Author: Jessica Marquez

Last summer, as gas prices rose and housing prices came crashing down, Maia Lucier started hearing more requests from employees who wanted to work from home because they needed to save money. Overall, more employees were coming to her and her team complaining that they were worried about their finances.

“People were talking about their personal finance pressures more and more,” says Lucier, director of compensation and benefits at Dimension Data Americas, a technology company with dual headquarters in New York and Charlotte, North Carolina. “You could feel the tension.”

Dimension Data had an outside financial advisor that often put out communications to the company’s 750 employees, but Lucier and her team felt they had to do more to reach everyone.

Rather than do a one-off financial educational session, Lucier and her team decided to host a monthly financial wellness seminar and regularly distribute materials that would all fall under the firm’s 2-year-old wellness campaign, Think Wellness.

“The point of wellness programs is to get employees to feel good,” Lucier says. “And when we looked at the different things that might cause employees to not be productive, stress over personal financial situations was a cause.”

Wellness programs and financial education aren’t new to the workplace. But just over the past couple of years, a growing number of companies have been marrying these two concepts, experts say.

“There has been a push to focus on personal health and wealth as a way of managing your personal overall well-being,” says Steve Cyboran, vice president and consulting actuary at Sibson Consulting, a division of the Segal Co. “Certainly I think this is exacerbated by the current economic situation.”

Bringing the concept of financial health into a wellness campaign can help employers reduce health care costs—which is often one of the primary goals of these initiatives, consultants say.

For example, smokers might not be interested in attending a smoking cessation program because they aren’t ready to quit, says Sander Domaszewicz, a principal at Mercer. “But if that person attends a program on their financial health that discusses the costs of cigarettes and the potential health care costs associated with smoking, that might get them to participate in a smoking cessation program,” he says.

Also, by integrating financial education with wellness programs, employers can help employees make better decisions about how they spend their health care dollars, Domaszewicz says. For example, more employees may realize that it makes sense to invest more of their paychecks into their flexible spending accounts.

Dimension Data recently ran a feature in its employee newsletter on how employees could save money on their health care bills. In the article, the company noted that employees who get drugs by mail order receive a discount.

The company also highlighted a service it offers, through a partnership with Health Advocate, a Plymouth Meeting, Pennsylvania-based company, that assists employees in resolving health care claims issues and correcting bills that might contain incorrect charges. “We want them to use this service so that they don’t blindly pay their bills,” Lucier says.

The University of Iowa began adding a financial component to its wellness program, LiveWell, over the past two years. For several years, the university has offered a referral for a free financial consultant, but decided to increase its focus on financial wellness as part of its LiveWell campaign in response to employee demand, says Joni Troester, assistant HR director.

“Particularly in the past year we have been getting more requests relative to the economy,” Troester says.

Through the program, the university’s internal employee assistance provider offers seminars on financial topics for the 15,000 benefits-eligible employees. The university also promotes the financial counseling through its health fair events as well as in newsletters, Troester says.

“We see this as part of lifestyle management,” she says. “Financial stress can impede people from having an overall healthy lifestyle.”

One major challenge that many employers face in adding financial education to their wellness programs is that in many instances these two initiatives are handled by separate vendors, Domaszewicz says.

“Often these vendors don’t interact with each other,” he says. Employers need to make sure that the vendors communicate with one another and that their messaging is consistent.

Another challenge that employers are facing today is that while they see the need for financial wellness programs, they don’t have the budgets for them. That’s the case for Dimension Data Americas, Lucier says.

“We just don’t have the resources to offer as much as our employees would like,” she says.

Tracking the return on investment of incorporating a financial aspect to a wellness program can also be challenging, experts say.

However, there are many studies that show that stress leads to poor health, Cyboran says. And it’s a good assumption that many employees are feeling financial stress these days, he says.

“Taking this more holistic approach to wellness is catching on at many companies, but hasn’t quite hit the mainstream yet,” Domaszewicz says

“The most forward-thinking companies are doing it,” he says.

Despite the recession, Seth Wolk, the new director of human interest at Saatchi & Saatchi, is optimistic about the opportunities that the poor economy offers for the advertising agency. He is hoping to use the economic downturn to get to know the existing talent at the company and poach from outside for certain positions. Wolk recently spoke to Workforce Management New York bureau chief Jessica Marquez.

Workforce Management: Why is your title “director of human interest” instead of “director of human resources”?

Seth Wolk: It’s a title I have inherited, and it’s key to the philosophy at Saatchi & Saatchi. A resource is something to use. It’s sort of reactionary. It’s looking at your people as resources. I think “interest” is a much more outward-bound way of thinking about people. My function is making sure that we have knowledge, interest and awareness of who our people are and what makes them effective.

WM: How do you put that into practice?

Wolk: It’s making sure that there is real feedback through the performance management process. It’s about having a dialogue about how people are doing and where they want to be and using them more efficiently. That might not sound different from what other HR departments do, but here people have the expectation to have that two-way dialogue.

WM: How are the market conditions affecting what you are doing?

Wolk: From a talent perspective, the market conditions are acting in our favor in that people are not in motion. The doors aren’t swinging so fast. So we can examine our people and talk to them and make sure that they are committed. We can have that dialogue without worrying about them leaving. It gives me a moment to reflect, whereas in faster times you don’t have that opportunity. It’s a huge buyer’s market in terms of talent. Maybe this is my opportunity to say, “Who is out there, and are there strategic opportunities to upgrade our talent?”

WM: Are you hiring?

Wolk: Like most of the people in our business we are under a classic freeze, but that doesn’t stop us from upgrading. I can’t add headcount, but if I can make the case that I can part ways with a B-player and bring on an A-player at the same cost, I can do that.

WM: How has the economy posed a challenge for you?

Wolk: Clearly it makes it difficult to flat-out hire. So you have to make trade-offs to upgrade your skills. We are doing as well as expected, but the days of making money hand over fist are over. Although I said it’s a buyer’s market in terms of talent, people are risk-averse to leave, so that’s also a challenge.

Workforce Management, April 6, 2009, p. 11 — Subscribe Now!

In January, Fran Ruderman, senior director of benefits and compensation at Leviton Manufacturing, was in a position that many benefits managers are finding themselves in these days.

After a series of discussions among top-level executives, the Little Neck, New York-based manufacturer of electronic products decided to suspend its 401(k) match, effective March 1. And it was up to Ruderman to make sure the company’s 3,600 employees understood why it was taking the action.

“This was a really difficult decision,” Ruderman says.

Leviton isn’t alone in its decision. A February survey by Hewitt Associates found that 2 percent of employers have cut or temporarily suspended their 401(k) match, while another 5 percent expect to do so in 2009. Up to 10 percent of companies could cut or suspend their 401(k) match in the next 12 to 18 months if markets continue to deteriorate, according to Hewitt.

For HR and benefits managers at these companies, delivering this message can prove to be challenging, experts say. While companies want to make sure they give employees all of the accurate legal information they need about the change, they also want to address workers with compassion, says Suzanne Samuelson, a principal at Mercer.

“At some point things are going to turn around, and when that happens you want employees to feel connected to you,” she says. “The better you communicate with them, the more likely they will stay with you in good and bad times.”

From the top
While dealing with a 401(k) match cut is the domain of benefits managers, experts agree that the announcement about such cuts or reductions should come from the top leadership of the company.

“This is not the time for leadership to sit under the desk,” says Nanette Kress, senior vice president and communications practice leader at the Segal Co., a New York-based consultant. “When changes like this are taking place, it’s important to make sure that people aren’t being left in the dark.”

After Leviton’s executives made the decision to cut the 401(k) match, CEO Donald J. Hendler took it upon himself to inform employees.

“Our CEO felt it imperative that communications come from him,” Ruderman says.

In late January, Hendler, Ruderman and other senior executives at Leviton put together the letter informing 401(k) participants that the match would be suspended as of March 1. “We said that once business conditions improved, it is our intent to reinstate matching contributions,” Ruderman says. Leviton had offered a match of 100 percent on the first 3 percent contributed by employees and 50 percent on the next 2 percent.

A couple days before the letter was e-mailed out to participants, however, Ruderman sent it out to managers and to the company’s 13 HR representatives to make sure that they would be prepared to answer questions and address employees’ concerns. “I followed up with them to let everyone know that if they needed any assistance or help answering questions to come to me or someone else in the corporate office,” she says.

Making sure that managers and HR are prepared for a change like this is essential to communicating effectively with employees, experts say.

“The last thing you want is an employee asking a manager about their reaction to this kind of move and the manager saying, ‘How the heck do I know?’ ” Samuelson says. “Managers aren’t there as cheerleaders for making the change, but they can be a support network about why such a change needs to be made.”

Managers also can be helpful in explaining the business case behind the decision, which is crucial, experts say. Obviously most employees know that the economy is in a recession, Samuelson says. “But employees need to understand that this isn’t simply a way to save money,” she says. “It’s about being able to ensure the viability of the business.”

If companies are doing this to avoid layoffs, they need to say that, experts say.

When communicating a cut or a reduction in the 401(k) match, employers are required to send out legal information explaining the change. This can be a big stumbling block for companies because legal language is often difficult for employees to understand, experts say.

Ruderman found this to be a particular issue with Leviton employees. After the company sent out the initial e-mail about the 401(k) match suspension, things seemed fine in terms of employee reaction, she says.

“Our employees understand our nation’s economic condition and have acknowledged that many companies have suspended 401(k) matching contributions,” she says. “Employees weren’t happy to see the match suspended, but morale was still high.”

But two days later, after the company e-mailed a legal notification called a “Summary of Material Modification,” Ruderman heard from a number of distressed colleagues.

“I had several employees, including the in-house attorney, contact me and say, ‘I’m just stopping my participation in the 401(k). I don’t get it,’ ” Ruderman told attendees of the Pensions & Investments Defined Contribution Conference, in Miami Beach, Florida, in February. Specifically, employees were confused by the language of the document, which was e-mailed without accompanying explanation.

To address employees’ confusion, Ruderman contacted Leviton’s 401(k) plan provider, Bank of America, for help. “We came up with a series of communications campaigns,” she says, noting that the company has launched Web-based modules and lunch discussions to talk about the change and the importance of saving for retirement.

The mistake that Leviton and many other employers make is sending out legal information without an explanation, Mercer’s Samuelson says. “You should never send out any of the legal notices without a cover letter explaining the context of the situation,” she says.

Ruderman agrees that if she could do anything over again it would be to send out the legal notice with an explanatory note.

Ruderman says she is now continuing to focus on communicating to employees the importance of retirement savings in these difficult economic times.

“I think over-communicating might be better than under-communicating right now,” she says

J im Konieczny likes to refer to the mid-2000s as the “euphoric period” for HR busi­ness process outsourcing.

    In June 2004, Hewitt Associates acquired Irvine, California-based outsourcing company Exult for $690 million. Overnight, the Lincolnshire, Illinois-based consulting and benefits provider became the goliath of the fast-growing HR business process outsourcing market. Within months of the acquisition, Hewitt closed almost $1 billion in deals with 10 big-name companies, including Mar­riott, PepsiCo and Sun Microsystems.

    “Everyone was talking about HR BPO and how big it was going to be and how great it was and that it was worth jumping into

    right now,” says Konieczny, senior vice president of multiprocess HRO at Hewitt.

    But then it came time to implement the deals, and the mood within the market drastically changed as providers realized they might not be able to fulfill the duties required in the contracts they had signed.

    During the next three years, employers including Wachovia and NiSource brought their HR processes back in-house while others struggled with implementation delays and rising costs. In 2007, it became routine to hear about HRO pro­viders turning down pro­spective clients because they were too bogged down with making existing contracts work, analysts say.

    No company is more familiar with these challenges than Hew­itt. Once the industry leader, the company now places fifth in terms of market share behind IBM, Accenture, ACS and Convergys, according to AMR Research.

    In the past couple years, Konieczny and his colleagues have been renegotiating contracts with buyers and fixing the business model of the deals. In fiscal 2006 and 2007, the company’s HR outsourcing business saw total losses of $918.6 million.

    But today, Hewitt is back in business, albeit on a smaller scale. No longer is the company saying yes to any big deal that comes its way. Instead, it’s being selective and looking to be the outsourcer for a more core HRO offering that centers on benefits administration, workforce administration and payroll for North America- and U.K.-based companies.

    “We have learned that it is hard to be all things to all people,” says Robyn Sweet, vice president of multiprocess HRO solutions. “When you are delivering 10, 11 or 12 processes, it’s hard to be great.”

    And Hewitt’s back-to-basics approach to HR outsourcing may very well be the new face of the industry, experts say.

“We have learned that it is hard to be all things to all people. … There were certainly discussions about not taking all of these clients on, but we wanted desperately for the [Exult] acquisition to be successful. And they were great clients with strong brand names.” —Robn Sweet, VP of mulitprocess HRO solutions, Hewitt

    “The days of the business transformation outsourcing deal are probably dead,” says Neil McEwen, managing consultant at PA Consulting. “No one has the time to go through that whole effort.”

    That means buyers are looking to outsource one or two HR processes at a time rather than sign a huge HR outsourcing deal that involves 10 processes to one provider, he says.

    For Hewitt and other pro­viders, the fact that buyers are more cautious could be a good thing, says Jason Corsello, a vice president at consulting firm Knowledge Infusion.

    “Hewitt shot to the moon and had a very hard fall back to reality,” Corsello says. “Now the question is, where do they go from here?”

What went wrong
    Even in the months after the Exult acquisition, Hewitt executives knew there were problems with some of the deals being signed, Sweet says.

    “There were certainly discussions about not taking all of these clients on, but we wanted desperately for the acquisition to be successful. And they were great clients with strong brand names,” she says.

    So Hewitt said yes to everyone, resulting in multiple deals that required various levels of customization, Konieczny says.

    “In many of those deals, the buyers were saying, ‘This is what we need; you guys build it like this,’ ” he says. “But when we looked at what we had, we found that we had a lot of deals that were like 31 different flavors of ice cream, and they all needed to get done.”

    The major problems with the early deals, which are known as “lift and shift” because the providers essentially lifted the client’s operations and people and shifted them to their own centers, was that they weren’t scalable, says Mike Wright, senior vice president of HRO sales and marketing at Hewitt.

    On top of that, the language in many of the contracts often was vague, meaning that providers would find themselves in charge of duties that they didn’t know were supposed to be part of the contract. That happened with Hewitt, Wright says.

“There was obviously disappointment about the financial performance, but the mind-set was always that we have to fix this. It was too intertwined with our other businesses.” —Jay Rising, president of HRO, Hewitt

    One issue with the early HR outsourcing contracts was sweep clauses, which essentially said the providers would be in charge of “all other things” included in the HR role, Wright says.

    “Those ‘all other’ provisions became things like planning birthday parties for executives, because that’s what HR used to do,” he says.

    Vague contract language and sweep clauses were a problem that ended up plaguing all providers, says Lowell Wil­liams, executive director, human resources advisory services at Equa­Terra, a Houston-based sourcing advisor.

    “Some of those clauses went way off track,” he says. “Usually when you hear people talk about them, the discussion is preceded by some profanity.”

    By the summer of 2006, it was clear to Hewitt executives that they had a problem. That June, the company announced that Bryan Doyle, president of the HRO business, was leaving and CEO Dale Gifford was retiring.

    By August, the company announced a third-quarter net loss of $202.2 million, or $1.88 diluted loss per share, compared with net income of $33 million, or 31 cents per diluted share, a year earlier. This loss included a $249 million pretax noncash charge related to the company’s HRO business. That charge included a $70 million loss provision based on the expectation that one-third of its 2005 contracts and two earlier contracts would lose money.

    It was then that Konieczny, who at the time was Hewitt’s HR outsourcing operations leader, took over the multiprocess HRO division to help fix it. First on his list was to figure out which contracts were in the most trouble and see if they could be salvaged.

    “We found about eight to 10 agreements that if we couldn’t fix them, it was time to fold the tent,” he says.

    But getting out of HR outsourcing wasn’t really an option for Hewitt, because those clients also were either benefits clients or consulting clients, says Jay Rising, who joined Hew­itt as president of its HRO business in May 2007.

    “There was obviously disappointment about the financial performance, but the mind-set was always that we have to fix this,” he says. “It was too intertwined with our other businesses.”

    Starting in late 2006, Konieczny set out to renegotiate one-third of the company’s contracts that had been identified as the biggest problems for the firm.

    “I would basically go in and say, ‘This thing needs a tourniquet,’ ” he says. For the most part, buyers understood the depth of the troubles and were willing to renegotiate contracts.

    Mark Azzarello, who at the time was director of HRO operations at International Paper, remembers Konieczny being frank about the company’s position. International Paper signed a 10-year end-to-end HR outsourcing deal with Exult in 2001. While the deal wasn’t one of the problem contracts, Hewitt wanted to change a few things.

“In many of those [early] deals. the buyers ere saying, ‘This is what we need; you guys build it like this.’ But when we looked at what we had, we found that we had a lot of deals that were like 31 difference flavors of ice cream, and they all needed to get done.” —Jim y, senior VP of mulitprocess HRO, Hewitt

    Under the initial agreement, Hewitt agreed to maintain International Paper’s service center in Memphis, Tennessee. But when Hewitt started having issues, it asked International Paper if it could consolidate operations into its center in Houston.

    But Azzarello wasn’t happy with the transition’s progress. “They had a great project plan, but there was a lack of execution,” he says. “They addressed our concerns, but not without a lot of involvement from us.”

    Renegotiating and fixing problem contracts while continuing with day-to-day business was a challenge for
Hewitt, Wright says. And the timetable was tight. “We were taking huge write-downs,” Konieczny says. For fiscal 2006, Hewitt reported a net loss of $115.8 million, which included $264 million in charges related to the HR outsourcing business.

    By April 2007, Konieczny had renegotiated the majority of deals that needed to be fixed. “We kept all of the deals that we wanted to,” he says. And even clients that Hewitt lost on the HR outsourcing side, such as Wachovia, decided to keep their benefits administration with Hewitt.

Rebuilding a business
    Today, Hewitt’s HR outsourcing contracts look very different from those signed during the “euphoric period,” Konieczny says.

    For one, the company has metrics in place it checks on a monthly basis, he says. “For example, we check our implementation costs monthly and make sure that [they track] it tracks against the deal model and goals,” Konieczny says.

    Hewitt’s overall HR outsourcing model is much more standardized than before, Sweet says. The days of agreeing to do everything a buyer might want are over.

    “Right now we are more focused on selling upfront a standard scope of services with standard service level agreements and standard HR technology,” she says.

    Yet Hewitt still offers customization to clients, Sweet says. “It just means that we will price it in,” she says.

    If clients want Hewitt’s call center support to handle calls on a specific topic that is out of scope, Hewitt can add that into the contract.

    The core Hewitt HRO offering centers on workforce administration, payroll, benefits and the customer service and technology surrounding those functions. Hewitt will no longer offer full-scale recruitment process outsourcing, but it will provide some back-end administrative services that support recruiting, Sweet says.

    And Hewitt is focusing on prospects that are based in English-speaking regions. “We are looking for deals initiated out of the U.K. and North America,” Wright says, noting that these companies may have employees in other locations. “That is the business model and scale that we feel we can deliver on.”

    While three years ago Hewitt’s approach was to sell the concept around an end-to-end HR outsourcing deal, today the company is more focused on one or two processes at a time.

    “It is so much easier to do one process at a time,” Rising says. “You don’t need board approval. It’s better for everyone in this environment.”

    Hewitt also has further integrated its consulting services into its BPO offering, a move clients welcome.

    “When Hewitt and Exult merged, we anticipated that Hewitt’s consulting would be part of the BPO offering,” says Azzarello of International Paper. “But that never happened. In fact they, like many of the providers, drew clear lines in the sand between consulting and BPO instead of integrating them.”

    That was never Hewitt’s intention, Wright says. But integrating consulting expertise can be challenging, and
Hewitt was busy fixing its financials, he says. Today, consulting on issues such as performance management (through an arrangement with SuccessFactors) and change management are all part of Hewitt’s HRO offering.

    “This will now be our offering out of the gate,” Wright says.

Looking forward
    Despite a widespread belief among analysts that Hewitt is going to go back to its core business of benefits administration, executives insist they are going after new HR outsourcing deals.

    “This is a $600 million book of business; of course we are in this business,” Konieczny says. “But I’m not going to sign 10 deals. That’s a capacity issue. If they came to me, I wouldn’t do them.”

    Instead, Hewitt is selling BPO to existing clients to see if they want to add more processes, Wright says. “Frankly, we aren’t seeing a lot of RFPs out there,” he says, noting that he has seen fewer than 12 requests for proposals in the past year.

    But Hewitt has had recent success. Late last year, the company renewed its HR outsourcing contract with BP—an Exult deal. In 2006, BP announced it wasn’t going to renew the contract, but then reversed that decision. Sources say, however, that the agreement is scaled down from the original end-to-end contract. Hewitt also expects to sign one or two more deals in the next several months.

    While the market has slowed from the frenetic pace of four years ago, there are deals happening. As of July 2008, there were 22 large-market HR outsourcing deals, compared with 33 in July 2007, according to AMR Research. “Deals are getting done, but they are more transactional deals rather than the full-scope deals we used to see,” says Phil Fersht, an analyst with AMR Research.

    Analysts don’t think the days of the big HR outsourcing deal are dead; those contracts are just fewer and far between.

    “Single-process outsourcing deals are more attractive right now because there is an earlier payback in term of cost savings,” says Helen Neale, an analyst in the London office of sourcing advisor NelsonHall.

    The current economic crisis has buyers much more focused on the bottom line, and that means CFOs are often involved in discussions about HR outsourcing, Rising says.

    For Hewitt, the end of the euphoric era for HR outsourcing means that deals today are centered on common sense—deals that Hewitt says it wants to win.

    “The first deals were largely built on vision and aspiration because that’s what pioneers do,” Wright says. “Now we have a much more solid base. We are probably in the teenage years of growing up.”

Workforce Management, March 16, 2009, p. 1, 14-19 — Subscribe Now!

Mike Wright, senior vice president of HRO sales and marketing at Hewitt Associates, has learned a thing or two about what makes a good client. He also has learned more than he would have liked about what makes a bad one.

    As a result of some difficult years in HR outsourcing, he says he and his colleagues now have a keen eye for red flags that indicate a prospect isn’t going to work out.

    At the top of the list is making sure that the pros­pect’s management board buys into the idea of outsourcing the company’s HR processes, says Jim Konieczny, senior vice president of multiprocess HRO at Hewitt.

    Just a few years ago, it wasn’t unusual for the HR executive to start discussions with a provider without bringing in the CFO or other executives, he says.

    “Now, I will go to the board with what we are proposing,” Konieczny says. “This might not require board approval, but it’s a strategic move to make sure the buy-in is there.”

    Hewitt also is wary of prospects that have small numbers of employees scattered in different regions of the world, Wright says.

    “Large geographies with small populations never worked well,” he says. “There was no scale and leverage in that.”

“Large geographies with small populations never worked well.”  —Mike Wright, senior VP of HRO sales and marketing, Hewitt

    Similarly, Wright says Hewitt won’t take on a client with global locations and no willingness to standardize all of the processes.

    “We are implementing a hospital system that has 50 to 60 hospitals being done in waves,” he says, adding that Hewitt still works with decentralized clients. “But they bought in upfront to the need to standardize how these services are rolling out.”

    Specifically, the hospital system, Catholic Health Initiatives, which signed a 10-year HRO contract with Hewitt in 2006, has a person in charge of driving that standardization, he says. “If that didn’t exist, we would be concerned,” Wright says.

    Given the financial pressure that many companies are under today, Hewitt also is making sure that prospects understand the long-term nature of HRO implementations. While many companies may want a quick cost fix immediately, they need to understand that it can take time before they realize those cost savings, Wright says.

    “If an organization is trying to outsource to get a quick fix for the next two quarters, we wouldn’t look at this,” Wright says. “We understand why these are real needs at this time, but these are longer-term decisions.”

Workforce Management, March 16, 2009, p. 16 — Subscribe Now!

In January, Dutch insurance conglomerate ING Group announced that it would be cutting 7,000 positions this year. For Tom Waldron, executive vice president of HR and brand at ING Americas, that meant cutting 750 positions and not filling an additional 250 jobs. Although Waldron has been through layoffs before, he says this time it’s much more difficult. Waldron recently spoke with Workforce Management New York bureau chief Jessica Marquez.

    Workforce Management: Why were the recent layoffs more difficult than past reductions?

    Tom Waldron: Usually in the past, when you downsize in a particular area, you have somewhere else to put people. But because you have this incredibly shrinking economy, the company has to shrink globally and our options to redeploy are tremendously reduced. I have never had so many high performers on a reduction list ever.

    WM: What do you offer to those employees who lost their jobs?

    Waldron: I would say on a scale of severance arrangements, we are on the very fair to richer side. That does cost us more money, but it’s a wise investment because you want to treat people who have worked for you with dignity and respect. We also offer outplacement services to employees to help them find other opportunities.

    WM: How did you conduct the layoffs?

    Waldron: I am not a big believer in everyone getting called into a room and then they all leave immediately. You have to weigh the risk that you could have isolated employees who don’t take the situation well, and we have to be very conscious of that. We told people that the layoffs would be coming during the second week of January and that they would be leaving two to three weeks after that. There were a few people who stayed on longer. In many offices, we had representatives from Right Management to answer displaced employees’ questions and schedule appointments with them to help with career transition.

    WM: What’s the business case behind offering “rich” severance packages and outplacement services?

    Waldron: You need to treat people with dignity. That’s important for the morale of the people who are remaining with you as well as for the people who are leaving. This is our brand and those are our customers. I can say that we will never look at cutting severance payments to reduce costs when we are laying off people. Not over my dead body. People come and go. We believe these people will be our customers and that many of them will come back to work for us.

    WM: What are your top priorities today during these difficult times?

    Waldron: From an HR standpoint, part of our role is to be the conscience of the organization and make sure that managers are thinking about questions like ‘How do you handle people in situations likes this?’ We also have to help make sure the business strategy is secure while motivating and engaging people and retaining our top talent. It’s mind-boggling from an HR perspective, but I just tell my people, ‘Have your meltdown later.’

Workforce Management, February 16, 2009, p. 8 — Subscribe Now!

Despite the equity market’s turmoil and the faltering value of some retirement portfolios, many employers with defined-contribution plans are nevertheless discussing automatically increasing employees’ contributions to their plans, according to speakers and attendees at Pensions & Investments’ Defined Contribution Conference.

It’s more important now than ever for companies to implement automatic increases in their 401(k) plans, said Jaime Erickson, HR manager of DC plans at Akzo Nobel, a Chicago-based chemical company with 12,000 employees. Erickson was a speaker at the conference, which took place in early February in Miami Beach, Florida.

“When you look at people who have a 3 percent default, they will just sit there,” she said, failing to invest enough to build a retirement fund. In April, Akzo Nobel will automatically increase its employees’ contributions to the 401(k) plan up to 6 percent of pay. The company offers a 6 percent match and has no plans to freeze it.

However, even companies that have decided to suspend their 401(k) match for employees are considering automatically increasing the contribution for employees. Leviton Manufacturing, a Little Neck, New York-based producer of electrical and electronic products with 3,800 employees, is suspending its 401(k) match as of March 1.

“This was a very difficult decision for us,” Fran Ruderman, senior director, benefits and compensation, said in an interview following her presentation at the conference. The company matched 100 percent of the first 3 percent of an employee’s contribution, and 50 percent for the next 2 percent. The company also has implemented a salary freeze.

But despite these moves, Ruderman is considering adding an auto increase feature to the company’s 401(k) plan so that employees can be on track to save enough for retirement.

“I have to really think about this,” she said. “On one hand, we have lots of hardship withdrawals, but on the other hand, we want to keep employees on track with their savings. And they can always opt out.”

Many plan sponsors are discussing automatically increasing employees’ contributions despite the market environment, said Joe Masterson, senior vice president of Diversified Investment Advisors, a service provider based in Purchase, New York. They’re even choosing the option over automatic enrollment, he said in a discussion over lunch. Companies are wary of auto-enrolling employees at this moment in the downturn because the employer match for all of those employees costs companies money.

The dilemma that Leviton Manufacturing is struggling with—cutting or freezing the employer contribution while simultaneously investing more of employees’ money so they won’t fall behind in retirement saving—is one that many plan sponsors face, particularly as more and more suspend their company matches, experts said. Some attendees at the conference said they believe that the number of employers planning to freeze their match is greater than industry surveys indicate.

A recent Hewitt Associates survey shows that just 2 percent of employers have cut or temporarily suspended their 401(k) company match since the markets tumbled last fall, and 5 percent are suspend or cut their matches in 2009. However, depending on how long the recession lasts, Hewitt estimates that 10 percent of companies could cut or freeze their match in the next 12 to18 months.

But Don Stone, president of Plan Sponsor Advisors, a Chicago-based consultant, said he has seen greater numbers of companies cutting their matches. “We have clients who three months ago were not going to cut the match, and now they have,” he said in an interview at the conference. “Twenty percent of clients have cut or stopped their match completely in the past four months.”

But these clients shouldn’t abandon the idea of adding auto increase—even if they are cutting the match, Martha Tejera, a principal at Tejera & Associates, said in an interview. “The message is, ‘You own your retirement, and here is a way to make it up.”

In many ways, Subha Barry believes her job will be easier now that the United States has its first African-American president. She was having lunch at a diversity conference in Hong Kong when the organizers broadcast President-elect Barack Obama’s November 4 victory speech in Chicago.

“I remember thinking that the job of any supporter of diversity is going to be much easier because we now have this visual symbol in the most powerful role in the world,” says Barry, managing director of global diversity and inclusion at Merrill Lynch.

But Barry also realizes that with Obama’s presidency comes a new set of challenges—the most game-changing of which will be how his position raises the bar in defining diversity. No longer will it be sufficient for companies to simply consider race, sex and religion in silos, Barry says. Experts believe there will be more focus on multicultural as well as socioeconomic diversity within the workplace.

“In this country, we have these constructs that view race in a one-dimensional perspective. But in other countries the consideration of race is more complex, so he is viewed as multicultural,” says Ana Duarte McCarthy, chief diversity officer at Citigroup. “The fact that Obama is multicultural will put more focus on what it means to be multicultural.”

Obama’s father was born in Kenya, and his mother was an American from the Midwest.

At the same time, Obama has spoken about the need for more socioeconomic diversity in higher education, and experts expect that to spill into the workplace.

“There has started to be chatter online about a move toward class-based affirmative action,” says Tarun Mehta, an attorney in the San Francisco office of Bryan Cave. This could mean that employers will have to take into account socioeconomic differences as part of their diversity initiatives.

But before companies can even think about working on these more sophisticated diversity initiatives, they will have to address a slew of new challenges that are expected under Obama’s administration. These include increased criticism of affirmative action policies by opponents as well as greater enforcement of affirmative action policies by the government.

All of this comes as companies face the biggest economic crisis in years. A Conference Board survey of CEOs released in October found that having a diverse workforce fell in importance by four rankings since last summer, while reducing health care costs jumped seven rankings.

“It’s probably going to be more difficult for HR to get the CEO’s attention on these kinds of issues right now,” says Toni Riccardi, senior vice president of HR and chief diversity officer at the Conference Board. “It’s not that diversity is less important to employers; it’s just that other things are more important.”

Election’s impact
Within days of the election, HR executives already were hearing arguments from critics of affirmative action saying that Obama’s victory was a sign that there isn’t a need for diversity policies, says Lewis Benavides, vice president for HR at Texas Woman’s University and a member of the Society for Human Resource Management’s special-expertise panel on workplace diversity. A similar concern was raised by several SHRM diversity panel members at a meeting November 10 in Alexandria, Virginia, Benavides says.

“There is an acknowledgement that when the highest officer of the land is an African-American, there will be people who will say, ‘Why do we need these programs anymore?’ ” he says.

It’s an issue particularly for companies with voluntary diversity programs, experts say. Companies may also see an increase in reverse-discrimination lawsuits from white males, Mehta says.

“Given the economic conditions, it might not be hard for opponents of affirmative action to find possible plaintiffs for these cases,” he says.

At the same time, companies with affirmative action policies in place can expect that the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs will have more resources under Obama and be more aggressive about enforcing affirmative action policies.

The majority of Fortune 1,000 companies have contracts with the government, and thus have affirmative action policies, experts say.

Under the George W. Bush administration, agencies like the OFCCP saw their budgets cut, so they weren’t as effective as they could have been, says Renee Dunman, president of the Affirmative Action Association, a group of diversity and affirmative action officers from private and public organizations. In fiscal 2008, President George W. Bush requested a budget of $84.2 million for the OFCCP, down from $85.2 million in 2006 and significantly down from the $92.3 million requested in 2001. “I think Obama is going to look at that budget and say, ‘No wonder you can’t do the compliance piece,’ ” she says.

Experts also predict that under the Obama administration, the OFCCP will have more support from the Office of the Solicitor General, which tries OFCCP cases.

“I believe that the solicitor’s office will be supporting more of the OFCCP’s demands,” says Valerie Hoffman, a partner in the law firm Seyfarth Shaw. “It means that employers will need to spend additional energy ensuring that they can defend a failure-to-hire case and that their applicant tracking systems are accurate,” she says.

Also, experts believe the EEOC and the OFCCP will be more rigid—not only looking at the composition of an organization’s workforce to ensure that it is complying with affirmative action policies, but also closely analyzing how organizations are paying minorities compared with non-minorities in the same roles.

Specifically, some experts believe that the OFCCP will return to using the Equal Opportunity Survey, a reporting tool that allowed the agency to collect information on companies’ compensation data and affirmative action programs. The program was dropped in 2006, but Mark Bendick, partner at Bendick and Egan Economic Consultants, a Washington-based diversity consultant that helped evaluate the tool in 2006, believes the Obama administration will bring back the survey.

“It would mean that the federal government is going to be in a better position to know when there are glass-ceiling problems and wage discrimination going on within companies,” Bendick says.

For HR and diversity executives confronting push back about spending money on diversity issues, this increased enforcement may help explain the business case behind these measures, Bendick says.

“HR staffs within companies that have affirmative action will now have more ammunition with which to go to the CEO and make their case, because enforcement is going to be more stringent,” he says.

Redefining diversity
Opponents of affirmative action cite a television interview with Obama last spring as a sign that he agrees with their stance. In that interview, commentator George Stephanopoulos asked whether Obama thought his daughters should get affirmative action protections. Obama responded, “I think that my daughters should probably be treated by any admissions officer as folks who are pretty advantaged.”

Obama added: “I think that we should take into account white kids who have been disadvantaged and have grown up in poverty and shown themselves to have what it takes to succeed.”

While diversity experts don’t believe that this is a sign that Obama will do away with affirmative action edicts, they do agree that it may mean that the administration will encourage more emphasis on recruiting candidates from various socioeconomic backgrounds.

Focusing on socioeconomic status is “very cutting edge” and just now is starting to be part of the diversity discussions at some employers, Bendick says. “Companies that are really trying to establish diversity initiatives around the business case are finding that they have to be more sophisticated about how they define diversity,” he says.

Bendick offers the example of a retail client that has traditionally hired African-Americans to work in its stores in inner-city neighborhoods.

“The assumption was that African-American customers would relate to African-American salespeople,” he says. But the client hired middle-class African-American college graduates and soon discovered these salespeople had no cultural connection with the customers.

“The salespeople were as much strangers to this low-income minority neighborhood as their white colleagues,” he says. So Bendick is working with the client to hire salespeople from a similar background to that of its customers, which might have nothing to do with race, he says.

For many companies, hiring a workforce from different socioeconomic backgrounds will mean going beyond the list of universities and colleges where they usually recruit, says Peter Bye, president of MDB Group, a Livingston, New Jersey-based diversity consultant.

Often to attract minority candidates, companies will go to historically black colleges, which are excellent sources of talent, he says. “But now let’s also consider the City University of New York, which has more African-American students than all of the historically black universities, and they have as many Latino students, but they are more diverse from a socioeconomic standpoint,” Bye says.

Merrill Lynch has been trying to focus on socioeconomic diversity through its recruiting, Barry says.

For the past five years, Merrill has been the lead sponsor of a summer program for inner-city high school students through Rice University in Houston. Through Rice’s Summer Business Institute, each year 40 to 50 high school students from 10 of Houston’s inner-city schools are invited to take two weeks of business courses. Merrill invites the students into its offices and has created a mentorship program. “A handful of exceptional students get internships at Merrill,” Barry says.

Merrill has hired four students as interns from the program. Now that Merrill has been acquired by Bank of America, Barry and her team are looking to establish this model abroad with similar arrangements with Hong Kong universities as well educational institutions in London, Barry says.

“My goal is to do this in major centers where we have large operations,” she says. “We believe there is a huge opportunity to create a pipeline for future talent while also having a positive social impact.”

Socioeconomic diversity is on the radar at Citigroup as well, although no formal plans have been established, says Duarte McCarthy, the company’s chief diversity officer.

Right now the focus at Citigroup is on multiculturalism, and diversity executives believe that having a biracial president will raise awareness around this topic.

“It’s helpful that Obama seems to be comfortable discussing some of the race issues very explicitly and matter-of-factly,” Bendick says, noting that when a reporter asked Obama what kind of dog the family was going to get, he responded that he wanted “a mutt like me.”

“I thought that comment was very helpful in expressing a tone that says, ‘It’s all right to talk about race,’ ” Bendick says.

Citigroup has been trying to focus on multicultural issues for some time. Duarte McCarthy is trying to get the company’s employee affinity groups, which are organized by race or ethnicity, to interact more. Not only would this help each group pool its resources, but it also addresses the fact that there are many employees who could be members of several affinity groups.

“We are really trying to get more of these groups to do more together, more unity-type programming,” Duarte McCarthy says.

Merrill Lynch is also trying to get its affinity groups to hold more events together to promote multiculturalism, Barry says. “I’m really thinking about approaching things with this multicultural lens as opposed to having silos based on race and gender,” she says.

Barry wants to establish cross-network groups that could organize events for the various affinity groups within the company. She also is looking into ways that the company could measure employee attendance at these events. “I have seen this at other firms,” she says.

Ideally, Barry wants to establish a requirement of how many events an employee has to attend per year and that would become part of the employee’s performance evaluation. “People may initially attend events because they have to check a box, but they stay and learn and it benefits everyone,” she says.

The economy
While diversity executives are energized by Obama’s election, they say that in this economic climate, getting diversity initiatives to be front and center in top executives’ minds can be challenging.

But these are the times that it’s more important than ever for companies to prove their dedication to diversity issues, executives say.

Citigroup is making it a point to continue with diversity events that it sees as core to its business, Duarte McCarthy says. In fact, on November 17—the same day that the company announced it would be laying off 52,000 employees—the firm held its annual Women’s Leadership Development Program, which invites 31 female employees to its Armonk, New York, development center for three days of seminars.

“Some people were surprised that we continued with the program,” Duarte McCarthy says. “But we feel it’s important to send a strong message that we are going to continue to focus on developing talent. And that might mean in 2009, there will be more potluck dinners and brown bag lunches,” she says.

At Merrill, the activities might shift, but not the intent behind them, Barry says.

“We now focus on retention as much as we are focused on recruiting,” she says. “So the focus may change, but the ability to be nimble and adapt makes us smarter.”

W hen a Los Angeles X-ray technician killed his family and himself shortly after being fired, it sent a shudder of sadness and horror through his community. It also serves as a reminder to employers that any kind of dismissal in a sinking economy—even one done for cause—can be fraught with emotional issues and even the potential for violence.

    On January 26, Ervin Antonio Lupoe, 40, who just had been fired by Kaiser Permanente, faxed a two-page letter to a local television station. He claimed that he and his wife, who was also fired by Kaiser, had made a suicide pact, and blamed Kaiser for his actions.

    In the letter, Lupoe claimed that a Kaiser supervisor suggested that Lupoe shoot himself. Later that day, police discovered that Lupoe had shot himself, his wife and their five young children.

    In a statement, Kaiser spokeswoman Diana Bonta said that the health care organization is “saddened by the despair in Mr. Lupoe’s note, but we are confident that no one told him to take his own life.”

    The Oakland, California-based health care provider said that Lupoe and his wife, Ana, were terminated “for good cause.”

    “They had forged the signatures of supervisors and misrepresented their income on official documents provided to a nonprofit agency that provides assistance for child care,” Bonta said.

    Throughout the termination process, “the Lupoes were treated with the dignity and respect,” Bonta said. She added that Kaiser is cooperating with the police investigation and has shared information from its internal investigation with investigators.

    No one may ever know all the factors that led Lupoe to kill himself and his family, but the tragedy shows how fragile employees can be during a serious economic downturn, experts say.

    And while services that an employer will offer to a dismissed employee may vary, depending on whether a person is fired for cause or because of a tanking economy, it’s critical for managers and HR to be aware of how devastating a dismissal can be.

    The loss of a job “can result in huge psychological and emotional swings as well as physical difficulties in some cases for employees and their families,” says Peter Burki, CEO of LifeCare, a Shelton, Connecticut-based employee assistance program provider. During the past three months, call volume has jumped 215 percent at LifeCare, Burki says. Those calls all centered on layoffs, home foreclosures, bankruptcies, stress and depression.

    To avoid a potentially volatile situation during a layoff, employers should make sure to provide information about their employee assistance programs, Burki says. Not only can EAP providers help with emotional support, but they can also provide practical support, like providing information on how to get food assistance or assistance with paying bills, he says.

    Managers also should undergo training so that they can recognize the signs of a potentially violent or suicidal employee, Burki says. “It is important for employees who are laid off to be offered counseling to help them talk to their families and give them hope,” Burki says. “You cannot predict a death by suicide, but you can identify people who are at risk.”

    Another way that employers can help laid-off employees look forward is by providing reference letters when they lay off employees, says Paul Bressan, chair of the labor and employment practice group at Los Angeles-based law firm Buchalter Nemer.

    Many companies have policies that instruct managers not to give references to employees who are being laid off, but providing a reference letter can show the employee that the company wants to help, he says.

    “Employers should say, ‘How can we help you with your transition?’ ” Bressan says.

    Taking this approach can help employers avoid legal claims in the future, he says.

    “When all the legal niceties are said and done, a jury is going to look at who was the good guy,” Bressan says. “If the jury thinks the employee is the good guy, then the employer has a problem.”

    Employers also can make it easier for laid-off employees by offering outplacement services on-site when they break the news, says Debbie Muller, president of HR Acuity, a Chatham, New Jersey-based company that handles employee relations issues and conducts workplace investigations.

    “You want to help people think forward,” she says. Outplacement firms can help laid-off employees work on their résumés and find job prospects.

    Even someone who has been let go because of poor performance can be connected with such services if the employer has a good relationship with the outplacement company, Muller says.

    “Sometimes people are just in the wrong job, and that’s as much the fault of the company as the person,” she says. Ultimately, they’ll be better off in a different job, Muller says, “and providing services like outplacement can help them.”

    A company may not be as generous when an employee is fired for something “really egregious,” like a direct violation of company policy, the sharing of confidential or proprietary information, or a misuse of company funds, Muller says. In such firings, the company’s primary interest is in ensuring the security of the company and the safety of its employees during and after the termination.

    But even if a firing is completely warranted, the process should be respectful, she says.

    “You do it that way because other people are watching, and if the person you’re firing is treated disrespectfully, that can hurt the rest of the workforce,” Muller says. “All they see is how the person is being treated,” and often won’t know why someone is being let go.

    Perhaps nothing could have been done to prevent Lupoe from killing himself and his family, but experts say treating terminated employees with dignity, respect and fairness—no matter why they’re being let go—is something employers should always do to avoid potentially explosive situations.

    Bressan invokes the golden rule: Do unto others as you would have them do unto you.

The ongoing chaos in the financial markets has created a new set of issues for HR executives at companies with defined-benefit plans. Many employers are discovering that they may be restricted in their ability to provide lump-sum payments to retiring employees.

    Defined-benefit plans have been pummeled by the markets in the past few months. In October and November, the defined-benefit plans of the S&P 1,500 companies saw their funded status shrink by $240 billion, according to Mercer.

    As a result, many employers may find that their plans are below the 80 percent funded status required to be able to pay retiring employees full lump-sum payments. Under current regulations, companies with defined-benefit plans that are below 80 percent funded can pay only half of the lump sum owed to retirees. HR executives need to be in close contact with their company’s actuaries to determine whether this is going to be an issue at their firms, experts say.

“I think we will see a significant minority of firms that fall below the 80 percent funded status [required for full retiree lump-sum payments].” —Alan Glickstein, Watson Wyatt Worldwide

    Companies that don’t certify their funded status by April 1 will be assumed to be 10 basis points below their 2007 levels. That means any company that was 90 percent funded or less last year could have issues, experts say. Congress did give defined-benefit plan sponsors some relief late last year by passing legislation that will allow companies that are less than 60 percent funded to use their January 1, 2008, funding levels for the year. Under the Pension Protection Act, companies with plans that are less than 60 percent funded have to freeze their plans, and thus cannot dispense lump-sum payments, so the last-minute legislation was a relief to many employers, experts say.

    Still, there will be issues. “I think we will see a significant minority of firms that fall below the 80 percent funded status,” says Alan Glickstein, a senior consultant at Watson Wyatt Worldwide.

    Companies with plans that are below 80 percent funded will have to decide in the next few months whether they will contribute more to their plans to increase the funded status, and HR executives need to be part of those discussions, says Brad Klinck, senior vice president in Aon Consulting’s retirement practice.

    “Some are going to have to choose between making contributions to their plans or keeping people employed,” he says.

“Some [companies] are going to have to choose between making contributions to their plans or keeping people employed.” —Brad Klinck, senior vice president, Aon Consulting’s retirement practice

    HR also has to decide how to communicate this to employees. “It’s a very difficult question to answer,” says Eric Keener, a principal and senior consultant in the retirement practice at Hewitt Associates. From a fiduciary point of view, the HR executive has to decide whether it’s better to allow retiring employees to take lump-sum payments before the restrictions take effect or whether that’s a bad idea because it will result in less money in the plan, he says.

    This could become a real issue for companies in which there are unions, he says. “I think if a union is going into collective bargaining in the future, you will see them want to include some language around these issues,” Keener says.

    HR executives at companies with benefits restrictions also have to make sure that they communicate to all employees about the changes, not just the ones who are retiring soon, Glickstein says.

    In some cases, employers may even find themselves as defendants in lawsuits brought by employees affected by the restrictions, experts say.

    “People are going to be wondering, ‘Does this mean my company is in trouble?’ ” Glickstein says. “It could affect productivity and morale.”

Workforce Management, January 19, 2008, p. 35 — Subscribe Now!