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Target-date funds got a huge boost from the Department of Labor’s final regulation on qualified default options for defined-contribution plans with automatic enrollment. But industry observers say the investment structure of the funds is deeply flawed by their high exposure to stocks.

The new DOL regulation says qualified default investment alternatives will be target-date funds, managed accounts and balanced funds. By choosing one of these options as a default, plan sponsors can avoid a certain amount of fiduciary liability.

Target-date funds are viewed as the big winner. Allocations to the funds will grow to 56 percent of assets in all defined-contribution plans by 2011, up from 11 percent this year, estimates the TowerGroup, a Needham, Massachusetts-based research and consulting firm that focuses on the financial services industry. Assets in these funds, which decrease in equity holdings as a participant ages, now hold about $370 billion of retirement plan assets, up from $150 billion at the end of 2004, according to Financial Research Corp., based in Boston.

The DOL regulation, which goes into effect December 24, gives a nod to stable-value funds. The life insurance industry fought hard to have them included as a qualified default investment alternative, and the funds are considered the big loser under the change. The rule says plan sponsors could receive legal protection by placing employee investments in a stable-value fund for the first 120 days of their participation in a defined-contribution plan.

Bradford P. Campbell, assistant secretary of labor and head of the Employee Benefits Security Administration, says that the temporary default was offered as an administrative convenience for plan sponsors.

In addition, the DOL’s new rules provide protection for investments made in stable-value funds before the December 24 effective date of the new regulations. The grandfathered protection is intended to minimize costs associated with transferring the funds.

Although target-date funds win this battle, it’s unclear whether the funds will provide adequate retirement income for plan participants.

“Three years ago, if you looked at an average target-date fund, 50 percent of assets were in stocks until you [were] 60; now it’s much higher,” says Richard Glass, president of investment advisory firm Investment Horizons in Pittsburgh. “The problem is comparing the different target-date funds. If I have 50 percent in stocks, and the next guy has 30 percent and the market is up, the 30 percent guy will look bad. At what point is the goal to conserve assets rather than go for growth?”

This story was filed by Jenna Gottlieb and Doug Halonen Pensions & Investments, a sister publication of Workforce Management. To comment please e-mail editors@workforce.com.

Yahoo HotJobs continues to expand its network of media partners, this time joining forces with 16 regional newspapers owned by the New York Times Co. HotJobs has also sealed an alliance with the Columbus Dispatch in Columbus, Ohio.

The agreements, announced November 20, come on the heels of the job board giant’s partnership two weeks ago with the New York Daily News, the nation’s fifth-largest newspaper.

HotJobs’ parent company began teaming with media companies a year ago to form the Newspaper Consortium, which now includes some 415 dailies and 140 weeklies, to broaden its reach and tap into diverse audiences. It’s a strategy that competitors Monster and CareerBuilder have also pursued.

It enables HotJobs to localize its advertisements, making them more relevant to specific communities, Lem Lloyd, who runs the consortium, has previously stated.

—Gina Ruiz

People who provide child care for 12 million youngsters each week often can’t afford such programs for their own kids, according to advocates seeking to increase pay and training for the social workers.

They have a prominent champion in Sen. Hillary Rodham Clinton, D-New York and the leading candidate for the Democratic presidential nomination.

fund for states to use to increase compensation, benefits, education and training for child care workers.

Supporters hope to attach the bill to other legislation. But even if it doesn’t move far in the legislative process before the end of 2008, it lays a foundation for what may be done in 2009, especially if Democrats maintain control of Congress and Clinton is elected.

At a Capitol Hill event, she emphasized the importance of strengthening the workforce that plays a critical role in the lives of children during their formative years.

“Let’s provide the resources we need to attract and keep people in the field … and give our kids the best start,” Clinton says.

The issue ties into Democratic efforts during the past year to appeal to families who make less than $100,000 annually and are buffeted by the increasing cost of living and the stress of economic competition.

“It is time to put middle-class families center stage,” DeLauro says. “This is about investing in the future of our country, in our workforce and in our children.”

The people who work with children day to day, however, make on average about $19,000 and have few benefits like paid sick days, DeLauro says.

It’s not just child care personnel who are at the bottom of the economic ladder. They are joined by those who work with drug and alcohol addicts, the homeless and the mentally ill.

These highly educated professionals also have trouble supporting themselves, says Elizabeth Franklin, an official with the National Association of Social Workers in Washington.

The median salary for someone with a master’s degree in social work and two to four years’ experience is $35,600. They also are often carrying big student loans.

To address the problem, the association has launched the Social Work Reinvestment Initiative, which is designed to improve recruiting, retention and training in the field through federal and state investments.

“Social workers think that it is selfish to advocate on behalf of themselves,” says Franklin, who manages the project. “We want to help vulnerable populations and be able to pay the rent at the end of the month.”

One of the reasons Franklin is trying to recruit more people to the field is that 7 percent of licensed social workers plan to retire in the next two years, leaving fewer people to care for the growing elderly population.

“We have a severe shortage of gerontologically competent practitioners,” Franklin says.

But the demand probably won’t lead to increased salaries.

“The market doesn’t work in terms of compensating providers,” says Nancy Duff Campbell, co-president of the National Women’s Law Center.

—Mark Schoeff Jr.

In a stock debut that may prompt other HR software vendors to go public, SuccessFactors saw the price of its shares rise 33 percent on their first day of trading Tuesday, November 20. SuccessFactors’ stock closed at $13.25, after the San Mateo, California.-based firm priced shares in its initial public offering at $10.

In a public filing this week, SuccessFactors estimated that its net proceeds from the IPO would range from about $89.8 million to roughly $104.8 million. The shares trade on the Nasdaq Global Market under the ticker symbol “SFSF.”

SuccessFactors competes in the red-hot field of “talent management” software, which refers to applications for key human resources tasks such as recruiting, performance management and employee development. Talent management applications are among the fastest-growing products in HR software, which is itself the fastest-growing category of business software. Thanks in part to concerns about talent shortages, revenue from “human capital management” software applications is slated to rise 11 percent annually between 2006 and 2011, to $10.6 billion, according to AMR Research.

Talent management vendors Taleo and Kenexa already are publicly traded. Privately held companies include Authoria and Plateau Systems.

SuccessFactors and other talent management specialists typically offer “software as a service” that is accessed over the Internet and paid for on a subscription basis. This on-demand model promises quicker implementations, lower upfront costs and reduced maintenance hassles compared with the traditional tactic of running business software on a customer’s internal computers.

The HR software market is in the midst of consolidation. SuccessFactors’ IPO gives it a war chest that conceivably could be used to snap up other players. The company said its main reasons for the IPO include increasing public awareness of the firm and its ability to obtain additional capital. The firm said it plans to use some of the proceeds to pay off its debt, which totaled about $20.7 million as of September 30, and related prepayment fees of about $300,000.

“We expect to use our remaining net proceeds from this offering for general corporate purposes and working capital, including potential investments in technologies, applications, software or assets, and acquisition of companies that complement our business,” SuccessFactors said in its filing.

The company added: “We have no present negotiations or current agreements or commitments with respect to any material acquisitions.”

SuccessFactors’ IPO success came despite mounting losses at the firm. In a public filing this week, the company said it incurred net losses of $5.3 million in 2004, $20.8 million in 2005, $32.0 million in 2006 and $49.2 million in the nine months ended September 30, 2007. On the other hand, SuccessFactors said its revenue has grown from $10.2 million in 2004 to $13 million in 2005, $32.6 million in 2006, and $44.1 million for the nine months ended September 30.

In a July blog posting, Jason Corsello, vice president at consulting firm Knowledge Infusion, described SuccessFactors’ strategy as a “ ‘cold war’ approach to the market, focused on outspending the competition.” He added: “This strategy will pose a significant challenge to many vendors that don’t have the financial resources [or] the ambition to dominate the market.”

The IPO involves 10.79 million shares. Of those, 10 million are being offered by SuccesFactors and 790,000 are being offered by certain stockholders, the company said. The offering is expected to close November 26. The underwriters have been granted an option to buy up to an additional 1.6 million shares of common stock from SuccessFactors to cover over-allotments, if any.

—Ed Frauenheim

In another twist to a lawsuit between software rivals SAP and Oracle, SAP said Monday, November 19, that several senior managers of its TomorrowNow unit, including the unit’s CEO, have resigned. SAP also said it is considering several options for the future of the TomorrowNow business, including a possible sale.

TomorrowNow is the software support unit at the heart of Oracle’s lawsuit alleging that SAP committed “corporate theft on a grand scale.”

TomorrowNow CEO Andrew Nelson and several members of his senior management team are leaving the company, SAP said. Mark White, who was appointed in July 2007 as executive chairman of TomorrowNow, will continue in that role.

“Our primary focus is TomorrowNow’s existing customers, who will be supported through this management transition,” White said in a statement.

TomorrowNow offers support services to clients running various Oracle product lines, such as PeopleSoft software. In March, Oracle sued SAP, accusing it of stealing support materials.

In July, SAP said TomorrowNow was authorized to download materials from Oracle’s Web site on behalf of TomorrowNow customers, but acknowledged “some inappropriate downloads.” SAP also said the U.S. Department of Justice has requested that SAP and TomorrowNow provide certain documents.

Despite SAP’s admission of improper downloads, some see a bright future for using a third-party company to support HR software and other applications.

—Ed Frauenheim

Strikes by Broadway workers and TV scriptwriters seemed to be setting the stage for increasingly contentious contract talks in a number of industries. Those affected include the thousands of people who clean Manhattan office buildings and work in office cafeterias, as well as radio news writers and telephone technicians.

Workers are demanding a greater share of the prosperity that many of the city’s employers have enjoyed in recent years. But companies are reluctant to commit to generous long-term contracts just when the economy is slowing down. In some industries in which companies have been struggling, employers are looking for concessions from workers, who are digging in their heels.

“There is anger out there, and it is exacerbated by the opulent lifestyle that everybody sees,” says Richard Boris, executive director of the National Center for the Study of Collective Bargaining in Higher Education at Hunter College. “We have now the recipe for very charged collective bargaining across the board.”

Unite Here is waging a campaign in the city and elsewhere in the nation to lift the living standards of cafeteria workers. Food service company Aramark is the target of a strike by about 70 Unite Here Local 100 members who work in Aramark-operated cafeterias in New York Life’s headquarters and at 55 Water Street, the city’s largest office building.

“Workers who have been on the job 13 or 14 years at New York Life are taking home less than $500 a week,” says Matt Furshong, a researcher at the union local. “This is a company that is trying to hold down the wages in the industry, and the workers are trying to raise them up.”

The company’s current offer to the union would lift wages by between 40 cents and 50 cents an hour, which Furshong says is inadequate. “The workers are looking for a dignified wage,” he says.

Aramark officials declined to comment.

Other job actions against Aramark-run cafeterias could follow. Food service workers at the Fashion Institute of Technology and Citigroup, whose contracts have expired, have voted to authorize strikes. Hundreds of workers at JPMorgan Chase, the United Nations and other Manhattan workplaces also face expiring contracts.

Pressure to hold the line

As the economy slows, employers are feeling more pressure to hang tough in contract talks.

“The condition of the economy looks murkier than it did even six months ago,” says James Berg, president of the Realty Advisory Board on Labor Relations, which is negotiating with 26,000 office cleaners on behalf of 1,000 building owners.

RAB officials note that early talks on a new contract, scheduled to go into effect January 1, have been cordial. However, the group said in a statement last week that building owners should be prepared for a job action.

“The possibility of a strike always exists,” the RAB noted.

Meanwhile, the union points to soaring rents and low vacancy rates in the Manhattan office market, and says its members should benefit from landlords’ growing revenues.

“There is no excuse for holding back on the real wage increases that these hardworking men and women deserve and need to get by in New York,” says Mike Fishman, president of SEIU Local 32BJ, which represents the building cleaners.

For some employees, such as those working in news broadcasting, the struggle is to not lose ground. Local radio has been a weak area for CBS Corp., as it has lost business to Internet companies and other competitors. CBS has pushed for drastic concessions from the Writers Guild of America, including the right to combine the workforces of union and nonunion stations. This could potentially force out union members at some stations.

Over the two and a half years since the last writers contract expired, CBS has stuck to its guns on that and other key issues. In a memo sent to staff last week, CBS notes that its final offer awards 3 percent annual pay increases without retroactivity for employees in TV and network radio, and provides 2 percent to local radio employees “in recognition of more challenging times faced by local radio.”

But demanding lower pay for radio employees unfairly penalizes the guild, says Ann Toback, assistant executive director of WGA East.

The union represents writers only in New York, Los Angeles and Chicago, who are “among the most profitable in the CBS universe,” Toback says. The profits they bring into larger stations help prop up weaker CBS properties in smaller markets that are not represented by the guild, she says.

The impasse in negotiations with CBS led the union to authorize a strike vote on November 15. On Monday, November 19, the union announced that 81 percent of the 300 writers who participated gave WGA negotiators the authority to call a strike.

Some companies are taking pains to reach settlements with unions early and avoid strikes. Verizon Communications’ contract with 55,000 East Coast employees, including 10,000 in New York City, doesn’t expire until August. Still, Verizon asked the Communications Workers of America to begin negotiations last week. With working-class resentment high, and memories of a punishing 18-day strike in 2000 still vivid, executives may be right to talk to the union well ahead of time.

This story was filed by Tom Fredrickson of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

A new study by Ernst & Young reveals that while employers are increasingly aware of the developing talent shortage that will be caused by retiring baby boomers, few companies are taking meaningful steps to deal with it at the critical middle management level.

The report, the 2007 Aging U.S. Workforce Survey: Challenges and Responses-An Ongoing Review, found that while 41 percent of companies think the middle management level will be hit hardest by a retirement-related talent drain, 75 percent of them are doing succession planning for senior management positions only.

“The impending crisis is really at the middle management layer,” says Bill Leisy, a principal in Ernst & Young’s performance and reward practice. “Companies are going to need programs to develop employees for these roles. And the time to start those programs is now, since it’s going to take time to get them in place and time to develop the talent.”

The U.S. Bureau of Labor Statistics has projected that 25 percent of the nation’s workforce will be eligible to retire within the next five years, and that over the next decade, the number jumps to 43 percent.

Leisy says that to their credit, companies are more aware of the potential problems caused by baby-boom retirements than they were in a similar Ernst & Young study in 2006. Back then, for example, 38 percent of companies viewed retention of critical employees as a top priority. This year, the number has jumped to 68 percent.

Even so, companies have not gotten around to doing much about their concerns, the study shows. For example, while 44 percent of companies say it would be desirable to have senior management stay beyond the normal retirement age, 60 percent say their current retirement programs don’t encourage them to do so.

Less than one in 10 companies have established phased retirement programs, in which employees begin to receive some of their retirement benefits even though they remain at work, although 29 percent of companies are considering it. In addition, while 39 percent of companies recognize that health care is the main driver in employees’ decisions to retire, 54 percent of them are considering increasing employee co-payments, which could accelerate the exodus of talent by encouraging employees to retire and make Medicare their primary health plan.

Leisy says that baby-boomer retirement “clearly is not just an HR issue. It’s a key long-term issue that impacts all aspects of the business-corporate strategy, operations, compliance and financial. The accountability for it doesn’t stop at the HR director; it goes all the way up into the C suite.”

The study prescribes a number of steps that companies can take to deal with baby-boomer retirement and the resulting talent shortfall. Leisy urges companies to begin with an in-depth demographic assessment of their workforces, followed by internal surveys to determine employees’ needs and interests. Only then can they effectively develop and implement programs to deal with the problem, he says.

Measures that can help reduce the talent crunch include phased retirement programs and flexible work arrangements, in which employees can gradually reduce their hours and responsibilities instead of leaving, Leisy says.

—Patrick J. Kiger

Event: Oracle OpenWorld 2007

When: November 11-15, 2007

Where: Moscone Center, San Francisco

What: Oracle’s annual business and technology conference in San Francisco is a major gathering of customers, partners and analysts. In part through a slew of acquisitions in recent years, Oracle has grown from its database software roots to become a key player in a variety of business software categories, including human resources applications.

Conference info: For information, go to www.oracle.com/openworld/2007.

Day 4—Wednesday, November 14, 2007

Oracle 2.0: In keeping with its push into social networking, Oracle has woven aspects of Web 2.0 interactivity and collaboration into the conference. Most intriguing is the “Unconference” tucked away in a corner of the massive Moscone Center. Essentially, Oracle has created space for conference participants to generate their own seminars. And generate they did, with hourlong sessions devoted to topics including “WebCenter vs. Portal: Let’s Discuss Why Oracle has 2 Portals-and Which to Choose?” as well as “The Oracle DBA [database administrator]: A Dying Breed?”

Those drawn to the Unconference were invited to share thoughts on a wiki as well as “mingle with fellow unconferencers.”

Count Chen Shapira, a database administrator at computer maker Hewlett-Packard, among the unconferencers. On Wednesday, she was found scanning a bulletin board on which people had slapped their ad-hoc session topics. “It’s the coolest thing of Oracle OpenWorld,” Shapira said. She said she had learned more at Unconference sessions than at the traditional sessions. Official seminars can bleed into marketing speak, she said. “This is more real.”

In a sign of how much Oracle respects the user-generated content world, show organizers even let Unconference sessions take place during the Wednesday keynote speech by company head Larry Ellison. Official conference sessions were scheduled around the time Ellison was on stage.

Dissing 2.0: Michael Dell might disagree with the way Oracle has embraced Web 2.0. After Dell finished a keynote speech, someone at the conference took advantage of Oracle’s bottom-up involvement to dress drown the computer-maker CEO. Dell’s presentation included a video touting the concept of a “ReGeneration”-in other words, the idea that people of all ages are focused on recycling and otherwise saving the planet. It is part of Dell’s campaign to design the most environmentally sustainable computer technology. A more cynical view is that Dell is wrapping itself in the environmental movement as a marketing ploy.

That view came out when, after Dell spoke, Oracle invited everyone waiting for Ellison’s ensuing speech to answer a question by text messaging. Answers emerged on the mammoth screen at the front of the auditorium. The question was about integrated computer systems, but one person sent this message: “No more Dell commercials please.”

Upgrades can be a downer: It’s a common belief that moving from one version of traditional business software to a supposedly more advanced one is a headache. A panel session about upgrading PeopleSoft HR software confirmed that point. Wayne Fuller, application systems engineer at financial services company Wells Fargo, said it took his firm about 18 months to go from PeopleSoft 8.3 to PeopleSoft 8.9. The upgrade didn’t make for leisurely workweeks, he suggested. Asked about the top challenges in the project, Fuller said, “It’s a challenge to work 40 hours a week during an upgrade.”

But participants also noted benefits from moving on up. Fuller said PeopleSoft 8.9 has a nicer user interface. And Massimo Rapparini, director of HR applications at security software firm Symantec, said switching to PeopleSoft 8.9 from PeopleSoft 8.3 means fewer bug fixes. “We have a lot less intensive maintenance,” he said.

Larry’s world: Among the highlights of Oracle’s show is hearing Larry Ellison speak. Described by turns as rapacious, smart and funny, Ellison has been a major presence in the technology world for years. In fact, 30 years have passed since he founded Oracle, and this year’s show highlighted that anniversary. The theme also allowed for some personal revelations from the man ranked as the world’s 11th richest man by Forbes earlier this year.

During a question-and-answer session after his keynote speech Wednesday, Ellison was asked if he was having as much fun as he did when he first started the firm. Dressed in a brown suit and one of his trademark mock-turtleneck sweaters, Ellison said the initial period was “more stressful,” and that today Oracle can tackle more challenging and interesting projects. “I’m having at least as good a time now as I did then,” he said.

Software, drugs and rock ‘n’ roll: Conference-goers, for their part, seemed to have a great time at the rock concert extravaganza Oracle sponsored Wednesday night. The company arranged for multiple acts including Billy Joel, Stevie Nicks and Lenny Kravitz to play at the Cow Palace just outside of San Francisco. At one point at the stage set up for Nicks and her band (which included a guest appearance from Fleetwood Mac drummer Mick Fleetwood), the smell of marijuana smoke wafted through the air, eliciting nervous smiles in the audience.

Nicks got the crowd pumping with her hit song “Edge of Seventeen.” Many in the audience were balding or showing other signs of aging. But Nicks seemed to transport them back to an earlier time and inspire a youthful spirit. Near the end of the song, she veered from the original lyrics by saying she “still” hears the call of a night bird.

—Ed Frauenheim

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Day 3—Tuesday November 13, 2007

Oracle the great: Last year, attendance at Oracle’s signature event topped 41,000. This year the software titan expected more than 42,000 attendees. More than 1,600 educational sessions were planned, and the show features more than 450 partner exhibits and over 350 live Oracle product demos. Kingpins of technology are on hand to share the stage with Oracle’s charismatic leader, Larry Ellison. Keynote speakers include Paul Otellini, head of semiconductor giant Intel; Michael Dell, founder of computer maker Dell; and Mark Hurd, chief executive of Dell rival Hewlett-Packard.

Fusion at the fore: At last year’s show, Oracle downplayed its quest to blend the best of its business software product lines in a new set of applications. But this year, both Oracle and customers are talking more about “Fusion” applications, which are due beginning next year.

There’s been concern about how well the Fusion project, first announced in early 2005, is going. But Oracle has been at pains to reassure conference attendees that Fusion is on schedule. And it has provided some details about the coming applications.

At one session devoted to Fusion, Oracle senior vice president Steve Miranda said the coming software products will be productive, manageable, secure and based on standards. On the productivity front, Miranda demonstrated how Fusion products are being built with “context menus.” These pop up when a user “hovers” over particular elements on the screen with their cursor. Hovering over a person’s name, for example, will immediately let the user see if the person is available for an instant-messaging chat as well as provide other information such as their phone number.

Miranda also touted “embedded analytics” as a key Fusion feature. He showed how a manager about to request approval for an employee bonus can see how the proposed bonus would affect the budget. Such analysis tools will help employees make better decisions, Miranda said. “It’s not a dashboard after the fact,” he said.

Despite Oracle’s focus on Fusion, some attendees suggest the company hasn’t said enough. “Each year [at OpenWorld], I don’t get as much information as I’d hoped,” said one.

Another attendee said Oracle had yet to provide a business case for moving to Fusion. “It’s a technology in search of a problem,” he said.

Not everyone is confused about Fusion. Wayne Fuller, application systems engineer for financial services company Wells Fargo, said he is “absolutely” satisfied with the amount of information Oracle has given on Fusion.

On the other hand, Fuller is wary about how Fusion will stack up at the outset. “I don’t think Fusion will in two years be as good as PeopleSoft is from a functional standpoint,” he said, referring to Oracle’s PeopleSoft product line. “Any new product has to develop.”

—Ed Frauenheim