Author: Site Staff

Dear Questioning Sanity:



I am a firm believer in a pay-for-performance philosophy. That being said, most merit-increase programs fail to provide the level of differentiation needed to motivate employees. For example, you would need at least a 3 percent to 4 percent difference in the amount of increase received by your top performers vs. employees who merely meet expectations. Realistically, employees aren’t going to be motivated by less than that. But most companies with merit systems use only about a 2 percent average differential—which is insufficient.

Managers complain that merit discussions are painful and distracting. The problem gets worse if salary and wage structures are frozen or only sporadically adjusted. Employees who reach their maximum pay range may get minimal increases or none at all. Some companies provide lump sums (a one-time payment in lieu of a salary increase), but we find that these are no substitute for increased pay.

However, the reverse case is no more pleasant. Providing the same increase, or percentage increase, to all employees actually may de-motivate your high-performing employees. Many companies use step rates (automatic increases) to compensate employees for more experience, more time or better performance on the job. Wages are maxed out once employees reach the cap. Unless rates are adjusted upward annually, employees with longer service may wait years for their next increase.

Needless to say, this can lead to serious employee-relations problems. In addition, calling this general bump in wages a cost-of-living increase can create some definite headaches. First of all, cost of living is a very arbitrary number. Few agree on how to calculate it, much less how to apply it to any one individual. There is no such thing as a standard cost-of-living figure for a particular employee. The term, and whatever number you decide on, will be open to debate.

Fixed or general increases are used with great effectiveness by companies whose cultures emphasize teamwork. Even so, most companies adopt general increases for other reasons. Typically, they want to avoid the underlying issues around merit and simply provide the same increases to everyone. If your company decides to go that route, be sure to position it as an adjustment to meet competitive labor costs, not cost of living.

One final note: we recognize that some companies can absorb wage increases, while others are plagued by narrow margins and squeezed by both customers and suppliers. The best-performing companies involve their employees in developing solutions. Not surprisingly, these companies experience fewer issues relating to employee morale and unionization.

One option to seriously consider is an incentive plan, such as gain sharing, to help drive greater productivity and efficiency. Gain sharing is a lot like profit sharing, but it’s usually based on things like productivity or efficiency rather than profit. It may be a while before such plans take hold in your culture, but when combined with continual improvement efforts, they provide effective support for a company’s business strategy and culture.

SOURCE: Bob Fulton, managing director,The Chatfield Group, Glenview, Illinois, September 20, 2004.

LEARN MORE:Relocation: Dealing with Cost-of-Living Issues.

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.

Dear Multiple Choices:



The most important question to ponder is this: How will employee training affect your bottom line? Will it boost sales/profit, reduce expenses or favorably influence other key organizational goals? Reflecting on these questions yields two benefits: It helps you prioritize course selection and also helps decide whether, and when, to outsource classes to vendors.

When deciding which classes to offer first, choose those that provide the biggest bang for your buck. Which seminars or courses will make a lasting impression on your group? Are there courses that would prompt your workforce to clamor for additional training? It’s one thing for you to pitch resources for training–you have a vested interest as a learning and development professional–but it’s quite another for business lines to insist on “that great seminar” they’ve attended or heard about from their employees. Again, try to gauge the impact that specific training classes have on your bottom line. Evensoft-skill seminars have a direct effect on profits and expenses.

Outsourcing decisions may be made on a handful of criteria, including budget, expertise and cost/benefit. Do you have the money to hire a vendor? Do your internal trainers have the expertise to develop and deliver the seminar? Answers to those questions may quickly point you in the right direction. If you’re going to spend money on vendors, you’ll definitely have to demonstrate how the expense is mitigated by improvements in productivity, cost-savings or other benefits.

Literally dozens of vendors offer development and training curricula. Find a vendor that can understand your culture and customize a curriculum for your workforce. Check out Workforce Management‘s paidlist of vendors. The American Society for Training & Development and the Society for Human Resource Management both have Web resources and publications that include lists of vendors. Always check references. The list may seem endless, so don’t hesitate to call on peers or colleagues in your network to recommend training vendors they have used.

SOURCE: Don Gaile, principal, dmg consulting company, New York, September 29, 2004.

LEARN MORE: What Should I Be Aware of When Analyzing Training Needs?

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.

For the second year in a row, the House of Representatives last month approved a package of bills designed to make it easier to appeal citations from the Occupational Safety and Health Administration. Although the measures mostly benefit small employers, proponents say that the assault on bureaucracy is good for all business.

“We’ve overcome the mind-set that you can’t touch OSHA,” says John Stone, communications director for Georgia Republican Rep. Charles Norwood, chairman of the Workforce Protections Subcommittee of the House Education and the Workforce Committee.

The four bills target OSHA enforcement and appeals processes rather than workplace safety rules. One would allow exceptions to the 15-day deadline for employers to respond to citations. Another would expand the Occupational Safety and Health Review Commission from three members to five, ostensibly making it easier for the body to achieve a quorum and adjudicate disputes. A third would allow businesses with less than $7 million in assets and 100 or fewer employees to recover attorneys’ fees if they successfully contest a citation. The fourth bill would give the Occupational Safety and Health Review Commission authority to interpret the law and independently review citations.

Detractors say that the legislation establishing OSHA in 1970 remains virtually intact, hampering the agency’s effectiveness.

“For the most part, it has been untouched,” says Marc Freedman, director of labor law policy at the U.S. Chamber of Commerce. “Workplaces have changed dramatically over those years. There’s lots of room for further reform. These bills are a modest first step.”

The measures passed mostly with Republican backing, but the fact that some Democrats were on board for each one was hailed as a victory by OSHA reformers. Extending the appeals deadline and allowing recovery of attorneys’ fees received the most Democratic votes, 31 and 17, respectively. The outcome signaled a breakthrough on a typically contentious issue that polarizes labor and business interests.

But Democratic Rep. George Miller of California, ranking member of the House Education and Workforce Committee, decried what he called a Republican attack on OSHA. He cited a March explosion at a BP Amoco refinery in Texas that killed 15 workers as an example of the need for strong safety regulation.

“Rather than taking decisive action on behalf of hardworking employees–like increasing the minimum wage, stopping runaway pension terminations, or expanding access to health care–these bills do nothing more than jeopardize health and safety of employees on the job,” he said in a statement.

In 2004, the package died in the Senate Health, Education, Labor and Pensions Committee. This time it might get a boost from Sen. Johnny Isakson, a freshman Georgia Republican who worked with Norwood on the issue while he was in the House. Isakson chairs the Employment and Workplace Safety Subcommittee of the Senate labor committee. Panel Republicans hope to introduce OSHA reform legislation in July that likely will include the Norwood proposals.

If the bills make it through the Senate, it will be a triumph for Norwood, a dentist who made OSHA reform part of his inaugural campaign in 1994 because he was irritated by workplace safety rules that affected his practice.

Although the Bush administration has attempted to foster more cooperation between OSHA and industry, the agency’s inspections still have teeth. “I would not say that the agency has rolled over and agreed to everything business … wanted,” Freedman says. “The employer community still thinks about OSHA as much as they ever did.”

—Mark Schoeff Jr

Dear Driven:



You need to know precisely the kind of person you want. Determine the core competencies or skills of the position and insist that candidates demonstrate the ability to manage and master them. Corecompetencies fall into two categories: technical skills, sometimes also called hard skills, and work-behavior characteristics, or soft skills.

As manager, your job is to clearly identify the core competencies. These skills tend to be the most easily identified as learned skills, developed talents and proven experience. Specifically, ask applicants to describe the detailed steps involved in a particular job-critical process, or require them to perform a part of the actual job.

Ask additional questions that require applicants to show how they grew into their position over time. For example, inquire about lessons learned or responsibilities accepted during their tenure.

Although it’s important to focus closely on required technical proficiency, consider soft skills as well. You do this by identifying the key characteristics that distinguish the top performers from lesser performers. Characteristics include work behaviors such as attention to detail, ability to influence others, customer focus and listening skills. Talk not only with the applicant but also with the person’s direct supervisor to get a handle onsoft skills.

Once you identify these competencies, develop pointed interview questions. These may include developing scenarios, such as: “Tell me about a time when you were charged with responsibility for training a fellow worker. What were the challenges and how did you handle them?”

SOURCE: Lonnie Harvey Jr., president,The JESCLON Group, Inc., Rock Hill, South Carolina, September 17, 2004.

LEARN MORE:The Art and Craft of Training for Training.

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.

With the change in accounting rules for stock options, many firms are taking a knee-jerk approach and are simply getting rid of options in favor of restricted stock, says Jack Dolmat-Connell, president and CEO of DolmatConnell & Partners, an executive compensation consulting firm in Newton, Massachusetts. But in doing so, they might be undercutting their ability to get the most out of key executives.

“There are a lot of tax and accounting ramifications to offering stock options, but if companies only look at it from that perspective, they may miss out on the bigger picture,” he says.

A recent survey conducted by Dolmat-Connell shows that of the 100 largest technology companies, high-performing firms were 65 percent more likely than low-performing companies to grant stock options to their CEOs and 39 percent less likely to grant restricted stock.

Conversely, low-performing companies were 32 percent less likely than their high-performing peers to solely grant stock options, and 63 percent more likely to grant stock.

The issue with restricted stock is that even if the company’s performance dips, the employee still can benefit. That is not the case with options, Dolmat-Connell says. “If you grant an option at $30 and the stock goes to $25, the option is worthless,” he says. “But if that amount is in restricted shares, the executive still gets a payout.”

The technology industry in particular realizes the value of stock options, but more companies in that sector are combining them with restricted stock, Dolmat-Connell says. According to the study, 41 percent of the companies surveyed offer only stock options to executives, 17 percent offer a combination of restricted stock and stock options and just 5 percent offer restricted stock only.

Technology companies remember how important stock options are to the culture of their companies, Dolmat-Connell says. “Bill Gates could not have recruited the level of talent that he did had he not had stock options to give to employees.”

—Jessica Marquez

Just before the July Fourth weekend, and without fanfare, Yahoo HotJobs started to include in its job search results listings from hundreds of corporate sites and regional job boards–without charging employers. With that change, Yahoo HotJobs cast doubt on the future of paid job listings and breathed life into corporate job sites.

It’s a smart move, says Peter Weddle, an HR and recruitment consultant. “Employment sites are going to have to expand what they offer, and Yahoo is doing that. I give them credit,” he says.

What Yahoo HotJobs instituted is called “vertical search,” meaning that a job seeker is offered all the positions that match the search criteria, regardless of where the job is posted.

Analysts say that while it is premature to write the obituary for paid listings, it wouldn’t be wrong to say that dramatic changes are in store for the commercial job boards. Vertical search has the potential for leveling the playing field by providing as much visibility for a job posted to a corporate site as to a paid site. If that happens, recruiters will start to ask: Why pay?

“This is the beginning of the end for Monster and CareerBuilder,” says William Warren, executive director of the DirectEmployers Association and a former president of Monster.com.

While Yahoo HotJobs by itself has the clout to change the job search dynamics, Google also is expected to enter the recruitment field when it introduces what is rumored to be a classifieds search program. Company officials have no comment on the speculation, but Silicon Valley insiders say it’s only a matter of time before Google jumps in.

HotJobs, CareerBuilder and Monster postings already are listed in searches done on Google’s powerful search engine. Job seekers just enter a city and a job title and they can find jobs collected from the big three boards.

For recruiters, Yahoo HotJobs’ move means that human resources departments will be able to make a business case for building and maintaining corporate recruiting sites. If companies can get the same results posting to the company site as to a job board, then it makes sense to invest in the company site and save the posting fees.

But it also means it will be harder to get results. If a company is recruiting for an accounting position in Chicago, its listing might be one of hundreds to turn up on a search.

And that’s why Dan Finnigan, executive vice president and general manager of HotJobs, says he doesn’t see the paid job listings business going away. But paid listings alone, he says, will be insufficient for recruiters.

“They will need and require additional recruitment tools,” he says. And those are tools that Yahoo HotJobs just happens to be able to provide.

—John Zappe

Business groups that have been fiercely fighting the Bush administration’s proposal on pension reform may be in for good news: A bill that would ease some of the measures employers feared in the White House’s original plan is gaining momentum.

The Pension Protection Act, introduced by Ohio Republican Rep. John Boehner, chairman of the U.S. House Education and Workforce Committee, cleared his committee June 30. Many lobbyists and industry watchers say this is the bill that has the most support from employers and the Bush administration.

“This bill represents a revision to the administration proposal by which a lot of employers’ concerns have been addressed,” says Patrick Purcell, specialist in social legislation for the Congressional Research Service at the Library of Congress. “If anything goes anywhere, this is the bill that will.”

On July 22, Sen. Charles Grassley, (R-Iowa) and Senate Finance Committee Chairman Max Baucus (D-Montana) released a bill that is similar to the Bush Administration’s plan, which has been met with staunch resistance from employer groups who say that it would cause more companies to stop offering traditional defined-benefit plans. Among the most controversial provisions, the proposal would increase flat premiums from $19 to $30, prohibit employers from using credit balances to fund their plans and apply tougher funding rules to junk-rated companies. The proposal also would bar companies from using smoothing techniques when calculating their funding requirements and mandate that they use a yield curve that many employers argue would make funding their plans much more volatile and difficult to predict.

If enacted, the Pension Protection Act would ease the pain of the premium increase by phasing it in over three to five years. The bill would permit the use of credit balances to fund plans in certain circumstances. It would allow for smoothing and the use of a simplified yield curve for calculating funding requirements. Finally, Boehner’s bill would not require tougher rules for junk-rated companies.

The American Benefits Council, which came out against Bush’s proposal, says the Boehner bill is a step in the right direction, but still misses the mark, says Jan Jacobson, director of retirement policy at the American Benefits Council. For example, the group wants the bill to clarify the legal status of cash-balance plans. Under the proposal, the creation of cash-balance plans would be deemed legal, but there is nothing about existing plans.

Although Boehner’s proposal was the first to make it into bill format and has gained momentum quickly, it still has to face the Senate. Anything could happen there, says Kyle Brown, retirement consultant in the Arlington, Virginia, office of Watson Wyatt Worldwide.

Another potential hurdle for the bill would be if its
co-sponsor, House Ways and Means Committee Chairman William Thomas, R-California, folds the proposal into bigger retirement package that includes Social Security reform. If he does, the prospects for pension reform this year may grow dim, Brown says. “The level of controversy pales in comparison to the level of controversy around Social Security reform,” he says.

—Jessica Marquez

For the first time in four years, industries that traditionally offer higher-paying hourly jobs like technology, health services and construction are starting to grow faster than retail and other industries that provide lower-paying jobs.

The reversal in what had been a dismal trend is good news, says Elise Gould of the Economic Policy Institute, who spotted the shift by crunching Department of Labor statistics for the first quarter of 2005. Expanding industries were paying about 3 percent better than contracting industries, she says.

Tracking higher-paying jobs is one way economists have of judging growth in job quality. When the economy is strong, as it was between 1996 and 2001, industries with better-paying jobs, like professional and technical services, were growing much faster than lower-paying industries.

Despite the positive development, Gould is cautious in interpreting the numbers. “I’m hoping it’s part of a long-term trend, but I think it’s too early to say,” she says.

Gould notes that growth in part-time jobs has been stronger than full-time jobs during the recovery. She also says that real wage growth has not been keeping up with inflation. The average inflation-adjusted wage in May was $16.03 an hour, 10 cents an hour less than what the average worker made in January, she says.

“Incredible gains in productivity haven’t translated into real wage gains, which you would expect to have in a recovery period,” she says.

Sanford Jacoby, a professor at UCLA’s Anderson School of Management, says the improving picture is being fed by the rebound of the technology industry.

“It’s pretty consistent with underlying economic trends as well as longer-term trends,” he says of the report. “We’ve had fairly slow hiring in industries that employ highly educated workers, like technology. They are coming back.”

Longer term, Jacoby says the EPI research reflects a growing divide between highly paid better-educated workers and those with more limited educations and lower levels of pay.

Ron Blackwell, chief economist for the AFL-CIO, also is concerned about the disparity.

“These are the best of times for some people,” he says. “But we have had a generation-long stagnation in wages, and that is why the middle class is so stressed.”

Still, Gould says the development is welcome.

“We’re in positive territory,” she says. High-wage industries are expanding rather than contracting. “Hopefully that is a sign of increased wages to come.”    

—Douglas P. Shuit