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Rethinking Temp-to-Perm

The percentage of accounting temps converted to permanent hires jumped 40 percent in 2006 at Vedior North America, one of the largest staffing firms in the U.S. “The shortage of talent in accounting and finance is well known, and employers are trying to grab labor while they can, CEO Greg Netland says. “From a fee perspective, employers are essentially paying the permanent placement fee, but on a prorated basis.”

    The temp-to-perm strategy, preferred by many employers as a low-risk approach to recruiting, is still effective for some positions, but increasingly counterproductive for skilled positions in candidate-driven markets.


    Unemployment in accounting, nursing and other skilled occupations that require specific degrees and certifications is now less than 2 percent. For IT positions, the time to fill full-time permanent positions now stands at 56 days for staff and 87 days for managers, according to Robert Half Technology.


    “Temp-to-perm is a fantastic avenue for employers when you have great pools of candidates and a candidate-rich environment,” says Dan Glazier, COO of Snelling Staffing Services, with 200 offices across the U.S. “But demographically, we now have very low unemployment in the major labor markets. Temp-to-perm becomes the least advantageous path for job candidates. Under the current market dynamics, it may not be the best approach for employers.”


    Employers who rely on temp-to-perm as a fast and effective way to pull in candidates may have to rethink their position. “Particularly at the higher skill levels, temp-to-perm is counterintuitive and not a way to get the best candidates,” Glazier says. Snelling, along with many of the major staffing firms, has redirected its focus to straight recruiting.


    “We do a disservice in the industry if we don’t steer both candidates and employers in the right direction,” Glazier says. “Right now, many candidates are receiving multiple offers for full-time permanent positions, and a temp-to-perm offer goes to the bottom of the heap.” He believes that labor markets will continue to tighten, even for lower-skilled jobs. He reports that in manufacturing, for example, finding skilled and semi-skilled workers, even line workers, is now a major hurdle for employers.


Understanding markets
    “Temp-to-perm and permanent placements are totally driven by the talent pool on a market-to-market basis,” says Eric Buntin, managing director of marketing and operations for Randstad USA, another staffing giant. “In contrast to what we saw in 2002-2003, we now see a critical shortage of certain skills.”


    Beginning in the first quarter of 2006, the availability of certain skills sets dropped drastically, so employers shifted away from temp-to-perm and toward permanent hires, Buntin reports. The key skills needed for the position and the availability of those skills should drive the decision about whether to fill the position through temp-to-perm or direct hire. At Randstad USA, permanent placement work has grown sharply while temp-to-perm orders have remained roughly constant.


    The biggest change that Randstad USA has seen in its temp-to-perm arrangements is that companies are moving toward earlier conversions. The timing of conversions is based on the position and the onboarding and training process required. For a relatively simple job, onboarding and training may take be three to four months. For a more complicated position, it may be six months.


    At Spherion, which places 375,000 workers annually, clients would take on more high-skilled temp-to-perm employees if they could, but the supply is limited, reports Don Weis, vice president of national recruiting. “The trend at the lower levels is still ‘Try before you buy,’ and many temporary workers in the lower levels are active candidates,” he says. “In the more highly skilled positions, employers would like to use temp-to-perm candidates, but there is a much more limited pool of active job seekers.”


    At Vedior, the highest levels of temp-to-perm occur in accounting and finance positions, where there is a huge demand for quick onboarding. “It may take one day to hire and onboard a temp, compared with six weeks for a permanent hire,” Netland reports. Most of the accounting employees are sent out as temps, but with the understanding that the position may be considered for temp-to-perm.


    “We don’t want to lose the asset, so we have a nine-month scenario with a prorated fee,” Netland says. There is no fee after the temp has been on the job for nine to 12 months.


Pricing pressures
    Like most staffing firms, Vedior is feeling pricing pressures. “It’s an odd market because every measure shows that labor supply is down, but staffing firm pricing is still under pressure,” Netland says. “If clients push too hard, however, we have to serve other clients first.”


    Although there is pricing pressure, in some fields where there is essentially zero unemployment, such as engineering and nursing, bill rates have gone up. “We have an extremely hard time recruiting nurses and bill rates are rising, but hospitals are still struggling, and other businesses are still under cost pressures,” Netland says.


    Snelling structures its temp-to-perm arrangements based on the components included in each account. Its recruiting costs are rising, but clients are pushing back on prices. “It’s only a matter of time before pricing will have to move up for clients who want the best candidates,” Glazier says. He advises employers to look at whether they are getting the results they need from their temps instead of focusing only on transactional pricing.


    The transactional focus comes from the overwhelming emphasis on lower price, Glazier reports. Line mangers have budgets they have to hit, so they are very price-conscious. Some of the pressure comes from finance and procurement, which focus only on the contract. “CFOs look at total cost equations for everything except people,” he says. “When we talk to them, they understand total costs, but sometimes there is a misalignment with procurement.”


    Snelling avoids working with companies that only measure price because it leads to miscalculations of the total value of the work. “It may take 15 people to do the work of 10 if a company looks only for the lowest price and ends up with low-quality employees,” Glazier says. “Hiring under-skilled people and low-end workers in a tight labor market will cost the company over time in productivity and output.”


    Snelling recognizes that it is hard for any company in any industry to raise prices, so it works with clients to reduce its costs. “We try to educate clients about how we work,” Glazier reports.


    Winter, Wyman, a staffing firm based in Waltham, Massachusetts, saw a fairly dramatic uptick in temp-to-perm two years ago, but demand has remained basically steady since then. The firm’s temp-to-perm arrangements vary from client to client based on the volume of business and whether the client is looking for lower or higher skill level candidates. “The fee structure is part of the negotiation,” reports Scott Ragusa, president.


    Winter, Wyman’s fee structure generally starts at 25 percent and decreases 1 percent for every two weeks, down to a minimum of 20 percent. For large clients, the fee may be waived after the temp has been on the job for an extended period.


    “Our clients do not view temp labor as a commodity and we have had some ability to raise prices to cover higher recruiting costs,” Ragusa says. “This is a candidate-driven market and will remain so for quite some time. For the higher positions, it is becoming harder to replace the workers we lose to permanent jobs.”


Setting objectives
    HR executives can help produce an effective temp-to-perm arrangement by letting the staffing firm know upfront that the company is looking for a permanent employee, Ragusa says. “It’s a different pool of candidates,” he notes. Also, the client company should be aware that it is selling the job to the candidate and should be sure to give the candidate challenging work. Finally, the HR executive should keep the staffing firm informed of any changes in the status of the position.


    Buntin advises HR executives to define the core workforce and the flexible workforce, and actively manage both. “This is far more effective than letting line managers hire temps on a one-off basis,” he notes. “We have seen this development in our client companies.”


    HR executives must look at the tradeoff between the fully loaded cost of in-house recruiting compared with the fees paid to the staffing agency, Buntin advises. “Companies are still trying to drive out costs,” he says. “But if the market drives the fees too low, the quality of the workers provided will suffer.” He notes that it is more challenging now to recruit workers who will take temp work.


    The key for HR executives is to really look at the objectives, the skill sets required, and the availability of those skills in the marketplace. “It may be that a temp-to-perm strategy cannot be part of a permanent recruiting strategy, but only a temporary strategy under certain market conditions or for certain positions,” Buntin says. For now, employers in high-demand labor markets may have to chose between direct hires or temps, and forgo the comfortable temp-to-perm middle ground.

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Charge of Age Bias in Boeing Cash-Balance Plan Dismissed

A U.S. district court judge, following an earlier appeals court ruling in the same circuit, has dismissed charges that Boeing Co.’s cash-balance pension plan discriminates against older employees.


Judge David Herndon of the U.S. District Court for the Southern District of Illinois ruled this week that it was the duty of the court “to follow the law of this circuit as expressed in Cooper [v. IBM],” referring to an August 2006 ruling by the 7th U.S. Circuit Court of Appeals in Chicago that said the design of cash-balance plans in general and IBM Corp.’s plan in particular do not violate age discrimination law.


In that ruling, the appeals court said the terms of the IBM plan were age-neutral and the credits allocated to employees’ accounts were not reduced on account of age.


In the case of the Boeing plan, “there is no dispute that the plan is age-neutral” or that credits to participants are reduced on account of age, Herndon wrote.


In addition to the 7th Circuit Court ruling, a second appellate court—the 3rd U.S. Circuit Court of Appeals in Philadelphia—ruled recently that the plans are not age discriminatory. At least two other appeals courts are expected to rule on the issue within the next year or so.


New cash-balance plans that follow certain basic standards under a 2006 federal pension funding law, however, are shielded from such suits. Since that legislation was passed, two major employers—MeadWestvaco Corp. of Richmond, Virginia, and SunTrust Banks Inc. of Atlanta—said they were adopting cash-balance plans. A third employer, package delivery giant FedEx Corp. of Memphis, Tennessee, said it was expanding an existing cash-balance plan to cover all eligible U.S. employees.


The plans are so-named because accrued benefits are expressed as a cash lump sum.


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

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Protections for Transgender Workers on Rise

City commissioners in Largo, Florida, were not explicitly prohibited under federal law from voting to fire City Manager Steve Stanton after he disclosed his plan to have a sex-change operation. But discrimination law experts warn that any employer who takes similar action against a transgender employee may face a host of legal troubles.


    “I don’t think there’s any jurisdiction where it’s quote-unquote ‘safe’ to discriminate,” says Christopher Daley, director of the Transgender Law Center.


    The federal appeals courts are currently split over whether Title VII of the Civil Rights Act protects transgender or transsexual employees from discrimination. The 6th U.S. Circuit Court of Appeals took the biggest pro-plaintiff leap by ruling in 2004 that a transgender firefighter—who had notified his boss he would be presenting himself as a woman at work—could sue the city of Salem, Ohio, for “sex stereotyping based on a person’s gender nonconforming behavior.” But that decision is binding only on courts in Ohio, Michigan, Kentucky and Tennessee. In the U.S. court district that covers Largo, a judge in 1999 dismissed a transsexual’s Title VII claim.


    Outside the 6th Circuit, Title VII liability is “questionable, very questionable,” says Jillian T. Weiss, a professor of law and society at Ramapo College in New Jersey who consults with companies on transgender issues. “Ultimately, [the issue] will be going to the Supreme Court.”


    But as Michael Silverman, executive director of the Transgender Legal Defense & Education Fund, points out, “Title VII is definitely not the end of the story here.” Nine states and almost 100 local jurisdictions, from Key West, Florida, to Tacoma, Washington, have passed laws protecting transgender employees in the workplace. A recent amendment to the New Jersey Law Against Discrimination extends its coverage to persons defined as “having or perceived as having a different gender-related identity or expression than the one typically associated with a person’s sex or birth.”


    Plaintiffs who sue employers under such laws are entitled to seek compensation for lost wages, reinstatement and even punitive damages.


    “Twenty-five to 30 percent of the population is now covered by transgender-inclusive nondiscrimination ordinances,” Silverman says.


    Another possible legal avenue for transgender plaintiffs is a disability bias claim. “You can argue that somebody who is undergoing sex-reassignment surgery has been diagnosed with gender identity disorder,” Silverman explains. “That puts them within the protection of disability rights law.” An administrative tribunal in Florida upheld such a claim in the case of a transsexual corrections officer, rejecting the employer’s argument that inmates would not respect a transsexual.


    In Largo, Stanton has expressed reluctance about taking the city to court, saying it would be “like suing my mother.” But Weiss believes a suit “could make a very good test case. There’s nothing to suggest the city had any reason to fire him other than the disclosure of his gender identity.”


    Of course, it may be easier for private employers to hide bias—after all, they don’t hold public hearings on personnel matters. But according to Weiss, the Largo controversy is a clear wakeup call for both the public and private sectors.


    “It shows that not only is this a legal issue, but a PR issue,” she says. “This isn’t publicity you want at all.”

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China Returnee Takes Lessons From Time Abroad

China native Nick Zhang has one foot in the East and the other in the West—and hopes more of his countrymen will learn leadership lessons from overseas.


    Zhang, 51, grew up in Xian, China’s ancient capital. He studied English in college and was married to an American woman for a time. In 1986, he moved with her to the U.S., and earned an MBA at George Washington University.


    After returning to Asia in 1991, Zhang worked at health care giant Johnson & Johnson and later switched to work in Chinese startups. Beginning in 2000, he led two mobile communications services firms. Disney purchased the latter startup, Mobile2Win, last year. While a chief executive, Zhang tried to manage with a Western mind-set. His goals included giving employees “opportunities to shine” and keeping the organizations flat.


    “My door was always open,” he says.


    Zhang just finished a stint consulting for Disney, and says he may return to school to study Chinese culture.


    Over snacks at a tea house near Jin Mao Tower, Shanghai’s tallest building, Zhang argues that China could use more independent thinking—a key foundation for leadership.


    For years, he says, many Chinese idolized Lei Feng, a soldier publicized by the government as a selfless hero. Now, Zhang says, they fawn over the Chinese entrepreneurs who are lauded in the mass media.


    He himself was missing a maverick mind-set when he applied to business graduate school years ago in the United States. Asked who his hero was, Zhang first drew a blank, then named Zhou Enlai, a popular former Chinese premier.


    “The premier was someone I respected, but he was not a hero that I wanted to be,” Zhang says. “China, in a very general way, lacks diversity. Everything seems to be a mass movement with a herd mentality.”


Workforce Management, March 12, 2007, p. 22 — Subscribe Now!

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Q&A Wal-Marts Linda Dillman Talks About Changing the Health Care System

Linda Dillman knows how to execute the Wal-Mart playbook. When she was the company’s chief information officer, she used the retail giant’s size to force its supply chain to change. Change, in Wal-Mart’s case, means becoming more efficient. You don’t become the world’s largest retailer and largest employer, with 1.8 million employees in about 6,400 stores worldwide, unless you are able to move thousands of products globally with the precision of a Swiss watch (a watch you’re likely to find these days in a Wal-Mart store near you).


    As CIO, Dillman led Wal-Mart’s embrace of radio-frequency identification (RFID) tags, which use wireless bar-code technology to track products from factories in China to store shelves around the globe. Now, the use of RFID is standard in the industry—and just about everywhere else.


    In 2006, Dillman was named executive vice president of risk management, benefits and sustainability, succeeding Susan Chambers to manage the company’s health benefits as Chambers moved up to become the head of the company’s people division. Once again Dillman is trying to use technology to change the health care industry and, in the process, improve health care quality and drive down costs through greater efficiency.


    Before Dillman even took her new job, she met with other CIOs to ask how information technology could make health care more efficient and responsive to consumers. What Dillman learned was made clear on December 6, when Wal-Mart announced it would join Intel’s effort to offer employees personal, private digital health records. Joined by BP, Pitney Bowes and Applied Materials, the employer consortium called Dossia is the latest attempt by Wal-Mart and other large employers to use their clout as innovators and market movers to change the health care industry.


    Dossia is both a system to store the personal health records and a nonprofit organization that will be run independent of the employer-members who finance it, ensuring the privacy of the personal records. The records will be owned by employees regardless of whether they stay with one of the member companies.


    The decision to join Intel’s Dossia project was an act of faith in the power of technology, Dillman told Workforce Management. Dillman knows that technology can cut waste from an inefficient system, and that as much as $350 billion spent in the $2 trillion health care industry is considered wasteful. With that in mind, she and her company decided to support Dossia in hopes of taking costs, rather than benefits, out of the entire health care delivery system.


    “This was not something we did because we wanted to reduce our health care costs,” Dillman says. “What we wanted to do was impact the trajectory of both cost and quality of health care in the United States. It’s long term, which is going to impact all of us.”


    Dillman spoke to Workforce Management staff writer Jeremy Smerd shortly after the Dossia announcement to discuss how employers can think strategically about health care benefits.


Workforce Management: How did a former CIO become the chief administrator of health benefits for the world’s largest employer?

Linda Dillman: There are several factors. One that’s key is that Wal-Mart is notorious for moving us around to expand and grow us. And they had been in discussions with me for a long time about an upcoming change. I didn’t know what it was going to be.
And there are other aspects. One is, if you look at what you do in a technology role, you spend most of your career solving complex business problems, working across silos. That’s a lot of what I need to do in this space.


WM: And is Dossia a manifestation of your role to bring together IT and health benefits?

Dillman: The icing on the cake—Dossia—was not a consideration at that point. But what was a consideration was looking at our involvement in health care and taking Wal-Mart’s known strengths and apply them to the health care industry and try to drive change.


WM: Where do you see technology decreasing the costs of Wal-Mart’s health benefits?

Dillman: We are going to do things internally, but the biggest fact is, there’s only so much I can manage within the space of Wal-Mart and what we do internally. When you have an issue that looks like the health care issue looks for us, for all of the United States, when you have the disconnect on quality and payment, when you have limited use of technology in the industry itself, when you have costs escalating at the rate they are, I could change our plan forever and implement all kind of technology internally and it would not change the needle.
A lot of it is looking externally, which is why we like the Dossia announcement. It’s an initiative that is broader than what we hope we can do with our associates. We hope it will move the industry.


WM: Other than those involved with Dossia, which employers have you reached out to?

Dillman: Oh. I’m not sure I can share those with you. We’re having discussions with a lot of people who we would normally partner with to just get employers engaged in the health care situation.


WM: Any particular industry?

Dillman: In a lot of our supplier base—to a lot of consumer goods companies and tech companies.


WM: Any carrot-or-stick approach you can use?

Dillman: This will never impact, not today, the business we do with them. We’re really just speaking to them as, you know, “You are an employer as well and you’re facing the same issues we are in terms of being competitive in the global marketplace and trying to manage the costs while trying to provide the most you can for your associates.” And most are willing to have those discussions.


WM: Are they more interested in becoming more publicly involved about the need for employers to involve themselves in the health care debate?

Dillman: Yes. Everyone is trying to figure out what that means.


WM: Are you working with GM and other employers who have been vocal on a policy level in this issue?

Dillman: We have not talked to GM about this.


WM: You mentioned escalating growth of health care costs. What are they for Wal-Mart?

Dillman: That’s not something we talk about. We are double digit in our costs like everybody else. Our trend is not going to be all that different from the [rest of the] country.


WM: You recently introduced health plans with higher deductibles. Part of your reasoning was you felt employees would save money with the plans. There was also some mention of wanting to attract healthier workers.

Dillman: First of all, that’s not the reason we did that. So let me debunk that myth. You’ve been reading the wrong Web site.


WM: No, I’ve been reading the memo the head of Wal-Mart’s people division, Susan Chambers, wrote last year when she was in your position.

Dillman: Well, you might want to reread it. And read it in its entirety. I get to look at the facts. What we drove for with our value plan [is this], and I’ll explain it to you so you understand what it is.What we needed to do was to get something that was affordable and had broad reach for our associates. Our current plans are available to all of our associates for $23 a month. They can afford that. They can’t afford some of the plans that are in other spaces.We needed to be able to give them something that was affordable. So we did that. We wanted them to not forgo health care, so we included in it first-dollar coverage. And we are going to continue to work on how we do this. But for right now, it gives every participant three doctor visits and three generic prescriptions a year, pre-deductible. And it allows them to have catastrophic coverage. It’s very good coverage. It’s the same we have on the rest of the plan, after the $1,000 deductible.Most of the scenarios we ran—and we ran a lot of scenarios for our associate base—over 70 percent of them actually come out financially ahead. So the difference with plans most employers are offering, the difference … is that we are putting the money back into the pockets of our associates.We happen to believe that our associates are pretty smart, and can add value when they’re managing those costs. We believe that by putting the money in their hands they will end up getting more for those dollars than they do in large plans today.(Editor’s note: In more than 40 percent of the areas where Wal-Mart has stores, that $23 value plan is even less: $11 a month.)


WM: So, how does Dossia and this push for empowering the consumer fit into your overall benefits strategy?

Dillman: Dossia was not part of our benefits design. It was part of this external initiative to look at the health care system and see if we could make a difference there. We believe in the value of electronic health records. We see how both from a quality perspective and an efficiency perspective, technology has made improvements in virtually every other industry.


WM: Have you done any analysis of how it might improve the health of workers or save you money?

Dillman: No, none.


WM: It was just a leap of faith in the power of technology?

Dillman: I didn’t build this into my business plan. This was not something we did because we wanted to reduce our health care costs. What we wanted to do was impact the trajectory of both cost and quality of health care in the United States. It’s long term, which is going to impact all of us.Sometimes you have to take strategic initiatives. Anybody who innovates will tell you that if you can create a business plan and prove it, it’s probably not an innovation because it’s already being done.


WM: How soon after talking to Intel chairman Craig Barrett did you give the OK to join Dossia?

Dillman: We knew we were interested. You go through an initial interest level, which was actually pretty quick. And then work through all the logistics. So it was probably three or four months.


WM: What does Wal-Mart bring to Dossia?

Dillman: We’ve got a pretty good track record for being able to use technology. We’ve built large data warehouses. We’ve deployed to a large number of people, specifically. Our associate base uses a lot of technology every day, so we kind of know how to do that.


WM: Are you bringing any of your expertise to bear on the Dossia project?

Dillman: Absolutely. Our tech people will be involved. Our process people will be involved. Our security people will be involved. Our experience in implementing technology to a large group of people as diverse as this will be involved.


WM: Will Wal-Mart integrate this with its benefits?

Dillman: No. No. You really have to take this out of a P&L, traditional business kind of view. Not everything has to integrate back into your core business. We believe this will change the bigger picture. This will be given to our associates. It’s theirs to use, their choice to use it—they and their dependents. We believe it adds value. They will see that value. They will understand how their health care is working. They will begin to tell their health care providers and start to drive adoption across that space. We believe it is a benefit, by the way, that we offer to them. This is not going to tie back to our health care plan. We are not going to have any access to the data. We’re not going to have any access to the system. We are not going to monitor who does and who does not use it. We will not know that. This is intended for their benefit.


WM: Are these personal health records something a Wal-Mart customer could use?

Dillman: Dossia is meant to be the framework that personal health records, that are customer-facing, and electronic health records, that are provider-facing—they all can connect to this framework. Dossia is not trying to create the software that others are going to go use. But whatever anybody creates will have the ability to connect to this to get all the information.Having said that, all of our [health] clinic providers have their own information systems that they use to manage their clinics. Most are already using electronic health records. Of course, we’d like for their system to connect to Dossia so when [customers] come in they can have an entire record.


WM: Is that a decision the clinics will make for themselves?

Dillman: That is absolutely their decision. What we can do is make it easier for them. A parallel initiative is to make sure providers have the ability to access [the records stored in Dossia]. We started with our base [in Dossia] because 2.5 million people is a pretty good place to start. When we get past 2.5 million, the intention is really to start opening up access.


WM: When might that happen?

Dillman: The second half of 2007 is when we will start piloting to our associates. Then we will have a better sense of how fast we can go.


WM: What else can Wal-Mart do as a business leader to address this issue of rising health care costs? What is Wal-Mart’s role?

Dillman: Our vice president, John Menzer, was appointed to AHIC—the American Health Information Community. So again, getting involved at a higher level with how technology can get implemented in this space.


WM: Were you aware of the AHIP announcement saying health insurance companies representing 200 million Americans will create a health record that can be used at all carriers?

Dillman: Sure.


WM: Any sense of how that fits in with Dossia?

Dillman: In the long term, we’d like to be the backbone that everybody can connect through. So they still have the ability to offer the people on their plans the front end and the functionality that makes them competitive and then everybody shares data.


WM: They have 200 million members.

Dillman: We don’t want to compete.


WM: Is this a movement that should be employer-driven?

Dillman: What we wanted to do is to introduce something that would belong to the individual, that was in a nonprofit space, not a commercial space, and that an individual could have for their entire lifetime. So they go from being a child who is on their parents’ health insurance or wherever they get health care to their own careers through many insurance companies to retirement … to make sure all their information was cohesive through that entire lifetime.


WM: And lastly, getting back to the high-deductible plan, have you selected a high-deductible health plan for yourself?

Dillman: I absolutely have.


WM: You have a high deductible?

Dillman: Oh, you better believe it. In an instant. I actually have a health savings account. How about you?


WM: No, I don’t.

Dillman: And it was one of the smartest—I mean, it was a great choice.


WM: OK, so you’re doing better than CEO Lee Scott, because he has said that he couldn’t figure out how to sign up for one. Have you talked to him about how to do that?

Dillman: I think we’re probably done with the interview. I don’t know if I want to talk about how Lee manages his health care.

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Letting Doctors in on the Ratings Process

N early two years before Regence Blue Shield issued its first letter telling doctors they would not be included in Boeing Co.’s select network, another organization just a few miles away was working toward a similar goal of rating medical clinics, hospitals and doctors, but in a much different way.

    The Seattle-based Puget Sound Health Alliance started with “all the constituents at the table,” says Diane Giese, a spokeswoman for the group.


    The group’s board, composed of 11 purchasers of health care (including private and public employers), four health plans, four people representing doctors and two representing consumers, reflects a more conciliatory approach to a controversial subject, Giese says.


    Long before any data is made public, the group shares its results with the doctors it has reviewed. The doctors then have an opportunity to respond and improve. The approach is not new—a similar employer coalition in Bloomington, Minnesota, the Buyers Health Care Action Group, waited more than a decade between making its results available to doctors and releasing them to the public. It stands in sharp contrast to Regence, which moved quickly from rating its doctors to creating a network based on its results.


    “The lesson learned from Boeing is to include physicians,” Giese says.


Long before any data is made public, the group shares its results with the doctors it has reviewed.
“The lesson learned from Boeing is to
include physicians.”
–Diane Giese, Puget Sound
Health Alliance

    The alliance underscored that point in an opinion article published September 13 in the Seattle Post-


    Intelligencer announcing its intention to produce comparative data on the efficiency and costs of physicians in the area. But the group received a wake-up call two weeks later. Just five days after the Washington State Medical Association announced its lawsuit against Regence on September 21, it wrote an opinion piece of its own, in which it issued “a cautionary note” to the alliance based on the medical association’s experience with Regence.


    What the medical association called the “fatal flaws” of the Regence program were “inaccurate evaluation of outdated claims data” and “not giving physicians an opportunity to respond to the data.”


    The story was a shot across the bow of the Puget Sound Health Alliance.


    “Their response was a way to make sure we’re listening,” Giese says. “And we are.”


    Nonetheless, the opinion piece came as a surprise.


    “We were surprised they tied it so closely to the lawsuit against Regence, because we’re not creating tiered networks,” Giese says. “It potentially gives people the impression that the medical association is not supporting what the alliance is doing, which is far from the truth. That was the most shocking thing about seeing it.”


“We feel very good about the fact
that we are going to see the data before it’s released so physicians can change their behavior”
–W. Hugh Maloney,
Washington State Medical Association

    W. Hugh Maloney, the medical association’s president, says he supports the alliance’s projects and believes the alliance has been working with the doctors in good faith.


    “We feel very good about the fact that we are going to see the data before it’s released so physicians can change their behavior,” he says. “Physicians resent being held up to public scrutiny when they have not had a chance to respond to the data.”


    Meanwhile, Regence’s crosstown rival Premera Blue Shield, which created a high-performance network in 2001, has offered a contrasting example for the Puget Sound Health Alliance.


    Premera realized after creating the select network that it did not produce huge savings that were worth the pushback it got from doctors and patients. So Premera instead focused on creating a quality scorecard to be used only by its medical groups as a tool to compare their practices with one another. By knowing where they stood, doctors made changes and improved.


    Eventually, Premera offered financial rewards for the best-performing doctors, says Rich Maturi, senior vice president for health care development systems. The lesson, he says, was clear: “The greatest potential for creating efficiency and improving quality is to focus on the whole network rather than getting rid of a portion that doesn’t perform well at a certain point in time.”


Workforce Management, February 26, 2007, p. 21 — Subscribe Now!

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Man Decides to Become Woman, Gets Fired

A Florida city preaches tolerance, but officials fire the city manager after news of his planned sex change surfaces


Even though he was fired after word got out that he was planning to have a sex-change operation, the city manager of Largo, Florida, still defends the city’s diversity program.


On February 21, the St. Petersburg Times reported that Steven Stanton, who had been Largo’s city manager for 14 years, was undergoing hormone therapy and was planning to have a sex-change operation. Six days later, the city commissioners voted 5-2 to terminate his employment, saying that they were concerned about his ability to lead the city.


Stanton’s termination comes just seven months after Largo trumpeted its diversity program in an application for the Workforce Management Optimas Awards, which are given to organizations for exemplary workforce initiatives.


Largo, whose motto is “The City of Progress,” created the program three years ago after a small number of employees were terminated for making racial slurs or using derogatory remarks, says Susan Sinz, the city’s human resources director.


The program didn’t focus on specific issues, like those around transgender employees, but it did focus on employees assessing one another based on their knowledge, skills and abilities, Sinz says.


And the program was effective, Stanton insists.


“There is substantive tolerance for diversity among the employees of the city of Largo,” he says. “This wasn’t a Largo issue as much as it was the result of a very active group of churches hijacking the process.”


In the four days following the media reports about Stanton’s planned operation, the city received 800 e-mails insisting that Stanton be fired, he says.


In many cases, Largo employees were prevented from working, Sinz says. For example, one employee who was driving in a city vehicle was afraid to leave her car because of protesters, she says.


Largo tried to address the issue with its 900 full-time employees in the days following the media reports by hosting voluntary educational meetings, says Karen Doering, senior counsel for the National Center for Lesbian Rights, which held the sessions. Doering also is Stanton’s attorney. “It was Transgender 101, and it was designed to answer any questions they might have,” she says.


About 40 employees in total attended the pair of two-hour sessions.


A few employees expressed discontent over Stanton’s planned sex change, Sinz says. “Some employees have had a difficult time with this, asking, ‘If he can dress like a woman, why can’t I wear an earring?’ “


Experts say that Largo might have prevented some of the outcry if it had included diversity training about transgender issues sooner.


“Transgender issues are still on the periphery of most diversity initiatives,” says Billy Vaughn, managing partner and chief learning officer of Diversity Training University, a San Francisco-based provider. “It’s a very hard thing for people to understand and talk about because people have very strong feelings about it.”


Stanton and Sinz had developed an education and communications program to address concerns employees might have about his upcoming operation. But they ended up not having time to execute the program because a reporter broke the story before Stanton had informed the commissioners. At press time, Stanton was “leaning toward” appealing the commissioners’ decision, Doering said.


Stanton still believes that if the education plan had been put into place, it would have been successful. Sinz, meanwhile, isn’t sure that any diversity program could have prevented the firestorm in Largo.


“The potential is out there for the public to trump any efforts because they are the ones that allow us to work in the community,” she says.


    Stanton is appealing the commissioners’ decision and a public hearing is scheduled for March 23.

Workforce Management Online, March 2007 — Register Now!

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The Right Profile for Leading In China

Managing in China is hard.


    Business moves at a breakneck pace. Politically, the authoritarian country is relatively stable, but still unpredictable. Personal connections are key and ethical minefields abound. What’s more, leaders of multinational firms find themselves in a culture clash between a society heavily influenced by the hierarchical tenets of Confucius and global corporations that increasingly favor flat, egalitarian management styles.


    Running the show in China amounts to a delicate balancing act, whether the executive is a Chinese national or an expatriate, says Janet Carmosky, chief executive of consulting firm China Prospects.


    “The Chinese leader has to translate the expectations of the foreign party into something that works in the Chinese setting,” says Carmosky, who spent nearly 20 years working in China beginning in the mid-1980s. In choosing a Chinese national, U.S. companies should be wary of a bias for a “can do” attitude, Carmosky warns. By contrast, a savvy Chinese leader won’t promise what can’t be delivered.


    “A good Chinese leader knows how complex things are and is not going to sell out to American pressure to make things simple,” she says.


    Expatriates, in her view, should be charismatic, good at networking, open-minded and realistic rather than idealistic. “You definitely don’t want a ‘missionary,’ ” she says.


Workforce Management, March 12, 2007, p. 18 — Subscribe Now!

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CUE 07 (Lawson conference and user exchange)

Event: CUE 07 (Lawson conference and user exchange)


What: St. Paul, Minnesota-based software company Lawson provides software and service products to 4,000 customers in manufacturing, distribution, maintenance and service sector industries across 40 countries. Human resource applications are part of Lawson’s portfolio of products, which also includes supply-chain management and customer relationship management software. A milestone for the company was last year’s merger with European software company Intentia.


Where: San Diego Marriott Hotel & Marina and the San Diego Convention Center


When: March 4-7, 2007


Conference info: For information about Lawson, go to www.lawson.com.


Day 1—Monday, March 5, 2007


Aiming high: Lawson officials touted a bold goal at meetings here: be the top vendor of HR software in the world. Dean Hager, senior vice president of product management, told analysts and reporters that Lawson plans to outdo big guns SAP and Oracle even as it offers a better alternative to the throngs of talent management software specialists. “We want to be No. 1,” Hager said. “We see a jugular vein and we’re going to invest and go after it.”


It may be true there’s uncertainty in the HR software arena as Oracle hammers out its Fusion applications, which are designed to blend the best of the company’s various product lines. And organizations looking to buy software from niche vendors in performance management, recruiting or learning management face the difficulty of integrating those talent management applications with core HR and other software systems.


But Lawson has a huge gap to close in its quest. According to AMR Research, Lawson ranked fifth in human capital management revenue in 2005 with $104 million, behind Sage Group, Kronos, SAP and Oracle. The two top players, though, had revenue that dwarfed Lawson’s, according to AMR Research: Oracle’s was roughly $1.4 billion and SAP’s was nearly $1.3 billion.


“We’ve got a long ways to go,” Hager conceded.


Best in suite? Lawson’s strategy centers on creating HR applications that are higher-quality than those from Oracle and SAP, yet better integrated than those from the smaller talent management vendors. Larry Dunivan, the company’s vice president for human capital management, calls the approach a “best of suite” strategy. That’s a twist on the “best of breed” phrase used by specialists.


So far, it’s hard to judge how well Lawson will do. A key will be a set of Lawson applications under development that focus on global HR, talent acquisition, performance management and compensation.


What is it about penguins and software execs? For the second time in the past 12 months, a software executive has shared the stage with penguins. Last year, Oracle’s Larry Ellison greeted the endearing birds during a speech in San Francisco focused on a Linux-related service (the penguin is the mascot for the Linux software operating system). And at Lawson’s CUE event, Lawson chief executive Harry Debes had penguin visitors during his conference-opening presentation from nearby SeaWorld. Debes managed to get a few laughs with this joke about a penguin walking into a pharmacy. As Debes told it, the penguin says, “I’d like some ChapStick please, and you can put it on my bill.”


—Ed Frauenheim
 

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A New Boss From Outside Costs More … a Lot More

Succession planning pays. Or, rather, it saves.


According to a new study, companies pay their chief executives nearly three times more when they hire them from outside the company than if they promote from within. In the first year of employment, CEOs snagged from the outside earned median pay of $13 million in 2005, compared with $5 million for those appointed from the inside, according to the Corporate Library, a Portland, Maine, governance watchdog.


The study was based on the compensation packages of 52 CEOs of S&P 500 companies. Thirty-two were promoted in 2005 and 20 were hired.


Paul Hodgson, senior research associate at the Corporate Library and the author of the report, said he was surprised by how many boards continue to hunt for CEO talent outside the company, considering the high costs.


“Most boards are either not doing succession planning or they aren’t doing it effectively,” he said, adding that there are instances—like after a corporate scandal—when it’s necessary for boards to hire outside CEOs.


Corporate directors are aware of the need for better succession planning. In a separate study conducted this year by the National Association of Corporate Directors and Mercer Delta Consulting, roughly half of the corporate boards surveyed from public, private and nonprofit companies said they were “less than effective” at CEO succession, and only a similar percentage said they had a succession plan in place. Just 15% of the directors said their boards were “highly effective” in managing and developing their executive talent.


—Jeff Nash


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