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Pensions & Investments East Coast Defined Contribution Conference

Event: Pensions & Investments East Coast Defined Contribution Conference


When: March 3-4, 2008


Where: PGA National Resort & Spa, Palm Beach, Florida


What: Defined-contribution plan sponsors, providers and consultants come together to discuss compliance, best practices and the changing regulations in retirement benefits.


Conference information: For information about Pensions & Investments, go to www.pionline.com.


Day 2—March 4, 2008


Compliance complaints: Day 2 kicked off with Deanna Garen, senior vice president, relationship management, at Prudential Retirement, lamenting all the new rules and regulations confronting 401(k) plan providers.


“If only we could spend as much money on innovation as we do on compliance,” she said as several people in the audience nodded their heads.


Preaching to the choir: Keynote speaker Raymond Martin spent the first half of his keynote speech discussing the retirement savings crisis in America—a concern that wasn’t new to attendees.


However, benefits managers’ ears pricked up when Martin, president and CEO of CitiStreet Advisors, chastised them for only automatically enrolling new hires into their 401(k) plans and not current employees.


The three biggest reasons companies say they do not automatically enroll current employees is they are afraid of increased liability, more costs associated with offering an employer match to more participants, and a fear of increased complaints from employees, Martin said.


But if companies comply with the Pension Protection Act on default funds for employees, liability shouldn’t be an issue, he said. And proper communications and education should address complaints from employees, he said. And what about increased cost?


“My sense is that the savings companies are seeing from changes in their pensions and health care plans are more than the increase cost associated with the employer match,” he said.


Martin also gave an earful to 401(k) plan providers for making it so difficult for employees to roll over their assets from a 401(k) plan to an Individual Retirement Account. This is a particular issue as young people are switching jobs more often, he said.


“It is just absurd how difficult financial institutions make it to roll over money,” he said. As a result, employees often just cash out of their plans.


Even legislators—none of whom were in attendance—got a talking-to from Martin in his speech. As people are living longer, these individuals are going to need to figure out how to pay for their health care in retirement, he said. Martin called on Congress to allow for tax-free withdrawals from 401(k)s to pay for health care.


“This could be yet another incentive to get employees participating in their 401(k) plans.”


Day 1—Monday, March 3, 2008


More news on the horizon: Plan sponsors and providers who thought they could relax now that the Pension Protection Act has been enacted were in for a rude awakening from the opening speaker of the conference.


James Delaplane, a partner at the Washington law firm Davis & Harman, is a regular speaker at the P&I events and is known for waking up attendees by listing a number of important issues being batted around Capitol Hill. This conference was no different.


A pressing concern for both plan sponsors and plan providers is the Department of Labor’s pending regulations on fee transparency.


First, the DOL is planning to establish regulations on how plan providers should disclose fees to plan sponsors. This, however, may not be limited to just defined-contribution providers, Delaplane noted. As it currently stands, health and welfare providers and defined-benefit providers would also have to disclose this information—which came as news to several attendees.


“Many people are saying that they should break this out into different buckets,” Delaplane said in an interview after his presentation. It remains unclear what the Labor Department will do.


Even more pressing for employers, however, is what will happen with the current discussions both at the DOL and on Capitol Hill on how employers should disclose fees to plan participants.


Right now, the DOL, the House of Representatives and the Senate are all looking at this issue. The potential good news for employers, according to Delaplane, is that while the House is likely to pass a bill, the Senate is not. This means the Labor Department will likely be the source of the rules on how companies should disclose fees to plan participants.


Without predicting who our next president might be (at the last conference, he predicted that Mitt Romney would be running against Hillary Rodham Clinton), Delaplane also discussed the various implications for employers if Clinton, Obama or McCain became president.


Regardless of who becomes president, there will be much discussion in coming years about how to take care of the baby boomers as they retire, Delaplane said.


The national concern about reaching people who are not covered in retirement plans is only growing.


And the question that all companies are going to be wrestling with is what happens to those retired employees and their management of money after they leave the company, he said. “Are you ready to take that on?”

Effective marketing for 401(k)s: Sitting outside over breakfast, Ross Servick, head of consultant and research relations at Schroders Capital Management, discussed one of the most effective strategies of increasing 401(k) plan participation that he had ever witnessed.


Twenty years ago, when he was just starting to work at MFS Investment Management, the HR person gave him and the other new employees two forms.


They were told that one was to fill out now and if they didn’t want to do that, they could fill out the second one when they turned 65. The first form was a 401(k) application. The second? An application to work for McDonald’s.


Needless to say, everyone signed up.


—Jessica Marquez

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Study 401(k) Automatic Enrollment Grows

The number of employers offering a 401(k) plan automatic enrollment feature continues to grow, with 44 percent of employers now doing so, up from 36 percent in 2007, a study shows.


The Hewitt Associates study of 190 midsize and large U.S. employers—released Monday, March 3—also found that of the employers that do not offer automatic enrollment, 30 percent said they are very likely to add the feature this year, while 27 percent are somewhat likely to do so.


Automatic enrollment is aimed at those employees who don’t elect or decline to enroll in their employer’s 401(k) plan. Under automatic enrollment, such employees are told that they will be enrolled—with a specified percentage of their salary deferred to the 401(k) plan—unless they object.


Such programs have grown rapidly in recent years for several reasons, including the passage of legislation in 2006 that pre-empted any state laws that could have interfered with the programs.


In addition, as more employers phase out their defined-benefit pension plans, 401(k) plans increasingly have become employers’ sole retirement savings plans. Adding an automatic enrollment feature increases the likelihood that more employees will have at least some retirement plan savings.


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Few Public-Sector Employers Pre-Fund Retiree Health Plans

Few state and local governments are pre-funding their retiree health care plans, which could have liabilities as high as $1.6 trillion, the Government Accountability Office reports.


In its report, the GAO said that based on its discussions with public-sector executives, there are several reasons why few public-sector employers pre-fund retiree health care benefits.


One reason, the GAO was told, is that many of the plans were established at the time when health care costs were low, so paying the benefits as a yearly expense was not considered burdensome.


Additionally, since there are fewer restrictions in cutting retiree health care benefits—compared with pension plans—employers are reluctant to commit funds to a benefit that may be reduced or eliminated in the future, the GAO was told.


Currently, on average, retiree health care benefits costs are equal to about 2 percent of what public employers pay for employees’ salaries. By 2050, that expense will be affected by a growing pool of retirees and health care inflation and is expected, on average, to equal about 5 percent of salary, “adding to budgetary stress,” the GAO said.


That will mean public employers “may face even greater pressure to reduce benefits or shift the costs of benefits to beneficiaries,” the GAO said.


Indeed, in the private sector, the percentage of employers offering retiree health care has plummeted in the last decade, while in the auto industry—one of the last bastions of rich retiree health care coverage—the Big Three Detroit automakers reached agreements last year with the United Auto Workers to walk away from those commitments in exchange for tens of billions of dollars in contributions to special health care trusts that the UAW will control.


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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In the Midst of Deep Global Job Cuts, Unilever Combines Divisions, Shores Up Overseas Leadership

Unilever announced on Friday, February 29, its biggest senior management shake-up since Patrick Cescau became CEO in 2005, combining its home and personal care unit with its foods division under a single executive and leaving the Anglo-Dutch company with no English or Dutch executives in its uppermost ranks.


The overhaul of the world’s No. 2 advertising spender expands the roles of two key Indian executives—and the odds one will eventually succeed Cescau, 59, a Frenchman, as CEO. The company is in the midst of 20,000 job cuts globally and in the process of trying to sell its North American laundry detergent business.


Vindi Banga, 53, now president-foods, will also oversee home and personal care following Unilever’s annual shareholder meeting in May. Harish Manwani, 54, currently president-Asia/Africa, will add Central and Eastern Europe to his duties, putting most developing and emerging markets under his leadership.


Manwani, who was president of North American home and personal care for about a year prior to assuming his current post in 2005, like Banga began his career with Unilever’s $3 billion Hindustan Lever business in India.


Doug Baillie, 52, born in Zimbabwe, will move from CEO of Hindustan Lever to president of Western Europe, which will now operate as a separate unit from the rest of Europe.


Two longtime executives are retiring: Kees van der Graaf, 57, a Dutch executive who is now president-Europe, and Ralph Kugler, 51, a Brit who is now president-home and personal care.


“We thank Kees and Ralph for all they have done for … and we wish them well,” Michael Treschow, the Swedish non-executive chairman of Unilever, said in a statement.


The moves complete a near-total overhaul of senior leadership at Unilever the past three years, including Treschow’s appointment last year. The balance of top managers includes James Lawrence, 54, an American and veteran of General Mills who was appointed CFO in September; and Michael Polk, 46, an American and veteran of Kraft Foods and Procter & Gamble Co. who became president-Americas in 2006.


Just over three years ago, Unilever was led by British and Dutch co-chairmen and a mostly Anglo-Dutch leadership group.


Filed by Jack Neff of Advertising Age, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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No Claim for Depressed Employee Who Can’t Work

Elizabeth Rask worked two days a week as a kidney dialysis technician for Fresenius Medical Care North America, where she cared for seriously ill patients. After she failed to report to work on May 28, 2004, and due to her pattern of absences, Rask was fired. Rask alleged that she had notified her two supervisors of her struggle with depression when she told them that she was experiencing problems with her medication and that “I might need to miss a day here and there because of it.”


    Rask brought suit in the U.S. District Court for the District of Minnesota, alleging that Fresenius violated the Americans With Disabilities Act and the Minnesota Human Rights Act by discriminating against her because of her depression. She also asserted that the absences that led to her termination were protected under the Family and Medical Leave Act as she suffered a “serious health condition,” which would qualify her for unpaid leave under the statute. The district court granted summary judgment in favor of the employer on all claims.


    The U.S. Court of Appeals for the 8th Circuit held that Rask was not a “qualified individual” under the ADA. Because Rask was unable to work on a regular and consistent basis, she was not able to perform an essential function of her job, and therefore was not a qualified individual under the statute.


    The court found that “the ability to take sudden, unscheduled absences would not have assisted Ms. Rask in performing the duties of her particular job; they would have been for her personal benefit.” Finally, the court also agreed that Rask had failed to put Fresenius on notice that she had a serious health condition that would make her eligible for FMLA leave. Rask v. Fresenius Medical Care North America, 8th Cir., No. 06-3923 (12/6/07).


    Impact: An employee who cannot perform essential job duties of regular and predictable attendance, regardless of his or her alleged disability, is not ADA protected.


    Workforce Management,February 18, 2008, p. 8 — Subscribe Now!

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Compensation Model Breeds Excessive Executive Pay, Study Finds

Corporate boards of directors and institutional investors disagree about whether the executive pay model has helped improve corporate performance, but they agree it has led to excessive levels of compensation, according to a Watson Wyatt Worldwide study.


Some 65 percent of responding directors believe the model has improved corporate performance, compared with only 39 percent of institutional investor respondents, a Watson Wyatt survey for its study found. But 61 percent of directors and 86 percent of institutional investors believe the model has led to excessive executive pay levels, and 75 percent of each group believes the executive pay model has hurt corporate America’s image.


Some 63 percent of directors in the survey think the executive pay system is improving, compared with 36 percent of institutional investors, but the pay model system has created employee resentment, according to 60 percent of directors and 78 percent of institutional investors.


Among recommendations for improving the pay model, the study says boards should “evaluate performance-based portions of executive pay plans” and “increase the use of performance-contingent (long-term incentive) programs and the level of executive pay opportunity to reflect pay for performance.”


The Watson Wyatt 2008 Report on Directors’ and Investors’ Views on Executive Pay and Corporate Governance: Managing Executive Compensation in the Shareholders’ Interests is based on a survey of 163 directors on the boards of 230 publicly traded companies and 42 privately held companies or nonprofit organizations that earned a combined $1.5 trillion in annual revenue; and 27 investors from union or public pension fund or foundations along with 45 from private-sector institutions that manage a total of $5 trillion in assets.


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

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The Toughest HR Job in America

The real innovations in HR today are coming from companies caught in the most difficult industries, where adversity is the mother of invention.

Peter Perez is working under a time-sensitive mandate to reinvent corporate culture, jump-start employee engagement, create a new communications program, overhaul the performance management system, collapse 50 pay plans into one and meet insane goals for internal promotions. He needs to do all this while he manages 26,500 workers—half of whom are unionized—spread over 100 plants in an industry that is under attack from all sides.


Perez is executive vice president of human resources at ConAgra Foods Inc., where a revolution is under way.


“With all the chaos in the corporate world and all the chaos here, my biggest focus has to be to stay on top of the business and not get lost in the HR agenda,” he says. “I have to stay focused on driving results this quarter, this year.”


By almost any measure, he has succeeded. Employee engagement, retention and internal promotion metrics show remarkable results, and ConAgra’s financial performance is stellar despite two costly product recalls, soaring grain and fuel prices and exposure to the long list of corporate challenges that have rocked profitability for U.S. companies during the past year.


Omaha, Nebraska-based ConAgra reported $12 billion in revenue for fiscal 2007. More than half came from the company’s consumer foods segment, which includes such brands as Banquet, Chef Boyardee, Egg Beaters, Healthy Choice, Hunt’s, Libby’s and La Choy. The ConAgra workforce is an awkward mix of 20,000 hourly production workers—mostly unskilled operatives—and 6,500 salaried, professional and managerial employees located in the major hubs.


ConAgra is the fifth-largest company in the U.S. food manufacturing industry, which pumps out a half-trillion dollars a year in products and employs 1.4 million workers. Producers are reeling from food safety problems, consumer lawsuits, constant regulatory changes, trade restrictions, shifting workforce demographics, high workplace injury rates, labor strife, animal rights protests and increasingly demanding buyers.


“With all the chaos in the corporate world and al the chaos here, my biggest focus has to be to stay in top of the business and not get lost in the HR agenda. I have to stay focused on driving results this quarter, this year.”
—Peter Perez, executive VP of human resources, ConAgraFoods Inc.

This dark constellation of business pressures forms the backdrop for the industry’s workforce management executives who, like Perez, must squarely address basic plant operations and cost issues with one hand and unleash performance management and employee engagement innovations with the other. Three-fourths of the industry’s workforce consists of relatively unskilled production workers from diverse racial and ethnic backgrounds, some unionized and some not.


The business press may love Google and Yahoo for their innovative stock plans and perks like concierge services, but the fact remains that HR executives in the food industries manage more workers than all the high-tech industries combined, and they work with a much fuller range of HR issues than their counterparts in the relatively soft world of ISPs, portals and programming. Up and down the industrial food chain, from the meat and poultry producers to the food manufacturers to the retail food stores, best practices are emerging from tough places.


New operating principles
ConAgra has seen its share of the challenges that make workforce management and innovation particularly difficult. Just a few months after Perez joined the company in 2003, a production line worker shot and killed six co-workers at a ConAgra plant. As the company moved into restructuring, thousands of employees lost their jobs. Labor relations have been rocky, and salmonella poisoning outbreaks have sliced millions from the bottom line. Ongoing plant closings and safety issues continue to generate workplace tensions.


In 2005, ConAgra was staring at a stagnant top line, weak margins and unacceptable return on invested capital from an unwieldy portfolio of 50 operating companies with no coherent discipline. The board brought in a new CEO with a mandate to reinvent the company. Today, Perez is one of only two top corporate leaders who predate the 2005 shake-up. He holds an MBA from Northwestern University’s Kellogg School of Management, and like ConAgra’s new CEO, CFO and the executive vice president for research, he pulled a stint at Pepsi earlier in his career.


The mandate for change required a fundamental upending of the company. “We needed to switch from an 80 percent commodities and 20 percent branded foods split to the opposite,” Perez says. “And we had to move from being a big holding company of 50 independent operating units to one entity that could leverage scale.”


In fiscal 2006, the company implemented a restructuring plan with completion set for the end of fiscal 2008. The goals include stripping out $100 million in annual costs. “We are integrating all the units in one big bang,” Perez says. “This requires massive innovation to drive higher margin growth. It is an unbelievably huge undertaking.”


The mandate generated what the company refers to as six “must do’s.” The first five focus on optimizing the portfolio, innovating for sustainable growth, improving the cost structure and margins and meeting customer expectations. But the sixth is a clear directive for the HR function: “Nourish our people to build an inclusive and winning culture.”


The new culture is built on three operating principles: simplicity, collaboration and accountability. “These are not just bookmarks that look nice,” Perez says. “They are driving principles.” The three new operating principles now determine HR strategy.


Simplicity required divesting acquisitions that were never fully integrated, including ConAgra’s troublesome meats, seafood and cheese processing units. This set off massive headcount reductions. The simplicity imperative also arose from customer demands. “Customers like Wal-Mart want one face,” Perez says. Wal-Mart, now universally acknowledged as one of the most demanding buyers in the world, represented 13 percent of ConAgra’s net sales in fiscal 2007.


The collaboration principle calls for alignment toward the same objectives throughout the company with a decisive focus on higher-margin brands. “The collaboration element is the most important and the toughest to implement,” Perez says. “We had to force the independent operating companies to get on the same page with everything from procurement to pay plans. We have labeled this internally as the ‘one ConAgra approach.’ ”


In addition, the company moved to enterprise-wide standards for all functions, including HR. The shift to one coherent organization with unified functions underscored the need for a new culture. “We had to move from many cultures, with very low employee engagement and communication, and low development of our people, to one culture,” Perez says. “And we needed all units working together toward the hierarchy of brands instead of each unit working only for its own products.”


“There was so much improvement in the engagement measures over the past year that our consultants asked us to double-check the numbers.”
—Peter Perez

The new approach also meant moving from 50 separate incentive plans based on each operating unit’s results to one plan with payouts determined by ConAgra’s companywide performance. “Now everyone lives or dies by one plan,” Perez says. In addition, all salaried employees have the new operating principles built into their performance goals. ConAgra instituted a much more aggressive pay-for-performance plan to reinforce the change, with rewards based on cost savings and top-line growth objectives.


“We also initiated a massive marketing and communications program to change the hearts and minds of more than 20,000 people,” Perez says. Ongoing employee communications now range from frequent town hall meetings to a new onboarding program. In 2007, ConAgra launched its first “People Annual Report,” which documents progress toward key goals. The report includes metrics for employee engagement, internal and external hires, retention and diversity.


Driving engagement
The accountability principle holds employees responsible for two behaviors: pushing for decisions and speaking up about problems, with a clear focus on attacking costs and boosting plant efficiency. Its success relies heavily on production employees identifying better production methods.


The framework for the accountability principle is the new ConAgra Performance System, based on Toyota’s hugely successful production management process. The ConAgra Performance System is designed to increase operational efficiencies and employee engagement. The new system is now being introduced across all ConAgra plants. “It speeds up the lines and takes out downtime,” Perez notes.


“This is a dramatically different approach for us. Before the change, there was no engagement or communication. CPS is critical. It provides an opportunity for two-way communications.” ConAgra is also issuing a monthly report that plant managers give to hourly workers to keep them fully abreast of conditions in the industry and the company.


Buy-in from production workers is essential, and the payoff for them centers on improvements in working conditions and job security. According to Perez, the response to the performance system has been overwhelmingly positive. “Production workers watched for years while we did stupid things,” he says. “They were tremendously frustrated. If you are on a plant floor and the plant does not work well, your job is more painful.” ConAgra also focused on building support across shifts to end the problem of one shift dumping work and unresolved issues onto the next.


In fiscal 2007, the ConAgra Performance System initiative boosted engagement and accountability and raised plant equipment effectiveness by 4.4 percent, generating $30 million in savings. “The bottom line for production workers is that the better their plant runs, the more secure their jobs will be and the more they can make decisions and drive results,” Perez says.


In a number of plants, ConAgra uses a gainsharing plan—pay incentives for boosting performance and reducing costs—and it is now introducing it across additional plants to make gainsharing universal. “Gainsharing allows us to tie the individual’s performance to the company’s performance,” Perez notes.


ConAgra also adopted GE’s groundbreaking Work-Out system, which involves every employee in efforts to raise productivity and eliminate waste, as a new “Road­map” program for the salaried workforce, with a decisive focus on process improvements and cost reductions.


Perez is also managing new mandates for organizational development and talent management. “Culture is big, but talent and organization structure are huge,” he says. “Turnover was high and we constantly had to go outside for hires. It was a horrible situation. You can’t sustain a company on that basis.”


To reverse this trend, ConAgra now focuses explicitly on bringing in top talent that can be promoted. The company also built an organizational development program from scratch to boost promotion from within. “It is completely essential that employees know that they can build their careers at ConAgra,” Perez says.


The company is now at 60 percent internal promotions. The three-year interim goal for internal promotions is 70 percent, and the company is ultimately looking for 85 percent to 90 percent.


Senior leadership reviews human capital metrics quarterly, including the ratio of internal to external hires, diversity hires and promotions, and retention. ConAgra uses a five-point performance management scale. If an employee with a rating in the top three leaves, ConAgra counts the quit as “regret” turnover. The goal for regret turnover is no more than 5 percent.


The top management team also looks carefully at survey results for employee engagement, which measure the company’s status as a preferred employer and whether employees are willing to recommend it as a place to work. Baselines established at the beginning of the process measure improvements. “There was so much improvement in the engagement measures over the past year that our consultants asked us to double-check the numbers,” Perez reports.


In the middle of all this change, Perez must still devote considerable time to plant safety, where the company has made dramatic improvements. Food safety and quality issues also spill over into workforce management. “We have to keep workers focused on this,” Perez says.


He also invests time in labor relations. “We have to maintain good relations with the unions and keep our nonunion shops nonunion. Also, all across the lower end of the organization, there is a lot of pressure around retention, and we have to deal with this.” Five thousand of the company’s 13,000 unionized workers are covered under contracts that expire in fiscal 2008.


May 2007 marked the end of the company’s first full year as the new ConAgra Foods, fully focused on higher margins and cost improvements. Fiscal 2007 total shareholder returns hit 16.3 percent, up from a dismal -10.7 percent in 2006. The company increased its projected annual earnings growth to 8 percent to 10 percent for fiscal years 2008-2010.


The percentage of employees reporting that they are proud to work at ConAgra rose 14 percentage points in one year to 79 percent, well above the 75 percent benchmark for high-performing companies. The percentage expressing confidence in the company’s leadership rose 40 points to 73 percent, substantially greater than the 62 percent high-performing benchmark.


“For me, it’s been a huge challenge to stay on top of our HR initiatives while maintaining all the traditional HR functions, including labor relations, HRIS and benefits,” Perez says. Still, the heavy lifting has not detracted from successful innovation. As the U.S. economy heads south and more companies slip into hard times, ConAgra’s experience may prove instructive.


Workforce Management, February 18, 2008, p. 1, 18-25 — Subscribe Now!

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The Fight to Fill The Open Seat

Companies in the midst of the new battle for talent say that in order to win the people they need, they must develop “intelligence” on up-and-coming candidates, look in places they hope will be hidden from competitors, and make decisions quickly.


“We believe the war for talent is over, and that talent won,” says Mark Nicholls, corporate workplace executive for Bank of America.


In a recession, of course, the war for talent may shift. Though companies may not need the same number of people, they may search even harder for the best managers, those who can lead during lean times and scale up when the economy comes back.


Compensation is still a key element to woo those top people, and pay has been rising much faster in recent years for top-performing managers than for other kinds of workers. From 2007 to 2008, companies were expecting to raise pay for top managers by 5.7 percent, according to consulting firm Mercer.


But if nice salaries and pay increases are givens, companies must get creative to differentiate themselves.
Nicholls talks up the ergonomically correct workspaces and floor-to-ceiling windows in Bank of America’s new tower at 1 Bryant Park.


“We discovered, somewhat to our surprise, that space matters,” Nicholls says.


Chief executives are more involved now in hiring and taking potential managers to dinner and on golf outings.


“They need to entice the best people to come work for their team, because there are a lot of options out there,” says Michael Koren, managing partner of Koren Rogers Executive Search. “Those candidates are harder to find, harder to land, and can write their own tickets.”


Going overseas
To find the people they need, companies increasingly recruit from abroad, looking for managers who can operate either in New York or in their overseas offices.


“For an American credit company, we found the person in Germany to work in Hong Kong,” says Brian Drum, chief executive of recruiter Drum Associates. “Wal-Mart is expanding in China, and they’re doing it with American executives.”


Advertising agency Taxi New York has hired from Australia and India and is working with a freelancer from South Africa, says Wayne Best, executive creative director.


“We want people who are very diverse and very experienced,” he says. “It’s less about nationality and more about breadth of capabilities.”


The cross-border battle for talent also means that companies here face poaching efforts. Real estate and financial executives, among others, are being recruited by overseas employers in China, Singapore, Russia, the Middle East, Eastern Europe and South America.


In addition to searching globally, recruiters and companies are reaching into minority communities.


“You have to think out of the box and not reach into the same ordinary channels for top talent,” says Lisa Tromba, vice president at recruiting agency Battalia Winston International.


The agency has developed a formal diversity practice consisting of recruiters from, and with strong ties to, minority communities. “It’s a valuable resource for talent that’s not usually as reachable,” Tromba says.


The group of people not looking for new jobs remains the most fertile source of new hires, recruiters say. Key employees are not as loyal to their employers as they were a generation ago.


Even those who weren’t initially looking to change jobs frequently end up considering three to five offers from competitors, Koren reports.


That necessitates another change in employers’ tactics: The process of interviewing and preparing an offer that routinely used to take two months is being condensed. To stay ahead of competing offers, the more proactive employers are scheduling fewer rounds of interviews or setting up multiple meetings on a single day, and coming to decisions quickly.


“There are only so many candidates, and if you stall, you may lose them,” Best says. He ended up at the boutique agency because a larger agency took three months to extend him an offer. “We’ll sometimes interview a candidate in the morning and, if it’s the right person, have an offer letter sent to them that afternoon,” he says.


Planning ahead
Indeed, to be ready to act fast, recruiters say that companies are asking them to plan much further ahead. Recruiters have always had to be aware of the talent in particular industries, but now they are developing external pools of potential hires and keeping dossiers on them.


Tromba has a current assignment to locate someone for an executive-level position without a specific future job description. “The client doesn’t know exactly where the person will be deployed,” she says. “It’s a classic example of hiring ahead of need.”

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Getting a Handle on Workers Comp Claims

SuperValu Inc. is the third-largest food retailer in the country, with $44 billion in annual revenues and 200,000 workers in 2,500 grocery stores and 35 product distribution centers, all managed from headquarters in Eden Prairie, Minnesota. Fifteen thousand employees work at the distribution centers, pulling products off of racks that reach 30 feet high and loading them onto pallets.


    “We know that one of the primary drivers of improved productivity is financial accountability for results,” says Jim Koskan, corporate direc- tor of risk control. “Every profit center is responsible for the cost of employee injuries, and we review these numbers monthly.” In an industry with razor-thin margins, excessive injury costs can have a substantial impact on financial results.


    The retail food industry is the largest employer in the entire retail sector, and the most dangerous. The supermarket injury incidence rate of 6.5 per 100 equi- valent full-time employees for 2006 is a full 2 points higher than the rate for all private industry. But with comprehensive safety programs in place, SuperValu has achieved injury rate reductions ranging from the high single digits to the low teens every year for the past five years, and now has rates that are consistently below the industry average.


    The company has also slashed the cost of the injuries. Ten years ago, SuperValu installed on-site clinics in its distribution centers and then outsourced the project to Medcor Inc., which provides both on-site clinics and on-call 24/7 triage services to a wide range of companies.


    “When we saw the results of the on-call services, we decided that it made sense for all locations that couldn’t support a full on-site clinic,” Koskan says. SuperValu is now completing the on-call rollout to all 2,500 retail stores.


    “With the on-call tool, we can track how many calls result in referrals to physicians and how many lead to treatment at the facility, which we call ‘saves,’ ” Koskan says. The percentage of injuries now treated on site ranges from 20 percent at some facilities up to 60 percent at others.


    Across all 30,000 work sites that now use Medcor’s on-call service, 50 percent of injuries are treated on site, according to the company. Cost savings come from the reduction in the number of physician visits, which translates directly into reduced workers’ compensation claims.


    Injured workers speak directly with a registered nurse, who uses proprietary software and clinical protocols to determine if the injury can and should be treated on site. All calls are logged and recorded. Medcor adds clients as additional insureds on its malpractice policies. “Many clients hire us because they are interested in risk shifting,” says Curtis Smith, Medcor’s vice president.


    On-site clinics also produce significant savings. The smallest staffed on-site clinic costs $200,000 on average, including the cost of space and supplies, and should reduce claims by 50 percent to 75 percent, according to Smith. “The point is not to build the most comprehensive clinic, but to build a lean clinic that can deliver the best value,” he says. “To find the sweet spot, you have to know the costs and determine what is the least amount of program that will achieve results.”


    Substantial savings occur downstream as claims decline. “But the most sophisticated buyers look beyond claims reduction to recruiting, retention, productivity and a net decrease in all heath care costs,” Smith notes. “Across all industries, any site with more than 1,000 employees will see cost savings from an on-site clinic. In low-injury environments such as white-collar sites, the savings come from greater wellness and prevention efforts, such as on-site strep tests and flu shots and monitoring preventive testing.”


Workforce Management, February 18, 2008, p. 23 — Subscribe Now!

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NYC Shortfalls Worst in 3 Key Industries

Facing a shortage of nurses, Jacobi Medical Center in the Bronx turned to an unlikely prospect: clerical worker Ewa Stasiewicz. The hospital sent the Brooklyn mother of two to nursing school—for free.

“They were paying for my tuition and my books, and I was getting my regular salary,” says Stasiewicz, 32, who began her studies at the College of Staten Island in 2003.


Three years later, she swapped her 9-to-5 job at Jacobi for 12-hour shifts on a medical/surgical floor.


Health care is one of a handful of industries across New York City in the vanguard of the battle for talent. Because of especially high demand, health care, engineering and online advertising are suffering from acute worker shortages.


Confronting the reality that even higher salaries aren’t sufficient to draw new employees to their fields, businesses in all three industries have turned to education for the answer. They are focusing their efforts not only on luring individuals already working in those fields, but also on producing new ones.


“It’s very competitive, which is why we look at building training programs and hiring from undergrads,” says Pete Stein, general manager for the New York office of online ad firm Avenue A|Razorfish, which has 50 to 60 openings.


The wider business world might take note. More than 77 million baby boomers are expected to retire by 2020, and only about 40 million workers will be available to take their places. In New York City—where roughly one in six workers are 55 or older—shortages are expected across key industries.


Beyond pay raises
Engineering firms, online advertising companies and health care providers have found that when shortages are severe, raising pay isn’t enough to attract workers. Organizations in all three sectors have raised pay for workers in recent years. Then they’ve had to go further.


For instance, the city’s Health and Hospitals Corp. is increasing starting salaries for its nursing workforce, which now numbers 7,100, to $66,000 from $55,000. But it also is reaching out to low-income New Yorkers, hoping to persuade at least 400 of them to become nurses by offering scholarships for its Nurse Career Ladder program. Last year, 140 aspiring nurses graduated from various HHC education programs.


Jing Lee, 26, of Flushing, Queens, was among them. Lee received a full $40,000 scholarship to attend Pace University’s accelerated three-semester nursing program for students with bachelor’s degrees. In exchange, she committed to working at Woodhull Medical and Mental Health Center in Brooklyn for four years.


“Nursing had always been in the back of my mind,” says Lee, who majored in business at SUNY Binghamton. “It’s a career where I can contribute to the community.”


The Visiting Nurse Service of New York has also rethought the way it recruits. VNS formerly hired only nurses who had a bachelor’s degree and medical/surgical experience. But given a scarcity of candidates, it began hiring inexperienced nurses and training them in home care.


The agency recently started recruiting nurses with associate degrees. VNS used a grant from the Jonas Center for Nursing Excellence to examine the differences between two- and four-year programs, and teamed with Queensborough Community College to develop an internship program that helps bridge the gaps.


The longer it takes to train workers in a field, the more difficult it is to cope with shortages. While nurses require a few years of training, engineers need rigorous math and science education, beginning in primary school.


The shortage of engineers has been exacerbated by the New York City building boom. With construction booming in lower Manhattan and on the Far West Side and with new stadiums going up in Queens and the Bronx, firms have been stretched thin.


“We’re not getting enough talent coming into the engineering field from the grade schools and the high schools,” says Nina Weber, director of career services at Polytechnic University in Brooklyn, which tries to pique grade-schoolers’ interest in the profession. “Engineering needs people with backgrounds in science and math.”


Engineering leaders across the state are working to sell their profession to young people. The American Council of Engineering Companies of New York recently produced an eight-minute video featuring young engineers. One speaks of his pride in helping reconstruct the Third Avenue Bridge between Manhattan and the Bronx. Another excitedly tells of the tunnels he’s designing for the East Side Access project.


Mentoring programs that produce aspiring engineers like Nubia Castaño are taking on growing importance. The 26-year-old from Maspeth, Queens, is preparing to start a master’s program in transportation engineering at City College.


Early intervention
Castaño remembers attending a presentation by Metropolitan Transportation Authority engineers when she was a high schooler participating in the ACE Mentor Program.


“They showed what transportation engineers do and what kinds of projects they have,” Castaño says. “For me, it had a big impact.”


Companies say that alliances with educational institutions do pay off, even if it takes a while.


Avenue A is hiring straight out of universities, tapping 30 new graduates last year. The company designed a six-month boot camp, in which each newcomer is handed a trial project and paired with a mentor. G2 Direct & Digital has a 12-week training program that concludes with employees making presentations to senior management.


Many agency executives participate in student portfolio reviews, keeping an eye open for top talent that will soon be ready to enter the workforce. In a world in which many young people are more tech-savvy than their elders, the focus on recent graduates has its benefits.


“People coming out of school haven’t known the world without the Web,” says Avenue A’s Stein. “They’re able to add value very quickly.”


Regardless of the industry, the hard work for businesses begins once the recruiting is done. Hospitals can find and cultivate employees like Stasiewicz, but if those workers don’t stay on the job, it’s all for naught.


“It’s not just recruit, recruit, recruit,” says Denise Soares, the chief nurse executive at Jacobi. “Yes, we recruit, but we have to retain our staff. That is the key.”