a consultant and fields a request for Dole to participate in an upcoming local event with the Rotary Club.

10:05 a.m.
Sue and I head upstairs to a meeting with Pete Nolan, head of packaged foods, and Dave Payn, senior HR consultant. This time, they meet in Pete’s corner office to discuss the intricacies of possibly reorganizing one of the company’s divisions to encourage efficiencies. The division currently is organized into “silo” groups, and few, if any, members of the division have crossfunctional expertise within the division. They agree that this could be a problem should senior members of the group leave for any reason. It’s clear a consultant needs to be called in for an objective look at the division to see how and if it needs to be reorganized and they talk about who they might call.

Sue suggests she might begin looking at succession planning within the group related to individuals’ performance development plans and related comp issues. The discussion moves into the tight staffing market. They talk about the longer time-to-fill jobs. Sue says people can be pickier these days, but she’s not sure if the company’s hiring managers have changed their hiring strategies. Some managers are still having just about everyone in their departments meet every candidate. It may be overkill. They talk about the employee referral program. Sue says they upped the ante last year to get employees more interested by doubling the incentive. Sue wraps it up by saying they’ll meet next week to discuss consultants and project criteria.

10:55 a.m.
Sue tackles the pile in her in-box. She explains that she makes a quick assessment of what mail is important and throws away what’s not critical, and she saves most mail to read at home on the weekends. “I just can’t take the time to read some things thoroughly at work,” she explains. On weekends, she catches up on trade journals, business magazines and other industry-related news. She makes a couple more phone calls.

11:05 a.m.
Sue walks over to the payroll department to meet with David Dale, Nashawn Smith and Soccoro Garcia about a payroll problem with some expats’ paychecks. It seems their accounting system was incorrectly withholding the wrong amount of “hypotax.” Sue later explains to me that they were referring to the federal taxes that Dole employees living outside the United States (but still American citizens) must pay on their wages each year, even if they’re working elsewhere. Dole helps employees estimate “hypothetical tax”—how much tax they think they’ll need to pay each year—and withholds the amount. However, the system overestimated hypotax for the last pay period. After the payroll people explain the extent of the problem, Sue helps suggest solutions. She seems to have a calming effect on the group. They agree they need to make manual adjustments right away for those people whose paychecks were affected, and they’ll tweak the system calculation to ensure it doesn’t happen going forward. Nashawn and Soccoro leave, and Sue stays to talk with Dave about another matter of concern to him regarding a co-worker.

11:50 a.m.
Sue and I walk across the street to a local Chinese restaurant. She explains that she often doesn’t take a formal lunch. She usually grabs something to eat quickly and gets back to work.

Between bites of cashew chicken and spicy egg-drop soup, we talk about her career at Dole and how she started as a secretary with a bachelor’s degree in psychology in the HR department at Dole when the corporate office was much smaller and had just moved to Westwood, California. Later, the corporate headquarters was moved up the road 40 miles to Westlake Village. After a few promotions, Sue went back and got her MBA.

“Things just kept coming up under my responsibility in HR, and eventually I was promoted to director of HR,” says Sue. “I never said early on, ‘This is my calling.’ It’s just that the work was very interesting. And it still is. It’s so varied. It requires that you not only have knowledge of legal issues, but you need finance knowledge and you need to understand the business itself. It’s challenging to keep current with everything you have to know.” She keeps current by reading The Wall Street Journal every day. She also reads Fortune, Forbes, Workforce and other HR-related journals.

We go on to talk about outsourcing issues (she outsources as much as possible) and how her job helps directly impact the bottom line at Dole. Sue clearly loves her job, and what she can contribute to her organization.

1:30 p.m.
We return to her office and she makes more phone calls. She receives a call from someone at Levi Strauss who’s aiming to organize a coalition of employers to look at “living wages” and other self-sufficiency issues for workers overseas. Sue also makes a call to one of Dole’s corporate attorneys to discuss drawing up a contract that would bind an employee with Dole for a certain time if they arrange and pay for the costs involved in helping the employee establish permanent residency.

2:05 p.m.
Sue walks to the office of Henry Cassity, who’s the director of purchasing. She tells him about an employee survey she’s implementing (the company’s first-ever). She explains the reasoning behind it: The company’s costs to recruit and relocate keep going up. They want to understand the reasons why employees stay and why they go, and what makes them happy long-term. The survey, which will be administered, scored and analyzed by Hewitt Associates’ office in Newport Beach, California, will look at seven areas, including leadership, quality of life and compensation. Henry thinks it’s a great idea. Sue asks him for his support of the survey and he agrees to encourage his group to fill the surveys out.

2:35 p.m.
One door down from Sue’s office, Jacqueline Hill, human resources consultant, has been working on comparing compensation data against industry norms for two particular employees. Sue walks to her office to discuss what she’s found out and whether the two employees should be eligible to participate in the executive bonus plan. It’s clear from their discussion that the two employees are critical to company operations, but may not qualify as executives. They think they should look into perhaps creating another incentive plan for “mission-critical” employees such as these. Because Dole is a flat organization and highly decentralized, there are many employees who have organizational impact, but not in the “executive, profit-and-loss” sense. Sue asks for copies of Jacqueline’s reports, and they agree to meet at a later date to discuss the possibility of a new incentive plan for these types of employees.

3:05 p.m.
Sue pops into George Horne’s office at the end of the hall. George is a Dole vice president who oversees HR. He asks her how her weekend went and whether she won any money. This is when I learn that Sue’s long weekend was in Las Vegas. She quips that she didn’t win any money, but she had a good time. The joking quickly turns serious as they discuss a job candidate for one of the company’s high-level positions, then talk about transitioning HRMS support from the IS group upstairs during the move to the new building. They talk about confidentiality and security issues, and how to back up the system during the interim. Sue then shows George data on total executive compensation for the past three years, showing the variances in targeted comp and actual comp. Sue also lets George know about the hypotax problem and how they’re resolving it, then has him sign off on some bonus payouts. They discuss their job opening for another HR generalist, and the fact that no good candidates have been identified yet. They joke that they might have to have some former HR people back in as consultants.

4:10 p.m.
Sue spends the rest of her afternoon returning phone calls and e-mails, verifying vacation accruals, checking back in on the hypotax problem, and hunts for a consultant for the divisional design study.

6:10 p.m.
Sue makes the short trip home, and goes out for another run. Then it’s a quiet evening fixing dinner and relaxing. The sun sets on another busy day in the life of Sue Hagen.

You can always tell who the winners are. They never settle for less than the best. They’re motivated more by inner conviction than outside influences. And they willingly learn from their own mistakes. But winners aren’t made in a day. Neither was Hewlett Packard Co.’s personnel department.

Despite the commitment of co-founders Bill Hewlett and Dave Packard to create an environment in which employees can fulfill their natural desires to do good, creative work, they refused to establish a personnel department until 1957 — 18 years after they founded the electronics manufacturer in Palo Alto, California, simultaneously creating Silicon Valley. A personnel professional wasn’t allowed to run the department until 1989, when F.E. (Pete) Peterson became vice president of personnel after a 24-year career in human resources, 17 of them at HP. “My getting this job was unique,” Peterson says, “because the company had a tradition of filling the top personnel job with a general manager on his or her way to something bigger and better.”

As with many roads paved with good intentions, HP’s way didn’t always take it to the best of places. The company got a late start on its personnel department because both Hewlett and Packard believed that line managers should care about their people and handle their own personnel issues. And because big bureaucracies often inhibit creativity, the late-blooming personnel function, like the rest of the organization, was decentralized as much as possible. Ironically, by 1990 the firm had an inflated roster of 1,800 personnel staffers, for 90,000 total employees worldwide, which represented twice the industry norm. Moreover, HP’s line managers were relying increasingly upon these personnel staffers, with diminishing returns. “I didn’t see morale going up [and] I didn’t perceive that managers were getting any better at people management,” Peterson recalls.

That era has ended. Today, HP’s core values are evident in sweeping changes in how the $16.4 billion (sales) electronics firm’s human resources are managed. In only three years, the personnel-to-employee ratio has dropped from 1:53 to 1:75 — and while Peterson has set no new goals for slimming his department, he’s keeping an eye on other firms that boast ratios as low as 1:200.

But reducing numbers are only the beginning. That they’ve been attained without violating HP’s long-standing no-layoff ethic is equally important. At the same time, Peterson’s staff has launched a campaign to provide better service to the organization by carefully reexamining virtually every personnel process. Thus, they’re searching out opportunities to consolidate activities that can work better either in a single global center or in a few regional locations. New computer technologies are putting information in the right hands — whether it’s a staff professional, line manager, employee or job applicant — more quickly than ever. Wherever possible, they’re taking personnel out of the decision-making loop, assuming a consultative role, re-empowering line managers to take responsible action on people issues and returning their attention to staying at the top of the list of preferred employers. And through it all, they’re trying to preserve the best of HP’s past practices. “We’re moving the pendulum back in the [right] direction,” says Peterson. Once again, personnel is becoming a complement to management, not a substitute for it — and it’s looking a lot like a winner in the process.

New personnel leadership leads to new strategy.
After Peterson took the top personnel position in 1989, he spent six months gathering data and developing a plan of action. He met with all 50 of HP’s senior managers in addition to benchmarking the best practices of other companies. Peterson concluded that HP’s personnel function was on the right track in several areas, but still could benefit from some changes that would more closely link personnel with the organization’s goals, processes and strategies. “Identifying, prioritizing and resolving issues was something we already did well,” he says. “What was lacking was a clear definition of the role of HR in the ’90s and how we add value to the organization.”

Part of the answer lay in returning to the founders’ original vision of making line managers responsible for people issues. “I think of ourselves more as consultants than as counselors,” he says. Instead of being involved in the day-to-day people problems, HP’s personnel professionals are taking on a broader consulting and coaching role to train managers how to be more effective in people management.

“There’s a lot more coaching and counseling that managers could do that personnel has been happy to do [in the past],” says Tom Pierson, HP’s human resources planning, staffing and relocations manager. Anybody can sit down and become familiar with HP’s transfer policy, for example, and make an employee and his or her family feel comfortable about transferring. Getting personnel out of the loop allows managers more responsibility over this process and others. “You provide the tools to managers that allow them to do it themselves or make it easier and so much fun that they want to do it themselves,” says Pierson.

In 1990, Peterson called upon his worldwide personnel team to create the environment by increasing value, providing higher quality and utilizing resources more effectively. Moreover, as part of its new role, personnel at HP is serving as a business partner with line managers. “HR will become an increased source of competitive advantage and will become more involved in business strategy throughout the ’90s,” says Peterson. “How you help your organization become more competitive in a rapidly changing business environment is by far the No. 1 issue.”

To translate this revised vision of personnel’s role into specific actions, Peterson designed Project ’93, a set of specific goals for personnel. In addition to reducing the personnel-to-employee ratio, some of these goals were to:

• Reengineer, define, standardize and continuously improve HP’s personnel processes
• Implement information technology such as a worldwide employment-management system and an international- employee master file and to improve efficiency and effectiveness
• Stimulate change in such areas as teamwork, organizational effectiveness, quality and people development.

To accomplish these goals, Peterson focused the personnel department’s attention on its own processes. The first order of business for HP’s personnel department in learning how to use its resources more effectively was to decrease the personnel-to-employee ratio. The goal was meant to help the department streamline its operations and increase its effectiveness both to employees and to the company’s managers.

Over the years, the personnel function had grown both in numbers of people and as a percentage of the work force. The largest gain in personnel professionals was in the area of personnel generalists or personnel liaisons. Peterson had to find ways to reduce personnel headcount, while still being a value-added function at HP. Basically, it was a matter of doing more, better, with less. By May 1993, the department had shrunk to 1,335, a 25% reduction in personnel staff worldwide that will yield an overall savings of more than $35 million a year for the company.

For HP, streamlining the personnel function to its present level has been an important step in its reengineering process. After considerable debate, the department decided to monitor ratios annually, but not to set new ratio goals for the future so that it can focus on other parts of Project ’93. One of those has been the consolidation and regionalization of certain personnel services.

This move came as the result of the personnel department looking at its processes, which were highly decentralized worldwide. Virtually all of Hewlett Packard’s 50 divisions and 120 sales offices had their own on-site personnel staff, which took care of all their HR needs, both administrative and strategic. Peterson decided that there had to be a better way. There was.

Peterson’s strategy was to consolidate duplicated or redundant personnel operations wherever possible while keeping those activities that require local attention at the site level. Some operations were centralized at the corporate level, others were concentrated into regional personnel centers, while still others remained the responsibility of on-site personnel staffs that could be responsive to business needs.

Over the past few years, for example, personnel has consolidated disability-claims management into a disability service center, medical transactions into a medical response center and relocations into a relocations center.

The disability service center was consolidated into a single site in January. Previously, there were 26 personnel staffers responsible for disability-claims processing. Instead, managers now own the process by submitting the initial information about an employee who’s out on disability leave. “[The new process is that] wherever possible, decisions should be made by the people who know the most about it,” says Sally Dudley, compensation, benefits and systems manager.

Some of the other major personnel consolidations at HP have taken place in the U.K., Italy and HP’s European multicountry region. HP’s Australasia location, which includes Australia and New Zealand, has gone to one personnel function for both sites, instead of having two. In the U.S., a large number of field offices have consolidated many of their people-related processes, most notably in the San Francisco Bay Area.

The Bay Area includes 13 different sites and more than 15,000 employees. Since Project ’93 started in 1990, the area’s 200 personnel employees have incorporated most human resources functions into one regionalized center called the Bay Area Personnel Services (BAPS) Regional Center. This consolidation is expected to be completed by the end of fiscal year 1994.

The regionalized personnel services include operational activities such as records, benefits and staffing and organizational activities, such as employee-relations issues and organizational design projects. Personnel site managers primarily are responsible for these operational and organizational activities at all of Hewlett Packard’s business sites, including the Bay Area.

In addition, BAPS personnel plans to add another component to the 13 Bay Area business sites which will give managers access to common human resources materials such as personnel forms, training and education schedules and employee-records forms. These components will be known as personnel-service centers.

One of personnel’s new goals is to contribute to business decision making and facilitate changes that are consistent with HP’s basic values. By maintaining on-site personnel professionals who can consult with managers on business-specific issues, personnel can be more involved in correlating personnel knowledge and practice with business challenges. These on-site groups, called management support teams, include personnel managers, personnel support managers, function specialists and administrative assistants.

Each of HP’s business sites may have different needs. For example, one site may need custom training that must be designed especially for them. Personnel and management can meet to discuss exactly what’s needed and develop a solution according to those needs.

“We learned years ago at Hewlett Packard that progressive human resources practices don’t just occur because you have a group of bright, dedicated people sitting in corporate headquarters thinking up new ideas,” says Peterson. That’s why HP opens up the process to managers for suggestions. Ideas are tried out and implemented if they work. If ideas work in one area, they can spread throughout the organization worldwide. For example, Hewlett Packard pioneered the idea of flexible working hours in its West German division in 1967, and by 1972 it had spread throughout the organization.

The long-term results of personnel’s regionalization at HP are yet to be realized. Personnel expects continued cost reduction, increased effectiveness and greater efficiency of service delivery. Peterson says that he hopes to spread the regionalization of personnel services to wherever it’s applicable worldwide.

In addition to consolidating services, personnel has streamlined itself carefully by outsourcing administrative activities when it proves cost-effective and provides a higher-quality service. Outside vendors already handle: 401(k) administration, group universal life program (GULP), COBRA administration and service-award administration.

Technology helps personnel streamline and get managers closer to the people-management process.
HP is well on its way to being world-class in human resources information technology systems. Currently, it has several systems in place and several more on the way. These systems are helping the HP personnel community improve its efficiency and effectiveness in numerous ways.

Before technology improvements could be made, however, it was important for the personnel function first to look at its overall operation. “You can’t implement the information technology unless you have process definition. You can’t go to consolidated organizations without having systems in place. All three have to move in parallel,” says Peterson.

The focus on technology has come as a direct result of Peterson’s new direction for the personnel department. In terms of technology, the human resources function had taken a back seat to most other functions at Hewlett Packard. “We’ve been kind of the cobbler’s children,” says Peterson. “We’re now very highly funded in long-term information technology.”

HP’s business sites used to manage human resources projects with decentralized personnel technology systems in much the same way as it provided personnel services at each location. Personnel’s technology, in some cases, was more than 20 years old. Now the company is moving toward a single, integrated system that will serve as the foundation for all people-management processes worldwide — from recruitment through retirement.

The personnel department scrapped its previous HR technology, which included a distributed-employee database, an HRIS and a payroll system. It now has a new umbrella system called PeopleBase, under which it developed several new personnel applications. These include a telephone-activated benefits system, an employment-management system, a training-management system, a human-resources-management system, an optical-file-imaging system, a personnel-document-management system and an international-employee-master-file system.

In short, HP intends for PeopleBase to be more than just a personnel information system. It’s a vision of people management as an integrated, cross-functional process, rather than a collection of separate, people-related activities.

The employment-management system (EMS) represents one of the personnel department’s biggest achievements and is the largest application on the PeopleBase client/server network. The idea for EMS started three years ago with a conversation between Dave Packard and Tom Pierson. They realized that they had a big problem: just to apply for a job at Hewlett Packard, applicants had to send their resumes to 46 different mailing addresses in the U.S. Each of Hewlett Packard’s business units collected resumes individually. Few, if any, shared resumes with each other.

Pierson has spent the last two and a half years designing, developing, testing and implementing a completely automated staffing system for Hewlett Packard U.S. and all of its English-speaking foreign divisions. Applicants now send their resumes to one Hewlett Packard address — HP’s employment response center at its corporate facility in Palo Alto. They’re then scanned into the system using advanced, optical-character-recognition technology and are available to all U.S. hiring managers within 72 hours. The system currently is available only to HP’s U.S. personnel staff and its English-speaking divisions, but plans are in the works for similar systems to become available for Hewlett Packard’s non-U.S. operations.

The system, which just went online this fall, can hold as many as 220,000 resumes in the data base. The resumes are kept current — six months old to the present. In addition, EMS can perform a short-list search for applicants in various categories such as the college-recruitment pool, the unsolicited-resume pool or the internal-candidate pool. The system also tracks each resume through the entire hiring process so that any personnel staffer or hiring manager knows at any given time exactly where each candidate is within the HP system. In addition, EMS automatically sends acknowledgement and regret letters to candidates and tracks affirmative-action information. It evens opens an employee file for each new hire as soon as he or she accepts a job offer. The system is expected to save HP $24 million a year.

In the future, Pierson says that HP is hoping to put fax machines on each college campus where it recruits so that students can send their resumes directly to HP’s employment-management system. In addition, Hewlett Packard plans to install kiosks at every HP building so that employees can submit their resumes for any job opening.

Another bonus for employees is that if they don’t currently have a resume, the system will help them write one. EMS even can be accessed by HP’s college recruiters with laptop or palm-held computers so that they can input student-interview reports off-site.

The system also will be compatible with HP’s redeployment program, which matches employees who have lost their jobs because of downsizing or outsourcing with other positions within Hewlett Packard. “It’s reverse engineering,” explains Pierson. HP can match people with jobs rather than jobs with people. “It will provide a lot of added value to be able to rebalance our work force and move people around within HP to maintain their employment security,” he adds.

Line managers also are getting closer to the hiring process with the advent of the new employment-management system. Instead of asking a personnel staffer at his or her particular site to look up all the candidates that fit a certain job description, site managers can look up those candidates themselves in a maximum of five minutes using a key word or key phrase. It takes only a few minutes to learn how to use the system. “Managers are now begging for it because they’ve heard how great it is,” says Pierson. The system will serve managers better, especially those who work alternate shifts and who don’t usually have live access to personnel staff members.

Another technology system that’s in development is a worldwide data-access system. The system basically is a warehouse in a client/server environment that allows managers worldwide to access employment information across geographies. In the past, when senior management teams wanted information about their worldwide work forces, personnel had to gather each element from each country or entity separately. HP’s international systems don’t talk with each other whether it’s U.S., European or Asian. “It’s very frustrating for the managers,” says Pierson.

With the input of managers worldwide, personnel has identified 14 data elements and installed them into what’s called an international-employee master file. On the system’s first incarnation are such data elements as performance evaluations, payroll and benefits information. The master file will be updated each month with information on every HP employee worldwide. Managers can access everything from employees’ names and employee numbers to payroll information.

Personnel will be adding more data elements to the system each year. Soon it will become so automated that HP will have one employee master file that contains information on every HP employee worldwide.

According to Pierson, no other company in the world has HR systems with the capabilities of its EMS and international-employee-master-file systems. They already are proving to be models for the future as other companies call upon HP to share information about how it developed these systems.

Personnel links its strategy to HP’s quality-of-work-life strategy.
One of personnel’s major new initiatives coincides with those of HP’s new chairman, president and CEO, Lewis E. Platt. For 1994, Platt set a strategic planning policy to reassert HP’s position as the best place to work. Hewlett Packard’s past leadership in this area has translated into a significant competitive advantage for the firm in the computer industry, where rapid turnover among highly valued employees is a persistent challenge. HP’s most recent internal surveys, however, show that its employees now believe that the company no longer exceeds industry norms.

To outsiders, this perception may seem off the mark. After all, for the past seven years, the company has been on Working Mother magazine’s list of the 100 best places to work. It’s also featured in The 100 Best Companies To Work for in America, the widely acknowledged book by Robert Levering and Milton Moskowitz. And just this year, HP was ranked as No. 7 on Money magazine’s list of companies offering the best benefits packages in the U.S.

Nonetheless, some events over the past decade may have tarnished HP’s image with its own employees. For example, a corporate downsizing and an illfated program to use part-time workers have taken the luster off its vaunted no-layoff policy. Moreover, the firm isn’t making as much progress in managing diversity and promoting women as senior management had hoped.

Once more, the solution was found in refocusing on HP’s traditional values. While putting a fresh emphasis on its internal employee survey, Peterson’s staff is working to reverse any weakening of commitment to the Hewlett Packard Way throughout the organization. This campaign touches on everything from job security to promoting women.

“I’m absolutely convinced that employment security has a lot to do with why reasonably well-educated human beings select a company, are loyal to a company and are good performers,” Pierson says. So, HP has gone out of its way to maintain that employment-security mindset and value system. “It repays itself tenfold,” he adds.

The no-layoff policy, however, has changed since 1985, when Hewlett Packard embarked on a major restructuring, which has been accomplished through voluntary severance, early retirement and redeployment plans. Pierson credits the success of the no-layoff policy to good overall management. “HP has been well-managed to the extent that we can see things coming better than maybe some other companies do,” he adds.

Another of Hewlett Packard’s personnel programs undergoing change is its flex-force program. Designed to protect the company during recessions while offering employment to non-career workers, it was a well-designed program that had some fatal flaws, which personnel discovered three years into the five-year program. One flaw was that the company counted on having an ample labor market of retirees, students and second-income earners who didn’t need medical insurance or pension security from Hewlett Packard.

Within a few years of implementing its flex-force program, personnel realized that there weren’t enough people like that to meet its needs. The other problem was that Hewlett Packard realized that it was taking advantage of contingent workers. The individuals that Hewlett Packard hired for its flex-force program actually wanted full-time work, but couldn’t find it elsewhere. “HP, the consummate ethical company with uncompromising integrity and high moral standards, said, ‘This isn’t right,’ ” explains Pierson. Clearly, it needed a new strategy.

Now, Hewlett Packard is winding down its flex-force program and is developing partnerships with third-party employment agencies that provide their workers with insurance coverage, benefits and employment security. “These agencies are in the business of making sure they find these people their next job,” explains Pierson. “We feel more socially responsible about developing relationships with two or three world-class companies that have a value system similar to HP.”

By effectively managing diversity within Hewlett Packard, personnel also hopes to help increase the firm’s stance as a leading employer. Although the overall percentage of professionals at Hewlett Packard who are women is a respectable 28%, and the overall percentage of professionals who are minorities is 17%, the upper echelons of management still are experiencing the glass-ceiling effect. Only 4% of senior managers at Hewlett Packard are female and 5% are minorities. Women managers quit at twice the rate of men at HP.

Hewlett Packard has had a management-diversity training program since 1988. The training is given to the company’s first- and second-level managers. “What was missing in that program was that it really didn’t start at the top,” says Emily Duncan, Hewlett Packard’s corporate manager of work force diversity.

The issue of diversity needed top-down emphasis. In June, Hewlett Packard’s CEO and his direct reports participated in an executive diversity-education workshop. This has helped increase awareness of the issue and positioned it as one of the key business policies for the ’90s at HP.

Duncan sees development and retention of women and minorities as the two biggest problems facing HP in the area of diversity. “We need to ensure that we’re providing the right level of support for development activities,” says Duncan. In addition, focusing on making sure that the work environment is supportive and is a place where people want to stay and grow will aid retention.

Hewlett Packard has a variety of diversity-education programs for employees and managers. Recent additions to the program include classes on the issues of disability, sexual orientation and harassment. In many cases, employees and managers take diversity-education classes together.

Peterson says that it’s important that both senior executives and line managers get involved in the diversity process at Hewlett Packard. “Show me an entity where there’s excitement in managing diversity — where there’s enthusiasm, results and where people are busting through the glass ceiling — and I’ll show you an organization where there’s management ownership and responsibility for that aspect of the business,” he says. “Show me an entity where it’s primarily a compliance program and I’ll show you where the personnel function has sole ownership for what goes on in the personnel area.” Managers at Hewlett Packard now must be directly involved in bringing about change throughout the organization.

An important component of HP’s diversity-education process is a 12-month, accelerated-development program for high-potential employees who are in mid-level management positions representing line functions. The program is for all employees, not just minority and women managers, but HP’s goal is to have 38% women and minorities in the program. So far, 38 people have participated in the program, which started two years ago.

The program has four major components: an assessment center, a mentor relationship, a structured work experience and an external education and training program. During the year, managers work (in addition to their normal jobs) on projects that give them a better understanding of HP’s business and help them develop new skills.

Outside the U.S., HP’s diversity program faces special challenges. For example, the management team at Hewlett Packard’s Yokogawa (YHP), Japan, region has focused on the process of hiring women, people with disabilities and utilizing and motivating its employees who are over the age of 40. Currently, 4.7% of this division’s professional work force are women. Its short-term goal is to increase the number to 10% by the end of 1995. Its long-term goal is to have 25% of its professional/exempt positions filled by women.

One of the region’s special problems retarding the movement of women into senior management is a labor law that prohibits professional women (except managers) from working after 10 p.m. It’s common for professional men to stay until midnight, often giving them a business advantage over women colleagues. The other problem is that the Japanese culture is among the world’s most conservative on women’s issues. Not surprisingly, it hasn’t encouraged women to be as aggressive or as confident as men in moving up the organizational ladder. Focusing on the development of professional women is HP’s goal.

One of the region’s solutions is to send an annual interviewing invitation to all of its female employees. Those women who want to move up within HP then can interview with various managers for higher positions. Other solutions include better training of employees and managers about diversity issues, giving dependent-care leave and offering more flex-time arrangements.

Although Hewlett Packard’s U.S. divisions may be slightly ahead of the game over its foreign counterparts in terms of diversity issues, the company has refocused its efforts to provide its managers worldwide with the tools that they need to build a diverse work force, such as part-time work, job-rotation assignments and telecommuting. Says Duncan: “I think most companies now recognize that this isn’t just something nice to do. It creates an important advantage to our business success.”

There never is one answer to a problem, and Hewlett Packard hasn’t cornered the market on personnel solutions. However, by not being afraid to reevaluate every HR process and to constantly discard what doesn’t work so that solutions emerge, HP has discovered a winning combination. It very well could be the only way that the human resources profession — and therefore, business — will survive in the ’90s.

Personnel Journal, December 1993, Vol. 72, No. 12, pp. 38-46.

A whole new business vocabulary has emerged over the past decade as corporations have laid off hundreds of thousands of workers. People have been slashed, cut, eliminated, excessed, rightsized and surplused. Others have been severed, trimmed, reengineered, pared down, terminated, chopped, given early retirement and just plain put out to pasture. The language, if it didn’t represent the jobs of so many people, might actually be humorous.

But downsizing is no laughing matter. It’s a serious workforce issue, and has been for years. Lately, companies across the country have continued to lay people off and downsize with increasing frequency, despite warnings from the human resources community about what layoffs can do to a company’s morale, productivity, customer retention and other important business indicators.

In fact, 1993 had previously held the record for the most job-cut announcements this decade with 615,186, according to results compiled monthly by Chicago-based outplacement firm, Challenger, Gray & Christmas Inc. Last year, there were 677,795 job-cut announcements—a hefty 10 percent more. All this downsizing is now taking place, despite a booming economy, massive hiring activity and other factors that seem puzzling when you look at it from the other end of the decade.

So what’s going on? To gain an understanding of the issues involved in 1999 and looking forward to the new millennium, Workforce looks at the roller coaster ride of downsizing and upsizing—and what companies stand to lose by letting large numbers of people go without having a clear staffing plan for the future in mind.

What’s up with downsizing?
There have been more than 4.6 million job cuts announced in the last decade—with last year topping the decade’s biggest downsizing year ever. Economists at the Federal Reserve Bank of Chicago estimated that in 1995 (the most recent year for which they have data), workers faced a 3.4 percent chance of being laid off. Many employees intuitively feel the odds are much greater.

As earlier in the decade, many factors contribute to downsizing decisions including reorganization, minimizing bureaucracy and eliminating excess. Now business downturns, mergers and acquisitions top the list of reasons for chopping headcount. In fact, merger and acquisition activity is now to blame for one in nine job cuts, according to Challenger, Gray & Christmas. Merger-related job cuts totaled 73,903 in 1998, nearly twice the 1997 total of 37,033.

All this cutting seems puzzling when you look at what’s going on in the economy. For example, President Bill Clinton rang in 1999 with a new report by his Council of Economic Advisers charting the economy’s continued growth over the previous 93 months as the nation’s longest peacetime expansion. In late February, Federal Reserve Chairman Alan Greenspan told the Senate Banking Committee in testimony accompanying the Fed’s semiannual report to Congress that “Americans can justifiably feel proud” of the economy and its performance. Although he warned that a huge trade deficit could spell the end of expansion in the near future, he said that the American “economy’s performance should remain solid this year, although with a slower pace of economic expansion and a slightly higher rate of overall inflation than last year.”

Greenspan also noted that the tight labor market could also push the economy’s performance out of whack this year. “Worker depletion [the shortage of skilled employees] constitutes a critical upside risk to the inflation outlook,” he added. And with the tight labor market often comes accelerated wage increases, which puts pressure on consumer pricing.

Two other sources echo the same prediction. According to the top 10 trend predictions for 1999 published in the Winter 1999 issue of The Trends Journal (a publication of The Trends Research Institute, based in Rhinebeck, New York), the wave of corporate firings that swept many industries in 1998 will actually build in 1999 as economic recession spreads globally and the domestic economy weakens. The article, titled “Dumbsizing II: The Sequel,” further predicts that many companies, obsessed with sustaining short-term profitability at the expense of long-term growth, will downsize to levels not seen since their peak in 1993.

Small and mid-sized business owners also think the economy soon will be hitting the skids, according to the seventh annual “Survey of Small and Mid-Sized Businesses” conducted by Arthur Andersen’s Enterprise Group and the National Small Business United (NSBU). In the survey of 504 small and mid-sized businesses owners, reactions about the current economy were mixed. Most (58 percent) expect the economy in 1999 to remain flat—to neither grow nor decline.

“Many experts consider small and mid-sized businesses to be the ‘economic engine’ of the country,” says Nancy Pechloff, managing director of Arthur Andersen’s Enterprise Group. “By their nature, the entrepreneurs who own these growing companies tend to be more optimistic about the future than other business owners. This makes their conservatism even more noteworthy.” Adds Todd McCracken, president of NSBU: “The combination of a tight job market, increased wage pressures and the roller coaster ride that Wall Street has become are putting a slight damper on their optimism.”

Wall Street analysts still take companies to task for the slightest downturn in profits or not hitting estimated earnings projections—ever concerned about the short-term picture. Many companies are posting record profits. And surprisingly, Corporate America’s high earnings reports also may be attributable in part to the huge downsizing wave. Essentially, organizations want to continue the growth spree and will do everything possible to continue producing hefty earnings. Companies still face crushing cost pressures as they did earlier in the decade. However, increasing globalization is pushing that envelope further.

“Inexplicably, the cuts come at a time when economic growth appears to be virtually unstoppable,” says John A. Challenger, executive vice president of Challenger, Gray & Christmas. “It’s apparent that the economic crises in Asia and Latin America, while having little impact on the overall economy, have affected exports and pricing power to the point that companies are compelled to make significant payroll cuts to remain competitive.”

Pricing pressures from companies moving business operations overseas to lower labor costs also are having a big effect on downsizing activity back in the States. For example, clothesmaker Levi Strauss & Co., based in San Francisco, announced in late February that it will close 11 of its 22 plants in North America and lay off approximately 5,900 employees, or 30 percent of its workforce in the United States and Canada. The decision came on the heels of a 13 percent sales decline last year. It was the second year of disappointing results at the privately held company. And this downsizing announcement is just the latest in a round of cutbacks for the firm, which laid off nearly 7,400 workers in 1997 (more than a third of its North American workforce) and closed more than 10 plants, and nearly 1,900 jobs in 1998. To ease the situation for those employees whose jobs will be lost this time, Levi’s will be offering its U.S. employees an extremely generous severance package, including three weeks pay for each year of service, extended medical coverage and up to $6,000 toward training, education and business start-up expenses.

Another factor in downsizing decisions is the high cost of labor, which is rising dramatically for many businesses. While a majority of small and mid-sized business owners who responded to the Enterprise Group/NSBU survey say the number of people they employ remained the same or increased slightly in 1998, most say their compensation costs have gone up during the same time period. Seventy-one percent of small and mid-sized business owners report that they haven’t increased their number of employees. However, despite static staffing, 63 percent of business owners say they’re paying more in employee compensation.

As it turns out, downsizing actually is the number one factor inhibiting wage inflation, according to information from Challenger, Gray & Christmas. Once seen mainly as a component of corporate reorganization aimed at achieving a healthier bottom line, the chilling effect of downsizing on workforce wage demands has effectively kept wage inflation in check. Downsizing acts as a valve to relieve a company of unprofitable lines or unwanted employees, freeing resources that can then be used elsewhere for a better return on investment.

Yet it’s very much a push-pull situation because in mass downsizings, companies inevitably let go both good and bad performers because equal opportunity laws prevent discrimination in singling out certain people (such as older employees) for layoff while keeping others in the same business unit. However, downsizing strategies continue to evolve. As management teams fine-tune their reorganization efforts, selective job cuts here and there are becoming a more common practice than massive downsizings. Regardless of the finer points of how downsizing is accomplished, it’s still occurring—and despite massive hiring efforts in other areas.

What’s the lowdown on upsizing?
This is the puzzling side of the story because, despite the downsizing wave, at the same time there’s been much “upsizing” or massive hiring within Corporate America, often within the same firm. For example, in 1996 some of the earlier decade’s biggest downsizers like AT&T, IBM, Boeing, Sears and Xerox, hired a combined total of 63,800 people, having cut a combined total of 249,836 job cuts starting only three years earlier in 1993, according to survey data from Challenger, Gray & Christmas.

Armonk, New York-based IBM, for instance, cut 69,256 people and increased its workforce by 16,000 in 1996. Much of the hiring by IBM was in the services sector, which was an anticipated growth area for the company. “IBM is the perfect example of a company that had to downsize in one area and, at the same time, hire in another to adjust to a drastically changing market,” says Challenger. “What we saw at the time in the computer industry was a shift of demand from computer hardware to computer software and services. IBM was reacting to this shift when it embarked on its reorganization strategy.”

An annual survey by New York City-based American Management Association on downsizings for the year ending June 1998 showed that although downsizing activity was increasing, so was hiring activity. Some 41 percent of the companies in the survey (which represents one-fourth of the U.S. workforce) eliminated jobs—the same number as in 1997. However, two-thirds of them were concurrently creating new positions. The AMA defines a downsizing as a net decrease in the workforce.

And a burst of 1998 year-end hiring activity, which returned the nation’s unemployment rate to 4.3 percent in December, helped produce the strongest peacetime labor market in four decades. For the year, employers added 2.9 million jobs, slightly fewer that the 3.4 million jobs added in 1997.

But there continues to be a severe labor shortage because of low unemployment. The technology industry, for one, is scrambling worldwide to find workers. Many other industries are hard-pressed to keep their doors open because they just can’t find qualified, or simply enough, workers. It seems like an enviable position for a company to have so much work it can’t hire people fast enough. “Paradoxically, while this sounds like a good thing, severe labor shortages can cause more job cuts. If a company can’t accept new business because of a lack of workers or, even worse, if a company loses business because the quality of work suffers from a lack of skilled workers, then that could lead to slowed growth, sinking profits and ultimately cost cutting through downsizing,” Challenger observes.

And surprisingly, while the computer industry has been celebrated for its rapid growth and unrestrained job creation, a five-year study released in February shows that this industry has also been one of the top three biggest job cutters. From 1993 to 1998, companies in the computer industry collectively announced 272,891 job cuts, nearly tying second in the ranking of top job-cut industries, according to data from Challenger, Gray & Christmas. The biggest job cuts were from the aerospace/defense industry which logged in 373,278 job-cut announcements.

All this massive hiring and firing leaves you wondering what American business leaders are thinking, and why it’s still occurring in such a tight job market.

Does all the cutting and adding make sense in today’s business environment?
Last time we went through what came to be known as the “churn and burn” early ’90s, downsizing was characterized by many as a bad solution to business problems. It was the beginning of the end of the old-style, paternalistic corporation—and the end to employee loyalty as we knew it. At that point, people still believed in the jobs-for-life paradigm. Getting rid of people was something companies just didn’t do without good reason. Although there had always been layoffs at companies, there had never been so many of them in such a short amount of time.

Because the workforce landscape was changing so fast, it created tremendous social unrest. Society, often through the media, put pressure on Corporate America to find jobs for displaced people. Outplacement services became popular and continue to be a transition step for workers who were laid off or lost their jobs to restructuring. “One of the major differences if you look back eight to ten years ago is that the condition of the job market was clearly different. Back in the early ’90s a person in the job search was anxious to get a job offer. Today, their search time is short because it’s a hot job market, and there’s a greater chance they’ll find a position that’s more aligned with what they want to accomplish rather than being concerned with whether or not they should take the job offer,” says Carlo A. Martellotti, area sales director for the midwest office of Drake Beam Morin, a large career transition and career management firm based in Boston.

Downsizing in the early ’90s demoralized people. People this time are feeling the same, and are trying to recover from previous reorganization efforts. They’re still playing catch-up, trying to get work done that was left by others. People are doing the jobs of two or three people. And with the increasing amount of new technology, companies have justified the heavier workload.

According to an article written by Challenger in the October 1998 edition of The Futurist entitled “There Is No Future for the Workplace,” technology has already made it possible for American business to become more productive. “Computers are now doing the work of two or three people, helping to keep total wages in check and hold down inflation,” Challenger writes. Many people refuse to go the extra mile, realizing they could be spit out from the firm just as quickly as their former co-workers who were purged.

“From my experience in a large health care system, layoffs are deadly to the morale and motivation of a workforce and toxic to an organization’s culture,” says a senior leader in organizational development. She says the number of people laid off doesn’t really matter. At her former firm, senior management laid off 65 people out of 6,500 in its first wave of downsizing. “Senior leadership foolishly believed that because this was such a small number, it really wouldn’t have any impact on the total organization. Wrong! A bomb couldn’t have made a larger impact, and that impact has remained over three years later and many more layoffs.

“Unless a company is willing to undertake the hard but necessary work of developing a new contract to replace the old one, employees will just feel betrayed and this shows in many ways including lost loyalty, poor morale, health problems and reduced customer service,” she continues. “There is a belief that layoffs should be an embarrassment to the leaders of a company as it shows that they have failed in successfully leading that organization. I tend to agree with that theory.”

Rebounding from a job cut has become easier.
In the current downsizing cycle, society realizes most of those people can find another job easily. Perhaps that’s why there seems to be little, if any, public outcry against downsizing. A full 92 percent of job seekers who had been laid off found jobs with equivalent or better salaries in 1998, according to the U.S. Bureau of Labor Statistics based in Washington, D.C. Companies have forced people to be self-reliant.

People aren’t staying with one job or one company as much anymore. Temps are in high demand and can get more pay for their skills as contingent workers. According to the National Association of Temporary and Staffing Services in Alexandria, Virginia, 9 out of 10 staffing firms say that recruiting new employees is a huge problem. “Staffing companies have been running flat-out for over a year to catch up with demand,” says Richard Wahlquist, executive vice president.

And in the future, temporary staffing may continue to get more competitive. The U.S. Bureau of Labor Statistics projects 151 million jobs by 2006 and 141 million people employed. As often happens today, many of those workers will be working two jobs. According to Challenger, Gray & Christmas, 8 million people held down more than one job in 1997 compared with 3.8 million multiple-job holders in 1965.

A U.S. Department of Labor survey found that 17 percent of contingent workers had a previous and different relationship with the companies that now rented them. And an American Management Association survey of 720 companies reported that 30 percent had brought back laid-off employees either as outside contractors or as rehired employees.

Although the Hudson Institute Center for Workforce Development in Indianapolis predicts that the labor crunch will loosen up slightly around 2000 because of an economic downturn, the labor shortage overall will continue for the next 20 years, and may actually get worse. This message was delivered by Richard Judy, senior research fellow and co-director of the institute. He believes unemployment will reach no higher than 7 percent in the next 20 years, with lows of about 3.5 percent.

Many people don’t want to be Corporate American citizens at all anymore, and they’re going into business for themselves. Approximately 20 percent of the workforce is now self-employed. Eleven percent of jobless managers and executives started businesses in the fourth quarter of 1998, the highest level since 1996. Part of this may have been because the demand for executives showed a dramatic weakening in 1998 vs. 1997, according to Exec-U-Net’s Executive Market Demand Index. Exec-U-Net is a Norwalk, Connecticut-based career and networking organization exclusively for senior-level employees. Overall growth in executive job demand was only 19 percent in 1998 versus growth in 1997 of well over 30 percent.

In addition, the societal mood has changed. There’s a growing trend toward a more compassionate way of being. According to the winter 1999 issue of The Trends Journal, as the Industrial Age dies, its survival-of-the-fittest philosophy is being replaced by a Global Age school of thought. People are looking for a kinder, gentler organization—even amidst the loss of corporate loyalty—that matches their goals and values. This is why employees are looking at the popular saying “People are our most important asset” as somewhat of a joke. Corporations are saying it. But do they really mean it?

The ‘people as important assets’ mantra doesn’t mix well with downsizing.
From the HR perspective, downsizing at this point on the business continuum doesn’t make a lot of sense. It’s at odds with the “people are our most important asset” mantra so prevalent in today’s business environment. “Small and mid-sized business owners know talented people are their most valuable resource, and recognize that this resource is scarce,” says Pechloff, at Arthur Andersen’s Enterprise Group.

Especially in a knowledge worker based economy, it seems strange that a company’s human resources aren’t treated with more value these days with respect to downsizing. An article in the February 1999 issue of CFO magazine points out that where knowledge assets (read: people) are concerned, accounting practice hasn’t changed much over the past several hundred years. Accountants still don’t treat knowledge assets as assets. The article further points out that despite the increasing awareness that the value of knowledge assets now approaches, or even exceeds the value of reported book assets, rolemakers in the United States have largely dodged the issue.

Company leaders seemingly are still using downsizing as a tool to get their businesses back on track with little thought about the long-term effects that such measures inflict on the survivors. Are CEOs driving downsizing because of a boost in personal wealth? Have HR’s gainsharing and incentive-pay programs actually pushed CEOs to downsize to realize quick profit potential?

“While it’s likely that some CEOs will downsize for short-term personal gain, I believe this is atypical behavior,” says Jack Dolmat-Connell, vice president and managing director of the Wilson Group, Inc. a compensation and HR consulting firm based in Concord, Massachusetts. “CEOs want to be winners, in both the short-run and the long-run. Downsizing for short-term gain is a recipe for failure, which they intuitively know. Even if the CEO were acting in his or her own best interest, the real money to be made is in the long-term because of the increasing size of stock-option awards. The amount of short-term incentive opportunity pales compared with long-term incentives.” One case in point is Phil Condit, chairman and CEO of Boeing Inc., based in Seattle. Condit felt compelled to refuse last year’s bonus because the company was slashing tens of thousands of jobs.

A Wall Street Journal article examining what happened to the stock prices of downsizing firms showed that following an initial increase in stock value, after two years, in two-thirds of the cases, the stock prices were lagging those of comparable firms in the industry by 5 to 45 percent, and in more than half of the cases, stock prices lagged the general market by amounts ranging from 17 to 48 percent. This result isn’t surprising in the context of other studies that show downsizing doesn’t necessarily increase productivity or profits.

Despite this hard data, a recent survey of 75 CEOs by Christian & Timbers, a retained executive search firm based in Cleveland, reveals that 69 percent of those CEOs surveyed think continual rightsizing is the wave of the future. According to Jeffrey E. Christian, president and CEO of Christian & Timbers, “With mergers and acquisitions, changing markets and constantly new technology to contend with, companies today are making continual adjustments to a very dynamic environment.”

Most studies confirm that downsizing leaves people bruised and far less productive. It works against the gains leaders often anticipate. In fact, it often doesn’t pay off financially. While this tradeoff certainly fits with fiscal responsibility, this too is short-sighted, according to Dolmat-Connell, because organizations later recognize that they need to rehire in the areas where downsizing has taken place—after having destroyed employee trust in the organization, and lowered their overall value proposition with employees. In many cases, they end up spending more to rehire than if they had left staff in place during the entire period.

Downsizing is a reflex, not a strategic solution.
Downsizing still seems to be more of a knee-jerk reaction than a carefully planned strategy. Thomas B. Wilson, president of the Wilson Group, tells of a company he recently worked with whose first thought during a particularly difficult year profit-wise was to cut people. But it was more expedient to cut materials costs, which in the end, solved the problem with better results. “Ultimately, companies have to turn the corner and look at revenue growth; that’s the name of the game,” says Wilson. “They have to align their costs to fit with their growth cycle, but to keep downsizing, downsizing, downsizing is like anorexic behavior.”

At SAS Institute Inc., a Cary, North Carolina-based software development firm, they take a different approach to business downturns. “While we’ve been fortunate in our rate of growth (double-digit revenue growth in each of the company’s 23 years), we take a view that goes well beyond monthly or annual benchmarks. Our aim is to take a long-term approach which enables us not to lose sight of our goals despite short-term business fluctuations in either direction,” explains David Russo, vice president of human resources. “Part of this long-term focus includes our investment in research and development. Our reinvestment of more than 30 percent of revenues annually into R&D gives us the ability to work on a number of technologies instead of putting all of our eggs in one basket.”

In the firm’s 23-year history, it has never laid off any employees—although it doesn’t have a specific no-layoff policy. The firm, which landed in the number three spot on this year’s Fortune magazine list of the 100 best companies to work for, now employs 3,402 employees in the United States and 2,225 outside the United States. The company enjoys only 5 percent turnover, compared to the industry average of 22 percent. What does Russo think HR can do in the business arena to help companies better understand the issue of human talent so downsizing isn’t used as a reflex to business problems? “If you truly believe in employees and invest in them, they in turn will invest themselves in your company’s success. If you have a win-win relationship with employees and believe—all the time, not just in good or bad times—that they’re your best asset, you’ll want those loyal, dedicated employees on your team when times are tough.”

He adds: “We also believe that HR plays a vital role in building a healthy company, helping ensure that downsizing never becomes an issue. The value of continuous professional training and communicating business issues to employees offers the organization a more company-educated, more talented employee base. Combined with a nurturing culture, you may find that these loyal employees go the extra mile in doing their part to keep the company thriving. I think this is why Wall Street is beginning to pay more attention to ‘soft issues’ in its recommended picks instead of just focusing on quarterly earnings.”

Such a forward-thinking philosophy on downsizing is rare, yet alternatives to downsizing are possible. “If companies are serious about seeing their people as assets and as the key to profits and—as a consequence—about avoiding layoffs, almost anything is possible,” says Jeffrey Pfeffer, a professor of organizational behavior at the Stanford Graduate School of Business and author of The Human Equation: Building Profits by Putting People First.

While Pfeffer isn’t saying companies should never downsize, he is saying there’s more than one way to do it. “Even for firms that need to reduce the number of employees, downsizing can be accomplished while still treating people as important assets and maintaining morale and trust. By contrast, other ways of downsizing signal that, whatever the rhetoric, management neither respects nor values its workforce. Case studies show that repeated waves of downsizing are crushing to morale, reduce credibility and trust in management, and make high-performance work practices difficult, if not impossible, to implement.”

Rather than downsizing some departments and upsizing others, in many cases it’s more beneficial for the organization to invest in retraining its existing employees, according to Dolmat-Connell. It may be more efficient for employees who are already on staff to learn new skills than it would be to hire new staff. However, this takes a great deal of foresight, something that is all too atypical with respect to workforce planning. Many companies also downsize staff and end up rehiring former employees as contract workers at three times their hourly rate. “This provides inspiration for Dilbert cartoons, but isn’t a financially sound business practice,” he says.

Dolmat-Connell suggests that HR still hasn’t been able to adequately quantify the human asset and relay that agenda to senior management teams in Corporate America. Therefore, companies will continue to think of downsizing first when business conditions turn sour. But it’s a dangerous road to travel.

What emerges from this downsizing discussion is that human resources professionals clearly have a role in clarifying the risks involved in downsizing, but also communicate the benefits of long-term staffing plans. There are certainly good business reasons to downsize in certain situations. However, companies that are simultaneously cutting and adding may need to rethink and redistribute their resources more strategically.

Workforce spoke with John E. Moore, senior vice president of HR at Cessna Aircraft Co. The following are some highlights of that conversation.

What’s the best part of your job?
The variety. I deal with everyone from staffing to succession planning, 21st street, training, employee relations, labor relations and I’m responsible for our relationship with state government and the air transportation department. It’s the variety I like, because on any given day, week or month, my attention can be focused in a different area. And I like being in a decision-making position.

What’s the toughest part?
Dealing with people who can’t be successful because of themselves, and they refuse to accept that. If somebody can’t get up and go to work consistently, if they’re openly belligerent and very difficult to work with, they won’t stay with us. You look at 21st Street, and those are folks who’ve found themselves in some personal circumstances that precluded them from pursuing economic independence. We gave them the opportunity to do that, and they seized that opportunity and have gone on and flourished. Contrary to those folks, there are others who refuse to modify their ambition, attitude and conduct that would enable them to succeed. That’s the toughest part.

What does being a strategic business partner mean to you?
We have a senior staff that consists of the chairman and four people, and I’m one of those four people. I’m part of the decision-making group for this business. And we’ll approach $2 billion this year. Because I understand where the business is going—we’re partners. If you look at the mid- to late-1990s, the most difficult issues businesses had to deal with were HR issues: the absence of a qualified labor pool, the need to hire qualified people in the face of that, the need to train, the need to retain. We’ve been an active partner in the business as everyone looks to us to find solutions to reduce employee attrition or increase retention, and to find and keep qualified people.

What are the personal rewards you get from your job?
There are several. We’ve had 30 graduations from 21st Street now. When I see people who’ve taken an opportunity to turn their lives around, and are now economically independent and making a professional and personal contribution to a company, that’s probably the most rewarding thing that I get involved with. In addition to the over 200 people who’ve graduated, our trainees average three dependents. So you have those 200 people plus 600 children who’ll grow up in homes where there’s a productive, self-respecting adult who’s earning his or her way as opposed to being a welfare household. When you understand all the ramifications of that, it makes it terribly rewarding. Regarding the balance of my job, this function has brought great change to our company over a decade and a half. It has been change that’s been implemented in a way that contributed to the changes that needed to be made as opposed to being disruptive. We’re a different company today than we were 15 years ago. We’re a better company.

Workforce talked with John Sloan, senior vice president of human resources for Sears, Roebuck and Co., about the HR function and Sears’ transformation process over he past several years. The highlights:

What is the toughest part of your job?
The toughest part is trying to manage a workforce of our size. We’re about the 8th largest company in the United States. Trying to respond to an extremely large and diverse workforce in which people have different needs and desires, and trying to listen to and accommodate those differences for a workforce our size is always a challenge.

Why do you think the HR team at Sears is a unique and good place to be?
We have a vital part in the overall success of our company. We sit at the table with the most senior executives of the organization. All our HR people are a vital link between the human element and the business element of Sears. We provide a conduit between our employees and their needs and desires, and the company’s overall success. We’re actively involved in managing the company, which I think is extremely exciting.

What impact do you think today’s HR professionals can have on business?
I think they play a vital role in ensuring the strategic direction of a company. HR maps out those issues that are critical from both a human element, as well as a business element, and tying the two together.

What advice do you have for other HR professionals who are going through an organizational transformation?
First, be sure that you listen to your employees. The people on the front lines are the ones closest to the customer. They can give you outstanding advice. Then take aggressive action to respond to those needs and interests. Also have the patience to realize that changing an organizational culture doesn’t happen overnight.

Workforce, March 1999, Vol. 78, No. 3, p. 28.

The cover of Molex Inc.’s 1998 annual report boasts: “Everywhere, Anywhere.” It’s a declaration that speaks volumes about what this 60-year-old manufacturer is all about. It’s a company that’s truly global—having taken to heart the idea that no matter where the customers are based, Molex can serve them. Although based in Lisle, Illinois (a suburb of Chicago), the $1.6 billion firm operates 49 manufacturing facilities in 21 countries and employs 13,000 people worldwide. However, only 4,500 of them are located in Molex’s U.S. divisions. The rest are local nationals.

Molex makes more than 100,000 kinds of electronic, electrical and fiber-optic connectors and switches used in the electrical systems of cars, computers, household appliances, medical equipment, office electronics and other products. Its products are delivered to customers in more than 50 countries around the world. Despite the fact that the company produces technology that helps enable people to interact from anywhere, Molex has developed a culture that places high importance on human interaction and communications.

Molex adopted a global mindset early on.
Molex has a truly global outlook. The company established an international division in 1967, opening its first plant in Japan in 1970 and a plant in Ireland in 1971. Today, nearly 70 percent of Molex’s sales come from outside the United States and 46 percent of its sales are to Asia. In 1998, its sales by region were 40.1 percent in the Americas, 21.8 percent in Europe, 20.2 percent in the Far East North and 17.9 percent in the Far East South. “This broad flexibility, combined with a strong balance sheet, enabled us to continue to invest aggressively in tooling new products, improving our equipment and serving our customers—even in countries experiencing major economic problems, such as Korea, Malaysia and Thailand,” wrote Frederick A. Krehbiel, Molex’s chairman of the board and CEO, and John H. Krehbiel, Jr., president and COO, in the firm’s 1998 annual report.

Because it’s global, the firm’s senior management team can shift operational emphasis from one area of the world to another when economic downturns happen, while investing in the future. For example, even though 1998 was a bad year in the Asian region, Molex still invested in its operations there by refurbishing the cafeteria in Malaysia and installing air conditioning in the warehouses. It continued to expand and invest in factories and equipment in Asia for new products.

“Our philosophy of boosting investments and sharpening our edge during rough times has greatly contributed to our moving from the 10th largest connector company in 1980 to the second largest today,” the Krehbiels wrote in the annual report. During the 1990s, Molex more than doubled its global manufacturing capacity. It recently opened factories in China and Puerto Rico.

Last year, despite having experienced many challenges, the company achieved record sales and profits, growing 5.4 percent during the period. Company managers consider this respectable performance since two of the company’s four regions were affected by very difficult economic conditions and the PC industry, the largest end-market they serve, experienced weakness.

People-focused goals elevate HR.
The company’s four corporate goals, which have been in place for many years, are to provide good customer service, to fully develop its human resources, to build a truly global company and to meet or exceed financial goals. “The way I’ve always looked at Molex is, there’s only four corporate goals and two of them have to do with people,” explains Malou Roth, vice president of human resources for corporate training and development who has been with the company for 15 years helping develop the firm’s global HR commitment. Every employee has an HR-related element tied to his or her performance goals.

The company goals have been translated into the languages of all employees worldwide and put on posters. “Rating goals and having posters and putting them up all over the world is all fine and good, but if you don’t help people execute them or interpret them, then all they are is posters,” says Roth. Molex tries to make the goals come alive for its workforce, and its human resources team has a big hand in making that happen.

Notice we didn’t say global HR team. Molex was one of the first U.S.-based firms to do away with the concept of a domestic and international title for HR staff. The assumption was: What’s domestic if you’re a global organization? This is the kind of attitude that pervades the business.

As the primary global HR coordinator, Roth declares her philosophy that when you’re running an international company, you really can’t—or shouldn’t—expect to have the same HR policies and programs all over the world. HR actually is the most localized of all the functions. “If you’re looking at engineering, quality, manufacturing, finance, legal or other functions, HR is the one that’s the most country-specific,” says Roth. “Everybody usually thinks it’s the opposite.

“What I tried to do when I came to Molex 15 years ago was take the basic HR programs and practices that I knew were good ones and make those things standards or consistent practices at every entity in every country,” says Roth. Molex calls each of its business units an “entity.” Each operation worldwide is a separate company. “But of course, they’re all little baby companies of Mother Molex,” says Roth. “There were certain things everybody had to do to be part of the Molex family.”

For example, as Molex grew rapidly during the ’80s, Roth made sure every new unit did the same things: have an employee manual with policies and practices in writing, new employee orientation, salary administration with a consistent grading system, written job descriptions, written promotion and grievance procedures, performance appraisals—all the basic HR stuff. “Now, that may sound really boring, but it isn’t when you’re starting up a company or taking over a company and it doesn’t have that sort of thing,” says Roth. She found that a lot of companies in other countries never had such materials available to them. All the materials were translated into the languages of the countries in which Molex had operations. Managers were free to question anything or suggest changes to materials. However, few did. Most were happy to have human resources guidelines and they worked well from the beginning.

Other entities can add to the programs and be creative with them, but they have to implement minimum HR standards. Roth says, “It’s really a matter of: Are the basics in place and are they working?” Kathi Regas, corporate VP of HR for Molex, adds: “Our global HR Practices in training and communications helps us build on the strong foundation we have—a common way of managing our employees, strengthening their skills, and improving service to our customers both locally and globally.”

Yet each local unit has unique needs, so the philosophy for hiring HR staff internationally has been to hire experienced HR professionals from other companies in the same country in which they have operations. Roth figures you need to hire people who know the language, have credibility, know the law and know how to recruit. “You can’t transfer someone in to do that,” says Roth. “You can transfer a controller or a quality guy in from someplace else because those operations are much more standardized—but HR isn’t.” There are 80 HR staff members in 17 countries where Molex operates.

Having guidelines and policies in place is also important because when you hire HR managers from other companies, like Intel or IBM, you run the risk of having them want to implement the same types of policies from their former firms. While you can get good ideas from new blood, you have to protect the investment you’ve made in forming a culture and your company’s way of doing things.

Sending employees to work elsewhere.
Part of the Molex philosophy about being global is to have many people moving around the company’s operations worldwide to learn from each other. For example, last year, the company continued with the rollout of the Molex Global Information System (GIS), a system that will connect all company operations around the world through a single communications link. When fully implemented, the GIS will give the firm a tool for integrating technology, manufacturing, marketing and administrative systems across all regions. It also will be year 2000 compliant and euro capable. The team that has been implementing the system has comprised employees from Molex locations worldwide. “In this case, having people from everywhere working on the system has made the expense of the project go way up, but it’s been incredibly beneficial for the overall project because it has really been a worldwide effort,” says Roth.

Molex has five categories of “expats”—people who work outside their home country:

1. Regular expats live in a country other than their home for three- to five-year assignments. There are approximately 50 of these expats on assignment at any given time.
2. Inpats are workers who come to work at the company’s Lisle headquarters from another country.
3. Third country nationals (TCNs) are people who go from one Molex entity to another—for example, someone who goes from Singapore to Taiwan.
4. Short-termers are people who go to a Molex entity in another country for a short time, such as for six to nine months.
5. Medium-termers undertake a project somewhere other than their home office that may take 12 to 24 months.

For a medium-size company, having so much worldwide employee movement is unusual—and costly. If you consider that an employee making a $75,000 salary costs about a quarter of a million dollars in total costs as an expatriate, sending 60 employees from site to site each year is an expensive undertaking. “But we feel it’s really worthwhile because there’s nothing like living and working with people outside your home country to make you understand you’re really in something bigger than Molex Japan or Molex Germany,” explains Roth. Adds Regas: “Our investment in expatriates is critical to building the strong foundation we have of sharing our expertise with each other. It’s important for us to respect individual cultures while maintaining Molex’s unique global culture.”

Specialized communications are vital for a global workforce.
As one way to maintain the culture, every Molex entity worldwide has to conduct bimonthly communications meetings. They’re top-down communications blitzes that bring people up to speed on what’s going on in that particular Molex unit. Usually the HR manager kicks off the meeting, and then the general manager or sales manager speaks. They’ve often had Molex clients and customers come in and speak about why quality is important to them. Engineers will come in to explain new products.

Meetings always begin with sales figures and new customer prospects, and between meetings, sales figures are posted for all to see. These meetings take no more than an hour per group. But for larger Molex entities, such as the one in Singapore, employees attend the meetings in groups of approximately 100 at a time, so the meetings can take more than a day and a half to complete.

Molex also does annual communication meetings, which include the company’s chairman, the COO, the executive vice president, the corporate VP of HR and the VP of HR, in addition to other senior executives of the local entity and the region. They spend a day at each location touring the factory, looking at new equipment and facilities and meeting with employees. “Our annual communications meetings ensure that our employees know they’re a part of something much bigger than their local entities,” says Regas. “They know our history, our performance, and our plans for the future. This, combined with frequent contact among our employees from entities around the world and common practices, helps maintain our culture and strengthen a global team of employees.”

Molex may be on to something. Wrote Dennis R. Briscoe in his book, International Human Resource Management (Prentice Hall, 1995): “In the end, this merger of the cultural aspects of international businesses boils down to finding ways for individuals with varying backgrounds and perspectives to work together; that is, finding ways to develop a corporate ‘glue’ that will hold the organization effectively together.”

The tough part is figuring out how to do that in such a way that maximizes the energy of individuals throughout a company’s global operations, while limiting the financial barriers that inevitably result from transporting individuals from one place to another. Molex seems to have figured out a workable formula for maximizing its return on the global workforce investment and spreading the talent. As the back of the company’s 1998 annual report states: “Molex: Bringing People & Technology Together, Worldwide.” The slogan has dual meaning for both customers and employees. It certainly isn’t a bad goal to strive for.

Can’t seem to make the connection between setting goals and making them happen? Kevin Gross, president of TRI Inc. in Elmhurst, Illinois, offers some ideas for how to smooth the rocky road between telling employees what you want them to accomplish, getting them to follow through and rewarding their behavior along the way.

1. Clearly communicate the WIIFM (“What’s in it for me?”) to employees.
   The goal-setter’s agenda isn’t necessarily compelling to the doer. The first thing the goal has to answer is, “What’s in it for me?”

2. Communicate in actionable terms what the worker or the line person can do to meet the goals.
   All too frequently we leave it up in the conceptual realm: Why don’t we increase sales? Why don’t we make it the year of the customer? You have to specify the behaviors that actually make those goals happen. When you see someone doing those behaviors or they’ve changed what they’re doing now from what they did before in response to the goal, you need to immediately recognize and reinforce that. That means linking praise close to the behavior.

3. Immediately recognize behaviors that support company goals.
   Frequently, line managers don’t look for the behaviors and they don’t recognize them. Accordingly, the behavior doesn’t get reinforced, which is the bad business outcome. The personal outcome is that the individual who’s changing and trying to do a good job gets no validation and feels that nobody cares about him or her-you just ask the person to do more work, which totally undermines the whole achievement of the goal.

4. Marry the work ethic with the employee’s worth ethic.
   Help each employee to understand why he or she is important and how he or she makes a difference. Unleashing the potential of people is easy because everybody wants to be great. Notice what people do and tell them the impact it’s having on your organization.

5. Celebrate or stagnate.
   If you don’t acknowledge good behaviors, you’ll get a stagnant, lifeless result.

6. Ask people how they like to receive acknowledgement before the work is done.
   People will see that you cared enough to ask. It sets a stage for people to do a great job.

Workforce, February 1999, Vol. 78, No. 2, pp. 82.