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People feel strong emotions during any major organizational change, and the move to teams is no exception. Anticipation, anger, acceptance and renewed self-confidence-in that order-affect both the individual and the team. By understanding the following four phases of team development, leaders can help their teams cope with change.

Forming: Team members want to know, “What’s expected of me? How do I fit in? What are the rules?” Anxiety follows the initial excitement. But no one feels secure enough yet to be real, so leaders don’t see much open conflict. At this time, leaders help the team develop operating guidelines or ground rules that regulate how leaders and team members interact.

Storming: Enthusiasm gives way to frustration and anger. Team members struggle to work together. Leaders see mindless resistance, wrangling, hostile subgroups, jealousies and general disgust with the whole transition. Ground rules may splinter like trees in a cyclone. This phase is critical because what emerges from it is something different from the sum of the parts: the team itself.

Norming: Gradually, the team gains its balance and enters the tranquil norming phase. People find standard ways to do routine things, they drop the power plays and grandstanding, and everyone makes a conscious effort to stay mellow. The main danger now is that team members hold back their good ideas for fear of further conflict. Leaders help the team blow through their reticence-usually by increasing their responsibility and authority.

Performing: The team now goes about its business with smooth self-confidence. People have learned to disagree constructively, take measured risks, make adjustments and trade-offs, and apply their full energy to a variety of challenges. Given the high level of mutual trust, leaders step back and let the team demonstrate its capabilities.

It’s important to note that reaching the performing phase doesn’t mean smooth sailing forevermore. A team can experience a stormy period at any time. The team can even return to the forming phase if it adds or loses members. As teams begin to recycle through earlier phases, leaders again need to take an active role in helping the team find its balance and settle down to business.

SOURCE: Excerpted from the book, Leading Teams: Mastering the New Role, by John H. Zenger, Ed Musselwhite, Kathleen Hurson and Craig Perrin. c 1994 by Zenger Miller, Inc.

Personnel Journal, February, 1994, Vol.73, No. 2, p. 44.

One way to reduce effective costs of retiree health care and liabilities resulting from Financial Accounting Standards rule number 106, without cutting benefits, is to prefund retiree health-care costs using triple-tax-exempt high-growth strategies. The ideal funding method should provide tax deductions for contributions, tax exemptions on income, tax-free benefits and funds to offset the entire liability. No single vehicle will satisfy these requirements. However, companies are creatively using a number of options to prefund through employer and employee contributions. Utilities and government contractors are particularly likely to prefund, because they can build the expense into their rate base. Some prefunding vehicles are:

1. Voluntary Employee’s Beneficiary Association (VEBA).
   A VEBA trust provides advance funding for various types of employee-welfare benefits, including health care. Its effectiveness, however, is restricted by the unrelated business income tax (UBIT) on earnings and by limits on tax-deductible employer contributions. Future liabilities must be calculated based on current medical costs without inflation adjustments.
   
   Despite these restraints, VEBAs appeal to some employers. A VEBA for unionized employees who have a collectively bargained plan isn’t subject to limits on contributions and taxes on investment earnings. Nonprofit, tax-exempt organizations aren’t subject to UBIT.
2. Trust Owned Life Insurance (TOLI).
   The insurance industry is promoting group variable life insurance as an option to VEBAs. Under this plan, the employer makes maximum tax-deductible contributions to a VEBA, which purchases life insurance on a group of employees, naming the VEBA trust as beneficiary. Death benefits, which are directly tied to portfolio investment performance, are used to pay postretirement health costs. Because life insurance is tax-sheltered, the income is tax-exempt. Moreover, the policyholder (the VEBA) can direct investment strategy to maximize potential investment return within an acceptable risk tolerance. Large companies may find TOLIs most effective because life insurance should cover a pool of 2,500 or more insured employees.
   
   The main disadvantage of this funding vehicle is the lack of case law and the potential for future legislative restrictions. Although state laws generally don’t allow trustees to purchase policies on the lives of trust beneficiaries, a VEBA trust is subject to federal law. No ERISA provision prohibits a VEBA from holding life insurance. However, a change in the tax laws or an unfavorable ruling from the IRS could have adverse tax and cost consequences for companies that have purchased a TOLI.
3. Section 401(h) retiree medical account.
   A qualified pension plan may provide retiree health expenses by contributing to a separate account under the plan. Contributions are tax-deductible, earnings are tax-free, and, unlike VEBAs, cost projections include inflation. However, limitations on contributions make it impossible for fully funded pension plans to take advantage of this option.
   
   Section 401(h) specifies that medical benefits must be subordinate to the plan’s retirement benefits. Non-pension contributions can’t exceed 25% of the aggregate contributions made to the pension plan. For an overfunded pension plan, allowable contributions are low and nonexistent.
   
   Combining a 401(h) account with a defined contribution plan substantially increases the allowable contribution. Nevertheless, most companies, especially those that have a high ratio of retirees to workers, still will be unable to fully fund the liability.
4. Health Stock Ownership Plan (HSOP).
   Cincinnati-based Procter & Gamble has creatively redesigned its profit-sharing plan to gain some of the 401(h) advantages. Procter & Gamble converted its employee stock-ownership plan (ESOP) into a combination stock bonus plan and money-purchase pension plan, then attached a 401(h) retiree medical account to the pension plan. The HSOP borrowed convertible preferred stock and will repay the loan with annual fixed contributions from Procter & Gamble, plus dividends on the stock. Upon retirement, the funds in the account will be used to provide medical benefits.
   
   The legal status of an HSOP is questionable. The IRS has approved the plan for Procter & Gamble only; other companies will have to wait for regulators to study both the tax- and health-policy issues. If they agree, Coca-Cola will consider an HSOP to fund its $250 to $300 million liability.

SOURCE: Reprinted with permission from State Street Bank and Trust Company Master Trust Quarterly vol. 3, no. 2.

Personnel Journal, November 1993, Vol. 72, No.11, p. 82.

Here are ten ways managers can help:

1. Allow employees to talk freely with one another. In an organization in which employees can talk freely with each other, productivity and problem-solving usually are enhanced.
   
   
2. Reduce personal conflicts on the job. Here are three steps that employers can take to minimize conflicts: a) training managers and employees to resolve conflicts through communication, negotiation and respect; b) treating employees fairly; and c) defining job expectations clearly.
   
   
3. Give employees adequate control over how they do their work. Workers are more productive and able to deal with stress better if they have some control over and flexibility in how they perform their work.
   
   
4. Ensure that staffing and expense budgets are adequate. Heavier workloads can increase illness, turnover and accidents and decrease productivity. Therefore, a new project may not be worth taking on if staffing and funding are inadequate.
   
   
5. Talk openly with employees. Management should keep employees informed about bad news as well as good news. Giving employees opportunities to air their concerns to management also is important.
   
   
6. Support employees’ efforts. Workers are better able to cope with heavy workloads if management is sympathetic, understanding and encouraging. Listening to employees and addressing their issues also is helpful.
   
   
7. Provide competitive personal leave and vacation benefits. Workers who have time to relax and recharge after working hard are less likely to develop stress-related illnesses.
   
   
8. Maintain current levels of employee benefits. Workers’ stress levels increase when they see reductions made in their employee benefits. Employers must weigh carefully the savings gained from reducing benefits with the potentially high costs of employee burnout.
   
   
9. Reduce the amount of red tape for employees. Employers can lower burnout rates if they ensure that employees’ time isn’t wasted on unnecessary paperwork and procedures.
   
   
10. Recognize and reward employees for their accomplishments and contributions. Ignoring employees’ accomplishments can lower morale and provoke talented and experienced employees to seek work elsewhere.

SOURCE: Northwestern National Life

Personnel Journal, June 1993, Vol. 72, No. 6, p. 57.