Author: Site Staff

Dear Before We Send Them:



Yours is a great question, and one that is becoming increasingly relevant with the steady increase in globalization we are currently experiencing. I am happy to say that there has been a good bit of research to demonstrate the effectiveness of using assessments to determine an individual’s propensity for success in long-term overseas assignments.

It is important to open by saying that this research has clearly shown the No. 1 reason for failure in such assignments is the inability of spouses or other family members to adapt to the new environment. This is often brought on by the fact that it is hard for the trailing spouse to find meaningful work during the assignment. For this reason, one of the very first things I recommend is to have a candidate’s spouse and family go through an education and evaluation session to be sure they are up for the task. Part of this may also involve helping provide the spouse with career-development assistance and a liaison in the host country.

Besides family issues, there has been a good deal of research that has shown the importance of several other factors. Chief among these is previous overseas experience. It goes without saying that those who have successfully completed and enjoyed a previous assignment will be more likely to have what it takes to complete similar assignments. That is, provided that the individual also possesses the interest and motivation to take on the assignment.

Beyond family, experience and motivation, research has also shown the value of assessing certain key personality “constructs” that have been shown to be related to one’s ability to adapt to a foreign assignment. In the past, many companies selected workers for expatriate assignments based solely on their technical skills. This has proved to be problematic because technical aptitude alone has almost no bearing on the ability of an individual to adapt to life in a foreign culture. When asking someone to perform within a foreign environment, it is critical to attend to some additional factors. Failure to assess these things as part of the selection process can prove quite costly, as failed expatriate assignments can carry substantial economic consequences.

Research has shown that evaluation of an individual, in terms of their propensity to succeed on an expatriate assignment, should account for several dimensions. Although a full explanation of these things is beyond the scope of this article, included below is a brief explanation of these findings.

These individual skills have been categorized into three dimensions by experts Mark Mendenhall and Gary Oddou: the self dimension, which includes skills that enable expatriates to maintain mental health and psychological well-being; the relationship dimension, which includes skills for fostering relationships with foreign nationals; and the perception dimension, which refers to an expatriate’s ability to perceive and evaluate the environment. The literature also emphasizes the importance of factoring in the “cultural toughness” of the host country: namely, how different that country is from the expatriate’s home country.

A wide range of tests are available for assessing individual characteristics that are known predictors of success. In general, these tests measure things such as:

• Expectations
  
• Open-mindedness
  
• Respect for the beliefs of others
  
• Trust
  
• Flexibility
  
• Tolerance for discomfort
  
• Social adaptability
  
• Initiative
  
• Risk taking
  

My advice is to look for an organization that has created and validated an assessment that covers these or similar dimensions. Discuss with them how well their assessment might work in your situation. You should look for them to provide evidence that this assessment has been properly constructed and has a good track record. There are a number of firms that I feel can definitely help you out. Good luck.

SOURCE: Charles A. Handler Ph.D., PHR, Rocket-Hire, New Orleans, July 10, 2006.

LEARN MORE: Please read a list of tips on how to minimize expatriate turnover. Also notable: What to know when sending nonexempt employees overseas.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Dear Workforce Newsletter

While many of Wall Street’s most powerful executives convened at a conference inside the New York Stock Exchange, labor organizers on the street outside voiced their concerns about the implications of these deals on the workforce and on American families.

Braving 93-degree heat today, June 27, officials from the Service Employees International Union and the Working Families Party held a news conference on Wall Street to kick off a yearlong campaign addressing their concerns about private equity buyouts.

Inside the New York Stock Exchange,  The Wall Street Journal was hosting a conference on “Deals & Dealmakers.” Speakers included Lloyd Blankfein, the chairman and CEO of Goldman Sachs, and Carl Icahn, a longtime player in the private equity world.

“While they are talking about the future of the industry, we are talking about how this is affecting working families throughout the country,” said Dan Cantor, executive director of the Working Families Party, a New York-based labor party, in an interview before the press conference.

During the press conference, Cantor and Stephen Lerner, assistant to SEIU president Andy Stern, announced the launch of the yearlong Private Equity Accountability Campaign, during which the union and labor party will target specific private equity firms with protests and demonstrations.

On June 28, in Chicago, the groups plan to hold a prayer vigil outside a shareholder vote on Clayton, Dubilier & Rice’s buyout of ServiceMaster, a Memphis, Tennessee-based home-services provider.

“ServiceMaster uses toxic chemicals,” Lerner said in the press conference. “We are calling on them to become a truly green company.”

A spokeswoman for ServiceMaster was unavailable for comment.

The next stop on the campaign will be Times Square in New York, where on July 18, the groups will hold a tour of the various businesses now owned by private equity.

“From Dunkin’ Donuts to AMC Theatres to Madame Tussaud’s—these are all owned by private equity,” Cantor says.

Other targets of the campaign will be Bain Capital, a Boston-based venture capital firm, and Bank of America and JPMorgan Chase, which are leading a private equity takeover of Sallie Mae, the student loan provider.

The goal of the campaign is to pressure private equity firms to make their intentions more public and to work with labor to ensure that workers don’t lose their pensions and their jobs, Lerner said.

“These takeovers are not just happening with distressed manufacturers, they are also happening in other parts of the economy,” Lerner said in an interview.

Last month, the SEIU published a paper, “Behind the Buyouts,” which details how private equity deals have cost workers their benefits and jobs.

Lerner realizes it’s going to take more than a few union protests to get private equity firms to address the group’s concerns.

Ultimately, the groups hope to persuade Congress to pass legislation that will force private equity firms to be more public with their transactions.

“This is going to take some time,” Lerner said at the press conference. “We believe legislation will be necessary.”

—Jessica Marquez

For a related story, please see: “Union Takes Aim at Equity Buyouts”

 

Many multinational companies are scrutinizing global investment policies and risk management strategies related to their retirement plans, according to a new Watson Wyatt Worldwide survey.

About 78 percent of companies surveyed reported that the efficient governance of worldwide pension plans is a major issue. Roughly 53 percent have reviewed their global governance procedures in the last three years, and of those, 83 percent changed their procedures as a result, the survey found. Concern over regulatory risk was the reason for the change 69 percent of the time.

Several multinational companies also reported that the consistency of their global pension strategies was an issue. Roughly 31 percent of respondents are considering moving toward a more consistent global investment policy for retirement plans, and 9 percent plan to implement a consistent global risk management policy during the next three years.

The study included data collected in the fall of 2006 from 101 multinational companies with pension plans in several countries.

Filed by Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

A bill that would make it easier for workers to form a union likely will fail in the Senate in the next few days.

Sometime between Thursday, June 21, and the July 4 recess, the Senate is expected to conduct a cloture vote on the measure, the Employee Free Choice Act. It takes 60 votes to invoke cloture—or end debate—on a bill and move to a final vote.

It is likely that nearly all of the Senate’s 48 Republicans will vote against cloture, ensuring that it will not reach the 60-vote bar. The bill, which has 46 Democratic co-sponsors, would allow a union to form if a majority of workers sign cards authorizing a bargaining unit. Under current law, a company can insist on a secret-ballot election conducted by the National Labor Relations Board.

The bill would enable any party in a first-contract negotiation that is not concluded within 90 days to take it to federal mediation. If no agreement is reached within another 30 days, it would go to arbitration.

The legislation also would impose fines of up to $20,000 per violation if a company violates a worker’s rights during an organizing campaign.

The House approved the bill 241-185 on March 1. President Bush has vowed to veto it.

Unions have made the measure their top priority, while the business community has been lobbying against it fiercely.

Advocates for what has come to be known as the card-check bill argue that companies intimidate workers during unionization drives. Opponents say that a card-check election would foster intimidation by unions.

Rhetorically, Democrats place the measure on a roster of proposals that they say will strengthen the middle class because workers are more likely to have health care and pension coverage if they’re represented by a union.

Republicans label the bill “undemocratic” and assert that it would violate workers’ rights to a secret-ballot election—like the one that puts senators in office.

At a sweltering rally near the Capitol on Tuesday, June 19, Democratic office holders addressed hundreds of union members and organizers, in part to thank them for delivering Democratic majorities in the House and Senate last fall.

But they stopped short of saying that approval of the card-check bill is possible. They stoked the crowd by declaring that senators would be forced to take a stand on the issue.

Achieving a win may require more electoral gains in the Senate—and the White House—for Democrats.

“Unions are essential to this country’s success and absolutely critical to the middle class,” Sen. Hillary Rodham Clinton, D-New York, told the union rally. “If [President Bush] vetoes it, when I’m president, I’ll sign it and we’ll finally get it done.”

Republicans in the Senate are just as passionate in their opposition. “The bill is un-American,” Sen. John Ensign, R-Nevada, said at a Capitol press conference on Wednesday, June 20. He argues that it would strip workers of their right to a secret-ballot election.

Sen. Orrin Hatch, R-Utah, asserted that the bill also would dramatically change collective bargaining rules, weakening the contract-negotiating process.

“It’s an overreach like I’ve never seen before,” he said, noting that unions already win 60 percent of the time in NLRB elections. “This is a very, very important battle. We’re going to do everything in our power to make sure employees are protected.”

Democrats invoked similar language in promoting the bill. “We need to do it for the American worker,” Senate Majority Leader Harry Reid, D-Nevada, told the June 19 labor rally. “It’s time they were moved up on the agenda.”

But Reid has drawn criticism from Republicans for putting the bill on the Senate calendar without having it approved by the Senate Health Education Labor and Pensions Committee. The panel held a March 28 hearing but did not mark up the bill.

“They didn’t have the courage to take it through the committee, which means it’s purely political,” says Sen. Mike Enzi, R-Wyoming and the panel’s highest-ranking GOP member.

Wrangling is also occurring among interest groups. The AFL-CIO says that 53 percent of U.S. workers, or 60 million people, would join a union if they could.

Rick Berman, executive director of the Center for Union Facts, an anti-union advocacy group, disputes that number, questioning labor’s polling methodology. He says independent surveys indicate that upwards of 75 percent of nonunion workers don’t want to form bargaining units.

He also asserts that this week’s activity is a preamble for labor. “This is simply part of a staged setup by the unions to create a more meaningful vote after the 2008 elections,” he says. “Business is not taking this campaign seriously. The unions are playing a long-term game.”

—Mark Schoeff Jr.

Detroit automakers are vowing to fight for significant labor savings in master contract negotiations with the UAW.

At a series of background sessions this month, executives from the three major U.S. car companies said they need to close a labor cost gap of $20 to $30 per hour with their Japanese counterparts in North America.

The UAW is accustomed to wages and benefits gradually growing, not shrinking. But these negotiations, which run until the September 14 expiration of the current contract, must bring change, says Dave Cole, director of the Center for Automotive Research, a think tank in Ann Arbor, Michigan.

“I think you could see a lockout,” Cole says. “The car companies won’t settle for anything short of transformational change in their labor agreements.”

UAW president Ron Gettelfinger has said the union already gave General Motors and Ford Motor Co. substantial relief on health care costs over the past few years. He has said the UAW is not interested in giving up more in the current negotiations.

Ford has a goal to cut its labor costs by 30 percent, The Detroit News reported last week. Ford declined to confirm the report.

But in the face of massive financial losses, the Detroit automakers must bring labor costs that are now about $72 per hour ($28 an hour in wages plus benefits and pension costs), closer to the $45 to $50 per hour of the Japanese car companies operating in North America, Cole says.

Among the ideas being floated by the Detroit automakers is a new structure to pay for retiree health care. Under various scenarios, the car companies would pay the UAW 60 cents to 70 cents on the dollar to assume a combined liability of $93 billion for the Detroit companies.

The union would then control the money and the risk of meeting the obligations through a trust known as a Voluntary Employee Benefits Association.

The union isn’t interested in that plan—at least not now, Cole says. But it is listening to the idea as a hedge against possibly losing all those benefits should any of the companies falter into bankruptcy, he says.

The UAW declined to comment last week.

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

When President Bush signed a bill just before Memorial Day that would provide funding for the Iraq war, he also ushered in new employment law.

The high-profile workforce provision included in the Iraq bill raises the minimum wage to $7.25 during the next two years. But buried in the legislation were changes to a massive 2006 pension reform bill.

The modifications may be a harbinger for further tinkering to that 900-page measure, which, among many other reforms, tightened funding rules for defined-benefit plans and required them to cover 100 percent of liabilities.

The legislation was spurred by spectacular pension defaults following the economic downturn early in the decade and the specter of future airline pension collapses. It was that industry that received the most substantial relief in the Iraq legislation.

In the original pension bill, Northwest and Delta, which had put their pensions in a “hard freeze,” were allowed to use an 8.85 percent interest rate to calculate liabilities. American and Continental, whose plans were in a “soft freeze,” had to use a yield curve interest rate of about 6 percent.

But those two carriers were able to secure language in the Iraq bill that would allow them to use an 8.25 percent interest rate, a much more favorable rule because a higher rate lowers pension costs.

The nimble footwork by American and Continental lobbyists has drawn the ire of two senators who are instrumental in setting pension policy.

Finance Committee Chairman Max Baucus, D-Montana, and Ranking Member Charles Grassley, R-Iowa, sent a letter on June 6 to the CEOs of each airline requesting that they tell the panel how big their projected minimum contribution to their pension plans would be before and after the relief they received in the Iraq spending measure. They also asked for the number of participants in each plan and the amount of accrued benefits in excess of the amount insured by the Pension Benefit Guarantee Corporation.

“These two airlines flew around the Finance Committee to get this pension provision in the spending bill, but we will review in the light of day exactly what deal they got,” Baucus said in a statement.

Grassley said that Congress spent months assembling the pension bill last year, taking into account the airlines’ situations and the potential liability borne by taxpayers if they defaulted on their pensions.

“Now these two airlines and their allies in Congress have undermined that work,” Grassley said in a statement.

Among other changes slipped into the Iraq bill were provisions affecting the use of excess pension funding for retiree medical benefits and setting rules for treating multiemployer plans as single-employer plans.

Meanwhile, House and Senate committee aides have been hammering out a bill that would make technical corrections to the 2006 pension law. It’s not clear whether that measure will include changes as substantive as those provided for the airlines in the Iraq legislation.

As part of the effort to produce a corrections measure, a House Education and Labor subcommittee held a hearing in early May in which witnesses called for an array of changes to the pension bill.

Airline pilots argued that they should receive the maximum federal pension insurance benefit granted to people who retire at 65, even though pilots must quit at 60.

Scott Macey, senior vice president of Aon Consulting Inc., asserted that the effective date of the new funding rules should be delayed from 2008 until 2009, phase-in funding targets should be loosened, and references in the bill to “asset averaging” should be changed to “asset smoothing” to better ensure market valuations.

“The law was so complex and comprehensive that, without a criticism of anyone, you need a few corrections to carry out what the intent is,” Macey says.

The chairman of the subcommittee maintains that he does not intend to rewrite the original pension bill, which took years to produce.

“I’m not interested in upsetting the delicate balance that was struck in 2006,” says Rep. Robert Andrews, D-New Jersey. “I want to see how it works in practice for a reasonable amount of time. We want this to be a thoughtful, deliberative process that improves the law.”

Mark Schoeff Jr.

Lower spending on prescription drugs and increased cost-sharing with employees are expected to lower the growth rate of medical spending in 2008, a sign that premium increases may decline as well, according to data released Tuesday, June 19, by PricewaterhouseCoopers.

The driving force behind the drop is patients’ increased sensitivity to price. Employers have achieved this by sharing more of the cost of medical care with employees. They have also focused on managing the health of employees to prevent disease and encourage healthy lifestyles through health coaches and disease management.

“The causes for the current deceleration are complex,” according to the report’s authors, “but it’s clear that the movement into consumerism is real and is affecting medical costs.”

The use of electronic medical records is partially responsible for the slowing of medical cost increases.

Though a drop in medical cost growth does not necessarily mean a decline in premium growth, the past few years have seen just that.

This year, medical costs at health maintenance organizations, for example, are expected to increase 9.9 percent, compared with an increase of 11.8 percent last year. Consumer-directed plan costs increased 7.4 percent, compared with 10.7 percent a year earlier.

Premium growth rate, meanwhile, has dropped every year since 2003, when premiums rose 13.9 percent nationally. In 2006 and 2007, premiums increased 7.7 percent.

Medical cost trends for employers are a combination of factors: how much medical care costs; how much medical care patients seek; and how much of the cost employers shift to employers.

Jeremy Smerd

 

Companies received more guidance recently on how to implement the Pension Protection Act when the Treasury Department and the Internal Revenue Service issued proposed mortality tables and regulations on mortality tables used to measure pension liabilities.

The proposed regulations include rules on the substitute mortality tables that the PPA authorized companies to construct using data on their own workforces.

Jay Rosenberg, a director in the retirement practice of Buck Consultants, said the proposed regulations cleared up one concern of plan sponsors by saying that companies with a number of pension plans of varying sizes can use plan-specific tables for plans big enough to have sufficient data and rely on the tables the government provides for the smaller plans.

But the proposed regulations did not include any information on the mortality tables used to calculate minimum lump-sum distributions, Rosenberg said.

“Our clients have been very interested in being able to describe to their employees what they can expect in the amount of lump sums if they retire in 2008 versus 2007, or 2009 versus 2008, so that people can make appropriate plans,” he explained. “Hopefully we’ll get some guidance soon. There’s a very pressing need for the government to issue guidance in this area so that employers can notify their employees.”

If companies want to build their own mortality tables, the proposed regulations require that they have “credible data.” The regulations define the amount of information that would be sufficient as data on 1,000 deaths of workers of the same gender.

The regulations also say that companies must notify the government seven months in advance of a new plan year that they are going to use a plan-specific table, but add that companies have until October 1 to notify the government about 2008 plans.

Filed by Susan Kelly of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Sen. Ron Wyden, D-Oregon, is trying to resolve what may be the primary domestic issue of the 2008 presidential election—health care—in 2007. Wyden introduced the Healthy Americans Act into the Senate this year with some help from employers such as Safeway CEO Steve Burd, who on May 7 announced his own employer-led coalition on health care reform. Wyden’s bill would remove employers from the health care equation. Under the measure, individuals would purchase coverage directly from private insurers. Companies would make contributions into the system based in part on the number of people they employ. The bill also establishes incentives for prevention and wellness. Wyden recently spoke with Workforce Managementstaff writer Jeremy Smerd.

Workforce Management: Why should employers support legislation that eliminates their role providing health care benefits?

Ron Wyden: It’s going to make them more competitive in the global marketplace. They are getting pounded today … because of a historical accident. They are getting clobbered because back in the 1940s, before they were competing in a global economy, health care was pushed onto the employer by accident, through wage and price controls. That may have made sense 60 years ago, but it doesn’t make sense today when the people who own businesses are seeing their workers change jobs constantly. The world is all about portability and convenience, and I think it’s time to cut the cord between employment and health insurance. And that is why I’ve proposed the bill.

WM: Employers who say health benefits are a way to attract employees in a competitive marketplace may differ with your perspective.

Wyden: I require that people buy a basic package: prevention, outpatient, inpatient hospitalization and catastrophic. I think there will be very fertile ground for employers to supplement that package in order to attract quality workers, and I think that is very appropriate. What I am trying to do is say, “Let’s figure out a way that makes sense for workers and businesses so that everybody can get a basic package.” But, of course, it’s a free society and people will choose to buy even more. And I think a prime opportunity for employers to attract good workers is to come in and say, “The Healthy Americans Act requires that you buy this basic coverage. But we really want you, so we’re going to offer A, B and C on top of that.”

WM: Chronic illness is a huge contributor to health care costs. And employers are investing in ways to manage diseases to avoid sick workers, high costs and lost productivity. How does your legislation address the need to improve the health of workers?

Wyden: Perhaps the leading company in the United States, the leading employer that has focused on prevention, is Safeway. And their CEO, Steve Burd, stood with me the day I proposed my legislation. So there’s no question that employers want to work in a preventive kind of area. Employers may choose to supplement what I am offering in terms of preventive benefits—gym benefits and incentives for employees to be involved in various kinds of preventive efforts. All that will go forward. But the reason employers are excited about my legislation—which is called the Healthy Americans Act for a reason—is because I feel so strongly about health care and not sick care. Employers are saying the Healthy Americans Act really gets it right in terms of prevention.

WM: How so? Can you be more specific?

Wyden: If an employee signs up for health coverage under the Healthy Americans Act, their plan would have to inform them of various preventive and wellness programs. The worker is not required to do anything, but if a worker took the child to do the preventive and wellness program, then the worker is eligible for a reduction in the worker’s premium. In the legislation, it’s spelled out.

WM: If an employer adds supplemental benefits, do they get a tax break?

Wyden: No. And the question is, if you’re going to go to a market-based system and reward competition, which is what I’m doing, I don’t know why you throw more tax breaks on top of what we’re already doing. Most of the flak we’re getting, in particular on the liberal side, [is] people saying, “You’re doing too much for employers as it is.”

Workforce Management, May 21, 2007, p. 6 — Subscribe Now!

It looks like companies interested in acquiring an HR outsourcing provider might have another shot at bidding for Affiliated Computer Services and Ceridian. Despite previous bids for each firm, there appears to be movement to open the process to more contenders.

In March, ACS chairman Darwin Deason and Cerberus Capital Management proposed buying the company for $59.25 per share and subsequently upped their bid to $62 per share. Under the terms of the bid, Deason would work exclusively with Cerberus on the acquisition.

But on Sunday, June 10, ACS announced it had suspended a temporary exclusivity agreement with Deason and Cerberus Capital Management, thus opening the company for more bidding.

ACS’ board of directors said in a statement that it believes the waiver will “enable it to conduct a process for considering strategic alternatives available to the company, including a potential sale of the company, that it considers to be in the best interest of the company and its stockholders.”

Similarly, on Tuesday, June 12, Ceridian shareholder William Ackman, founder of hedge fund Pershing Square Capital Management, sent a letter to Ceridian shareholders encouraging them to oppose the $5.2 million buyout offer made last month for Ceridian by private equity firm Thomas H. Lee Partners and Fidelity National Financial.

“We do not support a sale of the company at this low price,” Ackman says in the letter, which was filed with the Securities and Exchange Commission. “It appears to us that the current deal is an ill-suited response to our proxy contest, and is suboptimal for Ceridian stockholders.”

Ackman has been waging a several-month battle against Ceridian about how the company is managed. Pershing has retained Lazard Frères & Co., a New York investment banker, to look into alternatives to the sale, according to the letter.

It would make sense for ACS and Ceridian to open their bidding to other potential buyers given the state of the market, says Jason Corsello, vice president at Knowledge Infusion, a Minneapolis-based talent management consultant.

“There are a lot of private equity dollars out there,” he says. “If they can find other bidders that are willing to pay more, it makes sense.”

Private equity firms recognize that HR technology firms in general are in growth mode and that being a publicly held company during a period of growth is not ideal, says Phil Fersht, an HRO expert.

“Being public requires companies to be highly disciplined and try to squeeze margins as much as they can, which is hard to do when you are trying to grow,” he says. “Private equity firms recognize that and that’s why they are looking at this space.”

In a June 13 statement, Ceridian’s board of directors emphasized that it believes the buyout by Thomas H. Lee and Fidelity National Financial “was in the best interest” of shareholders, but said it would be open to future discussions with shareholders if they could come up with a better alternative.

“The board welcomes involvement by shareholders and is prepared to review any proposals that might result in a superior proposal per the merger agreement,” the board said in its statement.

And it’s possible both Ceridian and ACS could get better offers, Corsello says.

“These two firms have some great assets in terms of client base and brand,” he says. “I wouldn’t be surprised if other firms put in a bid.”

—Jessica Marquez

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