Author: Site Staff

Event:International Association for Human Resource Information Management
IHRIM 2006 Conference and Technology Expo
April 9-12, 2006 at the Hilton Washington, Washington, D.C.

What: The International Association for Human Resource Information Management (IHRIM) represents the world of workforce information management, systems issues, trends and technology.

Show info:For more information about the show, click on www.ihrim.org.

IHRIM, Day 2

Show notes: Don’t Be So Nosy

Date: Tuesday, April 11, 2006

Online recruiting 2.0: Using the Web to find jobs or job seekers can be much improved by weaving technology systems together, an executive with CareerBuilder.com said Tuesday at IHRIM’s annual conference. Eric Waldinger, director of strategic services for the job site, said it is possible to integrate so-called applicant tracking systems with job boards to make life easier for both job hunters and recruiters. He also said that companies can increase the willingness of candidates to complete applications online by not asking for highly personal data upfront. “For every page a job seeker has to complete there is a 50 percent drop-off rate,” Waldinger noted in his presentation materials. “(There’s a) 90 percent drop-off if you ask for personal information!”

Just for laughs: Political comedy troupe the Capitol Steps performed at Tuesday’s keynote luncheon, thoroughly skewering both ends of the political spectrum, as well as popular culture. Highlights included a joke-telling contest between John Kerry and President Bush, a routine that took pot shots at Vice President Dick Cheney’s hunting adventures and a parody of aging rock stars Mick Jagger and Keith Richards.

Stormy weather: It’s a well-worn meteorology analogy, but maybe it might be true this time: There is a “perfect storm” of change coming for HR, according to Jim Candler, senior HCM strategist at Workday Inc. In his presentation, “The Global Workplace Survival Guide for the HRIS Professional,” Candler said that HR is being held captive by the concept of vertical organizations. Human resources must start thinking of companies as being horizontal or as communities of practice in which people are connected in a variety of ways. HR must ditch the simple answers to the challenges being posed by change and globalization, he said. “By not recognize the complexity of our world, we’re making our world more complex,” Candler said.

Aging workforce: With the help of SAP’s Business Warehouse, Philip Morris is planning for an expected wave of retirements as its workforce ages. In the presentation “Preparing the Way for the Future,” R. Dennis Newcomb, manager, HR reporting and analysis at Philip Morris, and Robert Rupar, managing consultant for IBM, detailed how they were able to help managers throughout the company accept the new system.
 
–R.S. and E.F.

Show notes: Measuring, But Measuring What?

IHRIM Day 1

Date: Monday, April 10, 2006

IHRIM attendance up: HR technology is a timely, important topic, judging by attendance at this year’s annual confab of the International Association for Human Resource Information Management.

About 850 people are attending the IHRIM HRMStrategies 2006 conference, a jump of roughly 10 percent from last year’s show, says Nov Omana, chairman of the board for the group. Omana, also the founder of consulting firm Collective HR Solutions, says the technological shift to Web services—which promises easier integration of applications—is prompting organizations to revisit their HR systems. “People are starting to say, ‘I’ve got to do something.’ “

Successful metrics: A major theme so far at the conference is the value of bringing hard numbers to the practice of managing people. Along these lines, the association on Monday gave its Chairman’s Award to Jac Fitz-enz, often called the father of human capital measurement. Fitz-enz, who founded the Saratoga Institute more than two decades ago, offered a moment of levity as the conference got under way. People ask what the secret to success is, given that he’s been at it so long, Fitz-enz said. “The secret to success is simple,” he told the participants. “’Outlive the bastards!’”

Measuring workforce performance: The discussion was more businesslike at a breakout session labeled “So Much Talk About Human Capital Measurement, But So Little Action! Let’s Get on With It!” Rick Emslie, a consultant with Strata Systems, suggested that workforce managers collect some basic metrics, including income per employee and an index of employee engagement or commitment. Emslie suggested HR-related measurements may not always be precise, but nonetheless can point organizations in a useful direction. “You don’t have to be 100 percent (accurate),” he said. “You just have to be indicative.”

Most attendees who are workforce practitioners say they are still grappling with obtaining basic workforce performance data.

Data privacy issues: A significant trend that is emerging at the conference is data privacy and the difficulty of maintaining it. Eli Lilly and Co. employees Carolyn Anker, an HR data privacy expert, and Brenda Striggo, an “employee privacy architect,” presented a session called “Can Data Privacy and HRIT Coexist?” They gave an overview of the complexities and challenges of dealing with privacy laws and regulations that differ from state to state and nation to nation. “HR privacy is the sleeping giant of privacy issues,” Anker says. Vendors who process any type of employee data, such as payroll, are a particular concern when it comes to privacy issues.

Conference buzzwords: “Handcuff issues” are violations of key laws that can lead to criminal charges. “Privacy audits” are what companies should undertake to make sure that all of their HR data that should be private stays private.

–Robert Scally and Ed Frauenheim

Wal-Mart’s controversial new head of human resources may struggle to sell the company’s self-image as a benevolent employer.

So say some analysts on the news that Susan Chambers has been promoted to executive vice president of Wal-Mart’s people division. She replaces Lawrence Jackson, who after 17 months in the position was tapped to run the retailer’s global procurement division. Chambers gained notoriety several months ago with the public airing of a memo she wrote about limiting benefit costs, including the prospect of making Wal-Mart cashiers do some “cart gathering” to attract a healthier workforce.

That memo was a reflection of Chambers’ background as a logical-minded technology professional, and indicates she wasn’t concerned about how it might appear to the public, says Kevin Berchelmann, president of Triangle Performance, a consulting firm focused on human resource issues. To Berchelmann, the memo signals that Chambers may find the public relations aspect of her new job difficult.

“I think it bodes ominously,” he says.

Wal-Mart spokesman Dan Fogleman disputes the suggestion that Chambers will stumble in the spotlight. “Ms. Chambers is very articulate and very savvy when it comes to the positions that need to be taken in the public venue,” he says. “She’s a great communicator.”

Wal-Mart announced the executive changes Wednesday, April 6. The Bentonville, Arkansas-based company says that Chambers will be responsible for human resources functions and the company’s office of diversity. She will report to chief executive Lee Scott. Among other leadership moves, Wal-Mart says that Linda Dillman, previously executive vice president and chief information officer, will become executive vice president of risk management and benefits administration.

The company cast the changes as part of a corporate policy of rotating executives.

“These leaders are people of great capacity, and today’s changes reflect a long history at Wal-Mart of what Sam Walton used to call ‘cross-pollinization,’ ” Scott said in a statement. “They are good examples of Wal-Mart’s commitment to developing a strong bench, with talent ready to step up and lead this company into the future.”

Wal-Mart has been dogged in recent years by employment-related litigation and criticism, including the claim that the company offers a skimpy benefits package. Chambers’ memo last fall bolstered some of those attacks, admitting that “our critics are correct in some of their observations.”

Scott says Chambers has been instrumental in the retailer’s ongoing efforts to meet the needs of employees with the company’s benefits plan.

“Much of what we’ve done in improving our benefits program, as well as the actions we’ve taken for Wal-Mart to be more proactive on the health care issue in the United States, has happened under her leadership,” Lee says in a statement.

But Wal-Mart Watch, a group critical of the company, labeled Chambers’ promotion “bad news for Wal-Mart employees.”

Among her biggest challenges is facing pressure to change the company’s low-cost approach to compensation, says Jim Walker, a consultant on human resources strategy.

“They’ve been managing people by their own rules for a long time,” Walker says. “The public’s asking them to change.”

Chambers came to Wal-Mart in 1999 and took a benefits management post in 2002. Much of her professional career, though, has been in information technology roles. At Wal-Mart, she served as a vice president of applications development. She also was director of applications development at Hallmark Cards.

Jackson is known as both a hard-driving business manager and a skilled schmoozer. Prior to taking the HR reins at Wal-Mart in 2004, he’d been president and COO at retailer Dollar General.

Procurement is critical to Wal-Mart, and the fact that Jackson is moving to lead that division is a sign that the company believes he succeeded in HR, says Jeff Cohn, managing partner at New York-based consulting firm Bench Strength Advisors. Jackson is likely seen as a rising star within Wal-Mart, Cohn says.

“The grooming is on track,” he says.

Jackson’s experience as a seasoned business leader helped him make the transition into the HR leadership role at Wal-Mart, says Berchelmann at Triangle Performance. Chambers lacks that sort of business background, nor does she have much experience in the field of human resources, he says.

“She doesn’t bring either one to the table,” Berchelmann says. “I think it’s going to be a challenge for her.”

Wal-Mart’s Fogleman, though, characterizes Chambers’ background as broad. And he says that under her leadership in the benefits field, the company has seen greater levels of participation in its open enrollment process. In the company’s most recent open enrollment period, last fall, about 70,000 employees who’d previously waived health coverage signed up for a company plan, Fogleman says. Wal-Mart has more than 1.3 million U.S. employees, and more than 1.7 million employees worldwide.

—Ed Frauenheim

The health care bill passed by the Massachusetts Legislature on Tuesday requiring nearly all residents to purchase health insurance found an unlikely ally in the business community, health care and business experts say.

And while states that have a higher percentage of uninsured residents may be less likely to adopt a similar initiative, the new legislation has focused all eyes in the health care debate on Massachusetts.

“This has stirred the policy pot,” says Helen Darling, president of the National Business Group on Health.

Spurred by the risk of losing $385 million in annual federal Medicaid funding, legislators made a bipartisan effort to placate concerns from businesses concerning the high fees and price tags of health plans. Those are costs that have sunk previous measures aimed at mandating near-universal health insurance coverage for the state’s 550,000 uninsured residents.

Health care and business experts cited several reasons why the legislation had the support of business groups. The bill, which passed the state Legislature almost unanimously, is expected to be signed by Republican Gov. Mitt Romney and go into effect in January 2007.

“I would characterize this as a big evolutionary step forward,” says Jim Klocke, executive vice president of the Greater Boston Chamber of Commerce, one of the groups involved in drafting the measure. “The legislation contains a number of very innovative measures that we think will make health care more affordable and accessible.”

The most radical innovation is a requirement that individuals who can afford some form of health insurance must buy it.

The legislation will also allow companies to offer employees cheaper, pared-down health plans that might include, for example, catastrophic insurance, limited doctor’s visits and only generic drugs, or high-deductible health plans with low premiums. Employees will also be able to buy these limited health care plans through their employer using pretax dollars.

The legislation will also create market reforms that will allow individuals and small groups to buy insurance collectively, creating an economy of scale that could reduce individual premiums by 25 percent.

Employers that have 11 or more full-time employees but do not contribute to their employees’ health insurance premiums will be forced to pay $295 a year for every full-time employee, a fee that is far less than the $800 outlined in earlier drafts of the bill.

That fee, which would go toward the $160 million pool that helps pay for the emergency hospitalization of the uninsured, is aimed at correcting what the plan’s architects say is an imbalance in the state’s current system. Currently, employers that provide health insurance are required to pay an insurance tax, while businesses that do not offer health insurance do not pay into the fund.

Companies that do not offer employees a health care plan, either their own or through the health care market to be created by the state, risk having to pay for an uninsured employee’s health care costs if these costs rise above $50,000.

Beyond the plan’s particulars, experts believe employers could also reap long-term benefits if employees experience fewer sick days and emergency room visits.

“A healthier workforce is probably a workforce that changes jobs less and probably a workforce that is more productive,” says Jon Gabel, vice president for the Center for Studying Health System Change.

Gabel says the legislation, if it works, could be adopted by neighboring states that have a similar uninsured rate of around 10 percent.

“But for states like California, Arizona or Texas, which have around 20 percent uninsured, this is neither politically nor economically doable,” he says.

It remains to be seen, however, whether the program will reduce overall health care costs in the state. While the policy might reduce the overall cost of coverage initially, others say the costs will rise because people who have health insurance spend more on health care than those who do not see a doctor except when they really need to.

“This legislation is a very, very short-term solution that won’t have a meaningful impact unless they take more steps to manage costs,” says Brian Klepper, president of the nonpartisan Center for Practical Health Reform.

The legislation does include mechanisms to make the cost of insurance more transparent. But the cost of monthly premiums have not been fixed. While legislators believe it could be around $200 a month for individuals, that number could be significantly higher.

Others say the increase in cost is not as important as how the money will be spent. Observers believe costs will shift from hospitals to primary care physicians as individuals spend more on preventive care. The result could be a more economically stable health care system.

“They will spend more money covering people in total than the handful of people who enter the emergency room,” says Darling at the National Business Group on Health. “We’re going to spend more money, but we’re spending it on the right things.”

A constricted Capitol Hill calendar and a looming deadline for pension plan payments may combine to force Congress to do something unusual–work out a compromise on a complicated bill in a timely way.

Although a House-Senate conference committee on pension reform legislation, which got under way March 8, was delayed as Democrats and Republicans in the Senate fought over appointments to the panel, observers believe it may be able to deliver a final bill by April 7. The deadline was set by Sen. Mike Enzi, R-Wyo­ming, chairman of the Senate Health, Education, Pensions and Labor Committee and conference leader.

Congress is scheduled for a two-week recess in April, and businesses must make their first pension payments of the year on April 15. But the complex reforms–and volatile politics surrounding them–may push the conference into May or later. The final bill must be passed by the House and Senate.

“Everybody wants to fix this thing. I think they’ll work it out,” says Ron Gebhardtsbauer, senior pension fellow at the American Academy of Actuaries.

Plenty of controversial issues could blow the 27-member conference off schedule, including provisions to give airlines more time to shore up their pensions, ensure the legality of cash-balance plans and reform multi-employer plans.

The Senate bill allows airlines 20 years to fully fund their pensions, while the House bill contains no airline language. All other companies have seven years to reach 100 percent funding. Neither bill makes cash-balance plans retro­actively legal, leaving them vulnerable to lawsuits.

The White House, worried about the $23 billion deficit at the Pension Benefit Guaranty Corp. and $450 billion in underfunded pension liabilities, has threatened to veto any bill it deems too weak.

Other volatile areas include rules governing the smoothing of interest rates, credit balances and the use of credit ratings to determine whether a company must make higher payments into its pension plan.

The makeup of the conference will affect its decisions. Sen. Tom Harkin, D-Iowa, has voiced misgivings about cash-balance conversions. Sens. Mike De­Wine, R-Ohio, and Barbara Mikulski, D-Maryland, have fought the credit rating proposal, arguing that it clobbers faltering companies in cyclical industries like auto manufacturing.

DeWine and Mikulski blocked the Senate bill until they were assured their concerns would be addressed in conference. Ohio Republican Rep. John Boehner, former chairman of the House Education and the Workforce Committee and now House majority leader, reassured skeptical Democratic supporters that their lingering objections would be assuaged during House-Senate negotiations.

The stage is set for “both an unusual amount of cooperation and an unusual amount of conflict,” says Kyle Brown, retirement counsel at Watson Wyatt. “This might be the hottest a pure pension bill has ever been.”

The Pension Coalition, comprising about 200 companies and trade associations, is making dozens of visits to Capitol Hill, sponsoring advertising and mobilizing employees for grass-roots support.

“Congress needs to get it right,” says Martin Reiser, manager of government policy for Xerox Corp. and coalition spokesman. “At the end of the day, it’s more important that we resolve the issues correctly than (adhere to) any particular timeframe.”

—Mark Schoeff Jr.

Despite a constricted Capitol Hill calendar and a looming deadline for pension plan payments, it will take a while for Congress to work out a compromise on a complicated pension reform bill.

A House-Senate conference committee on the legislation got under way March 8 after a delay as Senate Democrats and Republicans fought over appointments to the panel. Sen. Mike Enzi, R-Wyoming, chairman of the Senate Health, Education, Pensions and Labor Committee and conference leader, set an April 7 deadline to produce a final bill. Now that schedule has faltered.

Last week, House Majority Leader John Boehner, R-Ohio, indicated that it might take until May to work out a deal on the legislation. Congress is scheduled for a two-week recess beginning April 7. The complex reforms–and volatile politics surrounding them–make the negotiation timeline unpredictable. The final bill must be passed by the House and Senate.

Businesses must make their first pension payments of the year on April 15, but experts say that they can still use the corporate bond rate set in 2004 for their 2006 payments. They don’t need to switch to the 30-year Treasury bond rate until April 15, 2007. The mid-April payment deadline was one of the factors adding urgency to the conference because the pension reform measure would introduce a different bond rate for calculating payments. Companies would have to pay more into their pension plans under the Treasury rate, which is now in effect.

Even though the conference is proceeding more slowly than many had hoped, there is optimism that a deal can be reached. “Everybody wants to fix this thing. I think they’ll work it out,” says Ron Gebhardtsbauer, senior pension fellow at the American Academy of Actuaries.

Plenty of controversial issues could blow the 27-member conference off schedule, including provisions to give airlines more time to shore up their pensions, ensure the legality of cash-balance plans and reform multiemployer plans.

The Senate bill allows airlines 20 years to fully fund their pensions, while the House bill contains no airline language. All other companies have seven years to reach 100 percent funding. Neither bill makes cash-balance plans retroactively legal, leaving them vulnerable to lawsuits.

The White House, worried about the $23 billion deficit at the Pension Benefit Guaranty Corp. and $450 billion in underfunded pension liabilities, has threatened to veto any bill it deems too weak.

Other volatile areas include rules governing the smoothing of interest rates, credit balances and the use of credit ratings to determine whether a company must make higher payments into its pension plan.

The makeup of the conference will affect its decisions. Sen. Tom Harkin, D-Iowa, has voiced misgivings about cash-balance conversions. Sens. Mike DeWine, R-Ohio, and Barbara Mikulski, D-Maryland, have fought the credit rating proposal, arguing that it clobbers faltering companies in cyclical industries like auto manufacturing.

DeWine and Mikulski blocked the Senate bill until they were assured their concerns would be addressed in conference. Boehner, former chairman of the House Education and the Workforce Committee and now House majority leader, reassured skeptical Democratic supporters that their lingering objections would be assuaged during House-Senate negotiations.

The stage is set for “both an unusual amount of cooperation and an unusual amount of conflict,” says Kyle Brown, retirement counsel at Watson Wyatt. “This might be the hottest a pure pension bill has ever been.”

The Pension Coalition, comprising about 200 companies and trade associations, has been making dozens of visits to Capitol Hill, sponsoring advertising and mobilizing employees for grass-roots support.

“Congress needs to get it right,” says Martin Reiser, manager of government policy for Xerox Corp. and coalition spokesman. “At the end of the day, it’s more important that we resolve the issues correctly than (adhere to) any particular timeframe.”

—Mark Schoeff Jr.

President Bush’s effort to expand health savings accounts may have stalled just weeks after he introduced his proposal, thanks to Capitol Hill resistance to the price tag.

Bush devoted only a couple lines to the issue in his January State of the Union speech. But he followed up with a budget proposal that called for tax breaks related to the accounts that would cost nearly $2 billion in fiscal year 2007 and $29 billion between 2007 and 2011.

The White House wants to raise the maximum amount of money that participants can add annually to their accounts from $2,700 to $5,250 for individuals and from $5,450 to $10,500 for families. Contributions and withdrawals could be made tax-free. The accounts, which were created as part of a Medicare reform bill in 2003, must be combined with high-deductible health plans.

The power of the bully pulpit not­withstanding, one of the most influential figures in tax policy doused the Bush plan with cold water. Sen. Charles Grassley, chairman of the Senate Finance Committee, has indicated that there is not enough Democratic support to pass HSA legislation this year.

He is concerned about the politics and costs of enhancing the accounts.

“Too often here in Washington, people try to solve problems by throwing money at them,” Grassley, R-Iowa, said at a hearing in early March. “Before we add more tax subsidies, we first should look to see if we can make the incentives we have today work better.”

The Senate Budget Committee put another obstacle in the path of HSA expansion when it drafted a 2007 budget resolution that ignored Bush’s proposals.

HSA policy changes haven’t gained much traction in the House either. A bill that would allow HSAs to be used in conjunction with flexible spending accounts and health reimbursement accounts has attracted six co-sponsors since it was introduced at a December press conference featuring House Speaker J. Dennis Hastert, R-Illinois.

Business interests continue to push for HSA expansion. Pending pension legislation contains a provision that would allow as much as $500 in a health care flexible spending account to be transferred to an HSA. Corporations also advocate legislation to convert HRAs into HSAs and a Treasury Department rule change that would allow employers to vary their HSA contributions depending on an employee’s income and health condition.

“We’re still encouraged that something can be done this year either legislatively or through the regulatory process,” says Maria Ghazal, director of public policy for the Business Roundtable, an association of CEOs of large corporations.

Only 7 percent of companies with 20,000 or more employees offer HSAs, according to a report by Mercer Human Resource Consulting. But the concept is touted as a way to reduce company costs by putting individuals in charge of their health care spending.

Deere & Co., a manufacturer of heavy equipment and power systems, will introduce an HSA-based insurance system in January. “The outcome will be better health and better health care decisions,” company spokesman Ken Gold­en says. “This will have a great impact on managing the long-term costs of health care.”

—Mark Schoeff Jr.

Dear Meeting Resistance:



Two Dear Workforce experts, Carl Nielson and Scott Weston, weigh in separately.

First, Carl Nielson:

This sounds like a re-engineering effort in a way. Most re-engineering projects result in eliminating low-valued processes or tasks, usually by automation and/oroutsourcing. Any re-engineering effort can be met with resistance. In this case, adding steps to a process may receive even greater resistance. No matter what’s changing,change is one of those nasty words that create stress for many people.

Involve the people who are being affected by these changes. Getting their buy-in usually provides significantly better results than something concocted in a vacuum. Form focus groups composed of employees from throughout the organization, especially those who will be directly affected by the changes. Identify and include stakeholders. Hold meetings–perhaps fun pizza lunches–to present the high-level goal (for example, the new process and the expected outcome).

During the meeting, present the proposed new steps in appropriate detail as an idea you are exploring to accomplish a specific goal: improving the ability to anticipate customer needs. Ask the same specifically worded questions in every focus group, such as:

• What about these proposed added new steps can we improve?
  
• Are there other steps, methods or ideas that might be implemented?
  
• How would you want the new steps implemented?
  
• What barriers do you see to a smooth implementation?
  

Use all the information gathered from the focus groups to improve upon steps before rolling them out. Also, identify those in attendance at the focus group meetings who respond positively to the proposed changes. Consider inviting those people to be part of the implementation team. Also include the most vocal opponents to the changes on the implementation team. Have team members provide ongoing input into all aspects of the new steps.

Implementing the new steps requires preparation and communication. Start with clear, upbeat communications. Consider building an entire PR campaign around the new steps.Incentives may be appropriate, but remember that employees want to improve if given the right tools and training. Putting incentives into the mix may or may not be effective.

Move to training after everyone has received appropriate communications about the impending changes. Set up a hotline to answer questions during the initial phase. As a follow-up, hold a final focus-group lunch meeting to celebrate the successful implementation and get feedback for improving what already is in place.

Now, Scott Weston’s view:

Sales trainer Tom Hopkins has said it well: “If I say it, they can doubt me. If they say it, it is true.”

Rather than trying to just “sell” the change to your staff, the best approach is to explore with them the truth of your hypothesis and then involve them in identifying a solution. By doing this, instead of just convincing them of your conclusions and why change must be implemented, you involve them in creating a solution they’re much more likely to embrace.

There are two parts to this equation:

• You’re probably right, but even if your assumption about saving time is true, you really need to base it on facts. Saying “just because” won’t win anyone over.
  
• If you haven’t gathered the facts yet, start collecting them along with your team. This also will help sell any changes.
  

Depending on the size of your workforce, this might be best accomplished by selecting a team of frontline staff to gather data, analyze it and then draw conclusions. For example, you can gather customer requests from a certain time period. This could be for a day, a week or a month. Then you can organize them into two basic groups:

• Customer requests that could have been avoided.
  
• Customer requests that could not have been avoided.
  

Look at the requests that could have been avoided and organize them into groups based on the reasons. Next, you should prioritize these groups based on a) their volume and b) your ability to avoid them. The groups with the highest volume and the highest ability to be remedied should be your first priority. Then you can address the lower-priority groups.

It sounds like this will be a work in progress and your staff’s anticipation of customer needs will improve as they find ways to prevent these requests earlier in the process.

Taking the time to explore the requests you are talking about with your frontline staff and involving them in devising solutions will help persuade them to become advocates of change. Be open to other possible outcomes too. A different solution may emerge from your discussions.

SOURCE: Scott Weston, Falcon Strategic Group, San Francisco, May 13, 2005. Carl Nielson, principal, theNielson Group, Dallas, May 12, 2005.

LEARN MORE: How Do We Get Workers to Embrace Change? Also, the role ofincentives in changing behavior.

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.

Foresight and careful planning made a recent catastrophic event at Kelly Services a bit easier to get through. The Fortune 500 company, which provides temporary staffing services, unexpectedly lost Terence Adderly, its chairman and CEO of almost 20 years, when he was left incapacitated by a cardiac incident in February. But thanks to a succession plan that Adderly and the board of directors had designed in previous years, the company was not left in a panic.

The chaos that typically ensues whenever there is a loss of a leader—massive stock price depreciation, ugly power struggles among upper management and confusion about the company’s direction among employees—did not occur at Kelly Services, according to the company. Its board of directors simply activated the contingency plan that was put in place before Adderly’s health crisis. The torch was passed to Carl Camden, executive vice president and COO, in a timely and efficient manner, says Jim Macintyre, vice president of public affairs for the company, which is based in Troy, Michigan.

Kelly Services’ transition of power, however, is more the exception than the rule, notes Scott Cohen, specialist at Watson Wyatt. Boards of directors often have to scramble during times of crisis because there has been no succession planning. And to make matters worse, finding candidates who can fill senior leadership roles is becoming increasingly difficult. For one thing, the pickings are getting slimmer because many leaders are hitting retirement age and leaving the workforce, Cohen explains. Furthermore, downsizing trends in the workforce have dwindled the pool of potential candidates.

“The middle layer of management has been trimmed down significantly and companies are now wondering what happened to the warming bench,” Cohen says.

The good news is that companies are starting to change—at least in part because of the media attention that leadership succession has received in recent years. “High-profile cases are giving company boards a wake-up call,” Cohen says. One such example is that of McDonald’s. Company CEO Jim Cantalupo died suddenly of a heart attack in 2004, and the following year his successor, Charlie Bell, succumbed to colon cancer. The company averted turmoil by having qualified candidates, such as the current CEO, Jim Skinner, who could take the reins.

Predicting the death or incapacitation of a leader is, of course, impossible. Even identifying potential health risks is tricky because of legal considerations, such as the Americans With Disabilities Act. That is why companies need to take precautions, says David Fowler, vice chairman at WJM Associates, a New York City-based consulting firm. He stresses the importance of continuously fostering potential leaders within a company.

Fowler points to General Electric as a model in succession planning. The company’s leadership took a hands-on role in fostering, training and identifying Jack Welch’s potential successors. Candidates were rotated on various assignments, which deepened their understanding of multiple markets and exposed them to diverse segments of the business.

GE did this not with just one executive, but with many. One of those potential successors, Robert Nardelli, went on to become CEO at Home Depot after Jeffrey Immelt got the top job at GE. It is always a good idea for companies to err on the side of caution by grooming more than one potential successor, Fowler says. “Catastrophes can strike at any time and in multiple ways.”

—Gina Ruiz

Great River Health Systems names a sandwich in the cafeteria each month after an employee who performs an exceptional act. IBM’s T.J. Watson Research Center gives employees tools for finding elder care. ARUP Laboratories offers workers a free on-site health clinic. These are among the practices that helped a handful of organizations win “Psychologically Healthy Workplace” awards this month.

The American Psychological Association, the award sponsor, argues that attention to matters such as worker recognition, health and safety, and work/life balance do more than just help employees’ mental health. “Many employers now recognize that the key to success lies in their own workforce and understand that employee health and well-being and organizational performance are inextricably linked,” Russ Newman, executive director for professional practice at the APA, said in a statement.

This is the first year the APA has given out national psychologically healthy workplace awards. Six employers won, including West Burlington, Iowa-based health care provider Great River Health Systems, computing giant IBM’s research operation located just outside of New York City, and ARUP Laboratories, a clinic and laboratory based in Salt Lake City. The other three were Versant, a Milwaukee-based marketing communications firm, the Comporium Group, a Rock Hill, South Carolina-based communications services provider, and Green Chimneys School, a New York-based facility serving emotionally disturbed children.

IBM, whose Watson Research Center employs about 1,600 people in New York State, was credited for a commitment to the “whole employee” and programs such as self-managed work teams, health screenings and immunizations. “By empowering employees and treating them with dignity and trust, IBM is able to attract and retain top-quality talent,” the APA says.

As a company overall, IBM has cut some U.S. jobs while hiring overseas in recent years. Fear of being “offshored” looms in the minds of many technology professionals, but IBM has tried to offset this anxiety. Two years ago, the company launched a $25 million retraining program in the face of overseas competition. “Employees can continue developing their skills to meet the needs of the marketplace,” IBM spokesman Todd Martin says.

At Great River Health Systems, a not-for-profit organization with 1,600 employees, workers developed the customer service philosophy. Employee representatives also meet regularly with company leaders to discuss concerns.

The APA called attention to Great River’s recognition programs, including the service “hero” of the month sandwich honor. One went to a nurse who drove 30 miles after her shift to take medications to a patient who’d left them at the hospital, says Craig Borchard, Great River’s director of public relations.

Great River’s award stems from an effort launched in 1999 with the construction of a new hospital, Borchard says. Prior to its opening, Great River’s patient satisfaction rates had dipped below the 20th percentile nationally. Now it is in the upper 80s and low 90s, Borchard says. What’s more, the company’s employee turnover rate fell from 12.8 percent in 2004 to 9.6 percent last year.

To continue winning over workers, and therefore satisfy patients, Great River just broke ground on a day care facility for employees. “One of our primary goals is to be the employer of choice in the area,” Borchard says.

—Ed Frauenheim