Author: Jennifer Koch

If a cash-balance pension plan isn’t right for your company, you may want to consider these other variations on the pension theme.

Retirement-bonus plan:
This is a defined-benefit plan that states the amount payable at retirement as a single sum that’s a multiple of pay. Although payable as a lump sum, it must also be offered as an annuity for life.

Pension-equity plan:
This is a defined-benefit plan in which participants receive a credit percentage for each year of service. At retirement, employees receive the product of the accumulated percentage points multiplied by their final pay.

Mobility-bonus plan:
This type of defined-benefit plan is for employers in special circumstances. No individual accounts are kept; however, it functions like a defined-contribution plan because the payment is a single sum rather than an annuity stream.

Target-benefit plan:
A type of defined-contribution vehicle that has many features of a defined-benefit plan. The purpose of this plan is to build an account that will equal a specified or “target” amount at retirement.

On the Western horizon, the sun is setting. This particular evening, six employees who work at People’s Bank in Bridgeport, Connecticut, are watching the sun set in silence from a conference room on the 14th floor. Many evenings at about 5 o’clock (or earlier if it’s winter), you can find a few individuals from various departments there—watching the sun set and meditating, all in their own way. All lost in their own thoughts.

These sunset watchers aren’t members of a group. They don’t even necessarily know each other. They’re just individuals who work at the same company and who feel compelled to “download” as one of them calls it, taking a moment of silence at the end of their workday to transition to the next phase of their day—going home.

“I’ve always been drawn to sunrises and sunsets. It’s a form of meditation and helps me to get my head together as to what has transpired [during the day],” says Mary Ann Vlahac, director of marketing research for People’s Bank, who says she’s a pagan and has practiced the Wicca tradition—a form of ancient earth magic.

Vlahac discovered, quite by accident, that others, like her, also want to get in touch with their spirituality at work. She had wandered into a conference room one day while trying to follow the setting sun and found other people already there.

Since then, Vlahac says she has found kindred spirits—and a way to unwind after her workday. “It’s just a form of bringing together the end of the day and collecting our thoughts, as well as letting them go, so that when we go home, we’re the people we were when we came in the door.” She also quips: “This just may be the coffee break of the 21st century!”

Vlahac is but one of many individuals in the United States and, in fact, throughout the world, who are beginning to express their spirituality at work. While that may seem amazing and even shocking to some, the idea has been stirring throughout the business world for the past several years. For years, employers compartmentalized workers, carefully separating business concerns from personal identities. But productivity waned because people’s personal lives do affect their work. That’s why companies increasingly have added work-and-family programs and a variety of other benefits aimed at helping employees achieve balanced lives. So when they’re at work, they’re more focused. This focus on personal problems, combined with organizations’ valiant efforts to value diversity, have caused workers to wonder why they can’t express other parts of themselves, such as their personal missions, vision and values, while on the job.

But it isn’t just employees who don’t want to leave their values at the door. Managers and corporate officers are wondering too, because many feel they aren’t doing enough to promote job satisfaction among their employees. For example, when Menlo Park, California-based Robert Half International Inc. surveyed CEO concerns late last year, it found that senior U.S. executives believe that CEOs should spend more than one-third of their time building the morale of their troops. “Promoting job satisfaction and reducing employee turnover are viewed as top priorities for corporate leaders, especially in the wake of the recent recession,” says Max Messmer, chairman and CEO of Robert Half, in a recent statement. Messmer suggests senior-level managers should avoid pitting employees against one another in unhealthy competition and should maintain open lines of communication at all levels. As companies have downsized, restructured and reorganized themselves into oblivion, they’ve been left with skeleton crews who, quite literally, feel lifeless, tired and sucked dry. Managers struggle to manage work forces with little energy, creativity or commitment. In short, people have largely been disembodied from their spirits and left feeling less than whole, less than human. And there seems to be no end in sight. According to a study of 1,800 CEOs, CFOs and senior HR managers in Japan, North America and Europe, by Washington, D.C.-based Watson Wyatt Worldwide, more than one-third expect their restructuring activities to continue, and almost as many expect their restructuring activities to accelerate.

Despite the fact that fewer people are doing more work, managers still demand everything they used to demand, and more. Employees increasingly are saying, “I’ve had enough” and “What does it all mean?” In a world where companies no longer commit to workers for life and vice versa, what’s left to consummate the bonding process? Money? Medical insurance? Perks? Sorry. Even those don’t have the pull they used to. Studies show that the perks of the past have given over to such workplace offerings as flextime and longer vacations so people can spend more time in activities away from work. A 1994 study by Hewitt Associates LLC in Lincolnshire, Illinois indicates employees value paid time more than pensions, 401(k) plans, dental benefits and life insurance. Baby boomers and others are finding the give-me-more ’80s didn’t satisfy their longings for fulfillment. They’re looking for more satisfying pursuits, and to retain these workers, you may have to figure out how to engage more than just their minds.

Articles on things spiritual have flooded the popular business press for months. And books such as “Jesus CEO: Using Ancient Wisdom for Visionary Leadership” and “The Heart Aroused: Poetry and the Preservation of the Soul in Corporate America” have been on bestseller lists for weeks.

Obviously, spiritual themes may be a more comfortable topic in our homes than at our desks. But maybe that’s because of our American workplace taboos. “One of the challenges of bringing spiritual formation into the workplace is that [spirituality is] hard to measure,” says Shelly Paul, spiritual formation manager for World Vision International in Monrovia, California. “The dominant culture seems to value what can be counted. If it cannot be categorized, systematized and counted, then it doesn’t have value. Perhaps spiritual development is an area where we need to leave space for ambiguity and agree that spirituality can’t be talked about in the same way we talk about other elements of the workplace. If we try to squeeze spirituality into our existing molds to validate it, we may squeeze out the very gifts—including challenging our paradigms—which spirituality in the workplace can give us.”

The spirituality-at-work movement asks more questions than it answers. But one thing is certain. Something spiritual is creeping into the workplace, and it seems to be gearing up to be more than a trend. This may be the birth of a business revolution based on centuries-old concepts, revised to fit today’s work force. You need to know how it’s shaping up so that you can interpret it for yourself, your fellow employees and the company you serve.

Defining spirituality in the workplace is like capturing an angel—it’s ethereal and beautiful, but perplexing.
The term spirituality means many things to many people. Webster’s defines spirituality as: of, relating to, consisting of, or affecting the spirit; of or relating to sacred matters; ecclesiastical rather than lay or temporal; concerned with religious values; of, related to, or joined in spirit.

Even the dictionary definition is cryptic. And translating it to the workplace is even trickier. Those who are encircled in the spirit-at-work movement often have trouble defining it themselves.

“Sometimes, it’s much easier to say what it’s not, than to say what it is,” explains Ann Bass Perle, an HR consultant based in Spokane, Washington, interested in the spirituality-at-work concept. “It’s not about religion. It’s not about converting people. It’s not about making people believe a belief system or a thought system or a religious system. It’s about knowing that we’re all spiritual beings having a human experience. It’s about knowing that every person has within him or herself a level of truth and integrity, and that we all have our own divine power.”

Perle gets to the heart of what spirituality may mean—the view that people are more than just mind and body; they’re also spirits with unique and individual gifts. Perle, who’s the founding minister of the Spokane Pathways Church, has worked in HR for the past 23 years. In her own personal search, Perle says she realized there was something missing in her life and her work over the past several years, which led her to founding the church. But she says that at a deeper level, she’s always known spirituality was part of the answer to what was missing in her life—and her work—and suspects the same is true for others.

Indeed, a worldwide survey completed three years ago confirms the view that people are striving for congruence in their lives and meaning in their work. The “International Workplace Values Survey,” found that more than two-thirds (69%) of the respondents expressed a desire to become part of “a formal organization to further new thinking and humanistic values in the workplace.” The study, co-sponsored by The Compass Group, a Silicon Valley-based research group, “The New Leaders” business newsletter in San Francisco and the Institute of Noetic Sciences in Sausalito, California, also found an average of 55% of the 1,200 respondents from 18 countries had experienced what they called a “personal transformation” during the years from 1985 to 1990. More than 70% of the them reported they either meditated or prayed. And surprisingly, spiritual development ranked ahead of physical development in order of importance.

In fact, after completing the study, one of its authors concluded that innovative companies of the future will offer sanctuaries of introspection for employees, such as meditation rooms, prayer rooms or contemplation gardens. That’s already happening. Alex Pattakos, president of Creative Learning Technologies in Boise, Idaho, mentions that he helped one company, Donato’s Pizza in Ohio, install what’s called “the N.E.S.T.” (Naturally Enhanced Sound Transmission). The N.E.S.T. was created by Bio-Innergy Systems Inc. in Delaware, Ohio. “Without calling it meditation or introspection or reflection, people sit in this machine, listen to music, read a book or just close their eyes and take a stress-relief break. It’s there to promote creativity enhancement and improve worker performance,” he adds. “It helps to slow down the little voices inside that are chattering.”

Most of the people leading the spirit-at-work paradigm shift, or at least those nudging it along, say spirituality at work isn’t about believing in a particular religion, although many expressions of spirituality at work stem from various religious traditions—from the Jewish faith to Hinduism to Christianity. It’s about taking a broader, more global view of the spiritual dimension which may, for some, encompass their religious beliefs. For example, the spiritual concepts of balance, trust, harmony, communication, values, mission, honesty and cooperation come from religious traditions, but aren’t the sole by-product of any one of them.

Another reason spirituality at work is difficult to pin down: people resist being proselytized toward any particular belief system, especially at work. Most people are leery of talking about spirituality at work because they immediately think it means religion. And religious discussions can border on harassment. So can religious symbols. According to a Personnel Journal survey, 40% of human resources managers say their companies prohibit employees from bringing to work or wearing spiritual symbols or artifacts. Whether the law supports such policies is unclear.

Title VII of The Civil Rights Act of 1964 (as amended) states that you can’t discriminate against applicants or employees because of religion, but neither must you accommodate all their religious practices if it would interfere with the normal conduct of the business. What Title VII does require is that employers (other than nonprofit religious organizations) make reasonable efforts to accommodate its applicants’ and employees’ religious beliefs. Which means, if an employee has to have Saturdays off because his or her religion requires it, you should think twice about making that employee work on a Saturday.

Even with laws in place, examples of religious harassment still abound. Because of the traditional red flags that have gone up around religion, many business managers are wary about crossing the fine line between accommodating religious beliefs and encouraging individuals to make decisions at work based on those ideals. But increasingly, workers are beginning to push for common ground.

“There are just a lot of people who are saying, especially after [the recession of the] ’80s, that organizations have been acting as if people were only something that cost something, not something with souls and spirits. It was so dehumanizing, and I think that affected so many people,” explains Judith A. Neal, an associate management professor at the University of New Haven, Connecticut, and publisher of the “Spirit at Work” newsletter. “People are saying, ‘that’s enough. We’re more than just a cost to the organization. We have spirits. We have souls. We have dreams. We want a life that’s meaningful. We want to contribute to society. We want to feel good about what we do.'”

In the end, there may not be a single definition of what it means to bring spirituality into the workplace. In fact, there may be as many definitions as there are people and companies. Even the experts say there really are no answers. Spirituality can encompass all of these definitions, and perhaps none of them. Martin Rutte, a leader of the spirituality-at-work movement and president of Livelihood Inc. in Santa Fe, New Mexico, says it’s about spirituality at work as the question, not as the answer.

Spirituality is creeping into the workplace and workgroups.
One way spirituality is finding a voice in the workplace is through workgroups. For example, Richard Barrett, a principal urban transport specialist for the World Bank in Washington, D.C., started a Spiritual Unfoldment Society two years ago at his company, which employs 6,000 people worldwide. Every Wednesday at lunch-time, 50 to 80 people meet to discuss a variety of spiritual topics ranging from attaining soul consciousness to reincarnation. Barrett says the group especially focuses on coping with the work environment by having a larger perspective on life. The society has grown from just a few people to more than 500, and includes people from other nearby companies.

Barrett says he has been re-focusing his own work life from one that is just a job to more of a personal mission. As a result, he now works only three days a week in the office. The other two days, he’s writing his second book on the topic of spirituality and business life. “I want to move the concept of values and spirituality into the business community,” says Barrett. “If we’re ever going to live a sustainable life on this planet, it’s the workplace that’s going to create that, because nation states are no longer in control of the world economy,” he says. “Business is in control. And unless we can shift the business world to a new value system, we’ve lost it.”

He thinks it’s important to let employees talk about their lives from their deepest sense of self. “You can’t get a proper understanding of life until you take the soul perspective,” he says, claiming there’s a scientific basis for his viewpoint. Just as the physical world is multidimensional—having forces and energies beyond our human senses—there’s also a dimension of consciousness we rarely tap into. It’s this dimension in which the soul resides, says Barrett. It’s much like TV signals that we can’t perceive with touch, smell or sight, but which exist nonetheless.

Barrett thinks this spiritual perspective is already causing a shift in workplace values. The shift that he, and others, envision is the move from fear to cooperation. “Fear is one of the great destroyers of community, particularly community in the workplace. It stops us from becoming all we can be,” he says. “We need to design workplaces that eliminate fear.” The fear he speaks of isn’t just fear of physical violence, but the fear that comes from not being able to speak up and the fear of what other people might think. “This isn’t an atmosphere conducive to liberating the intuition and creativity that can come from a deeper level—a level we can only reach when there’s no fear around,” adds Barrett.

In fact, a U.S. workplace-values survey co-sponsored by “Industry Week” magazine and “The New Leaders” found there’s a significant gap between what employees value and want in the workplace—motivation techniques based on caring—and the way corporations choose to motivate their work forces—through fear. The study, published in May 1994, also found workers value a more humanistic atmosphere than their employers provide and favor a work environment that allows them to express their feelings. Their employers, however, generally still want them to keep their feelings to themselves.

Others in the spirituality movement agree removing fear can help companies achieve peak performance. “As you implement these new values—leaving behind competition, promoting cooperation, making people equal and allowing them to live in a fear-free environment—you’ll engage not only people’s intuition and creativity; you’ll also engage their ownership of the organization,” says Barrett.

From there, he says, people will begin to work for the common good instead of the what’s-in-it-for-me? model. Workers will begin to move from the it’s-just-a-job perspective to the this-is-my-mission view of their work. “It’s the difference between getting and giving,” he says. Employers will help employees better understand where their personal visions coincide with their companies’, creating passion about work and improving productivity, efficiency and the bottom line, says Barrett. When people find their personal visions don’t match their companies’, they’ll self-select out of the organization and work elsewhere. And when companies need to lay people off, it will be based on a holistic view of company goals, not just an automatic approach to cost-cutting.

Barrett sees the shifting of corporate values arising from two distinct camps: top-down and bottom-up. “What I’m trying to do here at World Bank is develop the bottom-up model,” he adds. It has taken hold. One workgroup at the World Bank has embraced the spirituality-at-work concept and become more cohesive. Surinder Deol, a continuous learning specialist in the company’s corporate HR department, says his workteam allows team members to talk about their personal and spiritual values along with business matters.

Deol’s team, which includes individual contributors from various HR specialties, set new ground rules for themselves from the start. But Deol credits the team’s manager, Helen Vasquez, with supporting the group’s interest in laying their values on the table when talking about business issues.

From the first meetings, team members tended to speak from the heart, says Deol. “When you want to express yourself deeply about certain things, it comes out—you can’t hide it,” he explains. They regularly tell stories, share poems and even meditate as a group. Their unusually nonsecular orientation developed gradually. “In our case, nobody objected,” says Deol, who practices the Sikh religion, an offshoot of Hinduism, but who has studied many other religions.

Deol says he wasn’t able to discuss such things in the last team he was on. “In that team, there was little trust, recognition of one’s self or openness,” he says. “The managers felt spirituality was something you left at home. When you go to the office, you work by a different set of rules.” Ultimately, he found his former team wasn’t cohesive.

“In my new team, we bring our spiritual and ethical values with us. We cherish them and want to talk about them,” he says. “We find everything at a spiritual dimension because whatever we do affects the people for whom we are working. It’s resulted in a strong sense of shared values, which has been a very powerful tool.”

In fact, his team went on a retreat to discuss the values they wanted to espouse, and determined three core values: trust, integrity and building positive relationships, which to them means recognition of and caring for people in their business and domestic lives.

But, managers traditionally haven’t agreed that workers should share of themselves in such an intimate way, even though the desire for a more open management style by workers and managers was documented in the “Industry Week” survey. It found that although it’s politically correct to value a more open, more candid management style, industrial managers overwhelmingly say their companies are still secretive. Employees want to speak out on how to make their work better and more productive. They want true empowerment.

While empowerment has been a popular business practice, and has for the most part been successful in bringing more shared power into organizations, applying such spiritual principles as trust and cooperation to the workplace takes empowerment to another level. “[Spirituality] goes beyond empowerment. It’s not just giving people decision-making authority; it’s allowing people to live their values at work,” says Pattakos, who is also president of Renaissance Business Associates (RBA), Inc. based in Boise, Idaho. RBA is a non-profit, international, educational network started in 1983 with the goal of valuing and enhancing integrity and ethics in the workplace. It seeks not just to humanize the workplace, but also to tap into and unleash the human spirit at work in a non-religious and non-dogmatic way. “It gets back to the business side of to what extent managers and supervisors really trust employees, and to what extent the people working together trust each other,” says Pattakos. “That’s a big piece of the whole notion of spirit at work.”

He adds that it’s particularly difficult to be soulful in large organizations, because they traditionally are driven by profit at the expense of humanistic factors. As workers, customers, business partners and communities begin to expect corporations to live up to higher standards, standards that go well beyond what’s mandated, businesses will have to figure out how to satisfy those standards or risk the continuous loss of personnel and, ultimately, their livelihood.

“The most important perspective that we must develop when working in organizations is understanding how to see the system as part of a whole. It’s the ability to see that we’re not separate islands, that we can’t do it all alone,” says Pattakos. He adds: “If you [rise above], you’ll see that most companies, governments, communities and families are interrelated. If you take the soulful view: we all are one.”

Companies take a soulful approach to business.
Vancouver City Savings Credit Union (VanCity), Canada’s largest savings credit union with $4 billion in assets, is one organization that looks at its business as interdependent with, not separate from, its business community.

Its focus is on ethics. “We have defined ethics as striking a balance between the competing needs and voices and values that businesses are confronted with every day,” says Pieter van Gils, manager of community-economics development for VanCity. His responsibility is to find new products, services and programs that enhance VanCity’s social role in the 30 communities that it serves all over Canada.

VanCity saw its origins in the cooperative movement that was started more than 100 years ago to link financial responsibility with social change, economic self-reliance, social justice and environmental responsibility. Ethics are so important to VanCity, it started giving other organizations ethics awards last year. “Ethics are about balancing day-to-day decision making,” says van Gils. “If you want to look after your company’s interests, your employees and the community, and you want to look after your professional standards and the environment, then you want to look after what’s happening on a larger scale in the world,” explains van Gils. “Taking all these things into consideration and trying to balance them is difficult and often requires a radical commitment.”

For example, the credit union has an annual community-consultation process in which it asks for ideas from the communities it serves about how to better serve them. Money is then invested into projects to support some of those needs. VanCity was also one of the first financial institutions to offer an ethical mutual fund.

On the home front, VanCity implemented a “Living Well” program four years ago. The Living Well program offers rewards to employees when they reach certain preset wellness incentive levels. Employees earn wellness points (on the honor system) by making healthy lifestyle choices and participating in the fun things in life. For example, employees receive points for activities such as knitting, hugging, meditating and composting kitchen waste. Workers are encouraged to take a holistic approach to their lives, rather than just focusing on healthy habits. “When we hire people, we say you have to realize that you’re working for VanCity, that we are a community financial institution and feel that as an institution, we hire people who make balanced decisions—people who look not only for profit, but who look for ways to strengthen the community in general,” he says.

Van Gils says eventually he would like to see workers be able to discuss shared values, then actually talk about religion in the workplace, although his company isn’t there yet. “In general, the thrust should be to make explicit what has been implicit, because people bring their religion into their decision making anyway. They should be allowed to talk about it, rather than just leave it out,” he says. Maybe it just comes down to semantics. “If you define spirituality as bringing values into the workplace, I would say, yes, we do, and that message does come strongly from all sides, from the top as well as from the people on the front line.”

Although there aren’t many companies yet that profess at the top of the organization to be motivated by a higher source, there are a few. Tom’s of Maine Inc. based in Kennebunk, Maine, is one of them. Tom Chappell (pronounced chapel, as in a church) and his wife Kate started their small, personal-care products company back in 1970. From the start, they dedicated themselves to producing innovative, natural products, such as toothpaste, de-odorant and soaps, in a caring and creative work environment. They were committed to building a successful business with a healthy profit margin, but weren’t willing to sacrifice their personal values for profit.

They haven’t. With Episcopal beliefs in tow, and a deep respect for the planet and its resources, the Chappells have instilled a set of holistic values into their company, which are expressed by their mission statement. It says their company commits to “respect, value, and serve not only our customers, but also our co-workers, owners, agents, suppliers, and our community; we will be concerned about and contribute to their well-being, and we will operate with integrity so as to be deserving of their trust.”

Their vision is to create a balance between responsibility, goodness and profitability. And the latter goal hasn’t been at the expense of the former. Tom’s is the country’s leading manufacturer of natural personal products with sales of more than $5 million and a 4% share of the toothpaste market in such places as Boston and San Francisco.

While values have always been important to Tom Chappell, he faced a personal crisis in 1986 which led him to Harvard Divinity School looking for purpose, meaning and direction. What he found was that his business was his mission. He returned to the business with a renewed spirit and a deeper sense that God, for him, was the answer. After receiving a master’s degree in theology in 1991, he wrote a book: “The Soul of a Business: Managing for Profit and the Common Good,” which outlines his perspective on managing an organization spiritually, without sacrificing revenue or retained earnings.

Tom’s, which employs 80 people, values teamwork and places an emphasis on creativity, which it says comes from a spiritual place. “A key to our creativity is encouraging people to let their imaginations rip,” Chappell writes. “I try to give a new idea a chance before beating it down with reasons why it could fail. Key to our success is holding that creativity accountable. No one is allowed to do any old thing at Tom’s and charge it to ‘creativity.’ Dreams and visions are one thing; outrageous fantasy and silly whims are quite another. After all, every company is accountable in the marketplace, at the bottom line.” Chappell makes a good point. While we may be spiritual beings having a human experience, we have to feed our hungry bodies as well as our souls.

Going toward the light: How HR professionals feel about spirituality at work.
As yet, HR, as a profession, isn’t pushing the envelope on spirituality at work. Yet, according to the Personnel Journal survey, most HR managers think the spirituality concept has merit. In fact, 70% of the respondents say they think spirituality does have a place at work.

Most personnel professionals, however, aren’t yet sure how spirituality fits into the corporate picture or how it can enhance employee development. However, some have seen the benefits of spirituality in their personal lives and think that it might also translate into a better working environment. For example, Alyce Dana, a corporate recruiter for Circon, ACMI in Stamford, Connecticut, says, “When you talk about spirituality, to my mind, it’s the inspirational force behind our morals. That translates into our integrity, ethics and honesty on the job, how we treat people and hold meetings, etc. It always comes back to, ‘do I make honest decisions? Am I making them through ethics and integrity, or am I making them through personal greed?’ I always try to base my decisions on that moral priority. And our morals and ethics translate back to spirituality.”

On the personal side, Dana says that she meditates, often during her workday, to get her thoughts back on the right track. “Sometimes I [meditate] when someone’s talking to me and I don’t want to react to what they’re saying in an angry or emotional way,” she explains. “I try to focus on what the real issue is that we need to resolve and I will reach out in my thoughts for a calm space.” Other times, she drives to a park and meditates in her car at lunch time. “I try to re-center and focus back on my reality as a spiritual person. I pray for the support from my higher power to carry me through the day and help me focus on what’s good and true.”

While Dana sees the personal benefits of incorporating spirituality into her own work life, she’s unsure how she could translate some of those benefits back to the rest of the organization into terms that are acceptable and workable.

For direction on how a focus on spirituality can help cement relationships within an organization and improve such HR goals as higher productivity and increased morale, it may be helpful to consider the example of World Vision International.

World Vision is a non-profit organization whose goal is to serve needy people in all parts of the world. It provides long-term, transformational development and emergency relief to suffering people, and also seeks to promote justice and public awareness about these needs. The organization raised more than $282 million dollars in donations last year to benefit more than 5,200 projects in such countries as Africa, Eastern Europe and Latin America. Although World Vision has been operating for 45 years and is organized around a Christian belief system, it only just created an office of spiritual formation within the HR department a little more than two years ago.

The organization has always been concerned with the spiritual development of its staff, which now includes 500 employees in the United States and 6,000 people in 100 countries outside the United States. But, senior management felt the company needed to be taken to a deeper level spiritually and needed to commit energy and resources toward that end. “What we’re really trying to do is move the organization to more of a sense of who we are,” says Paul, World Vision’s spiritual-formation manager. Paul, who trained as a spiritual director with the Los Angeles Roman Catholic Archdiocese and who is Native American, sees her role as twofold: 1) helping employees discern what God is saying to them in their individual lives and 2) helping employees discern how they’re responding to this connection with God.

“As we have encouraged the spiritual development of our staff, we recognized that the most effective and fulfilled employee is one whose personal goals are aligned with the goals of the community in which he or she is employed,” says Paul. “Spiritually, we can speak of this in terms of values—that is, the most effective and fulfilled employee is one whose personal values are aligned with the values of his or her organization or community.”

Paul says an approach to spiritual development based on values is the most effective way to align people with a corporate mission. She cites the work of author Brian Hall, a professor at Santa Clara University in California, who has outlined a spiritual-development approach to values based on four premises: 1) values are an important component of behavior, and they can be identified and measured, 2) values are described through words, 3) values are developed in stages and 4) values are modified and shaped by circumstances.

Employees at World Vision are nurtured along the spiritual path toward a better understanding of their own values and the company’s values through weekly chapel meetings, morning devotions, group retreats and individual sessions with the spiritual-formation manager, if people feel they need personal direction.

“Allowing employees time to enhance their own spiritual quests benefits the company in many ways,” says Rebecca Pribus, vice president of HR for World Vision. “It increases employees’ energy levels. They seem to have a more positive attitude and a higher creativity level. We also have seen dramatic changes in their mental, emotional and physical health.” For example, Paul reports that since the implementation of a spiritual-formation office, the company has experienced fewer spiritual-harassment cases; fewer disability, stress and workers’ compensation claims; increased fund-raising activities; and an increased congruence between its core values and the expression of those values.

Fulfilling a company’s mission is a lofty order, especially when the weight of a firm’s work-force retention and development goals falls on the shoulders of human resources managers. “You can only have so many waves of downsizing and reengineering before it affects even the best HR manager,” says Pattakos.

If you’ve been immersed in the latest business paradigm—the learning-organization concept—you’ve already been faced with trying to translate a somewhat nebulous concept into concrete application. “The real key to a learning organization—if you really get down deep—is a spiritual core. It’s the learning core. It’s the ability to express one’s self completely.” It requires a lot of creativity, a lot of true grit, and a lot of tools and techniques to get people engaged in meaningful dialogue.

“If HR managers are able to focus on bringing out the best communication styles and the best shared meaning, that not only builds a learning organization, but that also builds personnel management’s capacity, too,” says Pattakos. “It’s not enough anymore for people to be only in the head. We’ve got to be in the heart, too. But we can’t just be in the heart, because then we just have a bunch of touchy-feely personnel managers running around.” He adds: “To the extent that we can bridge the intuitive, feeling and soulful essence of who we are as human beings, with the personnel tools such as statistical-process control, training agendas, demands for performance and metrics, then we have true personnel management. You can’t build a learning organization unless you get to the soul.”

It’s perhaps best summed up by Lewis Brown Griggs, CEO of San Francisco-based Griggs Productions, Inc. and co-author of “Valuing: New Tools For a New Reality.” Griggs, who originally went into HR because of a near-death experience, says, “From the entire universe down to each particle of matter, we all belong to the whole. And if we can see that, that we really are spiritually connected to one another, needing each other to be as diverse as we can be and giving each other those gifts, then we aren’t only tolerating other people’s diversity, we’re allowing ourselves to be all we can be. So when we go back up into that white light, God’s not going to ask, ‘Why weren’t you a better person?’ or ‘Why didn’t you fulfill your mission?'”

Those ultimately are the questions we all must answer for ourselves. In the end, the sun rises and the sun sets, and what you do in between makes all the difference.

Congratulations. Thanks to your excellent sexual-harassment policy and informative training, your firm’s employees aren’t harassing each other. That’s a huge accomplishment for any human resources or employee diversity specialist. But wait a minute. Are you sure that you’re done with the topic? If the possibility exists that your employees are sexually harassing people outside the firm, or if people from outside your organization are harassing your employees, you have more work to do. But, fortunately, we’re going to help you.

Don’t make the mistake of thinking that because sexual harassment isn’t happening within the walls of your firm, you’re off the liability hook. According to Title VII of the Civil Rights Act of 1964, employers are liable for any un-welcome conduct of a sexual nature that occurs within the work environment. This means no matter where your employees are, they must not be subjected to crude comments, suggestions or implications of a sexual nature, nor may they be touched inappropriately, forced into committing sexual acts or be subjected to viewing sexually explicit objects, posters, photos or materials. If this happens, and one or more of your employees finds it offensive and complains, guess what? You’re responsible.

“The employer is not strictly liable as they are when a manager harasses a subordinate. But the standard is going to be if they knew or should have known that [harassment] was going on, [they are liable]” says Susan Crawford, a partner with the Palo Alto, California offices of Holtzmann, Wise & Shepard, who specializes in sexual harassment legalities. Third-party sexual harassment cases are always difficult situations, says Crawford. “They present difficult issues for the employer to deal with because it’s their client or customer, but they have the same legal obligation to remedy it,” she adds.

For example, in one case of third-party sexual harassment, a waitress was harassed in a sexually explicit way by a male customer who frequented the restaurant where she worked. One particular evening, four men (including the regular customer) came into the restaurant, and while they were waiting to be served, loudly directed sexually explicit jokes and comments at the waitress. The regular customer remarked that he’d like to engage in a particular sexual activity with the waitress, which he described in explicit terms. When the waitress approached the men to take their order, one man made grabbing gestures toward the waitress’s breasts. The same customer then slid his hand under her uniform and squeezed her buttocks. She recoiled in shock and anger and refused to wait on them again.

Although the waitress complained to her boss (the restaurant owner) when he arrived at the restaurant later, he failed to take corrective action against the harasser who was also his friend. She informed her boss that she had been previously subject to sexual harassment by the same man on other occasions, but had chosen not to say anything before because she feared for her job. The incident that particular evening, she told him, exceeded the boundaries of behavior that she could attempt to dismiss with the good humor required of a waitress.

Not only did the boss not tell the harasser to stop his behavior, he also didn’t request that another server wait on the customer. He also failed to inform his other servers that he didn’t condone sexual harassment in the workplace. In addition, the owner subsequently fired the waitress after she had complained about the harassment.

The court decided that because the evidence showed that immediate and appropriate corrective action was within the employer’s control, and because he failed to take any action when his employee first complained or soon thereafter, the restaurant owner was responsible under Title VII for the sexual harassment that the waitress endured while on the job.

Specifically, sexual harassment by third parties may be a violation of Title VII, as amended, which defines harassment as: Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when 1) submission to such conduct is made either explicitly or implicitly a term or condition of an individual’s employment; 2) submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting the individual, or 3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile or offensive working environment.

Pay particular attention to point #3 above, because that’s how most third-party sexual harassment will insidiously make its way into your organization. Most third-party sexual harassment, like harassment between two employees, isn’t overt. It’s environmental and, therefore, can be difficult for supervisors and managers to detect. For instance, it may be those certain glances that customers give your employees when they call on them. It may be sexually suggestive posters or artwork that decorate the offices they visit. It may be those requests employees get to “stand a little closer” to clients while they make their presentations. All these may add up to an uncomfortable working relationship for your employees. And you’ll want to know about them.

Harassers can be a photocopier repair person, an external accountant, a supervisor at an outsource-services company or your next-door business neighbor. They even can be the family, friends or acquaintances of your employees. If any of these individuals engage in behavior or conversations that are offensive to your employees while they’re on the job, your company is liable and you must take action to stop it immediately.

You will need your employees’ full attention and support to track down and eliminate this kind of discriminatory work environment. The way to get your workers’ attention is by having a written policy that lets every employee know you won’t tolerate sexual harassment from other employees, or from anyone with whom they come into contact during the daily performance of their jobs.

How to curb incidents of third-party sexual harassment.
First, have a policy that takes an unwavering stand against sexual harassment at your workplace. In every state, if you employ 15 or more people, the law requires that you have such a policy or address sexual harassment in some way. Don’t let any worker get too much farther than your front door before you hand them a copy. That goes for new employees, temporary employees, contingent workers and independent contractors. State in your policy that you won’t tolerate sexual-harassment by insiders or outsiders.

For example, New York City-based Price Waterhouse’s sexual harassment policy explicitly states that: “Sexual harassment of any Price Waterhouse staff member by a partner, another staff member or client, or other non-Price Waterhouse employee will not be tolerated.”

Avon Products, Inc., in New York City, words it this way: “This policy applies to conduct in the workplace, at company functions, and in all employment relationships, and protects employees at all levels and positions within the company.” Ron Shane, manager of HR policy and practices for Avon, adds: “We also point out that in terms of sexual harassment, it doesn’t mean it happens on the premises. If an Avon associate is traveling abroad or traveling on business someplace, the same policy applies as well.”

And New York City-based Corning Incorporated’s guidelines tell employees that: “[Sexual harassment] can occur between co-workers, subordinate and supervisor, outside vendor and employee, etc.” Corning’s guidelines further say that, “…sexual harassment will not be tolerated in any form, whether committed by supervisors, other employees or non-employees. Any individual found violating this policy can be subject to disciplinary action up to and including termination, and possibly prosecution by the victim.”

Next, reinforce the policy by training your employees about sexual harassment. “[Employers] need to train their supervisors and managers to make sure that the company is responsible for protecting its employees from third-party harassment, or from keeping its employees from harassing third parties,” says Crawford.

For example, E.I. DuPont de Nemours and Company based in Wilmington, Delaware, trains its employees about third-party sexual harassment during its sexual-harassment workshops. The training involves a series of seven, three-minute videotaped vignettes interspersed with question-and-answer sessions after each tape. The scenarios are based on actual events that have happened to DuPont employees. Two of the vignettes deal with third-party harassment. The first shows Joyce, a DuPont sales rep, dealing with Michael, a vendor. The two have spent a considerable amount of time trying to work out a business deal. Michael comes on to Joyce and says things such as, “You want my business, don’t you?” inferring that Joyce should sleep with him to close the deal.

This example shows not only a third-party harassment situation, but also demonstrates quid pro quo harassment, (“this for that”). Quid pro quo sexual harassment bases the condition of employment or a business deal on whether or not one person submits to performing sexual favors for another person.

Bob Hamilton, diversity consultant for DuPont, says this particular scenario usually sparks at least a 20-minute discussion. “It’s very important that [employees] understand how their management feels about these issues, what kind of support they have, and know that we don’t do business that way,” says Hamilton. And, he adds, they need to know this before they’re confronted with the situation. “[They need to know that] we don’t need to use sex or the inference of sex to sell a product. If it’s dependent on that,” he quips, “then we need to do more work on the product.”

During training, be particularly careful to alert managers to the fact that they can be held personally liable for any third-party sexual harassment that happens under their supervision. “If you’re an agent of the corporation,” says Hamilton, “it’s deemed that you have a higher level of responsibility, and therefore a higher level of expectations around behavior.” The law says that if you know or should have known about sexual harassment, you have an obligation to do something about it. “It’s not clear in the law what you have to do, but you have to take action,” he adds. Hamilton recalls one legal battle at a Minnesota trade school in which a human resources director and the dean ended up with a higher personal liability than the perpetrator. Although the harassee reported the sexual harassment to senior officials, they chose to do nothing about it. The courts deemed the company’s neglect as gross misconduct and duly punished the organization for it.

Employees are often surprised to learn their company is liable for sexual harassment by people outside their organizations. “One reason that we don’t have more complaints of this type yet is because some employees aren’t aware that that is prohibited harassment,” says Marcia Haight, a sexual harassment expert and president of Haight Consulting in Pacific Palisades, California. “They think it has to be harassment by another employee.” Indeed, most employers haven’t focused on outsider sexual harassment in their training programs, but are beginning to do so with more and more frequency. “The more training and awareness there is, the more employees understand what isn’t acceptable, the more complaints of this type you’ll see,” adds Haight. Getting more complaints, say the experts, isn’t necessarily a bad thing. If employees are talking with you, it gives you the chance to remedy the situation—hopefully before they take action outside, such as filing a complaint with the Equal Employment Opportunity Commission (EEOC).

The EEOC, which is responsible for tracking sexual-harassment complaints, doesn’t track third-party harassment cases, although it investigates and prosecutes them. So, there’s no telling how many cases among the 12,537 complaints it received in 1993 (twice as many as in 1990) are because of third parties. Yet, companies and sexual-harassment experts say that harassment by outsiders is a pressing and constant problem that is not often discussed—but should be.

Sexual harassment is also a corporate resources drain. According to Boston-based sexual-harassment consultant Freda Klein, sexual harassment costs a typical Fortune 500 company $6.7 million a year ($282.53 per employee) in legal costs and other employee-related expenses, including loss of productivity and absenteeism. DuPont’s Hamilton says an investigation alone can cost $20,000 to $30,000. “So it’s really a green issue, a money issue,” he says.

Of course, training costs money, too. With so many demands on organizations to conduct many types of training to ensure that their staffs are well-equipped to operate in the global marketplace, why are companies placing so much importance on sexual-harassment training? Quite simply, because sexual harassment is such a sensitive topic. “It’s much more personal than, say, business ethics, where somebody finds a voucher and embezzles money from the corporation,” says Hamilton. He explains that with sexual harassment, the impact upon the employee is more personal and usually affects someone rather than something. “If someone steals a computer, there isn’t personal harm done to another employee,” he says. “But if somebody harasses someone else, they’re doing a whole lot of things.” It causes workers to produce less, get sick more often, call in sick more and change their demeanor. If people can’t respect each other in the workplace, including those from outside their company, it becomes very tough to get any work done.

Here are the first steps in handling outsider sexual harassment.
Even when you have an explicit policy against third-party sexual harassment and an effective training program, employees still may be harassed by people over whom you have no control—namely, outsiders. So you need to establish a procedure to follow when you find out about an incident.

First, just as you do with harassment problems between employees, give workers options about whom to report sexually harassing activity from people outside the organization. For example, DuPont has a sexual-harassment hotline available to every employee 24 hours a day, 365 days a year, just like an employee assistance program. “[The hotline] started out as a rape-prevention hotline,” explains Hamilton. “Many times, people need to have a place where they can talk and vent and get some support and counseling without going directly to their manager. So that really generated a lot of confidentiality around this.” The hotline provides employees with a confidential way to speak with professionally trained, caring people who will talk them through questions and concerns, and who will give them information about where to report incidents of sexual harassment, including third-party harassment.

Sometimes, employees don’t want to talk about the problem in concrete terms such as identifying who’s harassing them. “When that happens, your hands are tied [because] you don’t know who it is and you don’t know what’s happening,” says Hamilton. “It becomes very hard to resolve it.” That’s why, in addition to its help line, DuPont also has 100 facilitators in the corporation whose job it is to meet with employees who want to talk about their sexual-harassment concerns and support those employees if they want to go to their managers or human resources representatives to formally report the problems.

Reporting can be a tricky question in cases of third-party harassment. Another vignette in DuPont’s sexual-harassment training deals with this problem. It shows an employee who’s working for an outside contractor and who is harassed on the job by an employee of that organization. The dilemma in resolving this situation is that the harassed employee, in a sense, has two bosses. So who does he report the harassment to? The employee is encouraged to report the problem either to his onsite boss or to his DuPont supervisor or another DuPont representative.

Once employees report, what’s next? If possible, have the employee say something directly to the person who’s harassing him or her. Have them explain their company’s policy against sexual harassment, and tell the harasser that their actions are against the law. Also have them explain that they find certain language, behavior or objects personally offensive, and that they do not want to see, hear or experience it again.

Advise workers, however, that people who offend their sexual sensibilities may not realize what they have done. “We try to get people to understand that they’re dealing with a person, and everyone has the right to be made aware when they’re doing something that’s inappropriate,” says Hamilton. That person should have the opportunity to correct his or her behavior. In fact, Hamilton says that what most people who are harassed want is simply for the harassment to stop and for behavior to change. They don’t want retribution. They just want to work in a harassment-free environment.

Realize, however, that it may be difficult for some employees to speak out against harassment. Kit Goldman, managing partner for Live Action Training, a sexual harassment training organization based in San Diego, says that the hospitality industry is a perfect example of a group of people who are trained to be accommodating and service-oriented, and who may feel that such dialogue directly conflicts with their service training. However, because they have high guest-contact jobs, they have plenty of opportunity to be subjected to harassment. “They may feel that they are being rude if they tell someone not to say certain things or to engage in certain behaviors,” says Goldman. “So we try to give them positive ways, non-confrontational ways, to say something. But not everybody is that assertive, so we say if you feel threatened or you just can’t bring yourself to [confront the person], then please let someone know.” Because from the supervisor’s point of view, if they don’t have an opportunity to deal with it, that person becomes a walking time bomb. “They could leave the company two months from now and file a lawsuit and nobody could do anything about it,” she adds.

If employees can’t or won’t say something to harassment perpetrators themselves, you need to ask them what they would like to see happen next, and explain their options. Do they want you to speak to the employee’s supervisor at the other company? Would they speak out if a manager or human resources professional went along with them on their next sales call? Do they want you to be there the next time the harasser comes into the office? Do they want you to draft a letter to the person? Do they want to file formal charges?

“[Employers] obviously aren’t in a position to discipline the harasser, as they are when it’s their own employee, so the types of remedies that are available are going to be somewhat narrow,” says Crawford. She explains that remedies run the gamut from kicking a customer out of a bar and telling him not to come back to telling a sales employee that the next time he or she is scheduled to meet with a client who has harassed him or her in the past, a manager will go along and will make it clear to the harasser that that kind of behavior is unacceptable and won’t be tolerated.

Avon takes this approach. “If a third party is guilty of harassing one of Avon’s associates, we want the associate to come forward and report those complaints to us. We, in turn, will deal with the third party,” says Shane. “For example, let’s say that it’s one of our vendors. We’d go back to that vendor or the vendor’s president, and maybe have that salesperson taken off our account.”

Whatever the decision, take immediate action and do everything possible to respect the privacy and the dignity of the individuals involved. For example, if you go with a sales employee to discuss a sexual harassment problem with an outside client, meet in a room where you can discuss the matter in private. You may consider bringing two tape recorders and taping the conversation. At the end of the conversation, date it. Keep one and hand one to the other person to take with them. It will be a reminder of the meeting and will help document that you have put the other person on notice.

One of the smartest strategies is the one taken by Texas Instruments’ HR professionals. They’ve learned that some problems can’t be taken care of simply by having employees speak to their offenders, such as asking them not to tell any more dirty jokes or not to display a sexually suggestive poster in their public work area. “If the harasser is the employee of a third party, we get in touch with their HR people to let them know what the situation is, and then we partner with them to try to find out the facts,” says Dee Hunter, diversity manager for Texas Instruments’ semiconductor group in Dallas.

Whenever Texas Instruments, which has 35,000 employees in the United States, has had to approach another organization about a sexual impropriety, Hunter says his HR counterparts at the other firm are always willing to get to the heart of the matter and get it resolved. “I think it’s critical for us to partner with other companies, because we have to have an environment where people feel like they’re valued, and [partnering] helps us to win,” says Hunter. And, if another company comes to you with complaints of harassment by one of your employees, you should cooperate fully in their investigation of the incident or incidents.

New York City-based Ernst & Young LLP has found that other companies appreciate knowing about their concern regarding these types of problems and cooperate from the start. “If [another company has] a person on their staff whose behavior may be inappropriate, he or she probably has conducted themselves inappropriately internally [within their own companies] also,” says Rosemarie Meschi, diversity director for Ernst & Young’s national human resources group. “The [company’s] usually appreciative of the fact that we have brought it to their attention and done so in a discreet manner that allows them to let their own internal policies carry through.”

Cut the ties that bind.
Despite the aggressive tactics mentioned above, some companies must take even harsher action. One of the most effective strategies that companies use to get another company’s attention on a sexual-harassment problem is to establish a procedure of “kicking it upstairs,” says Haight. “Call the president of the [other] company and say, ‘I’m calling you because I want to handle this in the very best way. What do you think would be the best approach?’” she says. Most times, as you can imagine, this gets the ball rolling immediately.

If this doesn’t work, you may be forced to cut the cord completely. Says DuPont’s Hamilton, “We have refused to deal with [certain companies] again. We say that if that’s the way that you’re going to do business, we do not want to do business with you in the future.” Period. End of relationship. It not only sends a strong message to the client, it also reinforces the policy with your employees and builds respect for the way you do business.

Under no circumstances should you attempt to kid yourself into thinking that your employees might not be facing situations of sexual harassment. It can happen to companies of any size. For example, a sales employee at a small company talks about an ongoing sexual-harassment problem that she has had with a client. Her employer has yet to help her eliminate the problem. “I see this certain client at trade shows twice a year. He’s the president of the company and is an older man. He always puts his arms around me and wants a kiss and a big hug. I always know that it’s going to happen, so I go call on him the first day of the trade show so that I get it over with and don’t have to think about it anymore. I don’t think he really knows what he’s doing, but I really hate it. It’s awful, but I’m reluctant to say anything because he’s a good client.”

This example highlights perhaps the stickiest, and potentially the most damaging, kind of third-party sexual harassment situations—when a senior executive of a client company sexually harasses one of your employees. It’s like paying for a date and expecting physical intimacy afterward. Just because a client spends money with your company doesn’t give them the right to take advantage of your company’s representatives. “Many times, harassment is as much a power issue as it is a sexual issue,” says Hamilton.

“Often, compliance with these laws and policies are in conflict with economic and political realities,” says Goldman. It hurts to cut ties with customers who spend large amounts of money with you. However, million-dollar sexual-harassment lawsuits aren’t worth the trouble of figuring out who’s the more powerful. And, ultimately, your company must decide whether its reputation is worth the cost of any customer’s contract.

“The thorny issues in this area of third-party harassment arise when the offending party is your lifeblood, your best customer,” says Crawford. “By no means can you say [to your employees], ‘This is an important client. Play along with it.’” She adds: “Most people will not fire their customer easily, but it’s an option they should keep available in their bag of tricks.”

Ernst & Young does. According to Meschi, the firm will sever relationships if a reasonable solution to sexual harassment can’t be worked out with another firm whose employee has committed sexually harassing behavior. With 75% of its work force consistently out in the field serving clients’ needs, Ernst & Young has a tremendous potential for third-party sexual-harassment problems. Although it has had a zero-tolerance policy on sexual harassment for many years, the professional services firm trained its entire 20,000-employee U.S. work force last year on sexual harassment because it’s trying to prevent all types of sexual harassment, including third-party harassment.

With harassment problems, there never is one strategy that works in every case. You have to look at your alternatives and know what your objectives are—which is to immediately stop the harassment, but also to try to preserve the relationship, if possible.

If you already have a policy on third-party sexual harassment, you’re ahead of the crowd. But if you don’t, you may consider learning from your colleagues who have one. Although your company may be one of the lucky ones that’s never had to deal with sexual harassment from outsiders, or that’s never had to discipline one of your employees who has committed this crime, it probably isn’t a chance you’ll want to take. It’s certainly better to be penny wise, than pound foolish.

Jack Welch, CEO of General Electric Company in Fairfield, Connecticut, defines an effective corporate executive as “someone who can change the tires while the car’s still rolling.” It would seem an impossible task, yet today’s fast-moving businesses demand extraordinary talents.

The problem for most human resources professionals is that, traditionally, they haven’t even been allowed near the car, much less asked to get in it. But things are changing. Companies are finding that they need their functional experts working together to get

their businesses rolling in the right direction. For HR professionals, this means they must work directly with line managers and business operations directors to solve business problems.

HR managers are increasingly taking their place in the great business race. They’re hanging out the windows with the other executives while they all change the tires. It’s called business partnership. And it’s making sense in today’s business environment—not just for HR, but for every business function. It’s happening because business leaders think that having their functional leaders working together more closely is important for the business, not because any particular functional area feels left out.

Many examples of how HR departments are becoming business partners may sound familiar in their mechanics, because they often use such tools as reorganizing, reengineering and personnel attitude tune-ups. But when human resources mechanics use all these tools together in a focused effort, they start to sound like strategy, purpose, direction and impact on an organization with far-reaching implications on the bottom line. This, after all, is what being a business partner is all about.

HR retools to become a business partner.
The idea of HR as business partner isn’t new. “It’s a role that has been talked about for 15 years, and now is becoming a reality,” says David Ulrich, a professor of business at the University of Michigan’s School of Business in Ann Arbor. “Companies now are finding that the HR issues are, in fact, center stage to business competitiveness. The intellectual capital, core competencies and organizational capabilities are all the pieces that are central to success. HR folks have known that for a long time,” adds Ulrich. “I think that we, as an HR profession, are moving [toward] that. It’s an old role in terms of discussion; it’s a new role in terms of practice.”

Says William J. Conaty, senior vice president of corporate human resources for General Electric: “I think what’s key from a human resources standpoint is anticipating the business needs and trying to define and create what really adds value to business performance.” To do that, you have to already be in the car, ready to diagnose shortcomings and deliver solutions as you’re rolling down the road.

Conaty adds: “I have no problem getting to the [leadership] table. And when at the table, you’re expected to add some value.” He explains that personnel issues aren’t as clearly defined as they once were at his company because they’re more interrelated with the business than ever. But HR hasn’t always played such a strong partnership role in the business. That has changed through a series of financial problems, downsizings and restructurings. “Usually where there are business issues, it doesn’t take too long as you peel that onion back to find that there are people issues involved in inhibiting progress.” The company has had to look at people issues as an integral part of the business, instead of as a side issue.

How do you begin to move toward business partnership and help diagnose business needs? According to Marilyn Condon, program manager for the internal consulting workshop for Personnel Decisions, Inc. based in Minneapolis, there are three important areas to focus on when trying to become an internal consultant. Like three legs of a stool, they are: 1) becoming a business partner; 2) building relationships with business-unit managers; and 3) establishing credibility in the organization. All three are interrelated and often are accomplished simultaneously.

HR partnering often starts with a reevaluation of HR’s role and whether the personnel department is actually adding value to the business where the business needs it. While an HR department can spin an intricate web of programs and policies that it thinks are invaluable to their organizations, the trick is to figure out whether the web actually effectively supports the business and holds the people processes together.

For example, the human resources strategists at Clorox, the Oakland, California-based company that makes such products as Clorox® liquid bleach, Combat® insecticide and Formula 409® spray cleaner, are quickly becoming more strategic business partners through a new HR strategy and a new attitude. Clorox’s personnel department got its first wake-up call three years ago when a survey of the company’s top executives revealed that the human resources department had finished dead last when it was evaluated against other key functions in the company. The survey further determined that not only was HR not adding value to the company’s operations, it was also failing miserably in many of the more basic HR areas such as being accessible to employees and keeping up with their changing needs. Just as being rated number one is a moment you’ll always remember, being rated last is a moment you don’t soon forget nor easily shrug off as unimportant.

They devoted 20% of their time last summer to developing a strategy to become more business-partner oriented. This year, they’re implementing the strategy, which has involved a reorganization of HR. “Although we were probably late in starting the reorganization [compared with other U.S. businesses], we have been like a heat-seeking missile in executing it,” says Janet M. Brady, vice president of human resources. “It’s like the tortoise and the hare—maybe we were late in starting, but we’re right out in front because we’re not just talking about it, we’re actually doing it.”

Consider Clorox’s seemingly simple, but revolutionary, partnering approach. The firm’s HR department of 92 people decided to change their structure from being simply HR generalists to being business-function specialists so their departmental organization matched the overall business structure. Instead of the human resources professionals being organized around HR specialties such as benefits, compensation or recruitment, they’re organized around business functions such as marketing, sales and manufacturing. “We used to have a set of decentralized generalists supporting a division,” says Brady. The problem was that divisions didn’t necessarily share their best HR practices. Now, six senior human resources professionals are responsible for understanding and supporting the needs of each of the functional areas across all six divisions. Of course, one HR person can’t handle all of a function’s needs singlehandedly—even with the increasing generalist orientation that many personnel professionals are adopting. It’s their job to be the HR broker. They gather and deploy the necessary HR resources, talent and skills from wherever they may be within the organization, and transfer them to their clients. This way, all HR processes are similar across all functions and divisions.

This means that if Larry Peiros, vice president corporate marketing services, wants to hire a new marketing manager, for example, he can go to the person in charge of HR marketing support and get help in hiring that new person, but he can also go to the same person to ask about changing the job-grading system for the marketing department. It’s up to personnel’s functional expert to figure out how to give that business manager what he needs. “We’re calling them client managers,” explains Brady. “Client managers handle the really senior-level, organizational issues and organizational diagnoses.”

To get more time to be strategic, Clorox has reorganized the personnel department with a call center for its more basic HR services, such as answering payroll and benefits questions. It’s new shared-services center houses the three centers of HR expertise—comp and benefits, human resources management systems, and individual and organizational effectiveness. “It’s going to give us permission to play in the areas that we feel are more strategic. But if you don’t get someone’s paycheck out on time, [just like in football] if you don’t do the blocking and tackling correctly, then you’re not going to get the long ball. So we wanted to make sure that we do a really good job in the fundamentals of HR; then, over time, we will be respected more and be allowed to play in more strategic business issues,” says Brady.

For example, although Brady isn’t on the company’s executive management committee, she was instrumental in helping them develop the firm’s new “people strategy”—a vision statement about how the company and its employees will work together. It aligns business needs with people needs so that the business can move forward quickly. Brady not only sat in on all the meetings to form the people strategy, she actually managed the meetings and guided the group on the human resources issues with advice from her HR staff. “We were able to flow input upwards and say, ‘Here are the programs that make sense.’ Historically, we might not have played in that arena as much,” says Brady. And because HR is sitting at the strategy table, decisions about people-related issues are getting made faster. “We deploy HR programs like lightning now,” says Brady. For example, the people strategy was finalized at the end of January and rolled out at the end of February, including all collateral materials to all the company’s 4,800 employees.

If you break down her HR team’s strategy to the simplest common denominator, the key for Brady’s HR group in becoming a business partner has basically been active listening—putting their HR ears to the ground to hear what people in the company are talking about. Brady is used to listening to people. Having spent 19 years in the company’s marketing department before taking the top human resources spot two years ago, Brady had a strong bent toward listening to consumers before giving the go-ahead to anything new. “You have to listen to your consumers before you develop a new product,” says Brady. “We’ve got to listen to our [people] and get that feedback and input in a way that maybe we weren’t doing before. We were doing a lot of things in isolation. Now we’re trying to do things in a context that makes sense.”

There are other ways that HR is reorganizing to get closer to their business. Take Matthew Bender & Co. Inc., for example. The New York City-based legal publishing company is a subsidiary of Times Mirror Co. Matthew Bender has 1,000 employees spread out over three locations, two in New York and one in California. It was E. Lynne Pou, Bender’s former vice president of HR, who decided last year to formally implement a personnel department initiative with which her department had been experimenting for several months. Through this initiative they call Primary Partners, each HR director partners with a line-department manager so the human resources person becomes one-stop shopping for all that line manager’s HR needs.

“We had believed for some time that we ought to get out of the transaction business and into adding higher value to the groups that we worked with,” says Pou, who has just moved over as an HR consultant to Times Mirror. Because Matthew Bender’s parent company, much like Clorox, was implementing a call-center operation to take care of a lot of the financial, administrative, and payroll and benefits services for employees companywide, the subsidiary HR departments were being freed up to be more strategic. With her staff’s help, Pou decided that they needed to learn more about the business, and the best way to do that was to get out and live with the line managers to see what made their departments tick. “One of the things that you have to do to be a legitimate business partner is to actually get in there and learn the business,” says Pou, “and you can’t do that by sitting in your HR office.” She says that it’s personnel’s job to figure out if the organization has the right people doing the right things at the right time.

Mark Howe, director of human resources for the company’s 250-employee Albany division, is the personnel professional who’s the Primary Partner for the company’s operations department. The operations group is responsible for customer service, credit and fulfillment. Last summer, Howe completely immersed himself in the operations department for three months, paying particular attention to the customer-service area. His assignment was to take an in-depth look at who the company’s customers are, what their needs are and how the customer-service personnel were meeting their needs with the products and services they provide. Howe found that their customer-service employees were assessed around what he calls babysitting issues, such as attendance and number of calls taken per hour. What the department needed was more than just new annual review procedures; it needed a whole new set of competency and performance expectations and a comprehensive performance system to manage those new expectations—something Howe probably wouldn’t have been able to assess had he not put in the time.

As a result of his in-depth look at the customer-service operation, Howe worked with the operations director to identify new behavioral expectations for the customer-service representatives that will help increase customer satisfaction and ensure future business success. These new expectations include expecting employees to take more initiative and to communicate better with clients. They have also identified specific ways to measure those competencies, and are coming up with training to help the customer-service reps understand and learn not only how to perform to those expectations but why they’re important as well.

As a result, the customer-service reps now spend more time talking with customers to glean additional information. “It used to be that they just answered a call. The idea was how fast they could answer it and get on to the next call,” says Howe. “Now they’re trying to really dazzle the customer while they have them on the phone and maybe find out a little bit more about them and possibly sell them other products.”

Did Howe have any background in customer service on which to base his recommendations? “No, and that’s what was really scary about it,” says Howe. He learned by reading a lot and talking to lots of people, both inside the company and outside the firm through benchmarking. “I was at a disadvantage because customer service was new to me, but I had an advantage because I knew the company well. So I used that advantage to go and talk to people to get their input about what they thought could be improved about our customer service,” says Howe.

In fact, Howe thinks that personnel professionals have three key skills to help serve their organizations in unique ways beyond traditional human resources skills: facilitating, organizing and interpersonal sensitivity. “Sometimes, people just need help in organizing their thoughts, coordinating them and tying them all together,” says Howe. And they want to do all of that in a non-threatening environment. “So I spend a lot of time at the white board, just kind of mapping things out and visualizing things for them, but they give the input.”

How is the primary partnership idea perceived by line managers? “Before, the HR department was seen by a lot of line organizations as an administrator and a little bit of a policeman who would keep you from doing some crazy stuff in terms of compensation or hiring. They kind of kept the human rules in place,” says Linda Reiss, vice president of operations for Matthew Bender. From her standpoint, Reiss says that the personnel department’s Primary Partner initiative has been valuable in a couple of ways. First, the human resources staff now knows what drives their business, so if a problem comes up or if they need to make a change in how they’re doing business, HR now understands from the line manager’s position what’s driving the need for that change. “That’s very different,” says Reiss. Second, Reiss points out that in a traditional HR department, HR often was put in the middle of personnel situations between management and employees. “HR’s being a mediator wasn’t in anyone’s best interest,” she adds. As HR professionals gain a more balanced view of the business, they’re better able to balance business needs with employee needs.

Partnership is a two-way street: you must build relationships.
Although totally reorganizing how a department operates is one way to accomplish a systemwide effort toward becoming a better business partner, human resources departments don’t have to make such large-scale internal changes to make a big difference as a business partner. Start small. Start with individual relationships. “The very first step we took was to find one line manager who needed help, who appreciated what we could bring to the party, and then we served the hell out of him,” remembers Elizabeth Drewry, vice president of human resources for Newsday, a newspaper in New York City and a sister company to Matthew Bender. That was five years ago. At the time, that line manager was trying to transform his department from a sales focus to a service focus, and he needed assistance in training, selection, performance reviews, compensation and other issues that were crucial to the transformation. “We really worked hard for him. We did special training and worked with him on developing new ways of managing performance,” says Drewry. The net result was that as other line managers heard how instrumental HR was in helping him achieve his business goals, they also starting beating down HR’s door to get similar help.

Drewry also implemented another fairly simple, but effective, partnership strategy. At budget time last year, she initiated meetings between the company’s key support departments including information services, administrative services, finance, and human resources, and each of the line-department managers, such as editorial, operations and marketing. During the two-day meetings, each support function found out what the main goals of their counterparts in the line departments were and how they could help them reach those goals in the following year.

Although all the function managers and department managers had met informally for these types of meetings in previous years, these expanded interdepartmental meetings served two important purposes. First, they formalized interdepartmental huddling—the process of transmitting information. Second, the support departments got in on the budgeting process at the front end, rather than at the back end, as was typical. “When we were done, we produced a document that was a guideline, so that we all knew what was going to be hot in advertising, circulation and the other areas,” says Drewry. It particularly helped HR to be able to plan for personnel needs that the line departments were going to have in the areas of staffing and training. And money was dedicated early on in the year for those needs rather than trying to scramble to find it in the budget later, which had sometimes happened in the past.

Drewry says that the line managers were ready for this new kind of interdepartmental meeting because it was built on a string of good relationships that the HR department had been building in previous years. “Most line departments aren’t going to come to a meeting that HR calls,” admits Drewry. “It’s got to be worth their while.” You have to make it worth their while by building a history of HR partnering that directly supports the business. “We had a track record,” says Drewry. “We invited people who were our good clients and then made it more valuable by bringing in the other support departments.”

HR actually may be the most-qualified candidate for the job of focusing people’s attention on certain issues. “I think HR often is in the best place to coordinate resources, to see the contribution that different departments can make and to get everybody focused in the same direction. It typically involves a lot of communication, such as having special meetings, seeing where the resistance is and figuring out ways to overcome it. In many ways, that calls on our special expertise because it involves working across departments,” says Drewry. Those are skills personnel professionals have developed for years; partnering is just a more effective way of applying them directly to business problems.

For example, Martha Glantz, human resources director for Matthew Bender’s New York City and Oakland, California, divisions, is serving as the Primary Partner to her company’s editorial operations. When the Primary Partnership initiative began in January, Glantz initiated meetings with the publishing managers and directors for the western editorial operations. They identified the goal of streamlining the editorial department to achieve operational excellence that would support new pricing initiatives. The pricing initiatives were going to reduce prices, which would reduce revenues. Editorial needed to reduce its expense base by cutting jobs, but at the same time add more value to the products by making them more consistent across product lines and getting them to market faster.

“Before we initiated the partnership, I probably would have attended parts of those meetings. I would have come in and talked about severance and then I would have been invited to leave,” says Glantz. Because of the partnership, Glantz actually acted as the facilitator and leader of the meetings. She was able to hear all of the discussions about how the department operated and gave opinions about new team groupings that might work better. “Where I played a key role with [the editorial directors] was that they’re not particularly process people, so I kept them focused. I was their voice of reason and conscience and often was a challenger to what they were discussing,” says Glantz. “I would bring up issues and ask them to be sure they had fully articulated them.”

As the meetings progressed, she started to play more of an HR role and helped them to articulate what the jobs were going to be, talked about what the competencies would be for those jobs and articulated the selection methodology. “Then when we got closer to actually downsizing, I talked about the classic HR stuff such as getting the letters ready, doing the costing and severance,” says Glantz.

In April, they reduced the editorial staff from 44 managing editors to 17, and from 160 legal editors to approximately 115. In the process, they moved from a hierarchical organizational structure to team models. “I’ve also kept them focused on what they’re going to have to do to make these teams work,” says Glantz. “I’m finding now that my suggestions, which I thought were falling on deaf ears, are coming back to me as if they were their own ideas.” In the end, it doesn’t really matter whose ideas are whose. What matters is that all the issues are discussed as the car is moving. Line managers are realizing that the people issues are among the most important issues, and it’s invaluable to have the human resources voice at the bargaining table from the start.

“Sometimes it’s helpful to have somebody who’s not in the thick of things to facilitate meetings,” says Reiss. For example, Reiss has discovered that having an HR representative in meetings helps when she’s presenting new ideas to other departments or outside clients. When HR steps in with a thought on one thing or another, it adds more credibility to the discussion because it’s truly a cross-functional discussion. “I think that’s very helpful,” she adds.

At Newsday, there’s been a joint recognition by the company’s senior managers and line managers that training is critical to business outcomes. “In the last couple of years, human resources has been a real business partner as far as making sure that we get the right kind of training,” says Ed Hughes, Newsday’s director of operations. Of course training is typically HR’s responsibility. But in Newsday’s case, HR has proactively partnered with the operations department to figure out what skills the department’s staff was lacking, and has designed training to directly fill the gaps. For instance, they developed a training program to help managers and supervisors learn more about managing union workers, with specifics on understanding labor contracts. These were skills that many individuals didn’t have after being promoted from the line into management. HR also developed training for the operations staff around problem-solving techniques. “Operations people are typically pretty good problem-solvers, but it’s always good to get new techniques,” says Hughes.

Hughes says he’s seen the interaction between HR and line departments such as his grow more and more intimate in the last few years. “I think it’s an indication that these [HR] folks are willing to spend the time to help us develop the right kinds of programs that allow us to improve,” says Hughes, and adds, “I think that that partnership is critical if you’re going to maximize the potential of your people and your potential as a manager.”

Don’t underestimate the power of building one-on-one relationships. Although a company is a monolith of departments, functions and groups, it’s also a team of individuals who must work together. Should HR think about themselves as team members with line managers? Absolutely, says Personnel Decisions’ Condon. “When it comes to building those relationships, it’s important that [HR professionals] not only understand the strategy from the organization’s perspective, but that they get to know the people that they’re supporting,” says Condon. Find out: What are their concerns and issues? What keeps them awake at night? One of the best ways for HR professionals to build relationships is to network within the organization, says Condon. (Please see “The Five Biggest Mistakes HR Managers Make In Business-partner Relationships.) Have breakfast with your counterparts in other departments. Have lunch with them or walk with them around their departments. But spend the time. If you help them with small problems now, they’ll start coming to you with the bigger ones later. Eventually, they won’t ask for your help; they’ll ask for your advice.

Don’t just spin your wheels; establish credibility.
Are HR managers consistently being asked to the business table? No, says Condon. “They’re really struggling to establish their credibility and improve their value so that they will be able to get in when the strategy is being planned. They have to establish their credibility by being able to link their expertise to the business strategies and issues of the managers they support,” she adds.

“You have to know your business,” says Newsday‘s Drewry. Keep your language simple. “You can’t be in there talking HR jargon when people want help. You have to speak the language of the line. You have to know your business well enough to know what’s really going to move it ahead, so that you’re not wasting your time on things that are peripheral to the true goals.” The way you know your business is to make it a point to get out there and see what really goes on, she adds.

For example, before they formally implemented the primary partnership initiative at Matthew Bender, Glantz got out into the company’s editorial operations and observed about 15 people in editorial actually doing their jobs. So, when it came time to talk about streamlining the operations, she understood what people did in that department and could make intelligent observations and recommendations for how to change things. Also, Glantz has been at the company for 11 years as a compensation specialist. “I’ve either written or reviewed every single job in the company. Over the years, [managers in the other departments] have gained respect for my technical expertise in compensation and some of the other classic HR stuff,” says Glantz. “I don’t think you’re going to be able to go in and [change things] if they don’t think you already know how to do the job that you’ve been hired to do.”

Other human resources professionals establish their credibility by having line experience themselves. That’s what GE’s Conaty did. He’s had numerous human resources and employee- and labor-relations assignments since he started at GE after graduating from college in 1967. But he also once functioned as plant manager of GE’s diesel engine plant in Grove City, Pennsylvania. Now he reports directly to CEO Welch.

Having been in the top human resources position only for the past 20 months, Conaty says that he still has a strong bias toward staying integrated and close to the line operations. Since his arrival as the human resources leader at his organization, he has added a new segment to the HR department’s leadership program, in which recently recruited MBAs spend two years in various personnel operations. Now, they also get experience in line functions such as finance, new business development, manufacturing or marketing. “What I’m really doing there is driving much more of that understanding of the business equation early on to some of our top future talent,” says Conaty. “It will enhance the credibility of the individuals who do it and it will broaden their perspective dramatically.”

Human resources experts say that your credibility stems from your ability to think and act as though it’s your responsibility to run the business. “I hear a lot of people in HR saying, ‘What do we do to get invited to the table?’ Well, in my opinion, if you have to ask that question you don’t deserve to get invited,” says Matthew Bender’s Glantz. “If you’ve done your homework, and you know the business and can give them some good, solid business advice, they’re going to invite you. Then once you get invited, you’d better get up to speed or they’re not going to invite you back.”

You also build credibility by being grounded in reality. You can help change as many tires as you want to, but if you’re not even in the right car, it’s not going to further your business. “Some HR professionals mean well in some cases, but they do what I call navel gazing,” says James B. Millard, managing director with responsibility for HR reengineering and change management for Boston-based Harbridge House, a division of Coopers & Lybrand. “They come up with these lofty ideas about what they think the HR professional should be and then somebody in operations or management asks the dumb question, ‘Who have you talked with to confirm this role?’ “

For example, he says that in one organization he’s worked with, the HR department came up with a vision of having line management take more responsibility for human resources issues. It’s a role that many HR departments are doing with great success. It sounded like a great idea, but HR never bothered to ask line management if they wanted to take on that responsibility, which, in fact, they didn’t. “They hadn’t built any commitment,” says Millard. “As soon as the senior line managers heard about it, there was a mutiny and HR lost.” They hadn’t built commitment by first communicating their vision and getting buy-in from those whom it directly involved. From the line perspective, HR was simply dumping what they perceived as HR’s job.

Lastly, it might sound simple, but you maintain credibility by keeping your promises. “Whatever you say you’re going to do, you have to do,” says Drewry. “[Credibility] is your most precious possession, because most HR people don’t have huge budgets or the kind of power that the line people have. What you have is your reputation and your credibility. If you don’t tell the truth, you don’t have a job.”

Says University of Michigan’s Ulrich: “We need to talk less and do more. We need to write fewer vision statements and start adding more value. The time for rhetoric has passed. It’s time for some resolve and results. In fact, if you’re asking permission to join managers, then you’re asking the wrong question. We shouldn’t be asking permission, we should be demonstrating value.” Don’t ask, “What can I do?” Rather ask, “What am I doing?”

In the end, it’s just as well that you learn how to change your company’s tires while the car’s still moving. Next, you’ll be changing rocket boosters on your space shuttle. Welcome to business in the ’90s.

In life, it’s generally a good idea to practice what you preach. In business, it’s not only a good idea, it can be crucial to your success.

Although Valhalla, New York-based Prudential Resources Management, a unit of The Prudential Insurance Co. of America, formally began a total-quality journey in 1991, that journey took a sharp and more focussed turn a couple of years ago when the company revised its mission and tied that mission to the company’s core values: Client Focus, Winning, Worthy of Trust and Respect for Each Other.

Because of the company’s move toward quality objectives, the firm’s culture had changed, but HR-and the systems it administered-had not. As a human resources consultant, it was time for the company to practice what it preached. It was a goal that although clear-as it is for many companies-isn’t always easy to reach. But it could offer large payoffs.

The company’s revised mission is to be a world-class leader in providing relocation, real estate, human resources and related consulting services to individuals and institutions globally while generating a satisfactory return. Above all, the company now strives to “delight its clients” and to do so with honesty, integrity and mutual respect, realizing that its greatest asset in achieving this mission is its employees. As a learning organization, the firm states that its employees’ ongoing education and development is critical to its success.

After Prudential set its sights on total-quality improvements, the organization’s Chairman and CEO Matthew M. Luca and President and COO T. Stephen Gross chartered an ongoing human relations assessment project (HRAP) team to be responsible for ensuring that all the company’s human relations systems directly support the company’s revised mission, vision and values.

“We recognized that in order to succeed, we needed to make sure that our human relations systems were aligned with our company’s mission, vision and total-quality principles,” explains Maria Stolfi, director of employee benefits and lead facilitator of the HRAP team. “When we say we [must] work toward continuous improvement, we [must also] give everybody the tools to do that.” Some of the questions they began asking themselves were: Are our human relations systems supporting continuous improvement and total quality? Are our people getting rewarded and recognized according to our mission and values? Is their performance being managed on that basis? In many cases, the answer was no. It clearly was time for action.

The HR team takes stock of HR systems.
According to their chairman’s mandate, the company formed a cross-functional team of 10 associates (which is how Prudential refers to all its employees) ranging in level from senior vice president to lower-level employees.

Why give the task to a team instead of simply giving it to the HR department? “One of the things in our learning about total quality is the strength and the effectiveness of cross-functional teams and that’s why we went that direction,” says Thomas R. Jago, an internal communications officer and an HRAP team member. The firm had had success over the past few years in having cross-functional teams tackling multidimensional projects, so the company’s senior management felt it should also give HR systems the same directive. Also, because there are only 10 individuals in the company’s internal HR organization, it would be difficult to give sole responsibility for a project of this magnitude to so few people.

The team first looked at the HR services the company provided for its employees and categorized them into well-defined service units. They identified six broad human relations systems or services which the human resources function provides to the organization. These services included: Performance management, reward and recognition, personnel policy, compensation and benefits, communication and career development.

After careful evaluation, the team ranked these systems, putting the performance-management system at the top of the list. They determined that these were the six areas where there were some concerns, where there was the greatest room for improvement and where they felt they could get some relatively quick results so that changes would have a positive impact on the organization.

The next step was to figure out how to systematically redesign each of these six systems so that they would be aligned with the company’s new vision, mission and values. The team went about setting concrete objectives for measuring the six HR systems’ impact on the organization. “We established a set of 10 objectives that we would base all of our human relations systems against,” says Jago.

The goal of these 10 HR objectives, which included such areas as fostering open communication and leading by example (see “Prudential Resource Management’s 10 HR Objectives”), was to recognize that the company’s ongoing success is dependent on HR’s ability to recognize and value each individual’s unique differences and talents. The HRAP team envisioned that a work environment, supported by these 10 objectives, would allow each person the opportunity to reach his or her fullest potential, and therefore directly contribute to, and of course help improve, the bottom line.

Realigning employees’ performance goals with company goals.
After establishing the 10 HR objectives, the HRAP team had to figure out what criteria to use in aligning the company’s performance-management system with the 10 objectives. They had to determine: Where the systems fell on the objectives continuum, where they should be and where the gaps were.

To figure all this out, the team gathered best-practice information from award-winning companies and consulted with leading experts through secondary-research sources. “We also did informal benchmarking by referring to publications that have written about other organizations and what they’ve done in performance management,” Jago adds.

In addition, they evaluated a recent employee survey that had asked questions-many relating to performance management. From this, the HRAP group learned that the performance management system wasn’t used consistently, it didn’t stress ongoing and multilevel feedback and it didn’t factor in team performance.

The team also spoke to other organizations on an informal basis to get an outside perspective. “We didn’t actually go out and talk to other organizations because time was important to us,” says Stolfi. The HRAP team also solicited feedback from the organization’s senior management team about what changes they thought needed to be made. All those insights were incorporated into the evaluation process.

“Through our research of total quality, we imagineered what our HR systems would look like in terms of behaviors if they were aligned completely with all the [objectives],” Stolfi explains. “So we looked at all that data, came up with a common rating system and then conducted about 12 focus groups throughout our company of both management and nonmanagement groups,” adds Stolfi.

Over the course of a month (late last summer), they met with about 20% of the company’s employees in focus groups throughout the organization, facilitated by HRAP team members. The team’s research lead them to the realization that employees wanted a more formal way to see how the work they do every day helps the company achieve its mission and quality vision.

Performance management tops the list.
The HRAP team’s research suggested that the company’s performance-management system was the first HR system that needed to be realigned with the company’s new vision.

The system had flaws, both in design and in execution. The biggest flaws were that it didn’t clearly tie individual objectives to company objectives and that it lacked clear evaluation standards. Although people could be rated on a scale of 1-5 (from “needs substantial improvement” to “outstanding”), in several areas such as client focus and technical ability, those performance dimensions needed further clarification. “The process that we had was pretty good if people were using it as it was intended,” says Jago. “There were situations where people were doing quite well because employees’ managers were very focused on it.” But, in many cases, people weren’t using the system as it was intended, often because they didn’t receive training. Many weren’t using it at all.

“Where we were falling short was that [the performance-management system] was not well-communicated and it was very unevenly implemented,” says Jago. In fact, some employees weren’t setting objectives at all so they couldn’t be measured by any performance system. Often, managers were dictating objectives with little or no input from employees and employees weren’t getting a lot of ongoing feedback throughout the year about how they were achieving whatever objectives were set.

The performance-management system underwent reconstruction. What emerged was a four-part improvement plan. The new plan calls for:

• Systems improvements:
  The plan requires feedback from three to five team members for each associate’s performance evaluation. Everyone is reviewed-exempt and non-exempt-with a 360-degree feedback system. Also, managers are now responsible for coaching and counseling their direct reports on a scheduled basis.

• Skills building:
  A complaint of the old system was that managers, especially new managers, weren’t trained on how to help employees set objectives and how to conduct performance evaluations. Within the last several months, 700 of the company’s 1,000 employees have received training in how to set objectives for themselves or for their subordinates.

• Education of the process and company expectations:
  “People had been feeling lousy about the [old] process because they didn’t know what the expectations were,” says Stolfi. Employees are being educated about how to set their job objectives based on company objectives.

• Management of the process:
  There’s now a cross-functional team that’s responsible for managing the performance-management process-to make sure that there’s continuous improvement and measurement of how the process itself is proceeding on a monthly or quarterly basis.

The new performance management system now includes: setting performance objectives, ongoing communication and feedback between manager and associate, gathering associate input, client/ project team input, performance review and compensation review. The biggest difference between the company’s old system and the new one is that performance management is viewed as a shared, rather than a one-sided, top-down responsibility.

The new system was put into place for the company’s 1995 planning purposes at the end of 1994. Every associate has developed 1995 objectives that are meant to track and be consistent with their manager’s objectives and to support the company’s four strategic objectives. Everyone will be evaluated at the end of the year based on the new system.

Evaluating the new performance-management system’s progress.
Although the company is still in its first year of implementing the new performance-management system, already the HRAP team has identified changes they’ll make to next year’s plan.

They’ll be incorporating a section into the performance appraisal form to elicit feedback from clients-both internal clients, external clients and colleagues-similar to other feedback mechanisms the company has incorporated into areas of the business as a result of its quality objectives. Improvements such as these, in turn, help support the 10 HR objectives-communication being at the top of the list.

“One of the other things we’re going to be doing [more] is putting a couple of questions on our E-mail system and having people zap back their answers,” explains Stolfi. Before, they asked: “Were you setting objectives before, yes or no?” Now they’ll ask: “Were your objectives set by January 15th?” Or, “Have you assessed to improve the process?” Adds Stolfi: “We’re going to continually solicit more data. But there’s a lot more work to be done.”

Improving five other HR systems.
Prudential Resources Management’s HRAP team has started looking at revamping the next system on the list: reward and recognition. The realignment process for this system is taking the same course as the performance-management system did. “We’re looking at where we are today, we’re doing focus groups, we’re looking at survey data and we’re also doing a lot more internal work on the reward and recognition system,” says Stolfi.

In tandem with this project, the company is further focusing on evaluating HR’s approach to achieving total-quality objectives through: 1) Discussions by the senior management group about where they perceive HR to be today; 2) Having an outside consulting firm conduct an assessment of how well the company is meeting its total-quality objectives; 3) Designing a formal matrix of the organizationally sponsored HR programs.

The firm’s reward and recognition systems are a good place to start. “Right now, we’re looking at the organizationally sponsored programs and identifying what we spend on the programs, how many people it affects and how they’re utilized,” explains Stolfi. “A lot of our regions have different programs they they might do on their own.” For instance, there might be 15 different types of reward and recognition programs used throughout the company, which include such variations-on-a-theme as base pay, benefits, incentive compensation, public thank you’s and private thank you’s.

“People are being asked to rank what personally motivates them,” says Stolfi. “So we’re going to take that data to determine if we’re spending our money in the places that make sense for people.” Says Jack Navarro, senior VP: “We’ve brought our client focus to a higher level, we’ve got tools to improve our processes and we’re creating measurement systems for collecting data on client and associate satisfaction. Now we must focus on the human side of these initiatives.”

Although the company is eager to tackle each of the remaining four HR systems that it has committed to aligning with the firm’s mission, it doesn’t want to hurry the process by laying out an overly ambitious schedule. In keeping with the company’s commitment to continuous improvement, it plans to work on each remaining HR system until all have been revamped. But the process won’t stop there. Because each system will have a cross-functional team as its monitor, each will continue to undergo tinkering. Such is the way of total quality.

Measuring success with a total-quality filter.
For some organizations that decide to travel the total-quality road, results are immediate and measurable. Prudential Resources Management has found this to be true. Comparing its 1993 year-end results to 1991 (the year the company began its total-quality journey), it has found that:

• The number of clients it serves has nearly doubled
• Overall client satisfaction increased almost 10%
• Associate productivity jumped 5%
• It increased its profits by 20%.

Why is Prudential’s focus on tying quality objectives to HR systems so innovative? Sometimes, innovation is simply common sense put into action. However, common sense, as they say, often isn’t common at all. “The key is that we’re getting people involved and we’re understanding that their contributions impact the organization,” says Jago. Indeed, they have. “Last year we phased in more than $2.6 million in efficiency improvements, and it’s because of this planning and focus that we’ve been able to do that,” he adds.

Now, with numerous partnerships and more than 65 cross-functional quality planning and improvement teams throughout the company, total quality is well integrated into the fabric of the company. Practicing what you preach isn’t always easy and may feel like the road less travelled. In the end, however, it very well may be the road most profitable.

No company likes to throw away $1 million. However, that’s exactly how much money Brown & Root Inc, a Houston-based engineering, construction and maintenance company was spending each year in legal and court fees litigating disputes involving employees. To make matters worse, the company was spending this money on only 2% of its 35,000 employees who seemed unable to resolve their conflicts without litigation.

After considering a new tactic for nearly four years, Brown & Root implemented a dispute resolution program in June 1993. Whenever workers feel they need to resolve a dispute, the program allows them to choose one or all of four options: Open-door policy, conference, mediation or arbitration. “We wanted to give our employees several ports of entry to lodge a complaint if they wanted to,” says Ralph Morales, manager of employee relations and administrator of Brown & Root’s Dispute Resolution Program.

Because management surveyed employees extensively about what such a program should look like before they put it into place, there were few problems once it was implemented. Says Morales: “Only two employees had any problem with it.”

Open door policy. Although the company had maintained an informal open-door policy for many years, the new program emphasized that employees can take any problems to management at any level in the organization. Employees are encouraged to start at the lowest possible level, but they may take them as far up the chain of command as they need to, including the CEO.

In addition, the company added an employee hotline and a legal consultation program. Through the employee hotline, advisers offer free, expert and confidential advice and also provide information on how workers can solve problems informally within the company or through the other external options such as mediation or arbitration through the American Arbitration Association (AAA).

Employees also may request a legal consultation with the attorney of their choice when their dispute involves a legally protected right. “We can say it’s a fair system, but to make it fair, we said, how much more fair can it be if an employee has a legal concern about an employment problem, and we’re telling them that we’ll pay for them to go see a lawyer if they want advice,” explains Morales. “We wanted to level the playing field.” Legal consultations are paid for much like benefits under the company’s medical plan. Employees pay a deductible of $25 and a copayment of 10% of the balance, and Brown & Root pays the remaining 90% with a maximum annual benefit of $2,500 per employee. So far, only 14 employees have used this option.

Conference. Workers also may request a conference with a company representative and someone from the dispute resolution program to discuss the conflict and choose a process for resolving it. From there, the employee decides whether to loop back to the chain of command option, try an informal mediation process or to proceed with mediation or arbitration.

Mediation. Through the mediation process, employees resolve their disputes by talking through their conflict with a neutral third party, called a mediator, who helps each party come to an agreement based upon their interests and needs. Mediation is a nonbinding process that helps each side by opening up the lines of communication and helps them recognize their options. All mediators used by Brown & Root are employed by the AAA.

Arbitration. Like the mediation process, all arbitration proceedings are conducted by an AAA arbitrator. Employees are encouraged to resolve their conflicts before reaching this option; however, the company fully participates once this option has been selected. Arbitration is a binding process, through which employees can win monetary awards just like in a courtroom, although there is no jury.

“The first thing that people always think about is to implement something like this because it will save you money,” says Morales. Although the financial burden of litigation was a growing concern to the organization, a primary impetus for the program was to preserve the company’s relationships with its employees. “We’re not in the litigation business,” explains Morales. “So whatever we could do to minimize that, we wanted to do.”

Since the program was implemented, about 500 employees have used one or more of the program’s options. About 80% of their disputes have been resolved in fewer than four weeks. The majority of those conflicts have been resolved in fewer than two weeks. In an organization the size of a city, Brown & Root needed an alternative to litigation. “Any time you get people together, there are going to be disputes, and you just have to understand that you have to have a conflict management system in place to handle those,” says Morales. “We just don’t think that the courthouse is the place for it.”

Ang Heng knows what it means to be scared. Really scared. One night this past summer, Heng, 18, was driving a friend home through an unfamiliar neighborhood in Long Beach, California. While stopped at a light, he and his friend suddenly heard “Mira, mira” (“look, look”). Heng looked out of his car window and saw a gang of youths moving toward his car. Heng remembers: “Then one of the guys came to the car with his baseball bat, and that’s when I saw his big pants, you know, those baggy pants and I saw his belt hanging down, and then I know I can’t go. I was in a panic. I didn’t know what to do. When I looked back, my window was smashed—boom!— like that, and then he came to the side and tried to hit my friend and he broke two of my windows. Then I sped up and they tried to follow us, but luckily, I drove up to Signal Hill where one of the police stations is. Then they forgot about it and went the other way.”

It was a frightening encounter. Heng can’t remember ever being so terrified. Although gangs, drugs and poverty are common in his neighborhood and throughout much of the Los Angeles area, Heng usually steers clear of trouble because he has more important things on his mind. Although economically disadvantaged, Heng’s dream is to become a physician. Having come to the United States from Cambodia six years ago, Heng has worked hard to learn English and to do well in school.

Because dreams aren’t limited by economic status, Heng has actively pursued opportunities to improve his life. One of those opportunities was the Long Beach Summer Youth Program funded by the federally run Job Training Partnership Act (JTPA). The summer youth program is a work experience and academic enrichment program for economically disadvantaged youth, 14 to 21 years old. During the eight-week program, the approximately 1,200 young people selected each year to participate in the program work at non-profit venues, including state, federal and city offices or public or community non-profit organizations.

Typically, the employers’ work with the youth is finished once the summer program is complete. However, after participating with a group of 10 teens in the program for the first time in 1993, one employer—the Los Angeles County Health Department—wanted to do more for the kids. Because the teens had benefited so much from their interaction with the employees at the health department, program administrator Jack Carrel thought that the kids would benefit from the continued involvement of himself and his co-workers.

To Carrel, working with kids like these is at the heart of health education and of America’s future. These kids had dreams. They needed guidance in figuring out how to make them come true. Whether these disadvantaged kids would sink or swim might very well depend on whether there were people who would reinforce that they could follow through with their dreams.

“For a lot of kids, a lot of their public health problems like violence, sexually transmitted diseases and drugs, it really comes down to people being able to have some long-term goals. I think the reason that a lot of stuff happens today is that kids don’t have that. I can teach people how to use a condom or clean their needles but unless I can get people to have goals and value themselves and other people, it’s pretty ineffective,” says Carrel, former director of health education for the Los Angeles County Health Department’s Sexually Transmitted Disease (STD) Program in Downey, California. “I’ve worked with a lot of kids, including kids just out of jail, and what I hear the most is: ‘I can’t go to school. I can’t do this. I can’t do that.’ We can show people that they really do have some options.”

Teens such as Ang Heng face enormous barriers to employment, including the lack of positive role models, money, job-search and job-retention skills. For some of them, English is their second language and they often are uncomfortable speaking English in front of a group. Carrel envisioned a program that would continue throughout the year and would enable the youth (most of the kids were 18 or younger) to improve their work and communications skills, build their self-esteem, clarify their life goals and have opportunities to practice employment skills that would help them get and retain good jobs. “It’s our firm belief that if we’re to truly impact the lives and employability of these youths we must offer ongoing support after the program, while they are actually looking for jobs,” says Carrel.

Carrel also wanted to provide each teen with a mentor who would support their individual efforts in overcoming whatever barriers to continuing their education or seeking employment they might encounter. He also thought that providing opportunities to interact with peer role models who had overcome similar barriers and providing job-search and job-retention training and practice would be important to the kids’ long-term development. The kids agreed.

What Carrel lacked was the money to fund such an effort. As luck would have it, Carrel’s father, Jack Carrel Sr., was a human resources manager at Gaylord Container Corp. in Bogalusa, Louisiana. The elder Carrel had regularly loaned his son copies of Personnel Journal. The younger Carrel subsequently noticed in the March 1993 issue that the magazine was offering a Rebuild America Challenge Grant to organizations interested in breaking down barriers to employment such as homelessness and lack of job skills through such avenues as apprenticeships, retraining programs and investing in inner-city communities.

The younger Carrel applied for and received one of three challenge grants that Personnel Journal awarded in 1993. (See “Personnel Journal Helps Rebuild America Through Its Challenge Grant,”). Over the past year and a half, the money from the grant has given Carrel Jr.’s team the opportunity to help 17 teens improve their job skills and prepare to be active participants in America’s work force.

Teens become job-ready.
After finishing the summer youth program in which the teens worked at the STD office and learned peer-education skills, most of them returned to school—either to finish high school, start college or to enroll in a technical school, such as nursing or real estate. Only one teen got a job instead. All continued to interact with the STD staff through monthly seminars that focused on becoming job-ready. For most of the kids, the employment information proved useful as they looked for after-school jobs, holiday jobs or employment after graduation.

“Not really knowing how to properly go about securing a job, the idea of having a resume, how to act in an interview, how to fill out an application and those sorts of things, were big problems for them,” says Carrel Jr. To help alleviate this problem, several health educators in the STD unit taught seminars on interviewing, preparing resumes, filling out applications and conducting job searches using employment training materials provided by the elder Carrel. “We could provide them with the kind of support and information about self-esteem and those kinds of things, but we really needed some outside help on how to get them ready for jobs,” explains Carrel Jr. who’s now manager of the HIV counseling and testing unit for the Los Angeles County Health Department.

One training session focused on how to fill out a job application. The elder Carrel provided this advice: Be neat. Carry a pad of notepaper so that you can write out answers to the longer questions. Take your time. Carry a small pocket dictionary to ensure the correct spelling of words that you want to use. Read the form carefully all the way through before you begin to fill it out, that way you’ll know which information goes where without having to guess or erase.

During a segment on interviewing skills, the teens learned about interview preparation. “I sent them information on preparing for an interview,” says Carrel Sr. “If you’re really interested in a particular company, then get some information about that company, so when you go in, you can impress them with the fact that you know something about the company.”

The elder Carrel also provided sample interview questions and these interviewing tips: Be prepared with answers to commonly asked questions. Dress neatly. Listen to what the questions are. Don’t answer before the interviewer is done asking the questions. Don’t sit until the interviewer says, “Have a seat.” Sit up straight. Don’t be a name-dropper.

Then the kids conducted mock interviews while being videotaped. Afterwards, they reviewed themselves, paying particular attention to their posture, their eye contact and how thoroughly they answered questions. Annette Peters, an STD program health educator and training coordinator for the teen program, says that most of the kids were extremely nervous during this exercise. She says that Heng felt particularly anxious because English isn’t his first language. “After we practiced, however, most of them felt a lot better about [interviewing],” says Peters.

The kids visited a local shopping mall where they practiced collecting applications. Peters says that the teens went into stores and asked about job openings. “It gave them a sense of being able to walk in somewhere cold,” says Peters.

Back at the STD office, the teens learned how to conduct a job search. They looked through want ads in the newspaper and placed cold calls about job openings with a specified set of questions such as: What are the job duties? How much does the job pay? What are the hours? Peters says that having a list of questions in front of them while they made calls gave them a sense of having a system and provided a checklist to refer back to when going in for an actual interview.

After completing a workshop on resume preparation, program administrators made copies of the kids’ resumes on disks so that they could continue to update them throughout the year and print out copies whenever they needed them. When some of the kids subsequently went out looking for jobs, they reported back to the group that employers were impressed with the fact that they had resumes. Most young people applying for service-type jobs just fill out an application and leave it at that. “Adding a resume really gave the application that extra oomph,” says Peters.

The kids found most of the employment information useful. For example, many of the teens felt much more comfortable speaking in front of a group after completing the training. Of all the teens, Peters says that Juan Barrias improved the most. She says: “He didn’t speak English very well, but he still got up [in front of the group] and really tried. I think that showed the comfort level he had for being around all of us,” Peters adds. Barrias was living in a group home in Long Beach last year. Whenever there was a group activity, Peters or his mentor would pick him up, sign him out and take him along. This year Juan was moved to another home in Los Angeles and was unable to continue participating in the teen program, although Carrel and Peters stay in touch with him.

Peters explains that as a result of the encouragement he got in the program, Barrias decided to go on in school and become a mortician. Peters remembers one exercise that she did with the kids where she asked them to say where they’d live if they could live anywhere in the world. “Most of the kids said they’d like to live in places like England or study in Paris. Juan said he’d like to live in Lake Elsinore [California] where he wouldn’t hear gunshots going off,” she says. “It was so humbling.”

Business involvement is crucial to teens’ long-term success.
At-risk students often need more than their school guidance counselors or teachers can give them. What they need is the real-world perspective of adults, especially those in business.

From a human resources perspective, the elder Carrel sees great value in students having firsthand access to human resources professionals, hiring managers and people in business. “I think if business would participate with educational institutions personally by standing up in front of the classroom and talking about these three things: applying for a job, interviews and after being hired, those companies are going to get much better employees in the long run,” says Carrel Sr. who was the HR manager for Gaylord for 23 years before retiring this March. “I’m not saying that students don’t take seriously what a teacher says, but I do feel that they do take seriously what someone from business says on what we expect from individuals who come to us and apply for a job and what we expect when we put an individual on the payroll. I think the impact of that is just tremendous.”

Each kid also had a mentor. In most cases, the mentor served as a sounding board—someone to bounce ideas off of. In some cases, the advice might have been difficult to accept, even though it was firmly based on firsthand information from the school of hard knocks. For example, Doris Simpson, a disease intervention specialist for the STD program, was a mentor to Carmen McLendon, 18. They immediately learned that they had something in common: Both had a child at a young age. McLendon had a daughter a year ago and completed her high-school education at an extension school because of her pregnancy. After graduating, McLendon attended real estate classes. Although she failed on her first attempt to pass the test, she hopes to pass on her next try.

After getting to know each other, Simpson, in a kind, but firm way, challenged McLendon to think about her career choice. Although real estate sales can be lucrative down the line, Simpson explained that it could take quite awhile before it would provide the kind of monthly stability that a young, unmarried mother would need to ensure the support of herself and her child. “I did sense that she thought about it. I was wanting her to look for something more concrete and more structured,” Simpson explains. “So many people have a microwave consciousness. They want everything right now, yesterday.”

Simpson knows the value of hard work and tried to convey her perspective to her protege during the mentor relationship. As a woman who married, had a child and divorced young, she took charge of her life by going back to school and pursuing a career. She recently got her master’s degree and is able to support herself comfortably. “Carmen would say to me, ‘You drive such a nice car.’ And I would say to her, ‘You can have nice things, too, but it doesn’t come easy. You’ve got to put forth the effort,’ ” says Simpson.

Harlan Rotblatt, director of the Adolescent’s STD/HIV Services Project for the STD Program, mentored two kids over the past year: Arturo Mata and Rang Thach. He says that he focused on helping his proteges “deal with the practical issues that come up as a direct result of the program.” He says, “I tried to hone in on helping them develop their resumes, work through the possibilities of getting job experience and provided resources and contacts.”

For instance, Thach didn’t have much work experience, so Rotblatt helped him think about whether any of his life experiences could be translated into job-related skills on his resume. For example, he reminded Thach that his planning a presentation and presenting it to his teen group was job applicable. Rotblatt also helped Thach prepare for the SAT.

Rotblatt says that the mentoring relationship became a structured place where the kids could talk about school, work or their future plans. It was important to get the perspective of someone in the business world who had gone to college and who could relate to their hopes and dreams. Mata says that Rotblatt helped him by being able to talk about college—what freshman year was like, what to expect and what to avoid. “I don’t know many people who went to college. My parents never went, so I really can’t ask them,” says Mata. “Besides my teachers in high school, I really didn’t talk to anybody else about college.”

Sometimes, the mentors gave their proteges the permission to think about career possibilities, even if they seemed somewhat far-fetched. For example, Thach had the idea of pursuing a very practical job. While he was developing a resume around that, he and his mentor realized he also was interested in a career that was a little less practical as well. “The fantasy job wasn’t necessarily practical, but I felt that it was important for him to think through that,” says Rotblatt. “I wanted him to realize that he could take his dream and apply the kinds of things that they were learning in this program to see if it was something he could do, and how to go about doing it in a practical way.”

Teens clarify their life goals.
Program administrators were surprised by the strength of character that the kids demonstrated throughout their involvement in the teen program, despite their many obstacles. They were always on time and always called when they couldn’t attend a function or come to a meeting. They also showed a lot of respect for their mentors, the health educators and each other. They raised their hands. They asked questions. They listened to each other’s hopes and fears. “This was a pretty goal-oriented group of youth,” says Rotblatt. “Most of the people already had ideas for themselves. The program was interesting to them because they already had a sense of being able to do stuff like this.”

The administrators were surprised that the kids had such well-defined plans for their lives when they started the program. “Ang, Arturo, Tina, Eang, Robert and Hortencia all said they wanted to go on in school when they first got there,” says Peters. “Most of them already had a goal in their minds, and that’s what impressed me most about this group. I found that quite amazing since most of them came from backgrounds of poverty.”

The kids’ lives were further complicated by violence and drugs. “Almost every one of them had seen at least one person shot and dead on the ground,” says Peters. Many of the kids regularly hear the sound of gunfire in their neighborhoods. Others had been approached by drug dealers at one time or another. “Some kind of way, they [managed] to rise above that,” says Peters. “These kids were something special.” She adds: “I will never again lump people together. [I’ll never again think that] just because someone lives below the poverty line that they have lower ambitions.”

Many of the kids also came from large families and faced the difficulty of studying or working on projects with lots of activity going on all around them. Because most of them grew up having family responsibilities in addition to work and school, they were comfortable doing several things at the same time. For example, Mata often babysits for his 6-month-old brother and sometimes cares for the baby and his two other brothers while his parents travel to Mexico. “In spite of all that,” says Peters, “he graduated [from high school] with honors.” Having scored 1,200 on his SAT (out of a possible 1,600), Mata entered college this year and plans to get a bachelor’s degree in health administration. Mata works as a security guard on the weekend and goes to school during the week. He continues to live with his family. He says that having worked at the STD office is a great addition to his resume and will look good when he applies for jobs as a health administrator down the line.

Although some of the kids had a good sense of what they wanted to do when they graduated from high school, they all further honed their plans through the interaction of their mentors and their involvement in the teen program. In the process, most of them identified the need for more schooling. “There’s not much you can do in this world with only a high-school education,” says Carrel. Most of the kids who are going to college are seeking financial aid.

Seven of the kids from the first summer’s group are now going to college. For example, Tina McCoy is both working at Target and is going to school at Long Beach City College and is studying nursing. Oscar Franco, however, got a job with the Long Beach Conservation Corps.

Five of the same kids from the first summer’s group also actively participated in activities and mentoring during the second summer as well. In addition, seven new kids participated this year. All of the kids who participated in the program this year are now going to school, either returning to high school or entering college.

Their mentors helped them make contacts in the community. For instance, before applying to medical school four years from now, Heng must log in at least 500 volunteer hours at a health institution. Heng’s mentor last year, Peggy Preacely, helped set him up in a volunteer spot at Long Beach Memorial Hospital. He’s also volunteering at a local health center. He says that his mentor this year, Carrel, also has helped him a lot. But he says that both people must work at the relationship. “Some people don’t need their mentor and it doesn’t work well,” says Heng. “But me, I need their help. Everything they want me to do, I do it. Your willingness to work—that’s what makes your mentor want to help you.”

When he first started the program, Carrel says that he thought the kids either would need help in getting a job or going back to school. “What we ended up doing is working with most of them to get into school,” he says. “Sometimes the biggest issue for these kids is that they really don’t know that they have options. They come from a background where they haven’t had many options. That’s why some changed [their minds about] what they wanted to do.”

For example, Carrel says that people who advise youth usually try to steer them in certain career directions without trying to find out what their aspirations are first. As an example, he says that in the past, counselors tried to steer his protege Juan Barrias, who originally is from Guatemala and lives in the group home, into just getting his GED and then going to work as a clerk in a store. “I think a lot of people feel that kids like this have had a lot of disappointments in their lives, so they try not to make it worse,” he says. What they don’t realize is that it limits their choices. Carrel encouraged Barrias to stick with his idea of becoming a mortician. “We really did let the kids see what options they had and tried to expose them to things they hadn’t been exposed to before,” he adds.

Different viewpoints provide valuable perspective.
For such a small group, the teens represented a lot of diversity—a goal that Carrel wanted to achieve when he originally offered to take kids from the summer youth program. In all, there were eight women and nine men. And in terms of culture—six of the kids were Asian, five were African American and six were Hispanic.

The kids got along well with each other, in spite of, or maybe even because of, their different cultural backgrounds. For example, Heng (an Asian American) describes his interaction with Barrias, who had been in a Hispanic gang: “When he first came here, he acted all big and stuff, but then he was so nice to me, you know? I get along with him. If you want people to understand each other, maybe [you have to] learn about them.” Heng adds: “It’s tough. I think it’s not going to stop, this [racial] problem. I think you just have to live through it.”

Various field trips helped the kids to see the world from different perspectives. For example, they visited the Museum of Tolerance in West Los Angeles. While there, the kids learned about victims of the Holocaust and about various other cultural groups who face discrimination. “I think they learned that we’re all people and that we all need to be treated as human beings,” says Peters. They all talked about the experience afterwards. The kids agreed that one of the most powerful encounters was being in a room where they could push buttons and hear people shouting various racial slurs at them—it was an experience not unlike some that they had experienced in their own lives. “They learned that we all have to be conscious of everyday things, what we say, what we do and how we treat people,” adds Peters.

The kids also went on a field trip to a local Renaissance Faire, which is a tribute to medieval life held annually in Southern California. Afterwards, the group talked about what it would have been like to live during that time. Another outing involved going to a local bookstore to view a photo exhibit by some teens depicting life in their Los Angeles neighborhood, which is heavily affected by gang activity. The photos showed the more positive aspects of life in the community.

An important part of the program involved having positive peer role models speak to the teens so that they could learn how to overcome barriers encountered by youth like themselves and act as reinforcement that it’s possible to set a goal and achieve it. Probably the most memorable event for the kids was a visit from one of the stars of a recent movie called “Mi Vida Loca,” a film that told about the lives of female gang members. The kids had gone out to see the movie as a group one night, then the next evening, actress Seidy Lopez—a young woman in her early 20s—came to talk with the kids. She talked about coming to the United States from Mexico as a child, how she wanted to be a movie star and how she struggled to finish school and then finally got her big break in this movie. During her visit, each of the kids talked about their goals. She encouraged all of them to value their education.

She knows what it means to believe in herself when few others did. Through this teen program, disadvantaged kids were inspired to reach into themselves and find the place where strength and courage lies, with the help of some people who cared about their development. Like flowers growing through cracks in a sidewalk, these kids emerged from desolate neighborhoods with the dreams of a better life and the power to make them come true.

Two years ago, Los Angeles-based First Interstate Bancorp. outsourced its entire benefits function to Towers Perrin, a management-consulting firm. It wasn’t the first time the bank had used outside vendors to perform traditional human resources functions. It previously had outsourced its relocation functions to Paragon Decision Resources, Inc. in Illinois and temporary employment services to Talent Tree Personnel Services in California. In all cases, the lesson was clear: Outsourcing is not just a matter of farming out services for expediency. On the contrary, it is the meticulous pursuit of long-term “strategic partners.”

Learning to establish the right relationship is increasingly important because continued outsourcing looms on the horizon. If current trends continue, typical large corporations of the future may consist of a relatively small core of permanent employees, with the remainder of the work force composed of individuals who are hired for specific, temporary assignments, and a network of vendors. Indeed, a recent 927-company survey conducted by Washington, D.C.-based The Wyatt Company, shows that 32% of employers already outsource some or all of the administration of their human resources and benefit programs. In this environment, the vendor becomes an extension of the company, and the relationship rises above the traditionally narrow buy-sell level. “We’re dealing with a very professional, desired relationship,” says June Jones, senior vice president of corporate employee relations at First Interstate. “We have looked for people who could really add value to the corporate mission and strategies.”

Once a company decides to outsource, however, the contract is the primary mechanism to ensure that both its expectations and the vendor’s are realized. Negotiating a successful contract for both parties often can be an arduous process. Unlike one-time vendor contracts, outsourcing contracts require a different mindset because outsourcing vendors actually are integrated into the company over a long-term period during which they become privy to inside information. That’s why it takes months to select the proper vendor. And the key, according to those who have benefited from such relationships, is for a company to know its needs and goals before starting the selection process. In addition to specifying the scope of desired services and nitty-gritty working arrangements, outsourcing contracts can also include protection clauses for arbitration, confidentiality, risk sharing and penalties.

Whether the function being outsourced is part of personnel or from another area of the company, such a relationship involves a multitude of HR issues. Human resources specialists, therefore, need to be involved early on in the process, starting when the company begins to conduct its needs assessment, establish its short-and long-term goals, determine its decision-making structure and project the estimated costs.

In fact, HR departments already play a role in some 65% of all company outsourcing cases, up from about 35% in the past. So while the search and selection team ideally involves a top executive, the respective department manager and a legal expert, human resources often plays a critical role as facilitators and coordinators of the entire process.

It’s a natural role for human resources professionals to play because of their communication and administration expertise. They are qualified to assist in the proper selection and management of outside vendors. They can maintain focus on the company’s growth strategy, its corporate environment, workforce culture and overall objectives. “HR knows best the company’s personnel requirements and is skilled in asking the right questions in order to obtain quality staffing,” says Kathleen Correia, president of Accounting Solutions, a national consulting firm supplying organizations with professionals in accounting, human resources, management information, financial analysis and computer systems.

As a trend sweeping U.S. companies of all sizes, outsourcing is the purchase of a good or service that previously was provided in-house. Information-systems outsourcing options, for example, have existed since the beginning of data processing. As early as 1963, Electronic Data Systems (EDS) handled data-processing services for Frito-Lay and Blue Cross & Blue Shield. Today, other outsourcing options include such functions as mail room, data processing, COBRA administration, payroll, temporary employment services and relocation.

But not all experts agree that outsourcing is a friendly partnership. In a study of 14 Fortune 500 companies that faced outsourcing decisions, the companies most dissatisfied with outsourcing all had signed contracts that dramatically favored the vendor. The contracts merely stipulated that the vendor would provide the same level of service that the company received prior to outsourcing.

The study was conducted by Mary C. Lacity, assistant professor of management information systems, College of Business Administration, University of Missouri, and Rudy Hirschheim, professor and director of the Information Systems Research Center, College of Business Administration, University of Houston. (Their detailed case studies appear in their book, “Information Systems Outsourcing: Myths, Metaphors, and Realities.”) Although these researchers focused on information-systems outsourcing, many of the lessons included can be applied to how human resources departments work with any vendor that is providing an ongoing service or function.

Lacity and Hirschheim warn that viewing outsourcing vendors as “strategic partners” can be a mistake because the profit motive is not shared. Account managers at outsourcing providers, they say, are rewarded for maximizing profits, primarily by charging customers additional fees for services that extend beyond the contract. When a customer’s costs increase, so do the vendor’s profits.

The danger in viewing the vendor as a strategic partner, they emphasize, is that the customer may sign a loose contract. Once it goes into effect, the vendor may not provide the expected service. One petroleum company that outsourced its entire information systems function in the late 1980s, for example, was charged $500,000 in excess fees the first month into the contract. That was 50% more than what it had expected, because the company managers assumed the services already were covered in the contract. But the vendor rightfully claimed that services not documented in the contract are above baseline and so are subject to additional fees, according to the study. This doesn’t mean that vendors are inherently opportunistic. What’s more likely is that both parties failed to communicate clearly from the beginning.

Despite the risks, however, more and more companies view their outsourcing vendors as strategic partners. The most important tips for negotiating an outsourcing contract—once your needs have been assessed—focus on ensuring that the relationship will work given the customer’s real needs, while allowing for future changes:

• Institute a detailed Request for Proposal (RFP) process
• Solicit possible vendor references
• Discard the outsourcing vendor’s standard contract
• Don’t sign incomplete contracts
• Select your account manager
• Measure everything during the baseline period
• Determine growth rates
• Take care of your people.

Activate an aggressive bidding process.
When First Interstate initiated its outsourcing search, the company began with a mission statement of values and strategies. After promoting it within the organization, the statement was communicated during the RFP stage. As potential vendors were interviewed, they were introduced to First Interstate’s background: who they are, how they’re configured and some of their communication challenges and needs.

For example, when First Interstate outsourced its employee relocation services, one aspect was contracting van-line businesses.

What they found was that many van lines operate very independently. So the company asked the van lines to give one proposal through their franchise holder—the company whose name they bore even though they were separate and very independent legal entities. “It caused a bit of a stir, but that was logistically important for us in order to coordinate our communications and to make certain that we were working with an organization that could really give us one answer for their company and muster all of their resources to the needs in our territory,” says Jones. It was a condition, she adds, for responding to First Interstate’s RFP.

The RFP stage is important because it helps the company identify the most compatible candidates. Although reference checks are conducted, the RFP process prepares the vendor for one of several personal interviews. Many vendors say they appreciate the well-organized approach as well.

“A lot of those [vendors] have said how impressed they are with the level of knowledge we already have about their subject area and how professional the approach is.” Jones says that the outsourcing vendors understand early on that they aren’t dealing with a fly-by-night relationship.

Finding the right vendor for your company, even though it often can take a long time, pays off in the end. That was the case with Harvest Foods, Inc., says Robert Rough, executive vice president and CFO for the Little Rock, Arkansas-based retail grocery chain. With 54 stores, it employs about 3,100 workers.

Harvest Foods contracted with IBM’s Integrated Systems Solution Corporation (ISSC) to allow the company to focus on its core business, have access to enhanced technology and skilled personnel and to reduce operational expenses, Rough explains. He warns that outsourcing shouldn’t be used to address an organization’s lack of basic understanding of technology or as a “quick fix.”

Rough also advises that an organization’s decision-making group include the chief financial officer, chief information officer, board members, the human resources officer and a general counsel. That body’s commitment is essential, he says.

Although the search took six months, it resulted in a 10-year contract—long-term by most standards. The reason Harvest Foods opted for such a long contract, Rough explains, was to outsource the information systems, which included the installation of equipment such as scanners, cash registers, instore processors and other hardware that Harvest Foods could pay for over as long a period as possible.

Also during the solicitation stage, those who are experienced with outsourcing say that it’s important to supplement the personal interviews with reference checks. Art Young, benefits manager for Hewlett-Packard, says that his organization did so when it outsourced some of its benefits and service awards functions. Checking references, he says, should not be underestimated. “You want to know how much [business the vendor] has—who their big companies were and how much volume they had,” Young says.

Discard the vendor’s standard contract.
Many vendors push to use their standard contracts. But Lacity, Hirschheim and others say that the key to successful outsourcing arrangements is building a company-or even site-specific contract. Often the vendor’s contract is one-sided and only obligates the vendor to perform the same level of service that the company’s designated department already provides.

Site-specific contracts are useful because the impact of outsourcing is manifold. It affects each company in many areas: economics, service, organization, procedures, technical services and corporate culture. Standard contracts may not take into consideration a company’s individual profile.

Failing to make sure that the final contract fits your needs can turn outsourcing into a mixed blessing. In one case study of a bank that outsourced its information systems (IS) function, Lacity and Hirschheim illustrate the point. While senior management was happy because the outsourcing vendor had increased the percentage of online availability and response time, the lower-level users were dissatisfied with the arrangement because they no longer were able to contact an analyst to make changes to the system, but instead had to submit requests to a user-systems liaison group. Obviously, had the procedures been more clearly specified in the outsourcing contract, these problems may have been averted.

Nevertheless, the benefits of a successful outsourcing relationship are a powerful inducement for human resources departments and corporate management. The question, then, is how to avoid the pitfalls of bad outsourcing arrangements while reaping the benefits of the best.

Do not sign incomplete outsourcing contracts.
As a company and vendor become more anxious for the business relationship to begin, both can be tempted to close the negotiation prematurely. The outsourcing vendor, in particular, may pressure the company to sign the contract before all the details are specified. But since the vendor isn’t legally bound to alter the contract later, it may never agree to change the original contract. Even if revisions are worked out, the process may cause more damage to the ongoing relationship than all the rush was worth. So in addition to specifying the services requested, outsourcing contracts should also include:

• Designation of who does what
• Performance benchmarks
• A reporting system
• Procedures for any unanticipated problems
• Working arrangement (where and how)
• Penalties
• Duration of contract
• Payment schedule
• Cancellation provisions
• Special clauses that cover arbitration, risk sharing, confidentiality and renegotiation.

Designating who does what is the best way to ensure that a company retains control, says Kathryn Devos, manager of employee services for Madison, New Jersey-based Schering-Plough Corp. Her company outsourced relocation, awards and incentives to obtain better-quality service for employees.

In negotiating with a relocation vendor, Devos warns that without a clear plan for marketing employees’ homes, a corporation could end up taking a financial loss on a house. For example, the vendor may decide that the only way it can sell a home is by lowering the price. Meanwhile, the corporation is in the dark about how the home is being marketed. “You really have to force them into allowing you, the corporate person who’s paying the bills, to have some say in what’s happening to the home [in question],” says Devos.

She also advises that organizations conduct the accounting on site. Typically, a lot of work occurs in the background during a relocation process: giving equity advances to an employee, paying off a mortgage, paying the appraisal, paying for inspection and maintenance. All of those procedures require bills. If, for example, she gets a $150 bill for lawn care and Devos knows it’s a small home, she can walk over to one of the accountants and immediately clarify the item.

Also, by having relocation vendors on site, Schering-Plough’s employees now have one point of contact, instead of the 17 different people they were referred to previously. Because corporations always are subject to audits, Devos also insisted that all files be kept on site. “I wanted them here,” she says. “You can either be hands-on or hands-off. But you can’t be in the middle.”

Because the company spends at least $20 million to $30 million annually in relocation costs, somebody in the organization has to follow the money. An account manager should be clearly designated, Devos says. When reports are submitted, someone in the company has to know what the numbers mean and understand each service charge.

Also, whether the vendor provides one or more professionals, the names of the vendor’s outsourcing team should be reported to ensure strict dedication to the company. In situations where a vendor may want to subcontract out, these conditions also should be clarified in the contract. Jones, of First Interstate, says that organizations should include provisions that allow the company to approve or disapprove a subcontract relationship with any vendor other than the original outsource partner. In some cases, it might be approved only on a temporary basis until the original vendor can resume its services.

In terms of establishing performance benchmarks, the contract must be specific since either the company or vendor may wish to add, combine, improve or delete certain performance measures. But both parties might also want to allow some flexibility by inserting appendices, which is a legal term applied to all standard contracts.

Measures, according to Lacity and Hirschheim, typically require vendors to deliver a certain amount of work in a certain period of time. This applies to IS vendors and others. For example, 90% of all service requests may be promised within three days. But what about the remaining 10%? It may be serviced later or not at all. Despite the fact that 10% may never be measured, the outsourcing vendor has technically met its service-level measurement.

To avoid that problem, companies should specify 100% service accountability in the contract. If 90% is processed in three days, the remaining 10% should be completed, for example, in five days. Any exceptions should be fully documented and reported.

A reporting system also should be included in the outsourcing contract. Otherwise, a company can’t be guaranteed that the services it expects have been provided. Organizations may choose to require weekly, monthly or even quarterly reports. Those decisions should be based not so much on convenience, but at what intervals those services are best evaluated.

In one case study covered by Lacity and Hirschheim, a security vendor’s report indicated that “One hundred security requests were implemented this month.” The report did not, however, specify how many were submitted or the average turn-around time for the requests. According to the contract, the vendor had met its service levels. But the users complained that security requests took more than two weeks to process. Reports, therefore, should quantify the agreed-upon service levels. Organizations might also want to design the reports so there is little room for fudging by the vendor.

Because unforseen problems always arise, companies might also specify what procedures will prevail if services are unmet. Lacity and Hirschheim recommend that services be divided into critical and noncritical categories. For example, you might want to allow a vendor to miss noncritical measures (such as analyst training hours) once or twice a year. But for critical services (such as online availability), the company may require immediate reporting and a cash penalty if necessary. Those penalties for undelivered services also should be specified in the contract negotiations.

Some of those penalties may prove costly for the outsourcing vendor. For example, a commercial bank may invoke penalties between $25,000 and $50,000 if its data-processing vendor fails to meet end-user response time, system availability and batch-delivery deadlines for critical systems.

Although cash penalties never fully compensate the company, they certainly ensure that the vendor’s senior management will attend to service-level problems. “Who’s responsible if something goes wrong?” asks Young. “That’s a sticky issue.”

Protect yourself when negotiating the contract.
After most major items have been specified in a given contract, organizations also should consider including protection clauses for items such as special compensation, arbitration, cancellation, confidentiality and termination.

Correia, of Accounting Solutions, says that companies should set up parameters for special compensation. For example, companies sometimes want to hire key personnel away from an outsourcing vendor. Some contracts prohibit recruiting the vendor’s employees; others allow the practice but set terms of compensation for the vendor. In either case, the point is to be honest and up-front in the working relationship. After all, people are what the vendors are selling, says Correia. And again, the role of HR managers is important because they are the ones to help cultivate a positive working relationship with the vendor.

Many companies also are reluctant to outsource because they don’t trust vendors to protect their confidentiality or competitive information. Most outsourcing vendors work hard to defuse this issue. Accounting Solutions, for example, requests its temporary CPAs to undergo a professional ethics exam. But for highly sensitive or competitive information, companies should take more stringent measures. If, for example, the company is engaged in research and development, and the vendor is allowed access to privileged information, the company may want to request that all computer disks are returned. Both sides, Correia says, need to have an agreement about public disclosures. “You always think people have discretion, but it’s better to put it in writing.”

Because relationships don’t last forever, or even as long as the original contract, most lawyers will insist that termination clauses be inserted to protect both parties. Either the company or vendor may need to terminate a contract because of bankruptcy, sale of a company or some other unforseen disaster. The main feature in such clauses is to specify the time period in which adequate notice is given. Failure to provide it also may result in a severe penalty charge.

Since negotiation with another vendor could take another six months and rebuilding an internal department could take up to a year, continued vendor assistance should be a requirement during the transition, regardless of who initiated the changing circumstance.

Assuming that there have been no problems with a vendor, organizations also will face the issue of outsourcing-contract renewals. Some critics of outsourcing say that companies have no other choice but to renew the vendor contract because the decision is long-term. In some cases, ceasing or changing vendors can be costly because you end up paying for some of the services twice. But if an organization has drawn up a detailed contract and established a successful working relationship with its vendor, renewals—even short-term—are most likely.

Another strategy for negotiating outsourcing contracts is to measure everything during a baseline period. That means documenting the company’s current service level and using that as the yardstick to determine the vendor’s obligations.

This procedure is different from the RFP in that the RFPs are merely high-level descriptions of service requirements. Baseline measures are much more exact measurements that, if not noted, can cause service problems and excess charges if items are unclear.

Moreover, an organization might want to anticipate its growth rate so it can share the benefits of price performance improvements.

In such areas as information systems, for example, the cost of a unit of processing decreases every year. If a company doesn’t make its own projections, some information systems vendors could underestimate growth, which could lead to excessively high fees in the future. Says Rough, of Harvest Foods: “It’s kind of tough when you’re sitting there trying to figure out what your costs will be for the next 10 years. But you have to make the effort.”

Although there are naysayers who claim that such projections are impossible to make, Rough argues that a company can’t enter a long-term, 10-year contract without them. The company’s negotiating team has to make some assumptions as to where it’s going. “That way,” Rough says, “you’re comparing apples to apples.”

HR sets the tone for outsourcing.
In many cases of outsourcing, companies have to displace employees. HR can help ensure that the company assumes social responsibility to treat those affected fairly. That means informing them of any final decision as soon as possible and helping them secure positions elsewhere, if necessary.

According to one labor mediator, the challenge for human resources is to create a temporary benefit package and provide job referrals or job retraining. For those remaining employees, the HR department must continue to raise the morale and resolidify the corporate culture around the changes. But in the best scenario, a vendor will consider retaining most of the employees in question on a trial basis.

As more and more companies continue to downsize and restructure for leaner times, human resources specialists will find that they are also asked to assist in companywide outsource planning. Whether or not HR’s role is confined to its own department or it’s participating companywide, the best approach to contract negotiations and any subsequent changes can be greatly facilitated by HR’s communication skills throughout the process.

Besides the nuts and bolts of pinning down the contract’s specifics, there is also an underlying attitude issue that must frame the process. Lillian R. Gorman, vice president of human resources at First Interstate, believes that flexibility and open communication is the key. Every professional relationship evolves and requires some give and take on both sides. A solid working relationship can yield a contract later on if a vendor wasn’t chosen as today’s provider of choice. “That’s the spirit we want going into relationships. [Vendors] aren’t just the hired guns asked to go out and fix something,” says Gorman.

What goes up, must come down. The theory applies to gravity and also aptly describes U.S. real estate values. Declining real estate prices over the past few years in certain areas, such as California and the Northeast, have caused a chain reaction in corporate relocation problems within the U.S. Employers that move operations to less costly areas often experience resistance from homeowning employees who stand to lose lots of money on the sale of their properties.

Many corporate moves in 1993, prompted by downsizings and reorganizations, were group moves rather than individual ones-creating greater challenges than ever before for HR professionals.

Uncle Sam didn’t help matters much either last year. New 1994 tax laws now prevent employees from itemizing deductions for certain moving expenses, forcing employers to decide whether to gross workers up by making up the difference.

Employers have to deal with the relocation turmoil and figure out how to get the right people, to the right places, at the right time-for the right price. Corporations are countering transferee resistance with improved ways to smooth out the relocation road. These new strategies, developed over the past few years, are holding new promise for the relocation challenges of 1994 and beyond.

Some of the strategies have been around for a while, but are being reintroduced with renewed vigor. Others are being discovered by many relocation professionals for the first time. The strategies include such real-estate sales incentives as self-marketing and bonus programs, and loss-on-sale assistance. They also include relocation reimbursement strategies like lump-sum payments. The effect of these programs has been to slow or eliminate employees’ resistance to relocate in the wake of depressed housing markets while also helping save on the high administrative costs of running a relocation program.

Depressed housing markets cause resistance to relocate.
According to the Washington, D.C.-based Employee Relocation Council’s (E-R-C) 1993 relocation trends survey, nearly 60% of the respondees had problems relocating employees during 1992. E-R-C cites the biggest reasons why employees were reluctant to relocate (in order of significance): as slowed real-estate appreciation and depressed housing markets at the old location, high housing costs and high costs-of-living at proposed destinations. The E-R-C also reports that in 1992, more than three-quarters of companies have either “some” or “a great deal” of transfer activity in high-cost areas.

The areas that employees most resisted moving to in 1993 were the Northeast states such as New York, New Jersey and Massachusetts, and California, which has experienced the biggest housing downturn in recent memory. The National Association of Realtors (NAR), headquartered in Washington, D.C., confirms that home sale prices were lower in the West and the Northeast in 1993 than they were in 1992, while home prices in the Midwest and South have steadily risen for the past three years.

The NAR reports that homes sales were up in every region except the West at the end of 1993. “What has happened there is overinflated home values,” explains Alvin Wagner of A.L. Wagner & Co., a real-estate appraisal company based in Flossmoor, Illinois. “California has had the highest housing losses and continues to be in a rapidly declining market from 1% to 1-1/2% per month.”

In addition, depressed housing markets causing relocation resistance, corporate reorganizations and downsizings forced many employees to make moves that they otherwise wouldn’t have had to make. According to a survey conducted by Evansville, Indiana-based Atlas Van Lines, Inc., more than 42% of the organizations surveyed named corporate reorganizations rather than promotions or resignations as the internal condition that prompted the most relocations in 1992.

According to relocation experts, that trend also continued in 1993 and caused a huge upswing in group moves. Most group moves were from high-cost regions on the West and East coasts where the stubborn recession persists, and to areas such as the South and Midwest where it’s generally less expensive to operate.

The group-move scenario caused an outcry among many employees caught in the reorganization cycle last year. For example, Beverly Berberich, corporate relocation manager of Racine, Wisconsin-based SC Johnson Wax, handled her company’s first-ever group move in 1993. Because Johnson Wax purchased the Drakett Co. from Bristol-Meyers Squibb Co., it had to move 55 of Drackett’s 1,200 employees from Cincinnati to Racine.

“Whenever you have a group move situation, there’s a lot of dynamics going on,” says Berberich. “People are going to an unknown. It’s normal for a group move to cause some apprehension, and in some cases, resistance.” The biggest resistance comes from younger employees who tend to look at how a relocation will affect their quality of life rather than how it will enhance their professional career.

For other organizations, such as Armonk, New York-based IBM Corp., however, moving groups of employees didn’t create much resistance for the company last year. Although most of its 8,700 domestic moves in 1993 were of a group nature, anywhere from 20 to 1,000 employees at a time, transferees didn’t complain much. The reason? While workers may lose money on the sale of their homes as they move out of depressed housing markets, they still have a job-at least for the time being.

“The changes occurring in the relocation industry parallel the changes that are going on in corporate America,” says Cris Collie, executive vice president of the E-R-C. For example, the continued surge in corporate restructurings have led many of the E-R-C’s members to conduct more relocations in 1993 than they anticipated at the beginning of the year, says Collie. Many employers thought that overall transfer volume would decrease. In fact, it either remained steady or increased slightly in 1993 and is expected to continue on the same path this year.

And how will real-estate values affect relocation? Is the end of the housing slump in the West in sight? Not likely for a few years, say the experts. Continued good interest rates (around 7%) in the Northeast, however, may spell some relief for home-selling transferees in that region who may find it easier to locate buyers now than they have for the past few years. According to a November 1993 report in Resources, a newsletter published by the Gillette, New Jersey-based Tri-State Relocation Services Group, Inc. (a not-for-profit corporation serving New York, New Jersey and Connecticut), the buyer’s bull market in the Northeast may last for at least another year, if not two or three.

Where does that leave employers? Looking for strategies that will get employees to go where they need them to go, while also holding down ever-increasing prices. “Every company is looking to control costs,” says Collie. “In order to accomplish that, companies are requiring their employees to participate more in the relocation process.”

Self-marketing programs and bonus programs help keep costs down and morale up.
mployers are taking a renewed interest in home-sales incentives such as self-marketing and bonus programs. Self-marketing programs topped Rochester, Wisconsin-based Runzheimer International’s list of relocation trends for 1993. More and more companies are asking employees to get involved in selling their homes through premarketing or self-marketing programs—so that employers don’t have to step in and handle home sales themselves, or worse, take homes into inventory.

With self-marketing programs, a third-party counselor helps a worker through the home-sale process. For instance, counselors help transferees identify real-estate agents and know what to look for, such as:

• What types of activities the real-estate agent should be performing throughout the listing period
• How often to hold open houses
• How to develop counteroffer plans.

“It’s someone in the employee’s corner to talk with about the sale of the house,” says Laura Hamilton, manager of relocation services for Midland, Michigan-based Dow Corning Corp. Dow Corning, which relocated 43 employees domestically last year, has offered this service as an option to employees for the past two years. “It’s been very successful in helping avoid purchasing employee homes and taking them into inventory, which is extremely expensive,” says Hamilton.

Almost 90% of Dow’s relocating employees participate in the company’s home-marketing assistance program. Of those employees, more than 80% are successful in selling their homes themselves. Dow ends up taking approximately 20% of transferees’ homes into inventory.

While the idea isn’t new, self-marketing continues to increase in popularity. The E-R-C reported that between 1988 and 1991, the use of home-marketing assistance programs in general nearly doubled, from 15% to 29%.

Relocation experts say that employee-generated home sales are an increasingly attractive alternative to taking homes into corporate inventory. Although employee sales costs increased slightly in 1992, the average cost of employee home sales is still less than half the cost of selling inventoried homes, according to Runzheimer. In dollars, that translates into a $120 savings per $1,000 of a home’s appraised value.

“Once homes go into inventory, you’re talking 20% to 24% of the value of the property,” says Tom Peiffer, executive vice president of Runzheimer’s living-cost division. “If you can get the employee to market the home for 45 to 90 days, that saves the company a lot of money.”

Will the home-marketing idea continue to be important in 1994? “I think it will,” says Peiffer. “If companies want people to move from soft or depressed housing market areas, I don’t know how they can do otherwise.” Home-marketing isn’t as crucial for employees who’ve been in their homes for eight to 10 years. They’ll probably make money on the sale of their home regardless of specific marketing strategies that help ensure a higher price. However, transferees who’ve been in their homes only a few years may need home-marketing programs to get as much equity out of their home as possible. They even may help transferees break even.

According to E-R-C trends surveys, bonus programs that are tied to home-marketing programs are another increasingly popular relocation provision and help get employees more involved in the home-sale process. The E-R-C reported that in 1991, almost 40% of companies with third-party home-marketing assistance programs gave workers a bonus or cash incentive if they found a buyer for their home during the self-marketing period. Although methods of determining the dollar amount vary, the most common method is to base it on a percent of the home’s sale price with no dollar maximum.

In addition to offering transferees home-marketing assistance, Dow Corning also offers a bonus program. An employee need not use home-marketing assistance, however, to qualify for a bonus. “It’s positioned as an extra benefit,” says Dow’s Hamilton.

Dow bases its bonus program on a sliding scale that takes into account the appraised value of the home and the actual sales price. If an employee finds a buyer for his or her home at the appraised value, Dow pays the employee a 3% bonus. If the employee sells the home at 99% of the appraised value, he or she earns a 2.5% bonus. The scale goes down to 96% and yields a bonus of 1%.

Employees at Dow are guaranteed to earn 100% of their homes’ appraised value through the company’s policy to take homes into inventory if employees can’t sell them outright. “The idea is to bring more offers to the table,” says Hamilton. “So the way to get them to do that is to give them a monetary incentive.”

By contrast, IBM doesn’t take transferees homes into inventory if employees can’t sell them. But it does offer transferees a bonus program in association with a self-marketing program. Nearly two years ago, IBM implemented a bonus program that allows employees to receive 1% of a home’s appraised value if they sell their home within 90 days.

According to Suzane Parker, manager of international assignments and relocation services for IBM’s WFS Workforce Solutions, a bonus program gets employees more involved in selling their homes from the outset. “It’s an issue of getting them up and running faster,” says Parker. “If you really get employees charged up about premarketing, hopefully you can get the home sold in 45 days. That’s less cost to the corporation, but it’s also an emotional boost for employees as well.” The sooner their homes are sold, the sooner they can get to their new assignments.

While bonus programs may be popular, one relocation expert warns that companies first should see how well a self-marketing program works in getting homes sold before tacking a bonus program onto their relocation policies. Ellie Monty, president and publisher of the Relocation Compass, a newsletter published in Hinsdale, Illinois, says that when self-marketing programs first came into vogue a few years ago, many employers automatically threw in a bonus incentive with them.

“Bonuses are being reexamined by companies because, while they’re an incentive for the employee, they might not be necessary to implement a successful home marketing program,” says Monty. She advises that employers first check to see how a well-managed home-marketing program works before attaching bonus incentive, because once it’s written into policy, it’s often difficult to remove later.

Loss-on-sale programs spread.
Where home-marketing and bonus programs end, loss-on-sale programs begin. While loss-on-sale programs are another increasingly popular option in the relocation professional’s bag of tricks, like self-marketing or bonus programs, they aren’t an entirely new idea.

For several years, companies have been reimbursing workers with part or all of the difference between what they sell their homes for and what their homes are worth. For example, in 1989, 40% of companies provided loss-on-sale assistance via a formal policy to transferees, according to E-R-C. And another 27% provided such assistance on a case-by-case basis. By 1992, 75% of companies provided loss-on-sale assistance and the other 25% provided it on a case-by-case basis.

Despite continued increases in loss-on-sale amounts because of transferees who are forced to sell their homes in depressed housing markets, fewer companies are willing to shoulder the entire burden when a loss on sale occurs. Only 25% of companies with formal loss-on-sale policies cover 100% of the loss, according to the E-R-C.

Dow Corning is one of them. It upgraded its loss-on-sale program from 80% to 100% reimbursement in 1993. “We recently reviewed our loss-on-sale policy to help us avoid employees’ hesitation in accepting jobs from one location to another,” says Hamilton. While loss-on-sale programs may be a good option for companies that transfer small numbers of employees each year, it might be an impossibility for the firm with large numbers of transferees.

IBM is one company that doesn’t cover employees’ real estate losses-on-sale. “It’s really an affordability issue,” says Parker of IBM. “If we tried to offer that type of program, we’d have an awfully huge financial impact on the corporation,” she says.

Loss-on-sale programs, however, aren’t the only way that employers can ease transferees’ burdens during the move process. Companies increasingly are handling the discretionary relocation items such as temporary living expenses and house-hunting trip expenses through lump-sum payment programs. Employers dole out a chunk of money to transferees before the move and let them keep whatever they don’t use.

Are lump-sum payment programs the best thing since sliced bread?
Although lump-sum payment programs aren’t new-they’ve been around for more than eight years-their popularity increased dramatically in 1993. Some companies swear by them. Employers ask employees to manage their moving expenses, and in return, the employee can keep any excess money.

And why not? Companies can save enormous amounts of time and administrative expense. By not having to collect and process a receipt for every relocation item such as meals, lodging, airfare and rental car expenses, relocation professionals can spend more time counseling transferees on other important issues pertaining to the move.

“Lump sums are a hot topic,” says Runzheimer’s Peiffer. Proof: the E-R-C reports that in 1993, 3% of companies gave current employees a lump-sum payment (with no requirements to itemize expenses). The same study indicated that 2% reimburse the household goods shipment but provide a lump sum for all other moving expenses. And 3% of companies even cover real-estate sales expenses, such as closing costs, with lump sums.

The benefit of lump sums for employees is that they get to manage the cash and spend it as they see fit. In the end, managing the lump-sum relocation benefit may be one of the only aspects of the relocation that transferees have control over. For instance, if an employer is dictating which moving companies a transferee must use, such as the real-estate company, the premarketing company and the homefinding company, the lump-sum allowance at least gives the transferee the ability to pick which hotel to stay in during the move or whether to fly first class or coach.

Says Peiffer, “It helps people settle in a lot faster.” Given the enormous emotional and psychological stress that’s associated with any move, allowing the transferee to make some decisions on his or her own is no small consideration in getting the transferee up and running in the new location as quickly as possible.

A new twist in the tax laws, however, have thrown companies using lump-sum programs a curve ball. The federal government’s new moving expense deduction rules (Section 217 under the Revenue Reconciliation Act of 1993, Public Law 103-66), which took effect January 1, 1994, restrict transferees who itemize from deducting lump-sum payments that cover house-hunting trips, temporary living expenses, or residence-sale or residence-purchase expenses. However, for the first time in many years, renters who don’t itemize deductions are able to claim such expenses as van line or date-of-move expenses.

Under the old law, employers had difficulty determining what was tax deductible and what wasn’t. “Now it’s clear that it’s all going to be taxable,” says E-R-C’s Collie, “so it’s easier to handle in terms of grossing up of that tax liability.”

Many corporations are having to decide exactly what they want to do about the grossing-up issue. “It’s going to take more money on their part to make the employee whole,” explains Monty. For example, if an organization in the past had given an employee a lump sum of $10,000, that employee, in essence, may have received only $7,000 under the new tax law because he or she has to pay taxes on that money. So that organization will have to determine if it wants to give the employee $3,000 or more to make up the difference. “A corporation can still say, ‘I’m sorry that that person has to eat that money, but we can’t continue to just gross this up either,” says Monty. “That’s the decision that corporations are making.”

IBM has offered a lump-sum payment to domestic transferees since 1989, and to international transferees since 1990. “The one challenge that we face is the handling of the enroute expenses,” says Parker. Many corporations that have lump sums have chosen to take out the enroute portion and handle that with expense accounts. “It isn’t a difficult thing to handle, but it’s more administration for us,” she adds.

Companies that have large transferee populations such as IBM usually benefit the most from a lump-sum program. Fewer receipts to process means less administrative paperwork.

Those employers that provide lump sums generally are satisfied with the way these programs work. But some employers are cautious. Johnson Wax’s Berberich says that while she’s thought about implementing a lump-sum program, she’s carefully considering whether it fits in with her company’s culture. “We’re a very paternalistic company,” says Berberich. “I wouldn’t want our employees to think that we’re pushing them away by giving them a lump sum and by saying, ‘Here, go take care of your own relocation.'” While she has seen that most employees at other organizations who get lump sums don’t see lump sums that way, she’s still considering the pros and cons.

Hamilton of Dow Corning agrees. “One of the reasons we’ve opted not to provide lump sums is that [not offering them] it keeps us in closer contact with our transferees, which we feel is important for customer service,” she says. When Hamilton’s relocation staff sees expense reports coming through, they know at which stage the transferee is in the relocation process and can offer assistance wherever necessary.

Lump sums tend to eliminate employees asking for additional funds. Because lump sums usually are based on a set policy that takes into consideration how much it costs for certain expenses such as a house-hunting trip for an employee and his or her partner to a certain area, including airfare, meals, rental car and so forth, advance lump-sum payments usually meet the need. But not always.

Therein lies the potential problem with lump-sum payments. “The downside with a lump sum is that you hand an employee money thinking that that employee shares your objective of covering the intended relocation costs,” says Monty. The money may be spent on peripheral expenses not related to the relocation such as credit card bills or college tuition. If an employee mishandles the money, says Monty, you’ve got a big problem—the employee still hasn’t moved, but may ask for more money. “That’s the story with lump sums,” says Monty, “they need direction.”

So do most relocation policies. Relocation professionals increasingly report that they have to revise their relocations policies nearly every year, rather than every five to 10 as they used to.

As relocation policies struggle to fit all the people all the time in the midst of reorganizations, group moves and ping-ponging real-estate values, relocation professionals are left wondering what will go up and what will go down next. No one can be certain. However, relocation strategies that capture the spirit of a company’s culture and are weighted carefully with financial priorities will get the most people where they need to go, when they need to get there.

Each year, UPS interns are selected for the Community Internship Program by following these steps.

1. Each operations-management department within UPS’s 12 regions keeps a list of managers’ names as potential interns. The criteria for selecting managers vary, but employees generally must have been with the organization for several years, be in mid- to upper management and be respected leaders within their own work groups. Managers may submit their own names for consideration; but volunteering doesn’t necessarily guarantee that a certain manager will be chosen. Because UPS is highly decentralized, the selection criteria are specifically vague so that senior managers have the latitude to select individuals whom they think are the best candidates for the program.
2. Each regional operations-management department submits a list of three to four names of potential interns to the corporate-training department in Atlanta. This department is responsible for running the internship program.
3. The corporate-training manager, along with the internship coordinator, chooses six to eight managers who will participate in each internship session. There are seven internship sessions each year at four different sites across the U.S. A total of 43 managers participate each year. The training department is careful to select managers with varied backgrounds and from varied locations so that the intern mix represents a cross section of UPS management.