Author: Site Staff

Each member of a search committee at MassMutualfilled out this sheet after interviewing CEO candidates. The form gave the committee a way to make the process less subjective.

Candidate:

Evaluator:

Ratings:

5 – Clearly confident 4 – Confident 3 – Seems OK 2 – Some concern 1 – Serious concern 0 – no information

Criteria:	A track record of achievement, demonstrating success in leading a dynamic, volatile environment; experience should include successful acquisition and related integration or culture shifts; capable of leading a large, complex business on day one.
Comments:
Rating:	0 1 2 3 4 5

Criteria:	Will not gamble foolishly with the assets of the corporation. Knows how to protect and “anchor” a franchise, as well as project a leadership position in a highly competitive financial services environment.
Comments:
Rating:	0 1 2 3 4 5

Criteria:	Uses seasoned judgment to make sound strategic choices — knows when to emphasize and balance the organization’s long-term strategic objectives; applies broad knowledge and experience when addressing complex issues; makes timely, tough decisions.
Comments:
Rating:	0 1 2 3 4 5

Criteria:	Has demonstrated the ability to develop a vision for the business; maintains a long-term, big-picture view; anticipates obstacles and opportunities; generates break-through ideas; is willing to entertain alternative corporate structures and governance models to achieve strategic objectives.
Comments:
Rating:	0 1 2 3 4 5

Criteria:	A great leader who inspires others to perform at their best; creates a climate that fosters personal investment and excellence; sets and pursues aggressive goals; a high-energy type who can change a successful culture, keep the momentum going; drives for results; promotes collaboration and teamwork.
Comments:
Rating:	0 1 2 3 4 5

Criteria:	Strong integrity base; establishes open, candid, trusting relationships; treats all individuals fairly and with respect; makes decisions that are effective rather than politically expedient.
Comments:
Rating:	0 1 2 3 4 5

Criteria:	Experience in the financial services industry as a leader of a substantially distributed financial-services product.
Comments:
Rating:	Yes No

Criteria:	Clear understanding of the customer, competition, and legislative environments.
Comments:
Rating:	Yes No

Criteria:	Clear, date-certain successor to the chairman.
Comments:
Rating:	Yes No

Criteria:	Excellent presenter to board of directors, management team, employee population, and external communities.
Comments:
Rating:	Yes No

Reprinted with permission from The Right CEO by Frederick W. Wackerle, Copyright 2001 by John Wiley & Sons, Inc.

Use the below evaluation to determine the effectiveness of your team. Scorefrom 1 (hardly at all) to 5 (greatly).

1.Teams need to be organized around horizontal processes thatinclude different disciplines, functions, or skills.
	Towhat extent is there one key process that provides the focus for our team?
	Towhat extend does our team represent all of the functions or disciplinesthat contribute to this process?
	Towhat extent is our team composed of the skills needed to maintain andimprove this process?
	Towhat extent does our team have the ability to add or delete competencies?

2.Teamsneed to have a shared view of what is to be accomplished, a goal towardwhich all team members contribute.
	Towhat extent is there a specific goal (or goals) that our team needs toaccomplish?
	Towhat extent do our goals align with and contribute to the overall businessgoals and objectives?
	Towhat extent are our team goals clear and defined in simple terms, so thatall team members understand what the team is trying to do?
	Towhat extent are our team goals shared among all users of the team’soutput?

3.Teams need to have agreed-upon ways of working that cut across boundaries.
	Towhat extent has our team defined how it will solve problems, makedecisions, and handle conflict in the team?
	Towhat extent does our team have a process for dealing with poor performanceor discipline issues within the team?
	Towhat extent does our team dedicate time to assessing team members’abilities to work as a team?
	Towhat extent is our team clear about roles, about who does what toaccomplish team goals?
	Towhat extent do all members of our team feel empowered to voice theiropinions so that the team makes better and more informed decisions thanindividuals acting alone?

4.Teams need shared measures of success and ways of rewarding achievement.
	Towhat extent are our team’s goals measurable and operational?
	Towhat extent do all members of our team feel personal responsibility forteam results?
	Towhat extent do team members share in the rewards earned by our team?

Scoring:

> 65

Your team is most likely a true teamand is functioning reasonably well. You might want to focus on the few keyscores that were lowest or the category that received the lowest scores, anddo some fine tuning.

45-65

There are probably some significantweaknesses in the way your team is functioning. Look to see if theweaknesses are across the board or if there are targeted categories thatneed immediate attention.

< 45

Your score was fairly low; youshould examine whether your team is really a team and whether team membersunderstand what it means to be a team.

 

Reprinted with permission from TheBoundaryless Organization by Ron Ashkenas, Copyright 2002 by John Wiley &Sons, Inc.

Workforce Online, March 2002

A downturn in the economy can have a ripple effect on your company’s employee benefit packages. A company’s worsening profit picture can force you to offer enhanced early retirement packages or to decrease matching contributions to its 401(k) plan.

How you communicate these and other employee benefit changes can make the difference between the company winning or losing in court.

Decreasing future pension benefits
As a means of dealing with slowing profits, companies may decide to reduce the rate at which its employees earn future pension benefits. In this way, the company may be able to reduce its required contribution.

While generally, you don’t have to communicate to employees amendments to plans, such as Section 401(k) plans, until well after the plan year in which the change is adopted, a different rule may apply in the case of pension plans.

Specifically, if the company decides to amend its pension plan to significantly reduce the rate at which employees earn benefits in the future, including early retirement benefits, employees, as well as any union representing the employees, must be notified within a reasonable period of time before the effective date of the amendment.

While what constitutes a “reasonable period of time” has not yet been defined by statute, companies will likely wish to give at least 30 days prior notice. The notice must be written so that the average participant can understand the effects of the amendment. This means, among other things, that the notice should not unduly minimize the effects of the amendment, notwithstanding the fact that telling employees bad news in a softening economy is not easy.

Although it may be difficult in some instances to determine whether a future reduction constitutes a “significant” reduction requiring the notice to be provided, as a practical matter, companies should provide the notice whenever they are amending a pension plan to decrease future benefits. The result of not providing the notice when it should have been issued is a $100 a day per participant penalty, or, possibly even nullification of the amendment.

Possible enhanced severance packages
Once a company actually amends or adopts a program covered by the Employee Retirement Income Security Act, employees must be advised in writing of the amendment’s or plan’s — as applicable — provisions. However, an evolving area of the law may require a company to disclose potential amendments or enhancements in order to avoid a fiduciary breach. This issue becomes particularly important as more and more companies contemplate providing enhanced early retirement or severance packages in order to reduce their workforces by voluntary terminations.

More and more courts are ruling that once a company has given “serious consideration” to such enhancements, HR professionals, and others in the company to whom employees would generally direct their benefit questions, must make sure that they do not mislead employees.

This is important because typically the employees inquiring as to possible enhanced severance programs are those who would likely qualify for the early retirement or enhanced severance package and who are afraid to retire lest they lose out on the increased benefits.

These court rulings mean, for example, after management has given serious consideration to implementing an early retirement program, an HR professional may be forced to reveal the fact as to the existence of the deliberations if asked by employees. While HR is not required to be a soothsayer and predict the outcome of those deliberations, he/she cannot disavow that enhancements may be adopted. Rather, the HR professional should respond that management is considering making changes but have not yet made a final decision.

This standard has been held to apply even if the HR professional being asked is truthfully unaware of management’s deliberations. This means then, that in order for a company and its officials to avoid potential fiduciary liability, HR, as well as any employees who are likely to be the persons to whom employees would direct benefit questions, will need to be apprised as to the existence of these deliberations.

In order to determine when the potential for liability exists, it is necessary to know when companies enter the “serious deliberations” stage. Serious consideration occurs when: (1) a specific proposal; (2) is being discussed for purposes of implementation, (3) by senior management with the authority to implement the change.

In order to have a specific proposal, it is not necessary that the choices have been narrowed to only one option nor is it necessary that the proposal being considered actually be the one ultimately implemented. Rather, it is sufficient if there is a specific proposal that is sufficiently concrete to support consideration by senior management for the purpose of implementation.

The requirement that the specific proposal be discussed for purposes of implementation means that management can still participate in the fact gathering stage, such as discussing options with outside consultants, without necessarily triggering the “serious consideration” stage.

Finally, the fact that under a company’s by-laws, only its board of directors has authority to actually implement such a program does not mean that you will not have “serious consideration” until the proposal reaches the board. It is likely that the third requirement is satisfied if the proposal has reached management with the authority to present it to the board.

While most courts have not gone so far as to rule that a company has an affirmative obligation to advise all potential employees that might be affected by the change of the existence of deliberations, at least one court has held that a company can in effect, obligate itself to do so.

This might arise, for example, if an employee who has heard rumors of an enhanced severance package stops by the HR office to inquire. If, at the time, management has not given serious consideration to such a change, the HR professional can answer in the negative without concern for fiduciary liability. If, however, the employee then asks the HR professional to keep him advised of any change in the answer, the HR professional must use extreme care in answering.

If the HR professional’s answer can be interpreted as agreeing to do so, at least one court takes the position that the failure to advise the employee if management begins serious consideration could again expose the company to fiduciary liability.

The deteriorating investment vendor
One of the issues that may arise when the economy turns downward is the solvency of various investment providers. This issue might arise, for example, if the company’s Section 401(k) plan allows participants to choose to invest among various investment options, including a fixed income investment, such as a guaranteed investment contact.

If the company learns that the investment advisor’s solvency may be in peril, the company must decide what must be told to participant/investors and when. Several recent cases have arisen alleging the failure of companies and plan fiduciaries to timely and/or sufficiently advise participants.

While there is no direct statutory guidance, the standard being used by the courts is whether the company and/or plan fiduciaries provided employees with enough information with sufficient expediency to allow participants to attempt to protect their investments. For example, if company officials learn through articles in financial publications that the vendor may be experiencing financial difficulties, the company and/or plan fiduciaries will need to follow-up by discussions with the vendor, research in other financial publications and possibly through the assistance of qualified third-party advisors, such as accountants or other financial specialists.

The company should also determine what — if any — means exist for extricating participant funds; for example, whether individual or bulk-transfers are available under the terms of the contract. This information should be complied in a short time frame and ultimately made available to all potentially affected participants.

If participants have the right to transfer some or all of their investments, the communications should also remind participants of any transfer or surrender options. As a practical matter, company and plan officials communicate in a manner that allows employees to protect themselves but without causing a panic or run on the investment that might only serve to exacerbate the problem.

Summary
When the economy slows, companies will often make changes in their employee benefit packages designed to increase their profits. These types of changes can themselves require special communications to employees. In order to avoid potential litigation, it is necessary to know what has to be communicated and when.

This article is prepared in summary form and is not to be construed as legal advice or opinion on any specific fact or circumstance.

Peace River Electric Cooperative, Inc. (PRECO) – a not-for-profit distribution cooperative providing electric service to 24,000+ families and businesses – has a common business problem: Geographic dispersion. But PRECO takes this problem to the Nth degree with 100 employees – the bulk of which in the field – reporting back to 10 remote locations across 10 Florida counties!

So how did they integrate the widespread HR, payroll and training data that’s so critical to their business? By choosing Best Software’s Abra® Suite solutions to:

• Centralize key HR and payroll data in a single database
• Empower employees and managers with online self-service access
• Streamline reporting and analysis, strategic planning and workflow

PRECO specifically chose Abra HR® and Abra Payroll® – core components of the industry-leading Abra Suite HRMS – to save time and money for their troubled HR department and to easily track their complex training requirements.

The bulk of PRECO’s employees are “line technicians” in charge of maintaining the consistent flow of energy to its rural customer base. To accommodate such a wide area with limited staff, PRECO technicians use an increasingly complex array of tools and technologies – becoming more mobile with the use of two-way pagers and laptops.

Today, more than ever, HR Director Roberta Harrison and her staff emphasize the importance of continuous technology training.

ABRA Lights The Way
In response, PRECO partnered with a local community college to train its line technicians in electrical distribution technology. Paying employees to obtain a degree, the Cooperative challenges employees to display a working knowledge of more than 270 skill sets specific to the line technician job function to graduate.

And they count on Abra to track and audit skill sets performed successfully by individual employees based on testing by PRECO and the college.

“We believe employees should not be regarded as overhead, but as capital assets worth an investment in time and technology,” said Harrison. “We use Abra to help realize a return on that investment.”

The program has already seen success. All 16 students in the Algebra class passed the final exam, marking the college’s first 100-percent pass ratio! Plus, PRECO notices:

• Employees are more productive! They’re manage their time better to juggle field work and time to attend classes.
• Employees are more motivated and professional! We’re helping them earn a sense of accomplishment by helping them obtain a degree.

It’s a real win-win situation for both parties involved.

Make the most of your investment in your workforce. Use Abra HR to easily manage employee information, administer benefits, maintain government compliance and more. Visit bestsoftware.com/StayCompliant with priority code AAAFI for a FREE Compliance Guide and more pertinent information about our industry-leading Abra HR solution.

Taking The Shock Out of Succession Planning
Offering such innovative benefits, the HR department has already received requests from other employees wishing to move into utility management. By tracking every employee’s unique skill set, Abra is helping with the organization’s succession planning requirements.

PRECO is able to monitor employee progress and match appropriate skills and capabilities with job descriptions for optimum workforce efficiency. This is increasingly important as Harrison estimates nearly 25 percent of PRECO’s workforce will retire in the next five to seven years.

However, Harrison’s fear of insufficient knowledge transfer is quickly put to rest with Abra’s help. PRECO is actively building a new group of experienced line technicians and management.

Abra is even helping enroll students in the program! Not only must technicians demonstrate their knowledge of 270 skill sets, they must also be taught in a certain progression. Using Abra’s online enrollment functionality, PRECO can ensure each individual is working along the correct track and efficiently building upon their daily training.

Powering Up For Growing Needs
Outside of training, PRECO is using Abra to recruit technicians to compensate for growth in both the industry and region. The organization culls hiring and applicant pools using Abra’s sophisticated database, and then matches resumes with open job requisitions.

All of these capabilities are in addition to Abra’s use as a back-office system for compensation, benefits, and payroll administration. Harrison hopes to have PRECO operating in a completely paperless HR environment within the next three to five years.

Today, PRECO is implementing Abra Employee Self-Service™ to provide employees with online access to their training and educational progress. Thanks to Abra, Harrison and her staff are maintaining consistent, real-time dialogue with each of the organization’s 100 employees.

“With Abra, we’re better able to connect with all employees and provide even more strategic counsel and training recommendations,” she added.

You, too, can improve the level of service you provide your employees with Abra Employee Self-Service™. Call 866-425-6404 with priority code AAAFJ to receive a FREE ESS White Paper — Developing a Winning eHR Strategy with Employee Self-Service — and to learn more about this innovative solution.

 

The following is a list of various merger and acquisition terms:

Acquisition–When a firm buys another firm.

Acquisition of Assets–A merger or consolidation in which an acquirerpurchases the selling firm’s assets.

Acquisition of Stock–A merger or consolidation in which an acquirerpurchases the acquiree’s stock.

Accounts Receivable Aging–A periodic report showing all outstandingreceivable balances, by customer, spread as to month due.

Agreement in Principle–An outline of the understanding between the parties,including the price and the major terms. Often referred to as a letter ofintent.

Announcement Date–Date on which particular news concerning a given companyis announced to the public.

Annuity–A regular periodic payment made by an insurance company to apolicyholder for a specified period of time.

Any–or–all Bid–Often used in risk arbitrage. Takeover bid where theacquirer offers to pay a set price for all outstanding shares of the TargetCompany, or any part thereof; contrasts with two-tier bid.

Assets Retained–Assets that an owner would keep after a merger oracquisition.

Asset Utilization Ratios–A group of ratios that measures the speed at whichthe firm is turning over or utilizing its assets.

Basket–Applies to derivative products. Group of stocks that is formed withthe intention of either being bought or sold all at once, usually to performindex arbitrage or hedging.

Bid Price–This is the quoted bid, or the highest price an investor iswilling to buy a security. Available price at which an investor can sell sharesof stock.

Book Cash–A firm’s cash balance as reported in its financial statements.

Brands–A symbol or name identifying suppliers of goods or services. The costassociated with establishing a brand are included in goodwill, and areamortizable for reporting but not for tax purposes.

Break-even Analysis–An analysis of the level of sales at which a projectwould make zero profit.

Business Broker or Intermediary–Professionals who arrange mergers,acquisitions, and various funding of companies with most of their transactionsin the under $1 million market. Business brokers or intermediaries do not havetheir own fund to invest.

Buyout–Purchase of a controlling interest or percent of shares of a company’sstock. A leveraged buyout is done with borrowed money.

Capital Gain–When a stock is sold for a profit, it’s the differencebetween the net sales price of securities and their net cost, or original basis.If the stock is sold below cost, the difference is a capital loss.

Capital Gains Distribution–Payments to mutual fund shareholders of profitsfrom the sale of securities in a fund’s portfolio.

Capitalization–The debt and/or equity mix that funds a firm’s assets.

Comebacks-Adjustments–Post-closing adjustments of any future stream ofpayments as a result of due diligence or post-closing negative discoveries, i.e.additional costs or payables, uncollectible notes, erroneous accruals.

Corporate Acquirer–A company seeking acquisitions that provide more than theprofits and cash flow of the acquisition target and may include the desire toacquire operational economies, additional market share, technology, or someother synergy.

Deal Structure–The nature of the fee paid by the acquiring entity in amerger transaction. Typical deal structure may include stock or other valuablesbesides cash. The complex nature of deal structure is an important reason whymiddle market intermediaries are often hired.

Due Diligence–In the process of an acquisition, the acquiring firm is oftenallowed to see the target firm’s internal books. The acquiring firm does aninternal audit. Offers are made contingent upon the resolution of the duediligence process.

EBITDA–Earnings before interest, taxes, depreciation, and amortization.

Enterprise-Wide Integration–A disciplined project management approach whereone infrastructure coordinates integration efforts and communications to allfunctional departments and business units simultaneously.

Flipping–The sale of a company within a year or two of its being bought.

HR Financial Due Diligence–Investigative stage of an M&A assessing HRfinancial risks, liabilities, and plan structures of compensation, benefits, andpension plans.

Human Capital Due Diligence–Investigative stage of an M&A assessingHuman Capital aspects including culture, organizational structure, performancemanagement, and workforce-development approaches.

Human Capital Integration–M&A stage that integrates HR processes andpolicies and enables HR to support human-capital aspects (i.e. communication,training, retention, etc.) of integration across the enterprise.

In Play–Company that has become the target of a takeover, and whose stockhas become a speculative issue.

Integration–The combination of two or more firms to form a new entity.

Joint Venture–A venture by partnership or conglomerate designed to sharerisk or expertise.

Merger–Acquisition in which all assets and liabilities are absorbed by thebuyer. More generally, any combination of two companies.

Merger Premium–The part of a buyout or exchange offer which represents avalue over and above the market value of the acquired firm.

Non-Binding–Directs that the parties to that particular agreement are notbound or exclusively committed by its provisions.

Non-Compete–Directs that the signing party will not engage in anyactivities that compete with the organization being departed from.

Ongoing M&A Capabilities–An established set of an organization’sM&A competencies set in a replicable process to increase success in allfuture M&As.

Optimal Portfolio–An efficient portfolio most preferred by an investorbecause its risk/reward characteristics approximate the investor’s utilityfunction. A portfolio that maximizes an investor’s preferences with respect toreturns and risk.

PLC–Designation of British public limited company equivalent to U.S. publiccompany.

Pooling of Interests–An accounting method for reporting acquisitionsaccomplished through the use of equity. The combined assets of the merged entityare consolidated using book value, as opposed to the purchase method, which usesmarket value. The merging entities’ financial results are combined as thoughthe two entities have always been a single entity.

Post-Closing–Conditions or events that are activated after a transaction isfinalized.

Purchase Method–Accounting for an acquisition using market value for theconsolidation of the two entities’ net assets on the balance sheet.

Pure Play–An acquired company that is in only one business.

Required Rate of Return–That rate of return that investors demand from aninvestment (securities) to compensate them for the amount of risk involved.

Restructuring–Redeploying the asset and liability structure of the firm.This can be accomplished through repurchasing shares with cash or borrowedfunds, acquiring other firms, or selling off unprofitable or unwanted divisions.

Seamless Transition–Describes the most advantageous method of completing allthe necessary tasks to absorb and manage all the operational, financial, andorganizational aspects of an acquisition.

Selling Memorandum–A description of the business including its history,products, markets, management, facilities, competition, financial statements,product literature, and a review of its prospects.

Strategic Acquisition–The purchase of an operating business that supplementsthe buyer’s strengths or complements the buyer’s weakness matrix.

Synergy–The feature of a system whereby, when the parts are properlyinterrelated and functioning, an output is achieved that is greater than orsuperior to the effects obtained when the parts function independently.

SOURCE: Reprinted with permission from “Best Practices in Mergers andAcquisitions,” Watson Wyatt Data Services. For more information, visit www.wwdssurveys.com or call 201/843–1177

Workforce Online, September 2002 — Register Now!

This checklist of best-practices solutions provides a sampling of proven and practical approaches used by leading companies to address critical issues and challenges in the area of mergers & acquisitions. As you read the list, you may want to place a checkmark next to the best-practice solutions that you could adopt or modify to add value to your company’s unique situation.

1. Over communicate all aspects of the merger or acquisition with employees. This is a stressful time and people often need to receive information several times and by several different means before they truly “hear” it. Be creative with your communications: hold group meetings, utilize the corporate intranet, write submissions to company newsletters, and send information home.

2. Establish integration task groups made up of key individuals from each of the combining organizations. Not only are these your best and brightest choices for those actually working within the process and helping make decisions, but they will play a pivotal role in gaining buy-in from the rest of the ranks when they take informed, positive information back to their workgroups.

    3. When restaffing, evaluate and then select the best candidates for new positions. It is a mistake to assume that the best candidate will necessarily be from the acquiring firm or even the larger firm. Take time to determine who has the best fit with the new organization’s culture and goals.

    4. Begin planning integration immediately, even before due diligence has begun. Waiting to act until the close of the deal will undoubtedly be too late. When you identify a target company to acquire, develop a vision of how much integration is desired.

    5. Remember that no merger or acquisition is perfect and obstacles are inevitable. Stay focused on the outcome and if mistakes happen (and they will!), own them, be honest with employees, and move on.

    6. Make it a family affair. Do not ignore the influence family members can have on employee attitudes and readiness for a merger. Make certain to include spouses and significant others among those receiving information about the deal.

7. Pick up the pace. Moving through the deal quickly will mitigate instances where too much time allows uncertainties to brew. Don’t be afraid to sacrifice some precision in the process in order to achieve critical speed of decision making.

8. Involve HR in the entire process. If HR gets involved too late, it will be playing catch up and correcting problems rather than participating in the development of a strategy that will avoid problems from the start. HR’s participation is essential at all stages of the merger or acquisition process.

    9. Retain the services of a consulting firm with a well-established background in mergers and acquisitions. Consultants provide valuable help, as well as an objective viewpoint, at all of the various stages of the process.

10. Heavily emphasize due diligence and do not hesitate to “Just say no!” Don’t forget cultural due diligence. Sometimes even the greatest integration efforts will not be able to meld two disparate organizations. Not all potential mergers are meant to be. Increase the odds for success by knowing just what you are getting into.

11. Answer “Me” questions immediately. Once employees know how their jobs, pay, benefits, and work environment are likely to be effected, they will be able to focus on their work and on their activities that will further integration.

12. Do not sacrifice core business or customer service during transition. Merger and acquisition processes are time and energy consuming.

13. Design the features of the merger or acquisition process with the cultures of the participating organizations in mind. Consider culture in all communication efforts, especially. Culture dictates how people process information and how well they adapt to changes, both sudden and planned.

14. Identify each organization’s best practices. Then, determine what from each organization should be carried forward. Do not automatically continue only the practices of the acquiring company, larger company, older company, or even the most profitable company.

15. Accept the fact that sometimes neither organization’s process, system, manager, etc., is right for the new, combined organization. Be open to developing something new to service needs strategically, since all parameters have likely changed with the merger.

16. Be certain to conduct “external” benchmarking of competitors and non-competitors, alike, to enhance your own best practices. “Raising the bar” can increase the success of transition processes and the newly combined organization.

17. Ensure that communication efforts support unification and alignment of the two cultures. The wrong messages, or even the right messages by the wrong messenger, can sabotage the best-intentioned program.

18. Include training in the list of post-merger activities. This will serve to facilitate integration and cultural alignment on top of the other, more traditional benefits of training. Training topics should include: benefits and retirement, administrative procedures and information technology, career development, corporate vision, product and services, customer make-up, and communication skills.

19. Remember that change is the only constant. Employees need help understanding the changes taking place. They also need assistance anticipating changes yet to come. Educate your workforce in the change-management process.

20. Focus attention on career opportunities. Many times concerns about the negative career impacts of a merger overshadow the many great opportunities it presents. Get information out there about career growth, training, and advancement opportunities.

21. Be willing to listen to employees. It is normal, and even productive, for a certain amount of anxiety and uncertainty to surface for employees during the process. Face it, discuss it, and be honest with your advice. Keep business as usual as much as possible for the sake of reassurance and be sure to offer praise and positive feedback wherever warranted.

22. Present clear opportunities for employees to participate in the process and be rewarded for the success of the new business. This will serve a dual purpose: to motivate employees and to encourage their “ownership” of corporate growth.

    23. Keep managers and HR representatives abreast of all information. These are the people to whom employees, in general, will turn when they have questions. If buy-in is secured from these individuals, they will be able to positively represent issues when asked.

SOURCE: Reprinted with permission from “Best Practices in Mergers and Acquisitions,” Watson Wyatt Data Services. For more information, visit www.wwdssurveys.com or call 201/843-1177.

Workforce Online, August 2002 — Register Now!

Here are eight reminders about employment of employees with disabilities.

• Provide a comfortable environment in which an open discussion ofissues is welcomed.

• Describe what the interview process involves, i.e., any tests or jobdemonstrations, so that the interviewee can be prepared. Fifty-five percent ofindividuals interviewed cited a company’s culture and work environment as acritical factor in their employment success.

• Increase employer knowledge about assistive technology and what it can dofor an employee with special needs.

• Provide IT staff with training on AT so that they can be prepared toaddress any compatibility problems between the company’s systems and anemployee’s technology. Fifty-five percent of individuals interviewed believed that ATavailability and use was fundamental to their employability.

• Provide more opportunities such as summer jobs and internships for individuals with disabilities, since these experiences will introduce people with disabilities to the world of work. Such an experience can alleviate some of the hardships of the job search by providing valuable interviewing andwork skills. Nearly 33 percent of those interviewed wished there were moreinternship and training opportunities available to people with disabilities.

• Consider flextime and time-sharing options. The option of a flexible workschedule was the third most common accommodation made for the group ofindividuals interviewed.

• Provide more diversity training to HR professionals and other staffresponsible for conducting interviews. Forty percent of participants felt thatthere is still a need for more training and education about disabilities foremployers.

• Provide more training to all employees about disabilities. Fifty-fivepercent of the individuals interviewed cited supportive and open-mindedcoworkers and supervisors as one of the critical factors in their employmentsuccess.

Workforce, August 2002, p. 44 — Subscribe Now!

Many managers have the mistaken impression that they should treat all workers equally. The opposite is true.Great managers have figured out how to treat top, average, and poor performers “differently.” If you want to give your company a competitive advantage and increase employee productivity — and thus company performance — you should dedicate more time and resources to the top 20 percent of your employees. In fact, you can increase company revenue by millions of dollars — literally — by retaining the top 20 percent, releasing the bottom 10 percent, and replacing the latter with average employees.

    This doesn’t mean you should abuse or ignore the rest of your employees. It just means you shouldn’t treat all employees equally.

10 times more valuable
    Top performers almost always exceed the performance of average workers by at least 25 percent. It is not unusual in some industries to find that the performance differential between average and top performers is 10 — that’s 1,000 percent! If you invest in an asset (whether that asset is an employee or any other financial investment) that costs 25 percent more but produces 10 times more in output or revenue, you have a net gain — and an outstanding one at that.

Calculating the “top performer differential”
    Demonstrating the dollar value of top performers in comparison to average workers isn’t as difficult as you might think. Start by identifying several jobs that have easily measurable results (the outputs by which your employees should be measured). Sales positions are an easy starting point. The goal is to compare output or results of those with average performance and those ranked as the best in each job function.

    Follow these steps to calculate your Top Performer Differential:

1. Average Output per Employee. Start with the output of the average performer. This is called the average output per employee.

   
   

2. Top Performer Output. Calculate the output of your very top performers (or the average of the top 1 percent of your employee population).

   
   

3. Top Performer Increase Factor. Divide the top performer output per employee for a specific position by the number you identified as the average performer output. The resulting number is your “top performer increase factor” for that position. (The ratio is usually between .5 and 3, but sometimes is as high as 10, as in the case of Cisco Systems.)

   
   

4. Revenue per Employee. Calculate the average revenue for an employee for these jobs (total divisional revenue for a year divided by the number of divisional employees. If that is not available, take the total revenue of the firm for a year, and divide it by the number of employees.) You can also choose to do “profit per employee” instead. Just substitute dollars of profit for revenue.

   
   

5. Revenue Increase for Top Performers. Take the average revenue per employee and multiply it by the top performer increase factor. The resulting number is the revenue generated by the top performer.

   
   

6. Value Difference Between Top and Average Performer. Subtract the average revenue per employee from the revenue of a top performer. The difference is the value added each year by hiring or retaining a top performer versus an average performer. (The same calculations can be done to compare average and poor performers.)

   
   

7. Add Other Jobs. Next, do it for other measurable-output jobs. If the ratio (the percentage difference) is close for most jobs (it usually is), use that ratio for all jobs in the firm. If various positions provide dramatically disparate differentials, average them to come up with an organizational differential.

   
   

A sampling of outputs
    If you find yourself at a loss for potential outputs to use in measuring your employees’ performance, then consider some of the following as starting points. You can always refine these over time as you figure out what works best for your team and company. Your goal is to test tools and strategies of measure. So, begin by using multiple measures. No single measure will be without its faults, so “triangulate” to verify your initial findings.

Examples of direct measures of results (data-driven results)

• Output data/overall results for current period

  
  

• Percentage of goals or targets met

  
  

• Error rate

  
  

• Customer complaints or compliments

  
  

• Impact (accuracy) of key decisions. Amount of money that a decision lost or made the company.

  
  

• Impact (accuracy) of forecasts

  
  

• Percentage/number of repeat customers

  
  

• Number of ideas, suggestions, or innovations implemented

  
  

Examples of indirect measures of results (proxies for performance–subjective team or manager review of an individual’s performance)

• Key accomplishments ranking (first to achieve or last to achieve)

  
  

• Speed of promotions

  
  

• Performance improvement

  
  

• Scores on standard performance appraisals, 360-degree assessments

  
  

• Performance of their employees (in the case of a manager)

  
  

• Success rate of teams they are a part of

  
  

• Customer feedback

  
  

• Output results from previous projects/positions (assuming that past performance is indicative of future performance)

  
  

• Forced ranking by direct peers

  
  

• Forced ranking by project team

  
  

• Forced ranking by manager(s)

  
  

• Forced ranking by neutral (selected) panel of experts /committee

  
  

• Attendance

  
  

• How high they are ranked by outside recruiters

  
  

• How high they are ranked on the company succession plan

  
  

Pay as indicator of worth

• Percentage of bonus target(s) met

  
  

• The ratio of employee bonus to salary (how high their bonus-to-salary ratio is)

  
  

• Employee base pay rate compared to market rate

  
  

Training as indicator of worth

• Scores/assessments in training courses

  
  

• Scores on job simulations

  
  

• Number of certifications

  
  

• Number of jobs employee can do/fill in for

  
  

• Tools and technology employee can utilize

  
  

Recognition as indicator of worth

• Name recognition in the field

  
  

• Number and quality of awards, recognition, and commendations (internal and external)

  
  

• Number and/or value of copyrights and patents

  
  

• Number of requests for employee’s work or services

  
  

• Number of employees who cite the employee as a factor in their development/learning

  
  

• Number and severity of disciplinary actions

  
  

• Customer compliments and complaints

  
  

How to calculate the performance differential for a salesperson
    Let’s say the average salesperson generates $250,000 per year, whereas your top salesperson generates $400,000.

    Divide 400,000 by 250,000, and you are provided with a “top performer increase factor” of 1.6.

    Next, divide total revenues of your organization by the number of current employees. Let’s say you have $100,000,000 in revenues and 1,000 employees. The result is an average revenue per employee of $100,000.

    Multiply this number by the top performer increase factor, and you get the average contribution to revenues by top performers — $160,000 in this example.

    Subtract from this number the average revenue per employee of $100,000, and you see that on average, top performers contribute $60,000 more per year than average performers.

Let employees know
    Regardless of the measurements (criteria) you decide to use to calculate employee performance, don’t keep it a secret.

    Even if the measures you select have some bias in them, employees can learn to change their work behaviors to fit the criteria if they know in advance what they are. Letting them know the rules and measures they will be compared to minimizes confusion and allows the workers to focus on what is important.

    In addition, when you post the criteria, you will (whether you like it or not) get feedback. You can use that feedback to adjust the criteria over time.

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