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SAP Dust-Up May Have Little Impact on Fledgling Industry

Despite the recent news that software support specialist TomorrowNow improperly downloaded materials, some see a bright future for tapping a third party to support HR software and other applications.


Using an independent service provider to handle tasks such as fixing bugs typically cuts support costs by half, says Forrester Research analyst Paul Hamerman, which can mean saving hundreds of thousands of dollars annually. Hamerman adds that third-party software support will likely survive a legal spat between vendors Oracle and SAP, as well as SAP’s admission in early July that “some inappropriate downloads” of Oracle software fixes and support documents occurred at its TomorrowNow subsidiary.


“The legal case could have a dampening effect on the market, but only temporarily,” Hamerman says.


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. On July 3, SAP said TomorrowNow was authorized to download materials from Oracle’s Web site on behalf of TomorrowNow customers, but acknowledged the “inappropriate downloads.” SAP also said the U.S. Department of Justice has requested that SAP and TomorrowNow provide certain documents.


The Oracle-SAP dispute has thrown light on the relatively new arena of third-party software support. Traditionally, business software vendors have charged customers an annual support and maintenance fee as part of a software license sale. That support typically includes corrections to coding errors and updates for legislative changes. Support customers also generally get more substantial software upgrades for free—although installing those upgrades can be costly.


Support fees can start at less than 20 percent of the original license fee. But support fees usually rise each year and are considered lucrative for vendors. Third-party software support providers offer similar services—minus the upgrade option—for a lower price. Besides TomorrowNow, other third-party support providers include netCustomer and Rimini Street.


Of the thousands of business software customers worldwide, no more than 500 organizations have signed up for third-party software support arrangements, experts estimate. What’s more, the idea of a support contract is under pressure from the growing practice of renting applications over the Internet, where firms often pay a monthly fee that includes a support component.


Still, some analysts have been speaking highly of third-party support and maintenance options.


“These programs promise to significantly reduce annual support fees while eliminating forced upgrades, delivering services not available with standard vendor support and guaranteeing a much better service-level commitment,” research firm Technology Evaluation Centers said in an April report.


Some companies are heading to Rimini Street. In the second quarter of this year, sales bookings at the Las Vegas-based firm increased fourfold from the first quarter. Rimini Street was founded in 2005 by Seth Ravin, who co-founded TomorrowNow and sold his stake in that firm to SAP in early 2005.


Ravin says the SAP-Oracle legal dispute has been a blip rather than a big deal for his business.


“Most people are rightly seeing this as a procedural issue at TomorrowNow rather than an industry issue,” he says.


Ed Frauenheim

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What to Do When an HR Employee Sues

The person who opens the mail in the human resources department picks up an envelope and sees the return address of the local EEOC office. “Another employment claim,” he thinks.


    The prediction proves correct. The envelope holds an employment discrimination claim against the company. This, however, is no ordinary claim. This claimant is an employee in the company’s human resources department. What should the company do?


    First the company should recognize that claim is different from other claims, and the differences are both negative and positive. This article provides an analysis of both perspectives and some recommendations on handling such situations.


The negatives
   Executives must immediately confront the fact that an HR claimant might know damaging, embarrassing or unflattering information about the company. Every organization experiences regrettable events or has employees who make mistakes or exercise poor judgment.


    The HR claimant may have received complaints from other employees, investigated incidents or counseled others in connection with employee problems. Possibly privy to internal investigations as well as disciplinary or needed remedial action, the claimant could attempt to use this irrelevant but negative information to confuse issues or embarrass the company to gain advantage in their claim.


    Employee problems sometimes progress into actual litigation against the company, and HR staff frequently assists the company with litigation.


    In addition to possessing information about the company’s approach to litigation or the strategy in a particular case, the claimant may have had privileged communications with the company’s lawyers. While this information may be protected by the attorney-client privilege or the attorney work product doctrine, it is important to determine whether the claimant had access to confidential litigation information.


    The company’s settlement philosophy and negotiation strategies are some of the most sensitive litigation information that HR professionals know. The HR claimant may be aware of the amounts, terms or rationale for settlements that the company reached with other employees.


    While irrelevant, this highly confidential information could be costly to the company. For example, settlement demands for HR claimants may be strikingly similar to settlements that the company actually reached with other employees.


    In addition, employment claims frequently highlight oversights, flaws or inconsistencies in the company’s policies and procedures. As these company rules are applied in particular situations or are challenged by employees, management and HR may discover that certain policies and procedures are out of date legally or are inadequate in light of the company’s current operations or needs. Aware of these weaknesses, the HR claimant may carefully characterize their claim to exploit known deficiencies in policies and procedures.


    Even where policies and procedures are current and completely suitable, company rules may not always be applied consistently. The company may show top performers or employees with certain personal relationships more leniency than other similarly situated employees. The HR claimant may be aware of exceptions and could use this information to resist an otherwise valid disciplinary action.


    For example, an HR claimant terminated for excessive absenteeism or lateness could know of instances where these problems were overlooked with other employees. Suddenly, a valid termination could morph into an allegation of unfair treatment based upon age, gender, race or disability because of leniency showed to other employees with similar performance issues. While any employee could potentially employ this tactic, the HR claimant is likely to have more access to such information.


    Perhaps the most awkward scenario exists when the HR claimant continues to work while their claim is pending. The claimant would be shielded from the investigation of the claim, but that person may have friends in the HR department privy to sensitive information.


    In addition, the claimant could have acquaintances throughout the company. People naturally talk about their claims against their employer.


    A chatty HR claimant can do particular damage. Like a state trooper who complains about traffic laws or a doctor who laments on the poor quality of health care, an HR employee who complains about unfair treatment by the company could cause other employees to have less confidence and respect for the company and its policies and procedures.


The positives
   HR employees asserting an employment claim against the company may have some advantages. But when confronting such a claim, the company can have the upper hand.


    Investigators, mediators, judges and juries may assume the HR claimant has superior knowledge of the company’s policies and procedures, including available resources, employee rights, reporting obligations, notice requirements and grievance procedures. They may also credit the claimant with a clear understanding of federal statutes, such as Title VII, FMLA, ADA or ADEA. An HR claimant’s failure to act on this information will be less tolerated than with other, less knowledgeable claimants. Several other factors may make resolving these disputes a bit easier:


  • Often privy to information about other claims, HR claimants may recognize that the vast majority of such claims are resolved with little or no payment.


  • Familiarity with the negotiation process and outcomes could result in realistic demands, thereby making settlement, if appropriate, easier to achieve.


  • Claimants could also be less likely to pursue litigation past the EEOC or state agency stage, because they tend to have a greater appreciation for emotionally draining and potentially embarrassing aspects of public litigation.


  • Finally, claimants may be concerned about how public litigation could impact their future HR employment opportunities.


Steps in the right direction
   As with every employment claim, conducting a thorough investigation is critical. After the investigation is complete, there should be a frank and honest assessment of the findings.


    In turn, the company should agree to appropriate action based upon applicable law, company policies and procedures, the employee’s contract or collective bargaining agreement, the advice of counsel and, ultimately, the best interest of the company and its employees.


Before a claim hits
   Some things can’t be changed once a claim is made. So it’s important to plan ahead, anticipating that someday, an HR employee might be a claimant:


  • Routinely stress the importance of confidentiality within the HR department.


  • Be sensitive to issues of importance to HR professionals. As you know, those charged with serving others in the company frequently get overlooked. This includes meaningful performance evaluations and appropriate personnel file documentation for HR employees.


  • Periodically review, correct, update and adjust company policies and procedures on a routine basis to eliminate the need to make changes in a crisis.


  • Address problems as soon as they are discovered. Do not ignore problems in hopes that they will go away or never get publicized.


  • Always follow the law and apply company policies and procedures in a fair and consistent manner.


When a claim hits


  • Do not panic. Every employee’s claim is likely to have strengths and weaknesses.


  • Again, stress confidentiality within the HR department.


  • Assert attorney-client privilege, anticipation-of-litigation protection, HIPAA privacy, employer-employee confidentiality and prejudice and/or irrelevance, when appropriate, if the HR claimant attempts to gain unfair advantage by using unrelated but potentially damaging information.


  • Remember to use HR claimants’ knowledge of the field and their potential interest in a quick and quiet resolution to your advantage.


In the aftermath
   As with any significant employment claim, HR, company management and perhaps counsel should consider whether any important information was learned from the incident.


    Determine whether personnel changes, updates to policies or procedures, training, counseling or other adjustments are appropriate. You may gain the protection of attorney-client privilege if you conduct such assessments as a preventive legal project, and at the direction of employment law counsel.


    Finally, if the HR claimant continues to be employed by the company, it is important that he or she be permitted to continue working as if a claim were never filed. This “forgive and forget” approach is critical to ensuring a productive and positive workplace.


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New OFCCP Regs Have Employers on Guard for Discrimination

Employers across the country could receive a troubling piece of news in the mail this summer. The Department of Labor’s Office of Federal Contract Compliance Programs started sending audit notifications, kicking off its official probe into companies’ compliance with the Internet-applicant final rule.


    The mandate, which went into effect in February 2006, set standards in record-keeping practices for all federal contractors and subcontractors that rely on electronic data technologies to fill vacancies. The list of employers is diverse and substantive and includes most of the Fortune 500 as well as small and midsize companies from numerous industries. According to experts, about the only exception would be a hot dog vendor who doesn’t hire anybody.


    Experts also contend that process of online recruiting—not just the end results of who gets hired—will be under the agency’s microscope. The OFCCP’s intent is to discern whether systemic discrimination, whether deliberate or unintended, is unfolding in the workplace. Since electronic data technologies often have powerful filtering tools, such as electronic résumé searches and data screenings that can shape the makeup of an applicant pool, the selection process is a key area of focus for the agency.


    “This is not just about who ultimately got hired,” says Kurt Ronn, founder of HRworks, a national recruitment firm based in Atlanta. “It is also about the manner in which companies constructed the pools of candidates that they considered for a vacancy.”


    The fact that audit notifications were sent a year after the ruling was enacted could signal that the OFCCP is serious when it comes to enforcement, industry experts say.


    “The notifications came on the early side,” Ronn says. “Normally, the OFCCP waits for two years after a ruling has been around so that there is enough rope to hang violators.”


    Experts encourage employers to prepare for a potential audit by understanding the OFCCP’s three primary focuses.


    At the most basic level, the agency will try to determine whether an employer kept a detailed record of the applications they received via electronic data technologies, such as a job board. In addition, the OFCCP will take a critical look at the basic qualifications that a company sets forth for a job vacancy. Finally, the agency will scrutinize the data management technique an employer uses to select the résumés.


Record-keeping requirements
   One of the most important aspects of the Internet-applicant rule is that it finally establishes a formal definition of an online applicant—something government contractors had requested for several years.


    There are several elements that define an online applicant, says Matt Halpern, partner at Jackson Lewis LLP, a national workplace law firm. To begin with, an individual has to express interest in a position using electronic data technologies, such as sending a résumé via the Internet. In addition, a company has to look at the information that was received and evaluate whether the person meets the basic qualifications required for the job. Lastly, the individuals must remain in the running to be considered for the job. If they express any disinterest in the position, they are no longer considered applicants.


    Once a government contractor establishes that an individual fits the definition of an applicant, it is required to keep detailed records. Employers will have to elicit key information from online job applicants such as race, gender and ethnicity. This data will play a critical role helping the agency determine how the employer’s pool of candidates compares with the makeup of the broad workforce.


    The OFCCP will specifically stack up the proportions of minorities and women applicants to the company against the relevant labor force statistics.


    For instance, if an employer has a vacancy for an engineering position and only 2 percent of the total applicant pool is composed of women, the auditor will examine how this figure relates to the broad engineering industry.


    There could be a reasonable explanation for the low percentage of female applicants—perhaps engineering is a profession that attracts few women. If through research, however, the auditor finds that women make up a large percentage of the broad engineering population, the investigation will deepen. The auditor’s goal will be to determine whether any steps in a company’s selection process have an adverse impact on female applicants.


    Government contractors are not the only group being affected by the OFCCP ruling. Talent management vendors across the country must make significant adjustments as well. SilkRoad Technology has had to update its applicant tracking platform, OpenHire.


    “We retooled the system to help recruiters comply with the specific OFCCP reporting requirements,” says Peter Hauschild, manager of implementation services for the Winston-Salem, North Carolina-based company. “The entire ATS community has had to mobilize for this ruling.”


    The revisions to OpenHire mean it can now provide more detailed reports about the ethnicity of applicants. Now more than ever, it’s important for employers to become familiar with the reporting capabilities of the ATS providers, Hauschild says.


    Employers should also be mindful that online applicants can come from a variety of sources—not just job banks, résumé databases or via e-mail. There are six Internet-related technologies and applications that the OFCCP has identified as recruiting tools for online applicants: job banks, résumé databases, e-mail, electronic scanning technology, applicant screeners and applicant tracking systems.


    But this list is bound to change with new technologies coming online. When in doubt, err on the side of caution, Ronn says.


    “If contractors review or accept applications electronically, the new rule applies, even if it’s something they don’t think is likely, such as a fax,” he notes.


    Fax machines can transmit digitized signals that can be sent and received via e-mail, which is why companies need to keep a record of any activity through a fax.


    Auditors will investigate not just the pools of external job candidates, but also the list of internal applicants a company evaluates for a vacancy, which is why records need to be kept on both sets of applicants.


Qualified candidates
   Basic qualifications such as skills, education and experience are the criteria that an employer deems necessary for a candidate to perform a particular job.


    Workforce executives must pay close attention to how basic qualifications are worded, as OFCCP auditors will analyze them for signs of potential discrimination.


    One of the most important points for employers to remember is that basic requirements must be established before any recruiting efforts begin, Halpern says. In addition, the basic qualification standards must be relevant to a position and be objective.


    It is legally acceptable for an employer to request a bachelor’s degree in accounting for a certain position, as it ensures a certain level of education and skills. Making a seemingly innocuous tweak to this wording, however, could draw serious scrutiny from the agency, Ronn explains.


    If an employer went beyond requesting a bachelor’s degree in accounting and asked that the diploma come from an Ivy League school, such standards are considered non-objective. More important, as far as the OFCCP would be concerned, is that it could have an adverse impact on the number of women and minorities who apply for the position.


    It is the type of basic qualification that could raise a red flag for the OFCCP auditors, particularly if they find that a statistical disparity exists in the percentages of women and minorities within the company’s pool of applicants and those figures found in the relevant labor force.


    “Companies are going to have to give some serious consideration to how they word basic qualifications,” Ronn says. “It can make or break their fate during the audit process.”


    Drawing up acceptable basic qualifications, however, will only go so far in keeping a company in compliance. Execution is another key component. Employers must make sure that everyone involved in the recruiting and selection of talent uses the vetted wording for basic qualifications.


    “It is critical for everybody to be on the same page when it comes to language,” Ronn says. “It gets risky when recruiters begin to deviate from the established definition and introduce concepts that may or may not be acceptable.”


    Ronn recommends that companies launch formal training campaigns for recruiters and hiring managers, since they are the ones on the front line. First, they should be informed of the agreed-upon basic standards. They should also be instructed on why it is important to stick to those definitions.


    It is important that the educational initiative extend beyond internal staffers who are responsible for recruiting and hiring. Under the new rule, employers will also be held accountable for the actions of the external staffing and recruiting agencies that they retain to hire talent.


    Besides basic qualification standards, OFCCP auditors will be studying the kinds of online searches that recruiters use to narrow the pool of applicants from the thousands of résumés that they receive. Online searches will be an area of focus because they can shape the composition of an applicant pool.


    Training and education programs in this arena will also play a critical role in keeping employers compliant. Recruiters and hiring managers will have to be educated on how to carry out online searches that are objective and relevant, Ronn says.


    Inserting words such as “Perez” or “Harvard University” during online searches could include or exclude certain groups of candidates—ultimately spelling trouble for an employer.


Data management technique
   Keeping up with the tremendous volume of résumés that pour into companies can be a daunting task. As a result, employers have had to develop data management techniques that help them narrow the number of résumés they receive—from the thousands to maybe a few dozen.


    OFCCP auditors will be taking a critical look at how companies do this. Here too, employers are required to choose their preferred method of data management before any recruiting efforts take place.


    Initially, employers cannot make data management selections by looking at the qualifications of applicants, since that could potentially be considered a biased process. Instead, it will have to be based on other methods, like picking résumés in random order or perhaps by selecting the first 100 résumés that were received. Whatever method they use, it must be race and gender neutral, Ronn explains. After whittling down the stack of résumés to a manageable number, employers can then sift through the applicants’ qualifications to take the necessary next steps.


    The important thing for employers to remember is to have a solid understanding of their recruiting process and to develop a well-defined plan to tackle the new ruling.


    “It is important to plan ahead,” Ronn says. “Being compliant today is trickier than ever.”

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Sophisticated New Methods Aid OFCCP Search for Violators

The past several years have ushered in significant changes in the way the Office of Federal Contract Compliance Programs achieves its primary objective of guarding against workplace discrimination based on race, gender, religion and disability.


    Experts say the agency now relies on sophisticated techniques like linear regressions and statistical data analysis to make its auditing capabilities tougher than ever.


    “There is no doubt that the OFCCP will become to the HR community what Sarbanes-Oxley was for finance and accounting professionals,” says Ted Daywalt, CEO of military job board VetJobs and OFCCP committee chair for the International Association of Employment Websites, a trade organization.


    The changes first became evident in 2003, when the OFCCP created the Division of Statistical Analyses, spearheaded by director Michael Sinclair. The division’s goal was to bring a greater level of accuracy to OFCCP investigations, says Michael Biddle, a spokesman for the federal agency.


    Since that time, Sinclair has increased the number of OFCCP agents. In addition, he has developed training initiatives to help them master statistical analysis techniques, Biddle explains.


    It appears that Sinclair’s efforts are paying off: There has been a sharp spike in settlements derived from systemic discrimination cases. Last year, companies paid more than $51 million in settlements, almost doubling the $26 million from 2003.


    Employers of all sizes and across all industries are feeling the agency’s bite. Daywalt has heard of assessments that could cost companies millions of dollars if they are found to be in violation.


    Any firm—not just federal contractors, but also subcontractors doing indirect business with the government—are subject to OFCCP assessments. Daywalt urges companies to be conservative when it comes to determining whether they need to adhere to the OFCCP rules.


    “Everybody, not just big employers and vendors in the recruiting industry, is going to have to be on their toes when it comes to compliance,” Daywalt notes. “It won’t be cheap, but it is necessary.”

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Retiree Benefits Is UAW at the Wheel

Will U.S. automakers manage to lighten their legacy costs by transferring an estimated $100 billion of liabilities for retiree health care to the United Auto Workers?


As the UAW opens contract negotiations this week with General Motors and Ford, following the start of talks with Chrysler on Friday, July 20, expectations are that the three car companies will try to replicate deals struck earlier this month by Dana Corp. and late last year by Goodyear.


Both Dana and Goodyear moved all their liabilities for retiree health care off their books by agreeing to pay lump sums into trusts that unions will use to provide retirees with health care. (The Dana and Goodyear deals still have to be approved by the courts.)


Such trusts, known as voluntary employee beneficiary associations, or VEBAs, look like a possible solution to the burden that retiree health care obligations pose for the automakers.


Changes in benefits are a sensitive topic for union members. In fact, UAW president Ron Gettelfinger has suggested that retiree health benefits are not up for discussion.


The problem of the car companies’ extensive retiree health care costs “cannot be solved at the collective bargaining table,” Gettelfinger said in a speech in June. “The UAW believes it would be immoral and irresponsible to abandon the hundreds of thousands of retirees who helped build GM, Ford and Chrysler.”


But the extent of the automakers’ financial difficulties suggests that they will be looking at all possible solutions.


“Ford and GM have never been in as dire straits as they are now. They need to make further progress,” said Robert Shulz, a managing director at Standard & Poor’s. “We think there are going to be some creative approaches to the legacy issues, including health care.”


The amounts involved in retiree health care are considerable. Analysts estimate that the three car manufacturers’ liabilities for retiree health care come to about $100 billion, with GM responsible for about half that amount.


But transferring the responsibility for future retiree health care expenditures to a VEBA would require the car companies to come up with a significant amount of money to put into the VEBA. Such a move also means the UAW would be assuming the risk of future health care cost increases.


Dana’s VEBA deal is seen as particularly significant because the UAW was one of the two unions involved, along with the United Steelworkers.


The Dana deal made it “more probable” that the automakers could achieve something similar, said Mark Oline, a managing director at Fitch Ratings. “It’s becoming more evident that the UAW is willing to enter this type of settlement to divorce the fate of retiree health care from the fate of the manufacturers.”


But Dana’s unions were negotiating against the backdrop of the company’s bankruptcy, a situation that conceivably could have allowed the company to walk away from its promises regarding retiree health care. Shulz questioned whether the Dana deal is relevant to the auto negotiations, noting that although U.S. automakers are in bad shape financially, they’re not bankrupt.


“What someone’s negotiating in bankruptcy doesn’t necessarily translate to something like the current contract negotiations between GM, Ford and Chrysler and the UAW,” he said.


Goodyear’s case is also somewhat different from that of the car companies, Shulz said, because Goodyear was more stable financially than GM or Ford are, and thus better able to commit a sizable amount of cash to fund the VEBA.


Certainly the sums involved would be large.


Oline estimated that General Motors might have to come up with $30 billion to $35 billion in order to transfer its roughly $50 billion of retiree health care liabilities into a VEBA, and Ford might have to pay $13 billion to $17 billion.


“If you look at the transactions that have been done and the level of funding that would be required of Ford and GM, it does draw into question the sufficiency of the liquidity as the companies are still in the early stages of a long-term restructuring program,” he said, adding that Chrysler, whose liabilities are smaller, “is probably better positioned at this point to put an agreement into place.”


Oline said the car companies might consider alternative financing methods, like using company stock as part of the funding for the VEBA.


The good working relationship between Gettelfinger and auto company executives and the progress the two sides have made on improving productivity were grounds for some optimism going into the talks.


“They’ve been working through their problems, which bodes well for the negotiations,” said Harry Katz, dean of the School of Industrial and Labor Relations at Cornell.


Filed by Susan Kelly of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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A Week Devoted to Training

H eather Hatfield is looking forward to EMD Serono Inc.’s inaugural “Week of Learning.” As director of corporate and scientific communications, her job entails taking complex information about the biotech company, such as its various therapeutic products and specialized research, and making it easy to understand.

    The challenge is also to make it engaging and informative, without oversimplifying the material, when talking to colleagues, investors, journalists and members of the business community. So Hatfield jumped at the chance to take a special class, titled “Persuasive Conversation Skills,” during the July 23-27 training event.


    Coupled with an earlier course on how to present complex information, which is offered through EMD Serono’s in-house training university, Hatfield expects to gain new knowledge that will help her improve her job performance.


    “This training is extremely useful by helping me communicate more effectively and to get buy-in from employees. In fact, I can’t think of a situation in my job where it won’t come in handy,” says Hatfield, who is one of more than 200 employees scheduled to participate.


    Despite the name, the Week of Learning isn’t intended as a weeklong cram session. Instead, the goal is to underscore the company’s year-round commitment to growth and development, says Mike Laffin, EMD Serono’s director of learning and organizational development.


    “It’s important for our employees to have training (opportunities) that meet the demands of their jobs,” Laffin says.


    More than 20 specialized training opportunities will be delivered in a variety of formats, including classroom work, virtual classes and e-learning modules. Taking the courses will be researchers, clinical scientists, financial professionals and support staff at the company’s Rockland, Massachusetts, headquarters, near Boston. The company is a subsidiary of pharmaceutical and chemicals giant Merck, which is based in Darmstadt, Germany.


    EMD Serono has hired training vendors to facilitate the classes and publicized the event to employees for about six months through e-mails and meetings. Most of the training is interactive and gives participants a chance to do hands-on activities. Its employees are not required to sign up for training, although participation is strongly encouraged by senior management. Laffin estimates about 60 percent of employees will take at least one course during the week.


    To set an example for their employees, managers also are being requested to participate in course offerings during the week.


    In addition to attending training, employees will be able to participate in various forums, meet individually with program facilitators and gain exposure to the company’s array of training resources. The company expects that the Week of Learning will be an annual event.


    “This proactive employee development and learning focus [should be] a strong marketing approach for EMD Serono in attracting and retaining top talent,” says David Hagerty, regional vice president for BlessingWhite in Skillman, New Jersey, one of several training providers hired for the event.


    Although EMD Serono always has provided training programs, the past few years have brought about a stronger organizational commitment to learning. Biotech companies are in an intense scrimmage for the scarce talent available in the Boston area. Amid the stepped-up competition, top management recognized the tremendous role a highly competent workforce plays in achieving business goals, Laffin says.


    “Our training has always been skewed in favor of results competencies. Now we’re paying equal attention to employee development and competency objectives,” which contribute directly to business results, Laffin says.


    The company has solidified its performance management process as well. Employees are expected to consult with their supervisors to identify development goals and training plans for achieving them. Each individual goal is mapped to the organization’s larger business objectives, which in turn shapes the types of training provided by the company’s in-house university, known as Lead Academy.


    For employees like Hatfield, the weeklong learning event illustrates a more comprehensive effort to prepare employees for greater responsibilities.


    “It shows that our company sees professional development as a priority,” she says.

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SuccessFactors Files Initial Public Offering

HR software company SuccessFactors has filed to go public, despite mounting losses that totaled $32 million last year.



SuccessFactors on Friday, July 20, filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of its common stock. The company, which offers applications such as performance and recruiting management software, said the number of shares to be offered and the price range for the offering have not yet been determined.



The company’s public filing gave a window into its operations. SuccessFactors, which launched in 2001 and competes in the fast-growing arena of talent management software, said its revenue rose from $10.2 million in 2004 to $13 million in 2005 and $32.6 million in 2006. It took in $12.4 million in revenue for the first three months of this year.



But the San Mateo, California-based company’s losses are climbing as well. SuccessFactors recorded net losses of $5.3 million in 2004, $20.8 million in 2005 and $32 million last year. For the first three months of 2007, SuccessFactors weathered a net loss of $12.6 million.



SuccessFactors may be bleeding cash, but it operates in a healthy market. Research firm AMR Research calls human capital management software the fastest-growing segment of the business applications market, with revenue expected to grow 11 percent annually during the next five years to $10.6 billion.



The IPO filing comes as a number of other HR software and services firms have been moving from public to private ownership. Among them are software firms Kronos and Workbrain.



Jason Corsello, an executive at consulting firm Knowledge Infusion, said in a blog posting Monday, July 23, that SuccessFactors is investing heavily in sales and marketing and in product development.



“The company is obviously taking a ‘cold war’ approach to the market, focused on outspending the competition,” Corsello wrote. “This strategy will pose a significant challenge to many vendors that don’t have the financial resources or the ambition to dominate the market.”



SuccessFactors faces competition from a variety of rivals, including the giants of the field Oracle and SAP as well as talent management specialists such as Halogen and Authoria.



In its public filing, SuccessFactors also acknowledged a hurdle within its walls. The company’s independent registered public accounting firm “noted certain material weaknesses in our internal control over financial reporting,” SuccessFactors stated in the filing.



“Failure to achieve and maintain effective internal control over financial reporting could result in our failure to accurately report our financial results,” the company said.



SuccessFactors plans to use about $10.4 million of the net proceeds of the IPO to replay a loan.



“We expect to use the remaining net proceeds from this offering for general corporate purposes and working capital, which may include potential acquisitions,” the company said.



Should investors overlook the financial reporting trouble and growing losses to buy up SuccessFactors’ stock, it will amount to a win for HR software vendors overall, Corsello suggested.



“A successful IPO will be great news for the industry,” he wrote, “providing increased visibility in the HCM market, something that all vendors in the market should be cheering.”



—Ed Frauenheim


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Momentum Builds to Lengthen Pay Discrimination Lawsuit Limitations

Legislation that would overturn a recent Supreme Court decision on pay discrimination is gaining momentum on Capitol Hill.


On Friday, July 20, Sen. Edward Kennedy, D-Massachusetts, along with 11 other Democrats and two Republicans, introduced a bill that would allow victims to file a claim within 180 days of any paycheck that has been diminished by bias—even if the discriminatory act occurred decades ago.


Business advocates worry that such a revision of the statute of limitations could make companies vulnerable to stale claims involving supervisors and employees who have long since left the company.


A similar bill was approved by the House Education and Labor Committee in late June, just days after it had been officially introduced. That measure is awaiting action by the full House.


Both pieces of legislation were inspired by a contentious 5-4 Supreme Court ruling on May 29. The court held that a discrimination claim must be filed within 180 days of the moment that an unfair pay decision is made.


Outside of that statutory window, which in some states is 300 days, an employer is not liable, the court said. The decision significantly narrowed the scope of pay cases.


Supreme Court Justice Ruth Bader Ginsburg excoriated the majority for a ruling that she said ignored the realities of today’s workplace—where pay levels are secret and women and minorities can feel intimidated. She encouraged Congress to clarify the statute of limitations language in federal discrimination law.


Democrats in the House and Senate quickly responded, holding up the Supreme Court plaintiff, Lilly Ledbetter, as a civil rights hero.


The Supreme Court ruled that Ledbetter, a former supervisor at a Goodyear plant in Gadsden, Alabama, could not sue the company for paying her less than it paid men for the same job over most of her nearly 20-year tenure because she did not file the suit when the discrimination first occurred. Ledbetter said she did not discover the disparity until years later.


Democrats contend that a narrow statute of limitations allows companies to avoid punishment for discrimination by hiding it long enough.


“This is unacceptable—that you win by being able to keep an illegal act secret,” said Rep. George Miller, D-California and chairman of the House labor committee, when the panel approved the bill. “That’s what cries out for this legislation.”


House Republicans criticized Democrats for rushing the legislation ahead to score political points without considering its potential consequences.


“This bill guts the statute of limitations and Equal Employment Opportunity Commission charging requirement contained in current law,” said Rep. Howard “Buck” McKeon, R-California and ranking member of the House labor committee.


McKeon’s GOP colleagues said the bill could create myriad new liabilities for companies and subject them to expensive jury verdicts.


“This bill will destroy American jobs,” said Rep. John Price, R-Georgia.


The American Benefits Council, which represents Fortune 500 companies, raised concerns about how the bill would affect a company’s retirement plan if it had to recalculate benefits payable to a plaintiff.


Rep. Robert Andrews, D-New Jersey, said that language in the bill would prevent each pension payment from being a cause of action in a suit.


He also asserted that the measure would not make it easier to win discrimination cases. “It is the burden of the plaintiff to prove that a payment has been infected by discrimination,” he said.


Both the Senate and House bills would maintain the two-year limit on back pay in discrimination cases.


“Under the Kennedy bill, employers would not have to make up for salary differences that occurred decades ago,” said a statement announcing the introduction of the legislation.


—Mark Schoeff Jr.


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HR Executive Dies in New York Steam Blast

A Pfizer human resources executive, Lois Baumerich, died of a heart attack she suffered when a steam pipe exploded in Midtown Manhattan on Wednesday, July 18.

Baumerich’s death was the lone fatality of the explosion, which sent tens of thousands of workers scrambling for safety at the height of the evening rush hour and dredged up latent fears of a terrorist attack.

Forty people were hurt during the blast. The most critically injured was Gregory McCullough, a 21-year-old tow truck driver. McCullough was at the intersection of 41st Street and Lexington Avenue when the earth opened up and a geyser of scalding steam erupted more than 150 feet high, flipping his truck and depositing it into the crater left by the explosion. McCullough remains in a coma with burns over 80 percent of his body, according to press reports.

Minutes before the explosion, Baumerich, who was director of employment compliance at Pfizer, was on the phone planning an upcoming conference in New York for the National Industry Liaison Group, an organization promoting workplace equality, according to press reports.

Baumerich, who was 51 and lived by herself in New Jersey, was a board member. She helped found the group, according to its Web site.

Baumerich worked for 28 years at AT&T before retiring in January, a spokesman for the company wrote in an e-mail.

“Our condolences go out to her family, friends and former colleagues,” the spokesman, Michael Coe, wrote.

Baumerich was hired in January to work in Pfizer’s legal division in charge of compliance with affirmative action and equal employment opportunity laws. CEO Jeffrey Kindler sent a memo to employees Thursday morning, July 19, to let employees know about Baumerich’s death and to make counseling available.

“It’s obviously a difficult time for people, particularly in the legal division, who worked with her,” says company spokesman, Bryant Haskins.

Shortly after the blast, Baumerich collapsed as employees fled the area, police said. She was outside Pfizer’s office at 150 East 42nd Street, which abuts Lexington Avenue where the explosion occurred. She died in an ambulance on her way to a nearby hospital, Haskins says.

Her family said she had no prior health issues, according to press reports.

Jeremy Smerd

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Worker E-Mail and Blog Misuse Seen as Growing Risk for Companies

Employee misuse of e-mail, blogs, message boards and media-sharing Web sites posed a significant security risk for publicly traded U.S. companies last year, with 31.8 percent investigating a suspected violation of privacy or data protection regulations, according to a new survey.


A report on outbound e-mail and content security conducted by Forrester Consulting and Proofpoint, a messaging and data security firm, found that 26 percent of the companies surveyed saw their businesses affected by the exposure of sensitive or embarrassing information.


Experts familiar with data security say corporations risk the loss of company trade secrets and also leave themselves open to a variety of defamation- or slander-related lawsuits when blogs and message boards are used inappropriately.


Proper use of e-mail continues to be a major problem at many firms, as one in three companies surveyed said they investigated a suspected leak of confidential or proprietary information last year. Furthermore, companies on average estimated that almost 19 percent of all outgoing e-mail contained content that poses a legal, financial or regulatory risk. Showing the seriousness of these matters, 27.6 percent of the companies surveyed reported terminating an employee for violating e-mail policies.


The survey also found that blogs and message boards have become a growing source of risk for companies. More than 19 percent of the companies disciplined employees for violating blog or message board policies, and more than 9 percent fired employees for such infractions.


Robert Scott, a partner at Scott & Scott, a Dallas-based IT compliance and management firm, said the ramifications of leaks of important data on blogs and message boards can be devastating. Scott said a company’s brand could be irreparably damaged if trade secrets fall into the hands of competitors.


“The overall financial impact depends on what the secrets are, who’s getting them and what they are used for,” he says.


Scott also emphasized that blogs are here to stay, so companies need to monitor them vigorously. In addition to leaking sensitive information, employees making disparaging remarks about competitors or using blogs for sexually explicit or offensive material can also lead to liability and lawsuits.


“It’s a matter of enforcement and compliance,” Scott noted, “because the individual employees may not be aware or may be intentionally disregarding [policies].”


Filed by Matthew Scott of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.