Author: Shari Caudron

The weary group of corporate vice presidents shuffled into the conference room for yet another emergency strategy session. The reason? Same as it was the last three times this happened: Competition is up, contracts are down and costs must be cut—now. But this time, the desperate CEO at the head of the table adds another request. “Can you please do something about the morale around here?” he pleads. “I know times are tough, but if we don’t find some way to perk up these people we’ll never turn this place around.”

How right he is. When employees share that indefinable sense of spirit, enthusiasm and pride called morale, they’re more than willing to help companies achieve their goals. Problem is, many organizations suffer from low morale because employees don’t have the vaguest idea what those goals are to begin with. If you’re searching for ways to elevate the spirit of your workers—and who isn’t?—give them something to believe in, provide hope for the future and lead them there.

Focus on growth.
Nothing saps esprit de corps quicker than an absence of positive objectives. “Most companies today are focused on restructuring, reorganizing and reengineering,” explains Robert Tomasko, management consultant with Arthur D. Little in Washington, D.C. Because these programs are designed to fix problems, the problems become the focus of the employees’ attention. They start worrying more about how the pie is going to be sliced rather than on how the business will grow. They become protective, fearful and eventually, demoralized. According to Tomasko, what more companies should be doing, and aren’t, is focusing on growth. “This gives employees a sense of purpose and a way to look beyond problems and toward new opportunities,” he says, “both of which help boost morale.”

Now some people will tell you high morale is the result of the way you treat people. But that’s not enough. Companies can’t just strive to make workers feel good without also communicating a sense of purpose. Without clear objectives, even well-cared-for employees will feel disappointed in their efforts. It’s the corporate equivalent of being all dressed up with no place to go.

Anaheim, California-based Odetics, a manufacturer of data management products, is a case in point. Recognized in the book, “The 100 Best Companies to Work for in America” by Robert Levering and Milton Moskowitz, Odetics scored high marks for being a fun employer—a characteristic that hints at sustained high morale. But CEO Joel Slutzky says, “We’ve earned a reputation as a fun company, but like any company, morale depends on what’s happening with the business at any given time. We’re not immune from highs and lows.”

Give them a flag to follow.
Odetics faced its first real morale challenge in early 1994 when one of its key customers bought a competitor. Overnight, the customer disappeared, taking 40% of one division’s sales and 10% of overall company sales with it. For the first time in Odetic’s history, layoffs were inevitable and its 600 employees were noticeably anxious. This was the first layoff. Would it be the last? “The way we were able to minimize employees’ fears was by developing a solid strategic plan based on growing the company,” Slutzky says. The plan was very specific, outlining the number of new customers Odetics was aiming for as well as setting a goal for revenue. The emphasis wasn’t on plugging leaks, but on building a stronger, better company.

The growth plan wasn’t developed in a vacuum. Employee meetings, hosted by Slutzky and the company’s HR managers, were held to discuss business challenges and gain employee input. Several suggestions were forthcoming, including one to cut the company’s training budget in order to save a few jobs. It wasn’t implemented, for good reason. At the time, Odetics had just begun implementing a companywide training program to give employees tools to help them with continuous quality improvement. “We told employees training was part of our strategic plan,” Slutzky says. “That we couldn’t grow the company without teaching employees about new technologies and without giving them new ways to improve our processes and cut time to market.” By tying all strategic decisions back to the growth plan, Odetics was able to keep employees focused on the future.

To reinforce this growth message, every time a contract is signed with a new customer, the good news is announced on the company’s public address system. Furthermore, earnings are charted in the company newspaper. “Success builds success,” Slutzky says.

In 1995, Odetics had two outstanding quarters in a row and by December, a successful third quarter appeared likely. Slutzky is gearing up to congratulate employees for Odetics’ successful turn-around. His focus on growth hasn’t diminished, however. His current challenge to employees is something he calls the 10/100 plan. “My goal is to get the stock price back to $10, which dropped to $4 when we lost the key customer last year, and to get annual revenue to $100 million.”

By making the growth goal specific and simple, Slutzky has been able to focus employees on the future and help them celebrate measurable results—both of which help boost morale. “We didn’t need a survey to know people were distraught over last year’s layoff,” he says. “But today, you can feel the excitement as you walk in the door.

“Yes, we’re a fun company to work for,” he adds, “but we pay attention to business first. If we were all madcaps and merry clowns, this company wouldn’t last a day. High morale comes as a result of knowing what you’re in business to do.”

Conversely, Bruce Court, vice president of mergers and acquisitions for Development Dimensions International in Pittsburgh, says nothing negatively impacts morale (which he defines as the cheerfulness of an organization) like the fear of the unknown. “You see this very clearly after a merger,” he says. In almost all cases, four things are likely to happen: turnover increases while productivity, quality and morale decrease.

Court cites the case of a pharmaceutical company that owned two medical equipment manufacturers in the same state. The honchos at corporate headquarters thought it made sound economic sense to put the two companies together in a sort of “arranged marriage.” The result was disastrous. Morale at the newly joined company went down the tubes because employees, who understood the goals of their original companies, had no idea what the merger was designed to do. “There was no sense of purpose, direction or guidance,” Court says. And people left the new company in droves. Exit interviews revealed that departing employees shared the same lament. “They told us: ‘We need a flag to follow.'”

Cultivate good leaders.
So why is it so hard for companies to communicate goals to employees? Isn’t that a routine part of doing business? Maybe so, but Court believes too many managers still hold on to the notion that information is power. “Executives may have a clear sense of purpose but there’s a black hole in middle management where key messages get in but never get communicated to the next link in the chain.” Even if they want to communicate, he adds, a lot of managers don’t have the necessary skills to do so.

“Leaders are definitely the key to keeping employees focused,” agrees Mary Schoenborn, acting HR manager for Great Plains Software Inc., in Fargo, North Dakota. At her company, leaders are so focused on the goal that they’ve generated 13 years of consecutive growth in the highly competitive financial software industry. “Programs designed to boost morale are great, but it’s the individual managers who keep the team strong,” she says. “They’re the ones who can individualize goals for employees.” Her company believes so strongly in management as the key to high morale that all managers receive extensive training in communication skills, especially in how to listen to employees and put their suggestions into action.

Hal Rosenbluth, CEO of Rosenbluth International, a travel services company in Philadelphia, believes listening to employees is key. For example, he has gained quite a reputation in management circles for the ideas presented in his book, “The Customer Comes Second.” His premise is that by caring, valuing, empowering and motivating employees, morale stays high and customer satisfaction can’t help but follow.

Pam Schmidt agrees. When she took over as director of membership and customer services for the Alexandria, Virginia-based American Society for Training and Development (ASTD) in 1993, she was greeted with a group of 20 employees she describes as scared, cynical, beaten down and unwilling to experiment. Sick leave was up, motivation was down. “I spent three months just listening to employees [talk] about what they felt the problems were,” she says.

Listening to employees benefits customers.
In the process, she discovered that the department, which provides services such as fulfilling publication requests for ASTD members, hadn’t changed its processes in 50 years even though membership had grown exponentially. Furthermore, the computer and telephone technology used by employees wasn’t able to keep up with increasing call volume. Members who didn’t hang up out of sheer frustration were put on interminable hold. By the time employees picked up most calls, members were irate and employees took the brunt of it.

It was obvious to Schmidt that new technology and processes were needed to turn the department around. So after listening to employees, she set a goal to eliminate distractions and disruptions to the customer-service process. “I wrote the plan and I worked the plan,” Schmidt says. “As cynical as employees were, they wanted something to believe in.”

With a concrete plan for process improvement in place, employees had something to work toward. They provided suggestions for technical improvements. They searched for more efficient ways to handle membership requests. And as each suggestion was implemented, they started to believe working conditions and customer satisfaction really could improve, which they did. In 1994, 16% of callers to ASTD’s customer-service center hung up in frustration. By August 1995, that number had been slashed to 5.6%. With each achievement, trust in the department increased and so did employee morale.

Can you quantify morale?
Today, there’s still some angst among ASTD employees because the change process isn’t over. But Schmidt says they’re much more willing to jump in and try to fix the problem. An even better indicator, she says, is that employees now laugh during weekly meetings. To what single thing does she attribute the turnaround? “We had a plan and the focus was external.”

Schmidt’s experience shows what a positive effect morale can have on customer satisfaction. But is there any way to quantify the overall bottom-line impact of high morale? Tomasko doesn’t think so. “It’s hard to make a strong case between employee morale and economic performance because some organizations have done great things without high morale,” he says. This may be true, but these companies probably didn’t do those great things for long.

Carol B. Rosebrough, general manager of Cox Communications Inc., a cable company with 13 franchises around Williamsport, Pennsylvania, believes high morale can be quantified, and she has done so. When Rosebrough assumed her current position in 1988, she inherited a workforce of 38 employees who’d spent years working in dismal working conditions with outdated tools and resources. Their lack of spirit had driven customer satisfaction to an all-time low. Over the years, by listening to employee complaints and gradually implementing their suggestions, Rosebrough has seen morale steadily improve. How does that translate to the bottom line? “Dollar for dollar, we increased cash flow by 55% between 1989 and 1994,” she says, “and revenue has jumped almost 42%.”

If your company is focused on growth and you listen to—and implement—employee ideas about how to achieve that growth, you can’t help but experience similar successes. In the end, when it comes to morale there are only two ways to go: gimmicks or growth. Gimmicks are those slap-happy motivational programs wherein a high-energy speaker comes in and whips employees into a frenzy of good feelings. Unfortunately, these programs are like aspirin: They only make the pain go away for a few hours. To make truly lasting changes in morale, you must find a way to release employees from the negativity that constricts them. And the best way to do that is by giving them that flag to follow.

Executives from Texaco Trading and Transportation in Denver are grappling with all the painful feelings caused by its downsizing almost two years ago—fear, depression, mistrust and betrayal. These aren’t outplaced workers experiencing these wrenching emotions, however. They’re employees who survived the layoffs.

“Just when we begin to think our jobs are safe, they change the rules on us,” says Brian McMillan (a pseudonym), an analyst with the company. “We don’t know who’s in charge, who we can trust or what we’re supposed to be doing,” he says. “The more unsettling it gets around here, the less productive we are.”

All across the country, companies such as Texaco Trading that breathed a sigh of relief at having managed their downsizings without mishap now are struggling with the realization that dealing with surviving employees is the real challenge. While companies go to great lengths to take care of outplaced workers through generous severance packages and job-placement assistance, little is being done to help surviving employees cope with the trauma of a downsizing or understand their roles in the new, leaner organization.

Indeed, many executives think surviving employees will be so relieved to still have a job that they’ll eagerly get down to business. But nothing is further from the truth. Often, any relief felt by employees soon is overwhelmed by a number of less-pleasant emotions, including pain, guilt, loneliness, depression and job insecurity. “This isn’t paranoia on the part of survivors,” says Frederick Miller of the Kaleel Jamison Consulting Group Inc., in Cincinnati, Ohio. “Their fears are reality-based.”

Believing they once had a job for life, survivors now question whether management can be trusted. They’re not sure if they should continue doing their old jobs or if something new is expected of them. Add to all this the physical and mental exhaustion that comes from overwork—because companies are better at downsizing people than they are the workload—and you have an organization in crisis. It’s no wonder only half the firms that downsized between 1989 and 1994 increased their operating profits, according to a study by the New York City-based American Management Association. Given these dismal statistics, why are the needs of survivors being overlooked in the overwhelming majority of organizations?

“Because there’s very little recognition that survivors have any needs at all,” says Harris Sussman, president of Workways, an organizational consulting firm in Cambridge, Massachusetts. Part of the problem is that to say the word survivor is to recognize there has been a slaughter. The word is too loaded. Also, it’s part of our culture to canonize survivors—to treat them as heroes. But even if companies do recognize survivors have special needs, there is an ugly Catch-22 involved: Companies downsize for monetary reasons, and programs to help remaining employees cost money.

To put it bluntly, that may be a good excuse, but it’s a poor reason. If you don’t spend the money to salvage something from the wreckage, your workers will resist any other organizational change effort you attempt. Worse yet, you’ll never get the company to where the restructuring was intended to take it in the first place. Survivors need emotional support, extensive communication from management, clear-cut job descriptions and career management assistance for a downsizing to be successful. After all, the remaining employees are the only ones who can turn your company around.

Be proactive.
Like any malady, the survivor syndrome, as it has come to be known, is best cured by preventing it from ever occurring. Compaq Computer in Houston laid off 2,000 people—15% of its work force—in October 1991 to reduce costs and more effectively compete with some of the lower-cost products on the market. Knowing employees would feel shocked and betrayed by the downsizing, the corporate HR department developed a comprehensive communication campaign about the layoff before it occurred. Managers were given responsibility for implementing the campaign, not only because the information would seem more credible, but also because employees could have their questions answered immediately.

“We wanted employees to understand the reason behind the layoff—that it wasn’t being done because of any problems now, but to prevent them in the future,” says Ryan Robinson, senior consultant in corporate OHRD. Compaq felt if surviving employees understood the strategic reason behind the downsizing, rumors would be squelched and employees would more clearly understand where the company was headed and thus be able to help it get there.

Before the layoff, all managers went through training that not only covered how to outplace people, but perhaps more importantly, helped managers understand how to help survivors. During the four-hour workshops, managers learned the reasons behind the downsizing and how to conduct departmental meetings to explain the move to employees. They were given information about company finances and the competitive environment in which Compaq operated. Managers also were given a packet of sample Q-and-As to prepare them to deal with the questions most likely to be asked by surviving employees. The packet included a list of resources to which managers could refer frustrated employees, including the company’s employee assistance program and community mental- health specialists.

Robinson believes one of the most beneficial aspects of the communications effort was telling surviving employees how the company was treating those who were being laid-off. “We felt if survivors knew we were helping their friends who were leaving the company, they would feel more positive about the downsizing—at least, to the extent possible.”

Compaq was so successful in keeping the survivor syndrome at bay that just eight months after the downsizing, the company announced a slew of new products, including several low-end competitors. “We met our goal in less than a year because employees understood, right from the beginning, where we were heading,” Robinson says. Even though the company had a second layoff just three months later, employees had received so much information about Compaq’s new direction that they knew the layoff was inevitable and were able to gear up for the changes. Since then, there have been no additional work-force cuts, and sales have grown from $4 billion in 1992 to almost $11 billion last year.

In 1992, Patagonia Inc., an outdoor-apparel manufacturer based in Ventura, California, laid off 125 employees—20% of its work force—in an effort to correct inefficiencies created by aggressive and unchecked growth. Terri Wolfe, director of HR, says the extensive communication that surrounded the downsizing helped surviving employees focus their energies on rebuilding the company. They didn’t have to wonder why the company laid off certain people or why the company had to be restructured. All this information was clearly communicated at the time.

Acknowledge survivors’ emotional needs.
Unlike Compaq and Patagonia, few companies have the foresight or wherewithal to deflect the distressing onslaught of the survivor syndrome. More often, HR people have to quickly implement some type of triage for survivors, a process that starts with recognizing these survivors need emotional support.

According to Al Siebert, a Portland, Oregon-based organizational consultant and author of the book “The Survivor Personality,” managers aren’t aware a tremendous amount of emotional work needs to take place. This is because most managers have an internal locus of control. That is, they’re internally driven, self-motivated and accustomed to change. People in subordinate positions, however, are usually externally driven and comforted by routine. Managers, including those in HR, frequently overlook the fact that these employees aren’t naturally good survivors. “They just aren’t emotionally prepared to handle major disruptions,” Siebert says. To help employees adapt to the changing realities of the workplace, you must acknowledge their emotional upheaval and allow them to express their discontent.

Two years ago, Siebert was hired by the state of Oregon to conduct a series of workshops called How to Be a Survivor and Thrive. More than 1,000 jobs had been eliminated, and the state wanted to help employees grapple with the distress caused by the downsizing. “I was there to uncork all the negative energy that was building in the work force,” he says. It wasn’t a pleasant task. “By getting people to acknowledge and address their anger and unhappiness, I was given the name Dr. Feel Bad. But people needed the opportunity to vent their frustrations.”

If you’re dealing with an angry work force, this kind of venting can be very constructive, but employees also have to be given coping strategies. Don’t let the newly released anxiety float around unattended. Give employees tips on how to harness it and become changeresilient by developing good coping skills, such as flexibility, curiosity and optimism.

According to Glen Fahs, who was Oregon’s state training coordinator at the time of the downsizing, these workshops achieved three things: 1) they encouraged employees to honor and grieve about the past; 2) they helped employees acknowledge the chaos and discomfort caused by change; and 3) they showed employees how to develop skills that would help them think of change as an opportunity for growth.

Participation in the workshops was voluntary, Fahs explains, because “the key was to make employees feel in control of their lives again.” Were the workshops successful? Fahs has no hard data, but he says they were filled with 30 people each day for several months. “Furthermore, from what employees have told me, I get the feeling that change is something they now look forward to and believe they can control.”

If he were to do it differently, Fahs says he wouldn’t rely on the workshops alone to help employees cope. Instead he would arrange for a counselor from the state’s employee assistance program to visit individual worksites and be available for drop-in appointments. This way, employees could receive assistance when they needed it most. Also he would arrange for the counselors to conduct group meetings at the departmental level. “Since a downsizing is a shared social experience it should be a shared healing experience,” he says. “Grieving losses together isn’t only cleansing, it helps connect people.”

Communicate after the downsizing.
Perhaps one of the best ways to comfort employees in the wake of a downsizing is to communicate with them—honestly, openly and frequently. In the absence of any information from management, employees have a tendency to fill in the gaps with their own assumptions, which are usually based on worst-case scenarios. This is how paralyzing rumors begin. But opening up to employees through brown-bag lunches, telephone hotlines, newsletters and staff meetings can do wonders in quelling rumors and allaying anxieties. As China Miner Gorman, group vice president with Drake Beam Morin Inc. in Boston, says: “No matter how much you do, you can’t communicate too much.”

Executives appear to understand this. In fact, in a recent change-management survey conducted by Wilton, Connecticut-based Deloitte & Touche, 75% of respondents ranked employee communication as “very important.” Unfortunately, only 23% said they’ve been very successful at their communication efforts, and often, it’s the survivors who suffer.

Take the case of Robert Gardner (a pseudonym), a middle manager at American Express Travel-Related Services who oversees 70 employees and who has started to feel the effects of restructuring in his division. Not only has he had to lay off several employees, but two other middle managers with more experience were recently and unexpectedly handed their walking papers. “Nothing has been clearly communicated about the changes,” he says. “I only know what I hear through the grapevine. My staff wants to know what’s going on, but I can’t tell them because I don’t know. I hate to say it, but it’s making me less tolerant.”

What does Gardner think would help the situation? “More communication about the big picture,” he says, “and having the ability to ask questions and get immediate answers.”

Robert Levering, a consultant with New York City-based Arthur D. Little, and co-author of the book “The 100 Best Companies to Work for in America,” agrees. He believes the fundamental problem of most companies is that they don’t have ways for people to get answers to their questions. “HR should be screaming for more two-way communication,” he says. “The good companies figure out mechanisms where-by people can ask tough and even embarrassing questions and it’s OK. Pitney Bowes in Stamford, Connecticut, for example, hosts regular jobholders’ meetings at which they give employees $50 for the toughest question asked.”

Immediately after Patagonia’s downsizing, the company implemented a monthly open forum during which employees could meet with the CEO during work hours to have their questions answered and hear about the company’s progress. The forums have been so well attended, they’re now held twice every month.

Along with the open forum, the downsizing caused the HR department to launch an intensive effort to educate employees about the financial goals of the business and the competitive environment in which Patagonia operates. Employees were taught to read financial statements and understand the strategic-planning process. “Giving people access to information helps allay their greatest fears,” Wolfe says. “Before, no one wanted financial information. Now, everyone does. We’ve all grown up.”

Even with this intensive communication effort, Wolfe admits it took approximately 18 months for morale to improve to the level at which it was before the downsizing. Could anything have been done to speed that up? “You can reduce the amount of time it takes to turn morale around by acknowledging the difficulties related to the downsizing, but you can’t eliminate it entirely,” she says. As a footnote, proof of Patagonia’s successful communication strategy came in the form of record corporate profits at the end of fiscal year 1994.

Clarify new roles.
As you strive to help employees understand the big picture—which includes not only the reason behind a downsizing, but also an explanation of the company’s new direction—be sure to communicate the little picture. That is, it’s equally important to explain how each employee’s job has changed, if at all, and relate how each individually contributes to the bottom line.

“Frequently, the most long-lasting problem after a downsizing—longer even than the lack of trust—is role ambiguity,” explains Stan Silverman, managing partner with Human Resource Decisions Inc. in Akron, Ohio, and co-author of the book “Working Scared.” “People are uneasy because they’re not sure what they’re supposed to be doing, who they should be accountable to, or if they’re doing a good job,” he says.

In the absence of any concrete guidelines, employees tend to be very cautious and focus only on the work they enjoy, and not necessarily the work that’s most important to the organization. If employees aren’t clear on their own goals, how can you possibly expect them to help the company reach its goals?

In the wake of a downsizing, Silverman suggests companies develop performance management systems in which managers sit down with each employee to help clarify his or her new role. Employees need to know what expectations have changed and how those changes may have an impact on their daily work. They must also know what their major job responsibilities are—in order of priority. It’s important to be as clear-cut about these new job descriptions as you possible can be. Most employees find great comfort in knowing exactly what they’re working toward and exactly what’s expected of them.

The state of Oregon is launching its performance management process with a five-day management training program. During this program, managers are told about the state’s overall mission, values and performance expectations. The managers are then expected to take this information back to their individual worksites and translate the organizational goals into specific departmental goals.

If you sense employees don’t know what they’re supposed to be doing, it’s probably a good idea to follow Oregon’s example and spend some time educating your managers about the new organization.

In the end, the task of managing survivors doesn’t have to be all that difficult. It all boils down to recognizing that survivors have special needs, giving them the emotional support they deserve and communicating with them like adults. As an HR professional, you can help ease the pain and shorten the recovery time.

Maria Nichols, an office manager at Chicago-based Accenture.com (formerly Andersen Consulting), is 30 years old, single, and the type of person who likes to play hard on weekends. But like many young professionals, her free time is often consumed by drudgery: replacing lost buttons on a coat, buying birthday gifts and making seemingly endless runs to the dry cleaner, bank and shoe-repair shop. “I come in early and stay late, and the last thing I want to do on weekends are these horrible errands,” she says.

Who does? Errands are the bane of modern life. They’re controlling, nagging, relentless and frustrating in their ability to interfere with our good times. When it comes to errands, it seems there are only two options: A) Neglect them and suffer the consequences; or B) Take care of them and give up your free time in the process.

Recognizing that personal chores are something many of today’s workers don’t have the time or inclination to do, Accenture.com has established an onsite concierge service that gives employees a valuable third option when it comes to errands: Have someone else do them for you. Piloted in November 1993 at three offices, “Accenture.com… At Your Service” is a ground-breaking employee benefit that many employers struggling with work-family issues can learn from. The service, which employees can use for any personal errand, has been so well received that by the end of this year it will be available to all 10,500 Accenture.com employees in 45 U.S. locations.

The concierge service came about following a 1993 employee survey in which workers complained—loudly—about not having enough time to take care of their personal lives. The company’s strong work ethic is partly to blame. Employees at the firm’s Chicago office, for instance, work an average of 15% to 20% overtime. But the problem is compounded by the fact that most employees are consultants who spend the majority of the workweek on the road, leaving little time at home for the mundane, but critical, chores of daily living.

“When employees finally get home on the weekends, they want to go bike riding or meet with friends,” says Caroline Glasser, senior manager and director of training.

In searching for ways to address this problem and keep errands from distracting people on the job, an HR department task force hit upon the idea of providing concierge services for employees. Office buildings and hotels offer concierges. Why not a private employer? The problem was that Accenture.com could find no outside vendors that offered errand-running services for private companies. Most were in business to run errands for individuals or to staff the lobbies of large office buildings where tenants could use the concierge for limited and usually business-related reasons.

After an exhaustive search, Accenture.com located two companies that were willing to expand their services and experiment with onsite concierges for private employees. The experiment worked. Today, the same two companies, Cincinnati-based BurCorp At Your Service and Atlanta-based 2 Places At 1 Time, have grown along with Accenture.com’s concierge program.

The system is extremely user friendly.
Accenture.com… At Your Service is easy for employees to use. Let’s say, for example, that an employee has had some alterations done on her son’s Power Ranger costume, and that the costume is ready to be picked up. Problem is, it has to be picked up by the time he gets home from school the next day, but the employee will be tied up in meetings.

To request help from the concierge, the employee simply calls, faxes or sends an E-mail to the onsite concierge station. She tells the concierge where the costume is, what time it will be ready and where it must be delivered. As long as her request is made before midnight the previous night she is assured the errand will be done the next day. Because the cost of the alteration is less than $50, the concierge will pay for it out of petty cash, and then the employee will be billed. (Anything more than $50 requires a personal check or a charge-card number.) Finally, the concierge calls the employee to let her know the errand was done.

Accenture.com’s concierges and errand runners will do any personal and household errands for employees including house sitting, picking up a car from the repair shop and making dinner reservations at a swank downtown restaurant. Because it’s intended to help employees balance work and personal responsibilities, the concierge service cannot be used for business errands. The only exception is help with business-related social activities, because Accenture.com’s consultants do a lot of client entertaining.

Tom Tubergen, a partner in Accenture.com’s Chicago office, recently had a party at his home for 60 people, many of whom were business associates. He chartered the concierge service to help find and order party goods in keeping with the “biker” theme of his party. “They helped me find fake nose-rings, press-on tattoos and punches called Black Lemonade and Brain Wash,” he says. “Not only do I not have time to do this sort of thing, but I wouldn’t have known where to get this stuff.”

Because of tax reasons, the concierge service is not free. Instead, Accenture.com’s employees pay $5 an hour, which is charged in 15-minute increments for any errands that don’t involve entry to their homes and cars. This amount is billed to employees along with their paychecks. If the concierge or errand runner has to visit an employee’s home or take a car to the garage for service, the fee is $10 an hour because the concierge must be bonded to perform these activities. Still, the amount employees pay is about 10% to 20% less than what it actually costs the company to provide the service.

According to Glasser, Accenture.com was going to cover all costs of the benefit until the IRS said it would be taxable the same way as insurance and vacation benefits are. “If it costs us $25 an hour to provide the service, employees would have to pay taxes based on that amount,” Glasser says. Not only would this present a significant accounting challenge for the company, but employees would be paying for the service anyway, albeit in a roundabout fashion. “To avoid the hairy record-keeping involved, we decided to charge a price [near] what the employees would have to pay if they hired someone outside the company to provide the service,” she says, adding that no one has complained about the prices.

Because the concierges often recommend or hire outside vendors for specific tasks—e.g. building a fence or making wedding plans—employees sign a waiver to excuse Accenture.com from any liability resulting from use of these vendors. “We’re merely making recommendations and referrals,” says Susan Larence, head concierge at Accenture.com’s Chicago office. The employees assume the responsibility for the vendors’ work just as they would if they were directly hiring them. Furthermore, to make sure employees get the best rate possible from those vendors, Accenture.com does not allow its concierges to receive kickbacks for referrals. Any volume discounts that are negotiated are passed on to the employees.

The service has become almost indispensable.
In developing Accenture.com… At Your Service, the company asked employees to recommend their favorite vendors for a whole host of services, from carpentry to flower arranging. Each of the company’s 45 offices has gathered this information because, for example, a favored masseuse in Cincinnati obviously wouldn’t work for employees in Atlanta. Accenture.com then gave this information to its two concierge companies so that they could update their data bases with vendors preferred by Accenture.com employees.

The annual contract Accenture.com maintains with the concierge companies is based on a set fee that is intended to cover the concierges’ salaries and mileage regardless of how many errands are run. Because Accenture.com chose to locate its concierges onsite, the company provides the space, a personal computer, phones and FAX machines.

The concierge staff is jointly hired by Accenture.com and the concierge companies, although technically they are employees of either BurCorp At Your Service or 2 Places At 1 Time. Accenture.com helps with recruitment and interviewing and maintains the first right of refusal on applicants. “Finding qualified people to staff each location is one of the biggest challenges to providing this benefit,” says Glasser. “We want people who understand and fit into our corporate culture.”

Larence adds that concierges are a special breed of person who must not only be highly service-oriented, but must know the ins and outs of the city in which they’re operating. “I look for people with three characteristics: 1) they must know the city; 2) they must know how to find things in other cities, such as a trail map of the Grand Canyon or map of the London Underground; and 3) they have to be able to prioritize requests.” Why? Because at Accenture.com, all employees are treated the same by the concierge regardless of their position in the company. No priority is given to high-level employees.

After experimenting with its concierge staff, Accenture.com has found it generally requires one concierge or errand runner for every 250 employees. At the Chicago office, for example, there are three concierges and three errand runners. Concierges staff the desk, take and prioritize requests, make phone calls and reservations, and direct the errand runners who actually perform the tasks. Accenture.com also has discovered it takes about six months for a concierge station to mature. “Requests increase about 25% a month for six months,” says Glasser, “then requests level off and we can be pretty sure about the number of people needed at that station.”

Once the stations are up and running, the concierge companies prepare monthly usage reports for Accenture.com. In May, for example, at the company’s Columbus office, 280 employees used the service: 29% were secretaries, 18% were staff members, 21% were senior partners, 27% were managers and 5% were partners. Glasser says that, on average, one-third of employees will use the service in any given month. The heaviest use, as you might expect, is around Christmas, Mother’s Day and Valentine’s Day.

At many offices, the concierge service has matured to a point where the concierges now send reminders to employees about special events such as holidays, plays or concerts. Accenture.com’s concierges can even keep track of birthdays and special celebrations, calling an employee in time for them to get a birthday present for a special friend, for example. Also, because many of the concierge stations negotiate specials every month with certain vendors, they can offer employees such things as low-cost, onsite bicycle tune-ups, haircuts or car washes.

According to Glasser, the biggest challenge she faced in developing the concierge service was convincing the firm’s senior partners, many of whom are married to stay-at-home wives, that the service was necessary. “Their resistance had to do primarily with cost,” she says. But the service has proven so valuable that even those senior partners now use it. “Personally, I didn’t think I had a need for the service,” says Tubergen, “but I use it at least once a month for things like getting a battery for my watch or taking the car in for service.”

Furthermore, once the pilot programs at the firm’s three Ohio offices had been functioning for awhile, it became clear to Glasser that the benefits would far outweigh the costs. Glasser doesn’t have any hard numbers, but from conversations with employees she believes the service has boosted both morale and productivity. Why? Because employees aren’t worrying about how they are going to manage to take care of the niggling little details in their lives. She adds that the benefit also has been a great help with recruiting more capable candidates. “This is a sexy service that appeals to busy young professionals” (the average Accenture.com employee is 27 years old).

So, after having been in the concierge business for 18 months, are there any requests that Accenture.com… At Your Service has been unable to fulfill for their employees? “Yes,” says Larence. “I couldn’t find a 1964 1/2 Mustang convertible for an employee to rent for a wedding. I found the car, but the owners wouldn’t let us rent it.”

Em-pow-er-ment: (im-paü(-e)r-ment)

It’s hard to imagine any group of employees being less empowered than those who worked in communist enterprises behind the Iron Curtain. The communist “management” style was blatantly authoritarian: Employees simply did what they were told, no questions asked. Forget creativity and innovation. Employees were seen as bodies, not minds, and any thinking that needed to be done would be done by supervisors, thank you very much. The communist regime destroyed employee initiative, eliminated trust and created legions of workers who weren’t lazy so much as they were uninspired.

This was the kind of work force New York City-based Colgate-Palmolive Corp. confronted when the company began to open manufacturing plants in Central Europe three years ago. The HR challenge? How to get the best from employees in countries such as Czechoslovakia, Romania and Poland, employees who were used to doing only what was required—no more, no less. “We wanted employees to believe in the business, to understand what needed to be done and to be willing to give us their good ideas,” explains Philip Berry, the company’s director of HR for Central Europe, Middle East and Africa. In short, the company wanted empowered employees. Managers knew, however, that the idea was antithetical to the workers’ way of thinking. Creating a truly empowered work force would require patience and an extraordinary HR effort.

“We could have brought in strong expatriate managers to go with the grain, to continue the authoritarian management style,” Berry says. Instead, the company chose to emphasize its own culture, the Colgate-Palmolive managerial style that’s consistent around the world. The company encouraged employees to share their ideas about how to run the business and then rewarded them for doing so. To help them generate ideas, managers gave employees information about the business, invested in new skills training, set goals for employees and gave them ongoing feedback on how they were meeting those goals. “In short,” Berry says, “we treated them like adults.”

Just a few years later, the results are nothing short of amazing. Workers have blossomed—they’re finding skills they didn’t know they had, and the majority of the work force is operating at a capacity never before thought possible. Job satisfaction is high, most employees appear to trust management, and when you ask Berry if he thinks workers have become empowered, he answers with an emphatic “Yes.” Now, if Colgate can get these kinds of results from employees used to working in autocracies, imagine what companies can achieve by empowering their U.S. work forces.

Unfortunately, this is no easy task. True empowerment doesn’t provide immediate gratification. Bill Byham, president and CEO of Pittsburgh-based Development Dimensions Int’l., and author of “Zapp! The Lightning of Empowerment,” says the length of the learning curve is the greatest challenge to most empowerment programs. “It takes longer for employees to figure out how to make improvements on their own than it does to just tell them what to do,” he says. “The cost of empowerment is in the time it takes, not in the cost of training or anything else.”

It also takes time for workers to understand managers really do want more input on how to run the business. “Empowerment is a very fragile process,” says Jerry Pfundtner, quality assurance manager at Stamford, Connecticut-based Xerox Corp. “It’s subject to a great many influences, including changes in managers, employees, priorities and job requirements.”

In addition to the patience many companies lack, a lot of so-called empowerment programs fail because HR initiates the process the wrong way. As Colgate discovered, empowerment isn’t something you do to people. It’s something HR must nurture and encourage by creating an empowering environment—one in which employees are given goals, information, feedback, training, and perhaps most importantly, positive reinforcement.

Work teams and information sharing are the building blocks of an empowering environment.
“Empowerment programs tend to fail when management doesn’t deal with the environment that influences employee behavior,” explains Byham, considered one of the country’s foremost authorities on employee empowerment. The only way to capture employees’ hearts and get them psychologically involved in work, he says, is by changing how they view that work.

Companies in which employees are most likely to consider themselves empowered are those that rely heavily on teams and teamwork. That’s because by working in teams, employees not only find greater meaning in their work but also have more ability to influence its outcome. As a result, teams change how work is viewed, setting the stage for more important and longer-lasting changes in attitude.

“Empowerment programs won’t work unless employees work in teams,” agrees Russell Justice, technical associate and quality consultant for Eastman Chemical Co. in Kingsport, Tennessee, a 1993 Malcolm Baldrige National Quality Award winner. Team members get ongoing positive feedback from each other in a way they never could working independently and relying on a single supervisor for support and direction. For this reason, HR professionals who want employees to feel empowered should start by reorganizing their work force into teams. Only then can they start making the environmental changes needed to support those teams.

The first of these changes is information sharing. Give employees information about the business and demonstrate how their work fits in. One of the most important measures of job satisfaction is whether employees find meaning in their work—if they know what they’re working toward and understand how their work affects other employees and the company as a whole. Surprisingly few organizations take the time to share this kind of information. HR needs to take special care that employees aren’t left in the dark.

“Employees tend to resist empowerment programs when they don’t understand what it is they’re working toward,” says Richard Harris, senior vice president of the Forum Corp., a global training company based in Boston. “Employees need strategic goals, and they need to understand the impact their work has on the achievement of those goals.” This kind of information creates the buy-in necessary to generate dramatic and ongoing improvements in the business.

Take the Central European employees hired by Colgate. These people had spent their careers working in a vacuum. They had no information about organizational goals. They knew nothing about sales. They had no idea what it cost to produce products. And because they were used to working in a communist system, they had no understanding of marketing or free enterprise.

To help employees understand their new jobs, Colgate’s HR managers gave them information about the company and explained what the free-enterprise system is all about. They shared sales and cost figures, they talked about their products and their competitors’ products, and they described company initiatives in a way that made employees understand how their work fit into the big picture. Not accustomed to being given this kind of information, employees were skeptical at first. But as Berry says, “Everyone wants to feel they do something of value. When you demonstrate the value individuals bring to the business, people want to grow.”

As employees began to understand the business, the individual and team goals that they were working toward and how their contributions fit into the company’s larger business goals, they began to find greater meaning in their work, and productivity improved.

Information sharing is also key to employee empowerment at Eastman Chemical, where every employee works on teams that are challenged to find ways to improve the business. “Teams are regarded as the board of directors for their particular business,” Justice says, “because no one knows how to improve the work better than the people who do it every day.”

Like any board of directors, however, those team members need information to make decisions about how to improve the work. For this reason, Eastman Chemical, like Colgate, shares information about sales results, quality improvements, cost reductions and anything else employees need to understand their jobs better.

The company also spends a lot of time talking about goals and explaining why those goals are important to customers, to the company and to individual employees. Each goal is accompanied by a timeline and a description of what management will do to help employees achieve it.

This information helps employees focus on things that need improving, Justice says. It helps team members become like-minded. “Without focus, employees are like an orchestra that’s warming up,” he adds. “Individually, they may be very talented, but if they don’t know what they’re working toward, no common sound will emerge.”

Provide the training and resources needed to do a good job.
Once employees understand what needs to be done to improve the company, they must have the skills and resources necessary to be able to accomplish those improvements. Nothing is more demotivating or disempowering than being stopped in your tracks because you either don’t know how to proceed or lack the tools necessary to do a good job.

“Having the skills and ability to do a job well is one of the most important dimensions of empowerment,” says Justice. That’s why at Eastman Chemical—as with most other companies with successful empowerment initiatives—training is an important part of the process. There, team members attend training together, bringing an actual problem that needs solving to the training program. Legal teams, for example, are working on ways to cut down on legal jargon so it’s easier to do business with Eastman. Sales teams are working on how to better ensure sales orders are completed with the correct information. “This way, employees acquire skills they need when they need them,” Justice says.

Pfundtner agrees that employee development is key to an empowered work force. If you want to make significant changes in the business, you have to make significant changes in how you do things, he says. And you do this by showing employees how to do things differently through continuous education and skills upgrading.

Team training and interpersonal-skills training are especially important because empowered employees rarely, if ever, work independently. “Empowerment is about interdependence,” says Byham. “A good idea doesn’t mean anything unless other people can help you put it to work.”

After employee training, the second half of empowerment training is aimed at helping management learn to empower others. This kind of training, by necessity, is less about management and more about coaching and creating an environ ment open to new ways of doing things. For employees to truly be empowered, managers have to give up control—and that’s not easy. They have to learn less hands-on, more supportive management styles. Managers also have to learn how to nurture and reward good ideas, and know what kind of challenges to give employees.

“A lot of managers make the mistake of giving employees too great a challenge in the early days of empowerment,” Byham says. Then, the employees fail and are unwilling to take the initiative again. As Aubrey Daniels, author of “Bringing Out the Best in People,” writes in his book: “The best way to empower team members is gradually and systematically. You can’t say to people, ‘Okay, after all these years of reporting to your boss, getting everything approved and working within limited boundaries, you are now free! You’re on your own! Start taking responsibility and making decisions!’ Responsibilities for self-management and decision making should be turned over to employees on an as-ready basis, and the responsibilities given initially should be limited in scope.”

Managers must also accept the fact that not all employees want to be empowered. Many workers just work better in jobs that are clearly defined and closely supervised. Even at Colgate’s Central European plants, a full 25% of the employees have resisted the notion of empowerment, Berry says, adding that those employees tend to be older and more resistant to the idea of change in general.

“Usually employees uncomfortable with empowerment leave the company on their own,” adds Justice. “The peer pressure to get involved is so great that either they do or they opt out.”

Once both employees and managers have received proper training, the next step is to give employees control of the resources needed to make improvements. A team formed at Allied Systems Inc., based in Decatur, Georgia, for example, was empowered to find ways of reducing on-the-job injuries by 50% within one year. Managers gave the team a goal and information about the current injury rate (team building and information sharing being the important first steps mentioned earlier). Then, the group was given a budget and told to find ways to improve safety awareness.

“The employees were in total control of the budget and in determining how to spend it,” says Jim Gage, terminal manager at the St. Louis facility where the team was formed. Armed with the necessary information, a clear sense of direction and resources to work with, the team reduced injuries by 71%, well above the stated goal.

Provide measurements, feedback and reinforcement.
Once employees have devised ways to improve their jobs, departments or the business as a whole, managers must allow employees to measure those improvements. If, for example, employees find a method they believe will reduce scrap in the manufacturing process, they need to know on a regular basis if scrap is indeed being reduced. After all, why would they continue to seek improvements when they don’t know whether their previous suggestions are working?

“The secret of empowerment is [having] measurements that people can control,” Byham says. Ideally, employees should come up with their own goals and ways of measuring achievement of those goals. But this may not always be possible, as information is often collected and managed by other departments within a company. Therefore, managers must find ways to gather and disseminate measurements and provide feedback on them.

At Eastman Chemical, for example, managers are in the process of devising a “sale-o-meter,” in which sales figures will be transferred immediately from the computers on which orders were placed to an electronic display in the employee lunchroom. Employees will eventually see a running tally of sales made each day, with the top 10 sales highlighted. Knowing daily sales figures gives employees a shared sense of accomplishment and pride in the company, Justice says. “The whole idea is to make performance visible.”

Employee empowerment requires ongoing positive reinforcement.
Just as important as providing progress measurement is providing continued, positive reinforcement, says Daniels, president of management-consulting firm Aubrey Daniels and Associates in Tucker, Georgia. “You have to make empowerment something employees want to do, and you do this by celebrating their successes,” he explains. “Change requires many reinforcers for the new behaviors before new habits can be established.”

Motivational experts suggest managers give positive reinforcement often and immediately after a job well done. Employees want to be recognized individually for good work from their supervisors. They also want to be publicly recognized because it tells them their achievements are worth everyone’s attention. But groups also want to celebrate their successes.

At Eastman Chemical, managers create very elaborate plans for positively reinforcing group achievement. The company doesn’t spend a lot of money on these celebrations. Instead, it spends a lot of creativity. For example, a group of mechanics who met an important goal were treated to a car wash conducted by top managers. Employees whose ideas generated $1 million in cost savings were invited to come view $1 million in $20 bills. “We went to the bank, got a million dollars and invited employees to come up and see what their savings looked like,” Justice says.

Another expression that’s often used to refer to the positive reinforcement process is “performance management,” and companies whose employees demonstrate great initiative are those in which performance management is an established part of doing business. At The Orange County Register in Santa Ana, California, performance management has been implemented on a companywide basis for more than two years. The goal? To encourage employees to continually improve customer service, then reward them for doing so.

An important part of the company’s performance-management process is its system of positive reinforcement through celebrations. Managers solicited ideas for successful celebrations from everyone in the company and then developed a “cookbook” that includes recipes for a variety of celebrations. Included were “fast-food recipes,” which are quick and economical celebrations used in the early stages of employee empowerment and goal setting; “main meals” designed for observing a group or departmental subgoal; and “gourmet meals” which are elaborate celebrations for achievement of a major goal.

The company’s emphasis on positive reinforcement has created dramatic improvements in the business—improvements that resulted from employees taking the initiative to get things done. After suffering through a departmental downsizing that affected 100 employees, for instance, the circulation department still managed to improve productivity and customer service. A program to reduce newsprint waste ended up also reducing errors, saving film, saving printing plates and improving print quality and department productivity. “The results have been nothing short of phenomenal,” says John Schueler, president and chief operating officer.

By giving employees information, resources and training, and by following up with measurements and reinforcement, HR can create an empowered environment. But remember, empowering employees is a continual process—like quality improvement, it’s a race without a finish line. Those companies that take the first step by creating an environment conducive to empowerment will be at the head of the pack.

Colgate-Palmolive is known worldwide for its empowered employees, due in a large part to its environment. Here’s how to know if your environment supports empowered employees:

• Your workplace has established self-directed teams
• Higher-ups freely share information about the company’s directions and goals with the entire employee base
• Employees receive training they need to achieve goals, whether it be specific work skills or education on “bigger picture” issues, such as time management or leadership
• Employees continually develop new work skills
• Managers understand and respect the challenges of an empowering workplace. They’re more coaches than bosses. They empower gradually and systematically as team members are ready. They don’t expect or push for immediate results
• Employees are in control of the resources they need to meet their goals
• The company provides measurements so teams can see whether their ideas are effective
• Team members are treated to continual positive feedback and reinforcement

Although a difference in communication styles is only one of the many differences men and women bring to the workplace, miscommunication does cause the most immediate and frequent frustrations. In her book, “Genderflex: Men & Women Speaking Each Other’s Language at Work,” Judith Tingley argues that men and women successfully can address their chronic conflicts and misunderstandings-without sacrificing their strengths-through a process she calls “genderflexing.” According to Tingley, all that genderflexing requires is that you consider a situation from someone else’s point of view. To begin addressing and modifying our very different communication styles, the author suggests:

So you think your company is dealing with gender issues? Think again. Men and women have had it with each other and it’s high time you paid attention. Picture the U.S. workplace as a boxing ring. In one corner, the American male worker—seething, resentful, a little smug, and sick and tired of all the accusations leveled at him by members of the “fairer” sex. In the other corner, the American female—jaw set, fists up, and bound and determined to gain more respect, power, money and understanding from the men who rule corporate America.

She, quite frankly, is sick of accommodating men, proving herself over and over again, and waiting patiently for the creeps in the big leather chairs to “get it;” to stop being such insensitive, narrow-minded jerks who only encourage and promote clones of themselves. “Pay me what I’m worth,” she says, “and promote me on my merits. What’s so hard about that?”

He, on the other hand, wonders if she’ll ever stop whining and start acting like an adult. He’s tired of censoring everything he says, and sick to death of being blamed for the oppression of women in this society. “You want my respect?” he asks. “Earn it. And take a look around. Lots of women are making it today. What’s your problem?”

If you were the bookmaker for this match, on whose head would you place higher odds? His, because men do hold the power in this society and the situation isn’t likely to change significantly in the near future? Or hers, because she does deserve better treatment and more authority than she’s been getting? Your answer, of course, may depend on who wears the pants in your family. But, frankly, you shouldn’t be betting on either gender. Any clear winner in the battle of the sexes means a giant loss for American enterprise.

Does all the tension between men and women sound grossly overstated? Hardly. The fact is, gender relations in the workplace are worse than they’ve ever been because we’ve patently ignored the real reasons behind gender warfare: Women want more power, and men don’t want to share it; men and women really are different, and we’ve overlooked those differences for far too long; and the ceaseless change in our society has all of us feeling overwhelmed, vulnerable and more eager to find scapegoats than ever before. And let’s face it: the opposite sex makes for an easy target.

What’s more, the things human resources professionals think they’re doing to mitigate gender strife, including sexual harassment workshops, work-family programs and diversity initiatives, may actually be exacerbating the conflict.

Conflict arises from the pursuit of power.
Let’s talk about what everybody in corporate America is afraid to talk about: power and power-sharing between the sexes. Men, who have held all the power positions for years, are feeling more vulnerable than ever. In terms of sheer numbers, more white men have lost their jobs through downsizing and restructuring than any other group of Americans, and those who are left with a paycheck are determined to keep it come hell or high water.

Unfortunately, their job losses have come at the same time that more companies are recognizing the need to recruit and promote more women into management positions. These men, to put it mildly, aren’t eager to share their power, especially with women they feel may not be qualified for the job, or worse, may abuse that power once they attain it.

“Women who have gotten into good positions are afraid men are going to take their jobs away, so they take a ‘CYA—cover-your-ass’—approach to management,” says Jim Hart, a private psychotherapist in Acton, Massachusetts, and former vice president with Mediplex behavioral treatment centers in Boston. Hart, who has been looking for a management job since Mediplex was sold six months ago, has been interviewed by women for five different positions. In each case, he says, he believes the females who interviewed him were threatened by his credentials. “I was perfect for those jobs, but the women interviewing me were afraid I would eventually overtake them, even though I told them I didn’t want their jobs. And I’m not alone,” he adds. “A lot of men I know are running into this.”

Hart may have a point. A recent study conducted by Drake Beam Morin Inc. found that for the third year in a row in 1994, women at the executive level were able to find new jobs about a month faster than men on average. However, women still feel that corporations—or, more to the point, the men who run them—don’t want them at the top no matter how exemplary their performance. A survey conducted for Working Woman magazine by the Louis Harris polling firm found that female executives still feel like aliens who are “frozen out of the old-boy network and unable to advance beyond an unshatterable glass ceiling.” After 20 years of fighting the battle for advancement, women are tired: Tired of being patient; tired of waiting until their numbers are large enough to challenge the status quo; tired of waiting for the wage gap to narrow; and tired of adopting male work and communication styles in an effort to play by their rules.

“Women are mad because they feel like they’ve been doing the adapting for years,” explains Judith C. Tingley, author of “Genderflex: Men and Women Speaking Each Other’s Language at Work.” Women have believed that the more they’re “like men,” the more likely they are to be admitted to the inner circle. They’ve worn the navy blue suits, they’ve altered their styles to be more manly, and now, when they hear disgruntled men accuse powerful women of protecting their hard-won turf, they have very little sympathy.

Women especially are tired of having to be better than men just to keep on par with them. A communications manager at a Southern California-based pharmaceutical company says, “Women are regarded as harder workers around here by both the male and female bosses. Yet you look at all the corporate veeps and there’s only one woman—and she’s pretty manly. What does that tell you?”

Women, and probably most men, have long recognized that people in power exhibit certain behavioral characteristics and, to get ahead, it’s best to assume those characteristics to the greatest extent possible. But are those characteristics associated with gender or with power itself? Although little scholarly study has been done on the issue, strong opinions abound.

A group of eight men who are suing their former employer, Del Mar, California-based Jenny Craig International, for sex discrimination and sexual harassment, would probably support the latter theory—that power leads people to oppress others, and that men are not oppressors by nature. According to a New York Times report, the “Jenny Craig Eight” are saying they were fired, denied promotion or given unfavorable assignments because they were outsiders in a female-dominated corporate culture. The men complain about sexual remarks—one plaintiff said his female supervisor told him she dreamed of him naked; another was told he had “tight buns.” They say they have been negatively stereotyped. For example, one was told he was “sensitive for a guy.” They claim they have been assigned tasks, such as shoveling snow, because of their gender rather than because of their job description. And they protest being bombarded with “girl talk,” about pregnancy and menstrual periods.

Commenting on the case, Jane Brayton, an official at the Massachusetts Commission Against Discrimination, says: “It’s the same stuff; it’s just that sometimes the “he” turns into a “she.” Nothing’s changed. The majority keeps putting down the minority.”

Stories like this aren’t at all surprising to Hart, who strongly agrees that power, and not gender differences per se, is at the root of all this seething tension. “Women have complained for years about all the ‘Hitlers’ in power in corporate America,” he says. “But now, as more women have attained powerful positions, I’m seeing a ton of ‘Hitlerettes.’”

Mary Mattis, vice president of research and advisory services for Catalyst in New York City, also believes that escalating gender tension is a result of power, or more specifically, a power imbalance between men and women. “This isn’t so much about gender as it is about power-sharing,” she says, “and we shouldn’t be so totally alarmed that this issue is coming to a head. There’s a national shifting of power under way, and we’re naive if we think men don’t feel threatened.” It’s much easier for us to talk about more superficial differences in communication and management style, she adds, than it is to talk about power-sharing.

The experience of young men and women entering the work force further substantiates this theory of power as the root cause of gender combat, because male-female relations are best among young adults. They’ve gone to school together, they’ve roomed side by side in dormitories, they’ve played in co-ed intramural sports. Men and women enter the work force as chums, but when the first set of promotions and blue-chip projects are offered, and they must compete against each other for those opportunities, suddenly it’s the boys against the girls. The young women think men get better jobs because men in power are more comfortable hiring others who are like them, and men think women have a leg up, so to speak, because of some hidden Affirmative Action or diversity agenda. Apparently, it’s much harder to set aside differences when you’re talking about economic survival than it was when your only worry was what to be when you grow up.

The power struggle intensifies in an unstable work environment.
This competition for a paycheck is another reason why men and women are locking horns more these days. When human beings feel vulnerable, they lash out more at those with obvious differences. And with the enormous restructuring under way in corporate America, everyone feels threatened these days. The eroding recession, the changing nature of jobs and the fact that the corporate pie no longer is big enough for everyone has all of us bewildered, under stress and suspicious of our colleagues. Promotions used to be the reward for hard work, but flatter organizations have fewer top spots toward which to advance. For better or worse, men and women are being forced to compete more against each other—not only for the precious few advancement opportunities, but to hold the positions they’ve already attained.

“When people are threatened, they start to behave in a primitive survival mode,” says George Simons, a gender and diversity consultant in Santa Cruz, California. They start looking for places to put their anger, for people to blame. In this kind of environment, everyone who’s “different” becomes a target, he says. A man working with a female sales partner, for example, may start to feel threatened if she becomes more successful. But instead of attributing her success to hard work, he, who is under pressure already, may claim she seduced customers. A female, on the other hand, who witnesses a male partner’s success, may be more likely to attribute that success to the old-boy network.

“Popping off, name calling and gender slurs are becoming much more common because of the stress we all are operating under,” Simons adds, which also partly explains the increase in such things as gay bashing and white supremacist groups. People are harried by the changing nature of work, they’re irritable, and as a result they’re less likely to overlook differences and more likely to ascribe problems to them. The fact that men and women have ignored their differences for so long has only added fuel to the fire.

“It used to be politically taboo to talk about the differences between men and women,” says Simons, because different meant inferior and equality meant sameness. In seeking equality, the idea was to downplay any behavioral characteristics associated with gender. The goal was androgyny. Men were supposed to be more sensitive, women more assertive. Men started wearing floral ties; women, padded shoulders. It wasn’t long before all employees started to check their hormones at the office door because the way to deal with our differences became to ignore them, to neuter ourselves.

Unfortunately, ignoring the very real differences between men and women has only heightened our inability to deal with them. Women still don’t understand why men express friendship by punching each other. Men still don’t understand why women seem to share so many secrets among themselves. Women don’t understand why men cuss. Men don’t know why women care. Women are exasperated because men still don’t listen. Men still want women to say exactly what’s on their minds. And on and on and on. It’s why men and women are keyed up on opposite sides of the boxing ring.

Granted, we’re starting to talk about our differences, but the discussion is tentative; it makes us nervous, and our discomfort shows up as intolerance. Until we get to the point where we can acknowledge those differences, be proud of them, and embrace the benefits of varying approaches and perspectives, men and women likely are to be stuck in an antagonistic, “he-said, she-said” mentality. Furthermore, before we begin to grapple like adults with the many ways our differences impact the workplace, we have to look at the ways HR professionals have unwittingly been fueling the gender fire.

Sexual-harassment, diversity-awareness and family-friendly programs can serve as kindling.
Indeed, well-meaning HR programs can increase gender tension. Take, for example, programs to prevent sexual harassment. These programs, which are designed to raise awareness of the kinds of sexually-oriented behaviors that are inappropriate for the workplace, have in many companies polarized the work force, making men feel defensive and women feel victimized.

Even though blatant sexual harassment is perpetrated by only a very small percentage of males, the awareness of the issue and the emphasis on “thou shalt nots” have many working men afraid to interact too closely with women. Increasingly, stories are told about men who won’t lunch with a woman, travel with a woman, have discussions with a woman behind closed office doors, or even ride in an elevator with a woman unless other employees are present. A sales and marketing manager who supervises nine women at a San Diego based publishing company put it this way: “I have completely shut down. I don’t even know how to be friendly without getting strange looks.”

According to Aaron Kipnis, co-director of the Gender Relations Institute in Santa Barbara, California, sexual-harassment programs have been extremely successful at raising fear and anxiety, inhibiting spontaneity and communication, and distancing women and men. Fearing their behaviors will be misinterpreted, both sexes have become “like robots.” Men find themselves talking much more slowly because they’re evaluating everything they say. They wonder why the term “lady” has become such a no-no. Women, on the other hand, start questioning whether or not they should wear perfume or jewelry or dress the way they normally would. “Am I somehow encouraging harassment?” they wonder.

“Awareness of the issue is good,” Kipnis says, “but we have to move away from the kind of reactive training we’ve been offering (since much of this training was established in the wake of the Anita Hill-Clarence Thomas debacle) and move toward more proactive, inclusive training that increases our overall understanding of each other’s behaviors.”

If sexual harassment courses have created a hairline fracture between men and women, diversity-awareness programs have become the wedge that’s cracking those relationships apart. Not that awareness of our differences is bad, especially since greater understanding of each other is our goal. The problem is that in many companies diversity programs have been mismanaged. They have become what George Simons calls “a faddish fix-all,” offered by inexperienced trainers to fulfill some vague HR mandate. Furthermore, white males believe diversity programs simply encourage women and minorities to vent their anger, which only increases the simmering antagonism between women and men.

Ken Richardson, a white male administrator with the Licking County Sheriff’s office in Ohio, was one of five white males in a racially and sexually diverse group of 30 who attended a week-long diversity program in 1992. Having lived in a mixed neighborhood and abroad, Richardson says he has always respected differences. But, as reported in Business Week, Richardson says other participants at the training session blamed him for everything from slavery to the glass ceiling, and the instructor fed into this white-male bashing. “I became bitter and remain so,” he says.

In an attempt to address this bitterness, companies such as AT&T have started to offer workshops with titles such as: “White males: The label, the dilemma.” The goal, according to AT&T spokesperson Burke Stinson, is to allow men to talk about their growing feelings of resentment. “White men don’t want to be categorized or reduced to a cliche anymore than anyone else does,” he explains. Courses such as this bring the diversity issue full circle by addressing everyone’s concerns, and they’re a good first step toward bringing white men back into the corporate melting pot. But male resentment runs deep and stems not only from diversity-awareness programs, but from strategic diversity goals as well.

Recognizing the business benefits of a diverse work force, more and more companies are establishing goals and timetables for hiring more women into management positions and “non-traditional” jobs. Some companies are even holding management personnel accountable through their paychecks for promoting more women. It’s an important step on the way to diversity and equality, and women champion these efforts. Some men, however, believe these programs lead to the promotion of less-qualified females, especially in organizations where, because of past discrimination, managers are forced by consent decree to hire a certain percentage of women.

Several years ago, at the Angeles National Forest in Arcadia, California, a consent decree mandated that the organization hire more females, provide written justification whenever a woman wasn’t hired, file quarterly reports on the makeup of the work force, and provide ongoing training on issues related to sexual harassment and sexual discrimination.

According to Sandiann Engh, employee development specialist, the male workers believed that some of the women hired into positions such as police officer and smoke jumper weren’t nearly as qualified as many of the men who had applied, and that managers had hired women simply to fulfill quotas and avoid the paperwork hassle. The men believed hiring less-qualified people put their own lives at risk, and they were angry about it. Furthermore, after several years of mandatory sexual-harassment training, everybody—men and women alike—was on edge and “closed down.” The women felt defensive; the men, resentful.

Resentment is something many men in the work force are feeling these days, and who can blame them? Diversity programs and sexual-harassment courses have been designed primarily with the needs of women in mind. Men are portrayed as the bad guys, the perpetrators, the oppressors, the force to fight against. Because of this, men feel their needs go unrecognized, and this is nowhere more apparent than in the way work-family programs have been marketed to employees.

According to Harris Sussman, president of Workways, an organizational consulting firm in Cambridge, Massachusetts, many men are starting to feel marginalized and neglected because their needs as family members are being overlooked. “Family-friendly policies are written as if only women are parents and, as a result, a lot of men believe their role as a parent isn’t valued by management,” he explains. These policies talk about working mothers, single mothers, mothers with sick children. “But men are parents too, and my advice for HR people is to understand that these directives shouldn’t address women only. This only adds to the tension between men and women.”

Relieving the tension requires first recognizing there’s a problem.
Consultants who deal with workplace gender issues seem to agree that managers have ignored the mudslinging between men and women just about as long as they can. “It’s been possible to push gender issues out of the way, so we’ve been doing it to the greatest extent possible,” explains Mary Martinez, leader of the work force diversity center at Organization Resources Counselors Inc. in New York City.

One theory of why gender issues have been ignored says that because women are the keepers of relationships in this society, they’re more likely to notice tension and inequities before their male counterparts. Prior to conducting a class on gender issues, Tingley asked 100 lawyers—50 men and 50 women—if they thought gender relations were a problem at their firm. Not one male lawyer recognized that there was a problem, whereas 100% of the women said there was.

“Because men aren’t very relationship-oriented, they might not be as compelled to pursue programs designed to alleviate gender tension,” Tingley says. And since men still hold most of the top HR positions, this could explain why gender relationships at work aren’t being adequately addressed.

But an even more likely reason is that gender tension is such a loaded topic. It’s fraught with emotion and disagreement. Men and women not only have trouble agreeing on the source of the problem, but within each sex there’s great debate.

The first step toward defusing the tension is for HR people to acknowledge there is a problem between men and women in the workplace, and that a lot of those problems are subtle. Blatant sexual discrimination and harassment come to the attention of the HR department, but HR never hears about a lot of the awkwardness of micro-inequities—such things as a woman’s point of view not being acknowledged at meetings. It’s up to personnel professionals to go looking for those problems.

At Deloitte & Touche, L.L.P., based in Wilton, Connecticut, partners formed a task force in 1991 to find out why so many talented women were leaving the firm prior to becoming candidates for partnership. One of the reasons, the task force discovered, was that women were constantly confronting negative stereotypes about them by the male senior partners. During a 10-year period, the company had an enormous influx of women into professional positions but there had never been any discussion about what it was like to be a man or woman working at Deloitte & Touche, explains Karen Graci, senior manager for national HR.

Once the firm understood that sexual differences were getting in the way of productivity, it was able to initiate a dialogue between men and women. Through a series of two-day workshops, attended by some 5,000 managers and partners, the firm sought to understand its gender issues, uncover assumptions related to gender, and recognize the business implications of gender tension. To keep the dialogue going, the company regularly brings in external speakers on gender topics, covers gender issues in in-house newsletters and memoranda, and sponsors focus groups where men and women can air their concerns.

Creating an environment, like Deloitte & Touche did, in which people can air their concerns and confront each other in a nonthreatening way, is a crucial second step—after acknowledging there is a problem—toward thawing the big chill between men and women. Remember the situation at Angeles National Forest, where women were ostensibly hired over more qualified men, and everybody was tense because of the mandated sexual-harassment prevention courses? Well, in an attempt to remedy the situation, Engh hired Kipnis and his partner, Elizabeth Herron, from the Gender Relations Institute, to host a series of what they called “gender summits.”

Male and female employees were brought together in groups of approximately 20 to air their issues about working with the opposite sex, including their frustration over quotas, communication-style differences and the way sexual-harassment training and the forced “reporting environment” made everyone feel as if they were working in a fishbowl.

As Kipnis and Herron explain, relations between the sexes had gotten so contentious that the men and women had to be separated at the start of each summit—the men went with Kipnis, the women with Herron—before they would talk openly. When they were brought back together, the problems experienced by each group were shared and, together, the men and women talked about their feelings related to the work environment. Each summit then ended with a discussion about what employees liked about working with the opposite sex.

What kind of impact did the summits have on gender relations back at work? “By allowing people to air their views, a great deal of tension was alleviated,” Engh says. And does she think the change will have a lasting impact? “Probably not. I think a change of this magnitude—men truly accepting women in the workplace—will require a generation. Too many companies rush for a quick-fix solution and then are disappointed. I don’t think a four-hour training course will fix anything, but in the short term, it helped.”

E.I. DuPont De Nemours and Company in Wilmington, Delaware, also has started to grapple with gender differences through a three-day program called “Men and Women Working as Colleagues.” The voluntary workshop is designed, as the title suggests, to help men and women deal effectively with co-workers of the opposite sex. Open and promoted to everyone in the company, it covers interpersonal and leadership skills, raises issues related to workplace changes, and includes a host of team-building exercises. What prompted DuPont to offer such a course? “Our industry, like many others, has historically been male-dominated,” explains Bob Hamilton, diversity consultant in HR. “We realized that our male employees have had little experience and training in how to work with women. We’ve never learned how to compete with women, and we’re unsure as to whether the way we interact and compete with men will work as well with the opposite gender.”

Although ahead of most companies in terms of dealing with gender issues, even DuPont has a long way to go. Since launching its course five years ago, only 2,500 employees—out of a U.S. work force of 90,000—have participated. Realistically speaking, how much impact can less than 3% of the work force have on the rest of the employees? The point is, truly positive changes in gender relations will take time. “Trying to change an attitude isn’t like learning a new software program,” Tingley says.

Personnel professionals who are courageous enough to begin grappling with gender issues can rest assured that by recognizing there’s a problem they’re already ahead of the game. In contemporary American society, everybody’s role is undergoing revision, and the standards of acceptable behavior are changing rapidly. “The workplace needs to catch up with the rest of the world,” says Sussman, because HR policies that make archaic assumptions about men and women will only contribute to the tension that already exists between the two sexes. HR professionals should be looking at the realities of people’s lives today.

If George Foreman and Mohammed Ali were brought together in that boxing ring described earlier, we’d expect them to fight using their particular strengths. Although their skill might be equal, they would probably exhibit different techniques. It’s what makes the sport interesting. It’s what encourages each fighter to improve. It’s what keeps the spectators engaged. Furthermore, between Ali and Foreman, we accept that the battle is about power, about being the best, about coming out on top.

Unlike in a heavyweight match, in the battle of the sexes we don’t want a clear winner. But we do want our differences to make our companies better. And before we can tap into the power of our differences, we have to acknowledge the differences in our power.

If you find yourself thinking that for the most part men and women do get along fairly well together at work, you’d be both right and deluding yourself. Yes, we get along together because we’re forced to, but a lot of men and woman are having trouble with that forced togetherness, and it’s high time HR paid attention. As Catalyst’s Mary Mattis says, “Corporate America would like to think it has got this thing licked. But it doesn’t.” In fact, it has only just begun.

Because corporate executives are so afraid to admit that escalating gender tension is a problem in the American workplace, Personnel Journal could find no companies that have a comprehensive strategy for tampering it. Because no good program models exist, no one is really sure how to best deal with gender tension among employees.

Based on our research, we suggest that HR professionals:

1. Admit that gender strife might be a problem at your company.
2. Conduct employee surveys to learn how gender issues manifest themselves at your particular workplace.
3. Start an ongoing dialogue between your male and female employees. Gender “summits” and communications workshops are a good first step, but don’t stop there. Recognize that men and women may have different reactions to every corporate initiative. Learn what those sensitivities are, then address them as an ongoing part of business planning.
4. Review HR programs such as sexual harassment prevention courses, diversity initiatives and work-family programs to make sure the needs of both men and women are addressed. Also, don’t market these programs to just one gender or the other.
5. Address employee stress pro-actively by searching for ways to alleviate the sources of that stress, such as overwork, miscommunication, restructuring, and so on. When employees feel threatened and overwhelmed, they’re most likely to lash out at people with obvious differences. By keeping stress to a minimum, you’ll be well on your way to creating a harmonious work force.
6. Be patient. Men and women working together is still a relatively new phenomenon. Whereas younger people are more adept at overlooking sexual differences, older adults may still be guided—or misguided—by outdated stereotypes. Getting used to the co-ed workplace will take time.

Thirty-eight million dollars is well above what most employers spend on health benefits each year. But that’s what the National Railway Labor Conference in Washington D.C. was able to save in health costs, specifically those related to mental-health and substance-abuse treatment, thanks to the use of a benefits-management strategy called carve-outs.

Using a similar approach, US West, the telecommunications company based in Englewood, Colorado, was able to slash its mental-health costs by 25% without reducing the level of benefits to employees. Carve-outs also allowed the Orange County School Board in Orlando, Florida, to cut its mental-health tab in half, and they helped a manufacturing division of Dow Chemical in Free-port, Texas, reduce mental-health expenditures from $5.2 million to $1.4 million in five years—a 73% savings.

What, exactly, is this technique that’s helping so many companies maintain the same level of employee benefits, while drastically cutting costs? Why are carve-outs becoming so popular? And what types of health costs are carve-outs most successful in controlling?

According to Leslie Schneider, managing consultant with Foster Higgins in Atlanta, the term carve-out refers to the practice of carving out or separating a particular class of health benefits—usually those that involve specialty health services—from the overall health plan in an effort to manage those benefits more cost-effectively. How? By applying managed-care strategies such as precertification, utilization review and case management.

Although traditional managed-care organizations such as HMOs and PPOs utilize case-management techniques, they’re typically more concerned with the delivery of general medical services. They don’t have the depth of expertise to manage specialty areas. And the major insurance carriers, according to Suzanne Gelber, senior consultant with Towers Perrin in Stamford, Connecticut, have been more concerned with processing claims, not reviewing specialty treatment to see if the care provided was appropriate and cost-effective. “The carriers are just beginning to get into the health business,” she says. “For them to know all about several hundred mental-health diagnoses and how to handle them is pretty difficult.”

This is why more and more employers are taking it upon themselves to carve out certain benefits and assign the management of them to a specialty managed-care vendor who knows what is involved in that type of care. “It makes sense that a company devoted to that kind of care is going to be more focused on it,” Gelber adds. “They are going to have a better handle on how to manage, credential and contract with providers.”

To date, carve-outs have been most effective in controlling the cost of prescription drugs and mental-health and substance-abuse services. In fact, Towers Perrin estimates about 80% of Fortune 500 companies have carved out EAP services, mental-health care, or both. This is because these services are relatively distinct from the rest of the medical delivery system. “The more interconnected a service is with the rest of the delivery network, the less likely it is to be carved out,” says Howard Wizig, a consultant in the Kansas City office of Towers Perrin. The next generation of carve-outs is likely to manage such services as chiropractic and physical-therapy claims, diagnostic-testing services, high-risk pregnancy care, as-thma, diabetes and chronic-disease management. Why? Because these services also aren’t heavily intertwined with primary-care services.

While the term carve-out is relatively new, the practice itself isn’t. Dental plans, for instance, have been separate from the main medical plan in many companies for years. “Most people don’t think of them as being carved out,” Gelber explains, “when in fact, they are.” Dental plans are carved out because they represent an area of specialty care and because the care providers represent a specialized group of health professionals. The organizations that administer the claims are equally specialized.

Part of the reason carve-outs are getting more attention lately is because more specialty-care providers are managing carved-out services. These providers have had to become very entrepreneurial and respond to the cost and quality concerns of purchasers because of a growing trend, at least in the managed-care environment, to rely more heavily on primary-care physicians. Why? Because they’re cheaper. Fearing a loss of business, the specialists have banded together and created organizations that offer a level of expertise—be it in internal medicine or mental health—that’s not available anywhere else. In essence, this is marketplace economics at its finest.

The second reason carve-outs have become so popular is, quite simply, because they work. When specialists are put in charge of managing specialty care, patient satisfaction increases and costs go down. By how much? The large mental-health vendors routinely achieve a 90% satisfaction rate while cutting costs for employers, on average, from 30% to 40%, Gelber says. And in prescription drug carve-outs, savings can be as high as 50%. For companies that carve out these services, the potential savings come at a good time, because for years the costs of mental-health and drug benefits have been rising at a higher rate than those of other health benefits.

Deciding what to carve out.
In looking for pieces of the benefits pie to single out, HR professionals should begin by analyzing their health-care data to see how they’ve used health benefits, including for what diagnoses and what kinds of care. These data will allow you to spot problems in quality, utilization or cost. If you notice, for example, that mental-health costs are rising faster than the costs of other care areas, you might want to consider carving out this benefit.

Which is exactly what the National Railway Labor Conference did last year. The self-insured organization which provides, among other things, health benefits to more than 200,000 railroad employees across the nation, could not cut benefits as a means of controlling costs because railway workers are unionized and the union would not accept reduced coverage. Besides, as many companies have discovered, cutting benefits can ultimately lead to other problems such as lower morale, sicker workers and declining productivity. The alternative, according to Joe Epstein, director of employee benefits, was to work with the union to find better ways of managing those benefits. How? By carving out some of the benefits and contracting with Value Behavioral Health (VBH), a specialty vendor based in Wilton, Connecticut, to manage them.

VBH not only serves as a gatekeeper to all mental-health services by precertifying railroad employees to use those services, but also manages a network of mental-health providers. Employees who use providers in the network are covered at a higher benefit level than those who go outside the network. The $38 million National Railway saved came from the combination of reduced per-visit costs VBH was able to negotiate with its care providers, and from the avoidance of inappropriate care (especially costly procedures) realized by having experts manage the recently carved-out benefits.

Savings can be a big reason why some companies decide to switch to carve-outs, but there are other factors. Despite the savings US West has realized, cost wasn’t the reason this organization carved out its mental-health benefits. Instead, it was because of access problems. In 1991, when the company consolidated four indemnity plans into one, HR professionals were concerned the chosen carrier would be unable to provide adequate mental-health coverage to all of its management employees in 14 western states. “In our opinion, the medical plan didn’t have a large enough mental-health network,” explains Keith Orton, regional director of mental-health services in the company’s Portland, Oregon, office. So, the company carved out its mental-health coverage and contracted with a specialty vendor. Today, US Behavioral Health in Emeryville, California, manages these services for US West.

Because utilization is closely monitored, US Behavioral Health knows where to add providers to the network in order to make sure all employees have access to quality services. “Their sole purpose in life is to efficiently manage mental-health services for their clients,” Orton explains.

Another factor in US West’s decision to carve out mental health was because negotiations with its union, the Communication Workers of America, comes up this year and the company wants to introduce managed care into the health-benefits package provided to union employees. By carving out mental-health services for management employees ahead of time, “we’re hoping we’ve created a plan that will look appealing to the bargained employees,” Orton says.

Sandoz Pharmaceuticals in East Hanover, New Jersey, carved out its medical-surgical and mental-health benefits in January 1994 for yet another reason: as a way of getting employees used to the idea of managed care. According to Bill Flannery, director of benefits, employees had been used to a traditional indemnity plan in which all reasonable and customary charges were paid in full. Employees didn’t have to go through a precertification and utilization review process, nor did they have to choose from a list of network providers.

In an effort to control costs, the company is planning to make the switch to a comprehensive managed-care program in 1995. As an interim step, Sandoz contracted with Intracorp in Plymouth Meeting, Pennsylvania, to review medical-surgical procedures, and with Value Behavioral Health for mental-health services. Both vendors serve the company solely as gatekeepers who approve procedures and length of stay. Employees are not—at least not yet—sent to providers in those networks.

“These vendors are charged with making medical judgements and determining the medical necessity of certain procedures,” Flannery says. “We want employees to get used to the idea of case management before we change the whole benefit program on them. Though we have saved some money by carving out and managing those two benefits more closely, our primary reason for doing so was to create a cultural change in the organization.”

There are lots of different ways to manage carved-out services.
Once you’ve decided what benefits you need to carve out and why, you must determine how you will manage those benefits. Since separate administration of carve-outs is what makes them so effective, choosing a qualified administrator is crucial.

There are essentially four ways to take advantage of carve-outs. The easiest way to manage carve-outs, and one that is mostly transparent to employers, is to contract with managed-care organizations that have already carved out specialty services. They do this by either creating their own internally specialized services or by contracting with outside vendors. Either way, the services are managed by experts.

An HMO may carve out radiology and laboratory services, for example, and instruct their doctors to use only pre-approved radiology and lab vendors. Because this is done internally, there is no impact felt by employers or their employees. However, because costs can be controlled, purchasers get the financial and quality benefits of carved-out services without having to manage them. According to Gelber, about 10% of employers use HMOs that have internally carved-out services. Because they are often invisible to purchasers, you may already be taking ad-vantage of them without knowing it.

The second and most difficult way to carve out benefits is by creating and contracting with your own network of providers. This requires the HR department to identify, credential and manage the physicians and vendors in the network, as well as handle all the precertification, utilization review, case management and claims processing. Direct contracting is by far the most cost-effective route because it eliminates costly intermediaries. However, the administrative burden on the HR function is enormous. “Increasingly, employers who had been direct contracting are not doing it anymore,” Gelber says, “because it’s a pain to administer.” Only about 10% of employers who use carve-outs have gone the direct-contract route.

About 40% of companies are taking advantage of carve-outs by using specialty services managed by major insurance carriers. Under this kind of arrangement, you could either opt to use the carve-outs offered by your own carrier—one-stop shopping, as it were—or carve out the benefits and assign them to separate carriers. You may choose Travelers Insurance, for example, for your indemnity coverage and Aetna for your medical point-of-service plan. The problem with using the same carrier for all carved-out services is that the account manager who handles your account will then be responsible for both the indemnity and specialty coverage. “Very often,” Gelber explains, “employers are not happy with that arrangement because account managers can’t know enough about all specialty areas. They aren’t dentists and pharmacists and mental-health clinicians as well as account executives.”

The last, and one of the most popular ways to manage carve-outs, is to use a specialty managed-care vendor like VBH or US Behavioral Health. These organizations are in business solely to provide cost-effective, high-quality specialty care for their clients.

Most companies, regardless of the way they decide to manage the carve-out, offer the carved-out managed-care services to employees as a choice that’s available in addition to their regular benefits coverage. Employees are then of-fered financial incentives to use the specialty network.

Managing carve-outs challenges HR professionals.
As you might imagine, there are several challenges inherent in managing carved-out services. First and foremost, you must make sure that specialty providers are able to work within your cost and quality requirements. Union Carbide Corp. in Danbury, Connecticut, learned this lesson the hard way when it contracted with a specialty vendor to carve out psychiatric and substance-abuse services in 1988.

According to Ed Hoefer, associate director of benefit plans, during the first year of the carve-out, costs for psychiatric services dropped significantly and the company was happy. By the end of the second year, however, costs had jumped up 40% and HR managers had a difficult time getting the vendor to account for the increase. After some investigation, Union Carbide found the vendor wasn’t properly managing the discounts it had negotiated with providers. For example, a per diem hospital rate that should have been $400 was actually being paid out at $800. Other claims were not being paid at negotiated rates because of problems with the vendor’s computer system. “Basically, the services were not being managed the way we were promised they would be,” Hoefer says.

After working with the vendor and searching, mostly unsuccessfully, for ways to better manage costs, Union Carbide fi-nally gave the vendor an ultimatum: guarantee that costs would be maintained at a certain rate per em-ployee per year or lose the contract. “Because the vendor wanted our business, they agreed, and costs dropped like a rock the next year,” he says.

Yet this created an-other problem. “We no-ticed a drastic drop in admission rates and the average length of stay which made us wonder if the vendor was limiting access to necessary psychiatric care,” Hoefer explains. “We wanted to control costs, but we also wanted to get people well.”

Eventually, Union Carbide worked with its vendor to draw up a detailed business plan that included a series of clinical quality measures. After five years, the company and its employees are finally happy with the arrangement. Costs are down—Union Carbide paid $228 per employee per year for mental-health services in 1994 compared to $326 in 1989—and patient satisfaction is up.

Given his experience, what advice would Hoefer have for other companies that wish to carve out psychiatric services? “Develop measurable standards,” he says. Gelber agrees, adding that vendors should be willing to pledge a percentage of their fee against the attainment of administrative, clinical and financial standards.

Another trick in managing carved-out services is getting the specialty vendors and primary-care physicians to work to-gether so referrals can be made between the two groups. If an employee is undergoing treatment for cancer, for example, he or she may need some support from mental-health therapists. The primary-care doctor who is covered under the general medical plan needs to know the specialty network exists. “This is tough because sometimes the primary-care physicians are not interested in knowing who to refer [patients] to,” Gelber says, and unless the carve-out vendor has been instructed to share appropriate information with medical providers, they may neglect to do so.

From an internal standpoint, the biggest challenge with carve-outs is communication. Teaching em-ployees what managed care and specialty health-care networks are all about is tough, but as Epstein from the National Railway Labor Conference ex-plains: “You can’t over-communicate about managed care.” Extensive communication with managers also is important because they are the ones who have to approve and sell the concept of managed care to their employees.

In the end, what is the biggest impact of carve-outs on the HR function itself? “It creates a different sort of function,” Gelber says, one that is focused on vendor management and data analysis. Carve-outs require analytical, coordination and management skills that fit well with the new customer-oriented generation of HR people. When carve-outs are done right, costs decline, care improves, quality monitoring improves and there’s a broader spectrum of care covered by the benefits plan. Companies can’t help but come out ahead.

Two years ago, the United Steelworkers devised a model contract to be used by its local affiliates in negotiations. The key components of the contract reflect the changing concerns of all unions today. According to the Harvard Business Review, the major provisions of the model contract are:

• No-layoff guarantees
• Labor involvement at all levels
• Longer term contracts, with caveats, which would provide stability for markets, companies and employees
• Revitalization of craft apprenticeships and job-training programs
• Health-care reductions through managed care, without shifting costs to employees
• Preservation of the pensions, insurance and other benefits for active and retired workers
• Company neutrality in organizing drives and a simplified process of union recognition
• Continuing commitment to plant modernization.

Furthermore, as Barbara Presley Noble writes in the Harvard Business Review, “The Steelworkers would also like the industry to join the union in lobbying for a mutually beneficial public policy agenda: investment in rebuilding the nation’s disintegrating infrastructure, adoption of a national health-care program, enforcement and strengthening of U.S. trade laws, and labor law reform. With such an agenda, two legendary antagonists may one day stand shoulder to shoulder.”