Author: Michelle Rafter

Posted on

Wagering on Equal Wages

The Gap Inc. didn’t wait for California’s new law on fair pay to kick in to do something about it.

Last year, the San Francisco-based retailer hired an outside firm to audit its pay practices to make sure women and men in the same jobs got the same wages. The consultants analyzed the company’s 129,992 employees and confirmed it — their salaries were on par.

The California Fair Pay Act took effect on Jan. 1, and labor experts predict more companies in and outside the state will take similar steps to minimize the gender pay gap.

That and other types of income inequality have contributed to a shrinking U.S. middle class and become an issue of the 2016 presidential election campaign. Democratic candidate Bernie Sanders has built his campaign around ending it.

Through it all, one of the most entrenched inequities has been the difference in pay between the sexes. In 2014, the median full-time wage and salary for women was 81 percent of what it was for men, according to the latest data from the U.S. Bureau of Labor Statistics. The 19-cent difference is an improvement from 38 cents in 1979, the first year the agency measured the wage gap. But it’s remained between 17 cents and 20 cents for the past dozen years, according to a November 2015 BLS report.

Like Gap, some companies have narrowed or closed the margin. They did it by creating hiring committees that represent a wide swath of the company’s employee population to curb recruiters’ and hiring managers’ potential biases. They use data-based performance metrics to award raises and promotions. They run mentor programs and sponsor opportunities that help women advance. Some work with nonprofit apprentice programs that help place women intotraditionally male-dominated trades.

'Because we have such a free-flowing conversation, it helps women feel like they're more empowered.'

—Patti Murphy, Walsh Construction

Once companies start to see that with a few simple changes they could increase their percentage of women or bring more women into leadership positions, “They’re going to put some of those mechanisms in place,” said Connie Ashbrook, executive director for Oregon Tradeswomen Inc., a nonprofit that helps place women into apprenticeships in union-heavy trades.

Here’s a deeper look at three organizations that have taken action to close the gender pay gap.

Wage Audits and Compensation Policies

Gap, which has a workforce that’s 73 percent female, hired diversity and inclusion consulting firm Exponential Talent to audit its own findings on gender pay. The firm ran a series of assessments, including tests comparing average male and female salary by level, and tests to detect differences in salary by gender based on factors such as full-time status and number of years on the job.

The consultant found no significant gender wage differences between men and women within Gap job codes globally or in any of its five largest locations (the United States, Canada, Japan, the United Kingdom and China). Gap didn’t return a request for comment, and Exponential Talent executives declined to comment.

With the California Fair Pay Act coming online, labor and employment lawyer Gary Gansle sees more companies following in the clothing retailer’s footsteps. “California is often a bellwether,” said Gansle, a partner with the law firm Squire Patton Boggs in Palo Alto, California. “More progressive states will look to California and likely adopt some or all of the new pay equity principles over time.”

He recommends companies review existing hiring and performance review policies to see if they’re likely to produce gender pay gaps and formulate a compensation philosophy that focuses on gender equity. He also suggests training management to recognize and root out unconscious biases that could cause gender-related pay problems. Companies “are more likely to work toward gender pay equity if it is an established and articulated goal,” he said.

Apprentices and Mentors

Walsh Construction Co. has taken some of those suggestions to heart to move women closer to job and wage parity in the male-dominated commercial real estate construction industry.

The 55-year-old general contractor’s workforce is still predominately male. Men represent 93 percent of its 249-person construction crew, and 69 percent of its 213-person project management and engineering staff, according to Patti Murphy, human resources director for the business, which is based in Portland, Oregon.

Many of the women in Walsh’s construction crew came in through partnerships with nonprofit groups, such as Oregon Tradeswomen, that help them find apprenticeships in carpenter, painter, machine operator and other trade jobs. Because construction jobs are covered by unions, there’s no difference between hourly wages for men and women, Murphy said.

While women might make the same hourly wage as men in construction apprenticeships and jobs, their annual incomes are likely to be lower because they aren’t offered the same hours, said Oregon Tradeswomen’s Ashbrook. The same holds true for men and women of color in the trades, she said. She sees that changing, though, as boomers age out of the industry “because there won’t be enough of the traditional demographic of white males” to meet demand.

Murphy said she didn’t know whether annual income for women on Walsh’s construction crew is less than their male counterparts. The fact that the tenure for Walsh’s tradeswomen employees is seven years, longer than the company’s 6.3-year average, indicates that they feel well-treated, she said. “I think that’s unique for the industry.”

On the professional side of the business, Walsh actively promotes women into positions where they might oversee part or all of constructing at an apartment complex or mixed-use building, and manage budgets of $1 million or more. Today, 29 women hold some type of management role, representing about 14 percent of the total, up from 11 percent a decade ago. “We still have work to do at the executive level,” Murphy said, “but in middle-management roles is where we’ve seen an increase.”

To help more women get there, Walsh created a peer group for women project managers that meets once a month. Junior- and senior-level female employees mentor each other and use the group to share information. “I think it has really helped them feel like they have more support and resources,” Murphy said. “Periodically the general manager attends their meetings to gain a better understanding of issues and concerns they face as women in the industry. This has been particularly helpful in getting new women project managers to feel integrated.”

Walsh’s approach to the performance review process is more informal than companies that use software-based rating or ranking systems, which Murphy said helps female employees feel comfortable talking about their jobs and pay. After project managers finish a job — which could take anywhere from six to 18 months — they discuss with their bosses and other executives how it went, what they could have done better and what they’d like to do next.

“Depending on where someone is in their career, they might have owned a piece of the budget, but not all,” Murphy said. “For the next one, we’d ask them what other pieces they’d want to take on. We don’t use reviews as a way to take corrective action, it’s all about development.

“Because we have such a free-flowing conversation, it helps women feel like they’re more empowered,” she said.

Walsh also levels the playing field by having women coming into entry-level positions work on site for their first few years. Many have no experience on a jobsite, so giving them an idea of what it’s like helps them understand how a building is put together. It’s also generates goodwill for Walsh. “Many of the women we have hired from other companies have said they were typically stuck in the office and came to Walsh because they heard they could get field experience and training,” Murphy said.

Metrics-Based Pay and Promotions

Financial planning adviser Sullivan, Bruyette, Speros & Blayney relies on results, a gender-neutral interview process and the goodwill of its founders to remove biases from hiring, compensation and promotions and maintain income parity.

The McLean, Virginia-based firm, a division of BMO Financial Corp., has 45 employees, including 24 certified financial planners plus staff.

Sullivan’s advisers’ livelihood depends on how much new business they bring in and how successful they are at managing existing clients’ investments. The firm bases pay and promotions on those financial metrics, which are relatively easy to track.

“If women are performing equally well as men, they’ll be compensated equally well,” said Martine Lellis, the firm’s chief operating officer.

Lellis credits Sullivan’s top management for creating a culture that recognizes and rewards people based on merit. The three founders still active at the 25-year-old firm — the fourth, a woman, has retired — are committed to fairness in everything from hiring practices and promotions to compensation and annual reviews. “That takes us away from the culture of hoarding clients and creates more of a collaborative, collegial environment,” she said.

As the firm’s COO, Lellis manages hiring, a process that includes putting a prospect in front of an interview committee composed of male and female employees at all levels. Candidates must analyze and write about an investment case study, work that Lellis and several other advisers review, though she declined to say whether job applicants’ names were redacted to avoid any bias.

“The point is, I’m getting input from people who haven’t met the interviewee in person, so they look at it from a different angle,” she said. Everyone who interviews a candidate or reads their work is part of a debriefing session, and gives input on whether the person should be hired.

Lellis said the system works, and as proof points to employees’ tenure: an overall average of 9.35 years for women and 9.94 years for men, and for financial advisers, 16 years for women and 17 years for men.

Sullivan isn’t an anomaly. In general, the pay gap between the sexes is relatively smaller in financial advisory firms than the national average. Female advisers who are not firm owners earn 86 cents for every $1 male advisers earn compared with the national average of 81 cents, according to a November 2015 report from Investment News.

The pay gap varies by job type, with women in lower-level service adviser and support adviser jobs equaling or surpassing their male counterparts after three to 10 years of experience, according to the report. Women in higher-level financial adviser jobs were worse off, with median earnings lagging their male counterparts by 5 percent after eight to 10 years, and 6 percent after 20 to 30 years, according to the report.

Lellis agrees that the numbers, though promising, could be better. If there’s still a gap, “There’s still a problem we need to work on,” she said.

Posted on

Independent Contractor Issues: A Tale of Drivers, Strippers and Lawsuits

Drivers suing Uber and Lyft for allegedly treating them as independent contractors instead of employees could learn a few things from another group of workers who successfully navigated the same road — strippers.

Since 2012, exotic dancers have won more than $27 million in judgments or settlements in at least seven employee misclassification lawsuits across the country, said Rich Meneghello, a labor lawyer who’s a partner at Fisher & Phillips in Portland, Oregon.

The strippers’ cases involved some of the same legal issues at the center of lawsuits filed in recent years against Uber, Lyft and other companies built on the so-called on-demand or 1099 economy model, where independent contractors make up some or most of an enterprise’s workforce.

If exotic dancers, drivers, house cleaners or delivery service gophers don’t control their work environment, and if a business wouldn’t exist without them, they’re employees, not contractors, Meneghello said.

“The overwhelming groundswell is for courts and government agencies to find that these individuals are employees and not independent contractors,” he said.
Employee misclassification lawsuits aren’t new. But the boom in venture-backed Silicon Valley startups such as Uber and Lyft that rely on a large labor force of independent contractors has caused a related boom in employee misclassification lawsuits.

It’s not just startups coming under fire for treating workers one way and paying them another. Since before the recession, established companies in a variety of industries have offloaded work to independent contractors to control operating costs. Even when the U.S. economy improved, companies didn’t return to hiring full-time employees. All told, an estimated 53 million people in the country work as independent contractors or freelancers of some sort, according to a 2014 Freelancers Union survey.

In July, the escalating number of lawsuits and complaints filed with federal regulators led the Labor Department to publish its first guidance on the issue. A 15-page document from the department’s Wage and Hour Division details the standards that companies should use to determine who is an employee, in part using an “economic realities” test to determine whether a worker is economically dependent on an employer or in business for him or herself. The document also explains how to analyze the control workers have over “meaningful aspects” of what they do to ascertain whether it’s possible to view them as running their own business.

Questionable Levels of Compliance
Despite how widespread employee misclassification lawsuits have become, many companies still don’t take the necessary actions to avoid them.

“There are a lot of companies with questionable levels of compliance,” said Richard Reibstein, a partner at Pepper Hamilton in New York and head of the firm’s independent contractor compliance practice group. Companies believe that since “they haven’t been called to task yet, it’s unlikely they’re going to have to do anything.”

That thinking could be misguided. Companies that have lost or settled employee misclassification lawsuits have paid out millions, and in some cases, filed for bankruptcy protection. In June, FedEx Corp. agreed to pay $228 million to settle an employee misclassification lawsuit that, if approved by the U.S. District Court for the Northern District of California, will resolve claims by more than 2,000 drivers dating back to 2000. Last year, a Kansas court ruled that hundreds of FedEx drivers who worked in that state from 1998 to 2007 were employees and not independent contractors.  The delivery service changed its business model in 2011 and now hires drivers through an intermediary company.  Lawsuits in other states are pending.

Learning About Employee Classification

Here are courses and other resources for learning about worker classification regulations:

  • U.S. Labor Department's Administrator’s Interpretation No. 2015-1 (PDF): The U.S. Labor Dept.’s Wage and Hour Division issued this 15-page memo in mid-July clarifying how employers should apply the Fair Labor Standard Act’s “suffer or permit” to determine whether workers are employees or independent contractors.
     
  • Society for Human Resource Management (shrm.org): The HR professional association covers classification issues in online and in-person courses offered throughout the year, including “SHRM Essentials of HR Management,” “Manage & Engage Your Organization’s Human Capital” and, for California employers, “California HR: Applying CA Law to Employment Practices. Fees for the for-credit courses vary.
     
  • American Bar Association (americanbar.org): The legal organization offers an online course, Independent Contractors and the Sharing Economy: Uber, Lyft, and other “Tech” Business Models based on a May 19 webinar with employment lawyers and 1099 economy companies involved in pending lawsuits. Fees for the continuing legal education course start at $89.
     
  • Independent Contractor Compliance
    (independent
    contractorcompliance.com    ):     The blog, published by Richard Reibstein and other lawyers in Pepper Hamilton’s independent contractor compliance practice group, covers employee misclassification and related issues, including recent lawsuits, Internal Revenue Service investigations, and state tax and workforce agency actions.
     
  • IRS (tinyurl.com/EmployerTaxGuide): The 2015 edition of the Employer’s Tax Guide (IRS Publication 15) is a comprehensive guide to federal regulations governing employees. Fill out and submit IRS Form SS-8 to determine whether a worker is an employee or independent contractor.
     
  • Bar Association of San Francisco (tinyurl.com/Legal-SF): The bar’s Justice & Diversity Center memo, “Penalties for Misclassifying Workers as Independent Contractors,” explains applicable California state labor codes, includes a list of common factors used to determine if a worker is an employee, and includes links to additional resources.

—Michelle V. Rafter

In 2012, the Southern California division of limousine operator Carey International Inc. filed for Chapter 11 bankruptcy protection after 16 drivers won a $4.5 million arbitration award stemming from an employee misclassification lawsuit. The lawsuit came in the wake of a 2011 California law that broadened the state’s worker misclassification regulations, including creating penalties of up to $25,000 per violation for companies that willfully misclassify employees as independent contractors.

Uber has fared no better. In June, the California Labor Commissioner’s Office ruled that a driver for the app-based car service was an employee, not an independent contractor, and therefore was entitled to be reimbursed for mileage and other expenses. Uber appealed, but if the ruling is upheld, it would award the driver $4,000. More importantly, it could eventually force the company to pay for benefits such as health care and Social Security for all 160,000 of its drivers.

Drivers for Uber and Lyft also have filed separate civil lawsuits claiming they are employees and as such are entitled to be reimbursed for expenses such as gas and vehicle maintenance. The companies’ requests to dismiss the cases were denied earlier this year, allowing both to continue toward jury trials.

Uber and Lyft aren’t the only 1099 economy companies being sued by workers. Two former house cleaners for Handy, an on-demand house cleaning and handyman service, filed a lawsuit in Alameda County (California) Superior Court claiming the company deliberately misclassified workers as independent contractors instead of employees. In the lawsuit, the ex-workers say they had to follow set protocols spelling out how to dress, clean and act around customers, what products to use, and how much to charge. They point to the protocols as evidence that the company exerts significant control over workers and therefore should classify them as employees. The lawsuit is pending.

In a class-action lawsuit filed against Instacart in March, workers accused the app-based grocery delivery service startup for failing to pay them for expenses such as overtime, gas and workers’ compensation.

Strippers won judgments or settlements in similar employee misclassification lawsuits because strip-club owners blatantly treated them like employees but classified them as independent contractors, Meneghello said. In some cases that Meneghello included in a 2014 presentation on the subject, club owners set dancers’ schedules and work hours, made workers clock in and out for shifts, and gave them a “dancers’ packet” with house rules to follow. One club gave dancers the choice of being an employee or contractor but made no distinction in the work either group performed.

However, it’s not up to workers to choose how they want to be classified, Meneghello said. Employers have to decide which status is legally correct for the situation and apply it. “A worker’s wishes will not be determinative, especially since they might change their mind when they realize they have a legal claim against you,” he wrote in the presentation.

Regardless of the type of company, the decision to use independent contractors or other contingent labor typically comes from operations, finance or other C-level functions, not human resources, Reibstein said. But HR has to deal with the consequences, so HR managers and middle managers should keep tabs on the company’s contingent labor practices and alert higher-ranking executives if they’re at risk of running afoul of labor laws, he said.

One way HR can bring attention to the issue is by talking about the legal exposure the company could be opening itself up to, for example, if their independent contractor agreement doesn’t accurately reflect “the realities on the ground,” Reibstein said. “The courts will disregard it.”

He recommends companies analyze contracts that they ask independent contractors to sign to ensure the agreements are structured and documented to match how they’re being implemented. “There are a huge number of companies for whom their independent contractor agreements aren’t properly documented, and they need to have those restructured or re-engineered to be consistent with their business model,” he said.

Doing nothing isn’t an option, especially for companies built on the 1099 business model. “Every one of those companies, and there are some big ones, are getting hit left and right, and they all probably thought they didn’t have exposure,” Reibstein said. “What they don’t know in the C-suite will hurt them.”

Posted on

Women in Management: Ceiling Is Believing

Female managers’ long march to corporate America’s corner offices has led to a record 26 female CEOs at Fortune 500 companies.

Danielle Weinblatt’s experience as a CEO, however, shows how much further women have to go to attain parity with men in the executive suite.

Weinblatt, 31, dropped out of Harvard Business School three years ago to start a human resources tech company called Take the Interview. Since then, she’s raised $6 million in venture financing, and was named a 2014 Workforce Game Changer. Yet when she attended an investor’s annual meeting last November, she was mistaken for an executive assistant. “One limited partner asked me where the name tags were,” Weinblatt said. Another wanted to know when refreshments would be served. “Stuff like that happens all the time.”

Closing the Gap

At Hyatt Hotels Corp., makeup mirrors matter. So do robes, menus and gift shop items sold in the company’s 573 properties worldwide.

Women account for more than 80 percent of overall travel decisions, so the $4.2 billion Chicago-based hotelier is paying closer attention to amenities they prefer, down to the type of makeup mirrors in guest bathrooms.

For help, Hyatt is turning to its female employees, who make up half its 95,000-person workforce. Hyatt isn’t merely relying on female employees’ feedback. The company is embarking on a multiyear mission to give women parity with men at all levels, including upper management.

Some changes have already taken place. In 2014, Hyatt added a second woman to its 12-member board. The company also is assigning more women to executive posts at regional offices in parts of the world like Asia, where male executives are still the norm.

Hyatt plans to spend the next two years making changes to help propel more women into upper management. To prepare, the company is reviewing hiring and other personnel management practices, and partnering with outside consultants to review things like flex-time and family leave policies, according to company executives.

Hyatt is also expanding a Women@Hyatt employee program. Since it started in 2012, the internal networking group has grown to 27 chapters, which host speakers and give women the opportunity “to connect with women in more senior roles,” said Nikki Massey, Hyatt’s director of learning and development.

In late 2014, Hyatt hired veteran diversity and inclusion specialist Tyronne Stoudemire to help more women move from middle management to top positions. Stoudemire declined to share what percentage of women hold executive positions at the hospitality giant today. However, at Mercer he consulted on a similar initiative at Kimberly-Clark Corp., which saw the number of women in director roles or above increase from 19 percent to 26 in four years. “I don’t think it’ll take us four years to get there,” he said.

—Michelle V. Rafter

Women have worked alongside men in increasing numbers since the feminist movement of the 1960s and 1970s and today account for more than 40 percent of the workforce worldwide. Some studies have shown that companies with more gender parity in top management roles do better financially.

As Weinblatt’s experience shows, however, old attitudes toward who should run companies continue to plague women with aspiration of making it to upper management. The glass ceiling that stopped women from ascending to top management jobs at the same pace as men for so long is sporting some enormous cracks. But it’s still there, held in place by attitudes as well as stagnant hiring practices and lack of effective efforts inside institutions to change the status quo.

The rise of CEOs such as Mary Barra at General Motors Co., Marissa Mayer at Yahoo Inc., Ginni Rometty at IBM Corp. and Indra Nooyi at PepsiCo Inc. proves the corner office isn’t the old boys club it once was.

Neither are corporate boards. For the first time, more than half of 4,000 corporations worldwide reported boards with 10 percent or more female members, according to an October report by Reuters.

In government, the 114th Congress seated 104 women, including a record 84 in the House of Representatives. Hillary Rodham Clinton is being mentioned as a potential front-runner in the 2016 presidential elections. In 2014, President Barack Obama tapped women to head the U.S. Postal Service and U.S.  Technology Office.

Some companies are rebuilding their workforces to be more gender diverse, including promoting more women into middle- and upper-management positions — in some cases to appeal to their largely female customer base and improve financial results.

Kimberly-Clark Corp., for example, remade its workforceto more closely resemble its predominately female customers, and as a result, increased the number ofinternal promotions of women to director level or above from 19 percent in 2009 to 44 percent in 2013. A globalinitiative that McDonald’s Corp. launched in 2006 to help women rise through the fast-food chain’s ranks saw the number of female general managers in the United States jump from 13 percent to 38 in four years. In fall 2014, Hyatt Hotels Corp. hired veteran diversity and inclusion specialist Tyronne Stoudemire to spearhead the hospitality giant’s efforts to help women in the management pipeline overcome obstacles that have kept more of them from reaching hotel general manager and other top positions (See “Closing the Gap,” page 48).

“We’re at a tipping point now in the workplace in general,” said Stoudemire, previously a diversity and inclusion consultant at Mercer. “You have more women in the workplace. They’re holding more degrees than any other demographic. Women anchor the community. So if we’re making a difference with diversity and inclusion, it will be with women across the board.”

Inequalities Linger

For all the progress that’s been made, male CEOs and board members still vastly outnumber women. The disconnect exists even in traditionally female-dominated fields. In human resources, for example, close to 7 in 10 rank-and-file HR roles are filled by women, according to HR industry surveys. By comparison, “some paltry percentage” of chief human resources officers in the large employer category are female, according to China Gorman, CEO of Great Place to Work Institute and former chief operating officer of the Society for Human Resource Management.

Helping Women Get Ahead

 

According to Mercer’s first-ever corporate gender diversity survey — “When Women Thrive, Businesses Thrive,” released in November 2014 — womenare better able to rise through the ranks and earn closer to what their male counterparts make when companies do the following:

• Take an enterprisewide approach to supporting female talent rather than relying on discrete programs or initiatives, which may actually slow down progress.

•Get company leaders activelyinvolved in diversity programs.

• Actively manage pay equity vs. making a passive commitment.

• Give women and men direct profit and loss responsibilities.

• Go beyond implementing traditional leave and flexibility programs to offer more proactive career management, such as coaching.

• Create health and retirement programs that cater to women’s unique needs.

• Recognize the different strengths of female and male managers as equallyimportant to success.

Source: Mercer

“There are some really powerful and fantastic female CHROs all over the world whose organizations are doing some extraordinary things,” Gorman said. “And there aren’t enough of them.”

Top male executives continue to earn more. A dispute over pay inequity was reportedly one of several reasons that led to Jill Abramson’s exit as executive editor ofThe New York Times in the spring of 2014. Sony Pictures Entertainment confidential personnel data leaked by hackers in December revealed that of 17 company executives withannual salaries of more than $1 million, only one was a woman: co-chair Amy Pascal, head of Sony’s movie business.

Because the conversation has gone on so long and some progress has been made, it’s easy to think the imbalance has disappeared. “But of course it hasn’t,” said Davia Temin, a reputation and crisis management consultant and adviser to nearly 20 male and female CEOs. “When you look at statistics and see the numbers at the highest levels of corporations, although they’ve improved, they’re not that improved,” Temin said. “While we are making more strides with corporate boards, we’re not making that many strides in the executive ranks or operational teams.”

A Mercer gender diversity survey published in late 2014 bears that out. Despite being 41 percent of the global workforce, women account for only 19 percent of executives, 26 percent of senior managers and 36 percent of managers, according to the report. To reach those conclusions, Mercer looked at workforce data from more than 1.7 million employees in 28 countries, including more than 680,000 women.

The numbers are slightly better at U.S. companies identified as the country’s best workplaces. At companies on Great Place to Work’s 100 Best Companies lists from 2011 to 2014, women made up 31 percent of executives and senior managers, and 45 percent of managers and supervisors.

Making Diversity Part of the Culture

Unless companies substantially change their diversity efforts, the number of women in executive roles at North American companies overall is expected to stay relatively flat over the next decade, inching to 26 percent in 2024 from 24 percent today, according to Mercer.

Senior leaders continue to be most comfortable hiring direct reports who look like them, and because most CEOs are still white males, that method of hiring perpetuates the demographic’s hold on top positions, Gorman said. The dynamic should change as baby boomer-era executives age out of the C-suite and are replaced by Gen X and millennial CEOs who grew up in a world that puts a higher  value on diversity. “There will still be a bias toward hiring people they’re comfortable with, but it won’t be people who look just like them,” she said.

Some organizations aren’t waiting for the next generation to make changes. Companies such as Kimberly-Clark Corp. and McDonald’s Corp. that have placed more women in top executive positions have woven diversity into their corporate culture, said Julie Nugent, a vice president at Catalyst Inc., a consulting firm that studies women in management. “If diversity and inclusion are a business imperative, that’s critical, and allows companies to make progress.”

Companies where women have made big strides toward getting into upper-level management have visible buy-in from senior executives, talent management programs that recruit and promote high-value female candidates and employees, strong mentor programs and “robust” succession planning, Nugent said.

In addition to those types of programs, Kimberly-Clark also sends promising female — and male — managers on three- to six-month international assignments, the type of posts that Nugent said help middle managers rise to the next level.

As a result of the strategy, Kimberly-Clark’s promotions of women to director-level or higher positions rose from 19 percent to 26 in the four years ending in 2013. The improvement led Nugent’s organization to give the consumer goods-maker its annual Catalyst prize in 2014 for expanding management opportunities for women.

The motivation to bring more women into executive positions isn’t altruistic — it’s about the bottom line.

“We knew to win the marketplace and achieve the business results our shareholders deserve, we needed to transform the organization,” said Sue Dodsworth, Kimberly-Clark’s chief diversity officer, in a company video about the initiative, called “Unleash Your Power: Strengthening the Business With Women Leaders.”

Kimberly-Clark and other companies that cultivate a more diverse workforce have lower employee turnover as well as stronger financial results, according to Great Place to Work’s data on top workplaces. Publicly traded companies on Great Place to Work’s annual 100 Best Companies  list consistently outperform major stock indices by a factor of two, according to the consulting firm. Top companies also typically have as much as 65 percent less voluntary turnover than their competitors, which saves on recruiting and training costs, according to the firm.

Diversity programs aimed at closing the management gender gap won’t work, though, if they’re viewed as remedial, said Temin, founder of New York-based Temin and Co. “The level of women who come through a program has to be high,” she said. “If it’s seen as remedial, it doesn’t get respect. If it’s seen as a high-potential training program, it does get that respect.”

READER REACTION

Is there still a glass ceiling in 2015 or is it a thing of the past?


@CindyLauEvans:
Still there but w/cracks.

@PaySavvy:
It depends what industry you work in. But for the most part, we think it has become a thing of the past.

Jenise Fuson:
Yes, glass ceilings still exist — although it seems to be more “in force” in certain industries.

What do you think? Join the discussion at tinyurl.com/HRglassceiling or follow us on Twitter @Workforcenews.

Some industries have better track records of promoting women into top positions than others. At health care companies on Great Place to Work’s 2014 list of top large workplaces, women account for 74 percent of the workforce, 70 percent of managers and supervisors, and 43 percent of executives or senior managers. Health care organizations faced with a dearth of available outside talent have had to look inside their own organizations for management candidates, which could explain the higher than average percentage of women in top roles, Gorman said.

Professional services firms, including accounting and financial services companies, are also advancing more women into management roles. Women at professional services firms on Great Place to Work’s large workplaces list make up 47 percent of all employees, 49 percent of managers and supervisors and 39 percent of executives or senior managers. “That’s not accidental; it’s very intentional,” Gorman said. “It’s both creating a culture where we give everyone opportunity and creating special programs to help underserved parts of their population.”

Tech’s Problem With Women

While many industries are figuring out how to add women in middle- and upper-management roles, the tech field is struggling. Women at all levels, including executives, are more likely to leave tech-intensive industries for a variety of reasons, including lack of role models, said Catalyst’s Nugent. According to Catalyst’s research, a disproportionate percentage — 73 percent — of women say they feel like an outsider in the tech space, she said. “It can make it more challenging in some ways to even want to stay in the field,” she said.

Because so many startups are tech-related,it shouldn’t be a surprise thatfemale-run businesses account for a fraction of venture-based businesses. From 2011 to 2013, only 2.7 percent of 6,517 companies that received venture capital financing had a female CEO, according to a 2014 Babson College report on women entrepreneurs.

Small wonder Take the Interview’s Weinblatt was mistaken for a secretary. Weinblatt brushes it off, though, and agrees that the millennial generation she’s part of is more accepting of meritocracy and diversity than older generations, something she says will help more female founders and CEOs.

On top of that, younger women executives have role models such as Lean In movement leader and Facebook Inc. Chief Operating Officer Sheryl Sandberg and Yahoo’s Mayer to look up to, Weinblatt says. “Women are being more assertive,” she said.

Posted on

Perks at Work

Employees at Camden Property Trust get lots of perks, including discounted rent on apartments owned by the real estate company and furnished vacation suites at its properties in popular U.S. vacation destinations for a mere $20 a night. Also, a Camden scholarship program for children of employees attending two- or four-year colleges has paid out $1 million during the past seven years.

'We’re not all Googles. We don’t need to be Google.'

—Margaret Plummer, Camden Property Trust

Of everything the company offers though, a favorite of employees at Camden’s Houston headquarters costs absolutely nothing: wearing jeans on Fridays.

“We have special jeans-theme days,” said Margaret Plummer, vice president of employee development for the company that reported $800 million in revenue in 2013. “Before July 4, it was red, white and blue. This Friday is a sports theme where you wear something from your favorite team.”

In highly competitive fields like technology and finance, employees are treated to expensive perks such as free meals, private commuter buses and team-building trips to exotic locales.

But perks don’t have to cost a lot to make employees happy.

In fact, human resources and employee development directors from a wide range of industries say they get by just fine offering perks that cost little or nothing — if the extras are things employees value or help reinforce the company’s mission or corporate culture.

“We’re not all Googles. We don’t need to be Google,” Plummer said.

What Makes a Perk a Perk?

Companies offer perks — short for perquisites — to reinforce their workplace culture, but also to attract and retain workers. Perks are defined as goods, services or opportunities that aren’t part of salary or wages but have value. Some perks are taxable — tickets to a ballgame for example — while other less-tangible extras are not.

Perks play a key role in helping Genentech Inc. attract talent, said Lisa Slater, a spokeswoman for the 12,300-person South San Francisco, California-based company and Roche Group subsidiary. Recruiters play up Genentech’s child-care centers, on-site concierge and commuter shuttle service. “Our aim is to help every employee do their best work,” Slater said. “We feel this differentiates us from our competitors.”

Quirky Perks

Perks are not created equal, but some are more — let’s say unusual — than others.

Companies that depend on perks to attract or retain employees believe in tailoring what they offer to fit their culture. The more unique the culture, the quirkier the perks. Here are some companies with perks specifically suited to their business:

Nestle Purina PetCare Co.: The maker of pet products espouses supporting pet owners and walks the walk by letting employees bring their pets to work. At Nestle Purina’s 1,800-person St. Louis headquarters, “We have more than 100 dogs every day,” said Wendy Henke, the company’s human resources manager. Cats come to work, too, but have to be on a leash, and even then they tend to wander. “We had a cat on a leash climb up a tree,” she said.

Oculus VR Inc.: The Irvine, California, virtual reality startup that was acquired by Facebook Inc. for $2 billion in March pays employees’ toll-road fees. On the job, Oculus staff can play with the latest 3-D printers, motion capture hardware and robots, and everyone gets free Oculus hardware.

Navy Federal Credit Union: To better manage their finances, employees of this 11,000-person Vienna, Virginia, credit union can sign up for free budget counseling and a debt management program. The company also hosts an annual financial expo and runs an online game that shows employees how much they need to save for retirement.

SmartPak Equine:Because so many of the Plymouth, Massachusetts-based horse supply retailer’s 350 employees bring dogs to work, the company schedules monthly visits from a mobile dog groomer. SmartPak also provides on-site dry cleaning drop off and pick up, mobile car detailing and subsidized gym memberships. The company gives employees paid time off for annual physicals, and is in the process of adding an on-site smoking cessation program and on-site eye exams. “We hear people say they don’t want to use vacation time for appointments, so we offer a half day on us to take care of yourself,” said Jennifer Burt, SmartPak’s human resources director.

Costco Wholesale Corp.: The discount retailer came in No. 2 on Glassdoor Inc.’s 2014 list of top 25 U.S. companies for compensation and benefits, in part because of generous perks, according to an online anonymous survey by the jobs website. “They have a college retention program so you can get your job back as soon as you get back from school each summer or break,” one anonymous reviewer wrote on the site. All Costco employees get free Costco memberships, and retail location workers who clock in on Sundays make time and a half. During holidays, Costco keeps stores open late so workers can shop after hours, “and not have to fight the parking lot,” writes another anonymous Glassdoor reviewer.

—Michelle V. Rafter

More than a quarter of employees in a 2013 CareerBuilder survey agreed that some perks are an effective way of getting them to stay in a job. Asked what one perk would make their workplace better, 18 percent picked the same freebie Camden employees like — “ability to wear jeans” — third only to half-day Fridays (40 percent) and on-site fitness centers (20 percent), according to the survey.

Lenny Sanicola, a senior practice leader at WorldatWork who tracks compensation and benefits trends, said perks such as free concierge services that disappeared during the recession are back. They’re rejoining perks like financial wellness seminars and health and wellness programs that never left. He also sees more companies offering perks of paid and unpaid sabbaticals, and paid time off for community service. “It’s not new. It’s been out there, but we’re seeing more organizations offering it,” he said.

Companies generally distinguish perks from benefits such as health care coverage, but some straddle the line. Companies may identify yoga classes at an on-site workout facility, offer flu shots at a company-run medical clinic or pass out free Fitbits as part of a wellness program, even though those offerings veer into benefits territory. Perks are also different from structured rewards and recognition programs that compensate employees for hiring anniversaries, reaching specific goals or other job-related accomplishments.

Because some perks fall into a gray area and others might not cost anything, companies don’t always track what they spend as rigorously as they do budgets for benefits, rewards and recognition and other forms of compensation.

SmartPak Equine, a Plymouth, Massachusetts, online retailer of nutritional supplements for horses and other equestrian gear, doesn’t track what it spends on perks, though the company surveys employees for feedback and asks for suggestions. “We accept it as an expense, and it’s the right thing to do for employees,” said Jennifer Burt, the company’s human resources director.

Gone to the Dogs

Small perks can have a big impact.

SmartPak spends nothing to let its 350 employees bring their dogs to work. An average day can see upward of 30 hounds lounging behind doggy gates inside their owners’ office pods. “We’re in an industrial park; there’s a dead-end street, so there’s an opportunity for employees to walk their dogs during the day. We’re lucky enough that the property also has a field,” Burt said.

The specialty retailer is a magnet for horse lovers, and supports employees who own, train or show horses by giving them use of free samples, as well as discounts on its merchandise, plus other goodies. “They’re coming to us to combine their lifestyle passion with work, so it’s what we can do to make them feel engaged in their passion,” she said.

Companies in ultracompetitive industries pour on the perks to find and retain people with sought-after skills. Google employees don’t just get a free cup of coffee, a barista makes it for them, along with free breakfast, lunch, dinner and snacks. Employees at some locations can sign up to get produce boxes delivered to them at the office. Employees in the company’s headquarters can recognize each other for doing well on a project with credits that can be exchanged for a one-hour massage (on campus, of course).

Some perks are so generous they’ve become barriers between employees and the communities they work and live in. Nowhere has that been more apparent than in the San Francisco Bay Area where, during the past year, protesters have physically stopped or damaged the air-conditioned private buses that shuttle employees of Apple Inc., Google Inc. and Genentech and other tech companies throughout San Francisco and Silicon Valley an hour to the south. Protesters argue that the buses are contributing to rent increases, evictions, air pollution and other problems that decrease quality of life for the area’s nontech residents.

Genentech responded in part by adding signs to its commuter shuttles that explain how many cars they displace from streets every day. To show it’s a good neighbor, Genentech also offers opportunities for employees to volunteer. One is the 3-year-old Genentech Gives Back Week, which in 2013 raised $215,000 for 129 nonprofits. “Employees view the ability to give back as a perk since they are proud to be associated with a company that does so much for the community,” said Genentech’s Slater.

Real Perks at Virtual Companies

Virtual companies, with no physical office for a pingpong table or Friday happy hours, must take a different approach to perks.

Buffer, a San Francisco-based social media startup with several dozen employees around the world and no headquarters, gives every new hire Jawbone’s UP electronic fitness wristband monitor to track daily activities and how much they sleep. Employees also get a Kindle Paperwhite e-reader and three e-books of their choice. To encourage conversation, employees share their UP results with each other through iPhone and Android apps, and their reading on the company’s Facebook page and on a Buffer book board on Pinterest. Three times a year, Buffer takes everyone but new hires still in training on an all-expenses-paid retreat somewhere exotic, such as South Africa or Thailand.

Part of the company’s mission is promoting self-improvement, and fitness monitors and book discussions help with that, said Buffer co-founder Leo Widrich in a video on the company’s blog. Trips let employees who don’t see each other in the office bond. “Once you return home … the conversations you have with team members are enhanced,” writes Buffer chief executive Joel Gascoigne in a blog post about the all-hands trips. “You know the tone of somebody’s voice and the way they approach problems and discussions. You read their emails differently.”

Pet products-maker Nestle Purina PetCare Co. extends its business of supporting pet owners to the perks it offers employees. They can bring pets to work if the animals meet certain criteria. Workers also get up to $200 toward buying or adopting a pet, as well as discounts on pet food at company stores at its St. Louis headquarters and 19 other U.S. offices and factories.

Nestle Purina offers other perks as well. On-site company stores sell a variety of Nestle and non-Nestle products, including frozen food and other staples so employees can grab something on the way out of work and not have to stop at the grocery store before heading home. “I wish they would have bread, and then I wouldn’t have to go to the store at all,” said Wendy Henke, the company’s HR manager.

Giving Employees VIP Treatment

When Camden Property Trust’s co-founders started the business, they vowed to treat their employees better than they had been treated at the previous real estate company they worked for, starting with perks, Plummer said.

To that end, Camden offers 20 percent rent discounts to full-time employees (and 10 percent to part-timers), and extends the same offer to employees’ children or parents — a perk that, at any given time, 600 to 800 Camden workers or their family members are using, Plummer said.

The company reserves several furnished apartments in complexes in 16 major metro areas, including a unit in Orlando, Florida, a mile from Disney World. The $20 nightly fee, access to a kitchen, laundry facilities and pool make a vacation more affordable even for low-wage employees in maintenance or landscaping, she said. “Our philosophy is we want you to use your vacation,” Plummer said. “You work hard serving people; you need the time to relax and spend time with the family, and we’ll give you space to do it.”

Inexpensive vacation rentals, jeans days, e-books, shuttle buses and other perks — free or otherwise — are great as far as they go, said WorldatWork’s Sanicola. But ultimately, they won’t keep employees happy if a company is deficient in other areas.

If employees don’t have the tools to do their job properly, don’t understand what’s expected of them or don’t understand what the company’s all about, “all the free meals in the world won’t help,” he said.

Michelle V. Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

Posted on

Big Data, Bigger Deal

Black Hills Corp. is taking a new approach to the old problem of finding employees.

After a 2008 acquisition, the 130-year-old energy conglomerate doubled its workforce to about 2,000 employees. With that, the average age of line and operations technicians and other workers at the $1.3 billion public company jumped from approximately 45 to 50. Forecasts showed that, within seven years, close to a quarter of the workforce would be eligible to retire.

That kind of turnover could have spelled trouble for utilities that the Rapid City, South Dakota, company runs because it’s bound by state regulators to provide gas and electric power with minimal disruptions.

To calculate exactly how many employees would retire a year, the types of workers needed to replace them, where those new hires were most likely to come from and how much training they would need to safely take over for outgoing workers, Black Hills turned to an untried source of help: big data.

It’s a move more companies are taking.

It has been more than a decade since Oakland Athletics General Manager Billy Beane used scientific methodology and statistics to take the then-low-performing A’s to one of the winningest teams in the Major Leagues, even though it had one of the league’s lowest payrolls. It’s a revolutionary gamble depicted in the book and movie Moneyball. More recently, statistician blogger Nate Silver became an overnight sensation after correctly predicting President Barack Obama’s overwhelming victory in the 2012 presidential election. As horrific as the damages were from Hurricane Sandy, they could have been much worse had meteorologists not accurately interpreted weather data to estimate when and where the storm would land, helping hundreds of thousands flee to safety ahead of time.

It’s all big data, and the world is generating and analyzing more of it. Websites, social networks, smartphone apps, cloud-based software services, cheaper data storage—all of it is contributing to the creation of information that this year alone is expected to reach 1.2 zettabytes. That’s the equivalent of 1 billion terabytes of raw, unstructured data.

Companies rank business analytics as the most important technology innovation they face, according to a December 2012 report from tech industry analyst Ventana Research.

Advocates believe precision number crunching can help companies become better at things like picking the perfect job candidates, keeping valued employees from leaving, grooming the right people to move up in an organization, planning future workforce needs and more.

It’s an area that’s ripe for a makeover. In the U.S. alone, companies spend 40 percent or more of their total revenue on payroll, says Josh Bersin, a human resources analyst who is the founder of Bersin by Deloitte, writing on his Forbes.com blog.

The buzz over successes at early workforce analytics adopters such as Google Inc. and Xerox Corp. is giving HR practitioners a bad case of big data fever. They’re buying workforce analytics software or adding modules to existing enterprise resource planning and human capital management software suites. In 2012 alone, SAP’s SuccessFactors Inc. division quadrupled its customers using workforce analytics tools, says Tony Ashton, the company’s senior director of product management for workforce planning and analytics.

HR departments also are contracting with outside workforce analytics companies, bringing data scientists and “people analytics” specialists on staff, and prepping themselves with conferences, blogs and books devoted to the subject.

So far, though, the promise of big data to transform workforce management has remained just that, a promise. “Big data is still the wild, wild west,” says Phil Simon, author of the just-published Too Big to Ignore: The Business Case for Big Data.

In the area of talent management alone, less than half of the global companies use objective data when making workforce decisions, and fewer than 20 percent were satisfied with the ability of their current data management systems to manage talent data, according to an SHL global assessment report published in February.

The obstacles to adopting better workforce analytics are many, starting with entrenched HR attitudes and practices that favor relationship-based decisions over cold, hard facts. It’s still too common for executives or hiring managers to go with one candidate over another based on a hunch or

because they went to an Ivy League school, Simon says.

For HR and other functions, just because companies are investing in Big Data software or services doesn’t mean they know what to do with it. Or they might not want to change how they operate despite knowing better. “You have to overcome the employee or cultural resistance to it,” Simon says.

The term “HR big data” gets tossed around to mean any number of things. Students of the discipline generally take it to describe a massive amount of information with a large number of variables that is quickly processed and analyzed so results can be used to make faster, evidence-based decisions. “We see more and more of our clients constructing a workforce strategy that’s as detailed and evidence-based as any financial strategy or business strategy they have,” says Haig Nalbantian, an HR industry veteran and senior partner at HR management consultant Mercer.

Instead of looking back at the end of an activity to see how it worked so HR can put in improvements for the next round of things, Big Data lets them be proactive, says David Bernstein, vice president of the data analytics division of jobs listings distributor eQuest Inc. He is also a blogger. “If something isn’t working, it can be changed right away, he says.

Generally, Big Data doesn’t just refer to information obtained from inside a company’s current employee records or operations, but to a mix of personnel data and information from competitors, industry or other benchmarks.

Getting HR to switch to data-driven decision-making isn’t easy, but sometimes the alternative is too serious to ignore.

That was the case at Black Hills, which three years ago didn’t have a formal plan for replacing retiring workers. Continuing the status quo wasn’t an option after the company acquired a Kansas City, Missouri-based power company with five utilities and saw its workforce double and age overnight.

Replacing retiring workers wasn’t going to be easy. Many of its employees, from engineers and power-line mechanics to systems operators and natural-gas technicians, have highly specialized skills that make them hard to replace.

As part of a companywide strategic initiative, Black Hills ran a pilot project at one utility to assess its future workforce needs. Black Hills used workforce analytics software and other data to discover how many of the utilities’ employees were expected to retire or leave voluntarily within five years, and how much the business was expected to grow. They did calculations to find out how many job functions were expected to be added, changed or relocated, and also on promotion rates and how long it takes replacements for different jobs to get up to full productivity.

Based on the pilot, Black Hills created a five-year-plan that outlines the companies’ labor needs for all of its businesses, in specific jobs and locations. It has led the company to make a number of changes on how it recruits, hires and trains, including filling the recruiting pipeline for certain highly technical positions earlier, says Bob Myers, Black Hills’ chief human resources officer.

Toward that end, Black Hills is working one-on-one with technical schools to develop training programs to produce a specific number of entry-level jobs every year for a set number of years.

To address the potential skills gap retiring workers could create, the company is enticing them to stay on the job longer. This year, Black Hills started offering all employees a retirement readiness and financial planning benefit, and employees who are 50 and older can work with a company-sponsored certified financial planner.

To help fill future labor demands internally, Black Hills started a management-training program for front-line supervisors and midlevel managers. Taught by senior managers, the training includes classroom sessions, 360-degree feedback and individualized development training. The company also hired a technical training and safety director and is considering building training centers to do more consistent training on the technical sides of the business, Myers says.

Finally, Black Hills is automating some processes to do more with fewer workers. The company switched to automatic meter readings and redeployed about 40 former meter readers into new jobs, and more may make the switch in the next couple of years.

Black Hills’ workforce planning programs are run by an in-house organizational development team that worked with business unit leaders to create labor demand models and use workforce analytics software. Myers declined to share the company’s budget.

“There’s an old saying that chance favors the prepared,” Myers says. “This is what this is about: How do you develop such an understanding of this that you can prepare well in advance and reap the benefits of being prepared?”

As more companies such as Black Hills warm up to HR big data, they can choose from a number of technology vendors eager to help.

Workforce analytics from SAP’s SuccessFactors business have been used by Black Hills as well as Aetna Inc., Amway and Comcast Corp. to name a few. Automatic Data Processing Inc. is spending millions to provide clients with real-time employee and industry analytics. Taleo Corp., which Oracle Corp. bought for $1.9 billion a little over a year ago, is touting its commitment to big data and predictive analytics for recruiting.

Jobs-listings distributor EQuest’s predictive analytics service combs through data from 1 million job openings that flow through its job board posting distribution service every day. Customers can sift through the data to determine not only the best job board to post a specific opening but also the best day of the week and time for the listing to appear.

Other companies are plumbing HR big data niches, too. San Francisco-based Evolv on Demand, for example, provides HR analytics for hourly workers, services that companies such as Xerox and The Results Cos. are using to screen call-center job applicants.

Despite the influx of vendors, a lot of HR big data isn’t easily accessible. “It’s not as simple as Googling it,” says Gerry Crispin, a recruiting industry consultant. “It still involves real people who understand numbers who will find the source and analyze the information, as opposed to simply pushing a button.”

There has been talk for years that HR deserves a seat at the executive leadership table, but at many companies that hasn’t happened. One reason, industry observers say, is because HR historically hasn’t spoken the language of business: numbers.

Big data could change that—if HR can overcome its analytics aversion, says David Bernstein, vice president of the data analytics division of eQuest Inc. “Moving forward, business is requiring HR people to speak numbers, and if you’re not into that, you’ll be out of the conversation.”

Michelle V. Rafter is a contributing editor. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

Posted on

Oracle, CedarCrestone Legal Battles Heat Up

On Dec. 5, Oracle International Corp. and CedarCrestone Inc. representatives will face off in court for the first time since the software giant accused its former partner of copyright infringement and fraudulent practices in a lawsuit that highlights Oracle’s continued quest to protect its software-maintenance business in the face of changing industry practices.

In the first of dueling lawsuits filed in California federal court, Oracle in September accused CedarCrestone of stealing customers and intellectual property, specifically updates for tax and regulatory software originally developed by PeopleSoft, which Oracle acquired in 2005.

CedarCrestone, which has sold maintenance support for the software as an approved Oracle partner since 2005, filed its own lawsuit in mid-October denying any wrongdoing. The company claims the lawsuit is part of Oracle’s “broader war on competition,” against third-party providers of consulting, implementation and support for its software.

CedarCrestone also alleges that Oracle knew about the business practices in question for several years, yet never complained about them until the day before filing its lawsuit, and earlier this year, even renewed CedarCrestone’s partnership agreement and invited the firm to join an elite tier of Oracle business partners.

The software support in question accounts for approximately $1 million in yearly sales, and represents less than 1 percent of CedarCrestone’s annual revenue, according to CedarCrestone’s countersuit.

Golden Gate Capital, a San Francisco-based private equity firm, paid more than $79 million to buy the privately held Marietta, Georgia-based company in 2011, according to the San Francisco Business Times.

Representatives from Oracle declined to comment. A CedarCrestone lawyer confirmed the companies will meet Dec. 5 for a hearing in U.S. District Court in San Francisco, but declined to provide additional details.

Because CedarCrestone is much smaller than SAP, some industry watchers don’t put it in the same league as other competitors Oracle has sued in recent years, including SAP and Rimini Street. Still, it shows how serious Oracle is about protecting its maintenance business, says Jason Averbook, CEO of human resources consultant Knowledge Infusion. “The minute someone starts screwing with it, they come out with gloves off,” he says.

Averbook predicts that legal squabbles over software maintenance and support fees will go away as more companies stop using the kind of on-premise HR software that’s at the heart of the litigation, software that companies must license on an annual basis and run on their own servers. In its place, they’re adopting cloud-based software services that are accessed over the Internet and paid for through subscription fees that include updates.

But that transition isn’t happening overnight. Small and midsize companies may be moving to cloud-based HR software, but it will be slower going for large enterprises. “It’s going to take longer to wipe out your whole ERP system and move to the cloud,” says Adam Mansfield, director of services for Upper Edge, referring to enterprise resource planning systems. Upper Edge is a Boston consultant that helps companies negotiate maintenance contracts for Oracle and other HR and business software. “This Oracle third-party support issue is still going to be very relevant for those size organizations for many years to come,” Mansfield says.

According to Mansfield, Oracle’s legal actions have an unintended silver lining for companies evaluating service contracts. By exposing details of service contracts from Oracle and its competitors, the lawsuits provide companies with leverage to better negotiate their own deals. “This allows us early on to coach our clients to really force Oracle to provide a stronger value proposition, what they’ll give and why it’s valuable,” he says.

CedarCrestone is the latest of three former business partners Oracle has sued over copyright infringement and other issues related to ongoing support for Oracle software from outside providers. In August, SAP agreed to pay Oracle $306 million after admitting liability for illegal downloads by TomorrowNow, a third-party support provider that SAP acquired in 2005. SAP shut down its TomorrowNow operations in 2008. Oracle is appealing the settlement as part of its efforts to obtain $1.3 billion in damages related to the lawsuit.

Oracle is also suing Rimini Street, a third-party support vendor headed by TomorrowNow’s former founder and chief executive. Oracle based some claims in its lawsuit against CedarCrestone on material the company uncovered while collecting information for lawsuits against Rimini Street and SAP.

Michelle Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com.

Posted on

HR Software Firm Workday’s IPO Shines Spotlight on Healthy HR Software Market

Workday Inc. pulled off what could be one of the most successful initial public stock offerings of the year. So, what’s next?

The maker of cloud-based people-management software is on a tear after its Oct. 12 IPO raised $637 million from selling 22.5 million Class A shares, or about 14 percent of the company. In the days immediately following the sale, Workday stock jumped as high as $57, more than doubling its opening price.

Investors’ interest in Workday doesn’t surprise industry analysts and insiders. The successful IPO is the latest validation of cloud-based software, or software-as-a-service—terms used to describe software delivered over the Internet.

Investors like software-as-a-service, or SaaS, businesses because they can grow quickly from predictable, recurring revenue, says Paul Sparta, a human resources industry veteran and founder of Plateau Systems, a pioneering learning management software vendor. On top of that, Workday is a well-managed company in an expanding market. “It’s putting them in the sweet spot, and investors like it a whole lot,” says Sparta, who sold Plateau to SuccessFactors Inc. in 2011.

It’s not just Workday that will benefit from the higher visibility the stock offering has brought to SaaS-based people management vendors. “A rising tide lifts all boats in my view,” says Lisa Rowan, HR services research program director at IDC.

Workday has become an HR software leader on the strength of its human resources management suite, which unlike some rivals, was cloud-based from the get-go, and gives employees as well as HR staff access to key HR data. The 7-year-old Pleasanton, California-based company has used that to collect 350 customers. The largest is computer-maker Hewlett-Packard Co., which has roughly 350,000 employees. Other clients include electronics manufacturer Flextronics and enterprises such as Chiquita Brands International Inc., Four Seasons Hotels Inc., Kimberly-Clark Corp. and Salesforce.com Inc.

The IPO will aid Workday’s efforts to take on industry leaders Oracle Corp. and SAP for a bigger share of the market for software that covers payroll, time and attendance, and other employee management functions. Oracle and SAP have rolled out their own cloud-based services to better meet demand for cloud-based human resources software. In the past year, both acquired smaller cloud-based software vendors to further support their efforts, with Oracle buying talent management vendor Taleo Corp. in February for $1.9 billion, and SAP buying SuccessFactors in November 2011 for $3.4 billion.

Oracle and SAP’s combined share of the global market for human capital management software still overshadows Workday. In 2011, SAP had 17.4 percent of the market, followed by Oracle with 12.4 percent, according to research firm IDC. Workday had just 3.5 percent.

But Workday is picking up steam. The IPO reinforces Workday’s place on the short list of prospective vendors that major enterprises consider when they’re actively searching for a new HR management system, says Tom Keebler, HR technology group practice leader at consultant Towers Watson. “Workday and SAP are virtually tied in the top slot.”

The IPO is sweet revenge for Workday cofounder David Duffield, who previously started and ran PeopleSoft before losing control of the company to Oracle’s Larry Ellison in a hostile takeover in 2005. Duffield’s stake in Workday is estimated to stand at about $2 billion, according to the company’s SEC filings.

The wild success of the offering is reminiscent of the dot-com era, when it was common for Internet startups with little or no revenue—or profits—to go public.

But dot-com era comparisons end there. Workday still is operating in the red, but the company’s revenue isgrowing quickly based on continued strong sales. In the first half of 2012, the company saw revenues double, to $119 million, from the same period the previous year.

Industry watchers expect to see Workday use proceeds from the IPO to continue spending on research and development, and on sales efforts.

Experts don’t expect Workday to use funds from the stock sale for acquisitions, at least not right away. “I don’t see any acquisitions of note short term,” Rowan says.

Workday declined requests to comment on the stock sale. The company’s stock is listed on the New York Stock Exchange under the symbol “WDAY.”

Michelle V. Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com.

Posted on

Japanese Company Buys Online Jobs Aggregator Indeed.com

A multibillion dollar Japanese human resources and information technology conglomerate made its highest profile U.S. acquisition to date, announcing Sept. 25 it will buy top jobs website Indeed for an undisclosed sum in a deal that could close as soon as next month.

Indeed’s purchase by Recruit Co. provides the Austin-based company with the capital it needs to continue expanding outside the United States, especially in Asia. While half of Indeed’s website traffic comes from non-U.S. job seekers, less than half its advertising revenue is international, says Anne Murguia, the company’s senior director of corporate marketing. “We’ve just scratched the surface in terms of monetizing that traffic,” Murguia says.

Widely regarded as an online jobs site industry leader, Indeed has seen revenue double three years in a row. The company has operated in the black since 2007, Murguia says. She declined to disclose current revenue or earnings.

The acquisition quiets rumors that Indeed.com had been pursuing an initial public offering to raise funds for expansion, following the path of HR tech companies such as Workday and Cornerstone OnDemand that have gone public in recent months or are expected to in the near future.

Opting to become part of a deep-pocketed, multinational company frees Indeed from the worries that come with operating as a public company, says job board industry analyst Jeff Dickey-Chasins. “It’s a more immediate payoff for those who’ve invested,” he says. “The IPO business is always chancy.”

One of those investors, the New York Times, is selling its interest in Indeed as part of the acquisition and will record an after-tax gain of about $100 million because of it, according to a Reuters report.

The deal is expected to close early in the fourth quarter. Once it does, Indeed will operate as an independent subsidiary. Co-founders Rony Kahan and Paul Forster will stay with the company, however, Murguia declined to say whether they have signed formal employment agreements to that effect.

Indeed may be the most high-profile American HR company Recruit Co. has acquired, but it’s not the first. In December 2011, the Japanese company bought privately held, U.S.-based staffing firm Advantage Resourcing America, Inc., and a British affiliate for $410 million from private equity firm Cerberus Capital Management LP.

The deal is the latest in a string of American HR tech vendor acquisitions in the past 12 months that has seen Oracle buy Taleo, SAP buy SuccessFactors and IBM buy talent management software provider Kenexa Corp. for $1.3 billion.

Indeed’s purchase comes at a time when the fate of other major jobs sites is evolving. Monster Worldwide Inc. has entertained several offers since chairman Sal Iannuzzi put the other jobs site market leader up for sale in spring. Earlier this month, CareerBuilder, partly owned by newspaper giant Gannett Co., bought an employment data and labor market analysis company as a way into the HR “big data” business.

Michelle V. Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com.

Posted on

Net Gains: HR Technology in the ’90s, Today

Two decades ago, when a produce manager or checker at one of Hannaford Bros. Co.’s 95 grocery stores wanted to look up the balance on a 401(k) account, that employee dialed into a voice-activated telephone system.

The Scarborough, Maine, company’s 15,000 workers also used the 16-line, state-of-the-art touch-tone system to check on their medical benefits or enroll in the company stock-purchase plan, according to a 1993 Personnel Journal article on HR technology advancements.

In the early 1990s, interactive phone systems were the height of innovation in human resources technology, along with HR processes running on mainframes and employee training or education materials stored on laserdiscs—for our millennial readers, think DVDs on steroids—and queued up on desktop computers or TV screens.

But all that was about to change.

The decade that witnessed the fall of the Soviet Union, scientific breakthroughs such as the launch of the Hubble Space Telescope and Human Genome Project, and the emergence of iconic pop-culture fare—including the TV shows Seinfeld and The Simpsons—also ushered in the dawn of the information age.

In a span of a few short years, what had passed for cutting-edge workplace and HR technology was supplanted by office productivity suites and other software running on local area networks, or LANs, and the vast global computer network that became known, simply, as the Internet.

By the end of the 1990s the ever-expanding World Wide Web of browser-friendly information led to the birth of such tech power players as Amazon.com, eBay, Yahoo and Google. The dot-com boom they helped create transformed forever the way companies sold things, helped customers and got work done.

The effect of such advancements on HR departments paved the way for today’s tech-enabled approach to people management.

Cheap computers, mobile devices and software sold as a service over the Internet are a direct continuation of that revolution, and the latest and greatest HR systems are now within economic reach for even the smallest startup.

Yet, for all that’s changed in the past 20 years, some things have taken after Bart Simpson’s haircut and stayed the same. Companies are just now starting to mine employee data to improve workforce planning. Industry watchers say too few top-level HR leaders have the technological know-how to make full use of what modern HR systems offer, a criticism not unlike one leveled against HR management in the 1993 article “How Technology Is Advancing HR.”

It is a frustrating but understandable deficit given that HR leaders also must stay abreast of the business of the company they work for and the role HR plays in it, according to longtime industry analysts interviewed for this story.

“The technology today is enormously capable. The cost is not insurmountable, and the workforce is tech-literate, and increasingly so,” says analyst and consultant Naomi Bloom, who has worked with HR information systems since the 1960s. “But we’re still not making effective use of tech in human capital management, and the barrier is the inability of the HR community to both master its deployment and plan for needed transformation in the practice of HR.”

The Internet was such a game-changer that it’s hard to regard the workplace technology before it existed as anything but quaint.

Two decades ago, companies still relied on mainframe or minicomputers to run payroll, time and attendance, and other processes. Everything was costly and slow.

“You had to be an HR professional to update an HR record,” says Vincent Tuccillo, global HR information management and solution delivery manager at mailing-equipment-maker Pitney Bowes Inc., where he’s worked since the 1990s. Given how long it took to plug employee data into such systems and the rate of workforce turnover, “You could be terminating an employee before the new hire record got into the system,” he says.

During the big-iron era, in which mainframe computers locked inside massive air-conditioned basement chambers processed business information, companies such as Oracle Corp. ruled HR. That changed with the advent of PCs and client-server computer systems, where instead of mainframes running programs that users accessed through dumb terminals, computing tasks were distributed through a local or far-reaching network of devices. It paved the way for upstarts such as PeopleSoft Inc. and Sybase Inc. to introduce client-server human capital management software.

For many HR departments, it was a great leap forward to scan paper résumés with optical readers into rudimentary applicant tracking systems, and store performance reviews in Excel spreadsheets instead of manila folders and metal filing cabinets. “It was miraculous that you could do it on a computer and not paper,” says Josh Bersin, president and CEO of consulting firm Bersin & Associates, who witnessed the changes working at IBM and Sybase during the 1990s.

But it wasn’t exactly a smooth transition.

Even as PCs’ computing power increased and prices dropped, corporate HR information technology departments had to be convinced that software built from the ground up to run on desktops could meet their needs, says Stan Swete, who held key leadership roles at PeopleSoft in the 1990s and today is Workday Inc.’s chief technology officer. “My job was to have endless conversations with mainframe-based techies who thought it [client-server software] could never perform, and it wasn’t a high performance way to get data,” he says.

Gradually the techies came around, though, especially when it became apparent that client-server software could handle process-intensive functions a lot faster, freeing up HR departments to focus on more strategic duties. “PeopleSoft was eating everyone’s lunch,” says Lisa Rowan, HR, talent and learning strategies program director at technology analyst IDC. “They had a much nicer user interface. It sat on your desktop and it was thought to be easier to use—all the things we didn’t have before,” says Rowan, who spent the 1990s at Digital Equipment Corp. and Genesis Software, an HR payroll applications provider.

As more companies used client-server software, it led to a blossoming of other types of HR programs: résumé scanning systems such as Resumix, which over time morphed into applicant tracking systems; performance management tools; and expense account trackers to name few. “A lot of what we see today as cloud computing is taking the client-server software we had in the 1990s and rebuilding it on the Web,” Bersin says.

A wave of HR startups was behind a lot of that software. By the end of the decade, that wave included some of the first purveyors of HR software sold exclusively on a software-as-a-service basis that in more recent times has taken the HR technology business by storm, including companies such as Taleo Corp., SuccessFactors Inc., and Cornerstone OnDemand Inc. “It was the birth of the next generation of HR technology,” says Cornerstone vice president Jason Corsello, who at the time worked in operations and business development for electronics manufacturer Flextronics.

The march of progress also transformed interoffice communications. In the 1990s, email was the new kid on the block, and like social media today, companies often stumbled figuring out how to use it. At one early point, for example, Flextronics’ Singapore headquarters had a single email address for an entire group. “Can you imagine that today?” Corsello asks.

The confusion didn’t last. By 2000, 48 million Americans a day were sending or reading email at home and at work, according to the inaugural Pew Research Center’s Internet & American Life Project survey published that year. Email use skyrocketed from there, and is expected to hit 3.3 billion users worldwide this year, and 4.3 billion by 2016, according to email researcher the Radicati Group Inc.

But even as email’s use grew, it changed from one of the fastest modes of business communication to one of the slowest. Today, that speed issue is causing more companies to look for alternatives, especially as they catch up with tech-savvy employees who’ve abandoned email for Facebook, Twitter and texting. More companies are adopting social media-style online collaboration tools such as Yammer, text messages, group texts and videoconferencing.

In the 1990s, the Internet also had an enormous effect on how companies found and managed employees. Early in the decade, “Talent management wasn’t even heard of,” says Jason Averbook, founder and CEO of HR consultant Knowledge Infusion, who worked at payroll processor Ceridian Corp. and then PeopleSoft in the 1990s.

Within eight or nine years, all big companies ran employment websites, used job boards to advertise open positions and were starting to use software for recruiting, assessments, performance reviews and other phases of talent management.

At the start of the 1990s, HR departments were running employee onboarding and training programs on then state-of-the-art video or laserdisc systems that displayed images via a computer or TV screen, and using telephone-based employee benefits programs

Such technologies were vast improvements over what they replaced, but they had limitations. Companies were often forced to choose between incompatible technology standards. Software and the equipment the programs ran on were expensive. Laserdisc-based learning started at $5,000 for off-the-shelf systems and custom installations ran up to $300,000, according to the 1993 Personnel Journal article.

Interactive phone systems such as the one Hannaford Bros. installed in 1990 cost $10,000 to $75,000 and had limited functions. Employees could use the original touch-tone system to change how much of their salary they put into their 401(k) account, but they couldn’t move funds from one investment to another or take money out of their account. For that, “You had to call a number and talk to someone,” says Chip LeBlanc, director of health and retirement benefits for Delhaize America. It’s the division of Belgium conglomerate Delhaize Group that acquired Hannaford in 2000 and runs it as part of a 1,500-store East Coast grocery chain..

Hannaford eventually replaced its phone-based system with a Web portal integrated into the company website. For the past decade, Delhaize America’s 100,000 U.S. employees have used the self-service site to access medical, benefits and 401(k) accounts, though the company continues to use a phone-based service during open-enrollment season. “We’re not bleeding-edge, but we continue to be progressive,” LeBlanc says.

By moving its benefits program to the Web, Hannaford joined hosts of companies placing more power to interact with HR systems into the hand of their workers, a transformative concept that came to be known as employee self-service. “It gave managers and employees a user experience, instead of knocking on HR’s door” for information, says IDC’s Rowan.

Employee self-service was the precursor to the hands-on nature of modern HR, where employees use Web or mobile apps to turn in expenses, recognize co-workers for a job well done, check benefits, compete against officemates in corporate wellness challenges and share their companies’ job openings with their friends on Facebook or Twitter.

Today’s workforce expects HR to accommodate its needs through multiple channels, a trend driven by an increasingly multigenerational workforce. “They want a mobile app and Web-enabled and to talk to someone when they want to talk to someone,” says Hannaford’s LeBlanc. “They want all points of access to us. We are certainly aware of that and absolutely take that into consideration as we develop long-term plans, and as we look to partner with outside vendors, so that any partners we use can meet our needs.”

Despite the progress of the past 20 years, some of the improvements that faster, cheaper, more ubiquitous computer processing power, client-server and Internet-based software promised remain unfulfilled. HR departments may have upgraded to client-server and more recently to cloud-based systems. But many failed to change the underlying processes upon which their HR practices were built, and without that, the latest tech bells and whistles aren’t much good. “They’re still thinking the same way when it comes to the outcomes they are trying to achieve, and if they don’t change that, it’s not going to make a difference,” Averbook says.

Averbook and other industry watchers also see companies only just starting to tap the power of “big people data,” in-depth analysis of employee statistics to drive better workforce or business planning.

For HR leaders, transforming their business practices to match the firepower of current people management technology and making use of the aggregate employee data that cloud-based software can generate will be the twin challenges of the next 20 years. Says Bersin: “The amount of technology available is huge, and the benefit is huge, and the risk of making a mistake is huge. HR professionals today have to get with it or hire people who are.”

Michelle V. Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com.

Posted on

Apps for Social Wellness Programs

If you’re considering launching a social wellness program, get ready to sort through an ever-growing list of services and apps. “The list is endless, and new ones are popping up all of the time or migrating from B to C to B to B,” says Fran Melmed, a human resources industry consultant who’s getting ready to debut her own app.

Here’s a sample of what’s available:

Hotseat: Melmed’s app, called Hotseat, lets employees set alerts to get up and move during the workday. Workers can use the app alone, in groups or for team challenges. The network lets employees monitor and share their progress; employers keep track through a Web portal. Melmed’s company, Context Communication Consulting, is due to show Hotseat at a June wellness conference and is negotiating a partnership with wellness vendor Limeade, she says.

Keas: A startup online social game platform created by the former head of the now-shuttered Google Health groups employees in teams of six to meet health and fitness challenges, earn points and share updates through a Twitter-style news feed. By the end of the first quarter, the venture-backed, San Francisco-based company expected to have 50 clients representing approximately 150,000 covered lives (employees and dependents), including Bechtel Corp., Pfizer Co. and SuccessFactors Inc. In early May, Keas partnered with Brain Research Inc. to incorporate brain fitness games into its offerings.

Limeade: One of the first social wellness platforms, Limeade lets employees set health or fitness goals, monitor their progress and share how they’re doing in an online community. The 6-year-old company has approximately 50 customers, according to a Puget Sound Business Journal report, including Chipotle Mexican Grill Inc., Holland & Hart and Intuit Inc. As part of a recent executive team build-out, the Bellevue, Washington, company hired a former general manager at Johnson & Johnson’s Wellness & Prevention Inc. division as senior vice president of operations and “customer delight.”

ShapeUp: The 6-year-old, venture-backed Providence, Rhode island, company offers a virtual, private social network that employees can use to create profiles, share health goals and fitness interests, and participate in group challenges. The company has 250 company and health plan clients, including Aetna Inc., CVS Caremark, and Sprint Nextel Corp. For now, ShapeUp works on desktop computers and on mobile devices via a mobile-optimized website and text messages. A mobile app will be out “later this year,” says company co-founder and chief medical officer Rajiv Kumar.

Virgin HealthMiles: Billionaire entrepreneur Richard Branson’s 7-year-old health venture offers multiple social wellness options, including a 12-week activity program, pedometer and heart rate monitors that work with an online activity journal, biometrics tracking stations, an incentive program and an online portal that ties them all together. HealthMiles has more than 120 U.S. corporate clients representing 700,000 employees, including Coca-Cola Co., Georgia-Pacific and SunTrust Banks Inc..

WalkingSpree: The online corporate walking program platform is built around a USB pedometer that employees wear while they walk and then plug into a PC or MacOS device to connect to an online network. There they can join clubs, check in on friends, keep a journal or blog or win prizes. Clients include Chaney Industries Inc., Verisk Health and American Financial Group Inc., which WalkingSpree says saved $9.27 in employee health care costs for every $1 spent on the program.

Michelle V. Rafter is a Workforce Management contributing editor. Comment below or email editors@workforce.com.