Author: Samuel Greengard

Bill Chickering has heard all the complaints about how difficult it is to manage a low-skill, low-wage work force. He has heard human resources professionals grumble about the lack of motivation and dependability—and what an enormous toll it takes on productivity. But the director of employee relations for Benton Harbor, Michigan-based Whirlpool Corp. doesn’t buy the sob stories. He admits that building a solid and dependable low-wage labor force takes work, but guarantees that “once an organization is able to develop its human resources, it’s possible to unleash workers’ brainpower and enthusiasm in ways that might not ever be imagined.”

Chickering speaks from experience. Whirlpool, a $7.5 billion company that sells appliances in 120 markets worldwide, employs hourly workers in dozens of locations throughout the United States. During the last six years, the company has grown 85%, while reducing turnover and increasing productivity. How? Partly by giving its low-wage workers—everyone from assemblers to janitors—a major stake in running the company.

Whirlpool does this through a stock purchase plan and gain-sharing. The latter encourages workers to view the plant they work in as their own and find ways to cut costs because the dividend goes straight to their pocketbooks at the end of the year. There’s also GED programs, college tuition reimbursement programs and ongoing training. And, perhaps most important of all, there’s an overall recognition that line employees have valuable insights and knowledge that can help the company operate more efficiently. Hourly employees serve on hiring teams; they even work alongside top executives as part of strategic groups to help decide where factories should be located and how work should be processed and distributed.

“If you expect a lot out of a work force, if you create realistic ways to get people involved and not just repeat hackneyed cliches, there are tremendous opportunities,” says Chickering. “The notion that the company would like to tap into the opinions and knowledge of its hourly work force is often met with skepticism. But once you can demonstrate over time the commitment to such a philosophy, the transformation is remarkable.”

Whirlpool is among a growing number of companies discovering the changing dynamics of the U.S. labor pool, and the need to adjust their HR practices accordingly. These companies see the need for HR to structure pay and policies to build a powerful low-wage work force. They must attract, retain and promote good workers. And, perhaps most importantly, they need to work with top management to fashion an organization that’s both solid and nimble. Says Donna Klein, director of work/life programs at Washington, D.C.-based Marriott International: “It’s a far more complex issue today than it has been at any point in the past. However, the companies that can manage their low-wage work force well are in a position to reap tremendous rewards.”

The low-wage labor pool swells as society changes.
Today, as the world economy grows more complex and intertwined, many jobs are being exported overseas—leaving vast numbers of the unskilled and uneducated clamoring for whatever work they can find. Meanwhile, wave after wave of immigrants—both legal and illegal—are flowing into the United States, many of whom are willing to work for rock-bottom wages.

In addition, society is changing from an industrial-based economy to a service economy, fundamentally changing the very nature of work. As better paying manufacturing jobs vanish with each round of layoffs and corporate downsizings, lower-wage jobs in restaurants, hotels and retailing flourish. According to the San Francisco Federal Reserve Bank, the service sector is expanding at a robust 18% annual clip. And the Bureau of Labor Statistics reports that since 1980, the service sector has expanded by 18.8 million jobs.

In many cases, these service jobs pay far lower wages than comparable unskilled jobs in the manufacturing sector. For example, the most recent figures available from the Federal Reserve Bank of Cleveland show that the lowest 10th percentile of the service sector earned only $212 a week in 1992, compared to $231 in the manufacturing sector. That translates into $1,000 a year less for service workers. “There’s a tremendous drive to increase productivity and lower costs—and in many instances the only variable is labor costs,” says Fred K. Foulkes, director of the Human Resources Policy Institute and a professor of management policy at Boston University.

Glance at statistics and you begin to understand the impact. According to the U.S. Census Bureau, almost one-fifth of America’s full-time workers receive what the government considers low pay—less than $13,091 a year. Among 35 to 54 year-olds, the percentage of low-wage workers grew from 9.9% in 1979 to 13.3% in 1983. Among the younger labor pool, the trend is even more pronounced. Those in the 18 to 24-year old age group, for example, have watched the numbers grow from 22.9% to 47.1% during the last 14 years.

However, many economists insist that government numbers don’t tell the entire story. Examine the minimum wage work force—those who earn roughly $8,500 a year full-time—and it’s obvious that the labor picture is even worse. Traditionally, Congress has set the federal minimum wage at roughly 50% of the average manufacturing wage. Today, however, the figure hovers at 40%, and is in danger of falling into the high 30s. “It’s a trend that can’t be ignored,” says Foulkes.

That has many deeply concerned. Edward N. Luttwak, director of Geo-Economics at the Washington, D.C.-based Center for Strategic and International Studies, believes that America could become a Third World country by 2020. He points out that in 1970, the nation’s GNP was $4,950 per person, while Japan was only $1,950. Two decades later, the U.S. GNP was $21,000 per person, while Japan had soared to $23,810. And by the year 2000, Japan is projected to double the GNP per person of the United States. Of course, many find the notion that the United States could suffer such a fate unbelievable. But Luttwak says that one only needs to look at Argentina for proof it can happen. A wealthy nation in the 1950s, this country has suffered a 40-year slide into poverty.

Adds Allen Scott, director of the Lewis Center for Regional Policy Studies at the University of California at Los Angeles: “Many areas—particularly America’s cities—have become vast pools for unskilled workers. It’s creating Third World conditions, and changing the responsibilities and challenges for companies and society.”

The issues stretch far beyond dollar figures on the corporate balance sheet. Not only do many of these low-wage workers require ongoing training to compensate for a lack of education and language skills, they embrace cultural and social practices that are fundamentally different than those professed by the vast majority of America’s work force. Getting them to believe in the corporate culture can be difficult, but failure to do so often results in unacceptable levels of turnover (as high as 80% to 100% a year in industries such as fast food), low worker morale and a general deterioration of the very service that’s the cornerstone of many firms that employ low-wage workers.

High turnover prompts scrutiny of selection processes.
To address the issues faced when depending on a low-wage work force, many companies are re-examining how they hire, train and reward employees. “Companies are far more selective in hiring because they’re recognizing the high cost of recruiting, retraining and turnover,” says Janet Fuersich, director of compensation consulting for New York City-based Coopers & Lybrand.

But finding educated, literate and dependable workers—especially in urban areas—is becoming a formidable challenge. “There’s a need to find people who have enough education and ability to function well on the job—so they’re often having to pay higher than minimum wage.”

At many fast food firms in urban areas, for example, it’s now necessary to pay entry-level workers $6 to $6.50 an hour—nearly $2 above minimum wage. Manufacturing jobs—union and non-union—often translate into an $8 to $12-an-hour wage. “The Federal minimum wage is a floor. But many organizations find that to attract and keep their labor category’s best and brightest, they must pay a higher wage,” says Fuersich. “And there’s often a shortage. That’s one reason why you see more senior citizens taking work in fast food restaurants, retail stores and banks.”

Adjusting salary alone isn’t enough, however. That’s why Chicago-based Sears Roebuck & Co. has scrutinized its HR practices. Sears, with more than 800 stores and 360,000 associates located throughout the nation, has worked during the last few years to construct standardized systems for hiring, retaining and promoting its employees. Although it’s built a stable work force in some areas, it suffers from chronic turnover in others.

The hiring process serves as the foundation for the company’s strategy. Sears now requires department managers—the people responsible for hiring virtually all associates—to adhere to a standardized interviewing process, which requires ongoing training and thorough documentation.

In addition, the stores also use paper and pencil testing for determining dependability. “We’re moving toward more testing, especially in the area of customer-service orientation,” says Sally Hartmann, manager of measurement and assessment systems in the firm’s national HR office. “We’re trying to do a better job of selecting applicants. We realize it’s crucial to think about the job requirements, ask the right questions and listen closely to the answers.”

Making sure that prospective employees understand what the job is all about has also become a priority. “It’s important to hire the right people in the first place,” Hartmann says, “but it’s also vital to give them, before they accept a job, a realistic job preview about what they can expect. That means talking to them about the job, the hours, the scheduling, the unpredictability and the need to be flexible. They must understand that they’re going to have to pitch in and straighten up, even if they’ve been hired to sell. Reducing turnover begins with recruiting and hiring.”

Sears expects that some turnover is inevitable. A certain amount actually is desirable. The very nature of the corporate pyramid is to weed out those who are less than committed to the company or don’t fit in on a long-term basis. Some observers argue that certain industries—particularly fast food—thrive in a high-turnover environment because new employees can be trained in a matter of minutes or hours and paid lower wages than long-term employees. Nevertheless, experts say that one of the most distressing problems for a company is to lose solid, dependable workers for the wrong reasons.

Says Sears’ Hartmann: “Ultimately, if we have a college student work for us for four years and then leave to become an engineer, then we view it as a wonderful partnership. However, if an associate graduates with a degree in fashion merchandising and then goes to work somewhere else, then we have really missed the boat. It’s important to identify those who have management potential and get them on the right track.” But Hartmann also admits that associates sometimes “fire” Sears. “If they’re a good employee and they leave to make 25 cents-an-hour more down the street, then we’ve failed.”

Sears now looks closely at why workers stay and why they leave, and has created a turnover management kit, which helps store managers access data from their own computers that gives them ideas on how to reduce turnover. Exit surveys that provide analysis and insight into why employees are leaving also have become part of the picture. “Overall, we know how costly turnover is in dollars from an HR and companywide perspective. But it also has tremendous costs in terms of customer perceptions and morale in the stores. So, there’s no way to attach a specific dollar amount,” says Hartmann.

Profit sharing and employee involvement foster loyalty.
Part of the reason low-wage workers leave a company is that they lack motivation to view their job as a career opportunity. They see little or no reason to buy into the corporate philosophy that management faithfully and doggedly espouses. In many instances—particularly in large cities—hourly employees feel little loyalty to their employer. They often jump at the opportunity to change jobs and earn 25 cents-an-hour more someplace else.

In response, companies must find ways to make their low-wage workers feel part of a cohesive corporate culture from day one. Sears assigns each new sales associate a buddy, who can answer questions and help the newcomer learn the ropes. Departments and entire stores also plan picnics, softball teams and other events to help build stronger bonds and encourage new workers to get to know their peers.

Sears also makes a commitment to ensuring that low-wage workers have opportunities for advancement and growth. New sales associates receive 12 hours of training that the company tries to make fun and entertaining with the use of such techniques as videos and interactive exercises.

Whenever possible, Sears prefers to promote from within. Not only do associates understand the nuances and realities of what goes on inside the stores, they often display great loyalty. “They know Sears from the bottom up. They know the customers; they’re aware of what they like and dislike in a manager, and they understand what it takes to motivate people who work on the floor,” says Hartmann. In fact, Sears recently has been focusing on making sure its most qualified associates get channeled into regional training programs, where they receive classroom instruction and mentoring. Then, they’re slotted into management positions as they become available.

Irvine, California-based Taco Bell Corp., an independent division of Purchase, New York-based PepsiCo Inc., embraces a similar approach. Says Dave Pace, vice president of human resources: “We try very hard to develop people through the system. We have people who started in entry-level positions and now are store managers, even assistant general managers running as many as 30 units. In many cases, the talent and initiative are there. It’s simply a matter of giving people an opportunity to grow within the organization.”

According to Pace, the greatest undertaking for this fast-food chain, which operates 3,500 company-owned Mexican restaurants in the United States, is distinguishing itself from the rest of the burger and burrito pack. “The challenge,” explains Pace, “is to become the employer of choice. Essentially, everyone in the industry is competing for the same labor pool.” Because Taco Bell’s “Value Menu” features ultra low-price items, which translates into razor-thin profit margins and an increased need to control labor costs, keeping low-wage workers is particularly important.

However, Taco Bell has cultivated a strong hourly work force by giving employees greater responsibility and allowing them to make decisions on their own. In most cases, crews are trained to open and close restaurants without a manager present, are allowed to handle cash and make bank deposits, and have responsibility to accept deliveries, manage inventory and even order food and supplies. “They’re able to handle a lot of duties that would traditionally be considered the responsibility of a manager,” Pace explains.

Besides making the work environment challenging, the company tries to make it exciting—and profitable. It offers an automatic stock option program for workers who have been at the company at least a year, and it has introduced monetary incentives to stores that meet key business benchmarks. That can add as much as 25 cents an hour to an employee’s pay during a specific month. More importantly, says Pace, it’s a way for store employees to identify with “what we’re trying to achieve from a business standpoint and receive a reward when they’re able to hit the goals.”

Whirlpool shares this philosophy of involving and rewarding hourly workers. In the mid- 1980s, the firm realized it had to redesign its workflow and HR policies to compete in an increasingly global environment. So it began systematically revamping work processes and its basic mindset. Whirlpool began inviting line employees to serve on hiring teams, and to travel with top executives to new plants so that the company could gain a broader perspective on production and labor issues.

The program has worked smoothly—with human resources providing training in interviewing and other personnel issues. “Not only do line employees know what it takes to do the job well, they’re suddenly accountable for the quality of the workers they hire,” says Chickering. And at Whirlpool, that’s an issue everyone takes seriously. The company’s gain-sharing program transforms each manufacturing plant into its own business. By reaching specific benchmarks and finding ways to operate more efficiently, the company and employees share in the profits. That can often translate into a $2,000 to $3,000 annual bonus [see “Whirlpool Strives To Build a Performance-based Strategy”].

But Whirlpool’s program doesn’t stop there. The company also places line employees on strategic teams that help make key business decisions for facilities nationally and abroad. The workers—some earning $12 an hour—serve alongside top managers and executives, and even travel overseas. “We want them to feel and act like equal partners in determining the company’s future,” Chickering says. “They may simply be assembling a part, but they know a lot more about how it can be done quickly and efficiently—and at a lower cost—than managers who sit in an office and crunch numbers.”

Winning over the trust of low-wage workers has been no easy task. Many employees simply don’t believe that the company means what it says. They often view the introduction of such programs and policies as nothing more than a ploy to keep them placated. But what Whirlpool has learned is that “skepticism doesn’t necessarily mean resistance, it may simply mean that they don’t know what’s involved, what’s expected of them and how they can contribute,” explains T.R. Reid, the firm’s manager of financial communications. “Everyone has to understand that there’s a learning curve and you aren’t going to remake the company overnight.”

Ultimately, adds Chickering, the company runs far more efficiently. “The more you cut down the barriers between exempt and non-exempt workers, the better the communication and the more everyone sees the big picture. No longer do workers check their brains at the door and figure that problems are someone else’s to deal with. Suddenly, they’re enthusiastic and involved. They’re truly a human resource.”

Personal support increases productivity potential.
Certainly, reducing turnover and eliminating low productivity isn’t easy. Comprehensive approaches like those at Taco Bell and Whirlpool are a start, but often aren’t enough by themselves. As a result, many companies now are taking a far more holistic approach. They’re getting involved in their employees’ lives and helping resolve personal problems that can spill over into work.

Marriott is a prime example of how a company can overcome tough challenges that extend beyond low income. Marriott’s product is largely its high standard of service, and all of the brainpower and management savvy in the world isn’t going to spell success at individual hotels without additional people support. “We have a high regard for our associates,” Klein says. “We understand that these are the people who deliver the product—it isn’t the manager or the executive at headquarters.” With personnel speaking 26 different languages and many employees less than familiar with U.S. customs and practices, there’s plenty of room for glitches. A clerk unfamiliar with U.S. social practices, for example, may inadvertently brush a customer off, or a housekeeper might not come to work because of a personal problem.

As a result, Marriott has created a series of programs for both managers and associates. Today, managers at the hotels receive extensive instruction on hiring techniques. In addition, many locations include customer and associate sensitivity training and teach about specific cultural practices. “It’s more than timesheets and payroll. It’s as much about the art of managing as the skill,” says Klein. Meanwhile, associates are placed in a detailed orientation program and then offered ongoing training and instruction in a wide array of areas—from interfacing with customers to balancing work and personal issues.

The centerpiece of Marriott’s approach is its work-life program. It’s something that, according to Klein, “focuses on the breadth of an employee’s life rather than just basic family issues.” Indeed, the company now provides ongoing educational programs on relationships, child care, elder care and legal issues. It offers a pilot hotline in Florida with trained representatives who can answer questions on a wide range of topics—including immigration, child care, education and housing—in Spanish, French and Creole.

It’s a program that has made a major impact on Marriott’s low-income work force. Employees who otherwise would miss work—or leave the company—because they don’t understand the bureaucracy or complexity of the U.S. system, are able to resolve their problems. Not surprisingly, that has led to a boost in productivity—particularly for managers who find themselves with 25% to 50% more time on their hands now that they’re free from counseling associates. Ultimately, says Klein, “the better employees are able to manage their lives, the better they’re able to serve our customers.”

Other companies have evolved toward a work-life approach as well. Seattle-based SeaFirst Bank, which operates 271 branches in the Pacific Northwest, provides a plethora of services: free or reduced cost banking; tuition reimbursement; English classes; career counseling; a discovery center where employees can improve skills needed to move up in the organization; child care, including provisions for sick children; a fitness center; and a wide array of social events.

SeaFirst also has established a variety of employee-recognition programs. It has staff excellence awards—cash bonuses of $475 to $7,500 for exceptional employees; a ThinkFirst program that rewards innovative ideas with cash incentives of $25 to $25,000; a “Teller Hall of Fame,” and an “Employee of the Quarter” award.

The philosophy has been successful. SeaFirst’s 1993 turnover rate was 19%, compared to the 22% average for businesses in the entire state of Washington. More importantly, the company has consistently ranked among the top 20 employers in the state, according to Washington CEO Magazine. Says Vicki Rohr, work, home and health coordinator for SeaFirst: “Today, as a company, you have to ask, ‘How do we motivate people? How do we make them feel that they’re an important part of the team? How do we maintain an hourly work force so that we’re better positioned for high performance?’ The cost of operating the programs is an investment—and one that generally pays huge dividends.”

Understanding the dynamics of the work force is key.
There’s no doubt that a low-wage work force presents unique challenges for human resources. Fred Foulkes believes that HR has a particularly tough role in balancing company and worker interests. “On the one hand, HR is striving to become a business partner that plays an important role in corporate decisions—and that can often mean keeping wages and costs down. However, HR also thinks of itself—and has been traditionally viewed—as a representative or advocate of employees. And that can present a huge conflict.”

He and other experts say that it’s essential for top management and HR to work side by side to re-examine company policies and practices, implement new programs that accomplish their intended goals, and learn to balance issues to create a stable work environment—one in which low-wage workers can feel valuable and important, and where the company can thrive while facing low-profit margins and growing competition.

But it’s also necessary to thoroughly understand the subtlety and diversity of today’s workplace. And that means more than just creating specific programs and communicating with hourly workers. It’s about understanding who the firm’s work force is and what kind of environment it needs to thrive. For example, Coopers & Lybrand’s Fuersich notes that in regions of the nation that have large concentrations of Hispanics—including Florida, New York, and Los Angeles—the social aspects of work are vital. As a result, it’s necessary to create an environment where employees feel they’re working together and can share common goals. Says Fuersich: “No matter what collar a work force wears, it’s crucial to understand them so that they can perform work to their potential.”

Foulkes echoes the sentiments. He also believes that a lower-wage work force is only as good as the managers and supervisors who oversee them. The habits and attitudes of management go a long way toward determining the success or failure of an organization. These individuals must know how to deal with the problems and idiosyncrasies of low-wage workers—many of whom have entirely different value systems—and they must understand what it takes to motivate and retain them. Moreover, “Many companies don’t understand that high turnover and poor training among entry-level managers can be devastating. They’re often the thread that holds low-wage work forces together.”

In the end, by giving workers the respect and credibility they deserve, and by listening to them and taking what they have to say seriously, a company can eliminate many of its most difficult problems. “Fundamental values ultimately get transferred from a company to its work force,” Foulkes remarks. “There’s no shortage of firms that depend largely—if not entirely—on lower-wage workers and manage to thrive.”

Experts say that investors are prone to seven common errors that can derail their retirement. Of course, it’s HR’s task to deal with these issues and provide solutions.

Not investing enough.
There are tremendous tax benefits to investing in a 401(k), but one has to save the money in order to realize them. And Americans are notoriously bad at saving—typically putting away half of what their counterparts in Europe and Japan manage. Workshops provide terrific information about general concepts and trends, but they aren’t always enough. “Workers have to understand things in personal terms,” says Christopher H. Cumming of Diversified Investment Advisors. And that’s where financial modeling, detailed financial statements and computer software can help.

Using retirement funds unwisely.
Too many Americans view their 401(k) or IRA as little more than a savings account. They borrow against it—thus reducing the principle, capital gains and interest. Even worse, many simply don’t roll over their savings when they change jobs. Not only do they have to ante up for taxes owed on the savings, they wind up starting all over again. “And now they have fewer years to save than before,” says Price Waterhouse’s Roger Hindeman.

Fear of loss.
“A reasonable fear of loss is entirely healthy,” says James Sullivan, manager of individual services practice at Arthur Andersen Co. To be sure, markets are volatile, and individual stocks can drop into an abyss and never return. Yet, “The fear of loss among most participants is greatly disproportionate to the pleasure of gain. This may cause many participants to bypass what otherwise may be very sound, long-term investments.” The solution? He suggests that HR emphasize returns over the longterm, and focus on real returns once inflation is factored in.

Short-term focus.
One of the most common mistakes fledgling investors make is selling shares of their equity mutual fund after one or two down quarters in the market. Likewise, many participants continually chase the previous quarter’s best-performing mutual fund but don’t obtain last quarter’s stellar results. By emphasizing long-term results and showing hot funds that dropped in value the following quarter, investors will become more adept at investing for the long haul.

Fear of making the wrong decision.
Inundated with investment choices and information, some participants make just one decision—defaulting to the most conservative investment choice available. It’s HR’s task to point out that too conservative a choice can actually be riskier than an aggressive instrument, says Wayne Bogosian, national director of personal financial education at The Wyatt Company.

Investment strategies that don’t relate to age, lifestyle or risk tolerance.
One of the difficulties of investing is that there are no set rules. It’s partly a matter of age, where one is in life and how strong a stomach an individual has for volatility and risk. To be sure, some try to realize too high a return over a short period of time. Others watch an investment drop during a down market, sell and vow never to get burned again. Making good decisions requires a thorough understanding of investment concepts—something computer programs and written matter can help immensely with.

Chasing unrealistic expectations.
At the peak of a bull market, a general euphoria leads participants to believe the gains of the recent past will continue indefinitely. Thus, “many find themselves with unsuitably aggressive portfolios they should never have,” says Sullivan. He recommends that HR stress the solid returns of a balanced fund over time, but also show how losses inflicted by selling an aggressive fund in a bear market can devastate an investor.

It’s 2 o’clock on a Wednesday afternoon. Inside the dining room of Chiat Day Mojo’s Venice, California, offices, Nancy Alley, manager of HR, is downing a sandwich and soda while wading through phone and E-mail messages. In front of her a computer—equipped with a fax-modem—is plugged into a special port on the dining table. The contents of her briefcase are spread on the table. As she sifts through a stack of paperwork and types responses into the computer, she periodically picks up a cordless phone and places a call to a colleague or associate. As she talks, she sometimes wanders across the room.

To be sure, this isn’t your ordinary corporate environment. Alley doesn’t have a permanent desk or workspace, nor her own telephone. When she enters the ad agency’s building, she checks out a portable Macintosh computer and a cordless phone and heads off to whatever nook or cranny she chooses. It might be the company library, or a common area under a bright window. It could even be the dining room or Student Union, which houses punching bags, televisions and a pool table. Wherever she goes, a concierge forwards mail and phone pages to her and a computer routes calls, faxes and E-mail messages to her assigned extension. She simply logs onto the firm’s computer system and accesses her security-protected files.

“I’m not tethered to a specific work area; I’m not forced to function in any predefined way,” says Alley, who spends mornings, and even sometimes an entire day, connected from home via sophisticated voicemail and E-mail systems, as well as a pager. “My work is processand task-oriented. As long as I get everything done, that’s what counts. Ultimately, my productivity is greater and my job-satisfaction level is higher. And for somebody trying to get in touch with me, it’s seamless. Nobody can tell that I might be in my car or sitting at home reading a stack of resumes in my pajamas. The call gets forwarded to me wherever I’m working.”

You’ve just entered the vast frontier of the virtual office—a universe in which leading-edge technology and new concepts redefine work and job functions by enabling employees to work from virtually anywhere. The concept allows a growing number of companies to alter their workplaces in ways never considered just a few years ago. They’re scrapping assigned desks and conventional office space to create a bold new world where employees telecommute, function on a mobile basis or use satellite offices or communal work areas that are free of assigned spaces with personal paraphernalia.

IBM, AT&T, Travelers Corporation, Pacific Bell, Panasonic, Apple Computer and J.C. Penney are among the firms embracing the virtual-office concept. But they’re just a few. The percentage of U.S. companies that have work-at-home programs alone has more than doubled in the past five years, from 7% in 1988 to 18% today. In fact, New York-based Link Resources, which tracks telecommuting and virtual-office trends, has found that 7.6 million Americans now telecommute—a figure that’s expected to swell to 25 million by the year 2000. And if you add mobile workers—those who use their cars, client offices, hotels and satellite work areas to get the job done—there’s an estimated 1 million more virtual workers.

Both companies and employees are discovering the benefits of virtual arrangements. Businesses that successfully incorporate them are able to slash real-estate costs and adhere to stringent air-quality regulations by curtailing traffic and commuters. They’re also finding that by being flexible, they’re more responsive to customers, while retaining key personnel who otherwise might be lost to a cross-country move or a newborn baby. And employees who successfully embrace the concept are better able to manage their work and personal lives. Left for the most part to work on their own terms, they’re often happier, as well as more creative and productive.

Of course, the basic idea of working away from the office is nothing new. But today, high-speed notebook computers, lightning-fast data modems, telephone lines that provide advanced data-transmission capabilities, portable printers and wireless communication are fueling a quiet revolution. “As a society, we’re transforming the way we work and what’s possible,” says Franklin Becker, director of the International Workplace Studies Program at Cornell University and a leading expert on the virtual office. “It’s creating tremendous opportunities, but it also is generating a great deal of stress and difficulty. There are tremendous organizational changes required to make it work.”

Adds Loree Goffigon, a consultant at Santa Monica, California-based Hellmuth, Obata & Kassabaum (HOK), which helps companies implement alternative office strategies: “As markets have changed—as companies have downsized, streamlined and restructured—many have been forced to explore new ways to support the work effort. The virtual office, or alternative office, is one of the most effective strategies for dealing with these changes.”

Of course, the effect of alternative officing on the HR function truly is great. HR must change the way it hires, evaluates employees and terminates them. It must train an existing work force to fit into a new corporate paradigm. There are issues involving benefits, compensation and liability. And, perhaps most importantly, there’s the enormous challenge of holding the corporate culture together—even if employees no longer spend time socializing over the watercooler or in face-to-face meetings. Notes Goffigon: “When a company makes a commitment to adopt a virtual-office environment—whether it’s shared work-space or basic telecommuting—it takes time for people to acclimate and adjust. If HR can’t meet the challenge, and employees don’t buy in, then the program is destined to fail.”

Virtual offices break down traditional office walls.
Step inside Chiat Day and you quickly see how different an environment the ad agency has created. Gone are the cubicles in which employees used to work. In their place are informal work carrels and open areas where any employee—whether it’s Chairman Jay Chiat or an administrative assistant—can set up shop. Teams may assemble and disperse at any given spot, and meetings and conferences happen informally wherever it’s convenient. Only a handful of maintenance workers, phone operators and food-services personnel, whose flexibility is limited by their particular jobs, retain any semblance of a private workspace.

Equally significant is the fact that on any given hour of any day, as many as one-third of the salaried work force aren’t in the office. Some are likely working at a client’s site, others at home or in a hotel room on the road. “The feeling,” says Adelaid Horton, the firm’s managing director of operations, “is that the employees of Chiat Day are self-starters. To empower the work force, we felt we could dispense with traditional structure and discipline. The work environment was designed around the concept that one’s best thinking isn’t necessarily done at a desk or in an office. Sometimes, it’s done in a conference room with several people. Other times it’s done on a ski slope or driving to a client’s office. We wanted to eliminate the boundaries about where people are supposed to think. We wanted to create an environment that was stimulating and rich in resources.” As such, employees decide on their own where they will work each day, and are judged on work produced rather than on hours put in at the office.

Another company that has jumped headfirst into the virtual-office concept is Armonk, New York-based International Business Machine’s Midwest division. The regional business launched a virtual-office work model in the spring of 1993 and expects 2,500 of its 4,000 employees—salaried staff from sales, marketing, technical and customer service, including managers—to be mobile by the beginning of 1995. Its road warriors, equipped with IBM Think Pad computers, fax-modems, E-mail, cellular phones and a combination of proprietary and off-the-shelf software, use their cars, client offices and homes as work stations. When they do need to come into an office—usually once or twice a week—they log onto a computer that automatically routes calls and faxes to the desk at which they choose to sit.

So far, the program has allowed Big Blue’s Midwest division to reduce real-estate space by nearly 55%, while increasing the ratio of employees to workstations from 4-to-1 to almost 10-to-1. More importantly, it has allowed the company to harness technology that allows employees to better serve customers and has raised the job-satisfaction level of workers. A recent survey indicated that 83% of the region’s mobile work force wouldn’t want to return to a traditional office environment.

IBM maintains links with the mobile work force in a variety of ways, says John F. Frank, project manager for mobility. All employees access their E-mail and voicemail daily; important messages and policy updates are broadcast regularly into the mailboxes of thousands of workers. When the need for teleconferencing arises, it can put hundreds of employees on the line simultaneously. Typically, the organization’s mobile workers link from cars, home offices, hotels, even airplanes.

Virtual workers are only a phone call away.
To be certain, telephony has become a powerful driver in the virtual-office boom. Satellites and high-tech telephone systems, such as ISDN phone lines, allow companies to zap data from one location to another at light speed. Organizations link to their work force and hold virtual meetings using tools such as video-conferencing. Firms grab a strategic edge in the marketplace by providing workers with powerful tools to access information.

Consider Gemini Consulting, a Morristown, New Jersey-based firm that has 1,600 employees spread throughout the United States and beyond. A sophisticated E-mail system allows employees anywhere to access a central bulletin board and data base via a toll-free phone number. Using Macintosh Powerbook computers and modems, they tap into electronic versions of The Associated Press, Reuters and The Wall Street Journal, and obtain late-breaking news and information on clients, key subjects, even executives within client companies. And that’s just the beginning. Many of the firm’s consultants have Internet addresses, and HR soon will begin training its officeless work force via CD-ROM. It will mail disks to workers, who will learn on their own schedule using machines the firm provides. The bottom line of this technology? Gemini can eliminate the high cost of flying consultants into a central location for training.

“Today, the technology exists to break the chains of traditional thought and the typical way of doing things,” says Gordon Stone, senior vice president for Gemini. “It’s possible to process information and knowledge in dramatically different ways than in the past.” That can mean that instead of one individual or a group handling a project from start to finish, teams can process bits and pieces. They can assemble and disassemble quickly and efficiently.

Some companies, such as San Francisco-based Pacific Bell, have discovered that providing telecommuters with satellite offices can further facilitate efficiency. The telecommunications giant currently has nearly 2,000 managers splitting time between home and any of the company’s offices spread throughout California. Those who travel regularly or prefer not to work at home also can drop into dozens of satellite facilities that each are equipped with a handful of workstations. At these centers, they can access proprietary data bases, check E-mail and make phone calls.

Other firms have pushed the telecommuting concept even further. One of them is Great Plains Software, a Fargo, North Dakota-based company that produces and markets PC-based accounting programs. Despite its remote—some might say undesirable—location, the company retains top talent by being flexible and innovative. Some of its high-level managers live and work in such places as Montana and New Jersey. Even its local employees may work at home a few days a week.

Lynne Stockstad’s situation at Great Plains demonstrates how a program that allows for flexible work sites can benefit both employer and worker. The competitive-research specialist had spent two years at Great Plains when her husband decided to attend chiropractic college in Davenport, Iowa. At most firms, that would have prompted Stockstad to resign—something that also would have cost the company an essential employee. Instead, Stockstad and Great Plains devised a system that would allow her to telecommute from Iowa and come to Fargo only for meetings when absolutely necessary. Using phone, E-mail, voicemail and fax, she and her work team soon found they were able to link together, and complete work just as efficiently as before. Today, with her husband a recent graduate, Stockstad has moved back to Fargo and has received a promotion.

Great Plains uses similar technology in other innovative ways to build a competitive advantage. For example, it has developed a virtual hiring process. Managers who are spread across the country conduct independent interviews with candidates, and then feed their responses into the company’s computer. Later, the hiring team holds a meeting, usually via phone or videoconferencing, to render a verdict. Only then does the firm fly the candidate to Fargo for the final interview.

“The virtual office radically changes thinking. It totally changes the corporate culture,” notes Cornell’s Becker. “Although many companies are attracted to the cost savings—real estate, maintenance, security, landscaping, energy and insurance can all be cut—many discover it has a lot of other benefits. It’s forcing organizations to fundamentally rethink how they function.”

HR must lay the infrastructure to support a mobile work force.
Just as a cafeteria offers a variety of foods to suit individual taste and preferences, the workplace of the future is evolving toward a model for which alternative work options likely will become the norm. “Nobody says you have to work the same way, even if you have the same job,” says Becker. “One person may find that telecommuting four days a week is great; another may find that he or she functions better in the office. The common denominator for the organization is: How can we create an environment in which people are able to produce to their maximum capabilities?”

Creating such a model and making it work is no easy task, however. Such a shift in resources requires a fundamental change in thinking. And it usually falls squarely on HR’s shoulders to oversee the program and hold the organization together during trying times. “When a company decides to participate in an alternative officing program, people need to acclimate and adjust to the new etiquette,” says HOK’s Goffigon. “Workers are used to doing things a certain way. Suddenly, their world is being turned upside down.”

From an HR perspective, one of the biggest problems is laying the infrastructure to support such a system. Often, it’s necessary to tweak benefits and compensation, create new job descriptions and methods of evaluation and find innovative ways to communicate. Sometimes, because companies are liable for their workers while they’re “on the clock,” HR must send inspectors to home offices to ensure they’re safe.

When Great Plains Software started its telecommuting program in the late 1980s, it established loose guidelines for employees who wanted to be involved in the program. “We pretty much implemented policies on an unscientific basis,” says Lynn Dreyer, director of HR for the company. Over time, the company has evolved to a far more stringent system of determining who qualifies and how the job is defined.

For example, as with most other companies that embrace the virtual-office concept, Great Plains stipulates that only salaried employees can work in virtual of-fices because of the lack of a structured time schedule and the potential for working more than eight hours a day. Those employees who want to telecommute must first articulate how the decision will benefit the company, the department and themselves. Only those who can convince a hiring manager that they meet all three criteria move on to the next stage.

Potential telecommuters then must define how they’ll be accountable and responsible in the new working model. “We ask them to specify their performance expectations—particularly in communication,” notes Dreyer. “The last thing you want is someone feeling like an outside consultant rather than part of the company.”

Finally, once performance standards and guidelines have been created, Great Plains presents two disclaimers to those going virtual. “We tell them that if their performance falls below certain predetermined standards, we’ll review the situation to determine whether it’s working. And if the position changes significantly and it no longer makes sense to telecommute, we will have to reevaluate,” says Dreyer. She explains that early on, some workers assumed the arrangement would be permanent and were taken aback when changes warranted ending it. “We learned that you can’t create the assumption that this is a lifetime program,” she says.

Other companies have adopted similar checks and balances. “We’re training HR advisers to make accommodations for the individual, but to not make accommodations for the person’s job responsibilities,” says Frank. “[But] we don’t want to create artificial safety nets that make it easy to go back to traditional ways of working. Otherwise, the program is doomed to failure.”

IBM provides counseling from behavioral scientists and offers ongoing assistance to those having trouble adapting to the new work model. By closely monitoring preestablished sales and productivity benchmarks, managers quickly can determine if there’s a problem. So far, Frank says only approximately 10% to 15% of its mobile work force has required counseling, and only a handful of employees have had to be reassigned.

Virtual workers need guidance from HR.
Not everyone is suited to working in a virtualoffice environment. Not only must workers who go mobile or work at home learn to use the technology effectively, but they also must adjust their workstyle and lifestyle. Says Cornell’s Becker: “The more you get connected, the harder it is to disconnect. At some point, the boundaries between work and personal life blur. Without a good deal of discipline, the situation can create a lot of stress.”

Managers often fear that employees will not get enough work done if they can’t see them. Most veterans of the virtual office, however, maintain that the exact opposite is true. All too often, employees wind up fielding phone calls in the evening or stacking an extra hour or two on top of an eighthour day. Not surprisingly, that can create an array of problems, including burnout, errors and marital discord.

IBM learned early on that it has to teach employees to remain in control of the technology and not let it overrun their lives. One of the ways it achieves the goal is to provide its mobile work force with twoline telephones. That way, employees can recognize calls from work, switch the ringer off at the end of the workday and let the voicemail system pick up calls.

Another potential problem with which virtual employees must deal is handling all the distractions that can occur at home. As a result, many firms provide workers with specific guidelines for handling work at home. “It’s essential to give the company one’s full effort,” says Great Plains’ Dreyer. “We expect that those who work at home will arrange child care or elder care.” And although she recognizes there are times when a babysitter falls through or a problem occurs, “If someone’s surrounded by noisy children, it creates an impression that the individual isn’t working or is distracted.”

Still, most say that problems aren’t common. “The majority of workers adjust and become highly productive in an alternative office environment,” says HOK’s Goffigon. “The most important thing for a company to do is lay out guidelines and suggestions that help workers adapt.”

At many firms, including IBM, HR now is providing booklets that cover a range of topics, including time management and family issues. Many companies also send out regular mailings that not only provide tips and work strategies but also keep employees informed of company events and keep them ingrained in the corporate culture.

This type of correspondence also helps alleviate workers’ fears of isolation. IBM goes one step further by providing voluntary outings, such as to the Indianapolis 500, for its mobile work force. Even without these events, however, virtual workers’ isolation fears often are unfounded. “The level of interaction in a virtual office actually can be heightened and intensified,” says Becker. “Because workers aren’t in the same place every day, they may be exposed to a wider range of people and situations. And that can open their eyes and minds to new ideas and concepts.”

However, dismantling the traditional office structure can present other HR challenges. One of the most nettlesome can be dealing with issues of identity and status. Workers who’ve toiled for years to earn a corner office suddenly can find themselves thrown into a ubiquitous work pod. Likewise, photographs and other personal items often must disappear as workspace is shared. But solutions do exist. For instance, when IBM went mobile, top executives led by example. They immediately cleared out their desks and began plugging in at common work pods.

Not surprisingly, one of the most difficult elements in creating a virtual office is dealing with this human side of the equation. Indeed, the human factor can send shock waves reverberating through even the most staid organization. “When all the accessories are stripped away, a company must redefine its success indicators,” says Goffigon. “They’re saying they don’t just value people sitting at their desk, they value results. Suddenly, there’s a huge paradigm shift in the workers’ heads. It’s a tremendous challenge for HR.”

According to Goffigon, this challenge requires HR to become a proactive business partner. That means working with other departments, such as real estate, finance and information technology. It means creating the tools to make a virtual office work. In some cases, that may require HR to completely rewrite a benefits package to include a $500-or $1,000-a-month stipend for those working at home. That way, the company saves money on real-estate and relocation costs, while the employee receives an incentive that can be used to furnish a home office.

HR also must change the way supervisors evaluate their workers. Managers easily can fall into the trap of thinking that only face-to-face interaction is meaningful and may pass over mobile workers for promotions. Great Plains has gone to great lengths to ensure that its performance-evaluation system functions in a virtual environment.The company asks its managers to conduct informal reviews quarterly with telecommuting employees, and formal reviews every six months. By increasing the interaction and dialogue, the company has eliminated much of the anxiety for employees—and their managers—while providing a better gauge of performance. In the final analysis, the system no longer measures good citizenship and attendance, but how much work people actually get done and how well they do it.

Adds Becker: “Today, the odds that a manager will find a specific employee at a desk on the spur of the moment isn’t always so great. People now have more channels of communication then at any time in the past. Face-to-face interaction is less important than ever before.”

Still, many experts point out that too much reliance on voicemail and E-mail can present problems. Although instantaneous messaging is convenient and efficient, it can overload virtual workers with too much information and not enough substance. “It isn’t what you communicate, it’s how you communicate. Without some human interaction it’s impossible to build relationships and a sense of trust within an organization,” Dreyer points out.

Sending workers offsite can boost productivity, while saving costs.
Those who have embraced the virtual office say that it’s a concept that works. At Pacific Bell, which began experimenting with telecommuting during the 1984 Summer Olympics in Los Angeles, employees routinely have reported 100% increases in productivity. Equally important: “They tell us that this fits into family and flexibility issues and that they enjoy working for the company more than ever before,” says Gary Fraundorfer, manager of HR quality communications strategy.

Emily Brassman, the company’s director of virtual office development, plunged into the lifestyle with unwavering commitment. She now spends three to four days a week at home, and schedules face-to-face meetings all on the same days. Using a notebook computer, portable printer and a separate business line in her home, she’s in constant touch with the office. “In most cases, nobody has any idea where I’m working. It’s completely invisible to them.”

Although the final results aren’t yet in, IBM’s mobile work force reports a 10% boost in morale and appears to be processing more work, more efficiently. What’s more, its customers have so far reported highly favorable results, says Andre’a Cheatham, manager of the National Mobility Project. “People are happier and more productive because they can have breakfast with their family before they go off to client meetings. They can go home and watch their child’s soccer game and then do work in the evening. They no longer are bound by a nine-to-five schedule. The only criterium is that they meet results.”

And at Chiat Day, the outcome speaks for itself. After the Los Angeles earthquake in January, the organization used virtual-office technology to link work teams and keep operations running at full speed. Now, long after the disaster, employees adhere to their own timetables and work preferences. “There’s a fundamental change in philosophy,” says Horton. There’s a focus on quality and not physically being someplace.”

In the end, says Becker, HR must become a major player in the transformation and keep both management and workers on track. “There’s a need to support people through all the changes,” he says. “And that requires mechanisms to encourage discussion and ways to solve problems. Migrating to a virtual office can be a positive and rewarding experience—but only if all the pieces are firmly in place.”

HOK’s Goffigon says that she believes society is on the frontier of a fundamental change in the way the workplace is viewed and how work is handled. “In the future, it will become increasingly difficult for traditional companies to compete against those embracing the virtual office,” she says. “Companies that embrace the concept are sending out a loud message. They’re making it clear that they’re interested in their employees’ welfare, that they’re seeking a competitive edge, and that they aren’t afraid to rethink—even reengineer—their work force for changing conditions. Those are the ingredients for future success.”

In today’s highly mobile environment, many companies are discovering that conventional corporate offices no longer fit the bill. They’re expensive to maintain, and they’re inconvenient for telecommuters and road warriors, who find themselves spending hours driving to and from a far-flung location. As a result, many firms now are turning to smaller telecommuting centers—places that offer a full-fledged office in a convenient location. At these sites, an employee can receive secretarial aid, make photocopies and pick up mail one or two days a week. Quite simply, they can step into a corporate environment that’s equipped for their specific needs.

It may be the next great wave in alternative work environments. Already, a growing number of companies—including Pacific Bell and Panasonic—are creating their own satellite offices, and independent firms now are beginning to create shared telecommuting centers to cater to the growing demand. In Valencia, California, located approximately 35 miles from downtown Los Angeles, the Newhall Land and Farming Company has created a prototype for corporate America. The 30,000-square-foot facility—a converted warehouse—is equipped with state-of-the-art offices, conference rooms, free parking and convenient freeway access. Companies—including CareAmerica, Cigna and Great Western Savings—have already leased space.

“The center provides a place for telecommuters and others to work in their own community,” says Jim Backer, director of marketing for commercial and industrial real estate at Newhall Land and Farming. “People find they no longer have to spend hours on the freeway getting to and from the office. It has improved their productivity and the quality of their lives.”

Newhall Land and Farming has gone to great lengths to satisfy companies seeking space. All office suites are separate and secure. Furnished and unfurnished offices are available. And the overall environment has been designed and laid out by consultants who specialize in alternative worksites and technology issues. To be sure, nothing is left to chance.

So far, the center has proven an overwhelming success. Not even a year after it opened the facility, Newhall Land and Farming is leasing at 100% occupancy. And some of the firms—such as Chatsworth, California-based CareAmerica Health Plan Inc.—have discovered an array of supplemental benefits. During last January’s earthquake, for example, the HMO provider used the site for recovery and emergency operations. Using computers, phones, modems and faxes, personnel were able to keep the company online during trying times. Afterwards, commuters, who were cut off from their usual worksites by impassable roads and freeways, were able to set up shop and continue with minimal disruption.

Consultants such as Santa Monica, California-based Hellmuth, Obata & Kassabaum’s Loree Goffigon, believe that independent telecommuting centers soon may appear at airports and a variety of other locations. “The problem with a lot of business centers is that they’re ugly and low-tech,” says Goffigon. “By fashioning the concept for the ’90s and providing cutting-edge capabilities, non-traditional workers have far more options available. Ultimately, that benefits them and the company.”

One of the more fascinating aspects of work-flow automation is the emergence of agents—powerful software programs that automate tasks. They’ve been likened to robots and described as the next great breakthrough in computer software. These mini-programs are able to monitor a computer system, and when they detect a specific set of conditions can tackle tedious and time-consuming tasks in ways of which humans only can dream.

For example, Palo Alto, California-based Hewlett Packard Co. uses an agent supplied by Santa Clara, California-based Edify Corp. to automate quarterly wage reviews for 13,000 salespeople. The PC-based software dials into the personnel system and downloads a list of whom works for each of 1,200 sales managers. Then, using electronic mail, it sends each a list for verification. Managers e-mail changes back to the system, which automatically updates any changes. Finally, the agent repeats the process—this time sending proposed salary changes for review. The managers either can approve the raises or make modifications by calling into an interactive voice-response system that uses telephone buttons to update records. The end result? H-P has a computer handling the work of 20 HR administrators.

Agents can manage dozens of tasks. Like Edify’s Electronic Workforce, they can scan the highways and byways of cyberspace, scheduling meetings, creating dynamic to-do lists, managing highly efficient “in-boxes” and automating information retrieval. They can even send out faxes or mail when a predetermined set of conditions occur. “The tools are powerful for moving information in and out of HR systems,” says Edify’s president, Jeffrey Crowe.

Atlanta-based Dun & Bradstreet Software, which markets a program called HR Stream, also has introduced agents into its software. Using an embedded workflow approach, the program not only collects and organizes data, it automatically routes activities, reports, mail and other information to users who need it. It can collate work, create to-do lists and even complete tasks while employees are at lunch or at a meeting. And, the software is driven by user-definable tables, which means it easily can be configured and reconfigured to meet constantly changing needs.

Although agent software can vary from the invisible to the obvious, it almost always mimics what humans do, but with far greater endurance and accuracy. For example, Santa Clara, California-based National Semiconductor Corp.’s Career Opportunity Program System—which provides 25,000 employees with online job listings—automatically updates itself by logging on to the HRIS computer every night. It can grab open requisitions and make them available online. Anyone who accesses E-mail and applies for a position generates electronic forms. Often, this data blaze through the system with little or no human handling.

Not surprisingly, all this is having a profound effect on how workflow automation affects human resources. “The days of the centralized, departmental hierarchy are fast disappearing,” says D&B’s Bill Busbin, director of HR product management. “An HR department needs to get information to the true end-users—line managers and other personnel—so they can perform their functions more efficiently. Just because people have client/server systems hooked into local or wide area networks doesn’t mean they’re cutting through the information bottleneck. The software has to fit their specific needs.”

In the history of corporate America, few companies have been forced to endure such a cataclysmic restructuring as Armonk, New York-based International Business Machines. And when it embarked on a thorough examination of the entire organization, human resources was near the top of the list. “It was immediately clear that we were terribly suboptimized,” says George Krawiec, general manager of IBM’s WFS Workforce Solutions Group. It turns out that IBM’s 36 human resources centers around the United States each had its own information technology department—something that contributed to plenty of repetition. Krawiec says: “We were a technology company that was not using technology effectively.”

So, in 1991, IBM set out to revamp human resources. One of its first decisions was to consolidate its benefits administration department. The firm immediately moved staff from the 36 locations around the U.S. into a new state-of-the-art service center in Raleigh, North Carolina. The firm equipped representatives with PCs capable of conducting powerful hypertext searches on benefits policies. It then divided the representatives into two work groups. Tier 1—the largest group composed of generalists—would receive the most basic questions, which make up the majority of the calls. Tougher questions would go to a smaller number of Tier 2 specialists. The result: IBM found that it no longer needed to staff to the highest level of need. Using call-path technology and a redesigned workflow, it was able to cut 40% of the original staff and handle a record number of calls.

And that was only the beginning. Today, a new salary system routes pay-increase requests to the proper person for approval. Once it’s signed off, the confirmation returns to the manager initiating the request and is sent automatically to payroll for processing. A 24-hour interactive voice-response system processes upwards of 170,000 benefits requests a year. Within 24 hours, it provides an employee with data on his or her retirement plan. In the past, a clerk had to pull the file, sit down with a calculator and figure out the employee’s status and mail the information out. That could take several days.

Some of the workflow automation the company’s using is downright innovative. For years, IBM operated a paper-based employee suggestion program. When a good idea came in, it could languish for weeks or months before being routed to the right department. But two years ago, it opted for technology that could fully automate the program. Now employees log onto E-mail, type in the word idea and access a menu that prompts them for information. Once they send their ideas off, the information is zapped to the appropriate department for evaluation. If ideas have merit in other divisions or departments—whether it’s Austin or Boca Raton—the computer sends them there automatically.

All this new technology is beginning to make its mark. Since 1987, IBM has slashed its HR work force from 3,300 to 900—and it hopes to make further cuts in the future by leveraging the technology even more. “We have pushed administrative tasks downward and outward,” says Krawiec. “We’re forcing the people who should be responsible for an action to handle it.” Yet, he’s also adamant about not merely dumping human resources work on to others. “I’m not interested in transferring the work of five HR people on to others in the organization. I’m interested in making things easier and more streamlined. Technology serves as the underpinnings for achieving that goal.”

Agents
Specialized soft-ware programs—or bits of programs—that detect specific conditions and then act on them in a highly efficient manner

Call Path Technology
A computerized phone system that routes calls as efficiently as possible, thus reducing the need for human intervention

Client/Server
An architecture that shares processing between the desktop (client) and the back end (server). The system is more efficient than a file server, which requires the PC to handle all processing after receiving the file from the server

Decision Support Solutions (DSS)
An application that enables users to make strategic decisions from information contained in the corporate data base

Document Imaging Processing
An automated system of scanning paper-based documents into a computer so they can be indexed and accessed electronically

Embedded Workflow
Software that operates nearly invisibly and provides an efficient way to process and route data

Groupware
Software that allows networked employees to exchange data and collaborate on documents and projects. Typically, groupware automates processes—such as document management, benefits and online listings—by more efficiently routing information across the network and to the appropriate person

Hypertext
Software that allows a user to access additional data or jump to another portion of a document by double clicking a mouse or hitting the enter key on an indexed word or an icon

Interactive Voice Response
A computerized system that uses the telephone to guide callers through a step series of actions. Selections—made using touch-tone buttons—prompt the computer to route or compile data

Local Area Network
A group of PCs interconnected so that data can be exchanged and shared

Optical Laserdisc
A disk-based storage medium that allows a user to access and view huge amounts of data via a PC

Rules-based Routing
Software that uses an organization’s rules and policies to automatically route a document to the correct individual or department

User Definable Tables
A data base that allows users to easily update and change information, thus providing the tools to redirect workflow according to an organization’s changing needs

Wide Area Network (WAN)
Groups of local area networks that are interconnected to allow users to exchange and share information over a wide geographic area.

When it comes to the latest corporate buzzwords, groupware—software that allows a group of employees to freely exchange data and collaborate on documents and projects—definitely is at the top of the list. And there’s no groupware program that has garnered as much buzz over the last few years as Lotus Notes—an integrated program that allows users on networked personal computers to share information and work together in real time.

Its appeal is obvious. Workers are able to use PCs in much the same way they would interact in the non-cyber world. As easily as using the telephone, they can connect to whomever they choose and pass information—text files, images and sound bytes—to anyone else who’s tied in. Group-ware also can automate certain tasks and provide valuable links to mountains of data. And it offers remarkable reporting capabilities. A manager quickly can determine where an electronic document is in the system, and then approach an employee to find out why the document is still sitting on his or her desk.

But groupware—at least in its current version—offers only a limited form of workflow technology. Nevertheless, Cambridge, Massachusetts-based Lotus Development Corp. has managed to build a system that shows the power and efficiency of groupware in the HR setting. Every form used by human resources now is electronic instead of paper. A clerk may initiate a transaction, send it to a supervisor for approval, who can then pull up a file using a document link. Those who are out of the office can use their notebook PC to access E-mail—in which a list of current requests might be stored. “A piece of paper that previously had to go through a series of signature loops and could get stalled for a week or two now is processed in minutes or hours,” says Kay Meckes, director of HR at Lotus.

The software giant has used the technology to improve other processes as well. It used to be that Lotus had no idea how many callers were dialing into HR or in which topics they were most interested. However, after setting up a Notes module that could track calls—human resources representatives simply type in a name or category on their PC and the system queries the data base to automatically populate much of the remaining data—it now knows what its strengths and deficiencies are. “We can see that if 40% of the calls are from people confused about the benefits program, we need to design better procedures and training,” Meckes explains.

Employees use the same technology to update their employment records. From their own PCs—or even from hotels across the country—they can pull up a change-of-address form via E-mail. They simply type their name, and the system automatically fills in other data, including employee number, social security number, department and date of birth. Once the changes are made, the E-mail messages are returned to the data bases, where they’re updated.

According to Meckes, groupware has made HR faster and far more professional. Without adding a single employee to the human resources payroll, the department has handled the addition of 700 new employees in the last year. That’s in addition to the 3,500 that already were working at Lotus. The company, meanwhile, is feverishly at work on a new version of Notes that will embrace sophisticated software agents (see “New Technologies Provide Agents for Change”) and full-blown workflow automation. Says Meckes: “The future of HR is wide open. Groupware technology is going to drastically change the way work gets done and the roles people play.”

Michael Traskey remembers the dark ages of HR automation. Of course, that was just two years ago. Back then, every time the director of organizational development at McCormick & Company, Inc. wanted to fill a management position internally, he had to wait for days as faxes and voice-mail messages sloshed back and forth to HR offices in California, Canada and the UK. Personnel managers in the field pored over files and employees’ qualifications before forwarding lists to Traskey, who then waded through them to find the right candidate. In the end, it was a highly inexact science. “We couldn’t always locate the best candidate as quickly as we would have liked,” Traskey recalls. “It was slow and frustrating.”

No more. Today, managers at the 104-year-old, $1.5 billion (sales) spice company can tap into a central data base of everyone in the 7,700-employee organization, including their education, training, language skills and preferences. “We wanted to automate the internal resume process and have a system do the searches for us,” Traskey explains. “If we needed a person with manufacturing experience, an MBA and a willingness to relocate to Morocco, we didn’t want to have to spend weeks trying to find him.” McCormick’s sophisticated new computer system can spit out a list of qualified candidates in minutes rather than days. Perhaps more importantly, it’s now possible for managers virtually anywhere in McCormick’s far-flung empire to do the search. That relieves the company’s central HR staff of the burden of doing every search while also giving managers away from the corporate center greater control over their operation’s destiny.

Traskey isn’t the only HR executive diving headfirst into the information revolution. All across America, companies large and small are finding new and innovative ways to use computers to collect, store, process, analyze and share information. That allows HR departments to tear down many of the barriers between themselves and the rest of the company—a key step in becoming equal partners in corporate affairs.

The new breed of system often uses desktop personal computers (PCs) linked together into so-called client/server networks to process information in far more efficient ways. At the core, or hub, of each network is a computer dedicated to two tasks: controlling the traffic on the network and storing data in a sophisticated relational data base. This central computer, called the server, may be anything from a mainframe to a powerful PC. Meanwhile, desktop computers, called the clients, are used by individuals to accomplish tasks ranging from data entry to sophisticated analysis.

This technology is breaking down organizational barriers, getting work off HR managers’ desks, and allowing those closer to the action to handle tasks and make decisions. The result? HR no longer is perceived as an entity that merely loads paperwork and bureaucracy onto the backs of other departments. It’s now viewed as a business partner that adds value and solves problems. “It is transforming human resources from a transaction-oriented entity into a department that can provide valuable insights into the workings and capabilities of the organization,” says William E. Berry, chairman of the Consulting Team, Inc. of West Palm Beach, Florida.

Indeed, the current generation of hardware and software is empowering workers in new ways. Sitting at a desk, an HR professional can do sophisticated spreadsheet modeling or succession planning—with a vast corporate data base at his or her fingertips. Software can automate recordkeeping by allowing employees to update appropriate portions of their own files at terminals or kiosks, yet it also protects everyone’s privacy and corporate confidentiality. New programs can track hiring, firing and promotion patterns and provide details about how managers deal with women and minorities; offer sophisticated modeling for downsizing or reengineering efforts; even handle changes in business rules and government requirements, so that an HR department can change employment criteria without reprogramming or aid from information services (IS).

Most importantly, today’s PC-based client systems are far simpler to use than the mainframes of the 1970s and ’80s. Now usually equipped with a user-friendly graphical user interface (GUI) made possible by operating programs such as Microsoft’s Windows, IBM’s OS/2 and UNIX, these “machines,” as technology buffs call computers, eliminate the need for memorizing arcane computer codes and help streamline data collection and processing. In many cases, they provide easily understood icons that identify key concepts and processes. Ultimately, a properly implemented client/server system moves critical data out of the thick-walled fortress of IS and into the hands of users.

But progress doesn’t come without a price. Equipment can be expensive, changes can be time-consuming and stressful, and there’s no guarantee that the new system—despite hype and rosy testimonials—will ever perform up to expectations. “You can spend months researching vendors and studying systems, only to find yourself back at ground zero,” complains Gary Montgomery, director of quality management and HR at Ropak, a plastic manufacturing and container company located in Fullerton, California.

Nevertheless, a growing number of companies are migrating to the new technology to provide greater flexibility and capabilities. “HR is changing, and in order to keep up with the times it has to have the tools to be able to do the job,” says Brenda Miller, an HR program manager at Houston-based Compaq Computer Corp. “Today, management wants and expects answers—they want to know about impacts and costs and what effect various scenarios might have on the company. It is HR’s responsibility to provide that.”

Technology is evolving rapidly.
The evolution of computers in HR is remarkable. Only a decade ago, most users had to interface with huge mainframes tucked away in a data center, usually at corporate headquarters. Accessing the system via a dumb terminal (a screen and keyboard linked to the remote computer) required knowledge of hundreds—if not thousands—of codes. And if you didn’t remember the entire sequence for processing a new hire or benefits claim, you could easily wind up with errors in the system.

PCs changed all of that. Configured into networks and able to process data at the work site, they allowed users the hands-on access they desired. What’s more, they brought greater functionality and customization to HRIS software. Most end users could learn how to operate an IBM PC-, PC-clone- or Macintosh-based system quickly. And PC-based networks and software were only a fraction of the cost of installing and operating a mainframe.

But there was still one problem. Large tasks such as payroll couldn’t be downsized easily to a PC environment. And data bases containing employee records couldn’t easily be accessed within a network. So while local area networks (LANs, or groups of computers wired together to provide mutual access to files and data) and wide area networks (groups of LANs communicating with each other from separate locations) quickly emerged as a connectivity tool, limitations—including speed when the system is in heavy use—dictated a new solution.

Enter the client/server model.
Unlike a conventional network where the file-server (the computer providing data to the user) acts as nothing more than a repository of information—sending entire files to workstations upon request—client/server architecture allows a user to enter a request and receive only the specific data needed. Processing and manipulation of the data is handled at the workstation. Because computing power is devoted to the location where it’s needed, traffic over the network is lighter and the entire system operates faster. The server—the mainframe, midframe or high-powered PC that stores the data (typically referred to as the back end)—isn’t overtaxed by trying to handle all the processing.

Today, newer and more powerful superservers—high-powered PCs specially designed for the task—are accelerating the trend. Companies like Compaq and Netframe are making solid inroads despite a hefty $13,000 to $500,000 price tag per unit. The reason? The systems use several microprocessors to run networking software efficiently, and provide far more flexibility than off-the-shelf PCs retailing for $3,000. They can transfer data faster, provide built-in redundancy to avoid data loss in the event of a hard disk crash, and can be easily expanded.

Mainframes still have an important role to play, even in the client/server environment. For example, McCormick’s Traskey opted to use an IBM-95 mainframe linked to hundreds of PCs connected over local- and wide-area networks. The company installed elaborate succession planning and internal resume software from Annandale, New Jersey-based Nardoni Associates, Inc. (NAI). Today, data flows like lightning between offices across town and across the world. And Traskey, from his desk at the firm’s headquarters in Sparks, Maryland, can gather information simply by tapping a few keys on his PC.

“Client/server is a marriage that offers advantages greater than the sum of the parts,” says Carl Hoffman, president of Hoffman Research Associates of Chapel Hill, North Carolina. Hoffman says that systems have evolved considerably over the last couple of years. Not only has the hardware become more powerful, the software is driving changes in the way people work. “Software has changed from transactional—where people fill out forms on a computer screen and enter the information—to systems that provide detailed insights and analysis.”

Meet the next generation.
As wonderful as the first generation client/server networks appear, the emerging second generation offers even more. “The first generation introduced a graphical user interface—such as Windows—at the front end. That solved problems related to ease of use, but most of the computing burden was still on the server,” explains Kathy Urbelis, senior vice president of marketing at Integral, a leading HR software vendor. “Second-generation systems are breaking down the walls of incompatibility [among computer brands and software programs] and providing more computing muscle.”

This has a profound influence on HR. At Transco, a Houston-based energy company, Integral’s InPower HR allows human resources professionals to boldly go where they’ve never gone before. Not only does the Windows-based system allow everyone to benefit from event-driven processing—HR tasks are grouped according to a functional event and users are automatically led through all steps needed to process the various related transactions—the client/server system and relational data base can analyze data in new ways. Human resources managers can spot departments with excessive workers’ compensation claims or overtime, as well as managers who aren’t promoting women and minorities in acceptable numbers.

“The technology is allowing us to examine things in a completely different light,” says Kurt Basler, manager for payroll/HRIS at Transco. “We are finding significant ways to spot trends before they become significant. Instead of sinking under the weight of data, we are filtering it to find what’s really important.”

Like a growing number of companies migrating to client/server systems, Transco has embraced a relational data base on the back end. That allows end users—regardless of what type of computer or operating environment they are using on the front end—to access corporate data seamlessly. Such data bases—including those from Oracle Corp., Sybase Inc., Gupta Corp., Novell Inc. and Microsoft—are not only adding muscle to HR capabilities, they’re accelerating a trend toward open architecture and cross-platform capabilities. This means that the same data can be used by different HR offices or other departments regardless of what type of computer they have on their desks. “The reality is that today, companies use applications and different operating systems for different purposes,” says Integral’s Urbelis. Being boxed into one proprietary system reduces the flexibility and capabilities of any department.” Adds Ren Nardoni, president of Nardoni Associates Inc., “Open architecture greatly reduces the need to constantly create custom computer codes.”

Second generation client/server systems offer other advantages as well. At Compaq, HR Program Manager Brenda Miller says the firm is presently migrating from a mainframe environment to a client/server system incorporating one of the company’s high-end servers and networked PCs. That will translate into less HR time spent maintaining records, and less training on the mainframe. Because the system is able to instantly update changes in legislation and company policy—and then use the information to affect the way employee records are handled—it also means fewer mistakes and potential problems.

Not surprisingly, software vendors have been eager to jump on the bandwagon. Recently, many have begun to pull business rules and legislative changes out of the application’s programming code. Instead, they are creating business rule tables that can be managed and changed by the end user, which allows HR professionals to take control of the data. “It is making HR less dependent on IS; it is allowing the company to devote more mainframe processing time to other needs,” explains Laurie Swift, manager of information systems for Southern Company Services, an Atlanta-based electric utility.

Southern Company is a classic case of how a well-implemented client/ server system is able to neatly tie together frayed ends. The firm previously used a hodgepodge of systems, including an old mainframe that was unable to handle anything other than simple batch requests. In addition, HR couldn’t access data real time—there was often a lag of days or weeks until files were updated. It had different versions of the company’s data base on different systems, and the firm had six different payroll systems and more than 500 different data software systems. As if all of that weren’t enough, the 25-year-old HR system was a dinosaur.

“In the old environment, nobody knew the right answer. Depending on what system you were using, you would get entirely different information,” says Swift. Moreover, the HR department simply couldn’t keep up with changes in tax laws and benefits, and IS professionals had to constantly tweak the system. “We had HR system professionals spending all their time handling basic functions,” she adds.

It was costing the company time and money. And upper management didn’t let the fact go unnoticed. So, over the last few years, Southern Company Services, with 30,000 employees spread among six different companies, has implemented second generation client/server technology. Although it continues to use a mainframe for data storage and processing, networked PCs based on Intel Corp.’s high-speed 486 microprocessor are linked to a data base and provide instantaneous data to 1,200 workstations. In the end, the PowerSoft system, which combines HR recordkeeping with payroll functions—is expected to save the company $5 million a year. It’s also expected to slash data redundancy by 70%.

Because today’s client/server systems use relational data bases, linear data processing models used by mainframes (which tackle one task or process a single report at a time) are vanishing into a brave new world that’s three-dimensional. Here, computers mimic the work patterns of humans. Events-driven processing lets HR know what real-world events need to occur when an employee marries, changes positions or is terminated. In the last case, for example, the system can prompt the user to handle that transaction—including collecting keys, company credit card and changing access codes. It also can provide COBRA data, open the position to recruitment or process a succession-planning module. Human resources doesn’t have to depend on memory or a long checklist to process the necessary data and forms. Most importantly, the entire process can take hours instead of days or weeks.

But the modeling capability of the software may be the most astounding feature of all. It’s allowing HR departments to entirely reengineer themselves and become a business partner for the first time. Programs like Ross Systems’ Human Resources CS Systems, Tesseract’s Intuition and Human Resource Manager, NAI’s Succession Plus and Integral’s InPower HR, linked to relational data bases, can offer blue-prints for different actions and scenarios. They can build a model of an entire enterprise able to recognize how human resources and other departments interface and affect one another. Such systems can project how 10,000 layoffs would affect the organization—not only in bottom-line costs, but training, skill levels and overall productivity. They can measure how changes in compensation, benefits and training would affect the firm in six months, a year or five years.

“Today, it’s not only important for HR to be able to do its own analysis, but also play a role in shaping the direction of the company,” says Compaq’s Miller.

Out of HR central.
Over the years, most HR departments have found that they operate most efficiently when operations are centralized. It isn’t difficult to understand why. Updating data bases and files at secondary locations usually means shipping a steady stream of floppy disks or tapes back and forth. Trying to coordinate actions between offices in, say, London and Los Angeles can translate into a torrent of phone calls and faxes. The larger the company, the bigger the potential headaches.

The new generation of client/server technology is changing all of that. It’s far simpler for firms to create decentralized departments and divisions—offices linked together without regard to walls, buildings and geographic distances. Although the information often is stored in one location, employees can access the data from a workstation anywhere within the company via a local or wide-area network. Security measures can effectively create levels of access, so that key data remains private.

Those who have embraced the technology say it is changing the way they work. At Transco, for example, employees maintain their own personnel records at PC-equipped kiosks located throughout the company. If there’s a change of address or phone number, it’s the employee’s responsibility to make sure the files are up-to-date. At Illinois Power, approximately 600 of the more than 1,700 employees who participated in last year’s benefits enrollment used kiosks equipped with a PC and Tesseract software. They could examine how different choices would affect their paychecks, as well as fill out electronic forms. Once they had punched in their selections, the results were immediately available to HR. “The idea was to create a system that could get employees more involved in the process, reduce errors and decrease the demand on staff,” says Susan Anselmo, supervisor of applications development at Illinois Power.

Yet she recognizes that’s only part of the picture. The client/server system, which also includes dozens of other tools, is helping make the company more competitive and better equipped to handle strategic decisions. “HR is clearly moving away from a centralized structure,” Anselmo says. “Line managers, area managers and others in the field have the tools to input data, analyze information and make decisions.”

To be sure, slick GUIs joined with networks and data bases are a powerful combination. Yet, as with any complex technology, it isn’t always easy to get the machinery to fly. The biggest challenge, HRIS experts say, is sorting through the myriad of choices. “There’s an infinite array of possibilities,” says Hoffman. He suggests HR departments focus on the software side—educating themselves about what programs offer the greatest benefits and ease of use, and provide input to IS. “Hardware is something that HR shouldn’t worry about.”

Debi Luddy, manager of HRIS development for Minnetonka, Minnesota-based Cargill Inc., admits that it took her firm eight months to decide on software. After developing a list of “musts” and “wants,” the company approached the vendor of choice. But the firm held off on signing a contract until HRIS had examined all implementation issues. By creating a ranking system based on points and asking vendors to perform on-site demos of their products, Cargill was able to make a choice that worked well.

Then there’s the cost issue. Even small firms can afford entry into client/server hardware and software, which can run as low as $10,000. At the other end of the spectrum, systems suitable for large companies can easily run into the millions of dollars, with software alone costing $30,000 to $100,000. And an integrated system that can handle compensation plan design, benefits enrollment, administration, statutory compliance issues, staffing functions, disciplinary-action management and business-rules management can run into the mid six figures or higher.

Moreover, according to HRIS specialists, not all costs are immediately obvious. “You may have to relocate people, and you will definitely have to train people,” says Betty Kagan, senior principal at Technology Solutions Co. in New York. In fact, some experts suggest that the costs of downsizing a computer system can dwarf by 10 times the hardware and software expenditures.

Making the transition without disrupting work flow is another vexing issue. It isn’t unusual for a client/server system to require a year or more to install and debug—and during that time an HR department must not only modify the way it functions internally, but learn to use the new software. “A lot of HR departments find it difficult to reinvent themselves from a mainframe to a client-server shop,” warns Kagan. “There aren’t a lot of people with the appropriate skills, and there’s the task of figuring out what kind of organization you want to set up. Lines blur when you have a decentralized organization. It requires a good deal of planning.”

Not surprisingly, the companies that succeed are the ones that take the process in stride. For instance, when McCormick’s Traskey committed to a client/ server system and wide-area network to implement its succession-planning software, management decided to make it a four-year mission. “You have to crawl before you can walk,” says Traskey. At Compaq, the migration to a second generation client/server is taking well over a year. “It is a methodical process,” explains Miller.

The transition does not always lead to a happy ending. Ropak’s Gary Montgomery spent nearly a year in search of a client/server system that could handle payroll and HR in both the U.S. and Canada. He also needed a system that could run UNIX but provide cross-platform capabilities and sophisticated report generation. He eventually threw up his hands in disgust. A major software vendor—whom Montgomery won’t name—promised nothing less than a turnkey operation, but instead it delivered a system that required high-level programming. Now, he’s back to searching for a new system. “Most people get burned,” Montgomery says, “not because they aren’t smart, but because they don’t know the right questions to ask.”

Nevertheless, second generation client/server technology is rolling through corporate America. It’s helping transform HR from simple administrators to strategic planners who are influencing CEO decisions. “The straight mainframe will continue to be around for years to come,” says Nardoni Associates’ Ren Nardoni. “But there is no other system that can provide the flexibility and power of a client/server environment. This is the basis for the entire process of reengineering. This is the basis of the Information Superhighway.”

When Atlanta-based Southern Company peered underneath the hood of all its computer systems a couple of years back, it never expected to find hundreds of different software and data-base programs—many used for the same tasks. “The entire system had gotten completely out of control,” recalls Laurie Swift, the company’s information systems manager. “There was no standardization of data, and in many cases it was difficult to exchange or share information.”

Eventually, Southern Company cleaned up and standardized its system, using client/server architecture. But it is hardly the only example of how things can spiral out of control with today’s PCs and LANs. From Seattle to Saratoga, companies large and small increasingly are finding they have data that isn’t being shared efficiently—often resulting in extra clerical load and an inhibited ability to make strategic decisions quickly and efficiently.

But HRIS experts say that a well-designed data base and software system can eliminate many of these problems. “Current business trends give HR managers more reasons than ever to seek the strategic benefits of integrating once separate data bases,” says Zena Brand, vice president of HRIS marketing for ADP, Inc. in Roseland, New Jersey. “An integrated payroll/personnel data base uses the same, consistently defined reservoir of data. Once a record is entered, it is immediately and continually available for analysis and reporting. Ultimately, it allows management to restructure HR and payroll along lines that are optimally effective to the entire organization.”

Of course, one of the pitfalls of today’s high-speed computers is that, in many cases, they’ve simply made inefficient processes faster. But an increasing array of vendors, including ADP and Rockville, Maryland-based PowerPay, are integrating packages to exploit the power of today’s client/server systems. In PowerPay’s case, the software can run off several PC servers to process checks for upwards of 25,000 employees each period. HR data—including benefits administration and general HR data—is available from anywhere on the network, as long as the user has security clearance to obtain the data. Moreover, the system works on any platform.

“Relational data bases provide enormous reporting tools,” says Kurt Basler, manager for payroll/human resource information systems at Transco Energy Company in Houston. “They are easier to work with, they are powerful and straightforward. Building a software system on top of a relational data base makes a lot of sense.”

Adds ADP’s Brand: “Integrated data bases support many of the critically important strategic business objectives of the 1990s, including reengineering, decentralizing human resources and financial data, the ability to use outsourcing, data quality improvement, and creating enterprise-wide executive information systems that incorporate all relevant financial and HR data.”