Author: Samuel Greengard

A company can ask any number of sources to rate how well it’s doing. Customers, shareholders, the business media and Wall Street all have opinions that they’re only too happy to share.

    But whether companies really want an honest opinion from their employees is another question. Eaton Corp., a Cleveland-based industrial manufacturing firm with 55,000 employees worldwide and $8.1 billion in 2003 sales, wants the straight story–and not just about such quick-fix issues as parking or the quality of vending-machine fare.

    Three years ago, the firm developed a global employee survey in 21 languages that gathers information in several areas, including business ethics, values, employee engagement, employee relations, manager effectiveness and strategic vision. The company uses software from Kenexa to facilitate the process.

    “The responses from our employees really do drive action, and they are as much a component of our business as strategic, financial or succession planning,” says Susan Cook, vice president of human resources at Eaton. “It is critical to helping us examine and improve how we operate our businesses. The Eaton Employee Survey is no longer an HR program–it’s an operational tool.”

    Even when the news isn’t positive. Although Eaton has formal or informal recognition programs in place at 90 percent of its locations, some employees taking the firm’s 2003 survey did not agree with the statement, “I receive recognition when I do a good job.”

    As a result, the company is developing a new global recognition and reward program that it will introduce in 2005. The program will use Web-based technology to provide recognition training for supervisors and allow all employees to participate in the recognition process. Utilizing common standards, supervisors will be able, within predetermined authority levels, to provide employees with immediate tangible rewards for a job well done.

    In addition, all employees will be able to provide fellow workers with an immediate expression of thanks when they wish to acknowledge their performance.

    David Snyder, a senior vice president at Aon Consulting in Chicago, says that employee surveys have the power to transform an organization. However, if there’s a mismatch between attitudes and policies, productivity can sputter. “The challenge is to understand where you’re at and what needs to be done to effect change,” he says.

    It’s a quandary that organizations are increasingly attempting to confront. Employee surveys, which have been around in one form or another for the last half-century, have become de rigueur. Finding out what is going on in employees’ heads and fashioning corporate policy and actions appropriately is a core concern.

    “In recent years, there has been an uptick in interest in surveys across all industries,” Snyder says.

    Yet, more isn’t always better. While the Web has made it easier to conduct elaborate surveys, many organizations continue to struggle with the process. In some cases, companies ask the wrong questions or do not put the data to full use. In other instances, they overload workers with questions or misinterpret the meaning of results and take the wrong action–such as introducing a new benefit based solely on popularity rather than what’s best for the organization.

    “There are many points where an organization can fall down in the survey process,” says James Benton, an associate partner for Accenture’s human services performance practice. “It’s essential to put some structure around all the information.”

    A growing number of organizations are now questioning the survey process, and many are attempting to turn it into a science. When used effectively, employee surveys can help identify gaps between organizational goals and actual policies.

    They can help an organization achieve higher retention rates, lower absenteeism, improved productivity, better customer service and better morale. They also can help ensure that management is getting its message across and that workers are receptive.

A matter of values
    The first workplace surveys grew out of the “research era” of the 1940s. At the time, most organizations viewed surveys as little more than opinion polls to provide basic information such as whether employees viewed the employer favorably and found their job satisfying. “For the most part, the information wasn’t used in any effective or targeted way,” says Marc Berwald, president of ClearPicture Corp., a firm in Point Claire, Quebec, that develops and administers surveys for companies.

    Over the years, employee surveys have grown far more sophisticated. They’ve evolved beyond basic tools used to appease employees or predict general outcomes. By asking the right questions it is possible to gain insights into how employees might behave.

    For example, low employee satisfaction levels or mistrust of a company are often a harbinger of poor attendance, high turnover and job actions or strikes.

    “The idea is to connect employee satisfaction with organizational goals,” says Robert Gray, president of Insightlink Communications, a Los Angeles firm that uses market research techniques to conduct workplace surveys.

    Developing effective surveys is certainly on the radar screen at BCE Corporate Services, a holding company in Mississauga, Ontario, for Bell Canada. “The data can drive corporate decision-making and lead to significant changes,” says Siegie Kinitz, a senior consultant for the firm.

    The company has dialed into Web-based global employee surveys since 1998. Once a year, BCE sends out a survey to its 60,000 employees. It uses dimensional demographic analysis, which allows the firm to examine different segments of its workforce in different ways.

    For example, BCE might examine how women over the age of 30 with five or more years of service respond to the question on career mobility. This can produce different results than looking at women with entry-level positions.

The best surveys don’t just identify a problem or a successful initiative, they uncover the reason why employees feel the way they do.

    Devising the current system required “exhaustive focus groups” so that the company could understand key issues for both employee and management, Kinitz says. After several weeks of analysis, BCE formulated 84 questions spanning more than a dozen categories, including autonomy, job challenge, information sharing, confidence in the company’s direction and trust in the company’s leadership.

    Human resources and other departments provided input and helped frame the most important issues. Every year, about 5 percent of the questions change. “It’s important to maintain a core group of questions so that it is possible to have yardsticks and view trend data,” Kinitz says.

    In addition to using global surveys, BCE conducts pulse surveys on a quarterly basis. These measure attitudes about various programs and policies–such as early retirement or how effectively the company is communicating. When combined with external benchmarking data and employee comments, the surveys provide solid information about how to adapt programs and initiatives to fit the organization’s needs.

    For example, a couple of years ago, BCE migrated from company-driven benefits to flexible benefits as a result of strong employee demand.

    Moving to a Web-based surveying system has boosted response rates from 65 percent to 88 percent (the figure currently stands at 85 percent). “The end goal is to improve customer satisfaction and shareholder value,” Kinitz says. “We have seen improvements in scores over time, and that has translated directly into better bottom-line results.”

Questioning common perceptions
    All this starts with asking the right questions, according to Gray. As the old saying goes: garbage in, garbage out.

    “If the questions aren’t framed properly, if they are too vague or too specific, it’s impossible to amass any meaningful data,” he says. The best surveys don’t just identify a problem or a successful initiative, they uncover the reason why employees feel the way they do.

    “Employees might not be happy with their pay, but there could be reasons other than the actual pay level that have caused the problem,” he says. “Perhaps HR has not done a good job of communicating that the organization’s pay levels are competitive.”

    Of course, developing highly targeted questions is only part of the equation. Getting employees to take the surveys and putting the data to use also is a challenge. Although some companies rely on incentives and sweepstakes to spur participation, many organizations find that when a survey is framed the right way and the data is put to good use, the opportunity for employees to share their opinions and influence the future direction of the organization is reward enough.

    Some organizations post response rates among various departments. “It’s a way to stimulate a competitive spirit,” Berwald says.

    Eaton is one company that has scored with surveys. Michael Bush, corporate manager of human resources programs, says the firm achieved a 96.3 percent response rate for its 2003 employee survey–despite the fact that many of its employees did not have access to personal computers. Eaton set up rooms where employees could go on company time to take the survey.

    Examples of statements Eaton poses to employees include: “I rarely think about looking for a new job at another company”; “I would gladly refer a family or friend to Eaton for employment”; and “I feel proud to work for Eaton.”

    With responses to these declarations, the firm began to assemble a clear picture of its strengths and weaknesses. Then, company leaders sat down with employee involvement teams in order to focus on potential changes.

    As a result of the survey, Bush says that several programs have undergone change, including performance management, rewards and recognition, tuition assistance, training and communication.

    In order for a survey to succeed, employees must find the process convenient and feel as though their responses are private.

    “If you’re saying that a survey is important to the business, then you must be willing to make the investment and pay employees for the time it takes to complete the survey,” Accenture’s Benton says. Organizations that lack PCs on every desktop can use kiosks or, like Eaton, set up special rooms. Depending on the organization and the survey, the process can take anywhere from 15 minutes to an hour.

    Many workers report that they feel more secure answering questions on a computer than on paper because it’s impossible for anyone to identify their handwriting. Since Web-based surveys took hold in the late ’90s, participation rates have climbed steadily. A decade ago, a 65 percent participation rate was considered excellent. Today, anything below 75 percent is viewed as mediocre. Berwald says that a few companies manage to hit 99 percent.

    As surveying techniques have become more sophisticated, so has analysis and reporting. In years past, companies too often conducted surveys and then dumped the data in the laps of human resources executives who weren’t prepared to put it to any real use. Today, best- practice organizations are turning to analysts like BCE’s Kinitz who can make sense of the material. They’re also deploying software that produces highly targeted reports.

    At BCE, for example, all middle managers receive a customized report tailored to the specific issues and concerns relevant for doing their job. The company generates more than 3,500 unique reports each year.

    Other organizations are posting results on enterprise portals and customizing results to fit the particular needs of senior executives, middle-level managers, line employees and all the various departments and work groups. That way, employees receive only targeted information that’s relevant to their job. An IT executive, for instance, might benefit from knowing employees’ attitudes about computers and technology, with information about different work groups’ age segments. Human resources, on the other hand, would likely benefit from information about payroll and benefits policies.

    Gray says that a few areas, such as exit surveys, remain largely untapped. Although almost every organization interviews departing workers or sends out a questionnaire, few put the information to any real use.

    Despite the fact that there’s little risk in letting the data sit idle, there are also missed opportunities. It’s far more difficult to adapt policies to deal with factors such as stress, tension and turnover–or understand what motivates a well-paid and respected employee to head for greener pastures.

    When companies get surveys right, they are able to link employee satisfaction and attitudinal data with internal benchmarks and metrics such as greater productivity and economic value. Ultimately, they are able to open the door to new opportunities, Snyder says. “It gives everyone the information and tools to work more effectively.”

Workforce Management, December 2004, pp. 76-78 — Subscribe Now!

It’s tough enough coping with a sputtering economy and relentless pressure to do more with less. But factor in upheaval among major software-application providers, a more transient workforce and the need to constantly upgrade the skills and knowledge of workers, and it’s enough to make even the most seasoned executive’s head spin. The workplace of today bears little resemblance to its counterpart of a quarter century ago. In some instances, it barely even looks like the working world of 1999.

    Companies on the leading edge have used Web portals to banish paper. They have instituted work-flow systems to eliminate the in-basket. They have embraced e-learning to deliver training and retain knowledge. And more organizations are now catching the wave. “We are in an era of enormous change. Human resources departments are feeling the pressure from all sides,” says Jim Holincheck, a research director at Gartner Inc., a market research and consulting firm.

    Navigating today’s business environment isn’t for the faint of heart. “It has been a mixed bag over the last couple of years,” says Maria Schafer, a senior program director at META Group, a technology research and consulting firm. “The human resources department is attempting to go deeper into the work cycle and employee life cycle. The emphasis is on tools that help organizations manage competencies, deal with performance and boost learning. But putting all the pieces together remains a huge challenge.”

The enterprise view
    In recent years, the ERP and HRMS markets have been flipped upside down by mergers and a general lack of spending. First, business dried up after the rush to put systems in place to address Y2K issues. Then came September 11 and a sluggish economy. The top six vendors reported a combined 14 percent gain in revenues for the first half of 2004, but once enterprise giant SAP is subtracted from the equation, net revenues were down 1 percent.

    Not surprisingly, the situation has left many vendors–and their customers–reeling. A spate of high-profile takeovers, including PeopleSoft’s purchase of JD Edwards and Oracle’s attempts to buy PeopleSoft, has generated a good deal of confusion and indecision in the marketplace. Only recently have companies begun to sort things out. “The disruption in the marketplace clearly factors into the decision-making process,” Holincheck says. “People would prefer not to buy from a vendor that’s going to be purchased.” He says there’s a growing awareness of the need to forge a solid contract. That way, “if an acquisition occurs, an organization has options” for dealing with any post-merger ambiguities.

    The trend among ERP and HRMS vendors toward adding features has not subsided. Most large organizations long ago addressed basic administrative and self-service functions. Many medium and small businesses are now turning to these capabilities for the first time, and they are being courted by large vendors that are eager to find new business in an already saturated market. The larger businesses, meanwhile, are increasingly focused on strategic initiatives such as performance management, workforce analytics, succession planning, compensation management, recruiting, and training and development.

    In fact, it seems that the mantra of the last few years–human resources must become more strategic–is beginning to take hold. At some firms, human resources executives are finally gaining respect as business decision-makers. Yet for every organization that manages to make the leap into strategic workforce management, too many others are left in the tactical trenches. Although there’s a greater awareness of strategic applications and the potential they provide, too many human resources professionals still cannot put together a strong business plan and engage in the kind of long-term planning that today’s enterprise requires, Schafer says.

    Through it all, the classic ERP vs. best-of-breed debate rages on. Some experts, such as David A. Link, a vice president of HR transformation at The Cedar Group, a Baltimore consulting firm, believe that many companies refuse to dumb down processes to adapt to the basic level of functionality that an ERP vendor’s product provides. As a result, “enterprise software vendors now recognize that they must provide more robust functionality. They understand that they must extend applications throughout the enterprise and into supply chains.” However, he also points out that best-of-breed vendors continue to find niches and fill them effectively. In fact, advances in the underlying IT infrastructure are making it simpler to mix and match applications and deliver results immediately.

Human resources applications evolve
    Only a few years ago, many companies were deploying employee self-service, first-generation recruiting software and benefits administration systems over the Web. Now that these organizations have achieved significant administrative gains, they’re turning to more strategic functions. “There is a great deal more interest in point solutions to complement a core ERP system,” says Robert Crow, a senior consultant at Watson Wyatt Worldwide in San Diego. These tools–including performance management, succession planning, recruiting, compensation management and analytics–are growing more sophisticated all the time.

    Recruiting software that initially automated the résumé-collection process is now offering greater analytical capabilities. “Instead of just hiring faster and winding up with poor candidates, we’re using the technology to hire better,” Link explains. Meanwhile, some organizations are now going so far as to outsource recruiting–a move that would have seemed radical only a few years ago, Schafer observes. “There is a greater openness and comfort level with different approaches.”

    Performance management and compensation planning are also garnering attention. A growing number of organizations are working to tie together these two functions. Over the past few years, Web-based performance-management systems have simplified the task of evaluating workers and transforming abstract corporate goals into definable actions and behaviors. Yet these applications have not solved the bigger problem of integrating compensation planning into the overall process. At the same time, stand-alone compensation-management systems have delivered only a portion of the tools required to develop a best-practice organization.

“Handling all the different aspects–software, system integration and maintenance, call centers and more–requires tremendous resources. It’s more than a lot of companies can handle.”

    Another hot area is workforce analytics. Tools similar to those that have transformed finance, operations and customer-relationship management are now poised to revolutionize human resources. Already, software for workforce analytics is helping companies scrutinize compensation, recruiting, retention and performance so they can make more informed decisions about how to structure human resources programs, policies and pay. “Companies are recognizing that the softer side of the business can be measured and that it’s a key factor in achieving success,” says David Ulrich, a business professor at the University of Michigan in Ann Arbor.

    Benefits administration is also receiving a good deal of attention. Holincheck says that while some companies are turning to outsourcing, all are looking to streamline processes. Basic Web functions are giving way to more sophisticated capabilities, including full enrollment, administration and account-management features. While many companies have already linked to outside service providers, including those offering 401(k)s and health benefits, highly automated systems, along with e-forms, are cutting down on paperwork, speeding transactions and improving overall service levels.

    Finally, there’s a growing interest in human-capital management. A strong emphasis on retaining core talent and institutional knowledge is leading some companies to wade through an array of issues related to recruiting, retention, turnover, benefits policies, compensation trends and learning opportunities. Crow believes that the battle for talent will intensify, and as it does, the reliance on more sophisticated solutions will grow. “A lot of companies now recognize that it’s less costly to manage an existing workforce than incur the expenses related to high turnover–including hiring, training and the loss of knowledge and expertise,” he says.

    The challenge, according to Gartner’s Holincheck, is connecting all the various systems effectively. Although portals on the front end and better integration features on the back end are making the task easier, too many organizations buy systems piecemeal and wind up with applications that do not address the broader, more strategic needs of today’s enterprise. Consequently, “there is a growing interest and emphasis on buying suites,” he says. What’s more, savvy organizations are turning to dedicated cross-functional teams to ensure that departments and operating divisions are making decisions that benefit the enterprise as a whole.

Outsourcing gains momentum
    It’s difficult to pick up a newspaper or magazine without reading a story about outsourcing. It’s one of the hottest business trends, and it continues to pick up steam. The human resources field is no exception. In July, NelsonHall, a market research firm in Washington, D.C. that specializes in business-process outsourcing, reported that the market for multi-process human resources BPO will grow at 21 percent annually, reaching $7 billion by 2008. It also forecast that the total human resources outsourcing market will grow by 11 percent, to $33 billion worldwide in 2008.

    “To date, the great majority of human resources outsourcing deals have been transaction-focused, single-process engagements, such as localized payroll services, pension and benefit administration, and recruitment. However, we are now seeing the emergence of the multi-process market,” says John Willmott, founder of NelsonHall He notes that vendors are increasingly partnering with and acquiring other firms to broaden their service-delivery capabilities. Areas of focus include organizational and people development, employee-data management, workforce planning and deployment, and human-capital services.

    Gartner Dataquest has found that the leading goals for adopting human resources business-process outsourcing include focusing on core business issues, improving service levels and reducing implementation costs. Holincheck says many companies believe that human resources outsourcing is relatively low risk compared to other activities, including sales and service functions. However, success is far from guaranteed. “The belief that outsourcing can cut costs attracts enterprises to HR BPO like moths to a flame,” he says. Enterprises “can become enlightened, but can also get burned.”

    The complexity of today’s human resources systems is fueling the outsourcing trend, says Naomi Bloom, managing partner at Bloom & Wallace, a Fort Myers, Florida, consulting firm. “Handling all the different aspects–software, system integration and maintenance, call centers and more–requires tremendous resources. It’s more than a lot of companies can handle.” An army of vendors, including Accenture, ADP, Ceridian, Convergys, EDS, Exult, Fidelity, Genesys, Hewitt, HRAmerica, IBM and TriNet, have entered the market. Bloom believes that in the future, many companies will access their ERP and HRMS through third-party providers. This could accelerate the trend toward consolidation.

    The challenge for many companies is to determine whether it’s best to outsource the entire spectrum of human resources processes, a single subprocess or a piece of a process, Holincheck says. Regardless of the precise approach, the key is to think strategically, says META Group’s Schafer. “It might make sense to outsource recruiting, payroll or benefits. One of the things that a human resources department must do is engage in long-term analysis and planning.” Total outsourcing of human resources is still far from reality, Schafer says. She has found that only about 40 large companies have taken the plunge.

    Some experts, including Link, aren’t sure that outsourcing will “overhaul” the human resources function in its entirety. “It will add tremendous value and increase flexibility, but it is unlikely to become the predominant method for running an organization,” he says. A more common scenario, for now, is the move toward the application service provider model. The potential and interest are growing quite rapidly, Crow says. “A lot of companies are looking at the ASP model because it delivers a lot of value to them from the technology perspective. They don’t have to deal with infrastructure issues, upgrades and more.”

    According to consulting firm IDC, the market for on-demand application services is projected to grow from $425 million in 2002 to $2.6 billion in 2007–a 44 percent annual growth rate. “Companies are growing more comfortable with the idea of using application service providers and other outsourcers,” Crow says. “It’s an important piece of the marketplace.”

Training and development make the grade
    A knowledge-based economy demands organizations that are smart and flexible. It’s no longer possible to ensure success with a great brand name or a stellar product. In today’s fast-changing world, an organization’s knowledge and talent determine whether it speeds to success or sputters to failure. As a result, training and development are attracting more attention than ever before. “There is a much greater emphasis on relevant training. Organizations are now tying it to business goals,” says Pat Galagan, vice president of content at the American Society of Training and Development.

    Driving this trend is the realization that a direct link exists between training and organizational success. It’s more than a need to get employees working at a functional level. It’s all about building an environment that makes the most of the organization’s potential. Consequently, companies are not only focusing on specific skills and knowledge required to perform well on the job, but also providing leadership training that helps managers maximize employees’ contributions. Employees, on the other hand, are demanding greater availability of training. “It’s a question that job candidates are asking in interviews,” Galagan says.

    According to the ASTD’s 2003 State of the Industry Report, per-employee spending at the Fortune 500 companies belonging to its Benchmarking Forum rose from $734 in 2001 to $826 in 2002. Meanwhile, the number of training hours provided per employee at these organizations grew from 24 in 2001 to 28 in 2002. Finally, spending on training as a percentage of payroll grew from 1.9 percent to 2.2 percent during the same period. While human resources is heavily involved in training, other departments and even outside providers are increasingly a part of the picture. The leading strategic areas for training and development include technical knowledge, managerial and supervisory topics, IT, professional skills, safety and compliance, customer relations, product knowledge, and interpersonal and leadership skills.

    Today, about half of the Fortune 500 operate corporate universities or plan to do so, and hundreds of other companies are following suit, according to Corporate University Xchange, a New York City research and consulting firm. In addition, many other organizations are establishing basic course work or relying on outside institutions–including Harvard, Stanford and Wharton–to pump up business knowledge. Executive education courses and executive MBA programs have become an important part of corporate learning.

    Although e-learning has played a key role in training and development over the last five years, the line between online and classroom training is increasingly blurred. In some cases, organizations are combining the two to customize content to meet the specific needs of students. ASTD estimates that about 15 percent of all learning takes place electronically. For the firms that invest the largest amounts in training, however, the figure is closer to 30 percent. Sophisticated games, simulations and multimedia course work are part of the mix. Companies are increasingly connecting training to scorecards, return on investment and overall business results.

The road ahead
    As memories of the dot-com debacle finally fade and the economy finds its footing, organizations will increasingly look to boost investment in technology and people. “Many companies are upgrading their ERP systems, boosting their strategic capabilities and investing in people,” Watson Wyatt’s Crow says. “They have the basic capabilities in place, and now they are looking to take things to the next level with work flow and automation…In today’s knowledge-based economy, they’re looking to put their dollars to maximum work.”

    Global competition, digital communication and, if predictions are true, an ongoing shortage of talent will raise the stakes and push companies to their limits. “Human resources departments that perform strategically put themselves and their organizations at a huge advantage,” Link says.

At about $10 per dose, Viagra isn’t cheap. But that isn’t stopping consumers from making the drug, which is used for erectile dysfunction, a runaway best seller. Today, many insurance plans cover the expense of the drug–along with other so-called “lifestyle enhancing” medications for problems ranging from male-pattern baldness to wrinkles. Combine these drugs with a new wave of ultra-expensive biotech drugs designed to treat everything from epilepsy to cancer, and it isn’t difficult to understand why some industry observers are sounding the alarm. Prescription-drug costs have climbed at a steady double-digit rate for the last decade. “It’s an alarming situation,” says Connie Perry, a vice president at Aon Consulting.

    Today, some medications run $15,000 or more per month, and even with a 25 percent copayment, a person can drop a few thousand dollars per month on a prescription. Who foots the bill and how copayments and deductibles are set is a point of growing debate. The question, Perry says, is this: “What can employers, employees and others afford? What is reasonable for people to expect?”

    Breakthrough therapies don’t come cheap. Developing a major drug takes seven to 10 years and costs somewhere between $300 million and $1 billion. What’s more, for every success story, pharmaceutical companies typically endure several failures. So when a firm has a major breakthrough, it typically goes after financial rewards aggressively. Today, spurred by television and print advertising–which costs more than $2.5 billion a year–consumers are gobbling up little purple, red and yellow pills with growing fervor. Although 46 percent of physicians view “direct-to-consumer” prescription-drug advertising negatively, according to a 2002 study by the National Health Council, many feel that they’re standing in the path of a loaded freight train.

Swallowing a bitter pill
    For employers, employees and the rest of society, these changes represent a sobering dose of reality. The federal Agency for Healthcare Research and Quality reports that the cost of overuse and misuse of prescription drugs is billions of dollars annually. Aon Consulting’s Spring 2004 Health Care Trend Survey reports that employers can expect to see double-digit increases for all types of medical coverage, with HMOs and POS plans forecast to increase by a hefty 14.1 percent for 2004. What’s more, the rise in pharmacy costs–though down slightly from 2003–will likely be 14.4 percent this year.

    “It is questionable whether large populations of people will be able to afford prescription drugs if the prices keep climbing,” says Michael Deskin, president of the Pharmacy Benefits Management Institute, a research organization in Tempe, Arizona.

    The 2004 Drug Trend Report produced by pharmacy benefit manager Medco Health Solutions found that:

• Spending on treatments for rheumatoid arthritis increased 80.6 percent, and utilization increased 71.2 percent in 2003. Overall, spending for rheumatologic conditions rose 64.5 percent in 2003, driven by a 28.8 percent increase in unit costs and new drug introductions.

  
  

• In 2003, specialty medications represented the largest proportion of total prescription-drug expenditures–8 percent–among children under 19 years of age. The 35-to-49 age group had the second-largest proportion of specialty spending, at 5 percent. Only 1 percent of the outlay for those age 65 and above was for specialty drugs.

  
  

• Spending on drugs used primarily to treat attention-deficit/hyperactivity disorder surged 369 percent for children under age 5.

  
  

    At the root of this upsurge are changing ideas and expectations about prescription drugs. “There are highly motivated and demanding patients who walk into a doctor’s office and push for particular medications,” Perry says. “Even if a doctor isn’t enthusiastic about having the person use the drug, he or she will often go ahead and write the prescription.” The issue is particularly tricky when people ask for drugs such as Viagra and Cialis that aren’t essential to life and well-being. “The question is: Are these essential medications or merely lifestyle enhancers?” Perry asks.

“It is questionable whether large populations of people will be able to afford prescription drugs if the prices keep climbing.”

    The answer is determined largely by which side of the examination table you’re sitting on. At the same time, other conditions, such as high cholesterol, are undertreated–often because physicians aren’t familiar with the pharmaceutical options available, Perry says. Some individuals believe that society should bear the cost of their treatment, regardless of price. Trying to find a way through this netherworld of health-care issues and prescription costs is nothing less than a Herculean task. Yet a growing wave of pharmacy-benefit managers such as Medco, Express Scripts and Caremark are trying by developing strategies that they believe will counteract the potent effects of today’s prescription-drug culture.

Dealing with the diagnosis
    Changing behavior starts with understanding motivations. When Medco surveyed consumers about their preferences for prescription medication, it found that 79 percent would use generic medications for minor conditions such as a cold or the flu, but that the figure dropped to 50 percent for serious conditions such as asthma. Interestingly, 57 percent of patients surveyed said they would be more likely to use a generic if they saw it advertised. Yet here is the catch-22: generics cost less in part because manufacturers spend almost no money advertising them.

    Medco also found that when presented with the same copay for using either a brand-name medication or a generic, 59 percent would choose the brand medication and 33 percent would choose the generic. Not surprisingly, as the cost of the copayment rose for the brand-name medication, consumers were more likely to choose a generic drug. “It is essential to design drug plans that take advantage of cost-saving opportunities,” says Glen Stettin, vice president of clinical products at Medco Health Solutions.

    That is easier said than done. Optimizing copayment schedules, deductibles and the use of generic medications presents formidable challenges. It requires PBMs and others in the industry to educate the public and doctors about key cost and performance issues. “In most cases, generic medications are just as good, if not better, than branded products,” he says. “It is possible for employers to design their plan with incentives for members and doctors to choose generic drugs.” At Express Scripts in St. Louis, a 48 percent increase in the use of generic prescriptions among its 50 million members helped keep the average cost of a prescription at $55.86 in 2003, up from $51.76 the year before. “Generic drugs are the key to managing the growing cost of prescription drugs and thus making it possible for plan sponsors to continue providing an attractive prescription benefit,” says Barrett Toan, chairman and CEO. An Express Scripts “Drug Trend Report” found that plan sponsors that introduced two or more trend-management tools in 2003 saw their drug costs decline by 4.6 percent. Those that introduced one or more tools for the first time in 2003 witnessed a 5.9 percent cost increase. Overall, plan sponsors that used at least one trend-management tool in 2003 saw their drug costs grow by 10.4 percent. Cost-containment strategies include promoting mail-order delivery, which can cut costs by 10 percent; placing a greater emphasis on over-the-counter drugs; developing more clearly defined coverage rules; and using patient medical and health-plan information to identify potential drug interactions–thus averting additional treatment.

Rx for managing costs
    Another area that some PBMs and employers are homing in on is overprescription or misprescription of certain drugs. Some observers say that the rate of increase in the use of some medications–such as those used to treat hyperactivity and ADHD in children–is cause for concern. “The risk we take is that we create an entire generation which believes that when in doubt, take a pill,” Stettin says.

    Some PBMs and employers are making it more difficult to obtain drugs such as Viagra and Propecia (which combats male-pattern baldness). In many cases, a request for a prescription for these medications automatically leads to a review. If the pharmacist, case specialist and prescribing physician agree on the need for the prescription, the PBM will approve its use. Otherwise, it is up to the patient to purchase the medication.

Workforce Management, August 2004, pp. 74-76 — Subscribe Now!

One of the few things that recruiters and hiring managers can agree on is that “quality of hire” is an essential recruiting metric. When asked what it means, however, many companies are stumped.

    Kevin Wheeler, president of Global Learning Resources, a Fremont, California, consulting firm, offers the following ways to measure whether an employee is a success.

• Goal Completion. Too often, employers don’t establish specific metrics for measuring an employee’s success on the job–particularly for white-collar workers during the first 30 to 90 days. It helps to have a mutually-agreed-upon goal. The goal can involve measures of quantity, quality or a combination of the two. For example, a technical writer might produce three manuals per month; a software programmer might produce a certain number of lines of code with an error rate below 1 percent. “More objective standards lead to fewer disagreements and arguments,” Wheeler says.

  
  

• Capacity. A retailer might expect an experienced call-center rep to handle an average of 100 calls per hour while maintaining a customer rating of “satisfactory” or above. The organization should understand what a typical person can handle during the first month or 90 days and communicate the requirements to new hires.

  
  

• Motivation. Is the person interested in his work? Does she come to work on time and appear motivated and energetic? “It’s pretty much a subjective measure based on the assessment made by their supervisor or manager,” Wheeler explains. However, he adds, it is possible to provide managers with a framework for measuring motivation by creating a list of specific criteria that describe such abstract words as motivation. If an employee, for example, asks to take on more responsibility, or wants to know more about a subject or about the company, that might indicate a high level of motivation.

  
  

• Knowledge and Skills. It sounds simple enough: does the person have the requisite skills to perform the job at a high level? Wheeler says that it’s rare for a company to hire someone and then fire the same person because of a lack of skills. However, “we see a lot of people who claim to be an expert programmer but are really more of an intermediate programmer.” It’s smart to use objective measures such as a skills test both pre-hire and post-hire. The one drawback? “Many people resent having to take these tests, especially after they have already been hired.”

  
  

• General Performance. It’s particularly important to know whether a new hire is performing on a par with others in the department or functional area. Although it’s next to impossible to eliminate subjectivity, Wheeler says that a stronger emphasis on metrics and measurement standards translates into greater success. Peer review and 360-degree performance reviews can help an organization achieve more objectivity. “You might ask all 10 people in the department to rate the new hire after 30 or 60 days and look at the resulting profile,” he says. “You eliminate the bias that a single person might have.”

  
  

• Problem-Solving Skills. Almost every job requires some ability to analyze and solve problems. “A trademark of a good employee is the ability to solve problems without a lot of input from their manager or supervisor,” Wheeler explains. If an employee is continually asking basic questions, then he or she may lack the required problem-solving skills.

  
  

• Experiential Contributions. The ability to bring knowledge to the job based on learning from past jobs is another key factor in measuring a new employee’s value. Again, there’s a certain amount of subjectivity involved in such assessments, though it’s possible to rate workers on the basis of key criteria or through a peer-review process. Some people come into a new job and are unable to apply what they’ve done at previous jobs to their current position.

  
  

• Customer Compatibility. In some sectors, such as retail or sales, it’s essential to track the number of complaints from customers about a new employee and the seriousness of the complaints. Wheeler says that a simple customer survey can go a long way toward understanding performance issues. If serious problems arise, a follow-up call to the customer can provide useful information.

  
  

• Work-Group Compatibility. In recent years, the ability of employees to function effectively within a work group has become a key factor in achieving success. Getting along with others, handling an appropriate workload and meshing with the group’s culture is critical. “If a person doesn’t fit the work team, huge problems can ensue,” Wheeler explains. “In some cases, a person might be an excellent employee and a valuable asset, but not fit a particular work group. It’s important to match the person to the right group.” He says that good employees sometimes wind up getting fired because the organization assigns them to the wrong work group and isn’t willing to make the necessary adjustments.

  
  

• Organizational Compatibility. The most important compatibility issue is centered on the individual’s fit with the corporate culture. “It’s conceivable that a person doesn’t get along with the people on his team but can be transferred to another team,” Wheeler says. However, if an individual doesn’t fit into the organization’s overall culture, it might not be the right match. He believes that attitudinal surveys administered during the hiring process can reduce friction down the line. “When there’s a cultural fit, the odds of an employee succeeding are much greater,” he says.

  
  

• Change/Learning Attitude. Today’s fast-paced business world demands constant change. Employees who can adapt–and make a concerted effort to constantly learn new skills and upgrade their knowledge–are more valuable and more likely to succeed. Companies can determine such qualities by conducting an attitudinal survey after the employee’s first 30 to 90 days. The capacity for change, Wheeler says, isn’t so easy to instill in employees, so HP, Southwest Airlines and other companies try to measure this during the interview process, rather than hope that an employee will suddenly become flexible a month into a new job.

  
  

It’s not unusual for human resources and IT to draw battle lines before coming to understand the key issues involved in choosing, implementing and operating a recruiting system. Ed Newman, president and founder of the Newman Group, a consulting firm in Phoenixville, Pennsylvania, says that organizations that think through the process up front are far more likely to avoid future casualties and carnage. His recommendations include:

    Analyzing business needs. According to Newman, company size and industry aren’t the primary factors. “There’s no single system that is right for everyone. Two Fortune 500 companies can have entirely different needs.” Typically, fast-growing organizations require more dynamic systems, such as best of breed offerings. Companies with fewer hiring spikes and more static processes generally benefit from an ERP approach.

    Understanding the alternatives. ERP systems plug directly into foundation data and require little or no integration. However, ERP platform upgrades are expensive and time-consuming. Best of breed systems, on the other hand, are more flexible and nimble, but demand considerable IT resources to connect to back-end foundation data. Only through careful analysis and an understanding of the pros and cons is it possible to develop a strategy.

    Assessing IT capabilities. The best recruiting application in the world is useless if IT cannot support it. “Most ERP packages allow some customization. A few best-of-breed vendors allow changes, but many do not support significant customization,” Newman says. Likewise, an 18-month implementation for an ERP application isn’t unusual and can put so much pressure on some IT departments that they come apart at the seams.

    Developing an upgrade path. It’s essential to understand where the recruiting application takes your company and what strategic and IT resources will be required in the future. If your company decides to go with a hosted-services model in the future, is this possible? If greater customization is required in the future, is this an option?

    Knowing the vendor and structuring a solid service-level agreement. Newman believes that it’s essential to examine the vendor’s customer-service record, its financial viability and the type of service-level agreement it offers. “There’s nothing worse than coping with unanticipated problems,” he explains. “If you analyze your organization, understand the marketplace and structure the right deal, you’re far more likely to succeed.”

Workforce Management, June 2004, p. 64 —Subscribe Now!