Author: Shari Caudron

When Household International, the Prospect Heights, Illinois-based provider of financial services, went through a restructuring in 1990, displaced employees used the internal jobposting system to find new opportunities within the company. Approximately 75% of 200 displaced employees found new jobs this way.

At the time, the posting system, known as Inside Track only was available to the company’s 5,000 Chicago-area employees. Because it was so successful in relocating those affected by the restructuring, however, human resources managers began to wonder if Inside Track might help with career moves for employees who weren’t being displaced.

Believing that employees and the company have a joint responsibility for career development, in August 1992 Household made Inside Track available to all 14,500 employees at 450 offices around the country. Now, by using their personal computers, every employee can access the company’s open positions, up to the level of assistant vice president.

According to Beth Derman, manager of corporate programs, having a nationwide system sends the following messages to employees: That the company is serious about career development and that opportunities aren’t limited based on location, division or job experience. “If you’re in accounting, you can go into marketing,” Derman says. “If you’re in HR, you can go into sales.” The goal is to empower people to take charge of their own careers.

Because Household International strongly believes managers have a responsibility when it comes to career development, the company offers them an incentive to refer employees to Inside Track. For every employee who’s placed in a position identified through Inside Track, the manager receives one share of stock. The incentive program recognizes managers who head departments that have a lot of turnover or who have a high percentage of entry-level employees. With the incentive, Household hopes to counter any resistance managers might have in encouraging employees to move on.

Inside Track is supported by other career-development tools, such as career counseling, cross-training opportunities within individual business units, tuition reimbursement, management training and a skills bank, which is a computerized database with up-to-date information on employee skills, education and experience.

Whereas Inside Track helps employees find job opportunities, the skills bank helps managers recruit qualified employees for open positions.

If the success of Inside Track can be demonstrated by the number of people who have relocated to new jobs in the company, then the program is working. Last year, 932 employees obtained new jobs through the online system.

In the long run, Derman adds, Household is better off with highly motivated people who know that if they do a good job they can move on. Inside Track is a way to get motivated people into positions in which they’re challenged and effective.

Employees at the San Diego Zoo used to have very narrow and very well-defined job responsibilities. Keepers did the keeping and gardeners did the gardening. Employees in construction and maintenance constructed and maintained. This system worked as long as there were clearly defined boundaries between animal exhibits, public areas and horticultural displays.

But in 1988, the zoo began to develop bioclimatic zones, in which plants and animals are grouped together in cageless enclosures that resemble their native habitats. Instead of viewing the exhibits from afar, visitors now walk into and become part of these zones in what the zoo calls an immersion experience. Bioclimatic zones such as the humid, 3.5 acre Tiger River exhibit not only provide a healthier environment for plants and animals, they provide a better way to educate visitors about conservation issues and increase their enjoyment of the zoo experience.

Because the zones themselves are more interdependent—plants are there to be eaten, not just admired—the employees who manage them must work more closely together. This is why, instead of maintaining the new exhibits with employees from traditional functional areas, the zoo has assigned self-directed, multidisciplinary teams to manage the bioclimatic zones.

Tiger River, for example, is run by a seven-member team of mammal and bird specialists, horticulturalists and maintenance and construction workers. The 5-year-old team tracks its own budget, and members are jointly responsible for the display. “Before, the gardener may not have cared about trash on the ground because that was the groundskeeper’s job,” explains David Glines, who is in charge of training and development at the zoo. But today, the horticulturalist may spend a morning cleaning the paths, helping the birdkeeper chase down some geese and answering questions from curious visitors—without even looking at the plants.

Tiger River team members received extensive cross training, and together, they analyzed the work required, set goals for themselves and gradually built a sense of mutual responsibility and ownership for the exhibit.

Glines says that the move to self-directed teams was a “painful, bumpy road,” but that the process is paying off. Zoo attendance is up, despite the depressed Southern California economy. Workers’ compensation claims are down, and employees report a much higher quality of work life. As one team member explained, “Until I was cross trained and became responsible for a whole area, I had little regard for other job classifications. Tiger River has taught me to respect and help others for the benefit of the entire Zoological Society. This, in turn, gave me pride, which enriched my work.”

Improved performance is increasing the use of self-directed teams.
Self-directed teams like those implemented at the San Diego Zoo are getting a lot of attention these days. In a survey conducted by Development Dimensions International, a human resources consulting firm in Pittsburgh, 27% of respondents reported that their organizations currently use self-directed teams, and half of those individuals predicted that the majority of their work force will be organized in teams within the next five years. This interest in self-directed teams is nothing short of phenomenal for such a new concept. The same DDI survey revealed that most respondents have two years’ or less experience with self-directed teams. Most surprising, however, is that HR led the move to self-directed teams in only a tiny minority of the organizations surveyed. This finding is significant because the successful implementation of self-directed teams often involves several HR issues, including compensation, labor relations and job descriptions.

Regardless of who is leading the drive to adopt self-directed teams, why are they becoming so popular? “Because they produce extra performance results,” explains Jon Katzenbach of McKinsey & Co. Inc. in New York City and author of The Wisdom of Teams. As corporate executives and small-business owners alike embrace the total quality movement, they’re finding that self-directed teams represent potentially one of the most productive forms of employee involvement to ever come down the pike. As Katzenbach says, there is virtually no environment in which teams—if done right—can’t have a measurable impact on the performance of an organization. How many management initiatives can you say that about?

Yet self-directed teams require an enormous amount of thought and planning, and no organization should implement them without first understanding what self-directed teams are—and aren’t.

Self-directed teams aren’t teams of co-workers from the same functional department who join together to foster team spirit. Self-directed teams also aren’t cross-functional groups of employees who come together to solve a particular problem and then return to their regular jobs. Neither of these two approaches represents self-direction because they don’t change the way the organization is structured and the way work gets done.

“Many people use the label ‘self-directed teams’ when it isn’t appropriate,” explains Barbara Kelly, an organizational development consultant in Kinnelon, New Jersey. “The move to self-directed teams requires changing not only the attitudes of people, it requires changing the organizational structure, information patterns, rewards and compensation systems and the whole concept of career paths. With self-directed teams, employees require a lot of training in team skills. They need cross training in different functions, and they require much greater business training so that they can understand the impact of their actions on the organization.”

Furthermore, to create an effective self-directed team, employees on the team must be interdependent and the team must be established for tangible business reasons. Unfortunately, a lot of teams are established because of what some experts call the country club effect. “This is where one vice president finds out at the country club that his cohort has established self-directed teams, and therefore, he has to have them too,” says DDI project manager Jeanne Wilson. But teams aren’t an end in themselves; they’re a means to an end. More appropriate and effective reasons to establish self-directed teams are to improve quality, reduce cycle time and adapt more quickly to the marketplace.

In the skin-care products division of Warner Lambert’s Consumer Health Products Group, self-directed teams were established in an effort to speed new- product development and improve communication and decision making among managers. The company, based in Morris Plains, New Jersey, produces the Lubriderm brand of lotions.

Warner Lambert’s decision to implement teams came after a lengthy design process in which a cross-section of management-level employees analyzed how work was done at the company. After developing a 30-foot-long flow chart that listed each activity undertaken on the journey from product development to sales, the design team pinpointed inefficiencies in the current system and found ways that employees and technology could be used more effectively. This process, known as socio-technical systems design, is used frequently by companies that are looking for ways to become high-performance organizations.

What the managers at Warner Lambert discovered was that skin-care products had been following a cumbersome design process in which a new product went from an idea in the marketing department, to research and development, on to manufacturing for a prototype, back to marketing and finance to see if the product could be made and sold at a profit, back to R & D and manufacturing, and then on to sales and distribution.

The continual back-and-forth process slowed product development considerably, says Fred Cheyunski, director of organization design and development. A better approach, the design team concluded, would be to reorganize the work into teams that contained management-level people from the different disciplines involved in the product development cycle. “Rather than handing the work off to each other at different stages, decisions now are made jointly and much more quickly,” Cheyunski says.

Self-directed teams often are a result of reengineering.
The approach taken by Warner Lambert forms the essence of the reengineering concept promoted in Michael Hammer and James Champy’s highly regarded book, Reengineering the Corporation. Simply put, reengineering is the single best reason for reorganizing a workplace into self-directed teams.

Hammer and Champy define reengineering as:

Though Rochester, New York-based Kodak didn’t call it reengineering, the company used this process when it instituted Team Zebra, a term that refers to the 1,500 employees involved in a massive reorganization of the company’s black-and-white film products division.

In 1989, faced with declining profits, soaring costs, late deliveries, low morale, environmental problems and a dearth of new products, managers realized that to survive, the division would have to undergo a major structural change. The company began by studying the concept of a high-performance workplace. “One of the tenets of high performance is that you must perfect a smooth flow of materials through the manufacturing operation,” says Stephen Frangos, executive consultant for Zenger Miller’s Achieve International Division in Rochester, New York, and former manager of Kodak’s black-and-white film manufacturing division. “This word ‘flow’ kept cropping up again and again, and we decided that to streamline the manufacturing process and boost quality, we would have to organize our work according to natural material flows.”

Today, Kodak Park, where black-and-white film manufacturing is located, is organized into six flows—two for photographic paper products and four for film products—with hundreds of teams servicing those flows and addressing customer needs. The majority of teams have between six and 12 employees. “We went from a functional organization into a flow organization that was organized by product and process instead of by function.”

Frangos says that all flow teams are self-directed, and that once team members understand the problems they are addressing and what the goals are, they have a huge amount of self direction in terms of how they will tackle the problem. “We went from an unempowered organization to an empowered one, thanks in large part to the team structure,” he says. As is the case with other companies that are successful in implementing self-directed teams, Kodak didn’t have a deliberate strategy to use teams. Instead, the company changed the way work was accomplished and teams were the result.

What has Team Zebra accomplished? A lot. The first two years after the reorganization, the division was the strongest productivity gainer in the company. Employees created about $40 million in cost reductions while producing the same or more products. They lowered inventory levels by $50 million, and sped up work processes—production time on one product was reduced from 42 to 20 days. Quality is up and morale in the division is near the top of the company.

The implementation of self-directed teams should involve HR.
The majority of organizations that make the move to self-directed teams are looking for quality improvement gains like those experienced at Kodak. In fact, the DDI survey revealed that 38% of respondents were using self-directed teams for the express purpose of boosting the quality of their services or products. Twenty-two percent of respondents are using teams to create productivity gains, and 17% want to reduce operating costs. Although improved morale and job satisfaction often are an end result of team development, only 12% of companies put teams into place for this reason.

Who spearheads the implementation of self-directed teams? According to the same survey, the decision to initiate teams is most often made by either division or upper-level management. Human resources led the move to self-directed teams in only 5% of the organizations. Yet management consultants agree that while upper management support of self-directed teams is crucial to their success, so is involvement by the human resources department.

“I think it’s a crime that the HR community isn’t taking a more active role in leading this effort,” Wilson says, “especially when you consider the implications of self-directed teams on compensation, job descriptions, training and development, labor relations, and other HR issues.”

Silicon Graphics Inc. in Mountain View, California, is a prime example of what can happen when HR isn’t involved from the inception of self-directed teams. The decision to implement self-directed teams in the customer- support division was driven by the business objectives of decentralization, bringing the business closer to the customer and exceeding customer expectations. As Debbie Tenenbaum, HR representative explains, “This was not an HR decision, it was business-based.”

In January 1992, the company piloted the team concept by establishing three teams of five to seven employees each. These manufacturing teams were organized around work involving particular product components (the company makes visual processing systems), and team members were cross trained to do each other’s jobs. Six months into the pilot it became apparent that human resources support systems should have been in place since the beginning of the effort. It wasn’t enough for human resources to develop these systems while the team was developing.

“As we implemented self-directed teams, we learned that teams are a systems approach to an organization and that there needs to be support in place through the performance evaluation, recognition, communication and training systems,” Tenenbaum says. “Teams change the whole dynamic of an organization, and you need a lot of support tools—not only for the business as a whole but for the teams as well. Team members need to know how to work together and managers have to learn how to work in a team environment. If we were to do this over again, we would have the HR infrastructure in place at the front end, and we would have the tools available to support and help the teams and their managers.”

But in addition to analyzing and restructuring organizational systems, such as compensation and performance management, and providing team members and their managers with skills training, HR has a crucial role to play even before teams are implemented: educating management about the benefits of self-directed teams, as well as the costs, risks and limitations. This might involve arranging site visits to similar organizations that already have teams, bringing in a successful team to speak to the key stakeholders in the organization, or bringing in consultants to discuss the team development process.

At Union Pacific Railroad in Omaha, Nebraska, the decision to reorganize into self-directed teams is being led from the middle of the organization, and the company currently is piloting self-directed teams in two locations. A representative from HR collaborates with the team that’s overseeing the pilot project, but the company made a conscious decision not to have HR lead the effort. Why? “We wanted to get people on the line to work through the issues related to team implementation,” explains Eric Butler, director of asset and operations analysis.

Yet, while HR may not be out front leading the effort, Charley Eisele, Union Pacific’s vice president of HR, is playing a crucial background role as an information conduit between team leaders and the CEO. Butler says Eisele took the responsibility of presenting research and explaining the bottom-line benefits of teams to the CEO. This involved introducing him to other executives who’ve had success with teams and explaining how self-directed teams differ from the quality-improvement teams that already were in place at Union Pacific. Butler says that Eisele orchestrated all communication between the teams and upper management.

Involving unions from the beginning can help self-directed teams succeed.
Another important HR role in the early stages of team implementation is to work with union leaders. “Unions can be a tremendous help in the move to teams and in the cases in which they haven’t been helpful it is because they haven’t been included from the start of the process,” explains Wilson. “The minute you start thinking about self-directed teams you should include union leadership.”

At Union Pacific, there’s a union advisor on every team who offers input, insight and guidance, Butler says. “The local union chair at each of our sites will assist in and drive the team design process at those sites. We wouldn’t try this without them,” he says.

Still, teams can make unions nervous. For example, at the San Diego Zoo, where about 75% of the staff is represented by Teamsters Local 481, the union is concerned about the zoo’s reorganization. Because job classifications are an important part of union contracts, converting to self-directed teams can present union members with an unattractive job structure. “We have 97 different job classifications at the zoo, and the team concept tends to make everyone into a generic worker,” explains Tom Miller, a union representative. “I’m not sure that’s good.”

For unionized companies that are considering the move to self-directed teams, Wilson has this advice: “Tackle the whole investigation of self-directed teams in partnership with the union. Many companies have found it effective to visit other unionized organizations that have implemented self-directed teams and have their union leaders talk to other union leaders. With teams, there’s so much potential growth for union membership—greater opportunities for compensation, increased job security and more interesting jobs—that teams are a natural fit with union needs.” Because of HR’s role in labor relations, it makes sense that HR lead this partnership effort.

Even with all the good reasons for HR to be involved in a team implementation, some companies may decide that the function doesn’t have a role to play; that if HR were to lead the effort it would become just another flavor of the month. Such was the case at Chevron USA’s Gulf of Mexico Business Unit based in New Orleans.

Four years ago, the company reorganized into cross-functional groups of employees called field management teams. “There were empires and politics surrounding the functional areas: petroleum engineering, facilities engineering, development geology and the support staff,” explains Robert Tilgham, senior petroleum engineer and quality improvement advisor. “We wanted people to collaborate more, to help all the functional areas understand how their roles are aligned with the overall organizational goals.”

But in making the move to teams, the company made a conscious decision that HR wouldn’t be involved in the process, explains Jerry Katz, manager of HR. This was because the company wanted to force the field management teams to truly become self-managing. If the teams need advice on human resources issues, such as staffing or performance management, human resources provides it by acting as an internal consultant. “But we are highly decentralized. Issues that pertain to people in this organization are being pushed down the line,” Katz says.

Clearly, no matter what kind of company you’re in, the decision to implement self-directed teams will be based on the company’s culture and business objectives. Warner Lambert wanted to speed new-product development. The San Diego Zoo wanted to increase guest satisfaction. And Kodak was working to turn around an ailing business unit. And as the experiences of these companies indicate, teams can work in any environment.

“The misconception is that self-directed teams only work in manufacturing environments,” Wilson says. “But service organizations, such as insurance companies and banks, are similar to white-collar factories. Instead of a product being passed down an assembly line, customers get passed from department to department.” By reorganizing into teams, service businesses can go a long way toward increasing customer satisfaction.

Naturally, there will be differences in team structure depending on the industry involved. Teams in a toy company, for example, may work on a new product for six to 18 months, whereas in a pharmaceutical firm, teams may be involved in new-product development for eight years. But in the end, the ways teams are formed—if they’re formed at all—will depend on the strategic business needs that brought teams together in the first place. And if teams are working, you’ll know it. As one member of the zoo’s Tiger River team explained, “I think the difference in this exhibit is obvious. Tiger River immerses the visitor in a quality exhibit in which animals, employees and guests are No. 1.”

Here are five common misconceptions:

1. Self-directed teams do not need leaders.
   Because the phrase “self-directed teams” conjures up a leaderless group, many organizations mistakenly have assumed that leaders and managers no longer are necessary when the organization makes the move to teams. But there is a definite need for some type of leader—or coach or facilitator—to transfer what traditionally has been leadership responsibility to these team members. The role of leaders changes substantially with teams, but they still have a part to play.
2. Leaders lose power in the transition to teams.
   Many managers think of power as a zero-sum game. That is, if employees have more power through self-directed teams, then the managers must have less. But power is an expandable and flexible resource. Instead of exercising power inwardly to control people, leaders of self-directed teams should turn their power outward and use it to break down barriers in the organization that prevent the team from being effective. Leaders can make things happen in the organization by helping to influence top management, suppliers—even customers. With self-directed teams, leaders don’t necessarily lose power, but they must exercise it differently.
3. Newly formed teams are automatically self-directing.
   Newly formed teams aren’t self-directed, nor will they be for some time. Team development is evolutionary, and describing new teams as self-directed may establish unrealistic expectations.
4. Employees are waiting for the opportunity to be empowered.
   Not everyone will welcome the empowering effect of self-directed teams. Some consultants have estimated that 25% to 30% of working Americans—regardless of their position in the organization—don’t want to be empowered; they simply don’t want any more responsibility than they already have.
5. If you group employees in a team structure, they will function as a team, and the organization will reap the benefits of teamwork.
   Unfortunately, it doesn’t happen this way. Groups must go through some developmental process to begin to function as teams. To begin, team members need training in such areas as group problem solving, goal setting and conflict resolution.

Talking to human resources professionals in rapidly growing companies is a bit like talking to parents of infants. They’re exhausted, excited and incapable of holding a single thought for long stretches of time. They talk quickly, are eager to share information about their challenges, and their enthusiasm is infectious. Although they realize that many, many other people have survived the experience, they wonder how and question what the future will look like two, three or even five years from now. Instinctively, they know that the challenges they face will never go away completely, they’ll simply change with time.

Managing the HR needs of a small, fast-growing company is indeed like trying to manage very young children, says Barbara Beck, director of human resources for Cisco Systems in Menlo Park, California. In just four years, the computer-equipment company has expanded from 50 employees to more than 1,500. As she puts it, “Our company has gone from infancy to young adulthood without spending any time in the adolescent phase.”

Believe it or not, despite all the ink about downsizing, there are hundreds of small companies that, like Cisco Systems, are growing at exponential rates every year. Among the countless small companies that are actually adding people to the payroll is MVM Inc., a provider of security services based in Falls Church, Virginia, that has grown from 300 employees in 1990 to more than 1,200 today. There’s also Melaleuca Inc., a direct-marketing company in Idaho Falls, Idaho, that has grown from 150 employees and $16 million in sales four years ago to 1,000 employees and $200 million in sales today. Then there’s Gateway 2000 in North Sioux City, South Dakota, which assembles and sells personal computers. In just two years, the company has more than doubled its work force, from 1,200 to 2,700 employees.

Adding employees at this rate can be an HR headache or a celebration, depending upon how well the personnel department has prepared for growth. In growing companies, the HR challenge lies not only in providing HR services, but in growing the department itself. Personnel Journal talked to the HR directors of several small but rapidly growing companies to find out how they were managing the growth of their departments. We found that there’s no absolute right or wrong way to develop an HR function; the process depends largely on the:

• Type of business
• Resources that are available
• Interests, expertise and goals of the directors themselves.

Because there are no hard-and-fast rules about developing an HR department, we thought that we’d let the human resources directors who are facing this challenge speak for themselves about their experiences.

Barbara Beck, Cisco Systems:
I was brought on five years ago when there were just 40 employees. At the time, Cisco had an employee in charge of recruitment who was just starting to develop the personnel files. My job was to formally establish the human resources function, to help with recruitment, to establish the compensation plan and to help in discussions about how the company should be structured.

David Jackson, Complete Health Services:
I took over as director of personnel three years ago when there were 250 employees. Until that point, there was no formal personnel department. Human resources activities were being managed by the director of administration, but there was no centralized function. I was brought in to formalize the human resources department. Because we were in such a high-growth mode, one of my first responsibilities was recruitment. In the beginning, 50% of my time was spent coordinating recruiting activities.

Meg Hawthorne, Clean Sites:
There has been a formal HR department since the organization was created in 1984. Why? Because if the organization was to succeed, we needed credible employees and people who were respected in their various constituencies. You see, we’re a widely diversified organization that deals with all aspects of hazardous-waste cleanup—the legal side, the technical side and the policy-analysis side. Our basic function is to work with government, industry and community representatives to facilitate cleanup and negotiation. For us to be involved and considered credible, we had to recruit people from diverse backgrounds and disciplines who were well respected.

Steve Coggin, Melaleuca:
We currently have three HR managers—one at each of our manufacturing facilities. One of them is an HR generalist, one is a recent graduate with a degree in HR management, and the third is a person with no HR experience who was promoted through the ranks. With 15 people in our HR organization, we now are in need of a strong department head. We are looking for a leader… someone who has solid HR experience who can consolidate and support the HR function.

Jackson:
My background is in human resources, and I was brought in because I’ve been through this a couple of times already with other companies that were in a high-growth mode. Growing the HR function in small companies is my area of expertise.

Hawthorne:
Before I was promoted to director of HR, I was a special assistant to the company president, which was an administrative function. My background is diverse. I spent time in the military, where I had some personnel responsibilities, but most of my experience is of an administrative nature. When I took over as HR director, I completed a course offered by the American Management Association called the “Fundamentals of Human Resources,” and found out that I actually knew more than I thought I did about HR issues. Still, it was a challenge to gain respect in the position and not be viewed as a glorified secretary.

Susan Ferguson, MVM Inc.:
I am an HR generalist with a bachelor’s degree and experience in the defense- contracting industry. We recently had to hire an HR director—whom I now report to—because as the company grew, we needed someone with more experience and education. She has a master’s degree in HR, has more experience and a more diverse background.

Jackson:
Making the transition from a small-company to a large-company mentality. As we grow, we need to have more policies and procedures to treat employees fairly and consistently, but we also don’t want to set ourselves up as bureaucrats.

Beck:
The biggest HR challenge in growing companies is recruitment. In fact, all positions in HR should be considered responsible for recruitment. But you also have to prepare and plan for a larger organization and pay careful attention to the way you structure HR programs.

Ferguson:
Keeping up with state and federal laws, and training managers in the field to provide HR services.

Earle Grueskin, Gateway 2000:
The toughest part is keeping up with the impact of heavy hiring… keeping up with benefits, health insurance, compensation, and so on, while continuing to recruit more employees.

Beck:
Our CEO is very interested in the people in this organization, so he approves all new HR programs and any major changes to them. But he trusts us to come up with recommendations and to actually run the programs.

Jackson:
This is an entrepreneurial environment, so we tend to get involved in decisions about HR from the back end—it isn’t a problem, it’s just the way it is in this kind of company. There are certain decisions related to HR—for example, percentage salary increases and manpower forecasts—that we’re involved in, but there are many decisions that are made strictly at the executive level. In this kind of environment, it isn’t uncommon for the CEO to hear about a great new HR program and come in and tell us, “Hey, we need to do this,” without thinking about the repercussions. In a sense, we have to train the CEO [to understand] that we can’t implement every new HR program that comes along.

Ferguson:
This is true in our organization as well. Our CEO is typical of those found in fast-growing companies. He’s enthusiastic, has many great ideas and tends to get “gung-ho” on certain projects. For example, he wanted us to implement a new interviewing process that he heard about at a seminar. We told him that the process would work well for technical employees, but not for the blue-collar employees that form the majority of our work force. There’s a high turn-over rate among this group, and it just didn’t make sense to spend hours interviewing candidates for those jobs. I would say that a lot of recommendations on HR issues come from the CEO, but our arrangement is collaborative.

Grueskin:
We’ve kept up by strategically planning our needs. For example, we’ve hired approximately 800 employees in the last six months, but we knew ahead of time we’d be facing this employment surge. How? We’re a direct-mail company, and phone calls were on the increase, our products were being praised in the trade press and the marketing department was forecasting a dramatic sales increase. As we’ve added more people throughout the rest of the company, we’ve added more people in compensation, employee relations, recruiting and in clerical areas. We didn’t add staff to HR after these new employees were on board, we added them along the way.

Ferguson:
Here, there’s no thought given to “if we grow.” Our attitude is “when we grow.” We are continually planning for a larger organization, and each department regularly projects what kind of staffing and resource needs it will have when the company grows to 1,200, 1,500, or 1,800 employees. We are more likely to have the resources we need allocated to us if we planned for that need ahead of time. This obviously means that we have to be prepared, but it helps us meet critical HR needs, such as hiring 270 people with just a week’s notice.

Coggin:
For years, we’ve relied on a consulting firm to supply needed expertise in areas such as benefits, compensation, performance appraisals, policies and procedures, health insurance, training, worker’s compensation and Department of Labor requirements. By contracting with this firm, we were able to gain a lot of skills and experience at a very reasonable cost. It was a cost-effective, “make-vs.-buy” decision. Many of the programs they developed—such as the procedure to follow when someone is accused of substance abuse—only have to be developed once. Once the programs are in place, our goal is simply to manage them.

We’re very conservative when it comes to adding HR staff, so at times when we’ve needed extra help—for example, when we had to get 200 people on the payroll immediately—we got employees from other departments to help us with recruitment temporarily. They worked with us for three weeks until the new hires were on the job, then the borrowed employees went back to their own responsibilities.

Typically, we borrow employees from departments such as customer service and in-bound sales. They have good phone manners, are excellent problem solvers, and they know a great deal about the company. We don’t try to make instant HR specialists out of them. Instead, we give them administrative duties, such as scheduling interviews, setting up appointments for drug screenings and assisting with reference checks.

Because the customer-service and sales departments have so many employees, it isn’t necessary to find other employees to take over the responsibilities of those we borrow. Also, when we need the most help in HR is usually at a time that is slow for those departments. For example, we may be in a hiring mode because we are getting ready to launch a new product. Customer service isn’t going to get busy until those new people are hired and the new product is officially launched. Our culture allows this kind of employee borrowing because, as our CEO says, we operate under a “sports car” mentality. Our people move in high speed to do whatever needs to be done. If customer service temporarily needed people from HR, they could have them.

Coggin:
We installed a large, companywide computer system two years ago, but the only HR module we had was a payroll program. The biggest mistake we made was not obtaining good HR software at the time that system was installed. We need to track such things as attendance and actual-versus-budgeted expenditures, and we need help with planning the appraisal process. Today, we’re doing all this manually. We will have major productivity gains when we finally get some good HR software.

Jackson:
One of my first jobs as personnel manager was to establish the information flow—to get everybody onto some sort of PC system so that we knew how many people we had, how many openings we had and where the people were. We didn’t have an HRIS previously, and our budgets were—and are—very limited. We had a lot of priorities, and putting money into an HRIS wasn’t one of them. What we did was establish a system to serve our purposes in the short term. We simply set up a data-base program in which we could add fields and put up to 150 pieces of data in order to generate reports. It was a low-budget kind of approach.

Beck:
When we put in an HRIS three years ago, we didn’t have any idea what we were doing. We accepted the vendor’s assurances that anyone can input and manage the data, but it wasn’t that easy. For example, we didn’t have a system that could provide monthly head-count reports and organizational charts, and it wasn’t till much later that I found out from the HRIS manager that she was retyping the organizational charts and doing a download from the main HRIS system. This didn’t make sense; it took a lot of time, and there was much greater potential for error. Through this experience, I found how important it is to set up an HRIS early that will allow you to function productively later on. If I were to do this over again, I would hire a senior person with a programming background to manage the system. I advise people to invest in a staff programmer or hire an HRIS consultant to create the capabilities you need.

Ferguson:
We consider ourselves to be internal consultants who develop policies and procedures that managers in the field can follow. We are so labor intensive that the company can’t make a move without HR being involved. For example, we are involved in sensitive government business. Before accepting the government contract, the company wanted to know how this kind of hush-hush business would affect HR—how employees would get the work done, how many people would need security clearances and what kind of effect the new business would have on existing work load. I would say we’re helping to guide the company.

Beck:
Our role is to help managers be successful in this company. We don’t set their agenda, we help them reach the agenda. For example, for every company goal, I develop a goal for the HR department. So, when managers talk about developing a strong, productive team, for instance, we help them by creating management- and employee-development programs, and providing employee support through the employee-assistance program. HR is involved in setting company goals, and we participate on the executive staff, but I’m not on equal footing with the vice presidents. We’re still perceived as more of an influencing function.

Jackson:
By the service we provide to our constituencies… in other words, customer satisfaction. We measure the number of complaints we receive, the turnaround time on requests, that sort of thing.

Beck:
We are held accountable in a number of ways: the effectiveness of recruitment (e.g. keeping turnover low); projected vs. actual compensation costs; performance statistics on existing vs. newer employees; and affirmative-action data.

Ferguson:
Customer satisfaction. We work to make sure we get employees to the field in time, and that turnover and overtime are kept to a minimum.

Hawthorne:
I’ve found it valuable to network with HR managers of other companies in this industry. These individuals recently formed the HR Council, an association through which they talk about personnel issues relative to our line of work. Clean Sites is very small compared to the other companies in this business, and I have found the other, larger companies to be a great source of employees when we are recruiting.

Ferguson:
I have learned that good ideas often come from outside of the HR department. I used to take it as an insult when ideas were presented to me from people outside of HR, but now I know to keep my ears open for those ideas.

Beck:
I rely on organizations, such as the Saratoga Institute [in Saratoga, California], to learn what other companies are doing in HR. I also have taken a look at many companies that are similar in size and growth to find out how they’re doing, what they’re doing and what they consider to be important facets of their HR operation. This kind of benchmarking is extremely important.

Ferguson:
Expect to make mistakes and forget things. It’s difficult to get a large number of employees up and running quickly without having things go wrong once in a while. Don’t expect to be proactive. Work to keep up.

Grueskin:
Plan ahead as much as you can. Anticipate HR needs in training, compensation, clerical support and so on. Contact other companies to find out how they’ve managed rapid growth.

Jackson:
Some people believe that their role in HR is to serve as police officer or paper processors. They don’t think of themselves as providing a service to managers and employees. Some HR people, for instance, think that if an employee didn’t complete a form correctly, the form should be sent back, and whatever the request was should be denied. If you get too caught up in processes, policies and procedures, you may lose sight of your objective, which is for HR to service the needs of the organization.

Beck:
Hire as high as you can when finding someone to lead the human resources department, with the expectation that you can build staff underneath that person. You want someone who can grow with the company and who takes a long-term approach to human resources planning. This kind of environment, while exciting, is very challenging. I relate it to being in a bicycle race, in which you’re riding the bike and trying to get ahead as fast as you can, while at the same time, you’re having to pump up the tire.

In seeking to control health-benefits costs, large, self-insured companies can use their economic might to demand price discounts from providers. But what about small employers that buy insurance? Is there any way for them to influence the cost and quality of the care that they purchase?

“Yes,” says George Morrow, principal and health-practice leader with William M. Mercer Inc. in Minneapolis. “Self-funded companies have gotten all the ink, but in fact it’s the small employer who will have the greatest long-term impact on the delivery of health care. Why? Because most people in this country are employed by small companies. By far the greatest percentage of health costs is picked up and paid for by small employers.”

Smaller companies can impact the cost and delivery of care in their communities the same way that large employers do: by uniting and using their combined purchasing power to get the attention of the insurance and provider communities. The only difference is that it takes many more small companies to make a statement.

In Cleveland, the Council of Smaller Enterprises (COSE) has more than 11,000 individual business members. These members buy health insurance for 70,000 workers and more than 105,000 dependents.

On behalf of its members, COSE has been able to buy coverage from a number of carriers—Blue Cross & Blue Shield of Ohio being the largest—at prices 25% to 50% lower than members can individually. This is because the group’s large size allows insurers to predict utilization patterns reasonably well, i.e., the number of births, appendectomies and so on. The current annualized premium is worth nearly $200 million, making COSE the largest single customer of Blue Cross in Ohio, explains John Hexter of Hexter and Assoc. Inc. in Cleveland. “It wasn’t this way when we started, however. It took 20 years to get this many small businesses together.”

By joining forces to collectively buy health insurance, the small employers in Cleveland have become a model for health-insurance purchasing cooperatives, or HIPCs. Federal lawmakers are pushing HIPCs as a way to enhance the accessibility and affordability of health insurance for small employers. As found in Cleveland, HIPCs offer members competitive premium pricing and the flexibility to choose from a variety of carriers.

HIPCs can help address the small-employer’s concerns about the cost of care, but what about quality issues and the importance of structural reform? Small employers can have an impact there too, Morrow says, by joining with larger employer-based health-care coalitions. “Initially, you’ll see small employers focused on cost, because that has defined their relationship to the delivery system. But small employers also are more prepared to pursue radical reform and to create more competition in the health-care marketplace. That’s because they’re so preoccupied with competition,” says Morrow.

In Cleveland, COSE members have addressed the issue of health-care competition and quality by uniting with the Health Action Council of Northeast Ohio, a coalition of large and mid-sized employers concerned about health-benefits issues.

“By joining with some of the larger purchasers,” Hexter says, “we were able to bring along our 105,000 covered lives—added this to their pool of 250,000 covered lives, and we created an organization that now has some tremendous clout in the medical community. Our common interests allow our organization to work beautifully.”

Because of the group’s efforts, providers in Cleveland now are compiling data on patient satisfaction and clinical outcomes on high-cost treatment. This will allow both direct buyers of care and managed-care organizations to direct patients to the most cost-effective and efficient providers.

Although COSE has been building its membership steadily since 1973, other small employers can learn from the examples that it provides: that it’s much harder to influence health costs individually than it is to do it collectively in a health-care coalition.

“This isn’t hard,” Hexter says. “Just put an ad in the newspaper asking if other companies are having trouble with their health-care costs and guess how fast you’ll get responses. It’s the hottest topic in the small-business market. It doesn’t take too many 100-employee companies before some of the benefits managers in big businesses in the community will see the value of your participation.”

The Malcolm Baldrige National Quality Award was created in 1987 to recognize companies that excel in quality management and quality achievement. The eligibility criteria are so comprehensive—the judges scrutinize nearly every management system in a company for quality—that only 17 companies out of 399 applicants have received the award so far.

Of the seven examination categories (otherwise known as the seven pillars of Baldrige) Human Resources Development and Management ranks third-highest in point value, having a total of 150 out of 1,000 possible points. Human resources clearly has a role to play in all seven categories, however. Such activities as training and development, for example, can influence such categories as Leadership, Strategic Quality Planning, and Customer Focus and Satisfaction.

Christopher Hart, president of the TQM Group in Boston, says that he believes that the Baldrige award criteria are an appropriate starting point for any organization embarking on TQM. Why? “Because the Baldrige framework was designed specifically for flexibility,” he explains, “so it could be used to assess the quality efforts and systems of any type or size firm.”

When evaluating the HR function, Baldrige judges examine how companies enable the work force to develop to its full potential. In doing so, they ask companies to describe their approaches and provide proof of positive results in the following categories:

1. HR Planning and Management.
   How are the firms’ overall HR plans and practices integrated with their overall performance goals, and how does HR address the needs and development of the entire work force?
2. Employee Involvement.
   What are the means available for workers to contribute effectively to meeting the companies’ performance goals and plans?
3. Employee Education and Training.
   How do organizations determine what kind of education and training employees need, and how does the training support organization plans and employee growth?
4. Employee Performance and Recognition.
   How do the companies’ employee-performance, recognition, promotion, compensation, reward and feedback approaches support the attainment of the companies’ quality goals?
5. Employee Well-being and Satisfaction.
   How do the companies maintain a work environment conducive to the well-being and growth of all workers?

In conducting an independent assessment of HR using the Baldrige criteria, Hart recommends that professionals adopt the perspective that HR is an independent contractor serving the organization. “This will help you come up with a more objective answer to the question, ‘How well are we really doing in satisfying our customers?'” Hart explains.

The award’s emphasis on HR activities not only clarifies the role of HR in quality efforts. According to Hart, it also can help professionals make the case for a better allocation of corporate resources to the HR function.

The quality-improvement process at Appleton Papers in West Carrollton, Ohio, began in 1988. Three years into the process, the effort had created no discernible improvements in customer satisfaction, morale, safety records or profitability.

“Quality had become more of a program than a process,” explains Wayne Reveal, the organization’s manager of organizational services. Why? “Because there was an obvious lack of recognition of employee behavior.”

Among other things, Reveal says, quality is an attempt to create or change behavior sets, yet Appleton workers who performed good work went unrecognized, and employees who performed poorly escaped disciplinary action.

In an attempt to reshape and reinforce its quality effort, Appleton implemented a comprehensive worker-recognition process in 1991. Today, each line manager receives a recognition budget from which he or she can buy gifts to reward employees for good behaviors.

The company’s basic rule is that recognition gifts must be personal in nature and something that the employees wouldn’t buy for themselves. The organization encourages managers to use the gifts as surprise rewards for good work, as well as incentives for special achievement.

Recently, for example, a department manager wanted to offer an incentive for several of the employees on his crew to acquire their GEDs. Thinking about other important aspects of high school, he realized that he couldn’t offer them the opportunity to attend the senior proms they had missed, nor could he give them an actual high-school diploma. What he could do—and did—was to give each worker who completed his or her GED successfully a class ring from the high school from which the person would have graduated.

There are no guidelines attached to the recognition process. Appleton simply encourages employees to recognize others when and where it’s appropriate.

“This isn’t a one-size-fits-all program,” Reveal says. Instead, the company encourages managers to think about what the individual being recognized would value most. Some employees favor public recognition, for example, whereas others find such accolades embarrassing.

Managers aren’t the only ones charged with the responsibility for recognizing good deeds. All employees are encouraged to give quality thank-you notes to co-workers, supervisors and subordinates in recognition of good work. Furthermore, the organization’s CEO recognizes individual and team achievement on an annual basis with lucrative, high-profile recognition items. “Employees used to think that recognition was only the job of HR,” Reveal says. “Now they realize that it’s everyone’s job.”

In addition to recognizing good deeds, Appleton’s managers must take the time to deal with inappropriate behavior as well. “We can’t just reinforce positive behavior without also letting the employees know what negative behavior looks like,” Reveal explains. This kind of response can range from brief verbal warnings to initiation of the progressive discipline process.

Before implementing the new recognition system, Appleton trained its managers in how both to give and to receive recognition effectively. “We didn’t want an employee to recognize his or her manager for a job well done and have that manager shrug off the compliment,” Reveal says. “We had to make sure that managers knew how to receive recognition gracefully as a way to reinforce the importance of it.”

Is the company’s quality effort more successful now because of its recognition process? Yes, according to Reveal.

Appleton has moved from an unfavorable to a favorable financial position, 75% less time is lost due to on-the-job accidents, and, though it’s hard to measure, morale has improved. As Reveal says, “Let’s just say it feels better around here.”

Human resources professionals have two requirements to fulfill when their companies start chasing quality. They must ensure that:

1. All human resources subsystems—training, communication and compensation—are aligned with the overall quality effort.
2. The quality function is using quality principles.

Ken Levine, who’s division manager for continuous improvement for Coca-Cola USA in Atlanta, interviewed 30 companies as part of a total-quality benchmark project. In this survey, he wanted to determine the various roles that HR plays in organizationwide quality efforts. Levine was astounded to learn that none of the HR departments surveyed had implemented quality strategies within the HR function. “If HR wants to be a leader in the quality movement, HR professionals have to walk the talk. They have to begin to pursue quality themselves,” he explains.

According to Ed Lawler, who’s a professor at the Center for Effective Organizations at the University of Southern California, the quality principles that human resources must follow are:

Quality work the first time: “Scrap and rework on the shop floor,” he explains, “has a counterpart in HR management.” For example, if a company wants to redesign a bonus system or benefits program because employees can’t understand it, this is rework. This takes time, costs money and erodes the credibility of the human resources department. By attempting to produce quality work the first time, HR professionals can begin living up to the standards that they’re encouraging employees to meet.

Customer satisfaction:
The HR department exists to serve the organization. It’s the function’s sole purpose to understand and meet internal customers’ needs. Anytime that HR puts its own needs above the needs of line managers or other workers, it has failed to provide customer satisfaction.

A comprehensive approach to improvement:
TQM may require changes in the mission, structure and management practices of the HR function. HR professionals need to be open to changes within their own departments. For example, it may behoove human resources professionals to pursue cross-training for the same reason that workers on the shop floor are being asked to learn each other’s jobs. If an employee can’t come to your department and get all questions answered by one person, then you aren’t providing quality customer service.

Continuous improvement:
One basic tenet of TQM is that continuous improvement must be ingrained as a value in the corporate culture. A company must apply it with equal emphasis in the HR department. Training programs must become more effective as time goes on, for example, and HR specialists must be willing to learn from their mistakes.

Mutual respect and teamwork:
Teamwork is important everywhere in today’s quality-driven companies, but it’s absolutely necessary for HR professionals. As a staff function, HR, by design, must gather information and respond to the needs of every department in the organization. The only way to learn these needs and respond to them effectively is by working with the people in those different departments.

The HR department at Milpitas, California-based Solectron Corp. embodies the quality principles exhibited elsewhere in the organization. As a 1991 winner of the Malcolm Baldrige National Quality Award, Solectron managers know what it takes to create and sustain quality. For HR, this means reviewing the function’s quality rating on a quarterly basis.

Every three months, according to J. William Webb, vice president of human resources, the department rates its achievements numerically in such areas as:

• Communication
• Staffing
• Performance reviews
• Overtime tracking
• Absences.

“It isn’t enough for us to know how well we’re doing. We must stand up in a management meeting and publicly report our results. We have to identify any problems and explain the quality process that we’ll undertake to solve those problems,” Webb says.

Webb says that Solectron keeps its HR department flexible so that it can respond quickly to organizational changes. “We perform a systematic review of all HR programs to make sure that they’re effective, contribute to customer satisfaction and have value-add to the business,” he says. “If they don’t, we do away with them. “

Few, if any, companies that embark on a quality journey know exactly how to reach their destinations. Sure, they have some idea about what customer service means and how to attain it. More often than not, however, organizations charge headlong down one path only to realize that another path might have been more efficient.

It’s practically a given in the pursuit of TQM that mistakes are going to be made. These mistakes can include ineffective quality communication, a compensation structure that rewards the wrong behavior, or, as happened at Coca-Cola USA in Atlanta, a training program that fails to provide any useful new information.

Coca-Cola USA launched its quality effort four years ago with a massive top-down training effort, in which all 1,300 workers learned about the tools of continuous quality improvement. Covered were such techniques as problem solving, statistical-process control and process management. As Ken Levine, division manager of continuous improvement, explains, training came in “a burst of awareness” for employees.

What was the problem? Three years later, the majority of employees had forgotten the tools they had learned because they never had had an opportunity to use those tools.

Today, the company is in the midst of redesigning its training effort to provide employees with training as they need it. Levine explains, “Rather than training all associates in the beginning of a TQM initiative to understand a myriad of tools they may never use, it’s useful to train teams as they form. Using this just-in-time training approach, real problems can be used to illustrate tools and techniques. This will accelerate the ability of teams to begin to solve problems and improve processes.”

As teams form, Coca-Cola now will provide training in meeting-management skills to team members. This includes:

• Training to improve listening skills
• Brainstorming
• Consensus decision making and agenda setting
• Training to help members establish their mission and determine individual roles and responsibilities.

The focus on meeting the skills goals is important, Levine explains, because “you have to improve the quality of team meetings before members can think about using quality tools.”

Once teams are up and running, the company will provide training in quality tools as it becomes necessary, while requiring employees to bring real-life issues to the training sessions. In a course on problem solving, for example, the organization will require team members to solve an actual team problem.

Just-in-time training can work especially well in a TQM environment that hosts a diversity of teams. Why? Because the training needed for a cross-functional team of salaried workers, for example, is different from the training needed for a naturally occurring work team on the shop floor.

“I believe that just-in-time training will become a model for training in the future. We no longer can afford to send employees to three-day classes that may or may not have anything to do with the real issues that they’re dealing with, and hope that they can apply what they’ve learned after the fact,” Levine says. To be effective, companies must provide training when it’s needed and how it’s needed.

There’s a story being told in quality circles. It involves an interview with an astronaut upon his return from a successful space mission. Asked what he was thinking as he sat in the capsule during the launch countdown, he replied, “I was thinking that all parts of this spacecraft had been built by the lowest bidder.” In other words, not by the best supplier but by the cheapest supplier.

Until recently, it was the American way to worry about price first and quality second—but not anymore. The pursuit of quality is almost a given in today’s marketplace. If your company isn’t pursuing technical excellence, reductions in cycle time and increased profitability, then it’s already on its way out of the game.

Product excellence is becoming vital in the era of quality. The difference between business success and failure will be the people who make up an organization. Who’s responsible for the people? Human resources, of course.

“Total-quality management is a culture change,” explains Jean Ferketish, senior consultant with Development Dimensions International in Bridgeville, Pennsylvania. “A culture change means a collective behavior change on the part of people in the organization. HR is the owner of many of the organizational systems that can create that behavior change.”

Unfortunately, HR systems often get in the way of cultural shifts. If you compensate employees only for acquiring new customers, for example, you can forget any idea of developing an orientation toward customer service. If you reward people only for individual achievement, then there’s no reason for employees to work hard at team building.

HR professionals aren’t necessarily the ones to blame when personnel practices interfere with quality. In many companies, it’s the low status of HR that’s at fault.

“What does HR have to do with turning out a quality product?” line managers ask.

“Everything,” Ferketish answers. “HR plays a significant role in supporting and driving a continuous-improvement culture. Keeping systems aligned with quality strategies will be the HR challenge of the next decade,” she says.

This doesn’t mean that HR should lead a quality effort, however. According to Ed Lawler, professor at the Center for Effective Organizations at the University of Southern California in Los Angeles, staff groups rarely lead any key strategic initiative successfully. “Line management should lead the effort,” he says, “but HR has to be involved as a partner from the beginning.”

Xerox, in the early stages of its quality effort, made a conscious decision to exclude human resources, according to Jerry Finnigan, manager of HR at the company’s plant in El Segundo, California. “In the past, HR has managed all cultural-change strategies,” he explains, “and management felt that if HR led the quality effort, it would be perceived as just another flavor of the month.” Instead, line managers and vice presidents carried the quality torch.

It wasn’t long, however, before Xerox managers realized that they had made a mistake. The company had to align its HR systems with its quality goals for the effort to be a success. Xerox invited HR to the table, and asked its HR professionals to share, among other things, their expertise in training and in the area of rewards and recognition. Today, few would deny that the function’s involvement helped Xerox win the Malcolm Baldrige National Quality Award in 1989. “HR is an integral part of making quality a reality,” Finnigan says. “Maybe we shouldn’t lead the effort, but we have to be partners early on.”

Every HR system has the potential to influence employee performance and thus the success or failure of a total-quality initiative. From hiring and compensation to training and performance management, HR must work to ensure that its systems reinforce the company’s quality message.

The first HR system to come under scrutiny in a start-up quality effort is employee communication.
The purpose of communication of a TQM program isn’t to sell quality, but to recognize quality. Unfortunately, many firms introduce TQM with a lot of hoopla, according to Tom Varian, VP of communication for Organizational Dynamics Inc. in Burlington, Massachusetts.

“The natural tendency is for managers to get the total-quality message out as quickly and forcefully as possible,” he says. It may take months or even years, however, for a company to see results from its quality efforts. “This creates a situation in which the employees perceive of the communications as a lot of commotion about nothing,” Varian explains.

Ferketish agrees. “Introducing TQM with banners, T-shirts, mugs and newsletter articles about the greatness of quality is disastrous for TQM,” she says. “All you’re doing is building a credibility gap, because no successes have been realized.”

How should a company communicate about quality? According to Varian, there are three basic principles:

1. Recognize that communication isn’t a check-the-box exercise. Don’t publish one newsletter story each month for six months and consider that you’ve explained quality. “Understand that communication about quality is a strategic effort, as is TQM,” he says.
2. The purpose of communication isn’t to explain quality to employees but to involve them in the effort. Newsletter articles shouldn’t discuss quality tools, for instance, without explaining why employees should be interested in those tools.
3. Companies should take pains to shape quality messages from the receiver’s perspective. To do this, Varian recommends that communicators uncover the employees’ alarm-clock concerns. “What do your employees think about in the morning as they’re getting ready for work?” Varian asks. “They probably aren’t thinking about how to achieve technical excellence or customer satisfaction. They’re probably thinking, ‘This job is a hassle’ or ‘My boss treats me like a child.’ You must learn what employees are thinking and then connect quality to issues that really matter to them,” Varian says. (See “Communicating TQM to Small Groups Improves Understanding.”)

Volkswagen of America Inc., in Auburn Hills, Michigan, used this approach in developing its quality communication plan earlier this year. According to John Madigan, corporate communication specialist, Volkswagen surveyed its employees about their alarm-clock issues and then anonymously printed some of their responses in the internal newsletter. A typical alarm-clock comment was, “Boy, I wish I had more influence over getting things done around here.”

In the same issue, Volkswagen printed a story about how the company’s total-quality effort, Total Quality Focus (TQF), might address these concerns. For this story, Madigan asked employees who had attended TQF training to explain to their peers how TQF would affect them. These employees said such things as, “The most exciting thing about TQF is that it opens the door for each employee to make changes within his or her area of responsibility.”

Madigan believes that using comments from actual employees lends credibility to the communication process. Furthermore, by printing the real-life alarm-clock issues, employees get the impression that the company genuinely cares about what matters to them. Thanks to this communication approach, Volkswagen employees are well on their way toward understanding what TQF means and toward understanding that TQF has the potential to address some fairly prevalent concerns. According to Madigan, the company hopes that this approach eventually will help create buy-in for the quality effort.

Training should focus on building quality skills.
Many companies fall into the same trap with training that they do in communicating. These companies invest all their resources in up-front awareness building, instead of looking at what individuals need to know for quality to become a long-term reality.

“Many companies that have finite training budgets dump all that money into awareness training,” Ferketish says. “You need a touch of awareness, and you want employees to learn about quality tools, but you also need to feed them skills that they need for handling conflict, delegating for results, reaching agreement in teams, and so on. Too many companies place their training emphasis on awareness and process improvement, ignoring the behavioral skills needed to create the change that they’re looking for.” (See “Coca-Cola Learns from Its Training Mistakes.”)

Ferketish adds that managers need to understand that awareness training takes less time than skills training. They need to realize that it’s a critical first step, but one that seldom leads to the behavioral changes that are necessary to support continuous quality improvement. “I may be aware that I shouldn’t have dessert because I’m counting calories, and I may know how to put my fork down, but unless my behavior and attitude about dessert change, I’ll probably eat it anyway.”

According to a survey conducted by the Olsten Corp. in New York City, many companies are beginning to understand the importance of behavioral-skills development. Of the survey participants that provide quality training, 54% offer courses in teamwork skills, 47% provide training to enhance communication and 45% offer workshops in decision making and problem solving. Far fewer companies provide training in traditional quality tools, such as quality control, statistical-process control and benchmarking.

Tellabs, a telecommunications equipment company in Lisle, Illinois, completely revamped its training program two years ago to bring it into alignment with the company’s total-quality effort. According to Dan Stolle, Tellabs’ director of HR, the company abolished its generic technical-training curriculum in favor of courses focusing on skills that are related to the company’s critical success factors. With a skill-based pay program, technical training still is important for employees in manufacturing. Tellabs, however, felt that employees could acquire those skills just as effectively from co-workers as from trainers, according to Stolle.

By shifting the responsibility for skills certification to employees, the company was able to reallocate its training budget for courses like leadership training, team problem solving and decision making. Furthermore, the company now emphasizes real-time training, by requiring that attendees bring real issues to the training sessions. For a workshop on team problem solving, for example, employees must attend with their team members and resolve a current team problem.

“This way,” Stolle says, “training doesn’t take time away from employees’ jobs; it is their job.” Practicing new skills during training also helps employees learn the behaviors that they need for applying those skills effectively.

The other significant shift in Tellabs’ training program is that company trainers now work as internal consultants who assess training needs, and as brokers who find experts outside the company to meet those needs. Little training is done by staff trainers. “This allows us to move quickly as needs change,” Stolle explains.

For companies that are beginning to revamp their training programs as part of a quality effort, Ferketish has this last bit of advice. “Quality principles should be woven into every course offered. If a course doesn’t show employees how to live the company values or how to meet its critical success factors, you’d better get rid of it,” she says. Introducing concepts and principles of quality to employees is relatively easy. Training workers to apply the concepts and principles of quality in a way that affects the bottom line is much more difficult.

Just as training needs to reinforce the behaviors necessary for quality, so does an organization’s performance-management system.

W. Edwards Deming, the quality guru, believes that most appraisal practices focus too much attention on individual achievement, although most quality problems are the products of systems or processes. As Deming’s argument goes, focusing on individuals is counterproductive and ignores the causes of poor quality.

For this reason, many U.S. companies are considering scrapping the individual performance appraisal. But as Ferketish asks, “Is no system really the right system?” Performance appraisals may conflict with continuous-improvement cultures, but only in companies that stress quantity on the appraisal without regard for quality.

Companies should revise their performance-appraisal processes to focus on the behaviors required to achieve objectives. It isn’t enough to evaluate whether or not an employee has met a deadline or managed a budget well. HR professionals have to look at the behavior that the employee has exhibited in achieving those goals. Did he or she exert a lot of pressure on co-workers in meeting deadlines or managing budgets? If so, that person probably isn’t in concert with the company’s goals of teamwork and mutual respect.

The performance-management system is the program that needed the most radical redesign at Harris Corporation’s Electronic Systems Sector in Melbourne, Florida, as the company pursued its quality goals. Like many companies, Harris previously had used the performance-management process only to justify compensation decisions. But as the company began to focus on continuous improvement and customer satisfaction, managers realized that the appraisal process was blocking the development of these new values instead of reinforcing them.

For example, in a continuous-improvement culture, employeess must be willing to take risks, but the performance-management process rewarded workers only for doing what they were told. “This wasn’t the behavior that we were looking for, yet it was the behavior that we were reinforcing,” says Terry Geraghty, director of organizational development.

In revising its performance-management system, Harris first had to identify the skills and values that were crucial to the company’s success—customer service, teamwork and technical knowledge. Harris calls these values dimensions.

For each dimension, the company then listed the key behaviors associated with it. For instance, behaviors that would support the dimension of customer service include:

• Encouraging customer involvement in problem solving
• Meeting or exceeding customer requirements
• Taking action to remedy misunderstandings or inconveniences to the customer.

Managers then rewrote each job description, incorporating the behavioral dimensions necessary for a worker to be successful in that job. All employees have access to this information so that they know what supervisors expect. “Our dimensions were guiding company decisions, but for employees to become involved, we had to explain what those dimensions meant in behavioral terms,” Geraghty says.

Today, the company evaluates employees on how well their accomplishments relate to the objectives set earlier in the year, and on how well they exhibit the behaviors listed under the dimensions for their jobs. Behaviors are assessed through a combination of the employee’s self-appraisal, peer review and manager’s observations.

According to Geraghty, Harris went this route because, to be effective, organizations should have both a management-by-objective type of system and a system of facilitating dimensions. Organizations also should integrate them. Using an MBO-type system alone results in employees’ receiving feedback on accomplishing goals and nothing on what they did to accomplish them. People who fall short of goals receive encouragement to work harder but little guidance on what to do to achieve the goals.

“How can individuals increase productivity or cut costs if they already are trying as hard as they can?” Geraghty asks. “The only way for them to improve is to change their behaviors.” To put it another way, he says, “I may want you to improve your golf score, but I can’t tell you just to go out and make it better without telling you how to make it better. I can’t coach results, which is what the old performance-management system attempted to do; I can only coach behaviors.”

The addition of behavioral dimensions to Harris’s performance appraisal greatly contributes to employee development as well. By focusing on behaviors, workers can understand more clearly what the company expects of them and how they can contribute to its overall goals. This, in turn, helps them set individual goals, and it helps the firm identify areas in which workers need training.

The quality revolution underway in the U.S. has created a corresponding revolution in compensation.
The growing popularity of skill-based pay, broadbanding and variable-pay programs is a direct result of quality-driven efforts to pay employees based on what they contribute, not on what a narrow job description says they’re supposed to contribute. If your firm is preaching quality and hasn’t changed the compensation-and-rewards systems to support those lessons, don’t be surprised if quality results are less than you’d hoped.

As Lawler writes in an article in Organizational Dynamics, “In the past, most pay systems have focused on individuals. Job descriptions spell out what an individual is to do, job-evaluation systems suggest how much the job is worth, and merit-pay increases reflect how well the individual has done the job.” Yet there’s a direct conflict between these traditional practices and TQM’s emphasis on collective responsibility.

For this reason, an overwhelming number of companies are revamping their pay systems to reward people based on how well the company or unit performs as a whole. Many consultants are calling this revolution new pay because the changes underway are destined to replace existing compensation practices. New pay, according to many pundits, isn’t a fad that will pass in time.

The new-pay view is that organizations should use all elements of compensation effectively, including salary, benefits, rewards and so on, to help form partnerships between the company and its employees. These partnerships help employees:

• Understand the goals of the organization better
• Know how to help accomplish those goals
• Be involved in decisions that affect their jobs
• Receive rewards for their contributions.

“Powerful messages are sent to employees through the rewards system,” says Jan Wilkinson, director of HR systems at Duke Power Company in Charlotte, North Carolina. “It’s a major reinforcer of company values.” For this reason, the compensation-and-reward structure was one of the first HR subsystems to undergo a major overhaul as Duke Power began its quality quest in 1989.

Many companies look at pay and benefits as individual items and adjust them to curb costs or meet workplace demands. Not Duke Power. It chose to view rewards as an interrelated system that could be reshaped continually to support the business needs of the company, Wilkinson explains. Duke Power’s first strategic decision along these lines was to package compensation and benefits together under a single reward system. “We looked at what was rewarding to employees about working here and then put all those things together under one heading,” she says.

Today, Duke Power’s reward system includes:

• Salary banding
• Variable compensation
• Hourly pay for performance
• Increased opportunities for career development
• Individualand team-incentive plans that are tied to organization performance
• A shift in performance-management measures and accountabilities
• Awards for excellence
• Flexible work-and-family benefits.

The organization is using the new reward systems to encourage customer satisfaction, cost-consciousness, innovation, risk taking, teamwork, employee involvement, information sharing and ownership. Furthermore, by linking rewards to company performance, Duke can provide greater rewards during good years and contain costs when the business isn’t as successful.

According to Wilkinson, the new integrated system sends the message to employees that there are ample recognition and rewards for those employees who help Duke Power reach its goals. It has taken extensive communication and training for employees to understand the new reward process and to realize the impact that they can have not only on the company’s bottom line, but also on their own. The communications effort has been successful, however. In a recent survey, employees gave high marks to the new system, proving that well-thought-out rewards can contribute greatly to employee satisfaction and thus to the achievement of quality goals.

Teamwork is important in TQM efforts that involve unions.
The egalitarian approach is extremely necessary in the labor-relations arena. Unfortunately, the us-versus-them mentality found in many unionized companies has the potential to undermine a total quality effort. It’s the responsibility of HR to communicate with union members and to coordinate team-building efforts.

Gary Schroer, manager of business systems for Armco Worldwide Grinding Systems in Kansas City, Missouri, describes his company’s relationship with the union as having been one of “periodic noncooperation.” That’s until the company implemented its TeamWorks program last year. Developed under the direction of the HR department, TeamWorks is an effort to give all employees an equal voice in developing ideas to make Armco more productive, more profitable and more fulfilling for its workers. It’s the latest step in a quality process that has been underway for 10 years.

With TeamWorks, employees volunteer to serve on seven-member teams that research and suggest ideas to improve quality and productivity, reduce expenses and generate additional revenue. When the company approves an idea, team members earn recognition and awards. Since the program began:

• Close to $4 million in cost savings have been realized through team ideas
• Nearly 500 ideas have been submitted for consideration from 80 employee teams
• Grievances have decreased by approximately 40%.

Until the company developed TeamWorks, Schroer says that employees spent more time thinking about “how the company is going to get to me next,” than they did about working on solutions to real business problems. By developing employee teams, encouraging open discussion and giving employees financial rewards for savings generated from their ideas, Armco has been able to turn this situation around.

“I’m uncomfortable with how simple this all sounds,” Schroer adds, “but it really comes down to talking with the union about what’s important. In our case, HR was the driver in generating management understanding of the need for TeamWorks and employee involvement.” Before TeamWorks, managers mandated all programs and workplace changes. Today, employees do.

An important part of TQM is hiring the right employees.
Although the primary concern of HR in a quality initiative obviously is the existing work force, HR professionals shouldn’t give short shrift to employee candidates and the hiring process. One of the first steps in delivering a quality customer-service orientation is selecting and developing the right people to provide that service.

The Ritz-Carlton Hotel Co., based in Atlanta, won the Baldrige Award in 1992. According to Patrick Mene, the company’s corporate director of quality, the company’s selection process especially impressed the Baldrige examiners. “Selecting people who are capable of serving others in a warm, genuine manner is critical,” explains Mene. For this reason, Ritz-Carlton focuses on finding people who are ladies and gentlemen.

But the hotel chain doesn’t rely on an interviewer’s opinion of how a lady or gentleman should act—far from it. Working with Talent+, a selection-and-management consulting company in Lincoln, Nebraska, Ritz-Carlton conducted research of current employees to learn what personal characteristics were likely to lead to success in the organization. Once the company identified the characteristics, it developed an applicant interview to solicit responses that would reveal if a candidate possessed these characteristics. All questions are job-related.

The Ritz-Carlton calls this approach its Quality Selection Process and claims that it has contributed significantly to the company’s 47% reduction in turnover and 27% decrease in customer complaints during the last three years.

Harris Electronic Systems Sector has taken a similar approach, applying the behaviors identified for its performance appraisal to a targeted-selection process. “Using dimensions to interview candidates will help managers identify the persons who exhibit the behaviors known to be important for the particular job. This will eliminate much of the guesswork and bias involved in the hiring process,” Geraghty says.

Because employee characteristics that spell success at one company may doom another company to failure, it’s important that HR professionals research the success characteristics of their own employees. This requires organizations to commit more resources to the selection process, and to structure the process so that it includes a realistic preview of expected behaviors and encourages self-selection whenever possible.

Perhaps the best quality principle for human resources professionals to keep in mind is the principle of integration. All HR systems must be integrated with and reflect the values and vision of the organization for quality to become a reality. In addition, the human resources function must be integrated. Don’t use one set of criteria for appraising performance on the job and a different set for selecting and hiring employees. Don’t train employees to behave in one way and then compensate them for behaving in another.

“Historians say that battles are won and lost on logistical support, not on the more glamorous parts of the effort,” Ferketish says. “The TQM battle will be won or lost on systems alignment. It may not be glamorous, but it’s a critical part of the emerging role of the HR function.”

HR is important to nurturing change, but it can’t lead the effort. “HR must have expertise in organizational change to get people excited and involved in total quality,” Lawler says, “but HR professionals can’t do it alone.”